1. FILIPINAS LIFE ASSURANCE COMPANY v. CLEMENTE N.

PEDROSO +

[GR No. 159489, Feb 04, 2008 ] 567 Phil. 514

QUISUMBING, J.:

This petition for review on certiorari seeks the reversal of the Decision[1] and Resolution,[2] dated
November 29, 2002 and August 5, 2003, respectively, of the Court of Appeals in CA-G.R. CV No. 33568.
The appellate court had affirmed the Decision[3] dated October 10, 1989 of the Regional Trial Court
(RTC) of Manila, Branch 3, finding petitioner as defendant and the co-defendants below jointly and
severally liable to the plaintiffs, now herein respondents.

The antecedent facts are as follows:

Respondent Teresita O. Pedroso is a policyholder of a 20-year endowment life insurance issued by

petitioner Filipinas Life Assurance Company (Filipinas Life). Pedroso claims Renato Valle was her
insurance agent since 1972 and Valle collected her monthly premiums. In the first week of January 1977,
Valle told her that the Filipinas Life Escolta Office was holding a promotional investment program for
policyholders. It was offering 8% prepaid interest a month for certain amounts deposited on a monthly
basis. Enticed, she initially invested and issued a post-dated check dated January 7, 1977 for P10,000.[4]
In return, Valle issued Pedroso his personal check for P800 for the 8%[5] prepaid interest and a Filipinas
Life "Agent's Receipt" No. 807838.[6]

Subsequently, she called the Escolta office and talked to Francisco Alcantara, the administrative
assistant, who referred her to the branch manager, Angel Apetrior. Pedroso inquired about the
promotional investment and Apetrior confirmed that there was such a promotion. She was even told
she could "push through with the check" she issued. From the records, the check, with the endorsement
of Alcantara at the back, was deposited in the account of Filipinas Life with the Commercial Bank and
Trust Company (CBTC), Escolta Branch.

Relying on the representations made by the petitioner's duly authorized representatives Apetrior and
Alcantara, as well as having known agent Valle for quite some time, Pedroso waited for the maturity of
her initial investment. A month after, her investment of P10,000 was returned to her after she made a
written request for its refund. The formal written request, dated February 3, 1977, was written on an
inter-office memorandum form of Filipinas Life prepared by Alcantara.[7] To collect the amount,
Pedroso personally went to the Escolta branch where Alcantara gave her the P10,000 in cash. After a
second investment, she made 7 to 8 more investments in varying amounts, totaling P37,000 but at a
lower rate of 5%[8] prepaid interest a month. Upon maturity of Pedroso's subsequent investments, Valle
would take back from Pedroso the corresponding yellow-colored agent's receipt he issued to the latter.

Pedroso told respondent Jennifer N. Palacio, also a Filipinas Life insurance policyholder, about the
investment plan. Palacio made a total investment of P49,550[9] but at only 5% prepaid interest.
However, when Pedroso tried to withdraw her investment, Valle did not want to return some P17,000
worth of it. Palacio also tried to withdraw hers, but Filipinas Life, despite demands, refused to return her
money. With the assistance of their lawyer, they went to Filipinas Life Escolta Office to collect their
respective investments, and to inquire why they had not seen Valle for quite some time. But their
attempts were futile. Hence, respondents filed an action for the recovery of a sum of money.
After trial, the RTC, Branch 3, Manila, held Filipinas Life and its co-defendants Valle, Apetrior and
Alcantara jointly and solidarily liable to the respondents.

On appeal, the Court of Appeals affirmed the trial court's ruling and subsequently denied the motion for
reconsideration.

Petitioner now comes before us raising a single issue:

WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR AND GRAVELY ABUSED
ITS DISCRETION IN AFFIRMING THE DECISION OF THE LOWER COURT HOLDING FLAC [FILIPINAS LIFE] TO
BE JOINTLY AND SEVERALLY LIABLE WITH ITS CO-DEFENDANTS ON THE CLAIM OF RESPONDENTS
INSTEAD OF HOLDING ITS AGENT, RENATO VALLE, SOLELY LIABLE TO THE RESPONDENTS.[10]

Simply put, did the Court of Appeals err in holding petitioner and its co-defendants jointly and severally
liable to the herein respondents?

Filipinas Life does not dispute that Valle was its agent, but claims that it was only a life insurance
company and was not engaged in the business of collecting investment money. It contends that the
investment scheme offered to respondents by Valle, Apetrior and Alcantara was outside the scope of
their authority as agents of Filipinas Life such that, it cannot be held liable to the respondents.[11]

On the other hand, respondents contend that Filipinas Life authorized Valle to solicit investments from
them. In fact, Filipinas Life's official documents and facilities were used in consummating the
transactions. These transactions, according to respondents, were confirmed by its officers Apetrior and
Alcantara. Respondents assert they exercised all the diligence required of them in ascertaining the
authority of petitioner's agents; and it is Filipinas Life that failed in its duty to ensure that its agents act
within the scope of their authority.

Considering the issue raised in the light of the submissions of the parties, we find that the petition lacks
merit. The Court of Appeals committed no reversible error nor abused gravely its discretion in rendering
the assailed decision and resolution.

It appears indisputable that respondents Pedroso and Palacio had invested P47,000 and P49,550,
respectively. These were received by Valle and remitted to Filipinas Life, using Filipinas Life's official
receipts, whose authenticity were not disputed. Valle's authority to solicit and receive investments was
also established by the parties. When respondents sought confirmation, Alcantara, holding a supervisory
position, and Apetrior, the branch manager, confirmed that Valle had authority. While it is true that a
person dealing with an agent is put upon inquiry and must discover at his own peril the agent's
authority, in this case, respondents did exercise due diligence in removing all doubts and in confirming
the validity of the representations made by Valle.

Filipinas Life, as the principal, is liable for obligations contracted by its agent Valle. By the 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.[12] The general rule is that the principal is
responsible for the acts of its agent done within the scope of its authority, and should bear the damage
caused to third persons.[13] When the agent exceeds his authority, the agent becomes personally liable
for the damage.[14] But even when the agent exceeds his authority, the principal is still solidarily liable
together with the agent if the principal allowed the agent to act as though the agent had full
powers.[15] In other words, the acts of an agent beyond the scope of his authority do not bind the
principal, unless the principal ratifies them, expressly or impliedly.[16] Ratification in agency is the
adoption or confirmation by one person of an act performed on his behalf by another without
authority.[17]

Filipinas Life cannot profess ignorance of Valle's acts. Even if Valle's representations were beyond his
authority as a debit/insurance agent, Filipinas Life thru Alcantara and Apetrior expressly and knowingly
ratified Valle's acts. It cannot even be denied that Filipinas Life benefited from the investments
deposited by Valle in the account of Filipinas Life. In our considered view, Filipinas Life had clothed Valle
with apparent authority; hence, it is now estopped to deny said authority. Innocent third persons should
not be prejudiced if the principal failed to adopt the needed measures to prevent misrepresentation,
much more so if the principal ratified his agent's acts beyond the latter's authority. The act of the agent
is considered that of the principal itself. Qui per alium facit per seipsum facere videtur. "He who does a
thing by an agent is considered as doing it himself."[18]

WHEREFORE, the petition is DENIED for lack of merit. The Decision and Resolution, dated November 29,
2002 and August 5, 2003, respectively, of the Court of Appeals in CA-G.R. CV No. 33568 are AFFIRMED.

Costs against the petitioner.

SO ORDERED.

2. MANILA MEMORIAL PARK CEMETERY, INC., PETITIONER, VS. PEDRO L. LINSANGAN,

RESPONDENT.

[ G.R. No. 151319, November 22, 2004 ]

TINGA, J,:

For resolution in this case is a classic and interesting textbook question in the law on agency.

This is a petition for review assailing the Decision[1] of the Court of Appeals dated 22 June 2001, and its
Resolution[2] dated 12 December 2001 in CA G.R. CV No. 49802 entitled "Pedro L. Linsangan v. Manila
Memorial Cemetery, Inc. et al.," finding Manila Memorial Park Cemetery, Inc. (MMPCI) jointly and
severally liable with Florencia C. Baluyot to respondent Atty. Pedro L. Linsangan.

The facts of the case are as follows:

Sometime in 1984, Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State at the
Holy Cross Memorial Park owned by petitioner (MMPCI). According to Baluyot, a former owner of a
memorial lot under Contract No. 25012 was no longer interested in acquiring the lot and had opted to
sell his rights subject to reimbursement of the amounts he already paid. The contract was for
P95,000.00. Baluyot reassured Atty. Linsangan that once reimbursement is made to the former buyer,
the contract would be transferred to him. Atty. Linsangan agreed and gave Baluyot P35,295.00
representing the amount to be reimbursed to the original buyer and to complete the down payment to
MMPCI.[3] Baluyot issued handwritten and typewritten receipts for these payments.[4]
Sometime in March 1985, Baluyot informed Atty. Linsangan that he would be issued Contract No.
28660, a new contract covering the subject lot in the name of the latter instead of old Contract No.
25012. Atty. Linsangan protested, but Baluyot assured him that he would still be paying the old price of
P95,000.00 with P19,838.00 credited as full down payment leaving a balance of about P75,000.00.[5]

Subsequently, on 8 April 1985, Baluyot brought an Offer to Purchase Lot No. A11 (15), Block 83, Garden
Estate I denominated as Contract No. 28660 and the Official Receipt No. 118912 dated 6 April 1985 for
the amount of P19,838.00. Contract No. 28660 has a listed price of P132,250.00. Atty. Linsangan
objected to the new contract price, as the same was not the amount previously agreed upon. To
convince Atty. Linsangan, Baluyot executed a document confirming that while the contract price is
P132,250.00, Atty. Linsangan would pay only the original price of P95,000.00.

The document reads in part:

The monthly installment will start April 6, 1985; the amount of P1,800.00 and the difference will be
issued as discounted to conform to the previous price as previously agreed upon. --- P95,000.00

Prepared by:

(Signed)

(MRS.) FLORENCIA C. BALUYOT

Agency Manager

Holy Cross Memorial Park

4/18/85

Dear Atty. Linsangan:

This will confirm our agreement that while the offer to purchase under Contract No. 28660 states that
the total price of P132,250.00 your undertaking is to pay only the total sum of P95,000.00 under the old
price. Further the total sum of P19,838.00 already paid by you under O.R. # 118912 dated April 6, 1985
has been credited in the total purchase price thereby leaving a balance of P75,162.00 on a monthly
installment of P1,800.00 including interests (sic) charges for a period of five (5) years.

(Signed)

FLORENCIA C. BALUYOT

By virtue of this letter, Atty. Linsangan signed Contract No. 28660 and accepted Official Receipt No.
118912. As requested by Baluyot, Atty. Linsangan issued twelve (12) postdated checks of P1,800.00
each in favor of MMPCI. The next year, or on 29 April 1986, Atty. Linsangan again issued twelve (12)
postdated checks in favor of MMPCI.
On 25 May 1987, Baluyot verbally advised Atty. Linsangan that Contract No. 28660 was cancelled for
reasons the latter could not explain, and presented to him another proposal for the purchase of an
equivalent property. He refused the new proposal and insisted that Baluyot and MMPCI honor their
undertaking.

For the alleged failure of MMPCI and Baluyot to conform to their agreement, Atty. Linsangan filed a
Complaint for Breach of Contract and Damages against the former.

Baluyot did not present any evidence. For its part, MMPCI alleged that Contract No. 28660 was
cancelled conformably with the terms of the contract[8] because of non-payment of arrearages.[9]
MMPCI stated that Baluyot was not an agent but an independent contractor, and as such was not
authorized to represent MMPCI or to use its name except as to the extent expressly stated in the Agency
Manager Agreement. Moreover, MMPCI was not aware of the arrangements entered into by Atty.
Linsangan and Baluyot, as it in fact received a down payment and monthly installments as indicated in
the contract. Official receipts showing the application of payment were turned over to Baluyot whom
Atty. Linsangan had from the beginning allowed to receive the same in his behalf. Furthermore,
whatever misimpression that Atty. Linsangan may have had must have been rectified by the Account
Updating Arrangement signed by Atty. Linsangan which states that he "expressly admits that Contract
No. 28660 'on account of serious delinquency…is now due for cancellation under its terms and
conditions.''

The trial court held MMPCI and Baluyot jointly and severally liable.[13] It found that Baluyot was an
agent of MMPCI and that the latter was estopped from denying this agency, having received and
enchased the checks issued by Atty. Linsangan and given to it by Baluyot. While MMPCI insisted that
Baluyot was authorized to receive only the down payment, it allowed her to continue to receive
postdated checks from Atty. Linsangan, which it in turn consistently encashed.[14]

The dispositive portion of the decision reads:

WHEREFORE, judgment by preponderance of evidence is hereby rendered in favor of plaintiff declaring

Contract No. 28660 as valid and subsisting and ordering defendants to perform their undertakings
thereof which covers burial lot No. A11 (15), Block 83, Section Garden I, Holy Cross Memorial Park
located at Novaliches, Quezon City. All payments made by plaintiff to defendants should be credited for
his accounts. NO DAMAGES, NO ATTORNEY'S FEES but with costs against the defendants.

The cross claim of defendant Manila Memorial Cemetery Incorporated as against defendant Baluyot is
GRANTED up to the extent of the costs.

SO ORDERED.[15]

MMPCI appealed the trial court's decision to the Court of Appeals.[16] It claimed that Atty. Linsangan is
bound by the written contract with MMPCI, the terms of which were clearly set forth therein and read,
understood, and signed by the former.[17] It also alleged that Atty. Linsangan, a practicing lawyer for
over thirteen (13) years at the time he entered into the contract, is presumed to know his contractual
obligations and is fully aware that he cannot belatedly and unilaterally change the terms of the contract
without the consent, much less the knowledge of the other contracting party, which was MMPCI. And in
this case, MMPCI did not agree to a change in the contract and in fact implemented the same pursuant
to its clear terms. In view thereof, because of Atty. Linsangan's delinquency, MMPCI validly cancelled
the contract.

MMPCI further alleged that it cannot be held jointly and solidarily liable with Baluyot as the latter
exceeded the terms of her agency, neither did MMPCI ratify Baluyot's acts. It added that it cannot be
charged with making any misrepresentation, nor of having allowed Baluyot to act as though she had full
powers as the written contract expressly stated the terms and conditions which Atty. Linsangan
accepted and understood. In canceling the contract, MMPCI merely enforced the terms and conditions
imposed therein.

Imputing negligence on the part of Atty. Linsangan, MMPCI claimed that it was the former's obligation,
as a party knowingly dealing with an alleged agent, to determine the limitations of such agent's
authority, particularly when such alleged agent's actions were patently questionable. According to
MMPCI, Atty. Linsangan did not even bother to verify Baluyot's authority or ask copies of official receipts
for his payments.[19]

The Court of Appeals affirmed the decision of the trial court. It upheld the trial court's finding that
Baluyot was an agent of MMPCI at the time the disputed contract was entered into, having represented
MMPCI's interest and acting on its behalf in the dealings with clients and customers. Hence, MMPCI is
considered estopped when it allowed Baluyot to act and represent MMPCI even beyond her authority.
The appellate court likewise found that the acts of Baluyot bound MMPCI when the latter allowed the
former to act for and in its behalf and stead. While Baluyot's authority "may not have been expressly
conferred upon her, the same may have been derived impliedly by habit or custom, which may have
been an accepted practice in the company for a long period of time."[21] Thus, the Court of Appeals
noted, innocent third persons such as Atty. Linsangan should not be prejudiced where the principal
failed to adopt the needed measures to prevent misrepresentation. Furthermore, if an agent
misrepresents to a purchaser and the principal accepts the benefits of such misrepresentation, he
cannot at the same time deny responsibility for such misrepresentation.[22] Finally, the Court of
Appeals declared:

There being absolutely nothing on the record that would show that the court a quo overlooked,
disregarded, or misinterpreted facts of weight and significance, its factual findings and conclusions must
be given great weight and should not be disturbed by this Court on appeal.

WHEREFORE, in view of the foregoing, the appeal is hereby DENIED and the appealed decision in Civil
Case No. 88-1253 of the Regional Trial Court, National Capital Judicial Region, Branch 57 of Makati, is
hereby AFFIRMED in toto.

SO ORDERED.[23]

MMPCI filed its Motion for Reconsideration,[24] but the same was denied for lack of merit.[25]

In the instant Petition for Review, MMPCI claims that the Court of Appeals seriously erred in
disregarding the plain terms of the written contract and Atty. Linsangan's failure to abide by the terms
thereof, which justified its cancellation. In addition, even assuming that Baluyot was an agent of MMPCI,
she clearly exceeded her authority and Atty. Linsangan knew or should have known about this
considering his status as a long-practicing lawyer. MMPCI likewise claims that the Court of Appeals erred
in failing to consider that the facts and the applicable law do not support a judgment against Baluyot
only "up to the extent of costs."

Atty. Linsangan argues that he did not violate the terms and conditions of the contract, and in fact
faithfully performed his contractual obligations and complied with them in good faith for at least two
years. He claims that contrary to MMPCI's position, his profession as a lawyer is immaterial to the
validity of the subject contract and the case at bar.[28] According to him, MMPCI had practically
admitted in its Petition that Baluyot was its agent, and thus, the only issue left to be resolved is whether
MMPCI allowed Baluyot to act as though she had full powers to be held solidarily liable with the latter.

We find for the petitioner MMPCI.

The jurisdiction of the Supreme Court in a petition for review under Rule 45 of the Rules of Court is
limited to reviewing only errors of law, not fact, unless the factual findings complained of are devoid of
support by the evidence on record or the assailed judgment is based on misapprehension of facts.[30] In
BPI Investment Corporation v. D.G. Carreon Commercial Corporation,[31] this Court ruled:

There are instances when the findings of fact of the trial court and/or Court of Appeals may be reviewed
by the Supreme Court, such as (1) when the conclusion is a finding grounded entirely on speculation,
surmises and conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3)
where there is a grave abuse of discretion; (4) when the judgment is based on a misapprehension of
facts; (5) when the findings of fact are conflicting; (6) when the Court of Appeals, in making its findings,
went beyond the issues of the case and the same is contrary to the admissions of both appellant and
appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings of fact are
conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in
the petition as well as in the petitioners' main and reply briefs are not disputed by the respondents; and
(10) the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and
contradicted by the evidence on record.[32]

In the case at bar, the Court of Appeals committed several errors in the apprehension of the facts of the
case, as well as made conclusions devoid of evidentiary support, hence we review its findings of fact.

By the 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.[33] Thus, the
elements of agency are (i) consent, express or implied, of the parties to establish the relationship; (ii)
the object is the execution of a juridical act in relation to a third person; (iii) the agent acts as a
representative and not for himself; and (iv) the agent acts within the scope of his authority.[34]

In an attempt to prove that Baluyot was not its agent, MMPCI pointed out that under its Agency
Manager Agreement; an agency manager such as Baluyot is considered an independent contractor and
not an agent. However, in the same contract, Baluyot as agency manager was authorized to solicit and
remit to MMPCI offers to purchase interment spaces belonging to and sold by the latter.[36]
Notwithstanding the claim of MMPCI that Baluyot was an independent contractor, the fact remains that
she was authorized to solicit solely for and in behalf of MMPCI. As properly found both by the trial
court and the Court of Appeals, Baluyot was an agent of MMPCI, having represented the interest of the
latter, and having been allowed by MMPCI to represent it in her dealings with its clients/prospective
buyers.
Nevertheless, contrary to the findings of the Court of Appeals, MMPCI cannot be bound by the contract
procured by Atty. Linsangan and solicited by Baluyot.

Baluyot was authorized to solicit and remit to MMPCI offers to purchase interment spaces obtained on
forms provided by MMPCI. The terms of the offer to purchase, therefore, are contained in such forms
and, when signed by the buyer and an authorized officer of MMPCI, becomes binding on both parties.

The Offer to Purchase duly signed by Atty. Linsangan, and accepted and validated by MMPCI showed a
total list price of P132,250.00. Likewise, it was clearly stated therein that "Purchaser agrees that he has
read or has had read to him this agreement, that he understands its terms and conditions, and that there
are no covenants, conditions, warranties or representations other than those contained herein." By
signing the Offer to Purchase, Atty. Linsangan signified that he understood its contents. That he and
Baluyot had an agreement different from that contained in the Offer to Purchase is of no moment,
and should not affect MMPCI, as it was obviously made outside Baluyot's authority. To repeat,
Baluyot's authority was limited only to soliciting purchasers. She had no authority to alter the terms
of the written contract provided by MMPCI. The document/letter "confirming" the agreement that
Atty. Linsangan would have to pay the old price was executed by Baluyot alone. Nowhere is there any
indication that the same came from MMPCI or any of its officers.

It is a settled rule that persons dealing with an 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.[38] The basis for agency
is representation and a person dealing with an agent is put upon inquiry and must discover upon his
peril the authority of the agent.[39] If he does not make such an inquiry, he is chargeable with
knowledge of the agent's authority and his ignorance of that authority will not be any excuse.[40]

As noted by one author, the ignorance of a person dealing with an agent as to the scope of the latter's
authority is no excuse to such person and the fault cannot be thrown upon the principal. A person
dealing with an agent assumes the risk of lack of authority in the agent. He cannot charge the
principal by relying upon the agent's assumption of authority that proves to be unfounded. The
principal, on the other hand, may act on the presumption that third persons dealing with his agent will
not be negligent in failing to ascertain the extent of his authority as well as the existence of his
agency.[42]

In the instant case, it has not been established that Atty. Linsangan even bothered to inquire whether
Baluyot was authorized to agree to terms contrary to those indicated in the written contract, much less
bind MMPCI by her commitment with respect to such agreements. Even if Baluyot was Atty. Linsangan's
friend and known to be an agent of MMPCI, her declarations and actions alone are not sufficient to
establish the fact or extent of her authority.[43] Atty. Linsangan as a practicing lawyer for a relatively
long period of time when he signed the contract should have been put on guard when their agreement
was not reflected in the contract. More importantly, Atty. Linsangan should have been alerted by the
fact that Baluyot failed to effect the transfer of rights earlier promised, and was unable to make good
her written commitment, nor convince MMPCI to assent thereto, as evidenced by several attempts to
induce him to enter into other contracts for a higher consideration. As properly pointed out by MMPCI,
as a lawyer, a greater degree of caution should be expected of Atty. Linsangan especially in dealings
involving legal documents. He did not even bother to ask for official receipts of his payments, nor
inquire from MMPCI directly to ascertain the real status of the contract, blindly relying on the
representations of Baluyot. A lawyer by profession, he knew what he was doing when he signed the
written contract, knew the meaning and value of every word or phrase used in the contract, and more
importantly, knew the legal effects which said document produced. He is bound to accept responsibility
for his negligence.

The trial and appellate courts found MMPCI liable based on ratification and estoppel. For the trial court,
MMPCI's acts of accepting and encashing the checks issued by Atty. Linsangan as well as allowing
Baluyot to receive checks drawn in the name of MMPCI confirm and ratify the contract of agency. On
the other hand, the Court of Appeals faulted MMPCI in failing to adopt measures to prevent
misrepresentation, and declared that in view of MMPCI's acceptance of the benefits of Baluyot's
misrepresentation, it can no longer deny responsibility therefor.

The Court does not agree. Pertinent to this case are the following provisions of the Civil Code:

Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of his authority, and
the principal does not ratify the contract, it shall be void if the party with whom the agent contracted
is aware of the limits of the powers granted by the principal. In this case, however, the agent is liable
if he undertook to secure the principal's ratification.

Art. 1910. The principal must comply with all the obligations that the agent may have contracted
within the scope of his authority.

As for any obligation wherein the agent has exceeded his power, the principal is not bound except when
he ratifies it expressly or tacitly.

Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the
agent if the former allowed the latter to act as though he had full powers.

Thus, the acts of an agent beyond the scope of his authority do not bind the principal, unless he ratifies
them, expressly or impliedly. Only the principal can ratify; the agent cannot ratify his own unauthorized
acts. Moreover, the principal must have knowledge of the acts he is to ratify.[44]

Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf
by another without authority. The substance of the doctrine is confirmation after conduct, amounting
to a substitute for a prior authority. Ordinarily, the principal must have full knowledge at the time of
ratification of all the material facts and circumstances relating to the unauthorized act of the person
who assumed to act as agent. Thus, if material facts were suppressed or unknown, there can be no valid
ratification and this regardless of the purpose or lack thereof in concealing such facts and regardless of
the parties between whom the question of ratification may arise.[45] Nevertheless, this principle does
not apply if the principal's ignorance of the material facts and circumstances was willful, or that the
principal chooses to act in ignorance of the facts.[46] However, in the absence of circumstances putting
a reasonably prudent man on inquiry, ratification cannot be implied as against the principal who is
ignorant of the facts.[47]

No ratification can be implied in the instant case.

A perusal of Baluyot's Answer[48] reveals that the real arrangement between her and Atty. Linsangan
was for the latter to pay a monthly installment of P1,800.00 whereas Baluyot was to shoulder the
counterpart amount of P1,455.00 to meet the P3,255.00 monthly installments as indicated in the
contract. Thus, every time an installment falls due, payment was to be made through a check from Atty.
Linsangan for P1,800.00 and a cash component of P1,455.00 from Baluyot.[49] However, it appears that
while Atty. Linsangan issued the post-dated checks, Baluyot failed to come up with her part of the
bargain. This was supported by Baluyot's statements in her letter[50] to Mr. Clyde Williams, Jr., Sales
Manager of MMPCI, two days after she received the copy of the Complaint. In the letter, she admitted
that she was remiss in her duties when she consented to Atty. Linsangan's proposal that he will pay the
old price while the difference will be shouldered by her. She likewise admitted that the contract
suffered arrearages because while Atty. Linsangan issued the agreed checks, she was unable to give her
share of P1,455.00 due to her own financial difficulties. Baluyot even asked for compassion from MMPCI
for the error she committed.

Atty. Linsangan failed to show that MMPCI had knowledge of the arrangement. As far as MMPCI is
concerned, the contract price was P132,250.00, as stated in the Offer to Purchase signed by Atty.
Linsangan and MMPCI's authorized officer. The down payment of P19,838.00 given by Atty. Linsangan
was in accordance with the contract as well. Payments of P3,235.00 for at least two installments were
likewise in accord with the contract, albeit made through a check and partly in cash. In view of Baluyot's
failure to give her share in the payment, MMPCI received only P1,800.00 checks, which were clearly
insufficient payment. In fact, Atty. Linsangan would have incurred arrearages that could have caused the
earlier cancellation of the contract, if not for MMPCI's application of some of the checks to his account.
However, the checks alone were not sufficient to cover his obligations.

If MMPCI was aware of the arrangement, it would have refused the latter's check payments for being
insufficient. It would not have applied to his account the P1,800.00 checks. Moreover, the fact that
Baluyot had to practically explain to MMPCI's Sales Manager the details of her "arrangement" with Atty.
Linsangan and admit to having made an error in entering such arrangement confirm that MMCPI had no
knowledge of the said agreement. It was only when Baluyot filed her Answer that she claimed that
MMCPI was fully aware of the agreement.

Neither is there estoppel in the instant case. The essential elements of estoppel are (i) conduct of a
party amounting to false representation or concealment of material facts or at least calculated to
convey the impression that the facts are otherwise than, and inconsistent with, those which the party
subsequently attempts to assert; (ii) intent, or at least expectation, that this conduct shall be acted upon
by, or at least influence, the other party; and (iii) knowledge, actual or constructive, of the real facts.[51]

While there is no more question as to the agency relationship between Baluyot and MMPCI, there is no
indication that MMPCI let the public, or specifically, Atty. Linsangan to believe that Baluyot had the
authority to alter the standard contracts of the company. Neither is there any showing that prior to
signing Contract No. 28660, MMPCI had any knowledge of Baluyot's commitment to Atty. Linsangan.
One who claims the benefit of an estoppel on the ground that he has been misled by the
representations of another must not have been misled through his own want of reasonable care and
circumspection.[52] Even assuming that Atty. Linsangan was misled by MMPCI's actuations, he still
cannot invoke the principle of estoppel, as he was clearly negligent in his dealings with Baluyot, and
could have easily determined, had he only been cautious and prudent, whether said agent was clothed
with the authority to change the terms of the principal's written contract. Estoppel must be intentional
and unequivocal, for when misapplied, it can easily become a most convenient and effective means of
injustice.[53] In view of the lack of sufficient proof showing estoppel, we refuse to hold MMPCI liable on
this score.

Likewise, this Court does not find favor in the Court of Appeals' findings that "the authority of defendant
Baluyot may not have been expressly conferred upon her; however, the same may have been derived
impliedly by habit or custom which may have been an accepted practice in their company in a long
period of time." A perusal of the records of the case fails to show any indication that there was such a
habit or custom in MMPCI that allows its agents to enter into agreements for lower prices of its
interment spaces, nor to assume a portion of the purchase price of the interment spaces sold at such
lower price. No evidence was ever presented to this effect.

As the Court sees it, there are two obligations in the instant case. One is the Contract No. 28660
between MMPCI and by Atty. Linsangan for the purchase of an interment space in the former's
cemetery. The other is the agreement between Baluyot and Atty. Linsangan for the former to
shoulder the amount P1,455.00, or the difference between P95,000.00, the original price, and
P132,250.00, the actual contract price.

To repeat, the acts of the agent beyond the scope of his authority do not bind the principal unless the
latter ratifies the same. It also bears emphasis that when the third person knows that the agent was
acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. If the
said third person was aware of such limits of authority, he is to blame and is not entitled to recover
damages from the agent, unless the latter undertook to secure the principal's ratification.[54]

This Court finds that Contract No. 28660 was validly entered into both by MMPCI and Atty. Linsangan.
By affixing his signature in the contract, Atty. Linsangan assented to the terms and conditions thereof.
When Atty. Linsangan incurred delinquencies in payment, MMCPI merely enforced its rights under the
said contract by canceling the same.

Being aware of the limits of Baluyot's authority, Atty. Linsangan cannot insist on what he claims to be
the terms of Contract No. 28660. The agreement, insofar as the P95,000.00 contract price is concerned,
is void and cannot be enforced as against MMPCI. Neither can he hold Baluyot liable for damages under
the same contract, since there is no evidence showing that Baluyot undertook to secure MMPCI's
ratification. At best, the "agreement" between Baluyot and Atty. Linsangan bound only the two of
them. As far as MMPCI is concerned, it bound itself to sell its interment space to Atty. Linsangan for
P132,250.00 under Contract No. 28660, and had in fact received several payments in accordance with
the same contract. If the contract was cancelled due to arrearages, Atty. Linsangan's recourse should
only be against Baluyot who personally undertook to pay the difference between the true contract price
of P132,250.00 and the original proposed price of P95,000.00. To surmise that Baluyot was acting on
behalf of MMPCI when she promised to shoulder the said difference would be to conclude that MMPCI
undertook to pay itself the difference, a conclusion that is very illogical, if not antithetical to its business
interests.

However, this does not preclude Atty. Linsangan from instituting a separate action to recover
damages from Baluyot, not as an agent of MMPCI, but in view of the latter's breach of their separate
agreement. To review, Baluyot obligated herself to pay P1,455.00 in addition to Atty. Linsangan's
P1,800.00 to complete the monthly installment payment under the contract, which, by her own
admission, she was unable to do due to personal financial difficulties. It is undisputed that Atty.
Linsangan issued the P1,800.00 as agreed upon, and were it not for Baluyot's failure to provide the
balance, Contract No. 28660 would not have been cancelled. Thus, Atty. Linsangan has a cause of action
against Baluyot, which he can pursue in another case.

WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals dated 22 June 2001
and its Resolution dated 12 December 2001 in CA- G.R. CV No. 49802, as well as the Decision in Civil
Case No. 88-1253 of the Regional Trial Court, Makati City Branch 57, are hereby REVERSED and SET
ASIDE. The Complaint in Civil Case No. 88-1253 is DISMISSED for lack of cause of action. No
pronouncement as to costs.

SO ORDERED.

3. RURAL BANK OF MILAOR v. FRANCISCA OCFEMIA +

[ GR No. 137686, Feb 08, 2000 ] 381 Phil. 911

PANGANIBAN, J.:

When a bank, by its acts and failure to act, has clearly clothed its manager with apparent authority to
sell an acquired asset in the normal course of business, it is legally obliged to confirm the transaction by
issuing a board resolution to enable the buyers to register the property in their names. It has a duty to
perform necessary and lawful acts to enable the other parties to enjoy all benefits of the contract which
it had authorized.

The Case

Before this Court is a Petition for Review on Certiorari challenging the December 18, 1998 Decision of
the Court of Appeals[1] (CA) in CA-GR SP No. 46246, which affirmed the May 20, 1997 Decision[2] of the
Regional Trial Court (RTC) of Naga City (Branch 28). The CA disposed as follows:

"Wherefore, premises considered, the Judgment appealed from is hereby AFFIRMED. Costs against the
respondent-appellant."[3]

The dispositive portion of the judgment affirmed by the CA ruled in this wise:

"WHEREFORE, in view of all the foregoing findings, decision is hereby rendered whereby the [petitioner]
Rural Bank of Milaor (Camarines Sur), Inc. through its Board of Directors is hereby ordered to
immediately issue a Board Resolution confirming the Deed of Sale it executed in favor of Renato
Ocfemia marked Exhibits C, C-1 and C-2); to pay [respondents] the sum of FIVE HUNDRED (P500.00)
PESOS as actual damages; TEN THOUSAND (P10,000.00) PESOS as attorney's fees; THIRTY THOUSAND
(P30,000.00) PESOS as moral damages; THIRTY THOUSAND (P30,000.00) PESOS as exemplary
damages; and to pay the costs."[4]

Also assailed is the February 26, 1999 CA Resolution[5] which denied petitioner's Motion for
Reconsideration.

The Facts

The trial court's summary of the undisputed facts was reproduced in the CA Decision as follows:
"This is an action for mandamus with damages. On April 10, 1996, [herein petitioner] was declared in
default on motion of the [respondents] for failure to file an answer within the reglementary period after
it was duly served with summons. On April 26, 1996, [herein petitioner] filed a motion to set aside the
order of default with objection thereto filed by [herein respondents].

"On June 17, 1996, an order was issued denying [petitioner's] motion to set aside the order of default.
On July 10, 1996, the defendant filed a motion for reconsideration of the order of June 17, 1996 with
objection thereto by [respondents]. On July 12, 1996, an order was issued denying [petitioner's] motion
for reconsideration. On July 31, 1996, [respondents] filed a motion to set case for hearing. A copy
thereof was duly furnished the [petitioner] but the latter did not file any opposition and so
[respondents] were allowed to present their evidence ex-parte. A certiorari case was filed by the
[petitioner] with the Court of Appeals docketed as CA GR No. 41497-SP but the petition was denied in a
decision rendered on March 31, 1997 and the same is now final.

"The evidence presented by the [respondents] through the testimony of Marife O. Niño, one of the
[respondents] in this case, show[s] that she is the daughter of Francisca Ocfemia, a co-[respondent] in
this case, and the late Renato Ocfemia who died on July 23, 1994. The parents of her father, Renato
Ocfemia, were Juanita Arellano Ocfemia and Felicisimo Ocfemia. Her other co-[respondents] Rowena O.
Barrogo, Felicisimo Ocfemia, Renato Ocfemia, Jr. and Winston Ocfemia are her brothers and sisters.

Marife O. Niño knows the five (5) parcels of land described in paragraph 6 of the petition which are
located in Bombon, Camarines Sur and that they are the ones possessing them which [were] originally
owned by her grandparents, Juanita Arellano Ocfemia and Felicisimo Ocfemia. During the lifetime of her
grandparents, [respondents] mortgaged the said five (5) parcels of land and two (2) others to the
[petitioner] Rural Bank of Milaor as shown by the Deed of Real Estate Mortgage (Exhs. A and A-1) and
the Promissory Note (Exh. B).

"The spouses Felicisimo Ocfemia and Juanita Arellano Ocfemia were not able to redeem the mortgaged
properties consisting of seven (7) parcels of land and so the mortgage was foreclosed and thereafter
ownership thereof was transferred to the [petitioner] bank. Out of the seven (7) parcels that were
foreclosed, five (5) of them are in the possession of the [respondents] because these five (5) parcels of
land described in paragraph 6 of the petition were sold by the [petitioner] bank to the parents of Marife
O. Niño as evidenced by a Deed of Sale executed in January 1988 (Exhs. C, C-1 and C-2).

"The aforementioned five (5) parcels of land subject of the deed of sale (Exh. C), have not been, however
transferred in the name of the parents of Merife O. Niño after they were sold to her parents by the
[petitioner] bank because according to the Assessor's Office the five (5) parcels of land, subject of the
sale, cannot be transferred in the name of the buyers as there is a need to have the document of sale
registered with the Register of Deeds of Camarines Sur.

"In view of the foregoing, Marife O. Niño went to the Register of Deeds of Camarines Sur with the Deed
of Sale (Exh. C) in order to have the same registered. The Register of Deeds, however, informed her that
the document of sale cannot be registered without a board resolution of the [petitioner] Bank. Marife
Niño then went to the bank, showed to it the Deed of Sale (Exh. C), the tax declaration and receipt of tax
payments and requested the [petitioner] for a board resolution so that the property can be transferred
to the name of Renato Ocfemia the husband of petitioner Francisca Ocfemia and the father of the other
[respondents] having died already.
"The [petitioner] bank refused her request for a board resolution and made many alibi[s]. She was told
that the [petitioner] bank ha[d] a new manager and it had no record of the sale. She was asked and she
complied with the request of the [petitioner] for a copy of the deed of sale and receipt of payment. The
president of the [petitioner] bank told her to get an authority from her parents and other [respondents]
and receipts evidencing payment of the consideration appearing in the deed of sale. She complied with
said requirements and after she gave all these documents, Marife O. Niño was again told to wait for two
(2) weeks because the [petitioner] bank would still study the matter.

"After two (2) weeks, Marife O. Niño returned to the [petitioner] bank and she was told that the
resolution of the board would not be released because the [petitioner] bank ha[d] no records from the
old manager. Because of this, Marife O. Niño brought the matter to her lawyer and the latter wrote a
letter on December 22, 1995 to the [petitioner] bank inquiring why no action was taken by the board of
the request for the issuance of the resolution considering that the bank was already fully paid [for] the
consideration of the sale since January 1988 as shown by the deed of sale itself (Exh. D and D-1).

"On January 15, 1996 the [petitioner] bank answered [respondents'] lawyer's letter (Exh. D and D-1)
informing the latter that the request for board resolution ha[d] already been referred to the board of
directors of the [petitioner] bank with another request that the latter should be furnished with a
certified machine copy of the receipt of payment covering the sale between the [respondents] and the
[petitioner] (Exh. E). This request of the [petitioner] bank was already complied [with] by Marife O. Niño
even before she brought the matter to her lawyer.

"On January 23, 1996 [respondents'] lawyer wrote back the branch manager of the [petitioner] bank
informing the latter that they were already furnished the receipts the bank was asking [for] and that the
[respondents] want[ed] already to know the stand of the bank whether the board [would] issue the
required board resolution as the deed of sale itself already show[ed] that the [respondents were] clearly
entitled to the land subject of the sale (Exh. F). The manager of the [petitioner] bank received the letter
which was served personally to him and the latter told Marife O. Niño that since he was the one himself
who received the letter he would not sign anymore a copy showing him as having already received said
letter (Exh. F).

"After several days from receipt of the letter (Exh. F) when Marife O. Niño went to the [petitioner] again
and reiterated her request, the manager of the [petitioner] bank told her that they could not issue the
required board resolution as the [petitioner] bank ha[d] no records of the sale. Because of this Merife O.
Niño already went to their lawyer and ha[d] this petition filed.

"The [respondents] are interested in having the property described in paragraph 6 of the petition
transferred to their names because their mother and co-petitioner, Francisca Ocfemia, is very sickly and
they want to mortgage the property for the medical expenses of Francisca Ocfemia. The illness of
Francisca Ocfemia beg[a]n after her husband died and her suffering from arthritis and pulmonary
disease already became serious before December 1995.

"Marife O. Niño declared that her mother is now in serious condition and they could not have her
hospitalized for treatment as they do not have any money and this is causing the family sleepless nights
and mental anguish, thinking that their mother may die because they could not submit her for
medication as they do not have money."[6]
The trial court granted the Petition. As noted earlier, the CA affirmed the RTC Decision.

Hence, this recourse.[7] In a Resolution dated June 23, 1999, this Court issued a Temporary Restraining
Order directing the trial court "to refrain and desist from executing [pending appeal] the decision dated
May 20, 1997 in Civil Case No. RTC-96-3513, effective immediately until further orders from this
Court."[8]

Ruling of the Court of Appeals

The CA held that herein respondents were "able to prove their present cause of action" against
petitioner. It ruled that the RTC had jurisdiction over the case, because (1) the Petition involved a matter
incapable of pecuniary estimation; (2) mandamus fell within the jurisdiction of RTC; and (3) assuming
that the action was for specific performance as argued by the petitioner, it was still cognizable by the
said court.

Issues

In its Memorandum,[9] the bank posed the following questions:

"1. Question of Jurisdiction of the Regional Trial Court. -- Has a Regional Trial Court original jurisdiction
over an action involving title to real property with a total assessed value of less than P20,000.00?

"2. Question of Law. -- May the board of directors of a rural banking corporation be compelled to
confirm a deed of absolute sale of real property owned by the corporation which deed of sale was
executed by the bank manager without prior authority of the board of directors of the rural banking
corporation?"[10]

This Court's Ruling

The present Petition has no merit.

First Issue:

Jurisdiction of the Regional Trial Court

Petitioner submits that the RTC had no jurisdiction over the case. Disputing the ruling of the appellate
court that the present action was incapable of pecuniary estimation, petitioner argues that the matter in
fact involved title to real property worth less than P20,000. Thus, under RA 7691, the case should have
been filed before a metropolitan trial court, a municipal trial court or a municipal circuit trial court.

We disagree. The well-settled rule is that jurisdiction is determined by the allegations of the
complaint.[11] In the present case, the Petition for Mandamus filed by respondents before the trial
court prayed that petitioner-bank be compelled to issue a board resolution confirming the Deed of Sale
covering five parcels of unregistered land, which the bank manager had executed in their favor. The RTC
has jurisdiction over such action pursuant to Section 21 of BP 129, which provides:

"SEC 21. Original jurisdiction in other cases. -- Regional Trial Courts shall exercise original jurisdiction:

(1)
in the issuance of writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and
injunction which may be enforced in any part of their respective regions; and

(2)

In actions affecting ambassadors and other public ministers and consuls."

A perusal of the Petition shows that the respondents did not raise any question involving the title to the
property, but merely asked that petitioner's board of directors be directed to issue the subject
resolution. Moreover, the bank did not controvert the allegations in the said Petition. To repeat, the
issue therein was not the title to the property; it was respondents' right to compel the bank to issue a
board resolution confirming the Deed of Sale.

Second Issue:

Authority of the Bank Manager

Respondents initiated the present proceedings, so that they could transfer to their names the subject
five parcels of land; and subsequently, to mortgage said lots and to use the loan proceeds for the
medical expenses of their ailing mother. For the property to be transferred in their names, however,
the register of deeds required the submission of a board resolution from the bank confirming both the
Deed of Sale and the authority of the bank manager, Fe S. Tena, to enter into such transaction.
Petitioner refused. After being given the runaround by the bank, respondents sued in exasperation.

Allegations in the Petition for Mandamus Deemed Admitted

Respondents based their action before the trial court on the Deed of Sale, the substance of which was
alleged in and a copy thereof was attached to the Petition for Mandamus. The Deed named Fe S. Tena
as the representative of the bank. Petitioner, however, failed to specifically deny under oath the
allegations in that contract. In fact, it filed no answer at all, for which reason it was declared in default.

Pertinent provisions of the Rules of Court read:

"SEC. 7. Action or defense based on document. -- Whenever an action or defense is based upon a written
instrument or document, the substance of such instrument or document shall be set forth in the
pleading, and the original or a copy thereof shall be attached to the pleading as an exhibit, which shall
be deemed to be a part of the pleading, or said copy may with like effect be set forth in the pleading.

"SEC. 8. How to contest genuineness of such documents. -- When an action or defense is founded upon a
written instrument, copied in or attached to the corresponding pleading as provided in the preceding
section, the genuineness and due execution of the instrument shall be deemed admitted unless the
adverse party, under oath, specifically denies them, and sets forth what he claims to be the facts; but this
provision does not apply when the adverse party does not appear to be a party to the instrument or
when compliance with an order for an inspection of the original instrument is refused."

In failing to file its answer specifically denying under oath the Deed of Sale, the bank admitted the due
execution of the said contract. Such admission means that it acknowledged that Tena was authorized
to sign the Deed of Sale on its behalf.[13] Thus, defenses that are inconsistent with the due execution
and the genuineness of the written instrument are cut off by an admission implied from a failure to
make a verified specific denial.
Other Acts of the Bank

In any event, the bank acknowledged, by its own acts or failure to act, the authority of Fe S. Tena to
enter into binding contracts. After the execution of the Deed of Sale, respondents occupied the
properties in dispute and paid the real estate taxes due thereon. If the bank management believed
that it had title to the property, it should have taken some measures to prevent the infringement or
invasion of its title thereto and possession thereof.

Likewise, Tena had previously transacted business on behalf of the bank, and the latter had
acknowledged her authority. A bank is liable to innocent third persons where representation is made
in the course of its normal business by an agent like Manager Tena, even though such agent is abusing
her authority. Clearly, persons dealing with her could not be blamed for believing that she was
authorized to transact business for and on behalf of the bank. Thus, this Court has ruled in Board of
Liquidators v. Kalaw:[15]

"Settled jurisprudence has it that where similar acts have been approved by the directors as a matter of
general practice, custom, and policy, the general manager may bind the company without formal
authorization of the board of directors. In varying language, existence of such authority is established,
by proof of the course of business, the usages and practices of the company and by the knowledge
which the board of directors has, or must be presumed to have, of acts and doings of its subordinates in
and about the affairs of the corporation. So also,

"'x x x authority to act for and bind a corporation may be presumed from acts of recognition in other
instances where the power was in fact exercised.'

"'x x x Thus, when, in the usual course of business of a corporation, an officer has been allowed in his
official capacity to manage its affairs, his authority to represent the corporation may be implied from
the manner in which he has been permitted by the directors to manage its business.'"

Notwithstanding the putative authority of the manager to bind the bank in the Deed of Sale, petitioner
has failed to file an answer to the Petition below within the reglementary period, let alone present
evidence controverting such authority. Indeed, when one of herein respondents, Marife S. Nino, went to
the bank to ask for the board resolution, she was merely told to bring the receipts. The bank failed to
categorically declare that Tena had no authority. This Court stresses the following:

"x x x Corporate transactions would speedily come to a standstill were every person dealing with a
corporation held duty-bound to disbelieve every act of its responsible officers, no matter how regular
they should appear on their face. This Court has observed in Ramirez vs. Orientalist Co., 38 Phil. 634,
654-655, that ---

'In passing upon the liability of a corporation in cases of this kind it is always well to keep in mind the
situation as it presents itself to the third party with whom the contract is made. Naturally he can have
little or no information as to what occurs in corporate meetings; and he must necessarily rely upon the
external manifestation of corporate consent. The integrity of commercial transactions can only be
maintained by holding the corporation strictly to the liability fixed upon it by its agents in accordance
with law; and we would be sorry to announce a doctrine which would permit the property of man in the
city of Paris to be whisked out of his hands and carried into a remote quarter of the earth without
recourse against the corporation whose name and authority had been used in the manner disclosed in
this case. As already observed, it is familiar doctrine that if a corporation knowingly permits one of its
officers, or any other agent, to do acts within the scope of an apparent authority, and thus holds him out
to the public as possessing power to do those acts, the corporation will, as against any one who has in
good faith dealt with the corporation through such agent, be estopped from denying his authority; and
where it is said 'if the corporation permits this means the same as 'if the thing is permitted by the
directing power of the corporation.'"[16]

In this light, the bank is estopped from questioning the authority of the bank manager to enter into
the contract of sale. If a corporation knowingly permits one of its officers or any other agent to act
within the scope of an apparent authority, it holds the agent out to the public as possessing the power
to do those acts; thus, the corporation will, as against anyone who has in good faith dealt with it through
such agent, be estopped from denying the agent's authority.[17]

Unquestionably, petitioner has authorized Tena to enter into the Deed of Sale. Accordingly, it has a
clear legal duty to issue the board resolution sought by respondents. Having authorized her to sell the
property, it behooves the bank to confirm the Deed of Sale so that the buyers may enjoy its full use.

The board resolution is, in fact, mere paper work. Nonetheless, it is paper work necessary in the
orderly operations of the register of deeds and the full enjoyment of respondents' rights. Petitioner-
bank persistently and unjustifiably refused to perform its legal duty. Worse, it was less than candid in
dealing with respondents regarding this matter. In this light, the Court finds it proper to assess the bank
treble costs, in addition to the award of damages.

WHEREFORE, the Petition is hereby DENIED and the assailed Decision and Resolution AFFIRMED. The
Temporary Restraining Order issued by this Court is hereby LIFTED. Treble costs against petitioner.

SO ORDERED.

4. CONSTANTE AMOR DE CASTRO v. CA +

[ GR No. 115838, Jul 18, 2002 ] 434 Phil. 53

CARPIO, J.:

Before us is a Petition for Review on Certiorari[1] seeking to annul the Decision of the Court of
Appeals[2] dated May 4, 1994 in CA-G.R. CV No. 37996, which affirmed in toto the decision[3] of the
Regional Trial Court of Quezon City, Branch 80, in Civil Case No. Q-89-2631. The trial court disposed as
follows:

"WHEREFORE, the Court finds defendants Constante and Corazon Amor de Castro jointly and solidarily
liable to plaintiff the sum of:

a) P303,606.24 representing unpaid commission;

b) P25,000.00 for and by way of moral damages;

c) P45,000.00 for and by way of attorney's fees;

d) To pay the cost of this suit.

Quezon City, Metro Manila, December 20, 1991."

The Antecedent Facts

On May 29, 1989, private respondent Francisco Artigo ("Artigo" for brevity) sued petitioners Constante
A. De Castro ("Constante" for brevity) and Corazon A. De Castro ("Corazon" for brevity) to collect the
unpaid balance of his broker's commission from the De Castros. The Court of Appeals summarized the
facts in this wise:

"x x x. Appellants[5] were co-owners of four (4) lots located at EDSA corner New York and Denver
Streets in Cubao, Quezon City. In a letter dated January 24, 1984 (Exhibit "A-1, p. 144, Records),
appellee[6] was authorized by appellants to act as real estate broker in the sale of these properties for
the amount of P23,000,000.00, five percent (5%) of which will be given to the agent as commission. It
was appellee who first found Times Transit Corporation, represented by its president Mr. Rondaris, as
prospective buyer which desired to buy two (2) lots only, specifically lots 14 and 15. Eventually,
sometime in May of 1985, the sale of lots 14 and 15 was consummated. Appellee received from
appellants P48,893.76 as commission.

It was then that the rift between the contending parties soon emerged. Appellee apparently felt short
changed because according to him, his total commission should be P352,500.00 which is five percent
(5%) of the agreed price of P7,050,000.00 paid by Times Transit Corporation to appellants for the two
(2) lots, and that it was he who introduced the buyer to appellants and unceasingly facilitated the
negotiation which ultimately led to the consummation of the sale. Hence, he sued below to collect the
balance of P303,606.24 after having received P48,893.76 in advance.

On the other hand, appellants completely traverse appellee's claims and essentially argue that appellee
is selfishly asking for more than what he truly deserved as commission to the prejudice of other agents
who were more instrumental in the consummation of the sale. Although appellants readily concede that
it was appellee who first introduced Times Transit Corp. to them, appellee was not designated by them
as their exclusive real estate agent but that in fact there were more or less eighteen (18) others whose
collective efforts in the long run dwarfed those of appellee's, considering that the first negotiation for
the sale where appellee took active participation failed and it was these other agents who successfully
brokered in the second negotiation. But despite this and out of appellants' "pure liberality, beneficence
and magnanimity", appellee nevertheless was given the largest cut in the commission (P48,893.76),
although on the principle of quantum meruit he would have certainly been entitled to less. So appellee
should not have been heard to complain of getting only a pittance when he actually got the lion's share
of the commission and worse, he should not have been allowed to get the entire commission.
Furthermore, the purchase price for the two lots was only P3.6 million as appearing in the deed of sale
and not P7.05 million as alleged by appellee. Thus, even assuming that appellee is entitled to the entire
commission, he would only be getting 5% of the P3.6 million, or P180,000.00."

Ruling of the Court of Appeals

The Court of Appeals affirmed in toto the decision of the trial court.
First. The Court of Appeals found that Constante authorized Artigo to act as agent in the sale of two
lots in Cubao, Quezon City. The handwritten authorization letter signed by Constante clearly
established a contract of agency between Constante and Artigo. Thus, Artigo sought prospective
buyers and found Times Transit Corporation ("Times Transit" for brevity). Artigo facilitated the
negotiations which eventually led to the sale of the two lots. Therefore, the Court of Appeals decided
that Artigo is entitled to the 5% commission on the purchase price as provided in the contract of
agency.

Second. The Court of Appeals ruled that Artigo's complaint is not dismissible for failure to implead as
indispensable parties the other co-owners of the two lots. The Court of Appeals explained that it is not
necessary to implead the other co-owners since the action is exclusively based on a contract of agency
between Artigo and Constante.

Third. The Court of Appeals likewise declared that the trial court did not err in admitting parol evidence
to prove the true amount paid by Times Transit to the De Castros for the two lots. The Court of
Appeals ruled that evidence aliunde could be presented to prove that the actual purchase price was
P7.05 million and not P3.6 million as appearing in the deed of sale. Evidence aliunde is admissible
considering that Artigo is not a party, but a mere witness in the deed of sale between the De Castros
and Times Transit. The Court of Appeals explained that, "the rule that oral evidence is inadmissible to
vary the terms of written instruments is generally applied only in suits between parties to the
instrument and strangers to the contract are not bound by it." Besides, Artigo was not suing under the
deed of sale, but solely under the contract of agency. Thus, the Court of Appeals upheld the trial court's
finding that the purchase price was P7.05 million and not P3.6 million.

Hence, the instant petition.

The Issues

According to petitioners, the Court of Appeals erred in -

I. NOT ORDERING THE DISMISSAL OF THE COMPLAINT FOR FAILURE TO IMPLEAD INDISPENSABLE
PARTIES-IN-INTEREST;

II. NOT ORDERING THE DISMISSAL OF THE COMPLAINT ON THE GROUND THAT ARTIGO'S CLAIM HAS
BEEN EXTINGUISHED BY FULL PAYMENT, WAIVER, OR ABANDONMENT;

III. CONSIDERING INCOMPETENT EVIDENCE;

IV. GIVING CREDENCE TO PATENTLY PERJURED TESTIMONY;

V. SANCTIONING AN AWARD OF MORAL DAMAGES AND ATTORNEY'S FEES;

VI. NOT AWARDING THE DE CASTRO'S MORAL AND EXEMPLARY DAMAGES, AND ATTORNEY'S FEES.

The Court's Ruling

The petition is bereft of merit.

First Issue: whether the complaint merits dismissal for failure to implead other co-owners as
indispensable parties

The De Castros argue that Artigo's complaint should have been dismissed for failure to implead all the
co-owners of the two lots. The De Castros claim that Artigo always knew that the two lots were co-
owned by Constante and Corazon with their other siblings Jose and Carmela whom Constante merely
represented. The De Castros contend that failure to implead such indispensable parties is fatal to the
complaint since Artigo, as agent of all the four co-owners, would be paid with funds co-owned by the
four co-owners.

The De Castros' contentions are devoid of legal basis.

An indispensable party is one whose interest will be affected by the court's action in the litigation, and
without whom no final determination of the case can be had.[7] The joinder of indispensable parties is
mandatory and courts cannot proceed without their presence.[8] Whenever it appears to the court in
the course of a proceeding that an indispensable party has not been joined, it is the duty of the court to
stop the trial and order the inclusion of such party.[9]

However, the rule on mandatory joinder of indispensable parties is not applicable to the instant case.

There is no dispute that Constante appointed Artigo in a handwritten note dated January 24, 1984 to
sell the properties of the De Castros for P23 million at a 5 percent commission. The authority was on a
first come, first serve basis. The authority reads in full:

"24 Jan. 84

To Whom It May Concern:

This is to state that Mr. Francisco Artigo is authorized as our real estate broker in connection with the
sale of our property located at Edsa Corner New York & Denver, Cubao, Quezon City.

Asking price P23,000,000.00 with 5% commission as agent's fee.

C.C. de Castro

owner & representing co-owners

This authority is on a first-come First serve basis CAC"

Constante signed the note as owner and as representative of the other co-owners. Under this note, a
contract of agency was clearly constituted between Constante and Artigo. Whether Constante
appointed Artigo as agent, in Constante's individual or representative capacity, or both, the De
Castros cannot seek the dismissal of the case for failure to implead the other co-owners as
indispensable parties. The De Castros admit that the other co-owners are solidarily liable under the
contract of agency,[10] citing Article 1915 of the Civil Code, which reads:

Art. 1915. If two or more persons have appointed an agent for a common transaction or undertaking,
they shall be solidarily liable to the agent for all the consequences of the agency.
The solidary liability of the four co-owners, however, militates against the De Castros' theory that the
other co-owners should be impleaded as indispensable parties. A noted commentator explained Article
1915 thus

"The rule in this article applies even when the appointments were made by the principals in separate
acts, provided that they are for the same transaction. The solidarity arises from the common interest of
the principals, and not from the act of constituting the agency. By virtue of this solidarity, the agent can
recover from any principal the whole compensation and indemnity owing to him by the others. The
parties, however, may, by express agreement, negate this solidary responsibility. The solidarity does not
disappear by the mere partition effected by the principals after the accomplishment of the agency.

If the undertaking is one in which several are interested, but only some create the agency, only the
latter are solidarily liable, without prejudice to the effects of negotiorum gestio with respect to the
others. And if the power granted includes various transactions some of which are common and others
are not, only those interested in each transaction shall be liable for it."[11]

When the law expressly provides for solidarity of the obligation, as in the liability of co-principals in a
contract of agency, each obligor may be compelled to pay the entire obligation.[12] The agent may
recover the whole compensation from any one of the co-principals, as in this case.

Indeed, Article 1216 of the Civil Code provides that a creditor may sue any of the solidary debtors. This
article reads:

Art. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them
simultaneously. The demand made against one of them shall not be an obstacle to those which may
subsequently be directed against the others, so long as the debt has not been fully collected.

Thus, the Court has ruled in Operators Incorporated vs. American Biscuit Co., Inc.[13] that

"x x x solidarity does not make a solidary obligor an indispensable party in a suit filed by the creditor.
Article 1216 of the Civil Code says that the creditor `may proceed against anyone of the solidary debtors
or some or all of them simultaneously'." (Emphasis supplied)

Second Issue: whether Artigo's claim has been extinguished by full payment, waiver or abandonment

The De Castros claim that Artigo was fully paid on June 14, 1985, that is, Artigo was given "his
proportionate share and no longer entitled to any balance." According to them, Artigo was just one of
the agents involved in the sale and entitled to a "proportionate share" in the commission. They assert
that Artigo did absolutely nothing during the second negotiation but to sign as a witness in the deed of
sale. He did not even prepare the documents for the transaction as an active real estate broker usually
does.

The De Castros' arguments are flimsy.

A contract of agency which is not contrary to law, public order, public policy, morals or good custom is
a valid contract, and constitutes the law between the parties. The contract of agency entered into by
Constante with Artigo is the law between them and both are bound to comply with its terms and
conditions in good faith.
The mere fact that "other agents" intervened in the consummation of the sale and were paid their
respective commissions cannot vary the terms of the contract of agency granting Artigo a 5 percent
commission based on the selling price. These "other agents" turned out to be employees of Times
Transit, the buyer Artigo introduced to the De Castros. This prompted the trial court to observe:

"The alleged `second group' of agents came into the picture only during the so-called `second
negotiation' and it is amusing to note that these (sic) second group, prominent among whom are Atty.
Del Castillo and Ms. Prudencio, happened to be employees of Times Transit, the buyer of the properties.
And their efforts were limited to convincing Constante to 'part away' with the properties because the
redemption period of the foreclosed properties is around the corner, so to speak. (tsn. June 6, 1991).

xxx

To accept Constante's version of the story is to open the floodgates of fraud and deceit. A seller could
always pretend rejection of the offer and wait for sometime for others to renew it who are much willing
to accept a commission far less than the original broker. The immorality in the instant case easily
presents itself if one has to consider that the alleged `second group' are the employees of the buyer,
Times Transit and they have not bettered the offer secured by Mr. Artigo for P7 million.

It is to be noted also that while Constante was too particular about the unrenewed real estate broker's
license of Mr. Artigo, he did not bother at all to inquire as to the licenses of Prudencio and Castillo. (tsn,
April 11, 1991, pp. 39-40)."[15] (Emphasis supplied)

In any event, we find that the 5 percent real estate broker's commission is reasonable and within the
standard practice in the real estate industry for transactions of this nature.

The De Castros also contend that Artigo's inaction as well as failure to protest estops him from
recovering more than what was actually paid him. The De Castros cite Article 1235 of the Civil Code
which reads:

Art. 1235. When the obligee accepts the performance, knowing its incompleteness and irregularity, and
without expressing any protest or objection, the obligation is deemed fully complied with.

The De Castros' reliance on Article 1235 of the Civil Code is misplaced. Artigo's acceptance of partial
payment of his commission neither amounts to a waiver of the balance nor puts him in estoppel. This
is the import of Article 1235 which was explained in this wise:

"The word accept, as used in Article 1235 of the Civil Code, means to take as satisfactory or sufficient, or
agree to an incomplete or irregular performance. Hence, the mere receipt of a partial payment is not
equivalent to the required acceptance of performance as would extinguish the whole obligation."[16]
(Emphasis supplied)

There is thus a clear distinction between acceptance and mere receipt. In this case, it is evident that
Artigo merely received the partial payment without waiving the balance. Thus, there is no estoppel to
speak of.
The De Castros further argue that laches should apply because Artigo did not file his complaint in court
until May 29, 1989, or almost four years later. Hence, Artigo's claim for the balance of his commission is
barred by laches.

Laches means the failure or neglect, for an unreasonable and unexplained length of time, to do that
which by exercising due diligence could or should have been done earlier. It is negligence or omission to
assert a right within a reasonable time, warranting a presumption that the party entitled to assert it
either has abandoned it or declined to assert it.[17]

Artigo disputes the claim that he neglected to assert his rights. He was appointed as agent on January
24, 1984. The two lots were finally sold in June 1985. As found by the trial court, Artigo demanded in
April and July of 1985 the payment of his commission by Constante on the basis of the selling price of
P7.05 million but there was no response from Constante.[18] After it became clear that his demands for
payment have fallen on deaf ears, Artigo decided to sue on May 29, 1989.

Actions upon a written contract, such as a contract of agency, must be brought within ten years from
the time the right of action accrues.[19] The right of action accrues from the moment the breach of
right or duty occurs. From this moment, the creditor can institute the action even as the ten-year
prescriptive period begins to run.[20]

The De Castros admit that Artigo's claim was filed within the ten-year prescriptive period. The De
Castros, however, still maintain that Artigo's cause of action is barred by laches. Laches does not apply
because only four years had lapsed from the time of the sale in June 1985. Artigo made a demand in July
1985 and filed the action in court on May 29, 1989, well within the ten-year prescriptive period. This
does not constitute an unreasonable delay in asserting one's right. The Court has ruled, "a delay within
the prescriptive period is sanctioned by law and is not considered to be a delay that would bar
relief."[21] In explaining that laches applies only in the absence of a statutory prescriptive period, the
Court has stated -

"Laches is recourse in equity. Equity, however, is applied only in the absence, never in contravention, of
statutory law. Thus, laches, cannot, as a rule, be used to abate a collection suit filed within the
prescriptive period mandated by the Civil Code."[22]

Clearly, the De Castros' defense of laches finds no support in law, equity or jurisprudence.

Third issue: whether the determination of the purchase price was made in violation of the Rules on
Evidence

The De Castros want the Court to re-examine the probative value of the evidence adduced in the trial
court to determine whether the actual selling price of the two lots was P7.05 million and not P3.6
million. The De Castros contend that it is erroneous to base the 5 percent commission on a purchase
price of P7.05 million as ordered by the trial court and the appellate court. The De Castros insist that the
purchase price is P3.6 million as expressly stated in the deed of sale, the due execution and authenticity
of which was admitted during the trial.

The De Castros believe that the trial and appellate courts committed a mistake in considering
incompetent evidence and disregarding the best evidence and parole evidence rules. They claim that the
Court of Appeals erroneously affirmed sub silentio the trial court's reliance on the various
correspondences between Constante and Times Transit which were mere photocopies that do not
satisfy the best evidence rule. Further, these letters covered only the first negotiations between
Constante and Times Transit which failed; hence, these are immaterial in determining the final purchase
price.

The De Castros further argue that if there was an undervaluation, Artigo who signed as witness
benefited therefrom, and being equally guilty, should be left where he presently stands. They likewise
claim that the Court of Appeals erred in relying on evidence which were not offered for the purpose
considered by the trial court. Specifically, Exhibits "B", "C", "D" and "E" were not offered to prove that
the purchase price was P7.05 Million. Finally, they argue that the courts a quo erred in giving credence
to the perjured testimony of Artigo. They want the entire testimony of Artigo rejected as a falsehood
because he was lying when he claimed at the outset that he was a licensed real estate broker when he
was not.

Whether the actual purchase price was P7.05 Million as found by the trial court and affirmed by the
Court of Appeals, or P3.6 Million as claimed by the De Castros, is a question of fact and not of law.
Inevitably, this calls for an inquiry into the facts and evidence on record. This we can not do.

It is not the function of this Court to re-examine the evidence submitted by the parties, or analyze or
weigh the evidence again.[23] This Court is not the proper venue to consider a factual issue as it is not a
trier of facts. In petitions for review on certiorari as a mode of appeal under Rule 45, a petitioner can
only raise questions of law. Our pronouncement in the case of Cormero vs. Court of Appeals[24] bears
reiteration:

"At the outset, it is evident from the errors assigned that the petition is anchored on a plea to review the
factual conclusion reached by the respondent court. Such task however is foreclosed by the rule that in
petitions for certiorari as a mode of appeal, like this one, only questions of law distinctly set forth may
be raised. These questions have been defined as those that do not call for any examination of the
probative value of the evidence presented by the parties. (Uniland Resources vs. Development Bank of
the Philippines, 200 SCRA 751 [1991] citing Goduco vs. Court of appeals, et al., 119 Phil. 531; Hernandez
vs. Court of Appeals, 149 SCRA 67). And when this court is asked to go over the proof presented by the
parties, and analyze, assess and weigh them to ascertain if the trial court and the appellate court were
correct in according superior credit to this or that piece of evidence and eventually, to the totality of the
evidence of one party or the other, the court cannot and will not do the same. (Elayda vs. Court of
Appeals, 199 SCRA 349 [1991]). Thus, in the absence of any showing that the findings complained of are
totally devoid of support in the record, or that they are so glaringly erroneous as to constitute serious
abuse of discretion, such findings must stand, for this court is not expected or required to examine or
contrast the oral and documentary evidence submitted by the parties. (Morales vs. Court of Appeals,
197 SCRA 391 [1991]citing Santa Ana vs. Hernandez, 18 SCRA 973 [1966])."

We find no reason to depart from this principle. The trial and appellate courts are in a much better
position to evaluate properly the evidence. Hence, we find no other recourse but to affirm their finding
on the actual purchase price.

Fourth Issue: whether award of moral damages and attorney's fees is proper
The De Castros claim that Artigo failed to prove that he is entitled to moral damages and attorney's fees.
The De Castros, however, cite no concrete reason except to say that they are the ones entitled to
damages since the case was filed to harass and extort money from them.

Law and jurisprudence support the award of moral damages and attorney's fees in favor of Artigo. The
award of damages and attorney's fees is left to the sound discretion of the court, and if such discretion
is well exercised, as in this case, it will not be disturbed on appeal.[25] Moral damages may be awarded
when in a breach of contract the defendant acted in bad faith, or in wanton disregard of his
contractual obligation.[26] On the other hand, attorney's fees are awarded in instances where "the
defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and
demandable claim."[27] There is no reason to disturb the trial court's finding that "the defendants' lack
of good faith and unkind treatment of the plaintiff in refusing to give his due commission deserve
censure." This warrants the award of P25,000.00 in moral damages and P45,000.00 in attorney's fees.
The amounts are, in our view, fair and reasonable. Having found a buyer for the two lots, Artigo had
already performed his part of the bargain under the contract of agency. The De Castros should have
exercised fairness and good judgment in dealing with Artigo by fulfilling their own part of the bargain -
paying Artigo his 5 percent broker's commission based on the actual purchase price of the two lots.

WHEREFORE, the petition is denied for lack of merit. The Decision of the Court of Appeals dated May 4,
1994 in CA-G.R. CV No. 37996 is AFFIRMED in toto.

SO ORDERED.

5. VICENTE SY-JUCO v. SANTIAGO V. SY-JUCO +

GR No. 13471, Jan 12, 1920 ]

40 Phil. 634

AVANCEÃ'A, J.:

In 1902 the defendant was appointed by the plaintiffs administrator of their property and acted as such
until June 30, 1916, when his authority was cancelled. The plaintiffs are defendant's father and mother
who allege that during his administration the defendant acquired the property claimed in the complaint
in his capacity as plaintiffs' administrator with their money and for their benefit. After hearing the case
the trial court rendered his decision, the dispositive part of which is the following:

"Wherefore, the court gives judgment for the plaintiffs and orders:

"1. That the defendant return to the plaintiffs the launch Malabon, in question, and execute all the
necessary documents and instruments for such delivery and the registration in the records of the
Custom House of said launch as plaintiffs' property;

"2. That the defendant return to the plaintiffs the casco No. 2584, or pay to them the value thereof
which has been fixed at the sum of P3,000, and should the return of said casco be made, execute all the
necessary instruments and documents for its registration in plaintiffs' name at the Custom House; and
"3. That the defendant return to the plaintiffs the automobile No. 2060 and execute the necessary
instruments and documents for its registration at the Bureau of Public Works. And judgment is hereby
given for the defendant absolving him from the complaint so far concerns:

"1. The rendition of accounts of his administration of plaintiffs' property;

"2. The return of the casco No. 2545;

"3. The return of the typewriting machine;

"4. The return of the house occupied by the defendant; and

"5. The return of the price of the piano in question."

Both parties appealed from this judgment.

In this instance defendant assigns three errors alleged to have been committed by the lower court in
connection with the three items of the dispositive part of the judgment unfavorable to him. We are of
the opinion that the evidence sufficiently justifies the judgment against the defendant.

Regarding the launch Malabon, it appears that in July, 1914, the defendant bought it in his own name
from the Pacific Commercial Co., and afterwards registered it at the Custom House. But this does not
necessarily show that the defendant bought it for himself and with his own money, as he claims. This
transaction was within the agency which he had received from the plaintiffs. The fact that he has
acted in his own name may be only, as we believe it was, a violation of the agency on his part. As the
plaintiffs' counsel truly say, the question is not in whose favor the document of sale of the launch is
executed nor in whose name same was registered, but with whose money was said launch bought. The
plaintiffs' testimony that it was bought with their money and for them is supported by the fact that,
immediately after its purchase, the launch had to be repaired at their expense, although said expense
was collected from the defendant. If the launch was not bought for the plaintiffs and with their money,
ft is not explained why they had to pay for its repairs.

The defendant invokes the decision of this Court in the case of Martinez vs. Martinez (1 Phil. Rep., 647),
which we do not believe is applicable to the present case. In said case, Martinez, Jr., bought a vessel in
his own name and in his name registered it at the Custom House. This Court then said that although the
funds with which the vessel was bought belonged to Martinez Sr., Martinez Jr. is its sole and exclusive
owner. But in said case the relation of principal and agent, which exists between the plaintiffs and the
defendant in the present case, did not exist between Martinez, Sr., and Martinez, Jr. By this agency
the plaintiffs herein clothed the defendant with their representation in order to purchase the launch
in question. However, the defendant acted without this representation and bought the launch in his
own name thereby violating the agency. If the result of this transaction should be that the defendant
has acquired for himself the ownership of the launch, it would be equivalent to sanctioning this violation
and accepting its consequences. But not only must the consequences of the violation of this agency not
be accepted, but the effects of the agency itself must be sought. If the defendant contracted the
obligation to buy the launch for the plaintiffs and in their representation, by virtue of the agency,
notwithstanding the fact that he bought it in his own name, he is obliged to transfer to the plaintiffs
the rights he received from the vendor, and the plaintiffs are entitled to be subrogated in these rights.
There is another point of view leading us to the same conclusion. From the rule established in article
1717 of the Civil Code that when an agent acts in his own name, the principal shall have no right of
action against the person with whom the agent has contracted, cases involving things belonging to the
principal are excepted. According to this exception (when things belonging to the principal are dealt
with) the agent is bound to the principal although he does not assume the character of such agent and
appears acting in his own name (Decision of the Supreme Court of Spain, May 1, 1900). This means that
in the case of this exception the agent's apparent representation yields to the principal's true
representation and that, in reality and in effect, the contract must be considered as entered into
between the principal and the third person; and, consequently, if the obligations belong to the
former, to him alone must also belong the rights arising from the contract. The money with which the
launch was bought having come from the plaintiff, the exception established in article 1717 is applicable
to the instant case.

Concerning the casco No. 2584, the defendant admits it was constructed by the plaintiff himself in the
tatter's ship-yard. Defendant's allegation that it was constructed at his instance and with his money is
not supported by the evidence. In fact the only proof presented to support this allegation is his own
testimony contradicted, on the one hand, by the plaintiffs' testimony and, on the other hand, rebutted
by the fact that, on the date this casco was constructed, he did not have sufficient money with which to
pay the expense of its construction.

As to the automobile No. 2060, there is sufficient evidence to show that its price was paid with
plaintiffs' money. Defendant's adverse allegation that it was paid with his own money is not supported
by the evidence. The circumstances under which, he says, this payment has been made, in order to
show that it was made with his own money, rather indicate the contrary. He presented in evidence his
check-book wherein it appears that on March 24, 1916, he issued a check for P300 and on the 27th of
same month another for P400 and he says that the first installment was paid with said checks. But it
results that, in order to issue the check for P300 on March 24 of that year, he had to deposit P310 on
that same day; and in order to issue the other check for P400 on the 27th of the same month, he
deposited P390 on that same day. It was necessary for the defendant to make these deposits for on
those dates he had not sufficient money in the bank for which he could issue those checks. But, in order
to pay for the price of the automobile, he could have made these payments directly with the money he
deposited without the necessity of depositing and withdrawing it on the same day. If this action shows
something, it shows defendant's preconceived purpose of making it appear that he made the payment
with his own funds deposited in the bank.

The plaintiffs, in turn, assign in this instance the following three errors alleged to have been committed
by the lower court:

"1. The court erred in not declaring that the plaintiffs did not sell to the defendant the casco No. 2545
and that they were its owners until it was sunk in June, 1916.

"2. The court erred in absolving the defendant from his obligation to render an account of his
administration to the plaintiffs, and to pay to the latter the amount of the balance due in their favor.
"3. The court erred in not condemning the defendant to pay to the plaintiffs the value of the woods,
windows and doors taken from their lumber-yard by the defendant and used in the construction of the
house on calle Real of the barrio of La Concepcion, municipality of Malabon, Rizal."

Concerning the casco No. 2545, the lower court refrained from making any declaration about its
ownership in view of the fact that this casco had been leased and was sunk while in the lessee's hands
before the complaint in this case was filed. The lower court, therefore, considered it unnecessary to
pass upon this point. We agree with the plaintiffs that the trial court should have made a
pronouncement upon this casco. The lessee may be responsible in damages for its loss, and it is of
interest to the litigants in this case that it be determined who is the owner of said casco that may
enforce this responsibility of the lessee.

Upon an examination of the evidence relative to this casco, we find that it belonged to the plaintiffs
and that the latter sold it afterwards to the defendant by means of a public instrument.
Notwithstanding plaintiffs' allegation that when they signed this instrument they were deceived,
believing it not to be an instrument of sale in favor of the defendant, nevertheless, they have not
adduced sufficient proof of such deceit which would destroy the presumption of truth which a public
document carries with it. Attorney Sevilla, who acted as the notary in the execution of this instrument,
testifying as a witness in the case, said that he never verified any document without first inquiring
whether the parties knew its content. Our conclusion is that this casco was lawfully sold to the
defendant by the plaintiffs.

Concerning the wood, windows and doors given by the plaintiffs to the defendant and used in the
construction of the latter's house on calle Real of the barrio of La Concepcion of the municipality of
Malabon, Rizal, we find correct the trial Court's decision that they were given to the defendant as his
and his wife's property.

Concerning the rendition of accounts which the plaintiffs require of the defendant, we likewise find
correct the trial court's decision absolving the latter from this petition, for it appears, from the plaintiffs'
own evidence, that the defendant used to render accounts of his agency after each transaction, to the
plaintiffs' satisfaction.

From the foregoing considerations, we affirm the judgment appealed from in all its parts except in so far
as the casco No. 2545 is concerned, and as to this we declare that, it having been sold by the plaintiffs to
the defendant, the latter is absolved. No special findings as to costs. So ordered.

6. HARRY E. KEELER ELECTRIC CO. v. DOMINGO RODRIGUEZ +

[ GR No. 19001, Nov 11, 1922 ] 44 Phil. 19

STATEMENT

The plaintiff is a domestic corporation with its principal office in the city of Manila and engaged in the
electrical business, and among other things in the sale of what is known as the "Matthews" electric
plant, and the defendant is a resident of Talisay, Occidental Negros, and A. C. Montelibano was a
resident of Iloilo.
Having this information, Montelibano approached plaintiff at its Manila office, claiming that he was
from Iloilo and lived with Governor Yulo; that he could find purchasers for the "Matthews" plant, and
was told by the plaintiff that for any plant that he could sell or any customer that he could find he
would be paid a commission of 10 per cent for his services, if the sale was consummated. Among other
persons, Montelibano interviewed the defendant, and, through his efforts, one of the "Matthews"
plants was sold by the plaintiff to the defendant, and was shipped from Manila to Iloilo, and later
installed on defendant's premises after which, without the knowledge of the plaintiff, the defendant
paid the purchase price to Montelibano. As a result, plaintiff commenced this action against the
defendant, alleging that about August 18, 1920, it sold and delivered to the defendant the electric
plant at the agreed price of P2,513.55 no part of which has been paid, and demands judgment for the
amount with interest from October 20, 1920.

For answer, the defendant admits the corporation of the plaintiff, and denies all other material
allegations of the complaint, and, as an affirmative defense, alleges "that on or about the 18th of
August, 1920, the plaintiff sold and delivered to the defendant a certain electric plant and that the
defendant paid the plaintiff the value of said electric plant, to wit: P2,513.55."

Upon such issues the testimony was taken, and the lower court rendered judgment for the defendant,
from which the plaintiff appeals, claiming that the court erred in holding that the payment to A. C.
Montelibano would discharge the debt of defendant, and in holding that the bill was given to
Montelibano for collection purposes, and that the plaintiff had held out Montelibano to the
defendant as an agent authorized to collect, and in rendering judgment for the defendant, and in not
rendering judgment for the plaintiff.

Johns, J.:

The testimony is conclusive that the defendant paid: the amount of plaintiff's claim to Montelibano, and
that no part of the money was ever paid to the plaintiff. The defendant, having alleged that the plaintiff
sold and delivered the plant to him, and that he paid the plaintiff the purchase price, it devolved upon
the defendant to prove the payment to the plaintiff by a preponderance of the evidence.

It appears from the testimony of H. E. Keeler that he was president of the plaintiff and that the plant in
question was shipped from Manila to Iloilo and consigned to the plaintiff itself, and that at the time of
the shipment the plaintiff sent Juan Cenar, one of its employees, with the shipment, for the purpose of
installing the plant on defendant's premises. That plaintiff gave Cenar a statement of the account,
including some extras and the expenses of the mechanic, making a total of P2,563.95. That Montelibano
had no authority from the plaintiff to receive or receipt for money. That in truth and in fact his
services were limited and confined to the finding of purchasers for the "Matthews" plant to whom the
plaintiff would later make and consummate the sale. That Montelibano was not an electrician, could
not install the plant and did not know anything about its mechanism.

Cenar, as a witness for the plaintiff, testified that he went with the shipment of the plant from Manila to
IloIlo, for the purpose of installing, testing it, and to see that everything was satisfactory. That he was
there" about nine days, and that he installed the plant, and that it was tested and approved by the
defendant. He also says that he personally took with him the statement of account of the plaintiff
against the defendant, and that after he was there a few days, the defendant asked to see the
statement, and that he gave it to him, and the defendant said, "he was going to keep it." I said that was
all right "if you want." "I made no effort at all to collect the amount from him because Mr. Rodriguez
told me he was going to pay for the plant here in Manila." That after the plant was installed and
approved, he delivered it to the defendant and returned to Manila.

The only testimony on the part of the defendant is that of himself in the form of a deposition in which
he says that Montelibano sold and delivered the plant to him, and "was the one who ordered the
installation of that electrical plant," and he introduced in evidence as part of his deposition a statement
and receipt which Montelibano signed to whom he paid the money. When asked why he paid the
money to Montelibano, the witness says:

"Because he was the one who sold, delivered, and installed the electrical plant, and he presented to me
the account, Exhibits A and A-I, and he assured me that he was duly authorized to collect the value of
the electrical plant." The receipt offered in evidence is headed:

"STATEMENT Folio No. 2494

"Mr. DOMINGO RODRIGUEZ,

"Iloilo, Iloilo, P. I.

"In account with "

"HARRY E. KEELER ELECTRIC COMPANY, INC.

"221 Calle Echague, Quiapo, Manila, P. I.

" MANILA, P. I., August 18,1920."

The answer alleges and the receipt shows upon its face ;hat the plaintiff sold the plant to the
defendant, and that tie bought it from the plaintiff. The receipt is signed as follows:

"Received payment

"HARRY E. KEELER ELECTRIC CO. INC.,

"Recibi

(Sgd.) "A. C. MONTELIBANO."

There is nothing on the face of this receipt to show that Montelibano was the agent of, or that he was
acting for, the plaintiff. It is his own personal receipt and his own personal signature. Outside of the
fact that Montelibano received the money and signed this receipt, there is no evidence that he had
any authority, real or apparent, to receive or receipt for the money. Neither is there any evidence that
the plaintiff ever delivered the statement to Montelibano, or authorized anyone to deliver it to him, and
it is very apparent that the statement in question is the one which was delivered by the plaintiff to
Cenar, and is the one which Cenar delivered to the defendant at the request of the defendant.

The evidence of the defendant that Montelibano was the one who sold him the plant is in direct conflict
with his own pleadings and the receipted statement which he offered in evidence. This statement also
shows upon its face that P81.60 of the bill is for:
"To Passage round trip, 1st Class @

P40.80 a trip....................................P81.60."

and

"Plus Labor @ P5.00 per day

"Machine's transportation.......... 9.85."

This claim must be for the expenses of Cenar in going to Iloilo from Manila and return, to install the
plant, and is strong evidence that it was Cenar and not Montelibano who installed the plant. If
Montelibano installed the plant, as defendant claims, there would not have been any necessity for
Cenar to make this trip at the expense of the defendant. After Cenar's return to Manila, the plaintiff
wrote a letter to the defendant requesting the payment of its account, in answer to which the
defendant on September 24 sent the following telegram:

"Electric plant accessories and installation are paid to Montelibano about three weeks Keeler Company
did not present bill."

This is in direct conflict with the receipted statement, which the defendant offered in evidence, signed
by Montelibano. That shows upon its face that it was an itemized statement of the account of plaintiff
with the defendant. Again, it will be noted that the receipt which Montelibano signed is not dated, and
it does not show when the money was paid: Speaking of Montelibano, the defendant also testified: "and
he assured me that he was duly authorized to collect the value of the electrical plant." This shows upon
its face that the question of Montelibano's authority to receive the money must have been discussed
between them, and that, in making the payment, defendant relied upon Montelibano's own statements
and representations, as to his authority, to receipt for the money.

In the final analysis, the plant was sold by the plaintiff to the defendant, and was consigned by the
plaintiff to the plaintiff at Iloilo where it was installed by Cenar, acting for, and representing, the
plaintiff, whose expense for the trip is included in, and made a part of, the bill which was receipted by
Montelibano.

There is no evidence that the plaintiff ever delivered any statement to Montelibano, or that he was
authorized to receive or receipt for the money, and defendant's own telegram shows that the plaintiff
"did not present bill" to defendant. He now claims that at the very time this telegram was sent, he had
the receipt of Montelibano for the money upon the identical statement of account which it is admitted
the plaintiff did render to the defendant.

Article 1162 of the Civil Code provides:

"Payment must be made to the person in whose favor the obligation is constituted, or to another
authorized to receive it in his name."

And article 1727 provides:

"The principal shall be liable as to matters with respect to which the agent has exceeded his authority
only when he ratifies the same expressly or by implication." In the case of Ormachea Tin-Congco vs.
Trillana (13 Phil., 194), this court held:
"The repayment of a debt must be made to the person in whose favor the obligation is constituted, or
to another expressly authorized to receive the payment in his name." Mechem on Agency, volume I,
section 743, says:

"In approaching the consideration of the inquiry whether an assumed authority exists in a given case,
there are certain fundamental principles which must not be overlooked. Among these are, as has been
seen, (1) that the law indulges in no bare presumptions that an agency exists: it must be proved or
presumed from facts; (2) that the agent cannot establish his own authority, either by his representations
or by assuming to exercise it; (3) that an authority cannot be established by mere rumor or general
reputation; (4) that even a general authority is not an unlimited one; and (5) that every authority must
find its ultimate source in some act or omission of the principal. An assumption of authority to act as
agent for another of itself challenges inquiry. Like a railroad crossing, it should be in itself a sign of
danger and suggest the duty to 'stop, look, and listen.' It is therefore declared to be a fundamental rule,
never to be lost sight of and not easily to be overestimated, that persons dealing with an assumed
agent, whether the assumed agency be a general or special one, are bound at their peril, if they would
hold the principal, to ascertain not only the fact of the agency but the nature and extent of the
authority, and in case either is controverted, the burden of proof is upon them to establish it."

" * * * It is, moreover, in any case entirely within the power of the person dealing with the agent to
satisfy himself that the agent has the authority he assumes to exercise, or to decline to enter into
relations with him." (Mechem on Agency, vol. I, sec". 746.)

"The person dealing with the agent must also act with ordinary prudence and reasonable diligence.
Obviously, if he knows or has good reason to believe that the agent is exceeding his authority, he
cannot claim protection. So if the suggestions of probable limitations be of such a clear and reasonable
quality, or if the character assumed by the agent is of such a suspicious or unreasonable nature, or if the
authority which he seeks to exercise is of such an unusual or improbable character, as would suffice to
put an ordinarily prudent man upon his guard, the party dealing with him may not shut his eyes to the
real state of the case, but should either refuse to deal with the agent at all, or should ascertain from the
principal the true condition of affairs." (Mechem on Agency, vol. I, sec. 752.)

"And not only must the person dealing with the agent ascertain the existence of the conditions, but he
must also, as in other cases, be able to trace the source of his reliance to some word or act of the
principal himself if the latter is to be held responsible. As has often been pointed out, the agent alone
cannot enlarge or extend his authority by his own acts or statements, nor can he alone remove
limitations or waive conditions imposed by his principal. To charge the principal in such a case, the
principal's consent or concurrence must be shown." (Mechem on Agency, vol. I, section 757.)

This was a single transaction between the plaintiff and the defendant.

Applying the above rules, the testimony is conclusive that the plaintiff never authorized Montelibano
to receive or receipt for money in its behalf, and that the defendant had no right to assume by any act
or deed of the plaintiff that Montelibano was authorized to receive the money, and that the
defendant made the payment at his own risk and on the sole representations of Montelibano that he
was authorized to receipt for the money.
The judgment of the lower court is reversed, and one will be entered here in favor of the plaintiff and
against the defendant for the sum of P2,513.55 with interest at the legal rate from January 10, 1921,
with costs in favor of the appellant. So ordered.

7. BA FINANCE CORPORATION v. CA +

[ GR No. 94566, Jul 03, 1992 ]

G.R. No. 94566

MEDIALDEA, J.:

This is a petition for review on certiorari of the decision of the respondent appellate court, which
reversed the ruling of the trial court dismissing the case against petitioner.

The antecedent facts are as follows:

On December 17, 1980, Renato Gaytano, doing business under the name Gebbs International, applied
for and was granted a loan with respondent Traders Royal Bank in the amount of P60,000.00. As
security for the payment of said loan, the Gaytano spouses executed a deed of suretyship whereby they
agreed to pay jointly and severally to respondent bank the amount of the loan including interests,
penalty and other bank charges.

In a letter dated December 5, 1980 addressed to respondent bank, Philip Wong as credit administrator
of BA Finance Corporation for and in behalf of the latter, undertook to guarantee the loan of the
Gaytano spouses. The letter reads:

"This is in reference to the application of Gebbs International for a twenty-five (25) month term loan of
60,000.00 with your Bank.

"In this connection, please be advised that we unconditionally guarantee full payment in peso value the
said accommodation (sic) upon non-payment by subject up to a maximum amount of P60,000.00.

"Hoping this would meet your requirement and expedite the early processing of their application.

"Thank you.

Very truly yours,

BA FINANCE CORPORATION

(signed)

PHILIP H. WONG

Credit Administrator"

(p. 12, Rollo)

Partial payments were made on the loan leaving an unpaid balance in the amount of P85,807.25. Since
the Gaytano spouses refused to pay their obligation, respondent bank filed with the trial court a
complaint for sum of money against the Gaytano spouses and petitioner corporation as alternative
defendant.

The Gaytano spouses did not present evidence for their defense. Petitioner corporation, on the other
hand, raised the defense of lack of authority of its credit administrator to bind the corporation.

On December 12, 1988, the trial court rendered a decision the dispositive portion of which states:

"IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of plaintiff and against
defendants/Gaytano spouses, ordering the latter to jointly and severally pay the plaintiff the following:

"1) EIGHTY FIVE THOUSAND EIGHT HUNDRED SEVEN AND 25/100 (P85,807.25), representing the total
unpaid balance with accumulated interests, penalties and bank charges as of September 22, 1987, plus
interests, penalties and bank charges thereafter until the whole obligation shall have been fully paid.

"2) Attorney's fees at the stipulated rate of ten (10%) percent computed from the total obligation; and

"3) The costs of suit.

"The dismissal of the case against defendant BA Finance Corporation is hereby ordered without
pronouncement as to cost.

"SO ORDERED." (p. 31, Rollo)

Not satisfied with the decision, respondent bank appealed with the Court of Appeals. On March 13,
1990, respondent appellate court rendered judgment modifying the decision of the trial court as
follows:

"In view of the foregoing, the judgment is hereby rendered ordering the defendants Gaytano spouses
and alternative defendant BA Finance Corporation, jointly and severally, to pay the plaintiff the amount
of P85,807.25 as of September 8, 1987, including interests, penalties and other back (sic) charges
thereon, until the full obligation shall have been fully paid. No pronouncement as to costs.

"SO ORDERED." (p. 27, Rollo)

Hence this petition was filed with the petitioner assigning the following errors committed by respondent
appellate court:
"1. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT PETITIONER IS JOINTLY AND
SEVERALLY LIABLE WITH GAYTANO SPOUSES DESPITE ITS FINDINGS THAT THE LETTER GUARANTY (EXH.
'C') IS 'INVALID AT ITS INCEPTION';

"2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE PETITIONER WAS GUILTY
OF ESTOPPEL DESPITE THE FACT THAT IT NEVER KNEW OF SUCH ALLEGED LETTER-GUARANTY;

"3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT RULING THAT SUCH LETTER
GUARANTY (EXHIBIT 'C') BEING PATENTLY ULTRA VIRES, IS UNENFORCEABLE;

"4. THE HONORABLE COURT OF APPEALS ERRED IN NOT AWARDING RELIEF ON PETITIONER'S
COUNTERCLAIM (p. 10, Rollo)."

Since the issues are interrelated, it would be well to discuss them jointly.

Petitioner contends that the letter guaranty is ultra vires, and therefore unenforceable; that said letter-
guaranty was issued by an employee of petitioner corporation beyond the scope of his authority since
the petitioner itself is not even empowered by its articles of incorporation and by-laws to issue
guaranties. Petitioner also submits that it is not guilty of estoppel to make it liable under the letter-
guaranty because petitioner had no knowledge or notice of such letter-guaranty; that the allegation of
Philip Wong, credit administrator, that there was an audit was not supported by evidence of any audit
report or record of such transaction in the office files.

We find the petitioner's contentions meritorious. It is a settled rule that persons dealing with an
assumed agent, whether the assumed agency be a general or special one 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 (Harry
Keeler v. Rodriguez, 4 Phil. 19). Hence, the burden is on respondent bank to satisfactorily prove that the
credit administrator with whom they transacted acted within the authority given to him by his principal,
petitioner corporation. The only evidence presented by respondent bank was the testimony of Philip
Wong, credit administrator, who testified that he had authority to issue guarantees as can be deduced
from the wording of the memorandum given to him by petitioner corporation on his lending authority.
The said memorandum which allegedly authorized Wong not only to approve and grant loans but also to
enter into contracts of guaranty in behalf of the corporation, partly reads:

"To: Philip H. Wong, SAM

Credit Administrator

From: Hospicio B. Bayona, Jr., VP and

Head of Credit Administration

Re: Lending Authority

I am pleased to delegate to you in your capacity as Credit Administrator the following lending limits:

a) P650,000.00 - Secured Loans

b) P550,000.00 - Supported Loans

c) P350,000.00 - Truck Loans/Contracts/ Leases

d) P350,000.00 - Auto Loan Contracts/ Leases

e) P350,000.00 - Appliance Loan Contracts

f) P350,000.00 - Unsecured Loans

Total loans and/or credits (Combination of (a) thru (f) extended to any one borrower including parents,
affiliates and/or subsidiaries, should not exceed P750,000.00. In exercising the limits aforementioned,
both direct and contingent commitments to the borrower (s) should be considered.

All loans must be within the Company's established lending guideline and policies.

xxx

LEVELS OF APPROVAL

All transactions in excess of any branch's limit must be recommended to you through the Official Credit
Report for approval. If the transaction exceeds your limit, you must concur in application before
submitting it to the Vice President, Credit Administration for approval or concurrence.

x x x" (pp. 62-63, Rollo) (Emphasis ours)

Although Wong was clearly authorized to approve loans even up to P350,000.00 without any security
requirement, which is far above the amount subject of the guaranty in the amount of P60,000.00,
nothing in the said memorandum expressly vests on the credit administrator power to issue guarantees.
We cannot agree with respondent's contention that the phrase "contingent commitment" set forth in
the memorandum means guarantees. It has been held that a power of attorney or authority of an agent
should not be inferred from the use of vague or general words. Guaranty is not presumed, it must be
expressed and cannot be extended beyond its specified limits (Director v. Sing Juco, 53 Phi. 205). In one
case, where it appears that a wife gave her husband power of attorney to loan money, this Court ruled
that such fact did not authorize him to make her liable as a surety for the payment of the debt of a third
person (Bank of Philippine Islands v. Coster, 47 Phil. 594).

The sole allegation of the credit administrator in the absence of any other proof that he is authorized to
bind petitioner in a contract of guaranty with third persons should not be given weight. The
representation of one who acts as agent cannot by itself serve as proof of his authority to act as agent or
of the extent of his authority as agent (Velasco v. La Urbana, 58 Phil. 681). Wong's testimony that he had
entered into similar transactions of guaranty in the past for and in behalf of the petitioner, lacks
credence due to his failure to show documents or records of the alleged past transactions. The actuation
of Wong in claiming and testifying that he has the authority is understandable. He would naturally take
steps to save himself from personal liability for damages to respondent bank considering that he had
exceeded his authority. The rule is clear that an agent who exceeds his authority is personally liable for
damages (National Power Corporation v. National Merchandising Corporation, Nos. L-33819 and L-
33897, October 23, 1982, 117 SCRA 789).

Anent the conclusion of respondent appellate court that petitioner is estopped from alleging lack of
authority due to its failure to cancel or disallow the guaranty, We find that the said conclusion has no
basis in fact. Respondent bank had not shown any evidence aside from the testimony of the credit
administrator that the disputed transaction of guaranty was in fact entered into the official records or
files of petitioner corporation, which will show notice or knowledge on the latter's part and its
consequent ratification of the said transaction. In the absence of clear proof, it would be unfair to hold
petitioner corporation guilty of estoppel in allowing its credit administrator to act as though the latter
had power to guarantee.

ACCORDINGLY, the petition is GRANTED and the assailed decision of the respondent appellate court
dated March 13, 1990 is hereby REVERSED and SET ASIDE and another one is rendered dismissing the
complaint for sum of money against BA Finance Corporation.

SO ORDERED.

8. BACALTOS COAL MINES v. CA +

[ GR No. 114091, Jun 29, 1995 ]

DAVIDE, JR., J.:

Petitioners seek the reversal of the decision of 30 September 1993 of the Court of Appeals in CA-G.R. CV
No. 35180,[1] entitled "San Miguel Corporation vs. Bacaltos Coal Mines, German A. Bacaltos and Rene R.
Savellon," which affirmed the decision of 19 August 1991 of the Regional Trial Court (RTC) of Cebu,
Branch 9, in Civil Case No. CEB-8187[2] holding petitioners Bacaltos Coal Mines and German A. Bacaltos
and their co-defendant Rene R. Savellon jointly and severally liable to private respondent San Miguel
Corporation under a Trip Charter Party.

The paramount issue raised is whether Savellon was duly authorized by the petitioners to enter into the
Trip Charter Party (Exhibit "A")[3] under and by virtue of an Authorization (Exhibit "C" and Exhibit
"1"),[4] dated 1 March 1988, the pertinent portions of which read as follows:

I, GERMAN A. BACALTOS, of legal age, Filipino, widower, and residing at second street, Espina Village,
Cebu City, province of Cebu, Philippines, do hereby authorize RENE R. SAVELLON, of legal age, Filipino
and residing at 376-R Osmeña Blvd., Cebu City, Province of Cebu, Philippines, to use the coal operating
contract of BACALTOS COAL MINES of which I am the proprietor, for any legitimate purpose that it may
serve. Namely, but not by way of limitation, as follows:

(1)

To acquire purchase orders for and in behalf of BACALTOS COAL MINES;

(2)

To engage in trading under the style of BACALTOS COAL MINES/RENE SAVELLON;

(3)

To collect all receivables due or in arrears from people or companies having dealings under BACALTOS
COAL MINES/RENE SAVELLON;

(4)

To extend to any person or company by substitution the same extent of authority that is granted to
Rene Savellon;

(5)

In connection with the preceeding paragraphs to execute and sign documents, contracts, and other
pertinent papers.

Further, I hereby give and grant to RENE SAVELLON full authority to do and perform all and every lawful
act requisite or necessary to carry into effect the foregoing stipulations as fully to all intents and
purposes as I might or would lawfully do if personally present, with full power of substitution and
revocation.

The Trip Charter Party was executed on 19 October 1988 "by and between BACALTOS COAL MINES,
represented ... by its Chief Operating Officer, RENE ROSEL SAVELLON" and private respondent San
Miguel Corporation (hereinafter SMC), represented by Francisco B. Manzon, Jr., its "SAVP and Director,
Plant Operations-Mandaue." Thereunder, Savellon claims that Bacaltos Coal Mines is the owner of the
vessel M/V Premship II and that for P650,000.00 to be paid within seven days after the execution of the
contract, it "lets, demises" the vessel to charterer SMC "for three round trips to Davao."

As payment of the aforesaid consideration, SMC issued a check (Exhibit "B")[5] payable to "RENE
SAVELLON IN TRUST FOR BACALTOS COAL MINES" for which Savellon issued a receipt under the heading
of BACALTOS COAL MINES with the address at No. 376-R Osmeña Blvd., Cebu City (Exhibit "B-1").[6]

The vessel was able to make only one trip. Its demands to comply with the contract having been
unheeded, SMC filed against the petitioners and Rene Savellon the complaint in Civil Case No. CEB-8187
for specific performance and damages. In their Answer,[7] the petitioners alleged that Savellon was not
their Chief Operating Officer and that the powers granted to him are only those clearly expressed in the
Authorization which do not include the power to enter into any contract with SMC. They further
claimed that if it is true that SMC entered into a contract with them, it should have issued the check in
their favor. They set up counterclaims for moral and exemplary damages and attorney's fees.

Savellon did not file his Answer and was declared in default on 17 July 1990.[8]

At the pre-trial conference on 1 February 1991, the petitioners and SMC agreed to submit the following
issues for resolution:

Plaintiff --

Whether or not defendants are jointly liable to plaintiff for damages on account of breach of contract;

Whether or not the defendants acted in good faith in its representations to the plaintiff;

Whether or not defendant Bacaltos was duly enriched on the payment made by the plaintiff for the use
of the vessel;

Whether or not defendant Bacaltos is estopped to deny the authorization given to defendant Savellon;
Defendants

Whether or not the plaintiff should have first investigated the ownership of vessel M/V PREM[SHIP] II
before entering into any contract with defendant Savellon;

Whether or not defendant Savellon was authorized to enter into a shipping contract with the [plaintiff]
corporation;

Whether or not the plaintiff was correct and not mistaken in issuing the checks in payment of the
contract in the name of defendant Savellon and not in the name of defendant Bacaltos Coal Mines;

Whether or not the plaintiff is liable on defendants' counterclaim.[9]

After trial, the lower court rendered the assailed decision in favor of SMC and against the petitioners
and Savellon as follows:

WHEREFORE, by preponderance of evidence, the Court hereby renders judgment in favor of plaintiff and
against defendants, ordering defendants Rene Savellon, Bacaltos Coal Mines and German A. Bacaltos,
jointly and severally, to pay to plaintiff:

The amount of P433,000.00 by way of reimbursement of the consideration paid by plaintiff, plus 12%
interest to start from date of written demand, which is June 14, 1989;

The amount of P20,000.00 by way of exemplary damages;

The amount of P20,000.00 as attorney's fees and P5,000.00 as litigation expenses. Plus costs.[10]

It ruled that the Authorization given by German Bacaltos to Savellon necessarily included the power to
enter into the Trip Charter Party. It did not give credence to the petitioners' claim that the authorization
refers only to coal or coal mining and not to shipping because, according to it, "the business of coal
mining may also involve the shipping of products" and "a company such as a coal mining company is not
prohibited to engage in entering into a Trip Charter Party contract." It further reasoned out that even
assuming that the petitioners did not intend to authorize Savellon to enter into the Trip Charter Party,
they are still liable because: (a) SMC appears to be an innocent party which has no knowledge of the
real intent of the parties to the Authorization and has reason to rely on the written Authorization
submitted by Savellon pursuant to Articles 1900 and 1902 of the Civil Code; (b) Savellon issued an
official receipt of Bacaltos Coal Mines (Exhibit "B-1") for the consideration of the Trip Charter Party, and
the petitioners' denial that they caused the printing of such official receipt is "lame" because they
submitted only a cash voucher and not their official receipt; (c) the "Notice of Readiness" (Exhibit "A-1")
is written on a paper with the letterhead "Bacaltos Coal Mines" and the logo therein is the same as that
appearing in their voucher; (d) the petitioners were benefited by the payment because the real payee in
the check is actually Bacaltos Coal Mines and since in the Authorization they authorized Savellon to
collect receivables due or in arrears, the check was then properly delivered to Savellon; and, (e) if
indeed Savellon had not been authorized or if indeed he exceeded his authority or if the Trip Charter
Party was personal to him and the petitioners have nothing to do with it, then Savellon should have
"bother[ed] to answer" the complaint and the petitioners should have filed "a cross-claim" against him.

In their appeal to the Court of Appeals in CA-G.R. CV No. 35180, the petitioners asserted that the trial
court erred in: (a) not holding that SMC was negligent in (1) not verifying the credentials of Savellon and
the ownership of the vessel, (2) issuing the check in the name of Savellon in trust for Bacaltos Coal
Mines thereby allowing Savellon to encash the check, and, (3) making full payment of P650,000.00 after
the vessel made only one trip and before it completed three trips as required in the Trip Charter Party;
(b) holding that under the authority given to him Savellon was authorized to enter into the Trip Charter
Party; and, (c) holding German Bacaltos jointly and severally liable with Savellon and Bacaltos Coal
Mines.[11]

As stated at the beginning, the Court of Appeals affirmed in toto the judgment of the trial court. It held
that: (a) the credentials of Savellon is not an issue since the petitioners impliedly admitted the agency
while the ownership of the vessel was warranted on the face of the Trip Charter Party; (b) SMC was not
negligent when it issued the check in the name of Savellon in trust for Bacaltos Coal Mines since the
Authorization clearly provides that collectibles of the petitioners can be coursed through Savellon as the
agent; (c) the Authorization includes the power to enter into the Trip Charter Party because the "five
prerogatives" enumerated in the former is prefaced by the phrase "but not by way of limitation"; (d) the
petitioners' statement that the check should have been issued in the name of Bacaltos Coal Mines is
another implicit admission that the Trip Charter Party is part and parcel of the petitioners' business
notwithstanding German Bacaltos's contrary interpretation when he testified, and in any event, the
construction of obscure words should not favor him since he prepared the Authorization in favor of
Savellon; and, (e) German Bacaltos admitted in the Answer that he is the proprietor of Bacaltos Coal
Mines and he likewise represented himself to be so in the Authorization itself, hence he should not now
be permitted to disavow what he initially stated to be true and to interpose the defense that Bacaltos
Coal Mines has a distinct legal personality.

Their motion for a reconsideration of the above decision having been denied, the petitioners filed the
instant petition wherein they raise the following errors:
THE RESPONDENT COURT ERRED IN HOLDING THAT RENE SAVELLON WAS AUTHORIZED TO ENTER INTO
A TRIP CHARTER PARTY CONTRACT WITH PRIVATE RESPONDENT IN SPITE OF ITS FINDING THAT SUCH
AUTHORITY CANNOT BE FOUND IN THE FOUR CORNERS OF THE AUTHORIZATION;

THE RESPONDENT COURT ERRED IN NOT HOLDING THAT BY ISSUING THE CHECK IN THE NAME OF RENE
SAVELLON IN TRUST FOR BACALTOS COAL MINES, THE PRIVATE RESPONDENT WAS THE AUTHOR OF ITS
OWN DAMAGE; AND

THE RESPONDENT COURT ERRED IN HOLDING PETITIONER GERMAN BACALTOS JOINTLY AND SEVERALLY
LIABLE WITH RENE SAVELLON AND CO-PETITIONER BACALTOS COAL MINES IN SPITE OF THE FINDING OF
THE COURT A QUO THAT PETITIONER BACALTOS COAL MINES AND PETITIONER BACALTOS ARE TWO
DISTINCT AND SEPARATE LEGAL PERSONALITIES.[12]

After due deliberations on the allegations, issues raised, and arguments adduced in the petition, and the
comment thereto and reply to the comment, the Court resolved to give due course to the petition.

Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of
the agent. If he does not make such inquiry, he is chargeable with knowledge of the agent's authority,
and his ignorance of that authority will not be any excuse. Persons dealing with an assumed agent,
whether the assumed agency be a general or special one, are bound at their peril, if they would hold the
principal, to ascertain not only the fact of the agency but also the nature and extent of the authority,
and in case either is controverted, the burden of proof is upon them to establish it.[13] American
jurisprudence[14] summarizes the rule in dealing with an agent as follows:

A third person dealing with a known agent may not act negligently with regard to the extent of the
agent's authority or blindly trust the agent's statements in such respect. Rather, he must use reasonable
diligence and prudence to ascertain whether the agent is acting and dealing with him within the scope
of his powers. The mere opinion of an agent as to the extent of his powers, or his mere assumption of
authority without foundation, will not bind the principal; and a third person dealing with a known agent
must bear the burden of determining for himself, by the exercise of reasonable diligence and prudence,
the existence or nonexistence of the agent's authority to act in the premises. In other words, whether
the agency is general or special, the third person is bound to ascertain not only the fact of agency, but
the nature and extent of the authority. The principal, on the other hand, may act on the presumption
that third persons dealing with his agent will not be negligent in failing to ascertain the extent of his
authority as well as the existence of his agency.
Or, as stated in Harry E. Keller Electric Co. vs. Rodriguez,[15] quoting Mechem on Agency:

The person dealing with the agent must also act with ordinary prudence and reasonable diligence.
Obviously, if he knows or has good reason to believe that the agent is exceeding his authority, he cannot
claim protection. So if the suggestions of probable limitations be of such a clear and reasonable quality,
or if the character assumed by the agent is of such a suspicious or unreasonable nature, or if the
authority which he seeks to exercise is of such an unusual or improbable character, as would suffice to
put an ordinarily prudent man upon his guard, the party dealing with him may not shut his eyes to the
real state of the case, but should either refuse to deal with the agent at all, or should ascertain from the
principal the true condition of affairs. [emphasis supplied]

In the instant case, since the agency of Savellon is based on a written document, the Authorization of 1
March 1988 (Exhibits "C" and "1"), the extent and scope of his powers must be determined on the basis
thereof. The language of the Authorization is clear. It pertinently states as follows:

I, GERMAN A. BACALTOS ... do hereby authorize RENE R. SAVELLON ... to use the 'coal operating
contract' of BACALTOS COAL MINES, of which I am the proprietor, for any legitimate purpose that it may
serve. Namely, but not by way of limitation, as follows: . . . . [emphasis supplied]

There is only one express power granted to Savellon, viz., to use the coal operating contract for any
legitimate purpose it may serve. The enumerated "five prerogatives" to employ the term used by the
Court of Appeals are nothing but the specific prerogatives subsumed under or classified as part of or as
examples of the power to use the coal operating contract. The clause ";but not by way of limitation"
which precedes the enumeration could only refer to or contemplate other prerogatives which must
exclusively pertain or relate or be germane to the power to use the coal operating contract. The
conclusion then of the Court of Appeals that the Authorization includes the power to enter into the Trip
Chatter Party because the "five prerogatives" are prefaced by such clause, is seriously flawed. It fails to
note that the broadest scope of Savellon's authority is limited to the use of the coal operating contract
and the clause cannot contemplate any other power not included in the enumeration or which are
unrelated either to the power to use the coal operating contract or to those already enumerated. In
short, while the clause allows some room for flexibility, it can comprehend only additional prerogatives
falling within the primary power and within the same class as those enumerated. The trial court,
however, went further by hastily making a sweeping conclusion that "a company such as a coal mining
company is not prohibited to engage in entering into a Trip Charter Party contract."[16] But what the
trial court failed to consider was that there is no evidence at all that Bacaltos Coal Mines as a coal
mining company owns and operates vessels, and even if it owned any such vessels, that it was allowed
to charter or lease them. The trial court also failed to note that the Authorization is not a general power
of attorney. It is a special power of attorney for it refers to a clear mandate specifically authorizing the
performance of a specific power and of express acts subsumed therein.[17] In short, both courts below
unreasonably expanded the express terms of or otherwise gave unrestricted meaning to a clause which
was precisely intended to prevent unwarranted and unlimited expansion of the powers entrusted to
Savellon. The suggestion of the Court of Appeals that there is obscurity in the Authorization which must
be construed against German Bacaltos because he prepared the Authorization has no leg to stand on
inasmuch as there is no obscurity or ambiguity in the instrument. If any obscurity or ambiguity indeed
existed, then there will be more reason to place SMC on guard and for it to exercise due diligence in
seeking clarification or enlightenment thereon, for that was part of its duty to discover upon its peril the
nature and extent of Savellon's written agency. Unfortunately, it did not.

Howsoever viewed, the foregoing conclusions of the Court of Appeals and the trial court are tenuous
and farfetched, bringing to unreasonable limits the clear parameters of the powers granted in the
Authorization.

Furthermore, had SMC exercised due diligence and prudence, it should have known in no time that
there is absolutely nothing on the face of the Authorization that confers upon Savellon the authority to
enter into any Trip Charter Party. Its conclusion to the contrary is based solely on the second
prerogative under the Authorization, to wit:

(2) To engage in trading under the style of BACALTOS COAL MINES/RENE SAVELLON;

unmindful that such is but a part of the primary authority to use the coal operating contract which it did
not even require Savellon to produce. Its principal witness, Mr. Valdescona, expressly so admitted on
cross-examination, thus:

Atty. Zosa (to witness - ON CROSS)

You said that in your office Mr. Rene Savellon presented to you this authorization marked Exhibit "C"
and Exhibit "1" for the defendant?

Yes, sir.

Did you read in the first part[y] of this authorization Mr. Valdescona that Mr. Rene Savellon was
authorized as the coal operating contract of Bacaltos Coal Mines?

Yes, sir.
Q

Did it not occur to you that you should have examined further the authorization of Mr. Rene Savellon,
whether or not this coal operating contract allows Mr. Savellon to enter into a trip charter party?

Yes, sir. We discussed about the extent of his authorization and he referred us to the number 2
provision of this authorization which is to engage in trading under the style of Bacaltos Coal Mines/Rene
Savellon, which we followed up to the check preparation because it is part of the authority.

In other words, you examined this and you found out that Mr. Savellon is authorized to use the coal
operating contract of Bacaltos Coal Mines?

Yes, sir.

You doubted his authority but you found out in paragraph 2 that he is authorized that's why you agreed
and entered into that trip charter party?

We did not doubt his authority but we were questioning as to the extent of his operating contract.

Did you not require Mr. Savellon to produce that coal operating contract of Bacaltos Coal Mines?

No sir. We did not.[18]

Since the principal subject of the Authorization is the coal operating contract, SMC should have required
its presentation to determine what it is and how it may be used by Savellon. Such a determination is
indispensable to an inquiry into the extent or scope of his authority. For this reason, we now deem it
necessary to examine the nature of a coal operating contract.

A coal operating contract is governed by P.D. No. 972 (The Coal Development Act of 1976), as amended
by P.D. No. 1174. It is one of the authorized ways of active exploration, development, and production of
coal resources[19] in a specified contract area.[20] Section 9 of the decree prescribes the obligation of
the contractor, thus:
SEC. 9. Obligations of Operator in Coal Operating Contract. The operator under a coal operating contract
shall undertake, manage and execute the coal operations which shall include:

(a)

The examination and investigation of lands supposed to contain coal, by detailed surface geologic
mapping, core drilling, trenching, test pitting and other appropriate means, for the purpose of probing
the presence of coal deposits and the extent thereof;

(b)

Steps necessary to reach the coal deposit so that it can be mined, including but not limited to shaft
sinking and tunneling; and

(c)

The extraction and utilization of coal deposits.

The Government shall oversee the management of the operation contemplated in a coal operating
contract and in this connection, shall require the operator to:

(a)

Provide all the necessary service and technology;

(b)

Provide the requisite financing;

(c)

Perform the work obligations and program prescribed in the coal operating contract which shall not be
less than those prescribed in this Decree;

(d)

Operate the area on behalf of the Government in accordance with good coal mining practices using
modern methods appropriate for the geological conditions of the area to enable maximum economic
production of coal, avoiding hazards to life, health and property, avoiding pollution of air, lands and
waters, and pursuant to an efficient and economic program of operation;

(e)

Furnish the Energy Development Board promptly with all information, data and reports which it may
require;

(f)
Maintain detailed technical records and account of its expenditures;

(g)

Conform to regulations regarding, among others, safety demarcation of agreement acreage and work
areas, non-interference with the rights of the other petroleum, mineral and natural resources operators;

(h)

Maintain all necessary equipment in good order and allow access to these as well as to the exploration,
development and production sites and operations to inspectors authorized by the Energy Development
Board;

(i)

Allow representatives authorized by the Energy Development Board full access to their accounts, books
and records for tax and other fiscal purposes.

Section 11 thereof provides for the minimum terms and conditions of a coal operating contract.

From the foregoing, it is obvious that a scrutiny of the coal operating contract of Bacaltos Coal Mines
would have provided SMC knowledge of the activities which are germane, related, or incident to the
power to use it. But it did not even require Savellon to produce the same.

SMC's negligence was further compounded by its failure to verify if Bacaltos Coal Mines owned a vessel.
A party desiring to charter a vessel must satisfy itself that the other party is the owner of the vessel or is
at least entitled to its possession with power to lease or charter the vessel. In the instant case, SMC
made no such attempt. It merely satisfied itself with the claim of Savellon that the vessel it was leasing
is owned by Bacaltos Coal Mines and relied on the presentation of the Authorization as well as its test
on the seaworthiness of the vessel. Valdescona thus declared on direct examination as follows:

In October, a certain Rene Savellon called our office offering us shipping services. So I told him to give us
a formal proposal and also for him to come to our office so that we can go over his proposal and
formally discuss his offer.

Did Mr. Rene Savellon go to your office?

Few days later he came to our office and gave us his proposal verbally offering a vessel for us to use for
our cargo.
Q

Did he mention the owner of that vessel?

Yes, sir. That it is Bacaltos.

Did he present a document to you?

Yes, sir. He presented to us the authorization.

When Mr. Rene Savellon presented to you the authorization what did you do?

On the strength of that authorization we initially asked him for us to check the vessel to see its sea
worthiness, and we assigned our in-house surveyor to check the sea worthiness of the vessel which was
on drydock that time in Danao.

What was the result of your inspection?

A:

We found out the vessel's sea worthiness to be our cargo carrier.

Q:

After that what did you do?

A:

After that we were discussing the condition of the contract.

Q:

Were you able to execute that contract?

A:

Yes, sir.[21]

He further declared as follows:

Q

When you entered into a trip charter contract did you check the ownership of M/V Premship?

The representation made by Mr. Rene Savellon was that Bacaltos Coal Mines operates the vessel and on
the strength of the authorization he showed us we were made to believe that it was Bacaltos Coal Mines
that owned it.

COURT: (to witness)

In other words, you just believed Rene Savellon?

Yes, sir.

COURT: (to witness)

You did not check with Bacaltos Coal Mines?

That is the representation he made.

Did he show you document regarding this M/V Premship II?

No document shown.[22]

The Authorization itself does not state that Bacaltos Coal Mines owns any vessel, and since it is clear
therefrom that it is not engaged in shipping but in coal mining or in coal business, SMC should have
required the presentation of pertinent documentary proof of ownership of the vessel to be chartered.
Its in-house surveyor who saw the vessel while drydocked in Danao and thereafter conducted a
seaworthiness test could not have failed to ascertain the registered owner of the vessel. The petitioners
themselves declared in open court that they have not leased any vessel for they do not need it in their
coal operations[23] thereby implying that they do not even own one.

The Court of Appeals' asseveration that there was no need to verify the ownership of the vessel because
such ownership is warranted on the face of the trip charter party begs the question since Savellon's
authority to enter into that contract is the very heart of the controversy.
We are not prepared to accept SMC's contention that the petitioners' claim that they are not engaged in
shipping and do not own any ship is belied by the fact that they maintained a pre-printed business form
known as a "Notice of Readiness" (Exhibit "A-1").[24] This paper is only a photocopy and, despite its
reservation to present the original for purposes of comparison at the next hearing,[25] SMC failed to
produce the latter. This "Notice of Readiness" is not, therefore, the best evidence, hence inadmissible
under Section 3, Rule 130 of the Rules of Court. It is true that when SMC made a formal offer of its
exhibits, the petitioners did not object to the admission of Exhibit "A-1," the "Notice of Readiness,"
under the best evidence rule but on the ground that Savellon was not authorized to enter into the Trip
Charter Party and that the party who signed it, one Elmer Baliquig, is not the petitioners' employee but
of Premier Shipping Lines, the owner of the vessel in question.[26] The petitioners raised the issue of
inadmissibility under the best evidence rule only belatedly in this petition. But although Exhibit "A-1"
remains admissible for not having been timely objected to, it has no probative value as to the ownership
of the vessel.

There is likewise no proof that the petitioners received the consideration of the Trip Charter Party. The
petitioners denied having received it.[27] The evidence for SMC established beyond doubt that it was
Savellon who requested in writing on 19 October 1988 that the check in payment therefor be drawn in
favor of BACALTOS COAL MINES/RENE SAVELLON (Exhibit "B-3") and that SMC drew the check in favor
of RENE SAVELLON IN TRUST FOR BACALTOS COAL MINES (Exhibit "B") and delivered it to Savellon who
thereupon issued a receipt (Exhibit "B-1"). We agree with the petitioners that SMC committed
negligence in drawing the check in the manner aforestated. It even disregarded the request of Savellon
that it be drawn in favor of BACALTOS COAL MINES/RENE SAVELLON. Furthermore, assuming that the
transaction was permitted in the Authorization, the check should still have been drawn in favor of the
principal. SMC then made possible the wrong done. There is an equitable maxim that between two
innocent parties, the one who made it possible for the wrong to be done should be the one to bear the
resulting loss.[28] For this rule to apply, the condition precedent is that both parties must be innocent.
In the present case, however, SMC is guilty of not ascertaining the extent and limits of the authority of
Savellon. In not doing so, SMC dealt with Savellon at its own peril.

Having thus found that SMC was the author of its own damage and that the petitioners are, therefore,
free from any liability, it has become unnecessary to discuss the issue of whether Bacaltos Coal Mines is
a corporation with a personality distinct and separate from German Bacaltos.

WHEREFORE, the instant petition is GRANTED and the challenged decision of 30 September 1993 of the
Court of Appeals in CA-G.R. CV No. 35180 is hereby REVERSED and SET ASIDE and another judgment is
hereby rendered MODIFYING the judgment of the Regional Trial Court of Cebu, Branch 9, in Civil Case
No. CEB-8187 by setting aside the declaration of solidary liability, holding defendant RENE R. SAVELLON
solely liable for the amounts adjudged, and ordering the dismissal of the case as against herein
petitioners.
SO ORDERED.