CELESTINA T. NAGUIAT vs.

COURT OF APPEALS and AURORA On 16 October 1980, Queao received a letter from Naguiats lawyer, demanding settlement
of the loan. Shortly thereafter, Queao and one Ruby Ruebenfeldt (Ruebenfeldt) met with
QUEAO Naguiat. At the meeting, Queao told Naguiat that she did not receive the proceeds of the
loan, adding that the checks were retained by Ruebenfeldt, who purportedly was Naguiats
Before us is a Petition for Review on Certiorari under Rule 45, assailing the decision of the
agent.[7]
Sixteenth Division of the respondent Court of Appeals promulgated on 21 December
1994[1], which affirmed in toto the decision handed down by the Regional Trial Court (RTC) Naguiat applied for the extrajudicial foreclosure of the mortgage with the Sheriff of Rizal
of Pasay City.[2] Province, who then scheduled the foreclosure sale on 14 August 1981. Three days before
the scheduled sale, Queao filed the case before the Pasay City RTC,[8] seeking the
The case arose when on 11 August 1981, private respondent Aurora Queao (Queao) filed a
annulment of the mortgage deed. The trial court eventually stopped the auction sale.[9]
complaint before the Pasay City RTC for cancellation of a Real Estate Mortgage she had
entered into with petitioner Celestina Naguiat (Naguiat). The RTC rendered a decision, On 8 March 1991, the RTC rendered judgment, declaring the Deed of Real Estate
declaring the questioned Real Estate Mortgage void, which Naguiat appealed to the Court Mortgage null and void, and ordering Naguiat to return to Queao the owners duplicates of
of Appeals. After the Court of Appeals upheld the RTC decision, Naguiat instituted the her titles to the mortgaged lots.[10] Naguiat appealed the decision before the Court of
present petition. Appeals, making no less than eleven assignments of error. The Court of Appeals
promulgated the decision now assailed before us that affirmed in toto the RTC
The operative facts follow:
decision. Hence, the present petition.
Queao applied with Naguiat for a loan in the amount of Two Hundred Thousand Pesos
Naguiat questions the findings of facts made by the Court of Appeals, especially on the
(P200,000.00), which Naguiat granted. On 11 August 1980, Naguiat indorsed to Queao
issue of whether Queao had actually received the loan proceeds which were supposed to
Associated Bank Check No. 090990 (dated 11 August 1980) for the amount of Ninety Five
be covered by the two checks Naguiat had issued or indorsed. Naguiat claims that being a
Thousand Pesos (P95,000.00), which was earlier issued to Naguiat by the Corporate
notarial instrument or public document, the mortgage deed enjoys the presumption that
Resources Financing Corporation. She also issued her own Filmanbank Check No. 065314,
the recitals therein are true. Naguiat also questions the admissibility of various
to the order of Queao, also dated 11 August 1980 and for the amount of Ninety Five
representations and pronouncements of Ruebenfeldt, invoking the rule on the non-binding
Thousand Pesos (P95,000.00). The proceeds of these checks were to constitute the loan
effect of the admissions of third persons.[11]
granted by Naguiat to Queao.[3]
The resolution of the issues presented before this Court by Naguiat involves the
To secure the loan, Queao executed a Deed of Real Estate Mortgage dated 11 August 1980
determination of facts, a function which this Court does not exercise in an appeal
in favor of Naguiat, and surrendered to the latter the owners duplicates of the titles
by certiorari. Under Rule 45 which governs appeal by certiorari, only questions of law may
covering the mortgaged properties.[4] On the same day, the mortgage deed was
be raised[12] as the Supreme Court is not a trier of facts.[13] The resolution of factual
notarized, and Queao issued to Naguiat a promissory note for the amount of TWO
issues is the function of lower courts, whose findings on these matters are received with
HUNDRED THOUSAND PESOS (P200,000.00), with interest at 12% per annum, payable on
respect and are in fact generally binding on the Supreme Court.[14] A question of law
11 September 1980.[5] Queao also issued a Security Bank and Trust Company check,
which the Court may pass upon must not involve an examination of the probative value of
postdated 11 September 1980, for the amount of TWO HUNDRED THOUSAND PESOS
the evidence presented by the litigants.[15] There is a question of law in a given case
(P200,000.00) and payable to the order of Naguiat.
when the doubt or difference arises as to what the law is on a certain state of facts; there
Upon presentment on its maturity date, the Security Bank check was dishonored for is a question of fact when the doubt or difference arises as to the truth or the falsehood of
insufficiency of funds. On the following day, 12 September 1980, Queao requested alleged facts.[16]
Security Bank to stop payment of her postdated check, but the bank rejected the request
Surely, there are established exceptions to the rule on the conclusiveness of the findings
pursuant to its policy not to honor such requests if the check is drawn against insufficient
of facts of the lower courts.[17] But Naguiats case does not fall under any of the
funds.[6]
exceptions. In any event, both the decisions of the appellate and trial courts are supported
by the evidence on record and the applicable laws.

CAYEN CERVANCIA CABIGUEN, MLQU SCHOOL OF LAW

CASES ON BUSINESS ORGANIZATION 1 ( AGENCY)
Against the common finding of the courts below, Naguiat vigorously insists that Queao
received the loan proceeds. Capitalizing on the status of the mortgage deed as a public
document, she cites the rule that a public document enjoys the presumption of validity
and truthfulness of its contents. The Court of Appeals, however, is correct in ruling that
the presumption of truthfulness of the recitals in a public document was defeated by the
clear and convincing evidence in this case that pointed to the absence of consideration.
[18] This Court has held that the presumption of truthfulness engendered by notarized
documents is rebuttable, yielding as it does to clear and convincing evidence to the
contrary, as in this case.[19]
On the other hand, absolutely no evidence was submitted by Naguiat that the checks she
issued or endorsed were actually encashed or deposited. The mere issuance of the checks
did not result in the perfection of the contract of loan. For the Civil Code provides that the
delivery of bills of exchange and mercantile documents such as checks shall produce the
effect of payment only when they have been cashed.[20] It is only after the checks have
produced the effect of payment that the contract of loan may be deemed perfected. Art.
1934 of the Civil Code provides:
An accepted promise to deliver something by way of commodatum or simple loan is
binding upon the parties, but the commodatum or simple loan itself shall not be perfected
until the delivery of the object of the contract.
A loan contract is a real contract, not consensual, and, as such, is perfected only upon the
delivery of the object of the contract.[21] In this case, the objects of the contract are the
loan proceeds which Queao would enjoy only upon the encashment of the checks signed
or indorsed by Naguiat. If indeed the checks were encashed or deposited, Naguiat would
have certainly presented the corresponding documentary evidence, such as the returned
checks and the pertinent bank records. Since Naguiat presented no such proof, it follows
that the checks were not encashed or credited to Queaos account.
Naguiat questions the admissibility of the various written representations made by
Ruebenfeldt on the ground that they could not bind her following the res inter alia acta
alteri nocere non debet rule. The Court of Appeals rejected the argument, holding that
since Ruebenfeldt was an authorized representative or agent of Naguiat the situation falls
under a recognized exception to the rule.[22] Still, Naguiat insists that Ruebenfeldt was
not her agent.
Suffice to say, however, the existence of an agency relationship between Naguiat and
Ruebenfeldt is supported by ample evidence. As correctly pointed out by the Court of
Appeals, Ruebenfeldt was not a stranger or an unauthorized person. Naguiat instructed
Ruebenfeldt to withhold from Queao the checks she issued or indorsed to Queao, pending
delivery by the latter of additional collateral. Ruebenfeldt served as agent of Naguiat on
CAYEN CERVANCIA CABIGUEN, MLQU SCHOOL OF LAW
CASES ON BUSINESS ORGANIZATION 1 ( AGENCY)
the loan application of Queaos friend, Marilou Farralese, and it was in connection with that
transaction that Queao came to know Naguiat.[23] It was also Ruebenfeldt who
accompanied Queao in her meeting with Naguiat and on that occasion, on her own and
without Queao asking for it, Reubenfeldt actually drew a check for the sum of P220,000.00
payable to Naguiat, to cover for Queaos alleged liability to Naguiat under the loan
agreement.[24]
The Court of Appeals recognized the existence of an agency by estoppel[25] citing Article
1873 of the Civil Code.[26] Apparently, it considered that at the very least, as a
consequence of the interaction between Naguiat and Ruebenfeldt, Queao got the
impression that Ruebenfeldt was the agent of Naguiat, but Naguiat did nothing to correct
Queaos impression. In that situation, the rule is clear. One who clothes another with
apparent authority as his agent, and holds him out to the public as such, cannot be
permitted to deny the authority of such person to act as his agent, to the prejudice of
innocent third parties dealing with such person in good faith, and in the honest belief that
he is what he appears to be.[27] The Court of Appeals is correct in invoking the said rule
on agency by estoppel.
More fundamentally, whatever was the true relationship between Naguiat and Ruebenfeldt
is irrelevant in the face of the fact that the checks issued or indorsed to Queao were never
encashed or deposited to her account of Naguiat.
All told, we find no compelling reason to disturb the finding of the courts a quo that the
lender did not remit and the borrower did not receive the proceeds of the loan. That being
the case, it follows that the mortgage which is supposed to secure the loan is null and
void. The consideration of the mortgage contract is the same as that of the principal
contract from which it receives life, and without which it cannot exist as an independent
contract.[28] A mortgage contract being a mere accessory contract, its validity would
depend on the validity of the loan secured by it.[29]
WHEREFORE, the petition is denied and the assailed decision is affirmed. Costs against
petitioner.
SO ORDERED.
ANTONIO E. PRATS vs. HON. COURT OF APPEALS
This is a petition for certiorari to review the decision of the Court of Appeals in CA-G.R. No.
45974-R entitled"Antonio E. Prats, doing business under the name of Philippine Real Estate
Exchange, vs. Alfonso Doronila and the Philippine National Bank", the dispositive part of
which reads:
In view of all the foregoing, it is our considered opinion and so hold that the decision of the 1968, after plaintiff had already contacted the Social Security System, its Deputy
lower court be, as it is hereby reversed, and the complaint, dismissed. On appellant's Administrator, Reynaldo J. Gregorio, wrote a letter to defendant Doronila inviting the latter
counterclaim, judgment is hereby rendered directing appellee to pay attorney's fees in the to a conference regarding the property in question with Administrator Teodoro, Chairman
sum of P10,000 to appellant, no moral damages as therein claimed being awarded for lack Gaviola and said Reynaldo J. Gregorio on March 4, 1968 at 10:00 o'clock in the morning,
of evidence to justify the same. The injunction issued by the lower court on the stating that the SSS would like to take up the offer of the lot; that having granted plaintiff
P2,000,000.00 cash deposit of the appellant is hereby lifted. No special pronouncement as the exclusive written option and authority to negotiate the sale of his 300 hectares of land,
to costs. defendant Doronila in a letter dated February 28, 1968 declined the invitation extended by
the Social Security System to meet with its Administrator and Chairman and requested
SO ORDERED. 1 them instead "to deal directly" with the plaintiff, that on March 16, 1968, at the suggestion
of defendant Doronila, the plaintiff wrote a letter to the Social Security System to the
On September 23, 1968 Antonio E. Prats, doing business under the name of "Philippine effect that plaintiff would be glad to sit with the officials of the Social Security System to
Real Estate Exchange" instituted against Alfonso Doronila and Philippine National Bank discuss the sale of the property of the defendant Doronila; that on March 18, 1968, the
Civil Case No. Q-12412 in the Court of First Instance of Rizal at Quezon City to recover a Social Security System sent a telegram to defendant Doronila to submit certain
sum of money and damages. documents regarding the property offered; that on May 6, 1968, a written offer to sell the
300 hectares of land belonging to defendant Doronila was formally made by the plaintiff to
The complaint stated that defendant Alfonso Doronila was the registered owner of 300
the Social Security System and accordingly, on May 7, 1968, the Social Security System
hectares of land situated in Montalban, Rizal, covered by Transfer Certificates of Title Nos.
Administrator dispatched the following telegram to defendant Doronila: "SSS considering
77011, 77013, 216747 and 216750; that defendant Doronila had for sometime tried to sell
purchase your property for its housing project Administrator Teodoro"; that a few days
his aforesaid 300 hectares of land and for that purpose had designated several agents;
thereafter, the plaintiff accompanied the defendant Doronila to the China Banking
that at one time, he had offered the same property to the Social Security System but
Corporation to arrange the matter of clearing payment by chock and delivery of the titles
failed to consummate any sale; that his offer to sell to the Social Security System having
over the property to the Society Security System; that having been brought together by
failed, defendant Doronila on February 14, 1968 gave the plaintiff an exclusive option and
the plaintiff, the defendant Doronila and the offices of the Society Security System, on May
authority in writing to negotiate the sale of his aforementioned property, which exclusive
29, 1968 and on June 4, 1968, met at the office of the SSS Administrator wherein the price
option and authority the plaintiff caused to be published in the Manila Times on February
for the purchase of the defendant Doronila's 300 hectares of land was, among others,
22, 1968; that it was the agreement between plaintiff and defendant Doronila that the
taken up; that on June 20, 1968, the Social Security Commission passed Resolution No.
basic price shall be P3.00 per square meter, that plaintiff shall be entitled to a commission
636 making a counter-offer of P3.25 per square meter subject to an appraise report; that
of 10% based on P2.10 per square meter or at any price finally agreed upon and if the
on June 27, 1968, Resolution No. 662 was adopted by the Social Security Commission
property be sold over and above P3.00 per square meter, the excess shall be created and
authorizing the Toples & Harding (Far East) Inc. to conduct an appraisal of the property
paid to the plaintiff in addition to his 10% commission based on P2.10 per square meter;
and to submit a report thereon; that pursuant thereto, the said company submitted its
that as a result of the grant of the exclusive option and authority to negotiate the sale of
appraisal report specifying that the present value of the property is P3.34 per square
his 300 hectares of land situated in Montalban, Rizal in favor of the plaintiff, the defendant
meter and that a housing program development would represent the highest and best use
Doronila, on February 20, 1968, wrote a letter to the Social Security System withdrawing
thereof, that on July 18, 1968, the Social Security Commission, at its regular meeting,
his previous offer to sell the same land and requesting the return to him of all papers
taking note of the favorable appraisal report of the Toples'& Harding (Far East) Inc., passed
concerning his offered property that the Social Security System, complying with said
Resolution No. 738, approving the purchase of defendant Doronila's 300 hectares of land
request of defendant Doronila, returned all the papers thereon and defendant Doronila, in
in Montalban, Rizal at a price of P3.25 per square meter or for a total purchase price of
turn gave them to the plaintiff as his duly authorized real estate broker; that by virtue of
Nine Million Seven Hundred Fifty Thousand Pesos (P9,750,000.00), appropriating the said
the exclusive written option and authority granted him and relying upon the announced
amount for the purpose and authorizing the SSS Administrator to sign the necessary
policy of the President of the Philippines to promote low housing program the plaintiff
documents to implement the said resolution; that on July 30, 1968, defendant Doronila
immediately worked to negotiate the sale of defendant Doronila's 300 hectares of land to
and the Social Security System executed the corresponding deed of absolute sale over the
the Social Security System, making the necessary contacts and representations to bring
300 hectares of land in Montalban, Rizal covered by Transfer Certificate of Title Nos.
the parties together, namely, the owner and the buyer, and bring about the ultimate sale
77011, 77013, 216747 and 216750 under the terms of which the total price of
of the land by defendant Doronila to the Social Security System; that on February 27,
P9,750,000.00 shall be payable as follows: (a) 60% of the agreed purchase price, or Five
CAYEN CERVANCIA CABIGUEN, MLQU SCHOOL OF LAW
CASES ON BUSINESS ORGANIZATION 1 ( AGENCY)
Million Eight Hundred Fifty Thousand Pesos (P5,860,000.00) immediately after signing the
deed of sale. and (b) the balance of 40% of the agreed price, or Three Million Nine
Hundred Thousand Pesos (P3,900,000.00) thirty days after the signing of the deed of
absolute sale; that on August 21, 1968, after payment of the purchase price, the deed
absolute sale executed by defendant Doronila in favor of the Social Security System was
presented for registration in the Office of the Register of Deeds of Rizal, and Transfer
Certificates of Title Nos. 926574, 226575, 226576 and 226577 in the name of the Social
Security System were issued; that defendant Doronila has received the full purchase price
for his 300 hectares of land in the total amount of P9,750,000.00, which amount he
deposited in his bank Account No. 0012-443 with the defendant Philippine National Bank;
that on September 17, 1968, the plaintiff presented his statement to, and demanded of
defendant Doronila the payment of his processional fee as real estate broker as computed
under the agreement of February 14, 1968 in the total amount of P1,380,000.00; that
notwithstanding such demand, the defendant Doronila, in gross and evident bad faith after
having availed of the services of plaintiff as real estate broker, refused to pay the
professional fees due him; that as a result of defendant Doronila's gross and evident bad
faith and unjustified refusal to pay plaintiff the professional fees due him under the
agreement, the latter has suffered and continues to suffer mental anguish, serious
anxiety, and social humiliation for which defendant Doronila shall be held liable to pay
moral damages; and, that by reason likewise of the aforesaid act of defendant Doronila,
the plaintiff has been compelled to file this action and to engage the services of counsel at
a stipulated professional fee of P250,000.00.
In his answer filed on November 18, 1968, the defendant Doronila alleged that when the
plaintiff offered the answering defendant's property to the Social Security System on May
6, 1968, said defendant had already offered his property to, and had a closed transaction
or contract of sale of, said property with the Social Security System; that the letter
agreement had become null and void because defendant Doronila had not received any
written offer from any prospective buyers of the plaintiff during the agreed period of 60
days until the last day of the authorization which was April 13, 1968 counting from
February 14, 1968; that it is not true that plaintiff brought together defendant Doronila
and the officials of the Social Security System to take up the purchase price of defendant
Doronila's property for the simple reason that the plaintiff's offer was P6.00 per square
meter and later on reduced to P4.50 per square meter because the SSS Chairman had
already a closed transaction with the defendant Doronila at the price of P3.25 per square
meter and that the offer of the plaintiff was refused by the officials of the Social Security
System; and that defendant Doronila did not answer the statement of collection of the
plaintiff because the latter had not right to demand the payment for services not rendered
according to the agreement of the parties. The answering defendant interposed a
counterclaim for damages and attorney's fees.
CAYEN CERVANCIA CABIGUEN, MLQU SCHOOL OF LAW
CASES ON BUSINESS ORGANIZATION 1 ( AGENCY)
On January 18, 1969, the plaintiff and defendant Alfonso Doronila submitted the following
stipulation of facts:
STIPULATION OF FACTS
COME NOW the plaintiff and defendant DORONILA, through their respective undersigned
counsel, and to this Honorable Court by way of abbreviating the proceeding i the case at
bar, without prejudice to presentation of explanatory evidence, respectfully submit the
following STIPULATION OF FACTS.
1.
The defendant Doronila was the registered owner of 300 hectares of land, situated in
Montalban, Rizal, covered by Transfer Certificates of Title Nos. 77011, 77013, 216747
(formerly TCT No. 116631) and 216750 (formerly TCT No. 77012).
2.
That on July 3, 1967, defendant DORONILA under his letter (marked Annex "1" of the
answer) addressed to the SSS Chairman, offered his said property to the Social Security
System (SSS) at P4.00 per square meter.
That on July 17, 1967 (Annex "2" of the Answer) the SSS Chairman, Mr. Ramon C. Gaviola,
Jr., replied to defendant DORONILA, as follows:
This will acknowledge your letter of July 3rd, 1967 relative to your offer for sale of your
real estate property.
In this regard, may I please be informed as to how many hectares, out of the total 300
hectares offered, are located in Quezon City and how many hectares are located in
Montalban, Rizal. Likewise, as regards your offer of P4.00 per square meter, would there
be any possibility that the same be reduced to P3.25 per square meter Finally and before I
submit your proposal for process it is requested that the NAWASA certify to the effect that
they have no objection to having this parcel of land subdivided for residential house
purposes.
Thank you for your offer and may I hear from you at the earliest possible time.
2-a
That on July 19, 1967, defendant DORONILA wrote a letter (a xerox copy, attached hereto
marked as Annex "2-a" for DORONILA) to NAWASA, and that in reply thereto, on July 25,
1967, the NAWASA wrote the following letter (Xerox copy attached hereto to be marked as
Annex "2-b" for DORONILA) to defendant DORONILA.
In connection with your proposed subdivision plan of your properties adjacent to our
Novaliches Watershed, this Office would like to impose the following conditions:
1. Since your property is an immediate boundary of our Novaliches Watershed, a 20-meter
road should be constructed along our common boundary.
2. That no waste or drainage water from the subdivision should flow towards the
watershed.
3. That the liquid from the septic tanks or similar waste water should be treated before it
is drained to the Alat River above our Alat Dam.
The above conditions are all safeguards to the drinking water of the people of Manila and
Suburbs. It is therefore expected that we all cooperate to make our drinking water safer
from any pollution.
3.
That on July 19, 1967, defendant DORONILA wrote another letter (marked as Annex '3' on
his Answer) addressed to the SSS Chairman, Mr. Ramon Gaviola Jr., stating, among others,
the following:
In this connection, I have your counter-offer of P3.25 per square meter against my offer of
P4.00 per square meter, although your counter-offer is lower comparing to the prices of
adjacent properties, I have to consider the difference as my privilege and opportunity to
contribute or support the Presidential policy to promote low cost housing in this country
particularly to the SSS members by accepting gladly your counter-offer of P3.25 per
square meter with the condition that it should be paid in cash and such payment shall be
made within a period of 30 days from the above stated date (2nd paragraph of letter
dated July 18, 1967, Annex "3" of the Answer).
3.a
That on August 10, 1967, the SSS Chairman, Mr. Ramon Gaviola Jr., wrote the following
(Xerox copy attached hereto and marked as Annex '2-c' for DORONILA: addressed to
defendant DORONILA:
With reference to your letter, dated July 1967, please be informed that the same is now
with the Administrator for study and comment. The Commission will act on receipt of
information re such studies.
With the assurance that you will be periodically informed of developments, we remain.
3-b
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CASES ON BUSINESS ORGANIZATION 1 ( AGENCY)
That on October 30, 1967, Mr. Pastor B. Sajorda, 'By authority of Atty. Alfonso Doronila,
property owner', wrote the following request (Xerox copy attached hereto and marked as
Annex '2-d' for DORONILA) addressed to Realtor Vicente L. Narciso for a certification
regarding the actual prices of DORONILA's property, quoted as follows:
May I have the honor to request for your certification as a member of the Board of Realtor
regarding the actual prices of my real estate raw-land properties described as Lots 3-B-7,
26B, 6 and 4-C-3 all adjacent to each other, containing a total area of 3,000,000 square
meters, all registered in the name of Alfonso Doronila, covered by T.C.T. Nos. 116631,
77013, 77011, and 77012, located at Montalban, Rizal, all adjacent to the Northern portion
of the NAWASA properties in Quezon City including those other surrounding adjacent
properties and even those properties located before reaching my own properties coming
from Manila.
This request is purposely made for my references in case I decided to sell my said
properties mentioned above.
3-c
That on November 3, 1967, Realtor Vicente Narciso wrote the following reply (Xerox copy
attached hereto and marked as Annex 2 for DORONILA) to Mr. Pastor B. Sajorda:
As per your request dated October 30, 1967, regarding prices of raw land, it is my finding
that the fair market value of raw land in the vicinity of the NAWASA properties at Quezon
City and Montalban, Rizal. including the properties of Atty. Alfonso Doronila. more
particularly known as lots 3-B-7, 26-B, and 4-C-3 containing approximately 3,000,000
square meters is P3.00 to P3.50 per square meter.
Current prices before reaching Doronila's property range from P6.00 to P7.00 per square
meter.
4.
That on February 14, 1968, defendant DORONILA granted plaintiff an exclusive option and
authority (Annex 'A' of the complaint), under the following terms and conditions:
1. The price of the property is THREE (P3.00) PESOS per square meter.
2. A commission of TEN (10%) PERCENT will be paid to us based on P2.10 per square
meter, or at any price that you DORONILA finally agree upon, and all expenses shall be for
our account, including preparation of the corresponding deed of conveyance, documentary
stamps and registration fee, whether the sale is causes directly or indirectly by us within
the time of this option. If the property is sold over and above P3.00 per square meter, the
excess amount shall be credited and paid to the herein workers. In addition to the 10% February 19, 1968
commission based on P2.10 per square meter, provided the brokers shall pay the
corresponding taxes to the owner of the excess amount over P3.00 per square meter, Don Alfonso Doronila
unless paid by check which would then be deductible as additional expenses.
Plaza Ferguzon
3. This exclusive option and authority is good for a period of sixty (60) days from the date
of your conformity; provided, however, that should negotiations have been started with a Ermita, Manila
buyer, said period is automatically extended until said negotiations is terminated, but not
Dear Don Alfonso:
more than fifteen (15) days;
In view of the exclusive option extended to us for the sale of your property consisting 300
4. The written offers must be made by the prospective buyers, unless they prefer to have
hectares located at Montalban, Rizal, we earnestly request that you take immediate steps
us take the offer for and in their behalf some buyers do not want to be known in the early
to withdraw any and all papers pertaining to this property offered to the SOCIAL SECURITY
stages of the negotiations:
SYSTEM
5. If no written offer is made to you until the last day of this authorization, this option and
Very truly yours,
authority shall expire and become null and void;
PHILIPPINE REAL
6. It is clearly understood that prospective buyers and all parties interested in this
property shall be referred to us, and that you will not even quote a price directly to any ESTATE EXCHANGE
agent or buyer. You agree to refer all agents or brokers to us DURING the time this option
is in force; and (Sgd) ANTONIO E. PRATS

7. There are some squatters occupying small portions of the property, which fact will be General Manager
reported to the prospective buyers, and said squatters will be removed at our expense.
(Annex "A" of the complaint) AEP/acc

Very truly yours, RECEIVED ORIGINAL

PHILIPPINE REAL ESTATE EXCHANCE By: (Sgd.) ROGELIO DAPITAN

(Sgd) ANTONIO E. PRATS 6.

General manager That on February 20, 1968, pursuant to the letter dated February 19, 1968 of plaintiff,
defendant DORONILA wrote a letter (Annex 'B' of the complaint) to the SSS Administrator
CONFORME: stating:

(Sgt.) ALFONSO DORONILA In as much as the SSS has not acted on my offer to sell a 300 hectare lot located in
Montalban, Rizal, for the last five (5) months I respectfully requested for the return of all
Date: February 14, 1968 my papers concerning this offered property.

5. 7.

That on February 19, 1968, plaintiff wrote the following letter to defendant DORONILA That on February 27, 1968, defendant DORONILA received the following letter (Annex "C"
(Annex "4" of the Answer), quoted as follows: of the complaint) from the SSS Deputy Administrator, Mr. Reynaldo J. Gregorio, to wit:
CAYEN CERVANCIA CABIGUEN, MLQU SCHOOL OF LAW
CASES ON BUSINESS ORGANIZATION 1 ( AGENCY)
May I take this opportunity of inviting you in behalf of Administrator Teodoro, to meet with
him, Chairman Gaviola and myself on Friday, March 4, 10:00 A.M. lot offer.
Thanks and regards.
8.
That on February 28, 1968, defendant DORONILA wrote the following letter (Annex "D" of
the complaint) to the SSS Deputy Administrator:
Thank you for your invitation to meet Administrator Teodoro, Chairman Gaviola and your
goodself, to take up my former offer to sell my property to the Social Security System.
Since the SSS had not acted on my offer dated July 19, 1967, more than seven (7) months
ago, I have asked for the return of my papers, as per my letter of February 20, 1968, and
which you have kindly returned to me.
As of February 20, 1968, I gave the Philippine Real Estate Exchange an exclusive option
and authority to negotiate the sale of this 300 hectare land, and I am no longer at liberty
to negotiate its sale personally; I shall therefore request you communicate directly with
the Philippine Real Estate Exchange, P. O. Box 84, Quezon City, and deal with them directly
if you are still interested in my property.
With my kind personal regards, I am
9.
That on March 16, 1968, plaintiff, acting upon the letter of defendant DORONILA dated
February 28, 1968 (Annex 'D' for plaintiff), wrote the following letter to SSS Administrator:
Don Alfonso Doronila, owner of the 300 hectare land located at Montalban, Rizal, adjoining
the Quezon City boundary, has informed us that the Administrator of the SOCIAL
SECURITY' SYSTEM, through Mr. Reynaldo J. Gregorio, has invited him to meet with the
Administrator and Chairman Gaviola to take up the former offer to sell his property to the
SSS.
In his letter to the Administrator dated February 20, 1968 (which has been received by the
SSS on the same day), Mr. Doronila advised you that as of February 20,1968, he gave the
PHILIPPINE REAL ESTATE EXCHANGE (PHILREX) the exclusive option and authority to
negotiate the sale of his 300 hectare land in Montalban, and that he is no longer at liberty
to negotiate its sale personally, and that, if you are still interested in the property, the SSS
should communicate directly with the PHILIPPINE REAL ESTATE EXCHANGE.
CAYEN CERVANCIA CABIGUEN, MLQU SCHOOL OF LAW
CASES ON BUSINESS ORGANIZATION 1 ( AGENCY)
It is by virtue of this arrangement that Mr. Doronila now refers to us invitation and his reply
to the SSS and has requested us to get in touch with you.
While, at present we have several prospective buyers interested in this property, we shall,
in compliance with the request of Mr. Doronila, be happy to sit down with you and
Chairman Ramon Gaviola, Jr.
Please let us know when it will be convenient to hold the conference.
10.
That on April 18, 1968, defendant DORONILA extended the plaintiff exclusive option and
authority to expire May 18, 1968.(annex 'B' Reply letter of Doronila to SSS Deputy
Administrator dated May 8, 1968).
11.
That on May 6,1968, plaintiff made a formal written offer to the Social Security System to
sell the 300 hectares land of defendant DORONILA at the price of P6.00 per square meter,
Xerox copy of which bearing the stamp or receipt of Social Security System is attached
hereof as Annex "D" plaintiff.
12.
That on May 16, 1968 the defendant DORONILA received the following telegram (Annex 'E'
of the complaint) form the SSS Administrative, reading:
SSS CONSIDERING PURCHASE YOUR PROPERTY FOR ITS HOUSING PROJECT
13.
That on May 18, 1968, after plaintiff exclusive option and authority had been extended,
plaintiff wrote the following letter (Annex "A" Reply' of plaintiff's REPLY TO ANSWER) to
defendant DORONILA, to wit:
CONFIDENTIAL
In our conference last Monday, May 13, 1968, you have been definitely advised by
responsible parties that the SOCIAL SECURITY SYSTEM is acquiring your 300-hectare land
at Montalban, Rizal, adjoining the Quezon City Boundary and that said property will be
acquired in accordance with the exclusive option and authority you gave the PHILIPPINE
REAL ESTATE EXCHANCE. You were assured in that conference that the property will be
acquired definitely, but, as it has been mentioned during the conference, it may take from
30 to 60 days to have all the papers prepared and to effect the corresponding payment.
The telegram from the SSS confirming these negotiations has already been received by
you, a copy of which you yourself have kindly furnished us.
Pursuant to paragraph 3 of the terms of the option that you have kindly extended, we still
have fifteen days more from today, May 18, 1968, within which to finish the negotiations
for the sale of your property to the SSS. For your convenience, we quote the pertinent
portion of paragraph 3 of the option:
... provided, however, that should negotiation have been started with a buyer, said period
is automatically extended until said negotiation is terminated, but no more than fifteen
(15) days.
Please be assured that we will do our very best to complete these negotiations for the sale
of your property within this fifteen-day period. In the meantime' we hope you will also
observe the provisions of paragraph 6 of the exclusive option you have extended to us.
14.
That on May 18, 1968, plaintiff wrote the following letter (Xerox copy attached and marked
hereof as Annex 'H' for plaintiff) addressed defendant DORONILA, to wit:
By virtue of the exclusive option and authority you have granted the PHILIPPINE REAL
ESTATE EXCHANGE to negotiate the sale of your 300-hectare land located at Montalban,
Rizal, adjoining the Quezon City boundary, which properties are covered by Transfer
Certificate of Titles Nos. 116631, 77011, 77012 and 77013, of the Registry of Deeds for
the Province of Rizal, we hereby make a firm offer, for and in behalf of our buyer, to
purchase said property at the price of FOUR PESOS AND FIFTY CENTAVOS (P4.50) per
square meter, or the total amount of THIRTEEN MILLION FIVE HUNDRED THOUSAND
(P13,500,000.00) PESOS, Philippine Currency, payable in Cash and D.B.P. Progress Bonds,
on a ratio to be decided between you and our principal.
To expedite the negotiations, we suggest that we sit down sometime early next week with
our principal to take up the final arrangement and other details in connection with the
purchase of the subject property.
To give you further assurance of the validity of this offer, we refer you to the CHINA
BANKING CORPORATION (Trust Department) who has already been apprised of these
negotiations, to which ]sank we strongly recommend that this transaction be coursed
through, for your own security and protection.
15.
CAYEN CERVANCIA CABIGUEN, MLQU SCHOOL OF LAW
CASES ON BUSINESS ORGANIZATION 1 ( AGENCY)
That on May 30, 1968, plaintiff wrote the following letter (Xerox copy attached hereto, and
marked as Annex 'I' for plaintiff) to defendant DORONILA, quoted as follows:
This is to advise you that the SOCIAL SECURITY SYSTEM agreed to purchase your 300-
hectare land located at Montalban, Rizal, which purchase can be conformed by the
Chairman of the SOCIAL SECURITY COMMISSION. The details will have to be taken up
between you and the Chairman, and we suggest that you communicate with the Chairman
at your earliest convenience.
This negotiation was made by virtue of the exclusive option and authority you have
granted the PHILIPPINE REAL ESTATE EXCHANGE, which option is in full force and effect,
and covers the transaction referred above.
16.
That on June 6,1968, defendant DORONILA wrote the following letter (Annex" 7" for
DORONILA), to the plaintiff, to wit:
I have to inform you officially, that I have not received any written offer from the SSS or
others, to purchase my Montalban property of which you were given an option and
exclusive authority as appearing in your letter- contract dated February 14, 1968, during
the 60 days of your exclusive authority which expired on April 14, 1968, nor during the
extension which was properly a new exclusive authority of 30 days from April 18, which
expired on May 18, 1968, nor during the provided 15 days grace, in case that you have
closed any transaction to terminate it during that period, which also expired on June 3,
1968.
As stated in said letter, we have the following condition:
5. If no written offer is made to you until the last day of this authorization, this option and
authority shall expire and becomes null and void.
As I have informed you, that on April 16, 1968 or two days after your option expired I have
signed an agreement to sell my property to a group of buyers to whom I asked later that
the effectivity of said agreement will be after your new authority has expired will be on
June 2, 1968, and they have accepted; As your option has expired, and they know that
there was no written offer made by the SSS for any price of my property, aside of their
previous letter announcing me that they are ready to pay, I was notified on June 4, 1968
by their representative, calling my attention but our agreement; that is why I am writing
you, that having expired your option and exclusive authority to offer for sale my said
property, I notified only this afternoon said to comply our agreement.
Hoping for your consideration on the matter, as we have to be guided by contracts that we
have to comply, I hereby express to you my sincere sentiments.
17.
That on June 19, 1968, defendant DORONILA wrote the following letter (Annex "5" of the
Answer) to the SSS Administrator, renewing his offer to sell his 300 hectare land to the
SSS at P4.00 per square meter, to wit:
This is to renew my offer to sell my properties located at Montalban, Rizal Identified as Lot
Nos. 3-B-7, 26-8, 6, and 4-C-3 registered in my name in the office of the Registry of Deeds
of Rizal under T.C.T. Nos. 116631, 77013, 77011 and 216750, containing a total area of
300 hectares or 3,000,000 square meters.
You will recall that last year, I offered to the Social Security System the same properties at
the price of Four (P4.00) pesos per square meter. After 3 ocular inspection of Chairman
Gaviola one of said inspections accompanied by Commissioner Arroyo and after receiving
the written apprisal report of Manila realtor Vicente L. Narciso, the System then made a
counter-offer of Three pesos and twenty-five (P3.25) per square meter which I accepted
under the condition that the total amount be paid within a period of thirty (30) days from
the date of my acceptance (July 19, 1967). My acceptance was motivated by the fact that
within said period of time I had hoped to purchase my sugarcane hacienda in Iloilo with
the proceeds I expected from the sale. No action was however taken by the System
thereon.
Recently the same properties were offered by Antonio E. Prats of the Philippine Real Estate
Exchange to the Presidential Assistant on Housing, at the price of six pesos (p6.00) per
square meter, who referred it to the System, but against no action had been taken by the
System.
Considering the lapse of time since our original offer during which prices of real estate
have increased considerably, on the one hand and in cooperation with the System's
implementation of our government's policy to provide low cost houses to its members, on
the other hand, I am renewing my offer to sell my properties to the system only at the
same price of P4.00 per square meter, or for a total amount of twelve million pesos
(P12,000,000.00), provided the total amount is paid in cash within a period of fifteen (15)
days from this date.
18.
That on June 20, 1968, the Social Security Commission passed Resolution No. 636 by
which the SSS formalized its counter-offer of P3.25 per square meter. (See Annex 'F' of the
complaint)
CAYEN CERVANCIA CABIGUEN, MLQU SCHOOL OF LAW
CASES ON BUSINESS ORGANIZATION 1 ( AGENCY)
19.
That on June 25, 1968, the SSS Administrator, Mr. Gilberto Teodoro, wrote the following
reply letter (Annex '6' of the Answer) to defendant DORONILA, to wit:
This has reference to your letter dated June 19, 1966 renewing your offer to sell your
property located at Montalban, Rizal containing an area of 300 hectares at P4.00 per
square meter. Please be informed that the said letter was submitted for the consideration
of the Social Security Commission at its last meeting on June 20, 1968 and pursuant to its
Resolution No. 636, current series, it decided that the System reiterate its counter-offer for
P3.25 per square meter subject to a favorable appraisal report by a reputable appraisal
entity as regards particularly to price and housing project feasibility. Should this counter-
offer be acceptable to you, kindly so indicate by signing hereunder your conformity
thereon.
Trusting that the foregoing sufficiently advises you on the matter, I remain
Very truly yours,
GILBERTO TEODORO
Administrator
CONFORME: With condition that the sale will be consummated within Twenty (20) days
from this date.
ALFONSO DORONILA
Returned and received the original by
June 25/68
Admtr's Office
20.
That on June 27, 1968, the Social Security Commission passed Resolution No. 662
authorizing the Toples & Harding (Far East) to conduct an appraisal of the property of
defendant DORONILA and to submit a report thereon. (See Annex 'F' of the complaint)
21.
That on July 17, 1968, the Social Security Commission taking note of the report of Toples &
Harding (Far East), passed Resolution No. 736, approving the purchase of the 300 hectare
land of defendant DORONILA, at the price of P3.25 per square meter, for a total purchase Atty. EUGENIO V. OBON
price of NINE MILLION SEVEN HUNDRED FIFTY THOUSAND PESOS (P9,750,000.00), and
appropriating the said amount of money for the purpose. (See Annex 'F' of the complaint). Counsel for the defendant

22. 9 West Point Street

That on July 30, 1968, defendant DORONILA executed the deed of absolute sale (Annex
"C" of the complaint) over his 300-hectare land, situated in Montalban, Rizal, covered by
TCT Nos. 77011, 77013, 216747 (formerly TCT No. 116631) and 216750 (formerly TCT No.
77012), in favor of the Social Security System, for the total purchase price of NINE
MILLION SEVEN HUNDRED FIFTY THOUSAND PESOS (P9,750,000.00), Philippine currency,
which deed of sale was presented for registration in the Office of the Register of Deeds of
Fiscal on August 21, 1968.
23.
That defendant DORONILA had received the full purchase price of NINE MILLION SEVEN
HUNDRED FIFTY THOUSAND PESOS (P9,750,000.00), Philippine Currency, in two
installments.
24.
That on September 17, 1968, plaintiff presented his STATEMENT OF ACCOUNT, dated
September 16, 1968 (Xerox copy of which is attached hereto and marked as Annex
plaintiff' to defendant DORONILA for the payment of his professional services as real
estate broker in the amount of P1,380,000.00, as computed on the basis of the letter-
agreement, Annex "A" of the complaint, which defendant failed to pay. Manila, for Quezon
City, January 18,1968.
Respectfully submitted:
CRISPIN D. BAIZAS & ASSOCIATES
and A.N. BOLINAO, JR.
By: (Sgd.)
Counsel for the plaintiff
Suite 305, ShurdutBldg.
Intramuros, Manila
(Sgd.) E. V. Obon
Quezon City
ALFONSO DORONILA
Counsel for the defendant
428 Plaza de Ferguson
Ermita, Manila 2
The trial court rendered its decision dated December 12, 1969, the initiative part of which
reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiff, ordering defendant Alfonso
Doronila, under the first cause of action, to pay to plaintiff the sum of P1,380,000.00 with
interest thereon at the rate of 6% per annum from September 23, 1968 until fully paid;
and under the second Cause of Action, to pay plaintiff the sum of P200,000.00 as moral
damages; the sum of P100,000.00 as exemplary damages; the sum of P150,000.00 as
attorney's fees, including the expenses of. litigation and costs of this suit.
The writ of preliminary injunction issued in this case is hereby made permanent; and the
defendant Philippine National Bank is hereby ordered to pay to the plaintiff the amount of
P1,380,000.00 and interest on the P1,380,000.00 to be computed separately out of the
P2,000,000.00 which it presently holds under a fixed time deposit.
SO ORDERED.
December 12, 1969, Quezon City, Philippines.
(SGD.) LOURDES P. SAN DIEGO
Judge3
The defendant appealed to the Court of Appeals where the appeal was docketed as CA-
G.R. No. 45974-R.
In a decision promulgated on September 19, 1974, the Court of Appeals reversed the
derision of the trial court and dismissed the complaint because:

CAYEN CERVANCIA CABIGUEN, MLQU SCHOOL OF LAW

CASES ON BUSINESS ORGANIZATION 1 ( AGENCY)
In any event, since it has been found that the authority of appellee expired on June 2,
1968, rather than June 12, 1968 as the lower court opined, the inquiry would be whether
up to that time, a written offer was made by appellee in behalf of the SSS. The stipulation
is clear on this point. There should be a written offer by the prospective buyer or by
appellee for or in their behalf, and that if no such written offer is made until the last day of
the authorization, the option and authority shall expire and become null and void. Note
that the emphasis is placed on the need of a written offer to save the authority from an
automatic termination on the last day of the authorization. We note such emphasis with
special significance in receive of the condition relative to automatic extension of not more
than 15 days if negotiations have been started. The question then is when are
negotiations deemed started In the light of the provisions just cited, it should be when a
response is given by the prospective buyer showing fits interest to buy the property when
an offer is made by the seller or broker and make an offer of the price. Strictly, therefore,
prior to May 29, 1968, there were no negotiations yet started within contemplation of the
letter-agreement of brokerage (Exh. A). Nevertheless appellant extended appellee's
exclusive authority to on May 18, 1968 (par. 10, Stipulation of Facts; R.A. p. 89), which was
automatically extended by 15 days under their agreement, to expire on June 2, 1968, if
the period extended up to May 18, 1968 a necessary authority. For, it may even be
considered as taking the of the 15-days automatic extension, since appellee's pretension
is that negotiations have been started within the original period of 60 days. Appellant in
fixing the expiry date on June 2, 1968, has thus made a liberal concession in favor of
appellee, when he chose not to the extension up to May 18, 1968 as the automatic
extension which ougth to have been no more than 15 days, but which he stretched twice
as long. 4
The petitioner assigned the following errors:
I
THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT PETITIONER WAS NOT
THE EFFICIENT PROCURING CAUSE IN BRING ABOUT THE SALE OF PRIVATE RESPONDENT
DORONILA'S LAND TO THE SSS.
II
THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT THERE WAS FAILURE
ON THE PART OF HEREIN PETITIONER TO COMPLY WITH THE TERMS AND CONDITIONS OF
HIS CONTRACT WITH PRIVATE RESPONDENT.
III
THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT PETITIONER IS NOT
ENTITLED TO HIS COMMISSION.
CAYEN CERVANCIA CABIGUEN, MLQU SCHOOL OF LAW
CASES ON BUSINESS ORGANIZATION 1 ( AGENCY)
IV
THE RESPONDENT COURT OF APPEALS ERRED IN AWARDING ATTORNEY'S FEES TO PRIVATE
RESPONDENT DORONILA INSTEAD OF AFFIRMING THE AWARD OF MORAL AND EXEMPLARY
DAMAGES AS WELL As ATTORNEY FEES TO PETITIONER. 5
The Court in its Resolution of May 23, 1975 originally denied the petition for lack of merit
but upon petitioner's motion for reconsideration and supplemental petition invoking
equity, resolved in its Resolution of August 20, 1975 to give due course thereto.
From the stipulation of facts and the evidence of record, it is clear that the offer of
defendant Doronila to sell the 300 hectares of land in question to the Social Security
System was formally accepted by the System only on June 20, 1968 after the exclusive
authority, Exhibit A, in favor of the plaintiff, petitioner herein, had expired. The respondent
court's factual findings that petitioner was not the efficient procuring cause in bringing
about the sale proceeding from the fact of expiration of his exclusive authority) which are
admittedly final for purposes of the present petition, provide no basis law to grant relief to
petitioner. The following pertinent excerpts from respondent court's extensive decision
amply demonstrate this:
It is noted, however, that even in his brief, when he said
According to the testimony of the plaintiff-appellee a few days before May 29, 1968, he
arranged with Mr. Gilberto Teodoro, SSS Administrator, a meeting with the defendant
Manila. He talked with Mr. Teodoro over the telephone and fixed the date of the meeting
with defendant-appellant Doronila for May 29, 1968, and that he was specifically
requested by Mr. Teodoro not to be present at the meeting, as he, Teodoro, wanted to deal
directly with the defendant-appellant alone. (Tsn., pp. 4446, March 1, 1969). Finding
nothing wrong with such a request, as the sale could be caused directly or indirectly (Exh.
'A'), and believing that as a broker all that he needed to do to be entitled to his
commission was to bring about a meeting between the buyer and the seller as to ripen
into a sale, plaintiff-appellee readily acceded to the request.
appellee is not categorical that it was through his efforts that the meeting took place on
inlay 29, 1968. He refers to a telephone call he made "a few days before May 29, 1968,"
but in the conversation he had with Mr. Teodoro, the latter requested him not to be present
in the meeting. From these facts, it is manifest that the SSS officials never wanted to be in
any way guided by, or otherwise subject to, the mediation or intervention of, appellee
relative to the negotiation for the purchase of the property. It is thus more reasonable to
conclude that if a meeting was held on May 29, 1968, it was done independently, and not
by virtue of, appellee's wish or efforts to hold such meeting. 6
xxx xxx xxx
... It is even doubtful if he tried to make any arrangement for meeting at all, because on
May 18, 1968, he told appellant:
... we hereby make a firm offer, for and in behalf of our buyer, to purchase said property at
the price of Four Pesos and Fifty Centavos (P4.50) per square meter ....
As this offer is evidently made in behalf of buyer other than the SSS which had never
offered the price of P4.50 per square meter, appellee could not have at the same time
arranged a meeting between the SSS officials and appellant with a view to consummating
the sale in favor of the SSS which had made an offer of only PS.25 per sq. m. and thus lose
the much bigger profit he would realize with a higher price of P4.50 per sq. meter. This
'firm offer' of P4.50 per sq. m. made by appellee betrayed his lack of any efficient
intervention in the negotiations with the SSS for the purchase by it of appellant's
property ... 7
xxx xxx xxx
... This becomes more evident when it is considered that on May 6, 1968 he was making
his first offer to sell the property at P6.00 per sq. m. to the SSS to which offer he received
no answer. It is this cold indifference of the SSS to him that must have prompted him to
look for other buyers, resulting in his making the firm offer of 714.50 per sq. m. on May
18, 1968, a fact which only goes to show that for being ignored by the SSS, he gave up all
effort to deal with the SSS. ... 8
xxx xxx xxx
... For him to claim that it was he who aroused the interest of the SSS in buying appellant's
property is to ignore the fact that as early as June, (July) 1967, the SSS had directly dealt
with appellant to such an extent that the price of P3.25 as offered by the SSS was
accepted by appellant, the latter imposing only the condition that the price should be paid
in cash, and within 30 days from the date of the acceptance. It can truly be said then that
the interest of SSS to acquire the property had been sufficiently aroused for there to be
any need for appellee to stimulate it further. Appellee should know this fact for according
to him, the 10-day grace period was agreed upon to give the SSS a chance to pay the
price of the land at P3.25 per sq. m., as a "compromise" to appellant's insistence that the
SSS be excluded from appellee's option or authority to sell the land. 9
... There should be a written offer by the prospective buyer or by appellee for or in their
behalf, and that if no such written offer is made until the last day of the authorization, the
option and authority shall expired and become null and void. ... Yet, no such written offer
was made. ... 10
CAYEN CERVANCIA CABIGUEN, MLQU SCHOOL OF LAW
CASES ON BUSINESS ORGANIZATION 1 ( AGENCY)
In equity, however, the Court notes that petitioner had Monthly taken steps to bring back
together respondent Doronila and the SSS, among which may be mentioned the following:
In July, 1967, prior to February 14, 1968, respondent Doronila had offered to sell the land
in question to the Social Security System Direct negotiations were made by Doronila with
the SSS. The SSS did not then accept the offer of Doronila. Thereafter, Doronila executed
the exclusive authority in favor of petitioner Prats on February 14, 1968.
Prats communicated with the Office of the Presidential Housing Commission on February
23, 1968 offering the Doronila property. Prats wrote a follow-up letter on April is, 1968
which was answered by the Commission with the suggestion that the property be offered
directly to the SSS. Prats wrote the SSS on March 16, 1968, inviting Chairman Ramon
Gaviola, Jr. to discuss the offer of the sale of the property in question to the SSS. On May
6, 1968, Prats made a formal written offer to the Social Security System to self the 300
hectare land of Doronila at the price of P6.00 per square meter. Doronila received on May
17, 1968 from the SSS Administrator a telegram that the SSS was considering the
purchase of Doronilas property for its housing project. Prats and his witness Raagas
testified that Prats had several dinner and lunch meetings with Doronila and/or his
nephew, Atty. Manuel D. Asencio, regarding the progress of the negotiations with the SSS.
Atty. Asencio had declared that he and his uncle, Alfonso Doronila, were invited several
times by Prats, sometimes to luncheons and sometimes to dinner. On a Sunday, June 2,
1968, Prats and Raagas had luncheon in Sulu Hotel in Quezon City and they were joined
later by Chairman Gaviola of the SSS.
The Court has noted on the other hand that Doronila finally sold the property to the Social
Security System at P3.25 per square meter which was the very same price counter-offered
by the Social Security System and accepted by him in July, 1967 when he alone was
dealing exclusively with the said buyer long before Prats came into the picture but that on
the other hand Prats' efforts somehow were instrumental in bringing them together again
and finally consummating the transaction at the same price of P3.25 square meter,
although such finalization was after the expiration of Prats' extended exclusive authority.
Still such price was higher than that stipulated in the exclusive authority granted by
Doronila to Prats.
Under the circumstances, the Court grants in equity the sum of One Hundred Thousand
Pesos (P100,000.00) by way of compensation for his efforts and assistance in the
transaction, which however was finalized and consummated after the expiration of his
exclusive authority and sets aside the P10,000.00 attorneys' fees award adjudged
against him by respondent court.
WHEREFORE, the derision appealed from is hereby affirmed, with the modification that
private respondent Alfonso Doronila in equity is ordered to pay petitioner or his heirs the
amount of One Hundred Thousand Pesos (P100,000.00) and that the portion of the said
decision sell petitioner Prats to pay respondent Doronila attorneys' fees in the sum of
P10,000.00 is set aside.
The lifting of the injunction issued by the lower court on the P2,000,000.00 cash deposit of
respondent Doronila as ordered by respondent court is hereby with the exception of the
sum of One Hundred Thousand Pesos (P100,000.00) which is ordered segregated
therefrom to satisfy the award herein given to petitioner, the lifting of said injunction, as
herein ordered, is immediately executory upon promulgation hereof.
No pronouncement as to costs.
RAMON RALLOS vs. FELIX GO CHAN & SONS REALTY
CORPORATION
This is a case of an attorney-in-fact, Simeon Rallos, who after of his death of his principal,
Concepcion Rallos, sold the latter's undivided share in a parcel of land pursuant to a power
of attorney which the principal had executed in favor. The administrator of the estate of
the went to court to have the sale declared uneanforceable and to recover the disposed
share. The trial court granted the relief prayed for, but upon appeal the Court of Appeals
uphold the validity of the sale and the complaint.
Hence, this Petition for Review on certiorari.
The following facts are not disputed. Concepcion and Gerundia both surnamed Rallos were
sisters and registered co-owners of a parcel of land known as Lot No. 5983 of the
Cadastral Survey of Cebu covered by Transfer Certificate of Title No. 11116 of the Registry
of Cebu. On April 21, 1954, the sisters executed a special power of attorney in favor of
their brother, Simeon Rallos, authorizing him to sell for and in their behalf lot 5983. On
March 3, 1955, Concepcion Rallos died. On September 12, 1955, Simeon Rallos sold the
undivided shares of his sisters Concepcion and Gerundia in lot 5983 to Felix Go Chan &
Sons Realty Corporation for the sum of P10,686.90. The deed of sale was registered in the
Registry of Deeds of Cebu, TCT No. 11118 was cancelled, and a new transfer certificate of
Title No. 12989 was issued in the named of the vendee.
On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion
Rallos filed a complaint docketed as Civil Case No. R-4530 of the Court of First Instance of
Cebu, praying (1) that the sale of the undivided share of the deceased Concepcion Rallos
in lot 5983 be d unenforceable, and said share be reconveyed to her estate; (2) that the
Certificate of 'title issued in the name of Felix Go Chan & Sons Realty Corporation be
CAYEN CERVANCIA CABIGUEN, MLQU SCHOOL OF LAW
CASES ON BUSINESS ORGANIZATION 1 ( AGENCY)
cancelled and another title be issued in the names of the corporation and the "Intestate
estate of Concepcion Rallos" in equal undivided and (3) that plaintiff be indemnified by
way of attorney's fees and payment of costs of suit. Named party defendants were Felix
Go Chan & Sons Realty Corporation, Simeon Rallos, and the Register of Deeds of Cebu, but
subsequently, the latter was dropped from the complaint. The complaint was amended
twice; defendant Corporation's Answer contained a crossclaim against its co-defendant,
Simon Rallos while the latter filed third-party complaint against his sister, Gerundia Rallos
While the case was pending in the trial court, both Simon and his sister Gerundia died and
they were substituted by the respective administrators of their estates.
After trial the court a quo rendered judgment with the following dispositive portion:
A. On Plaintiffs Complaint
(1) Declaring the deed of sale, Exh. "C", null and void insofar as the one-half pro-indiviso
share of Concepcion Rallos in the property in question, Lot 5983 of the Cadastral Survey
of Cebu is concerned;
(2) Ordering the Register of Deeds of Cebu City to cancel Transfer Certificate of Title No.
12989 covering Lot 5983 and to issue in lieu thereof another in the names of FELIX GO
CHAN & SONS REALTY CORPORATION and the Estate of Concepcion Rallos in the
proportion of one-half (1/2) share each pro-indiviso;
(3) Ordering Felix Go Chan & Sons Realty Corporation to deliver the possession of an
undivided one-half (1/2) share of Lot 5983 to the herein plaintiff;
(4) Sentencing the defendant Juan T. Borromeo, administrator of the Estate of Simeon
Rallos, to pay to plaintiff in concept of reasonable attorney's fees the sum of P1,000.00;
and
(5) Ordering both defendants to pay the costs jointly and severally.
B. On GO CHANTS Cross-Claim:
(1) Sentencing the co-defendant Juan T. Borromeo, administrator of the Estate of Simeon
Rallos, to pay to defendant Felix Co Chan & Sons Realty Corporation the sum of P5,343.45,
representing the price of one-half (1/2) share of lot 5983;
(2) Ordering co-defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos,
to pay in concept of reasonable attorney's fees to Felix Go Chan & Sons Realty Corporation
the sum of P500.00.
C. On Third-Party Complaint of defendant Juan T. Borromeo administrator of Estate of
Simeon Rallos, against Josefina Rallos special administratrix of the Estate of Gerundia
Rallos:
(1) Dismissing the third-party complaint without prejudice to filing either a complaint
against the regular administrator of the Estate of Gerundia Rallos or a claim in the
Intestate-Estate of Cerundia Rallos, covering the same subject-matter of the third-party
complaint, at bar. (pp. 98-100, Record on Appeal)
Felix Go Chan & Sons Realty Corporation appealed in due time to the Court of Appeals
from the foregoing judgment insofar as it set aside the sale of the one-half (1/2) share of
Concepcion Rallos. The appellate tribunal, as adverted to earlier, resolved the appeal on
November 20, 1964 in favor of the appellant corporation sustaining the sale in
question. 1 The appellee administrator, Ramon Rallos, moved for a reconsider of the
decision but the same was denied in a resolution of March 4, 1965. 2
What is the legal effect of an act performed by an agent after the death of his principal?
Applied more particularly to the instant case, We have the query. is the sale of the
undivided share of Concepcion Rallos in lot 5983 valid although it was executed by the
agent after the death of his principal? What is the law in this jurisdiction as to the effect of
the death of the principal on the authority of the agent to act for and in behalf of the
latter? Is the fact of knowledge of the death of the principal a material factor in
determining the legal effect of an act performed after such death?
Before proceedings to the issues, We shall briefly restate certain principles of law relevant
to the matter tinder consideration.
1. It is a basic axiom in civil law embodied in our Civil Code that no one may contract in
the name of another without being authorized by the latter, or unless he has by law a right
to represent him. 3 A contract entered into in the name of another by one who has no
authority or the legal representation or who has acted beyond his powers, shall be
unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it
has been executed, before it is revoked by the other contracting party. 4 Article 1403 (1)
of the same Code also provides:
ART. 1403. The following contracts are unenforceable, unless they are justified:
(1) Those entered into in the name of another person by one who hi - been given no
authority or legal representation or who has acted beyond his powers; ...
Out of the above given principles, sprung the creation and acceptance of the relationship
of agency whereby one party, caged the principal (mandante), authorizes another, called
the agent (mandatario), to act for and in his behalf in transactions with third persons. The
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essential elements of agency are: (1) there is consent, express or implied of the parties to
establish the relationship; (2) the object is the execution of a juridical act in relation to a
third person; (3) the agents acts as a representative and not for himself, and (4) the agent
acts within the scope of his authority. 5
Agency is basically personal representative, and derivative in nature. The authority of the
agent to act emanates from the powers granted to him by his principal; his act is the act
of the principal if done within the scope of the authority. Qui facit per alium facit se. "He
who acts through another acts himself". 6
2. There are various ways of extinguishing agency, 7 but her We are concerned only with
one cause death of the principal Paragraph 3 of Art. 1919 of the Civil Code which was
taken from Art. 1709 of the Spanish Civil Code provides:
ART. 1919. Agency is extinguished.
xxx xxx xxx
3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent; ...
(Emphasis supplied)
By reason of the very nature of the relationship between Principal and agent, agency is
extinguished by the death of the principal or the agent. This is the law in this
jurisdiction. 8
Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for
the law is found in thejuridical basis of agency which is representation Them being an in.
integration of the personality of the principal integration that of the agent it is not possible
for the representation to continue to exist once the death of either is
establish. Pothier agrees with Manresa that by reason of the nature of agency, death is a
necessary cause for its extinction. Laurent says that the juridical tie between the principal
and the agent is severed ipso jure upon the death of either without necessity for the heirs
of the fact to notify the agent of the fact of death of the former. 9
The same rule prevails at common law the death of the principal effects instantaneous
and absolute revocation of the authority of the agent unless the Power be coupled with an
interest. 10 This is the prevalent rule in American Jurisprudence where it is well-settled
that a power without an interest confer. red upon an agent is dissolved by the principal's
death, and any attempted execution of the power afterward is not binding on the heirs or
representatives of the deceased. 11
3. Is the general rule provided for in Article 1919 that the death of the principal or of the
agent extinguishes the agency, subject to any exception, and if so, is the instant case
within that exception? That is the determinative point in issue in this litigation. It is the
contention of respondent corporation which was sustained by respondent court that
notwithstanding the death of the principal Concepcion Rallos the act of the attorney-in-
fact, Simeon Rallos in selling the former's sham in the property is valid and enforceable
inasmuch as the corporation acted in good faith in buying the property in question.
Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule afore-
mentioned.
ART. 1930. The agency shall remain in full force and effect even after the death of the
principal, if it has been constituted in the common interest of the latter and of the agent,
or in the interest of a third person who has accepted the stipulation in his favor.
ART. 1931. Anything done by the agent, without knowledge of the death of the principal or
of any other cause which extinguishes the agency, is valid and shall be fully effective with
respect to third persons who may have contracted with him in good. faith.
Article 1930 is not involved because admittedly the special power of attorney executed in
favor of Simeon Rallos was not coupled with an interest.
Article 1931 is the applicable law. Under this provision, an act done by the agent after the
death of his principal is valid and effective only under two conditions, viz: (1) that the
agent acted without knowledge of the death of the principal and (2) that the third person
who contracted with the agent himself acted in good faith. Good faith here means that the
third person was not aware of the death of the principal at the time he contracted with
said agent. These two requisites must concur the absence of one will render the act of the
agent invalid and unenforceable.
In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the
death of his principal at the time he sold the latter's share in Lot No. 5983 to respondent
corporation. The knowledge of the death is clearly to be inferred from the pleadings filed
by Simon Rallos before the trial court. 12 That Simeon Rallos knew of the death of his
sister Concepcion is also a finding of fact of the court a quo 13 and of respondent
appellate court when the latter stated that Simon Rallos 'must have known of the death of
his sister, and yet he proceeded with the sale of the lot in the name of both his sisters
Concepcion and Gerundia Rallos without informing appellant (the realty corporation) of the
death of the former. 14
On the basis of the established knowledge of Simon Rallos concerning the death of his
principal Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law
expressly requires for its application lack of knowledge on the part of the agent of the
death of his principal; it is not enough that the third person acted in good faith. Thus in
Buason & Reyes v. Panuyas, the Court applying Article 1738 of the old Civil rode now Art.
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1931 of the new Civil Code sustained the validity , of a sale made after the death of the
principal because it was not shown that the agent knew of his principal's demise. 15 To the
same effect is the case of Herrera, et al., v. Luy Kim Guan, et al., 1961, where in the words
of Justice Jesus Barrera the Court stated:
... even granting arguemendo that Luis Herrera did die in 1936, plaintiffs presented no
proof and there is no indication in the record, that the agent Luy Kim Guan was aware of
the death of his principal at the time he sold the property. The death 6f the principal does
not render the act of an agent unenforceable, where the latter had no knowledge of such
extinguishment of the agency. (1 SCRA 406, 412)
4. In sustaining the validity of the sale to respondent consideration the Court of Appeals
reasoned out that there is no provision in the Code which provides that whatever is done
by an agent having knowledge of the death of his principal is void even with respect to
third persons who may have contracted with him in good faith and without knowledge of
the death of the principal. 16
We cannot see the merits of the foregoing argument as it ignores the existence of the
general rule enunciated in Article 1919 that the death of the principal extinguishes the
agency. That being the general rule it follows a fortiorithat any act of an agent after the
death of his principal is void ab initio unless the same fags under the exception provided
for in the aforementioned Articles 1930 and 1931. Article 1931, being an exception to the
general rule, is to be strictly construed, it is not to be given an interpretation or application
beyond the clear import of its terms for otherwise the courts will be involved in a process
of legislation outside of their judicial function.
5. Another argument advanced by respondent court is that the vendee acting in good faith
relied on the power of attorney which was duly registered on the original certificate of title
recorded in the Register of Deeds of the province of Cebu, that no notice of the death was
aver annotated on said certificate of title by the heirs of the principal and accordingly they
must suffer the consequences of such omission. 17
To support such argument reference is made to a portion in Manresa's Commentaries
which We quote:
If the agency has been granted for the purpose of contracting with certain persons, the
revocation must be made known to them. But if the agency is general iii nature, without
reference to particular person with whom the agent is to contract, it is sufficient that the
principal exercise due diligence to make the revocation of the agency publicity known.
In case of a general power which does not specify the persons to whom represents' on
should be made, it is the general opinion that all acts, executed with third persons who
contracted in good faith, Without knowledge of the revocation, are valid. In such case, the
principal may exercise his right against the agent, who, knowing of the revocation,
continued to assume a personality which he no longer had. (Manresa Vol. 11, pp. 561 and
575; pp. 15-16, rollo)
The above discourse however, treats of revocation by an act of the principal as a mode of
terminating an agency which is to be distinguished from revocation by operation of
law such as death of the principal which obtains in this case. On page six of this Opinion
We stressed that by reason of the very nature of the relationship between principal and
agent, agency is extinguished ipso jure upon the death of either principal or agent.
Although a revocation of a power of attorney to be effective must be communicated to the
parties concerned, 18 yet a revocation by operation of law, such as by death of the
principal is, as a rule, instantaneously effective inasmuch as "by legal fiction the agent's
exercise of authority is regarded as an execution of the principal's continuing will. 19 With
death, the principal's will ceases or is the of authority is extinguished.
The Civil Code does not impose a duty on the heirs to notify the agent of the death of the
principal What the Code provides in Article 1932 is that, if the agent die his heirs must
notify the principal thereof, and in the meantime adopt such measures as the
circumstances may demand in the interest of the latter. Hence, the fact that no notice of
the death of the principal was registered on the certificate of title of the property in the
Office of the Register of Deeds, is not fatal to the cause of the estate of the principal
6. Holding that the good faith of a third person in said with an agent affords the former
sufficient protection, respondent court drew a "parallel" between the instant case and that
of an innocent purchaser for value of a land, stating that if a person purchases a
registered land from one who acquired it in bad faith even to the extent of foregoing or
falsifying the deed of sale in his favor the registered owner has no recourse against
such innocent purchaser for value but only against the forger. 20
To support the correctness of this respondent corporation, in its brief, cites the case
of Blondeau, et al., v. Nano and Vallejo, 61 Phil. 625. We quote from the brief:
In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil. 630, one Vallejo was a
co-owner of lands with Agustin Nano. The latter had a power of attorney supposedly
executed by Vallejo Nano in his favor. Vallejo delivered to Nano his land titles. The power
was registered in the Office of the Register of Deeds. When the lawyer-husband of Angela
Blondeau went to that Office, he found all in order including the power of attorney. But
Vallejo denied having executed the power The lower court sustained Vallejo and the
plaintiff Blondeau appealed. Reversing the decision of the court a quo, the Supreme Court,
quoting the ruling in the case of Eliason v. Wilborn, 261 U.S. 457, held:
But there is a narrower ground on which the defenses of the defendant- appellee must be
overruled. Agustin Nano had possession of Jose Vallejo's title papers. Without those title
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papers handed over to Nano with the acquiescence of Vallejo, a fraud could not have been
perpetuated. When Fernando de la Canters, a member of the Philippine Bar and the
husband of Angela Blondeau, the principal plaintiff, searched the registration record, he
found them in due form including the power of attorney of Vallajo in favor of Nano. If this
had not been so and if thereafter the proper notation of the encumbrance could not have
been made, Angela Blondeau would not have sent P12,000.00 to the defendant Vallejo.'
An executed transfer of registered lands placed by the registered owner thereof in the
hands of another operates as a representation to a third party that the holder of the
transfer is authorized to deal with the land.
As between two innocent persons, one of whom must suffer the consequence of a breach
of trust, the one who made it possible by his act of coincidence bear the loss. (pp. 19-21)
The Blondeau decision, however, is not on all fours with the case before Us because here
We are confronted with one who admittedly was an agent of his sister and who sold the
property of the latter after her death with full knowledge of such death. The situation is
expressly covered by a provision of law on agency the terms of which are clear and
unmistakable leaving no room for an interpretation contrary to its tenor, in the same
manner that the ruling in Blondeau and the cases cited therein found a basis in Section 55
of the Land Registration Law which in part provides:
xxx xxx xxx
The production of the owner's duplicate certificate whenever any voluntary instrument is
presented for registration shall be conclusive authority from the registered owner to the
register of deeds to enter a new certificate or to make a memorandum of registration in
accordance with such instruments, and the new certificate or memorandum Shall be
binding upon the registered owner and upon all persons claiming under him in favor of
every purchaser for value and in good faith: Provided however, That in all cases of
registration provided by fraud, the owner may pursue all his legal and equitable remedies
against the parties to such fraud without prejudice, however, to the right, of any innocent
holder for value of a certificate of title. ... (Act No. 496 as amended)
7. One last point raised by respondent corporation in support of the appealed decision is
an 1842 ruling of the Supreme Court of Pennsylvania in Cassiday v. McKenzie wherein
payments made to an agent after the death of the principal were held to be "good", "the
parties being ignorant of the death". Let us take note that the Opinion of Justice Rogers
was premised on the statement that the parties were ignorant of the death of the
principal. We quote from that decision the following:
... Here the precise point is, whether a payment to an agent when the Parties are ignorant
of the death is a good payment. in addition to the case in Campbell before cited, the same
judge Lord Ellenboruogh, has decided in 5 Esp. 117, the general question that a payment
after the death of principal is not good. Thus, a payment of sailor's wages to a person
having a power of attorney to receive them, has been held void when the principal was
dead at the time of the payment. If, by this case, it is meant merely to decide the general
proposition that by operation of law the death of the principal is a revocation of the
powers of the attorney, no objection can be taken to it. But if it intended to say that his
principle applies where there was 110 notice of death, or opportunity of twice I must be
permitted to dissent from it.
... That a payment may be good today, or bad tomorrow, from the accident circumstance
of the death of the principal, which he did not know, and which by no possibility could he
know? It would be unjust to the agent and unjust to the debtor. In the civil law, the acts of
the agent, done bona fide in ignorance of the death of his principal are held valid and
binding upon the heirs of the latter. The same rule holds in the Scottish law, and I cannot
believe the common law is so unreasonable... (39 Am. Dec. 76, 80, 81; emphasis supplied)
To avoid any wrong impression which the Opinion in Cassiday v. McKenzie may evoke,
mention may be made that the above represents the minority view in American
jurisprudence. Thus in Clayton v. Merrett, the Court said.
There are several cases which seem to hold that although, as a general principle, death
revokes an agency and renders null every act of the agent thereafter performed, yet that
where a payment has been made in ignorance of the death, such payment will be good.
The leading case so holding is that of Cassiday v. McKenzie, 4 Watts & S. (Pa) 282, 39 Am.
76, where, in an elaborate opinion, this view ii broadly announced. It is referred to, and
seems to have been followed, in the case of Dick v. Page,17 Mo. 234, 57 AmD 267; but in
this latter case it appeared that the estate of the deceased principal had received the
benefit of the money paid, and therefore the representative of the estate might well have
been held to be estopped from suing for it again. . . . These cases, in so far, at least, as
they announce the doctrine under discussion, are exceptional. The Pennsylvania
Case, supra (Cassiday v. McKenzie 4 Watts & S. 282, 39 AmD 76), is believed to stand
almost, if not quite, alone in announcing the principle in its broadest scope. (52, Misc. 353,
357, cited in 2 C.J. 549)
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So also in Travers v. Crane, speaking of Cassiday v. McKenzie, and pointing out that the
opinion, except so far as it related to the particular facts, was a mere dictum, Baldwin J.
said:
The opinion, therefore, of the learned Judge may be regarded more as an extrajudicial
indication of his views on the general subject, than as the adjudication of the Court upon
the point in question. But accordingly all power weight to this opinion, as the judgment of
a of great respectability, it stands alone among common law authorities and is opposed by
an array too formidable to permit us to following it. (15 Cal. 12,17, cited in 2 C.J. 549)
Whatever conflict of legal opinion was generated by Cassiday v. McKenzie in American
jurisprudence, no such conflict exists in our own for the simple reason that our statute, the
Civil Code, expressly provides for two exceptions to the general rule that death of the
principal revokes ipso jure the agency, to wit: (1) that the agency is coupled with an
interest (Art 1930), and (2) that the act of the agent was executed without knowledge of
the death of the principal and the third person who contracted with the agent acted also in
good faith (Art. 1931). Exception No. 2 is the doctrine followed in Cassiday, and again We
stress the indispensable requirement that the agent acted without knowledge or notice of
the death of the principal In the case before Us the agent Ramon Rallos executed the sale
notwithstanding notice of the death of his principal Accordingly, the agent's act is
unenforceable against the estate of his principal.
IN VIEW OF ALL THE FOREGOING, We set aside the ecision of respondent appellate court,
and We affirm en toto the judgment rendered by then Hon. Amador E. Gomez of the Court
of First Instance of Cebu, quoted in pages 2 and 3 of this Opinion, with costs against
respondent realty corporation at all instances.
So Ordered.