EN BANC Fourth.
The court erred in holding that "the defendants having in good faith purchased the
G.R. No. L-5676 March 2, 1910
LIM TIU, LIM SUNTIAN and LIM KAENG JO, operating under the name of "Lim Juco
y Compañia,"plaintiffs-appellants,
vs.
RUIZ Y REMENTERIA, a concern operating under the name of "La Isla de
Cuba," defendant-appellee.
Thos. D. Aitken, for appellants.
Sanz & Opisso, for appellee.
JOHNSON, J.:
On the 6th day of July, 1908, the plaintiffs commenced an action against the defendants in
the Court of First Instance of the city of Manila, alleging that upon the 26th day of May, 1908,
the 5th day of June, 1908, and the 12th day of June, 1908, they sold to the defendant certain
merchandise, amounting to the sum of P1,043.57; that said amount was due and unpaid, and
prayed judgment for said sum (P1,043.57) with interest and cost.
To this petition the defendants filed a general denial.
After hearing the evidence, the lower court, found as a fact that "the defendants purchased
the merchandise in question from Domingo Tim Bun Liu and paid the said Domingo Tim Bun
Liu for the merchandise."
The lower court further said: "The conclusions are that the defendants have paid for the
merchandise described in the complaint, and that they are not liable for payment for the value
thereof," and rendered judgment in favor of the defendant and against the plaintiffs and
dismissed said complaint, with costs against the plaintiffs.
From this decision of the lower court the plaintiffs appealed and made the following
assignments of error:
First. The lower court erred in holding as follows: "It also clearly appears that the defendants
purchased the merchandise in question from Domingo Tim Bun Liu and paid Domingo Tim Bun
Liu for the merchandise."
Second. The lower court erred in holding that the plaintiffs never notified the defendants, in
any way, that their employee, Domingo Tim Bun Liu, could sell their merchandise, but could
not receive payment for it, and that the defendants never had notice that their business
transactions with Domingo Tim Bun Liu were by him as agent or employee of the plaintiffs.
Third. The court erred in holding that the plaintiffs accepted payment through Domingo Tim
Bun Liu.
goods upon an agreement to pay for them in merchandise of their own, under an agreement
with the person from whom they received the goods, to so pay for them, could not be held
responsible for the failure of the plaintiffs' employee to deliver to his employers, that which
was received in payment."
Fifth. The court erred in admitting as evidence Exhibit D (1), Exhibit D (2), and Exhibit D (3).
Sixth. The court erred in dismissing the plaintiffs' complaint and in deciding in favor of the
defendants.
Upon these assignments of error the plaintiffs and appellants present three questions:
First. Did the defendants purchase directly from the plaintiffs?
Second. If not, did the defendants have sufficient notice of Domingo Tim Bun Liu's relation
with the plaintiffs to place them on their guard?
Third. If the last is answered affirmatively, then was the payment by the defendants to
Domingo Tim Bun Liu, in something other than cash, binding on the plaintiffs?
With reference to the first question, "Did the defendants purchase directly from the plaintiffs?"
there is much conflict in the testimony. The lower court answered this question in the
negative. It appears that the defendants had been buying merchandise from Domingo Tim
Bun Liu for a period covering several months, and paying for said merchandise in exchange,
and from time to time settling their accounts by the defendants paying to the said Domingo
Tim Bun Liu the difference, if any, in his favor, and by Domingo paying to the defendants the
difference of the accounts, if there was found to be due them any balance on such
settlements. The defendant claim that they had no knowledge or information that the
merchandise which they were receiving from Domingo Tim Bun Liu was the merchandise of
the plaintiffs. This contention of the defendants is supported by the fact that during all of the
period during which they were doing business with Domingo, their which they were kept with
Domingo Tim Bun Liu, and not with the plaintiffs. The plaintiffs contend that for certain of the
merchandise sold by Domingo Tim Bun Liu to the defendants Domingo presented a bill in their
favor. In this proof the plaintiffs attempt to establish the fact that the defendants knew that
they were dealing with them and not with Domingo Tim Bun Liu.
In answer to this contention, the defendants contend that the only bill Domingo presented to
them for merchandise belonging to the plaintiffs was for the purpose of showing that he,
Domingo, was charging the defendants for the merchandise in question the same price which
he had been obliged to pay to the plaintiffs.
The fact is not disputed that Domingo Tim Bun Liu purchased all or nearly all of the goods
which he sold to the defendants, from the plaintiffs. We think a fair preponderance of the
evidence shows that the defendants, in their dealings with Domingo Tim Bun Liu, believed that
they were dealing with him and not with the plaintiffs. There is no proof that Domingo ever
notified the defendants that he was acting as the agent of the plaintiffs. Neither does the
proof show that the plaintiffs ever notified the defendants that Domingo Tim Bun Liu was
acting as their agent in selling the merchandise in question. It is not disputed that the
1
defendants have paid to Domingo Tim Bun Liu, in full, for all the merchandise which they
purchased of him.

It being established by a preponderance of the evidence that Domingo Tim Bun Liu acted in
his own name selling the merchandise to the defendants, and that the defendants fully
believed that they were dealing with the said Domingo Tim Bun Liu, without any knowledge of
the fact that he was the agent of the plaintiffs, and having paid him in full for the merchandise
purchased, they are not liable to the plaintiffs, for said merchandise, even though it be
admitted that Domingo Tim Bun Liu was in fact the agent of the plaintiffs in selling the
merchandise in question. This is true whether the transaction is covered by the provisions of
the Civil Code (art. 1717) or by the provisions of the Commercial Code (art. 246). Said article
1717 provides:

When an agent acts in his own name the principal shall have no action against the
persons with whom the agent has contracted, nor the said persons against the
principal.

Said article 246 provides that: "When an agent transacts business in his own name, it shall not
be necessary for him to state who is the principal, and he shall be directly liable, as if the
business were for his own account, to the persons with whom he transacts the same, said
persons not having any right of action against the principal, nor the latter against the former,
the liabilities of the principal and the agent to each other reserved."

(Castle Brothers, Wolf & Sons vs. Go Juno, 7 Phil. Rep., 144; Pastell & Regordosa vs. Hollman
& Co., 2 Phil. Rep., 235; 11 Manresa, 470; Munroe vs. Kearney, 17 Ohio, 572.)

Having reached the above conclusions, we deem it unnecessary to further discuss the
assignments of error and the questions presented by the appellant.

In view of the foregoing reasons, the judgment of the lower court should be and is hereby
affirmed. So ordered.

Arellano, C.J., Torres, Mapa, Carson and Moreland, JJ., concur.

2
 EN BANC may concern," (Section 330, Revised Administrative Code) for instance the owners of property
unlawfully sold by him on execution.3
G.R. No. L-10919 February 28, 1958
The complaint should not have been dismissed, appellant argues, since the court could have
included the Sheriff as party defendant, in line with Rule 3, section 11 of the Rules of Court.
LORETO LORCA, plaintiff-appellant,
However, what should have been done was not "inclusion" as plaintiff asked, nor "exclusion"
vs.
under said section 11. It was "substitution" of the deputy by the Sheriff. Anyway, the word
JOSE S. DINEROS, defendant-appellee.
"may" in said see. 11 implies direction of the court; and we are shown no reasons indicating
abuse thereof.
Pedro B. Puya for appellant.
Manuel F. Zamora for appellee.
This is not the first time an action is dismissed for the reason that the agent — instead of his
principal — was made the party defendant. (See Macias & Co. vs. Warner Barnes, 43 Phil.,
BENGZON, J.: 155; Banque Generate Belge vs.Walter Bull & Co., 84 Phil., 164, 47 Off. Gaz., 138.)

This action for damages against Deputy Sheriff Jose S. Dineros was dismissed by Hon. Judgment affirmed, with costs against appellant.
Pantaleon Pelayo, Judge of Iloilo, on the ground that it is the Sheriff who is responsible, if at
all — not this deputy.
Paras, C.J., Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes,
J.B.L., Endencia and Felix, JJ., concur.
Such decision resulted from a motion for judgment on the pleadings. The facts are short and
simple:

Pursuant to a writ of execution issued in Civil Case No. 1062 entitled "Rosario Suero vs. Jose
Morata" Jose S. Dineros as Deputy Sheriff and in the name of the Sheriff sold at public auction
to Jose Bermejo and Rosario Suero the property attached therein, disregarding the third-party
claim of Loreto Lorca (herein Plaintiff) who asserted ownership over said property. This suit for
damages is the result of said auction sale. Defendant, in his answer, denied liability, pointing
out, that he had merely acted for and on behalf of Provincial Sheriff, Cipriano Cabaluna.

The appellant insists here that Dineros was responsible in view of sec. 334 of the Revised
Administrative Code and sec. 15, Rule 39, Rules of Court, which provides as follows:

SEC. 334 — Right of Bonded Officer to require Bond from Deputy or assistant. — A
sheriff or other accountable official may require any of his deputies or assistants,
not bonded in the fidelity fund, to give an adequate personal bond as security
against loss by reason of any wrong doing on the part of such deputy or assistant.
The taking of such security shall in no wise impair the independent civil liability of
any of the parties.

. . . and in case the sheriff or attaching officer is sued for damages as a result of the
attachment. . . .

In the light of section 330 of the Administrative Code we think the above provisions apply
where the deputy acts in his own name or is guilty of active malfeasance1 or possibly where
he exceeds the limits of his agency. In this case it is clear from the certificate of sale attached
to the complaint as Annex C that Dineros acted all the time in the name of the Ex-Officio
Provincial Sheriff of Iloilo; and no allegations of misfeasance are made. The Sheriff is liable to
third persons on the acts of his deputy,2 in the same manner that the principal is responsible
for the acts of his agent, that is why he is required to post a bond for "the benefit of whom it

3
 EN BANC
G.R. No. L-13471 January 12, 1920
VICENTE SY-JUCO and CIPRIANA VIARDO, plaintiffs-appellants,
vs.
SANTIAGO V. SY-JUCO, defendant-appellant.
Sumulong and Estrada for plaintiffs and appellants.
Delgado and Delgado for defendant and appellant.
AVANCEÑA, J.:
In 1902 the defendant was appointed by the plaintiffs administrator of their property and
acted as such until June 30, 1916, when his authority was cancelled. The plaintiffs are
defendant's father and mother who allege that during his administration the defendant
acquired the property claimed in the complaint in his capacity as plaintiffs' administrator with
their money and for their benefit. After hearing the case the trial court rendered his decision,
the dispositive part of which is the following:
Wherefore, the court give judgment for the plaintiffs and orders:
1. That the defendant return to the plaintiffs the launch Malabon, in question, and
execute all the necessary documents and instruments for such delivery and the
registration in the records of the Custom House of said launch as plaintiffs' property;
2. That the defendant return to the plaintiffs the casco No. 2584, or pay to them the
value thereof which has been fixed at the sum of P3,000, and should the return of
said casco be made, execute all the necessary instruments and documents for its
registration in plaintiffs' name at the Custom House; and
3. That the defendant return to the plaintiffs the automobile No. 2060 and execute
the necessary instruments and documents for its registration at the Bureau of Public
Works. And judgment is hereby given for the defendant absolving him from the
complaint so far concerns:
1. The rendition of accounts of his administration of plaintiffs property;
2. The return of the casco No. 2545;
3. The return of the typewriting machine;
4. The return of the house occupied by the defendant; and
5. The return of the price of the piano in question.
Both parties appealed from this judgment.
In this instance defendant assigns three errors alleged to have been committed by the lower
court in connection with the three items of the dispositive part of the judgment unfavorable to
him. We are of the opinion that the evidence sufficiently justifies the judgment against the
defendant.
Regarding the launch Malabon, it appears that in July, 1914, the defendant bought it in his
own name from the Pacific Commercial Co., and afterwards registered it at the Custom House.
But his does not necessarily show that the defendant bought it for himself and with his own
money, as he claims. This transaction was within the agency which he had received from the
plaintiffs. The fact that he has acted in his own name may be only, as we believe it was, a
violation of the agency on his part. As the plaintiffs' counsel truly say, the question is not in
whose favor the document of sale of the launch is executed nor in whose name same was
registered, but with whose money was said launch bought. The plaintiffs' testimony that it was
bought with their money and for them is supported by the fact that, immediately after its
purchase, the launch had to be repaired at their expense, although said expense was collected
from the defendant. I the launch was not bought for the plaintiffs and with their money, it is
not explained why they had to pay for its repairs.
The defendant invokes the decision of this Court in the case of Martinez vs. Martinez (1 Phil.
Rep., 647), which we do not believe is applicable to the present case. In said case, Martinez,
Jr., bought a vessel in his own name and in his name registered it at the Custom House. This
court then said that although the funds with which the vessel was bought belonged to
Martinez Sr., Martinez Jr. is its sole and exclusive owner. But in said case the relation of
principal and agent, which exists between the plaintiffs and the defendant in the present case,
did not exist between Martinez, Sr., and Martinez, Jr. By this agency the plaintiffs herein
clothed the defendant with their representation in order to purchase the launch in question.
However, the defendant acted without this representation and bought the launch in his own
name thereby violating the agency. If the result of this transaction should be that the
defendant has acquired for himself the ownership of the launch, it would be equivalent to
sanctioning this violation and accepting its consequences. But not only must the consequences
of the violation of this agency not be accepted, but the effects of the agency itself must be
sought. If the defendant contracted the obligation to but the launch for the plaintiffs and in
their representation, but virtue of the agency, notwithstanding the fact that he bought it in his
own name, he is obliged to transfer to the plaintiffs the rights he received from the vendor,
and the plaintiffs are entitled to be subrogated in these rights.
There is another point of view leading us to the same conclusion. From the rule established in
article 1717 of the Civil Code that, when an agency acts in his own name, the principal shall
have no right of action against the person with whom the agent has contracted, cases
involving things belonging to the principal are excepted. According to this exception (when
things belonging to the principal are dealt with) the agent is bound to the principal although
he does not assume the character of such agent and appears acting in his own name(Decision
of the Supreme Court of Spain, May 1, 1900). This means that in the case of this exception
the agent's apparent representation yields to the principal's true representation and that, in
reality and in effect, the contract must be considered as entered into between the principal
and the third person; and, consequently, if the obligations belong to the former, to him alone
must also belong the rights arising from the contract. The money with which the launch was
bough having come from the plaintiff, the exception established in article 1717 is applicable to
the instant case.
Concerning the casco No. 2584, the defendant admits it was constructed by the plaintiff
himself in the latter's ship-yard. Defendant's allegation that it was constructed at his instance
4
and with his money is not supported by the evidence. In fact the only proof presented to
support this allegation is his own testimony contradicted, on the on hand, by the plaintiffs'
testimony and, on the other hand, rebutted by the fact that, on the date this casco was
constructed, he did not have sufficient money with which to pay the expense of this
construction.
As to the automobile No. 2060, there is sufficient evidence to show that its prices was paid
with plaintiffs' money. Defendant's adverse allegation that it was paid with his own money is
not supported by the evidence. The circumstances under which, he says, this payment has
been made, in order to show that it was made with his own money, rather indicate the
contrary. He presented in evidence his check-book wherein it appears that on March 24, 1916,
he issued a check for P300 and on the 27th of same month another for P400 and he says that
the first installment was paid with said checks. But it results that, in order to issue the check
for P300 on March 24 of that year, he had to deposit P310 on that same day; and in order to
issue the other check for P400 on the 27th of the same month, he deposited P390 on that
same day. It was necessary for the defendant to make these deposits for on those dates he
had not sufficient money in the bank for which he could issue those checks. But, in order to
pay for the price of the automobile, he could have made these payments directly with the
money he deposited without the necessity of depositing and withdrawing it on the same day.
If this action shows something, it shows defendant's preconceived purpose of making it
appear that he made the payment with his own funds deposited in the bank.
The plaintiffs, in turn, assign in this instance the following three errors alleged to have been
committed by the lower court:
presumption of truth which a public document carries with it. Attorney Sevilla, who acted as
the notary in the execution of this instrument, testifying as a witness in the case, said that he
never verified any document without first inquiring whether the parties knew its content. Our
conclusion is that this casco was lawfully sold to the defendant by the plaintiffs.
Concerning the wood, windows and doors given by the plaintiffs to the defendant and used in
the construction of the latter's house on calle Real of the barrio of La Concepcion of the
municipality of Malabon, Rizal, we find correct the trial Court's decision that they were given to
the defendant as his and his wife's property.
Concerning the rendition of accounts which the plaintiffs require of the defendant, we likewise
find correct the trial court's decision absolving the latter from this petition, for it appears, from
the plaintiffs' own evidence, that the defendant used to render accounts of his agency after
each transactions, to the plaintiffs' satisfaction.
From the foregoing considerations, we affirm the judgment appealed from in all its parts
except in so far as thecasco No. 2545 is concerned, and as to this we declare that, it having
been sold by the plaintiffs to the defendant, the latter is absolved. No special findings as to
costs. So ordered.
Arellano, C.J., Torres, Johnson, Araullo, Street and Malcolm, JJ., concur.

1. The court erred in not declaring that the plaintiffs did not sell to the defendant
the casco No. 2545 and that they were its owners until it was sunk in June, 1916.

2. The court erred in absolving the defendant from his obligation to render an
account of his administration to the plaintiffs, and to pay to the latter the amount of
the balance due in their favor.

3. The court erred in not condemning the defendant to pay to the plaintiffs the
value of the woods, windows and doors taken from their lumber-year by the
defendant and used in the construction of the house on calle Real of the barrio of La
Concepcion, municipality of Malabon, Rizal.

Concerning the casco No. 2545, the lower court refrained from making any declaration about
its ownership in view of the fact that this casco had been leased and was sunk while in the
lessee's hands before the complaint in this case was filed. The lower court, therefore,
considered it unnecessary to pass upon this point. We agree with the plaintiffs that the trial
court should have made a pronouncement upon this casco. The lessee may be responsible in
damages for its loss, and it is of interest to the litigants in this case that it be determined who
is the owner of said casco that may enforce this responsibility of the lessee.

Upon an examination of the evidence relative to this casco, we find that it belonged to the
plaintiffs and that the latter sold it afterwards to the defendant by means of a public
instrument. Notwithstanding plaintiffs' allegation that when they signed this instrument they
were deceived, believing it not to be an instrument of sale in favor of the defendant,
nevertheless, they have not adduced sufficient proof of such deceit which would destroy the

5
 FIRST DIVISION The Gaytano spouses did not present evidence for their defense. Petitioner corporation, on the
other hand, raised the defense of lack of authority of its credit administrator to bind the
corporation.
G.R. No. 94566 July 3, 1992

On December 12, 1988, the trial court rendered a decision the dispositive portion of which
BA FINANCE CORPORATION, petitioner, vs.
states:
HON. COURT OF APPEALS and TRADERS ROYAL BANK, respondents.

IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of plaintiff and

MEDIALDEA, J.:
This is a petition for review on certiorari of the decision of the respondent appellate court
which reversed the ruling of the trial court dismissing the case against petitioner.
The antecedent facts are as follows:
On December 17, 1980, Renato Gaytano, doing business under the name Gebbs International,
applied for and was granted a loan with respondent Traders Royal Bank in the amount of
P60,000.00. As security for the payment of said loan, the Gaytano spouses executed a deed of
suretyship whereby they agreed to pay jointly and severally to respondent bank the amount of
the loan including interests, penalty and other bank charges.
against defendants/Gaytano spouses, ordering the latter to jointly and severally pay the
plaintiff the following:
1) EIGHTY FIVE THOUSAND EIGHT HUNDRED SEVEN AND 25/100 (P85,807.25),
representing the total unpaid balance with accumulated interests, penalties and bank
charges as of September 22, 1987, plus interests, penalties and bank charges thereafter
until the whole obligation shall have been fully paid.
2) Attorney's fees at the stipulated rate of ten (10%) percent computed from the total
obligation; and
3) The costs of suit.

In a letter dated December 5, 1980 addressed to respondent bank, Philip Wong as credit
The dismissal of the case against defendant BA Finance Corporation is hereby ordered
administrator of BA Finance Corporation for and in behalf of the latter, undertook to guarantee
without pronouncement as to cost.
the loan of the Gaytano spouses. The letter reads:

SO ORDERED. (p. 31, Rollo)

This is in reference to the application of Gebbs International for a twenty-five (25)
month term loan of 60,000.00 with your Bank.
Not satisfied with the decision, respondent bank appealed with the Court of Appeals. On
March 13, 1990, respondent appellate court rendered judgment modifying the decision of the
In this connection, please be advised that we unconditionally guarantee full
trial court as follows:
payment in peso value the said accommodation (sic) upon non-payment by
subject up to a maximum amount of P60,000.00.
In view of the foregoing, the judgment is hereby rendered ordering the defendants
Gaytano spouses and alternative defendant BA Finance Corporation, jointly and
Hoping this would meet your requirement and expedite the early processing of
severally, to pay the plaintiff the amount of P85,807.25 as of September 8, 1987,
their application.
including interests, penalties and other back (sic) charges thereon, until the full
obligation shall have been fully paid. No pronouncement as to costs.
Thank you.
SO ORDERED. (p. 27 Rollo)
Very truly yours,
BA FICE
Hence this petition was filed with the petitioner assigning the following errors committed by
CORPORATION
respondent appellate court:

(p. 12, Rollo)

Partial payments were made on the loan leaving an unpaid balance in the amount of
P85,807.25. Since the Gaytano spouses refused to pay their obligation, respondent bank filed
with the trial court complaint for sum of money against the Gaytano spouses and petitioner
corporation as alternative defendant.
1. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT
PETITIONER IS JOINTLY AND SEVERALLY LIABLE WITH GAYTANO SPOUSES DESPITE
ITS FINDINGS THAT THE LETTER GUARANTY (EXH. "C") IS "INVALID AT ITS
INCEPTION";

6
 2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE
PETITIONER WAS GUILTY OF ESTOPPEL DESPITE THE FACT THAT IT NEVER KNEW OF
SUCH ALLEGED LETTER-GUARANTY;
3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT RULING THAT SUCH
LETTER GUARANTY (EXHIBIT "C") BEING PATENTLY ULTRA VIRES, IS
UNENFORCEABLE;
4. THE HONORABLE COURT OF APPEALS ERRED IN NOT AWARDING RELIEF ON
PETITIONER'S COUNTERCLAIM
(p. 10, Rollo).
Since the issues are interrelated, it would be well to discuss them jointly.
Petitioner contends that the letter guaranty is ultra vires, and therefore unenforceable; that
said letter-guaranty was issued by an employee of petitioner corporation beyond the scope of
his authority since the petitioner itself is not even empowered by its articles of incorporation
and by-laws to issue guaranties. Petitioner also submits that it is not guilty of estoppel to
make it liable under the letter-guaranty because petitioner had no knowledge or notice of such
letter-guaranty; that the allegation of Philip Wong, credit administrator, that there was an
audit was not supported by evidence of any audit report or record of such transaction in the
office files.
We find the petitioner's contentions meritorious. It is a settled rule that persons dealing with
an assumed agent, whether the assumed agency be a general or special one are bound at
their peril, if they would hold the principal liable, to ascertain not only the fact of agency but
also the nature and extent of authority, and in case either is controverted, the burden of proof
is upon them to establish it (Harry Keeler v. Rodriguez, 4 Phil. 19). Hence, the burden is on
respondent bank to satisfactorily prove that the credit administrator with whom they
transacted acted within the authority given to him by his principal, petitioner corporation. The
only evidence presented by respondent bank was the testimony of Philip Wong, credit
administrator, who testified that he had authority to issue guarantees as can be deduced from
the wording of the memorandum given to him by petitioner corporation on his lending
authority. The said memorandum which allegedly authorized Wong not only to approve and
grant loans but also to enter into contracts of guaranty in behalf of the corporation, partly
reads:
To: Philip H. Wong, SAM
Credit Administrator
From: Hospicio B. Bayona, Jr., VP and
Head of Credit Administration
Re: Lending Authority
I am pleased to delegate to you in your capacity as Credit Administrator the following
lending limits:
a) P650,000.00 — Secured Loans
b) P550,000.00 — Supported Loans
c) P350,000.00 — Truck Loans/Contracts/Leases
d) P350,000.00 — Auto Loan Contracts/Leases
e) P350,000.00 — Appliance Loan Contracts
f) P350,000.00 — Unsecured Loans
Total loans and/or credits [combination of (a) thru (f) extended to any one borrower
including parents, affiliates and/or subsidiaries, should not exceed P750,000.00. In
exercising the limits aforementioned, both direct and contingent commitments to the
borrower(s) should be considered.
All loans must be within the Company's established lending guideline and policies.
xxx xxx xxx
LEVELS OF APPROVAL
All transactions in excess of any branch's limit must be recommended to you through
the Official Credit Report for approval. If the transaction exceeds your limit, you must
concur in application before submitting it to the Vice President, Credit Administration
for approval or concurrence.
. . . (pp. 62-63, Rollo) (Emphasis ours)
Although Wong was clearly authorized to approve loans even up to P350,000.00 without any
security requirement, which is far above the amount subject of the guaranty in the amount of
P60,000.00, nothing in the said memorandum expressly vests on the credit administrator
power to issue guarantees. We cannot agree with respondent's contention that the phrase
"contingent commitment" set forth in the memorandum means guarantees. It has been held
that a power of attorney or authority of an agent should not be inferred from the use of vague
or general words. Guaranty is not presumed, it must be expressed and cannot be extended
beyond its specified limits (Director v. Sing Juco, 53 Phil. 205). In one case, where it appears
that a wife gave her husband power of attorney to loan money, this Court ruled that such fact
did not authorize him to make her liable as a surety for the payment of the debt of a third
person (Bank of Philippine Islands v. Coster, 47 Phil. 594).
The sole allegation of the credit administrator in the absence of any other proof that he is
authorized to bind petitioner in a contract of guaranty with third persons should not be given
weight. The representation of one who acts as agent cannot by itself serve as proof of his
authority to act as agent or of the extent of his authority as agent (Velasco v. La Urbana, 58
Phil. 681). Wong's testimony that he had entered into similar transactions of guaranty in the
past for and in behalf of the petitioner, lacks credence due to his failure to show documents or
records of the alleged past transactions. The actuation of Wong in claiming and testifying that
he has the authority is understandable. He would naturally take steps to save himself from
personal liability for damages to respondent bank considering that he had exceeded his
authority. The rule is clear that an agent who exceeds his authority is personally liable for
damages (National Power Corporation v. National Merchandising Corporation, Nos. L-33819
and
L-33897, October 23, 1982, 117 SCRA 789).
7
Anent the conclusion of respondent appellate court that petitioner is estopped from alleging
lack of authority due to its failure to cancel or disallow the guaranty, We find that the said
conclusion has no basis in fact. Respondent bank had not shown any evidence aside from the
testimony of the credit administrator that the disputed transaction of guaranty was in fact
entered into the official records or files of petitioner corporation, which will show notice or
knowledge on the latter's part and its consequent ratification of the said transaction. In the
absence of clear proof, it would be unfair to hold petitioner corporation guilty of estoppel in
allowing its credit administrator to act as though the latter had power to guarantee.

ACCORDINGLY, the petition is GRANTED and the assailed decision of the respondent appellate
court dated March 13, 1990 is hereby REVERSED and SET ASIDE and another one is rendered
dismissing the complaint for sum of money against BA Finance Corporation.

SO ORDERED. Cruz, Griño-Aquino and Bellosillo, JJ., concur.

8
 EN BANC November 18, 1948, P106,382.01. Thereafter, for unexplained reasons, the Bank ceased to
collect, until in 1952 its investigators found that more moneys were payable to ATACO from
the Public Works office, because the latter had allowed mother creditor to collect funds due to
G.R. No. L-20567 July 30, 1965
ATACO under the same purchase order to a total of P311,230.41.

PHILIPPINE NATIONAL BANK, petitioner,

Its demands on the principal debtor and the Surety having been refused, the Bank sued both
vs.
in the Court of First Instance of Manila to recover the balance of P158,563.18 as of February
MANILA SURETY and FIDELITY CO., INC. and THE COURT OF APPEALS (Second
15, 1950, plus interests and costs.
Division), respondents.

On October 4, 1958, the trial court rendered a decision, the dispositive portion of which reads:
Besa, Galang and Medina for petitioner.
De Santos and Delfino for respondents.
WHEREFORE, judgment is hereby rendered as follows:
REYES, J.B.L., J.:
1. Ordering defendants, Adams & Taguba Corporation and Manila Surety & Fidelity
Co., Inc., to pay plaintiff, Philippines National Bank, the sum of P174,462.34 as of
The Philippine National Bank petitions for the review and reversal of the decision rendered by
February 24, 1956, minus the amount of P8,000 which defendant, Manila Surety
the Court of Appeals (Second Division), in its case CA-G.R. No. 24232-R, dismissing the Bank's
Co., Inc. paid from March, 1956 to October, 1956 with interest at the rate of 5% per
complaint against respondent Manila Surety & Fidelity Co., Inc., and modifying the judgment
annum from February 25, 1956, until fully paid provided that the total amount that
of the Court of First Instance of Manila in its Civil Case No. 11263.
should be paid by defendant Manila Surety Co., Inc., on account of this case shall
not exceed P75,000.00, and to pay the costs;
The material facts of the case, as found by the appellate Court, are as follows:
2. Orderinq cross-defendant, Adams & Taguba Corporation, and third-party
The Philippine National Bank had opened a letter of credit and advanced thereon $120,000.00 defendant, Pedro A. Taguba, jointly and severally, to pay cross and third-party
to Edgington Oil Refinery for 8,000 tons of hot asphalt. Of this amount, 2,000 tons worth plaintiff, Manila Surety & Fidelity Co., Inc., whatever amount the latter has paid or
P279,000.00 were released and delivered to Adams & Taguba Corporation (known as ATACO) shall pay under this judgment;
under a trust receipt guaranteed by Manila Surety & Fidelity Co. up to the amount of
P75,000.00. To pay for the asphalt, ATACO constituted the Bank its assignee and attorney-in-
3. Dismissing the complaint insofar as the claim for 17% special tax is concerned;
fact to receive and collect from the Bureau of Public Works the amount aforesaid out of funds
and
payable to the assignor under Purchase Order No. 71947. This assignment (Exhibit "A")
stipulated that:
4. Dismissing the counterclaim of defendants Adams & Taguba Corporation and
Manila Surety & Fidelity Co., Inc.
The conditions of this assignment are as follows:

From said decision, only the defendant Surety Company has duly perfected its appeal. The
1. The same shall remain irrevocable until the said credit accomodation is fully
Central Bank of the Philippines did not appeal, while defendant ATACO failed to perfect its
liquidated.
appeal.

2. The PHILIPPINE NATIONAL BANK is hereby appointed as our Attorney-in-Fact for

us and in our name, place and stead, to collect and to receive the payments to be
made by virtue of the aforesaid Purchase Order, with full power and authority to
execute and deliver on our behalf, receipt for all payments made to it; to endorse
for deposit or encashment checks, money order and treasury warrants which said
Bank may receive, and to apply said payments to the settlement of said credit
accommodation.
This power of attorney shall also remain irrevocable until our total indebtedness to
the said Bank have been fully liquidated. (Exhibit E)
The Bank recoursed to the Court of Appeals, which rendered an adverse decision and modified
the judgment of the court of origin as to the surety's liability. Its motions for reconsideration
having proved unavailing, the Bank appealed to this Court.
The Court of Appeals found the Bank to have been negligent in having stopped collecting from
the Bureau of Public Works the moneys falling due in favor of the principal debtor, ATACO,
from and after November 18, 1948, before the debt was fully collected, thereby allowing such
funds to be taken and exhausted by other creditors to the prejudice of the surety, and held
that the Bank's negligence resulted in exoneration of respondent Manila Surety & Fidelity
Company.

ATACO delivered to the Bureau of Public Works, and the latter accepted, asphalt to the total
value of P431,466.52. Of this amount the Bank regularly collected, from April 21, 1948 to

9
This holding is now assailed by the Bank. It contends the power of attorney obtained from Bengzon, C.J., Concepcion, Paredes, Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar,
ATACO was merely in additional security in its favor, and that it was the duty of the surety, JJ., concur.
and not that of the creditor, owed see to it that the obligor fulfills his obligation, and that the Bautista Angelo and Barerra, JJ., took no part.
creditor owed the surety no duty of active diligence to collect any, sum from the principal
debtor, citing Judge Advocate General vs. Court of Appeals, G.R. No. L-10671, October 23,
1958.

This argument of appellant Bank misses the point. The Court of Appeals did not hold the Bank
answerable for negligence in failing to collect from the principal debtor but for its neglect in
collecting the sums due to the debtor from the Bureau of Public Works, contrary to its duty as
holder of an exclusive and irrevocable power of attorney to make such collections, since an
agent is required to act with the care of a good father of a family (Civ. Code, Art. 1887) and
becomes liable for the damages which the principal may suffer through his non-performance
(Civ. Code, Art. 1884). Certainly, the Bank could not expect that the Bank would diligently
perform its duty under its power of attorney, but because they could not have collected from
the Bureau even if they had attempted to do so. It must not be forgotten that the Bank's
power to collect was expressly made irrevocable, so that the Bureau of Public Works could
very well refuse to make payments to the principal debtor itself, and afortiori reject any
demands by the surety.

Even if the assignment with power of attorney from the principal debtor were considered as
mere additional security still, by allowing the assigned funds to be exhausted without notifying
the surety, the Bank deprived the former of any possibility of recoursing against that security.
The Bank thereby exonerated the surety, pursuant to Article 2080 of the Civil Code:

ART. 2080. — The guarantors, even though they be solidary, are released from their
obligation whenever by come act of the creditor they cannot be subrogated to the
rights, mortgages and preferences of the latter. (Emphasis supplied.)

The appellant points out to its letter of demand, Exhibit "K", addressed to the Bureau of Public
Works, on May 5, 1949, and its letter to ATACO, Exhibit "G", informing the debtor that as of
its date, October 31, 1949, its outstanding balance was P156,374.83. Said Exhibit "G" has no
bearing on the issue whether the Bank has exercised due diligence in collecting from the
Bureau of Public Works, since the letter was addressed to ATACO, and the funds were to come
from elsewhere. As to the letter of demand on the Public Works office, it does not appear that
any reply thereto was made; nor that the demand was pressed, nor that the debtor or the
surety were ever apprised that payment was not being made. The fact remains that because
of the Bank's inactivity the other creditors were enabled to collect P173,870.31, when the
balance due to appellant Bank was only P158,563.18. The finding of negligence made by the
Court of Appeals is thus not only conclusive on us but fully supported by the evidence.

Even if the Court of Appeals erred on the second reason it advanced in support of the decision
now under appeal, because the rules on application of payments, giving preference to secured
obligations are only operative in cases where there are several distinct debts, and not where
there is only one that is partially secured, the error is of no importance, since the principal
reason based on the Bank's negligence furnishes adequate support to the decision of the
Court of Appeals that the surety was thereby released.

WHEREFORE, the appealed decision is affirmed, with costs against appellant Philippine
National Bank.

10
 EN BANC Ohio St., 70.) In the fourth place, under the oral contract Reyes was an agent who was bound
to pay to the principal all that he had received by virtue of the agency. (Civil Code, article
1720; U. S. vs. Kiene [1907], 7 Phil. Rep., 736.) And, lastly, since for all practical purposes,
G.R. No. L-12743 August 25, 1917
the agency was terminated, the agent was under the obligation to turn over to the principal
the amount collected, minus his commission on that amount. (U. S. vs. Schneer [1907], 7 Phil.
THE UNITED STATES, plaintiff-appellee, Rep., 523.)
vs.
DOMINGO REYES, defendant-appellant.
All the requisites of estafa as punished by article 535, paragraph 5, of the Penal Code, and as
construed by the commentators, are here present. The assignment of error relative to the
Antonio Bengson for appellant. nonproduction by the fiscal of the transcription of the preliminary investigation is not
Acting Attorney-General for appellee. particularly important as secondary evidence was admitted and the substantial rights of the
accused were not affected.
MALCOLM, J.:
The judgment of the trial court being in accord with the facts and the law is hereby affirmed
This is an appeal from a judgment finding Domingo Reyes guilty of estafa and sentencing him with the costs. So ordered.
to four months and one day of arresto mayor, to the accessory penalties of the law, and to
indemnify R. B. Blackman in the sum of P118, with subsidiary imprisonment in case of Arellano, C.J., Johnson, Carson, Araullo and Street, JJ., concur.
insolvency, and to pay the costs.

Marked discrepancies in connection with the evidence, particularly that which concerns the
figures, are to be noted. Accepting the findings of the trial court, we can summarize the facts
as follows:

R. B. Blackman is a surveyor in the Province of Pangasinan. Domingo Reyes, the accused, also
lives in that province. Blackman employed Reyes to collect certain amounts due from twelve
individuals for Blackman's work in connection with the survey of their lands. The total amount
to be collected by Reyes was P860. He only succeeded in collecting P540. He delivered to
Blackman P368. He retained the balance, or P172. So far as good. The difficult point concerns
the exact terms of the contract. It was merely an oral agreement between Blackman and
Reyes. Blackman claims that he agreed to pay Reyes a commission of 10 per cent. Reyes
claims that he was to receive a commission of 20 per cent. The trial court, in its decision,
states that — "R. B. Blackman, agrimensor, dio al aqui acusado el encargo de cobrar algunas
cuentas de honorarios devengados per mediciones practicadas por el como agrimensor,
concediendole un 10 por ciento sobre todas las cobranzas." (R. B. Blackman, the surveyor,
ordered the said accused to collect certain debts due for surveying and offered a 10 per cent
commission on all accounts collected.)

To return to the figures again, it will be noticed that if we accept the statements of Blackman,
Reyes was entitled to 10 per cent of P540 (or P530), or P54, making P172 misappropriated,
or, if we deduct his commission, P118. On the other hand, if we accept the statements of
Reyes, then 20 per cent of the total amount to be collected, P860, is exactly P172, the amount
claimed to have been misappropriated.

There are a number of reasons which impel us to the conclusion that the defendant and
appellant is guilty as charged. In the first place, in view of the discrepancy in the evidence we
are not disposed to set up our judgment as superior to that of the trial court. In the second
place, conceding that Reyes was to receive 20 per cent, this, unless some contrary and
express stipulation was included, would not entitle him in advance to 20 per cent of the
amount actually collected. In the third place, the right to receive a commission of either 10 or
20 per cent did not make to hold out any sum he chose. (Campbell vs. The State [1878], 35

11
 [ G.R. No. L-9572, July 31, 1956 ]
JOAQUIN GUZMAN, PETITIONER, VS. THE HONORABLE COURT OF APPEALS,
RESPONDENT.
DECISION
REYES, J.B.L., J.:
Appeal by certiorari from the decision of the Court of Appeals finding appellant Joaquin
Guzman guilty of the crime of qualified theft.
The facts, as found by the Court of Appeals, are as follows:
"That accused Joaquin Guzman was a travelling sales agent of the New Life Commercial of
Aparri, Cagayan. On March 2, 1953, Guzman left Manila with 45 cases of different
assortments of La Tondeiia wine, in a truck driven by Andres Buenaventura, with Federico
Cabacungan as washing (helper), on their return trip to Aparri, by way of Ilocos Norte.
Along the route, the accused made various cash sales of wine and when they reached
Ballesteros, Cagayan, at about 3 o'clock in the afternoon of March 5, 1953, said accused
had in his possession the amount of P4,873.62. Here, they parked their truck at the
Sambrano Station and the accused left his companions until supper time at past 7:00
p.m. When they retired for the night, driver Buenaventura and the accused occupied the
driver's compartment of the truck, Buenaventura lying on the driver's seat and the accused
taking the upper deck with which the truck was provided (see photograph Exhibit. A). The
washing, Cabacungan, slept in the body of the 'truck where the wines were kept. There
was a wall between the body of the truck and the driver's compartment; and on that night
all the windows were locked from inside. In the morning of March 6, 1953, accused
Guzman told the driver that he lost the amount of P2,840.50, and his firearm license.
Upon the advice of the driver, said accused reported the matter to the Chief o£ Police of
Ballesteros, who gave him a certificate of loss of his firearm license. They were proceeding to
their home journey when, at the outskirts of Ballesteros, they were met by a tax collector
and policeman Mariano David who told the accused to return to Ballesteros and execute
an anidavit regarding the alleged theft. Before the accused returned to Ballesteros, he
entrusted to the driver Buenaventura, the amount of Pl,630 in dash and a check for P403.12
under the proper receipt (Exhibit C), with the sales invoices, for delivery to the manager,
Enrique Go, of the company of Aparri. Driver and washing continued the trip and arrived at
Aparri between 3 and 4 o'clock in the afternoon of the same day. The driver delivered the
money and invoices to Enrique Go and informed the latter of the loss. Go reported the
matter to the Philippine Constabulary. The PC investigators and Go picked the accused at his
house at Aparri at 8 o'clock in the morning, on March 7, 1953, after having failed to see him
(accused) at Ballesteros the previous night. Questioned at the PC barracks as to how much
money he still had, the accused stated that he had only P3, in his person. On March 10,
1953, the accused wrote to Go, requesting him to defer the filing of the criminal complaint
until March 16, 1953, on which date he promised to refund the amount lost (Exhibit G). On
March 17, 1953, the said accused paid the amount of P1,500 to Go. On April 1, 1953, the
accused was prosecuted for theft for the shortage of P804.70." (Appellant's Brief, pp. 13-
15.)
Appellant Guzman claims, first, that under the above findings of fact, he had committed
only the crime ofestafa; and second, as the crimes of estafa and theft are essentially
different offenses, he should be acquitted of the present charge for qualified theft, although
proceedings may be filed anew against him for the proper offense. We agree with appellant
that under the above facts, the Court of Appeals erred in holding that he "had only the
material or physical possession of the said merchandise or its proceeds, because he was not
the owner thereof; he was simply holding the money for and in behalf of his employer".
While it is true that appellant received the proceeds of his wine sales as travelling
salesman for the complainant, for and in behalf of the latter as his principal, and that
possession of the agent is possession of the principal, an agent, unlike a servant or
messenger, has both the physical and juridical possession of the goods received in
agency, or the proceeds thereof, which takes the place of the goods after their sale by the
agent. His duty to turn over the proceeds of the agency depends upon his discharge, as well
as the result of the accounting between him and the principal; and he may set up his right
of possession as against that of the principal until the agency is terminated.
The case cited by the Court of Appeals (People vs. Locson, 57 Phil., 325), in support of its
theory that appellant only had the material possession of the merchandise he was selling for
his principal, or their proceeds, is not in point. In said case, the receiving teller of a bank
who misappropriated, money received by him for the bank, was held guilty of qualified theft
on the theory that the possession of the teller is the possession of the bank. There is an
essential distinction between the possession by a receiving teller of funds received from third
persons paid to the bank, and an agent who receives the proceeds of sales of merchandise
delivered to him in agency by his principal. In the former case, payment by third
persons to the teller is payment to the bank itself; the teller is a mere custodian or
keeper of the funds received, and has no independent right or title to retain or possess
the same as against the bank. An agent, on the other hand, can even assert, as against
his own principal, an independent, autonomous, right to retain the money or goods received
in consequence of the agency; as when they principal fails to reimburse him for advances he
has made, and indemnify him for damages suffered without his fault (Article 1915, new Civil
Code; Article 1730, old).
As appellant converted to his own use proceeds of sales of merchandise delivered to him
as agent, which he received in trust for and under obligation to deliver and turn over to
his principal, he is guilty of the crime of estafa as defined by Article 315, paragraph 1,
subparagraph (e), of the Revised Penal Code. This has been the consistent ruling of this
Court in cases where a sales agent misappropriates or fails to turn over to his principal
proceeds of things or goods he was commissioned or authorized to sell for the latter.
(U. S. vs.Reyes, 36 Phil., 791; U. S. vs. Lim, 36 Phil., 682; People vs. Leachon, 56 Phil.,
737).
The next question is whether the present information for qualified theft alleges sufficient
facts to sustain a conviction for estafa under Article 315, paragraph 1, subparagraph (b), of
the Revised Penal Code. The information reads:
"The undersigned accuses Joaquin Guzman of the crime of Qualified Theft, defined and
penalized under Articles 308 and 309, No. 3 in connection with Article 310 of the Revised
Penal Code, as amended by Commonwealth Acts Nos. 273 and 417 and Republic Act No. 120,
committed as follows:
That on or about the 6th day of March, 1953, in the municipality of Aparri, province of
Cagayan, and within the jurisdiction of this Honorable Court, the said accused Joaquin
Guzman, while in the employ of Enrique Go and with grave abuse of confidence did then
and there, willfully, unlawfully, and feloniously, with intent to gain but without violence
against or intimidation of persons nor force upon things, without the consent of the owner
Enrique Go alias Ngo Yat, take and carry away for his personal use and benefit the sum of
eight hundred four pesos and seventy eentavos (P804.70) to the damages and prejudice of
said Enrique Go altos Ngo Yat, in the amount of P804.70." (Original Records p. 22.)
12
Article 315, paragraph 1, subparagraph (6), on the other hand, provides:

"Surindling (estafa).—Any person who shall defraud another by any of the means
mentioned hereinbelow shall be punished by:
* * * * * * *

(2) With unfaithfulness or abuse of confidence, namely:

* * * * * * *

(b) By misappropriating or converting, to the prejudice of another, money, goods, or any

other personal property received by the offender in trust or on commission, or for
administration, or under any other obligation involving the duty to make delivery of, or to
return the same, even though such obligation be totally or partially guaranteed by a bond;
or by denying having received such money, good, or other property;

Under the above definition of estafa, it is an essential element of the crime that the money or
goods misappropriated or converted by the accused to the prejudice of another was
received by him "in trust or on commission, or for administration, or under any other
obligation involving the duty to make delivery of, or to retain the same". No such allegation
appears in the above information. Consequently, we agree with appellant that he can not
be convicted thereunder of the crime of estafa as defined by the article above.
Wherefore, the decision appealed from is reversed, and appellant Joaquin Guzman acquitted
of the crime of qualified theft. Appellant should, however, be held in custody pending the
filing of another information against him for estafa under Article 315, paragraph 1,
subparagraph (6), of the Revised Penal Code. Without costs in this instance. So ordered.

Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angela, Labrador, Concepcion,
Endencia, andFelix, JJ., concur.

13
 SECOND DIVISION
[G.R. No. 109595. April 27, 2000]
CRISTETA CHUA-BURCE, petitioner, vs. COURT OF APPEALS AND PEOPLE OF THE
PHILIPPINES, respondents.
DECISION
QUISUMBING, J.:
Subject of the present appeal by certiorari is the decision dated November 27, 1992 of the
Court of Appeals in CA-G.R. CR No. 12037, (a) affirming in toto the trial court’s decision
finding petitioner guilty of estafa, and (b) denying her Motion for Reconsideration in a
Resolution dated March 25, 1993. The Regional Trial Court, Calapan, Oriental Mindoro, Branch
40, rendered a joint decision finding petitioner guilty of estafa under Article 315, par. 1 (b) of
the Revised Penal Code, in Criminal Case No. C-2313, and likewise found petitioner liable for
the amount of P150,000.00 in Civil Case No. R-3733. Only the criminal case is before us for
review. Â h Y
The uncontroverted facts, as found by the Court of Appeals, are as follows:
On August 16, 1985, Ramon Rocamora, the Manager (of Metropolitan Bank and Trust
Company, Calapan Branch, Oriental Mindoro) requested Fructuoso Peñaflor, Assistant Cashier,
to conduct a physical bundle count of the cash inside the vault, which should total
P4,000,000.00, more or less. During this initial cash count, they discovered a shortage of
fifteen bundles of One Hundred Pesos denominated bills totalling P150,000.00. The One
Hundred Peso bills actually counted was P3,850,000.00 as against the balance of
P4,000,000.00 in the Cash in Vault (CIV) Summary Sheet, or a total shortage of P150,000.00.
The next day, to determine if there was actually a shortage, a re-verification of the records
and documents of the transactions in the bank was conducted. There was still a shortage of
P150,000.00.
The bank initiated investigations totalling four (4) in all. The first was by Ramon Rocamora,
the Manager. The second was by the bank’s internal auditors headed by Antonio Batungbakal.
Then, the bank’s Department of Internal Affairs conducted an independent investigation.
Thereafter, the National Bureau of Investigation (NBI) came in to investigate. All of these
investigations concluded that there was a shortage of P150,000.00, and the person primarily
responsible was the bank’s Cash Custodian, Cristeta Chua-Burce, the herein accused. Jksm
On November 4, 1985, unable to satisfactorily explain the shortage of P150,000.00, the
accused’s service with the bank was terminated.
To recover the missing amount, Metropolitan Bank and Trust Company (Metrobank) filed a
Civil Case for Sum of Money and Damages with Preliminary Attachment and Garnishment
docketed as Civil Case No. R-3733 against petitioner and her husband, Antonio Burce. Esm
Prior to the filing of the Answer, the following Information for Estafa was filed against
petitioner:
"That on or about the 16th day of August 1985, and for a period prior and
subsequent thereto, the above-named accused, with unfaithfulness or abuse of
confidence, and with intent to defraud, did then and there wilfully, unlawfully, and
feloniously, in her capacity as Cash Custodian of the Metrobank, Calapan Branch,
take from the Bank’s Vault the amount of ONE HUNDRED FIFTY THOUSAND
(P150,000.00) PESOS, which is under her direct custody and/or accountability,
misappropriate and convert to her own personal use and benefit, without the
knowledge and consent of the offended party, despite repeated demands for her to
account and/or return the said amount, she refused and failed, and still fails and
refuses to the damage and prejudice of the Metrobank, Calapan Branch, in the
aforementioned amount of ONE HUNDRED FIFTY THOUSAND (P150,000.00) PESOS.
Contrary to Article 315 of the Revised Penal Code.
Calapan, Oriental Mindoro, November 27, 1985."[1]
Both civil and criminal cases were raffled to the same branch of the Regional Trial Court of
Calapan, Oriental Mindoro, Branch 40. Esmsc
Thereafter, petitioner moved for the suspension of the criminal case on the ground of the
existence of a prejudicial question, viz., that the resolution of the civil case was determinative
of her guilt or innocence in the criminal case.[2] The trial court, over the vehement opposition
of the private and public prosecutors, granted the motion and suspended the trial of the
criminal case.[3] On petition for certiorari to the Court of Appeals, the appellate court ruled that
there was no prejudicial question.[4]
Petitioner was arraigned and assisted by counsel de parte, entered a plea of not
guilty.[5] While the trial of the criminal case was suspended, the trial of the civil case
continued. At the time of arraignment, the civil case was already submitted for decision.
Hence, during the pre-trial conference of the criminal case, the parties agreed to adopt their
respective evidence in the civil case as their respective evidence in the criminal case.[6] The
trial court ordered the parties to submit their written agreement pursuant to Section 4 of Rule
118 of the Rules of Court.[7] Thereafter, petitioner, duly assisted by her counsel, with
the conforme of the public prosecutor, entered into the following pre-trial agreement:[8]
"COMES NOW, the accused, assisted by counsel, and unto this Honorable Court
most respectfully submits this Pre-Trial agreement:
1. That the evidence already adduced by the plaintiff in Civil Case No. R-3733 will
be adopted by the prosecution as its evidence in Criminal Case No. C-2313;
2. That the evidence to be adduced by the defendant in Civil Case No. R-3733 will
also be adopted as evidence for the defense in Criminal Case No. C-2313.
14
 WHEREFORE, premises considered, it is prayed that the foregoing pre-trial WHEREFORE, the Court hereby finds the accused Cristeta Chua-Burce guilty beyond
agreement be admitted in compliance with the Order of this Court dated April 19, reasonable doubt of the crime of Estafa, punishable under Art. 315, paragraph 1 (b)
1988. of the Revised Penal Code, which imposes a penalty of prision correccional in its
maximum period to prision mayor in its minimum period but considering that the
amount involved exceeds P22,000.00, the penalty provided for shall be imposed in
RESPECTFULLY SUBMITTED.
its maximum period, adding one year for each additional P10,000.00, but the total
amount not to exceed twenty years. Esmmis
Calapan, Oriental Mindoro, August 20, 1990.
Applying the Indeterminate Sentence Law, the imposable penalty shall be one
CRISTETA CHUA-BURCE (sgd.) degree lower as minimum of arresto mayor with a penalty range of One Month
and One Day to Six Months, as minimum to prision mayor in its maximum period,
Accused as maximum, or a penalty of Six years to Twelve Years. Considering the mitigating
circumstance of voluntary surrender, the court hereby imposes upon the accused
to suffer imprisonment from SIX (6) MONTHS of arresto mayor in its maximum
Assisted By: period, as minimum, to EIGHT (8) YEARS of prision mayor, in its minimum period,
as maximum. The civil liability shall not be imposed in this case due to a separate
RODRIGO C. DIMAYACYAC (sgd.) civil action. Esmso

Defense Counsel - In Civil Case No. R-3733 -

San Vicente, Calapan WHEREFORE, judgment is hereby rendered in favor of the plaintiff Metrobank,
ordering defendants Cristeta Chua-Burce and Antonio Burce, spouses, to pay
Metrobank the amount of P150,000.00 representing the amount misappropriated
Oriental Mindoro with the legal rate of six percent (6%) per annum from August 15, 1985 until fully
paid and to pay the costs of suit.
IBP O.R. No. 292575
SO ORDERED."
May 11, 1990
Petitioner seasonably appealed her conviction in the criminal case to the Court of Appeals.
Quezon City Petitioner filed a separate appeal in the civil case.

With Conformity: In a decision dated November 27, 1992,[12] the Court of Appeals affirmed the trial court’s
decision in toto. Petitioner’s Motion for Reconsideration was likewise denied.[13] Hence, the
recourse to this Court. Msesm
EMMANUEL S. PANALIGAN (sgd.)

Petitioner raises the following issues:[14]

Prosecuting Fiscal

1. IS THE RESULT OF POLYGRAPH EXAMINATION ADMISSIBLE IN EVIDENCE?

Pursuant to the pre-trial agreement, the public prosecutor filed a Motion to Adopt
Evidence.[9] Both the pre-trial agreement and said Motion were granted by the trial court.[10]
2. CAN THE PRESIDING JUDGE OF THE REGIONAL TRIAL COURT ADMIT IN
[11] EVIDENCE THE EVIDENCE WHICH WAS ALREADY DENIED ADMISSION IN THE
On March 18, 1991, the trial court rendered a consolidated decision finding petitioner (a) ORDER OF THE FORMER JUDGE OF THE SAME COURT?
guilty of estafa under Article 315 (1) (b) of the Revised Penal Code in the criminal case, and
(b) liable for the amount of P150,000.00 in the civil case. The dispositive portion of decision
provides - 3. DOES PRIMA FACIE PRESUMPTION OF MISAPPROPRIATION OR CONVERSION
EXISTS (sic) AGAINST THE PETITIONER WHEN THERE WERE OTHER PERSONS
WHO HAD DIRECT AND GREATER ACCESS IN THE CASH-IN-VAULT?
- In Criminal Case No. C-2313 -

15
 4. IS RULE 111 SECTION 2 (a) OF THE REVISED RULES ON CRIMINAL
PROCEDURE APPLICABLE IN (sic)THE CASE AT BAR?
5. WAS THERE A VALID PROCEEDING WHEN THE FISCAL WAS NOT ACTUALLY
PRESENT AND DID NOT CONTROL AND SUPERVISE THE PROSECUTION OF THE
CASE? Exsm
In gist, (1) petitioner contends that the trial court erred in taking into account the results of
the polygraph examination as circumstantial evidence of guilt considering the inherent
unreliability of such tests, and the fact that the previous trial judge who handled the case
already ruled such evidence as inadmissible; (2) petitioner insists that there can be no
presumption of misappropriation when there were other persons who had access to the cash
in vault; and (3) petitioner questions the validity of the trial of criminal case considering that
the pre-trial agreement dispensed with the intervention of the public prosecutor in a full-blown
trial of the criminal case. Kyle
The Office of the Solicitor General, for the State, contends that the guilt of petitioner has been
proven beyond reasonable doubt by the following facts which were duly established during
trial - first, petitioner was the cash custodian who was directly responsible and accountable for
the cash-in-vault. Second, the other persons who had access to the vault facilities never used
the duplicate keys to open the safety deposit boxes and the cash safe from where the P100.00
bill denominations were located. In fact, the duplicate keys were offered in evidence still in
their sealed envelopes. Third, alterations and superimposition on the cash-in-vault summary
sheet were made by petitioner to cover the cash shortage. Lastly, there was a valid joint trial
of the civil and criminal cases.
The crucial issues, in our mind, are (1) whether there was a valid trial of the criminal case,
and (2) whether the elements of the crime of estafa under Article 315 (1) (b) of the Revised
Penal Code were duly proven beyond reasonable doubt. Kycalr
First, petitioner assails the validity of the proceedings in the trial court on the ground that the
public prosecutor did not intervene and present any evidence during the trial of the criminal
case. The records clearly show that the pre-trial agreement was prepared by petitioner with
the conforme of the public prosecutor. Thereafter, petitioner filed
a consolidated memorandum for both civil and criminal cases. Section 5 of Rule
110[15] requires that all criminal actions shall be prosecuted under the direction and control of
the public prosecutor. The rationale behind the rule is "to prevent malicious or unfounded
prosecutions by private persons."[16] The records show that the public prosecutor actively
participated in the prosecution of the criminal case from its inception. It was during pre-trial
conference when the parties agreed to adopt their respective evidence in the civil case to the
criminal case. This is allowed under Section 2 (e) of Rule 118 of the Rules of Court[17] which
provides that during pre-trial conference, the parties shall consider "such other matters as will
promote a fair and expeditious trial." The parties, in compliance with Section 4 of Rule
118,[18] reduced to writing such agreement. Petitioner, her counsel, and the public prosecutor
signed the agreement. Petitioner is bound by the pre-trial agreement, and she cannot now
belatedly disavow its contents.[19]
On the second issue. Petitioner was charged with the crime of estafa under Article 315 (1) (b)
of the Revised Penal Code.[20] In general, the elements of estafa are: (1) that the accused
defrauded another (a) by abuse of confidence or (b) by means of deceit; and (2) that damage
or prejudice capable of pecuniary estimation is caused to the offended party or third
person.[21] Deceit is not an essential requisite of estafa with abuse of confidence, since the
breach of confidence takes the place of the fraud or deceit, which is a usual element in the
other estafas.[22]
The elements of estafa through conversion or misappropriation under Art. 315 (1) (b) of the
Revised Penal Code are:[23]
(1) that personal property is received in trust, on commission, for administration or
under any other circumstance involving the duty to make delivery of or to return the
same, even though the obligation is guaranteed by a bond;
(2) that there is conversion or diversion of such property by the person who has so
received it or a denial on his part that he received it;
(3) that such conversion, diversion or denial is to the injury of another and
(4) that there be demand for the return of the property.
Have the foregoing elements been met in the case at bar? We find the first element absent.
When the money, goods, or any other personal property is received by the offender from the
offended party (1) in trust or (2) on commission or (3) foradministration, the offender acquires
both material or physical possession and juridical possession of the thing received.[24] Juridical
possession means a possession which gives the transferee a right over the thing which the
transferee may set up even against the owner.[25] In this case, petitioner was a cash custodian
who was primarily responsible for the cash-in-vault. Her possession of the cash belonging to
the bank is akin to that of a bank teller, both being mere bank employees.Calrky
In People v. Locson,[26] the receiving teller of a bank misappropriated the money received by
him for the bank. He was found liable for qualified theft on the theory that the possession of
the teller is the possession of the bank. We explained inLocson that -
"The money was in the possession of the defendant as receiving teller of the
bank, and the possession of the defendant was the possession of the bank. When
the defendant, with grave abuse of confidence, removed the money and
appropriated it to his own use without the consent of the bank, there was the
taking or apoderamiento contemplated in the definition of the crime of theft."[27]
In the subsequent case of Guzman v. Court of Appeals,[28] a travelling sales agent
misappropriated or failed to return to his principal the proceeds of things or goods he was
commissioned or authorized to sell. He was, however, found liable for estafa under Article 315
(1) (b) of the Revised Penal Code, and not qualified theft. In the Guzman case, we explained
the distinction between possession of a bank teller and an agent for purposes of determining
criminal liability -
"The case cited by the Court of Appeals (People vs. Locson, 57 Phil. 325), in
support of its theory that appellant only had the material possession of the
merchandise he was selling for his principal, or their proceeds, is not in point. In
said case, the receiving teller of a bank who misappropriated money received by
him for the bank, was held guilty of qualified theft on the theory that the
16
 possession of the teller is the possession of the bank. There is an essential
distinction between the possession by a receiving teller of funds received from
third persons paid to the bank, and an agent who receives the proceeds of sales
of merchandise delivered to him in agency by his principal. In the former case,
payment by third persons to the teller is payment to the bank itself; the teller is a
mere custodian or keeper of the funds received, and has no independent right or
title to retain or possess the same as against the bank. An agent, on the other
hand, can even assert, as against his own principal, an independent, autonomous,
right to retain money or goods received in consequence of the agency; as when
the principal fails to reimburse him for advances he has made, and indemnify him
for damages suffered without his fault (Article 1915, [N]ew Civil Code; Article
1730, old)." Mesm

Petitioner herein being a mere cash custodian had no juridical possession over the missing
funds. Hence, the element of juridical possession being absent, petitioner cannot be convicted
of the crime of estafa under Article 315, No. 1 (b) of the Revised Penal Code.[29]

WHEREFORE, the petition is hereby granted and petitioner is ACQUITTED of the crime of
estafa under Article 315 (1) (b) of the Revised Penal Code. Petitioner is ordered RELEASED
from custody unless she is being held for some other lawful cause. No costs. Slx

SO ORDERED. Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

17
 SECOND DIVISION
[G.R. No. 141485. June 30, 2005]
PABLITO MURAO and NELIO HUERTAZUELA, petitioners, vs. PEOPLE OF THE
PHILIPPINES, respondent.
DECISION
CHICO-NAZARIO, J.:
In this Petition for Review on Certiorari under Rule 45 of the Rules of Court, petitioners
pray for the reversal of the Decision of the Court of Appeals in CA-G.R. CR No. 21134, dated
31 May 1999,[1] affirming with modification the Judgment of the Regional Trial Court (RTC) of
Puerto Princesa City, Palawan, in Criminal Case No. 11943, dated 05 May 1997,[2] finding
petitioners guilty beyond reasonable doubt of the crime of estafa under Article 315(1)(b) of
the Revised Penal Code.
Petitioner Pablito Murao is the sole owner of Lorna Murao Industrial Commercial
Enterprises (LMICE), a company engaged in the business of selling and refilling fire
extinguishers, with branches in Palawan, Naga, Legaspi, Mindoro, Aurora, Quezon, Isabela,
and Laguna. Petitioner Nelio Huertazuela is the Branch Manager of LMICE in Puerto Princesa
City, Palawan.[3]
On 01 September 1994, petitioner Murao and private complainant Chito Federico
entered into a Dealership Agreement for the marketing, distribution, and refilling of fire
extinguishers within Puerto Princesa City.[4] According to the Dealership Agreement, private
complainant Federico, as a dealer for LMICE, could obtain fire extinguishers from LMICE at a
50% discount, provided that he sets up his own sales force, acquires and issues his own sales
invoice, and posts a bond with LMICE as security for the credit line extended to him by
LMICE. Failing to comply with the conditions under the said Dealership Agreement, private
complainant Federico, nonetheless, was still allowed to act as a part-time sales agent for
LMICE entitled to a percentage commission from the sales of fire extinguishers.[5]
The amount of private complainant Federico’s commission as sales agent for LMICE was
under contention. Private complainant Federico claimed that he was entitled to a commission
equivalent to 50% of the gross sales he had made on behalf of LMICE,[6] while petitioners
maintained that he should receive only 30% of the net sales. Petitioners even contended that
as company policy, part-time sales agents were entitled to a commission of only 25% of the
net sales, but since private complainant Federico helped in establishing the LMICE branch
office in Puerto Princesa City, he was to receive the same commission as the full-time sales
agents of LMICE, which was 30% of the net sales.[7]
Private complainant Federico’s first successful transaction as sales agent of LMICE
involved two fire extinguishers sold to Landbank of the Philippines (Landbank), Puerto
Princesa City Branch, for the price of P7,200.00. Landbank issued a check, dated 08
November 1993, pay to the order of “L.M. Industrial Comm’l. Enterprises c/o Chito Federico,”
for the amount of P5,936.40,[8] after deducting from the original sales price the 15% discount
granted by private complainant Federico to Landbank and the 3% withholding tax. Private
complainant Federico encashed the check at Landbank and remitted only P2,436.40 to LMICE,
while he kept P3,500.00 for himself as his commission from the sale.[9]
Petitioners alleged that it was contrary to the standard operating procedure of LMICE
that private complainant Federico was named payee of the Landbank check on behalf of
LMICE, and that private complainant Federico was not authorized to encash the said check.
Despite the supposed irregularities committed by private complainant Federico in the collection
of the payment from Landbank and in the premature withholding of his commission from the
said payment, petitioners forgave private complainant Federico because the latter promised to
make-up for his misdeeds in the next transaction.[10]
Private complainant Federico, on behalf of LMICE, subsequently facilitated a transaction
with the City Government of Puerto Princesa for the refill of 202 fire extinguishers. Because of
the considerable cost, the City Government of Puerto Princesa requested that the transaction
be split into two purchase orders, and the City Government of Puerto Princesa shall pay for
each of the purchase orders separately.[11] Pursuant to the two purchase orders, LMICE refilled
and delivered all 202 fire extinguishers to the City Government of Puerto Princesa: 154 units
on 06 January 1994, 43 more units on 12 January 1994, and the last five units on 13 January
1994.[12]
The subject of this Petition is limited to the first purchase order, Purchase Order No.
GSO-856, dated 03 January 1994, for the refill of 99 fire extinguishers, with a total cost
of P309,000.00.[13] On 16 June 1994, the City Government of Puerto Princesa issued Check No.
611437 to LMICE to pay for Purchase Order No. GSO-856, in the amount of P300,572.73, net
of the 3% withholding tax.[14] Within the same day, petitioner Huertazuela claimed Check No.
611437 from the City Government of Puerto Princesa and deposited it under the current
account of LMICE with PCIBank.[15]
On 17 June 1994, private complainant Federico went to see petitioner Huertazuela at
the LMICE branch office in Puerto Princesa City to demand for the amount of P154,500.00 as
his commission from the payment of Purchase Order No. GSO-856 by the City Government of
Puerto Princesa. Petitioner Huertazuela, however, refused to pay private complainant Federico
his commission since the two of them could not agree on the proper amount thereof.[16]
Also on 17 June 1994, private complainant Federico went to the police station to file an
Affidavit-Complaint for estafa against petitioners.[17] Petitioners submitted their Joint Counter-
Affidavit on 12 July 1994.[18] The City Prosecution Office of Puerto Princesa City issued a
Resolution, dated 15 August 1994, finding that a prima facie case for estafa existed against
the petitioners and recommending the filing of an information for estafa against both of
them.[19]
The Information, docketed as Criminal Case No. 11943 and raffled to the RTC of Puerto
Princesa City, Palawan, Branch 52, reads as follows –
INFORMATION
The undersigned accuses PABLITO MURAO and NELIO C. HUERTAZUELA of the crime of
ESTAFA, committed as follows:
That on or about the 16th day of June, 1994, at Puerto Princesa City, Philippines, and within
the jurisdiction of this Honorable Court, the said accused, conspiring and confederating
together and mutually helping one another, after having received the amount of P309,000.00
as payment of the 99 tanks of refilled fire extinguisher (sic) from the City Government of
Puerto Princesa, through deceit, fraud and misrepresentation, did then and there willfully,
unlawfully and feloniously defraud one Chito Federico in the following manner, to wit: said
accused, well knowing that Chito Federico agent of LM Industrial Commercial Enterprises is
entitled to 50% commission of the gross sales as per their Dealership Contract or the amount
of P154,500.00 as his commission for his sale of 99 refilled fire extinguishers
18
worth P309,000.00, and accused once in possession of said amount of P309,000.00
misappropriate, misapply and convert the amount of P154,500.00 for their own personal use
and benefit and despite repeated demands made upon them by complainant to deliver the
amount of P154,500.00, accused failed and refused and still fails and refuses to do so, to the
damage and prejudice of said Chito Federico in the amount of P154,500.00, Philippine
Currency.[20]
After holding trial, the RTC rendered its Judgment on 05 May 1997 finding petitioners
guilty beyond reasonable doubt as co-principals of the crime of estafa defined and penalized in
Article 315(1)(b) of the Revised Penal Code. Estafa, under the said provision, is committed by
–
ART. 315. Swindling (estafa). – Any person who shall defraud another by any of the means
mentioned hereinbelow . . .
1. With unfaithfulness or abuse of confidence, namely:
(a) …
(b) By misappropriating or converting, to the prejudice of another, money, goods, or any
other personal property received by the offender in trust or on commission, or for
administration, or under any other obligation involving the duty to make delivery of or to
return the same, even though such obligation be totally or partially guaranteed by a bond; or
by denying having received such money, goods, or other property; . . .
In the same Judgment, the RTC expounded on its finding of guilt, thus –
For the afore-quoted provision of the Revised Penal Code to be committed, the following
requisites must concur:
1. That money, goods or other personal property be received by the offender in
trust, or on commission, or for administration, or under any other obligation
involving the duty to make delivery of, or to return, the same;
2. That there be misappropriation or conversion of such money or property by
the offender, or denial on his part of such receipt;
3. That such misappropriation or conversion or denial is to the prejudice of
another; and
4. That there is demand made by the offended party to the offender. (Reyes,
Revised Penal Code of the Philippines, p. 716; Manuel Manahan, Jr. vs.
Court of Appeals, Et Al., G.R. No. 111656, March 20, 1996)
All the foregoing elements are present in this case. The aborted testimony of Mrs. Norma
Dacuan, Cashier III of the Treasurer’s Office of the City of Puerto Princesa established the fact
that indeed, on June 16, 1994, co-accused Nelio Huertazuela took delivery of Check No.
611437 with face value of P300,572.73, representing payment for the refill of 99 cylinders of
fire extinguishers. Although the relationship between complaining witness Chito Federico and
LMIC is not fiduciary in nature, still the clause “any other obligation involving the duty to make
delivery of or to return” personal property is broad enough to include a “civil obligation”
(Manahan vs. C.A., Et. Al., Mar. 20, 1996).
The second element cannot be gainsaid. Both Pablito Murao and Nelio Huertazuela
categorically admitted that they did not give to Chito Federico his commission. Instead, they
deposited the full amount of the consideration, with the PCIBank in the Current Account of
LMIC.
…
The refusal by the accused to give Chito Federico what ever percentage his commission
necessarily caused him prejudice which constitute the third element of estafa. Demand for
payment, although not an essential element of estafa was nonetheless made by the
complainant but was rebuffed by the accused. The fraudulent intent by the accused is
indubitably indicated by their refusal to pay Chito Federico any percentage of the gross sales
as commission. If it were true that what the dealer/sales Agent is entitled to by way of
commission is only 30% of the gross sales, then by all means the accused should have paid
Chito Federico 30%. If he refused, they could have it deposited in his name. In that way
they may not be said to have misappropriated for themselves what pertained to their Agent by
way of commission.
…
WHEREFORE, premises considered judgment is hereby rendered finding the accused PABLITO
MURAO and NELIO HUERTAZUELA guilty beyond reasonable doubt as co-principals, of the
crime of estafa defined and penalized in Article 315 par. 1(b) of the Revised Penal Code, and
applying the provisions of the Indeterminate Sentence Law, both accused are hereby
sentenced to an indeterminate penalty ranging from a minimum of TWO (2) YEARS, FOUR (4)
MONTHS and ONE (1) DAY of prision correccional in its medium period, to a maximum of
TWENTY (20) YEARS of reclusion temporal in its maximum period; to pay Chito Federico,
jointly and severally:
a. Sales Commission equivalent to
50% of P309,000.00 or ------------------- P154,500.00
with legal interest thereon from
June 17, 1994 until fully paid;
b. Attorney’s fees ---------------------------- P 30,0000.00.[21]
Resolving the appeal filed by the petitioners before it, the Court of Appeals, in its
Decision, dated 31 May 1999, affirmed the aforementioned RTC Judgment, finding petitioners
guilty of estafa, but modifying the sentence imposed on the petitioners. The dispositive
portion of the Decision of the Court of Appeals reads –
19
WHEREFORE, the appealed decision is hereby AFFIRMED with the MODIFICATION that
appellants PABLITO MURAO and NELIO HUERTAZUELA are hereby each sentenced to an
indeterminate penalty of eight (8) years and One (1) day of prision mayor, as minimum, to
Twenty (20) years of reclusion temporal, as maximum. The award for attorney’s fee
of P30,000.00 is deleted because the prosecution of criminal action is the task of the State
prosecutors. All other aspects of the appealed decision are maintained.[22]
When the Court of Appeals, in its Resolution, dated 19 January 2000,[23] denied their
Motion for Reconsideration, petitioners filed the present Petition for Review[24] before this
Court, raising the following errors allegedly committed by the Court of Appeals in its Decision,
dated 31 May 1999 –
I
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT
RULED THAT PETITIONERS ARE LIABLE FOR ESTAFA UNDER ARTICLE 315 1(B) OF THE
REVISED PENAL CODE UNDER THE FOREGOING SET OF FACTS, WHEN IT IS CLEAR FROM
THE SAID UNDISPUTED FACTS THAT THE LIABILITY IS CIVIL IN NATURE.
II
WITH DUE RESPECT, THE HONORABLE COURT ERRED WHEN IT UPHOLD (sic) PRIVATE
COMPLAINANT’S CLAIM THAT HE IS ENTITLED TO A FIFTY (50%) PERCENT COMMISSION
WITHOUT EVIDENCE TO SUPPORT SUCH CLAIM.
This Court finds the instant Petition impressed with merit. Absent herein are two
essential elements of the crime of estafa by misappropriation or conversion under Article
315(1)(b) of the Revised Penal Code, namely: (1) That money, goods or other personal
property be received by the offender in trust, or on commission, or for administration, or
under any other obligation involving the duty to make delivery of, or to return, the same; and
(2) That there be a misappropriation or conversion of such money or property by the offender.
The findings of the RTC and the Court of Appeals that petitioners committed estafa rest
on the erroneous belief that private complainant Federico, due to his right to commission,
already owned 50% of the amount paid by the City Government of Puerto Princesa to LMICE
by virtue of Check No. 611437, so that the collection and deposit of the said check by
petitioners under the account of LMICE constituted misappropriation or conversion of private
complainant Federico’s commission.
However, his right to a commission does not make private complainant
Federico a joint owner of the money paid to LMICE by the City Government of Puerto
Princesa, but merely establishes the relation of agent and principal.[25] It is unequivocal that an
agency existed between LMICE and private complainant Federico. Article 1868 of the Civil
Code defines agency as a special contract whereby “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.” Although private complainant Federico never had the opportunity to
operate as a dealer for LMICE under the terms of the Dealership Agreement, he was allowed
to act as a sales agent for LMICE. He can negotiate for and on behalf of LMICE for the refill
and delivery of fire extinguishers, which he, in fact, did on two occasions – with Landbank and
with the City Government of Puerto Princesa. Unlike the Dealership Agreement, however, the
agreement that private complainant Federico may act as sales agent of LMICE was based on
an oral agreement.[26]
As a sales agent, private complainant Federico entered into negotiations with
prospective clients for and on behalf of his principal, LMICE. When negotiations for the sale or
refill of fire extinguishers were successful, private complainant Federico prepared the
necessary documentation. Purchase orders, invoices, and receipts were all in the name of
LMICE. It was LMICE who had the primary duty of picking up the empty fire extinguishers,
filling them up, and delivering the refilled tanks to the clients, even though private
complainant Federico personally helped in hauling and carrying the fire extinguishers during
pick-up from and delivery to clients.
All profits made and any advantage gained by an agent in the execution of his agency
should belong to the principal.[27] In the instant case, whether the transactions negotiated by
the sales agent were for the sale of brand new fire extinguishers or for the refill of empty
tanks, evidently, the business belonged to LMICE. Consequently, payments made by clients
for the fire extinguishers pertained to LMICE. When petitioner Huertazuela, as the Branch
Manager of LMICE in Puerto Princesa City, with the permission of petitioner Murao, the sole
proprietor of LMICE, personally picked up Check No. 611437 from the City Government of
Puerto Princesa, and deposited the same under the Current Account of LMICE with PCIBank,
he was merely collecting what rightfully belonged to LMICE. Indeed, Check No. 611437
named LMICE as the lone payee. Private complainant Federico may claim commission,
allegedly equivalent to 50% of the payment received by LMICE from the City Government of
Puerto Princesa, based on his right to just compensation under his agency contract with
LMICE,[28] but not as the automatic owner of the 50% portion of the said payment.
Since LMICE is the lawful owner of the entire proceeds of the check payment from the
City Government of Puerto Princesa, then the petitioners who collected the payment on behalf
of LMICE did not receive the same or any part thereof in trust, or on commission, or for
administration, or under any other obligation involving the duty to make delivery of, or to
return, the same to private complainant Federico, thus, the RTC correctly found that no
fiduciary relationship existed between petitioners and private complainant Federico. A
fiduciary relationship between the complainant and the accused is an essential element of
estafa by misappropriation or conversion, without which the accused could not have
committed estafa.[29]
The RTC used the case of Manahan, Jr. v. Court of Appeals[30] to support its position
that even in the absence of a fiduciary relationship, the petitioners still had the civil obligation
to return and deliver to private complainant Federico his commission. The RTC failed to
discern the substantial differences in the factual background of the Manahan case from the
present Petition. The Manahan case involved the lease of a dump truck. Although a contract
of lease may not be fiduciary in character, the lessee clearly had the civil obligation to return
the truck to the lessor at the end of the lease period; and failure of the lessee to return the
truck as provided for in the contract may constitute estafa. The phrase “or any other
obligation involving the duty to make delivery of, or to return the same” refers to contracts of
bailment, such as, contract of lease of personal property, contract of deposit,
and commodatum, wherein juridical possession of the thing was transferred to the lessee,
depositary or borrower, and wherein the latter is obligated to return the same thing.[31]
In contrast, the current Petition concerns an agency contract whereby the principal
already received payment from the client but refused to give the sales agent, who negotiated
the sale, his commission. As has been established by this Court in the foregoing paragraphs,
LMICE had a right to the full amount paid by the City Government of Puerto Princesa. Since
LMICE, through petitioners, directly collected the payment, then it was already in possession
of the amount, and no transfer of juridical possession thereof was involved herein. Given that
private complainant Federico could not claim ownership over the said payment or any portion
thereof, LMICE had nothing at all to deliver and return to him. The obligation of LMICE to pay
20
private complainant Federico his commission does not arise from any duty to deliver or return
the money to its supposed owner, but rather from the duty of a principal to give just
compensation to its agent for the services rendered by the latter.

Furthermore, the Court of Appeals, in its Decision, dated 31 May 1999, defined the
words “convert” and “misappropriate” in the following manner –

The High Court in Saddul v. Court of Appeals [192 SCRA 277] enunciated that the words
“convert” and “misappropriate” in the crime of estafa punished under Art. 315, par. 1(b)
connote an act of using or disposing of another’s property as if it were one’s own, or if
devoting it to a purpose or use different from that agreed upon. To misappropriate to one’s
use includes, not only conversion to one’s personal advantage, but also every attempt to
dispose of the property of another without right.[32]

Based on the very same definition, this Court finds that petitioners did not convert nor
misappropriate the proceeds from Check No. 611437 because the same belonged to LMICE,
and was not “another’s property.” Petitioners collected the said check from the City
Government of Puerto Princesa and deposited the same under the Current Account of LMICE
with PCIBank. Since the money was already with its owner, LMICE, it could not be said that
the same had been converted or misappropriated for one could not very well fraudulently
appropriate to himself money that is his own.[33]

Although petitioners’ refusal to pay private complainant Federico his commission caused
prejudice or damage to the latter, said act does not constitute a crime, particularly estafa by
conversion or misappropriation punishable under Article 315(1)(b) of the Revised Penal Code.
Without the essential elements for the commission thereof, petitioners cannot be deemed to
have committed the crime.

While petitioners may have no criminal liability, petitioners themselves admit their civil
liability to the private complainant Federico for the latter’s commission from the sale, whether
it be 30% of the net sales or 50% of the gross sales. However, this Court is precluded from
making a determination and an award of the civil liability for the reason that the said civil
liability of petitioners to pay private complainant Federico his commission arises from a
violation of the agency contract and not from a criminal act.[34] It would be improper and
unwarranted for this Court to impose in a criminal action the civil liability arising from a civil
contract, which should have been the subject of a separate and independent civil action.[35]

WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R. CR No. 21134,
dated 31 May 1999, affirming with modification the Judgment of the RTC of Puerto Princesa
City, Palawan, in Criminal Case No. 11943, dated 05 May 1997, finding petitioners guilty
beyond reasonable doubt of estafa by conversion or misappropriation under Article 315(1)(b)
of the Revised Penal Code, and awarding the amount of P154,500.00 as sales commission to
private complainant Federico, is hereby REVERSED and SET ASIDE. A new Judgment is
hereby entered ACQUITTING petitioners based on the foregoing findings of this Court that
their actions did not constitute the crime of estafa by conversion or misappropriation under
Article 315(1)(b) of the Revised Penal Code. The cash bonds posted by the petitioners for
their provisional liberty are hereby ordered RELEASED and the amounts thereof RETURNED to
the petitioners, subject to the usual accounting and auditing procedures.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

21
 EN BANC Nothing to the contrary appearing in the record, and the existence of the agency and the
collection of the funds on account of the principal having been established, the obligation to
deliver these funds to the principal must be held to have been imposed upon the agent by
G.R. No. 3188 March 12, 1907
virtue of the contract of agency.

THE UNITED STATES, plaintiff-appellee,

vs.
ALEC KIENE, defendant-appellant.
Hartigan, Marple, Rohde & Gutierrez for appellant.
Attorney-General Araneta for appellee.
CARSON, J.:
The defendant was an insurance agent. As such agent there was paid over to him for the
account of his employers, the China Mutual Life Insurance Company, the sum of 1,539.20
pesos, Philippine currency, which he failed and refused to turn over to them. For his failure
and refusal so to do, he was convicted of the crime ofestafa in the Court of First Instance of
the city Manila in sentenced to be imprisoned for one year and six months in Bilibid, and to
pay the costs of the trial.
The facts as stated above were fully established at the trial of the case; the accused offered
no evidence on his own behalf and rest his appeal substantially upon the alleged failure of the
prosecution to establish the existence of a duty or obligation imposed on the defendant to turn
over his principal the funds which he is charged with appropriating to his own use.
Counsel for the defendant contends that the trial court erroneously admitted in evidence a
certain document purporting to be a contract of agency signed by the defendant. The name of
the accused is attached to this document, and one of the witnesses, the district agent of the
China Mutual Life Insurance Company, stated that it was the contract of agency it purported
to be, but failed to state specifically that the signature attached thereto was the signature of
the defendant, though he declared that he knew his signature and had seen him write it on
various occasions.
Counsel for the appellant further contented that the court erred in admitting in evidence a
certain letter written by the defendant wherein he admitted the collection of certain funds on
account of his principal, but we think that the execution of this letter was conclusively
established, and that it was properly admitted, being pertinent and material to the issue in the
case.
There were other objections to the admission of certain testimony at the trial of the case, but
we find no error in the proceedings prejudicial to the real rights of the accused, and it is
unnecessary to discuss the assignments of error based on these objections.
The crime of which the accused was convicted is defined and penalized in paragraph 5 of
article 535, read together with paragraph 3 of article 534, of the Penal Code, and the penalty
prescribed is that of presidio correccional in its minimum and medium degrees. There being no
aggravating or extenuating circumstance to be taken into consideration, this penalty should be
imposed in its medium degree ,which, in accordance with the provisions of article 82 of the
said code, is from one year eight months and twenty-one days to two years eleven months
and ten days of presidio correccional. The trial court imposed the penalty of one year and six
months of imprisonment in Bilibid, and failed to impose the accessory penalties prescribed by
law, and this sentence should therefore be reversed, and is hereby reversed, and instead
thereof we impose the penalty of one year eight months and twenty-one days' imprisonment
( presidio correccional), together with the accessory penalties prescribed by law, and the
payment to the agents of the China Mutual Life Insurance Company, Limited, of the sum of
1,550.30 pesos, Philippine currency, with subsidiary imprisonment in case of insolvency, and
the costs in both instances. After the expiration of ten days let judgment be entered in
accordance herewith, and ten days thereafter let the case be remanded to the lower court for
proper action. So ordered.
Arellano, C.J., Torres, Mapa, Willard and Tracey, JJ., concur.

An examination of the record seems to indicate that the failure of the witness to expressly
identify the signature of the defendant attached to the document was due to an oversight, but
however this may be, it is contented that the execution of the document was not formally
established, and the trial court erred in taking into consideration one of its provisions whereby
the defendant appears to have expressly obligated himself to deliver to the China Mutual Life
Insurance Company the funds collected on its account, without deduction for any purpose
whatever.

We do not deem it necessary to review the action of the court in admitting this document in
evidence, because we are of opinion that the obligation of the defendant to deliver the funds
in question to his employers is determined by the provision of article 1720 of the Civil Code,
which is as follows:

Every agent is bound to give an account of his transactions and to pay to the
principal all that he may have received by virtue of the agency, even though what
has been received is not owed to the principal.

22
 EN BANC April 7, 1924
In re H. V. BAMBERGER
OSTRAND, J.:
At the instance of the Attorney-General, disbarment proceedings have been instituted against
Attorney H. V. Bamberger for alleged malpractice in his profession. The matter has been
investigated by the provincial fiscal of Iloilo, aided by an assistant attorney of the Bureau of
Justice, and after receiving considerable testimony and other evidence, and after hearing the
respondent, the fiscal summarizes the facts found as follows:
First. That Mr. H. V. Bamberger was attorney for the plaintiff in the case No. 4076 of
the Court of First Instance of Iloilo "S. M. Berger, plaintiff vs. Enrique de Valera,
defendant" regarding a certain sum of money.
Second. That Mr. Bemberger took possession of the personal property attached by
the plaintiff in said case, as well as other personal property not attached, and the
respondent disposed of a certain amount of steel bars which the defendant Enrique
de Valera had deposited with the Chairman King Chio.
Third. That Mr. Bamberger, as he admitted in his answer and statement, has
disposed of a lot 83 tins of canned peas at the price of 10 centavos per tin and one
case of catchup at the price P10, without due authorization.
Fourth. That while all the merchandise was in the possession of Mr. H. V.
Bamberger, the respondent, he collected and received the amount of P2,178.82 as
he admitted, either from debtor of Enrique de Valera, especially the Chinaman King
Chio, or for having disposed of some merchandise. It is also an admitted fact by him
that he is accountable fro P1,187 to S. M. Berger & Co.
Fifth. That Mr. Bamberger has, on various occasions, required either by Mr. Block, in
the name of S. M. Berger & Co., or by Messrs. S. M. Berger & Co. themselves, to
render an immediate accounting which he has disregarded without any reasonable
cause.
Sixth. That Mr. H. V. Bamberger, since the civil case No. 4076 above referred to has
been decided, on July 22, 1921, and completely determinated as per the stipulation
and agreement, Exhibit T and the answer of the defendant admitting all and every
one of the allegations in the amended complaint of the plaintiff, has not made any
effort to render an accounting to S. M. Berger nor has he been willing to send or
deliver to his client the money collected at any time.
Seventh. That the excuse of the respondent that he could not render an accounting
to his client because Mr. Cedrum did not give him a list of the merchandise taken by
the latter and because Mr. Berger took with him the receipt of King Chio, Exhibit H,
and certain notes in connection with King Chio's account, is not admissible:
(a) Because Mr. Cendrum declared that he furnished Mr. Bemberger with
the list in question, and the respondent made a note in his book of the
merchandise turned over.
(b) Because the evidence of the complaint shows clearly that Mr.
Bamberger never asked Mr. Berger for Exhibit H and other notes he
needed to render his account and if Mr. Berger [Bamberger] had written
to Mr. Berger for the papers he needed for his accounting, Mr. Berger
would have, of course, given them to him with pleasure.
(c) Because if we were true that he could not give a complete accounting
in regard to King Chio's account without such papers and notes, it is not
understood why he prepared and acknowledge before a notary the
document Exhibit 2, which is an assignment of the account owed to King
Chio by the Talisay-Silay Milling Co. amounting to P5,390. This document
was executed on April 25, 1922.
Upon the facts stated the fiscal recommends that the respondent be suspended from the
practice of law.
The findings quoted are amply supported by the evidence. Whether the respondent, after
deducting proper attorney's fees, owes his client any considerable sum of money, we need not
here decide; that must be determined an another and different proceeding. But attorneys are
bound to promptly account to their clients for money or property received by them as such,
and the fact that an attorney has a lien for fees on money in his hands does not relieve him
from liability. (6 C. J., 693.) Notwithstanding repeated demands on the part of his client, the
defendant has for several years failed to render an accounting of the money received by him
on behalf of his client and the excuses offered for his failure to do so are so inadequate as to
merit no consideration. The respondent is clearly guilty of professional misconduct in falling to
account to S. M. Berger & Co. for money received by him as attorney for the latter.
It is therefore ordered that H. V. Bamberger be and he hereby is suspended from his office of
lawyer for the period of six months beginning with the date upon which he is notified of this
order.
Araullo, C. J., Johnson, Street, Avanceña, Johns and Romualdez, JJ., concur.
23
 FIRST DIVISION
[G.R. No. 130423. November 18, 2002]
VIRGIE SERONA, petitioner, vs. HON. COURT OF APPEALS and THE PEOPLE OF THE
PHILIPPINES, respondents.
DECISION
YNARES-SANTIAGO, J.:
During the period from July 1992 to September 1992, Leonida Quilatan delivered pieces
of jewelry to petitioner Virgie Serona to be sold on commission basis. By oral agreement of the
parties, petitioner shall remit payment or return the pieces of jewelry if not sold to Quilatan,
both within 30 days from receipt of the items.
Upon petitioner’s failure to pay on September 24, 1992, Quilatan required her to
execute an acknowledgment receipt (Exhibit B) indicating their agreement and the total
amount due, to wit:
Ako, si Virginia Serona, nakatira sa Mother Earth Subd., Las Pinas, ay kumuha ng mga alahas
kay Gng. Leonida Quilatan na may kabuohang halaga na P567,750.00 para ipagbili para ako
magkakomisyon at ibibigay ang benta kung mabibili o ibabalik sa kanya ang mga nasabing
alahas kung hindi mabibili sa loob ng 30 araw.
Las Pinas, September 24, 1992.[1]
The receipt was signed by petitioner and a witness, Rufina G. Navarette.
Unknown to Quilatan, petitioner had earlier entrusted the jewelry to one Marichu
Labrador for the latter to sell on commission basis. Petitioner was not able to collect payment
from Labrador, which caused her to likewise fail to pay her obligation to Quilatan.
Subsequently, Quilatan, through counsel, sent a formal letter of demand[2] to petitioner
for failure to settle her obligation. Quilatan executed a complaint affidavit[3] against petitioner
before the Office of the Assistant Provincial Prosecutor. Thereafter, an information
for estafa under Article 315, paragraph 1(b)[4] of the Revised Penal Code was filed against
petitioner, which was raffled to Branch 255 of the Regional Trial Court of Las Pinas. The
information alleged:
That on or about and sometime during the period from July 1992 up to September 1992, in
the Municipality of Las Pinas, Metro Manila, Philippines, and within the jurisdiction of this
Honorable Court, the said accused received in trust from the complainant Leonida E. Quilatan
various pieces of jewelry in the total value of P567,750.00 to be sold on commission basis
under the express duty and obligation of remitting the proceeds thereof to the said
complainant if sold or returning the same to the latter if unsold but the said accused once in
possession of said various pieces of jewelry, with unfaithfulness and abuse of confidence and
with intent to defraud, did then and there willfully, unlawfully and feloniously misappropriate
and convert the same for her own personal use and benefit and despite oral and written
demands, she failed and refused to account for said jewelry or the proceeds of sale thereof, to
the damage and prejudice of complainant Leonida E. Quilatan in the aforestated total amount
of P567,750.00.
CONTRARY TO LAW.[5]
Petitioner pleaded not guilty to the charge upon arraignment.[6] Trial on the merits
thereafter ensued.
Quilatan testified that petitioner was able to remit P100,000.00 and returned P43,000.00
worth of jewelriy;[7] that at the start, petitioner was prompt in settling her obligation; however,
subsequently the payments were remitted late;[8] that petitioner still owed her in the amount
of P424,750.00.[9]
On the other hand, petitioner admitted that she received several pieces of jewelry from
Quilatan and that she indeed failed to pay for the same. She claimed that she entrusted the
pieces of jewelry to Marichu Labrador who failed to pay for the same, thereby causing her to
default in paying Quilatan.[10] She presented handwritten receipts (Exhibits 1 &
2)[11] evidencing payments made to Quilatan prior to the filing of the criminal case.
Marichu Labrador confirmed that she received pieces of jewelry from petitioner worth
P441,035.00. She identified an acknowledgment receipt (Exhibit 3)[12] signed by her dated
July 5, 1992 and testified that she sold the jewelry to a person who absconded without paying
her. Labrador also explained that in the past, she too had directly transacted with Quilatan for
the sale of jewelry on commission basis; however, due to her outstanding account with the
latter, she got jewelry from petitioner instead.[13]
On November 17, 1994, the trial court rendered a decision finding petitioner guilty
of estafa, the dispositive portion of which reads:
WHEREFORE, in the light of the foregoing, the court finds the accused Virgie Serona guilty
beyond reasonable doubt, and as the amount misappropriated is P424,750.00 the penalty
provided under the first paragraph of Article 315 of the Revised Penal Code has to be imposed
which shall be in the maximum period plus one (1) year for every additional P10,000.00.
Applying the Indeterminate Sentence Law, the said accused is hereby sentenced to suffer the
penalty of imprisonment ranging from FOUR (4) YEARS and ONE (1) DAY of prision
correccional as minimum to TEN (10) YEARS and ONE (1) DAY of prision mayor as maximum;
to pay the sum of P424,750.00 as cost for the unreturned jewelries; to suffer the accessory
penalties provided by law; and to pay the costs.
SO ORDERED.[14]
Petitioner appealed to the Court of Appeals, which affirmed the judgment of conviction
but modified the penalty as follows:
WHEREFORE, the appealed decision finding the accused-appellant guilty beyond reasonable
doubt of the crime of estafa is hereby AFFIRMED with the following MODIFICATION:
Considering that the amount involved is P424,750.00, the penalty should be imposed in its
maximum period adding one (1) year for each additional P10,000.00 albeit the total penalty
should not exceed Twenty (20) Years (Art. 315). Hence, accused-appellant is hereby
SENTENCED to suffer the penalty of imprisonment ranging from Four (4) Years and One (1)
Day of Prision Correccional as minimum to Twenty (20) Years of Reclusion Temporal.
24
SO ORDERED.[15]
Upon denial of her motion for reconsideration,[16] petitioner filed the instant petition
under Rule 45, alleging that:
I
RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN CONCLUDING THAT THERE WAS
AN ABUSE OF CONFIDENCE ON THE PART OF PETITIONER IN ENTRUSTING THE SUBJECT
JEWELRIES (sic) TO HER SUB-AGENT FOR SALE ON COMMISSION TO PROSPECTIVE BUYERS.
II
RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN CONCLUDING THAT THERE WAS
MISAPPROPRIATION OR CONVERSION ON THE PART OF PETITIONER WHEN SHE FAILED TO
RETURN THE SUBJECT JEWELRIES (sic) TO PRIVATE COMPLAINANT.[17]
Petitioner argues that the prosecution failed to establish the elements of estafa as
penalized under Article 315, par. 1(b) of the Revised Penal Code. In particular, she submits
that she neither abused the confidence reposed upon her by Quilatan nor converted or
misappropriated the subject jewelry; that her giving the pieces of jewelry to a sub-agent for
sale on commission basis did not violate her undertaking with Quilatan. Moreover, petitioner
delivered the jewelry to Labrador under the same terms upon which it was originally entrusted
to her. It was established that petitioner had not derived any personal benefit from the loss of
the jewelry. Consequently, it cannot be said that she misappropriated or converted the same.
We find merit in the petition.
The elements of estafa through misappropriation or conversion as defined in Article 315,
par. 1(b) of the Revised Penal Code are: (1) that the money, good or other personal property
is received by the offender in trust, or on commission, or for administration, or under any
other obligation involving the duty to make delivery of, or to return, the same; (2) that there
be misappropriation or conversion of such money or property by the offender or denial on his
part of such receipt; (3) that such misappropriation or conversion or denial is to the prejudice
of another; and (4) that there is a demand made by the offended party on the
offender.[18] While the first, third and fourth elements are concededly present, we find the
second element of misappropriation or conversion to be lacking in the case at bar.
Petitioner did not ipso facto commit the crime of estafa through conversion or
misappropriation by delivering the jewelry to a sub-agent for sale on commission basis. We
are unable to agree with the lower courts’ conclusion that this fact alone is sufficient ground
for holding that petitioner disposed of the jewelry “as if it were hers, thereby committing
conversion and a clear breach of trust.”[19]
It must be pointed out that the law on agency in our jurisdiction allows the appointment
by an agent of a substitute or sub-agent in the absence of an express agreement to the
contrary between the agent and the principal.[20] In the case at bar, the appointment of
Labrador as petitioner’s sub-agent was not expressly prohibited by Quilatan, as the
acknowledgment receipt, Exhibit B, does not contain any such limitation. Neither does it
appear that petitioner was verbally forbidden by Quilatan from passing on the jewelry to
another person before the acknowledgment receipt was executed or at any other time. Thus,
it cannot be said that petitioner’s act of entrusting the jewelry to Labrador is characterized by
abuse of confidence because such an act was not proscribed and is, in fact, legally sanctioned.
The essence of estafa under Article 315, par. 1(b) is the appropriation or conversion of
money or property received to the prejudice of the owner. The words “convert” and
“misappropriated” connote an act of using or disposing of another’s property as if it were
one’s own, or of devoting it to a purpose or use different from that agreed upon. To
misappropriate for one’s own use includes not only conversion to one’s personal advantage,
but also every attempt to dispose of the property of another without right.[21]
In the case at bar, it was established that the inability of petitioner as agent to comply
with her duty to return either the pieces of jewelry or the proceeds of its sale to her principal
Quilatan was due, in turn, to the failure of Labrador to abide by her agreement with petitioner.
Notably, Labrador testified that she obligated herself to sell the jewelry in behalf of petitioner
also on commission basis or to return the same if not sold. In other words, the pieces of
jewelry were given by petitioner to Labrador to achieve the very same end for which they
were delivered to her in the first place. Consequently, there is no conversion since the pieces
of jewelry were not devoted to a purpose or use different from that agreed upon.
Similarly, it cannot be said that petitioner misappropriated the jewelry or delivered them
to Labrador “without right.” Aside from the fact that no condition or limitation was imposed on
the mode or manner by which petitioner was to effect the sale, it is also consistent with usual
practice for the seller to necessarily part with the valuables in order to find a buyer and allow
inspection of the items for sale.
In People v. Nepomuceno,[22] the accused-appellant was acquitted of estafa on facts
similar to the instant case. Accused-appellant therein undertook to sell two diamond rings in
behalf of the complainant on commission basis, with the obligation to return the same in a few
days if not sold. However, by reason of the fact that the rings were delivered also for sale on
commission to sub-agents who failed to account for the rings or the proceeds of its sale,
accused-appellant likewise failed to make good his obligation to the complainant thereby
giving rise to the charge of estafa. In absolving the accused-appellant of the crime charged,
we held:
Where, as in the present case, the agents to whom personal property was entrusted for sale,
conclusively proves the inability to return the same is solely due to malfeasance of a subagent
to whom the first agent had actually entrusted the property in good faith, and for the same
purpose for which it was received; there being no prohibition to do so and the chattel being
delivered to the subagent before the owner demands its return or before such return becomes
due, we hold that the first agent can not be held guilty of estafa by either misappropriation or
conversion. The abuse of confidence that is characteristic of this offense is missing under the
circumstances.[23]
Accordingly, petitioner herein must be acquitted. The lower courts’ reliance on People v.
Flores[24] and U.S. v. Panes[25] to justify petitioner’s conviction is misplaced, considering that
the factual background of the cited cases differ from those which obtain in the case at bar.
In Flores, the accused received a ring to sell under the condition that she would return it
the following day if not sold and without authority to retain the ring or to give it to a sub-
agent. The accused in Panes,meanwhile, was obliged to return the jewelry he received upon
demand, but passed on the same to a sub-agent even after demand for its return had
already been made. In the foregoing cases, it was held that there was conversion or
misappropriation.
25
 Furthermore, in Lim v. Court of Appeals,[26] the Court, citing Nepomuceno and the case
of People v. Trinidad,[27] held that:

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

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

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

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

SO ORDERED.

Davide, Jr., (Chairman), Vitug, Carpio, and Azcuna, JJ., concur.

26
 FIRST DIVISION
G.R. No. 137162 January 24, 2007
CORAZON L. ESCUETA, assisted by her husband EDGAR ESCUETA, IGNACIO E.
RUBIO, THE HEIRS OF LUZ R. BALOLOY, namely, ALEJANDRINO R. BALOLOY and
BAYANI R. BALOLOY, Petitioners,
vs.
RUFINA LIM, Respondent.
DECISION
AZCUNA, J.:
This is an appeal by certiorari1 to annul and set aside the Decision and Resolution of the Court
of Appeals (CA) dated October 26, 1998 and January 11, 1999, respectively, in CA-G.R. CV No.
48282, entitled "Rufina Lim v. Corazon L. Escueta, etc., et. al."
The facts2 appear as follows:
Respondent Rufina Lim filed an action to remove cloud on, or quiet title to, real property, with
preliminary injunction and issuance of [a hold-departure order] from the Philippines against
Ignacio E. Rubio. Respondent amended her complaint to include specific performance and
damages.
In her amended complaint, respondent averred inter alia that she bought the hereditary
shares (consisting of 10 lots) of Ignacio Rubio [and] the heirs of Luz Baloloy, namely:
Alejandrino, Bayani, and other co-heirs; that said vendors executed a contract of sale dated
April 10, 1990 in her favor; that Ignacio Rubio and the heirs of Luz Baloloy received [a down
payment] or earnest money in the amount of P102,169.86 and P450,000, respectively; that it
was agreed in the contract of sale that the vendors would secure certificates of title covering
their respective hereditary shares; that the balance of the purchase price would be paid to
each heir upon presentation of their individual certificate[s] of [title]; that Ignacio Rubio
refused to receive the other half of the down payment which is P[100,000]; that Ignacio Rubio
refused and still refuses to deliver to [respondent] the certificates of title covering his share on
the two lots; that with respect to the heirs of Luz Baloloy, they also refused and still refuse to
perform the delivery of the two certificates of title covering their share in the disputed lots;
that respondent was and is ready and willing to pay Ignacio Rubio and the heirs of Luz Baloloy
upon presentation of their individual certificates of title, free from whatever lien and
encumbrance;
As to petitioner Corazon Escueta, in spite of her knowledge that the disputed lots have already
been sold by Ignacio Rubio to respondent, it is alleged that a simulated deed of sale involving
said lots was effected by Ignacio Rubio in her favor; and that the simulated deed of sale by
Rubio to Escueta has raised doubts and clouds over respondent’s title.
In their separate amended answers, petitioners denied the material allegations of the
complaint and alleged inter alia the following:
For the heirs of Luz Baloloy (Baloloys for brevity):
Respondent has no cause of action, because the subject contract of sale has no more force
and effect as far as the Baloloys are concerned, since they have withdrawn their offer to sell
for the reason that respondent failed to pay the balance of the purchase price as orally
promised on or before May 1, 1990.
For petitioners Ignacio Rubio (Rubio for brevity) and Corazon Escueta (Escueta for brevity):
Respondent has no cause of action, because Rubio has not entered into a contract of sale with
her; that he has appointed his daughter Patricia Llamas to be his attorney-in-fact and not in
favor of Virginia Rubio Laygo Lim (Lim for brevity) who was the one who represented him in
the sale of the disputed lots in favor of respondent; that the P100,000 respondent claimed he
received as down payment for the lots is a simple transaction by way of a loan with Lim.
The Baloloys failed to appear at the pre-trial. Upon motion of respondent, the trial court
declared the Baloloys in default. They then filed a motion to lift the order declaring them in
default, which was denied by the trial court in an order dated November 27, 1991.
Consequently, respondent was allowed to adduce evidence ex parte. Thereafter, the trial court
rendered a partial decision dated July 23, 1993 against the Baloloys, the dispositive portion of
which reads as follows:
IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of [respondent] and
against [petitioners, heirs] of Luz R. Balolo[y], namely: Alejandrino Baloloy and Bayani Baloloy.
The [petitioners] Alejandrino Baloloy and Bayani Baloloy are ordered to immediately execute
an [Absolute] Deed of Sale over their hereditary share in the properties covered by TCT No.
74392 and TCT No. 74394, after payment to them by [respondent] the amount
of P[1,050,000] or consignation of said amount in Court. [For] failure of [petitioners]
Alejandrino Baloloy and Bayani Baloloy to execute the Absolute Deed of Sale over their
hereditary share in the property covered by TCT No. T-74392 and TCT No. T-74394 in favor of
[respondent], the Clerk of Court is ordered to execute the necessary Absolute Deed of Sale in
behalf of the Baloloys in favor of [respondent,] with a consideration ofP[1,500,000]. Further[,]
[petitioners] Alejandrino Baloloy and Bayani Baloloy are ordered to jointly and severally pay
[respondent] moral damages in the amount of P[50,000] and P[20,000] for attorney’s fees.
The adverse claim annotated at the back of TCT No. T-74392 and TCT No. T-74394[,] insofar
as the shares of Alejandrino Baloloy and Bayani Baloloy are concerned[,] [is] ordered
cancelled.
With costs against [petitioners] Alejandrino Baloloy and Bayani Baloloy.
SO ORDERED.3
The Baloloys filed a petition for relief from judgment and order dated July 4, 1994 and
supplemental petition dated July 7, 1994. This was denied by the trial court in an order dated
September 16, 1994. Hence, appeal to the Court of Appeals was taken challenging the order
denying the petition for relief.
Trial on the merits ensued between respondent and Rubio and Escueta. After trial, the trial
court rendered its assailed Decision, as follows:
27
IN VIEW OF THE FOREGOING, the complaint [and] amended complaint are dismissed against THE HONORABLE COURT OF APPEALS ERRED IN DENYING THE PETITION FOR RELIEF FROM
[petitioners] Corazon L. Escueta, Ignacio E. Rubio[,] and the Register of Deeds. The JUDGMENT FILED BY THE BALOLOYS.
counterclaim of [petitioners] [is] also dismissed. However, [petitioner] Ignacio E. Rubio is
ordered to return to the [respondent], Rufina Lim[,] the amount of P102,169.80[,] with
II
interest at the rate of six percent (6%) per annum from April 10, [1990] until the same is fully
paid. Without pronouncement as to costs.
THE HONORABLE COURT OF APPEALS ERRED IN REINSTATING THE COMPLAINT AND IN
4 AWARDING MORAL DAMAGES AND ATTORNEY’S FEES IN FAVOR OF RESPONDENT RUFINA L.
SO ORDERED.
LIM CONSIDERING THAT:

On appeal, the CA affirmed the trial court’s order and partial decision, but reversed the later
A. IGNACIO E. RUBIO IS NOT BOUND BY THE CONTRACT OF SALE BETWEEN
decision. The dispositive portion of its assailed Decision reads:
VIRGINIA LAYGO-LIM AND RUFINA LIM.

WHEREFORE, upon all the foregoing premises considered, this Court rules:
B. THE CONTRACT ENTERED INTO BETWEEN RUFINA LIM AND VIRGINIA LAYGO-
LIM IS A CONTRACT TO SELL AND NOT A CONTRACT OF SALE.
1. the appeal of the Baloloys from the Order denying the Petition for Relief from
Judgment and Orders dated July 4, 1994 and Supplemental Petition dated July 7,
C. RUFINA LIM FAILED TO FAITHFULLY COMPLY WITH HER OBLIGATIONS UNDER
1994 is DISMISSED. The Order appealed from is AFFIRMED.
THE CONTRACT TO SELL THEREBY WARRANTING THE CANCELLATION THEREOF.

2. the Decision dismissing [respondent’s] complaint is REVERSED and SET ASIDE

D. CORAZON L. ESCUETA ACTED IN UTMOST GOOD FAITH IN ENTERING INTO
and a new one is entered. Accordingly,
THE CONTRACT OF SALE WITH IGNACIO E. RUBIO.

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

III
upheld.

THE CONTRACT OF SALE EXECUTED BETWEEN IGNACIO E. RUBIO AND CORAZON

b. Rubio is directed to execute a Deed of Absolute Sale conditioned upon
L. ESCUETA IS VALID.
the payment of the balance of the purchase price by [respondent] within
30 days from the receipt of the entry of judgment of this Decision.
IV
c. the contracts of sale between Rubio and Escueta involving Rubio’s
share in the disputed properties is declared NULL and VOID. THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING PETITIONERS’
COUNTERCLAIMS.
d. Rubio and Escueta are ordered to pay jointly and severally the
[respondent] the amount ofP[20,000] as moral damages and P[20,000] as Briefly, the issue is whether the contract of sale between petitioners and respondent is valid.
attorney’s fees.
Petitioners argue, as follows:
3. the appeal of Rubio and Escueta on the denial of their counterclaim is
DISMISSED. First, the CA did not consider the circumstances surrounding petitioners’ failure to appear at
the pre-trial and to file the petition for relief on time.
SO ORDERED.5
As to the failure to appear at the pre-trial, there was fraud, accident and/or excusable neglect,
Petitioners’ Motion for Reconsideration of the CA Decision was denied. Hence, this petition. because petitioner Bayani was in the United States. There was no service of the notice of pre-
trial or order. Neither did the former counsel of record inform him. Consequently, the order
declaring him in default is void, and all subsequent proceedings, orders, or decision are void.
The issues are:

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

28
Second, the sale by Virginia to respondent is not binding. Petitioner Rubio did not authorize
Virginia to transact business in his behalf pertaining to the property. The Special Power of
Attorney was constituted in favor of Llamas, and the latter was not empowered to designate a
substitute attorney-in-fact. Llamas even disowned her signature appearing on the "Joint
Special Power of Attorney," which constituted Virginia as her true and lawful attorney-in-fact
in selling Rubio’s properties.
Dealing with an assumed agent, respondent should ascertain not only the fact of agency, but
also the nature and extent of the former’s authority. Besides, Virginia exceeded the authority
for failing to comply with her obligations under the "Joint Special Power of Attorney."
The amount encashed by Rubio represented not the down payment, but the payment of
respondent’s debt. His acceptance and encashment of the check was not a ratification of the
contract of sale.
Third, the contract between respondent and Virginia is a contract to sell, not a contract of
sale. The real character of the contract is not the title given, but the intention of the parties.
They intended to reserve ownership of the property to petitioners pending full payment of the
purchase price. Together with taxes and other fees due on the properties, these are conditions
precedent for the perfection of the sale. Even assuming that the contract is ambiguous, the
same must be resolved against respondent, the party who caused the same.
Fourth, Respondent failed to faithfully fulfill her part of the obligation. Thus, Rubio had the
right to sell his properties to Escueta who exercised due diligence in ascertaining ownership of
the properties sold to her. Besides, a purchaser need not inquire beyond what appears in a
Torrens title.
The petition lacks merit. The contract of sale between petitioners and respondent is
valid.lawphil.net
Bayani Baloloy was represented by his attorney-in-fact, Alejandrino Baloloy. In the Baloloys’
answer to the original complaint and amended complaint, the allegations relating to the
personal circumstances of the Baloloys are clearly admitted.
"An admission, verbal or written, made by a party in the course of the proceedings in the
same case, does not require proof."6 The "factual admission in the pleadings on record
[dispenses] with the need x x x to present evidence to prove the admitted fact."7 It cannot,
therefore, "be controverted by the party making such admission, and [is] conclusive"8 as to
them. All proofs submitted by them "contrary thereto or inconsistent therewith should be
ignored whether objection is interposed by a party or not."9 Besides, there is no showing that
a palpable mistake has been committed in their admission or that no admission has been
made by them.
Pre-trial is mandatory.10 The notices of pre-trial had been sent to both the Baloloys and their
former counsel of record. Being served with notice, he is "charged with the duty of notifying
the party represented by him."11 He must "see to it that his client receives such notice and
attends the pre-trial."12 What the Baloloys and their former counsel have alleged instead in
their Motion to Lift Order of As In Default dated December 11, 1991 is the belated receipt of
Bayani Baloloy’s special power of attorney in favor of their former counsel, not that they have
not received the notice or been informed of the scheduled pre-trial. Not having raised the
ground of lack of a special power of attorney in their motion, they are now deemed to have
waived it. Certainly, they cannot raise it at this late stage of the proceedings. For lack of
representation, Bayani Baloloy was properly declared in default.
Section 3 of Rule 38 of the Rules of Court states:
SEC. 3. Time for filing petition; contents and verification. – A petition provided for in either of
the preceding sections of this Rule must be verified, filed within sixty (60) days after the
petitioner learns of the judgment, final order, or other proceeding to be set aside, and not
more than six (6) months after such judgment or final order was entered, or such proceeding
was taken; and must be accompanied with affidavits showing the fraud, accident, mistake, or
excusable negligence relied upon, and the facts constituting the petitioner’s good and
substantial cause of action or defense, as the case may be.
There is no reason for the Baloloys to ignore the effects of the above-cited rule. "The 60-day
period is reckoned from the time the party acquired knowledge of the order, judgment or
proceedings and not from the date he actually read the same."13 As aptly put by the appellate
court:
The evidence on record as far as this issue is concerned shows that Atty. Arsenio Villalon, Jr.,
the former counsel of record of the Baloloys received a copy of the partial decision dated June
23, 1993 on April 5, 1994. At that time, said former counsel is still their counsel of record. The
reckoning of the 60 day period therefore is the date when the said counsel of record received
a copy of the partial decision which was on April 5, 1994. The petition for relief was filed by
the new counsel on July 4, 1994 which means that 90 days have already lapsed or 30 days
beyond the 60 day period. Moreover, the records further show that the Baloloys received the
partial decision on September 13, 1993 as evidenced by Registry return cards which bear the
numbers 02597 and 02598 signed by Mr. Alejandrino Baloloy.
The Baloloys[,] apparently in an attempt to cure the lapse of the aforesaid reglementary
period to file a petition for relief from judgment[,] included in its petition the two Orders dated
May 6, 1994 and June 29, 1994. The first Order denied Baloloys’ motion to fix the period
within which plaintiffs-appellants pay the balance of the purchase price. The second Order
refers to the grant of partial execution, i.e. on the aspect of damages. These Orders are only
consequences of the partial decision subject of the petition for relief, and thus, cannot be
considered in the determination of the reglementary period within which to file the said
petition for relief.
Furthermore, no fraud, accident, mistake, or excusable negligence exists in order that the
petition for relief may be granted.14 There is no proof of extrinsic fraud that "prevents a party
from having a trial x x x or from presenting all of his case to the court"15 or an "accident x x x
which ordinary prudence could not have guarded against, and by reason of which the party
applying has probably been impaired in his rights."16 There is also no proof of either a
"mistake x x x of law"17 or an excusable negligence "caused by failure to receive notice of x x
x the trial x x x that it would not be necessary for him to take an active part in the case x x x
by relying on another person to attend to the case for him, when such other person x x x was
chargeable with that duty x x x, or by other circumstances not involving fault of the moving
party."18
Article 1892 of the Civil Code provides:
29
Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from perusal of the certificates of title alone will reveal that the subject properties are registered in
doing so; but he shall be responsible for the acts of the substitute: common, not in the individual names of the heirs.

(1) When he was not given the power to appoint one x x x.
Applying the above-quoted provision to the special power of attorney executed by Ignacio
Rubio in favor of his daughter Patricia Llamas, it is clear that she is not prohibited from
appointing a substitute. By authorizing Virginia Lim to sell the subject properties, Patricia
merely acted within the limits of the authority given by her father, but she will have to be
"responsible for the acts of the sub-agent,"19 among which is precisely the sale of the subject
properties in favor of respondent.
Even assuming that Virginia Lim has no authority to sell the subject properties, the contract
she executed in favor of respondent is not void, but simply unenforceable, under the second
paragraph of Article 1317 of the Civil Code which reads:
Nothing in the contract "prevents the obligation of the vendor to convey title from becoming
effective"24 or gives "the vendor the right to unilaterally resolve the contract the moment the
buyer fails to pay within a fixed period."25 Petitioners themselves have failed to deliver their
individual certificates of title, for which reason it is obvious that respondent cannot be
expected to pay the stipulated taxes, fees, and expenses.
"[A]ll the elements of a valid contract of sale under Article 1458 of the Civil Code are present,
such as: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price
certain in money or its equivalent."26 Ignacio Rubio, the Baloloys, and their co-heirs sold their
hereditary shares for a price certain to which respondent agreed to buy and pay for the
subject properties. "The offer and the acceptance are concurrent, since the minds of the
contracting parties meet in the terms of the agreement."27

Art. 1317. x x x
A contract entered into in the name of another by one who has no authority or legal
representation, or who has acted beyond his powers, shall be unenforceable, unless it is
ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it
is revoked by the other contracting party.
Ignacio Rubio merely denies the contract of sale. He claims, without substantiation, that what
he received was a loan, not the down payment for the sale of the subject properties. His
acceptance and encashment of the check, however, constitute ratification of the contract of
sale and "produce the effects of an express power of agency."20"[H]is action necessarily
implies that he waived his right of action to avoid the contract, and, consequently, it also
implies the tacit, if not express, confirmation of the said sale effected" by Virginia Lim in favor
of respondent.
Similarly, the Baloloys have ratified the contract of sale when they accepted and enjoyed its
benefits. "The doctrine of estoppel applicable to petitioners here is not only that which
prohibits a party from assuming inconsistent positions, based on the principle of election, but
that which precludes him from repudiating an obligation voluntarily assumed after having
accepted benefits therefrom. To countenance such repudiation would be contrary to equity,
and would put a premium on fraud or misrepresentation."21
Indeed, Virginia Lim and respondent have entered into a contract of sale. Not only has the
title to the subject properties passed to the latter upon delivery of the thing sold, but there is
also no stipulation in the contract that states the ownership is to be reserved in or "retained
by the vendor until full payment of the price."22
In fact, earnest money has been given by respondent. "[I]t shall be considered as part of the
price and as proof of the perfection of the contract.28 It constitutes an advance payment to
"be deducted from the total price."29
Article 1477 of the same Code also states that "[t]he ownership of the thing sold shall be
transferred to the vendee upon actual or constructive delivery thereof."30 In the present case,
there is actual delivery as manifested by acts simultaneous with and subsequent to the
contract of sale when respondent not only took possession of the subject properties but also
allowed their use as parking terminal for jeepneys and buses. Moreover, the execution itself of
the contract of sale is constructive delivery.
Consequently, Ignacio Rubio could no longer sell the subject properties to Corazon Escueta,
after having sold them to respondent. "[I]n a contract of sale, the vendor loses ownership
over the property and cannot recover it until and unless the contract is resolved or rescinded x
x x."31 The records do not show that Ignacio Rubio asked for a rescission of the contract.
What he adduced was a belated revocation of the special power of attorney he executed in
favor of Patricia Llamas. "In the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed upon the rescission of the
contract shall of right take place, the vendee may pay, even after the expiration of the period,
as long as no demand for rescission of the contract has been made upon him either judicially
or by a notarial act."32
WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals
in CA-G.R. CV No. 48282, dated
October 26, 1998 and January 11, 1999, respectively, are hereby AFFIRMED. Costs against
petitioners.

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

30
 EN BANC to him to his own use, he is not liable for interest thereon, in accordance with the provisions
of article 1742 of the Civil Code.
G.R. No. L-38479 November 20, 1933
The defendant-appellant's claim to the effect that he is entitled to collect the rents for
the use of the earthen jar factory and the buildings thereof, is, likewise, unfounded. The trial
QUINTIN DE BORJA, judicial administrator of the intestate estate of the deceased
court held that all there existed between the parties was a mere gratuitous commodatum and
Marcelo de Borja,plaintiff-appellant,
that the most that the deceased bound himself to do was to pay the taxes on the properties in
vs.
question. There is nothing in the records of the case to justify reversing the judgment
FRANCISCO DE BORJA, defendant-appellant.
rendered therein.

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

The judgment appealed from being, in our opinion, in accordance with the law and
Jose de Borja for defendant-appellant.
sufficiently supported by a preponderance of the evidence presented therein, it is hereby
affirmed, without special pronouncement as to the costs of this instance. So ordered.
IMPERIAL, J.:
Avanceña, C.J., Malcolm, Villa-Real, and Hull, JJ., concur.
The plaintiff herein, in his capacity as judicial administrator of the estate of the
deceased Marcelo de Borja, instituted this action of the Court of First Instance of Rizal, to
recover from the defendant the sum of P61,376.56 which, according to the amended
complaint, the said defendant owed the aforesaid deceased, for the certain sums of money
loaned to and collected by him from other persons with the obligation to render an accounting
thereof to the said deceased.

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

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

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

The plaintiff-appellant's contention that the counterclaims presented by the defendant

have already prescribed, is untenable. The counterclaims in question are based on instruments
in writing marked Exhibit 1 to 6. The period of prescription thereof is not six (6) years, as
claimed, but ten (10) years, in accordance with the provisions of section 43 (1) of the Code of
Civil Procedure.

Neither is the plaintiff entitled to the interest claimed by him upon the alleged sums
loaned to and collected by the defendant from various persons for his deceased father. In all
the aforementioned transactions, the defendant acted in his capacity as attorney-in-fact of his
deceased father, and there being no evidence showing that he converted the money entrusted

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