Republic of the Philippines

SUPREME 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.
DECISION

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.

YNARES-SANTIAGO, J.:
CONTRARY TO LAW.5
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.

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

Upon petitioners 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:

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

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

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.

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.

SO ORDERED.14

We find merit in the petition.

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

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.

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, accusedappellant 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 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 petitioners 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 petitioners 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 anothers property as if it
were ones own, or of devoting it to a purpose or use different from that agreed upon.
To misappropriate for ones own use includes not only conversion to ones 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.

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-agents
faithlessness, her acquittal is in order.28 (Italics copied)

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.

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.

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 petitioners 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:

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 CAG.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.

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;
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 137162

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
respondents title.

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.
DECISION

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.

AZCUNA, J.:
1

This is an appeal by certiorari 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

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 attorneyin-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 attorneys 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.

2. the Decision dismissing [respondents] 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
Rubios 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 attorneys fees.

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:

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:

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 courts 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.

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 ATTORNEYS 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.

Dealing with an assumed agent, respondent should ascertain not only the fact of
agency, but also the nature and extent of the formers 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 respondents 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.

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

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

Petitioners argue, as follows:

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.

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 Rubios properties.

"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 Baloloys 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.

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

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

Article 1892 of the Civil Code provides:
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 petitioners 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

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

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

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 sellers 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 buyers 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.

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

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

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

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.

Republic of the Philippines

SUPREME 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.

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

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 resignationwhich was acceptedeffective 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.

Republic of the Philippines

SUPREME 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.:

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 Banknot 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.

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

Republic of the Philippines

SUPREME 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.

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 YangTsze 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.

Republic of the Philippines

SUPREME 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.:

Araullo, C.J., Johnson, Street, Malcolm, Avancea, Villamor, Ostrand and

Romualdez, JJ., concur.

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:
xxx

xxx

xxx

. . . 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.
xxx

xxx

xxx

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.)
xxx

xxx

xxx

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 Philippines

SUPREME 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.

business for any foreign corporation not having the license prescribed shall be
punished by imprisonment for etc. ... ."

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.

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.

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

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

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 Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 167552

April 23, 2007

EUROTECH INDUSTRIAL TECHNOLOGIES, INC., Petitioner,

vs.
EDWIN CUIZON and ERWIN CUIZON, Respondents.
DECISION
CHICO-NAZARIO, J.:
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. CEB19672.

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, petitioners 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 attorneys
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 petitioners prayer for the issuance of writ
of preliminary attachment.13
On 25 June 1997, respondent EDWIN filed his Answer14 wherein he admitted
petitioners 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 petitioners 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 petitioners motion to
declare respondent ERWIN in default "for his failure to answer within the prescribed
period despite the opportunity granted"18 but it denied petitioners 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 EDWINs Memorandum21 in support of his special and
affirmative defenses and petitioners 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:

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.

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
Petitioners 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
ERWINs 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 ERWINs action repudiated EDWINs 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

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 latters 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

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.

Applying the foregoing to the present case, we hold that Edwin Cuizon acted wellwithin 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 EDWINs 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

Republic of the Philippines

SUPREME 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 nonfulfillment 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 Philippines

SUPREME 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 nonregistration 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 defendantappellee'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.

(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."

Republic of the Philippines

SUPREME 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-inlaw, applied for a loan of P500,000.00 with the Development Bank of the Philippines

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.

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").

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 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.

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.-CV
No. 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.

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 twentythird 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

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."

Republic of the Philippines

SUPREME COURT
Manila

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.

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

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.

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.

Araullo, C. J., Johnson, Street, Malcolm, Avancea, Villamor, Ostrand, and

Romualdez, JJ., concur.

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

Republic of the Philippines

SUPREME 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 Tuao 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

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-inlaw, 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
Republic of the Philippines
SUPREME COURT
Manila

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.

THIRD DIVISION
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.

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.

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 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

. . . 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.

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 Philippines

SUPREME COURT
Manila

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.

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 Osmea 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 OperationsMandaue" 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 Osmea 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 crossexamination, 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;

(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.

(b) Steps necessary to reach the coal deposit so that it can be

mined, including but not limited to shaft sinking and tunneling; and

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

(c) The extraction and utilization of coal deposits.

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.

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, noninterference
with the rights of the other petroleum, mineral and natural
resources operators;

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 "A1"). 24 This paper is only a photocopy and, despite its reservation to present the
original for purposes of comparison at the next
hearing, 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. CEB8187 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 Philippines

SUPREME 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 "Agents
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 petitioners 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 interoffice 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 Pedrosos subsequent investments, Valle would take back from
Pedroso the corresponding yellow-colored agents 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 courts 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 Lifes 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
petitioners 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 Lifes official receipts, whose authenticity were not disputed.
Valles 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 agents 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 Valles acts. Even if Valles representations
were beyond his authority as a debit/insurance agent, Filipinas Life thru Alcantara and
Apetrior expressly and knowingly ratified Valles 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 agents acts
beyond the latters 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.

Feed Store Price (Catalogue)

Less 10%
Wholesale Price
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

Less 10%
Distributor Price
There are exceptions to the above price structure. At present, these
are:

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

1. Afsillin Improved 40 lbs. bag
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:

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 turnover 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.

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.

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.

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

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.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
A.C. No. 6733

October 10, 2012

HERMINIA P. VOLUNTAD-RAMIREZ, Complainant,

vs.
ATTY. ROSARIO B. BAUTISTA, Respondent.
RESOLUTION
CARPIO, J.:
The Case
This administrative case arose from a complaint filed by Herminia P. VoluntadRamirez (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 complainants 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
Engineers 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
respondents "failure to institute the desired complaint on time" against complainants
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 lawyers 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 complainants case. Respondent made several follow ups with the City Engineers
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
respondents 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 complainants request for a refund.
Respondent claims that he sent a letter dated 17 March 2004, which stated that
although it is their law firms 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 complainants lawyer, Atty. Bartolome, signifying respondents willingness to refund
the amount of P 9,000.9
In her Reply-Affidavit, complainant stated that even before she engaged respondents
legal services, her case was already referred to the barangay for conciliation

proceedings. However, complainants 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 Recommendation
of the Commission on Bar Discipline
The Investigating Commissioner found respondent "guilty of violation of the lawyers
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 clients cause during the six months that complainant engaged his legal
services.
Decision of the Board of Governors of the
Integrated Bar of the Philippines
On 31 May 2007, the IBP Board of Governors passed Resolution No. XVII-2007-230,
adopting and approving the Investigating Commissioners 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 Respondents
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 lettercomplaint 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 respondents Motion for Reconsideration:
RESOLVED to unanimously GRANT partially, the Respondents 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
respondents 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 clients 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 latters 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 clients
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 respondents
legal services on 25 November 2002. Respondents allegation that complainant failed
to inform him about the existence of the Certification to File Action is hard to believe
considering complainants determination to file the case against her siblings. Clearly,
respondent has been negligent in handling complainants case.
In Cario v. Atty. De Los Reyes,17 the respondent lawyer who failed to file a complaintaffidavit before the prosecutors office, restituted the P 10,000 acceptance fee paid to
him. The respondent lawyer in Cario 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 clients 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-2011143 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.

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),
attorneys 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

Republic of the Philippines

SUPREME 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.
RESOLUTION
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 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 CounterAffidavit/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 complainants 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 complainants husband went to the
office of respondent to tell the latter that the Sheriff of the RTC had informed
complainant of the CAs Resolution dismissing the case, respondent was just as
surprised. The lawyer exclaimed, "KALA KO BA NAKIPAG AREGLO NA KAYO."12

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

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.

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.

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

As proof that none of them ever intended to enter into a lawyer-client relationship, he
also alleges that complainants 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 formers services.20

According to respondent, however, "[C]ontrary to the complainants 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 clients cause.23 Once a lawyer agrees to handle
a case, it is that lawyers 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 complainants 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
complainants husband said.
The IBP Investigating Commissioners 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 respondents 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 appellants 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 disbarment Complaint filed against him. But because of his negligence, he chose
to sit on the case and do nothing.

The obligations of lawyers as a consequence of their Canon 5 duty have been

expounded in Dulalia, Jr. v. Cruz,26to wit:

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:

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.
Respondents 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 complainants
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
complainants husband only two days before the expiration of the period for filing the
Appellants 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 CAs 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 latters
Memorandum of Appeal.
This explanation does not excuse respondents 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

18.04 - A lawyer shall keep the client informed of the status of his case and shall
respond within a reasonable time to the clients 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
Duigans Motion to Dismiss is negligence on his part.1wphi1 Under 18.03 of the
Code, a lawyer is liable for negligence in handling the clients 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.

DECISION
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:

Republic of the Philippines

SUPREME COURT
Baguio
THIRD DIVISION
A.C. No. 6903

April 16, 2012

SUZETTE DEL MUNDO, Complainant,

vs.
ATTY. ARNEL C. CAPISTRANO, Respondent.

January 8, 2005

PhP30,000.00 Acceptance fee

January 15, 2005

PhP11,000.00 Filing fee

February 3, 2005

PhP5,000.00 Filing fee

May 4, 2005

PhP2,500.00 Filing fee

June 8, 2005

PhP30,000.00 Filing 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 Tuparans case, to which she agreed. On the
same occasion, Atty. Capistrano handed to her copies of her unfiled
petition,3 Tuparans petition4 and his Withdrawal of Appearance5 in Tuparans 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
Suzettes 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 (IBPCBD), 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 clients
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

attorneys fees to Suzette.
However, upon Atty. Capistranos 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 Respondents 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 Suzettes 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 lawyers oath; that this is his first offense; and that his
profession is the only means of his and his familys 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 clients request for
information.
Indeed, when a lawyer takes a clients cause, he covenants that he will exercise due
diligence in protecting the latters 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 ones 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. Capistranos 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.

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.

Republic of the Philippines

SUPREME COURT
Manila

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 (CAG.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.