Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 130423             November 18, 2002

VIRGIE SERONA, petitioner, vs.HON. COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES, respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

During the period from July 1992 to September 1992, Leonida Quilatan delivered pieces of jewelry to petitioner Virgie Serona to be sold on commission basis. By oral agreement of the parties, petitioner shall remit payment or return the pieces of jewelry if not sold to Quilatan, both within 30 days from receipt of the items.

Upon petitioner’s failure to pay on September 24, 1992, Quilatan required her to execute an acknowledgment receipt (Exhibit B) indicating their agreement and the total amount due, to wit:

Ako, si Virginia Serona, nakatira sa Mother Earth Subd., Las Pinas, ay kumuha ng mga alahas kay Gng. Leonida Quilatan na may kabuohang halaga na P567,750.00 para ipagbili para ako magkakomisyon at ibibigay ang benta kung mabibili o ibabalik sa kanya ang mga nasabing alahas kung hindi mabibili sa loob ng 30 araw.

Las Pinas, September 24, 1992.1

The receipt was signed by petitioner and a witness, Rufina G. Navarette.

Unknown to Quilatan, petitioner had earlier entrusted the jewelry to one Marichu Labrador for the latter to sell on commission basis. Petitioner was not able to collect payment from Labrador, which caused her to likewise fail to pay her obligation to Quilatan.

Subsequently, Quilatan, through counsel, sent a formal letter of demand2 to petitioner for failure to settle her obligation. Quilatan executed a complaint affidavit3 against petitioner before the Office of the Assistant Provincial Prosecutor. Thereafter, an information for estafa under Article 315, paragraph 1(b)4 of the Revised Penal Code was filed against petitioner, which was raffled to Branch 255 of the Regional Trial Court of Las Pinas. The information alleged:

That on or about and sometime during the period from July 1992 up to September 1992, in the Municipality of Las Pinas, Metro Manila, Philippines, and within the jurisdiction of this Honorable Court, the said accused received in trust from the complainant Leonida E. Quilatan various pieces of jewelry in the total value of P567,750.00 to be sold on commission basis under the express duty and obligation of remitting the proceeds thereof to the said complainant if sold or returning the same to the latter if unsold but the said accused once in possession of said various pieces of jewelry, with unfaithfulness and abuse of confidence and with intent to defraud, did then and there willfully, unlawfully and feloniously misappropriate and convert the same for her own personal use and benefit and despite oral and written demands, she failed and refused to account for said jewelry or the proceeds of sale thereof, to the damage and prejudice of complainant Leonida E. Quilatan in the aforestated total amount of P567,750.00.

CONTRARY TO LAW.5

Petitioner pleaded not guilty to the charge upon arraignment.6 Trial on the merits thereafter ensued.

Quilatan testified that petitioner was able to remit P100,000.00 and returned P43,000.00 worth of jewelriy;7 that at the start, petitioner was prompt in settling her obligation; however, subsequently the payments were remitted late;8 that petitioner still owed her in the amount of P424,750.00.9

On the other hand, petitioner admitted that she received several pieces of jewelry from Quilatan and that she indeed failed to pay for the same. She claimed that she entrusted the pieces of jewelry to Marichu Labrador who failed to pay for the same, thereby causing her to default in paying Quilatan.10 She presented handwritten receipts (Exhibits 1 & 2)11 evidencing payments made to Quilatan prior to the filing of the criminal case.

Marichu Labrador confirmed that she received pieces of jewelry from petitioner worth P441,035.00. She identified an acknowledgment receipt (Exhibit 3)12 signed by her dated July 5, 1992 and testified that she sold the jewelry to a person who absconded without paying her. Labrador also explained that in the past, she too had directly transacted with Quilatan for the sale of jewelry on commission basis; however, due to her outstanding account with the latter, she got jewelry from petitioner instead.13

On November 17, 1994, the trial court rendered a decision finding petitioner guilty of estafa, the dispositive portion of which reads:

WHEREFORE, in the light of the foregoing, the court finds the accused Virgie Serona guilty beyond reasonable doubt, and as the amount misappropriated is P424,750.00 the penalty provided under the first paragraph of Article 315 of the Revised Penal Code has to be imposed which shall be in the maximum period plus one (1) year for every additional P10,000.00.

Applying the Indeterminate Sentence Law, the said accused is hereby sentenced to suffer the penalty of imprisonment ranging from FOUR (4) YEARS and ONE (1) DAY

of prision correccional as minimum to TEN (10) YEARS and ONE (1) DAY of prision mayor as maximum; to pay the sum of P424,750.00 as cost for the unreturned jewelries; to suffer the accessory penalties provided by law; and to pay the costs.

SO ORDERED.14

Petitioner appealed to the Court of Appeals, which affirmed the judgment of conviction but modified the penalty as follows:

WHEREFORE, the appealed decision finding the accused-appellant guilty beyond reasonable doubt of the crime of estafa is hereby AFFIRMED with the following MODIFICATION:

Considering that the amount involved is P424,750.00, the penalty should be imposed in its maximum period adding one (1) year for each additional P10,000.00 albeit the total penalty should not exceed Twenty (20) Years (Art. 315). Hence, accused-appellant is hereby SENTENCED to suffer the penalty of imprisonment ranging from Four (4) Years and One (1) Day of Prision Correccional as minimum to Twenty (20) Years of Reclusion Temporal.

SO ORDERED.15

Upon denial of her motion for reconsideration,16 petitioner filed the instant petition under Rule 45, alleging that:

I

RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN CONCLUDING THAT THERE WAS AN ABUSE OF CONFIDENCE ON THE PART OF PETITIONER IN ENTRUSTING THE SUBJECT JEWELRIES (sic) TO HER SUB-AGENT FOR SALE ON COMMISSION TO PROSPECTIVE BUYERS.

II

RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN CONCLUDING THAT THERE WAS MISAPPROPRIATION OR CONVERSION ON THE PART OF PETITIONER WHEN SHE FAILED TO RETURN THE SUBJECT JEWELRIES (sic) TO PRIVATE COMPLAINANT.17

Petitioner argues that the prosecution failed to establish the elements of estafa as penalized under Article 315, par. 1(b) of the Revised Penal Code. In particular, she submits that she neither abused the confidence reposed upon her by Quilatan nor converted or misappropriated the subject jewelry; that her giving the pieces of jewelry to a sub-agent for sale on commission basis did not violate her undertaking with Quilatan. Moreover, petitioner delivered the jewelry to Labrador under the same terms upon which it was originally entrusted to her. It was established that petitioner had not derived any personal benefit from the loss of the jewelry. Consequently, it cannot be said that she misappropriated or converted the same.

We find merit in the petition.

The elements of estafa through misappropriation or conversion as defined in Article 315, par. 1(b) of the Revised Penal Code are: (1) that the money, good or other personal property is received by the offender in trust, or on commission, or for administration, or under any other obligation involving the duty to make delivery of, or to return, the same; (2) that there be misappropriation or conversion of such money or property by the offender or denial on his part of such receipt; (3) that such misappropriation or conversion or denial is to the prejudice of another; and (4) that there is a demand made by the offended party on the offender.18 While the first, third and fourth elements are concededly present, we find the second element of misappropriation or conversion to be lacking in the case at bar.

Petitioner did not ipso facto commit the crime of estafa through conversion or misappropriation by delivering the jewelry to a sub-agent for sale on commission basis. We are unable to agree with the lower courts’ conclusion that this fact alone is sufficient ground for holding that petitioner disposed of the jewelry "as if it were hers, thereby committing conversion and a clear breach of trust."19

It must be pointed out that the law on agency in our jurisdiction allows the appointment by an agent of a substitute or sub-agent in the absence of an express agreement to the contrary between the agent and the principal.20 In the case at bar, the appointment of Labrador as petitioner’s sub-agent was not expressly prohibited by Quilatan, as the acknowledgment receipt, Exhibit B, does not contain any such limitation. Neither does it appear that petitioner was verbally forbidden by Quilatan from passing on the jewelry to another person before the acknowledgment receipt was executed or at any other time. Thus, it cannot be said that petitioner’s act of entrusting the jewelry to Labrador is characterized by abuse of confidence because such an act was not proscribed and is, in fact, legally sanctioned.

The essence of estafa under Article 315, par. 1(b) is the appropriation or conversion of money or property received to the prejudice of the owner. The words "convert" and "misappropriated" connote an act of using or disposing of another’s property as if it were one’s own, or of devoting it to a purpose or use different from that agreed upon. To misappropriate for one’s own use includes not only conversion to one’s personal advantage, but also every attempt to dispose of the property of another without right.21

In the case at bar, it was established that the inability of petitioner as agent to comply with her duty to return either the pieces of jewelry or the proceeds of its sale to her principal Quilatan was due, in turn, to the failure of Labrador to abide by her agreement with petitioner. Notably, Labrador testified that she obligated herself to sell the jewelry in behalf of petitioner also on commission basis or to return the same if not sold. In other words, the pieces of jewelry were given by petitioner to Labrador to achieve the very same end for which they were delivered to her in the first place. Consequently, there is no conversion since the pieces of jewelry were not devoted to a purpose or use different from that agreed upon.

Similarly, it cannot be said that petitioner misappropriated the jewelry or delivered them to Labrador "without right." Aside from the fact that no condition or limitation was

imposed on the mode or manner by which petitioner was to effect the sale, it is also consistent with usual practice for the seller to necessarily part with the valuables in order to find a buyer and allow inspection of the items for sale.

In People v. Nepomuceno,22 the accused-appellant was acquitted of estafa on facts similar to the instant case. Accused-appellant therein undertook to sell two diamond rings in behalf of the complainant on commission basis, with the obligation to return the same in a few days if not sold. However, by reason of the fact that the rings were delivered also for sale on commission to sub-agents who failed to account for the rings or the proceeds of its sale, accused-appellant likewise failed to make good his obligation to the complainant thereby giving rise to the charge of estafa. In absolving the accused-appellant of the crime charged, we held:

Where, as in the present case, the agents to whom personal property was entrusted for sale, conclusively proves the inability to return the same is solely due to malfeasance of a subagent to whom the first agent had actually entrusted the property in good faith, and for the same purpose for which it was received; there being no prohibition to do so and the chattel being delivered to the subagent before the owner demands its return or before such return becomes due, we hold that the first agent can not be held guilty of estafa by either misappropriation or conversion. The abuse of confidence that is characteristic of this offense is missing under the circumstances.23

Accordingly, petitioner herein must be acquitted. The lower courts’ reliance on People v. Flores24 and U.S. v. Panes25 to justify petitioner’s conviction is misplaced, considering that the factual background of the cited cases differ from those which obtain in the case at bar. In Flores, the accused received a ring to sell under the condition that she would return it the following day if not sold and without authority to retain the ring or to give it to a sub-agent. The accused in Panes, meanwhile, was obliged to return the jewelry he received upon demand, but passed on the same to a sub-agent even after demand for its return had already been made. In the foregoing cases, it was held that there was conversion or misappropriation.

Furthermore, in Lim v. Court of Appeals,26 the Court, citing Nepomuceno and the case of People v. Trinidad,27held that:

In cases of estafa the profit or gain must be obtained by the accused personally, through his own acts, and his mere negligence in permitting another to take advantage or benefit from the entrusted chattel cannot constitute estafa under Article 315, paragraph 1-b, of the Revised Penal Code; unless of course the evidence should disclose that the agent acted in conspiracy or connivance with the one who carried out the actual misappropriation, then the accused would be answerable for the acts of his co-conspirators. If there is no such evidence, direct or circumstantial, and if the proof is clear that the accused herself was the innocent victim of her sub-agent’s faithlessness, her acquittal is in order.28 (Italics copied)

Labrador admitted that she received the jewelry from petitioner and sold the same to a third person. She further acknowledged that she owed petitioner P441,035.00, thereby negating any criminal intent on the part of petitioner. There is no showing that petitioner derived personal benefit from or conspired with Labrador to deprive

Quilatan of the jewelry or its value. Consequently, there is no estafa within contemplation of the law.

Notwithstanding the above, however, petitioner is not entirely free from any liability towards Quilatan. The rule is that an accused acquitted of estafa may nevertheless be held civilly liable where the facts established by the evidence so warrant. Then too, an agent who is not prohibited from appointing a sub-agent but does so without express authority is responsible for the acts of the sub-agent.29 Considering that the civil action for the recovery of civil liability arising from the offense is deemed instituted with the criminal action,30 petitioner is liable to pay complainant Quilatan the value of the unpaid pieces of jewelry.

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CR No. 17222 dated April 30,1997 and its resolution dated August 28, 1997 are REVERSED and SET ASIDE. Petitioner Virgie Serona is ACQUITTED of the crime charged, but is held civilly liable in the amount of P424,750.00 as actual damages, plus legal interest, without subsidiary imprisonment in case of insolvency.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 137162             January 24, 2007

CORAZON L. ESCUETA, assisted by her husband EDGAR ESCUETA, IGNACIO E. RUBIO, THE HEIRS OF LUZ R. BALOLOY, namely, ALEJANDRINO R. BALOLOY and BAYANI R. BALOLOY, Petitioners, vs.RUFINA LIM, Respondent.

D E C I S I O N

AZCUNA, J.:

This is an appeal by certiorari1 to annul and set aside the Decision and Resolution of the Court of Appeals (CA) dated October 26, 1998 and January 11, 1999, respectively, in CA-G.R. CV No. 48282, entitled "Rufina Lim v. Corazon L. Escueta, etc., et. al."

The facts2 appear as follows:

Respondent Rufina Lim filed an action to remove cloud on, or quiet title to, real property, with preliminary injunction and issuance of [a hold-departure order] from the Philippines against Ignacio E. Rubio. Respondent amended her complaint to include specific performance and damages.

In her amended complaint, respondent averred inter alia that she bought the hereditary shares (consisting of 10 lots) of Ignacio Rubio [and] the heirs of Luz Baloloy, namely: Alejandrino, Bayani, and other co-heirs; that said vendors executed a contract of sale dated April 10, 1990 in her favor; that Ignacio Rubio and the heirs of Luz Baloloy received [a down payment] or earnest money in the amount of P102,169.86 and P450,000, respectively; that it was agreed in the contract of sale that the vendors would secure certificates of title covering their respective hereditary shares; that the balance of the purchase price would be paid to each heir upon presentation of their individual certificate[s] of [title]; that Ignacio Rubio refused to receive the other half of the down payment which is P[100,000]; that Ignacio Rubio refused and still refuses to deliver to [respondent] the certificates of title covering his share on the two lots; that with respect to the heirs of Luz Baloloy, they also refused and still refuse to perform the delivery of the two certificates of title covering their share in the disputed lots; that respondent was and is ready and willing to pay Ignacio Rubio and the heirs of Luz Baloloy upon presentation of their individual certificates of title, free from whatever lien and encumbrance;

As to petitioner Corazon Escueta, in spite of her knowledge that the disputed lots have already been sold by Ignacio Rubio to respondent, it is alleged that a simulated deed of sale involving said lots was effected by Ignacio Rubio in her favor; and that the simulated deed of sale by Rubio to Escueta has raised doubts and clouds over respondent’s title.

In their separate amended answers, petitioners denied the material allegations of the complaint and alleged inter alia the following:

For the heirs of Luz Baloloy (Baloloys for brevity):

Respondent has no cause of action, because the subject contract of sale has no more force and effect as far as the Baloloys are concerned, since they have withdrawn their offer to sell for the reason that respondent failed to pay the balance of the purchase price as orally promised on or before May 1, 1990.

For petitioners Ignacio Rubio (Rubio for brevity) and Corazon Escueta (Escueta for brevity):

Respondent has no cause of action, because Rubio has not entered into a contract of sale with her; that he has appointed his daughter Patricia Llamas to be his attorney-in-fact and not in favor of Virginia Rubio Laygo Lim (Lim for brevity) who was the one who represented him in the sale of the disputed lots in favor of respondent; that theP100,000 respondent claimed he received as down payment for the lots is a simple transaction by way of a loan with Lim.

The Baloloys failed to appear at the pre-trial. Upon motion of respondent, the trial court declared the Baloloys in default. They then filed a motion to lift the order declaring them in default, which was denied by the trial court in an order dated November 27, 1991. Consequently, respondent was allowed to adduce evidence ex parte. Thereafter, the trial court rendered a partial decision dated July 23, 1993 against the Baloloys, the dispositive portion of which reads as follows:

IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of [respondent] and against [petitioners, heirs] of Luz R. Balolo[y], namely: Alejandrino Baloloy and Bayani Baloloy. The [petitioners] Alejandrino Baloloy and Bayani Baloloy are ordered to immediately execute an [Absolute] Deed of Sale over their hereditary share in the properties covered by TCT No. 74392 and TCT No. 74394, after payment to them by [respondent] the amount of P[1,050,000] or consignation of said amount in Court. [For] failure of [petitioners] Alejandrino Baloloy and Bayani Baloloy to execute the Absolute Deed of Sale over their hereditary share in the property covered by TCT No. T-74392 and TCT No. T-74394 in favor of [respondent], the Clerk of Court is ordered to execute the necessary Absolute Deed of Sale in behalf of the Baloloys in favor of [respondent,] with a consideration ofP[1,500,000]. Further[,] [petitioners] Alejandrino Baloloy and Bayani Baloloy are ordered to jointly and severally pay [respondent] moral damages in the amount of P[50,000] and P[20,000] for attorney’s fees. The adverse claim annotated at the back of TCT No. T-74392 and TCT No. T-74394[,] insofar as the shares of Alejandrino Baloloy and Bayani Baloloy are concerned[,] [is] ordered cancelled.

With costs against [petitioners] Alejandrino Baloloy and Bayani Baloloy.

SO ORDERED.3

The Baloloys filed a petition for relief from judgment and order dated July 4, 1994 and supplemental petition dated July 7, 1994. This was denied by the trial court in an order dated September 16, 1994. Hence, appeal to the Court of Appeals was taken challenging the order denying the petition for relief.

Trial on the merits ensued between respondent and Rubio and Escueta. After trial, the trial court rendered its assailed Decision, as follows:

IN VIEW OF THE FOREGOING, the complaint [and] amended complaint are dismissed against [petitioners] Corazon L. Escueta, Ignacio E. Rubio[,] and the Register of Deeds. The counterclaim of [petitioners] [is] also dismissed. However, [petitioner] Ignacio E. Rubio is ordered to return to the [respondent], Rufina Lim[,] the amount of P102,169.80[,] with interest at the rate of six percent (6%) per annum from April 10, [1990] until the same is fully paid. Without pronouncement as to costs.

SO ORDERED.4

On appeal, the CA affirmed the trial court’s order and partial decision, but reversed the later decision. The dispositive portion of its assailed Decision reads:

WHEREFORE, upon all the foregoing premises considered, this Court rules:

1. the appeal of the Baloloys from the Order denying the Petition for Relief from Judgment and Orders dated July 4, 1994 and Supplemental Petition dated July 7, 1994 is DISMISSED. The Order appealed from is AFFIRMED.

2. the Decision dismissing [respondent’s] complaint is REVERSED and SET ASIDE and a new one is entered. Accordingly,

a. the validity of the subject contract of sale in favor of [respondent] is upheld.

b. Rubio is directed to execute a Deed of Absolute Sale conditioned upon the payment of the balance of the purchase price by [respondent] within 30 days from the receipt of the entry of judgment of this Decision.

c. the contracts of sale between Rubio and Escueta involving Rubio’s share in the disputed properties is declared NULL and VOID.

d. Rubio and Escueta are ordered to pay jointly and severally the [respondent] the amount ofP[20,000] as moral damages and P[20,000] as attorney’s fees.

3. the appeal of Rubio and Escueta on the denial of their counterclaim is DISMISSED.

SO ORDERED.5

Petitioners’ Motion for Reconsideration of the CA Decision was denied. Hence, this petition.

The issues are:

I

THE HONORABLE COURT OF APPEALS ERRED IN DENYING THE PETITION FOR RELIEF FROM JUDGMENT FILED BY THE BALOLOYS.

II

THE HONORABLE COURT OF APPEALS ERRED IN REINSTATING THE COMPLAINT AND IN AWARDING MORAL DAMAGES AND ATTORNEY’S FEES IN FAVOR OF RESPONDENT RUFINA L. LIM CONSIDERING THAT:

A. IGNACIO E. RUBIO IS NOT BOUND BY THE CONTRACT OF SALE BETWEEN VIRGINIA LAYGO-LIM AND RUFINA LIM.

B. THE CONTRACT ENTERED INTO BETWEEN RUFINA LIM AND VIRGINIA LAYGO-LIM IS A CONTRACT TO SELL AND NOT A CONTRACT OF SALE.

C. RUFINA LIM FAILED TO FAITHFULLY COMPLY WITH HER OBLIGATIONS UNDER THE CONTRACT TO SELL THEREBY WARRANTING THE CANCELLATION THEREOF.

D. CORAZON L. ESCUETA ACTED IN UTMOST GOOD FAITH IN ENTERING INTO THE CONTRACT OF SALE WITH IGNACIO E. RUBIO.

III

THE CONTRACT OF SALE EXECUTED BETWEEN IGNACIO E. RUBIO AND CORAZON L. ESCUETA IS VALID.

IV

THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING PETITIONERS’ COUNTERCLAIMS.

Briefly, the issue is whether the contract of sale between petitioners and respondent is valid.

Petitioners argue, as follows:

First, the CA did not consider the circumstances surrounding petitioners’ failure to appear at the pre-trial and to file the petition for relief on time.

As to the failure to appear at the pre-trial, there was fraud, accident and/or excusable neglect, because petitioner Bayani was in the United States. There was no service of the notice of pre-trial or order. Neither did the former counsel of record inform him. Consequently, the order declaring him in default is void, and all subsequent proceedings, orders, or decision are void.

Furthermore, petitioner Alejandrino was not clothed with a power of attorney to appear on behalf of Bayani at the pre-trial conference.

Second, the sale by Virginia to respondent is not binding. Petitioner Rubio did not authorize Virginia to transact business in his behalf pertaining to the property. The Special Power of Attorney was constituted in favor of Llamas, and the latter was not empowered to designate a substitute attorney-in-fact. Llamas even disowned her signature appearing on the "Joint Special Power of Attorney," which constituted Virginia as her true and lawful attorney-in-fact in selling Rubio’s properties.

Dealing with an assumed agent, respondent should ascertain not only the fact of agency, but also the nature and extent of the former’s authority. Besides, Virginia exceeded the authority for failing to comply with her obligations under the "Joint Special Power of Attorney."

The amount encashed by Rubio represented not the down payment, but the payment of respondent’s debt. His acceptance and encashment of the check was not a ratification of the contract of sale.

Third, the contract between respondent and Virginia is a contract to sell, not a contract of sale. The real character of the contract is not the title given, but the intention of the parties. They intended to reserve ownership of the property to petitioners pending full payment of the purchase price. Together with taxes and other fees due on the properties, these are conditions precedent for the perfection of the sale. Even assuming that the contract is ambiguous, the same must be resolved against respondent, the party who caused the same.

Fourth, Respondent failed to faithfully fulfill her part of the obligation. Thus, Rubio had the right to sell his properties to Escueta who exercised due diligence in ascertaining ownership of the properties sold to her. Besides, a purchaser need not inquire beyond what appears in a Torrens title.

The petition lacks merit. The contract of sale between petitioners and respondent is valid.lawphil.net

Bayani Baloloy was represented by his attorney-in-fact, Alejandrino Baloloy. In the Baloloys’ answer to the original complaint and amended complaint, the allegations relating to the personal circumstances of the Baloloys are clearly admitted.

"An admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof."6 The "factual admission in the pleadings on record [dispenses] with the need x x x to present evidence to prove the admitted fact."7 It cannot, therefore, "be controverted by the party making such admission, and [is] conclusive"8 as to them. All proofs submitted by them "contrary thereto or inconsistent therewith should be ignored whether objection is interposed by a party or not."9 Besides, there is no showing that a palpable mistake has been committed in their admission or that no admission has been made by them.

Pre-trial is mandatory.10 The notices of pre-trial had been sent to both the Baloloys and their former counsel of record. Being served with notice, he is "charged with the duty of notifying the party represented by him."11 He must "see to it that his client receives such notice and attends the pre-trial."12 What the Baloloys and their former counsel have alleged instead in their Motion to Lift Order of As In Default dated December 11, 1991 is the belated receipt of Bayani Baloloy’s special power of attorney in favor of their former counsel, not that they have not received the notice or been informed of the scheduled pre-trial. Not having raised the ground of lack of a special power of attorney in their motion, they are now deemed to have waived it. Certainly, they cannot raise it at this late stage of the proceedings. For lack of representation, Bayani Baloloy was properly declared in default.

Section 3 of Rule 38 of the Rules of Court states:

SEC. 3. Time for filing petition; contents and verification. – A petition provided for in either of the preceding sections of this Rule must be verified, filed within sixty (60) days after the petitioner learns of the judgment, final order, or other proceeding to be set aside, and not more than six (6) months after such judgment or final order was entered, or such proceeding was taken; and must be accompanied with affidavits showing the fraud, accident, mistake, or excusable negligence relied upon, and the facts constituting the petitioner’s good and substantial cause of action or defense, as the case may be.

There is no reason for the Baloloys to ignore the effects of the above-cited rule. "The 60-day period is reckoned from the time the party acquired knowledge of the order, judgment or proceedings and not from the date he actually read the same."13 As aptly put by the appellate court:

The evidence on record as far as this issue is concerned shows that Atty. Arsenio Villalon, Jr., the former counsel of record of the Baloloys received a copy of the partial decision dated June 23, 1993 on April 5, 1994. At that time, said former counsel is still their counsel of record. The reckoning of the 60 day period therefore is the date when the said counsel of record received a copy of the partial decision which was on April

5, 1994. The petition for relief was filed by the new counsel on July 4, 1994 which means that 90 days have already lapsed or 30 days beyond the 60 day period. Moreover, the records further show that the Baloloys received the partial decision on September 13, 1993 as evidenced by Registry return cards which bear the numbers 02597 and 02598 signed by Mr. Alejandrino Baloloy.

The Baloloys[,] apparently in an attempt to cure the lapse of the aforesaid reglementary period to file a petition for relief from judgment[,] included in its petition the two Orders dated May 6, 1994 and June 29, 1994. The first Order denied Baloloys’ motion to fix the period within which plaintiffs-appellants pay the balance of the purchase price. The second Order refers to the grant of partial execution, i.e. on the aspect of damages. These Orders are only consequences of the partial decision subject of the petition for relief, and thus, cannot be considered in the determination of the reglementary period within which to file the said petition for relief.

Furthermore, no fraud, accident, mistake, or excusable negligence exists in order that the petition for relief may be granted.14 There is no proof of extrinsic fraud that "prevents a party from having a trial x x x or from presenting all of his case to the court"15 or an "accident x x x which ordinary prudence could not have guarded against, and by reason of which the party applying has probably been impaired in his rights."16 There is also no proof of either a "mistake x x x of law"17 or an excusable negligence "caused by failure to receive notice of x x x the trial x x x that it would not be necessary for him to take an active part in the case x x x by relying on another person to attend to the case for him, when such other person x x x was chargeable with that duty x x x, or by other circumstances not involving fault of the moving party."18

Article 1892 of the Civil Code provides:

Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be responsible for the acts of the substitute:

(1) When he was not given the power to appoint one x x x.

Applying the above-quoted provision to the special power of attorney executed by Ignacio Rubio in favor of his daughter Patricia Llamas, it is clear that she is not prohibited from appointing a substitute. By authorizing Virginia Lim to sell the subject properties, Patricia merely acted within the limits of the authority given by her father, but she will have to be "responsible for the acts of the sub-agent,"19 among which is precisely the sale of the subject properties in favor of respondent.

Even assuming that Virginia Lim has no authority to sell the subject properties, the contract she executed in favor of respondent is not void, but simply unenforceable, under the second paragraph of Article 1317 of the Civil Code which reads:

Art. 1317. x x x

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.

Ignacio Rubio merely denies the contract of sale. He claims, without substantiation, that what he received was a loan, not the down payment for the sale of the subject properties. His acceptance and encashment of the check, however, constitute ratification of the contract of sale and "produce the effects of an express power of agency."20 "[H]is action necessarily implies that he waived his right of action to avoid the contract, and, consequently, it also implies the tacit, if not express, confirmation of the said sale effected" by Virginia Lim in favor of respondent.

Similarly, the Baloloys have ratified the contract of sale when they accepted and enjoyed its benefits. "The doctrine of estoppel applicable to petitioners here is not only that which prohibits a party from assuming inconsistent positions, based on the principle of election, but that which precludes him from repudiating an obligation voluntarily assumed after having accepted benefits therefrom. To countenance such repudiation would be contrary to equity, and would put a premium on fraud or misrepresentation."21

Indeed, Virginia Lim and respondent have entered into a contract of sale. Not only has the title to the subject properties passed to the latter upon delivery of the thing sold, but there is also no stipulation in the contract that states the ownership is to be reserved in or "retained by the vendor until full payment of the price."22

Applying Article 1544 of the Civil Code, a second buyer of the property who may have had actual or constructive knowledge of such defect in the seller’s title, or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyer’s title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale.23 Even the argument that a purchaser need not inquire beyond what appears in a Torrens title does not hold water. A perusal of the certificates of title alone will reveal that the subject properties are registered in common, not in the individual names of the heirs.

Nothing in the contract "prevents the obligation of the vendor to convey title from becoming effective"24 or gives "the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period."25Petitioners themselves have failed to deliver their individual certificates of title, for which reason it is obvious that respondent cannot be expected to pay the stipulated taxes, fees, and expenses.

"[A]ll the elements of a valid contract of sale under Article 1458 of the Civil Code are present, such as: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent."26 Ignacio Rubio, the Baloloys, and their co-heirs sold their hereditary shares for a price certain to which respondent agreed to buy and pay for the subject properties. "The offer and the acceptance are concurrent, since the minds of the contracting parties meet in the terms of the agreement."27

In fact, earnest money has been given by respondent. "[I]t shall be considered as part of the price and as proof of the perfection of the contract.28 It constitutes an advance payment to "be deducted from the total price."29

Article 1477 of the same Code also states that "[t]he ownership of the thing sold shall be transferred to the vendee upon actual or constructive delivery thereof."30 In the present case, there is actual delivery as manifested by acts simultaneous with and subsequent to the contract of sale when respondent not only took possession of the subject properties but also allowed their use as parking terminal for jeepneys and buses. Moreover, the execution itself of the contract of sale is constructive delivery.

Consequently, Ignacio Rubio could no longer sell the subject properties to Corazon Escueta, after having sold them to respondent. "[I]n a contract of sale, the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded x x x."31 The records do not show that Ignacio Rubio asked for a rescission of the contract. What he adduced was a belated revocation of the special power of attorney he executed in favor of Patricia Llamas. "In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act."32

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 48282, dated

October 26, 1998 and January 11, 1999, respectively, are hereby AFFIRMED. Costs against petitioners.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-38479             November 20, 1933

QUINTIN DE BORJA, judicial administrator of the intestate estate of the deceased Marcelo de Borja,plaintiff-appellant, vs.FRANCISCO DE BORJA, defendant-appellant.

M.H. de Joya and Quintin Paredes for plaintiff-appellant.Jose de Borja for defendant-appellant.

 

IMPERIAL, J.:

The plaintiff herein, in his capacity as judicial administrator of the estate of the deceased Marcelo de Borja, instituted this action of the Court of First Instance of Rizal, to recover from the defendant the sum of P61,376.56 which, according to the amended complaint, the said defendant owed the aforesaid deceased, for the certain sums of money loaned to and collected by him from other persons with the obligation to render an accounting thereof to the said deceased.

In his amended answer, the defendant interposed various counterclaims for alleged sums of money owed by him by the aforesaid deceased.

After the trial thereof and the presentation of voluminous evidence therein, the trial court reached the conclusion and held that, from his various causes of action, the plaintiff was entitled to recover the sum of P33,218.86 from the defendant, and that, by way of counterclaim, the said defendant in turn was entitled to collect the sum of P39,683 from the plaintiff, and rendered judgment in favor of the defendant in the sum of P6,464.14 with legal interest thereon from the date of the counterclaim, with the costs. Both parties appealed therefrom.lawphil.net

The trial court made a very careful analysis of the oral and documentary evidence presented therein, and from the preponderance thereof, inferred the findings of fact stated in its decision. We are convicted that, from the evidence presented, the liquidation made by the trial court is the nearest approach to its findings of fact, and for this reason we do not feel inclined to alter or modify it.

The plaintiff-appellant's contention that the counterclaims presented by the defendant have already prescribed, is untenable. The counterclaims in question are based on instruments in writing marked Exhibit 1 to 6. The period of prescription thereof is not

six (6) years, as claimed, but ten (10) years, in accordance with the provisions of section 43 (1) of the Code of Civil Procedure.

Neither is the plaintiff entitled to the interest claimed by him upon the alleged sums loaned to and collected by the defendant from various persons for his deceased father. In all the aforementioned transactions, the defendant acted in his capacity as attorney-in-fact of his deceased father, and there being no evidence showing that he converted the money entrusted to him to his own use, he is not liable for interest thereon, in accordance with the provisions of article 1742 of the Civil Code.

The defendant-appellant's claim to the effect that he is entitled to collect the rents for the use of the earthen jar factory and the buildings thereof, is, likewise, unfounded. The trial court held that all there existed between the parties was a mere gratuitous commodatum and that the most that the deceased bound himself to do was to pay the taxes on the properties in question. There is nothing in the records of the case to justify reversing the judgment rendered therein.

The judgment appealed from being, in our opinion, in accordance with the law and sufficiently supported by a preponderance of the evidence presented therein, it is hereby affirmed, without special pronouncement as to the costs of this instance. So ordered.

Avanceña, C.J., Malcolm, Villa-Real, and Hull, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-7912             August 30, 1955

HORTENSIA ZIALCITA-YUSECO assisted by her husband JOAQUIN P. YUSECO, Jr., plaintiffs-appellants, vs.WILLIAM SIMMONS, defendant-appellee.

Yuseco, Abdon and Yuseco for appellants.Ross, Selph, Carrascoso and Janda for appellee.

BENGZON, Acting C.J.:

Action for damages resulting from plaintiff's allegedly illegal separation from the service of the National City Bank of New York.

In June, 1952 Hortensia Zialcita was employed by the National City Bank of New York, a foreign banking corporation doing business in the Philippines, under a contract of employment, signed by her, including the following clause:

I understand that I am being hired as a single female employee. In the event of my marriage you may terminate this employment in which case I shall be entitled to no other benefits except my salary through the last day on which I worked.

Because she intended to marry soon, and pursuant to the above stipulation, plaintiff filed on July 7, 1952, her written resignation—which was accepted—effective August 15, 1952. On July 13, 1952 she married her co-plaintiff; and on August 18, 1952 she commenced, in the Manila court of first instance, this suit against William Simmons, the general manager of the National City Bank of New York asserting that said defendant "urged by his distorted notion of a new policy" in the said bank "as manager thereof, forced the herein plaintiff to sign" the above letter of resignation "in implementation of the aforementioned immoral and illegal agreement in the contract of employment." She demanded that said defendant be ordered to pay her damages totalling P15,000.

For answer the defendant averred that: (a) plaintiff signed the contract voluntarily, (b) the above condition of employment was valid, and (c) before marriage plaintiff resigned her position; and asserting she had no cause of action against him; he asked for damages.

The case was heard; and on March 31, 1953 the Honorable Alejandro Panlilio, Judge, entered judgment absolving the defendant for the reason that the plaintiff had signed

the contract voluntarily and clause in question was a valid condition of employment not repugnant to public policy. His Honor furthermore opined that plaintiff had no cause of action "taking into consideration the undeniable fact that said plaintiff was not employed by the defendant William Simmons, but by the National City Bank of New York, of which said defendant happened to be the general manager. If at all, that is, if by reason of the termination of her employment contract with the bank, plaintiff Hortensia Zialcita had any cause of action, the action should have been directed, not against the National City Bank of New York."

The plaintiff appealed, contending in her brief that the lower court erred in declaring she had no cause to complain against defendant, and in sustaining the validity of the aforesaid condition of her employment. She argues that the defense of failure to state a cause of action was not raised by the defendant in his answer, nor in a motion to dismiss; and under the Rules such defense was waived and was unavailable, when appellee for the first time pleaded it in his memorandum.

This argument is without merit, because in the defendant's answer he specifically alleged:

That plaintiff has no cause of action against defendant; that the action instituted by her against defendant (is) unwarranted; . .."

Now, then, does plaintiff have the right to compel the manager of the National City Bank to pay damages by reason of her separation? She does not rebut the court's reasoning that defendant merely acted as agent of the Bank, and that her remedy, if any, is to sue such Bank. Indeed such reasoning is in line with well-known principles of agency. According to the complaint itself, in requiring her to sign the contract, defendant acted as manager of the Bank, and in requiring her resignation he also acted as manager of the Bank. There is no allegation that he exceeded his power as manager or that his actuation was repudiated by his principal, the Bank. Consequently any claim for damages supposedly resulting from his acts as manager should be directed against his principal, the Bank—not against him personally.

"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 . . ..""The principal must comply with all the obligations which the agent may have contracted within the scope of his authority." (Arts. 1897 and 1910 New Civil Code.)

Of course it is not necessary to cite authorities to conclude that the defendant as manager had authority to contract plaintiff's services for the corporation and to accept or require her resignation. (See Guevarra, Phil. Corporation Law pp. 54-55 and Nepomuceno vs. Parlatone 40 Off. Gaz. 119.)

In Macias vs. Warner Barnes & Co., 43 Phil., 155 action to enforce a fire policy was filed against the insurer'sagent  that had issued a policy in the name of the insurer. Applying the doctrine of the principal's responsibility, the courts dismissed the action.

In this view of the litigation, we find it unnecessary to decide the issue extensively discussed in the briefs, whether the employment clause is in restraint of marriage, and/or contravenes public policy. That issue would be a proper subject for debate in a proceeding against the Bank, the true employer of plaintiff. To consider the point now, would be unfair to said Bank, which is not presently before the Court to defend its side of the debate.

The judgment absolving defendant is affirmed with costs.

Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo, Labrador, Concepcion, and Reyes, J. B. L., JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. 16492             March 9, 1922

E. MACIAS & CO., importers and exporters, plaintiff-appellant, vs.WARNER, BARNES & CO., in its capacity as agents of "The China Fire Insurance Co.," of "The Yang-Tsze" and of "The State Assurance Co., Ltd.," defendant-appellant.

Ramon Sotelo for plaintiff-appellant.Cohn, Fisher & DeWitt for defendant-appellant.

STATEMENT

The plaintiff is a corporation duly registered and domiciled in Manila. The defendant is a corporation duly licensed to do business in the Philippine Islands, and is the resident agent of insurance companies "The China Fire Insurance Company, Limited, of Hongkong," "The Yang-Tsze Insurance Association Limited, of Shanghai," and "The State Assurance Company, Limited, of Liverpool. The plaintiff is an importer of textures and commercial articles for wholesale.

In the ordinary course of business, it applied for, and obtained, the following policies against loss by fire:

Policy No. 4143, issued by The China Fire Insurance Co., Ltd., for ....................................................................... P12,000

Policy No. 4382, issued by The China Fire Insurance Co., Ltd., for .......................................................................... 15,000

Policy No. 326, issued by The Yang-Tsze Insurance Ass'n., Ltd., for ..................................................................... 10,000

Policy No. 796111, issued by The State Assurance Co., Ltd., for ............................................................................ 8,000

Policy No. 4143, of P12,000, recites that Mrs. Rosario Vizcarra, having paid to the China Fire Insurance Company, Limited, P102 for insuring against or damage by fire certain merchandise the description of which follows, "the company agrees with the insured that, if the property above described, or any party thereof, shall be destroyed or damaged by fire between September 16, 1918, and September 16, 1919," etc., "The company will, out of its capital, stock and funds, pay or make good all such loss

or damage, not exceeding" the amount of the policy. This policy was later duly assigned to the plaintiff.

Policy No. 4382, for P15,000, was issued by the same company to, and in the name of, plaintiff.

Policy No. 326, for P10,000, was issued to, and in the name of policy No. 326, for P10,000, was issued to, and in the name of the plaintiff by The Yang-Tsze Insurance Association, Limited, and recites that the premium of P125 was paid by the plaintiff to the association, and that, in the event of loss by fire between certain dates, "the funds and property of the said association shall be subject and liable to pay, reinstate, or make good to the said assured, their heirs, executors, or administrators, such loss or damage as shall be occasioned by fire to the property above-mentioned and hereby insured," not exceeding the amount of the policy.

Policy No. 796111, for P8,000, was issued by The States Assurance Company, Limited, to the plaintiff for a premium of P100, which was paid to the Assurance Company through the defendant, its authorized agent, and recites that "the company agrees with the insured that in the event of loss by fire between certain dates, the company will, out of its capital, stock and funds, pay the amount of such loss or damage," not exceeding the amount of the policy, and it is attested by the defendant, through its "Cashier and Accountant and Manager, Agents, State Assurance Co., Ltd.," authorized agents of the Assurance Company.

Policy No. 4143 is attested "on behalf of The China Fire Insurance Company, Limited," by the cashier and accountant and manager of the defendant, as agents of The China Fire Insurance Company, Limited. The same is true as to policy no. 4382.

Policy No. 326 recites the payment of a premium of P125 by the plaintiff to The Yang-Tsze Insurance Association, Limited, and that, in the event of loss, "the funds and property of the said association shall be subject and liable to pay, reinstate, or make good to the said assured, their heirs, executors, or administrators, such loss or damage as shall be occasioned by fire or lightning to the property" insured, not exceeding the amount of the policy, and it is attested by the defendant, through its cashier and accountant and manager, as agents of the association "under the authority of a Power of Attorney from The Yang-Tsze Insurance Association, Limited," "to sign, for and on behalf of the said Association, etc."

March 25, 1919, and while the policies were in force, a loss occurred in which the insured property was more or less damaged by fire and the use of water resulting from the fire.

The plaintiff made a claim for damages under its policies, but could not agree as to the amount of loss sustained. It sold the insured property in its then damaged condition, and brought this action against Warner, Barnes & Co., in its capacity as agents, to recover the difference between the amount of the policies and the amount realized from the sale of the property, and in the first cause of action, it prayed for judgment for P23,052.99, and in the second cause of action P9,857.15.

The numbers and amounts of the policies and the names of the insurance companies are set forth and alleged in the complaint.

The answer admits that the defendants is the resident agent of the insurance companies, the issuance of the policies, and that a fire occurred on March 25, 1919, in the building in which the goods covered by the insurance policies were stored, and that to extinguish the fire three packages of goods were damage by water not to exceed P500, and denies generally all other material allegations of the complaint.

As a further and separate defense, the defendant pleads certain provisions in the policies, among which was a written notice of loss, and all other insurance and certain detailed information. It is then alleged —

That although frequently requested to do so, plaintiff failed and refused to deliver to defendant or to any other person authorized to receive it, any claim in writing specifying the articles or items of property damaged or destroyed and of the alleged amount of the loss or damage caused thereto.

That defendant was at all times ready and willing to pay, on behalf of the insurance companies by whom said policies were issued, and to the extent for which each was proportionately liable, the actual damage to plaintiff's goods covered by the risks insured against, upon compliance within the time limited, with the terms of the clause of the contracts of insurance above set forth.

Defendants prays judgment for costs.

Before the trial, counsel for the defendant objected to the introduction of any evidence in the case, and moved "that judgment be entered for the defendant on the pleadings upon the ground that it appears from the averment of the complaint that the plaintiff has had no contractual relations with the defendant, and that the action has not been brought against the real party in interest." The objection and motion was overruled and exception duly taken. After trial the court found that there was due the plaintiff from the three insurance companies p18,493.29 with interest thereon at the rate of 6 per cent per annum, from the date of the commencement of the action, and costs, and rendered the following judgment:

It is, therefore, ordered that judgment be entered against Warner, Barnes & Co., Ltd., in its capacity as agent and representative in the Philippine Islands for The China fire Insurance Company, Ltd., The Yang-Tsze Insurance Association, Ltd., and The State Assurance Co., Ltd., for the payment to the plaintiff, E. Macias & Co., of the sum of P18,493.29, the amount of this judgment to be prorated by Warner, Barnes & Co., among the three insurance companies above-mentioned by it represented, in proportion to the interest insured by each of said three insurance companies, according to the policies issued by them in favor of the plaintiff, and sued upon in this action.

The defendant then filed a motion to set aside the judgment and for a new trial, which was overruled and exception taken. From this judgment the defendant appealed, claiming that "the court erred in overruling defendant's motion for judgment on the pleadings; that the court erred in giving judgment for the plaintiff; that the court erred in denying defendants motion for a new trial," and specifying other assignments which are not material to this opinion, Plaintiff also appealed.

 

JOHNS, J.:

The material facts are not in dispute it must be conceded that the policies in question were issued by the different insurance companies, through the defendant as their respective agent; that they were issued in consideration of a premium which was paid by the insured to the respective companies for the amount of the policies, as alleged; that the defendant was, and is now, the resident agent in Manila of the companies, and was authorized to solicit and do business for them as such agent; that each company is a foreign corporation. The principal office and place business of the The China Fire Insurance Company is at Hongkong; of The Yang-Tsze Insurance Association is at Shanghai; and of The State Assurance Company is at Liverpool. As such foreign corporations they were duly authorized and licensed to do insurance business in the Philippine Islands, and, to that end and for that purpose, the defendant corporation, Warner, Barnes & Co., was the agent of each company.

All of the policies are in writing, and recite that the premium was paid by the insured to the insurance company which issued the policy, and that, in the event of a loss, the insurance company which issued it will pay to the insured the amount of the policy.

This is not a case of an undisclosed agent or an undisclosed principal. It is a case of a disclosed agent and a disclosed principal.

The policies on their face shows that the defendant was the agent of the respective companies, and that it was acting as such agent in dealing with the plaintiff. That in the issuance and delivery of the policies, the defendant was doing business in the name of, acting for, and representing, the respective insurance companies. The different policies expressly recite that, in the event of a loss, the respective companies agree to compensate the plaintiff for the amount of the loss. the defendant company did not insure the property of the plaintiff, or in any manner agree to pay the plaintiff the amount of any loss. There is no contract of any kind. either oral or written, between the plaintiff and Warner, Barnes & Co. Plaintiff's contracts are with the insurance companies, and are in writing, and the premiums were paid to the insurance companies, and are in writing, and the premiums were paid to the insurance companies and the policies were issued by, and in the name of, the insurance companies, and on the face of the policy itself, the plaintiff knew that the defendant was acting as agent for, and was representing, the respective insurance companies in the issuance and deliver of the policies. The defendant company did not contract or agree to do anything or to pay the plaintiff any money at any time or on any condition, either as agent or principal.

There is a very important distinction between the power and duties of a resident insurance agent of a foreign company and that of an executor, administrator, or receiver. An insurance agent as such is not responsible for, and does not have, any control over the corpus or estate of the corporate property, as does an executor, administrator, or receiver. Subject only to the order of the court, such officers are legal custodians and have actual possession of the corporate property. It is under their control and within their jurisdiction.

As stated by counsel for Warner, Barnes & Co., an attorney of record for an insurance company has greater power and authority to act for, and bind, the company than does a soliciting agent of an insurance company. Yet, no attorney would contend that a personal action would lie against local attorneys who represent a foreign corporation to recover on a contract made by the corporation. On the same principles by which plaintiff seeks to recover from the defendant, an action could be maintained against the cashier of any bank on every foreign draft which he signed for, and on behalf of, the bank.

Every cause of action ex contractu must be founded upon a contract, oral or written, either express or implied.

Warner, Barnes & Co., as principal or agent, did not make any contract, either or written, with the plaintiff. The contracts were made between the respective insurance companies and the insured, and were made by the insurance companies, through Warner, Barnes & Co., as their agent.

As in the case of a bank draft, it is not the cashier of the bank who makes the contract to pay the money evidenced by the draft, it is the bank, acting through its cashier, that makes the contract. So, in the instant case, it was the insurance companies, acting through Warner, Barnes & Co., as their agent, that made the written contracts wit the insured.

The trial court attached much importance to the fact that in the further and separate answer, an admission was made "that defendant was at all times ready and will not to pay, on behalf of the insurance companies by whom each was proportionately liable, the actual damage" sustained by the plaintiff covered by the policies upon the terms and conditions therein stated.

When analyzed, that is nothing more than a statement that the companies were ready and willing to prorate the amount when the losses were legally ascertained. Again, there is not claim or pretense that Warner, Barnes & Co. had any authority to act for, and represent the insurance companies in the pending action, or to appear for them or make any admission which would bind them. As a local agent, it could not do that without express authority. That power could only exercised by an executive officer of the company, or a person who was duly authorized to act for, and represent, the company in legal proceedings, and there is no claim or pretense, either express or implied, that the defendant has any such authority.

Plaintiff's cause of action, if any, is direct against the insurance companies that issued the policies and agreed to pay the losses.

The only defendant in the instant case is "Warner, Barnes & Co., in its capacity as agents of:" the insurance companies. Warner, Barnes & Co. did not make any contract with the plaintiff, and are not liable to the plaintiff on any contract, either as principal or agent. For such reason, plaintiff is not entitled to recover its losses from Warner, Barnes & Co., either as principal or agent. There is no breach of any contract with the plaintiff by Warners, Barnes & Co., either as agent or principal, for the simple reason that Warner, Barnes & Co., as agent or principal, never made any contract, oral or written, with the plaintiff. This defense was promptly raised before the taking of the testimony, and again renewed on the motion to set aside the judgment.

Plaintiff's own evidence shows that any cause of action it may have is against the insurance companies which issued the policies.

The complaint is dismissed, and the judgment of the lower court is reversed, and one will be entered here in favor of Warner, Barnes & Co., Ltd., against the plaintiff, for costs in both this and the lower court. So ordered.

Araullo, C.J., Johnson, Street, Malcolm, Avanceña, Villamor, Ostrand and Romualdez, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-2246             January 31, 1951

JOVITO R. SALONGA, plaintiff-appellee, vs.WARNER, BARNES AND CO., LTD., defendant-appellant.

Perkins, Ponce Enrile, Contreras and Gomez for appellant.Pedro L. Yap for appellee.

BAUTISTA ANGELO, J.:

This is an appeal from a decision of the Court of First Instance of Manila ordering the defendant, as agent of Westchester Fire Insurance Company of New York, to pay to the plaintiff the sum of P727. 82 with legal interest thereon from the filing of the complaint until paid, and the costs. The case was taken to this court because it involves only questions of law.

On August 28, 1946, Westchester Fire Insurance Company of New York entered into a contract with Tina J. Gamboa whereby said company insured one case of rayon yardage which said Tina J. Gamboa shipped from San Francisco, California, on steamer Clovis Victory, to Manila, Philippines and consigned to Jovito Salonga, plaintiff herein. According to the contract of insurance, the insurance company undertook to pay to the sender or her consignee the damages that may be caused to the goods shipped subject to the condition that the liability of the company will be limited to the actual loss which the insured may suffer not to the exceed the sum of (2,000. The ship arrived in Manila on September 10, 1946. On October 7, the shipment was examined by C. B. Nelson and Co., marine surveyors, at the request of the plaintiff, and in their examination the surveyors found a shortage in the shipment in the amount of P1,723,12. On October 9, plaintiff filed a claim for damages in the amount of P1,723.12 against the American President Lines, agents of the ship Clovis Victory, demanding settlement, and when apparently no action was taken on this claim, plaintiff demanded payment thereof from Warner, Barnes and Co., Ltd., as agent of the insurance company in the Philippines, and this agent having refused to pay the claim, on April 17, 1947, plaintiff instituted the present action.

In the meantime, the American President Lines, in a letter dated November 25, 1946, agreed to pay to the plaintiff the amount of P476.17 under its liability in the bill of lading, and when this offer was rejected, the claim was finally settled in the amount of P1,021.25. As a result, the amount claimed in the complaint as the ultimate liability of the defendant under the insurance contract was reduced to P717.82 only.

After trial, at which both parties presented their respective evidence, the court rendered judgment as stated in the early part of this decision. The motion for

reconsideration filed by the defendant having been denied, the case was appealed to this court.

Appellant now assigns the following errors:

I

The trial court erred in finding that the loss or damage of the case of rayon yardage (Pilferage, as found by the marine surveyors)is included in the risks insured against as enunciated in the insurance policy.

II

The trial court erred in holding that defendant, as agent of Westchester Fire Insurance Company of New York, United States of America, is responsible upon the insurance claim subject to the suit.

III

The trial court erred in denying defendant's motion for new trial and to set aside the decision. (Appellant's assignments of error).

We will begin by discussing the second error assigned by appellant for the reason that if our view on the question raised is in favor of the claim of appellant there would be no need to proceed with the discussion of the other errors assigned, for that would put an end to the controversy.

As regards the second assignment of error, counsel claims that the defendant cannot be made responsible to pay the amount in litigation because (1) said defendant has no contractual relation with either the plaintiff or his consignor; (2) the defendant is not the real party in interest against whom the suit should be brought; and (3) a judgment for or against an agent in no way binds the real party in interest.

1. We are of the opinion that the first point is well taken. It is a well known rule that a contractual obligation or liability, or an action ex-contractu, must be founded upon a contract, oral or written, either express or implied. This is axiomatic. If there is no contract, there is no corresponding liability, and no cause of action may arise therefrom. This is what is provided for in article 1257 of the Civil Code. This article provides that contracts are binding upon the parties who make them and their heirs, excepting, with respect to the latter, where the rights and obligations are not transmissible, and when the contract contains a stipulation in favor of a third person, he may demand its fulfillment if he gives notice of his acceptance before it is revoked. This is also the ruling laid down by this court in the case of E. Macias and Co. vs. Warner, Barnes and Co. (43 Phil. 155) wherein, among others, the court said:

x x x           x x x           x x x

. . . There is no contract of any kind, either oral or written, between the plaintiff and Warner, Barnes and Company. Plaintiff's contracts are with the insurance companies, and are in writing, and the premiums were paid to the insurance companies and the policies were issued by, and in the name of, the insurance companies, and on the face of the policy itself, the plaintiff knew that the defendant was acting as agent, for, and was representing, the respective insurance companies in the issuance and delivery of the policies. The defendant company did not contract or agree to do anything or to pay the plaintiff any money at any time or on any condition, either as agent or principal.

x x x           x x x           x x x

Every cause of action ex-contractu must be founded upon a contract, oral or written, either express or implied.

Warner, Barnes and Co., as principal or agent, did not make any contract, either oral or written, with the plaintiff. The contracts were made between the respective insurance companies and the insured, and were made by the insurance companies, through Warner, Barnes and Co., as their agent.

As in the case of a bank draft, it is not the cashier of the bank who makes the contract to pay the money evidenced by the draft, it is the bank, acting through its cashier, that makes the contract. So, in the instant case, it was the insurance companies, acting through Warner, Barnes and Co., as their agent, that made the written contracts with the insured. (E. Macias and Co. vs. Warner, Barnes and Co., 43 Phil., 155, 161, 162.)

Bearing in mind the above rule, we find that the defendant has not taken part, directly or indirectly, in the contract in question. The evidence shows that the defendant did not enter into any contract either with the plaintiff or his consignor — Tina J. Gamboa. The contract of marine insurance, Exhibit C, was made and executed only by and between the Westchester Fire Insurance Company of New York and Tina J. Gamboa. The contract was entered in New York. There is nothing therein which may affect, in favor or adversely, the defendant, the fulfillment of which may be demanded by or against it. That contract is purely bilateral, binding only upon Gamboa and the insurance company. When the lower court, therefore, imposed upon the defendant an obligation which it has never assumed, either expressly or impliedly, or when it extended to the defendant the effects of a contract which was entered into exclusively by and between the Westchester Fire Insurance Company of New York and Tina J. Gamboa, the error it has committed is evident. This is contrary to law.

We do not find any material variance between this case and the case of E. Macias and Co. vs. Warner, Barnes and Co., supra, as pointed out by counsel for appellee, in so far as the principle we are considering is concerned. Both cases involve similar facts which call for the application of a similar ruling. In both cases the issue is whether an agent, who acts within the scope of his authority, can assume personal liability for a contract entered into by him in behalf of his principal. And in the Macias case we said that the agent did not assume personal liability because the only party bound was the principal. And in this case this principle acquires added force and

effect when we consider the fact that the defendant did not sign the contract as agent of the foreign insurance company as the defendant did in the Macias case. The Macias case, therefore, is on all fours with this case and is decisive of the question under consideration.

2. Counsel next contends that Warner, Barnes and Co., Ltd., is not the real party in interest against whom the suit should be brought. It is claimed that this action should have been filed against its principal, the Westchester Fire Insurance Company of New York. This point is also well taken. Section 2, Rule 3 of the Rules of Court requires that "every action must be prosecuted in the name of the real party in interest." A corollary proposition to this rule is that an action must be brought against the real party in interest, or against a party which may be bound by the judgment to be rendered therein (Salmon and Pacific Commercial Co. vs. Tan Cueco, 36 Phil., 556). The real party in interest is the party who would be benefited or injured by the judgment, or the "party entitled to the avails of the suit" (1 Sutherland, Court Pleading Practice and Forms, p. 11). And in the case at bar, the defendant issued upon in its capacity as agent of Westchester Fire Insurance Company of New York in spite of the fact that the insurance contract has not been signed by it. As we have said, the defendant did not assume any obligation thereunder either as agent or as a principal. It cannot, therefore, be made liable under said contract, and hence it can be said that this case was filed against one who is not the real party in interest.

We agree with counsel for the appellee that the defendant is a settlement and adjustment agent of the foreign insurance company and that as such agent it has the authority to settle all the losses and claims that may arise under the policies that may be issued by or in behalf of said company in accordance with the instructions it may receive from time to time from its principal, but we disagree with counsel in his contention that as such adjustment and settlement agent, the defendant has assumed personal liability under said policies, and, therefore, it can be sued in its own right. An adjustment and settlement agent is no different from any other agent from the point of view of his responsibility, for he also acts in a representative capacity. Whenever he adjusts or settles a claim, he does it in behalf of his principal, and his action is binding not upon himself but upon his principal. And here again, the ordinary rule of agency applies. The following authorities bear this out:

An insurance adjuster is ordinarily a special agent for the person or company for whom he acts, and his authority is prima facie coextensive with the business intrusted to him. . . .

An adjuster does not discharge functions of a quasi-judicial nature, but represents his employer, to whom he owes faithful service, and for his acts, in the employer's interest, the employer is responsible so long as the acts are done while the agent is acting within the scope of his employment. (45 C. J. S., 1338-1340.)

It, therefore, clearly appears that the scope and extent of the functions of an adjustment and settlement agent do not include personal liability. His functions are merely to settle and adjusts claims in behalf of his principal if those claims are proven and undisputed, and if the claim is disputed or is disapproved by the principal, like in

the instant case, the agent does not assume any personal liability. The recourse of the insured is to press his claim against the principal.

3. This brings us to the consideration of the third point. It is claimed that a judgment, for or against an agent, in no way binds the real party in interest. In our opinion this point is also well taken, for it is but a sequel to the principle we have pointed out above. The reason is obvious. An action is brought for a practical purpose, nay to obtain actual and positive relief. If the party sued upon is not the proper party, any decision that may be rendered against him would be futile, for it cannot be enforced or executed. The effort that may be employed will be wasted. Such would be the result of this case if it will be allowed to proceed against the defendant, for even if a favorable judgment is obtained against it, it cannot be enforced because the real party is not involved. The defendant cannot be made to pay for something it is not responsible. Thus, in the following authorities it was held:

. . . Section 114 of the Code of Civil Procedure requires an action to be brought in the name of the real party in interest; and a corollary proposition requires that an action shall be brought against the persons or entities which are to be bound by the judgment obtained therein. An action upon a cause of action pertaining to his principal cannot be brought by an attorney-in-fact in his name (Arroyo vs. Granada and Gentero, 18 Phil., 484); nor can an action based upon a right of action belonging to a principal be brought in the name of his representative (Lichauco vs. Limjuco and Gonzalo, 19 Phil., 12). Actions must be brought by the real parties in interest and against the persons who are to be bound by the judgment obtained therein. (Salmon and Pacific Commercial Co. vs. Tan Cueco, 36 Phil., 557-558.)

x x x           x x x           x x x

An action to set aside an instrument of transfer of land should be brought in the name of the real party in interest. An apoderado or attorney in fact is not a real party. He has no interest in the litigation and has absolutely no right to bring the defendant into court or to put him to the expense of a suit, and there is no pro-vision of law permitting action to be brought in such manner. A judgment for or against the apoderado  in no way binds or affects the real party, and a decision in the suit would be utterly futile. It would touch no interest, adjust no question, bind no one, and settle no litigation. Courts should not be required to spend their time solemnly considering and deciding cases where no one could be bound and no interest affected by such deliberation and decision. (Arroyo vs. Granada and Gentero, 18 Phil., 484.)

If the case cannot be filed against the defendant as we have pointed out, what then is the remedy of the plaintiff under the circumstances? Is the case of the plaintiff beyond remedy? We believe that the only way by which the plaintiff can bring the principal into this case or make it come under the courts in this jurisdiction is to follow the procedure indicated in section 14, Rule 7, of the Rules of Court concerning litigations involving foreign corporations. This rule says that if the defendant is a foreign corporation and it has not designated an agent in the Philippines on whom service may be made in case of litigation, such service may be made on any agent it may

have in the Philippines. And in our opinion the Westchester Fire Insurance Company of new York comes within the import of this rule for even if it has not designated an agent as required by law, it has however a settling agent who may serve the purpose. In other words, an action may be brought against said insurance company in the Philippines and the process may be served on the defendant to give our courts the necessary jurisdiction. This is the way we have pointed out in the case of General Corporation of the Philippines and Mayon Investment Co. vs.Union Insurance Society of Canton Ltd. et al., (87 Phil., 313).

In view of the foregoing, we are of the opinion and so hold that the lower court erred in holding the defendant responsible for the loss or damage claimed in the complaint. And having arrived at this conclusion, we do not deem it necessary to pass upon the other errors assigned by the appellant.

Wherefore, the decision appealed from is hereby reversed. The complaint is hereby dismissed, with costs against the appellee.

Moran, C.J., Paras, Feria, Pablo, Bengzon, Padilla, Tuason, Montemayor, Reyes and Jugo, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-17160           November 29, 1965

PHILIPPINE PRODUCTS COMPANY, plaintiff-appellant, vs.PRIMATERIA SOCIETE ANONYME POUR LE COMMERCE EXTERIEUR: PRIMATERIA (PHILIPPINES) INC., ALEXANDER G. BAYLIN and JOSE M. CRAME, defendants-appellees.

Jose A. Javier for plaintiff-appellant.Ibarra and Papa for defendants-appellees.

BENGZON, C.J.:

This is an action to recover from defendants, the sum of P33,009.71 with interest and attorney's fees of P8,000.00.

Defendant Primateria Societe Anonyme Pour Le Commerce Exterieur (hereinafter referred to as Primateria Zurich) is a foreign juridical entity and, at the time of the transactions involved herein, had its main office at Zurich, Switzerland. It was then engaged in "Transactions in international trade with agricultural products, particularly in oils, fats and oil-seeds and related products."

The record shows that:

On October 24, 1951, Primateria Zurich, through defendant Alexander B. Baylin, entered into an agreement with plaintiff Philippine Products Company, whereby the latter undertook to buy copra in the Philippines for the account of Primateria Zurich, during "a tentative experimental period of one month from date." The contract was renewed by mutual agreement of the parties to cover an extended period up to February 24, 1952, later extended to 1953. During such period, plaintiff caused the shipment of copra to foreign countries, pursuant to instructions from defendant Primateria Zurich, thru Primateria (Phil.) Inc. — referred to hereafter as Primateria Philippines — acting by defendant Alexander G. Baylin and Jose M. Crame, officers of said corporation. As a result, the total amount due to the plaintiff as of May 30, 1955, was P33,009.71.

At the trial, before the Manila court of first instance, it was proven that the amount due from defendant Primateria Zurich, on account of the various shipments of copra, was P31,009.71, because it had paid P2,000.00 of the original claim of plaintiff. There is no dispute about accounting.

And there is no question that Alexander G. Baylin and Primateria Philippines acted as the duly authorized agents of Primateria Zurich in the Philippines. As far as the record discloses, Baylin acted indiscriminately in these transactions in the dual capacities of agent of the Zurich firm and executive vice-president of Primateria Philippines, which also acted as agent of Primateria Zurich. It is likewise undisputed that Primateria Zurich had no license to transact business in the Philippines.

For failure to file an answer within the reglementary period, defendant Primateria Zurich was declared in default.

After trial, judgment was rendered by the lower court holding defendant Primateria Zurich liable to the plaintiff for the sums of P31,009.71, with legal interest from the date of the filing of the complaint, and P2,000.00 as and for attorney's fees; and absolving defendants Primateria (Phil.), Inc., Alexander G. Baylin, and Jose M. Crame from any and all liability.

Plaintiff appealed from that portion of the judgment dismissing its complaint as regards the three defendants.

It is plaintiff's theory that Primateria Zurich is a foreign corporation within the meaning of Sections 68 and 69 of the Corporation Law, and since it has transacted business in the Philippines without the necessary license, as required by said provisions, its agents here are personally liable for contracts made in its behalf.

Section 68 of the Corporation Law states: "No foreign corporation or corporation formed, organized, or existing under any laws other than those of the Philippines shall be permitted to transact business in the Philippines, until after it shall have obtained a license for that purpose from the Securities and Exchange Commission .. ." And under Section 69, "any officer or agent of the corporation or any person transacting business for any foreign corporation not having the license prescribed shall be punished by imprisonment for etc. ... ."

The issues which have to be determined, therefore, are the following:

1. Whether defendant Primateria Zurich may be considered a foreign corporation within the meaning of Sections 68 and 69 of the Corporation Law;

2. Assuming said entity to be a foreign corporation, whether it may be considered as having transacted business in the Philippines within the meaning of said sections; and

3. If so, whether its agents may be held personally liable on contracts made in the name of the entity with third persons in the Philippines.

The lower court ruled that the Primateria Zurich was not duly proven to be a foreign corporation; nor that a societe anonyme ("sociedad anomima") is a corporation; and that failing such proof, the societe cannot be deemed to fall within the prescription of Section 68 of the Corporation Law. We agree with the said court's

conclusion. In fact, our corporation law recognized the difference between sociedades anonimas and corporations.

At any rate, we do not see how the plaintiff could recover from both  the principal (Primateria Zurich) and its agents. It has been given judgment against the principal for the whole amount. It asked for such judgment, and did not appeal from it. It clearly stated that its appeal concerned the other three defendants.

But plaintiff alleges that the appellees as agents of Primateria Zurich are liable to it under Art. 1897 of the New Civil Code which reads as follows:

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.

But there is no proof that, as agents, they exceeded  the limits of their authority. In fact, the principal — Primateria Zurich — who should be the one to raise the point, never raised it, denied its liability on the ground of excess of authority. At any rate, the article does not hold that in cases of excess of authority, both  the agent and the principal are liable to the other contracting party.

This view of the cause dispenses with the necessity of deciding the other two issues, namely: whether the agent of a foreign corporation doing business, but not licensed here is personally liable for contracts made by him in the name of such corporation.1 Although, the solution should not be difficult, since we already held that such foreign corporation may be sued here (General Corporation vs. Union Ins., 87 Phil. 509). And obviously, liability of the agent is necessarily premised on the inability to sue the principal or non-liability of such principal. In the absence of express legislation, of course.

IN VIEW OF THE FOREGOING CONSIDERATIONS, the appealed judgment is affirmed, with costs against appellant.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 167552             April 23, 2007

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

D E C I S I O N

CHICO-NAZARIO, J.:

Before Us is a petition for review by certiorari assailing the Decision1 of the Court of Appeals dated 10 August 2004 and its Resolution2 dated 17 March 2005 in CA-G.R. SP No. 71397 entitled, "Eurotech Industrial Technologies, Inc. v. Hon. Antonio T. Echavez." The assailed Decision and Resolution affirmed the Order3 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.

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 ASSIGNOR5 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 ASSIGNEE6 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;

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. 09339prepared by said power company and an official receipt dated 15 August 1995 issued by Impact Systems.10Alarmed 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 Answer14 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.

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 2001.19However, 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 Memorandum21 in support of his special and affirmative defenses and petitioner’s opposition22 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. 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.

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. x x x.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 1995.38The 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.

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 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.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-11442             May 23, 1958

MANUELA T. VDA. DE SALVATIERRA, petitioner, vs.HON. LORENZO C. GARLITOS, in his capacity as Judge of the Court of First Instance of Leyte, Branch II, and SEGUNDINO REFUERZO, respondents.

Jimenez, Tantuico, Jr. and Tolete for petitioner.Francisco Astilla for respondent Segundino Refuerzo.

FELIX, J.:

This is a petition for certiorari  filed by Manuela T. Vda. de Salvatierra seeking to nullify the order of the Court of First Instance of Leyte in Civil Case No. 1912, dated March 21, 1956, relieving Segundino Refuerzo of liability for the contract entered into between the former and the Philippine Fibers Producers Co., Inc., of which Refuerzo is the president. The facts of the case are as follows:

Manuela T. Vda. de Salvatierra appeared to be the owner of a parcel of land located at Maghobas, Poblacion, Burauen, Teyte. On March 7, 1954, said landholder entered into a contract of lease with the Philippine Fibers Producers Co., Inc., allegedly a corporation "duly organized and existing under the laws of the Philippines, domiciled at Burauen, Leyte, Philippines, and with business address therein, represented in this instance by Mr. Segundino Q. Refuerzo, the President". It was provided in said contract, among other things, that the lifetime of the lease would be for a period of 10 years; that the land would be planted to kenaf, ramie or other crops suitable to the soil; that the lessor would be entitled to 30 per cent of the net income accruing from the harvest of any, crop without being responsible for the cost of production thereof; and that after every harvest, the lessee was bound to declare at the earliest possible time the income derived therefrom and to deliver the corresponding share due the lessor.

Apparently, the aforementioned obligations imposed on the alleged corporation were not complied with because on April 5, 1955, Alanuela T. Vda, de Salvatierra filed with the Court of First Instance of Leyte a complaint against the Philippine Fibers Producers Co., Inc., and Segundino Q. Refuerzo, for accounting, rescission and damages (Civil Case No. 1912). She averred that sometime in April, 1954, defendants planted kenaf on 3 hectares of the leased property which crop was, at the time of the commencement of the action, already harvested, processed and sold by defendants; that notwithstanding that fact, defendants refused to render an accounting of the income derived therefrom and to deliver the lessor's share; that the estimated gross income was P4,500, and the deductible expenses amounted to P1,000; that as defendants' refusal to undertake such task was in violation of the

terms of the covenant entered into between the plaintiff and defendant corporation, a rescission was but proper.

As defendants apparently failed to file their answer to the complaint, of which they were allegedly notified, the Court declared them in default and proceeded to receive plaintiff's evidence. On June 8, 1955, the lower Court rendered judgment granting plaintiff's prayer, and required defendants to render a complete accounting of the harvest of the land subject of the proceeding within 15 days from receipt of the decision and to deliver 30 per cent of the net income realized from the last harvest to plaintiff, with legal interest from the date defendants received payment for said crop. It was further provide that upon defendants' failure to abide by the said requirement, the gross income would be fixed at P4,200 or a net income of P3,200 after deducting the expenses for production, 30 per cent of which or P960 was held to be due the plaintiff pursuant to the aforementioned contract of lease, which was declared rescinded.

No appeal therefrom having been perfected within the reglementary period, the Court, upon motion of plaintiff, issued a writ of execution, in virtue of which the Provincial Sheriff of Leyte caused the attachment of 3 parcels of land registered in the name of Segundino Refuerzo. No property of the Philippine Fibers Producers Co., Inc., was found available for attachment. On January 31, 1956, defendant Segundino Refuerzo filed a motion claiming that the decision rendered in said Civil Case No. 1912 was null and void with respect to him, there being no allegation in the complaint pointing to his personal liability and thus prayed that an order be issued limiting such liability to defendant corporation. Over plaintiff's opposition, the Court a quo granted the same and ordered the Provincial Sheriff of Leyte to release all properties belonging to the movant that might have already been attached, after finding that the evidence on record made no mention or referred to any fact which might hold movant personally liable therein. As plaintiff's petition for relief from said order was denied, Manuela T. Vda. de Salvatierra instituted the instant action asserting that the trial Judge in issuing the order complained of, acted with grave abuse of discretion and prayed that same be declared a nullity.

From the foregoing narration of facts, it is clear that the order sought to be nullified was issued by tile respondent Judge upon motion of defendant Refuerzo, obviously pursuant to Rule 38 of the Rules of Court. Section 3 of said Rule, however, in providing for the period within which such a motion may be filed, prescribes that:

SEC. 3. WHEN PETITION FILED; CONTENTS AND VERIFICATION. — A petition provided for in either of the preceding sections of this rule must be verified, filed within sixty days after the petitioner learns of the judgment, order, or other proceeding to be set aside, and not more than six months after such judgment or order was entered, or such proceeding was taken; and must be must be accompanied with affidavit showing the fraud, accident, mistake, or excusable negligence relied upon, and the facts constituting the petitioner is good and substantial cause of action or defense, as the case may be, which he may prove if his petition be granted". (Rule 38)

The aforequoted provision treats of 2 periods, i.e., 60 days after petitioner learns of the judgment, and not more than 6 months after the judgment or order was rendered,

both of which must be satisfied. As the decision in the case at bar was under date of June 8, 1955, whereas the motion filed by respondent Refuerzo was dated January 31, 1956, or after the lapse of 7 months and 23 days, the filing of the aforementioned motion was clearly made beyond the prescriptive period provided for by the rules. The remedy allowed by Rule 38 to a party adversely affected by a decision or order is certainly an alert of grace or benevolence intended to afford said litigant a penultimate opportunity to protect his interest. Considering the nature of such relief and the purpose behind it, the periods fixed by said rule are non-extendible and never interrupted; nor could it be subjected to any condition or contingency because it is of itself devised to meet a condition or contingency (Palomares vs. Jimenez,* G.R. No. L-4513, January 31, 1952). On this score alone, therefore, the petition for a writ of certiorari filed herein may be granted. However, taking note of the question presented by the motion for relief involved herein, We deem it wise to delve in and pass upon the merit of the same.

Refuerzo, in praying for his exoneration from any liability resulting from the non-fulfillment of the obligation imposed on defendant Philippine Fibers Producers Co., Inc., interposed the defense that the complaint filed with the lower court contained no allegation which would hold him liable personally, for while it was stated therein that he was a signatory to the lease contract, he did so in his capacity as president of the corporation. And this allegation was found by the Court a quo to be supported by the records. Plaintiff on the other hand tried to refute this averment by contending that her failure to specify defendant's personal liability was due to the fact that all the time she was under the impression that the Philippine Fibers Producers Co., Inc., represented by Refuerzo was a duly registered corporation as appearing in the contract, but a subsequent inquiry from the Securities and Exchange Commission yielded otherwise. While as a general rule a person who has contracted or dealt with an association in such a way as to recognize its existence as a corporate body is estopped from denying the same in an action arising out of such transaction or dealing, (Asia Banking Corporation vs. Standard Products Co., 46 Phil., 114; Compania Agricola de Ultramar vs. Reyes, 4 Phil., 1; Ohta Development Co.; vs. Steamship Pompey, 49 Phil., 117), yet this doctrine may not be held to be applicable where fraud takes a part in the said transaction. In the instant case, on plaintiff's charge that she was unaware of the fact that the Philippine Fibers Producers Co., Inc., had no juridical personality, defendant Refuerzo gave no confirmation or denial and the circumstances surrounding the execution of the contract lead to the inescapable conclusion that plaintiff Manuela T. Vda. de Salvatierra was really made to believe that such corporation was duly organized in accordance with law.

There can be no question that a corporation with registered has a juridical personality separate and distinct from its component members or stockholders and officers such that a corporation cannot be held liable for the personal indebtedness of a stockholder even if he should be its president (Walter A. Smith Co. vs. Ford, SC-G.R. No. 42420) and conversely, a stockholder or member cannot be held personally liable for any financial obligation be, the corporation in excess of his unpaid subscription. But this rule is understood to refer merely to registered corporations and cannot be made applicable to the liability of members of an unincorporated association. The reason behind this doctrine is obvious-since an organization which before the law is non-existent has no personality and would be incompetent to act and appropriate for itself the powers and attribute of a corporation as provided by law; it cannot create agents or confer authority on another to act in its behalf; thus, those who act or

purport to act as its representatives or agents do so without authority and at their own risk. And as it is an elementary principle of law that a person who acts as an agent without authority or without a principal is himself regarded as the principal, possessed of all the rights and subject to all the liabilities of a principal, a person acting or purporting to act on behalf of a corporation which has no valid existence assumes such privileges and obligations and comes personally liable for contracts entered into or for other acts performed as such, agent (Fay vs. Noble, 7 Cushing [Mass.] 188. Cited in II Tolentino's Commercial Laws of the Philippines, Fifth Ed., P. 689-690). Considering that defendant Refuerzo, as president of the unregistered corporation Philippine Fibers Producers Co., Inc., was the moving spirit behind the consummation of the lease agreement by acting as its representative, his liability cannot be limited or restricted that imposed upon corporate shareholders. In acting on behalf of a corporation which he knew to be unregistered, he assumed the risk of reaping the consequential damages or resultant rights, if any, arising out of such transaction.

Wherefore, the order of the lower Court of March 21, 1956, amending its previous decision on this matter and ordering the Provincial Sheriff of Leyte to release any and all properties of movant therein which might have been attached in the execution of such judgment, is hereby set aside and nullified as if it had never been issued. With costs against respondent Segundino Refuerzo. It is so ordered.

Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., and Endencia, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-19118             June 16, 1965

MARIANO A. ALBERT, plaintiff-appellant, vs.UNIVERSITY PUBLISHING CO., INC., defendant-appellee.

Uy and Artiaga and Antonio M. Molina for plaintiff-appellant.Aruego, Mamaril and Associates for defendant-appellee.

R E S O L U T I O N*

BENGZON, J.P., J.:

Defendant-appellee University Publishing Co., Inc. has two prayers before us: First, that said defendant-appellee be granted leave to present original papers not included in the records of this case because they were never presented in the trial of the case; and second, that the decision promulgated by this Court on January 30, 1965 be reconsidered.

For a proper appraisal of all the facts and circumstances of this case it becomes necessary and convenient to trace the origin of the same.

Plaintiff Albert, almost sixteen (16) years ago, sued University Publishing Co., Inc. for breach of contract. On April 18, 1958, in L-9300, this court awarded the sum of P15,000.00 as damages. On October 24, 1960, in L-15275, to clarify whether the P7,000.00 paid on account should be deducted therefrom, this Court decided that the amount should be paid in full because said partial payment was already taken into consideration when it fixed P15,000.00 as damages.

From the inception until the time when the decision in L-15275 was to be executed, corporate existence on the part of University Publishing Co., Inc. seems to have been taken for granted, for it was not put in issue in either of the cases abovementioned. However, when the Court of First Instance of Manila issued on July 22, 1961 an order of execution against University Publishing Co., Inc., plaintiff, speaking also for the Sheriff of Manila, reported to the Court by petition of August 10, 1961 that there is no such entity as University Publishing Co., Inc., thereupon praying that, Jose M. Aruego being the real defendant, the writ of execution be issued against him. Attached to said petition was a certification from the Securities and Exchange Commission dated July 31, 1961 attesting: "The records of this Commission do not show the registration of UNIVERSITY PUBLISHING CO., INC., either as a corporation or partnership." The issue of its corporate existence was then clearly and squarely presented before the court.

University Publishing Co., Inc., instead of informing the lower court that it had in its possession copies of its certificate of registration its by-laws, and all other pertinent papers material to the point in dispute — corporate existence — chose to remain silent thereon. It merely countered the aforesaid petition by filing through counsel (Jose M. Aruego's own law firm) a manifestation stating that Jose M. Aruego is not a party to this case and, therefore, plaintiff's petition should be denied. After the court a quo denied the request that a writ of execution be issued against Jose M. Aruego, plaintiff brought this present appeal on the issue of the corporate existence of University Publishing Co., Inc., as determinative of the responsibility of Jose M. Aruego, the person or official who had always moved and acted for and in behalf of University Publishing Co., Inc.

It may be worth noting again that Jose M. Aruego started the negotiation which culminated in the contract between the parties, signing said contract as president of University Publishing Co., Inc. Likewise he was the one who made partial payments up to the amount of P7,000.00 for, and in behalf of University Publishing Co., Inc. He also appeared not only as a witness but as lawyer, signing some pleadings or motions in defense of University Publishing Co., Inc., although in other instances it is one of his associates or members of his law firm who did so. Known is the fact that even a duly existing corporation can only move and act through natural persons. In this case it was Jose M. Aruego who moved and acted as or for University, Publishing Co., Inc.

It is elemental that the courts can only decide the merits of a given suit according to the records that are in the case. It is true that in the two previous cases decided by this Court, the first, awarding damages (L-9300), the second, clarifying the amount of P15,000.00 awarded as such (L-15275), the corporate existence of University Publishing Co., Inc. as a legal entity was merely taken for granted.

However, when the said issue was squarely presented before the court, and University Publishing Co., Inc. chose to keep the courts in the dark by withholding pertinent documents and papers in its possession and control, perforce this Court had to decide the points raised according to the records of the case and whatever related matters necessarily included therein. Hence, as a consequence of the certification of the Securities and Exchange Commission that its records "do not show the registration of University Publishing Co., Inc., either as a corporation or partnership," this Court concluded that by virtue of its non-registration, it can not be considered a corporation. We further said that it has therefore no personality separate from Jose M. Aruego and that Aruego was in reality the one who answered and litigated through his own law firm counsel. Stated otherwise, we found that Aruego was in fact, if not in name, the defendant. 1 Indeed, the judge of the court of first instance wrote in his decision thus: "Defendant Aruego (all along the judge who pens this decision considered that the defendant here is the president of the University Publishing Co., Inc. since it was he who really made the contract with Justice Albert) 2" And this portion of the decision made by the court a quo was never questioned by the defendant.

The above statement made by the court a quo in its decision compelled this Court to carefully examine the facts surrounding the dispute starting from the time of the negotiation of the business proposition, followed by the signing of the contract;

considered the benefits received; took into account the partial payments made, the litigation conducted, the decisions rendered and the appeals undertaken. After thus considering the facts and circumstances, keeping in mind that even with regard to corporations shown as duly registered and existing, we have in many a case pierced the veil of corporate fiction to administer the ends of justice, 3 we held Aruego personally responsible for his acts on behalf of University Publishing Co., Inc.

Defendant would reply that in all those cases where the Court pierced the veil of corporate fiction the officials held liable were made party defendants. As stated, defendant-appellee could not even pretend to possess corporate fiction — in view to its non-registration per the evidence — so that from the start Aruego was the real defendant. Since the purpose of formally impleading a party is to assure him a day in court, once the protective mantle of due process of law has in fact been accorded a litigant, whatever the imperfection in form, the real litigant may be held liable as a party. Jose M. Aruego definitely had his day in court, and due process of law was enjoyed by him as a matter of fact as revealed by the records of the case. 4

The dispositive portion of the decision the reconsideration of which is being sought is the following: "Premises considered, the order appealed from is hereby set aside and the case remanded ordering the lower court to hold supplementary proceedings for the purpose of carrying the judgment into effect against University Publishing Co., Inc. and/or Jose M. Aruego."

According to several cases a litigant is not allowed to speculate on the decision the court may render in the case. 5The University Publishing Co., Inc. speculated on a favorable decision based on the issue that Jose M. Aruego, not being a formal party defendant in this case, a writ of execution against him was not in order. It, therefore, preferred to suppress vital documents under its possession and control rather than to rebut the certification issued by the Securities and Exchange Commission that according to its records University Publishing Co., Inc. was not registered. If the lower court's order is sustained, collection of damages becomes problematical. If a new suit is filed against Aruego, prescription might be considered as effective defense, aside from the prospect of another ten years of pending litigation. Such are the possible reasons for adopting the position of speculation of our decision. Our ruling appeared to be unfavorable to such speculation. It was only after the receipt of the adverse decision promulgated by this Court that University Publishing Co., Inc., disclosed its registration papers. For purposes of this case only and according to its particular facts and circumstances, we rule that in view of the late disclosure of said papers by the University Publishing Co., Inc., the same can no longer considered at this stage of the proceedings.

Specifically said original papers are:

1. Original Certificate of Registration of the University Publishing Co., Inc., signed by then Director of Commerce, Cornelio Balmaceda, showing that said company was duly registered as a corporation with the Mercantile Registry of the then Bureau of Commerce (predecessor of the Securities and Exchange Commission) as early as August 7, 1936;

2. Original copy of the Articles of Incorporation of the University Publishing Co., Inc consisting of five (5) pages, showing that said corporation was incorporated as early as August 1, 1936, Manila, Philippines, with an authorized capital stock of TEN THOUSAND PESOS (P10,000), TWO THOUSAND PESOS (P2,000.00) of which was fully subscribed and FIVE HUNDRED PESOS (P500.00), fully paid up; that it had a corporate existence of fifty (50) years and the original incorporators of the same are: Jose M. Aruego, Jose A. Adeva, Delfin T. Bruno Enrique Rimando and Federico Mangahas;

3. The original copy of the By-Laws of the University Publishing Co., Inc. consisting of eleven (11) pages, showing that it exercised its franchise as early as September 4, 1936;

4. A certificate of Reconstitution of Records issued by the Securities and Exchange Commission recognized the corporate existence of the University Publishing, Co., Inc. as early as August 7, 1936.

Defendant-appellee could have presented the foregoing papers before the lower court to counter the evidence of non-registration, but defendant-appellee did not do so. It could have reconstituted its records at that stage of the proceedings, instead of only on April 1, 1965, after decision herein was promulgated.

It follows, therefore, that defendant-appellee may not now be allowed to submit the abovementioned papers to form part of the record. Sec. 7 of Rule 48, Rules of Court (in relation to Sec. 1. Rule 42), invoked by movant, states:

SEC. 7. Original papers may be required. Whenever it is necessary or proper in the opinion of the court that original papers of any kind should be inspected in the court on appeal, it may make such order for the transmission, safekeeping, and return of such original papers as may seem proper, and the court may receive and consider such original papers in connection with the record.

The provision obviously refers to papers the originals of which are of record in the lower court, which the appellate court may require to be transmitted for inspection. The original papers in question not having been presented before the lower court as part of its record, the same cannot be transmitted on appeal under the aforesaid section. In contrast, the certification as to University Publishing Co., Inc.'s non-registration forms part of the record in the lower court.

For original papers not part of the lower court's record, the applicable rule is Sec. 1 of Rule 59 on New Trial. Under said Rule, the papers in question cannot be admitted, because they are not "newly discovered evidence ," for with due diligence movant could have presented them in the lower court, since they were in its possession and control.

As far as this case is concerned, therefore, University Publishing Co., Inc. must be deemed as unregistered, since by defendant-appellee's choice the record shows it to

be so. Defendant-appellee apparently sought to delay the execution by remaining unregistered per the certification of the Securities and Exchange Commission. It was only when execution was to be carried out, anyway, against it and/or its president — and almost 19 years after the approval of the law authorizing reconstitution — that it reconstituted its records to show its registration, thereby once more attempting to delay the payment of plaintiff's claim, long since adjudged meritorious. Deciding, therefore, as we must, this particular case on its record as submitted by the parties, defendant-appellee's proffered evidence of its corporate existence cannot at this stage be considered to alter the decision reached herein. This is not to preclude in future cases the consideration of properly submitted evidence as to defendant-appellee's corporate existence.

WHEREFORE, the motion for reconsideration and for leave to file original papers not in the record, is hereby denied. It is so ordered.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

G.R. No. L-109937 March 21, 1994

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs.COURT OF APPEALS and the ESTATE OF THE LATE JUAN B. DANS, represented by CANDIDA G. DANS, and the DBP MORTGAGE REDEMPTION INSURANCE POOL, respondents.

Office of the Legal Counsel for petitioner.

Reyes, Santayana, Molo & Alegre for DBP Mortgage Redemption Insurance Pool.

 

QUIASON, J.:

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court to reverse and set aside the decision of the Court of Appeals in CA-G.R CV No. 26434 and its resolution denying reconsideration thereof.

We affirm the decision of the Court of Appeals with modification.

I

In May 1987, Juan B. Dans, together with his wife Candida, his son and daughter-in-law, applied for a loan of P500,000.00 with the Development Bank of the Philippines (DBP), Basilan Branch. As the principal mortgagor, Dans, then 76 years of age, was advised by DBP to obtain a mortgage redemption insurance (MRI) with the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool).

A loan, in the reduced amount of P300,000.00, was approved by DBP on August 4, 1987 and released on August 11, 1987. From the proceeds of the loan, DBP deducted the amount of P1,476.00 as payment for the MRI premium. On August 15, 1987, Dans accomplished and submitted the "MRI Application for Insurance" and the "Health Statement for DBP MRI Pool."

On August 20, 1987, the MRI premium of Dans, less the DBP service fee of 10 percent, was credited by DBP to the savings account of the DBP MRI Pool. Accordingly, the DBP MRI Pool was advised of the credit.

On September 3, 1987, Dans died of cardiac arrest. The DBP, upon notice, relayed this information to the DBP MRI Pool. On September 23, 1987, the DBP MRI Pool notified DBP that Dans was not eligible for MRI coverage, being over the acceptance age limit of 60 years at the time of application.

On October 21, 1987, DBP apprised Candida Dans of the disapproval of her late husband's MRI application. The DBP offered to refund the premium of P1,476.00 which the deceased had paid, but Candida Dans refused to accept the same, demanding payment of the face value of the MRI or an amount equivalent to the loan. She, likewise, refused to accept an ex gratia settlement of P30,000.00, which the DBP later offered.

On February 10, 1989, respondent Estate, through Candida Dans as administratrix, filed a complaint with the Regional Trial Court, Branch I, Basilan, against DBP and the insurance pool for "Collection of Sum of Money with Damages." Respondent Estate alleged that Dans became insured by the DBP MRI Pool when DBP, with full knowledge of Dans' age at the time of application, required him to apply for MRI, and later collected the insurance premium thereon. Respondent Estate therefore prayed: (1) that the sum of P139,500.00, which it paid under protest for the loan, be reimbursed; (2) that the mortgage debt of the deceased be declared fully paid; and (3) that damages be awarded.

The DBP and the DBP MRI Pool separately filed their answers, with the former asserting a cross-claim against the latter.

At the pre-trial, DBP and the DBP MRI Pool admitted all the documents and exhibits submitted by respondent Estate. As a result of these admissions, the trial court narrowed down the issues and, without opposition from the parties, found the case ripe for summary judgment. Consequently, the trial court ordered the parties to submit their respective position papers and documentary evidence, which may serve as basis for the judgment.

On March 10, 1990, the trial court rendered a decision in favor of respondent Estate and against DBP. The DBP MRI Pool, however, was absolved from liability, after the trial court found no privity of contract between it and the deceased. The trial court declared DBP in estoppel for having led Dans into applying for MRI and actually collecting the premium and the service fee, despite knowledge of his age ineligibility. The dispositive portion of the decision read as follows:

WHEREFORE, in view of the foregoing consideration and in the furtherance of justice and equity, the Court finds judgment for the plaintiff and against Defendant DBP, ordering the latter:

1. To return and reimburse plaintiff the amount of P139,500.00 plus legal rate of interest as amortization payment paid under protest;

2. To consider the mortgage loan of P300,000.00 including all interest accumulated or otherwise to have been settled, satisfied or set-off by virtue of the insurance coverage of the late Juan B. Dans;

3. To pay plaintiff the amount of P10,000.00 as attorney's fees;

4. To pay plaintiff in the amount of P10,000.00 as costs of litigation and other expenses, and other relief just and equitable.

The Counterclaims of Defendants DBP and DBP MRI POOL are hereby dismissed. The Cross-claim of Defendant DBP is likewise dismissed (Rollo, p. 79)

The DBP appealed to the Court of Appeals. In a decision dated September 7, 1992, the appellate court affirmedin toto  the decision of the trial court. The DBP's motion for reconsideration was denied in a resolution dated April 20, 1993.

Hence, this recourse.

II

When Dans applied for MRI, he filled up and personally signed a "Health Statement for DBP MRI Pool" (Exh. "5-Bank") with the following declaration:

I hereby declare and agree that all the statements and answers contained herein are true, complete and correct to the best of my knowledge and belief and form part of my application for insurance. It is understood and agreed that no insurance coverage shall be effected unless and until this application is approved and the full premium is paid during my continued good health (Records, p. 40).

Under the aforementioned provisions, the MRI coverage shall take effect: (1) when the application shall be approved by the insurance pool; and (2) when the full premium is paid during the continued good health of the applicant. These two conditions, being joined conjunctively, must concur.

Undisputably, the power to approve MRI applications is lodged with the DBP MRI Pool. The pool, however, did not approve the application of Dans. There is also no showing that it accepted the sum of P1,476.00, which DBP credited to its account with full knowledge that it was payment for Dan's premium. There was, as a result, no perfected contract of insurance; hence, the DBP MRI Pool cannot be held liable on a contract that does not exist.

The liability of DBP is another matter.

It was DBP, as a matter of policy and practice, that required Dans, the borrower, to secure MRI coverage. Instead of allowing Dans to look for his own insurance carrier or some other form of insurance policy, DBP compelled him to apply with the DBP MRI Pool for MRI coverage. When Dan's loan was released on August 11, 1987, DBP already deducted from the proceeds thereof the MRI premium. Four days latter, DBP made Dans fill up and sign his application for MRI, as well as his health statement. The DBP later submitted both the application form and health statement to the DBP

MRI Pool at the DBP Main Building, Makati Metro Manila. As service fee, DBP deducted 10 percent of the premium collected by it from Dans.

In dealing with Dans, DBP was wearing two legal hats: the first as a lender, and the second as an insurance agent.

As an insurance agent, DBP made Dans go through the motion of applying for said insurance, thereby leading him and his family to believe that they had already fulfilled all the requirements for the MRI and that the issuance of their policy was forthcoming. Apparently, DBP had full knowledge that Dan's application was never going to be approved. The maximum age for MRI acceptance is 60 years as clearly and specifically provided in Article 1 of the Group Mortgage Redemption Insurance Policy signed in 1984 by all the insurance companies concerned (Exh. "1-Pool").

Under Article 1987 of the Civil Code of the Philippines, "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."

The DBP is not authorized to accept applications for MRI when its clients are more than 60 years of age (Exh. "1-Pool"). Knowing all the while that Dans was ineligible for MRI coverage because of his advanced age, DBP exceeded the scope of its authority when it accepted Dan's application for MRI by collecting the insurance premium, and deducting its agent's commission and service fee.

The liability of an agent who exceeds the scope of his authority depends upon whether the third person is aware of the limits of the agent's powers. There is no showing that Dans knew of the limitation on DBP's authority to solicit applications for MRI.

If the third person dealing with an agent is unaware of the limits of the authority conferred by the principal on the agent and he (third person) has been deceived by the non-disclosure thereof by the agent, then the latter is liable for damages to him (V Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, p. 422 [1992], citing Sentencia [Cuba] of September 25, 1907). The rule that the agent is liable when he acts without authority is founded upon the supposition that there has been some wrong or omission on his part either in misrepresenting, or in affirming, or concealing the authority under which he assumes to act (Francisco, V., Agency 307 [1952], citing Hall v. Lauderdale, 46 N.Y. 70, 75). Inasmuch as the non-disclosure of the limits of the agency carries with it the implication that a deception was perpetrated on the unsuspecting client, the provisions of Articles 19, 20 and 21 of the Civil Code of the Philippines come into play.

Article 19 provides:

Every person must, in the exercise of his rights and in the performance of his duties, act with justice give everyone his due and observe honesty and good faith.

Article 20 provides:

Every person who, contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for the same.

Article 21 provides:

Any person, who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage.

The DBP's liability, however, cannot be for the entire value of the insurance policy. To assume that were it not for DBP's concealment of the limits of its authority, Dans would have secured an MRI from another insurance company, and therefore would have been fully insured by the time he died, is highly speculative. Considering his advanced age, there is no absolute certainty that Dans could obtain an insurance coverage from another company. It must also be noted that Dans died almost immediately, i.e., on the nineteenth day after applying for the MRI, and on the twenty-third day from the date of release of his loan.

One is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved (Civil Code of the Philippines, Art. 2199). Damages, to be recoverable, must not only be capable of proof, but must be actually proved with a reasonable degree of certainty (Refractories Corporation v. Intermediate Appellate Court, 176 SCRA 539 [1989]; Choa Tek Hee v. Philippine Publishing Co., 34 Phil. 447 [1916]). Speculative damages are too remote to be included in an accurate estimate of damages (Sun Life Assurance v. Rueda Hermanos, 37 Phil. 844 [1918]).

While Dans is not entitled to compensatory damages, he is entitled to moral damages. No proof of pecuniary loss is required in the assessment of said kind of damages (Civil Code of Philippines, Art. 2216). The same may be recovered in acts referred to in Article 2219 of the Civil Code.

The assessment of moral damages is left to the discretion of the court according to the circumstances of each case (Civil Code of the Philippines, Art. 2216). Considering that DBP had offered to pay P30,000.00 to respondent Estate in ex gratia settlement of its claim and that DBP's non-disclosure of the limits of its authority amounted to a deception to its client, an award of moral damages in the amount of P50,000.00 would be reasonable.

The award of attorney's fees is also just and equitable under the circumstances (Civil Code of the Philippines, Article 2208 [11]).

WHEREFORE, the decision of the Court of Appeals in CA G.R.-CVNo. 26434 is MODIFIED and petitioner DBP is ORDERED: (1) to REIMBURSE respondent Estate of Juan B. Dans the amount of P1,476.00 with legal interest from the date of the filing of the complaint until fully paid; and (2) to PAY said Estate the amount of Fifty Thousand Pesos (P50,000.00) as moral damages and the amount of Ten Thousand Pesos (P10,000.00) as attorney's fees. With costs against petitioner.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-19001             November 11, 1922

HARRY E. KEELER ELECTRIC CO., INC., plaintiff-appellant, vs.DOMINGO RODRIGUEZ, defendant-appellee.

Hartford Beaumont for appellant.Ross and Lawrence and Antonio T. Carrascoso, Jr., for appellee.

STATEMENT

The plaintiff is a domestic corporation with its principal office in the city of Manila and engaged in the electrical business, and among other things in the sale of what is known as the "Matthews" electric plant, and the defendant is a resident of Talisay, Occidental Negros, and A. C. Montelibano was a resident of Iloilo.

Having this information, Montelibano approached plaintiff at its Manila office, claiming that he was from Iloilo and lived with Governor Yulo; that he could find purchaser for the "Matthews" plant, and was told by the plaintiff that for any plant that he could sell or any customer that he could find he would be paid a commission of 10 per cent for his services, if the sale was consummated. Among other persons. Montelibano interviews the defendant, and, through his efforts, one of the "Matthews" plants was sold by the plaintiff to the defendant, and was shipped from Manila to Iloilo, and later installed on defendant's premises after which, without the knowledge of the plaintiff, the defendant paid the purchase price to Montelibano. As a result, plaintiff commenced this action against the defendant, alleging that about August 18, 1920, it sold and delivered to the defendant the electric plant at the agreed price of P2,513.55 no part of which has been paid, the demands judgment for the amount with interest from October 20, 1920.

For answer, the defendant admits the corporation of the plaintiff, and denies all other material allegations of the complaint, and, as an affirmative defense, alleges "that on or about the 18th of August, 1920, the plaintiff sold and delivered to the defendant a certain electric plant and that the defendant paid the plaintiff the value of said electric plant, to wit: P2,513.55."

Upon such issues the testimony was taken, and the lower court rendered judgment for the defendant, from which the plaintiff appeals, claiming that the court erred in holding that the payment to A. C. Montelibano would discharge the debt of defendant, and in holding that the bill was given to Montelibano for collection purposes, and that the plaintiff had held out Montelibano to the defendant as an agent authorized to collect, and in rendering judgment for the defendant, and in not rendering judgment for the plaintiff.

 

JOHNS, J.:

The testimony is conclusive that the defendant paid the amount of plaintiff's claim to Montelibano, and that no part of the money was ever paid to the plaintiff. The defendant, having alleged that the plaintiff sold and delivered the plant to him, and that he paid the plaintiff the purchase price, it devolved upon the defendant to prove the payment to the plaintiff by a preponderance of the evidence.

It appears from the testimony of H. E. Keeler that he was president of the plaintiff and that the plant in question was shipped from Manila to Iloilo and consigned to the plaintiff itself, and that at the time of the shipment the plaintiff sent Juan Cenar, one of its employees, with the shipment, for the purpose of installing the plant on defendant's premises. That plaintiff gave Cenar a statement of the account, including some extras and the expenses of the mechanic, making a total of P2,563,95. That Montelibano had no authority from the plaintiff to receive or receipt for money. That in truth and in fact his services were limited and confined to the finding of purchasers for the "Matthews" plant to whom the plaintiff would later make and consummate the sale. That Montelibano was not an electrician, could not install the plant and did not know anything about its mechanism.

Cenar, as a witness for the plaintiff, testified that he went with shipment of the plant from Manila to Iloilo, for the purpose of installing, testing it, and to see that everything was satisfactory. That he was there about nine days, and that he installed the plant, and that it was tested and approved by the defendant. He also says that he personally took with him the statement of account of the plaintiff against the defendant, and that after he was there a few days, the defendant asked to see the statement, and that he gave it to him, and the defendant said, "he was going to keep it." I said that was all right "if you want." "I made no effort at all to collect the amount from him because Mr. Rodriguez told me he was going to pay for the plant here in Manila." That after the plant was installed and approved, he delivered it to the defendant and returned to Manila.

The only testimony on the part of the defendant is that of himself in the form of a deposition in which he says that Montelibano sold and delivered the plant to him, and "was the one who ordered the installation of that electrical plant," and he introduced in evidence as part of his deposition a statement and receipt which Montelibano signed to whom he paid the money. When asked why he paid the money to Montelibano, the witness says:

Because he was the one who sold, delivered, and installed the electrical plant, and he presented to me the account, Exhibits A and A-I, and he assured me that he was duly authorized to collect the value of the electrical plant.

The receipt offered in evidence is headed:

STATEMENT           Folio No. 2494

Mr. DOMINGO RODRIGUEZ, Iloilo, Iloilo, P.I.

In account with HARRY E. KEELER ELECTRIC COMPANY, INC. 221 Calle Echaque, Quiapo, Manila, P.I. MANILA, P.I., August 18, 1920.

The answer alleges and the receipt shows upon its face that the plaintiff sold the plant to the defendant, and that he bought it from the plaintiff. The receipt is signed as follows:

Received payment HARRY E. KEELER ELECTRIC CO. Inc.,

Recibi(Sgd.) A. C. MONTELIBANO.

There is nothing on the face of this receipt to show that Montelibano was the agent of, or that he was acting for, the plaintiff. It is his own personal receipt and his own personal signature. Outside of the fact that Montelibano received the money and signed this receipt, there is no evidence that he had any authority, real or apparent, to receive or receipt for the money. Neither is there any evidence that the plaintiff ever delivered the statement to Montelibano, or authorized anyone to deliver it to him, and it is very apparent that the statement in question is the one which was delivered by the plaintiff to Cenar, and is the one which Cenar delivered to the defendant at the request of the defendant.

The evidence of the defendant that Montelibano was the one who sold him the plant is in direct conflict with his own pleadings and the receipt statement which he offered in evidence. This statement also shows upon its face that P81.60 of the bill is for:

To Passage round trip, 1st Class @ P40.80 a trip ........................................... P81.60.

Plus Labor @ P5.00 per day — Machine's transportation ................. 9.85.

This claim must be for the expenses of Cenar in going to Iloilo from Manila and return, to install the plant, and is strong evidence that it was Cenar and not Montelibano who installed the plant. If Montelibano installed the plant, as defendant claims, there would not have been any necessity for Cenar to make this trip at the expense of the defendant. After Cenar's return to Manila, the plaintiff wrote a letter to the defendant requesting the payment of its account, in answer to which the defendant on September 24 sent the following telegram:

Electric plant accessories and installation are paid to Montelibano about three weeks Keeler Company did not present bill.

This is in direct conflict with the receipted statement, which the defendant offered in evidence, signed by Montelibano. That shows upon its face that it was an itemized statement of the account of plaintiff with the defendant. Again, it will be noted that the receipt which Montelibano signed is not dated, and it does not show when the money was paid: Speaking of Montelibano, the defendant also testified: "and he assured me that he was duly authorized to collect the value of the electrical plant." This shows upon its face that the question of Montelibano's authority to receive the money must have been discussed between them, and that, in making the payment, defendant relied upon Montelibano's own statements and representation, as to his authority, to receipt for the money.

In the final analysis, the plant was sold by the plaintiff to the defendant, and was consigned by the plaintiff to the plaintiff at Iloilo where it was installed by Cenar, acting for, and representing, the plaintiff, whose expense for the trip is included in, and made a part of, the bill which was receipted by Montelibano.

There is no evidence that the plaintiff ever delivered any statements to Montelibano, or that he was authorized to receive or receipt for the money, and defendant's own telegram shows that the plaintiff "did not present bill" to defendant. He now claims that at the very time this telegram was sent, he had the receipt of Montelibano for the money upon the identical statement of account which it is admitted the plaintiff did render to the defendant.

Article 1162 of the Civil Code provides:

Payment must be made to the persons in whose favor the obligation is constituted, or to another authorized to receive it in his name.

And article 1727 provides:

The principal shall be liable as to matters with respect to which the agent has exceeded his authority only when he ratifies the same expressly or by implication.

In the case of Ormachea Tin-Conco vs. Trillana (13 Phil., 194), this court held:

The repayment of a debt must be made to the person in whose favor the obligation is constituted, or to another expressly authorized to receive the payment in his name.

Mechem on Agency, volume I, section 743, says:

In approaching the consideration of the inquiry whether an assumed authority exist in a given case, there are certain fundamental principles which must not be overlooked. Among these are, as has been seen, (1) that the law indulges in no bare presumptions that an agency exists: it must be proved or presumed from facts; (2) that the agent cannot establish his own authority, either by his representations or by assuming to exercise it; (3) that

an authority cannot be established by mere rumor or general reputation; (4)that even a general authority is not an unlimited one; and (5) that every authority must find its ultimate source in some act or omission of the principal. An assumption of authority to act as agent for another of itself challenges inquiry. Like a railroad crossing, it should be in itself a sign of danger and suggest the duty to "stop, look, and listen." It is therefore declared to be a fundamental rule, never to be lost sight of and not easily to be overestimated, that persons dealing with an assumed agent, whether the assumed agency be a general or special one, are bound at their peril, if they would hold the principal, to ascertain not only the fact of the agency but the nature and extent of the authority, and in case either is controverted, the burden of proof is upon them to establish it.

. . . It is, moreover, in any case entirely within the power of the person dealing with the agent to satisfy himself that the agent has the authority he assumes to exercise, or to decline to enter into relations with him. (Melchem on Agency, vol. I, sec. 746.)

The person dealing with the agent must also act with ordinary prudence and reasonable diligence. Obviously, if he knows or has good reason to believe that the agent is exceeding his authority, he cannot claim protection. So if the suggestions of probable limitations be of such a clear and reasonable quality, or if the character assumed by the agent is of such a suspicious or unreasonable nature, or if the authority which he seeks to exercise is of such an unusual or improbable character, as would suffice to put an ordinarily prudent man upon his guard, the party dealing with him may not shut his eyes to the real state of the case, but should either refuse to deal with the agent at all, or should ascertain from the principal the true condition of affairs. (Mechem on Agency, vol. I, sec 752.)

And not only must the person dealing with the agent ascertain the existence of the conditions, but he must also, as in other cases, be able to trace the source of his reliance to some word or act of the principal himself if the latter is to be held responsible. As has often been pointed out, the agent alone cannot enlarge or extend his authority by his own acts or statements, nor can he alone remove limitations or waive conditions imposed by his principal. To charge the principal in such a case, the principal's consent or concurrence must be shown. (Mechem on Agency, vol. I, section 757.)

This was a single transaction between the plaintiff and the defendant.lawph!l.net

Applying the above rules, the testimony is conclusive that the plaintiff never authorized Montelibano to receive or receipt for money in its behalf, and that the defendant had no right to assume by any act or deed of the plaintiff that Montelibano was authorized to receive the money, and that the defendant made the payment at his own risk and on the sole representations of Montelibano that he was authorized to receipt for the money.

The judgment of the lower court is reversed, and one will be entered here in favor of the plaintiff and against the defendant for the sum of P2,513.55 with interest at the legal rate from January 10, 1921, with costs in favor of the appellant. So ordered.

Araullo, C. J., Johnson, Street, Malcolm, Avanceña, Villamor, Ostrand, and Romualdez, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-38384             November 3, 1933

CORAZON CH. VELOSO Y RICABLANCA and ROBUSTIANO M. ROSALES, plaintiff-appellee, vs.LA URBANA, Mutual Building and Loan Association, and JOSE MARIA DEL MAR, defendants. LA URBANA, Mutual Building and Loan Association, appellant.

Ramirez and Ortigas for appellant.Gullas, Lopez and Tuaño and Jose N. Leuterio for appellees.Office of the Solicitor-General Hilado for the Insular Treasurer as amicus curiae.

 

IMPERIAL, J.:

The plaintiffs herein brought this action to annul certain mortgages constituted by Jose Maria del Mar in the name of the plaintiff, Corazon Ch. Veloso in favor of the defendant corporation, and recover damages amounting to P2,000 from the defendants.

La Urbana, one of the defendants herein, appealed from the judgment rendered in this case, the dispositive part of which reads as follows:

For the reasons above stated, the deeds of mortgage executed by Jose del Mar in the name of Corazon Ch. Veloso in favor of La Urbana are declared null and void in so far as they purport to bind the plaintiffs or their property; the sale of the said property to La Urbana by virtue of these mortgages is also hereby declared null and void; and it is further ordered and adjudged that the registration of the said deeds in the office of the register of deeds of

Manila be cancelled, and that La Urbana and Jose del Mar pay the costs of this suit.

This decision is without prejudice to any right of action which La Urbana may have against Jose Maria del Mar or the Insular Treasurer, or both, under the provisions of sections 99 to 107 of Act No. 496. So ordered.lawphil.net

The plaintiff Corazon Ch. Veloso was the owner of certain undivided portions of the five parcels of land in question together with the improvements thereon, situated in the City of Manila, and described in certificates of title Nos. 5767 and 33360. In the month of May, 1929, the defendant herein Jose Maria del Mar, plaintiff's brother-in-law, forged two powers of attorney purporting to have been executed by the plaintiffs, as husband and wife, conferring upon him ample authority to mortgage the plaintiff's participation in the aforementioned properties described in said certificates of title. These powers of attorney were duly registered in the office of the register of deeds. Acting under these powers of attorney, Del Mar succeeded in mortgaging the plaintiff's participations to La Previsora Filipina. On February 6, 1929, he cancelled said mortgage and transferred it to the defendant La Urbana which granted him a loan of P10,600. Upon mortgaging the said participations of the plaintiff to the aforesaid defendant, Del Mar delivered to the mortgage creditor the owner's duplicates of the certificates of title whereon the mortgage in question was noted. On November 14 of the same year. Del Mar obtained from the same defendant an additional loan, of P2,875 and executing another mortgage deed which was likewise noted or, the aforesaid duplicates of the certificates of title. Del Mar later violated the conditions of the mortgages whereupon La Urbana foreclosed them and purchased the said properties at public auction for the sum of P10,051.82 which was the total amount of Del Mar's indebtedness at that time. The plaintiffs herein learned of del Mar's fraudulent transactions from the advertisement of the sale thereof, and in addition to this civil action, they instituted criminal proceedings against him resulting in his conviction of the crime of falsification and the imposition upon him of a sentence of two (2) years, four (4) months and one (1) day of prision correccional.

In view of the foregoing facts, the court held that pursuant to article 1714 of the Civil Code and under the Torrens Act in force in this jurisdiction, the forged powers of attorney prepared by Del Mar were without force and effects and that the registration of the mortgages constituted by virtue thereof were likewise null and void and without force and effect, and that they could not in any way prejudice the rights of the plaintiff as the registered owners of her participations in the properties in question.

The defendant-appellant herein assign various alleged errors in its brief consideration thereof. Inasmuch as Del Mar is not the registered owner of the mortgaged properties and inasmuch as the appellant was fully aware of the fact that it was dealing with him on the strength of the alleged powers of attorney purporting to have been conferred upon him by the plaintiff, it was its duty to ascertain the genuineness of said instruments and not the said powers of attorney appeared to have been registered. In view of its failure to proceed in this manner, it acted negligently and should suffer the consequences and damages resulting from such transactions.lawph!l.net

Every person dealing with an agent is put upon inquiry, and must discover upon his peril the authority of the agent, and this is specially true where the act of the agent is of an unusual nature.

If a person makes no inquiry, he is chargeable with knowledge of the agent's authority, and his ignorance of that authority will not be any excuse. (Deen vs. Pacific Commercial Co., 42 Phil., 738.)

Persons dealing with an assumed agent, whether the assumed agency be a general or special one, are bound at their peril, if they would hold the principal, to ascertain not only the fact of the agency but the nature and extent of the authority, and in case either is controverted, the burden of proof is upon them to establish it. (Harry E. Keeler Electric Co. vs. Rodriguez, 44 Phil., 19.)

As has been noted at the beginning, the court reserved to the appellant any right of action it might have against Del Mar and the Insular Treasurer under the provisions of sections 99 to 107 of Act 496. We deem it unnecessary to repeat such reservation in this decision. At all events, the appellant may exercise such right of action without the necessity of such reservation if the facts of the case so warrant.

Wherefore, the judgment appealed from is hereby affirmed, with the costs against the appellant. So ordered.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

 

G.R. No. 125138 March 2, 1999

NICHOLAS Y. CERVANTES, petitioner, vs.COURT OF APPEALS AND THE PHILIPPINE AIR LINES, INC., respondent.

 

PURISMA, J.:

This Petition for Review on certiorari assails the 25 July 1995 decision of the Court of Appeals 1 in CA GR CV No. 41407, entitled "Nicholas Y. Cervantes vs. Philippine Air Lines Inc.", affirming in toto the judgment of the trial court dismissing petitioner's complaint for damages.

On March 27, 1989, the private respondent, Philippines Air Lines, Inc. (PAL), issued to the herein petitioner, Nicholas Cervantes (Cervantes), a round trip plane ticket for Manila-Honolulu-Los Angeles-Honolulu-Manila, which ticket expressly provided an expiry of date of one year from issuance, i.e., until March 27, 1990. The issuance of the said plane ticket was in compliance with a Compromise Agreement entered into between the contending parties in two previous suits, docketed as Civil Case Nos. 3392 and 3451 before the Regional Trial Court in Surigao City. 2

On March 23, 1990, four days before the expiry date of subject ticket, the petitioner used it. Upon his arrival in Los Angeles on the same day, he immediately booked his Los Angeles-Manila return ticket with the PAL office, and it was confirmed for the April 2, 1990 flight.

Upon learning that the same PAL plane would make a stop-over in San Francisco, and considering that he would be there on April 2, 1990, petitioner made arrangements with PAL for him to board the flight In San Francisco instead of boarding in Las Angeles.

On April 2, 1990, when the petitioner checked in at the PAL counter in San Francisco, he was not allowed to board. The PAL personnel concerned marked the following notation on his ticket: "TICKET NOT ACCEPTED DUE EXPIRATION OF VALIDITY."

Aggrieved, petitioner Cervantes filed a Complaint for Damages, for breach of contract of carriage docketed as Civil Case No. 3807 before Branch 32 of the Regional Trial

Court of Surigao del Norte in Surigao City. But the said complaint was dismissed for lack of merit. 3

On September 20, 1993, petitioner interposed an appeal to the Court of Appeals, which came out with a Decision, on July 25, 1995, upholding the dismissal of the case.

On May 22, 1996, petitioner came to this Court via the Petition for Review under consideration.

The issues raised for resolution are: (1) Whether or not the act of the PAL agents in confirming subject ticket extended the period of validity of petitioner's ticket; (2) Whether or not the defense of lack of authority was correctly ruled upon; and (3) Whether or not the denial of the award for damages was proper.

To rule on the first issue, there is a need to quote the findings below. As a rule, conclusions and findings of fact arrived at by the trial court are entitled to great weight on appeal and should not be disturbed unless for strong and cogent reasons. 4

The facts of the case as found by the lower court 5 are, as follows:

The plane ticket itself (Exhibit A for plaintiff; Exhibit 1 for defendant) provides that it is not valid after March 27, 1990. (Exhibit 1-F). It is also stipulated in paragraph 8 of the Conditions of Contract (Exhibit 1, page 2) as follows:

8. This ticket is good for carriage for one year from date of issue, except as otherwise provided in this ticket, in carrier's tariffs, conditions of carriage, or related regulations. The fare for carriage hereunder is subject to change prior to commencement of carriage. Carrier may refuse transportation if the applicable fare has not been paid. 6

The question on the validity of subject ticket can be resolved in light of the ruling in the case of Lufthansa vs. Court of Appeals. 7 In the said case, the Tolentinos were issued first class tickets on April 3, 1982, which will be valid until April 10, 1983. On June 10, 1982, they changed their accommodations to economy class but the replacement tickets still contained the same restriction. On May 7, 1983, Tolentino requested that subject tickets be extended, which request was refused by the petitioner on the ground that the said tickets had already expired. The non-extension of their tickets prompted the Tolentinos to bring a complaint for breach of contract of carriage against the petitioner. In ruling against the award of damages, the Court held that the "ticket constitute the contract between the parties. It is axiomatic that when the terms are clear and leave no doubt as to the intention of the contracting parties, contracts are to be interpreted according to their literal meaning."

In his effort to evade this inevitable conclusion, petitioner theorized that the confirmation by the PAL's agents in Los Angeles and San Francisco changed the compromise agreement between the parties.

As aptly by the appellate court:

. . . on March 23, 1990, he was aware of the risk that his ticket could expire, as it did, before he returned to the Philippines.' (pp. 320-321, Original Records) 8

The question is: "Did these two (2) employees, in effect, extend the validity or lifetime of the ticket in question? The answer is in the negative. Both had no authority to do so. Appellant knew this from the very start when he called up the Legal Department of appellee in the Philippines before he left for the United States of America. He had first hand knowledge that the ticket in question would expire on March 27, 1990 and that to secure an extension, he would have to file a written request for extension at the PAL's office in the Philippines (TSN, Testimony of Nicholas Cervantes, August 2, 1991, pp. 20-23). Despite this knowledge, appellant persisted to use the ticket in question." 9

From the aforestated facts, it can be gleaned that the petitioner was fully aware that there was a need to send a letter to the legal counsel of PAL for the extension of the period of validity of his ticket.

Since the PAL agents are not privy to the said Agreement and petitioner knew that a written request to the legal counsel of PAL was necessary, he cannot use what the PAL agents did to his advantage. The said agents, according to the Court of Appeals, 10 acted without authority when they confirmed the flights of the petitioner.

Under Article 1989 11 of the New Civil Code, the acts an agent beyond the scope of his authority do not bind the principal, unless the latter ratifies the same expressly or impliedly. Furthermore, when the third person (herein petitioner) knows that the agent was acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. If the said third person is aware of such limits of authority, he is to blame, and is not entitled to recover damages from the agent, unless the latter undertook to secure the principal's ratification. 12

Anent the second issue, petitioner's stance that the defense of lack of authority on the part of the PAL employees was deemed waived under Rule 9, Section 2 of the Revised Rules of Court, is unsustainable. Thereunder, failure of a party to put up defenses in their answer or in a motion to dismiss is a waiver thereof.

Petitioner stresses that the alleged lack of authority of the PAL employees was neither raised in the answer nor in the motion to dismiss. But records show that the question of whether there was authority on the part of the PAL employees was acted upon by the trial court when Nicholas Cervantes was presented as a witness and the depositions of the PAL employees, Georgina M. Reyes and Ruth Villanueva, were presented.

The admission by Cervantes that he was told by PAL's legal counsel that he had to submit a letter requesting for an extension of the validity of subject tickets was tantamount to knowledge on his part that the PAL employees had no authority to extend the validity of subject tickets and only PAL's legal counsel was authorized to do so.

However, notwithstanding PAL's failure to raise the defense of lack of authority of the said PAL agents in its answer or in a motion to dismiss, the omission was cured since the said issue was litigated upon, as shown by the testimony of the petitioner in the course of trial. Rule 10, Section 5 of the 1997 Rules of Civil Procedure provides:

Sec. 5. Amendment to conform, or authorize presentation of evidence. — When issues not raised by the pleadings are tried with express or implied consent of the parties, as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure to amend does not affect the result of the trial of these issues. . . .

Thus, "when evidence is presented by one party, with the express or implied consent of the adverse party, as to issues not alleged in the pleadings, judgment may be rendered validly as regards the said issue, which shall be treated as if they have been raised in the pleadings. There is implied consent to the evidence thus presented when the adverse party fails to object thereto." 13

Re: the third issue, an award of damages is improper because petitioner failed to show that PAL acted in bad faith in refusing to allow him to board its plane in San Francisco.

In awarding moral damages for breach of contract of carriage, the breach must be wanton and deliberately injurious or the one responsible acted fraudulently or with malice or bad faith. 14 Petitioner knew there was a strong possibility that he could not use the subject ticket, so much so that he bought a back-up ticket to ensure his departure. Should there be a finding of bad faith, we are of the opinion that it should be on the petitioner. What the employees of PAL did was one of simple negligence. No injury resulted on the part of petitioner because he had a back-up ticket should PAL refuse to accommodate him with the use of subject ticket.

Neither can the claim for exemplary damages be upheld. Such kind of damages is imposed by way of example or correction for the public good, and the existence of bad faith is established. The wrongful act must be accompanied by bad faith, and an award of damages would be allowed only if the guilty party acted in a wanton, fraudulent, reckless or malevolent manner. 15 Here, there is no showing that PAL acted in such a manner. An award for attorney's fees is also improper.

WHEREFORE, the Petition is DENIED and the decision of the Court of Appeals dated July 25, 1995 AFFIRMED in toto. No pronouncement as to costs.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

G.R. No. 114091 June 29, 1995

BACALTOS COAL MINES and GERMAN A. BACALTOS, petitioners, vs.HON. COURT OF APPEALS and SAN MIGUEL CORPORATION, respondents.

 

DAVIDE, JR., J.:

Petitioners seek the reversal of the decision of 30 September 1993 of the Court of Appeals in CA-G.R. CV No. 35180, 1 entitled "San Miguel Corporation vs. Bacaltos Coal Mines, German A. Bacaltos and Rene R. Savellon," which affirmed the decision of 19 August 1991 of the Regional Trial Court (RTC) of Cebu, Branch 9, in Civil Case No. CEB-8187 2holding petitioners Bacaltos Coal Mines and German A. Bacaltos and their co-defendant Rene R. Savellon jointly and severally liable to private respondent San Miguel Corporation under a Trip Charter Party.

The paramount issue raised is whether Savellon was duly authorized by the petitioners to enter into the Trip Charter Party (Exhibit "A") 3 under and by virtue of an Authorization (Exhibit "C" and Exhibit "1"), 4 dated 1 March 1988, the pertinent portions of which read as follows:

I. GERMAN A. BACALTOS, of legal age, Filipino, widower, and residing at second street, Espina Village, Cebu City, province of Cebu, Philippines, do hereby authorize RENE R. SAVELLON, of legal age, Filipino and residing at 376-R Osmeña Blvd., Cebu City, Province of Cebu, Philippines, to use the coal operating contract of BACALTOS COAL MINES of which I am the proprietor, for any legitimate purpose that it may serve. Namely, but not by way of limitation, as follows:

(1) To acquire purchase orders for and in behalf of BACALTOS COAL MINES;

(2) To engage in trading under the style of BACALTOS COAL MINES/RENE SAVELLON;

(3) To collect all receivables due or in arrears from people or companies having dealings under BACALTOS COAL MINES/RENE SAVELLON;

(4) To extend to any person or company by substitution the same extent of authority that is granted to Rene Savellon;

(5) In connection with the preceeding paragraphs to execute and sign documents, contracts, and other pertinent papers.

Further, I hereby give and grant to RENE SAVELLON full authority to do and perform all and every lawful act requisite or necessary to carry into effect the foregoing stipulations as fully to all intents and purposes as I might or would lawfully do if personally present, with full power of substitution and revocation.

The Trip Charter Party was executed on 19 October 1988 "by and between BACALTOS COAL MINES, represented by its Chief Operating Officer, RENE ROSEL SAVELLON" and private respondent San Miguel Corporation (hereinafter SMC), represented by Francisco B. Manzon, Jr., its "SAVP and Director, Plant Operations-Mandaue" Thereunder, Savellon claims that Bacaltos Coal Mines is the owner of the vessel M/V Premship II and that for P650,000.00 to be paid within seven days after the execution of the contract, it "lets, demises" the vessel to charterer SMC "for three round trips to Davao."

As payment of the aforesaid consideration, SMC issued a check (Exhibit "B") 5 payable to "RENE SAVELLON IN TRUST FOR BACALTOS COAL MINES" for which Savellon issued a receipt under the heading of BACALTOS COAL MINES with the address at No 376-R Osmeña Blvd., Cebu City (Exhibit "B-1"). 6

The vessel was able to make only one trip. Its demands to comply with the contract having been unheeded, SMC filed against the petitioners and Rene Savellon the complaint in Civil Case No. CEB-8187 for specific performance and damages. In their Answer, 7 the petitioners alleged that Savellon was not their Chief Operating Officer and that the powers granted to him are only those clearly expressed in the Authorization which do not include the power to enter into any contract with SMC. They further claimed that if it is true that SMC entered into a contract with them, it should have issued the check in their favor. They setup counterclaims for moral and exemplary damages and attorney's fees.

Savellon did not file his Answer and was declared in default on 17 July 1990. 8

At the pre-trial conference on 1 February 1991, the petitioners and SMC agreed to submit the following issues for resolution:

Plaintiff —

1. Whether or not defendants are jointly liable to plaintiff for damages on account of breach of contract;

2. Whether or not the defendants acted in good faith in its representations to the plaintiff;

3. Whether or not defendant Bacaltos was duly enriched on the payment made by the plaintiff for the use of the vessel;

4. Whether or not defendant Bacaltos is estopped to deny the authorization given to defendant Savellon;

Defendants —

1. Whether or not the plaintiff should have first investigated the ownership of vessel M/V PREM [SHIP] II before entering into any contract with defendant Savellon;

2. Whether or not defendant Savellon was authorized to enter into a shipping contract with the [plaintiff] corporation;

3. Whether or not the plaintiff was correct and not mistaken in issuing the checks in payment of the contract in the name of defendant Savellon and not in the name of defendant Bacaltos Coal Mines;

4. Whether or not the plaintiff is liable on defendants'counterclaim. 9

After trial, the lower court rendered the assailed decision in favor of SMC and against the petitioners and Savellon as follows:

WHEREFORE, by preponderance of evidence, the Court hereby renders judgment in favor of plaintiff and against defendants, ordering defendants Rene Savellon, Bacaltos Coal Mines and German A. Bacaltos, jointly and severally, to pay to plaintiff:

1. The amount of P433,000.00 by way of reimbursement of the consideration paid by plaintiff, plus 12% interest to start from date of written demand, which is June 14, 1989;

2. The amount of P20,000.00 by way of exemplary damages;

3. The amount of P20,000.00 as attorney's fees and P5,000.00 as Litigation expenses. Plus costs. 10

It ruled that the Authorization given by German Bacaltos to Savellon necessarily included the power to enter into the Trip Charter Party. It did not give credence to the petitioners' claim that the authorization refers only to coal or coal mining and not to shipping because, according to it, "the business of coal mining may also involve the shipping of products" and "a company such as a coal mining company is not prohibited to engage in entering into a Trip Charter Party contract." It further reasoned out that even assuming that the petitioners did not intend to authorize Savellon to enter into the Trip Charter Party, they are still liable because: (a) SMC appears to be an innocent party which has no knowledge of the real intent of the parties to the Authorization and has reason to rely on the written Authorization submitted by Savellon pursuant to Articles 1900 and 1902 of the Civil Code; (b) Savellon issued an official receipt of Bacaltos Coal Mines (Exhibit "B-1") for the consideration of the Trip Charter Party, and the petitioners denial that they caused the printing of such official receipt is "lame" because they submitted only a cash voucher and not their official receipt; (c) the "Notice of Readiness" (Exhibit "A-1") is written on a paper with the letterhead "Bacaltos Coal Mines" and the logo therein is the same as that appearing in their voucher; (d) the petitioners were benefited by the payment because the real payee in the check is actually Bacaltos Coal Mines and since in the Authorization they authorized Savellon to collect receivables due or in arrears, the check was then properly delivered to Savellon; and, (e) if indeed Savellon had not been authorized or if indeed he exceeded his authority or if the Trip Charter Party was personal to him and the petitioners have nothing to do with it, then Savellon should have "bother[ed] to answer" the complaint and the petitioners should have filed "a cross-claim" against him.

In their appeal to the Court of Appeals in CA-G.R. CV No. 35180, the petitioners asserted that the trial court erred in: (a) not holding that SMC was negligent in (1) not verifying the credentials of Savellon and the ownership of the vessel, (2) issuing the check in the name of Savellon in trust for Bacaltos Coal Mines thereby allowing Savellon to encash the check, and, (3) making full payment of P650,000.00 after the vessel made only one trip and before it completed three trips as required in the Trip Charter Party; (b) holding that under the authority given to him Savellon was authorized to enter into the Trip Charter Party; and, (c) holding German Bacaltos jointly and severally liable with Savellon and Bacaltos Coal Mines. 11

As stated at the beginning, the Court of Appeals affirmed in toto the judgment of the trial court. It held that: (a) the credentials of Savellon is not an issue since the petitioners impliedly admitted the agency while the ownership of the vessel was warranted on the face of the Trip Charter Party; (b) SMC was not negligent when it issued the check in the name of Savellon in trust for Bacaltos Coal Mines since the Authorization clearly provides that collectibles of the petitioners can be coursed through Savellon as the agent; (c) the Authorization includes the power to enter into the Trip Charter Party because the "five prerogatives" enumerated in the former is prefaced by the phrase "but not by way of limitation"; (d) the petitioners' statement that the check should have been issued in the name of Bacaltos Coal Mines is another implicit admission that the Trip Charter Party is part and parcel of the petitioners' business notwithstanding German Bacaltos's contrary interpretation when he testified, and in any event, the construction of obscure words should not favor him since he prepared the Authorization in favor of Savellon; and, (e) German Bacaltos admitted in the Answer that he is the proprietor of Bacaltos Coal Mines and he likewise represented himself to be so in the Authorization itself, hence he should not

now be permitted to disavow what he initially stated to be true and to interpose the defense that Bacaltos Coal Mines has a distinct legal personality.

Their motion for a reconsideration of the above decision having been denied, the petitioners filed the instant petition wherein they raise the following errors:

I. THE RESPONDENT COURT ERRED IN HOLDING THAT RENE SAVELLON WAS AUTHORIZED TO ENTER INTO A TRIP CHARTER PARTY CONTRACT WITH PRIVATE RESPONDENT INSPITE OF ITS FINDING THAT SUCH AUTHORITY CANNOT BE FOUND IN THE FOUR CORNERS OF THE AUTHORIZATION;

II. THE RESPONDENT COURT ERRED IN NOT HOLDING THAT BY ISSUING THE CHECK IN THE NAME OF RENE SAVELLON IN TRUST FOR BACALTOS COAL MINES, THE PRIVATE RESPONDENT WAS THE AUTHOR OF ITS OWN DAMAGE; AND

III. THE RESPONDENT COURT ERRED IN HOLDING PETITIONER GERMAN BACALTOS JOINTLY AND SEVERALLY LIABLE WITH RENE SAVELLON AND CO-PETITIONER BACALTOS COAL MINES IN SPITE OF THE FINDING OF THE COURT A QUO THAT PETITIONER BACALTOS COAL MINES AND PETITIONER BACALTOS ARE TWO DISTINCT AND SEPARATE LEGAL PERSONALITIES. 12

After due deliberations on the allegations, issues raised, and arguments adduced in the petition, and the comment thereto and reply to the comment, the Court resolved to give due course to the petition.

Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. If he does not make such inquiry, he is chargeable with knowledge of the agent's authority, and his ignorance of that authority will not be any excuse. Persons dealing with an assumed agent, whether the assumed agency be a general or special one, are bound at their peril, if they would hold the principal, to ascertain not only the fact of the agency but also the nature and extent of the authority, and in case either is controverted, the burden of proof is upon them to establish it. 13 American jurisprudence 14 summarizes the rule in dealing with an agent as follows:

A third person dealing with a known agent may not act negligently with regard to the extent of the agent's authority or blindly trust the agent's statements in such respect. Rather, he must use

reasonable diligence and prudence to ascertain whether the agent is acting and dealing with him within the scope of his powers. The mere opinion of an agent as to the extent of his powers, or his mere assumption of authority without foundation, will not bind the principal; and a third person dealing with a known agent must bear the burden of determining for himself, by the exercise of reasonable diligence and prudence, the existence or nonexistence of the agent's authority to act in the premises. In other words, whether the agency is general or special, the third person is bound to ascertain not only the fact of agency, but the nature and extent of the authority. The principal, on the other hand, may act on the presumption that third persons dealing with his agent will not be negligent in failing to ascertain the extent of his authority as well as the existence of his agency.

Or, as stated in Harry E. Keller Electric Co. vs. Rodriguez, 15 quoting Mechem on Agency:

The person dealing with the agent must also act with ordinary prudence and reasonable diligence. Obviously, if he knows or has good reason to believe that the agent is exceeding his authority, he cannot claim protection. So if the suggestions of probable limitations be of such a clear and reasonable quality, or if the character assumed by the agent is of such a suspicious or unreasonable nature, or if the authority which he seeks to exercise is of such an unusual or improbable character, as would suffice to put an ordinarily prudent man upon his guard, the party dealing with him may not shut his eyes to the real estate of the case, but should either refuse to deal with the agent at all, or should ascertain from the principal the true condition of affairs. [emphasis supplied].

In the instant case, since the agency of Savellon is based on a written document, the Authorization of 1 March 1988 (Exhibits "C" and "1"), the extent and scope of his powers must be determined on the basis thereof. The language of the Authorization is clear. It pertinently states as follows:

I. GERMAN A. BACALTOS do hereby authorize RENE R. SAVELLON . . . to use the coal operating contract of BACALTOS COAL MINES, of which I am the proprietor,  for any legitimate purpose that it may serve. Namely, but not by way of limitation, as follows  . . . [emphasis supplied].

There is only one express power granted to Savellon, viz., to use the coal operating contract for anylegitimate purpose it may serve. The enumerated "five prerogatives" — to employ the term used by the Court of Appeals — are nothing but the specific prerogatives subsumed under or classified as part of or as examples of the power to use the coal operating contract. The clause "but not by way of limitation" which precedes the enumeration could only refer to or contemplate other prerogatives which must exclusively pertain or relate or be germane to the power to use the coal operating contract. The conclusion then of the Court of Appeals that the Authorization

includes the power to enter into the Trip Chapter Party because the "five prerogatives" are prefaced by such clause, is seriously flawed. It fails to note that the broadest scope of Savellon's authority is limited to the use of the coal operating contract and the clause cannot contemplate any other power not included in the enumeration or which are unrelated either to the power to use the coal operating contract or to those already enumerated. In short, while the clause allows some room for flexibility, it can comprehend only additional prerogatives falling within the primary power and within the same class as those enumerated. The trial court, however, went further by hastily making a sweeping conclusion that "a company such as a coal mining company is not prohibited to engage in entering into a Trip Charter Party contract." 16 But what the trial court failed to consider was that there is no evidence at all that Bacaltos Coal Mines as a coal mining company owns and operates vessels, and even if it owned any such vessels, that it was allowed to charter or lease them. The trial court also failed to note that the Authorization is not a general power of attorney. It is a special power of attorney  for it refers to a clear mandate specifically authorizing the performance of a specific power and of express acts subsumed therein. 17 In short, both courts below unreasonably expanded the express terms of or otherwise gave unrestricted meaning to a clause which was precisely intended to prevent unwarranted and unlimited expansion of the powers entrusted to Savellon. The suggestion of the Court of Appeals that there is obscurity in the Authorization which must be construed against German Bacaltos because he prepared the Authorization has no leg to stand on inasmuch as there is no obscurity or ambiguity in the instrument. If any obscurity or ambiguity indeed existed, then there will be more reason to place SMC on guard and for it to exercise due diligence in seeking clarification or enlightenment thereon, for that was part of its duty to discover upon its peril the nature and extent of Savellon's written agency. Unfortunately, it did not.

Howsoever viewed, the foregoing conclusions of the Court of Appeals and the trial court are tenuous and farfetched, bringing to unreasonable limits the clear parameters of the powers granted in the Authorization.

Furthermore, had SMC exercised due diligence and prudence, it should have known in no time that there is absolutely nothing on the face of the Authorization that confers upon Savellon the authority to enter into any Trip Charter Party. Its conclusion to the contrary is based solely on the second prerogative under the Authorization, to wit:

(2) To engage in trading under the style of BACALTOS COAL MINES/RENE SAVELLON;

unmindful that such is but a part of the primary authority to use the coal operating contract which it did not even require Savellon to produce. Its principal witness, Mr. Valdescona, expressly so admitted on cross-examination, thus:

Atty. Zosa (to witness — ON CROSS)

Q You said that in your office Mr. Rene Savellon presented to you this authorization marked Exhibit "C" and Exhibit "1" for the defendant?

A Yes, sir.

Q Did you read in the first part[y] of this authorization Mr. Valdescona that Mr. Rene Savellon was authorized as the coal operating contract of Bacaltos Coal Mines?

A Yes, sir.

Q Did it not occur to you that you should have examined further the authorization of Mr. Rene Savellon, whether or not this coal operating contract allows Mr. Savellon to enter into a trip charter party?

A Yes, sir. We discussed about the extent of his authorization and he referred us to the number 2 provision of this authorization which is to engage in trading under the style of Bacaltos Coal Mines/Rene Savellon, which we followed up to the check preparation because it is part of the authority.

Q In other words, you examined this and you found out that Mr. Savellon is authorized to use the coal operating contract of Bacaltos Coal Mines?

A Yes, sir.

Q You doubted his authority but you found out in paragraph 2 that he is authorized that's why you agreed and entered into that trip charter party?

A We did not doubt his authority but we were questioning as to the extent of his operating contract.

Q Did you not require Mr. Savellon to produce that coal operating contract of Bacaltos Coal Mines?

A No sir. We did not. 18

Since the principal subject of the Authorization is the coal operating contract, SMC should have required its presentation to determine what it is and how it may be used by Savellon. Such a determination is indispensable to an inquiry into the extent or scope of his authority. For this reason, we now deem it necessary to examine the nature of a coal operating contract.

A coal operating contract is governed by P.D. No. 972 (The Coal Development Act of 1976), as amended by P.D. No. 1174. It is one of the authorized ways of active exploration, development, and production of coal resources 19 in a specified contract area. 20 Section 9 of the decree prescribes the obligation of the contractor, thus:

Sec. 9. Obligations of Operator in Coal Operating Contract. — The operator under a coal operating contract shall undertake, manage and execute the coal operations which shall include:

(a) The examination and investigation of lands supposed to contain coal, by detailed surface geologic mapping, core drilling, trenching, test pitting and other appropriate means, for the purpose of probing the presence of coal deposits and the extent thereof;

(b) Steps necessary to reach the coal deposit so that it can be mined, including but not limited to shaft sinking and tunneling; and

(c) The extraction and utilization of coal deposits.

The Government shall oversee the management of the operation contemplated in a coal operating contract and in this connection, shall require the operator to:

(a) Provide all the necessary service and technology;

(b) Provide the requisite financing;

(c) Perform the work obligations and program prescribed in the coal operating contract which shall not be less than those prescribed in this Decree;

(d) Operate the area on behalf of the Government in accordance with good coal mining practices using modern methods appropriate for the geological conditions of the area to enable maximum economic production of coal, avoiding hazards to life, health and property, avoiding pollution of air, lands and waters, and pursuant to an efficient and economic program of operation;

(e) Furnish the Energy Development Board promptly with all information, data and reports which it may require;.

(f) Maintain detailed technical records and account of its expenditures;

(g) Conform to regulations regarding, among others, safety demarcation of agreement acreage and work areas, non-interferencewith the rights of the other petroleum, mineral and natural resources operators; —

(h) Maintain all necessary equipment in good order and allow access to these as well as to the exploration, development and production sites and operations to inspectors authorized by the Energy Development Board;

(i) Allow representatives authorized by the Energy Development Board full access to their accounts, books and records for tax and other fiscal purposes.

Section 11 thereof provides for the minimum terms and conditions of a coal operating contract.

From the foregoing, it is obvious that a scrutiny of the coal operating contract of Bacaltos Coal Mines would have provided SMC knowledge of the activities which are germane, related, or incident to the power to use it. But it did not even require Savellon to produce the same.

SMC's negligence was further compounded by its failure to verify if Bacaltos Coal Mines owned a vessel. A party desiring to charter a vessel must satisfy itself that the other party is the owner of the vessel or is at least entitled to its possession with power to lease or charter the vessel. In the instant case, SMC made no such attempt. It merely satisfied itself with the claim of Savellon that the vessel it was leasing is owned by Bacaltos Coal Mines and relied on the presentation of the Authorization as well as its test on the sea worthiness of the vessel. Valdescona thus declared on direct examination as follows:

A In October, a certain Rene Savellon called our office offering us shipping services. So I told him to give us a formal proposal and also for him to come to our office so that we can go over his proposal and formally discuss his offer.

Q Did Mr. Rene Savellon go to your office?

A Few days later he came to our office and gave us his proposal verbally offering a vessel for us to use for our cargo.

Q Did he mention the owner of that vessel?

A Yes, sir. That it is Bacaltos.

Q Did he present a document to you?

A Yes, sir. He presented to us the authorization.

Q When Mr. Rene Savellon presented to you the authorization what did you do?.

A On the strength of that authorization we initially asked him for us to check the vessel to see its sea worthiness, and we assigned our in-house surveyor to check the sea worthiness of the vessel which was on dry dock that time in Danao.

Q What was the result of your inspection?

A We found out the vessel's sea worthiness to be our cargo carrier.

Q After that what did you do?

A After that we were discussing the condition of the contract.

Q Were you able to execute that contract?

A Yes, sir . 21

He further declared as follows:

Q When you entered into a trip charter contract did you check the ownership of M/V Premship?

A The representation made by Mr. Rene Savellon was that Bacaltos Coal Mines operates the vessel and on the strength of the authorization he showed us we were made to believe that it was Bacaltos Coal Mines that owned it.

COURT: (to witness)

Q In other words, you just believed Rene Savellon?

A Yes, sir.

COURT: (to witness)

Q You did not check with Bacaltos Coal Mines?

A That is the representation he made.

Q Did he show you document regarding this M/V Premship II?

A No document shown. 22

The Authorization itself does not state that Bacaltos Coal Mines owns any vessel, and since it is clear therefrom that it is not engaged in shipping but in coal mining or in coal business, SMC should have required the presentation of pertinent documentary proof of ownership of the vessel to be chartered. Its in-house surveyor who saw the vessel while drydocked in Danao and thereafter conducted a sea worthiness test could not have failed to ascertain the registered owner of the vessel. The petitioners themselves declared in open court that they have not leased any vessel for they do not need it in their coal operations 23 thereby implying that they do not even own one.

The Court of Appeals' asseveration that there was no need to verify the ownership of the vessel because such ownership is warranted on the face of the trip charter party begs the question since Savellon's authority to enter into that contract is the very heart of the controversy.

We are not prepared to accept SMC's contention that the petitioners' claim that they are not engaged in shipping and do not own any ship is belied by the fact that they maintained a pre-printed business form known as a "Notice of Readiness" (Exhibit "A-1"). 24 This paper is only a photocopy and, despite its reservation to present the original for purposes of comparison at the nexthearing, 25 SMC failed to produce the latter. This "Notice of Readiness" is not, therefore, the best evidence, hence inadmissible under Section 3, Rule 130 of the Rules of Court. It is true that when SMC made a formal offer of its exhibits, the petitioners did not object to the admission of Exhibit "A-1," the "Notice of Readiness," under the best evidence rule but on the ground that Savellon was not authorized to enter into the Trip Charter Party and that the party who signed it, one Elmer Baliquig, is not the petitioners' employee but of Premier Shipping Lines, the owner of the vessel in question. 26 The petitioners raised the issue of inadmissibility under the best evidence rule only belatedly in this petition. But although Exhibit "A-1" remains admissible for not having been timely objected to, it has no probative value as to the ownership of the vessel.

There is likewise no proof that the petitioners received the consideration of the Trip Charter Party. The petitioners denied having received it. 27 The evidence for SMC established beyond doubt that it was Savellon who requested in writing on 19 October 1988 that the check in payment therefor be drawn in favor of BACALTOS COAL MINES/RENE SAVELLON (Exhibit "B-3") and that SMC drew the check in favor of RENE SAVELLON IN TRUST FOR BACALTOS COALMINES (Exhibit "B") and delivered it to Savellon who there upon issued a receipt (Exhibit "B-1"). We agree with

the petitioners that SMC committed negligence in drawing the check in the manner aforestated. It even disregarded the request of Savellon that it be drawn in favor of BACALTOS COAL MINES/RENE SAVELLON. Furthermore, assuming that the transaction was permitted in the Authorization, the check should still have been drawn in favor of the principal. SMC then made possible the wrong done. There is an 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. 28 For this rule to apply, the condition precedent is that both parties must be innocent. In the present case, however, SMC is guilty of not ascertaining the extent and limits of the authority of Savellon. In not doing so, SMC dealt with Savellon at its own peril.

Having thus found that SMC was the author of its own damage and that the petitioners are, therefore, free from any liability, it has become unnecessary to discuss the issue of whether Bacaltos Coal Mines is a corporation with a personality distinct and separate from German Bacaltos.

WHEREFORE, the instant petition is GRANTED and the challenged decision of 30 September 1993 of the Court of Appeals in CA-G.R. CV No. 35180 is hereby REVERSED and SET ASIDE and another judgment is hereby rendered MODIFYING the judgment of the Regional Trial Court of Cebu, Branch 9, in Civil Case No. CEB-8187 by setting aside the declaration of solidary liability, holding defendant RENE R. SAVELLON solely liable for the amounts adjudged, and ordering the dismissal of the case as against herein petitioners.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 159489             February 4, 2008

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

DECISION

QUISUMBING, J.:

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

The antecedent facts are as follows:

Respondent Teresita O. Pedroso is a policyholder of a 20-year endowment life insurance issued by petitioner Filipinas Life Assurance Company (Filipinas Life). Pedroso claims Renato Valle was her insurance agent since 1972 and Valle collected her monthly premiums. In the first week of January 1977, Valle told her that the Filipinas Life Escolta Office was holding a promotional investment program for policyholders. It was offering 8% prepaid interest a month for certain amounts deposited on a monthly basis. Enticed, she initially invested and issued a post-dated check dated January 7, 1977 for P10,000.4 In return, Valle issued Pedroso his personal check for P800 for the 8%5prepaid interest and a Filipinas Life "Agent’s Receipt" No. 807838.6

Subsequently, she called the Escolta office and talked to Francisco Alcantara, the administrative assistant, who referred her to the branch manager, Angel Apetrior. Pedroso inquired about the promotional investment and Apetrior confirmed that there was such a promotion. She was even told she could "push through with the check" she issued. From the records, the check, with the endorsement of Alcantara at the back, was deposited in the account of Filipinas Life with the Commercial Bank and Trust Company (CBTC), Escolta Branch.

Relying on the representations made by the petitioner’s duly authorized representatives Apetrior and Alcantara, as well as having known agent Valle for quite

some time, Pedroso waited for the maturity of her initial investment. A month after, her investment of P10,000 was returned to her after she made a written request for its refund. The formal written request, dated February 3, 1977, was written on an inter-office memorandum form of Filipinas Life prepared by Alcantara.7 To collect the amount, Pedroso personally went to the Escolta branch where Alcantara gave her the P10,000 in cash. After a second investment, she made 7 to 8 more investments in varying amounts, totaling P37,000 but at a lower rate of 5%8 prepaid interest a month. Upon maturity of Pedroso’s subsequent investments, Valle would take back from Pedroso the corresponding yellow-colored agent’s receipt he issued to the latter.

Pedroso told respondent Jennifer N. Palacio, also a Filipinas Life insurance policyholder, about the investment plan. Palacio made a total investment of P49,5509 but at only 5% prepaid interest. However, when Pedroso tried to withdraw her investment, Valle did not want to return some P17,000 worth of it. Palacio also tried to withdraw hers, but Filipinas Life, despite demands, refused to return her money. With the assistance of their lawyer, they went to Filipinas Life Escolta Office to collect their respective investments, and to inquire why they had not seen Valle for quite some time. But their attempts were futile. Hence, respondents filed an action for the recovery of a sum of money.

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

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

Petitioner now comes before us raising a single issue:

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

Simply put, did the Court of Appeals err in holding petitioner and its co-defendants jointly and severally liable to the herein respondents?

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

On the other hand, respondents contend that Filipinas Life authorized Valle to solicit investments from them. In fact, Filipinas Life’s official documents and facilities were used in consummating the transactions. These transactions, according to respondents, were confirmed by its officers Apetrior and Alcantara. Respondents

assert they exercised all the diligence required of them in ascertaining the authority of petitioner’s agents; and it is Filipinas Life that failed in its duty to ensure that its agents act within the scope of their authority.

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

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

Filipinas Life, as the principal, is liable for obligations contracted by its agent Valle. By the contract 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.12 The general rule is that the principal is responsible for the acts of its agent done within the scope of its authority, and should bear the damage caused to third persons.13 When the agent exceeds his authority, the agent becomes personally liable for the damage.14 But even when the agent exceeds his authority, the principal is still solidarily liable together with the agent if the principal allowed the agent to act as though the agent had full powers.15 In other words, the acts of an agent beyond the scope of his authority do not bind the principal, unless the principal ratifies them, expressly or impliedly.16 Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf by another without authority.17

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

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

Costs against the petitioner.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-49395 December 26, 1984

GREEN VALLEY POULTRY & ALLIED PRODUCTS, INC., petitioner vs.THE INTERMEDIATE APPELLATE COURT and E.R. SQUIBB & SONS PHILIPPINE CORPORATION,respondents.

 

ABAD SANTOS, J.:

This is a petition to review a decision of the defunct Court of Appeals which affirmed the judgment of the trial court whereby:

... judgment is hereby rendered in favor of the plaintiff [E.R. Squibb & Sons Philippine Corporation], ordering the defendant [Green Valley Poultry & Allied Products, Inc.] to pay the sum of P48,374.74 plus P96.00 with interest at 6% per annum from the filing of this action; plus attorney's fees in the amount of P5,000.00 and to pay the costs.

On November 3, 1969, Squibb and Green Valley entered into a letter agreement the text of which reads as follows:

E.R. Squibb & Sons Philippine Corporation is pleased to appoint Green Valley Poultry & Allied Products, Inc. as a non-exclusive distributor for Squibb Veterinary Products, as recommended by Dr. Leoncio D. Rebong, Jr. and Dr. J.G. Cruz, Animal Health Division Sales Supervisor.

As a distributor, Green Valley Poultry & Allied Products, Inc. wig be entitled to a discount as follows:

Feed Store Price (Catalogue)

Less 10%

Wholesale Price

Less 10%

Distributor Price

There are exceptions to the above price structure. At present, these are:

1. Afsillin Improved — 40 lbs. bag

The distributor commission for this product size is 8% off P120.00

2. Narrow — Spectrum Injectible Antibiotics

These products are subject to price fluctuations. Therefore, they are invoiced at net price per vial.

3. Deals and Special Offers are not subject to the above distributor price structure. A 5% distributor commission is allowed when the distributor furnishes copies for each sale of a complete deal or special offer to a feedstore, drugstore or other type of account.

Deals and Special Offers purchased for resale at regular price invoiced at net deal or special offer price.

Prices are subject to change without notice. Squibb will endeavor to advise you promptly of any price changes. However, prices in effect at the tune orders are received by Squibb Order Department will apply in all instances.

Green Valley Poultry & Allied Products, Inc. win distribute only for the Central Luzon and Northern Luzon including Cagayan Valley areas. We will not allow any transfer or stocks from Central Luzon and Northern Luzon including Cagayan Valley to other parts of Luzon, Visayas or Mindanao which are covered by our other appointed Distributors. In line with this, you will follow strictly our stipulations that the maximum discount you can give to your direct and turnover accounts will not go beyond 10%.

It is understood that Green Valley Poultry and Allied Products, Inc. will accept turn-over orders from Squibb representatives for delivery to customers in your area. If for credit or other valid reasons a turn-over order is not served, the Squibb representative will be notified within 48 hours and hold why the order will not be served.

It is understood that Green Valley Poultry & Allied Products, Inc. will put up a bond of P20,000.00 from a mutually acceptable bonding company.

Payment for Purchases of Squibb Products will be due 60 days from date of invoice or the nearest business day thereto. No payment win be accepted in the form of post-dated checks. Payment by check must be on current dating.

It is mutually agreed that this non-exclusive distribution agreement can be terminated by either Green Valley Poultry & Allied Products, Inc. or Squibb Philippines on 30 days notice.

I trust that the above terms and conditions will be met with your approval and that the distributor arrangement will be one of mutual satisfaction.

If you are agreeable, please sign the enclosed three (3) extra copies of this letter and return them to this Office at your earliest convenience.

Thank you for your interest and support of the products of E.R. Squibb & Sons Philippines Corporation. (Rollo, pp. 12- 13.)

For goods delivered to Green Valley but unpaid, Squibb filed suit to collect. The trial court as aforesaid gave judgment in favor of Squibb which was affirmed by the Court of Appeals.

In both the trial court and the Court of Appeals, the parties advanced their respective theories.

Green Valley claimed that the contract with Squibb was a mere agency to sell; that it never purchased goods from Squibb; that the goods received were on consignment only with the obligation to turn over the proceeds, less its commission, or to return the goods ff not sold, and since it had sold the goods but had not been able to collect from the purchasers thereof, the action was premature.

Upon the other hand, Squibb claimed that the contract was one of sale so that Green Valley was obligated to pay for the goods received upon the expiration of the 60-day credit period.

Both courts below upheld the claim of Squibb that the agreement between the parties was a sales contract.

We do not have to categorize the contract. Whether viewed as an agency to sell or as a contract of sale, the liability of Green Valley is indubitable. Adopting Green Valley's theory that the contract is an agency to sell, it is liable because it sold on credit without authority from its principal. The Civil Code has a provision exactly in point. It reads:

Art. 1905. The commission agent cannot, without the express or implied consent of the principal, sell on credit. Should he do so, the

principal may demand from him payment in cash, but the commission agent shall be entitled to any interest or benefit, which may result from such sale.

WHEREFORE, the petition is hereby dismissed; the judgment of the defunct Court of Appeals is affirmed with costs against the petitioner.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

A.C. No. 6733               October 10, 2012

HERMINIA P. VOLUNTAD-RAMIREZ, Complainant, vs.ATTY. ROSARIO B. BAUTISTA, Respondent.

R E S O L U T I O N

CARPIO, J.:

The Case

This administrative case arose from a complaint filed by Herminia P. Voluntad-Ramirez (complainant) against Atty. Rosario B. Bautista (respondent) for violation of Canon 18, 1 Rule 18.02,2 and Rule 22.023 of the Code of Professional Responsibility, violation of the lawyer's oath, grave misconduct, and conduct prejudicial to the best interest of the public.

The Facts

In her Affidavit-Complaint4 dated 29 March 2005, complainant alleged that on 25 November 2002, she engaged the legal services of respondent to file a complaint against complainant’s siblings for encroachment of her right of way. For his legal services, respondent demanded P 15,000 as acceptance fee, plus P 1,000 per court appearance. Complainant then paid respondent the P 15,000 acceptance fee. On 29 May 2003, or six months after she hired respondent, complainant severed the legal services of respondent because respondent failed to file a complaint within a reasonable period of time as requested by complainant. Complainant then retrieved from respondent the folder containing the documents and letters pertaining to her case which complainant had entrusted to respondent. Complainant claimed that she was dissatisfied with the way respondent handled her complaint considering that during the six months that elapsed, respondent only sent a letter to the City Engineer’s Office in Navotas City concerning her complaint. On 8 March 2004, complainant sent a letter to respondent, reiterating that she was terminating the services of respondent and that she was asking for the refund of P 14,000 out of the P 15,000 acceptance fee. Complainant stated in her letter that due to respondent’s "failure to institute the desired complaint on time" against complainant’s brothers and sisters, complainant was compelled to hire the services of another counsel to file the complaint. Respondent failed to refund the P 14,000, prompting complainant to file on 10 May 2005 her complaint dated 29 March 2005 with the Office of the Bar Confidant of the Supreme Court. Complainant charged respondent with violation of Canon 18, Rule 18.02, and Rule 22.02 of the Code of Professional

Responsibility, violation of the lawyer’s oath, grave misconduct, and conduct prejudicial to the best interest of the public.

In his defense, respondent alleges that complainant initially wanted him to file an injunction case against her siblings but later changed her mind when she was apprised of the expenses involved. Respondent then advised complainant that since her case involves family members, earnest efforts toward a compromise should be made in accordance with Article 222 of the Civil Code5 and that since the parties reside in the same barangay, the case must be referred to the barangay in accordance with the Local Government Code. Respondent also suggested filing a criminal action instead of an injunction case. The day after he was hired by complainant, respondent wrote a letter to the City Engineer of Navotas City pertaining to complainant’s case. Respondent made several follow ups with the City Engineer’s Office and even filed a case6 against the City Engineer for nonfeasance under Republic Act No. 6713.7 When complainant voluntarily withdrew her case from respondent on 29 May 2003, complainant also retrieved the folder containing the documents relevant to her case. It was only after almost ten months from severing respondent’s legal services that complainant sent a letter dated 8 March 2004 demanding the refund of P14,000 out of the P 15,000 acceptance fee. Respondent explains that the acceptance fee is non-refundable because it covers the time and cost of research made immediately before and after acceptance of the case. The acceptance fee also pays for the office supplies used for the case. Nevertheless, respondent alleges that he did not ignore complainant’s request for a refund. Respondent claims that he sent a letter dated 17 March 2004, which stated that although it is their law firm’s policy not to entertain requests for refund of acceptance fee, they were willing to grant her a fifty percent (50%) discount and for complainant to contact them for her refund.8 In fact, respondent stated that he sent text messages to complainant’s lawyer, Atty. Bartolome, signifying respondent’s willingness to refund the amount of P 9,000.9

In her Reply-Affidavit, complainant stated that even before she engaged respondent’s legal services, her case was already referred to the barangay for conciliation proceedings. However, complainant’s siblings failed to appear which resulted in the issuance on 1 July 2002 of a Certification to File Action by the Office of the Lupong Tagapamayapa, Office of the Barangay Council, Barangay Daanghari, Navotas.10 Respondent countered in his Position Paper that complainant did not inform him of the existence of the alleged Certification to File Action and that the said certification was not part of the case folder which respondent turned over to complainant when his services was severed.

The case was referred to the Integrated Bar of the Philippines (IBP) for investigation, report and recommendation or decision.

Report and Recommendationof the Commission on Bar Discipline

The Investigating Commissioner found respondent "guilty of violation of the lawyer’s oath, Canon 18, Rule[s] 18.03 and 22.02 of the Code of Professional Responsibility, grave misconduct and thereby recommend that he be suspended for a period of one

(1) year with a stern warning that similar acts in the future will be severely dealt with."11 Respondent was also ordered to refund to complainant the sum of P 14,000.

The Investigating Commissioner held that respondent has the moral duty to restitute P 14,000 out of the P 15,000 acceptance fee considering that, apart from sending a letter to the City Engineer of Navotas City, respondent did nothing more to advance his client’s cause during the six months that complainant engaged his legal services.

Decision of the Board of Governors of theIntegrated Bar of the Philippines

On 31 May 2007, the IBP Board of Governors passed Resolution No. XVII-2007-230, adopting and approving the Investigating Commissioner’s Report and Recommendation, with modification, thus:

RESOLVED to ADOPT and APPROVE, as it is hereby ADOPTED and APPROVED, with modification, the Report and Recommendation of the Investigating Commissioner of the above-entitled case, herein made part of this Resolution as Annex "A"; and, finding the recommendation fully supported by the evidence on record and the applicable laws and rules, and considering Respondent’s dishonesty, negligence in [his] mandated duty to file a case to protect [his] clients cause, Atty. Rosario Bautista is hereby SUSPENDED from the practice of law for six (6) months, and Restitution of the amount of P 14,000 to complainant is likewise ordered.12

In his Motion for Reconsideration, respondent alleged that even before complainant officially engaged his legal services on 25 November 2002, complainant already consulted him for several days regarding her case for which no consultation fee was charged. A day after receiving the P 15,000 acceptance fee, respondent sent a letter-complaint to the City Engineer of Navotas City for a possible case of violation of the National Building Code. Respondent reiterated that complainant failed to disclose to him that a Certification to File Action was already issued by the Office of the Lupong Tagapamayapa.

In its 28 October 2011 Resolution No. XX-2011-143, the Board of Governors of the IBP partially granted respondent’s Motion for Reconsideration:

RESOLVED to unanimously GRANT partially, the Respondent’s Motion for Reconsideration. Thus, Resolution No. XVIII-2007-230 dated 31 May 2007 is hereby Amended, by lowering the recommended penalty of Suspension against respondent Atty. Rosario Bautista from six (6) months toADMONITION.

The Issue

The issue in this case is whether respondent is guilty of negligence in handling the case of complainant.

The Ruling of the Court

The Court affirms the 28 October 2011 Resolution No. XX-2011-143 of the Board of Governors of the IBP, reducing the recommended penalty from six months to admonition.

We agree with the finding of the Investigating Commissioner that respondent breached his duty to serve his client with competence and diligence. Respondent is also guilty of violating Rule 18.03 of the Code of Professional Responsibility, which states that "a lawyer shall not neglect a legal matter entrusted to him, and his negligence in connection therewith shall render him liable." However, we do not find respondent guilty of violating Rule 22.02 of the Code of Professional Responsibility13 since respondent immediately turned over to complainant the folder containing the documents and letters pertaining to her case upon the severance of respondent’s legal services.

Once a lawyer receives the acceptance fee for his legal services, he is expected to serve his client with competence, and to attend to his client’s cause with diligence, care and devotion.14 As held in Santiago v. Fojas:15

It is axiomatic that no lawyer is obliged to act either as adviser or advocate for every person who may wish to become his client. He has the right to decline employment, subject, however, to Canon 14 of the Code of Professional Responsibility. Once he agrees to take up the cause of [his] client, the lawyer owes fidelity to such cause and must always be mindful of the trust and confidence reposed in him. He must serve the client with competence and diligence, and champion the latter’s cause with wholehearted fidelity, care and devotion. Elsewise stated, he owes entire devotion to the interest of his client, warm zeal in the maintenance and defense of his client’s rights, and the exertion of his utmost learning and ability to the end that nothing be taken or withheld from his client, save by the rules of the law, legally applied. This simply means that his client is entitled to the benefit of any and every remedy and defense that is authorized by the law of the land and he may expect his lawyer to assert every such remedy or defense. If much is demanded from an attorney, it is because the entrusted privilege to practice law carries with it the correlative duties not only to the client bu also to the court, to the bar, and to the public. A lawyer who performs his duty with diligence and candor not only protects the interest of his client; he also serves the ends of justice, does honor to the bar, and helps maintain the respect of the community to the legal profession.16

In this case, respondent attributes his delay in filing the appropriate criminal case to the absence of conciliation proceedings between complainant and her siblings before the barangay as required under Article 222 of the Civil Code and the Local Government Code. However, this excuse is belied by the Certification to File Action by the Office of the Lupong Tagapamayapa, Office of the Barangay Council, Barangay Daanghari, Navotas. The Certification to File Action was issued on 1 July 2002, which was more than four months before complainant engaged respondent’s legal services on 25 November 2002. Respondent’s allegation that complainant failed to inform him about the existence of the Certification to File Action is hard to believe considering complainant’s determination to file the case against her siblings. Clearly, respondent has been negligent in handling complainant’s case.

In Cariño v. Atty. De Los Reyes,17 the respondent lawyer who failed to file a complaint-affidavit before the prosecutor’s office, restituted the P 10,000 acceptance fee paid to him. The respondent lawyer in Cariño was reprimanded by the Court with a warning that he should be more careful in the performance of his duty to his clients.

In this case, complainant is asking for the refund of P 14,000 out of the P 15,000 acceptance fee considering that, apart from sending a letter to the City Engineer of Navotas City, respondent did nothing more to advance his client’s cause during the six months that complainant engaged his legal services. We agree with the recommendation of the Investigating Commissioner and the IBP Board of Governors that a refund is in order.

WHEREFORE, the Court AFFIRMS the 28 October 2011 Resolution No. XX-2011-143 of the Board of Governors of the Integrated Bar of the Philippines, reducing the recommended penalty from six months to admonition. The Court finds Atty. Rosario B. Bautista GUILTY of violating Canon 18 and Rule 18.03 of the Code of Professional Responsibility and he is ADMONISHED to exercise greater care and diligence in the performance of his duty to his clients. Atty. Bautista is ordered to RESTITUTE to complainant P 14,000 out of the P 15,000 acceptance fee.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

A.C. No. 9387               June 20, 2012 (Formerly CBD Case No. 05-1562)

EMILIA R. HERNANDEZ, Complainant, vs.ATTY. VENANCIO B. PADILLA, Respondent.

R E S O L U T I O N

SERENO, J.:

This is a disbarment case filed by Emilia Hernandez (complainant) against her lawyer, Atty. Venancio B. Padilla (respondent) of Padilla Padilla Bautista Law Offices, for his alleged negligence in the handling of her case.

The records disclose that complainant and her husband were the respondents in an ejectment case filed against them with the Regional Trial Court of Manila (RTC).

In a Decision1 dated 28 June 2002, penned by Judge Rosmari D. Carandang (Judge Carandang), the RTC ordered that the Deed of Sale executed in favor of complainant be cancelled; and that the latter pay the complainant therein, Elisa Duigan (Duigan), attorney’s fees and moral damages.

Complainant and her husband filed their Notice of Appeal with the RTC. Thereafter, the Court of Appeals (CA) ordered them to file their Appellants’ Brief. They chose respondent to represent them in the case. On their behalf, he filed a Memorandum on Appeal instead of an Appellants’ Brief. Thus, Duigan filed a Motion to Dismiss the Appeal. The CA granted the Motion in a Resolution2 dated 16 December 2003.

No Motion for Reconsideration (MR) of the Resolution dismissing the appeal was filed by the couple. Complainant claims that because respondent ignored the Resolution, he acted with "deceit, unfaithfulness amounting to malpractice of law."3 Complainant and her husband failed to file an appeal, because respondent never informed them of the adverse decision. Complainant further claims that she asked respondent "several times" about the status of the appeal, but "despite inquiries he deliberately withheld response [sic]," to the damage and prejudice of the spouses.4

The Resolution became final and executory on 8 January 2004. Complainant was informed of the Resolution sometime in July 2005, when the Sheriff of the RTC came to her house and informed her of the Resolution.

On 9 September 2005, complainant filed an Affidavit of Complaint5 with the Committee on Bar Discipline of the Integrated Bar of the Philippines (IBP), seeking the disbarment of respondent on the following grounds: deceit, malpractice, and grave misconduct. Complainant prays for moral damages in the amount of P 350,000.

Through an Order6 dated 12 September 2005, Director of Bar Discipline Rogelio A. Vinluan ordered respondent to submit an answer to the Complaint. In his Counter-Affidavit/Answer,7 respondent prayed for the outright dismissal of the Complaint.

Respondent explained that he was not the lawyer of complainant. He averred that prior to the mandatory conference set by the IBP on 13 December 2005, he had never met complainant, because it was her husband who had personally transacted with him. According to respondent, the husband "despondently pleaded to me to prepare a Memorandum on Appeal because according to him the period given by the CA was to lapse within two or three days."8 Thus, respondent claims that he filed a Memorandum on Appeal because he honestly believed that "it is this pleading which was required."9

Before filing the Memorandum, respondent advised complainant’s husband to settle the case. The latter allegedly "gestured approval of the advice."10

After the husband of complainant picked up the Memorandum for filing, respondent never saw or heard from him again and thus assumed that the husband heeded his advice and settled the case. When respondent received an Order from the CA requiring him to file a comment on the Motion to Dismiss filed by Duigan, he "instructed his office staff to contact Mr. Hernandez thru available means of communication, but to no avail."11 Thus, when complainant’s husband went to the office of respondent to tell the latter that the Sheriff of the RTC had informed complainant of the CA’s Resolution dismissing the case, respondent was just as surprised. The lawyer exclaimed, "KALA KO BA NAKIPAG AREGLO NA KAYO."12

In his 5 January 2009 Report,13 IBP Investigating Commissioner Leland R. Villadolid, Jr. found that respondent violated Canons 5, 17, and 18 of the Code of Professional Responsibility (the Code). He recommended that respondent be suspended from practicing law from 3 to 6 months.

The board of governors of the IBP issued Resolution No. XIX-2010-452 on 28 August 2010. Therein, they resolved to adopt and approve the Report and Recommendation of the Investigating Commissioner. Respondent was suspended from the practice of law for six months.

Respondent filed a Motion for Reconsideration.14 He prayed for the relaxation of the application of the Canons of the Code. On 14 January 2012, the IBP board of governors passed Resolution No. XX-2012-1715 partly granting his Motion and reducing the penalty imposed to one-month suspension from the practice of law.

Pursuant to Rule 139-B of the Rules of Court, acting Director for Bar Discipline Dennis A.B. Funa, through a letter16addressed to then Chief Justice Renato C.

Corona, transmitted the documents pertaining to the disbarment Complaint against respondent.

We adopt the factual findings of the board of governors of the IBP. This Court, however, disagrees with its Decision to reduce the penalty to one-month suspension. We thus affirm the six-month suspension the Board originally imposed in its 28 August 2010 Resolution.

Respondent insists that he had never met complainant prior to the mandatory conference set for the disbarment Complaint she filed against him. However, a perusal of the Memorandum of Appeal filed in the appellate court revealed that he had signed as counsel for the defendant-appellants therein, including complainant and her husband.17 The pleading starts with the following sentence: "DEFENDANT[S]-APPELLANTS, by counsel, unto this Honorable Court submit the Memorandum and further allege that: x x x."18 Nowhere does the document say that it was filed only on behalf of complainant’s husband.

It is further claimed by respondent that the relation created between him and complainant’s husband cannot be treated as a "client-lawyer" relationship, viz:

It is no more than a client needing a legal document and had it prepared by a lawyer for a fee. Under the factual milieu and circumstances, it could not be said that a client entrusted to a lawyer handling and prosecution of his case that calls for the strict application of the Code; x x x19

As proof that none of them ever intended to enter into a lawyer-client relationship, he also alleges that complainant’s husband never contacted him after the filing of the Memorandum of Appeal. According to respondent, this behavior was "very unusual if he really believed that he engaged" the former’s services.20

Complainant pointed out in her Reply21 that respondent was her lawyer, because he accepted her case and an acceptance fee in the amount of P 7,000.

According to respondent, however, "[C]ontrary to the complainant’s claim that he charged P 7,000 as acceptance fee," "the fee was only for the preparation of the pleading which is even low for a Memorandum of Appeal: x x x."22

Acceptance of money from a client establishes an attorney-client relationship and gives rise to the duty of fidelity to the client’s cause.23 Once a lawyer agrees to handle a case, it is that lawyer’s duty to serve the client with competence and diligence.24 Respondent has failed to fulfill this duty.

According to respondent, he merely drafted the pleading that complainant’s husband asked from him. Respondent also claims that he filed a Memorandum of Appeal, because he "honestly believed" that this was the pleading required, based on what complainant’s husband said.

The IBP Investigating Commissioner’s observation on this matter, in the 5 January 2009 Report, is correct. Regardless of the particular pleading his client may have believed to be necessary, it was respondent’s duty to know the proper pleading to be filed in appeals from RTC decisions, viz:

Having seen the Decision dated 18 June 2002 of the trial court, respondent should have known that the mode of appeal to the Court of Appeals for said Decision is by ordinary appeal under Section 2(a) Rule 41 of the1997 Revised Rules of Civil Procedure. In all such cases, Rule 44 of the said Rules applies.25

When the RTC ruled against complainant and her husband, they filed a Notice of Appeal. Consequently, what should apply is the rule on ordinary appealed cases or Rule 44 of the Rules on Civil Procedure. Rule 44 requires that the appellant’s brief be filed after the records of the case have been elevated to the CA. Respondent, as a litigator, was expected to know this procedure. Canon 5 of the Code reads:

CANON 5 — A lawyer shall keep abreast of legal developments, participate in continuing legal education programs, support efforts to achieve high standards in law schools as well as in the practical training of law students and assist in disseminating information regarding the law and jurisprudence.

The obligations of lawyers as a consequence of their Canon 5 duty have been expounded in Dulalia, Jr. v. Cruz,26to wit:

It must be emphasized that the primary duty of lawyers is to obey the laws of the land and promote respect for the law and legal processes. They are expected to be in the forefront in the observance and maintenance of the rule of law. This duty carries with it the obligation to be well-informed of the existing laws and to keep abreast with legal developments, recent enactments and jurisprudence. It is imperative that they be conversant with basic legal principles. Unless they faithfully comply with such duty, they may not be able to discharge competently and diligently their obligations as members of the bar. Worse, they may become susceptible to committing mistakes.

In his MR, respondent begged for the consideration of the IBP, claiming that the reason for his failure to file the proper pleading was that he "did not have enough time to acquaint himself thoroughly with the factual milieu of the case." The IBP reconsidered and thereafter significantly reduced the penalty originally imposed.

Respondent’s plea for leniency should not have been granted.

The supposed lack of time given to respondent to acquaint himself with the facts of the case does not excuse his negligence.

Rule 18.02 of the Code provides that a lawyer shall not handle any legal matter without adequate preparation. While it is true that respondent was not complainant’s lawyer from the trial to the appellate court stage, this fact did not excuse him from his duty to diligently study a case he had agreed to handle. If he felt he did not have enough time to study the pertinent matters involved, as he was approached by complainant’s husband only two days before the expiration of the period for filing the

Appellant’s Brief, respondent should have filed a motion for extension of time to file the proper pleading instead of whatever pleading he could come up with, just to "beat the deadline set by the Court of Appeals."27

Moreover, respondent does not deny that he was given notice of the fact that he filed the wrong pleading. However, instead of explaining his side by filing a comment, as ordered by the appellate court, he chose to ignore the CA’s Order. He claims that he was under the presumption that complainant and her husband had already settled the case, because he had not heard from the husband since the filing of the latter’s Memorandum of Appeal.

This explanation does not excuse respondent’s actions.

First of all, there were several remedies that respondent could have availed himself of, from the moment he received the Notice from the CA to the moment he received the disbarment Complaint filed against him. But because of his negligence, he chose to sit on the case and do nothing.

Second, respondent, as counsel, had the duty to inform his clients of the status of their case. His failure to do so amounted to a violation of Rule 18.04 of the Code, which reads:

18.04 - A lawyer shall keep the client informed of the status of his case and shall respond within a reasonable time to the client’s request for information.

If it were true that all attempts to contact his client proved futile, the least respondent could have done was to inform the CA by filing a Notice of Withdrawal of Appearance as counsel. He could have thus explained why he was no longer the counsel of complainant and her husband in the case and informed the court that he could no longer contact them.28 His failure to take this measure proves his negligence.

Lastly, the failure of respondent to file the proper pleading and a comment on Duigan’s Motion to Dismiss is negligence on his part.1âwphi1 Under 18.03 of the Code, a lawyer is liable for negligence in handling the client’s case, viz:

Rule 18.03 - A lawyer shall not neglect a legal matter entrusted to him, and his negligence in connection therewith shall render him liable.

Lawyers should not neglect legal matters entrusted to them, otherwise their negligence in fulfilling their duty would render them liable for disciplinary action.29

Respondent has failed to live up to his duties as a lawyer. When a lawyer violates his duties to his client, he engages in unethical and unprofessional conduct for which he should be held accountable.30

WHEREFORE, respondent Atty. Venancio Padilla is found guilty of violating Rules 18.02, 18.03, 18.04, as well as Canon 5 of the Code of Professional Responsibility. Hence, he is SUSPENDED from the practice of law for SIX (6) MONTHS and

STERNLY WARNED that a repetition of the same or a similar offense will be dealt with more severely.

Let copies of this Resolution be entered into the personal records of respondent as a member of the bar and furnished to the Bar Confidant, the Integrated Bar of the Philippines, and the Court Administrator for circulation to all courts of the country for their information and guidance.

No costs.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Baguio

THIRD DIVISION

A.C. No. 6903               April 16, 2012

SUZETTE DEL MUNDO, Complainant, vs.ATTY. ARNEL C. CAPISTRANO, Respondent.

D E C I S I O N

PERLAS-BERNABE, J.:

Before the Court is an administrative complaint1 for disbarment filed by complainant Suzette Del Mundo (Suzette) charging respondent Atty. Arnel C. Capistrano (Atty. Capistrano) of violating the Code of Professional Responsibility.

The Facts

On January 8, 2005, Suzette and her friend Ricky S. Tuparan (Tuparan) engaged the legal services of Atty. Capistrano to handle the judicial declaration of nullity of their respective marriages allegedly for a fee of PhP140,000.00 each. On the same date, a Special Retainer Agreement2 was entered into by and between Suzette and Atty. Capistrano which required an acceptance fee of PhP30,000.00, appearance fee of PhP2,500.00 per hearing and another PhP2,500.00 per pleading. In addition, Atty. Capistrano allegedly advised her to prepare amounts for the following expenses:

PhP11,000.00

Filing fee

PhP5,000.00 Summons

PhP15,000.00

Fiscal

PhP30,000.00

Psychiatrist

PhP15,000.00

Commissioner

In accordance with their agreement, Suzette gave Atty. Capistrano the total amount of PhP78,500.00, to wit:

January 8, 2005PhP30,000.0

0Acceptance fee

January 15, 2005PhP11,000.0

0Filing fee

February 3, 2005 PhP5,000.00 Filing fee

May 4, 2005 PhP2,500.00 Filing fee

June 8, 2005PhP30,000.0

0Filing fee

For every payment that Suzette made, she would inquire from Atty. Capistrano on the status of her case. In response, the latter made her believe that the two cases were already filed before the Regional Trial Court of Malabon City and awaiting notice of hearing. Sometime in July 2005, when she could hardly reach Atty. Capistrano, she verified her case from the Clerk of Court of Malabon and discovered that while the case of Tuparan had been filed on January 27, 2005, no petition has yet been filed for her.

Hence, Suzette called for a conference, which was set on July 28, 2005, where she demanded the refund of the total amount of PhP78,500.00, but Atty. Capistrano instead offered to return the amount of PhP63,000.00 on staggered basis claiming to have incurred expenses in the filing of Tuparan’s case, to which she agreed. On the same occasion, Atty. Capistrano handed to her copies of her unfiled petition,3 Tuparan’s petition4 and his Withdrawal of Appearance5 in Tuparan’s case with instructions to file them in court, as well as a list6 containing the expenses he incurred and the schedule of payment of the amount of PhP63,000.00, as follows:

PhP20,000.00

August 15, 2005

PhP20,000.00

August 29, 2005

PhP23,000.00

September 15, 2005

However, Atty. Capistrano only returned the amount of PhP5,000.00 on August 15, 2005 and thereafter, refused to communicate with her, prompting the institution of this administrative complaint on September 7, 2005.

In his Comment/Answer7 dated November 14, 2005, Atty. Capistrano acknowledged receipt of the amount of PhP78,500.00 from Suzette and his undertaking to return the agreed sum of PhP63,000.00. He also admitted responsibility for his failure to file Suzette’s petition and cited as justification his heavy workload and busy schedule as then City Legal Officer of Manila and lack of available funds to immediately refund the money received.

In the Resolution8 dated January 18, 2006, the Court resolved to refer the case to the Integrated Bar of the Philippines (IBP) for investigation, report and recommendation.

The Action and Recommendation of the IBP

For failure of respondent Atty. Capistrano to appear at the mandatory conference set by Commissioner Lolita A. Quisumbing of the IBP Commission on Bar Discipline (IBP-CBD), the conference was terminated without any admissions and stipulations of facts and the parties were ordered to file their respective position papers to which only Atty. Capistrano complied.

In the Report and Recommendation9 dated April 11, 2007, the IBP-CBD, through Commissioner Quisumbing, found that Atty. Capistrano had neglected his client’s interest by his failure to inform Suzette of the status of her case and to file the agreed petition for declaration of nullity of marriage. It also concluded that his inability to refund the amount he had promised Suzette showed deficiency in his moral character, honesty, probity and good demeanor. Hence, he was held guilty of violating Rule 18.03, and Rule 18.04, Canon 18 of the Code of Professional Responsibility and recommended the penalty of suspension for two years from the practice of law.

On September 19, 2007, the IBP Board of Governors adopted and approved the report and recommendation of Commissioner Quisumbing through Resolution No. XVIII-2007-9810 with modification ordering the return of the sum of PhP140,000.00 attorney’s fees to Suzette.

However, upon Atty. Capistrano’s timely motion for reconsideration, the IBP Board of Governors passed Resolution No. XIX-2011-26311 on May 14, 2011 reducing the penalty of suspension from two years to one year, to wit:

RESOLVED to PARTIALLY GRANT Respondent’s Motion for Reconsideration, and unanimously MODIFY as it is hereby MODIFIED Resolution No. XVIII-2007-98 dated 19 September 2007 and REDUCED the penalty against Atty. Arnel C. Capistrano to SUSPENSION  from the practice of law for one (1) year and Ordered to Return the amount of One Hundred Forty Thousand Pesos (P140,000.00) to complainant with thirty (30) days from receipt of notice.

The Issue

The sole issue before the Court is whether Atty. Arnel C. Capistrano violated the Code of Professional Responsibility.

The Ruling of the Court

After a careful perusal of the records, the Court concurs with the findings and recommendation of the IBP-CBD but takes exception to the amount of PhP140,000.00 recommended to be returned to Suzette.

Indisputably, Atty. Capistrano committed acts in violation of his sworn duty as a member of the bar. In his Manifestation and Petition for Review,12 he himself admitted liability for his failure to act on Suzette’s case as well as to account and return the funds she entrusted to him. He only pleaded for the mitigation of his penalty citing the lack of intention to breach his lawyer’s oath; that this is his first offense; and that his profession is the only means of his and his family’s livelihood. He also prayed that the adjudged amount of PhP140,000.00 be reduced to PhP73,500.00 representing the amount of PhP78,500.00 he received less his payment of the sum of PhP5,000.00. Consequently, Commissioner Quisumbing and the IBP-CBD Board of Governors correctly recommended the appropriate penalty of one year suspension from the practice of law for violating the pertinent provisions of the Canons of Professional Responsibility, thus:

CANON 16 – A LAWYER SHALL HOLD IN TRUST ALL MONEYS AND PROPERTIES OF HIS CLIENT THAT MAY COME INTO HIS POSSESSION.

RULE 16.01 – A lawyer shall account for all money or property collected or received for or from the client.

RULE 16.02 – A lawyer shall keep the funds of each client separate and apart from his own and those of others kept by him.

xxx

CANON 18 – A LAWYER SHALL SERVE HIS CLIENT WITH COMPETENCE AND DILIGENCE.

xxx

RULE 18.03 – A lawyer shall not neglect a legal matter entrusted to him, and his negligence in connection therewith shall render him liable.

RULE 18.04 – A lawyer shall keep the client informed of the status of his case and shall respond within a reasonable time to the client’s request for information.

Indeed, when a lawyer takes a client’s cause, he covenants that he will exercise due diligence in protecting the latter’s rights. Failure to exercise that degree of vigilance and attention expected of a good father of a family makes the lawyer unworthy of the trust reposed on him by his client and makes him answerable not just to his client but also to the legal profession, the courts and society.13 His workload does not justify neglect in handling one’s case because it is settled that a lawyer must only accept cases as much as he can efficiently handle.14

Moreover, a lawyer is obliged to hold in trust money of his client that may come to his possession. As trustee of such funds, he is bound to keep them separate and apart from his own. Money entrusted to a lawyer for a specific purpose such as for the filing and processing of a case if not utilized, must be returned immediately upon demand.

Failure to return gives rise to a presumption that he has misappropriated it in violation of the trust reposed on him. And the conversion of funds entrusted to him constitutes gross violation of professional ethics and betrayal of public confidence in the legal profession.15

To stress, the practice of law is a privilege given to lawyers who meet the high standards of legal proficiency and morality, including honesty, integrity and fair dealing. They must perform their fourfold duty to society, the legal profession, the courts and their clients, in accordance with the values and norms of the legal profession as embodied in the Code of Professional Responsibility.16 Falling short of this standard, the Court will not hesitate to discipline an erring lawyer by imposing an appropriate penalty based on the exercise of sound judicial discretion in consideration of the surrounding facts.17

With the foregoing disquisition and Atty. Capistrano’s admission of his fault and negligence, the Court finds the penalty of one year suspension from the practice of law, as recommended by the IBP-CBD, sufficient sanction for his violation. However, the Court finds proper to modify the amount to be returned to Suzette from PhP140,000.00 to PhP73,500.00.

WHEREFORE, respondent Atty. Arnel C. Capistrano, having clearly violated Canons 16 and 18 of the Code of Professional Responsibility, is SUSPENDED from the practice of law for one year with a stern warning that a repetition of the same or similar acts shall be dealt with more severely. He is ORDERED to return to Suzette Del Mundo the full amount of PhP73,500.00 within 30 days from notice hereof and DIRECTED to submit to the Court proof of such payment.

Let copies of this Decision be entered in the personal record of respondent as a member of the Philippine Bar and furnished the Office of the Bar Confidant, the Integrated Bar of the Philippines and the Court Administrator for circulation to all courts in the country.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

A.C. No. 3283 July 13, 1995

RODOLFO MILLARE, petitioner, vs.ATTY. EUSTAQUIO Z. MONTERO, respondent.

 

QUIASON, J.:

This is a complaint for disbarment. Pursuant to paragraph 2, Section 1, Rule 139-B of the Revised Rules of Court, this Court resolved to refer it to the Integrated Bar of the Philippines (IBP) for investigation, report and recommendation.

On April 15, 1994, the IBP Board of Governors rendered a decision, finding respondent guilty of malpractice and recommending that he be suspended from the practice of law.

I

Pacifica Millare, the mother of the complainant, obtained a favorable judgment from the Municipal Trial Court, Bangued, Abra (MTC) which ordered Elsa Dy Co to vacate the premises subject of the ejectment case (Civil Case No. 844). Co, through respondent as counsel, appealed the decision to the Regional Trial Court, Branch 11, Bangued, Abra (RTC). She neither filed a supersedeas bond nor paid the rentals adjudged by the MTC. The RTC affirmed in toto the decision of the MTC.

The Court of Appeals (CA) dismissed Co's appeal from the decision of the RTC for failure to comply with Section 22 of B.P. Blg. 129 and Section 22(b) of the Interim Rules and Guidelines (CA-G.R. CV No. 11404). According to the CA, Co should have filed a petition for review and not an ordinary appeal (Rollo, Vol. I, p. 22).

The judgment of the MTC became final and executory on November 19, 1986.

On January 2, 1987, a Manifestation and Motion was filed by respondent as counsel for Co in CA-G.R. CV No. 11404, arguing that the decisions of the MTC and the RTC were null and void for being contrary to law, justice and equity for allowing the lessor to increase by 300% the rentals for an old house. Respondent, admitting his mistake in filing an ordinary appeal instead of a petition for review, prayed that he be allowed to file an action for annulment.

On February 23, 1987, the CA gave due course to respondent's Manifestation and Motion and let the records remain with it. However, on November 10, 1987, the said court ordered the records in CA-G.R. CV No. 11404 to be remanded to the court a quo.

On March 9, 1987, respondent filed with the CA a Petition for Annulment of Decisions and/or Reformation or Novation of Decisions of the MTC and the RTC (CA-G.R. SP No. 11690), insisting that the decisions were not in accordance with existing laws and policies. On December 17, 1987, the CA dismissed the petition for annulment or novation explaining that —

. . . , aside from the reliefs provided in these two sections (Secs. 1 & 2, Rule 38), there is no other means whereby the defeated party may procure final and executory judgment to be set aside with a view to the renewal of the litigation, unless (a) the judgment is void for want of jurisdiction or lack of due process of law, or (b) it has been obtained by fraud, . . . . There is no allegation in the present complaint to the effect that the judgments in the former cases were secured through fraud (Rollo, Vol. I, p. 35; Emphasis supplied).

On January 15, 1988, respondent filed an Urgent Motion for Reconsideration and Motion to Set Motion for Reconsideration for Oral Arguments of the CA decision. The CA denied the motion. Again, respondent requested the CA to set his Motion For Oral Arguments on April 14, 1988.

In a resolution dated February 12, 1988, the CA denied the Motion for Oral Argument and in a resolution dated October 18, 1988, denied the motion for reconsideration of the February 12 Resolution.

Respondent then filed a Petition for Review on Certiorari with this Court (G.R. No. 86084) questioning the decisions of the MTC and the RTC in favor of petitioner's mother. In a Resolution dated January 4, 1989, we denied the petition for having been filed and paid late on December 12, 1988 and November 12, 1988, respectively. A motion for reconsideration from such resolution was likewise denied with finality.

Respondent filed a Motion for the Issuance of a Prohibitory or Restraining Order (dated July 6, 1988) in CA-G.R. SP No. 11690.

On April 12, 1988, the mother of complainant filed a Motion for Execution of the judgment in Civil Case No. 844. Respondent filed an Opposition to the Motion for Execution on the ground that the case was still pending review by the CA in CA-G.R. SP No. 11690 and therefore the motion for execution was premature. On August 23, 1988, the MTC ordered the issuance of a writ of execution. Respondent filed a motion for reconsideration, which was denied. The RTC affirmed the order for the issuance of the writ of execution. Thus, a writ of execution was issued on October 18, 1988.

On October 26, 1988, respondent filed a special civil action (SP CV No. 624) with the RTC, Branch 1, Bangued, Abra for certiorari, prohibition, mandamus with preliminary injunction against the MTC, Provincial Sheriff and complainant's mother, seeking to annul the writ of execution issued in MTC Civil Case No. 844 and RTC Civil Case No. 344. Respondent alleged that the order granting the writ of execution was issued with grave abuse of discretion amounting to lack of jurisdiction since a petition to annul the decisions (CA-G.R. SP No. 11690) was still pending with the CA.

On October 28, 1988, the provincial sheriff, Romulo V. Paredes, deferred the implementation of the writ of execution until the petition filed in SP CV No. 624 for certiorari was resolved. The CA denied in SP CV No. 624 respondent's Urgent Motion to Set Aside and Declare Null and Void the Writ of Execution.

From the decision of the RTC, Branch 1, Abra in SP CV No. 624 denying the Petition for Certiorari, Prohibition,Mandamus with Preliminary Issuance of Prohibitory Order, respondent again filed an Appeal and/or Review byCertiorari, Etc. with the CA (CA-G.R. SP No. 17040).

II

We have no reason to reverse the findings of the IBP Board of Governors.

Under Canon 19 of the Code of Professional Responsibility, a lawyer is required to represent his client "within the bounds of the law." The Code enjoins a lawyer to employ only fair and honest means to attain the lawful objectives of his client (Rule 19.01) and warns him not to allow his client to dictate the procedure in handling the case (Rule 19.03). In short, a lawyer is not a gun for hire.

Advocacy, within the bounds of the law, permits the attorney to use any arguable construction of the law or rules which is favorable to his client. But the lawyer is not allowed to knowingly advance a claim or defense that is unwarranted under existing law. He cannot prosecute patently frivolous and meritless appeals or institute clearly groundless actions (Annotated Code of Professional Responsibility 310 [1979]). Professional rules impose limits on a lawyer's zeal and hedge it with necessary restrictions and qualifications (Wolfram, Modern Legal Ethics 579-582 [1986]).

Under Canon 12 of the Code of Professional Responsibility, a lawyer is required to exert every effort and consider it his duty to assist in the speedy and efficient administration of justice. Implementing said Canon are the following rules:

Rule 12.02. — A lawyer shall not file multiple actions arising from the same cause.

xxx xxx xxx

Rule 12.04. — A lawyer shall not unduly delay a case, impede the execution of a judgment or misuse court processes.

It is unethical for a lawyer to abuse or wrongfully use the judicial process, like the filing of dilatory motions, repetitious litigation and frivolous appeals for the sole purpose of frustrating and delaying the execution of a judgment (Edelstein, The Ethics of Dilatory Motions Practice: Time for Change, 44 Fordham L. Rev. 1069 [1976]; Overmeyer v. Fidelista and Deposit Co., 554 F. 2d 539, 543 [2d Cir. 1971]).

The rights of respondent's client in Civil Case No. 844 of the MTC were fully protected and her defenses were properly ventilated when he filed the appeal from the MTC to the RTC. But respondent thereafter resorted to devious and underhanded means to delay the execution of the judgment rendered by the MTC adverse to his client. The said decision became executory even pending its appeal with the RTC because of the failure of Co to file a supersedeas bond and to pay the monthly rentals as they fell due. Furthermore, his petition for annulment of the decisions of the MTC and RTC which he filed with the CA (CA-G.R. No. 11690) was defective and dilatory. According to the CA, there was no allegation therein that the courts had no jurisdiction, that his client was denied due process, or "that the judgments in the former cases were secured through fraud."

As ruled in Regidor v. Court of Appeals, 219 SCRA 530 (1993):

A judgment can be annulled only on two grounds: (a) that the judgment is void for want of jurisdiction or for lack of due process of law, or (b) that it has been obtained by fraud. . . . (at p. 534).

Moreover, when the CA ordered that the records of the case be remanded, respondent knew very well that the decision of the MTC was already ripe for execution.

This Court, in People of Paombong, Bulacan v. Court of Appeals, 218 SCRA 423 (1993), ruled:

. . . [w]hen the judgment of a superior court is remanded to the trial court for execution, the function of the trial court is ministerial only; the trial court is merely obliged with becoming modesty to enforce that judgment and has no jurisdiction either to modify in any way or to reverse the same. . . . (at p. 430).

(See also Valenzona v. Court of Appeals, 226 SCRA 306 [1993] and Garbo v. Court of Appeals, 226 SCRA 250 [1993]).

Respondent filed a total of six appeals, complaints or petitions to frustrate the execution of the MTC judgment in Civil Case No. 844, to wit:

(1) Civil Case No. 344 — Appeal from the decision rendered in Civil Case No. 844 of the Municipal Trial Court, Bangued, Abra, with the Regional Trial Court, Abra;

(2) CA-G.R. CV No. 11404 — Appeal from the decision of the Regional Trial Court, Abra;

(3) CA-G.R. SP No. 11690 — An Action For the Annulment of Decisions And/Or Reformation or Novation of Decisions filed with the Court of Appeals;

(4) G.R. No. 86084 — Petition For Review On Certiorari filed with the Supreme Court;

(5) CA-G.R. SP No. 17040 — Appeal And/Or Review By Certiorari, Etc. filed also with the Court of Appeals; and,

(6) SP Civil Action No. 624 — Petition For Certiorari, Prohibition, Mandamus with Preliminary Issuance of Prohibitory Order filed with the Regional Trial Court, Branch 1, Bangued, Abra.

Judging from the number of actions filed by respondent to forestall the execution of the same judgment, respondent is also guilty of forum shopping.

In Villanueva v. Adre 172 SCRA 876 (1989), the Court explained that forum shopping exists when, by reason of an adverse decision in one forum, defendant ventures to another for a more favorable resolution of his case. In the case of Gabriel v. Court of Appeals, 72 SCRA 272 (1976), this Court explained that:

Such filing of multiple petitions constitutes abuse of the Court's processes and improper conduct that tends to impede, obstruct and degrade the administration of justice and will be punished as contempt of court. Needless to add, the lawyer who filed such multiple or repetitious petitions (which obviously delays the execution of a final and executory judgment) subjects himself to disciplinary action for incompetence (for not knowing any better) or for willful violation of his duties as an attorney to act with all good fidelity to the courts and to maintain only such actions as appear to him to be just and are consistent with truth and honor (at p. 275).

By having wilfully and knowingly abused his rights of recourse in his efforts to get a favorable judgment, which efforts were all rebuffed, respondent violated the duty of a

member of the Bar to institute actions only which are just and put up such defenses as he perceives to be truly contestable under the laws (Garcia v. Francisco, 220 SCRA 512 [1993]). As correctly noted by the Committee on Bar Discipline "in filing a number of pleadings, actions and petitioner, respondent 'has made a mockery of the judicial processes' and disregarded canons of professional ethics in intentionally frustrating the rights of a litigant in whose favor a judgment in the case was rendered, thus, 'abused procedural rules to defeat ends of substantial justice'" (Report and Recommendation, IBP Committee on Bar Discipline, p. 2).

WHEREFORE, respondent is SUSPENDED for one year.

SO ORDERED.