G.R. No.

160346
August 25, 2009
PURITA PAHUD, SOLEDAD PAHUD, and IAN LEE CASTILLA (represented by
Mother and Attorney-in-Fact VIRGINIA CASTILLA) vs. CA, SPOUSES ISAGANI
BELARMINO and LETICIA OCAMPO, EUFEMIA SAN AGUSTIN-MAGSINO, ZENAIDA
SAN AGUSTIN-McCRAE, MILAGROS SAN AGUSTIN-FORTMAN, MINERVA SAN
AGUSTIN-ATKINSON, FERDINAND SAN AGUSTIN, RAUL SAN AGUSTIN,
ISABELITA SAN AGUSTIN-LUSTENBERGER and VIRGILIO SAN AGUSTIN
For our resolution is a petition for review on certiorari assailing the April 23, 2003
Decision1 and October 8, 2003 Resolution2 of the Court of Appeals (CA) in CA-G.R. CV
No. 59426. The appellate court, in the said decision and resolution, reversed and set
aside the January 14, 1998 Decision3 of the Regional Trial Court (RTC), which ruled in
favor of petitioners.
The dispute stemmed from the following facts.
During their lifetime, spouses Pedro San Agustin and Agatona Genil were able to acquire
a 246-square meter parcel of land situated in Barangay Anos, Los Baos, Laguna and
covered by Original Certificate of Title (OCT) No. O-(1655) 0-15.4 Agatona Genil died on
September 13, 1990 while Pedro San Agustin died on September 14, 1991. Both died
intestate, survived by their eight (8) children: respondents Eufemia, Raul, Ferdinand,
Zenaida, Milagros, Minerva, Isabelita and Virgilio.
Sometime in 1992, Eufemia, Ferdinand and Raul executed a Deed of Absolute Sale of
Undivided Shares5conveying in favor of petitioners (the Pahuds, for brevity) their
respective shares from the lot they inherited from their deceased parents
for P525,000.00.6 Eufemia also signed the deed on behalf of her four (4) other co-heirs,
namely: Isabelita on the basis of a special power of attorney executed on September 28,
1991,7 and also for Milagros, Minerva, and Zenaida but without their apparent written
authority.8 The deed of sale was also not notarized.9
On July 21, 1992, the Pahuds paid P35,792.31 to the Los Baos Rural Bank where the
subject property was mortgaged.10 The bank issued a release of mortgage and turned
over the owners copy of the OCT to the Pahuds.11 Over the following months, the
Pahuds made more payments to Eufemia and her siblings totaling toP350,000.00.12 They
agreed to use the remaining P87,500.0013 to defray the payment for taxes and the
expenses in transferring the title of the property.14 When Eufemia and her co-heirs drafted

an extra-judicial settlement of estate to facilitate the transfer of the title to the Pahuds,
Virgilio refused to sign it.15
On July 8, 1993, Virgilios co-heirs filed a complaint16 for judicial partition of the subject
property before the RTC of Calamba, Laguna. On November 28, 1994, in the course of
the proceedings for judicial partition, a Compromise Agreement17 was signed with seven
(7) of the co-heirs agreeing to sell their undivided shares to Virgilio forP700,000.00. The
compromise agreement was, however, not approved by the trial court because Atty.
Dimetrio Hilbero, lawyer for Eufemia and her six (6) co-heirs, refused to sign the
agreement because he knew of the previous sale made to the Pahuds. 18
lawphil.net

On December 1, 1994, Eufemia acknowledged having received P700,000.00 from

Virgilio.19 Virgilio then sold the entire property to spouses Isagani Belarmino and Leticia
Ocampo (Belarminos) sometime in 1994. The Belarminos immediately constructed a
building on the subject property.
Alarmed and bewildered by the ongoing construction on the lot they purchased, the
Pahuds immediately confronted Eufemia who confirmed to them that Virgilio had sold the
property to the Belarminos.20 Aggrieved, the Pahuds filed a complaint in intervention21 in
the pending case for judicial partition.
1avvphil

After trial, the RTC upheld the validity of the sale to petitioners. The dispositive portion of
the decision reads:
WHEREFORE, the foregoing considered, the Court orders:
1. the sale of the 7/8 portion of the property covered by OCT No. O (1655) O-15
by the plaintiffs as heirs of deceased Sps. Pedro San Agustin and Agatona Genil
in favor of the Intervenors-Third Party plaintiffs as valid and enforceable, but
obligating the Intervenors-Third Party plaintiffs to complete the payment of the
purchase price of P437,500.00 by paying the balance of P87,500.00 to defendant
Fe (sic) San Agustin Magsino. Upon receipt of the balance, the plaintiff shall
formalize the sale of the 7/8 portion in favor of the Intervenor[s]-Third Party
plaintiffs;
2. declaring the document entitled "Salaysay sa Pagsang-ayon sa Bilihan" (Exh.
"2-a") signed by plaintiff Eufemia San Agustin attached to the unapproved

Compromise Agreement (Exh. "2") as not a valid sale in favor of defendant

Virgilio San Agustin;

time the complaint [in] intervention was filed on April 12, 1995 until actual
payment of the same;

3. declaring the sale (Exh. "4") made by defendant Virgilio San Agustin of the
property covered by OCT No. O (1655)-O-15 registered in the names of Spouses
Pedro San Agustin and Agatona Genil in favor of Third-party defendant Spouses
Isagani and Leticia Belarmino as not a valid sale and as inexistent;

(3) Declaring the sale of appellant Virgilio San Agustin to appellants spouses,
Isagani and Leticia Belarmino[,] as valid and binding;

4. declaring the defendant Virgilio San Agustin and the Third-Party defendants
spouses Isagani and Leticia Belarmino as in bad faith in buying the portion of the
property already sold by the plaintiffs in favor of the Intervenors-Third Party
Plaintiffs and the Third-Party Defendant Sps. Isagani and Leticia Belarmino in
constructing the two-[storey] building in (sic) the property subject of this case;
and
5. declaring the parties as not entitled to any damages, with the parties
shouldering their respective responsibilities regarding the payment of attorney[]s
fees to their respective lawyers.
No pronouncement as to costs. SO ORDERED.22
Not satisfied, respondents appealed the decision to the CA arguing, in the main, that the
sale made by Eufemia for and on behalf of her other co-heirs to the Pahuds should have
been declared void and inexistent for want of a written authority from her co-heirs. The
CA yielded and set aside the findings of the trial court. In disposing the issue, the CA
ruled:
WHEREFORE, in view of the foregoing, the Decision dated January 14, 1998, rendered
by the Regional Trial Court of Calamba, Laguna, Branch 92 in Civil Case No. 2011-93-C
for Judicial Partition is hereby REVERSED and SET ASIDE, and a new one entered, as
follows:

(4) Declaring appellants-spouses as buyers in good faith and for value and are
the owners of the subject property.
No pronouncement as to costs. SO ORDERED.23
Petitioners now come to this Court raising the following arguments:
I. The Court of Appeals committed grave and reversible error when it did not
apply the second paragraph of Article 1317 of the New Civil Code insofar as
ratification is concerned to the sale of the 4/8 portion of the subject property
executed by respondents San Agustin in favor of petitioners;
II. The Court of Appeals committed grave and reversible error in holding that
respondents spouses Belarminos are in good faith when they bought the subject
property from respondent Virgilio San Agustin despite the findings of fact by the
court a quo that they were in bad faith which clearly contravenes the presence of
long line of case laws upholding the task of giving utmost weight and value to the
factual findings of the trial court during appeals; [and]
III. The Court of Appeals committed grave and reversible error in holding that
respondents spouses Belarminos have superior rights over the property in
question than petitioners despite the fact that the latter were prior in possession
thereby misapplying the provisions of Article 1544 of the New Civil Code. 24
The focal issue to be resolved is the status of the sale of the subject property by Eufemia
and her co-heirs to the Pahuds. We find the transaction to be valid and enforceable.

(1) The case for partition among the plaintiffs-appellees and appellant Virgilio is
now considered closed and terminated;

Article 1874 of the Civil Code plainly provides:

(2) Ordering plaintiffs-appellees to return to intervenors-appellees the total

amount they received from the latter, plus an interest of 12% per annum from the

Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the
authority of the latter shall be in writing; otherwise, the sale shall be void.

Also, under Article 1878,25 a special power of attorney is necessary for an agent to enter
into a contract by which the ownership of an immovable property is transmitted or
acquired, either gratuitously or for a valuable consideration. Such stringent statutory
requirement has been explained in Cosmic Lumber Corporation v. Court of Appeals: 26
[T]he authority of an agent to execute a contract [of] sale of real estate must be conferred
in writing and must give him specific authority, either to conduct the general business of
the principal or to execute a binding contract containing terms and conditions which are
in the contract he did execute. A special power of attorney is necessary to enter into any
contract by which the ownership of an immovable is transmitted or acquired either
gratuitously or for a valuable consideration. The express mandate required by law to
enable an appointee of an agency (couched) in general terms to sell must be one that
expressly mentions a sale or that includes a sale as a necessary ingredient of the act
mentioned. For the principal to confer the right upon an agent to sell real estate, a power
of attorney must so express the powers of the agent in clear and unmistakable language.
When there is any reasonable doubt that the language so used conveys such power, no
such construction shall be given the document. 27
In several cases, we have repeatedly held that the absence of a written authority to sell a
piece of land is, ipso jure, void,28 precisely to protect the interest of an unsuspecting
owner from being prejudiced by the unwarranted act of another.
Based on the foregoing, it is not difficult to conclude, in principle, that the sale made by
Eufemia, Isabelita and her two brothers to the Pahuds sometime in 1992 should be valid
only with respect to the 4/8 portion of the subject property. The sale with respect to the
3/8 portion, representing the shares of Zenaida, Milagros, and Minerva, is void because
Eufemia could not dispose of the interest of her co-heirs in the said lot absent any written
authority from the latter, as explicitly required by law. This was, in fact, the ruling of the
CA.
Still, in their petition, the Pahuds argue that the sale with respect to the 3/8 portion of the
land should have been deemed ratified when the three co-heirs, namely: Milagros,
Minerva, and Zenaida, executed their respective special power of attorneys 29 authorizing
Eufemia to represent them in the sale of their shares in the subject property.30
While the sale with respect to the 3/8 portion is void by express provision of law and not
susceptible to ratification,31 we nevertheless uphold its validity on the basis of the
common law principle of estoppel.

Article 1431 of the Civil Code provides:

Art. 1431. Through estoppel an admission or representation is rendered conclusive upon
the person making it, and cannot be denied or disproved as against the person relying
thereon.
True, at the time of the sale to the Pahuds, Eufemia was not armed with the requisite
special power of attorney to dispose of the 3/8 portion of the property. Initially, in their
answer to the complaint in intervention,32 Eufemia and her other co-heirs denied having
sold their shares to the Pahuds. During the pre-trial conference, however, they admitted
that they had indeed sold 7/8 of the property to the Pahuds sometime in 1992. 33 Thus,
the previous denial was superseded, if not accordingly amended, by their subsequent
admission.34 Moreover, in their Comment,35 the said co-heirs again admitted the sale
made to petitioners.36
Interestingly, in no instance did the three (3) heirs concerned assail the validity of the
transaction made by Eufemia to the Pahuds on the basis of want of written authority to
sell. They could have easily filed a case for annulment of the sale of their respective
shares against Eufemia and the Pahuds. Instead, they opted to remain silent and left the
task of raising the validity of the sale as an issue to their co-heir, Virgilio, who is not privy
to the said transaction. They cannot be allowed to rely on Eufemia, their attorney-in-fact,
to impugn the validity of the first transaction because to allow them to do so would be
tantamount to giving premium to their sisters dishonest and fraudulent deed. Undeniably,
therefore, the silence and passivity of the three co-heirs on the issue bar them from
making a contrary claim.
It is a basic rule in the law of agency that a principal is subject to liability for loss caused
to another by the latters reliance upon a deceitful representation by an agent in the
course of his employment (1) if the representation is authorized; (2) if it is within the
implied authority of the agent to make for the principal; or (3) if it is apparently
authorized, regardless of whether the agent was authorized by him or not to make the
representation.37
By their continued silence, Zenaida, Milagros and Minerva have caused the Pahuds to
believe that they have indeed clothed Eufemia with the authority to transact on their
behalf. Clearly, the three co-heirs are now estopped from impugning the validity of the
sale from assailing the authority of Eufemia to enter into such transaction.

Accordingly, the subsequent sale made by the seven co-heirs to Virgilio was void
because they no longer had any interest over the subject property which they could
alienate at the time of the second transaction.38 Nemo dat quod non habet. Virgilio,
however, could still alienate his 1/8 undivided share to the Belarminos.
The Belarminos, for their part, cannot argue that they purchased the property from
Virgilio in good faith. As a general rule, a purchaser of a real property is not required to
make any further inquiry beyond what the certificate of title indicates on its face. 39 But the
rule excludes those who purchase with knowledge of the defect in the title of the vendor
or of facts sufficient to induce a reasonable and prudent person to inquire into the status
of the property.40 Such purchaser cannot close his eyes to facts which should put a
reasonable man on guard, and later claim that he acted in good faith on the belief that
there was no defect in the title of the vendor. His mere refusal to believe that such defect
exists, or his obvious neglect by closing his eyes to the possibility of the existence of a
defect in the vendors title, will not make him an innocent purchaser for value, if
afterwards it turns out that the title was, in fact, defective. In such a case, he is deemed
to have bought the property at his own risk, and any injury or prejudice occasioned by
such transaction must be borne by him.41
In the case at bar, the Belarminos were fully aware that the property was registered not
in the name of the immediate transferor, Virgilio, but remained in the name of Pedro San
Agustin and Agatona Genil.42 This fact alone is sufficient impetus to make further inquiry
and, thus, negate their claim that they are purchasers for value in good faith. 43 They knew
that the property was still subject of partition proceedings before the trial court, and that
the compromise agreement signed by the heirs was not approved by the RTC following
the opposition of the counsel for Eufemia and her six other co-heirs. 44 The Belarminos,
being transferees pendente lite, are deemed buyers in mala fide, and they stand exactly
in the shoes of the transferor and are bound by any judgment or decree which may be
rendered for or against the transferor.45 Furthermore, had they verified the status of the
property by asking the neighboring residents, they would have been able to talk to the
Pahuds who occupy an adjoining business establishment 46 and would have known that a
portion of the property had already been sold. All these existing and readily verifiable
facts are sufficient to suggest that the Belarminos knew that they were buying the
property at their own risk.
WHEREFORE, premises considered, the April 23, 2003 Decision of the Court of Appeals
as well as its October 8, 2003 Resolution in CA-G.R. CV No. 59426, are REVERSED
and SET ASIDE. Accordingly, the January 14, 1998 Decision of Branch 92 of the

Regional Trial Court of Calamba, Laguna is REINSTATED with the MODIFICATION that
the sale made by respondent Virgilio San Agustin to respondent spouses Isagani
Belarmino and Leticia Ocampo is valid only with respect to the 1/8 portion of the subject
property. The trial court is ordered to proceed with the partition of the property with
dispatch. SO ORDERED.
G.R. No. 117356
June 19, 2000
VICTORIAS MILLING CO., INC. vs. CA and CONSOLIDATED SUGAR
CORPORATION
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the decision of the Court of Appeals dated February 24, 1994, in CA-G.R. CV
No. 31717, as well as the respondent court's resolution of September 30, 1994 modifying
said decision. Both decision and resolution amended the judgment dated February 13,
1991, of the Regional Trial Court of Makati City, Branch 147, in Civil Case No. 90-118.
The facts of this case as found by both the trial and appellate courts are as follows:
St. Therese Merchandising (hereafter STM) regularly bought sugar from petitioner
Victorias Milling Co., Inc., (VMC). In the course of their dealings, petitioner issued several
Shipping List/Delivery Receipts (SLDRs) to STM as proof of purchases. Among these
was SLDR No. 1214M, which gave rise to the instant case. Dated October 16, 1989,
SLDR No. 1214M covers 25,000 bags of sugar. Each bag contained 50 kilograms and
priced at P638.00 per bag as "per sales order VMC Marketing No. 042 dated October 16,
1989."1 The transaction it covered was a "direct sale."2 The SLDR also contains an
additional note which reads: "subject for (sic) availability of a (sic) stock at NAWACO
(warehouse)."3
On October 25, 1989, STM sold to private respondent Consolidated Sugar Corporation
(CSC) its rights in SLDR No. 1214M for P 14,750,000.00. CSC issued one check dated
October 25, 1989 and three checks postdated November 13, 1989 in payment. That
same day, CSC wrote petitioner that it had been authorized by STM to withdraw the
sugar covered by SLDR No. 1214M. Enclosed in the letter were a copy of SLDR No.
1214M and a letter of authority from STM authorizing CSC "to withdraw for and in our
behalf the refined sugar covered by Shipping List/Delivery Receipt-Refined Sugar (SDR)
No. 1214 dated October 16, 1989 in the total quantity of 25,000 bags." 4

On October 27, 1989, STM issued 16 checks in the total amount of P31,900,000.00 with
petitioner as payee. The latter, in turn, issued Official Receipt No. 33743 dated October
27, 1989 acknowledging receipt of the said checks in payment of 50,000 bags. Aside
from SLDR No. 1214M, said checks also covered SLDR No. 1213.
Private respondent CSC surrendered SLDR No. 1214M to the petitioner's NAWACO
warehouse and was allowed to withdraw sugar. However, after 2,000 bags had been
released, petitioner refused to allow further withdrawals of sugar against SLDR No.
1214M. CSC then sent petitioner a letter dated January 23, 1990 informing it that SLDR
No. 1214M had been "sold and endorsed" to it but that it had been refused further
withdrawals of sugar from petitioner's warehouse despite the fact that only 2,000 bags
had been withdrawn.5 CSC thus inquired when it would be allowed to withdraw the
remaining 23,000 bags.
On January 31, 1990, petitioner replied that it could not allow any further withdrawals of
sugar against SLDR No. 1214M because STM had already dwithdrawn all the sugar
covered by the cleared checks.6
On March 2, 1990, CSC sent petitioner a letter demanding the release of the balance of
23,000 bags.
Seven days later, petitioner reiterated that all the sugar corresponding to the amount of
STM's cleared checks had been fully withdrawn and hence, there would be no more
deliveries of the commodity to STM's account. Petitioner also noted that CSC had
represented itself to be STM's agent as it had withdrawn the 2,000 bags against SLDR
No. 1214M "for and in behalf" of STM.
On April 27, 1990, CSC filed a complaint for specific performance, docketed as Civil
Case No. 90-1118. Defendants were Teresita Ng Sy (doing business under the name of
St. Therese Merchandising) and herein petitioner. Since the former could not be served
with summons, the case proceeded only against the latter. During the trial, it was
discovered that Teresita Ng Go who testified for CSC was the same Teresita Ng Sy who
could not be reached through summons.7 CSC, however, did not bother to pursue its
case against her, but instead used her as its witness.
CSC's complaint alleged that STM had fully paid petitioner for the sugar covered by
SLDR No. 1214M. Therefore, the latter had no justification for refusing delivery of the
sugar. CSC prayed that petitioner be ordered to deliver the 23,000 bags covered by

SLDR No. 1214M and sought the award of P1,104,000.00 in unrealized profits,
P3,000,000.00 as exemplary damages, P2,200,000.00 as attorney's fees and litigation
expenses.
Petitioner's primary defense a quo was that it was an unpaid seller for the 23,000
bags.8 Since STM had already drawn in full all the sugar corresponding to the amount of
its cleared checks, it could no longer authorize further delivery of sugar to CSC.
Petitioner also contended that it had no privity of contract with CSC.
Petitioner explained that the SLDRs, which it had issued, were not documents of title, but
mere delivery receipts issued pursuant to a series of transactions entered into between it
and STM. The SLDRs prescribed delivery of the sugar to the party specified therein and
did not authorize the transfer of said party's rights and interests.
Petitioner also alleged that CSC did not pay for the SLDR and was actually STM's coconspirator to defraud it through a misrepresentation that CSC was an innocent
purchaser for value and in good faith. Petitioner then prayed that CSC be ordered to pay
it the following sums: P10,000,000.00 as moral damages; P10,000,000.00 as exemplary
damages; and P1,500,000.00 as attorney's fees. Petitioner also prayed that crossdefendant STM be ordered to pay it P10,000,000.00 in exemplary damages, and
P1,500,000.00 as attorney's fees.
Since no settlement was reached at pre-trial, the trial court heard the case on the merits.
As earlier stated, the trial court rendered its judgment favoring private respondent CSC,
as follows:
"WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of
the plaintiff and against defendant Victorias Milling Company:
"1) Ordering defendant Victorias Milling Company to deliver to the plaintiff 23,000
bags of refined sugar due under SLDR No. 1214;
"2) Ordering defendant Victorias Milling Company to pay the amount of
P920,000.00 as unrealized profits, the amount of P800,000.00 as exemplary
damages and the amount of P1,357,000.00, which is 10% of the acquisition
value of the undelivered bags of refined sugar in the amount of P13,570,000.00,
as attorney's fees, plus the costs.

"SO ORDERED."9
It made the following observations:
"[T]he testimony of plaintiff's witness Teresita Ng Go, that she had fully paid the purchase
price of P15,950,000.00 of the 25,000 bags of sugar bought by her covered by SLDR No.
1214 as well as the purchase price of P15,950,000.00 for the 25,000 bags of sugar
bought by her covered by SLDR No. 1213 on the same date, October 16, 1989 (date of
the two SLDRs) is duly supported by Exhibits C to C-15 inclusive which are post-dated
checks dated October 27, 1989 issued by St. Therese Merchandising in favor of Victorias
Milling Company at the time it purchased the 50,000 bags of sugar covered by SLDR No.
1213 and 1214. Said checks appear to have been honored and duly credited to the
account of Victorias Milling Company because on October 27, 1989 Victorias Milling
Company issued official receipt no. 34734 in favor of St. Therese Merchandising for the
amount of P31,900,000.00 (Exhibits B and B-1). The testimony of Teresita Ng Go is
further supported by Exhibit F, which is a computer printout of defendant Victorias Milling
Company showing the quantity and value of the purchases made by St. Therese
Merchandising, the SLDR no. issued to cover the purchase, the official reciept no. and
the status of payment. It is clear in Exhibit 'F' that with respect to the sugar covered by
SLDR No. 1214 the same has been fully paid as indicated by the word 'cleared'
appearing under the column of 'status of payment.'
"On the other hand, the claim of defendant Victorias Milling Company that the purchase
price of the 25,000 bags of sugar purchased by St. Therese Merchandising covered by
SLDR No. 1214 has not been fully paid is supported only by the testimony of Arnulfo
Caintic, witness for defendant Victorias Milling Company. The Court notes that the
testimony of Arnulfo Caintic is merely a sweeping barren assertion that the purchase
price has not been fully paid and is not corroborated by any positive evidence. There is
an insinuation by Arnulfo Caintic in his testimony that the postdated checks issued by the
buyer in payment of the purchased price were dishonored. However, said witness failed
to present in Court any dishonored check or any replacement check. Said witness
likewise failed to present any bank record showing that the checks issued by the buyer,
Teresita Ng Go, in payment of the purchase price of the sugar covered by SLDR No.
1214 were dishonored."10

On appeal, petitioner averred that the dealings between it and STM were part of a series
of transactions involving only one account or one general contract of sale. Pursuant to
this contract, STM or any of its authorized agents could withdraw bags of sugar only
against cleared checks of STM. SLDR No. 21214M was only one of 22 SLDRs issued to
STM and since the latter had already withdrawn its full quota of sugar under the said
SLDR, CSC was already precluded from seeking delivery of the 23,000 bags of sugar.
Private respondent CSC countered that the sugar purchases involving SLDR No. 1214M
were separate and independent transactions and that the details of the series of
purchases were contained in a single statement with a consolidated summary of cleared
check payments and sugar stock withdrawals because this a more convenient system
than issuing separate statements for each purchase.
The appellate court considered the following issues: (a) Whether or not the transaction
between petitioner and STM involving SLDR No. 1214M was a separate, independent,
and single transaction; (b) Whether or not CSC had the capacity to sue on its own on
SLDR No. 1214M; and (c) Whether or not CSC as buyer from STM of the rights to
25,000 bags of sugar covered by SLDR No. 1214M could compel petitioner to deliver
23,000 bagsallegedly unwithdrawn.
On February 24, 1994, the Court of Appeals rendered its decision modifying the trial
court's judgment, to wit:
"WHEREFORE, the Court hereby MODIFIES the assailed judgment and orders
defendant-appellant to:
"1) Deliver to plaintiff-appellee 12,586 bags of sugar covered by SLDR No.
1214M;
"2) Pay to plaintiff-appellee P792,918.00 which is 10% of the value of the
undelivered bags of refined sugar, as attorneys fees;
"3) Pay the costs of suit.
"SO ORDERED."11

Petitioner appealed the trial courts decision to the Court of Appeals.

Both parties then seasonably filed separate motions for reconsideration.

In its resolution dated September 30, 1994, the appellate court modified its decision to
read:

all sales in question were a series of one single transaction and withdrawal of sugar
depended on the clearing of checks paid therefor.

"WHEREFORE, the Court hereby modifies the assailed judgment and orders defendantappellant to:

"After a second look at the evidence, We see no reason to overturn the findings of the
trial court on this point."13

"(1) Deliver to plaintiff-appellee 23,000 bags of refined sugar under SLDR No.
1214M;
"(2) Pay costs of suit.
"SO ORDERED."12
The appellate court explained the rationale for the modification as follows:
"There is merit in plaintiff-appellee's position.
"Exhibit F' We relied upon in fixing the number of bags of sugar which remained
undelivered as 12,586 cannot be made the basis for such a finding. The rule is explicit
that courts should consider the evidence only for the purpose for which it was
offered. (People v. Abalos, et al, 1 CA Rep 783). The rationale for this is to afford the
party against whom the evidence is presented to object thereto if he deems it necessary.
Plaintiff-appellee is, therefore, correct in its argument that Exhibit F' which was offered to
prove that checks in the total amount of P15,950,000.00 had been cleared. (Formal Offer
of Evidence for Plaintiff, Records p. 58) cannot be used to prove the proposition that
12,586 bags of sugar remained undelivered.
"Testimonial evidence (Testimonies of Teresita Ng [TSN, 10 October 1990, p. 33] and
Marianito L. Santos [TSN, 17 October 1990, pp. 16, 18, and 36]) presented by plaintiffappellee was to the effect that it had withdrawn only 2,000 bags of sugar from SLDR
after which it was not allowed to withdraw anymore. Documentary evidence (Exhibit I,
Id., p. 78, Exhibit K, Id., p. 80) show that plaintiff-appellee had sent demand letters to
defendant-appellant asking the latter to allow it to withdraw the remaining 23,000 bags of
sugar from SLDR 1214M. Defendant-appellant, on the other hand, alleged that sugar
delivery to the STM corresponded only to the value of cleared checks; and that all sugar
corresponded to cleared checks had been withdrawn. Defendant-appellant did not rebut
plaintiff-appellee's assertions. It did not present evidence to show how many bags of
sugar had been withdrawn against SLDR No. 1214M, precisely because of its theory that

Hence, the instant petition, positing the following errors as grounds for review:
"1. The Court of Appeals erred in not holding that STM's and private respondent's
specially informing petitioner that respondent was authorized by buyer STM to
withdraw sugar against SLDR No. 1214M "for and in our (STM) behalf,"
(emphasis in the original) private respondent's withdrawing 2,000 bags of sugar
for STM, and STM's empowering other persons as its agents to withdraw sugar
against the same SLDR No. 1214M, rendered respondent like the other persons,
an agent of STM as held in Rallos v. Felix Go Chan & Realty Corp., 81 SCRA
252, and precluded it from subsequently claiming and proving being an assignee
of SLDR No. 1214M and from suing by itself for its enforcement because it was
conclusively presumed to be an agent (Sec. 2, Rule 131, Rules of Court) and
estopped from doing so. (Art. 1431, Civil Code).
"2. The Court of Appeals erred in manifestly and arbitrarily ignoring and
disregarding certain relevant and undisputed facts which, had they been
considered, would have shown that petitioner was not liable, except for 69 bags
of sugar, and which would justify review of its conclusion of facts by this
Honorable Court.
"3. The Court of Appeals misapplied the law on compensation under Arts. 1279,
1285 and 1626 of the Civil Code when it ruled that compensation applied only to
credits from one SLDR or contract and not to those from two or more distinct
contracts between the same parties; and erred in denying petitioner's right to
setoff all its credits arising prior to notice of assignment from other sales or
SLDRs against private respondent's claim as assignee under SLDR No. 1214M,
so as to extinguish or reduce its liability to 69 bags, because the law on
compensation applies precisely to two or more distinct contracts between the
same parties (emphasis in the original).
"4. The Court of Appeals erred in concluding that the settlement or liquidation of
accounts in Exh. F between petitioner and STM, respondent's admission of its

balance, and STM's acquiescence thereto by silence for almost one year did not
render Exh. `F' an account stated and its balance binding.
"5. The Court of Appeals erred in not holding that the conditions of the assigned
SLDR No. 1214, namely, (a) its subject matter being generic, and (b) the sale of
sugar being subject to its availability at the Nawaco warehouse, made the sale
conditional and prevented STM or private respondent from acquiring title to the
sugar; and the non-availability of sugar freed petitioner from further obligation.
"6. The Court of Appeals erred in not holding that the "clean hands" doctrine
precluded respondent from seeking judicial reliefs (sic) from petitioner, its only
remedy being against its assignor."14
Simply stated, the issues now to be resolved are:
(1)....Whether or not the Court of Appeals erred in not ruling that CSC was an
agent of STM and hence, estopped to sue upon SLDR No. 1214M as an
assignee.
(2)....Whether or not the Court of Appeals erred in applying the law on
compensation to the transaction under SLDR No. 1214M so as to preclude
petitioner from offsetting its credits on the other SLDRs.
(3)....Whether or not the Court of Appeals erred in not ruling that the sale of sugar
under SLDR No. 1214M was a conditional sale or a contract to sell and hence
freed petitioner from further obligations.
(4)....Whether or not the Court of Appeals committed an error of law in not
applying the "clean hands doctrine" to preclude CSC from seeking judicial relief.
The issues will be discussed in seriatim.
Anent the first issue, we find from the records that petitioner raised this issue for the first
time on appeal. It is settled that an issue which was not raised during the trial in the
court below could not be raised for the first time on appeal as to do so would be offensive
to the basic rules of fair play, justice, and due process.15 Nonetheless, the Court of
Appeals opted to address this issue, hence, now a matter for our consideration.
1avvphi1

Petitioner heavily relies upon STM's letter of authority allowing CSC to withdraw sugar
against SLDR No. 1214M to show that the latter was STM's agent. The pertinent portion
of said letter reads:
"This is to authorize Consolidated Sugar Corporation or its representative to withdraw for
and in our behalf (stress supplied) the refined sugar covered by Shipping List/Delivery
Receipt = Refined Sugar (SDR) No. 1214 dated October 16, 1989 in the total quantity of
25, 000 bags."16
The Civil Code defines a contract of agency as follows:
"Art. 1868. By the contract of agency a person binds himself to render some service or to
do something in representation or on behalf of another, with the consent or authority of
the latter."
It is clear from Article 1868 that the basis of agency is representation.17 On the part of the
principal, there must be an actual intention to appoint18 or an intention naturally inferable
from his words or actions;19 and on the part of the agent, there must be an intention to
accept the appointment and act on it,20 and in the absence of such intent, there is
generally no agency.21 One factor which most clearly distinguishes agency from other
legal concepts is control; one person - the agent - agrees to act under the control or
direction of another - the principal. Indeed, the very word "agency" has come to connote
control by the principal.22 The control factor, more than any other, has caused the courts
to put contracts between principal and agent in a separate category.23 The Court of
Appeals, in finding that CSC, was not an agent of STM, opined:
"This Court has ruled that where the relation of agency is dependent upon the acts of the
parties, the law makes no presumption of agency, and it is always a fact to be proved,
with the burden of proof resting upon the persons alleging the agency, to show not only
the fact of its existence, but also its nature and extent (Antonio vs. Enriquez[CA], 51 O.G.
3536]. Here, defendant-appellant failed to sufficiently establish the existence of an
agency relation between plaintiff-appellee and STM. The fact alone that it (STM) had
authorized withdrawal of sugar by plaintiff-appellee "for and in our (STM's) behalf" should
not be eyed as pointing to the existence of an agency relation ...It should be viewed in
the context of all the circumstances obtaining. Although it would seem STM represented
plaintiff-appellee as being its agent by the use of the phrase "for and in our (STM's)
behalf" the matter was cleared when on 23 January 1990, plaintiff-appellee informed
defendant-appellant that SLDFR No. 1214M had been "sold and endorsed" to it by STM

(Exhibit I, Records, p. 78). Further, plaintiff-appellee has shown that the 25, 000 bags of
sugar covered by the SLDR No. 1214M were sold and transferred by STM to it ...A
conclusion that there was a valid sale and transfer to plaintiff-appellee may, therefore, be
made thus capacitating plaintiff-appellee to sue in its own name, without need of joining
its imputed principal STM as co-plaintiff."24

"It is understood and agreed that by payment by buyer/trader of refined sugar and/or
receipt of this document by the buyer/trader personally or through a representative, title
to refined sugar is transferred to buyer/trader and delivery to him/it is deemed effected
and completed (stress supplied) and buyer/trader assumes full responsibility
therefore"29

In the instant case, it appears plain to us that private respondent CSC was a buyer of the
SLDFR form, and not an agent of STM. Private respondent CSC was not subject to
STM's control. The question of whether a contract is one of sale or agency depends on
the intention of the parties as gathered from the whole scope and effect of the language
employed.25 That the authorization given to CSC contained the phrase "for and in our
(STM's) behalf" did not establish an agency. Ultimately, what is decisive is the intention of
the parties.26 That no agency was meant to be established by the CSC and STM is
clearly shown by CSC's communication to petitioner that SLDR No. 1214M had been
"sold and endorsed" to it.27 The use of the words "sold and endorsed" means that STM
and CSC intended a contract of sale, and not an agency. Hence, on this score, no error
was committed by the respondent appellate court when it held that CSC was not STM's
agent and could independently sue petitioner.

The aforequoted terms and conditions clearly show that petitioner transferred title to the
sugar to the buyer or his assignee upon payment of the purchase price. Said terms
clearly establish a contract of sale, not a contract to sell. Petitioner is now estopped from
alleging the contrary. The contract is the law between the contracting parties. 30And where
the terms and conditions so stipulated are not contrary to law, morals, good customs,
public policy or public order, the contract is valid and must be upheld.31 Having
transferred title to the sugar in question, petitioner is now obliged to deliver it to the
purchaser or its assignee.

On the second issue, proceeding from the theory that the transactions entered into
between petitioner and STM are but serial parts of one account, petitioner insists that its
debt has been offset by its claim for STM's unpaid purchases, pursuant to Article 1279 of
the Civil Code.28 However, the trial court found, and the Court of Appeals concurred, that
the purchase of sugar covered by SLDR No. 1214M was a separate and independent
transaction; it was not a serial part of a single transaction or of one account contrary to
petitioner's insistence. Evidence on record shows, without being rebutted, that petitioner
had been paid for the sugar purchased under SLDR No. 1214M. Petitioner clearly had
the obligation to deliver said commodity to STM or its assignee. Since said sugar had
been fully paid for, petitioner and CSC, as assignee of STM, were not mutually creditors
and debtors of each other. No reversible error could thereby be imputed to respondent
appellate court when, it refused to apply Article 1279 of the Civil Code to the present
case.
Regarding the third issue, petitioner contends that the sale of sugar under SLDR No.
1214M is a conditional sale or a contract to sell, with title to the sugar still remaining with
the vendor. Noteworthy, SLDR No. 1214M contains the following terms and conditions:

As to the fourth issue, petitioner submits that STM and private respondent CSC have
entered into a conspiracy to defraud it of its sugar. This conspiracy is allegedly evidenced
by: (a) the fact that STM's selling price to CSC was below its purchasing price; (b) CSC's
refusal to pursue its case against Teresita Ng Go; and (c) the authority given by the latter
to other persons to withdraw sugar against SLDR No. 1214M after she had sold her
rights under said SLDR to CSC. Petitioner prays that the doctrine of "clean hands"
should be applied to preclude CSC from seeking judicial relief. However, despite careful
scrutiny, we find here the records bare of convincing evidence whatsoever to support the
petitioner's allegations of fraud. We are now constrained to deem this matter purely
speculative, bereft of concrete proof.
WHEREFORE, the instant petition is DENIED for lack of merit. Costs against petitioner.
SO ORDERED.

G.R. No. 149353

June 26, 2006
DOLES vs. ANGELES
This refers to the Petition for Review on Certiorari under Rule 45 of the Rules of Court
questioning the Decision1dated April 30, 2001 of the Court of Appeals (CA) in C.A.-G.R.
CV No. 66985, which reversed the Decision dated July 29, 1998 of the Regional Trial

Court (RTC), Branch 21, City of Manila; and the CA Resolution2 dated August 6, 2001
which denied petitioners Motion for Reconsideration.
The antecedents of the case follow:
On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed with the RTC a complaint for
Specific Performance with Damages against Jocelyn B. Doles (petitioner), docketed as
Civil Case No. 97-82716. Respondent alleged that petitioner was indebted to the former
in the concept of a personal loan amounting to P405,430.00 representing the principal
amount and interest; that on October 5, 1996, by virtue of a "Deed of Absolute
Sale",3 petitioner, as seller, ceded to respondent, as buyer, a parcel of land, as well as
the improvements thereon, with an area of 42 square meters, covered by Transfer
Certificate of Title No. 382532,4 and located at a subdivision project known as Camella
Townhomes Sorrente in Bacoor, Cavite, in order to satisfy her personal loan with
respondent; that this property was mortgaged to National Home Mortgage Finance
Corporation (NHMFC) to secure petitioners loan in the sum of P337,050.00 with that
entity; that as a condition for the foregoing sale, respondent shall assume the undue
balance of the mortgage and pay the monthly amortization of P4,748.11 for the
remainder of the 25 years which began on September 3, 1994; that the property was at
that time being occupied by a tenant paying a monthly rent of P3,000.00; that upon
verification with the NHMFC, respondent learned that petitioner had incurred arrearages
amounting to P26,744.09, inclusive of penalties and interest; that upon informing the
petitioner of her arrears, petitioner denied that she incurred them and refused to pay the
same; that despite repeated demand, petitioner refused to cooperate with respondent to
execute the necessary documents and other formalities required by the NHMFC to effect
the transfer of the title over the property; that petitioner collected rent over the property
for the month of January 1997 and refused to remit the proceeds to respondent; and that
respondent suffered damages as a result and was forced to litigate.
Petitioner, then defendant, while admitting some allegations in the Complaint, denied that
she borrowed money from respondent, and averred that from June to September 1995,
she referred her friends to respondent whom she knew to be engaged in the business of
lending money in exchange for personal checks through her capitalist Arsenio Pua. She
alleged that her friends, namely, Zenaida Romulo, Theresa Moratin, Julia Inocencio,
Virginia Jacob, and Elizabeth Tomelden, borrowed money from respondent and issued
personal checks in payment of the loan; that the checks bounced for insufficiency of
funds; that despite her efforts to assist respondent to collect from the borrowers, she
could no longer locate them; that, because of this, respondent became furious and

10

threatened petitioner that if the accounts were not settled, a criminal case will be filed
against her; that she was forced to issue eight checks amounting to P350,000 to answer
for the bounced checks of the borrowers she referred; that prior to the issuance of the
checks she informed respondent that they were not sufficiently funded but the latter
nonetheless deposited the checks and for which reason they were subsequently
dishonored; that respondent then threatened to initiate a criminal case against her for
violation of Batas Pambansa Blg. 22; that she was forced by respondent to execute an
"Absolute Deed of Sale" over her property in Bacoor, Cavite, to avoid criminal
prosecution; that the said deed had no valid consideration; that she did not appear
before a notary public; that the Community Tax Certificate number on the deed was not
hers and for which respondent may be prosecuted for falsification and perjury; and that
she suffered damages and lost rental as a result.
The RTC identified the issues as follows: first, whether the Deed of Absolute Sale is
valid; second; if valid, whether petitioner is obliged to sign and execute the necessary
documents to effect the transfer of her rights over the property to the respondent; and
third, whether petitioner is liable for damages.
On July 29, 1998, the RTC rendered a decision the dispositive portion of which states:
WHEREFORE, premises considered, the Court hereby orders the dismissal of the
complaint for insufficiency of evidence. With costs against plaintiff.
SO ORDERED.
The RTC held that the sale was void for lack of cause or consideration: 5
Plaintiff Angeles admission that the borrowers are the friends of defendant Doles and
further admission that the checks issued by these borrowers in payment of the loan
obligation negates [sic] the cause or consideration of the contract of sale executed by
and between plaintiff and defendant. Moreover, the property is not solely owned by
defendant as appearing in Entry No. 9055 of Transfer Certificate of Title No. 382532
(Annex A, Complaint), thus:
"Entry No. 9055. Special Power of Attorney in favor of Jocelyn Doles covering the share
of Teodorico Doles on the parcel of land described in this certificate of title by virtue of
the special power of attorney to mortgage, executed before the notary public, etc."

The rule under the Civil Code is that contracts without a cause or consideration produce
no effect whatsoever. (Art. 1352, Civil Code).
Respondent appealed to the CA. In her appeal brief, respondent interposed her sole
assignment of error:
THE TRIAL COURT ERRED IN DISMISSING THE CASE AT BAR ON THE GROUND
OF [sic] THE DEED OF SALE BETWEEN THE PARTIES HAS NO CONSIDERATION
OR INSUFFICIENCY OF EVIDENCE.6
On April 30, 2001, the CA promulgated its Decision, the dispositive portion of which
reads:
WHEREFORE, IN VIEW OF THE FOREGOING, this appeal is hereby GRANTED. The
Decision of the lower court dated July 29, 1998 is REVERSED and SET ASIDE. A new
one is entered ordering defendant-appellee to execute all necessary documents to effect
transfer of subject property to plaintiff-appellant with the arrearages of the formers loan
with the NHMFC, at the latters expense. No costs.
SO ORDERED.

through competent authority under Article 133511 of the Civil Code;12 that with respect to
the arrearages of petitioner on her monthly amortization with the NHMFC in the sum
of P26,744.09, the same shall be deemed part of the balance of petitioners loan with the
NHMFC which respondent agreed to assume; and that the amount of P3,000.00
representing the rental for January 1997 supposedly collected by petitioner, as well as
the claim for damages and attorneys fees, is denied for insufficiency of evidence. 13
On May 29, 2001, petitioner filed her Motion for Reconsideration with the CA, arguing
that respondent categorically admitted in open court that she acted only as agent or
representative of Arsenio Pua, the principal financier and, hence, she had no legal
capacity to sue petitioner; and that the CA failed to consider the fact that petitioners
father, who co-owned the subject property, was not impleaded as a defendant nor was
he indebted to the respondent and, hence, she cannot be made to sign the documents to
effect the transfer of ownership over the entire property.
On August 6, 2001, the CA issued its Resolution denying the motion on the ground that
the foregoing matters had already been passed upon.
On August 13, 2001, petitioner received a copy of the CA Resolution. On August 28,
2001, petitioner filed the present Petition and raised the following issues:

The CA concluded that petitioner was the borrower and, in turn, would "re-lend" the
amount borrowed from the respondent to her friends. Hence, the Deed of Absolute Sale
was supported by a valid consideration, which is the sum of money petitioner owed
respondent amounting to P405,430.00, representing both principal and interest.

I.

The CA took into account the following circumstances in their entirety: the supposed
friends of petitioner never presented themselves to respondent and that all transactions
were made by and between petitioner and respondent;7 that the money borrowed was
deposited with the bank account of the petitioner, while payments made for the loan were
deposited by the latter to respondents bank account;8 that petitioner herself admitted in
open court that she was "re-lending" the money loaned from respondent to other
individuals for profit;9 and that the documentary evidence shows that the actual
borrowers, the friends of petitioner, consider her as their creditor and not the
respondent.10

II.

Furthermore, the CA held that the alleged threat or intimidation by respondent did not
vitiate consent, since the same is considered just or legal if made to enforce ones claim

11

WHETHER OR NOT THE PETITIONER CAN BE CONSIDERED AS A DEBTOR

OF THE RESPONDENT.

WHETHER OR NOT AN AGENT WHO WAS NOT AUTHORIZED BY THE

PRINCIPAL TO COLLECT DEBT IN HIS BEHALF COULD DIRECTLY COLLECT
PAYMENT FROM THE DEBTOR.
III.
WHETHER OR NOT THE CONTRACT OF SALE WAS EXECUTED FOR A
CAUSE.14

Although, as a rule, it is not the business of this Court to review the findings of fact made
by the lower courts, jurisprudence has recognized several exceptions, at least three of
which are present in the instant case, namely: when the judgment is based on a
misapprehension of facts; when the findings of facts of the courts a quo are conflicting;
and when the CA manifestly overlooked certain relevant facts not disputed by the parties,
which, if properly considered, could justify a different conclusion.15 To arrive at a proper
judgment, therefore, the Court finds it necessary to re-examine the evidence presented
by the contending parties during the trial of the case.

Atty. Diza:
q. You also mentioned that you were not the one indebted to the plaintiff?
witness:
a. Yes, sir.
Atty. Diza:

The Petition is meritorious.

The principal issue is whether the Deed of Absolute Sale is supported by a valid
consideration.

q. And you mentioned the persons[,] namely, Elizabeth Tomelden, Teresa

Moraquin, Maria Luisa Inocencio, Zenaida Romulo, they are your friends?
witness:

1. Petitioner argues that since she is merely the agent or representative of the alleged
debtors, then she is not a party to the loan; and that the Deed of Sale executed between
her and the respondent in their own names, which was predicated on that pre-existing
debt, is void for lack of consideration.

a. Inocencio and Moraquin are my friends while [as to] Jacob and Tomelden[,]
they were just referred.
Atty. Diza:

Indeed, the Deed of Absolute Sale purports to be supported by a consideration in the

form of a price certain in money16 and that this sum indisputably pertains to the debt in
issue. This Court has consistently held that a contract of sale is null and void and
produces no effect whatsoever where the same is without cause or consideration. 17 The
question that has to be resolved for the moment is whether this debt can be considered
as a valid cause or consideration for the sale.
To restate, the CA cited four instances in the record to support its holding that petitioner
"re-lends" the amount borrowed from respondent to her friends: first, the friends of
petitioner never presented themselves to respondent and that all transactions were made
by and between petitioner and respondent;18 second; the money passed through the
bank accounts of petitioner and respondent;19 third, petitioner herself admitted that she
was "re-lending" the money loaned to other individuals for profit; 20 and fourth, the
documentary evidence shows that the actual borrowers, the friends of petitioner,
consider her as their creditor and not the respondent. 21

q. And you have transact[ed] with the plaintiff?

witness:
a. Yes, sir.
Atty. Diza:
q. What is that transaction?
witness:
a. To refer those persons to Aura and to refer again to Arsenio Pua, sir.
Atty. Diza:

On the first, third, and fourth points, the CA cites the testimony of the petitioner, then
defendant, during her cross-examination:22

12

q. Did the plaintiff personally see the transactions with your friends?

witness:

a. Yes, sir.

a. No, sir.

Atty. Diza:

Atty. Diza:

q. What profit do you have, do you have commission?

q. Your friends and the plaintiff did not meet personally?

witness:

witness:

a. Yes, sir.

a. Yes, sir.

Atty. Diza:

Atty. Diza:

q. How much?

q. You are intermediaries?

witness:

witness:

a. Two percent to Tomelden, one percent to Jacob and then Inocencio and my
friends none, sir.

a. We are both intermediaries. As evidenced by the checks of the debtors they

were deposited to the name of Arsenio Pua because the money came from
Arsenio Pua.
xxxx

Based on the foregoing, the CA concluded that petitioner is the real borrower,
while the respondent, the real lender.
But as correctly noted by the RTC, respondent, then plaintiff, made the following
admission during her cross examination:23

Atty. Diza:
Atty. Villacorta:

13

q. Did the plaintiff knew [sic] that you will lend the money to your friends
specifically the one you mentioned [a] while ago?

q. Who is this Arsenio Pua?

witness:

witness:

a. Yes, she knows the money will go to those persons.

a. Principal financier, sir.

Atty. Diza:

Atty. Villacorta:

q. You are re-lending the money?

q. So the money came from Arsenio Pua?

witness:

witness:

a. Yes, because I am only representing him, sir.

Atty. Villacorta:

Other portions of the testimony of respondent must likewise be considered: 24

q. And these friends of the defendant borrowed money from you with the
assurance of the defendant?

Atty. Villacorta:
witness:
q. So it is not actually your money but the money of Arsenio Pua?
a. They go direct to Jocelyn because I dont know them.
witness:
xxxx
a. Yes, sir.
Atty. Villacorta:
Court:
q. It is not your money?

q. And is it not also a fact Madam witness that everytime that the defendant
borrowed money from you her friends who [are] in need of money issued
check[s] to you? There were checks issued to you?

witness:
witness:
a. Yes, Your Honor.
a. Yes, there were checks issued.
Atty. Villacorta:
Atty. Villacorta:
q. Is it not a fact Ms. Witness that the defendant borrowed from you to
accommodate somebody, are you aware of that?

q. By the friends of the defendant, am I correct?

witness:

witness:

a. I am aware of that.

a. Yes, sir.

Atty. Villacorta:

Atty. Villacorta:

q. More or less she [accommodated] several friends of the defendant?

q. And because of your assistance, the friends of the defendant who are in need
of money were able to obtain loan to [sic] Arsenio Pua through your assistance?

witness:
witness:
a. Yes, sir, I am aware of that.
a. Yes, sir.
xxxx

14

Atty. Villacorta:

asserted principal and the third persons interested in the transaction in which he or she is
engaged.28

q. So that occasion lasted for more than a year?

witness:
a. Yes, sir.
Atty. Villacorta:
q. And some of the checks that were issued by the friends of the defendant
bounced, am I correct?
witness:

In this case, petitioner knew that the financier of respondent is Pua; and respondent
knew that the borrowers are friends of petitioner.
The CA is incorrect when it considered the fact that the "supposed friends of [petitioner],
the actual borrowers, did not present themselves to [respondent]" as evidence that
negates the agency relationshipit is sufficient that petitioner disclosed to respondent
that the former was acting in behalf of her principals, her friends whom she referred to
respondent. For an agency to arise, it is not necessary that the principal personally
encounter the third person with whom the agent interacts. The law in fact contemplates,
and to a great degree, impersonal dealings where the principal need not personally know
or meet the third person with whom her agent transacts: precisely, the purpose of agency
is to extend the personality of the principal through the facility of the agent. 29

a. Yes, sir.
Atty. Villacorta:
q. And because of that Arsenio Pua got mad with you?
witness:
a. Yes, sir.
Respondent is estopped to deny that she herself acted as agent of a certain Arsenio
Pua, her disclosed principal. She is also estopped to deny that petitioner acted as agent
for the alleged debtors, the friends whom she (petitioner) referred.
This Court has affirmed that, under Article 1868 of the Civil Code, the basis of agency is
representation.25 The question of whether an agency has been created is ordinarily a
question which may be established in the same way as any other fact, either by direct or
circumstantial evidence. The question is ultimately one of intention.26Agency may even
be implied from the words and conduct of the parties and the circumstances of the
particular case.27 Though the fact or extent of authority of the agents may not, as a
general rule, be established from the declarations of the agents alone, if one professes to
act as agent for another, she may be estopped to deny her agency both as against the

15

In the case at bar, both petitioner and respondent have undeniably disclosed to each
other that they are representing someone else, and so both of them are estopped to
deny the same. It is evident from the record that petitioner merely refers actual borrowers
and then collects and disburses the amounts of the loan upon which she received a
commission; and that respondent transacts on behalf of her "principal financier", a
certain Arsenio Pua. If their respective principals do not actually and personally know
each other, such ignorance does not affect their juridical standing as agents, especially
since the very purpose of agency is to extend the personality of the principal through the
facility of the agent.
With respect to the admission of petitioner that she is "re-lending" the money loaned from
respondent to other individuals for profit, it must be stressed that the manner in which
the parties designate the relationship is not controlling. If an act done by one person in
behalf of another is in its essential nature one of agency, the former is the agent of the
latter notwithstanding he or she is not so called. 30 The question is to be determined by
the fact that one represents and is acting for another, and if relations exist which will
constitute an agency, it will be an agency whether the parties understood the exact
nature of the relation or not.31
That both parties acted as mere agents is shown by the undisputed fact that the friends
of petitioner issued checks in payment of the loan in the name of Pua. If it is true that

petitioner was "re-lending", then the checks should have been drawn in her name and
not directly paid to Pua.
With respect to the second point, particularly, the finding of the CA that the
disbursements and payments for the loan were made through the bank accounts of
petitioner and respondent,
suffice it to say that in the normal course of commercial dealings and for reasons of
convenience and practical utility it can be reasonably expected that the facilities of the
agent, such as a bank account, may be employed, and that a sub-agent be appointed,
such as the bank itself, to carry out the task, especially where there is no stipulation to
the contrary.32
In view of the two agency relationships, petitioner and respondent are not privy to the
contract of loan between their principals. Since the sale is predicated on that loan, then
the sale is void for lack of consideration.
2. A further scrutiny of the record shows, however, that the sale might have been backed
up by another consideration that is separate and distinct from the debt: respondent
averred in her complaint and testified that the parties had agreed that as a condition for
the conveyance of the property the respondent shall assume the balance of the
mortgage loan which petitioner allegedly owed to the NHMFC.33 This Court in the recent
past has declared that an assumption of a mortgage debt may constitute a valid
consideration for a sale.34
Although the record shows that petitioner admitted at the time of trial that she owned the
property described in the TCT,35 the Court must stress that the Transfer Certificate of Title
No. 38253236 on its face shows that the owner of the property which admittedly forms the
subject matter of the Deed of Absolute Sale refers neither to the petitioner nor to her
father, Teodorico Doles, the alleged co-owner. Rather, it states that the property is
registered in the name of "Household Development Corporation." Although there is an
entry to the effect that the petitioner had been granted a special power of attorney
"covering the shares of Teodorico Doles on the parcel of land described in this
certificate,"37 it cannot be inferred from this bare notation, nor from any other evidence on
the record, that the petitioner or her father held any direct interest on the property in
question so as to validly constitute a mortgage thereon38 and, with more reason, to effect
the delivery of the object of the sale at the consummation stage.39 What is worse, there is
a notation that the TCT itself has been "cancelled."40

16

In view of these anomalies, the Court cannot entertain the

possibility that respondent agreed to assume the balance of the mortgage loan which
petitioner allegedly owed to the NHMFC, especially since the record is bereft of any
factual finding that petitioner was, in the first place, endowed with any ownership rights to
validly mortgage and convey the property. As the complainant who initiated the case,
respondent bears the burden of proving the basis of her complaint. Having failed to
discharge such burden, the Court has no choice but to declare the sale void for lack of
cause. And since the sale is void, the Court finds it unnecessary to dwell on the issue of
whether duress or intimidation had been foisted upon petitioner upon the execution of the
sale.
Moreover, even assuming the mortgage validly exists, the Court notes respondents
allegation that the mortgage with the NHMFC was for 25 years which began September
3, 1994. Respondent filed her Complaint for Specific Performance in 1997. Since the 25
years had not lapsed, the prayer of respondent to compel petitioner to execute
necessary documents to effect the transfer of title is premature.
WHEREFORE, the petition is granted. The Decision and Resolution of the Court of
Appeals are REVERSED andSET ASIDE. The complaint of respondent in Civil Case No.
97-82716 is DISMISSED.
SO ORDERED.
G.R. No. 144805 June 8, 2006
EDUARDO V. LINTONJUA, JR. and ANTONIO K. LITONJUA vs. ETERNIT
CORPORATION (now ETERTON MULTI-RESOURCES CORPORATION),
ETEROUTREMER, S.A. and FAR EAST BANK & TRUST COMPANY
On appeal via a Petition for Review on Certiorari is the Decision 1 of the Court of Appeals
(CA) in CA-G.R. CV No. 51022, which affirmed the Decision of the Regional Trial Court
(RTC), Pasig City, Branch 165, in Civil Case No. 54887, as well as the Resolution 2 of the
CA denying the motion for reconsideration thereof.
The Eternit Corporation (EC) is a corporation duly organized and registered under
Philippine laws. Since 1950, it had been engaged in the manufacture of roofing materials
and pipe products. Its manufacturing operations were conducted on eight parcels of land
with a total area of 47,233 square meters. The properties, located in Mandaluyong City,

Metro Manila, were covered by Transfer Certificates of Title Nos. 451117, 451118,
451119, 451120, 451121, 451122, 451124 and 451125 under the name of Far East Bank
& Trust Company, as trustee. Ninety (90%) percent of the shares of stocks of EC were
owned by Eteroutremer S.A. Corporation (ESAC), a corporation organized and
registered under the laws of Belgium.3 Jack Glanville, an Australian citizen, was the
General Manager and President of EC, while Claude Frederick Delsaux was the
Regional Director for Asia of ESAC. Both had their offices in Belgium.
In 1986, the management of ESAC grew concerned about the political situation in the
Philippines and wanted to stop its operations in the country. The Committee for Asia of
ESAC instructed Michael Adams, a member of ECs Board of Directors, to dispose of the
eight parcels of land. Adams engaged the services of realtor/broker Lauro G. Marquez so
that the properties could be offered for sale to prospective buyers. Glanville later showed
the properties to Marquez.
Marquez thereafter offered the parcels of land and the improvements thereon to Eduardo
B. Litonjua, Jr. of the Litonjua & Company, Inc. In a Letter dated September 12, 1986,
Marquez declared that he was authorized to sell the properties for P27,000,000.00 and
that the terms of the sale were subject to negotiation. 4
Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property to Eduardo
Litonjua, Jr., and his brother Antonio K. Litonjua. The Litonjua siblings offered to buy the
property for P20,000,000.00 cash. Marquez apprised Glanville of the Litonjua siblings
offer and relayed the same to Delsaux in Belgium, but the latter did not respond. On
October 28, 1986, Glanville telexed Delsaux in Belgium, inquiring on his position/
counterproposal to the offer of the Litonjua siblings. It was only on February 12, 1987
that Delsaux sent a telex to Glanville stating that, based on the "Belgian/Swiss decision,"
the final offer was "US$1,000,000.00 and P2,500,000.00 to cover all existing obligations
prior to final liquidation."5
Marquez furnished Eduardo Litonjua, Jr. with a copy of the telex sent by Delsaux.
Litonjua, Jr. accepted the counterproposal of Delsaux. Marquez conferred with Glanville,
and in a Letter dated February 26, 1987, confirmed that the Litonjua siblings had
accepted the counter-proposal of Delsaux. He also stated that the Litonjua siblings would
confirm full payment within 90 days after execution and preparation of all documents of
sale, together with the necessary governmental clearances.6

17

The Litonjua brothers deposited the amount of US$1,000,000.00 with the Security Bank
& Trust Company, Ermita Branch, and drafted an Escrow Agreement to expedite the
sale.7
Sometime later, Marquez and the Litonjua brothers inquired from Glanville when the sale
would be implemented. In a telex dated April 22, 1987, Glanville informed Delsaux that
he had met with the buyer, which had given him the impression that "he is prepared to
press for a satisfactory conclusion to the sale."8 He also emphasized to Delsaux that the
buyers were concerned because they would incur expenses in bank commitment fees as
a consequence of prolonged period of inaction.9
Meanwhile, with the assumption of Corazon C. Aquino as President of the Republic of
the Philippines, the political situation in the Philippines had improved. Marquez received
a telephone call from Glanville, advising that the sale would no longer proceed. Glanville
followed it up with a Letter dated May 7, 1987, confirming that he had been instructed by
his principal to inform Marquez that "the decision has been taken at a Board Meeting not
to sell the properties on which Eternit Corporation is situated." 10
Delsaux himself later sent a letter dated May 22, 1987, confirming that the ESAC
Regional Office had decided not to proceed with the sale of the subject land, to wit:
May 22, 1987
Mr. L.G. Marquez
L.G. Marquez, Inc.
334 Makati Stock Exchange Bldg.
6767 Ayala Avenue
Makati, Metro Manila
Philippines
Dear Sir:
Re: Land of Eternit Corporation
I would like to confirm officially that our Group has decided not to proceed with the sale
of the land which was proposed to you.

The Committee for Asia of our Group met recently (meeting every six months) and
examined the position as far as the Philippines are (sic) concerned. Considering [the]
new political situation since the departure of MR. MARCOS and a certain stabilization in
the Philippines, the Committee has decided not to stop our operations in Manila. In fact,
production has started again last week, and (sic) to recognize the participation in the
Corporation.

On July 3, 1995, the trial court rendered judgment in favor of defendants and dismissed
the amended complaint.12The fallo of the decision reads:

We regret that we could not make a deal with you this time, but in case the policy would
change at a later state, we would consult you again.

The complaint as against Far East Bank and Trust Company is likewise dismissed for
lack of cause of action.

xxx

The counterclaim of Eternit Corporation now Eterton Multi-Resources Corporation and

Eteroutremer, S.A. is also dismissed for lack of merit.13

WHEREFORE, the complaint against Eternit Corporation now Eterton Multi-Resources

Corporation and Eteroutremer, S.A. is dismissed on the ground that there is no valid and
binding sale between the plaintiffs and said defendants.

Yours sincerely,
(Sgd.)
C.F. DELSAUX
cc. To: J. GLANVILLE (Eternit Corp.)11
When apprised of this development, the Litonjuas, through counsel, wrote EC,
demanding payment for damages they had suffered on account of the aborted sale. EC,
however, rejected their demand.
The Litonjuas then filed a complaint for specific performance and damages against EC
(now the Eterton Multi-Resources Corporation) and the Far East Bank & Trust Company,
and ESAC in the RTC of Pasig City. An amended complaint was filed, in which defendant
EC was substituted by Eterton Multi-Resources Corporation; Benito C. Tan, Ruperto V.
Tan, Stock Ha T. Tan and Deogracias G. Eufemio were impleaded as additional
defendants on account of their purchase of ESAC shares of stocks and were the
controlling stockholders of EC.
In their answer to the complaint, EC and ESAC alleged that since Eteroutremer was not
doing business in the Philippines, it cannot be subject to the jurisdiction of Philippine
courts; the Board and stockholders of EC never approved any resolution to sell subject
properties nor authorized Marquez to sell the same; and the telex dated October 28,
1986 of Jack Glanville was his own personal making which did not bind EC.

18

The trial court declared that since the authority of the agents/realtors was not in writing,
the sale is void and not merely unenforceable, and as such, could not have been ratified
by the principal. In any event, such ratification cannot be given any retroactive effect.
Plaintiffs could not assume that defendants had agreed to sell the property without a
clear authorization from the corporation concerned, that is, through resolutions of the
Board of Directors and stockholders. The trial court also pointed out that the supposed
sale involves substantially all the assets of defendant EC which would result in the
eventual total cessation of its operation.14
The Litonjuas appealed the decision to the CA, alleging that "(1) the lower court erred in
concluding that the real estate broker in the instant case needed a written authority from
appellee corporation and/or that said broker had no such written authority; and (2) the
lower court committed grave error of law in holding that appellee corporation is not
legally bound for specific performance and/or damages in the absence of an enabling
resolution of the board of directors."15 They averred that Marquez acted merely as a
broker or go-between and not as agent of the corporation; hence, it was not necessary
for him to be empowered as such by any written authority. They further claimed that an
agency by estoppel was created when the corporation clothed Marquez with apparent
authority to negotiate for the sale of the properties. However, since it was a bilateral
contract to buy and sell, it was equivalent to a perfected contract of sale, which the
corporation was obliged to consummate.
In reply, EC alleged that Marquez had no written authority from the Board of Directors to
bind it; neither were Glanville and Delsaux authorized by its board of directors to offer the

property for sale. Since the sale involved substantially all of the corporations assets, it
would necessarily need the authority from the stockholders.
On June 16, 2000, the CA rendered judgment affirming the decision of the RTC. 16 The
Litonjuas filed a motion for reconsideration, which was also denied by the appellate
court.
The CA ruled that Marquez, who was a real estate broker, was a special agent within the
purview of Article 1874 of the New Civil Code. Under Section 23 of the Corporation
Code, he needed a special authority from ECs board of directors to bind such
corporation to the sale of its properties. Delsaux, who was merely the representative of
ESAC (the majority stockholder of EC) had no authority to bind the latter. The CA pointed
out that Delsaux was not even a member of the board of directors of EC. Moreover, the
Litonjuas failed to prove that an agency by estoppel had been created between the
parties.
In the instant petition for review, petitioners aver that

Petitioners maintain that, based on the facts of the case, there was a perfected contract
of sale of the parcels of land and the improvements thereon for "US$1,000,000.00
plus P2,500,000.00 to cover obligations prior to final liquidation." Petitioners insist that
they had accepted the counter-offer of respondent EC and that before the counter-offer
was withdrawn by respondents, the acceptance was made known to them through real
estate broker Marquez.
Petitioners assert that there was no need for a written authority from the Board of
Directors of EC for Marquez to validly act as broker/middleman/intermediary. As broker,
Marquez was not an ordinary agent because his authority was of a special and limited
character in most respects. His only job as a broker was to look for a buyer and to bring
together the parties to the transaction. He was not authorized to sell the properties or to
make a binding contract to respondent EC; hence, petitioners argue, Article 1874 of the
New Civil Code does not apply.
In any event, petitioners aver, what is important and decisive was that Marquez was able
to communicate both the offer and counter-offer and their acceptance of respondent ECs
counter-offer, resulting in a perfected contract of sale.

I
THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PERFECTED
CONTRACT OF SALE.
II
THE APPELLATE COURT COMMITTED GRAVE ERROR OF LAW IN HOLDING THAT
MARQUEZ NEEDED A WRITTEN AUTHORITY FROM RESPONDENT ETERNIT
BEFORE THE SALE CAN BE PERFECTED.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT GLANVILLE AND
DELSAUX HAVE THE NECESSARY AUTHORITY TO SELL THE SUBJECT
PROPERTIES, OR AT THE VERY LEAST, WERE KNOWINGLY PERMITTED BY
RESPONDENT ETERNIT TO DO ACTS WITHIN THE SCOPE OF AN APPARENT
AUTHORITY, AND THUS HELD THEM OUT TO THE PUBLIC AS POSSESSING
POWER TO SELL THE SAID PROPERTIES.17

19

Petitioners posit that the testimonial and documentary evidence on record amply shows
that Glanville, who was the President and General Manager of respondent EC, and
Delsaux, who was the Managing Director for ESAC Asia, had the necessary authority to
sell the subject property or, at least, had been allowed by respondent EC to hold
themselves out in the public as having the power to sell the subject properties.
Petitioners identified such evidence, thus:
1. The testimony of Marquez that he was chosen by Glanville as the then
President and General Manager of Eternit, to sell the properties of said
corporation to any interested party, which authority, as hereinabove discussed,
need not be in writing.
2. The fact that the NEGOTIATIONS for the sale of the subject properties
spanned SEVERAL MONTHS, from 1986 to 1987;
3. The COUNTER-OFFER made by Eternit through GLANVILLE to sell its
properties to the Petitioners;

4. The GOOD FAITH of Petitioners in believing Eternits offer to sell the

properties as evidenced by the Petitioners ACCEPTANCE of the counter-offer;

Yours sincerely,
C.F. DELSAUX19

5. The fact that Petitioners DEPOSITED the price of [US]$1,000,000.00 with the
Security Bank and that an ESCROW agreement was drafted over the subject
properties;
6. Glanvilles telex to Delsaux inquiring "WHEN WE (Respondents) WILL
IMPLEMENT ACTION TO BUY AND SELL";
7. More importantly, Exhibits "G" and "H" of the Respondents, which evidenced
the fact that Petitioners offer was allegedly REJECTED by both Glanville and
Delsaux.18
Petitioners insist that it is incongruous for Glanville and Delsaux to make a counter-offer
to petitioners offer and thereafter reject such offer unless they were authorized to do so
by respondent EC. Petitioners insist that Delsaux confirmed his authority to sell the
properties in his letter to Marquez, to wit:
Dear Sir,
Re: Land of Eternit Corporation
I would like to confirm officially that our Group has decided not to proceed with the sale
of the land which was proposed to you.
The Committee for Asia of our Group met recently (meeting every six months) and
examined the position as far as the Philippines are (sic) concerned. Considering the new
political situation since the departure of MR. MARCOS and a certain stabilization in the
Philippines, the Committee has decided not to stop our operations in Manila[.] [I]n fact
production started again last week, and (sic) to reorganize the participation in the
Corporation.
We regret that we could not make a deal with you this time, but in case the policy would
change at a later stage we would consult you again.
In the meantime, I remain

20

Petitioners further emphasize that they acted in good faith when Glanville and Delsaux
were knowingly permitted by respondent EC to sell the properties within the scope of an
apparent authority. Petitioners insist that respondents held themselves to the public as
possessing power to sell the subject properties.
By way of comment, respondents aver that the issues raised by the petitioners are
factual, hence, are proscribed by Rule 45 of the Rules of Court. On the merits of the
petition, respondents EC (now EMC) and ESAC reiterate their submissions in the CA.
They maintain that Glanville, Delsaux and Marquez had no authority from the
stockholders of respondent EC and its Board of Directors to offer the properties for sale
to the petitioners, or to any other person or entity for that matter. They assert that the
decision and resolution of the CA are in accord with law and the evidence on record, and
should be affirmed in toto.
Petitioners aver in their subsequent pleadings that respondent EC, through Glanville and
Delsaux, conformed to the written authority of Marquez to sell the properties. The
authority of Glanville and Delsaux to bind respondent EC is evidenced by the fact that
Glanville and Delsaux negotiated for the sale of 90% of stocks of respondent EC to
Ruperto Tan on June 1, 1997. Given the significance of their positions and their duties in
respondent EC at the time of the transaction, and the fact that respondent ESAC owns
90% of the shares of stock of respondent EC, a formal resolution of the Board of
Directors would be a mere ceremonial formality. What is important, petitioners maintain,
is that Marquez was able to communicate the offer of respondent EC and the petitioners
acceptance thereof. There was no time that they acted without the knowledge of
respondents. In fact, respondent EC never repudiated the acts of Glanville, Marquez and
Delsaux.
The petition has no merit.
Anent the first issue, we agree with the contention of respondents that the issues raised
by petitioner in this case are factual. Whether or not Marquez, Glanville, and Delsaux
were authorized by respondent EC to act as its agents relative to the sale of the
properties of respondent EC, and if so, the boundaries of their authority as agents, is a
question of fact. In the absence of express written terms creating the relationship of an

agency, the existence of an agency is a fact question.20 Whether an agency by estoppel

was created or whether a person acted within the bounds of his apparent authority, and
whether the principal is estopped to deny the apparent authority of its agent are, likewise,
questions of fact to be resolved on the basis of the evidence on record. 21 The findings of
the trial court on such issues, as affirmed by the CA, are conclusive on the Court, absent
evidence that the trial and appellate courts ignored, misconstrued, or misapplied facts
and circumstances of substance which, if considered, would warrant a modification or
reversal of the outcome of the case.22
It must be stressed that issues of facts may not be raised in the Court under Rule 45 of
the Rules of Court because the Court is not a trier of facts. It is not to re-examine and
assess the evidence on record, whether testimonial and documentary. There are,
however, recognized exceptions where the Court may delve into and resolve factual
issues, namely:
(1) When the conclusion is a finding grounded entirely on speculations, surmises, or
conjectures; (2) when the inference made is manifestly mistaken, absurd, or impossible;
(3) when there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the Court
of Appeals, in making its findings, went beyond the issues of the case and the same is
contrary to the admissions of both appellant and appellee; (7) when the findings of the
Court of Appeals are contrary to those of the trial court; (8) when the findings of fact are
conclusions without citation of specific evidence on which they are based; (9) when the
Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties,
which, if properly considered, would justify a different conclusion; and (10) when the
findings of fact of the Court of Appeals are premised on the absence of evidence and are
contradicted by the evidence on record.23
We have reviewed the records thoroughly and find that the petitioners failed to establish
that the instant case falls under any of the foregoing exceptions. Indeed, the assailed
decision of the Court of Appeals is supported by the evidence on record and the law.
It was the duty of the petitioners to prove that respondent EC had decided to sell its
properties and that it had empowered Adams, Glanville and Delsaux or Marquez to offer
the properties for sale to prospective buyers and to accept any counter-offer. Petitioners
likewise failed to prove that their counter-offer had been accepted by respondent EC,
through Glanville and Delsaux. It must be stressed that when specific performance is

21

sought of a contract made with an agent, the agency must be established by clear,
certain and specific proof.24
Section 23 of Batas Pambansa Bilang 68, otherwise known as the Corporation Code of
the Philippines, provides:
SEC. 23. The Board of Directors or Trustees. Unless otherwise provided in this Code,
the corporate powers of all corporations formed under this Code shall be exercised, all
business conducted and all property of such corporations controlled and held by the
board of directors or trustees to be elected from among the holders of stocks, or where
there is no stock, from among the members of the corporation, who shall hold office for
one (1) year and until their successors are elected and qualified.
Indeed, a corporation is a juridical person separate and distinct from its members or
stockholders and is not affected by the personal rights,
obligations and transactions of the latter.25 It may act only through its board of directors
or, when authorized either by its by-laws or by its board resolution, through its officers or
agents in the normal course of business. The general principles of agency govern the
relation between the corporation and its officers or agents, subject to the articles of
incorporation, by-laws, or relevant provisions of law.26
Under Section 36 of the Corporation Code, a corporation may sell or convey its real
properties, subject to the limitations prescribed by law and the Constitution, as follows:
SEC. 36. Corporate powers and capacity. Every corporation incorporated under this
Code has the power and capacity:
xxxx
7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and
otherwise deal with such real and personal property, including securities and bonds of
other corporations, as the transaction of a lawful business of the corporation may
reasonably and necessarily require, subject to the limitations prescribed by the law and
the Constitution.
The property of a corporation, however, is not the property of the stockholders or
members, and as such, may not be sold without express authority from the board of

directors.27 Physical acts, like the offering of the properties of the corporation for sale, or
the acceptance of a counter-offer of prospective buyers of such properties and the
execution of the deed of sale covering such property, can be performed by the
corporation only by officers or agents duly authorized for the purpose by corporate bylaws or by specific acts of the board of directors.28 Absent such valid
delegation/authorization, the rule is that the declarations of an individual director relating
to the affairs of the corporation, but not in the course of, or connected with, the
performance of authorized duties of such director, are not binding on the corporation. 29
While a corporation may appoint agents to negotiate for the sale of its real properties, the
final say will have to be with the board of directors through its officers and agents as
authorized by a board resolution or by its by-laws.30An unauthorized act of an officer of
the corporation is not binding on it unless the latter ratifies the same expressly or
impliedly by its board of directors. Any sale of real property of a corporation by a person
purporting to be an agent thereof but without written authority from the corporation is null
and void. The declarations of the agent alone are generally insufficient to establish the
fact or extent of his/her authority.31
By the contract of agency, a person binds himself to render some service or to do
something in representation on behalf of another, with the consent or authority of the
latter.32 Consent of both principal and agent is necessary to create an agency. The
principal must intend that the agent shall act for him; the agent must intend to accept the
authority and act on it, and the intention of the parties must find expression either in
words or conduct between them.33
An agency may be expressed or implied from the act of the principal, from his silence or
lack of action, or his failure to repudiate the agency knowing that another person is acting
on his behalf without authority. Acceptance by the agent may be expressed, or implied
from his acts which carry out the agency, or from his silence or inaction according to the
circumstances.34 Agency may be oral unless the law requires a specific form. 35 However,
to create or convey real rights over immovable property, a special power of attorney is
necessary.36 Thus, when a sale of a piece of land or any portion thereof is through an
agent, the authority of the latter shall be in writing, otherwise, the sale shall be void. 37
In this case, the petitioners as plaintiffs below, failed to adduce in evidence any
resolution of the Board of Directors of respondent EC empowering Marquez, Glanville or
Delsaux as its agents, to sell, let alone offer for sale, for and in its behalf, the eight
parcels of land owned by respondent EC including the improvements thereon. The bare

22

fact that Delsaux may have been authorized to sell to Ruperto Tan the shares of stock of
respondent ESAC, on June 1, 1997, cannot be used as basis for petitioners claim that
he had likewise been authorized by respondent EC to sell the parcels of land.
Moreover, the evidence of petitioners shows that Adams and Glanville acted on the
authority of Delsaux, who, in turn, acted on the authority of respondent ESAC, through its
Committee for Asia,38 the Board of Directors of respondent ESAC,39 and the
Belgian/Swiss component of the management of respondent ESAC.40 As such, Adams
and Glanville engaged the services of Marquez to offer to sell the properties to
prospective buyers. Thus, on September 12, 1986, Marquez wrote the petitioner that he
was authorized to offer for sale the property forP27,000,000.00 and the other terms of
the sale subject to negotiations. When petitioners offered to purchase the property
for P20,000,000.00, through Marquez, the latter relayed petitioners offer to Glanville;
Glanville had to send a telex to Delsaux to inquire the position of respondent ESAC to
petitioners offer. However, as admitted by petitioners in their Memorandum, Delsaux was
unable to reply immediately to the telex of Glanville because Delsaux had to wait for
confirmation from respondent ESAC.41 When Delsaux finally responded to Glanville on
February 12, 1987, he made it clear that, based on the "Belgian/Swiss decision" the final
offer of respondent ESAC was US$1,000,000.00 plus P2,500,000.00 to cover all existing
obligations prior to final liquidation.42 The offer of Delsaux emanated only from the
"Belgian/Swiss decision," and not the entire management or Board of Directors of
respondent ESAC. While it is true that petitioners accepted the counter-offer of
respondent ESAC, respondent EC was not a party to the transaction between them;
hence, EC was not bound by such acceptance.
While Glanville was the President and General Manager of respondent EC, and Adams
and Delsaux were members of its Board of Directors, the three acted for and in behalf of
respondent ESAC, and not as duly authorized agents of respondent EC; a board
resolution evincing the grant of such authority is needed to bind EC to any agreement
regarding the sale of the subject properties. Such board resolution is not a mere formality
but is a condition sine qua non to bind respondent EC. Admittedly, respondent ESAC
owned 90% of the shares of stocks of respondent EC; however, the mere fact that a
corporation owns a majority of the shares of stocks of another, or even all of such shares
of stocks, taken alone, will not justify their being treated as one corporation. 43
It bears stressing that in an agent-principal relationship, the personality of the principal is
extended through the facility of the agent. In so doing, the agent, by legal fiction,
becomes the principal, authorized to perform all acts which the latter would have him do.

Such a relationship can only be effected with the consent of the principal, which must
not, in any way, be compelled by law or by any court.44

positively and unequivocally declared that they were acting for and in behalf of
respondent ESAC.

The petitioners cannot feign ignorance of the absence of any regular and valid authority
of respondent EC empowering Adams, Glanville or Delsaux to offer the properties for
sale and to sell the said properties to the petitioners. A person dealing with a known
agent is not authorized, under any circumstances, blindly to trust the agents; statements
as to the extent of his powers; such person must not act negligently but must use
reasonable diligence and prudence to ascertain whether the agent acts within the scope
of his authority.45 The settled rule is that, persons dealing with an assumed agent are
bound at their peril, and if they would hold the principal liable, to ascertain not only the
fact of agency but also the nature and extent of authority, and in case either is
controverted, the burden of proof is upon them to prove it.46 In this case, the petitioners
failed to discharge their burden; hence, petitioners are not entitled to damages from
respondent EC.

Neither may respondent EC be deemed to have ratified the transactions between the
petitioners and respondent ESAC, through Glanville, Delsaux and Marquez. The
transactions and the various communications inter se were never submitted to the Board
of Directors of respondent EC for ratification.

It appears that Marquez acted not only as real estate broker for the petitioners but also
as their agent. As gleaned from the letter of Marquez to Glanville, on February 26, 1987,
he confirmed, for and in behalf of the petitioners, that the latter had accepted such offer
to sell the land and the improvements thereon. However, we agree with the ruling of the
appellate court that Marquez had no authority to bind respondent EC to sell the subject
properties. A real estate broker is one who negotiates the sale of real properties. His
business, generally speaking, is only to find a purchaser who is willing to buy the land
upon terms fixed by the owner. He has no authority to bind the principal by signing a
contract of sale. Indeed, an authority to find a purchaser of real property does not include
an authority to sell.47
Equally barren of merit is petitioners contention that respondent EC is estopped to deny
the existence of a principal-agency relationship between it and Glanville or Delsaux. For
an agency by estoppel to exist, the following must be established: (1) the principal
manifested a representation of the agents authority or knowlingly allowed the agent to
assume such authority; (2) the third person, in good faith, relied upon such
representation; (3) relying upon such representation, such third person has changed his
position to his detriment.48 An agency by estoppel, which is similar to the doctrine of
apparent authority, requires proof of reliance upon the representations, and that, in turn,
needs proof that the representations predated the action taken in reliance. 49 Such proof is
lacking in this case. In their communications to the petitioners, Glanville and Delsaux

23

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs
against the petitioners.
SO ORDERED.

G.R. No. 150128 August 31, 2006

ANGELES vs. PHILIPPINE NATIONAL RAILWAYS (PNR) AND RODOLFO FLORES
Under consideration is this petition for review under Rule 45 of the Rules of Court
assailing and seeking to set aside the following issuances of the Court of Appeals (CA)
in CA-G.R. CV No. 54062, to wit:
1. Decision 2 dated June 4, 2001, affirming an earlier decision of the Regional Trial Court
(RTC) of Quezon City, Branch 79, which dismissed the complaint for specific
performance and damages thereat commenced by the petitioner against the herein
respondents; and
2. Resolution 3 dated September 17, 2001, denying the petitioner's motion for
reconsideration.
The facts:
On May 5, 1980, the respondent Philippine National Railways (PNR) informed a certain
Gaudencio Romualdez (Romualdez, hereinafter) that it has accepted the latters offer to
buy, on an "AS IS, WHERE IS" basis, the PNRs scrap/unserviceable rails located in Del
Carmen and Lubao, Pampanga at P1,300.00 and P2,100.00 per metric ton, respectively,
for the total amount of P96,600.00. After paying the stated purchase price, Romualdez

addressed a letter to Atty. Cipriano Dizon, PNRs Acting Purchasing Agent. Bearing date
May 26, 1980, the letter reads:

46 metric tons of scrap/unserviceable rails and to pay them damages and attorney's
fees.

Dear Atty. Dizon:

Issues having been joined following the filing by PNR, et al., of their answer, trial ensued.
Meanwhile, Lizette W. Angeles passed away and was substituted by her heirs, among
whom is her husband, herein petitioner Laureno T. Angeles.

This is to inform you as President of San Juanico Enterprises, that I have authorized the
bearer, LIZETTE R. WIJANCO of No. 1606 Aragon St., Sta. Cruz, Manila, to be my lawful
representative in the withdrawal of the scrap/unserviceable rails awarded to me.
For this reason, I have given her the original copy of the award, dated May 5, 1980 and
O.R. No. 8706855 dated May 20, 1980 which will indicate my waiver of rights, interests
and participation in favor of LIZETTE R. WIJANCO.
Thank you for your cooperation.
Very truly yours,

On April 16, 1996, the trial court, on the postulate that the spouses Angeles are not the
real parties-in-interest, rendered judgment dismissing their complaint for lack of cause of
action. As held by the court, Lizette was merely a representative of Romualdez in the
withdrawal of scrap or unserviceable rails awarded to him and not an assignee to the
latter's rights with respect to the award.
Aggrieved, the petitioner interposed an appeal with the CA, which, as stated at the
threshold hereof, in its decision of June 4, 2001, dismissed the appeal and affirmed that
of the trial court. The affirmatory decision was reiterated by the CA in its resolution of
September 17, 2001, denying the petitioners motion for reconsideration.

(Sgd.) Gaudencio Romualdez

The Lizette R. Wijanco mentioned in the letter was Lizette Wijanco- Angeles, petitioner's
now deceased wife. That very same day May 26, 1980 Lizette requested the PNR to
transfer the location of withdrawal for the reason that the scrap/unserviceable rails
located in Del Carmen and Lubao, Pampanga were not ready for hauling. The PNR
granted said request and allowed Lizette to withdraw scrap/unserviceable rails in Murcia,
Capas and San Miguel, Tarlac instead. However, the PNR subsequently suspended the
withdrawal in view of what it considered as documentary discrepancies coupled by
reported pilferages of over P500,000.00 worth of PNR scrap properties in Tarlac.
Consequently, the spouses Angeles demanded the refund of the amount of P96,000.00.
The PNR, however, refused to pay, alleging that as per delivery receipt duly signed by
Lizette, 54.658 metric tons of unserviceable rails had already been withdrawn which,
at P2,100.00 per metric ton, were worth P114,781.80, an amount that exceeds the claim
for refund.
On August 10, 1988, the spouses Angeles filed suit against the PNR and its corporate
secretary, Rodolfo Flores, among others, for specific performance and damages before
the Regional Trial Court of Quezon City. In it, they prayed that PNR be directed to deliver

24

Hence, the petitioners present recourse on the submission that the CA erred in affirming
the trial court's holding that petitioner and his spouse, as plaintiffs a quo, had no cause of
action as they were not the real parties-in-interest in this case.
We DENY the petition.
At the crux of the issue is the matter of how the aforequoted May 26, 1980 letter of
Romualdez to Atty. Dizon of the PNR should be taken: was it meant to designate, or has
it the effect of designating, Lizette W. Angeles as a mere agent or as an assignee of his
(Romualdez's) interest in the scrap rails awarded to San Juanico Enterprises? The CAs
conclusion, affirmatory of that of the trial court, is that Lizette was not an assignee, but
merely an agent whose authority was limited to the withdrawal of the scrap rails, hence,
without personality to sue.
Where agency exists, the third party's (in this case, PNR's) liability on a contract is to the
principal and not to the agent and the relationship of the third party to the principal is the
same as that in a contract in which there is no agent. Normally, the agent has neither
rights nor liabilities as against the third party. He cannot thus sue or be sued on the
contract. Since a contract may be violated only by the parties thereto as against each

other, the real party-in-interest, either as plaintiff or defendant in an action upon that
contract must, generally, be a contracting party.

subject matter. Stated a bit differently, he intended to limit Lizettes role in the scrap
transaction to being the representative of his interest therein.

The legal situation is, however, different where an agent is constituted as an assignee. In
such a case, the agent may, in his own behalf, sue on a contract made for his principal,
as an assignee of such contract. The rule

Petitioner submits that the second paragraph of the Romualdez letter, stating - "I have
given [Lizette] the original copy of the award x x x which will indicate my waiver of rights,
interests and participation in favor of Lizette R. Wijanco" - clarifies that Lizette was
intended to be an assignee, and not a mere agent.

requiring every action to be prosecuted in the name of the real party-in-interest

recognizes the assignment of rights of action and also recognizes
that when one has a right assigned to him, he is then the real party-in-interest and may
maintain an action upon such claim or right. 4
Upon scrutiny of the subject Romualdez's letter to Atty. Cipriano Dizon dated May 26,
1980, it is at once apparent that Lizette was to act just as a "representative" of
Romualdez in the "withdrawal of rails," and not an assignee. For perspective, we
reproduce the contents of said letter:
This is to inform you as President of San Juanico Enterprises, that I have authorized the
bearer, LIZETTE R. WIJANCO x x x to be my lawful representative in the withdrawal
of the scrap/unserviceable rails awarded to me.
For this reason, I have given her the original copy of the award, dated May 5, 1980 and
O.R. No. 8706855 dated May 20, 1980 which will indicate my waiver of rights, interests
and participation in favor of LIZETTE R. WIJANCO. (Emphasis added)
If Lizette was without legal standing to sue and appear in this case, there is more reason
to hold that her petitioner husband, either as her conjugal partner or her heir, is also
without such standing.
Petitioner makes much of the fact that the terms "agent" or "attorney-in-fact" were not
used in the Romualdez letter aforestated. It bears to stress, however, that the words
"principal" and "agent," are not the only terms used to designate the parties in an agency
relation. The agent may also be called an attorney, proxy, delegate or, as
here,representative.
It cannot be over emphasized that Romualdez's use of the active verb "authorized,"
instead of "assigned," indicated an intent on his part to keep and retain his interest in the

25

We are not persuaded. As it were, the petitioner conveniently omitted an important

phrase preceding the paragraph which would have put the whole matter in context. The
phrase is "For this reason," and the antecedent thereof is his (Romualdez) having
appointed Lizette as his representative in the matter of the withdrawal of the scrap items.
In fine, the key phrase clearly conveys the idea that Lizette was given the original copy of
the contract award to enable her to withdraw the rails as Romualdezs authorized
representative.
Article 1374 of the Civil Code provides that the various stipulations of a contract shall be
read and interpreted together, attributing to the doubtful ones that sense which may
result from all of them taken jointly. In fine, the real intention of the parties is primarily to
be determined from the language used and gathered from the whole instrument. When
put into the context of the letter as a whole, it is abundantly clear that the rights which
Romualdez waived or ceded in favor of Lizette were those in furtherance of the agency
relation that he had established for the withdrawal of the rails.
At any rate, any doubt as to the intent of Romualdez generated by the way his letter was
couched could be clarified by the acts of the main players themselves. Article 1371 of the
Civil Code provides that to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered. In other words, in
case of doubt, resort may be made to the situation, surroundings, and relations of the
parties.
The fact of agency was, as the trial court aptly observed, 5 confirmed in subsequent
letters from the Angeles spouses in which they themselves refer to Lizette as "authorized
representative" of San Juanico Enterprises. Mention may also be made that the
withdrawal receipt which Lizette had signed indicated that she was doing so in a
representative capacity. One professing to act as agent for another is estopped to deny
his agency both as against his asserted principal and third persons interested in the
transaction which he engaged in.

Whether or not an agency has been created is a question to be determined by the fact
that one represents and is acting for another. The appellate court, and before it, the trial
court, had peremptorily determined that Lizette, with respect to the withdrawal of the
scrap in question, was acting for Romualdez. And with the view we take of this case,
there were substantial pieces of evidence adduced to support this determination. The
desired reversal urged by the petitioner cannot, accordingly, be granted. For, factual
findings of the trial court, adopted and confirmed by the CA, are, as a rule, final and
conclusive and may not be disturbed on appeal. 6 So it must be here.
Petitioner maintains that the Romualdez letter in question was not in the form of a special
power of attorney, implying that the latter had not intended to merely authorize his wife,
Lizette, to perform an act for him (Romualdez). The contention is specious. In the
absence of statute, no form or method of execution is required for a valid power of
attorney; it may be in any form clearly showing on its face the agents authority. 7
A power of attorney is only but an instrument in writing by which a person, as principal,
appoints another as his agent and confers upon him the authority to perform certain
specified acts on behalf of the principal. The written authorization itself is the power of
attorney, and this is clearly indicated by the fact that it has also been called a "letter of
attorney." Its primary purpose is not to define the authority of the agent as between
himself and his principal but to evidence the authority of the agent to third parties with
whom the agent deals. 8 The letter under consideration is sufficient to constitute a power
of attorney. Except as may be required by statute, a power of attorney is valid although
no notary public intervened in its execution. 9
A power of attorney must be strictly construed and pursued. The instrument will be held
to grant only those powers which are specified therein, and the agent may neither go
beyond nor deviate from the power of attorney. 10Contextually, all that Lizette was
authorized to do was to withdraw the unserviceable/scrap railings. Allowing her authority
to sue therefor, especially in her own name, would be to read something not intended, let
alone written in the Romualdez letter.
Finally, the petitioner's claim that Lizette paid the amount of P96,000.00 to the PNR
appears to be a mere afterthought; it ought to be dismissed outright under the estoppel
principle. In earlier proceedings, petitioner himself admitted in his complaint that it was
Romualdez who paid this amount.

26

WHEREFORE, the petition is DENIED and the assailed decision of the CA

is AFFIRMED. Costs against the petitioner.
G.R. No. 165133
April 19, 2010
SPOUSES JOSELINA ALCANTARA AND ANTONIO ALCANTARA, and SPOUSES
JOSEFINO RUBI AND ANNIE DISTOR- RUBI vs. BRIGIDA L. NIDO, as attorney-infact of REVELEN N. SRIVASTAVA
The Case
Spouses Antonio and Joselina Alcantara and Spouses Josefino and Annie Rubi
(petitioners) filed this Petition for Review1 assailing the Court of Appeals (appellate court)
Decision2 dated 10 June 2004 as well as the Resolution3dated 17 August 2004 in CAG.R. CV No. 78215. In the assailed decision, the appellate court reversed the 17 June
2002 Decision4 of Branch 69 of the Regional Trial Court of Binangonan, Rizal (RTC) by
dismissing the case for recovery of possession with damages and preliminary injunction
filed by Brigida L. Nido (respondent), in her capacity as administrator and attorney-in-fact
of Revelen N. Srivastava (Revelen).
The Facts
Revelen, who is respondents daughter and of legal age, is the owner of an unregistered
land with an area of 1,939 square meters located in Cardona, Rizal. Sometime in March
1984, respondent accepted the offer of petitioners to purchase a 200-square meter
portion of Revelens lot (lot) at P200 per square meter. Petitioners paidP3,000 as
downpayment and the balance was payable on installment. Petitioners constructed their
houses in 1985. In 1986, with respondents consent, petitioners occupied an additional
150 square meters of the lot. By 1987, petitioners had already paid P17,5005 before
petitioners defaulted on their installment payments.
On 11 May 1994, respondent, acting as administrator and attorney-in-fact of Revelen,
filed a complaint for recovery of possession with damages and prayer for preliminary
injunction against petitioners with the RTC.
The RTCs Ruling
The RTC stated that based on the evidence presented, Revelen owns the lot and
respondent was verbally authorized to sell 200 square meters to petitioners. The RTC

ruled that since respondents authority to sell the land was not in writing, the sale was
void under Article 18746 of the Civil Code.7 The RTC ruled that rescission is the proper
remedy.8

Dismiss and Answer before the RTC.11 The RTC denied the Motion to Dismiss and
assumed jurisdiction over the case because the issues pertain to a determination of the
real agreement between the parties and rescission of the contract to sell the property.12

On 17 June 2002, the RTC rendered its decision, the dispositive portion reads:

The appellate court added that even if respondents complaint is for recovery of
possession or accion publiciana, the RTC still has no jurisdiction to decide the case. The
appellate court explained:

WHEREFORE, judgment is rendered in favor of plaintiff and against the defendants, by 1. Declaring the contract to sell orally agreed by the plaintiff Brigida Nido, in her
capacity as representative or agent of her daughter Revelen Nido Srivastava,
VOID and UNENFORCEABLE.
2. Ordering the parties, upon finality of this judgment, to have mutual restitution
the defendants and all persons claiming under them to peacefully vacate and
surrender to the plaintiff the possession of the subject lot covered by TD No. 090742 and its derivative Tax Declarations, together with all permanent
improvements introduced thereon, and all improvements built or constructed
during the pendency of this action, in bad faith; and the plaintiff, to return the sum
of P17,500.00, the total amount of the installment on the land paid by defendant;
the fruits and interests during the pendency of the condition shall be deemed to
have been mutually compensated.
3. Ordering the defendants to pay plaintiff the sum of P20,000.00 as attorneys
fees, plus P15,000.00 as actual litigation expenses, plus the costs of suit.

Note again that the complaint was filed on 11 May 1994. By that time, Republic Act No.
7691 was already in effect. Said law took effect on 15 April 1994, fifteen days after its
publication in the Malaya and in the Time Journal on 30 March 1994 pursuant to Sec. 8
of Republic Act No. 7691.
Accordingly, Sec. 33 of Batas Pambansa 129 was amended by Republic Act No. 7691
giving the Municipal Trial Court the exclusive original jurisdiction over all civil actions
involving title to, or possession of, real property, or any interest therein where the
assessed value of the property or interest therein does not exceed P20,000 or, in civil
actions in Metro Manila, where such assessed value does not exceed P50,000, exclusive
of interest, damages of whatever kind, attorneys fees, litigation expenses and costs.
At bench, the complaint alleges that the whole 1,939- square meter lot of Revelen N.
Srivastava is covered by Tax Declaration No. 09-0742 (Exh. "B", p. 100, Records) which
gives its assessed value of the whole lot of P4,890.00. Such assessed value falls within
the exclusive original prerogative or jurisdiction of the first level court and, therefore, the
Regional Trial Court a quo has no jurisdiction to try and decided the same. 13
1avvphi1

SO ORDERED.

The Appellate Courts Ruling

On 5 January 2004, petitioners appealed the trial courts Decision to the appellate court.
In its decision dated 10 June 2004, the appellate court reversed the RTC decision and
dismissed the civil case.10
The appellate court explained that this is an unlawful detainer case. The prayer in the
complaint and amended complaint was for recovery of possession and the case was filed
within one year from the last demand letter. Even if the complaint involves a question of
ownership, it does not deprive the Municipal Trial Court (MTC) of its jurisdiction over the
ejectment case. Petitioners raised the issue of lack of jurisdiction in their Motion to

27

The appellate court also held that respondent, as Revelens agent, did not have a written
authority to enter into such contract of sale; hence, the contract entered into between
petitioners and respondent is void. A void contract creates no rights or obligations or any
juridical relations. Therefore, the void contract cannot be the subject of rescission. 14
Aggrieved by the appellate courts Decision, petitioners elevated the case before this
Court.
Issues
Petitioners raise the following arguments:

1. The appellate court gravely erred in ruling that the contract entered into by
respondent, in representation of her daughter, and former defendant Eduardo
Rubi (deceased), is void; and
2. The appellate court erred in not ruling that the petitioners are entitled to their
counterclaims, particularly specific performance.15
Ruling of the Court
We deny the petition.
Petitioners submit that the sale of land by an agent who has no written authority is not
void but merely voidable given the spirit and intent of the law. Being only voidable, the
contract may be ratified, expressly or impliedly. Petitioners argue that since the contract
to sell was sufficiently established through respondents admission during the pre-trial
conference, the appellate court should have ruled on the matter of the counterclaim for
specific performance.16

xxx
Article 1874 of the Civil Code explicitly requires a written authority before an agent can
sell an immovable property. Based on a review of the records, there is absolutely no
proof of respondents written authority to sell the lot to petitioners. In fact, during the pretrial conference, petitioners admitted that at the time of the negotiation for the sale of the
lot, petitioners were of the belief that respondent was the owner of lot. 19 Petitioners only
knew that Revelen was the owner of the lot during the hearing of this case.
Consequently, the sale of the lot by respondent who did not have a written authority from
Revelen is void. A void contract produces no effect either against or in favor of anyone
and cannot be ratified.20
A special power of attorney is also necessary to enter into any contract by which the
ownership of an immovable is transmitted or acquired for a valuable consideration.
Without an authority in writing, respondent cannot validly sell the lot to petitioners.
Hence, any "sale" in favor of the petitioners is void.
Our ruling in Dizon v. Court of Appeals21 is instructive:

Respondent argues that the appellate court cannot lawfully rule on petitioners
counterclaim because there is nothing in the records to sustain petitioners claim that
they have fully paid the price of the lot.17 Respondent points out that petitioners admitted
the lack of written authority to sell. Respondent also alleges that there was clearly no
meeting of the minds between the parties on the purported contract of sale. 18
Sale of Land through an Agent
Articles 1874 and 1878 of the Civil Code provide:
Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the
authority of the latter shall be in writing; otherwise, the sale shall be void.
Art. 1878. Special powers of attorney are necessary in the following cases:

When the sale of a piece of land or any interest thereon is through an agent, the
authority of the latter shall be in writing; otherwise, the sale shall be void. Thus the
authority of an agent to execute a contract for the sale of real estate must be conferred in
writing and must give him specific authority, either to conduct the general business of the
principal or to execute a binding contract containing terms and conditions which are in
the contract he did execute. A special power of attorney is necessary to enter into any
contract by which the ownership of an immovable is transmitted or acquired either
gratuitously or for a valuable consideration. The express mandate required by law to
enable an appointee of an agency (couched) in general terms to sell must be one that
expressly mentions a sale or that includes a sale as a necessary ingredient of the act
mentioned. For the principal to confer the right upon an agent to sell real estate, a power
of attorney must so express the powers of the agent in clear and unmistakable language.
When there is any reasonable doubt that the language so used conveys such power, no
such construction shall be given the document.

xxx
(5) To enter into any contract by which the ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable consideration;

Further, Article 1318 of the Civil Code enumerates the requisites for a valid contract,
namely:
1. consent of the contracting parties;

28

2. object certain which is the subject matter of the contract;

3. cause of the obligation which is established.
Respondent did not have the written authority to enter into a contract to sell the lot. As
the consent of Revelen, the real owner of the lot, was not obtained in writing as required
by law, no contract was perfected. Consequently, petitioners failed to validly acquire the
lot.

consul, vice consul, or consular agent or by any officer in the foreign service of the
Philippines stationed in the foreign country in which the record is kept of said public
document and authenticated by the seal of his office. A city judge-notary who notarized
the document, as in this case, cannot issue such certification.25
Since the General Power of Attorney was executed and acknowledged in the United
States of America, it cannot be admitted in evidence unless it is certified as such in
accordance with the Rules of Court by an officer in the foreign service of the Philippines
stationed in the United States of America. Hence, this document has no probative value.

General Power of Attorney

Specific Performance
On 25 March 1994, Revelen executed a General Power of Attorney constituting
respondent as her attorney-in-fact and authorizing her to enter into any and all contracts
and agreements on Revelens behalf. The General Power of Attorney was notarized by
Larry A. Reid, Notary Public in California, U.S.A.
Unfortunately, the General Power of Attorney presented as "Exhibit C" 22 in the RTC
cannot also be the basis of respondents written authority to sell the lot.
Section 25, Rule 132 of the Rules of Court provides:
Sec. 25. Proof of public or official record. An official record or an entry therein, when
admissible for any purpose, may be evidenced by an official publication thereof or by a
copy attested by the officer having the legal custody of the record, or by his deputy, and
accompanied, if the record is not kept in the Philippines, with a certificate that such
officer has the custody. If the office in which the record is kept is in a foreign country, the
certificate may be made by a secretary of embassy or legation consul general, consul,
vice consul, or consular agent or by any officer in the foreign service of the Philippines
stationed in the foreign country in which the record is kept, and authenticated by the seal
of his office.
In Teoco v. Metropolitan Bank and Trust Company,23 quoting Lopez v. Court of
Appeals,24 we explained:
From the foregoing provision, when the special power of attorney is executed and
acknowledged before a notary public or other competent official in a foreign country, it
cannot be admitted in evidence unless it is certified as such in accordance with the
foregoing provision of the rules by a secretary of embassy or legation, consul general,

29

Petitioners are not entitled to claim for specific performance. It must be stressed that
when specific performance is sought of a contract made with an agent, the agency must
be established by clear, certain and specific proof. 26 To reiterate, there is a clear absence
of proof that Revelen authorized respondent to sell her lot.
Jurisdiction of the RTC
Section 33 of Batas Pambansa Bilang 129,27 as amended by Republic Act No. 7691
provides:
Section 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts in Civil Cases. Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts shall exercise:
xxx
(3) Exclusive original jurisdiction in all civil actions which involve title to, possession of,
real property, or any interest therein where the assessed value of the property or interest
therein does not exceed Twenty thousand pesos (P20,000.00) or, in civil actions in Metro
Manila, where such assessed value does not exceed Fifty thousand pesos (P50,000.00)
exclusive of interest, damages of whatever kind, attorneys fees, litigation expenses and
costs: x x x
In Geonzon Vda. de Barrera v. Heirs of Vicente Legaspi, 28 the Court explained:

Before the amendments introduced by Republic Act No. 7691, the plenary action of
accion publiciana was to be brought before the regional trial court. With the modifications
introduced by R.A. No. 7691 in 1994, the jurisdiction of the first level courts has been
expanded to include jurisdiction over other real actions where the assessed value does
not exceed P20,000, P50,000 where the action is filed in Metro Manila. The first level
courts thus have exclusive original jurisdiction over accion publiciana and accion
reivindicatoria where the assessed value of the real property does not exceed the
aforestated amounts. Accordingly, the jurisdictional element is the assessed value of the
property.

This is an appeal via certiorari1 from the decision of the Court of Appeals2 affirming the
decision3 of the Regional Trial Court, Branch 44, San Fernando, Pampanga, which
ordered petitioner Dominion Insurance Corporation (Dominion) to pay Rodolfo S.
Guevarra (Guevarra) the sum of P156,473.90 representing the total amount advanced by
Guevarra in the payment of the claims of Dominions clients.

Assessed value is understood to be "the worth or value of property established by taxing

authorities on the basis of which the tax rate is applied. Commonly, however, it does not
represent the true or market value of the property."

"On January 25, 1991, plaintiff Rodolfo S. Guevarra instituted Civil Case No. 8855 for
sum of money against defendant Dominion Insurance Corporation. Plaintiff sought to
recover thereunder the sum of P156,473.90 which he claimed to have advanced in his
capacity as manager of defendant to satisfy certain claims filed by defendants clients.

The appellate court correctly ruled that even if the complaint filed with the RTC involves a
question of ownership, the MTC still has jurisdiction because the assessed value of the
whole lot as stated in Tax Declaration No. 09-0742 is P4,890.29 The MTC cannot be
deprived of jurisdiction over an ejectment case based merely on the assertion of
ownership over the litigated property, and the underlying reason for this rule is to prevent
any party from trifling with the summary nature of an ejectment suit. 30
The general rule is that dismissal of a case for lack of jurisdiction may be raised at any
stage of the proceedings since jurisdiction is conferred by law. The lack of jurisdiction
affects the very authority of the court to take cognizance of and to render judgment on
the action; otherwise, the inevitable consequence would make the courts decision a
"lawless" thing.31 Since the RTC has no jurisdiction over the complaint filed, all the
proceedings as well as the Decision of 17 June 2002 are void. The complaint should
perforce be dismissed.
WHEREFORE, we DENY the petition. We AFFIRM the Decision and Resolution of the
Court of Appeals in CA-G.R. CV No. 78215. SO ORDERED.
G.R. No. 129919
February 6, 2002
DOMINION INSURANCE CORPORATION vs. CA, RODOLFO S. GUEVARRA, and
FERNANDO AUSTRIA
The Case

30

The Facts
The facts, as found by the Court of Appeals, are as follows:

"In its traverse, defendant denied any liability to plaintiff and asserted a counterclaim for
P249,672.53, representing premiums that plaintiff allegedly failed to remit.
"On August 8, 1991, defendant filed a third-party complaint against Fernando Austria,
who, at the time relevant to the case, was its Regional Manager for Central Luzon area.
"In due time, third-party defendant Austria filed his answer.
"Thereafter the pre-trial conference was set on the following dates: October 18, 1991,
November 12, 1991, March 29, 1991, December 12, 1991, January 17, 1992, January
29, 1992, February 28, 1992, March 17, 1992 and April 6, 1992, in all of which dates no
pre-trial conference was held. The record shows that except for the settings on October
18, 1991, January 17, 1992 and March 17, 1992 which were cancelled at the instance of
defendant, third-party defendant and plaintiff, respectively, the rest were postponed upon
joint request of the parties.
"On May 22, 1992 the case was again called for pre-trial conference. Only plaintiff and
counsel were present. Despite due notice, defendant and counsel did not appear,
although a messenger, Roy Gamboa, submitted to the trial court a handwritten note sent
to him by defendants counsel which instructed him to request for postponement.
Plaintiffs counsel objected to the desired postponement and moved to have defendant
declared as in default. This was granted by the trial court in the following order:

"When this case was called for pre-trial this afternoon only plaintiff and his counsel Atty.
Romeo Maglalang appeared. When shown a note dated May 21, 1992 addressed to a
certain Roy who was requested to ask for postponement, Atty. Maglalang vigorously
objected to any postponement on the ground that the note is but a mere scrap of paper
and moved that the defendant corporation be declared as in default for its failure to
appear in court despite due notice.

"WHEREFORE, premises considered, judgment is hereby rendered ordering:

"1. The defendant Dominion Insurance Corporation to pay plaintiff the sum of
P156,473.90 representing the total amount advanced by plaintiff in the payment
of the claims of defendants clients;
"2. The defendant to pay plaintiff P10,000.00 as and by way of attorneys fees;

"Finding the verbal motion of plaintiffs counsel to be meritorious and considering that the
pre-trial conference has been repeatedly postponed on motion of the defendant
Corporation, the defendant Dominion Insurance Corporation is hereby declared (as) in
default and plaintiff is allowed to present his evidence on June 16, 1992 at 9:00 oclock in
the morning.

"3. The dismissal of the counter-claim of the defendant and the third-party
complaint;
"4. The defendant to pay the costs of suit."4

"The plaintiff and his counsel are notified of this order in open court. "SO ORDERED.

On December 14, 1992, Dominion appealed the decision to the Court of Appeals. 5

"Plaintiff presented his evidence on June 16, 1992. This was followed by a written offer of
documentary exhibits on July 8 and a supplemental offer of additional exhibits on July
13, 1992. The exhibits were admitted in evidence in an order dated July 17, 1992.

On July 19, 1996, the Court of Appeals promulgated a decision affirming that of the trial
court.6 On September 3, 1996, Dominion filed with the Court of Appeals a motion for
reconsideration.7 On July 16, 1997, the Court of Appeals denied the motion. 8

"On August 7, 1992 defendant corporation filed a MOTION TO LIFT ORDER OF

DEFAULT. It alleged therein that the failure of counsel to attend the pre-trial conference
was due to an unavoidable circumstance and that counsel had sent his representative
on that date to inform the trial court of his inability to appear. The Motion was vehemently
opposed by plaintiff.

Hence, this appeal.9

"On August 25, 1992 the trial court denied defendants motion for reasons, among
others, that it was neither verified nor supported by an affidavit of merit and that it further
failed to allege or specify the facts constituting his meritorious defense.
"On September 28, 1992 defendant moved for reconsideration of the aforesaid order. For
the first time counsel revealed to the trial court that the reason for his nonappearance at
the pre-trial conference was his illness. An Affidavit of Merit executed by its Executive
Vice-President purporting to explain its meritorious defense was attached to the said
Motion. Just the same, in an Order dated November 13, 1992, the trial court denied said
Motion.
"On November 18, 1992, the court a quo rendered judgment as follows:

31

The Issues
The issues raised are: (1) whether respondent Guevarra acted within his authority as
agent for petitioner, and (2) whether respondent Guevarra is entitled to reimbursement of
amounts he paid out of his personal money in settling the claims of several insured.
The Court's Ruling
The petition is without merit.
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.10 The basis for agency is representation.11 On the part of the principal, there must
be an actual intention to appoint12 or an intention naturally inferrable from his words or
actions;13 and on the part of the agent, there must be an intention to accept the
appointment and act on it,14 and in the absence of such intent, there is generally no
agency.15

A perusal of the Special Power of Attorney16 would show that petitioner (represented by
third-party defendant Austria) and respondent Guevarra intended to enter into a principalagent relationship. Despite the word "special" in the title of the document, the contents
reveal that what was constituted was actually a general agency. The terms of the
agreement read:

Article 1878, Civil Code, enumerates the instances when a special power of attorney is
required. The pertinent portion that applies to this case provides that:
"Article 1878. Special powers of attorney are necessary in the following cases:
"(1) To make such payments as are not usually considered as acts of administration;

"That we, FIRST CONTINENTAL ASSURANCE COMPANY, INC., a corporation duly

organized and existing under and by virtue of the laws of the Republic of the Philippines,
xxx represented by the undersigned as Regional Manager, xxx do hereby appoint RSG
Guevarra Insurance Services represented by Mr. Rodolfo Guevarra xxx to be our
Agency Manager in San Fdo., for our place and stead, to do and perform the following
acts and things:
17

"1. To conduct, sign, manager (sic), carry on and transact Bonding and Insurance
business as usually pertain to a Agency Office, or FIRE, MARINE, MOTOR CAR,
PERSONAL ACCIDENT, and BONDING with the right, upon our prior written
consent, to appoint agents and sub-agents.
"2. To accept, underwrite and subscribed (sic) cover notes or Policies of
Insurance and Bonds for and on our behalf.
"3. To demand, sue, for (sic) collect, deposit, enforce payment, deliver and
transfer for and receive and give effectual receipts and discharge for all money to
which the FIRST CONTINENTAL ASSURANCE COMPANY, INC.,18 may
hereafter become due, owing payable or transferable to said Corporation by
reason of or in connection with the above-mentioned appointment.

"x x x

xxx

xxx

"(15) Any other act of strict dominion."

The payment of claims is not an act of administration. The settlement of claims is not
included among the acts enumerated in the Special Power of Attorney, neither is it of a
character similar to the acts enumerated therein. A special power of attorney is required
before respondent Guevarra could settle the insurance claims of the insured.
Respondent Guevarras authority to settle claims is embodied in the Memorandum of
Management Agreement23dated February 18, 1987 which enumerates the scope of
respondent Guevarras duties and responsibilities as agency manager for San Fernando,
Pampanga, as follows:
"x x x

xxx

xxx

"1. You are hereby given authority to settle and dispose of all motor car claims in the
amount of P5,000.00 with prior approval of the Regional Office.
"2. Full authority is given you on TPPI claims settlement.

"4. To receive notices, summons, and legal processes for and in behalf of the
FIRST CONTINENTAL ASSURANCE COMPANY, INC., in connection with
actions and all legal proceedings against the said Corporation."19 [Emphasis
supplied]
The agency comprises all the business of the principal, 20 but, couched in general terms, it
is limited only to acts of administration.21
A general power permits the agent to do all acts for which the law does not require a
special power.22 Thus, the acts enumerated in or similar to those enumerated in the
Special Power of Attorney do not require a special power of attorney.

32

"xxx

xxx

x x x "24

In settling the claims mentioned above, respondent Guevarras authority is further limited
by the written standard authority to pay,25 which states that the payment shall come from
respondent Guevarras revolving fund or collection. The authority to pay is worded as
follows:
"This is to authorize you to withdraw from your revolving fund/collection the amount of
PESOS __________________ (P ) representing the payment on the

_________________ claim of assured _______________ under Policy No. ______ in

that accident of ___________ at ____________.
"It is further expected, release papers will be signed and authorized by the concerned
and attached to the corresponding claim folder after effecting payment of the claim.

In this case, when the risk insured against occurred, petitioners liability as insurer
arose. This obligation was extinguished when respondent Guevarra paid the claims and
obtained Release of Claim Loss and Subrogation Receipts from the insured who were
paid.
1wphi1

Thus, to the extent that the obligation of the petitioner has been extinguished,
respondent Guevarra may demand for reimbursement from his principal. To rule
otherwise would result in unjust enrichment of petitioner.

"(sgd.) FERNANDO C. AUSTRIA

Regional Manager"26 [Emphasis supplied]
The instruction of petitioner as the principal could not be any clearer. Respondent
Guevarra was authorized to pay the claim of the insured, but the payment shall come
from the revolving fund or collection in his possession.
1wphi1

Having deviated from the instructions of the principal, the expenses that respondent
Guevarra incurred in the settlement of the claims of the insured may not be reimbursed
from petitioner Dominion. This conclusion is in accord with Article 1918, Civil Code,
which states that:
"The principal is not liable for the expenses incurred by the agent in the following cases:
"(1) If the agent acted in contravention of the principals instructions, unless the latter
should wish to avail himself of the benefits derived from the contract;

The extent to which petitioner was benefited by the settlement of the insurance claims
could best be proven by the Release of Claim Loss and Subrogation Receipts 27 which
were attached to the original complaint as Annexes C-2, D-1, E-1, F-1, G-1, H-1, I-1 and
J-l, in the total amount of P116,276.95.
However, the amount of the revolving fund/collection that was then in the possession of
respondent Guevarra as reflected in the statement of account dated July 11, 1990 would
be deducted from the above amount.
The outstanding balance and the production/remittance for the period corresponding to
the claims was P3,604.84. Deducting this from P116,276.95, we get P112,672.11. This is
the amount that may be reimbursed to respondent Guevarra.
The Fallo

"xxx

xxx

xxx"

However, while the law on agency prohibits respondent Guevarra from obtaining
reimbursement, his right to recover may still be justified under the general law on
obligations and contracts.

IN VIEW WHEREOF, we DENY the Petition. However, we MODIFY the decision of the
Court of Appeals28 and that of the Regional Trial Court, Branch 44, San Fernando,
Pampanga,29 in that petitioner is ordered to pay respondent Guevarra the amount of
P112,672.11 representing the total amount advanced by the latter in the payment of the
claims of petitioners clients. No costs in this instance. SO ORDERED.

Article 1236, second paragraph, Civil Code, provides:

"Whoever pays for another may demand from the debtor what he has paid, except that if
he paid without the knowledge or against the will of the debtor, he can recover only
insofar as the payment has been beneficial to the debtor."

33

G.R. No. 179625

February 24, 2014
NICANORA G. BUCTON (deceased), substituted by REQUILDA B. YRAY vs. RURAL
BANK OF EL SALVADOR, INC., MISAMIS ORIENTAL, and REYNALDO CUYONG
(Respondents) vs. ERLINDA CONCEPCION AND HER HUSBAND AND AGNES
BUCTON LUGOD (third party defendants)

A mortgage executed by an authorized agent who signed in his own name without
indicating that he acted for and on behalf of his principal binds only the agent and not the
principal.

This prompted respondent bank to file a Third-Party Complaint against spouses

Concepcion and Agnes Bucton Lugod (Lugod), the daughter of petitioner. Respondent
bank claimed that it would not have granted the loan and accepted the mortgage were it
not for the assurance of Concepcion and Lugod that the SPA was valid. Thus,
respondent bank prayed that in case it be adjudged liable, it should be reimbursed by
third-party defendants.
22

23

This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the
August 17, 2005 Decision and the June 7, 2007 Resolution of the Court of Appeals (CA)
in CA-G.R. CV No. 60841.
1

24

On January 30, 1992, spouses Concepcion were declared in default for failing to file a
responsive pleading.

Factual Antecedents

25

On April 29, 1988, petitioner Nicanora G. Bucton filed with the Regional Trial Court (RTC)
of Cagayan de Oro a case for Annulment of Mortgage, Foreclosure, and Special Power
of Attorney (SPA) against Erlinda Concepcion (Concepcion) and respondents Rural Bank
of El Salvador, Misamis Oriental, and Sheriff Reynaldo Cuyong.
4

During the trial, petitioner testified that a representative of respondent bank went to her
house to inform her that the loan secured by her house and lot was long overdue. Since
she did not mortgage any of her properties nor did she obtain a loan from respondent
bank, she decided to go to respondent bank on June 22, 1987 to inquire about the
matter. It was only then that she discovered that her house and lot was mortgaged by
virtue of a forged SPA. She insisted that her signature and her husbands signature on
the SPA were forged and that ever since she got married, she no longer used her
maiden name, Nicanora Gabar, in signing documents. Petitioner also denied appearing
before the notary public, who notarized the SPA. She also testified that the property
referred to in the SPA, TCT No. 3838, is a vacant lot and that the house, which was
mortgaged and foreclosed, is covered by a different title, TCT No. 3839.
26

27

Petitioner alleged that she is the owner of a parcel of land, covered by Transfer
Certificate of Title (TCT) No. T-3838, located in Cagayan de Oro City; that on June 6,
1982, Concepcion borrowed the title on the pretext that she was going to show it to an
interested buyer; that Concepcion obtained a loan in the amount of P30,000.00 from
respondent bank; that as security for the loan, Concepcion mortgaged petitioners house
and lot to respondent bank using a SPA allegedly executed by petitioner in favor of
Concepcion; that Concepcion failed to pay the loan; that petitioners house and lot
were foreclosed by respondent sheriff without a Notice of Extra-Judicial Foreclosure or
Notice of Auction Sale; and that petitioners house and lot were sold in an auction sale
in favor of respondent bank.
6

10

28

29

30

31

32

11

12

13

To support her claim of forgery, petitioner presented Emma Nagac who testified that
when she was at Concepcions boutique, she was asked by the latter to sign as a
witness to the SPA; that when she signed the SPA, the signatures of petitioner and her
husband had already been affixed; and that Lugod instructed her not to tell petitioner
about the SPA.
33

34

Respondent bank filed an Answer interposing lack of cause of action as a defense. It

denied the allegation of petitioner that the SPA was forged and averred that on June 22,
1987, petitioner went to the bank and promised to settle the loan of Concepcion before
September 30, 1987. As to the alleged irregularities in the foreclosure proceedings,
respondent bank asserted that it complied with the requirements of the law in foreclosing
the house and lot. By way of cross-claim, respondent bank prayed that in the event of
an adverse judgment against it, Concepcion, its co-defendant, be ordered to indemnify it
for all damages.
14

15

35

16

17

18

19

However, since summons could not be served upon Concepcion, petitioner moved to
drop her as a defendant, which the RTC granted in its Order dated October 19, 1990.
20

21

Respondent bank, on the other hand, presented the testimonies of its employees and
respondent sheriff. Based on their testimonies, it appears that on June 8, 1982,
Concepcion applied for a loan for her coconut production business in the amount
of P40,000.00 but only the amount of P30,000.00 was approved; that she offered as
collateral petitioners house and lot using the SPA; and that the proceeds of the loan
were released to Concepcion and Lugod on June 11, 1982.
36

37

38

39

40

Edwin Igloria, the bank appraiser, further testified that Concepcion executed a Real
Estate Mortgage over two properties, one registered in the name of petitioner and the
other under the name of a certain Milagros Flores. He said that he inspected petitioners
41

42

34

property; that there were several houses in the compound; and although he was
certain that the house offered as collateral was located on the property covered by TCT
No. 3838, he could not explain why the house that was foreclosed is located on a lot
covered by another title, not included in the Real Estate Mortgage.
43

44

To indemnify or reimburse [respondent bank] all sums of money plus interests thereon or
damages that [respondent bank] has in this case been forced to pay, disburse or deliver
to [petitioner] including the costs. SO ORDERED.
52

45

Ruling of the Court of Appeals

Ruling of the Regional Trial Court
On February 23, 1998, the RTC issued a Decision sustaining the claim of petitioner that
the SPA was forged as the signatures appearing on the SPA are different from the
genuine signatures presented by petitioner. The RTC opined that the respondent bank
should have conducted a thorough inquiry on the authenticity of the SPA considering that
petitioners residence certificate was not indicated in the acknowledgement of the
SPA. Thus, the RTC decreed:
46

47

Dissatisfied, respondent bank elevated the case to the CA arguing that the SPA was not
forged and that being a notarized document, it enjoys the presumption of
regularity. Petitioner, on the other hand, maintained that the signatures were
forged and that she cannot be made liable as both the Promissory Note and the Real
Estate Mortgage, which were dated June 11, 1982, were signed by Concepcion in her
own personal capacity.
53

54

55

56

57

48

WHEREFORE, the court hereby declares null and void or annuls the following:
1. The special power of attorney which was purportedly executed by [petitioner];
2. The real estate mortgage x x x

58

3. The sheriffs sale of Lot No. 2078-B-1-E, and the certificate of title issued in favor
of the Rural Bank of El Salavador [by] virtue thereof, as well as the sheriffs sale of
the two[-]story house described in the real estate mortgage.
4. The certificate of title in the name of the Rural Bank of El Salvador if any, issued
[by] virtue of the sheriffs sale.
The court hereby also orders [respondent] bank to pay [petitioner] attorneys fees
of P20,000 and moral damages of P20,000 as well as the costs of the case. SO
ORDERED.
49

On reconsideration, the RTC in its May 8, 1998 Resolution rendered judgment on the
Third-Party Complaint filed by respondent bank, the dispositive portion of which reads:
50

59

WHEREFORE, the above premises considered, the Decision and the Resolution of the
Regional Trial Court (RTC), 10th Judicial Region, Br. 19 of Cagayan de Oro City in Civil
Case No. 88-113 is hereby REVERSED and SET ASIDE. The Second Amended
Complaint of Nicanora Bucton is DISMISSED. Accordingly, the following are declared
VALID:
1. The Special Power of Attorney of Nicanora Gabar in favor of Erlinda Concepcion,
dated June 7, 1982;

51

WHEREFORE, judgment is hereby rendered under the third-party complaint and against
third-party defendants Erlinda Concepcion and her husband:

35

On August 17, 2005, the CA reversed the findings of the RTC. The CA found no cogent
reason to invalidate the SPA, the Real Estate Mortgage, and Foreclosure Sale as it was
not convinced that the SPA was forged. The CA declared that although the Promissory
Note and the Real Estate Mortgage did not indicate that Concepcion was signing for and
on behalf of her principal, petitioner is estopped from denying liability since it was her
negligence in handing over her title to Concepcion that caused the loss. The CA
emphasized that under the Principle of Equitable Estoppel, where one or two innocent
persons must suffer a loss, he who by his conduct made the loss possible must bear
it. Thus:

2. The Real Estate Mortgage, the foreclosure of the same, and the foreclosure sale
to the Rural Bank of El Salvador, Misamis Oriental; and
3. The certificate of title issued to the Rural Bank of El Salavador, Misamis Oriental
as a consequence of the foreclosure sale.

Costs against [petitioner]. SO ORDERED.

60

Petitioner moved for reconsideration but the same was denied by the CA in its June 7,
2007 Resolution.
61

62

Issues
Hence, this recourse by petitioner raising the following issues:

FOURTH
WHETHER X X X THE [CA] WAS RIGHT WHEN IT FOUND THAT IT WAS
PETITIONERS NEGLIGENCE WHICH MADE THE LOSS POSSIBLE, DESPITE [THE
FACT] THAT SHE HAS NO PART IN [THE] SUBJECT LOAN/MORTGAGE, THE BANKS
[FAILURE] TO CONDUCT CAREFUL EXAMINATION OF APPLICANTS TITLE AS
WELL AS PHYSICAL INVESTIGATION OF THE LAND OFFERED AS SECURITY, AND
TO INQUIRE AND DISCOVER UPON ITS OWN PERIL THE AGENTS AUTHORITY,
ALSO ITS INORDINATE HASTE IN THE PROCESSING, EVALUATION AND
APPROVAL OF THE LOAN.

FIRST
X X X WHETHER X X X THE [CA] WAS RIGHT IN DECLARING THE PETITIONER
LIABLE ON THE LITIGATED LOAN/MORTGAGE WHEN (i) SHE DID NOT EXECUTE
EITHER IN PERSON OR BY ATTORNEY-IN-FACT SUBJECT MORTGAGE; (ii) IT WAS
EXECUTED BY CONCEPCION IN HER PERSONAL CAPACITY AS MORTGAGOR,
AND (iii) THE LOAN SECURED BY THE MORTGAGE WAS CONCEPCIONS
EXCLUSIVE LOAN FOR HER OWN COCONUT PRODUCTION

FIFTH
WHETHER X X X THE [CA] WAS RIGHT WHEN IT DISREGARDED THE FALSE
TESTIMONY OF THE [RESPONDENT] BANKS EMPLOYEE, [WHEN HE DECLARED]
THAT HE CONDUCTED ACTUAL INSPECTION OF THE MORTGAGED PROPERTY
AND INVESTIGATION WHERE HE ALLEGEDLY VERIFIED THE QUESTIONED SPA.

SECOND
X X X WHETHER X X X UNDER ARTICLE 1878 (NEW CIVIL CODE) THE [CA] WAS
RIGHT IN MAKING PETITIONER A SURETY PRIMARILY ANSWERABLE FOR
CONCEPCIONS PERSONAL LOAN, IN THE ABSENCE OF THE REQUIRED [SPA]

SIXTH
WHETHER THE [CA] WAS RIGHT WHEN IT DISREGARDED ESTABLISHED FACTS
AND CIRCUMSTANCES PROVING THAT THE [SPA] IS A FORGED DOCUMENT
AND/OR INFECTED BY INFIRMITIES DIVESTING IT OF THE PRESUMPTION OF
REGULARITY CONFERRED BY LAW ON NOTARIZED DEEDS, AND EVEN IF VALID,
THE POWER WAS NOT EXERCISED BY CONCEPCION.
63

THIRD
WHETHER X X X THE [CA] WAS RIGHT WHEN IT RULED THAT PETITIONERS
DECLARATIONS ARE SELF-SERVING TO JUSTIFY ITS REVERSAL OF THE TRIAL
COURTS JUDGMENT, IN THE FACE OF THE RESPONDENTS DOCUMENTARY
EVIDENCES X X X, WHICH INCONTROVERTIBLY PROVED THAT PETITIONER HAS
ABSOLUTELY NO PARTICIPATION OR LIABILITY ON THE LITIGATED
LOAN/MORTGAGE

Petitioners Arguments
Petitioner maintains that the signatures in the SPA were forged and that she could not
be held liable for the loan as it was obtained by Concepcion in her own personal
capacity, not as an attorney-in-fact of petitioner. She likewise denies that she was
negligent and that her negligence caused the damage. Instead, she puts the blame on
respondent bank as it failed to carefully examine the title and thoroughly inspect the
property. Had it done so, it would have discovered that the house and lot mortgaged by
Concepcion are covered by two separate titles. Petitioner further claims that respondent
sheriff failed to show that he complied with the requirements of notice and publication in
foreclosing her house and lot.
64

65

66

67

68

69

Respondent banks Arguments

36

Respondent bank, on the other hand, relies on the presumption of regularity of the
notarized SPA. It insists that it was not negligent as it inspected the property before it
approved the loan, unlike petitioner who was negligent in entrusting her title to
Concepcion. As to the foreclosure proceedings, respondent bank contends that under
the Rural Bank Act, all loans whose principal is below P100,000.00 are exempt from
publication. Hence, the posting of the Notice of Foreclosure in the places defined by the
rules was sufficient. Besides, respondent sheriff is presumed to have regularly
performed his work.
70

71

72

In Far East Bank and Trust Company, the mother executed an SPA authorizing her
daughter to contract a loan from the bank and to mortgage her properties. The mortgage,
however, was signed by the daughter and her husband as mortgagors in their individual
capacities, without stating that the daughter was executing the mortgage for and on
behalf of her mother.

73

74

75

Our Ruling
The Petition is meritorious.
The Real Estate Mortgage was entered into by Concepcion in her own personal
capacity.
As early as the case of Philippine Sugar Estates Development Co. v. Poizat, we already
ruled that "in order to bind the principal by a deed executed by an agent, the deed must
upon its face purport to be made, signed and sealed in the name of the principal." In
other words, the mere fact that the agent was authorized to mortgage the property is not
sufficient to bind the principal, unless the deed was executed and signed by the agent for
and on behalf of his principal. This ruling was adhered to and reiterated with consistency
in the cases of Rural Bank of Bombon (Camarines Sur), Inc. v. Court of Appeals, Gozun
v. Mercado, and Far East Bank and Trust Company (Now Bank of the Philippine Island)
v. Cayetano.
76

77

78

79

80

In Philippine Sugar Estates Development Co., the wife authorized her husband to obtain
a loan and to secure it with mortgage on her property. Unfortunately, although the real
estate mortgage stated that it was executed by the husband in his capacity as attorneyin-fact of his wife, the husband signed the contract in his own name without indicating
that he also signed it as the attorney-in-fact of his wife.

Similarly, in this case, the authorized agent failed to indicate in the mortgage that she
was acting for and on behalf of her principal. The Real Estate Mortgage, explicitly shows
on its face, that it was signed by Concepcion in her own name and in her own personal
capacity. In fact, there is nothing in the document to show that she was acting or signing
as an agent of petitioner. Thus, consistent with the law on agency and established
jurisprudence, petitioner cannot be bound by the acts of Concepcion.
In light of the foregoing, there is no need to delve on the issues of forgery of the SPA and
the nullity of the foreclosure sale. For even if the SPA was valid, the Real Estate
Mortgage would still not bind petitioner as it was signed by Concepcion in her personal
capacity and not as an agent of petitioner. Simply put, the Real Estate Mortgage is void
and unenforceable against petitioner.
Respondent bank was negligent.
At this point, we find it significant to mention that respondent bank has no one to blame
but itself. Not only did it act with undue haste when it granted and released the loan in
less than three days, it also acted negligently in preparing the Real Estate Mortgage as it
failed to indicate that Concepcion was signing it for and on behalf of petitioner. We need
not belabor that the words "as attorney-in-fact of," "as agent of," or "for and on behalf of,"
are vital in order for the principal to be bound by the acts of his agent. Without these
words, any mortgage, although signed by the agent, cannot bind the principal as it is
considered to have been signed by the agent in his personal capacity.
1wphi1

Respondent bank is liable to pay petitioner attorneys fees, and the costs of the suit.
In Rural Bank of Bombon, the agent contracted a loan from the bank and executed a real
estate mortgage. However, he did not indicate that he was acting on behalf of his
principal.
In Gozun, the agent obtained a cash advance but signed the receipt in her name alone,
without any indication that she was acting for and on behalf of her principal.

37

Considering that petitioner was compelled to litigate or to incur expenses to protect her
interest, the RTC was right when it ruled that respondent bank is liable to pay petitioner
attorneys fees in the amount of P20,000.00. However, we are not convinced that
petitioner is entitled to an award of moral damages as it was not satisfactorily shown that
respondent bank acted in bad faith or with malice. Neither was it proven that respondent
banks acts were the proximate cause of petitioners wounded feelings. On the contrary,
81

we note that petitioner is not entirely free of blame considering her negligence in
entrusting her title to Concepcion. In any case, the RTC did not fully explain why
petitioner is entitled to such award.
Concepcion is liable to pay respondent bank her unpaid obligation and reimburse it for
all damages, attorneys fees and costs of suit.
Concepcion, on the other hand, is liable to pay respondent bank her unpaid obligation
under the Promissory Note dated June 11, 1982, with interest. As we have said,
Concepcion signed the Promissory Note in her own personal capacity; thus, she cannot
escape liability. She is also liable to reimburse respondent bank for all damages,
attorneys' fees, and costs the latter is adjudged to pay petitioner in this case.
WHEREFORE, the Petition is hereby GRANTED. The assailed August 17, 2005 Decision
and the June 7, 2007 Resolution of the Court of Appeals in CA-G.R. CV No. 60841 are
hereby REVERSED and SET ASIDE.
The February 23, 1998 Decision of the Regional Trial Court of Cagayan de Oro, Branch
19, in Civil Case No. 88-113 is hereby REINSTATED, insofar as it (a) annuls the Real

38

Estate Mortgage dated June 11, 1982, the Sheriffs Sale of petitioner Nicanora Bucton's
house and lot and the Transfer Certificate of Title issued in the name of respondent Rural
Bank of El Salvador, Misamis Oriental; and (b) orders respondent bank to pay petitioner
attorney's fees in the amount of P20,000.00 and costs of suit with MODIFICATION that
the award of moral damages in the amount of P20,000.00 is deleted for lack of basis.
Likewise, the May 8, 1998 Resolution of the Regional Trial Court of Cagayan de Oro,
Branch 19, in Civil Case No. 88-113 ordering the Third-Party Defendants, Erlinda
Concepcion and her husband, to indemnify or reimburse respondent bank damages,
attorneys' fees, and costs the latter is adjudged to pay petitioner, is hereby
REINSTATED.
Finally, Third-Party Defendants, Erlinda Concepcion and her husbahd, are hereby
ordered to pay respondent bank the unpaid obligation under the Promissory Note dated
June 11, 1982 with interest. SO ORDERED.