You are on page 1of 10

VDA. DE CHUA v. IAC (RL)G.R. No. 70909 January 5, 1994 Petitioners: CONCHITA T. VDA.

DE CHUA, THELMA CHUA and husband CHARLIE DY,CHARLITO CHUA, REYNALDO CHUA, SUSAN CHUA, ALEX CHUA, EDDIE CHUA, SIMONCHUA, AND ERNESTO CHUA Respondents: INTERMEDIATE APPELLATE COURT, VICENTE GO, VICTORIA T. GO, AND HERMINI GILDA HERRERA Facts: Herrera executed a lease contract for a term of 10 years, renewable for another 5 years, of her lots in Cebu in favor of Tian On Sy. Sy sold the residential building he erected on the land to the Chua. Sy stipulated to have assigned all rights and privileges on the least lot with the knowledge and consent of Herrera through her attorney-in-fact Reynes. Chua and Reynes executed another lease contract after the expiration of the former contract. Herrera later on sold to land to spouses Go and the latter were able to register the land. The Chuas assailed this but the complaint was dismissed by the RTC and the CA. The CA further noted that Reynes did not have a SPA to enter into the lease contract. Issue: WON the latter contract between Chua and Reynes is valid. Ruling: No. The SC held that it is void because an agent (atty-in-fact) must be armed with aSPA in order to enter into a lease contract for a period of more than one year. In this case, Reynes entered into a lease contract of 5 years with Chua which obviously requires the former to be armed with a SPA for the contract to be valid.

DUNGO v. LOPENA 6 SCRA 1007 FACTS: Anastacio Dungo and Rodrigo Gonzales purchased 3 parcels of land from Adriano Lopena and Rosa Ramos for the total price of P269,804.00. P28.000.00 was given as down payment with the agreement that the balance of P241,804.00 would be paid in 6 monthly installments. To secure the payment of the balance, the Dungo and Gonzales executed over the same parcels of land Deed of Real Estate Mortgage in favor of Lopena and Ramos. This deed was duly registered with the Office of the Register of Deeds Rizal, with the condition that failure of the vendees to pay any of the installments on their maturity dates shall automatically cause the entire unpaid balance to become due and demandable. Dungo and Gonzales defaulted on the 1st installment. Lopena and Ramos filed a complaint for the foreclosure of the real estate mortgage with the CFI of Rizal

There were 2 other civil cases filed in the same lower court against the same defendants Dugo and Gonzales. The plaintiff in one was a certain Dionisio Lopena, and in the other case, the complainants were Bernardo Lopena and Maria de la Cruz. All3 cases arose out of one transaction. In view of the identical nature of the cases, they were consolidated by the lower court into just one proceeding. This present decision refers solely to the interests and claim of Adriano Lopena against Anastacio Dugo alone. Before the cases could be tried, a compromise agreement was submitted to the lower court for approval. It was signed by Lopena and Ramos on one hand, and Gonzales, on the other. It was not signed by Dungo. However, Gonzales represented that his signature was for both himself and the Dugno. Moreover, Dugo's counsel of record, Atty. Chan, the same lawyer who signed and submitted for him the answer to the complaint, was present at the preparation of the compromise agreement and this counsel affixed his signature thereto. This compromise agreement was approved by the lower court on the same day it was submitted. Subsequently a so-called Tri-Party Agreement was drawn. The signatories to it were Dugo and Gonzales as debtors, Lopena and Ramos as creditors, and, one Emma R. Santos as payor. When Dugo and Gonzales failed to pay the balance, Lopena and Ramos filed a Motion for the Sale of Mortgaged Property. Although this last motion was filed ex parte, Dugo and Gonzales were notified of it by the lower court. Neither of them filed any opposition thereto. The lower court granted the above motion and ordered the sale of the mortgaged property. The 3 parcels of land were sold by the Sheriff at a public auction where at herein petitioners, together with the plaintiffs of the other two cases won as the highes t bidders.The said sheriff's sale was later confirmed by the lower court. Before confirming the sale, the lower court gave due notice of the motion for the confirmation to the herein petitioner who filed no opposition therefore. Dugo filed a motion to set aside all the proceedings on the ground that the compromise agreement was void ab initio with respect to him because he did not sign the same. Consequently, he argued, all subsequent proceedings under and by virtue of the compromise agreement, including the foreclosure sale, were void and null as regards him. This motion to set aside was denied by the lower court Dugo filed a Notice of Appeal from the order approving the foreclosure sale, as well as the order denying his motion to set aside. The approval of the record on appeal however, was opposed by the respondent spouses who claimed that the judgment was not appealable having been rendered by virtue of the compromise agreement. The opposition was contained in a motion to dismiss the appeal. The lower court dismissed the appeal ISSUES/HELD Was the compromise agreement, the Order of the same date approving the same, and, all the proceedings subsequent thereto, valid or void insofar as Dungo is concerned?

YES Dugo - the Compromise Agreement was void ab initio and could have no effect whatsoever against him because he did not sign the same. Furthermore, as it was void, all the proceedings subsequent to its execution, including the Order approving it, were similarly void and could not result to anything adverse to his interest. It is true that a compromise is, in itself, a contract. ART. 2028. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. Moreover, under Art. 1878 of the Civil Code, a third person cannot bind another to a compromise agreement unless he, the third person, has obtained a special power of attorney for that purpose from the party intended to be bound. Although the Civil Code expressly requires a special power of attorney in order that one may compromise an interest of another, it is neither accurate nor correct to conclude that its absence renders the compromise agreement void. In such a case, the compromise is merely unenforceable. It must be governed by the rules and the law on contracts. ART. 1403. The following contracts are unenforceable, unless they are ratified: Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers; WON Dugo had ratified the compromise agreement. YES The ratification of the compromise agreement was conclusively established by the Tri-Party Agreement. It is to benoted that the compromise agreement was submitted to and approved by the lower court. Now, the Tri-Party Agreement referred itself to that order. Rivero v. Rivero - When it appears that the client, on becoming aware the compromise and the judgment thereon, fails to repudiate promptly the action of his attorney, he will not afterwards be heard to contest its validity This Court has not overlooked the fact that which indeed Dugo was not a signatory to the compromise agreement, the principal provision of the said instrument was for his benefit. Originally, Dugo's obligation matured and became demandable on October 10, 1959. However, the compromise agreement extended the date of maturity to June 30, 1960.More than anything the compromise agreement operated to benefit of Dungo because it afforded him more time and opportunity to fulfill his monetary obligations under the contract. If only for this reason, this Court believes that the herein petitioner should not be heard to repudiate the said agreement. The compromise agreement stated "that, should the defendants fail to pay the said mortgage indebtedness, judgment of foreclosure shall thereafter be entered against the said defendants:" Beyond

doubt, this was ratified by the Tri-Party Agreement when it covenanted that - If the MAYOR defaults or fails to pay anyone of the installments in the manner stated above, the MAYOR and the DEBTOR hereby permit the CREDITOR to execute the order of sale referred to above (the Judgment of Foreclosure), and they (PAYOR and DEBTOR) hereby waive any and all objections or oppositions to the propriety of the public auction sale and to the confirmation of the sale to be made by the Court. Dugo - even assuming that the compromise agreement was valid, it nevertheless could not be enforced against him because it has been novated by the Tri-Party Agreement which brought in a third party, Santos, who assumed the mortgaged obligation of Dungo. Novation by presumption has never been favored. To be sustained, it need be established that the old and new contracts are incompatible in all points, or that the will to novate appears by express agreement of the parties or in acts of similar import. An obligation to pay a sum of money is not novated, in a new instrument wherein the old is ratified, by changing only the term of payment and adding other obligations not incompatible with the old one or wherein the old contract is merely supplemented by the new one Dungo claims that when a third party, Santos, came in and assumed the mortgaged obligation, novation resulted thereby inasmuch as a new debtor was substituted in place of the original one. In this kind of novation, however, it is not enough that the juridical relation of the parties to the original contract is extended to a third person; it is necessary that the old debtor be released from the obligation, and the third person or new debtor take his place in the new relation. Without such release, there is no novation; the third person who has assumed the obligation of the debtor merely becomes a co-debtor or surety. If there is no agreement as to solidarity, the first and the new debtors are considered obligation jointly. There was no such release of the original debtor in the Tri-Party Agreement. It is a very common thing in the business affairs for a stranger to a contract to assume its obligations; while this may have the effect of adding to the number of persons liable, it does not necessarily imply the extinguishment of the liability of the first debtor). The mere fact that the creditor receives a guaranty or accepts payments from a third person who has agreed to assume the obligation, when there is no agreement that the first debtor shall be released from responsibility, do not constitute a novation, and the creditor can still enforce the obligation against the original debtor . The Tri-Party Agreement was an instrument intended to render effective the compromise agreement. It merely complemented and ratified the same. That a third person was involved in it is inconsequential. Nowhere in the new agreement may the release of Dungo be even inferred.

VICENTE v. GERALDEZ 52 SCRA 210 Quickie: Hi-cement Corporation acquired Placer Lease Contract (which is essentially mining claims). Vicente, et. al were claiming some parts of the mining claims as theirs. So they were suing each other, etc. and then the Corporations lawyers finally agreed to settle with Vicente, et. al, through a compromise agreement. However, the Corporations VP refused to sign such compromise agreement. SC ruled that: It having been found by the trial court that "the counsel for the plaintiff entered into the compromise agreement without the written authority of his client and the latter did not ratify, on the contrary it repudiated and disowned the same ...", We therefore declare that the orders of the court a quo subject of these two petitions, have not been issued in excess of its jurisdictional authority or in grave abuse of its discretion. Rationale: 1. Special powers of attorney are necessary to compromise and to renounce the right to appeal from a judgment. Attorneys cannot compromise their clients litigation. It is not disputed that the lawyers of Hi Cement had not submitted to the Court any written authority from their client to enter into compromise. 2. Juridical persons may compromise only in the form and with the requisites which may be necessary to alienate their property. As a general rule an officer or agent of the corporation has no power to compromise or settle a claim by or against the corporation, except to the extent that such power is given to him either expressly or by reasonable implication from the circumstances. 3. To ratify the unauthorized contract of an agent and make it binding on the corporation, it must be shown that the governing body or officer authorized to ratify had full and complete knowledge of all the material facts connected with the transaction to which it relates. Ratification must be by the officer or governing body having authority to make such contract, and must be with full knowledge. Nature :There are two original actions of certiorari with prayer for preliminary injunction wherein petitioners seek to annul the orders dated April 24, May 18, and July 18, 1970 of respondent Judge of the Court of First Instance of Bulacan in Civil Case No. SM-201 (Hi Cement Corporation vs. Juan Bernabe, Ignacio Vicente andMoises Angeles).

Facts: On September 9, 1967 herein private respondent Hi Cement Corporation filed with the Court of First Instance of Bulacan a complaint for injunction and damages against herein petitioners Juan Bernabe, Ignacio Vicente and Moises Angeles. In said complaint the plaintiff alleged that: o Under a deed of sale and transfer, It had acquire the Placer Lease Contract No. V-90, from the Banahaw Shale Mining Association. The deed was duly registered with the Office of the Mining Recorder of Bulacan, and duly approved by the DENR Secretary. o The said Placer Lease Contract No. V-90 was for a period of twenty-five years commencing from August 1, 1960and covered two mining claims (Red Star VIII & IX)with a combined area of about fiftyone hectares o However, within the boundaries of the Red Star VIII are 3parcels of land which are being claimed by defendants Juan Bernabe (about two hectares), Ignacio Vicente(about two hectares) and Moises Angeles (about one-fourth hectare) o The plaintiff had requested the defendants to allow its workers to enter the area in question for exploration and development purposes as well as for the extraction of minerals therefrom, promising to pay the defendants reasonable amounts as damages, but the defendants refused to allow entry of the plaintiff's representatives o that the defendants were threatening the plaintiff's workers with bodily harm if they entered the premises, for which reason the plaintiff had suffered irreparable damages due to its failure to work on and develop its claims and to extract minerals therefrom, resulting in its inability to comply with its contractual commitments Trial Court: issued a restraining order and required the defendants to file an answer Defendants (herein petitioners) answer: They are rightful owners of certain portions of the land covered by the supposed mining claims of the plaintiff It was the plaintiff and its workers who had committed acts of force and violence when they entered into and intruded upon the defendants' lands; and that the complaint failed to state a cause of action. The court then suggested the relocation of the boundaries of the plaintiff's claims in relation to the properties of the defendants, and to this end named as Commissioner, a Surveyor from the Office of the District Engineer of Bulacan to relocate the boundaries of the plaintiff's mining claims, to show in a survey plan the location of the areas thereof in conflict with the portions whose ownership is claimed by the defendants and to submit his report thereof to the court on or before October 31, 1967. The court

also directed the parties to send their representatives to the place of the survey on the date thereof and to furnish the surveyor with copies of their titles. The report found that Angeles and Vicentes properties were totally covered by Corporations claim. Bernabes property was only partially covered. In an Order issued on December 14, 1967, the court approved the report "with the conformity of all the parties in this case. On January 30, 1969 the counsels of the parties executed and submitted to the court for its approval the following Compromise Agreement On the same date, the foregoing Compromise Agreement was approved by the trial court, which enjoined the parties to comply with the terms and conditions thereof. On October 21, 1969, Atty. Francisco Ventura, one of the three lawyers for plaintiff HI Cement Corporation, filed with the trial court a manifestation stating that on September 1,1969 he sent a copy of the Compromise Agreement to Mr. Antonio Diokno, President of the corporation, requesting the latter to intercede with the Board of Directors for the confirmation or approval of the commitment made by the plaintiff's lawyers to abide by the decision of the Court based on the reports of the Commissioners However, the corporations president answered through a letter stating that they do not agree with the valuation set be the court. But, TC rendered a judgment the plaintiff pursuant to the compromise agreement, is hereby ordered to pay the defendants the amount of P15.00 per square meter for the subject properties, and upon full payment, the restraining order earlier issued by this Court shall be deemed lifted. On April 22, 1970 the plaintiff filed with the court a motion for new trial on the ground that the decision of the court dated March 13, 1970 is null and void because it was based on the Compromise Agreement of January 30, 1969 which was itself null and void for want of a special authority by the plaintiff's lawyers to enter into the said agreement. ISSUE: Whether the compromise agreement entered into by the corporations lawyer is valid. Held/Ratio: No. 1. Special powers of attorney are necessary, among other cases, in the following: to compromise and to renounce the right to appeal from a judgment.

Attorneys have authority to bind their clients in any case by any agreement in relation thereto made in writing, and in taking appeals, and in all matters of ordinary judicial procedure, but they cannot, without special authority, compromise their clients' litigation, or receive anything in discharge of their clients' claims but the full amount in cash. The Compromise Agreement dated January 30, 1969 was signed only by the lawyers for petitioners and by the lawyers for private respondent corporation. It is not disputed that the lawyers of respondent corporation had not submitted to the Court any written authority from their client to enter into a compromise. This Court has said that the Rules "require, for attorneys to compromise the litigation of their clients, a special authority. And while the same does not state that the special authority be in writing the court has every reason to expect that, if not in writing, the same be duly established by evidence other than the self-serving assertion of counsel himself that such authority was verbally given him." 2. The law specifically requires that "juridical persons may compromise only in the form and with the requisites which may be necessary to alienate their property." Under the corporation law the power to compromise or settle claims in favor of or against the corporation is ordinarily and primarily committed to the Board of Directors. The right of the Directors "to compromise a disputed claim against the corporation rests upon their right to manage the affairs of the corporation according to their honest and informed judgment and discretion as to what is for the best interests of the corporation. This power may however be delegated either expressly or impliedly to other corporate officials or agents. Thus, it has been stated, that as a general rule an officer or agent of the corporation has no power to compromise or settle a claim by or against the corporation, except to the extent that such power isgiven to him either expressly or by reasonable implication from the circumstances. It is therefore necessary to ascertain whether from the relevant facts it could be reasonably concluded that the Board of Directors of the HI Cement Corporation had authorized its lawyers to enter into the said compromise agreement. 3. Whatever authority the officers or agents of a corporation may have is derived from the board of directors, or other governing body, unless conferred by the charter of the corporation. A corporation officer's power as an agent of the corporation must therefore be sought from the statute, the charter, the by-laws, or in a delegation of authority to such officer, from the acts of board of directors, formally expressed or implied from a habit or custom of doing business. In the case at bar no provision of the charter and by-laws of the corporation or any resolution or any other act of the board of directors of HI Cement Corporation has been cited, from which We could reasonably infer that the administrative manager had been granted expressly or impliedly the power to bind the corporation or the authority to compromise the case. Absent such authority to enter into the compromise, the signature of Atty. Cardenas on the agreement would be legally ineffectual.

4. Equally inapposite is petitioners' invocation of the principle of estoppel. In the case at bar, except those made by Attys. Ventura, Cardenas and Magpantay, petitioners have not demonstrated any act or declaration of the corporation amounting to false representation or concealment of material facts calculated to mislead said petitioners. The acts or conduct for which the corporation may be liable under the doctrine of estoppel must be those of the corporation, its governing body or authorized officers, and not those of the purported agent who is himself responsible for the misrepresentation.

INSULAR DRUG CO. v. NATIONAL BANK 58 PHIL 684 Quick Facts: Former salesman had anomalous transactions, committed suicide. The argument that Foerster had implied authority to indorse all checks made out in the name of the Insular Drug Co., Inc., has even less force. Not only did the bank permit Foerster to indorse checks and then place them to his personal account, but it went farther and permitted Foerster's wife and clerk to indorse the checks. The right of an agent to indorse commercial paper is a very responsible power and will not be lightly inferred. A salesman with authority to collect money belonging to his principal does not have the implied authority to indorse checks received in payment. Any person taking checks made payable to a corporation, which can act only by agent does so at his peril, and must same by the consequences if the agent who indorses the same is without authority. Facts: Foerster acted as a collector for the company. He was instructed to take the checks which came to his hands for the drug company to the Iloilo branch of the Chartered Bank of India, Australia and China and deposit the amounts to the credit of the drug company. Instead, Foerster deposited checks, including those of Juan Llorente, Dolores Salcedo, Estanislao Salcedo, and a fourth party, with the Iloilo branch of the PNB. The checks were in that bank placed in the personal account of Foerster. After the indorsements on the checks was written "Received payment prior indorsement guaranteed by the Philippine National Bank, Iloilo Branch, Angel Padilla, Manager." As a consequence of the indorsements on the checks the amounts therein stated were subsequently withdrawn by U. E.Foerster and Carmen E. de Foerster. Eventually the Manila office of the drug company investigated the transactions of Foerster. Upon the discovery of anomalies, Foerster committed suicide.

Argument of Insular Drug: it never received the face value of the132 checks in question covering a total of P18,285.92The drug company sued PNB for the amount covered by the checks which was improperly and illegally cashed by Foerster. Issue: WON Foerster had implied authority to indorse all checks made out in the name of the Insular Drug Co., Inc. Held: NO. Right of agent to indorse a very responsible power and not lightly inferred The right of an agent to indorse commercial paper is a very responsible power and will not be lightly inferred. A salesman with authority to collect money belonging to his principal does not have the implied authority to indorse checks received in payment. Any person taking checks made payable to a corporation, which can act only by agents does so at his peril, and must abide by the consequences if the agent who indorses the same is without authority. In the present case, PNB not only permitted Foerster to indorse the checks and place them in his personal account but also permitted Foerster's wife and clerk to indorse the checks. Good faith does not excuse responsibility Bank made itself responsible for amounts represented by checks PNB could tell by the checks brought to PNB Iloilo by Foerster, his wife and his clerk, that the money belonged to the Insular Drug Co. Inc., and not to Foerster of his wife or his clerk. When the bank credited those checks to the personal account of Foerster and permitted Foerster and his wife to make withdrawals without there being any authority from the drug company to do so, the bank made itself responsible to the drug company for the amounts represented by the checks. The bank could relieve itself from responsibility by pleading and proving that after the money was withdrawn from the bank it passed to the drug company which thus suffered no loss, but the bank has not done so. Thus, the bank will have to stand the loss occasioned by the negligence of its agents.