PAHUD v CA o When Eufemia and her co-heirs, drafted an extra-judicial settlement of estate to facilitate

GRN 160346 the transfer of the titlte to the Pahuds, Virgilio refused to sign it.
August 25, 2009 o
Regional Trial Court (For Judicial Partition)
TOPIC: Form and Manner of Creation – Arts. 1869, 1874  July 8, 1993 – Virgilio’s co-heirs, filed a complaint for judicial partition of the subject property before
PETITIONER: Purita Pahud, Soledad Pahud, and Ian Lee Castilla (represented by Mother and Attorney-inFact the RTC.
Virginia Castilla) o In the course of the proceedings, a Compromise Agreement was signed with seven of the
RESPONDENT: Court of Appeals, Spouses Isagani Belarmino and Leticia Ocampo, Eugemia San Agustin- co-heirs agreeing to sell their undivided shares to Virgilio for Php 700k.
Magsino, Zenaida San Agustin-McCrae, Milagros San Agustin-Fortman, Minerva San Agustin-Atkinson, o However, it was not approved by the trial court, because the lawyer of Eufemia and her 6
Ferdinand Agustin, Raul San Agustin, Isabelita San Agustin-Lustenberger and Virgio San Agustin co heirs refused to sign the agreement because he knew of the previous sale made to the
PONENTE: Nachura, J. Pahuds.
 December 1, 1994 – Eufemia acknowledged having received from Php 700k from Virgiilo.
SUMMARY: o Virgilio sold the entire property to spouses Isagani Belarmino and Leticia Ocampo.
o The Belarminos immediately constructed a building on the subject property.
DOCTRINE:  When the Pahuds, were alarmed on the ongoing construction on the lot they purchased, they
(1) Authority of an agent to execute a contract of sale of real estate must be conferred in wirting and immediately confronted Eufemia who confirmed to them that Virgilio.
must give him specific authority… The express mandate required by law to enable an appointee of
an agency in general terms to sell must be one that expressly mentions a sale or that includes a sale Regional Trial Court (Main Case)
as a necessary ingredient of the act mentioned.  Complaint: Pahuds filed a complaint in intervention in the pending case for judicial partition.
 DECISION:
(2) Basic rule in the law of agency that a principal is subject to liability for loss caused to another by the o Sale of 7/8 portion of the property by the Agustin in favor of the Intervenors-Third Party is
latter’s reliance upon a deceitful representation by an agent in the course of his employment: valid and enforceable, but obligating the third party, to complete the payment of the
a. (1) If the representation is authorized; purchase price by paying the balance of Php 87,500 to defendant. Upon receipt of the
b. (2) If it is within the implied authority of the agent to make for the principal; or balance, the plaintiff shall formalize the sale of 7/8 portion in favor of the third party
c. (3) If it is apparently authorized, regardless of whether the agent was authorized by him plaintiffs.
or not to make the representation. o Declaring the document entitled “Salasay sa Pagsang-ayon sa Bilihan” signed by Eufemia as
not a valid sale in favor of the defendant Virgilio.
(3) GR: a purchaser of a real property is not required to make any further inquiry beyond what the o Declaring the sale made by defendant Virgilio in favor of Sps Belarmino, as not a valid sale
certificate of title indicates on its face. and as inexistent;
a. XPN: those who purchase with knowledge of the defect in the title of the vendor or of o Declaring Virgilio and Sps Belarmino as in bad faith in buying the portion of the property
facts sufficient to induce a reasonable and prudent person to inquire into the status of already sold by the plaintiffs in constructing a building in the subject property; and
the property. o Declaring parties as not entitled to any damages.

FACTS: Court of Appeals

 Spouses Pedro San Agustin and Agatona Genil acquired a 246-sqm parcel of land situated in Barangay
Anos, Los Banos, Laguna. (Covered by OCT 0-15).
o Died intestate, survived by their 8 children: respondents, Eufemia, Raul, Ferdinand, Zenaida,
Milagros, Minerva, Isabelita and Virgilio.
 1992 – Eufemia, Ferdinand and Raul executed a Deed of Absolute Sale of Undivided Shares, in favor of
petitioners their respective shares from the lot they inherited from their parents for Php 525k.
o Eufemia also signed the deed on behalf of her four other co-heirs, namely: Isabelita on the
basis of SPA and;
o Milagros, Minerva and Zenaida, but without their written authority.
o The deed of sale was also not notarized.
 July 21, 1992 – Pahuds paid 35,792.31 to the Los Banos Rural Bank, where the subject property was
mortgaged.
o Bank issued a release of mortgage and turned over the onwer’s copy of the OCT to the
Pahuds.
o Followeing months, Pahuds made more payments to Eufemia and her siblings totaling to
Php 350k.
o They agreed to use the remaining Php 87,500 to defray the payment for taxes and the
expenses in transferring the title of the property.
 Respondents appealed the decision, arguing, that the sale made by Eufemia for and on behalf of her
other co-heirs to the Pahuds should have been declared void and existent for want of a written
authority from her co-heirs.
 DECISION: CA reversed and set aside the findings of the TC. CA ruled:
o Case for partition among the plaintiffs-appellees and appellant Virgilio is now considered
closed and terminated;
o Ordering plaintiffs to return to intervenors the total amount they received from the latter
+12 % legal interest.
o Declaring the sale Virgilo to Sps Belarmino as valid and binding
o Declaring appellants-spouses as buyers in good faith and for value and are the owners of
the subject property.
ISSUE:
(1) WON the status of the sale of the subject property by Eufemia and her co-heirs to the Pahuds is valid.
(YES)
(2) WON the 3/8 portion is deemed ratified when Milagros, Minerva, and Zenaida, executed SPA
authorizing Eufemia to represent them in the sale of their shares in the subject property. (YES)
(3) WON the sale made by the seven co-heirs to Virgilio was void. (YES)
HELD AND RULING:
(1) Yes, but only insofar or with respect to the 4/8 portion of the subject property.
 Art. 1874 provides When a sale of a piece of land or any interest therein is through an agent, the
authority of the latter shall be in writing; otherwise, the sale shall be void.
o According to the Court, under this provision, a special power of attorney is necessary
for an agent to enter into a contract by which the ownership of an immovable property
is transmitted or acquired, either gratuitously or for a valuable consideration.
o In the case of Cosmic Lumber Coporation v. Court of Appeals: Authority of an agent to
execute a contract of sale of real estate must be conferred in wirting and must give
him specific authority… The express mandate required by law to enable an appointee
of an agency in general terms to sell must be one that expressly mentions a sale or
that includes a sale as a necessary ingredient of the act mentioned.
o Thus, an absence of written authority to sell a piece of land, is ipso jure, VOID.
 In the case at hand, the sale made by Eufemia, ISabelita and her two brothers to the Pahuds,
should be valid only with respect to the 4/8 portion of the subject property.
o The sale with respect to the 3/8 portion, representing the shares of Zenaida, Milagros
and Minerva, is void because Eufemia could not dispose of the interest of her co-heirs
in the said lot absent any written authority from the latter.
o XPN: those who purchase with knowledge of the defect in the title of the vendor or of
facts sufficient to induce a reasonable and prudent person to inquire into the status
of the property.
 In the case at bar, the Belarminos were fully aware that the property was registered not in the
name of the immediate transferor, Virgilio, but remained in the name of Pedro San Agustin and
Agatona Genil. This fact alone is sufficient impetus to make further inquiry and, thus, negate their
claim that they are purchasers for value in good faith.
DISPOSITION: WHEREFORE, premises considered, the April 23, 2003 Decision of the Court of Appeals as well as its
October 8, 2003 Resolution in CA-G.R. CV No. 59426, are REVERSED and SET ASIDE. Accordingly, the January 14,
1998 Decision of Branch 92 of the Regional Trial Court of Calamba, Laguna is REINSTATED with the MODIFICATION
that the sale made by respondent Virgilio San Agustin to respondent spouses Isagani Belarmino and Leticia
Ocampo is valid only with respect to the 1/8 portion of the subject property. The trial court is ordered to proceed
with the partition of the property with dispatch.

(2) The sale with respect to the 3/8 portion is VALID.

 Although the sale with respect to the 3/8 portion is void by express provision of law and not susceptible
to ratification, the SC still uphold its validity
 Art. 1431 of the NCC provides: Through estoppel an admission or representation is rendered conclusive
upon the person making it, and cannot be denied or disproved as against the person relying thereon.
o Basic rule in the law of agency that a principal is subject to liability for loss caused to another
by the latter’s reliance upon a deceitful representation by an agent in the course of his
employment:
i. (1) If the representation is authorized;
ii. (2) If it is within the implied authority of the agent to make for the principal; or
iii. (3) If it is apparently authorized, regardless of whether the agent was authorized
by him or not to make the representation.
 In the case at hand, by the continued silence of Zenaida, Milagros and Minerva have caused the Pahuds
to believe that they have indeed clothed Eufemia with the authority to transact on their behalf. Clearly,
the three co-heirs are now estopped from impugning the validity of the sale from assailing the authority
of Eufemia to enter into such transaction.
b. It was shown that at the time of the sale to the Pahuds, Eufemia was not armed with the
SPA to dispose of the 3/8 portion of the property.
c. Initially, the 3 co-heirs in their answer, denied having sold their shares to the Pahuds.
However, during the pre-trial conference, they admitted that they had indeed sold 7/8 of
the property to the Pahuds. Thus, previous denial was superseded.
d. With this, they cannot be allowed to rely on Eufemia, their attorney-in-fact, to impugn the
validity of the first transaction because to allow them to do so would be tantamount to
giving premium to their sister’s disnonest and fraudulent deed. Therefore, the silence and
passivity of the three co-heirs on the issue bar them from making a contrary claim.

(3) Yes. The sale between the co-heirs and Virgilio is VOID.
 The sale made by the 7 co-heirs to Virgilio was void because they no longer had any interest over
the subject property which they could alienate at the timer of the second transaction. Nemo dat
quod non habet. However, Virgilio, could still alienate his 1/8 undivided share to the Belarminos.
 Belarminos, cannot argue that they purchased the property from Virgiilio in good faith.
o GR: a purchaser of a real property is not required to make any further inquiry beyond
what the certificate of title indicates on its face.
 PHILIPPINE REALTY v LEY CONSTRUCTION
GRN 165548
June 13, 2011

TOPIC: Form and Manner of Creation – Arts. 1869, 1874

PETITIONER: Philippine Realty and Holdings Corporation
RESPONDENT: Ley Construction and Development Corporation
PONENTE: Sereno, J.

SUMMARY:

DOCTRINE:

FACTS:
 Ley Construction and Development Corporation (LCDC) was the project contractor for the construction
of several buildings for Philippine Realty & Holdings Corporation (PRHC), the project owner.
o Engr. Abcede was the project construction manager of PRHC.
o Joselito Santos was its general manager and vice-president for operations.
 Apr. 1988 – Oct. 1989: The two corporations entered into four major construction projects.
o Evidenced by 4 duly notarized “construction agreements”.
o LCDC, committed itself to the construction of the buildings needed by the PRHC.
o PRHC, committed itself to pay the contract price agreed upon.
o These were the four construction projects, the parties entered into involving a Project 1,
Project 2, Project 3, and a Tektite Building.
 Project 1: Construction Agreement: Apr 25, 1988; Alexander Cluster C -
construction of 2 units of 7 storey buildings with basement at price of Php 68m.
 Project 2: July 25, 1988 – Alexander Cluster B – 11 storey twin-tower bldg. with
a common basement, price Php 140,500,000
 Project 3: November 23, 1988 – Alexander Cluster E – same info above
 Project 4: October 10, 1989 – Tekttite Towers Phase I – construction of Tektite
Tower Bldg 1 at Tektite Road – Php 729,138,964.
 The agreement covering the construction of the Tektite Building was signed by Mr, Campos under the
words “Phil. Rewalty & Holdings Corp.” and by Santos as a witness.
o Manuel Ley, the president of LCDC, signed under the words “Ley Const. and Dev. Corp”
o

ISSUE:

HELD AND RULING:

DISPOSITION:
 SPS YU v PAN AMERICAN
GRN 123560
March 27, 2000
TOPIC: Scope of Agency
PETITIONER: Sps Yu Eng Cho and Francisco Tao Yu
RESPONDENT: Pan American World Airways, Inc., Tourist World Services, Inc., Julieta Canilao and Claudia
Tagunicar
PONENTE: Puno, J.
SUMMARY:
DOCTRINE:
(1) It is settled rule that persons dealing with an assumed agent are bound at their peril, if they would
hold the principal liable to ascertain not only the fact of agency but also the nature and extent of
authority, and in case either is controverted, the burden of proof is upon them to establish it.
(2) In the case of Sarreal, Sr. v JAL: the airline was not liable for damages where the passenger was not
allowed to board the plane because his ticket had not been confirmed. SC ruled that the stub that
the lady employee put on the petitioner’s ticket showed among other coded items, under the column
“status” the letters “RQ” – which was understood to mean “Request”. Clearly, this does not mean a
confirmation but only a request.
FACTS:
 Plaintiff’s Claims:
 Plaintiff Yu Eng Cho, is the owner of Young Hardware, Co. and Achilles Marketing.
o In connection with his business, he travels from time to time to Malaysia, Taipei and
Hongkong.
 July 10, 1976, plaintiffs bought plane tickets from defendant Claudia Tagunicar, who represented
herself to be an agent of defendant Tourist World Services, Inc. (TWSI).
o The destinations are Hongkong, Tokyo, San Francisco for the amount of P25k per
computation of said defendant agent.
o The purpose of this trip is to go to Fairfield, New Jersey to buy two lines of infrared heating
system processing texture platic article.
 On said dates, only the passage from Manila to Hongkong, then to Tokyo were confirmed.
o The flight from Tokyo to San Fo was on “On Request” status.
o Per instruction of defendant agent, plaintiffs returned after a few days for the confirmation
of the Tokyo-SanFo trip.
o After calling Canilao of TWSI, defendant agent told plaintiffs that their flight is confirmed all
the way. Thereafter, attached the confirmation stickers on the plane tickets.
 Few days before the scheduled flight of plaintiffs, their son, Adrian Yu, called the Pan Am office to verify
the status of the flight. In which, personnel of Pan Am told him over the phone that the bookings were
confirmed.
 July 23 1978 – plaintiffs left for Hongkong and stayed there 5 days.
 July 28 1978 – plaintiffs left Hongkong for Tokyo.
o Upon arrival in Tokyo, they called up Pan Am office for reconfirmation of their flight to San
Francisco.
o However, they were informed that their names are not in the manifest.
o Since, no airlines could accommodate the plaintiffs going to San Fo from Japan. And could
not remain Japan for more than 72 hrs, they were constrained to agree to accept airline
tickets for Taipei instead, hence paying the tickets.
 August 3, 1978 - However, upon reaching Taipei, there were no flights available, thus forcing them to
return back to Manila.
o Japan Air Lines refunded the plaintiffs the difference of the price for Tokyo-Taipei and
Tokyo-San Francisco in the total amount of P2602.
 In view of their failure to reach Fairfield, New Jersey, Radiant Heat Enterprises, Inc. cancelled plaintiff’s
option to buy the two lines of infra-red heating system.
o The agreement was for him to inspect the equipment and make final arrangements with the
said company not later than August 7, 1978.
REGIONAL TRIAL COURT
 Petitioner/Plaintiff: filed a complaint for damages against private respondents Pan Am, TWSI, Julieta
Canilao and Claudia Tagunicar for expenses allegedly incurred such as costs of tickets and hotel
accommodations when petitioners were compelled to stay in Hongkong and then in Tokyo by reason
of the non-confirmation of their booking with Pan-Am.
 Decision: The RTC held the defendants jointly and severally liable, except defendant Julieta Canilao.
Court of Appeals
 Respondents, Pan Am and Tagunicar, appealed to CA.
 Decision: CA rendered judgment modifying the amount of damages awarded, holding private
respondent Tagunicar solely liable and absolving respondents Pan Am and TWSI from any and all
liability.
o CA found that Tagunicar is an independent travel solicitor and is not a duly authorized agent
or representative of either Pan Am or TWSI.
o It was held that their business transactions are not sufficient to consider Pan Am as the
principal and Tagunicar and TWSI as its agent and sub-agent.
o Furthermore, Tagunicar, was not authorized to confirm bookings, nor issue validation
stickers to petitioner.
o Thus, Pan Am and TWSI cannot be held responsible of her actions.
Supreme Court
 This petition for review seeks a reversal of the 31 August 1995 Decision 1 and 11 January 1998
Resolution 2 of the Court of Appeals holding private respondent Claudia Tagunicar solely liable for
moral and exemplary damages and attorney's fees, and deleting the TC’s award for actual damages.
ISSUE:
(1) WON petitioners’ ticket reservation in question were not confirmed and that there is no agency
relationship among Pan Am, TWSI and Tagunicar. (YES)
(2) WON Pan Am should also be held responsible for the acts of respondent Tagunicar. (NO)
(3) WON the tickets were confirmed (NO)
HELD AND RULING:
(1) YES. The SC do not agree with the petitioner’s contention that Tagunicar is a sub-agent of TWSI.
o A contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter. Hence,
the elements are as follows:
 (1) 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 agent acts as a representative and not for himself;
 (4) the agent acts within the scope of his authority.
o It is settled rule that persons dealing with an assumed agent are bound at their peril, if they
would hold the principal liable to ascertain not only the fact of agency but also the nature
 and extent of authority, and in case either is controverted, the burden of proof is upon them
to establish it.
o In the case at bar, petitioners rely on the affidavit of respondent Tagunicar where she stated
that she is an authorized agent of TWSI.
 However, the affidavit has weak probative value in light of respondent
Tagunicar’s testimony in court to the contrary.
 Further, affidavits are not complete reproductions what the declarant has in
mind because they are generally prepared by the administering officer and the
affiant simple signs them after same have been red to her.
 Between the negative allegation of respondent Canilao and Tagunicar that
neither is an agent nor principal of the other, and the affirmative allegation of
petitioners that an agency relationship exists, it is the latter who have the burden
of evidence to prove their allegation, failing in which, their claim must
necessarily fail.
 Lastly, Tagunicar categorically denied in open court that she is duly authorized
agent of TWSI.
 In case of conflict between statements in the affidavit and testimonial
declarations, the latter command greater weight.
 Therefore, the transaction is simply a contract of sale wherein Tagunicar buys
airline tickets from TWSI and then sells it at a premium to her clients.
o (4) Respondent, Tagunicar’s evidence, shows that the status of the San Fo – New York
segment was “OK”, meaning it was confirmed, but that the status of the Tokyo-San Fo
segment was still “on request”.
o (5) Respondent Canilao, testified that on the day that petitioners were to depart for
Hongkong, Tagunicar called her from the airport asking for confirmation of the Tokyo-San
Francisco flight, and that when she told respondent Tagunicar that she should not have
allowed petitioners to leave because their tickets have not been confirmed, Tagunicar
merely said “Bahala na”.
o (6) to prove that it really did not confirm the bookings of petitioners, respondent Canilao
pointed out that the validation stickers which Tagunicar attached to the tickets of
petitioners had different IATA nos.
o Therefore, Tagunicar, should be liable for having acted in bad faith in misrepresenting to
petitioners that their tickets have been confirmed.
DISPOSITION: WHEREFORE, the decision appealed from is hereby AFFIRMED. Cost against petitioners.

(2) NO. The SC ruled that the contentions of petitioner lacks factual and legal bases, thus, Pan Am should
not be held liable.
o The SC ruled that the real motive of petitioners in suing Pan Am, which appeared in their
amended complaint is that the TWSI, Canilao and Tagunicar may not be financially capable
of paying the petitioner/platinffs the amount sought to be recovered and hence, Pan Am,
being their ultimate principal, is also liable to pay the petitioner.
 The Court will not tolerate and abuse of the judicial process by passengers in
order to pry on international airlines for damage awards, like “trophies in a
safari”
o Further, there is no evidence to show that they lodged a protest with Pan Am’s Tokyo office
after they were refused passage for the flight to San Fo or even upon arrival in Manila.
o In the case of Sarreal, Sr. v JAL: the airline was not liable for damages where the passenger
was not allowed to board the plane because his ticket had not been confirmed. SC ruled
that the stub that the lady employee put on the petitioner’s ticket showed among other
coded items, under the column “status” the letters “RQ” – which was understood to mean
“Request”. Clearly, this does not mean a confirmation but only a request.
 In the case at bar, petitioner’s ticket were on “RQ” status. They were not
confirmed passengers and their names were not listed in the passenger
manifest.
 In other words, this is not a case where Pan Am bound itself to transport
petitioners and thereafter reneged on its obligation. Hence, respondent airline
cannot be held liable.

(3) NO. The SC ruled that CA correctly ruled that the tickets were never confirmed.
o (1) persistent calls made by respondent Tagunicar to Canilao, and those made by petitioners
at the Manila. Hongkong, and Tokyo offices of Pan Am. Are eloquent indications that
petitioners knew that their tickets have not been confirmed.
o (2) validation stickers which respondent Tagunicar, attached to petitioners’ tickets were
those intended for the exclusive use of airline companies. She had no authority to use them.
Hence, said validation stickers, wherein the word “OK” appears in the status box, are not
valid and binding.
o (3) the names of petitioners do not appear in the passenger manifest.
 PNB v STA MARIA
GRN L-24765
August 29, 1969
TOPIC: Classifications; Mortgage
PETITIONER/PLATINIFF: Philippine National Bank
RESPONDENT/DEFENDANTS: Maximo Sta. Maria, Et al, Valeriana, Emeteria, Teofilo, Quintin, Rosaria, and
Leonila, all surnamed Sta. Maria
PONENTE: Teehankee, J.
SUMMARY:
DOCTRINE:
(1) A special power of attorney to mortgage real estate is limited to such authority to mortgage and
does not bind the grantor personally to other obligations contracted by the grantee, in the absence
of any rati􏰃cation or other similar act that would estop the grantor from questioning or disowning
such other obligations contracted by the grantee.
Law Applicable:
Art. 1878. Special powers of attorney are necessary in the following cases:
(2) To effect novations which put an end to obligations already in existence at the time the agency was
constituted;
FACTS:
Regional Trial Court
 February 10, 1961 - Plaintiff bank, filed an action against the Sta Marias and the Associated Insurance
& Surety Co., Inc. as surety for the collection of certain amounts representing unpaid balances on two
agricultural sugar crop loans due allegedly from defendants.
o Defendant Maximo Sta. Maria, obtained sugar crop loans from plaintiff under a special
power of attorney, executed in his favor by his 6 brothers and sisters, to mortgage a 16-odd
hectar parcel of land, jointly owned by all of them. Pertinent provisions:
 “to mortgage, or convey as security to any bank, company or to any natural or
juridical person, our undivided shares over a certain parcel of land together with
the improvements thereon”
o In addition, Valeriana Sta. Maria alone executed in favor of her brother, Maximo, a SPA to
borrow money and mortgage any real estate owned by her, granting him the following
authority:
 "For me and in my name to borrow money and make, execute, sign and deliver
mortgages of real estate now owned by me standing in my name and to make,
execute, sign and deliver any and all promissory notes necessary in the premises."
o By virtue of the two powers, Maximo, applied for two separate crop loans for the 1952-1953
and 1953-1954 crop years, with plaintiff bank, in the amount of P15k, however, only
P13,216.11 was actually extended by plaintiff and the other amount of P23k, of which only
the sum of P12,427.57 was also extended by plaintiff.
o As security for the two loans, Maximo, executed in his own name in favor of plaintiff bank
two chattel mortgages on the standing crops, guaranteed by surety bonds for the full
authorized amounts of the loans executed by the Associated Insurance & Surety Co, inc. as
surety with Maximo as the principal.
o The record of the crop loan application further disclose that among the securities given by
Maximo for the loans were a “2nd mortgage on 25,302.3 Has of sugarland, including sugar
quota rights” including the parcel of land jointly owned by Maximo and his six brothers and
sisters for the 195201953 crop loan, with the notation that the bank already held a fist
mortgage on the same properties for the 1951-1952 crop loan of maximo and a 3rd mortgage
on the same properties for the 1953-1954 crop loan.
 Decision: TC rendered judgment condemning the defendant Maximo Sta. Maria and his co-defendants,
and the Associated Insurance and the Surety Company, Inc. jointly and severally to pay the plaintiff,
the PNB.
Court of Appeals
 Upon filing of appeal, defendant Maximo and Associate Insurance, did not resist the action, and did not
appeal the judgment.
 The appeal has been taken by Maximo’s 6 brothers and sisters who reiterate in their brief their main
contention in their Answer to the Complaint that under the special power of attorney.
o Which they had not given Maximo, the authority to borrow money but only to mortgage
the real estate jointly owned by them; and
o That if they are liable at all, their liability should not go beyond the value of the property
which had authorized to be given as security for the loans obtained by Maximo.
o Further, they did not benefit from the loans, and that the plaintiff’s only recourse against
them is to foreclose on the property which they had authorized Maximo to mortgage.
 Decision: ruled in favor of the defendants.
ISSUE:
(1) WON the defendants-appellants should be held liable for the unpaid balances of the loans obtained by
Maximo under the chattel mortgages.
(2) WON loans incurred in connection with said mortgage can be charged against owners of the property
mortgaged.
(3) WON Valeriana is liable in connection to the loan.
HELD AND RULING:
(1) NO. Except Valeriana should not be held liable for the unpaid balances of the loans obtained by
Maximo.
 According to the Court, A special power of attorney to mortgage real estate is limited to such
authority to mortgage and does not bind the grantor personally to other obligations contracted
by the grantee, in the absence of any rati􏰁cation or other similar act that would estop the grantor
from questioning or disowning such other obligations contracted by the grantee.
 In the case at hand, the authority granted by defendants-appellants (except Valeriana) unto their
brother, Maximo, was merely to mortgage the property jointly owned by them.
o They did not grant Maximo any authority to contract for any loans in their names and
behalf. Maximo alone, with Valeriana who authorized him to borrow money, must
answer for said loans and the other defendants-appellants' only liability is that the real
estate authorized by them to be mortgaged would be subject to foreclosure and sale
to respond for the obligations contracted by Maximo.
o But they cannot be held personally liable for the payment of such obligations, as
erroneously held by the trial court.
(2) NO. Loans incurred in connection with said mortgage CANNOT be charged against owners of the
property mortgaged.
 The fact that Maximo presented to the plaintiff bank Valeriana's additional special power of
attorney expressly authorizing him to borrow money, Exh. E-1, aside from the authority to
mortgage executed by Valeriana together with the other defendants-appellants also in Maximo's
favor, lends support to our view that the bank was not satis􏰁ed with the authority to mortgage
alone. For otherwise, such authority to borrow would have been deemed unnecessary and a
surplusage.
 (3) YES. Valeriana is liable because she authorized the grantee to incur loans.
 Valeriana, one of the co-owners of the property involved, granted Maximino not only the
authority to mortgage said property but also the special power of attorney to borrow money in
connection therewith, her liability is not only on the mortgage of her share in the property, but
also for the said loans which Maximo had obtained from plaintiff bank, and is joint pursuant to
the provisions of Article 1204 of the Civil Code.
o It should be noted that in the additional power of attorney, Exh. E-1, executed by
Valeriana, she did not grant Maximo the authority to bind her solidarity with him on
any loans he might secure thereunder.

DISPOSITION: WHEREFORE, the judgment of the trial court-against defendants-appellants EMETERIA, TEOFILQ,
QUINTIN, ROSARIO and LEONILA, all surnamed STA. MARIA is hereby reversed and set aside, with costs in both
instances against plaintiff. The judgment against defendant-appellant VALERIANA STA. MARIA is modi􏰁ed in that
her liability is held to be joint and not solidary, and the award of attorney's fees is reduced as set forth in the
preceding paragraph, without costs in this instance.
 HODGES v SALAS
GRN L-42958
October 21, 1936
TOPIC: LOAN/BORROW – ART. 1878 (7)
PETITIONER/PLAINTIFF: C.N. Hodges
RESPONDENT/DEFENDANTS: Carlota Salas and Paz Salas
PONENTE: Imperial, J.
SUMMARY:
DOCTRINE: With respect to a power of attorney of special character, it cannot be interpreted as also authorizing
the agent to use the money as he pleased, particularly when it does not appear that such was the intention of
the principals, and in applying part of the funds to pay his personal obligations, he exceeded his authority
LAW APPLICABLE
Art. 1878(7): Special powers of attorney are necessary in the following cases:
(7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the
things which are under administration;
FACTS:
 The action was brought by Hodges to foreclose a certain real estate mortgage constituted by the Salas
to secure a loan.
 Carlota and Paz Salas executed a power of attorney in favor of their brother-in-law Felix S. Yulo in order
for him to obtain a loan and secure it with a mortgage on the real property described in TCT No. 3335
 The power of attorney was registered in the registry of deeds of the Province of Occidental Negros:
o That we confer upon our brother-in-law Mr. Felix S. Yulo, married, of age and resident of the
municipality of Bago, Province of Occidental Negros, P. I., as required by law, a special power
of attorney to obtain, in our respective names and representation, a loan in any amount
which our said brother-in-law may deem necessary, being empowered, by virtue of the
authority conferred in this power of attorney, to constitute a mortgage on a parcel of land
absolutely belonging to us, the technical description of which is as follows:
'TRANSFER CERTIFICATE OF TITLE NO. 3335
" 'A parcel of land (lot No. 2464 of the Cadastral Survey of Bago) with the improvements
thereon, situated in the municipality of Bago. Bounded on the NE. and NW. by the Lonoy
Sapa and lot No. 2465; on the SE. by the Ilabo Sapa; and on the SW. by the Ilabo Sapa, lot
No. 2508 and the Sapa Talaptapan. Containing an area of one million nine hundred ninety-
four thousand eight hundred and thirty-four square meters (1,994,834), more or less.'
"That we confer and grant to our said brother-in-law Mr. Felix S. Yulo power and authority
to perform and execute each and every act necessary to the performance of his trust, which
acts shall be for all purposes as if we had performed or executed them personally, hereby
ratifying and confirming everything that our said brother-in- law Mr. Felix S. Yulo may
execute or cause to be executed."
 Acting under said power of attorney, Yulo on 27 March 1962, obtained a loan of P28,000 From Hodges,
binding his principals jointly and severally to pay it within 10 years, together with interest at 12% per
annum payable annually in advance.
 Yulo signed a promissory note for the said amount and executed a deeed of mortgage of the real
property described in TCT No. 3335 and the improvements thereon consisting in concrete buildings.
 It was stated in the deed that in case the defendants failed to pay the stipulated interest and the taxes
on the real property mortgaged and if Hodges were compelled to bring an action to recover his credits,
Salas would be obliged to pay 10% on the unpaid capital, as for Hodges’ attorneys.
 The mortgage was annotated at the back of the TCT
 The sum of P28,000 was not delivered to Yulo
 Salas failed to pay at maturity the interest stipulated, which should have been paid one year in advance
 All the sums paid by them on account of accrued interest up to 27 March 1934, on which the complaint
was filed.
o P14, 778.77 must be added the P3,360 deducted from Hodges upon granting the lone, as
interest for one year, making the total amount of interest paid by Salas and received by
Hodges P18, 138.77
 Hodges appealed from the judgment of the Court of First Instance of Occidental Negros absolving Salas
from the complaint and stating:
o That of the capital of P28,000 referred to in Exhibit A, the Salas were liable only for the sum
of P14,451.71
o The transactions and negotiations specified in Exhibit A as well as the interest charged are
usurious
o The sum of P14,778.77 paid by the defendants to the plaintiff should be applied to the
payment of the capital of P14,451.71
o Hodges must refund the sum of P3,327.06 to the defendants and, lastly, he must pay the
costs.
 Assignment of errors filed by Hodges’ in his appeal (Marami siya sinabi pero eto yung Agency related,
nasa notes yung iba):
o Hodges alleges that the judgment is erroneous for not having declared that the defendants
ratified all the obligations contracted by their attorney in fact
o Error was committed in not declaring that by virtue of the authority conferred by Salas,
agent Yulo was authorized to borrow money and invest it as he wished, without being
obliged to apply it necessarily for the benefit of his principals.
o Erred in fixing the capital, which Salas are obliged to pay him by virtue of the power of
attorney executed by them, at only P14,451.71
o The court should have ordered Salas to pay the entire capital owed, with interest thereon
in accordance with the mortgage deed, together with 10 per cent thereof as attorney's fees,
the action having been instituted due to nonfeasance on the part of the Salas.

ISSUE:
MAIN ISSUE:
(1) WON the actions of Yulo was within the scope of the power of attorney executed by Salas? NO
SUB ISSUES:
(2) WON the secondary evidence has probative value which being admitted without objection. YES
(3) WON the loan and the mortgage were usurious and illegal. YES.
HELD AND RULING:
(1) MAIN ISSUE: NO. The court ruled that the actions of Yulo was not within the scope of the power of
attorney executed by Salas.
 The terms thereof are limited; the agent was thereby authorized only to borrow any amount of
money which he deemed necessary.
o There is nothing, however, to indicate that the defendants had likewise authorized
him to convert the money obtained by him to his personal use.
 It cannot be interpreted as also authorizing the agent to dispose of the money as he pleased,
particularly when it does not appear that such was the intention of the principals, and in applying
part of the funds to pay his personal obligations, he exceeded his authority
 It should be understood that the agent was obliged to turn over the money to the principals or,
at least, place it at their disposal.
  Agent's act of employing part of the loan to pay his personal debts was ratified by the defendants
in their letter
o Contents of said document and has found nothing implying ratification or approval of
the agent's act. Salas confined themselves to stating that they would notify their agent
of the maturity of the obligation contracted by him.
o Salas said nothing about whether or not their agent was authorized to use the funds
obtained by him in the payment of his personal obligations.

(2) SUB-ISSUES: YES. The Court ruled that the court obliged to grant the probatory value of the secondary
evidence if such there is no objection on the part of the other party.
 It is universally accepted that when secondary or incompetent evidence is presented and
accepted without any objection on the part of the other party, the latter is bound thereby and
the court is obliged to grant it the probatory value it deserves.
 In the case at hand, the action brought by the plaintiff was for the foreclosure of a mortgage. At
the trial of the case, the attorney for the plaintiff did not present the mortgage deed showing the
rightration in the registry or owner’s TCT.
o Instead, the plaintiff testified that the mortgae had been duly registered in the registry
of deeds of Occidental Negros and had been noted on the back of the transfer certicate
of title.
o In which, the oral evidence was admitted without any objection on the part of the
attorney of the defendants.
 Therefore, inasmuch as the registration of the mortgage and the notation on the back of the TCT
have been established by the oral evidence, the court was without authority to conclude that the
action was personal in character and, consequently, the first assignment of error is well founded.

(3) SUB-ISSUES: NO. The SC ruled that the loan and the mortgage were not usurious and illegal.
 Section 5 of Act No. 2655, as amended by section 3 of Act No. 8291, expressly permits a creditor
to charge in advance interest corresponding to not more than one year, whatever the duration
of the loan.
o What is prohibited is the charging in advance of interest for more than one year.
Section 6 reiterates said rule in exempting a creditor found guilty of usury from the
obligation to return the interest and commissions collected by him in advance,
provided said interest and commissions are not for a period of more than one year
and the rate of interest does not exceed the maximum limit fixed by law.
 The fact of charging illegal interest, although it exceeds the maximum limit of interest that may
be charged, does not make the loan or the mortgage usurious because the transactions took place
subsequent to the execution of said contracts and the latter do not appear to be void ab initio

DISPOSITION: In view of the conclusions arrived at, the motion for a new trial filed by the attorneys for the plaintiff
on March 12, 1935, is denied, and the amendments to the complaint proposed by them in their pleading of March
20 of said year are admitted.

For all the foregoing reasons, the appealed judgment is modified and the defendants are ordered to pay jointly
and severally to the plaintiff the sums of P19,133.50 and P1,781.17. Within three months they shall make payment
of said two sums of money or deposit them with the clerk of court, at the disposal of the plaintiff, upon failure to
do which the real property mortgaged with the improvements thereon shall be sold at public auction and the
proceeds thereof applied to the payment of the two sums of money above-stated; without special pronouncement
as to the costs of this instance. So ordered.
 LSC v Atty. SSL
AC NO. 11483
October 3, 2017
TOPIC: Sale – Art. 1878 (5): To enter into any contract by which the ownership of an immovable is transmitted
or acquired either gratuitously or for a valuable consideration;
PETITIONER: Luzviminda S. Cerilla
RESPONDENT: Atty Samuel SM Lezama
PONENTE: Peralta, J.
SUMMARY:
DOCTRINE:
FACTS:
 COMPLAINT: Nov. 22, 2010 – LSC, filed an administrative complaint for gross misconduct against
respondent Atty SSL.
o In her complaint, she stated that she is one of that she is one of the co-owners of a parcel
of land located at Barangay Poblacion, Negros Oriental.
o Said property is covered by TCT 1-20416 and registered in the name of Fulquerio Gringio.
o It was later sold by his sole heir, Pancracio Gringio to the heirs of Fabio Solmayor, which
included the complainant.
o Being co-owner of the property, complainant engaged the services of respondent to file an
unlawful detainer case against Carmelita S. Garlito with the MTC.
o At that time, complainant executed a SPA in favor of the respondent to perform the
following acts:
 (1) To represent and act on my behalf in filing a case of ejectment against Lita
Garlito;
 (2) To appear on my behalf during the preliminary conference in Civ Case 497-04
and to make stipulations of facts, admissions and other matter for the early
resolution of the same including amicable settlement of the case if necessary.
o Complainant said on the basis of SPA, respondent entered into a compromise agreement
with the defendant in the unlawful detainer case to sell the subject property of the
complainant for P350k without her consent or special authority.
 In the compromise agreement (par. 2) it was stated that the plaintiff is willing to
sell the property.
o In which, the CA was approved by the MTC. Subsequently, a Motion of Execution was filed
due to complainant’s failure to comply with the terms and conditions indicated in CA, as
complainant refused to execute a Deed of Sale.
o Complainant, contended that respondent misrepresented in par. 2 of the CA that she was
willing to sell the subject property for 350k.
 Further, averred that she did not authorize the respondent to sell the property
and not willing to sell the property, considering there are other co-owners of the
property.
o Complainant contended that by entering into the CA to sell the subject property without
any special power, respondent committed gross misconduct.
o Lastly, complainant contended that she incurred lost due to the fact that the market value
is not less than P1.5m.
 ANSWER: Respondent denied complainant’s allegation that he misrepresented that complainant was
willing to sell the property in the amount of P350k, since he was duly armed with an SPA to enter into
CA, and the price of P350k was the actual price paid by the complainant to the owner of the property.
o Contended that complainant has no cause of action against him:
 SPA was executed due to her inability to attend every hearing of the unlawful
detainer case.
 SPA contains the sentence under number 2: including amicable settlement of the
case if necessary.
o Further, contended that the SPA given to him by the complainant, was sufficient authority
to enter into the said CA. the amount of 350k was the price of the subject property, because
the complainant paid the same amount for the purchase of the property from the Gringio
family.
o Lastly, he entered into CA under the honest and sincere belief that it was fairest and most
equitable arrangement.
o Hence, respondent prayed for the dismissal of the complaint.
IBP COMMISSION ON BAR DISCIPLINE
 Report: Finding respondent guilty of violations Canons 15 and 17 of the CPR and recommending that
respondent be suspended from the practice of law for a period of 2 years.
o The Investigating Commissioner stated that respondent must have overlooked the fact that
the subject property was co-owned by complainant's siblings. Respondent knew about the
co-ownership because of the existence of the Extrajudicial Settlement of Estate, but he did
not assert that his authority to compromise binds only the complainant.
o The Investigating Commissioner stated that the transcript of stenographic notes shows that
respondent admitted that complainant did not grant him the authority to sell the property
in the amount of P350,000.00.
o Thus, knowing that he did not possess such authority, respondent cannot validly claim that
his client, complainant herein, was willing to sell the property in the amount of P350,000.00.
o The Investigating Commissioner stated that based on the foregoing, respondent acted
beyond the scope of his authority. Respondent knew beforehand that no instruction was
given by his client to sell the property, yet he bound his client to sell the property without
her knowledge. Thus, he betrayed the trust of his client, complainant herein.
IBP BOARD OF GOVERNORS
 Decision: Finding that the recommendation was fully supported by the evidence on record and the
applicable laws and for violation of Canons 15 and 17 of the Code of Professional Responsibility, the
Board suspended respondent from the practice of law for two (2) years.
 MR: Denied.
ISSUE:
(1) WON the complainant authorized respondent through SPA to sell the subject property. NO.
(2) WON the respondent is guilty of violating Canon 5, 15 and 17 of the CPR. YES.
HELD AND RULING:
(1) NO. THE COURT AGREES WITH THE FINDING AND RECOMMENDATION OF THE IBP BOARD OF
GOVERNORS.
 Respondent entered into the Compromise Agreement 25 on the basis of the SPA granted to him by
complainant.
o The SPA authorized respondent to represent complainant in filing the ejectment case and
"[t]o appear on [complainant's] behalf during the preliminary conference in said ejectment
case and to make stipulations of fact, admissions and other matters for the early resolution
of the case, including amicable settlement of the case if necessary."
o Nowhere is it expressly stated in the SPA that respondent is authorized to compromise on
the sale of the property or to sell the property of complainant.
 In the case at hand, the records show that respondent admitted that he entered into the compromise
agreement with the defendant in the unlawful detainer case and stated that the plaintiff, who is the
complainant herein, was willing to sell the property to the defendant in the amount of P350,000.00
 even if the complainant did not instruct or authorize him to sell the property, and he merely acted upon
his own belief.
o As the SPA granted to him by the complainant did not contain the power to sell the property,
respondent clearly acted beyond the scope of his authority in entering into the compromise
agreement wherein the property was sold to the defendant Carmelita S. Garlito.

(2) YES. RESPONDENT VIOLATED CANON 5, 17 AND CANON 15 OF THE CPR.

 In the case of Hernadez v Padilla: it was held that It is imperative that they be conversant with basic
legal principles. Unless they faithfully comply with such duty, they may not be able to discharge
competently and diligently their obligations as members of the bar. Worse, they may become
susceptible to committing mistakes.

DISPOSITION: WHEREFORE, respondent Atty. Samuel SM. Lezama is found guilty of violating Canons 5, 15 and 17
of the Code of Professional Responsibility. Hence, he is SUSPENDED from the practice of law for a period of TWO
(2) YEARS and STERNLY WARNED that a repetition of the same or a similar offense shall be dealt with more
severely.
Let copies of this Resolution be furnished the O􏰁ce of the Bar Con􏰁dant, to be appended to the personal 􏰁le of
respondent. Likewise, copies shall be furnished the Integrated Bar of the Philippines and the Court Administrator
for circulation to all courts of the country for their information and guidance.
 PHILIPPINE REALTY v LEY CONSTRUCTION
GRN 165548
June 13, 2011

TOPIC: Form and Manner of Creation – Arts. 1869, 1874

PETITIONER:
RESPONDENT:
PONENTE:

SUMMARY:

DOCTRINE:

FACTS:


ISSUE:

HELD AND RULING:

DISPOSITION:
 KATIGBAK v TAI HING CO.
GRN 29917
Dec. 29, 1928

TOPIC: Sale – Art. 1878 (5): To enter into any contract by which the ownership of an immovable is transmitted
or acquired either gratuitously or for a valuable consideration;
PETITIONER/PLAINTIFF: Jose M. Katigbak
RESPONDENT/DEFENDANT: Tai Hing Co., Po Sun Suy and Po Ching
PONENTE: Villa-Real, J.

SUMMARY:

DOCTRINE:

FACTS:

ISSUE:

HELD AND RULING:

DISPOSITION:
 PHILIPPINE REALTY v LEY CONSTRUCTION
GRN 165548
June 13, 2011

TOPIC: Form and Manner of Creation – Arts. 1869, 1874

PETITIONER:
RESPONDENT:
PONENTE:

SUMMARY:

DOCTRINE:

FACTS:

ISSUE:

HELD AND RULING:

DISPOSITION:
 PHILIPPINE REALTY v LEY CONSTRUCTION
GRN 165548
June 13, 2011

TOPIC: Form and Manner of Creation – Arts. 1869, 1874

PETITIONER:
RESPONDENT:
PONENTE:

SUMMARY:

DOCTRINE:

FACTS:

ISSUE:

HELD AND RULING:

DISPOSITION: