Country Bankers Insurance vs.
Keppel Since Unimarine failed to deliver on
FACTS: On January 27, 1992,
Unimarine Shipping Lines, Inc. (Unimarine),
a corporation engaged in the shipping
industry, contracted the services of Keppel
Cebu Shipyard, formerly known as Cebu
Shipyard and Engineering Works, Inc. (Cebu
Shipyard), for dry docking and ship repair
works on its vessel, the M/V Pacific
Fortune.[5]
On February 14, 1992, Cebu
Shipyard issued Bill No. 26035 to Unimarine
in consideration for its services. Negotiations
between Cebu Shipyard and Unimarine led
to the reduction of this amount
to P3,850,000.00. The terms of this
agreement were embodied in Cebu
Shipyards February 18, 1992 letter to the
President/General Manager of Unimarine,
Paul Rodriguez, who signed his conformity
to said letter.
In compliance with the agreement,
Unimarine, through Paul Rodriguez, secured
from Country Bankers Insurance Corp.
(CBIC), through the latters agent, Bethoven
Quinain (Quinain), a surety bond in the
amount of P3,000,000.00. The expiration of
this surety bond was extended, through
Endorsement No. 33152[9] (the
endorsement), which was later on attached
to and formed part of the surety bond. In
addition to this, Unimarine, obtained
another bond from Plaridel Surety and
Insurance Co. (Plaridel).
On February 17, 1992, Unimarine
executed a Contract of Undertaking in favor
of Cebu Shipyard. Because Unimarine failed
to remit the first installment when it became
due on May 30, 1992, Cebu Shipyard was
constrained to deposit the peso check
corresponding to the initial installment
of P2,350,000.00. The check, however, was
dishonored by the bank due to insufficient
funds.[12] Cebu Shipyard faxed a message to
Unimarine, informing it of the situation, and
reminding it to settle its account
immediately.[13]On June 24, 1992, Cebu
Shipyard again faxed a message[14] to
Unimarine, to confirm Paul Rodriguezs
promise that Unimarine will pay in full
the P3,850,000.00, in US Dollars on July 1,
1992.
the above promise, Cebu Shipyard, on July
2, 1992, through a faxed letter, asked
Unimarine if the payment could be picked up
the next day. This was followed by another
faxed message on July 6, 1992, wherein
Cebu Shipyard reminded Unimarine of its
promise to pay in full on July 28, 1992. On
August 24, 1992, Cebu Shipyard again
faxed[15] Unimarine, to inform it that interest
charges will have to be imposed on their
outstanding debt.
On November 18, 1992, Cebu
Shipyard, through its counsel, sent
Unimarine a letter,[16] demanding payment.
Due to Unimarines failure to heed Cebu
Shipyards repeated demands, Cebu
Shipyard, through counsel, wrote the
sureties CBIC[18] on November 18, 1992, and
Plaridel,[19] on November 19, 1992, to inform
them of Unimarines nonpayment, and to ask
them to fulfill their obligations as sureties,
and to respond within seven days from
receipt of the demand.
However, even the sureties failed to
discharge their obligations, and so Cebu
Shipyard filed a Complaint dated January 8,
1993, before the RTC against Unimarine,
CBIC, and Plaridel.
CBIC, in its Answer,[20] said that
Cebu Shipyards complaint states no cause
of action. CBIC alleged that the surety bond
was issued by its agent, Quinain, in excess
of his authority. CBIC claimed that Cebu
Shipyard should have doubted the authority
of Quinain to issue the surety bond.
CBIC added that its liability was
extinguished when, without its knowledge
and consent, Cebu Shipyard and Unimarine
novated their agreement several
times. Furthermore, CBIC stated that Cebu
Shipyards claim had already been paid or
extinguished when Unimarine executed an
Assignment of Claims[23] of the proceeds of
the sale of its vessel M/V Headline in favor
of Cebu Shipyard. CBIC also averred that
Cebu Shipyards claim had already
prescribed as the endorsement that
extended the surety bonds expiry date, was
not reported to CBIC. Finally, CBIC
asseverated that if it were held to be liable,
its liability should be limited to the face
value of the bond and not for exemplary
damages, attorneys fees, and costs of
litigation.[24]
CBIC claimed that Paul Rodriguez,
Albert Hontanosas, and Peter Rodriguez
executed an Indemnity Agreement, wherein
they bound themselves, jointly and
severally, to indemnify CBIC for any amount
it may sustain or incur in connection with
the issuance of the surety bond and the
endorsement.[27] As for Quinain, CBIC
alleged that he exceeded his authority as
stated in the Special Power of Attorney,
wherein he was authorized to solicit
business and issue surety bonds not
exceeding P500,000.00 but only in favor of
the Department of Public Works and
Highways, National Power Corporation, and
other government agencies.[28]
On August 23, 1993, third party
defendant Hontanosas filed his Answer with
Counterclaim, to the Cross and Third Party
Complaint. Hontanosas claimed that he had
no financial interest in Unimarine and was
neither a stockholder, director nor an officer
of Unimarine. He asseverated that his
relationship to Unimarine was limited to his
capacity as a lawyer, being its retained
counsel. He further denied having any
participation in the Indemnity Agreement
executed in favor of CBIC, and alleged that
his signature therein was forged, as he
neither signed it nor appeared before the
Notary Public who acknowledged such
undertaking.[29]
Paul Rodriguez admitted that
Unimarine failed to pay Cebu Shipyard for
the repairs it did on M/V Pacific Fortune,
despite the extensions granted to
Unimarine. He claimed that he signed the
Indemnity Agreement because he trusted
Quinain that it was a mere pre-requisite for
the issuance of the surety bond. He added
that he did not bother to read the documents
and he was not aware of the consequences
of signing an Indemnity Agreement. Paul
Rodriguez also alleged to not having noticed
the limitation Valid only in favor of DPWH
stamped on the surety bond.[31] However,
Paul Rodriguez did not contradict the fact
that Unimarine failed to pay Cebu Shipyard
its obligation.[32]
CBIC presented Dakila Rianzares,
the Senior Manager of its Bonding
Department. Her duties included the
evaluation and approval of all applications
for and reviews of bonds issued by their
agents, as authorized under the Special
Power of Attorney and General Agency
Contract of CBIC. Rianzares testified that
she only learned of the existence of CBIC
Surety Bond No. G (16) 29419 when she
received the summons for this case. Upon
investigation, she found out that the surety
bond was not reported to CBIC by Quinain,
the issuing agent, in violation of their
General Agency Contract, which provides
that all bonds issued by the agent be
reported to CBICs office within one week
from the date of issuance. She further stated
that the surety bond issued in favor of
Unimarine was issued beyond Quinains
authority. Rianzares added that she was not
aware that an endorsement pertaining to the
surety bond was also issued by Quinain.[33]
The RTC held that CBIC, in its
capacity as surety is bound with its principal
jointly and severally to the extent of the
surety bond it issued in favor of [Cebu
Shipyard] because although the contract of
surety is in essence secondary only to a valid
principal obligation, his liability to [the]
creditor is said to be direct, primary[,] and
absolute, in other words, he is bound by the
principal.[36]
The RTC found CBICs contention
that Quinain acted in excess of his authority
in issuing the surety bond untenable. The
RTC held that CBIC is bound by the surety
bond issued by its agent who acted within
the apparent scope of his authority.-
All the defendants appealed this
Decision to the Court of Appeals.
The Court of Appeals held that it was
duly proven that Unimarine was liable to
Cebu Shipyard for the ship repair works it
did on the formers M/V Pacific Fortune. The
Court of Appeals dismissed CBICs
contention of novation for lack of
merit.[43] CBIC was held liable under the
surety bond as there was no novation on the
agreement between Unimarine and Cebu
Shipyard that would discharge CBIC from its
obligation. The Court of Appeals also did not
allow CBIC to disclaim liability on the
ground that Quinain exceeded his authority
because third persons had relied upon
Quinains representation, as CBICs
agent.[44] Quinain was, however, held
solidarily liable with CBIC under Article
1911 of the Civil Code.[45]
CBIC[48]and Unimarine, together with third
party defendants-appellants[49] filed their
respective Motions for Reconsideration. This
was, however, denied by the Court of
Appeals in its October 28, 2004 Resolution
for lack of merit.
Unimarine elevated its case to this Court via
a petition for review on certiorari, which was
denied in a Resolution dated January 19,
2005.[50]
The lone petitioner in this case,
CBIC, is now before this Court, seeking the
reversal of the Court of Appeals decision and
resolution on the following grounds:
Issue: The crux of the controversy lies in
CBICs liability on the surety bond Quinain
issued to Unimarine, in favor of Cebu
Shipyard.
ARGUMENTS:
CBIC avers that the Court of Appeals erred
in interpreting and applying the rules
governing the contract of agency. It argued
that the Special Power of Attorney granted to
Quinain clearly set forth the extent and
limits of his authority with regard to
businesses he can transact for and in behalf
of CBIC. CBIC added that it was incumbent
upon Cebu Shipyard to inquire and look into
the power of authority conferred to
Quinain. CBIC said:
CBIC claims that the foregoing is true
even if Quinain was granted the authority to
transact in the business of insurance in
general, as the authority to bind the
principal in a contract of suretyship could
nonetheless never be presumed
To go a little further, CBIC said that
the correct Civil Code provision to apply in
this case is Article 1898. CBIC asserts that
Cebu Shipyard was charged with knowledge
of the extent of the authority conferred on
Mr. Quinain by its failure to perform due
diligence investigations.[55]
Cebu Shipyard, in its
Comment[56] first assailed the propriety of
the petition for raising factual issues. In
support, Cebu Shipyard claimed that the
Court of Appeals application of Article 1911
of the Civil Code was founded on findings of
facts that CBIC now disputes. Thus, the
question is not purely of law.
The fact that Quinain was an agent of CBIC
was never put in issue. What has always
been debated by the parties is the extent of
authority or, at the very least, apparent
authority, extended to Quinain by CBIC to
transact insurance business for and in its
behalf.
In a contract of agency, a person, the
agent, binds himself to represent another,
the principal, with the latters consent or
authority.[57] Thus, agency is based on
representation, where the agent acts for and
in behalf of the principal on matters within
the scope of the authority conferred upon
him.[58] Such acts have the same legal effect
as if they were personally done by the
principal. By this legal fiction of
representation, the actual or legal absence of
the principal is converted into his legal or
juridical presence.[59]
The RTC applied Articles 1900 and
1911 of the Civil Code in holding CBIC liable
for the surety bond. It held that CBIC could
not be allowed to disclaim liability because
Quinains actions were within the terms of
the special power of attorney given to
him.[60] The Court of Appeals agreed that
CBIC could not be permitted to abandon its
obligation especially since third persons had
relied on Quinains representations. It based
its decision on Article 1911 of the Civil Code
and found CBIC to have been negligent and
less than prudent in conducting its
insurance business for its failure to
supervise and monitor the acts of its agents,
to regulate the distribution of its insurance
forms, and to devise schemes to prevent
fraudulent misrepresentations of its
agents.[61]
RULING
This Court does not agree.
Our law mandates an agent to act
within the scope of his authority.[62] The
scope of an agents authority is what appears
in the written terms of the power of attorney
granted upon him.[63] Under Article 1878(11)
of the Civil Code, a special power of
attorney is necessary to obligate the
principal as a guarantor or surety.
In the case at bar, CBIC could be
held liable even if Quinain exceeded the
scope of his authority only if Quinains act of
issuing Surety Bond No. G (16) 29419
is deemed to have been performed within
the written terms of the power of attorney he
was granted.[64]
However, contrary to what the RTC
held, the Special Power of Attorney accorded
to Quinain clearly states the limits of his
authority and particularly provides that in
case of surety bonds, it can only be issued in
favor of the Department of Public Works and
Highways, the National Power Corporation,
and other government agencies;
furthermore, the amount of the surety bond
is limited to P500,000.00, to wit:
CBIC does not anchor its defense on
a secret agreement, mutual understanding,
or any verbal instruction to Quinain. CBICs
stance is grounded on its contract with
Quinain, and the clear, written terms
therein. This Court finds that the terms of
the foregoing contract specifically provided
for the extent and scope of Quinains
authority, and Quinain has indeed exceeded
them.
Under Articles 1898 and 1910, an
agents act, even if done beyond the scope of
his authority, may bind the principal if he
ratifies them, whether expressly or tacitly. It
must be stressed though that only the
principal, and not the agent, can ratify the
unauthorized acts, which the principal must
have knowledge of.
Neither Unimarine nor Cebu
Shipyard was able to repudiate CBICs
testimony that it was unaware of the
existence of Surety Bond No. G (16) 29419
and Endorsement No. 33152. There were no
allegations either that CBIC should have
been put on alert with regard to Quinains
business transactions done on its behalf. It
is clear, and undisputed therefore, that there
can be no ratification in this case, whether
express or implied.
Article 1911, on the other hand, is
based on the principle of estoppel, which is
necessary for the protection of third
persons. It states that the principal is
solidarily liable with the agent even when the
latter has exceeded his authority, if the
principal allowed him to act as though he
had full powers. However, for an agency by
estoppel to exist, the following must be
established:
1. The principal manifested a
representation of the agents
authority or knowingly allowed
the agent to assume such
authority;
2. The third person, in good faith,
relied upon such
representation; and
3. Relying upon such
representation, such third
person has changed his position
to his detriment.[68]
In Litonjua, Jr. v. Eternit Corp.,[69] this
Court said that [a]n agency by estoppel,
which is similar to the doctrine of apparent
authority, requires proof of reliance upon the
representations, and that, in turn, needs
proof that the representations predated the
action taken in reliance.[70]
This Court cannot agree with the
Court of Appeals pronouncement of
negligence on CBICs part. CBIC not only
clearly stated the limits of its agents powers
in their contracts, it even stamped its surety
bonds with the restrictions, in order to alert
the concerned parties. Moreover, its
company procedures, such as reporting
requirements, show that it has designed a
system to monitor the insurance contracts
issued by its agents. CBIC cannot be faulted
for Quinains deliberate failure to notify it of
his transactions with Unimarine. In fact,
CBIC did not even receive the premiums paid
by Unimarine to Quinain.
Furthermore, nowhere in the
decisions of the lower courts was it stated
that CBIC let the public, or specifically
Unimarine, believe that Quinain had the
authority to issue a surety bond in favor of
companies other than the Department of
Public Works and Highways, the National
Power Corporation, and other government
agencies. Neither was it shown that CBIC
knew of the existence of the surety bond
before the endorsement extending the life of
the bond, was issued to Unimarine. For one
to successfully claim the benefit of estoppel
on the ground that he has been misled by
the representations of another, he must
show that he was not misled through his
own want of reasonable care and
circumspection.[71]
Unimarine undoubtedly failed to
establish that it even bothered to inquire if
Quinain was authorized to agree to terms
beyond the limits indicated in his special
power of attorney. While Paul Rodriguez
stated that he has done business with
Quinain more than once, he was not able to
show that he was misled by CBIC as to the
extent of authority it granted Quinain. Paul
Rodriguez did not even allege that he asked
for documents to prove Quinains authority
to contract business for CBIC, such as their
contract of agency and power of attorney. It
is also worthy to note that even with the
Indemnity Agreement, Paul Rodriguez
signed it on Quinains mere assurance and
without truly understanding the
consequences of the terms of the said
agreement. Moreover, both Unimarine and
Paul Rodriguez could have inquired directly
from CBIC to verify the validity and
effectivity of the surety bond and
endorsement; but, instead, they blindly
relied on the representations of Quinain. As
this Court held in Litonjua, Jr. v. Eternit
Corp.[74]:
A person dealing with a
known agent is not
authorized, under any
circumstances, blindly to
trust the agents; statements
as to the extent of his powers;
such person must not act
negligently but must use
reasonable diligence and
prudence to ascertain
whether the agent acts within
the scope of his
authority. The settled rule is
that, persons dealing with an
assumed agent are bound at
their peril, and 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 prove it. In this case,
the petitioners failed to
discharge their burden;
hence, petitioners are not
entitled to damages from
respondent EC.[75]
In light of the foregoing, this Court is
constrained to release CBIC from its liability
on Surety Bond No. G (16) 29419 and
Endorsement No. 33152. This Court sees no
need to dwell on the other grounds
propounded by CBIC in support of its
prayer.
G.R. No. L-20136 June 23, 1965
IN RE: PETITION FOR ISSUANCE OF
SEPARATE CERTIFICATE OF TITLE.
JOSE A. SANTOS Y Diaz, petitioner-
appellant,
vs.
ANATOLIO BUENCONSEJO, ET
AL., respondents-appellees.
Facts: Petitioner Jose A. Santos y Diaz seeks
the reversal of an order of the Court of First
Instance denying his petition, for the
cancellation of original certificate of title,
issued in the name of Anatolio Buenconsejo,
et al and the issuance in lieu thereof, of a
separate transfer certificate of title in his
name, It appears that the lot was originally
owned in common by Anatolio Buenconsejo
to the extent of ½ undivided portion and
Lorenzo Bon and Santiago Bon to the extent
of the other ½ that Anatolio Buenconsejo's
rights, interests and participation over the
portion abovementioned were on January 3,
1961 and by a Certificate of Sale executed by
the Provincial Sheriff of Albay, transferred
and conveyed to Atty. Tecla San Andres Ziga,
awardee in the corresponding auction sale
conducted by said Sheriff in connection with
the execution of the decision of the Juvenile
Delinquency and Domestic Relations Court
in Civil Case No. 25267, entitled "Yolanda
Buenconsejo, et al. vs. Anatolio Buenconsejo";
that on December 26, 1961 and by a
certificate of redemption issued by the
Provincial Sheriff of Albay, the rights,
interest, claim and/or or participation which
Atty. Tecla San Andres Ziga may have
acquired over the property in question by
reason of the aforementioned auction sale
award, were transferred and conveyed to the
herein petitioner in his capacity as Attorney-
in-fact of the children of Anatolio
Buenconsejo, namely, Anastacio
Buenconsejo, Elena Buenconsejo and
Azucena Buenconsejo.
It would appear, also, that petitioner Santos
had redeemed the aforementioned share of
Anatolio Buenconsejo, upon the authority of
a special power of attorney executed in his
favor by the children of Anatolio
Buenconsejo; that relying upon this power of
attorney and redemption made by him,
Santos now claims to have acquired the
share of Anatolio Buenconsejo in the
aforementioned Lot that as the alleged
present owner of said share, Santos caused
a subdivision plan of said Lot to be made, in
which the portion he claims as his share
thereof has been marked as Lot No. 1917-A;
and that he wants said subdivision at No.
1917-A to be segregated from Lot No. 1917
and a certificate of title issued in his name
exclusively for said subdivision Lot No.
1917-A.
ISSUE: Is the claim of the petitioner correct?
RULING: As correctly held by the lower court,
petitioner's claim is clearly untenable, for:
(1) said special power of attorney authorized
him to act on behalf of the children of
Anatolio Buenconsejo, and, hence, it could
not have possibly vested in him any property
right in his own name; (2) the children of
Anatolio Buenconsejo had no authority to
execute said power of attorney, because their
father is still alive and, in fact, he and his
wife opposed the petition of Santos; (3) in
consequence of said power of attorney (if
valid) and redemption, Santos could have
acquired no more than the share pro
indiviso of Anatolio Buenconsejo in Lot No.
1917, so that petitioner cannot — without
the conformity of the other co-owners
(Lorenzo and Santiago Bon), or a judicial
decree of partition issued pursuant to the
provisions of Rule 69 of the new Rules of
Court (Rule 71 of the old Rules of Court)
which have not been followed By Santos —
adjudicate to himself in fee simple a
determinate portion of said Lot No. 1917, as
his share therein, to the exclusion of the
other co-owners.
Inasmuch as the appeal is patently devoid of
merit, the order appealed from is hereby
affirmed, with treble cost against petitioner-
appellant Jose A. Santos y Diaz. It is so
ordered.
SPS VILORIA VS. CONTINENTAL
AIRLINES
FACTS: In 1997, while the spouses Viloria
were in the United States, they approached
Holiday Travel, a travel agency working for
Continental Airlines, to purchase tickets
from Newark to San Diego. The travel agent,
Margaret Mager, advised the couple that
they cannot travel by train because it was
already fully booked; that they must
purchase plane tickets for Continental
Airlines; that if they won’t purchase plane
tickets; they’ll never reach their destination
in time. The couple believed Mager’s
representations and so they purchased two
plane tickets worth $800.00.
Later however, the spouses found out that
the train trip wasn’t really fully booked and
so they purchased train tickets and went to
their destination by train instead. Then they
called up Mager to request for a refund for
the plane tickets. Mager referred the couple
to Continental Airlines. As the couple were
now in the Philippines, they filed their
 request with Continental Airline’s office in
Ayala. The spouses Viloria alleged that
Mager misled them into believing that the
only way to travel was by plane and so they
were fooled into buying expensive plane
tickets.
In a letter dated March 24, 1998,
Continental Micronesia denied Fernando’s
request for a refund and advised him that he
may take the subject tickets to any
Continental ticketing location for the re-
issuance of new tickets within two (2) years
from the date they were issued. Continental
Micronesia informed Fernando that the
subject tickets may be used as a form of
payment for the purchase of another
Continental ticket, albeit with a re-issuance
fee.5 On June 17, 1999, Fernando went to
Continental’s ticketing office at Ayala
Avenue, Makati City to have the subject
tickets replaced by a single round trip ticket
to Los Angeles, California under his name.
Therein, Fernando was informed that
Lourdes’ ticket was non-transferable, thus,
cannot be used for the purchase of a ticket
in his favor. He was also informed that a
round trip ticket to Los Angeles was
US$1,867.40 so he would have to pay what
will not be covered by the value of his San
Diego to Newark round trip ticket. In a letter
dated June 21, 1999, Fernando demanded
for the refund of the subject tickets as he no
longer wished to have them replaced. In
addition to the dubious circumstances
under which the subject tickets were issued,
Fernando claimed that CAI’s act of charging
him with US$1,867.40 for a round trip ticket
to Los Angeles, which other airlines priced at
US$856.00, and refusal to allow him to use
HELD:
4. the agent acts within the scope of his
Yes. All the elements of agency are
present, to wit:
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 agent acts as a representative and not for
himself, and
Lourdes’ ticket, breached its undertaking
under its March 24, 1998 letter.6
On September 8, 2000, Spouses
Viloria filed a complaint against CAI, praying
that CAI be ordered to refund the money they
used in the purchase of the subject tickets
with legal interest from July 21, 1997 and to
pay P1,000,000.00 as moral
damages, P500,000.00 as exemplary
damages and P250,000.00 as attorney’s
fees.7
Continental Airlines refused to refund the
amount of the tickets and so the spouses
sued the airline company. In its defense,
Continental Airlines claimed that the tickets
sold to them by Mager were non-refundable;
that, if any, they were not bound by the
misrepresentations of Mager because there’s
no contract of agency existing between
Continental Airlines and Mager.
The trial court ruled in favor of spouses
Viloria but the Court of Appeals reversed the
ruling of the RTC.
ISSUES:
1. Whether or not a contract of agency exists
between Continental Airlines and Mager.
2. Assuming that an agency relationship
exists between CAI and Holiday Travel, is
CAI bound by the acts of Holiday Travel’s
agents and employees such as Mager?
3. Is CAI justified in insisting that the
subject tickets are non-transferable
and non-refundable?
authority.
The first and second elements are present as
Continental Airlines does not deny that it
concluded an agreement with Holiday Travel
to which Mager is part of, whereby Holiday
Travel would enter into contracts of carriage
with third persons on the airlines’ behalf.
The third element is also present as it is
undisputed that Holiday Travel merely acted
in a representative capacity and it is
Continental Airlines and not Holiday Travel
who is bound by the contracts of carriage
entered into by Holiday Travel on its behalf.
The fourth element is also present
considering that Continental Airlines has
not made any allegation that Holiday Travel
exceeded the authority that was granted to
it.
Continental Airlines also never questioned
the validity of the transaction between Mager
and the spouses. Continental Airlines is
therefore in estoppel. Continental Airlines
cannot be allowed to take an altogether
different position and deny that Holiday
Travel is its agent without condoning or
giving imprimatur to whatever damage or
prejudice that may result from such denial
or retraction to Spouses Viloria, who relied
on good faith on Continental Airlines’ acts in
recognition of Holiday Travel’s authority.
Estoppel is primarily based on the doctrine
of good faith and the avoidance of harm that
will befall an innocent party due to its
injurious reliance, the failure to apply it in
this case would result in gross travesty of
justice.
2. NO.
Spouses Viloria’s cause of action on
the basis of Mager’s alleged fraudulent
misrepresentation is clearly one of tort or
quasi-delict, there being no pre-existing
contractual relationship between them.
Therefore, it was incumbent upon Spouses
Viloria to prove that CAI was equally at fault.
However, the records are devoid of any
evidence by which CAI’s alleged liability can
be substantiated. Apart from their claim that
CAI must be held liable for Mager’s supposed
fraud because Holiday Travel is CAI’s agent,
Spouses Viloria did not present evidence
that CAI was a party or had contributed to
Mager’s complained act either by instructing
or authorizing Holiday Travel and Mager to
issue the said misrepresentation.It may
seem unjust at first glance that CAI would
consider Spouses Viloria bound by the terms
and conditions of the subject contracts,
which Mager entered into with them on CAI’s
behalf, in order to deny Spouses Viloria’s
request for a refund or Fernando’s use of
Lourdes’ ticket for the re-issuance of a new
one, and simultaneously claim that they are
not bound by Mager’s supposed
misrepresentation for purposes of avoiding
Spouses Viloria’s claim for damages and
maintaining the validity of the subject
contracts. It may likewise be argued that CAI
cannot deny liability as it benefited from
Mager’s acts, which were performed in
compliance with Holiday Travel’s obligations
as CAI’s agent.However, a person’s vicarious
liability is anchored on his possession of
control, whether absolute or limited, on the
tortfeasor. Without such control, there is
nothing which could justify extending the
liability to a person other than the one who
committed the tort.
3. YES.
On the basis of the foregoing and given the
allegation of Spouses Viloria that Fernando’s
consent to the subject contracts was
supposedly secured by Mager through
fraudulent means, it is plainly apparent that
their demand for a refund is tantamount to
seeking for an annulment of the subject
contracts on the ground of vitiated consent.
Whether the subject contracts are
annullable, this Court is required to
determine whether Mager’s alleged
misrepresentation constitutes causal fraud.
Similar to the dispute on the existence of an
agency, whether fraud attended the
execution of a contract is factual in nature
and this Court, as discussed above, may
scrutinize the records if the findings of the
CA are contrary to those of the RTC. Under
Article 1338 of the Civil Code, there is fraud
when, through insidious words or
machinations of one of the contracting
parties, the other is induced to enter into a
contract which, without them, he would not
have agreed to. In order that fraud may
vitiate consent, it must be the causal (dolo
causante), not merely the incidental (dolo
incidente), inducement to the making of the
contract.30 In Samson v. Court of
Appeals,31 causal fraud was defined as “a
deception employed by one party prior to or
simultaneous to the contract in order to
secure the consent of the other.”32Also, fraud
must be serious and its existence must be
established by clear and convincing
evidence.
 On 11 May 1994, respondent, acting as
This Court finds the only proof of Mager’s administrator and attorney-in-fact of
alleged fraud, which is Fernando’s testimony
that an Amtrak had assured him of the Revelen, filed a complaint for recovery of
perennial availability of seats at Amtrak, to
possession with damages and prayer for
be wanting. As CAI correctly pointed out and
as Fernando admitted, it was possible that preliminary injunction against petitioners
during the intervening period of three (3)
with the RTC.
weeks from the time Fernando purchased
the subject tickets to the time he talked to
said Amtrak employee, other passengers
may have cancelled their bookings and RTCs Ruling
reservations with Amtrak, making it possible
for Amtrak to accommodate them. Indeed,
the existence of fraud cannot be proved by The RTC stated that based on the evidence
mere speculations and conjectures. Fraud is presented, Revelen owns the lot and
never lightly inferred; it is good faith that is.
Under the Rules of Court, it is presumed that respondent was verbally authorized to sell
"a person is innocent of crime or wrong" and 200 square meters to petitioners. The RTC
that "private transactions have been fair and
regular."35 Spouses Viloria failed to ruled that since respondents authority to
overcome this presumption. sell the land was not in writing, the sale was
void under Article 1874[6] of the Civil
ALCANTARA VS. NIDO
Code.[7] The RTC ruled that rescission is the
Facts
proper remedy.[8]
Revelen, who is respondents daughter and of
legal age, is the owner of an unregistered CA Ruling
land with an area of 1,939 square meters
located in Cardona, Rizal. Sometime in On 5 January 2004, petitioners
March 1984, respondent accepted the offer appealed the trial courts Decision to the
of petitioners to purchase a 200-square appellate court. In its decision dated 10
meter portion of Revelens lot (lot) at P200 per June 2004, the appellate court reversed the
square meter. Petitioners paid P3,000 as RTC decision and dismissed the civil case.[10]
downpayment and the balance was payable
on installment. Petitioners constructed their The appellate court explained that this is an

houses in 1985. In 1986, with respondents unlawful detainer case. The prayer in the

consent, petitioners occupied an additional complaint and amended complaint was for

150 square meters of the lot. By 1987, recovery of possession and the case was filed

petitioners had already within one year from the last demand letter.

paid P17,500[5] before petitioners defaulted Even if the complaint involves a question of

on their installment payments. ownership, it does not deprive the Municipal

Trial Court (MTC) of its jurisdiction over the
ejectment case. Petitioners raised the issue
 daughter, and former
of lack of jurisdiction in their Motion to
defendant Eduardo Rubi
Dismiss and Answer before the RTC.[11] The (deceased), is void; and
RTC denied the Motion to Dismiss and 2. The appellate court
assumed jurisdiction over the case because erred in not ruling that
the petitioners are
the issues pertain to a determination of the entitled to their
real agreement between the parties and counterclaims,
particularly specific
rescission of the contract to sell the performance.[15]
property.[12]

The appellate court added that even if

Ruling
respondents complaint is for recovery of
possession or accion publiciana, the RTC still
We deny the petition.
has no jurisdiction to decide the case.

Petitioners submit that the sale of land by an

The appellate court also held that
agent who has no written authority is not
respondent, as Revelens agent, did not have
void but merely voidable given the spirit and
a written authority to enter into such
intent of the law. Being only voidable, the
contract of sale; hence, the contract entered
contract may be ratified, expressly or
into between petitioners and respondent is
impliedly. Petitioners argue that since the
void. A void contract creates no rights or
contract to sell was sufficiently established
obligations or any juridical relations.
through respondents admission during the
Therefore, the void contract cannot be the
pre-trial conference, the appellate court
subject of rescission.[14]
should have ruled on the matter of the
counterclaim for specific performance.[16]
Aggrieved by the appellate courts Decision,
petitioners elevated the case before this
Respondent argues that the appellate court
Court.
cannot lawfully rule on petitioners
counterclaim because there is nothing in the
Issues
records to sustain petitioners claim that they
have fully paid the price of the
Petitioners raise the following arguments: lot.[17] Respondent points out that
petitioners admitted the lack of written
1. The appellate court
gravely erred in ruling authority to sell. Respondent also alleges
that the contract entered that there was clearly no meeting of the
into by respondent, in
representation of her
minds between the parties on the purported written authority from Revelen is void. A void
contract of sale.[18] contract produces no effect either against or
in favor of anyone and cannot be ratified.[20]
Sale of Land through an Agent

A special power of attorney is also

Articles 1874 and 1878 of the Civil Code
necessary to enter into any contract by
provide:
which the ownership of an immovable is
transmitted or acquired for a valuable
Art. 1874. When a sale of a
piece of land or any interest consideration. Without an authority in
therein is through an agent,
writing, respondent cannot validly sell the
the authority of the latter
shall be in writing; otherwise, lot to petitioners. Hence, any sale in favor of
the sale shall be void.
the petitioners is void.
Art. 1878. Special powers of
attorney are necessary in the
following cases: Further, Article 1318 of the Civil

xxx Code enumerates the requisites for a valid

contract, namely:
(5) To enter into any contract
by which the ownership of an
immovable is transmitted or 1. consent of the contracting
acquired either gratuitously parties;
or for a valuable
consideration;
2. object certain which is the
xxx
subject matter of the contract;
Article 1874 of the Civil Code
explicitly requires a written authority before 3. cause of the obligation which is
an agent can sell an immovable property. established.
Based on a review of the records, there is
absolutely no proof of respondents written Respondent did not have the written
authority to sell the lot to petitioners. In authority to enter into a contract to sell the
fact, during the pre-trial conference, lot. As the consent of Revelen, the real owner
petitioners admitted that at the time of the of the lot, was not obtained in writing as
negotiation for the sale of the lot, petitioners required by law, no contract was perfected.
were of the belief that respondent was the Consequently, petitioners failed to validly
owner of lot.[19] Petitioners only knew that acquire the lot.
Revelen was the owner of the lot during the
hearing of this case. Consequently, the sale
General Power of Attorney
of the lot by respondent who did not have a
On 25 March 1994, Revelen executed a
General Power of Attorney constituting
respondent as her attorney-in-fact and
authorizing her to enter into any and all
contracts and agreements on Revelens
behalf. The General Power of Attorney was
notarized by Larry A. Reid, Notary Public in
California, U.S.A.

Unfortunately, the General Power of

Attorney presented as Exhibit C[22] in the
RTC cannot also be the basis of respondents
written authority to sell the lot.

Since the General Power of Attorney was

executed and acknowledged in the United
States of America, it cannot be admitted in
evidence unless it is certified as such in
accordance with the Rules of Court by an
officer in the foreign service of the
Philippines stationed in the United States of
America. Hence, this document has no
probative value.

Specific Performance

Petitioners are not entitled to claim for

specific performance. It must be stressed
that when specific performance is sought of
a contract made with an agent, the agency
must be established by clear, certain and
specific proof.[26] To reiterate, there is a
clear absence of proof that Revelen
authorized respondent to sell her lot.