right of redemption on said two lots by public bidding
(Exhs. "1" and "2").
G.R. No. 95909               August 16, 1991
UNILAND RESOURCES, petitioner,  both lots be redeemed, the bidding guidelines set by DBP
vs.
DEVELOPMENT BANK OF THE PHILIPPINES,* respondent.
Romeo G. Roxas for petitioner.
GANCAYCO, J.:
In the law on agency, it is elementary that when the main
transaction between the principal parties does not materialize, the
claim for commission of the duly authorized broker is
disallowed.1 How about the instance when the sale was eventually
consummated between parties introduced by a middleman who, in
the first place, had no authority, express or implied, from the seller
to broker the transaction? Should the interloper be allowed a
commission? On these simplified terms rests the nature of the
controversy on which this case turns.
As stated by the respondent Court of Appeals,2 the ambient
circumstances of this case are as follows:
(1) [Petitioner] Uniland Resources is a private corporation
engaged in real estate brokerage and licensed as such (p.
2, Rec.), while [respondent] DBP, as we all know [sic], is a
government corporation engaged in finance and banking
in a proprietary capacity.
(2) Long before this case arose, Marinduque Mining
Corporation obtained a loan from the DBP and as security
therefor, mortgaged certain real properties to the latter,
among them two lots located in Makati, M.M., described
as follows:
(a) Corner lot, covered by TCT No. 114138,
located at Pasong Tamo, Makati with an area of
3,330 sq. mts. on which is constructed a [four]-
story concrete building, etc., which, for brevity,
shall be called the office building lot; and
(b) Lot covered by TCT No. 16279 with 12,355
sq. mts located at Pasong Tamo, Makati, on
which is constructed a concrete/steel
warehouse, etc., which, for brevity, shall be
called the warehouse lot.
The aforesaid lots had, however, been previously
mortgaged by Marinduque Mining Corp., to Caltex, and
the mortgage in favor of DBP was entered on their titles
as a second mortgage (Pre-Trial Order, p. 37, Rec.).
The account of the Marinduque Mining Corp., with the
DBP was later transferred to the Assets Privatization
Trust (APT) pursuant to Proclamation No. 50.
(3) For failure of the Marinduque Mining Corp. to pay its
obligations to Caltex, the latter foreclosed its mortgage on
the aforesaid two lots (pp. 37-38, Rec.). APT on the other
hand, to recover its investment on the Marinduque
Account, offered for sale to the public through DBP its
1
(4) Considering, however, that Caltex had required that
provided that any bid to purchase either of the two lots
would be considered only should there be two bids or a
bid for the two items which, when combined, would fully
cover the sale of the two lots in question (Exh. "1").
(5) The aforesaid bidding was held on May 5, 1987 with
only one bidder, the Counsel Realty Corp. [an affiliate of
Glaxo, Philippines, the client of petitioner], which offered a
bid only for the warehouse lot in the amount of
P23,900,000.00. Said bid was thus rejected by DBP.
(6) Seeing, however, that it would make a profit if it
redeemed the two lots and then offer them for sale, and
as its right to redeem said lots from Caltex would expire
on May 8, 1987, DBP retrieved the account from APT
and, on the last day for the exercise of its right of
redemption, May 8, 1987, redeemed said lots from Caltex
for P33,096,321.62 (Exh. "5"), thus acquiring them as its
physical assets.
(7) In preparation for the sale of the two lots in question,
DBP called a pre-bidding conference wherein a new set of
bidding guidelines were formulated (Exh. "3"). Then, on
July 30,1987, the public bidding for the sale of the two lots
was held and again, there was only one bidder, the
Charges Realty Corp. [another affiliate of Glaxo,
Philippines], for only the warehouse lot and for the amount
of P24,070,000.00, which is slightly higher than the
amount previously offered by Counsel Realty Corp.,
therefor at the May 5, 1987 bidding (see Exh. "5," p. 1 00,
Rec.). No bid was submitted for the office building lot (id.).
(8) Notwithstanding that there was no bidder for the office
building lot, the DBP approved the sale of the warehouse
lot to Charges Realty Corp., and on November 23, 1987,
the proper documentation of the sale was made (Exh.
"D"). As for the office building lot, it was later sold by DBP
in a negotiated sale to the Bank of P.I. as trustee for the
"Perpetual Care Fund of the Manila Memorial Park" for
P17,460,000.00, and proper documentation of the sale
was made on November 17, 1987 (Exh. "E" and
submarkings). The DBP admittedly paid the (five percent)
broker's fee on this sale to the DBP Management
Corporation, which acted as broker for said negotiated
sale (p. 15, Appellant DBP's brief).
(9) After the aforesaid sale, [petitioner], through its
President, wrote two letters to [respondent DBP], the first
through its Senior Vice President (Exh. "C"), and, the
second through its Vice Chairman (Exh. "4" [sic], asking
for the payment of its broker's fee in instrumenting the
sale of its (DBP's) warehouse lot to Charges Realty Corp.
The claim was referred to the Bidding Committee chaired
by Amanda S. Guiam which met on November 9, 1987,
and which, on November 18, 1987, issued a decision
denying [petitioner's] claim (Exh. "5"). Hence, the instant
case filed by [petitioner] to recover from [respondent] DBP
the aforesaid broker's fee.
After trial, the lower court, on October 25, 1988, rendered
judgment
 ORDERING [respondent DBP] to pay [petitioner]
the sum of P1,203,500,00 which is the equivalent
of [five percent] broker's fee plus legal interest
thereto (sic) from the filing of the complaint on
February 18, 1988 until fully paid and the sum of
P50,000.00 as and for attorney's fees. Costs
against [respondent DBP]. (p. 122, Rec.).3
On appeal, the Court of Appeals reversed the judgment of the
lower court4 and dismissed the complaint. The motion for
reconsideration filed by petitioner was also subsequently denied.5
Petitioner is now before this Court alleging that the petition
"RAISES A QUESTION OF LAW IN THE SENSE THAT THE
RESPONDENT COURT OF APPEALS BASED ITS DECISION
ONLY ON THE CONTROVERSIAL FACTS FAVORABLE TO THE
PRIVATE RESPONDENT DBP,6 primarily making capital of the
disparity between the factual conclusions of the trial court and of
the appellate court. Petitioner asserts that the respondent Court of
Appeals disregarded evidence in its favor consisting of its letters to
respondent DBP's higher officers sent prior to the bidding and sale,
wherein petitioner requested accreditation as a broker and, in the
process of informing that it had offered the DBP properties for sale,
also volunteered the name of its client, Glaxo, Philippines, as an
interested prospective buyer.7
The rule is that in petitions for certiorari as a mode of appeal, only
questions of law distinctly set forth may be raised.8 Such questions
have been defined as those that do not call for any examination of
the probative value of the evidence presented by the
parties.9 Petitioner's singular assignment of error would, however,
have this Court go over the facts of this case because it
necessarily involves the examination of the evidence and its
subsequent reevaluation. Under the present proceeding, the same,
therefore, cannot be done.
It bears emphasizing that mere disagreement between the Court of
Appeals and the trial court as to the facts of a case does not of
itself warrant this Court's review of the same. It has been held that
the doctrine that the findings of fact made by the Court of Appeals,
being conclusive in nature, are binding on this Court, applies even
if the Court of Appeals was in disagreement with the lower court as
to the weight of evidence with a consequent reversal of its findings
of fact, so long as the findings of the Court of Appeals are borne
out by the record or based on substantial evidence.10 while the
foregoing doctrine is not absolute, petitioner has not sufficiently
proved that his case falls under the known exceptions.11
Be that as it may, the Court has perused the assailed decision of
the Court of Appeals and still finds the primary assertion of
petitioner to be unfounded. The Court of Appeals has addressed all
the factual contentions of petitioner and chose not to give credence
to petitioner's version. Moreover, the findings of the Court of
Appeals are consistent with, and sufficiently supported by, the
records of this case.
It is obvious that petitioner was never able to secure the required
accreditation from respondent DBP to transact business on behalf
of the latter. The letters sent by petitioner to the higher officers of
the DBP and the APT are merely indicative of petitioner's desire to
secure such accreditation. At best these missives are self-serving;
the most that they prove is that they were sent by petitioner and
received by respondent DBP, which clearly never agreed to be
bound thereto. As declared by the trial court even when it found in
favor of petitioner, there was no express reply from the DBP or the
APT as to the accreditation sought by petitioner.12 From the very
2
beginning, therefore, petitioner was aware that it had no express
authority from DBP to find buyers of its properties.
In its reply submitted pursuant to the resolution requiring the
same13 petitioner also invokes Article 1869 of the new Civil
Code14 in contending that an implied agency existed. Petitioner
argues that it "should have been stopped, disauthorized and
outrightly prevented from dealing the 12,355 sq. m (with
warehouse) [sic] by the DBP from the inception."15 On the contrary,
these steps were never necessary. In the course of petitioner's
dealings with the DBP, it was always made clear to petitioner that
only accredited brokers may look for buyers on behalf of
respondent DBP. This is not a situation wherein a third party was
prejudiced by the refusal of respondent DBP to recognize petitioner
as its broker. The controversy is only between the DBP and
petitioner, to whom it was emphasized in no uncertain terms that
the arrangement sought did not exist. Article 1869, therefore, has
no room for operation in this case.
Petitioner would also disparage the formality of accreditation as
merely a mechanical act, which requires not much discretion, as
long as a person or entity looks for a buyer [and] initiate or promote
[sic] the interests of the seller.16Being engaged in business,
petitioner should do better to adopt the opposite attitude and
appreciate that formalities, such as the need for accreditation,
result from the evolution of sound business practices for the
protection and benefit of all parties concerned. They are designed
and adopted specifically to prevent the occurrence of situations
similar to that obtaining in this case.
More importantly, petitioner's stance goes against the basic axiom
in Civil Law that no one may contract in the name of another
without being authorized by the latter, unless the former has by law
a right to represent him.17 From this principle, among others,
springs the relationship of agency which, as with other contracts, is
one founded on mutual consent: the principal agrees to be bound
by the acts of the agent and the latter in turn consents to render
service on behalf or in representation of the principal.18
Petitioner, however, also invokes equity considerations, and in
equity, the Court recognizes the efforts of petitioner in bringing
together respondent DBP and an interested and financially-able
buyer. While not actively involved in the actual bidding and transfer
of ownership of the warehouse property, petitioner may be said to
have initiated, albeit without proper authority, the transaction that
eventually took place. The Court is also aware that respondent
DBP was able to realize a substantial profit from the sale of its two
properties. While purely circumstantial, there is sufficient reason to
believe that the DBP became more confident to venture and
redeem the properties from the APT due to the presence of a ready
and willing buyer, as communicated and assured by petitioner.
In Prats v. Court of Appeals,19 there was a finding that the
petitioner therein as the agent was no longer the efficient procuring
cause in bringing about the sale proceeding from the fact of
expiration of his exclusive authority. There was therefore no basis
in law to grant the relief sought. Nevertheless, this Court in equity
granted the sum of P100,000.00, out of the P1,380,000.00 claimed
as commission, by way of compensation for the efforts and
assistance rendered by the agent in the transaction prior to the
expiration of his authority. These consist in offering the lot for sale
to the eventual buyer, sending follow-up letters, inviting the buyer
to dinner and luncheon meetings, etc.
Parallel circumstances obtain in the case at bar. It was petitioner
who advised Glaxo, Philippines of the availability of the warehouse
property and aroused its interest over the same. Through
petitioner, respondent DBP was directly informed of the existence
of an interested buyer. Petitioner's persistence in communicating
with respondent DBP reinforced the seriousness of the offer. This
piece of information no doubt had a bearing on the subsequent
decisions made by respondent DBP as regards the disposition of
its properties.
Petitioner claims the amount of P1,203,500.00 awarded by the trial
court as commission computed at five percent of the sale price of
the warehouse property. Under the foregoing disquisition and
following the precedent, as well as roughly the proportion, set
in Prats, the Court in equity grants petitioner the sum of One
Hundred Thousand Pesos (Pl00,000.00) for the role it played in the
transaction between respondent DBP and buyer Glaxo,
Philippines. It is emphasized, however, that the circumstances that
came into play in this case do not meet the minimum legal
standards required for the existence of an agency relationship and
that the award is based purely on equity considerations.
Accordingly, petitioner's other arguments need not now be
discussed.
WHEREFORE, the decision appealed from is hereby AFFIRMED,
with the MODIFICATION that in equity respondent DBP is ordered
to pay petitioner the amount of One Hundred Thousand Pesos
(P100,000.00). No pronouncement as to costs.
SO ORDERED
G.R. No. L-9184            February 2, 1916
MACONDRAY & CO., INC., plaintiff-appellee,  throughout the transaction, on Monday morning, September 2d.
vs.
GEORGE S. SELLNER, defendant-appellant.
D.R. Williams for appellant.
Haussermann, Cohn and Fisher for appellee.
CARSON, J.:
This action was brought to recover the sum of P17, 175 by way of
damages alleged to have been suffered by the plaintiff as a result
of the sale of a parcel of land which it is alleged was made by the
defendant for and on behalf of the plaintiff after authority to make
the sale had been revoked. Judgment was rendered in favor of the
plaintiff for the sum of P3,435, together with interest at 6 per cent
per annum from the date of the institution of this action. From this
judgment defendant appealed, and brought the case have on his
duly certified bill of exceptions.
Early in 1912 the defendant, a real estate broker, sold the parcel of
land described in the complaint to the plaintiff company for
P17,175. The formal deed of sale was not executed and accepted
until July 29, 1912, the agreement to purchase being conditioned
on the delivery of a Torrens title, which was not secured until early
in that month. In the meantime the land was flooded by high tides,
and the plaintiff company became highly dissatisfied with its
purchase. When the final transfer was made the plaintiff company
informed defendant that the land was wholly unsuited for use as a
coal-yard, for which it had been purchased, and requested him to
find another purchaser. At that time it was expressly understood
and agreed that the plaintiff company was willing to dispose of the
land for P17,175, and that defendant was to have as his
commission for securing a purchaser anything over that amount
which he could get.
3
A short time thereafter, defendant reported to plaintiff that he had a
purchaser for the land in the person of Antonio M. Barretto, who
was willing to pay P2.75 per square meter, or a total of P18,892.50.
Plaintiff thereupon executed a formal deed of conveyance which,
together with the certificate of title (Torrens), was delivered to
defendant, with the understanding that he was to conclude the
sale, deliver the title-deed and certificate to Barretto, and received
from him the purchase price. The deed was dated August 21,
1912. Thereafter defendant advised Barretto that plaintiff had
executed the title-deed and that he was ready to close the deal.
Barretto agreed to accept the land if, upon examination, the title
and the deed should prove satisfactory; and defendant left the
deed of conveyance with him, with the understanding that if the title
and the deed of conveyance were as represented, Barretto would
give him his check for the amount of the purchase price. Defendant
retained possession of the Torrens certificate of title. A few days
afterwards Barretto was compelled to go to Tayabas on business
and was detained by a typhoon which delayed his return until the
31st of August.
During Barretto's absence the plaintiff company advised defendant
that he must consummate the sale and collect the purchase money
without delay upon Barretto's return to Manila. On the arrival of
Barretto on Saturday, August 31st, defendant called upon him and
informed him that the plaintiff company desired to close up the
transaction at once, and Barretto, who was somewhat indisposed
from his trip, promised to examine the papers as soon as he could
get to them, and assured the defendant that he would send his
check for the purchased price in a day or two if he found the
documents in proper shape. These assurance were reported to
Young, the plaintiff company's general manager and representative
Young then formally notified defendant that unless the purchase
price was paid before five o'clock of that same afternoon the deal
would be off. Defendants again called upon Barretto, who informed
him that if he would turn over the Torrens certificate of title he
would let him have a check for the purchase price. Defendant sent
the certificate as requested, but did not receive the check until
thirty-six hours afterwards, on Wednesday morning. On receipt of
Barretto's check he immediately tendered plaintiff company a
check for the agreed selling price, P17,175. Plaintiff's manager
refused to accept the check and soon thereafter filed this action,
claiming that the sale had been "cancelled" upon the failure of
defendant to turn over the purchase price on the afternoon of
Monday, September 2nd.
The following is a copy of plaintiff company's letter to defendant
advising him that the sale would be "cancelled" unless the
purchase price was paid at five o'clock of the day on which it was
written.
SEPT. 2, 1912.
Mr. GEO. C. SELLNER, Manila.
DEAR SIR: In accordance with our conversation today,
this is to notify you that we consider the sale of our lot in
Nagtajan to Antonio M. Barretto as cancelled in view of
the nonpayment of the purchase price before five o'clock
this afternoon.
Please confirm.
Yours very truly,

MACONDRAY & CO., INC.,
(Sgd.) CARLOS YOUNG,
General Manager.
As to the facts just narrated there is practically no dispute, the only
matters of facts as to which there is any real contention in the
record being limited to question as to the value of the land, and as
to the original instructions to defendant in regard to the delivery of
the title deeds.
Plaintiffs' manager testified that as he had no confidence in
Barretto, he expressly instructed defendant not to deliver the title
deeds until Barretto turned over the purchase price. Defendant
swore that he had received no such instruction. Upon this conflict
of testimony we do not deem it necessary to make an express
finding, because, as we view the transaction, it could in no event
affect our disposition of this appeal.
We are of opinion that the disputed evidence clearly discloses that
on August 21st the plaintiff company, through the defendant real
estate broker, agreed to sell the land to Barretto for P18,892.50,
and that Barretto agreed to buy the land at that price on the usual
condition precedent that before turning over the purchase price the
title deeds and deed of transfer from the company should be found
to be in due and legal form. That for the purpose of consummating
the sale the plaintiff company turned over to the defendant a deed
of transfer to Barretto, together with a Torrens title certificate to the
land, executed as of the day when the agreement to sell was
entered into. That the defendant, with full authority from plaintiff
company, agreed to deliver the deed and certificate to Barretto on
payment of the purchase price. That from the very nature of the
transaction it was understood that the purchaser should have a
reasonable time in which to examine the deed of transfer and the
other documents of title, and that defendant exercising an authority
impliedly if not expressly conferred upon him, gave the purchaser a
reasonable time in which to satisfy himself as to the legality and
correctness of the documents of title. That the company through its
manager Young, acquiesced in and ratified what had been done by
defendant in this regard when, with full knowledge of all the facts,
Young advised the defendant, during Barretto's absence in
Tayabas, that the deal must be closed up without delay on
Barretto's return to Manila.
No reason appears, nor had any reason been assigned for the
demand by the plaintiff company for the delivery of the purchase
price at the hour specified under threat in the event of failure to
make payment at that hour it would decline to carry out the
agreement, other than that the manager of the plaintiff company
had been annoyed by the delays which occurred during the earlier
stage of the negotiations, and had changed his mind as to the
desirability of making the sale at the price agreed upon, either
because he believed that he could get a better price elsewhere, or
that the land was worth more to his company than the price he had
agreed to take for it. It is very evident that plaintiff company's
manager hoped that by setting a limit of a few hours upon the time
within which he would receive the money, his company would be
relieved of the obligation to carry out its contract.
Upon the question of the value of the land we think that the
evidence clearly discloses that at the date of the sale its actual and
its true market value was not more than the amount paid for it by
Barretto, that is to say, P18,892.50. The evidence discloses that it
had been in the hands of an expert real estate agent for many
4
months prior to the sale, with every inducement to him to secure
the highest cash price which could be gotten for it. That he actually
sold it to the plaintiff company, a few months prior to the sale to
Barretto, for P17,175. That the plaintiff company was highly
dissatisfied with its purchase, and readily agreed to resell at that
price. That the defendant, in his company was highly dissatisfied
with its purchase, and readily agreed to resell at that price. That the
defendant, in his capacity as a real estate agent, with a personal
and direct interest in securing the highest possible price for the
land, sold it to Barretto for P18,892.50.
The only evidence in the record tending to prove that the land had
a higher market value than the price actually paid for it under such
circumstances is the testimony of a rival real estate broker, who
had never been on the land, but claimed that he was familiar with
its general location from maps and description, and asserted that in
his opinion it was worth considerably more than the price actually
paid for it, and that he thought he could have sold the land for P3 a
meter, or approximately P20,610. Of course an expert opinion of
this kind, however sincere and honest the witness may have been
in forming it, is wholly insufficient to maintain a finding that the land
was worth any more than it actually brought when sold under the
conditions above set forth.
It may be that the land has a speculative value much higher than
the actual market value at the time of the sale, so that if held for an
opportune turn in the market, or until a buyer of some special need
for it happened to present himself, a price approximating that
indicated by this witness might be secured for it. But the question
of fact ruled upon is the actual market value of the land at the time
of its sale to Barretto, and not any speculative value which might
be assigned to it in anticipation of unknown, indefinite and
uncertain contingencies.
Among other definitions of "market value" to be found in "Words
and Phrases," vol. 5, p. 4383, and supported by citation of
authority, are the following:
The "market value" of property is the price which the
property will bring in a fair market after fair and
reasonable efforts have been made to find a purchaser
who will give the highest price for it.
xxx           xxx           xxx
The market value of land is the price that would in all
probability result form fair negotiations where the seller is
willing to sell and the buyer desires to buy.
Upon the foregoing statement of the facts disclosed by the record,
we are of opinion that the judgment entered in the court below
should be reversed and the complaint dismissed without costs in
this instance.
1. Even were we to admit, which we do not, that the plaintiff
company had the right to terminate the negotiations at the time
indicated by its manager, and to direct its real estate not make the
sale of Barretto after the hour indicated, nevertheless we would be
compelled to hold, upon the evidence before us, that the plaintiff
company has no cause of action for monetary damages against the
defendant real estate agent.
The measure of the damages which the plaintiff would be entitled
to recover from the real estate agent for the unauthorized sale of its
property would be the actual market value of the property, title to
which had been lost as a result of the sale. We are not now
considering any question as to the right of the owner, under such
circumstances, to recover the property from the purchaser, or
damages for its detention or like; but merely his right to recover
monetary damages from his agent should he elect, as the plaintiff
company did in this case, to ratify the sale and recoup from the
agent any loss resulting from his alleged unauthorized
consummation of the sale.
The market value of the land in question was P18,892.50. Of this
the plaintiff company has received P17,175, leaving a balance of
P1,717.50 unpaid. But, whatever may be the view which should
taken as to the right of the plaintiff company to terminate the
negotiations for the sale of the property to Barretto at the time fixed
by it in its letter to the defendant real estate agent, there can be no
question as to the liability of the plaintiff company to the real estate
agent, in the event that it did so terminate the negotiations, for the
amount of the commission which it agreed to pay him should he
find a purchaser for the land at the price agreed upon in his agency
contract. The commission agreed upon was all over P17,175 which
the defendant could secure from the property, and it is clear that
allowing the defendant this commission, and offsetting it against
the unpaid balance of the market value of the land, the plaintiff
company is not entitled to a money judgment against defendant.
We do not mean to question the general doctrine as to the power
of a principal to revoke the authority of his agent at will, in the
absence of a contract fixing the duration of the agency (subject,
however, to some well defined exceptions). Our ruling is that at the
time fixed by the manager of the plaintiff company for the
termination of the negotiations, the defendant real estate agent had
already earned the commissions agreed upon, and could not be
deprived thereof by the arbitrary action of the plaintiff company in
declining to execute the contract of sale for some reason personal
to itself.
The question as to what constitutes a sale so as to entitle a real
estate broker to his commissions is extensively annotated in the
case of Lunney vs. Healey (Nebraska) 56313 reported in 44 Law
Rep. Ann., 593 [Note], and the long line of authorities there cited
support the following rule:
The business of a real estate broker or agent, generally, is
only to find a purchaser, and the settled rule as stated by
the courts is that, in the absence of an express contract
between the broker and his principal, the implication
generally is that the broker becomes entitled to the usual
commissions whenever he brings to his principal a party
who is able and willing to take the property and enter into
a valid contract upon the terms then named by the
principal, although the particulars may be arranged and
the matter negotiated and completed between the
principal and the purchaser directly.
In the case of Watson vs. Brooks (17 Fed. Rep., 540; 8 Sawy.,
316), it was held that a sale of real property entitling a broker to his
commissions, was an agreement by the vendor for a certain
valuable consideration then or thereafter to be paid, and was
complete without conveyance, although the legal title remained in
the vendor.
The rights of a real estate broker to be protected against the
arbitrary revocation of his agency, without remuneration for
services rendered in finding a suitable purchaser prior to the
revocation, are clearly and forcefully stated in the following citation
form the opinion in the case of Blumenthal vs. Goodall (89 Cal.,
251).
5
The act of the agent in finding a purchaser required time
and labor for its completion, and within three days of the
execution of the contract, and prior to its revocation, he
had placed the matter in the position that success was
practically certain and immediate, and it would be the
height of injustice to permit the principal then to withdraw
the authority and terminate the agency as against an
express provision of the contract, and perchance reap the
benefit of the agent's labors, without being liable to him for
his commissions. This would be to make the contract an
unconscionable one, and would offer a premium for fraud
by enabling one of the parties to take advantage of his
own wrong and secure the labor of the other without
remuneration.
2. We are of opinion that under all the circumstances surrounding
the negotiations as disclosed by the practically undisputed
evidence of record, the plaintiff company could not lawfully
terminate the negotiations at the time it attempted to do so and
thereafter decline to convey the land to Barretto, who had accepted
an offer of sale made to him by the plaintiff's duly authorized agent,
subject only to an examination of the documents of title, and stood
ready to pay the purchase price upon the delivery of the duly
executed deed of conveyance and other necessary documents of
title. We are not now considering the right or the power of the
plaintiff company to terminate or revoke the agency of the
defendant at that time. The revocation of the agent's authority at
that time could in no wise relieve the plaintiff company of its
obligation to sell the land to Barretto for the price and on the terms
agreed upon before the agency was revoked.
If we are correct in our conclusions in this regard, it follows, of
course that no matter hat was the actual value of the land, the
plaintiff company suffered no damage by the delivery of the title
deeds to Barretto, and the consummation of the sale by the
defendant upon the terms and at the price agreed upon prior to the
revocation of his agency.
Without considering any of the disputed questions of fact it clearly
appears that before the manager of the plaintiff company wrote the
letter dated September 2, 1912, which is set forth in the foregoing
statement of facts, and before the conversation was had to which
that letter refers, the defendant real estate agent had offered to sell
the land to Barretto for P18,892.50 and that he did so with the
knowledge and consent, and under the authority of the plaintiff
company. It further clearly appears that this offer had been duly
accepted by Barretto, who stood ready and willing to pay over the
agreed purchase price, upon the production and delivery of the
necessary documents of title, should these documents be found,
upon examination, to be executed in due and legal form. The only
question, then, which we need consider, is whether the plaintiff
company could lawfully "cancel" or rescind this agreement for the
sale and purchase of the land, on the sole ground that the
purchase price was not paid at the hour designated in the letter to
the defendant.
The only reasons assigned for the sudden and arbitrary demand
for the payment of the purchase price which was made with the
manifest hope that it would defeat the agent's deal with Barretto,
are that the plaintiff company's manager had become satisfied that
the land was worth more than he had agreed to accept for it; and
that he was piqued and annoyed at the delays which marked the
earlier stages of the negotiations.
Time does not appear to have been of the essence of the contract.
The agreement to sell was made without any express stipulation as
to the time within which the purchase price was to be paid, except
that the purchaser reserved the right to examine the documents of
title before making payment of the purchase price, though it was
understood that the sale was for cash upon the delivery of the
documents of title executed in due form. Under the agreement with
the agent of the plaintiff company, the purchaser had a perfect right
to examine the documents of title; and in the absence of an
express agreement fixing the time to be allowed therefore, he was
clearly entitled to such time as might be reasonably necessary for
that purpose.
The plaintiff company, through its agent, had given Barretto an
opportunity to examine the documents of title, with the express
understanding that if they were satisfactory he would hand the
agent his check for the purchase price, and it is very clear that the
plaintiff company could not arbitrarily, and for its own convenience,
deprive Barretto of this opportunity to make such examination of
the documents as might be reasonably necessary.
Of course we are not to be understood as denying the right of the
vendor to couple his agreement to sell with a stipulation that the
purchase price must be paid at a specific day, hour and minute; nor
that the obligation to pay over the purchase price forthwith may not
be inferred from all the circumstances surrounding the transaction
in a particular case. Time may be, and often is of the very essence
of the contract. But in a contract for the sale of real estate, where
no agreement to the contrary appears, it may fairly be assumed
that it was the intention of the parties to allow a reasonable time for
the examination of the documents of title; and in any case in which
time has been expressly allowed for that purpose, the vendor
cannot arbitrarily demand the payment of the purchase price before
the expiration of the time reasonably necessary therefor.
The doctrine supported by citation of authority is set forth as
follows on page 165, "Maupin on Marketable Title to Real Estate:"
The contract of sale usually specifies a time in which the
purchaser may examine the title before completing the
purchase. If no time be specified, he will be entitled to a
reasonable time for that purpose, but cannot keep the
contract open indefinitely so as to avail himself of a rise in
the value of the property or escape loss in case of
depreciation. He cannot be required to pay the purchase
money before he has examined the abstract, unless he
has expressly stipulated so to do. It has been held that if
the contract provide that the purchaser shall be furnished
an abstract of title, and shall have a specified time in
which to examine the title and pay the purchase money,
the purchaser must determine in that time whether he will
take the title, and that he cannot tender the purchase
money after that time, even though no abstract of the title
was furnished.
The purchaser is entitled to a reasonable time within
which to determine by investigation the validity of
apparent liens disclosed by the record. After the
purchaser has examined the abstract, or investigated the
title in the time allowed for that purpose, it is his duty to
point out or make known his objections to the title, if any,
so as to give the vendor an opportunity to remove them.
In the case of Hoyt vs. Tuxbury (70 Ill., 331, 332), the rule is stated
as follows:
Where the purchase of land is made upon condition the
title is found good, the purchaser is only entitled to a
reasonable time in which to determine whether he will
6
take the title the vendor has, or reject it. He cannot keep
the contract open indefinitely, so as to avail of a rise in the
value of the property, or relieve himself in case of a
depreciation.
In the case of Easton vs. Montgomery (90 Cal., 307), the rule is set
forth as follows:
A contract for the sale of land which provides "title to
prove good or no sale," without specifying the time within
which the examination is to be made, implies a
reasonable time.
In 39 Cyc., 1332, the general rule, supported by numerous
citations, is set forth as follows:
If the contract of sale does not specify the time of
performance, a reasonable time will be implied. In other
words a reasonable time for performance will be allowed,
and performance within a reasonable time will be
required. What is a reasonable time necessarily depends
upon the facts and circumstances of the particular case.
The rule permitting and requiring performance within a
reasonable time applies both to the time for making and
executing the conveyance by the vendor, and to the time
for making or tendering payment by the purchaser; and
where some precedent act or demand is necessary, the
rule applies to the time of performance after such act is
done, or after such demand has been made. It also
applies to the time within which any conditions precedent
is to be performed, or within which a contingency upon
which the transaction depends is to happen, and to the
performance of various acts by the parties such as the
furnishing of an abstract of title, or making a survey, or
any act which is to precede or may affect the time of
conveyance or payment, or which one of the parties may
do at his option which may affect the rights of the parties
under the contract. If the purchaser is entitled to an
examination of the title a reasonable time therefor will be
implied.
Under all the circumstances surrounding the transaction in the
case at bar, as they appear from the evidence of record, we have
no hesitation in holding that the plaintiff company's letter of
September 2, 1912 demanding payment before five o'clock of the
afternoon of that day, under penalty of the cancellation of its
agreement to sell, was an arbitrary unreasonable attempt to deny
to the purchaser the reasonable opportunity to inspect the
documents of title, to which he was entitled by virtue of the express
agreement of the plaintiff company's agent before any attempt was
made to revoke his agency. It follows that Barretto's right to enforce
the agreement to sell was in no wise affected by the attempt of the
plaintiff company to "cancel" the agreement; and that the plaintiff
company suffered no damage by the consummation of the
agreement by the acceptance of the stipulated purchase price by
the defendant real estate agent.
Perhaps we should indicate that in arriving at these conclusions we
have not found it necessary to pass upon the disputed question of
fact, as to whether or not the plaintiff company's manager
instructed the defendant not to deliver the title-deed until he had
received the purchase price. On this point there is a direct conflict
of evidence. But as we understand the transaction, it was clearly
understood that the purchaser would have a reasonable
opportunity to inspect and examine the documents of title before
paying over a large sum of money in exchange therefor, whether
the agent did or did not have the authority to make actual delivery
of the title deed for that purpose.
Twenty days hereafter let judgment be entered reversing the
judgment entered in the court below without costs in this instance,
and directing the dismissal of the complaint with the costs in first
instance against the plaintiff company, and ten days thereafter let
the record be returned to the court wherein it originated. So
ordered.
G.R. No. 199990, February 04, 2015
SPOUSES ROLANDO AND HERMINIA
SALVADOR, Petitioners, v. SPOUSES ROGELIO AND
ELIZABETH RABAJA AND ROSARIO
GONZALES, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari seeking to reverse and set
aside the August 22, 2011 Decision1  and the January 5, 2012
Resolution2  of the Court of Appeals (CA) in CA-G.R. CV No.
90296 which affirmed with modification the March 29, 2007
Decision of the Regional Trial Court Branch 214 (RTC-Branch
214), Mandaluyong City in Civil Case No. MC-03-2175, for
rescission of a contract (rescission case).
The Facts
This case stemmed from a dispute involving the sellers, petitioner
spouses Rolando and Herminia Salvador (Spouses Salvador); the
sellers’ agent, Rosario Gonzales (Gonzales); and the buyers,
respondent Spouses Rogelio and Elizabeth Rabaja (Spouses
Rabaja), over a parcel of land situated at No. 25, Merryland Village,
375 Jose Rizal Street, Mandaluyong City (subject property),
covered by Transfer Certificate of Title (TCT) No. 13426 and
registered in the names of Spouses Salvador. From 1994 until
2002, Spouses Rabaja were leasing an apartment in the subject
lot.
Sometime in July 1998, Spouses Rabaja learned that Spouses
Salvador were looking for a buyer of the subject property.
Petitioner Herminia Salvador (Herminia) personally introduced
Gonzales to them as the administrator of the said property.
Spouses Salvador even handed to Gonzales the owner’s duplicate
certificate of title over the subject property. On July, 3, 1998,
Spouses Rabaja made an initial payment of P48,000.00 to
Gonzales in the presence of Herminia. Gonzales then presented
the Special Power of Attorney3 (SPA), executed by Rolando
Salvador (Rolando) and dated July 24, 1998. On the same day, the
parties executed the Contract to Sell4 which stipulated that for a
consideration of P5,000,000.00, Spouses Salvador sold,
transferred and conveyed in favor of Spouses Rabaja the subject
property. Spouses Rabaja made several payments totalling
P950,000.00, which were received by Gonzales pursuant to the
SPA provided earlier as evidenced by the check vouchers signed
by Gonzales and the improvised receipts signed by Herminia.
Sometime in June 1999, however, Spouses Salvador complained
to Spouses Rabaja that they did not receive any payment from
Gonzales. This prompted Spouses Rabaja to suspend further
payment of the purchase price; and as a consequence, they
received a notice to vacate the subject property from Spouses
Salvador for non-payment of rentals.
7
Thereafter, Spouses Salvador instituted an action for ejectment
against Spouses Rabaja. In turn, Spouses Rabaja filed an action
for rescission of contract against Spouses Salvador and Gonzales,
the subject matter of the present petition.
In the action for ejectment, the complaint was filed before the
Metropolitan Trial Court of Mandaluyong City, Branch 60 (MeTC),
where it was docketed as Civil Case No. 17344. In its August 14,
2002 Decision,5the MeTC ruled in favor of Spouses Salvador
finding that valid grounds existed for the eviction of Spouses
Rabaja from the subject property and ordering them to pay back
rentals. Spouses Salvador were able to garnish the amount of
P593,400.006 from Spouses Rabaja’s time deposit account
pursuant to a writ of execution issued by the MeTC.7 Spouses
Rabaja appealed to the Regional Trial Court, Branch 212,
Mandaluyong City (RTC-Br. 212) which reversed the MeTC ruling
in its March 1, 2005 decision.8 The RTC-Br. 212 found that no
lease agreement existed between the parties. Thereafter, Spouses
Salvador filed an appeal with the CA which was docketed as CA-
G.R. SP No. 89259. On March 31, 2006, the CA ruled in favor of
Spouses Salvador and reinstated the MeTC ruling ejecting
Spouses Rabaja.9 Not having been appealed, the CA decision in
CA-G.R. SP No. 89259 became final and executory on May 12,
2006.10chanroblesvirtuallawlibrary
Meanwhile, the rescission case filed by Spouses Rabaja against
Spouses Salvador and Gonzales and docketed as Civil Case No.
MC No. 03-2175 was also raffled to RTC-Br. 212. In their
complaint,11 dated July 7, 2003, Spouses Rabaja demanded the
rescission of the contract to sell praying that the amount of
P950,000.00 they previously paid to Spouses Salvador be returned
to them. They likewise prayed that damages be awarded due to the
contractual breach committed by Spouses Salvador.
Spouses Salvador filed their answer with counterclaim and cross-
claim12 contending that there was no meeting of the minds between
the parties and that the SPA in favor of Gonzales was falsified. In
fact, they filed a case for falsification against Gonzales, but it was
dismissed because the original of the alleged falsified SPA could
not be produced. They further averred that they did not receive any
payment from Spouses Rabaja through Gonzales. In her defense,
Gonzales filed her answer13 stating that the SPA was not falsified
and that the payments of Spouses Rabaja amounting to
P950,000.00 were all handed over to Spouses Salvador.
The pre-trial conference began but attempts to amicably settle the
case were unsuccessful. It was formally reset to February 4, 2005,
but Spouses Salvador and their counsel failed to attend.
Consequently, the RTC issued the pre-trial order14declaring
Spouses Salvador in default and allowing Spouses Rabaja to
present their evidence ex parte against Spouses Salvador and
Gonzales to present evidence in her favor.
A motion for reconsideration,15 dated March 28, 2005, was filed by
Spouses Salvador on the said pre-trial order beseeching the
liberality of the court. The rescission case was then re-raffled to
RTC-Br. 214 after the Presiding Judge of RTC-Br. 212 inhibited
herself. In the Order,16 dated October 24, 2005, the RTC-Br. 214
denied the motion for reconsideration because Spouses Salvador
provided a flimsy excuse for their non-appearance in the pre-trial
conference.
Thereafter, trial proceeded and Spouses Rabaja and Gonzales
presented their respective testimonial and documentary evidence.
RTC Ruling
On March 29, 2007, the RTC-Br. 214 rendered a decision17 in favor
of Spouses Rabaja. It held that the signature of Spouses Salvador
affixed in the contract to sell appeared to be authentic. It also held
that the contract, although denominated as “contract to sell,” was
actually a contract of sale because Spouses Salvador, as vendors,
did not reserve their title to the property until the vendees had fully
paid the purchase price. Since the contract entered into was a
reciprocal contract, it could be validly rescinded by Spouses
Rabaja, and in the process, they could recover the amount of
P950,000.00 jointly and severally from Spouses Salvador and
Gonzales. The RTC stated that Gonzales was undoubtedly the
attorney-in-fact of Spouses Salvador absent any taint of
irregularity. Spouses Rabaja could not be faulted in dealing with
Gonzales who was duly equipped with the SPA from Spouses
Salvador.
The RTC-Br. 214 then ruled that the amount of P593,400.00
garnished from the time deposit account of Spouses Rabaja,
representing the award of rental arrearages in the separate
ejectment suit, should be returned by Spouses Salvador.18 The
court viewed that such amount was part of the purchase price of
the subject property which must be returned. It also awarded moral
and exemplary damages in favor of Spouses Rabaja and attorney’s
fees in favor of Gonzales. The dispositive portion of the said
decision reads:chanRoblesvirtualLawlibrary
WHEREFORE, this court renders judgment as
follows:chanRoblesvirtualLawlibrary
a. Ordering the “Contract to Sell” entered into by
the plaintiff and defendant spouses Rolando and
Herminia Salvador on July 24, 1998 as
RESCINDED;chanrobleslaw
b. Ordering defendant spouses Rolando and
Herminia Salvador and defendant Rosario S.
Gonzales jointly and severally liable to pay
plaintiffs:chanRoblesvirtualLawlibrary
1. the amount of NINE HUNDRED FIFTY
THOUSAND PESOS (P950,000.00),
representing the payments made by the
latter for the purchase of subject
property;chanrobleslaw
2. the amount of TWENTY THOUSAND
PESOS (P20,000.00), as moral
damages;chanrobleslaw
3. the amount of TWENTY THOUSAND
PESOS (P20,000.00), as exemplary
damages;chanrobleslaw
4. the amount of ONE HUNDRED
THOUSAND PESOS (P100,000.00), as
attorney’s fees;chanrobleslaw
5. the cost of suit.
c. Ordering defendant Spouses Rolando and
Herminia Salvador to pay plaintiffs the amount of
FIVE HUNDRED NINETY THREE THOUSAND
PESOS (P593,000.00) (sic), representing the
amount garnished from the Metrobank deposit of
plaintiffs as payment for their alleged back
rentals;chanrobleslaw
d. Ordering the defendant Spouses Rolando and
Herminia Salvador to pay defendant Rosario
8
Gonzales on her cross-claim in the amount of
ONE HUNDRED THOUSAND PESOS
(P100,000.00);chanrobleslaw
e. Dismissing the counterclaims of the defendants
against the plaintiff.
SO ORDERED.19
Gonzales filed a motion for partial reconsideration, but it was
denied by the RTC-Br. 114 in its Order,20dated September 12,
2007. Undaunted, Spouses Salvador and Gonzales filed an appeal
before the CA.
CA Ruling
On March 29, 2007, the CA affirmed the decision of the RTC-Br.
114 with modifications. It ruled that the “contract to sell” was indeed
a contract of sale and that Gonzales was armed with an SPA and
was, in fact, introduced to Spouses Rabaja by Spouses Salvador
as the administrator of the property. Spouses Rabaja could not be
blamed if they had transacted with Gonzales.
The CA then held that Spouses Salvador should return the amount
of P593,400.00 pursuant to a separate ejectment case, reasoning
that Spouses Salvador misled the court because an examination
of CA-G.R. SP No. 89260 showed that Spouses Rabaja were not
involved in that case. CA-G.R. SP No. 59260 was an action
between Spouses Salvador and Gonzales only and involved a
completely different residential apartment located at 302-C Jupiter
Street, Dreamland Subdivision, Mandaluyong City.
The CA, however, ruled that Gonzales was not solidarily liable with
Spouses Salvador. The agent must expressly bind himself or
exceed the limit of his authority in order to be solidarily liable. It
was not shown that Gonzales as agent of Spouses Salvador
exceeded her authority or expressly bound herself to be solidarily
liable.  The decretal portion of the CA decision
reads:chanRoblesvirtualLawlibrary
WHEREFORE, the appeal is PARTLY GRANTED. The assailed
Decision dated March 29, 2007 and the Order dated September
12, 2007, of the Regional Trial Court, Branch 214, Mandaluyong
City, in Civil Case No. MC-03-2175, are AFFIRMED with
MODIFICATION in that Rosario Gonzalez is not jointly and
severally liable to pay Spouses Rabaja the amounts enumerated in
paragraph (b) of the Decision dated March 29, 2007.
SO ORDERED.21
Spouses Salvador filed a motion for reconsideration but it was
denied by the CA in its January 5, 2012 Resolution.
Hence, this petition.
ASSIGNMENT OF ERRORS
I
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE
LOWER COURT GRAVELY ABUSED ITS DISCRETION IN
DECLARING PETITIONERS IN DEFAULT AND IN DEPRIVING
THEM OF THE OPPORTUNITY TO CROSS-EXAMINE
RESPONDENTS SPS. RABAJA AS WELL AS TO PRESENT
EVIDENCE FOR AND IN THEIR BEHALF, GIVEN THE
MERITORIOUS DEFENSES RAISED IN THEIR ANSWER THAT
CATEGORICALLY AND DIRECTLY DISPUTE RESPONDENTS
SPS. RABAJA’S CAUSE OF ACTION.
II
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE
TRIAL COURT GRAVELY ERRED IN GIVING CREDENCE TO
THE TESTIMONY OF RESPONDENT GONZALES THAT
PAYMENTS WERE INDEED REMITTED TO AND RECEIVED BY
PETITIONER HERMINIA SALVADOR EVEN AS THE
IMPROVISED RECEIPTS WERE EVIDENTLY MADE UP AND
FALSIFIED BY RESPONDENT GONZALES.
III
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE
TRIAL COURT GRAVELY ERRED IN RESCINDING THE
CONTRACT TO SELL WHEN THERE IS NOTHING TO RESCIND
AS NO VALID CONTRACT TO SELL WAS ENTERED INTO,
AND IN DIRECTING THE REFUND OF THE AMOUNT OF
P950,000.00 WHEN THE EVIDENCE CLEARLY SHOWS THAT
SAID AMOUNT WAS PAID TO AND RECEIVED BY
RESPONDENT GONZALES ALONE WHO MISAPPROPRIATED
THE SAME.
IV
THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL
COURT’S DECISION FOR PETITIONERS TO RETURN THE
AMOUNT OF P543,400.00 REPRESENTING RENTALS IN
ARREARS GARNISHED OR WITHDRAWN BY VIRTUE OF A
WRIT OF EXECUTION ISSUED IN AN EJECTMENT CASE
WHICH WAS TRIED AND DECIDED BY ANOTHER COURT.
V
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE
LOWER COURT GRAVELY ERRED IN AWARDING DAMAGES
TO RESPONDENTS SPS. RABAJA, THERE BEING NO
FACTUAL AND LEGAL BASES FOR SUCH AWARD.
VI
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT
THE TRIAL COURT GRAVELY ERRED IN AWARDING
P100,000.00 TO RESPONDENT GONZALES AS ATTORNEY’S
FEES WHEN RESPONDENT GONZALES, IN FACT,
COMMITTED FORGERY AND FALSIFICATION IN DEALING
WITH THE PROPERTY OF PETITIONERS AND
MISAPPROPRIATED THE MONIES PAID TO HER BY
RESPONDENTS SPS. RABAJA, THUS GIVING PREMIUM TO
HER FRAUDULENT ACTS.22
The foregoing can be synthesized into three main issues. First,
Spouses Salvador contend that the order of default must be lifted
because reasonable grounds exist to justify their failure to attend
the pre-trial conference on February 4, 2005. Second, Spouses
Salvador raise in issue the veracity of the receipts given by
Gonzales, the SPA and the validity of the contract to sell. They
claim that the improvised receipts should not be given credence
because these were crude and suspicious, measuring only by 2 x 2
inches which showed that Gonzales misappropriated the payments
of Spouses Rabaja for herself and did not remit the amount of
P950,000.00 to them. As there was no consideration, then no valid
contract to sell existed. Third, Spouses Salvador argue that the
ejectment case, from which the amount of P593,400.00 was
garnished, already became final and executory and could not
anymore be disturbed. Lastly, the award of damages in favor of
Spouses Rabaja and Gonzales was improper absent any legal and
factual bases.
On January 21, 2013, Spouses Salvador filed their supplemental
petition23 informing the Court that RTC-Br. 213 had rendered a
9
decision in Civil Case No. MC00-1082, an action for rescission of
the SPA. The said decision held that Spouses Salvador properly
revoked the SPA in favor of Gonzales due to loss of trust and
confidence. On September 11, 2013, Gonzales filed her comment
to the supplemental petition,24 contending that the RTC-Branch 213
decision had no bearing because it had not yet attained finality. On
even date, Spouses Rabaja filed their Comment,25 asserting that
the present petition is a mere rehash of the previous arguments of
Spouses Salvador before the CA.  On November 15, 2013,
Spouses Salvador replied that they merely wanted to show that the
findings by the RTC-Br. 213 should be given weight as a full-blown
trial was conducted therein.26chanroblesvirtuallawlibrary
The Court’s Ruling
As a general rule, the Court’s jurisdiction in a Rule 45 petition is
limited to the review of pure questions of law. A question of law
arises when the doubt or difference exists as to what the law is on
a certain state of facts. Negatively put, Rule 45 does not allow the
review of questions of fact. A question of fact exists when the doubt
or difference arises as to the truth or falsity of the
allegations.27chanroblesvirtuallawlibrary
The present petition presents questions of fact because it requires
the Court to examine the veracity of the evidence presented during
the trial, such as the improvised receipts, the SPA given to
Gonzales and the contract to sell. Even the petitioner spouses
themselves concede and ask the Court to consider questions of
fact,28  but the Court finds no reason to disturb the findings of fact
of the lower courts absent any compelling reason to the contrary.
The failure of Spouses Salvador to attend pre-trial conference
warrants the presentation of evidence ex parte by Spouses Rabaja
On the procedural aspect, the Court reiterates the rule that the
failure to attend the pre-trial conference does not result in the
default of an absent party. Under the 1997 Rules of Civil
Procedure, a defendant is only declared in default if he fails to file
his Answer within the reglementary period.29 On the other hand, if a
defendant fails to attend the pre-trial conference, the plaintiff can
present his evidence ex parte. Sections 4 and 5, Rule 18 of the
Rules of Court provide:chanRoblesvirtualLawlibrary
Sec. 4. Appearance of parties.
It shall be the duty of the parties and their counsel to appear at the
pre-trial. The non-appearance of a party may be excused only if a
valid cause is shown therefor or if a representative shall appear in
his behalf fully authorized in writing to enter into an amicable
settlement, to submit to alternative modes of dispute resolution,
and to enter into stipulations or admissions of facts and of
documents.
Sec. 5. Effect of failure to appear.
The failure of the plaintiff to appear when so required pursuant to
the next preceding section shall be cause for dismissal of the
action. The dismissal shall be with prejudice, unless otherwise
ordered by the court. A similar failure on the part of the
defendant shall be cause to allow the plaintiff to present his
evidence ex parte and the court to render judgment on the
basis thereof.
[Emphasis supplied]
The case of Philippine American Life & General Insurance
Company v. Joseph Enario30 discussed the difference between the
non-appearance of a defendant in a pre-trial conference and the
declaration of a defendant in default in the present Rules of Civil
Procedure. The decision instructs:chanRoblesvirtualLawlibrary
Prior to the 1997 Revised Rules of Civil Procedure, the phrase "as
in default" was initially included in Rule 20 of the old rules, and
which read as follows:chanRoblesvirtualLawlibrary
Sec. 2. A party who fails to appear at a pre-trial conference may be
non-suited or considered as in default.cralawred
It was, however, amended in the 1997 Revised Rules of Civil
Procedure. Justice Regalado, in his book, REMEDIAL LAW
COMPENDIUM, explained the rationale for the deletion of the
phrase "as in default" in the amended provision, to
wit:chanRoblesvirtualLawlibrary
1. This is a substantial reproduction of Section 2 of the former Rule
20 with the change that, instead of defendant being declared "as in
default" by reason of his non-appearance, this section now spells
out that the procedure will be to allow the ex parte presentation of
plaintiff’s evidence and the rendition of judgment on the basis
thereof. While actually the procedure remains the same, the
purpose is one of semantical propriety or terminological accuracy
as there were criticisms on the use of the word "default" in the
former provision since that term is identified with the failure to file a
required answer, not appearance in court.cralawred
Still, in the same book, Justice Regalado clarified that while the
order of default no longer obtained, its effects were retained,
thus:chanRoblesvirtualLawlibrary
Failure to file a responsive pleading within the reglementary period,
and not failure to appear at the hearing, is the sole ground for an
order of default, except the failure to appear at a pre-trial
conference wherein the effects of a default on the part of the
defendant are followed, that is, the plaintiff shall be allowed to
present evidence ex parte and a judgment based thereon may be
rendered against defendant.cralawred
From the foregoing, the failure of a party to appear at the pre-trial
has indeed adverse consequences. If the absent party is the
plaintiff, then his case shall be dismissed. If it is the defendant who
fails to appear, then the plaintiff is allowed to present his
evidence ex parte and the court shall render judgment based on
the evidence presented. Thus, the plaintiff is given the privilege to
present his evidence without objection from the defendant, the
likelihood being that the court will decide in favor of the plaintiff, the
defendant having forfeited the opportunity to rebut or present its
own evidence.31 The stringent application of the rules on pre-trial is
necessitated from the significant role of the pre-trial stage in the
litigation process. Pre-trial is an answer to the clarion call for the
speedy disposition of cases. Although it was discretionary under
the 1940 Rules of Court, it was made mandatory under the 1964
Rules and the subsequent amendments in 1997.32 “The importance
of pre-trial in civil actions cannot be
overemphasized.”33chanroblesvirtuallawlibrary
There is no dispute that Spouses Salvador and their counsel failed
to attend the pre-trial conference set on February 4, 2005 despite
proper notice. Spouses Salvador aver that their non-attendance
was due to the fault of their counsel as he forgot to update his
calendar.34 This excuse smacks of carelessness, and indifference
to the pre-trial stage. It simply cannot be considered as a justifiable
excuse by the Court. As a result of their inattentiveness, Spouses
Salvador could no longer present any evidence in their favor.
Spouses Rabaja, as plaintiffs, were properly allowed by the RTC to
present evidence ex parte against Spouses Salvador as
defendants. Considering that Gonzales as co-defendant was able
to attend the pre-trial conference, she was allowed to present her
evidence. The RTC could only render judgment based on the
evidence presented during the trial.
Gonzales, as agent of Spouses Salvador, could validly receive the
payments of Spouses Rabaja
Even on the substantial aspect, the petition does not warrant
10
consideration. The Court agrees with the courts below in finding
that the contract entered into by the parties was essentially a
contract of sale which could be validly rescinded. Spouses
Salvador insist that they did not receive the payments made by
Spouses Rabaja from Gonzales which totalled P950,000.00 and
that Gonzales was not their duly authorized agent. These
contentions, however, must fail in light of the applicable provisions
of the New Civil Code which state:chanRoblesvirtualLawlibrary
Art. 1900. So far as third persons are concerned, an act is deemed
to have been performed within the scope of the agent's authority, if
such act is within the terms of the power of attorney, as written,
even if the agent has in fact exceeded the limits of his authority
according to an understanding between the principal and the
agent.
xxxx
Art. 1902. A third person with whom the agent wishes to contract
on behalf of the principal may require the presentation of the power
of attorney, or the instructions as regards the agency. Private or
secret orders and instructions of the principal do not prejudice third
persons who have relied upon the power of attorney or instructions
shown them.
xxxx
Art. 1910. The principal must comply with all the obligations which
the agent may have contracted within the scope of his
authority.cralawred
Persons dealing with an agent must ascertain not only the fact of
agency, but also the nature and extent of the agent’s authority. A
third person with whom the agent wishes to contract on behalf of
the principal may require the presentation of the power of attorney,
or the instructions as regards the agency. The basis for agency is
representation and a person dealing with an agent is put upon
inquiry and must discover on his own peril the authority of the
agent.35chanroblesvirtuallawlibrary
According to Article 1990 of the New Civil Code, insofar as third
persons are concerned, an act is deemed to have been performed
within the scope of the agent's authority, if such act is within the
terms of the power of attorney, as written. In this case, Spouses
Rabaja did not recklessly enter into a contract to sell with
Gonzales. They required her presentation of the power of attorney
before they transacted with her principal. And when Gonzales
presented the SPA to Spouses Rabaja, the latter had no reason
not to rely on it.
The law mandates an agent to act within the scope of his authority
which what appears in the written terms of the power of attorney
granted upon him.36 The Court holds that, indeed, Gonzales acted
within the scope of her authority. The SPA precisely stated that she
could administer the property, negotiate the sale and collect any
document and all payments related to the subject property.37 As the
agent acted within the scope of his authority, the principal must
comply with all the obligations.38 As correctly held by the CA,
considering that it was not shown that Gonzales exceeded her
authority or that she expressly bound herself to be liable, then she
could not be considered personally and solidarily liable with the
principal, Spouses Salvador.39chanroblesvirtuallawlibrary
Perhaps the most significant point which defeats the petition would
be the fact that it was Herminia herself who personally introduced
Gonzalez to Spouses Rabaja as the administrator of the subject
property. By their own ostensible acts, Spouses Salvador made
third persons believe that Gonzales was duly authorized to
administer, negotiate and sell the subject property. This fact was
even affirmed by Spouses Salvador themselves in their petition
where they stated that they had authorized Gonzales to look for a
buyer of their property.40 It is already too late in the day for
Spouses Salvador to retract the representation to unjustifiably
escape their principal obligation.
As correctly held by the CA and the RTC, considering that there
was a valid SPA, then Spouses Rabaja properly made payments to
Gonzales, as agent of Spouses Salvador; and it was as if they paid
to Spouses Salvador. It is of no moment, insofar as Spouses
Rabaja are concerned, whether or not the payments were actually
remitted to Spouses Salvador. Any internal matter, arrangement,
grievance or strife between the principal and the agent is theirs
alone and should not affect third persons.  If Spouses Salvador did
not receive the payments or they wish to specifically revoke the
SPA, then their recourse is to institute a separate action against
Gonzales. Such action, however, is not any more covered by the
present proceeding.
The amount of P593,400.00 should not be returned by Spouses
Salvador
Nevertheless, the assailed decision of the CA must be modified
with respect to the amount of P593,400.00 garnished by Spouses
Salvador and ordered returned to Spouses Rabaja. The RTC
ordered the return of the amount garnished holding that it
constituted a part of the purchase price. The CA ruled that
Spouses Salvador misled the Court when they improperly cited
CA-G.R. SP No. 89260 to prove their entitlement to the said
amount. Both courts erred in their ruling.
First, the garnishment of the amount of P593,400.00 against
Spouses Rabaja was pursuant to the CA decision in CA-G.R. SP
No. 89259, an entirely different case involving an action for
ejectment, and it does not concern the rescission case which is on
appeal before this Court. Moreover, the decision on the ejectment
case is final and executory and an entry of judgment has already
been made.41  Nothing is more settled in law than that when a final
judgment is executory, it thereby becomes immutable and
unalterable. The judgment may no longer be modified in any
respect, even if the modification is meant to correct what is
perceived to be an erroneous conclusion of fact or law, and
regardless of whether the modification is attempted to be made by
the court which rendered it or by the highest Court of the land. The
doctrine is founded on consideration of public policy and sound
practice that, at the risk of occasional errors, judgments must
become final at some definite point in
time.42chanroblesvirtuallawlibrary
The March 31, 2006 CA decision43in CA-G.R. SP No. 89259 has
long been final and executory and cannot any more be disturbed
by the Court. Public policy dictates that once a judgment becomes
final, executory and unappealable, the prevailing party should not
be denied the fruits of his victory by some subterfuge devised by
the losing party. Unjustified delay in the enforcement of a judgment
sets at naught the role and purpose of the courts to resolve
justiciable controversies with finality.44chanroblesvirtuallawlibrary
Meanwhile, in ruling that the garnishment was improper and thus
ordering the return of the garnished amount, the CA referred to its
decision in CA-G.R. SP No. 89260. Spouses Salvador, however,
clarified in its motion for reconsideration45 before the CA and in the
present petition46 that the garnishment was pursuant to CA-G.R.
SP No. 89259, and not CA-G.R. SP No. 89260, another ejectment
case involving another property. A perusal of the records reveals
that indeed the garnishment was pursuant to the ejectment case in
the MeTC, docketed as Civil Case No. 17344,47 where Spouses
Rabaja were the defendants. The MeTC decision was then
reinstated by the CA in CA-G.R. SP No. 89259, not CA-G.R. SP
No. 89260. There, a writ of execution48 and notice of pay49 were
11
issued against Spouses Rabaja in the amount of P591,900.00.
Second, Spouses Rabaja’s appeal with the RTC never sought
relief in returning the garnished amount.50Such issue simply
emerged in the RTC decision. This is highly improper because the
court’s grant of relief is limited only to what has been prayed for in
the complaint or related thereto, supported by evidence, and
covered by the party’s cause of action.51chanroblesvirtuallawlibrary
If Spouses Rabaja would have any objection on the manner and
propriety of the execution, then they must institute their opposition
to the execution proceeding a separate case. Spouses Rabaja can
invoke the Civil Code provisions on legal compensation or set-off
under Articles 1278, 1279 and 1270.52 The two obligations appear
to have respectively offset each other, compensation having taken
effect by operation of law pursuant to the said provisions of the
Civil Code, since all the requisites provided in Art. 1279 of the said
Code for automatic compensation are duly present.
No award of actual, moral and exemplary damages
The award of damages to Spouses Rabaja cannot be sustained by
this Court. The filing alone of a civil action should not be a ground
for an award of moral damages in the same way that a clearly
unfounded civil action is not among the grounds for moral
damages.53 Article 2220 of the New Civil Code provides that to
award moral damages in a breach of contract, the defendant must
act fraudulently or in bad faith. In this case, Spouses Rabaja failed
to sufficiently show that Spouses Salvador acted in a fraudulent
manner or with bad faith when it breached the contract of sale.
Thus, the award of moral damages cannot be warranted.
As to the award of exemplary damages, Article 2229 of the New
Civil Code provides that exemplary damages may be imposed by
way of example or correction for the public good, in addition to the
moral, temperate, liquidated or compensatory damages.54 The
claimant must first establish his right to moral, temperate,
liquidated or compensatory damages. In this case, considering that
Spouses Rabaja failed to prove moral or compensatory damages,
then there could be no award of exemplary damages.
With regard to attorney’s fees, neither Spouses Rabaja nor
Gonzales is entitled to the award. The settled rule is that no
premium should be placed on the right to litigate and that not every
winning party is entitled to an automatic grant of attorney’s
fees.55 The RTC reasoned that Gonzales was forced to litigate due
to the acts of Spouses Salvador. The Court does not agree.
Gonzales, as agent of Spouses Salvador, should have expected
that she would be called to litigation in connection with her fiduciary
duties to the principal.
In view of all the foregoing, the CA decision should be affirmed with
the following modifications:chanRoblesvirtualLawlibrary
1. The order requiring defendant Spouses Rolando
and Herminia Salvador to pay plaintiffs the
amount of Five Hundred Ninety Three Thousand
(P593,000.00) Pesos, representing the amount
garnished from the Metrobank deposit of
plaintiffs as for their back rentals should be
deleted;chanrobleslaw
2. The award of moral damages in the amount of
Twenty Thousand (P20,000.00) Pesos;
exemplary damages in the amount of Twenty
Thousand (P20,000.00) Pesos, and attorney’s
fees in the amount of One Hundred Thousand
 (P100,000.00) Pesos in favor of Spouses Rabaja
should be  deleted; and
3. The award of attorney’s fees in amount of One
Hundred Thousand (P100,000.00) Pesos in favor
of Gonzales should be  deleted.
The other amounts awarded are subject to interest at the legal rate
of 6% per annum, to be reckoned from the date of finality of this
judgment until fully paid.
WHEREFORE, the petition is PARTLY GRANTED. The March 29,
2007 Decision of the Regional Trial Court, Branch 214,
Mandaluyong City, in Civil Case No. MC-03-2175, is MODIFIED to
read as follows:chanRoblesvirtualLawlibrary
“WHEREFORE, this Court renders judgment as
follows:chanRoblesvirtualLawlibrary
a. Ordering the “Contract to Sell” entered into by
Spouses Rogelio and Elizabeth Rabaja and
Spouses Rolando and Herminia Salvador on July
24, 1998 as RESCINDED;chanrobleslaw
b. Ordering Spouses Rolando and Herminia
Salvador to pay Spouses Rogelio and Elizabeth
Rabaja:chanRoblesvirtualLawlibrary
1. The amount of Nine Hundred Fifty
Thousand (P950,000.00) Pesos,
representing the payments made by the
latter for the purchase of the subject
property; and
2. The cost of suit;chanrobleslaw
c. Dismissing the counterclaims of Spouses
Rolando and Herminia Salvador and Rosario
Gonzales against Spouses Rogelio and
Elizabeth Rabaja
The amounts awarded are subject to interest at the legal rate of 6%
per annum to be reckoned from the date of finality of this judgment
until fully paid.”
As aforestated, this is without prejudice to the invocation by either
party of the Civil Code provisions on legal compensation or set-off
under Articles 1278, 1279 and 1270.
SO ORDERED.
G.R. No. L-11908            February 4, 1918
ANTONIO M.A BARRETTO, plaintiff-appellant, 
vs.
JOSE SANTA MARINA and "LA INSULAR," defendants-
appellees.
Alfredo Chcote and Jose Arnaiz for appellant.
William A. Kincaid and Kincaid and Perkins for appellee.
CARSON, J.:
The material facts upon which our disposition of this appeal
necessarily turns are set out at length in our opinion in the case of
Barretto vs. Santa Marina, decided December 2, 1913 (26 Phil
rep., 200). This court having ruled against the plaintiff's contention
in the former case, he now sets up a claim for interest at the legal
12
rate upon the amount of the purchase price of his share
(participacion) in the business from the 1st day of July, 1909, to the
22d day of November, 1910, the day upon which it was turned over
to him.
The finding of facts, and the reasoning upon which we based our
rulings in the former case, are manifestly conclusive in the present
case as to the plaintiff's claim of a right to interest from the first of
July, 1909, to the third of May, 1910.
In the former case we held that the sale of plaintiff's share
(participacion) in the tobacco factory was consummated on the
latter date; that the valuation set upon his share (participacion) in
business was determined as of that day by the committee charged
with the duty of ascertaining the cash value of this share
(participacion) in order to determine the exact amount which the
parties had agreed upon as the purchase price to be paid therefor;
and that the committee had included that the plaintiff's share of the
profits of the business down to the third of May, 1910, in their
estimate of the value of his share (participacion) in the business of
that date.
These rulings were made after a review of the same record which
is now relied upon by the plaintiff in support of his claim of interest
upon the amount fixed by the committee as the true value of his
share (participacion) in the business. We find nothing in the record
of the contention of counsel in this regard which would justify or
necessitate a modification or reversal of the conclusions reached
by us in our former opinion.
Plaintiff's share (participacion) in the business having been sold on
the 3rd day of May, 1910, for a stipulated price, that is to say, for its
value on that day as fixed by the valuation committee, it is very
clear that he is not entitled to interest on the amount fixed by the
committee, prior to the date on which the sale was consummated
(3rd of may, 1910).
So also plaintiff's contention that he should be allowed interest on
the amount of the purchase price from the date of the sale, May 3,
1910, down to the day upon which the money was actually turned
over to him, November 22, 1910, cannot be sustained. Under the
express terms of the agreement for the sale on May 3, 1910, the
plaintiff agreed to accept, and the defendant to pay, the amount
which the committee should find to be the true value of plaintiff's
share (participacion) in the business as of that day. Under the
agreement the defendant neither expressly nor impliedly obligated
himself to pay interest on that amount pending the report of the
committee. The only contractual obligation assumed by him was
that he would pay the amount fixed by the committee in cash
immediately upon the making of the award by the committee, and
in accordance with its terms.
The committee's report is dated November 14, 1910, and it
appears that promptly upon the submission of this report, the
amount awarded the plaintiff (P280,025.16) was paid over by the
defendant to the plaintiff in cash; and the letter of counsel for
plaintiff dated November 17, 1910, tendering a formal deed of sale
of plaintiff's share (participacion) in the business and making
demand for the purchase price as fixed by the committee, read
together with the formal deed of sale executed November 22,
1910, with its acknowledgment of the receipt of the purchase price,
leaves no room for doubt that at that time the parties understood
and accepted the purchase price therein set forth as full payment
of plaintiff's share (participacion) in the business in exact
conformity with the conditions imposed in the agreement
consummated to May 3, 1910.
The right to interest arises either by virtue of a contract or by way
of damages for delay or failure (demora) to pay the principal on
which interest is demanded, at the time when the debtor is
obligated to make such payment. In the case at bar where was no
contract, express or implied, for the payment of interest pending
the award of the committee appointed to value the property sold on
May 3, 1910, and there was no delay in the punctual compliance
with defendant's obligation to make immediate payment, in cash, of
the amount of the award, upon the filing of the report of the
committee.
We conclude that the judgment entered in the court below
dismissing the complaint in this case sine die  should be affirmed,
with the costs of this instance against the appellant. So ordered.
G.R. No. L-6530             October 6, 1911
LA COMPAÑIA GENERAL DE TABACOS DE
FILIPINAS, plaintiff-appellant, 
vs.
DIABA, defendant-appellee.
Orense and Gonzales diez, for appellant.
No appearance for appellee.
JOHNSON, J.:
On the 19th of July, 1909, the plaintiff commenced an action
against the defendant in the Court of First Instance of the Province
of Leyte, for the purpose of recovering the sum of P442, for goods
sold and delivered by the plaintiff, through its agent (Gutierrez) to
the defendant, between the 11th of January, 1909, and the 1st of
April, 1909.
To this complaint the defendant, in his special answer, admitted
that he had purchased from the agent of the plaintiff (Gutierrez)
goods, wares, and merchandise, between the 12th of January,
1909, and the 15th of March, 1909, amounting to the sum of P692,
and that he had sold to the agent of the plaintiff (Gutierrez) abaca
and other effects, between the 25th of January, 1909, and the 6th
of February, 1909, amounting to P1,308.80, leaving a balance due
him (the defendant) of P616.80.1awphil.net
After hearing the evidence, the Hon. Charles A. Low, judge, found
that the plaintiff was indebted to the defendant in the sum of
P616.80, and rendered a judgment against the plaintiff for said
sum. From that judgment the plaintiff appealed for said sum. From
that judgment the plaintiff appealed and made several assignments
of error in this court.
An examination of the record brought to this court shows by a large
preponderance of the evidence that the agent of the plaintiff
(Gutierrez) had been selling goods, wares, and merchandise to the
defendant, and buying abaca and other agricultural products of the
defendant for a period covering more than eight years; that the
particular transactions to which the present action related took
place between the 11th of January, 1909, and the 1st of April,
1909. The plaintiff attempted to show that it had suspended its
agent (Gutierrez), as its agent, and that he (Gutierrez) had no
further authority to represent it (the plaintiff). There is no convincing
proof in the record that the orders given by the plaintiff to its agent
(Gutierrez) had ever been communicated to the defendant. The
13
defendant had a perfect right to believe, until otherwise informed,
that the agent of the plaintiff, in his purchase of abaca and other
effects was still representing the plaintiff in said transactions. The
plaintiff, during the trial of the cause, placed Gutierrez, its agent,
upon the stand as a witness. He testified that the abaca which was
purchased of the defendant was purchased by him a agent of the
plaintiff and that said abaca was actually delivered to the plaintiff.
The plaintiff, it appears, was perfectly willing to ratify the acts of its
agent in selling goods to the defendant, but seemed to be unwilling
to ratify said agent's acts in purchasing goods from the defendant.
Under all of the facts of record, we see no reason for modifying the
judgment of the lower court; the same is, therefore, hereby affirmed
with costs.
GUARDEX ENTERPRISES and/or MARCELINA A.
ESCANDOR, Petitioners, v. NATIONAL LABOR RELATIONS
COMMISSION and JUMBEE ORBETA, Respondents.
Rogelio B. De Guzman, for Petitioners.
Vicente R. Guzman for Private Respondent.
SYLLABUS
1. REMEDIAL LAW; CRIMINAL PROCEDURE; SEARCH
WARRANT; PROBABLE CAUSE; DEFINITION AND REQUISITES
THEREOF. — The right against unreasonable searches and
seizures is guaranteed under Article III (Bill of Rights), Section 2 of
the 1987 Constitution of the Philippines. Under this provision, the
issuance of a search warrant is justified only upon a finding of
probable cause. Probable cause for a search has been defined as
such facts and circumstances which would lead a reasonably
discreet and prudent man to believe that an offense has been
committed and that the objects sought in connection with the
offense are in the place sought to be searched (Burgos, Sr. v.
Chief of Staff, G.R. No. 64261, Dec. 26, 1984, 133 SCRA 800). In
determining the existence of probable cause, it is required that: 1)
the judge (or) officer must examine the . . witnesses personally; 2)
the examination must be under oath; and (3) the examination must
be reduced to writing in the form of searching questions and
answers (Marinas v. Sioco, 104 SCRA 403, Ponsica v. Ignalaga,
G.R. No. 72301, July 31, 1987, 152 SCRA 647). These
requirements are provided under Section 4, Rule 126 of the New
Rules of Criminal Procedure.
2. ID.; ID.; ID.; ID.; FINDING OR OPINION THEREOF BY THE
EXAMINING JUDGE, MUST BE SUPPORTED BY THE RECORD;
NOT OBSERVED IN THE CASE AT BAR. — It has been ruled that
the existence of probable cause depends to a large degree upon
the finding or opinion of the judge conducting the examination
(Luna v. Plaza, G.R. No. L-27511, Nov. 29, 1968), however, the
opinion or finding of probable cause must, to a certain degree, be
substantiated or supported by the record. In this case, We find that
the requirement mandated by the law and the rules that the judge
must personally examine the applicant and his witnesses in the
form of searching questions and answers before issuing the
warrant, was not sufficiently complied with. The applicant himself
was not asked any searching question by Judge Magallanes. The
records disclose that the only part played by the applicant,
Lieutenant Rojas was to subscribe the application before Judge
Magallanes. The application contained pre-typed questions, none
of which stated that applicant had personal knowledge of a robbery
or a theft and that the proceeds thereof are in the possession and
control of the person against whom the search warrant was sought
to be issued. In the case of Roan v. Gonzales, G.R. No. 71410,
Nov. 25, 1986, 145 SCRA 687, citing the case of Mata v. Bayona,
G.R. No. 50720, March 26, 1984, 128 SCRA 388, where the
applicant himself was not subjected to an interrogation but was
questioned only "to ascertain, among others, if he knew and
understood (his affidavit) and only because the application was not
yet subscribed and sworn to," We held that: "It is axiomatic that the
examination must be probing and exhaustive, not merely routinary
or pro forma, if the claimed probable cause is to be established.
The examining magistrate must not simply rehash the contents of
the affidavit but must make his own inquiry on the intent and
justification of the application."cralaw virtua1aw library
3. ID.; ID.; ID.; ARTICLES SOUGHT TO BE SEIZED, MUST BE
DESCRIBED WITH PARTICULARITY. — Another infirmity of
Search Warrant No. 181 is its generality. The law requires that the
articles sought to be seized must be described with particularity.
The items listed in the warrant, to wit: "NAPOCOR Galvanized
bolts, grounding motor drive assembly, aluminum wires and other
NAPOCOR Towers parts and line accessories" are so general that
the searching team can practically take half of the business of
Kener Trading, the premises searched. Kener Trading, as alleged
in petitioner’s petition before respondent Court of Appeals and
which has not been denied by respondent, is engaged in the
business of buying and selling scrap metals, second hand spare
parts and accessories and empty bottles. Far more important is
that the items described in the application do not fall under the list
of personal property which may be seized under Section 2, Rule
126 of the Rules on Criminal Procedure because neither the
application nor the joint deposition alleged that the item/s sought to
be seized were: a) the subject of an offense; b) stolen or
embezzled property and other proceeds or fruits of an offense; and
c) used or intended to be used as a means of committing an
offense.
4. ID.; ID.; ID.;SEIZURE OF INCRIMINATING ARTICLES,
CANNOT VALIDATE AN INVALID WARRANT. — No matter how
incriminating the articles taken from the petitioner may be, their
seizure cannot validate an invalid warrant. Again, in the case of
Mata v. Bayona, G.R. No. 50720, March 26, 1984, 128 SCRA 388:
". . . that nothing can justify the issuance of the search warrant but
the fulfillment of the legal requisites. It might be well to point out
what has been said in Asian Surety & Insurance Co., Inc. v.
Herrera: ‘It has been said that of all the rights of a citizen, few are
of greater importance or more essential to his peace and
happiness than the right of personal security, and that involves the
exemption of his private affairs, books and papers from inspection
and scrutiny of others. While the power to search and seize is
necessary to the public welfare, still it must be exercised and the
law enforced without transgressing the constitutional rights of the
citizens, for the enforcement of no statute is of sufficient
importance to justify indifference to the basic principles of
government." "Thus, in issuing a search warrant the Judge must
strictly comply with the requirements of the Constitution and the
statutory provisions. A liberal construction should be given in favor
of the individual to prevent stealthy encroachment upon, or gradual
depreciation of the rights secured by the Constitution. No
presumption of regularity are to be invoked in aid of the process
when an officer undertakes to justify it."
DECISION
NARVASA, J.:
A claim for alleged unpaid commissions of an agent is what is
basically involved in the action at bar. Somehow, it twice escaped
outright rejection for lack of jurisdiction in the Department of Labor
14
where the case was resolved at the first instance and on appeal.
Both the Labor Arbiter and the National Labor Relations
Commission appeared unaware of the utter lack of labor-related
issues in the parties’ conflicting contentions as to the existence of
agency relations between them, and proceeded to decide the case.
Neither of them of course had competence to do so. Be that as it
may, the instant petition for certiorariwill be decided on its merits to
the end that the controversy may now be laid to rest without further
proceedings.chanrobles virtual lawlibrary
The protagonists in this case are:chanrob1es virtual 1aw library
1) Marcelina A. Escandor — engaged, under the name and style of
Guardex Enterprises, in (a) the manufacture and sale of fire-
fighting equipment such as fire extinguishers, fire hose cabinets
and related products, and (b) occasionally, the building or
fabrication of fire trucks; and
2) Jumbee Orbeta — a "freelance" salesman. 1 
It appears that Orbeta somehow learned that Escandor had offered
to fabricate a fire truck for Rubberworld (Phil.) Inc. He wrote to
Escandor inquiring about the amount of commission for the sale of
a fire truck. Escandor wrote back on the same day to advise that it
was P15,000.00 per unit. Four days later, Orbeta offered to look
after (follow-up) Escandor’s pending proposal to sell a fire truck to
Rubberworld, and asked for P250.00 as representation expenses.
Escandor agreed and gave him the money.
When no word was received by Escandor from Orbeta after three
days, she herself inquired in writing from Rubberworld about her
offer of sale of a fire truck. Having apparently received an
encouraging response, Escandor sent Rubberworld a revised price
quotation some ten days later.
In the meantime, Orbeta sold to other individuals some of
Escandor’s fire extinguishers, receiving traveling expenses in
connection therewith as well as the corresponding commissions.
He then dropped out of sight.
About seven months afterwards, Escandor herself finally concluded
a contract with Rubberworld for the latter’s purchase of a fire truck.
The transaction was consummated with the delivery of the truck
and full payment thereof by Rubberworld.
At this point, Orbeta suddenly reappeared and asked for his
commission for the sale of the fire truck to Rubberworld. Escandor
refused, saying that he had had nothing to do with the offer,
negotiation and consummation of the sale.
Insisting that he was entitled to the commission, Orbeta filed a
complaint against Escandor with the Ministry of Labor. The Labor
Arbiter agreed with him and rendered judgment in his favor, on
August 26, 1982. That judgment was affirmed by the National
Labor Relations Commission on December 29, 1983, on appeal
taken by Escandor. 2 Hence, this petition for certiorari, to annul
those judgments as having been rendered with grave abuse of
discretion if not indeed without or in excess of jurisdiction.
It is claimed that an implied agency had been created between
Escandor and Orbeta on the basis of the following
circumstances:chanrobles virtual lawlibrary
1) the alleged verbal authority given to him to offer a fire truck to
Rubberworld;
2) the alleged written authority to sell the truck contained in a letter
of Escandor’s dated August 14, 1978;
3) Escandor’s having given Orbeta P250.00 as representation
expenses; and
4) Orbeta’s submission of a price quotation to Rubberworld and his
having arranged a meeting between Escandor and Rubberworld’s
Purchasing Manager.
The circumstances have not been correctly read by Orbeta and his
co-respondents.
Escandor denies that she had ever given Orbeta any such verbal
authority. Indeed, months prior to Orbeta’s approaching Escandor,
the latter had already made a written offer of a fire truck to
Rubberworld. All that she consented to was for Orbeta to "follow
up" that pending offer. In truth, it does not even appear that on the
strength of this "arrangement" — vague as it was — Orbeta
undertook the promised follow-up at all. He reported nothing of his
efforts or their fruits to Escandor. It was Escandor who, in the
months that followed her initial meeting with Orbeta, determinedly
pushed the Rubberworld deal. Orbeta was simply nowhere to be
found. Furthermore, it seems fairly evident that the "representation
allowance" of P250 was meant to cover the expenses for the
"follow-up" offered by Orbeta — an ambiguous fact which does not
of itself suggest the creation of an agency and is not at all
inconsistent with the theory of its absence in this case.
Even a finding that under these circumstances, an agency had
indeed been constituted will not save the day for Orbeta, because
nothing in the record tends to prove that he succeeded in carrying
out its terms or even as much as attempted to do so. The evidence
in fact clearly indicates otherwise. The terms of Escandor’s letter of
August 14, 1978 — assuming that it was indeed an "authority to
sell," as Orbeta insists — are to the effect that entitlement to the
P15,000 commission is contingent on the purchase by a customer
of a fire truck, the implicit condition being that the agent would earn
the commission if he was instrumental in bringing the sale about.
Orbeta certainly had nothing to do with the sale of the fire truck,
and is not therefore entitled to any commission at all.
Furthermore, even if Orbeta is considered to have been Escandor’s
agent for the time he was supposed to "follow up" the offer to sell,
such agency would have been deemed revoked upon the
resumption of direct negotiations between Escandor and
Rubberworld, Orbeta having in the meantime abandoned all efforts
(if indeed any were exerted) to secure the deal in Escandor’s
behalf.chanrobles law library : red
It has of course already been stated at the outset that, given the
sole issue raised by the parties concededly from the case’s
inception (i.e., whether or not Orbeta is Escandor’s agent as
regards the sale of a fire truck to Rubberworld), the competence to
resolve the controversy did not pertain to either the Labor Arbiter or
the NLRC. The jurisdiction vested in them by the Labor Code
extends, generally speaking, only to cases arising from employer-
employee relationships.3 What has all along been at issue here, as
advanced by the parties themselves and as is evident from the
facts, is the existence of a contract of agency 4 — not employment
or lease of services. It is indeed a puzzle how the fundamental
differences between the two 5 altogether escaped not only the
parties’ counsel in this case but also the tribunals before which it
had been brought. Nevertheless, since no one has thought to
question their authority even up to this late stage, as in fact all the
parties appear to have completely accepted the validity of their
exercise of jurisdiction over the case, the Court has opted, as
already stated, to render judgment on its merits and end the
controversy once and for all. 6 
WHEREFORE, the petition for certiorari is GRANTED, and the
judgment of the National Labor Relations Commission dated
15
December 29, 1983, and that of the Labor Arbiter dated August 26,
1982, are hereby REVERSED and SET ASIDE and another one
rendered dismissing respondent Jumbee Orbeta’s claim for unpaid
commissions.chanrobles virtual lawlibrary
SO ORDERED.
Cruz, Gancayco, Griño-Aquino and Medialdea, JJ., concur.
G.R. No. 83122 October 19, 1990
ARTURO P. VALENZUELA and HOSPITALITA N.
VALENZUELA, petitioners, 
vs.
THE HONORABLE COURT OF APPEALS, BIENVENIDO M.
ARAGON, ROBERT E. PARNELL, CARLOS K. CATOLICO and
THE PHILIPPINE AMERICAN GENERAL INSURANCE
COMPANY, INC., respondents.
Albino B. Achas for petitioners.
Angara, Abello, Concepcion, Regala & Cruz for private
respondents.
GUTIERREZ, JR., J.:
This is a petition for review of the January 29, 1988 decision of the
Court of Appeals and the April 27, 1988 resolution denying the
petitioners' motion for reconsideration, which decision and
resolution reversed the decision dated June 23,1986 of the Court
of First Instance of Manila, Branch 34 in Civil Case No. 121126
upholding the petitioners' causes of action and granting all the
reliefs prayed for in their complaint against private respondents.
The antecedent facts of the case are as follows:
Petitioner Arturo P. Valenzuela (Valenzuela for short) is a General
Agent of private respondent Philippine American General
Insurance Company, Inc. (Philamgen for short) since 1965. As
such, he was authorized to solicit and sell in behalf of Philamgen
all kinds of non-life insurance, and in consideration of services
rendered was entitled to receive the full agent's commission of
32.5% from Philamgen under the scheduled commission rates
(Exhibits "A" and "1"). From 1973 to 1975, Valenzuela solicited
marine insurance from one of his clients, the Delta Motors, Inc.
(Division of Electronics Airconditioning and Refrigeration) in the
amount of P4.4 Million from which he was entitled to a commission
of 32% (Exhibit "B"). However, Valenzuela did not receive his full
commission which amounted to P1.6 Million from the P4.4 Million
insurance coverage of the Delta Motors. During the period 1976 to
1978, premium payments amounting to P1,946,886.00 were paid
directly to Philamgen and Valenzuela's commission to which he is
entitled amounted to P632,737.00.
In 1977, Philamgen started to become interested in and expressed
its intent to share in the commission due Valenzuela (Exhibits "III"
and "III-1") on a fifty-fifty basis (Exhibit "C"). Valenzuela refused
(Exhibit "D").
On February 8, 1978 Philamgen and its President, Bienvenido M.
Aragon insisted on the sharing of the commission with Valenzuela
(Exhibit E). This was followed by another sharing proposal dated
June 1, 1978. On June 16,1978, Valenzuela firmly reiterated his
objection to the proposals of respondents stating that: "It is with
great reluctance that I have to decline upon request to signify my
conformity to your alternative proposal regarding the payment of
the commission due me. However, I have no choice for to do
otherwise would be violative of the Agency Agreement executed
between our goodselves." (Exhibit B-1)
Because of the refusal of Valenzuela, Philamgen and its officers,
namely: Bienvenido Aragon, Carlos Catolico and Robert E. Parnell
took drastic action against Valenzuela. They: (a) reversed the
commission due him by not crediting in his account the commission
earned from the Delta Motors, Inc. insurance (Exhibit "J" and "2");
(b) placed agency transactions on a cash and carry basis; (c)
threatened the cancellation of policies issued by his agency
(Exhibits "H" to "H-2"); and (d) started to leak out news that
Valenzuela has a substantial account with Philamgen. All of these
acts resulted in the decline of his business as insurance agent
(Exhibits "N", "O", "K" and "K-8"). Then on December 27, 1978,
Philamgen terminated the General Agency Agreement of
Valenzuela (Exhibit "J", pp. 1-3, Decision Trial Court dated June
23, 1986, Civil Case No. 121126, Annex I, Petition).
The petitioners sought relief by filing the complaint against the
private respondents in the court a quo (Complaint of January 24,
1979, Annex "F" Petition). After due proceedings, the trial court
found:
xxx xxx xxx
Defendants tried to justify the termination of
plaintiff Arturo P. Valenzuela as one of defendant
PHILAMGEN's General Agent by making it
appear that plaintiff Arturo P. Valenzuela has a
substantial account with defendant PHILAMGEN
particularly Delta Motors, Inc.'s Account, thereby
prejudicing defendant PHILAMGEN's interest
(Exhibits 6,"11","11- "12- A"and"13-A").
Defendants also invoked the provisions of the
Civil Code of the Philippines (Article 1868) and
the provisions of the General Agency Agreement
as their basis for terminating plaintiff Arturo P.
Valenzuela as one of their General Agents.
That defendants' position could have been
justified had the termination of plaintiff Arturo P.
Valenzuela was (sic) based solely on the
provisions of the Civil Code and the conditions of
the General Agency Agreement. But the records
will show that the principal cause of the
termination of the plaintiff as General Agent of
defendant PHILAMGEN was his refusal to share
his Delta commission.
That it should be noted that there were several
attempts made by defendant Bienvenido M.
Aragon to share with the Delta commission of
plaintiff Arturo P. Valenzuela. He had persistently
pursued the sharing scheme to the point of
terminating plaintiff Arturo P. Valenzuela, and to
make matters worse, defendants made it appear
that plaintiff Arturo P. Valenzuela had substantial
accounts with defendant PHILAMGEN.
Not only that, defendants have also started (a) to
treat separately the Delta Commission of plaintiff
Arturo P. Valenzuela, (b) to reverse the Delta
commission due plaintiff Arturo P. Valenzuela by
16
not crediting or applying said commission earned
to the account of plaintiff Arturo P. Valenzuela,
(c) placed plaintiff Arturo P. Valenzuela's agency
transactions on a "cash and carry basis", (d)
sending threats to cancel existing policies issued
by plaintiff Arturo P. Valenzuela's agency, (e) to
divert plaintiff Arturo P. Valenzuela's insurance
business to other agencies, and (f) to spread wild
and malicious rumors that plaintiff Arturo P.
Valenzuela has substantial account with
defendant PHILAMGEN to force plaintiff Arturo
P. Valenzuela into agreeing with the sharing of
his Delta commission." (pp. 9-10, Decision,
Annex 1, Petition).
xxx xxx xxx
These acts of harrassment done by defendants
on plaintiff Arturo P. Valenzuela to force him to
agree to the sharing of his Delta commission,
which culminated in the termination of plaintiff
Arturo P. Valenzuela as one of defendant
PHILAMGEN's General Agent, do not justify said
termination of the General Agency Agreement
entered into by defendant PHILAMGEN and
plaintiff Arturo P. Valenzuela.
That since defendants are not justified in the
termination of plaintiff Arturo P. Valenzuela as
one of their General Agents, defendants shall be
liable for the resulting damage and loss of
business of plaintiff Arturo P. Valenzuela. (Arts.
2199/2200, Civil Code of the Philippines). (Ibid,
p. 11)
The court accordingly rendered judgment, the dispositive portion of
which reads:
WHEREFORE, judgment is hereby rendered in
favor of the plaintiffs and against defendants
ordering the latter to reinstate plaintiff Arturo P.
Valenzuela as its General Agent, and to pay
plaintiffs, jointly and severally, the following:
1. The amount of five hundred twenty-one
thousand nine hundred sixty four and 16/100
pesos (P521,964.16) representing plaintiff Arturo
P. Valenzuela's Delta Commission with interest
at the legal rate from the time of the filing of the
complaint, which amount shall be adjusted in
accordance with Article 1250 of the Civil Code of
the Philippines;
2. The amount of seventy-five thousand pesos
(P75,000.00) per month as compensatory
damages from 1980 until such time that
defendant Philamgen shall reinstate plaintiff
Arturo P. Valenzuela as one of its general
agents;
3. The amount of three hundred fifty thousand
pesos (P350,000.00) for each plaintiff as moral
damages;
 4. The amount of seventy-five thousand pesos
(P75,000.00) as and for attorney's fees;
5. Costs of the suit. (Ibid., P. 12)
From the aforesaid decision of the trial court,
Bienvenido Aragon, Robert E. Parnell, Carlos K.
Catolico and PHILAMGEN respondents herein,
and defendants-appellants below, interposed an
appeal on the following:
ASSIGNMENT OF ERRORS
I attorney's fees.
THE LOWER COURT ERRED IN HOLDING
THAT PLAINTIFF ARTURO P. VALENZUELA
HAD NO OUTSTANDING ACCOUNT WITH
DEFENDANT PHILAMGEN AT THE TIME OF
THE TERMINATION OF THE AGENCY.
II
THE LOWER COURT ERRED IN HOLDING
THAT PLAINTIFF ARTURO P. VALENZUELA IS
ENTITLED TO THE FULL COMMISSION OF
32.5% ON THE DELTA ACCOUNT.
III
THE LOWER COURT ERRED IN HOLDING
THAT THE TERMINATION OF PLAINTIFF
ARTURO P. VALENZUELA WAS NOT
JUSTIFIED AND THAT CONSEQUENTLY
DEFENDANTS ARE LIABLE FOR ACTUAL AND
MORAL DAMAGES, ATTORNEYS FEES AND
COSTS.
IV
ASSUMING ARGUENDO THAT THE AWARD
OF DAMAGES AGAINST DEFENDANT
PHILAMGEN WAS PROPER, THE LOWER
COURT ERRED IN AWARDING DAMAGES
EVEN AGAINST THE INDIVIDUAL
DEFENDANTS WHO ARE MERE CORPORATE
AGENTS ACTING WITHIN THE SCOPE OF
THEIR AUTHORITY.
V however certain exceptions to the rule which this Court has
ASSUMING ARGUENDO THAT THE AWARD
OF DAMAGES IN FAVOR OF PLAINTIFF
ARTURO P. VALENZUELA WAS PROPER,
THE LOWER COURT ERRED IN AWARDING
DAMAGES IN FAVOR OF HOSPITALITA
VALENZUELA, WHO, NOT BEING THE REAL
PARTY IN INTEREST IS NOT TO OBTAIN
RELIEF.
On January 29, 1988, respondent Court of Appeals promulgated its
decision in the appealed case. The dispositive portion of the
decision reads:
17
WHEREFORE, the decision appealed from is
hereby modified accordingly and judgment is
hereby rendered ordering:
1. Plaintiff-appellee Valenzuela to pay defendant-
appellant Philamgen the sum of one million nine
hundred thirty two thousand five hundred thirty-
two pesos and seventeen centavos
(P1,902,532.17), with legal interest thereon from
the date of finality of this judgment until fully paid.
2. Both plaintiff-appellees to pay jointly and
severally defendants-appellants the sum of fifty
thousand pesos (P50,000.00) as and by way of
No pronouncement is made as to costs. (p.
44, Rollo)
There is in this instance irreconcilable divergence in the findings
and conclusions of the Court of Appeals, vis-a-visthose of the trial
court particularly on the pivotal issue whether or not Philamgen
and/or its officers can be held liable for damages due to the
termination of the General Agency Agreement it entered into with
the petitioners. In its questioned decision the Court of Appeals
observed that:
In any event the principal's power to revoke an
agency at will is so pervasive, that the Supreme
Court has consistently held that termination may
be effected even if the principal acts in bad faith,
subject only to the principal's liability for
damages (Danon v. Antonio A. Brimo & Co., 42
Phil. 133; Reyes v. Mosqueda, 53 O.G. 2158 and
Infante V. Cunanan, 93 Phil. 691, cited in Paras,
Vol. V, Civil Code of the Philippines Annotated
[1986] 696).
The lower court, however, thought the
termination of Valenzuela as General Agent
improper because the record will show the
principal cause of the termination of the plaintiff
as General Agent of defendant Philamgen was
his refusal to share his Delta commission.
(Decision, p. 9; p. 13, Rollo, 41)
Because of the conflicting conclusions, this Court deemed it
necessary in the interest of substantial justice to scrutinize the
evidence and records of the cases. While it is an established
principle that the factual findings of the Court of Appeals are final
and may not be reviewed on appeal to this Court, there are
recognized and accepted, among which, are when the judgment is
based on a misapprehension of facts and when the findings of the
appellate court, are contrary to those of the trial court (Manlapaz v.
Court of Appeals, 147 SCRA 236 [1987]); Guita v. Court of
Appeals, 139 SCRA 576 [1986]). Where the findings of the Court of
Appeals and the trial court are contrary to each other, this Court
may scrutinize the evidence on record (Cruz v. Court of Appeals,
129 SCRA 222 [1984]; Mendoza v. Court of Appeals, 156 SCRA
597 [1987]; Maclan v. Santos, 156 SCRA 542 [1987]). When the
conclusion of the Court of Appeals is grounded entirely on
speculation, surmises or conjectures, or when the inference made
is manifestly mistaken, absurd or impossible, or when there is
grave abuse of discretion, or when the judgment is based on a
misapprehension of facts, and when the findings of facts are
conflict the exception also applies (Malaysian Airline System
Bernad v. Court of Appeals, 156 SCRA 321 [1987]).
After a painstaking review of the entire records of the case and the
findings of facts of both the court a quo and respondent appellate
court, we are constrained to affirm the trial court's findings and rule
for the petitioners.
We agree with the court a quo that the principal cause of the
termination of Valenzuela as General Agent of Philamgen arose
from his refusal to share his Delta commission. The records sustain
the conclusions of the trial court on the apparent bad faith of the
private respondents in terminating the General Agency Agreement
of petitioners. It is axiomatic that the findings of fact of a trial judge
are entitled to great weight (People v. Atanacio, 128 SCRA 22
[1984]) and should not be disturbed on appeal unless for strong
and cogent reasons, because the trial court is in a better position to
examine the evidence as well as to observe the demeanor of the
witnesses while testifying (Chase v. Buencamino, Sr., 136 SCRA
365 [1985]; People v. Pimentel, 147 SCRA 25 [1987]; and Baliwag
Trans., Inc. v. Court of Appeals, 147 SCRA 82 [1987]). In the case
at bar, the records show that the findings and conclusions of the
trial court are supported by substantial evidence and there appears
to be no cogent reason to disturb them (Mendoza v. Court of
Appeals. 156 SCRA 597 [1987]).
As early as September 30,1977, Philamgen told the petitioners of
its desire to share the Delta Commission with them. It stated that
should Delta back out from the agreement, the petitioners would be
charged interests through a reduced commission after full payment
by Delta.
On January 23, 1978 Philamgen proposed reducing the petitioners'
commissions by 50% thus giving them an agent's commission of
16.25%. On February 8, 1978, Philamgen insisted on the reduction
scheme followed on June 1, 1978 by still another insistence on
reducing commissions and proposing two alternative schemes for
reduction. There were other pressures. Demands to settle
accounts, to confer and thresh out differences regarding the
petitioners' income and the threat to terminate the agency followed.
The petitioners were told that the Delta commissions would not be
credited to their account (Exhibit "J"). They were informed that the
Valenzuela agency would be placed on a cash and carry basis thus
removing the 60-day credit for premiums due. (TSN., March 26,
1979, pp. 54-57). Existing policies were threatened to be cancelled
(Exhibits "H" and "14"; TSN., March 26, 1979, pp. 29-30). The
Valenzuela business was threatened with diversion to other
agencies. (Exhibit "NNN"). Rumors were also spread about alleged
accounts of the Valenzuela agency (TSN., January 25, 1980, p.
41). The petitioners consistently opposed the pressures to hand
over the agency or half of their commissions and for a treatment of
the Delta account distinct from other accounts. The pressures and
demands, however, continued until the agency agreement itself
was finally terminated.
It is also evident from the records that the agency involving
petitioner and private respondent is one "coupled with an interest,"
and, therefore, should not be freely revocable at the unilateral will
of the latter.
In the insurance business in the Philippines, the most difficult and
frustrating period is the solicitation and persuasion of the
prospective clients to buy insurance policies. Normally, agents
would encounter much embarrassment, difficulties, and oftentimes
frustrations in the solicitation and procurement of the insurance
policies. To sell policies, an agent exerts great effort, patience,
perseverance, ingenuity, tact, imagination, time and money. In the
18
case of Valenzuela, he was able to build up an Agency from
scratch in 1965 to a highly productive enterprise with gross billings
of about Two Million Five Hundred Thousand Pesos
(P2,500,000.00) premiums per annum. The records sustain the
finding that the private respondent started to covet a share of the
insurance business that Valenzuela had built up, developed and
nurtured to profitability through over thirteen (13) years of patient
work and perseverance. When Valenzuela refused to share his
commission in the Delta account, the boom suddenly fell on him.
The private respondents by the simple expedient of terminating the
General Agency Agreement appropriated the entire insurance
business of Valenzuela. With the termination of the General
Agency Agreement, Valenzuela would no longer be entitled to
commission on the renewal of insurance policies of clients sourced
from his agency. Worse, despite the termination of the agency,
Philamgen continued to hold Valenzuela jointly and severally liable
with the insured for unpaid premiums. Under these circumstances,
it is clear that Valenzuela had an interest in the continuation of the
agency when it was unceremoniously terminated not only because
of the commissions he should continue to receive from the
insurance business he has solicited and procured but also for the
fact that by the very acts of the respondents, he was made liable to
Philamgen in the event the insured fail to pay the premiums due.
They are estopped by their own positive averments and claims for
damages. Therefore, the respondents cannot state that the agency
relationship between Valenzuela and Philamgen is not coupled
with interest. "There may be cases in which an agent has been
induced to assume a responsibility or incur a liability, in reliance
upon the continuance of the authority under such circumstances
that, if the authority be withdrawn, the agent will be exposed to
personal loss or liability" (See MEC 569 p. 406).
Furthermore, there is an exception to the principle that an agency
is revocable at will and that is when the agency has been given not
only for the interest of the principal but for the interest of third
persons or for the mutual interest of the principal and the agent. In
these cases, it is evident that the agency ceases to be freely
revocable by the sole will of the principal (See Padilla, Civil Code
Annotated, 56 ed., Vol. IV p. 350). The following citations are
apropos:
The principal may not defeat the agent's right to
indemnification by a termination of the contract of
agency (Erskine v. Chevrolet Motors Co. 185 NC
479, 117 SE 706, 32 ALR 196).
Where the principal terminates or repudiates the
agent's employment in violation of the contract of
employment and without cause ... the agent is
entitled to receive either the amount of net losses
caused and gains prevented by the breach, or
the reasonable value of the services rendered.
Thus, the agent is entitled to prospective profits
which he would have made except for such
wrongful termination provided that such profits
are not conjectural, or speculative but are
capable of determination upon some fairly
reliable basis. And a principal's revocation of the
agency agreement made to avoid payment of
compensation for a result which he has actually
accomplished (Hildendorf v. Hague, 293 NW 2d
272; Newhall v. Journal Printing Co., 105 Minn
44,117 NW 228; Gaylen Machinery Corp. v.
Pitman-Moore Co. [C.A. 2 NY] 273 F 2d 340)
 If a principal violates a contractual or quasi-
contractual duty which he owes his agent, the
agent may as a rule bring an appropriate action
for the breach of that duty. The agent may in a
proper case maintain an action at law for
compensation or damages ... A wrongfully
discharged agent has a right of action for
damages and in such action the measure and
element of damages are controlled generally by
the rules governing any other action for the
employer's breach of an employment contract.
(Riggs v. Lindsay, 11 US 500, 3L Ed 419; Tiffin
Glass Co. v. Stoehr, 54 Ohio 157, 43 NE 2798)
At any rate, the question of whether or not the agency agreement
is coupled with interest is helpful to the petitioners' cause but is not
the primary and compelling reason. For the pivotal factor rendering
Philamgen and the other private respondents liable in damages is
that the termination by them of the General Agency Agreement
was tainted with bad faith. Hence, if a principal acts in bad faith and
with abuse of right in terminating the agency, then he is liable in
damages. This is in accordance with the precepts in Human
Relations enshrined in our Civil Code that "every person must in
the exercise of his rights and in the performance of his duties act
with justice, give every one his due, and observe honesty and good
faith: (Art. 19, Civil Code), and every person who, contrary to law,
wilfully or negligently causes damages to another, shall indemnify
the latter for the same (Art. 20, id). "Any person who wilfully causes
loss or injury to another in a manner contrary to morals, good
customs and public policy shall compensate the latter for the
damages" (Art. 21, id.).
As to the issue of whether or not the petitioners are liable to
Philamgen for the unpaid and uncollected premiums which the
respondent court ordered Valenzuela to pay Philamgen the amount
of One Million Nine Hundred Thirty-Two Thousand Five Hundred
Thirty-Two and 17/100 Pesos (P1,932,532,17) with legal interest
thereon until fully paid (Decision-January 20, 1988, p. 16; Petition,
Annex "A"), we rule that the respondent court erred in holding
Valenzuela liable. We find no factual and legal basis for the award.
Under Section 77 of the Insurance Code, the remedy for the non-
payment of premiums is to put an end to and render the insurance
policy not binding —
Sec. 77 ... [N]otwithstanding any agreement to
the contrary, no policy or contract of insurance is
valid and binding unless and until the premiums
thereof have been paid except in the case of a
life or industrial life policy whenever the grace
period provision applies (P.D. 612, as amended
otherwise known as the Insurance Code of 1974)
In Philippine Phoenix Surety and Insurance, Inc. v. Woodworks,
Inc. (92 SCRA 419 [1979]) we held that the non-payment of
premium does not merely suspend but puts an end to an insurance
contract since the time of the payment is peculiarly of the essence
of the contract. And in Arce v. The Capital Insurance and Surety
Co. Inc. (117 SCRA 63, [1982]), we reiterated the rule that unless
premium is paid, an insurance contract does not take effect. Thus:
It is to be noted that Delgado (Capital Insurance
& Surety Co., Inc. v. Delgado, 9 SCRA 177
[1963] was decided in the light of the Insurance
Act before Sec. 72 was amended by the
underscored portion. Supra. Prior to the
Amendment, an insurance contract was effective
even if the premium had not been paid so that an
19
insurer was obligated to pay indemnity in case of
loss and correlatively he had also the right to sue
for payment of the premium. But the amendment
to Sec. 72 has radically changed the legal
regime in that unless the premium is paid there
is no insurance. " (Arce v. Capitol Insurance and
Surety Co., Inc., 117 SCRA 66; Emphasis
supplied)
In Philippine Phoenix Surety case, we held:
Moreover, an insurer cannot treat a contract as
valid for the purpose of collecting premiums and
invalid for the purpose of indemnity. (Citing
Insurance Law and Practice by John Alan
Appleman, Vol. 15, p. 331; Emphasis supplied)
The foregoing findings are buttressed by Section
776 of the insurance Code (Presidential Decree
No. 612, promulgated on December 18, 1974),
which now provides that no contract of Insurance
by an insurance company is valid and binding
unless and until the premium thereof has been
paid, notwithstanding any agreement to the
contrary (Ibid., 92 SCRA 425)
Perforce, since admittedly the premiums have not been paid, the
policies issued have lapsed. The insurance coverage did not go
into effect or did not continue and the obligation of Philamgen as
insurer ceased. Hence, for Philamgen which had no more liability
under the lapsed and inexistent policies to demand, much less sue
Valenzuela for the unpaid premiums would be the height of
injustice and unfair dealing. In this instance, with the lapsing of the
policies through the nonpayment of premiums by the insured there
were no more insurance contracts to speak of. As this Court held in
the Philippine Phoenix Surety case, supra "the non-payment of
premiums does not merely suspend but puts an end to an
insurance contract since the time of the payment is peculiarly of the
essence of the contract."
The respondent appellate court also seriously erred in according
undue reliance to the report of Banaria and Banaria and Company,
auditors, that as of December 31, 1978, Valenzuela owed
Philamgen P1,528,698.40. This audit report of Banaria was
commissioned by Philamgen after Valenzuela was almost through
with the presentation of his evidence. In essence, the Banaria
report started with an unconfirmed and unaudited beginning
balance of account of P1,758,185.43 as of August 20, 1976. But
even with that unaudited and unconfirmed beginning balance of
P1,758,185.43, Banaria still came up with the amount of P3,865.49
as Valenzuela's balance as of December 1978 with Philamgen
(Exh. "38-A-3"). In fact, as of December 31, 1976, and December
31, 1977, Valenzuela had no unpaid account with Philamgen (Ref:
Annexes "D", "D-1", "E", Petitioner's Memorandum). But even
disregarding these annexes which are records of Philamgen and
addressed to Valenzuela in due course of business, the facts show
that as of July 1977, the beginning balance of Valenzuela's
account with Philamgen amounted to P744,159.80. This was
confirmed by Philamgen itself not only once but four (4) times on
different occasions, as shown by the records.
On April 3,1978, Philamgen sent Valenzuela a statement of
account with a beginning balance of P744,159-80 as of July 1977.
On May 23, 1978, another statement of account with exactly the
same beginning balance was sent to Valenzuela.
On November 17, 1978, Philamgen sent still another statement of
account with P744,159.80 as the beginning balance.
And on December 20, 1978, a statement of account with exactly
the same figure was sent to Valenzuela.
It was only after the filing of the complaint that a radically different
statement of accounts surfaced in court. Certainly, Philamgen's
own statements made by its own accountants over a long period of
time and covering examinations made on four different occasions
must prevail over unconfirmed and unaudited statements made to
support a position made in the course of defending against a
lawsuit.
It is not correct to say that Valenzuela should have presented its
own records to refute the unconfirmed and unaudited finding of the
Banaria auditor. The records of Philamgen itself are the best
refutation against figures made as an afterthought in the course of
litigation. Moreover, Valenzuela asked for a meeting where the
figures would be reconciled. Philamgen refused to meet with him
and, instead, terminated the agency agreement.
After off-setting the amount of P744,159.80, beginning balance as
of July 1977, by way of credits representing the commission due
from Delta and other accounts, Valenzuela had overpaid
Philamgen the amount of P530,040.37 as of November 30, 1978.
Philamgen cannot later be heard to complain that it committed a
mistake in its computation. The alleged error may be given
credence if committed only once. But as earlier stated, the
reconciliation of accounts was arrived at four (4) times on different
occasions where Philamgen was duly represented by its account
executives. On the basis of these admissions and representations,
Philamgen cannot later on assume a different posture and claim
that it was mistaken in its representation with respect to the correct
beginning balance as of July 1977 amounting to P744,159.80. The
Banaria audit report commissioned by Philamgen is unreliable
since its results are admittedly based on an unconfirmed and
unaudited beginning balance of P1,758,185.43 as of August
20,1976.
As so aptly stated by the trial court in its decision:
Defendants also conducted an audit of accounts
of plaintiff Arturo P. Valenzuela after the
controversy has started. In fact, after hearing
plaintiffs have already rested their case.
The results of said audit were presented in Court
to show plaintiff Arturo P. Valenzuela's
accountability to defendant PHILAMGEN.
However, the auditor, when presented as
witness in this case testified that the beginning
balance of their audit report was based on an
unaudited amount of P1,758,185.43 (Exhibit 46-
A) as of August 20, 1976, which was unverified
and merely supplied by the officers of defendant
PHILAMGEN.
Even defendants very own Exhibit 38- A-3,
showed that plaintiff Arturo P. Valenzuela's
balance as of 1978 amounted to only P3,865.59,
not P826,128.46 as stated in defendant
Bienvenido M. Aragon's letter dated December
20,1978 (Exhibit 14) or P1,528,698.40 as
reflected in defendant's Exhibit 46 (Audit Report
of Banaria dated December 24, 1980).
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These glaring discrepancy (sic) in the
accountability of plaintiff Arturo P. Valenzuela to
defendant PHILAMGEN only lends credence to
the claim of plaintiff Arturo P. Valenzuela that he
has no outstanding account with defendant
PHILAMGEN when the latter, thru defendant
Bienvenido M. Aragon, terminated the General
Agency Agreement entered into by plaintiff
(Exhibit A) effective January 31, 1979 (see
Exhibits "2" and "2-A"). Plaintiff Arturo P.
Valenzuela has shown that as of October 31,
1978, he has overpaid defendant PHILAMGEN
in the amount of P53,040.37 (Exhibit "EEE",
which computation was based on defendant
PHILAMGEN's balance of P744,159.80 furnished
on several occasions to plaintiff Arturo P.
Valenzuela by defendant PHILAMGEN (Exhibits
H-1, VV, VV-1, WW, WW-1 , YY , YY-2 , ZZ
and , ZZ-2).
Prescinding from the foregoing, and considering that the private
respondents terminated Valenzuela with evident mala fide it
necessarily follows that the former are liable in damages.
Respondent Philamgen has been appropriating for itself all these
years the gross billings and income that it unceremoniously took
away from the petitioners. The preponderance of the authorities
sustain the preposition that a principal can be held liable for
damages in cases of unjust termination of agency. In  Danon v.
Brimo, 42 Phil. 133 [1921]), this Court ruled that where no time for
the continuance of the contract is fixed by its terms, either party is
at liberty to terminate it at will, subject only to the ordinary
requirements of good faith. The right of the principal to terminate
his authority is absolute and unrestricted, except only that he may
not do so in bad faith.
The trial court in its decision awarded to Valenzuela the amount of
Seventy Five Thousand Pesos (P75,000,00) per month as
compensatory damages from June 1980 until its decision becomes
final and executory. This award is justified in the light of the
evidence extant on record (Exhibits "N", "N-10", "0", "0-1", "P" and
"P-1") showing that the average gross premium collection monthly
of Valenzuela over a period of four (4) months from December
1978 to February 1979, amounted to over P300,000.00 from which
he is entitled to a commission of P100,000.00 more or less per
month. Moreover, his annual sales production amounted to
P2,500,000.00 from where he was given 32.5% commissions.
Under Article 2200 of the new Civil Code, "indemnification for
damages shall comprehend not only the value of the loss suffered,
but also that of the profits which the obligee failed to obtain."
The circumstances of the case, however, require that the
contractual relationship between the parties shall be terminated
upon the satisfaction of the judgment. No more claims arising from
or as a result of the agency shall be entertained by the courts after
that date.
ACCORDINGLY, the petition is GRANTED. The impugned
decision of January 29, 1988 and resolution of April 27, 1988 of
respondent court are hereby SET ASIDE. The decision of the trial
court dated January 23, 1986 in Civil Case No. 121126 is
REINSTATED with the MODIFICATIONS that the amount of FIVE
HUNDRED TWENTY ONE THOUSAND NINE HUNDRED SIXTY-
FOUR AND 16/100 PESOS (P521,964.16) representing the
petitioners Delta commission shall earn only legal interests without
any adjustments under Article 1250 of the Civil Code and that the
contractual relationship between Arturo P. Valenzuela and
Philippine American General Insurance Company shall be deemed
terminated upon the satisfaction of the judgment as modified.

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