Professional Documents
Culture Documents
Eduardo
Litonjua,
Jr.
responded
to
the
offer.
Marquez
showed
the
property
to
Eduardo
Litonjua,
Jr.,
and
his
brother
Antonio
K.
Litonjua.
The
Litonjua
siblings
offered
to
buy
the
property
for
P20,000,000.00
cash.
Marquez
apprised
Glanville
of
the
Litonjua
siblings
offer
and
relayed
the
same
to
Delsaux
in
Belgium,
but
the
latter
did
not
respond.
On
October
28,
1986,
Glanville
telexed
Delsaux
in
Belgium,
inquiring
on
his
position/
counterproposal
to
the
offer
of
the
Litonjua
siblings.
It
was
only
on
February
12,
1987
that
Delsaux
sent
a
telex
to
Glanville
stating
that,
based
on
the
"Belgian/Swiss
decision,"
the
final
offer
was
"US$1,000,000.00
and
P2,500,000.00
to
cover
all
existing
obligations
prior
to
final
liquidation."5
Marquez
furnished
Eduardo
Litonjua,
Jr.
with
a
copy
of
the
telex
sent
by
Delsaux.
Litonjua,
Jr.
accepted
the
counterproposal
of
Delsaux.
Marquez
conferred
with
Glanville,
and
in
a
Letter
dated
February
26,
1987,
confirmed
that
the
Litonjua
siblings
had
accepted
the
counter-proposal
of
Delsaux.
He
also
stated
that
the
Litonjua
siblings
would
confirm
full
payment
within
90
days
after
execution
and
preparation
of
all
documents
of
sale,
together
with
the
necessary
governmental
clearances.6
In
1986,
the
management
of
ESAC
grew
concerned
about
the
political
situation
in
the
Philippines
and
wanted
to
stop
its
operations
in
the
country.
The
Committee
for
Asia
of
ESAC
instructed
Michael
Adams,
a
member
of
ECs
Board
of
Directors,
to
dispose
of
the
eight
parcels
of
land.
Adams
engaged
the
services
of
realtor/broker
Lauro
G.
Marquez
so
that
the
properties
could
be
offered
for
sale
to
prospective
buyers.
Glanville
later
showed
the
properties
to
Marquez.
Marquez
thereafter
offered
the
parcels
of
land
and
the
improvements
thereon
to
Eduardo
B.
Litonjua,
Jr.
of
the
Litonjua
&
Company,
Inc.
In
a
Letter
dated
September
12,
1986,
Marquez
declared
that
he
was
authorized
to
sell
the
properties
for
P27,000,000.00
and
that
the
terms
of
the
sale
were
subject
to
negotiation.4
Delsaux
himself
later
sent
a
letter
dated
May
22,
1987,
confirming
that
the
ESAC
Regional
Office
had
decided
not
to
proceed
with
the
sale
of
the
subject
land,
to
wit:
Sometime
later,
Marquez
and
the
Litonjua
brothers
inquired
from
Glanville
when
the
sale
would
be
implemented.
In
a
telex
dated
April
22,
1987,
Glanville
informed
Delsaux
that
he
had
met
with
the
buyer,
which
had
given
him
the
impression
that
"he
is
prepared
to
press
for
a
satisfactory
conclusion
to
the
sale."8
He
also
emphasized
to
Delsaux
that
the
buyers
were
concerned
because
they
would
incur
expenses
in
bank
commitment
fees
as
a
consequence
of
prolonged
period
of
inaction.9
Mr.
L.G.
334
6767
Makati,
Philippines
Makati
L.G.
Marquez,
Stock
Ayala
Metro
Exchange
Marquez
Inc.
Bldg.
Avenue
Manila
Dear
Sir:
Re:
Land
of
Eternit
Corporation
I
would
like
to
confirm
officially
that
our
Group
has
decided
not
to
proceed
with
the
sale
of
the
land
which
was
proposed
to
you.
The
Committee
for
Asia
of
our
Group
met
recently
(meeting
every
six
months)
and
examined
the
position
as
far
as
the
Philippines
are
(sic)
concerned.
Considering
[the]
new
political
situation
since
the
departure
of
MR.
MARCOS
and
a
certain
stabilization
in
the
Philippines,
the
Committee
has
decided
not
to
stop
our
operations
in
Manila.
In
fact,
production
has
started
again
last
week,
and
(sic)
to
recognize
the
participation
in
the
Corporation.
We
regret
that
we
could
not
make
a
deal
with
you
this
time,
but
in
case
the
policy
would
change
at
a
later
state,
we
would
consult
you
again.
x
x
x
Yours
sincerely,
(Sgd.)
C.F.
DELSAUX
cc.
To:
J.
GLANVILLE
(Eternit
Corp.)11
When
apprised
of
this
development,
the
Litonjuas,
through
counsel,
wrote
EC,
demanding
payment
for
damages
they
had
suffered
on
account
of
the
aborted
sale.
EC,
however,
rejected
their
demand.
The
Litonjuas
then
filed
a
complaint
for
specific
performance
and
damages
against
EC
(now
the
Eterton
Multi-Resources
Corporation)
and
the
Far
East
Bank
&
Trust
Company,
and
ESAC
in
the
RTC
of
Pasig
City.
An
amended
complaint
was
filed,
in
which
defendant
EC
was
substituted
by
Eterton
Multi-
Resources
Corporation;
Benito
C.
Tan,
Ruperto
V.
Tan,
Stock
Ha
T.
Tan
and
Deogracias
G.
Eufemio
were
impleaded
as
additional
defendants
on
account
of
their
purchase
of
ESAC
shares
of
stocks
and
were
the
controlling
stockholders
of
EC.
In
their
answer
to
the
complaint,
EC
and
ESAC
alleged
that
since
Eteroutremer
was
not
doing
business
in
the
Philippines,
it
cannot
be
subject
to
the
jurisdiction
of
Philippine
courts;
the
Board
and
stockholders
of
EC
never
approved
any
resolution
to
sell
subject
properties
nor
authorized
Marquez
to
sell
the
same;
and
the
telex
dated
October
28,
1986
of
Jack
Glanville
was
his
own
personal
making
which
did
not
bind
EC.
On
July
3,
1995,
the
trial
court
rendered
judgment
in
favor
of
defendants
and
dismissed
the
amended
complaint.12
The
fallo
of
the
decision
reads:
WHEREFORE,
the
complaint
against
Eternit
Corporation
now
Eterton
Multi-
Resources
Corporation
and
Eteroutremer,
S.A.
is
dismissed
on
the
ground
that
there
is
no
valid
and
binding
sale
between
the
plaintiffs
and
said
defendants.
The
complaint
as
against
Far
East
Bank
and
Trust
Company
is
likewise
dismissed
for
lack
of
cause
of
action.
The
counterclaim
of
Eternit
Corporation
now
Eterton
Multi-Resources
Corporation
and
Eteroutremer,
S.A.
is
also
dismissed
for
lack
of
merit.13
The
trial
court
declared
that
since
the
authority
of
the
agents/realtors
was
not
in
writing,
the
sale
is
void
and
not
merely
unenforceable,
and
as
such,
could
not
have
been
ratified
by
the
principal.
In
any
event,
such
ratification
cannot
be
given
any
retroactive
effect.
Plaintiffs
could
not
assume
that
defendants
had
agreed
to
sell
the
property
without
a
clear
authorization
from
the
corporation
concerned,
that
is,
through
resolutions
of
the
Board
of
Directors
and
stockholders.
The
trial
court
also
pointed
out
that
the
supposed
sale
involves
substantially
all
the
assets
of
defendant
EC
which
would
result
in
the
eventual
total
cessation
of
its
operation.14
The
Litonjuas
appealed
the
decision
to
the
CA,
alleging
that
"(1)
the
lower
court
erred
in
concluding
that
the
real
estate
broker
in
the
instant
case
needed
a
written
authority
from
appellee
corporation
and/or
that
said
broker
had
no
such
written
authority;
and
(2)
the
lower
court
committed
grave
error
of
law
in
holding
that
appellee
corporation
is
not
legally
bound
for
specific
performance
and/or
damages
in
the
absence
of
an
enabling
resolution
of
the
board
of
directors."15
They
averred
that
Marquez
acted
merely
as
a
broker
or
go-between
and
not
as
agent
of
the
corporation;
hence,
it
was
not
necessary
for
him
to
be
empowered
as
such
by
any
written
authority.
They
further
claimed
that
an
agency
by
estoppel
was
created
when
the
corporation
clothed
Marquez
with
apparent
authority
to
negotiate
for
the
sale
of
the
properties.
However,
since
it
was
a
bilateral
contract
to
buy
and
sell,
it
was
equivalent
to
a
perfected
contract
of
sale,
which
the
corporation
was
obliged
to
consummate.
In
reply,
EC
alleged
that
Marquez
had
no
written
authority
from
the
Board
of
Directors
to
bind
it;
neither
were
Glanville
and
Delsaux
authorized
by
its
board
of
directors
to
offer
the
property
for
sale.
Since
the
sale
involved
substantially
all
of
the
corporations
assets,
it
would
necessarily
need
the
authority
from
the
stockholders.
On
June
16,
2000,
the
CA
rendered
judgment
affirming
the
decision
of
the
RTC.
16
The
Litonjuas
filed
a
motion
for
reconsideration,
which
was
also
denied
by
the
appellate
court.
The
CA
ruled
that
Marquez,
who
was
a
real
estate
broker,
was
a
special
agent
within
the
purview
of
Article
1874
of
the
New
Civil
Code.
Under
Section
23
of
the
Corporation
Code,
he
needed
a
special
authority
from
ECs
board
of
directors
to
bind
such
corporation
to
the
sale
of
its
properties.
Delsaux,
who
was
merely
the
representative
of
ESAC
(the
majority
stockholder
of
EC)
had
no
authority
to
bind
the
latter.
The
CA
pointed
out
that
Delsaux
was
not
even
a
member
of
the
board
of
directors
of
EC.
Moreover,
the
Litonjuas
failed
to
prove
that
an
agency
by
estoppel
had
been
created
between
the
parties.
In
the
instant
petition
for
review,
petitioners
aver
that
I
THE
COURT
OF
APPEALS
ERRED
IN
HOLDING
THAT
THERE
WAS
NO
PERFECTED
CONTRACT
OF
SALE.
II
THE
APPELLATE
COURT
COMMITTED
GRAVE
ERROR
OF
LAW
IN
HOLDING
THAT
MARQUEZ
NEEDED
A
WRITTEN
AUTHORITY
FROM
RESPONDENT
ETERNIT
BEFORE
THE
SALE
CAN
BE
PERFECTED.
III
THE
COURT
OF
APPEALS
ERRED
IN
NOT
HOLDING
THAT
GLANVILLE
AND
DELSAUX
HAVE
THE
NECESSARY
AUTHORITY
TO
SELL
THE
SUBJECT
PROPERTIES,
OR
AT
THE
VERY
LEAST,
WERE
KNOWINGLY
PERMITTED
BY
RESPONDENT
ETERNIT
TO
DO
ACTS
WITHIN
THE
SCOPE
OF
AN
APPARENT
AUTHORITY,
AND
THUS
HELD
THEM
OUT
TO
THE
PUBLIC
AS
POSSESSING
POWER
TO
SELL
THE
SAID
PROPERTIES.17
Petitioners
maintain
that,
based
on
the
facts
of
the
case,
there
was
a
perfected
contract
of
sale
of
the
parcels
of
land
and
the
improvements
thereon
for
"US$1,000,000.00
plus
P2,500,000.00
to
cover
obligations
prior
to
final
liquidation."
Petitioners
insist
that
they
had
accepted
the
counter-offer
of
respondent
EC
and
that
before
the
counter-offer
was
withdrawn
by
respondents,
the
acceptance
was
made
known
to
them
through
real
estate
broker
Marquez.
Petitioners
assert
that
there
was
no
need
for
a
written
authority
from
the
Board
of
Directors
of
EC
for
Marquez
to
validly
act
as
broker/middleman/intermediary.
As
broker,
Marquez
was
not
an
ordinary
agent
because
his
authority
was
of
a
special
and
limited
character
in
most
respects.
His
only
job
as
a
broker
was
to
look
for
a
buyer
and
to
bring
together
the
parties
to
the
transaction.
He
was
not
authorized
to
sell
the
properties
or
to
make
a
binding
contract
to
respondent
EC;
hence,
petitioners
argue,
Article
1874
of
the
New
Civil
Code
does
not
apply.
In
any
event,
petitioners
aver,
what
is
important
and
decisive
was
that
Marquez
was
able
to
communicate
both
the
offer
and
counter-offer
and
their
acceptance
of
respondent
ECs
counter-offer,
resulting
in
a
perfected
contract
of
sale.
Petitioners
posit
that
the
testimonial
and
documentary
evidence
on
record
amply
shows
that
Glanville,
who
was
the
President
and
General
Manager
of
respondent
EC,
and
Delsaux,
who
was
the
Managing
Director
for
ESAC
Asia,
had
the
necessary
authority
to
sell
the
subject
property
or,
at
least,
had
been
allowed
by
respondent
EC
to
hold
themselves
out
in
the
public
as
having
the
power
to
sell
the
subject
properties.
Petitioners
identified
such
evidence,
thus:
1.
The
testimony
of
Marquez
that
he
was
chosen
by
Glanville
as
the
then
President
and
General
Manager
of
Eternit,
to
sell
the
properties
of
said
corporation
to
any
interested
party,
which
authority,
as
hereinabove
discussed,
need
not
be
in
writing.
2.
The
fact
that
the
NEGOTIATIONS
for
the
sale
of
the
subject
properties
spanned
SEVERAL
MONTHS,
from
1986
to
1987;
3.
The
COUNTER-OFFER
made
by
Eternit
through
GLANVILLE
to
sell
its
properties
to
the
Petitioners;
4.
The
GOOD
FAITH
of
Petitioners
in
believing
Eternits
offer
to
sell
the
properties
as
evidenced
by
the
Petitioners
ACCEPTANCE
of
the
counter-offer;
By
way
of
comment,
respondents
aver
that
the
issues
raised
by
the
petitioners
are
factual,
hence,
are
proscribed
by
Rule
45
of
the
Rules
of
Court.
On
the
merits
of
the
petition,
respondents
EC
(now
EMC)
and
ESAC
reiterate
their
submissions
in
the
CA.
They
maintain
that
Glanville,
Delsaux
and
Marquez
had
no
authority
from
the
stockholders
of
respondent
EC
and
its
Board
of
Directors
to
offer
the
properties
for
sale
to
the
petitioners,
or
to
any
other
person
or
entity
for
that
matter.
They
assert
that
the
decision
and
resolution
of
the
CA
are
in
accord
with
law
and
the
evidence
on
record,
and
should
be
affirmed
in
toto.
Petitioners
aver
in
their
subsequent
pleadings
that
respondent
EC,
through
Glanville
and
Delsaux,
conformed
to
the
written
authority
of
Marquez
to
sell
the
properties.
The
authority
of
Glanville
and
Delsaux
to
bind
respondent
EC
is
evidenced
by
the
fact
that
Glanville
and
Delsaux
negotiated
for
the
sale
of
90%
of
stocks
of
respondent
EC
to
Ruperto
Tan
on
June
1,
1997.
Given
the
significance
of
their
positions
and
their
duties
in
respondent
EC
at
the
time
of
the
transaction,
and
the
fact
that
respondent
ESAC
owns
90%
of
the
shares
of
stock
of
respondent
EC,
a
formal
resolution
of
the
Board
of
Directors
would
be
a
mere
ceremonial
formality.
What
is
important,
petitioners
maintain,
is
that
Marquez
was
able
to
communicate
the
offer
of
respondent
EC
and
the
petitioners
acceptance
thereof.
There
was
no
time
that
they
acted
without
the
knowledge
of
respondents.
In
fact,
respondent
EC
never
repudiated
the
acts
of
Glanville,
Marquez
and
Delsaux.
The
petition
has
no
merit.
Anent
the
first
issue,
we
agree
with
the
contention
of
respondents
that
the
issues
raised
by
petitioner
in
this
case
are
factual.
Whether
or
not
Marquez,
Glanville,
and
Delsaux
were
authorized
by
respondent
EC
to
act
as
its
agents
relative
to
the
sale
of
the
properties
of
respondent
EC,
and
if
so,
the
boundaries
of
their
authority
as
agents,
is
a
question
of
fact.
In
the
absence
of
express
written
terms
creating
the
relationship
of
an
agency,
the
existence
of
an
agency
is
a
fact
question.20
Whether
an
agency
by
estoppel
was
created
or
whether
a
person
acted
within
the
bounds
of
his
apparent
authority,
and
whether
the
principal
is
estopped
to
deny
the
apparent
authority
of
its
agent
are,
likewise,
questions
of
fact
to
be
resolved
on
the
basis
of
the
evidence
on
record.21
The
findings
of
the
trial
court
on
such
issues,
as
affirmed
by
the
CA,
are
conclusive
on
the
Court,
absent
evidence
that
the
trial
and
appellate
courts
ignored,
misconstrued,
or
misapplied
facts
and
circumstances
of
substance
which,
if
considered,
would
warrant
a
modification
or
reversal
of
the
outcome
of
the
case.22
It
must
be
stressed
that
issues
of
facts
may
not
be
raised
in
the
Court
under
Rule
45
of
the
Rules
of
Court
because
the
Court
is
not
a
trier
of
facts.
It
is
not
to
re-
examine
and
assess
the
evidence
on
record,
whether
testimonial
and
documentary.
There
are,
however,
recognized
exceptions
where
the
Court
may
delve
into
and
resolve
factual
issues,
namely:
(1)
When
the
conclusion
is
a
finding
grounded
entirely
on
speculations,
surmises,
or
conjectures;
(2)
when
the
inference
made
is
manifestly
mistaken,
absurd,
or
impossible;
(3)
when
there
is
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
of
the
Court
of
Appeals
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
Court
of
Appeals
manifestly
overlooked
certain
relevant
facts
not
disputed
by
the
parties,
which,
if
properly
considered,
would
justify
a
different
conclusion;
and
(10)
when
the
findings
of
fact
of
the
Court
of
Appeals
are
premised
on
the
absence
of
evidence
and
are
contradicted
by
the
evidence
on
record.23
We
have
reviewed
the
records
thoroughly
and
find
that
the
petitioners
failed
to
establish
that
the
instant
case
falls
under
any
of
the
foregoing
exceptions.
Indeed,
the
assailed
decision
of
the
Court
of
Appeals
is
supported
by
the
evidence
on
record
and
the
law.
It
was
the
duty
of
the
petitioners
to
prove
that
respondent
EC
had
decided
to
sell
its
properties
and
that
it
had
empowered
Adams,
Glanville
and
Delsaux
or
Marquez
to
offer
the
properties
for
sale
to
prospective
buyers
and
to
accept
any
counter-offer.
Petitioners
likewise
failed
to
prove
that
their
counter-offer
had
been
accepted
by
respondent
EC,
through
Glanville
and
Delsaux.
It
must
be
stressed
that
when
specific
performance
is
sought
of
a
contract
made
with
an
agent,
the
agency
must
be
established
by
clear,
certain
and
specific
proof.24
Section
23
of
Batas
Pambansa
Bilang
68,
otherwise
known
as
the
Corporation
Code
of
the
Philippines,
provides:
SEC.
23.
The
Board
of
Directors
or
Trustees.
Unless
otherwise
provided
in
this
Code,
the
corporate
powers
of
all
corporations
formed
under
this
Code
shall
be
exercised,
all
business
conducted
and
all
property
of
such
corporations
controlled
and
held
by
the
board
of
directors
or
trustees
to
be
elected
from
among
the
holders
of
stocks,
or
where
there
is
no
stock,
from
among
the
members
of
the
corporation,
who
shall
hold
office
for
one
(1)
year
and
until
their
successors
are
elected
and
qualified.
Indeed,
a
corporation
is
a
juridical
person
separate
and
distinct
from
its
members
or
stockholders
and
is
not
affected
by
the
personal
rights,
obligations
and
transactions
of
the
latter.25
It
may
act
only
through
its
board
of
directors
or,
when
authorized
either
by
its
by-laws
or
by
its
board
resolution,
through
its
officers
or
agents
in
the
normal
course
of
business.
The
general
principles
of
agency
govern
the
relation
between
the
corporation
and
its
officers
or
agents,
subject
to
the
articles
of
incorporation,
by-laws,
or
relevant
provisions
of
law.26
Under
Section
36
of
the
Corporation
Code,
a
corporation
may
sell
or
convey
its
real
properties,
subject
to
the
limitations
prescribed
by
law
and
the
Constitution,
as
follows:
SEC.
36.
Corporate
powers
and
capacity.
Every
corporation
incorporated
under
this
Code
has
the
power
and
capacity:
x
x
x
x
7.
To
purchase,
receive,
take
or
grant,
hold,
convey,
sell,
lease,
pledge,
mortgage
and
otherwise
deal
with
such
real
and
personal
property,
including
securities
and
bonds
of
other
corporations,
as
the
transaction
of
a
lawful
business
of
the
corporation
may
reasonably
and
necessarily
require,
subject
to
the
limitations
prescribed
by
the
law
and
the
Constitution.
The
property
of
a
corporation,
however,
is
not
the
property
of
the
stockholders
or
members,
and
as
such,
may
not
be
sold
without
express
authority
from
the
board
of
directors.27
Physical
acts,
like
the
offering
of
the
properties
of
the
corporation
for
sale,
or
the
acceptance
of
a
counter-offer
of
prospective
buyers
of
such
properties
and
the
execution
of
the
deed
of
sale
covering
such
property,
can
be
performed
by
the
corporation
only
by
officers
or
agents
duly
authorized
for
the
purpose
by
corporate
by-laws
or
by
specific
acts
of
the
board
of
directors.28
Absent
such
valid
delegation/authorization,
the
rule
is
that
the
declarations
of
an
individual
director
relating
to
the
affairs
of
the
corporation,
but
not
in
the
course
of,
or
connected
with,
the
performance
of
authorized
duties
of
such
director,
are
not
binding
on
the
corporation.29
While
a
corporation
may
appoint
agents
to
negotiate
for
the
sale
of
its
real
properties,
the
final
say
will
have
to
be
with
the
board
of
directors
through
its
officers
and
agents
as
authorized
by
a
board
resolution
or
by
its
by-laws.30
An
unauthorized
act
of
an
officer
of
the
corporation
is
not
binding
on
it
unless
the
latter
ratifies
the
same
expressly
or
impliedly
by
its
board
of
directors.
Any
sale
of
real
property
of
a
corporation
by
a
person
purporting
to
be
an
agent
thereof
but
without
written
authority
from
the
corporation
is
null
and
void.
The
declarations
of
the
agent
alone
are
generally
insufficient
to
establish
the
fact
or
extent
of
his/her
authority.31
petitioner,
D
E
C
I
S
I
O
N
TINGA,
J.:
Before
us
is
a
Petition
for
Review
on
Certiorari
under
Rule
45,
assailing
the
decision
of
the
Sixteenth
Division
of
the
respondent
Court
of
Appeals
promulgated
on
21
December
19941,
which
affirmed
in
toto
the
decision
handed
down
by
the
Regional
Trial
Court
(RTC)
of
Pasay
City.2
The
case
arose
when
on
11
August
1981,
private
respondent
Aurora
Queao
(Queao)
filed
a
complaint
before
the
Pasay
City
RTC
for
cancellation
of
a
Real
Estate
Mortgage
she
had
entered
into
with
petitioner
Celestina
Naguiat
(Naguiat).
The
RTC
rendered
a
decision,
declaring
the
questioned
Real
Estate
Mortgage
void,
which
Naguiat
appealed
to
the
Court
of
Appeals.
After
the
Court
of
Appeals
upheld
the
RTC
decision,
Naguiat
instituted
the
present
petition.1vvphi1.nt
The
operative
facts
follow:
Queao
applied
with
Naguiat
for
a
loan
in
the
amount
of
Two
Hundred
Thousand
Pesos
(P200,000.00),
which
Naguiat
granted.
On
11
August
1980,
Naguiat
indorsed
to
Queao
Associated
Bank
Check
No.
090990
(dated
11
August
1980)
for
the
amount
of
Ninety
Five
Thousand
Pesos
(P95,000.00),
which
was
earlier
issued
to
Naguiat
by
the
Corporate
Resources
Financing
Corporation.
She
also
issued
her
own
Filmanbank
Check
No.
065314,
to
the
order
of
Queao,
also
dated
11
August
1980
and
for
the
amount
of
Ninety
Five
Thousand
Pesos
(P95,000.00).
The
proceeds
of
these
checks
were
to
constitute
the
loan
granted
by
Naguiat
to
Queao.3
To
secure
the
loan,
Queao
executed
a
Deed
of
Real
Estate
Mortgage
dated
11
August
1980
in
favor
of
Naguiat,
and
surrendered
to
the
latter
the
owners
duplicates
of
the
titles
covering
the
mortgaged
properties.4
On
the
same
day,
the
mortgage
deed
was
notarized,
and
Queao
issued
to
Naguiat
a
promissory
note
for
the
amount
of
TWO
HUNDRED
THOUSAND
PESOS
(P200,000.00),
with
interest
at
12%
per
annum,
payable
on
11
September
1980.5
Queao
also
issued
a
Security
Bank
and
Trust
Company
check,
postdated
11
September
1980,
for
the
amount
of
TWO
HUNDRED
THOUSAND
PESOS
(P200,000.00)
and
payable
to
the
order
of
Naguiat.
Upon
presentment
on
its
maturity
date,
the
Security
Bank
check
was
dishonored
for
insufficiency
of
funds.
On
the
following
day,
12
September
1980,
Queao
requested
Security
Bank
to
stop
payment
of
her
postdated
check,
but
the
bank
rejected
the
request
pursuant
to
its
policy
not
to
honor
such
requests
if
the
check
is
drawn
against
insufficient
funds.6
On
16
October
1980,
Queao
received
a
letter
from
Naguiats
lawyer,
demanding
settlement
of
the
loan.
Shortly
thereafter,
Queao
and
one
Ruby
Ruebenfeldt
(Ruebenfeldt)
met
with
Naguiat.
At
the
meeting,
Queao
told
Naguiat
that
she
did
not
receive
the
proceeds
of
the
loan,
adding
that
the
checks
were
retained
by
Ruebenfeldt,
who
purportedly
was
Naguiats
agent.7
Naguiat
applied
for
the
extrajudicial
foreclosure
of
the
mortgage
with
the
Sheriff
of
Rizal
Province,
who
then
scheduled
the
foreclosure
sale
on
14
August
1981.
Three
days
before
the
scheduled
sale,
Queao
filed
the
case
before
the
Pasay
City
RTC,8
seeking
the
annulment
of
the
mortgage
deed.
The
trial
court
eventually
stopped
the
auction
sale.9
On
8
March
1991,
the
RTC
rendered
judgment,
declaring
the
Deed
of
Real
Estate
Mortgage
null
and
void,
and
ordering
Naguiat
to
return
to
Queao
the
owners
duplicates
of
her
titles
to
the
mortgaged
lots.10
Naguiat
appealed
the
decision
before
the
Court
of
Appeals,
making
no
less
than
eleven
assignments
of
error.
The
Court
of
Appeals
promulgated
the
decision
now
assailed
before
us
that
affirmed
in
toto
the
RTC
decision.
Hence,
the
present
petition.
Naguiat
questions
the
findings
of
facts
made
by
the
Court
of
Appeals,
especially
on
the
issue
of
whether
Queao
had
actually
received
the
loan
proceeds
which
were
supposed
to
be
covered
by
the
two
checks
Naguiat
had
issued
or
indorsed.
Naguiat
claims
that
being
a
notarial
instrument
or
public
document,
the
mortgage
deed
enjoys
the
presumption
that
the
recitals
therein
are
true.
Naguiat
also
questions
the
admissibility
of
various
representations
and
pronouncements
of
Ruebenfeldt,
invoking
the
rule
on
the
non-binding
effect
of
the
admissions
of
third
persons.11
The
resolution
of
the
issues
presented
before
this
Court
by
Naguiat
involves
the
determination
of
facts,
a
function
which
this
Court
does
not
exercise
in
an
appeal
by
certiorari.
Under
Rule
45
which
governs
appeal
by
certiorari,
only
questions
of
law
may
be
raised12
as
the
Supreme
Court
is
not
a
trier
of
facts.13
The
resolution
of
factual
issues
is
the
function
of
lower
courts,
whose
findings
on
these
matters
are
received
with
respect
and
are
in
fact
generally
binding
on
the
Supreme
Court.14
A
question
of
law
which
the
Court
may
pass
upon
must
not
involve
an
examination
of
the
probative
value
of
the
evidence
presented
by
the
litigants.15
There
is
a
question
of
law
in
a
given
case
when
the
doubt
or
difference
arises
as
to
what
the
law
is
on
a
certain
state
of
facts;
there
is
a
question
of
fact
when
the
doubt
or
difference
arises
as
to
the
truth
or
the
falsehood
of
alleged
facts.16
Surely,
there
are
established
exceptions
to
the
rule
on
the
conclusiveness
of
the
findings
of
facts
of
the
lower
courts.17
But
Naguiats
case
does
not
fall
under
any
of
the
exceptions.
In
any
event,
both
the
decisions
of
the
appellate
and
trial
courts
are
supported
by
the
evidence
on
record
and
the
applicable
laws.
Against
the
common
finding
of
the
courts
below,
Naguiat
vigorously
insists
that
Queao
received
the
loan
proceeds.
Capitalizing
on
the
status
of
the
mortgage
deed
as
a
public
document,
she
cites
the
rule
that
a
public
document
enjoys
the
presumption
of
validity
and
truthfulness
of
its
contents.
The
Court
of
Appeals,
however,
is
correct
in
ruling
that
the
presumption
of
truthfulness
of
the
recitals
in
a
public
document
was
defeated
by
the
clear
and
convincing
evidence
in
this
case
that
pointed
to
the
absence
of
consideration.18
This
Court
has
held
that
the
presumption
of
truthfulness
engendered
by
notarized
documents
is
rebuttable,
yielding
as
it
does
to
clear
and
convincing
evidence
to
the
contrary,
as
in
this
case.19
On
the
other
hand,
absolutely
no
evidence
was
submitted
by
Naguiat
that
the
checks
she
issued
or
endorsed
were
actually
encashed
or
deposited.
The
mere
issuance
of
the
checks
did
not
result
in
the
perfection
of
the
contract
of
loan.
For
the
Civil
Code
provides
that
the
delivery
of
bills
of
exchange
and
mercantile
documents
such
as
checks
shall
produce
the
effect
of
payment
only
when
they
have
been
cashed.20
It
is
only
after
the
checks
have
produced
the
effect
of
payment
that
the
contract
of
loan
may
be
deemed
perfected.
Art.
1934
of
the
Civil
Code
provides:
"An
accepted
promise
to
deliver
something
by
way
of
commodatum
or
simple
loan
is
binding
upon
the
parties,
but
the
commodatum
or
simple
loan
itself
shall
not
be
perfected
until
the
delivery
of
the
object
of
the
contract."
A
loan
contract
is
a
real
contract,
not
consensual,
and,
as
such,
is
perfected
only
upon
the
delivery
of
the
object
of
the
contract.21
In
this
case,
the
objects
of
the
contract
are
the
loan
proceeds
which
Queao
would
enjoy
only
upon
the
encashment
of
the
checks
signed
or
indorsed
by
Naguiat.
If
indeed
the
checks
were
encashed
or
deposited,
Naguiat
would
have
certainly
presented
the
corresponding
documentary
evidence,
such
as
the
returned
checks
and
the
pertinent
bank
records.
Since
Naguiat
presented
no
such
proof,
it
follows
that
the
checks
were
not
encashed
or
credited
to
Queaos
account.1awphi1.nt
Naguiat
questions
the
admissibility
of
the
various
written
representations
made
by
Ruebenfeldt
on
the
ground
that
they
could
not
bind
her
following
the
res
inter
alia
acta
alteri
nocere
non
debet
rule.
The
Court
of
Appeals
rejected
the
(30%)
percent.
Signed
Mr.
Primitive
Owner
and
Gen.
Manager
Siasat
On
October
16,
1974,
the
first
delivery
of
7,933
flags
was
made
by
the
United
Flag
Industry.
The
next
day,
on
October
17,
1974,
the
respondent's
authority
to
represent
the
United
Flag
Industry
was
revoked
by
petitioner
Primitivo
Siasat.
According
to
the
findings
of
the
courts
below,
Siasat,
after
receiving
the
payment
of
P469,980.00
on
October
23,
1974
for
the
first
delivery,
tendered
the
amount
of
P23,900.00
or
five
percent
(5%)
of
the
amount
received,
to
the
respondent
as
payment
of
her
commission.
The
latter
allegedly
protested.
She
refused
to
accept
the
said
amount
insisting
on
the
30%
commission
agreed
upon.
The
respondent
was
prevailed
upon
to
accept
the
same,
however,
because
of
the
assurance
of
the
petitioners
that
they
would
pay
the
commission
in
full
after
they
delivered
the
other
half
of
the
order.
The
respondent
states
that
she
later
on
learned
that
petitioner
Siasat
had
already
received
payment
for
the
second
delivery
of
7,833
flags.
When
she
confronted
the
petitioners,
they
vehemently
denied
receipt
of
the
payment,
at
the
same
time
claiming
that
the
respondent
had
no
participation
whatsoever
with
regard
to
the
second
delivery
of
flags
and
that
the
agency
had
already
been
revoked.
The
respondent
originally
filed
a
complaint
with
the
Complaints
and
Investigation
Office
in
Malacaang
but
when
nothing
came
of
the
complaint,
she
filed
an
action
in
the
Court
of
First
Instance
of
Manila
to
recover
the
following
commissions:
25%,
as
balance
on
the
first
delivery
and
30%,
on
the
second
delivery.
The
trial
court
decided
in
favor
of
the
respondent.
The
dispositive
portion
of
the
decision
reads
as
follows:
WHEREFORE,
judgment
is
hereby
rendered
sentencing
Primitivo
Siasat
to
pay
to
the
plaintiff
the
sum
of
P281,988.00,
minus
the
sum
P23,900.00,
with
legal
interest
from
the
date
of
this
decision,
and
ordering
the
defendants
to
pay
jointly
and
solidarily
the
sum
of
P25,000.00
as
moral
damages,
and
P25,000.00
as
attorney's
fees,
also
with
legal
interest
from
the
date
of
this
decision,
and
the
costs.
The
decision
was
affirmed
in
toto
by
the
Intermediate
Appellate
Court.
After
their
motion
for
reconsideration
was
denied,
the
petitioners
went
to
this
Court
on
a
petition
for
review
on
August
6,
1984.
In
assailing
the
appellate
court's
decision,
the
petition
tenders
the
following
arguments:
first,
the
authorization
making
the
respondent
the
petitioner's
representative
merely
states
that
she
could
deal
with
any
entity
in
connection
with
the
marketing
of
their
products
for
a
commission
of
30%.
There
was
no
specific
authorization
for
the
sale
of
15,666
Philippine
flags
to
the
Department;
second,
there
were
two
transactions
involved
evidenced
by
the
separate
purchase
orders
and
separate
delivery
receipts,
Exhibit
6-C
for
the
purchase
and
deliver
on
October
16,
1974,
and
Exhibits
7
to
7-C,
for
the
purchase
and
delivery
on
November
6,
1974.
The
revocation
of
agency
effected
by
the
parties
with
mutual
consent
on
October
17,
1974,
therefore,
forecloses
the
respondent's
claim
of
30%
commission
on
the
second
transaction;
and
last,
there
was
no
basis
for
the
granting
of
attorney's
fees
and
moral
damages
because
there
was
no
showing
of
bad
faith
on
the
part
of
the
petitioner.
It
was
respondent
who
showed
bad
faith
in
denying
having
received
her
commission
on
the
first
delivery.
The
petitioner's
counterclaim,
therefore,
should
have
been
granted.
This
petition
was
initially
dismissed
for
lack
of
merit
in
a
minute
resolution.On
a
motion
for
reconsideration,
however,this
Court
give
due
course
to
the
petition
on
November
14,
1984.
After
a
careful
review
of
the
records,
we
are
constrained
to
sustain
with
some
modifications
the
decision
of
the
appellate
court.
We
find
respondent's
argument
regarding
respondent's
incapacity
to
represent
them
in
the
transaction
with
the
Department
untenable.
There
are
several
kinds
of
agents.
To
quote
a
commentator
on
the
matter:
An
agent
may
be
(1)
universal:
(2)
general,
or
(3)
special.
A
universal;
agent
is
one
authorized
to
do
all
acts
for
his
principal
which
can
lawfully
be
delegated
to
an
agent.
So
far
as
such
a
condition
is
possible,
such
an
agent
may
be
said
to
have
universal
authority.
(Mec.
Sec.
58).
A
general
agent
is
one
authorized
to
do
all
acts
pertaining
to
a
business
of
a
certain
kind
or
at
a
particular
place,
or
all
acts
pertaining
to
a
business
of
a
particular
class
or
series.
He
has
usually
authority
either
expressly
conferred
in
general
terms
or
in
effect
made
general
by
the
usages,
customs
or
nature
of
the
business
which
he
is
authorized
to
transact.
An
agent,
therefore,
who
is
empowered
to
transact
all
the
business
of
his
principal
of
a
particular
kind
or
in
a
particular
involved
two
separate
contracts
because
there
were
two
purchase
orders
and
two
deliveries.
The
petitioners'
evidence
is
overcome
by
other
pieces
of
evidence
proving
that
there
was
only
one
transaction.
The
indorsement
of
then
Assistant
Executive
Secretary
Roberto
Reyes
to
the
Budget
Commission
on
September
3,
1974
(Exhibit
"C")
attests
to
the
fact
that
out
of
the
total
budget
of
the
Department
for
the
fiscal
year
1975,
"P1,000,000.00
is
for
the
purchase
of
national
flags."
This
is
also
reflected
in
the
Financial
and
Work
Plan
Request
for
Allotment
(Exhibit
"F")
submitted
by
Secretary
Juan
Manuel
for
fiscal
year
1975
which
however,
divided
the
allocation
and
release
of
the
funds
into
three,
corresponding
to
the
second,
third,
and
fourth
quarters
of
the
said
year.
Later
correspondence
between
the
Department
and
the
Budget
Commission
(Exhibits
"D"
and
"E")
show
that
the
first
allotment
of
P500.000.00
was
released
during
the
second
quarter.
However,
due
to
the
necessity
of
furnishing
all
of
the
public
schools
in
the
country
with
the
Philippine
flag,
Secretary
Manuel
requested
for
the
immediate
release
of
the
programmed
allotments
intended
for
the
third
and
fourth
quarters.
These
circumstances
explain
why
two
purchase
orders
and
two
deliveries
had
to
be
made
on
one
transaction.
The
petitioners'
evidence
does
not
necessarily
prove
that
there
were
two
separate
transactions.
Exhibit
"6"
is
a
general
indorsement
made
by
Secretary
Manuel
for
the
purchase
of
the
national
flags
for
public
schools.
It
contains
no
reference
to
the
number
of
flags
to
be
ordered
or
the
amount
of
funds
to
be
released.
Exhibit
"7"
is
a
letter
request
for
a
"similar
authority"
to
purchase
flags
from
the
United
Flag
Industry.
This
was,
however,
written
by
Dr.
Narciso
Albarracin
who
was
appointed
Acting
Secretary
of
the
Department
after
Secretary
Manuel's
tenure,
and
who
may
not
have
known
the
real
nature
of
the
transaction.
If
the
contracts
were
separate
and
distinct
from
one
another,
the
whole
or
at
least
a
substantial
part
of
the
government's
supply
procurement
process
would
have
been
repeated.
In
this
case,
what
were
issued
were
mere
indorsements
for
the
release
of
funds
and
authorization
for
the
next
purchase.
Since
only
one
transaction
was
involved,
we
deny
the
petitioners'
contention
that
respondent
Nacianceno
is
not
entitled
to
the
stipulated
commission
on
the
second
delivery
because
of
the
revocation
of
the
agency
effected
after
the
first
delivery.
The
revocation
of
agency
could
not
prevent
the
respondent
from
earning
her
commission
because
as
the
trial
court
opined,
it
came
too
late,
the
contract
of
sale
having
been
already
perfected
and
partly
executed.
In
Macondray
&
Co.
v.
Sellner
(33
Phil.
370,
377),
a
case
analogous
to
this
one
in
principle,
this
Court
held:
the
power
of
attorney
and
alleged
that
his
signature
was
falsified.
He
also
denied
having
seen
or
even
known
Rosemarie
Reyes
and
Imelda
Santos,
the
supposed
witnesses
in
the
execution
of
the
power
of
attorney.
He
vehemently
denied
having
met
or
transacted
with
the
defendant.
Thus,
he
contended
that
the
sale
of
the
property,
and
the
subsequent
transfer
thereof,
were
null
and
void.
Petitioner
Veloso,
therefore,
prayed
that
a
temporary
restraining
order
be
issued
to
prevent
the
transfer
of
the
subject
property;
that
the
General
Power
of
Attorney,
the
Deed
of
Absolute
Sale
and
the
Transfer
Certificate
of
Title
No.
180685
be
annulled;
and
the
subject
property
be
reconveyed
to
him.
Defendant
Aglaloma
Escario
in
her
answer
alleged
that
she
was
a
buyer
in
good
faith
and
denied
any
knowledge
of
the
alleged
irregularity.
She
allegedly
relied
on
the
general
power
of
attorney
of
Irma
Veloso
which
was
sufficient
in
form
and
substance
and
was
duly
notarized.
She
contended
that
plaintiff
(herein
petitioner),
had
no
cause
of
action
against
her.
In
seeking
for
the
declaration
of
nullity
of
the
documents,
the
real
party
in
interest
was
Irma
Veloso,
the
wife
of
the
plaintiff.
She
should
have
been
impleaded
in
the
case.
In
fact,
Plaintiff's
cause
of
action
should
have
been
against
his
wife,
Irma.
Consequently,
defendant
Escario
prayed
for
the
dismissal
of
the
complaint
and
the
payment
to
her
of
damages.
8
Pre-trial
was
conducted.
The
sole
issue
to
be
resolved
by
the
trial
court
was
whether
or
not
there
was
a
valid
sale
of
the
subject
property.
9
During
the
trial,
plaintiff
(herein
petitioner)
Francisco
Veloso
testified
that
he
acquired
the
subject
property
from
the
Philippine
Building
Corporation,
as
evidenced
by
a
Deed
of
Sale
dated
October
1,
1957.
10
He
married
Irma
Lazatin
on
January
20,
1962.
11
Hence,
the
property
did
not
belong
to
their
conjugal
partnership.
Plaintiff
further
asserted
that
he
did
not
sign
the
power
of
attorney
and
as
proof
that
his
signature
was
falsified,
he
presented
Allied
Bank
Checks
Nos.
16634640,
16634641
and
16634643,
which
allegedly
bore
his
genuine
signature.
Witness
for
the
plaintiff
Atty.
Julian
G.
Tubig
denied
any
participation
in
the
execution
of
the
general
power
of
attorney.
He
attested
that
he
did
not
sign
thereon,
and
the
same
was
never
entered
in
his
Notarial
Register
on
November
29,
1985.
In
the
decision
of
the
trial
court
dated
March
9,
1990,
12
defendant
Aglaloma
Escario
was
adjudged
the
lawful
owner
of
the
property
as
she
was
deemed
an
innocent
purchaser
for
value.
The
assailed
general
power
of
attorney
was
held
to
be
valid
and
sufficient
for
the
purpose.
The
trial
court
ruled
that
there
was
no
need
for
a
special
power
of
attorney
when
the
special
power
was
already
mentioned
in
the
general
one.
It
also
declared
that
plaintiff
failed
to
substantiate
his
allegation
of
fraud.
The
court
also
stressed
that
plaintiff
was
not
entirely
blameless
for
although
he
admitted
to
be
the
only
person
who
had
access
to
the
title
and
other
important
documents,
his
wife
was
still
able
to
possess
the
copy.
Citing
Section
55
of
Act
496,
the
court
held
that
Irma's
possession
and
production
of
the
certificate
of
title
was
deemed
a
conclusive
authority
from
the
plaintiff
to
the
Register
of
Deeds
to
enter
a
new
certificate.
Then
applying
the
principle
of
equitable
estoppel,
plaintiff
was
held
to
bear
the
loss
for
it
was
he
who
made
the
wrong
possible.
Thus:
WHEREFORE,
the
Court
finds
for
the
defendants
and
against
plaintiff
a.
declaring
that
there
was
a
valid
sale
of
the
subject
property
in
favor
of
the
defendant;
b.
denying
all
other
claims
of
the
parties
for
want
of
legal
and
factual
basis.
Without
pronouncement
as
to
costs.
SO
ORDERED.
Not
satisfied
with
the
decision,
petitioner
Veloso
filed
his
appeal
with
the
Court
of
Appeals.
The
respondent
court
affirmed
in
toto
the
findings
of
the
trial
court.
Hence,
this
petition
for
review
before
Us.
This
petition
for
review
was
initially
dismissed
for
failure
to
submit
an
affidavit
of
service
of
a
copy
of
the
petition
on
the
counsel
for
private
respondent.
13
A
motion
for
reconsideration
of
the
resolution
was
filed
but
it
was
denied
in
are
resolution
dated
March
30,
1992.
14
A
second
motion
for
reconsideration
was
filed
and
in
a
resolution
dated
Aug.
3,
1992,
the
motion
was
granted
and
the
petition
for
review
was
reinstated.
15
A
supplemental
petition
was
filed
on
October
9,
1992
with
the
following
assignment
of
errors:
I
The
Court
of
Appeals
committed
a
grave
error
in
not
finding
that
the
forgery
of
the
power
of
attorney
(Exh
.
"C")
had
been
adequately
proven,
despite
the
preponderant
evidence,
and
in
doing
so,
it
has
so
far
departed
from
the
applicable
provisions
of
law
and
the
decisions
of
this
Honorable
Court,
as
to
warrant
the
grant
of
this
petition
for
review
on
certiorari.
II
There
are
principles
of
justice
and
equity
that
warrant
a
review
of
the
decision.
III
The
Court
of
Appeals
erred
in
affirming
the
decision
of
the
trial
court
which
misapplied
the
principle
of
equitable
estoppel
since
the
petitioner
did
not
fail
in
his
duty
of
observing
due
diligence
in
the
safekeeping
of
the
title
to
the
property.
We
find
petitioner's
contentions
not
meritorious.
An
examination
of
the
records
showed
that
the
assailed
power
of
attorney
was
valid
and
regular
on
its
face.
It
was
notarized
and
as
such,
it
carries
the
evidentiary
weight
conferred
upon
it
with
respect
to
its
due
execution.
While
it
is
true
that
it
was
denominated
as
a
general
power
of
attorney,
a
perusal
thereof
revealed
that
it
stated
an
authority
to
sell,
to
wit:
2.
To
buy
or
sell,
hire
or
lease,
mortgage
or
otherwise
hypothecate
lands,
tenements
and
hereditaments
or
other
forms
of
real
property,
more
specifically
TCT
No.
49138,
upon
such
terms
and
conditions
and
under
such
covenants
as
my
said
attorney
shall
deem
fit
and
proper.
16
Thus,
there
was
no
need
to
execute
a
separate
and
special
power
of
attorney
since
the
general
power
of
attorney
had
expressly
authorized
the
agent
or
attorney
in
fact
the
power
to
sell
the
subject
property.
The
special
power
of
attorney
can
be
included
in
the
general
power
when
it
is
specified
therein
the
act
or
transaction
for
which
the
special
power
is
required.
without
notice
that
some
other
person
has
a
right
to,
or
interest
in
such
property
and
pays
a
full
and
fair
price
for
the
same,
at
the
time
of
such
purchase,
or
before
he
has
notice
of
the
claim
or
interest
of
some
other
person
in
the
property.
18
Even
granting
for
the
sake
of
argument,
that
the
petitioner's
signature
was
falsified
and
consequently,
the
power
of
attorney
and
the
deed
of
sale
were
null
and
void,
such
fact
would
not
revoke
the
title
subsequently
issued
in
favor
of
private
respondent
Aglaloma.
In
Tenio-
Obsequio
vs.
Court
of
Appeals,
20
it
was
held,
viz:
The
right
of
an
innocent
purchaser
for
value
must
be
respected
and
protected,
even
if
the
seller
obtained
his
title
through
fraud.
The
remedy
of
the
person
prejudiced
is
to
bring
an
action
for
damages
against
those
who
caused
or
employed
the
fraud,
and
if
the
latter
are
insolvent,
an
action
against
the
Treasurer
of
the
Philippines
may
be
filed
for
recovery
of
damages
against
the
Assurance
Fund.
Finally;
the
trial
court
did
not
err
in
applying
equitable
estoppel
in
this
case.
The
principle
of
equitable
estoppel
states
that
where
one
or
two
innocent
persons
must
suffer
a
loss,
he
who
by
his
conduct
made
the
loss
possible
must
bear
it.
From
the
evidence
adduced,
it
should
be
the
petitioner
who
should
bear
the
loss.
As
the
court
a
quo
found:
spouses
Orbeta.
On
the
same
day,
the
said
heirs
executed
an
Extra-judicial
Settlement
and
Partition
pertaining
to
the
estate
of
their
mother,
Basilisa
Teves-
Orbeta,
which
deed
included
the
latters
alleged
conjugal
share
in
the
subject
land
consisting
of
2,311
square
meters.
In
the
meantime
or
on
29
December
1956,
the
spouses
Juan
Sendiong
and
Exequila
Castellanes
donated
the
subject
land
in
favor
of
Luis
Sendiong
who
therafter
sold
the
easternmost
one-half
(1/2)
undivided
portion
thereof
to
the
spouses
Pretzylou
Sendiong4
on
9
June
1973.
Apparently,
Luis
Sendiong
kept
the
other
undivided
half
for
himself.
Thereafter,
Simeona
Montenegro,
having
apparently
lost
possession
over
the
884-square
meter
portion
that
was
excluded
in
the
1925
sale,
filed
a
complaint
on
25
May
1972
against
Luis
Sendiong
for
recovery
of
possession
of
the
said
portion,
and
damages,
which
was
docketed
as
Civil
Case
No.
5442
of
the
Court
of
First
Instance
of
Negros
Oriental.
The
heirs
of
Basilisa
Teves-Orbeta,
for
their
part,
filed
a
complaint-in-intervention
dated
26
December
1973,
praying
for
the
recovery
of
possession
of
their
portion
in
the
subject
land
comprising
of
2,311
square
meters.
However,
during
the
pendency
of
this
case,
the
case
records
were
destroyed
in
a
fire
which
razed
the
sala
of
the
RTC
hearing
the
complaint.
Said
records
were
not
reconstituted,
and
it
seems
the
complaint
was
never
pursued.
On
18
May
1992,
the
heirs
of
Simeona
Montenegro,
as
well
as
the
heirs
of
the
spouses
Orbetaherein
petitioners
("petitioners")filed
before
the
RTC
of
Negros
Oriental
a
complaint
against
Mr.
&
Mrs.
Benedicto
Pajulas,
otherwise
known
as
the
spouses
Pretzylou
Sendiong,
for
recovery
of
possession,
quieting
of
title
and
damages,
with
a
prayer
for
the
issuance
of
a
writ
of
preliminary
injunction,
docketed
as
Civil
Case
No.
10173,
entitled
"Ma.
Luisa
C.
Locsin,
et
al.
vs.
Mr.
and
Mrs.
Benedicto
Pajulas
@
"Mr.
and
Mrs.
Pretzylou
Sendiong."
Petitioners
asserted
that
Maximo
Orbeta,
whom
they
claim
as
having
sold
the
subject
property
to
the
spouses
Juan
Sendiong
and
Exequila
Castellanes
without
the
consent
of
his
wife,
could
have
conveyed
only
his
conjugal
share
in
the
propertywhich
comprised
of
2,311
square
meters
or
one-half
of
4,622
square
meters
of
the
subject
land
that
Simeona
Montenegro
had
actually
sold
to
spouses
Orbeta.
The
heirs
of
Simeona
Montenegro
also
reiterated
their
claim
over
the
884-square
meter
portion
that
had
been
excluded
in
the
1925
sale.
In
their
Complaint,
petitioners
prayed
that
they
be
declared
"absolute
co-
owners"
of
the
subject
property
except
for
the
"2,311.00
SQUARE
METERS
conveyed
by
Maximo
Orbeta
to
Spouses
Juan
Sendiong
and
Exequila
Castellanes."
In
their
Answer,
dated
11
September
1992,
defendant
spouses
claimed
that
in
the
1925
sale,
Simeona
Montenegro
had
actually
sold
Lot
606
in
its
entirety,
Pretzylou
and
Genosa
Sendiong5
sought
to
appeal
the
decision
by
filing
a
Notice
of
Appeal,
but
the
same
was
denied
by
the
RTC
on
the
ground
that
the
certificate
of
non
forum-shopping
was
signed
by
counsel
and
not
by
the
Sendiongs
themselves.
The
disallowance
of
the
Notice
of
Appeal
was
challenged
before
the
Court
of
Appeals
in
a
Petition
for
Certiorari,
docketed
as
C.A.-G.R.
SP
No.
48943,
but
the
petition
was
denied
by
the
Court
of
Appeals
Fourth
Division
in
a
Decision
dated
30
June
2000.6
A
motion
for
the
reconsideration
of
the
Decision
was
denied
in
a
Resolution
dated
8
January
2001.7
The
appeal
not
having
been
given
due
course,
the
decision
in
Civil
Case
No.
10173
lapsed
into
finality.
On
28
August
2000,
respondent,
represented
by
his
attorney-in-fact
and
daughter
Mae
A.
Sendiong,
filed
a
Petition
for
Annulment
of
Decision
with
a
Prayer
for
a
Temporary
Restraining
Order
and
Writ
of
Preliminary
Injunction
with
the
Court
of
Appeals,
in
respect
to
the
decision
in
Civil
Case
No.
10173.
Respondent,
as
petitioner
therein,
alleged
having
learned
of
the
decision
sought
to
be
annulled
only
in
1999,
as
he
was
not
made
a
party
thereto.
Asserting
his
right
to
the
property
as
an
heir
of
Luis
Sendiong,
respondent
noted
that
the
petitioners
did
not
implead
him
as
a
defendant
in
Civil
Case
No.
10173,
and
that
the
trial
court
had
refused
to
implead
him
as
an
indispensable
party
despite
repeated
motions
to
that
effect
by
the
defendants
in
the
civil
case.
Private
respondent
argued
that
the
decision
in
Civil
Case
No.
10173
encroached
on
the
hereditary
rights
of
himself
and
Lourdes
Sendiong
without
having
"even
given
the
elementary
courtesy
of
due
process."8
On
the
premise
that
he
and
Lourdes
Sendiong
were
indispensable
parties
in
Civil
Case
No.
10173
but
not
made
parties
thereto,
respondent
invoked
Rule
3,
Section
7
of
the
Rules
of
Civil
Procedure
and
jurisprudence
in
positing
that
the
RTC
decision
was
null
and
void.9
Before
the
Court
of
Appeals,
petitioners
argued
that
the
petition
for
annulment
of
judgment
was
fatally
infirm
as
the
certification
on
non-forum
shopping
was
signed
by
the
attorney-in-fact
by
virtue
of
a
General
Power
of
Attorney.
Petitioners
also
alleged
that
the
rule
on
res
judicata
should
apply
considering
that
the
issue
on
whether
respondent
is
an
indispensable
party
had
already
been
passed
upon
by
the
Court
of
Appeals
in
the
decision
in
C.A.-G.R.
SP
No.
48943,
the
petition
for
certiorari
filed
by
Pretzylou
and
Genosa
Sendiong.
In
its
Decision
dated
20
May
2002,
the
Court
of
Appeals
granted
the
petition
for
annulment
of
judgment
and
nullified
the
decision
in
Civil
Case
No.
10173.
It
ruled
that
respondent
and
Lourdes
Sendiong
were
indeed
indispensable
parties
in
Civil
Case
No.
10173,
considering
that
the
complaint
had
prayed
that
petitioners
be
declared
as
absolute
co-owners
of
the
subject
property.
Moreover,
petitioners
had
challenged
the
validity
of
the
donation
of
the
subject
property
to
Luis
Sendiong,
predecessor-in-interest
of
respondent,
and
accordingly,
any
judgment
regarding
petitioners
claims
would
affect
respondents
interests
in
the
subject
land.
Citing
jurisprudence,
the
appellate
.
.
.
.
Verily,
as
an
heir
of
Luis
Sendiong,
the
latter
having
acquired
the
subject
land
from
spouses
Juan
Sendiong
and
Exequila
Castellanes,
petitioners
right
over
his
share
in
the
estate
of
his
deceased
father
would
be
adversely
affected
by
the
assailed
decision
declaring
private
respondents
heirs
of
Simeona
Montenegro
and
heirs
of
spouses
Orbeta,
as
co-owners
of
the
portion
of
the
subject
land
consisting
of
884
square
meters
and
2,311
square
meters,
respectively,
which
consequently
encroached
upon
his
share
as
heir
of
Luis
Sendiong
as
it
involves
a
question
of
ownership
and
not
merely
of
possession.
Needless
to
state,
considering
that
the
complaint
was
for
quieting
of
title
of
the
subject
land,
said
heirs
of
Luis
Sendiong
should
have
been
impleaded
as
indispensable
parties
for
the
assailed
decision
to
bind
and
affect
their
interests.
In
like
manner,
when
an
action
involves
reconveyance
of
property,
owners
of
property
over
which
reconveyance
is
asserted
are
indispensable
parties,
without
whom
no
relief
is
available
and
without
whom
the
court
can
render
no
valid
judgment
and
it
is
the
duty
of
the
plaintiffs
to
implead
all
the
necessary
or
indispensable
parties
for
the
complete
determination
of
the
action
as
a
person
not
included
as
a
party
to
a
case
cannot
be
bound
by
the
decision
made
by
a
court.18
Indeed,
the
Court
could
not
see
how
or
why
respondent
and
Lourdes
Sendiong
could
not
have
been
impleaded
in
Civil
Case
No.
10173
before
the
RTC.
In
the
answer
filed
by
the
defendants
in
Civil
Case
No.
10173,
the
matter
of
the
indispensable
inclusion
of
Paul
and
Lourdes
Sendiong
was
already
raised.
Petitioners
could
have
easily
amended
their
complaint
to
that
effect,
but
they
did
not.
The
RTC
could
have
required
the
inclusion
of
Paul
and
Lourdes
Sendiong
as
party-defendants,
as
prayed
for
by
the
defendants
in
Civil
Case
No.
10173,
but
it
refused
to
do
so.
The
shared
intransigence
of
petitioners
and
the
RTC
in
refusing
to
implead
Paul
and
Lourdes
Sendiong
has
resulted
in
the
ignominy
of
a
void
decision.
The
foregoing
premises
considered,
the
Court
cannot
seriously
consider
petitioners
contention
that
respondents
hereditary
rights,
interests
and
participation
over
the
subject
land
would
not
be
adversely
affected
by
their
complaint.
Petitioners
allege
that
the
question
in
Civil
Case
No.
10173
involves
only
the
recovery
of
possession
from
Pretzylou
Sendiong
of
property
which
they
allege
is
rightfully
theirs.
However,
such
allegation
is
belied
by
the
very
complaint,
which
plainly
prays
that
petitioners
be
adjudged
absolute
co-owners
of
half
of
the
subject
land.
Besides,
as
pointed
out
by
the
Court
of
Appeals,
the
RTC
itself
ruled
against
the
validity
of
the
conveyance
by
Maximo
Orbeta
to
Juan
Sendiong
and
On
23
March
1999,
petitioners
initiated
with
the
RTC
an
action
for
the
annulment
of
REM
constituted
over
the
subject
property
on
the
ground
that
the
same
was
not
covered
by
the
SPA
and
that
the
said
SPA,
at
the
time
the
loan
obligations
were
contracted,
no
longer
had
force
and
effect
since
it
was
previously
revoked
by
Perla
on
10
March
1993,
as
evidenced
by
the
Revocation
of
SPA
signed
by
the
latter.8
Petitioners
likewise
alleged
that
together
with
the
copy
of
the
Revocation
of
SPA,
Perla,
in
a
Letter
dated
23
January
1996,
notified
the
Registry
of
Deeds
of
Quezon
City
that
any
attempt
to
mortgage
or
sell
the
subject
property
must
be
with
her
full
consent
documented
in
the
form
of
an
SPA
duly
authenticated
before
the
Philippine
Consulate
General
in
New
York.
9
In
the
absence
of
authority
to
do
so,
the
REM
constituted
by
Julian
over
the
subject
property
was
null
and
void;
thus,
petitioners
likewise
prayed
that
the
subsequent
extra-judicial
foreclosure
proceedings
and
the
auction
sale
of
the
subject
property
be
also
nullified.
In
its
Answer
with
Compulsory
Counterclaim,10
respondent
averred
that,
contrary
to
petitioners
allegations,
the
SPA
in
favor
of
Julian
included
the
subject
property,
covered
by
one
of
the
titles
specified
in
paragraph
1(b)
thereof,
TCT
No.
RT-
106338
registered
with
the
Registry
of
Deeds
of
Pasig
(now
Makati).
The
subject
property
was
purportedly
registered
previously
under
TCT
No.
T-106338,
and
was
only
subsequently
reconstituted
as
TCT
RT-
18206
(106338).
Moreover,
TCT
No.
T-106338
was
actually
registered
with
the
Registry
of
Deeds
of
Quezon
City
and
not
before
the
Registry
of
Deeds
of
Pasig
(now
Makati).
Respondent
explained
that
the
discrepancy
in
the
designation
of
the
Registry
of
Deeds
in
the
SPA
was
merely
an
error
that
must
not
prevail
over
the
clear
intention
of
Perla
to
include
the
subject
property
in
the
said
SPA.
In
sum,
the
property
referred
to
in
the
SPA
Perla
executed
in
favor
of
Julian
as
covered
by
TCT
No.
106338
of
the
Registry
of
Deeds
of
Pasig
(now
Makati)
and
the
subject
property
in
the
case
at
bar,
covered
by
RT
18206
(106338)
of
the
Registry
of
Deeds
of
Quezon
City,
are
one
and
the
same.
On
23
September
2003,
the
RTC
rendered
a
Decision
declaring
the
REM
constituted
over
the
subject
property
null
and
void,
for
Julian
was
not
authorized
by
the
terms
of
the
SPA
to
mortgage
the
same.
The
court
a
quo
likewise
ordered
that
the
foreclosure
proceedings
and
the
auction
sale
conducted
pursuant
to
the
void
REM,
be
nullified.
The
dispositive
portion
of
the
Decision
reads:
WHEREFORE,
premises
considered,
judgment
is
hereby
rendered
in
favor
of
the
[herein
petitioners]
and
against
the
[herein
respondent]
Bank:
There
is
no
question
therefore
that
Julian
was
vested
with
the
power
to
mortgage
the
pieces
of
property
identified
in
the
SPA.
However,
as
to
whether
the
subject
property
was
among
those
identified
in
the
SPA,
so
as
to
render
Julians
mortgage
of
the
same
valid,
is
a
question
we
still
must
resolve.
Petitioners
insist
that
the
subject
property
was
not
included
in
the
SPA,
considering
that
it
contained
an
exclusive
enumeration
of
the
pieces
of
property
over
which
Julian
had
authority,
and
these
include
only:
(1)
TCT
No.
T-53618,
with
an
area
of
3,522
square
meters,
located
at
Calapan,
Oriental
Mindoro,
and
registered
with
the
Registry
of
Deeds
of
Oriental
Mindoro;
(2)
TCT
No.
T-46810,
with
an
area
of
3,953
square
meters,
located
at
Calapan,
Oriental
Mindoro,
and
registered
with
the
Registry
of
Deeds
of
Oriental
Mindoro;
(3)
TCT
No.
T-53140,
with
an
area
of
177
square
meters,
located
at
Calapan,
Oriental
Mindoro,
and
registered
with
the
Registry
of
Deeds
of
Oriental
Mindoro;
(4)
TCT
No.
T-21403,
with
an
area
of
263
square
meters,
located
at
Calapan,
Oriental
Mindoro,
and
registered
with
the
Registry
of
Deeds
of
Oriental
Mindoro;
(5)
TCT
No.
T-
46807,
with
an
area
of
39
square
meters,
located
at
Calapan,
Oriental
Mindoro,
and
registered
with
the
Registry
of
Deeds
of
Oriental
Mindoro;
(6)
TCT
No.
T-
108954,
with
an
area
of
690
square
meters
and
located
at
Susana
Heights,
Muntinlupa;
(7)
RT-106338
805
Square
Meters
registered
with
the
Registry
of
Deeds
of
Pasig
(now
Makati);
and
(8)
Personal
Property
consisting
of
a
1983
Car
with
Vehicle
Registration
No.
R-16381,
Model
1983,
Make
Toyota,
and
Engine
No.
T-
2464.
Nowhere
is
it
stated
in
the
SPA
that
Julians
authority
extends
to
the
subject
property
covered
by
TCT
No.
RT
18206
(106338)
registered
with
the
Registry
of
Deeds
of
Quezon
City.
Consequently,
the
act
of
Julian
of
constituting
a
mortgage
over
the
subject
property
is
unenforceable
for
having
been
done
without
authority.
Respondent,
on
the
other
hand,
mainly
hinges
its
argument
on
the
declarations
made
by
the
Court
of
Appeals
that
there
was
no
property
covered
by
TCT
No.
106338
registered
with
the
Registry
of
Deeds
of
Pasig
(now
Makati);
but
there
exists
a
property,
the
subject
property
herein,
covered
by
TCT
No.
RT-18206
(106338)
registered
with
the
Registry
of
Deeds
of
Quezon
City.
Further
verification
would
reveal
that
TCT
No.
RT-18206
is
merely
a
reconstitution
of
TCT
No.
106338,
and
the
property
covered
by
both
certificates
of
title
is
actually
situated
in
Quezon
City
and
not
Pasig.
From
the
foregoing
circumstances,
respondent
argues
that
Perla
intended
to
include
the
subject
property
in
the
SPA,
and
the
failure
of
the
instrument
to
reflect
the
recent
TCT
Number
or
the
exact
designation
of
the
Registry
of
Deeds,
should
not
defeat
Perlas
clear
intention.
After
an
examination
of
the
literal
terms
of
the
SPA,
we
find
that
the
subject
property
was
not
among
those
enumerated
therein.
There
is
no
obvious
reference
to
the
subject
property
covered
by
TCT
No.
RT-18206
(106338)
registered
with
the
Registry
of
Deeds
of
Quezon
City.
There
was
also
nothing
in
the
language
of
the
SPA
from
which
we
could
deduce
the
intention
of
Perla
to
include
the
subject
property
therein.
We
cannot
attribute
such
alleged
intention
to
Perla
who
executed
the
SPA
when
the
language
of
the
instrument
is
bare
of
any
indication
suggestive
of
such
intention.
Contrariwise,
to
adopt
the
intent
theory
advanced
by
the
respondent,
in
the
absence
of
clear
and
convincing
evidence
to
that
effect,
would
run
afoul
of
the
express
tenor
of
the
SPA
and
thus
defeat
Perlas
true
intention.
In
cases
where
the
terms
of
the
contract
are
clear
as
to
leave
no
room
for
interpretation,
resort
to
circumstantial
evidence
to
ascertain
the
true
intent
of
the
parties,
is
not
countenanced.
As
aptly
stated
in
the
case
of
JMA
House,
Incorporated
v.
Sta.
Monica
Industrial
and
Development
Corporation,13
thus:
[T]he
law
is
that
if
the
terms
of
a
contract
are
clear
and
leave
no
doubt
upon
the
intention
of
the
contracting
parties,
the
literal
meaning
of
its
stipulation
shall
control.
When
the
language
of
the
contract
is
explicit,
leaving
no
doubt
as
to
the
intention
of
the
drafters,
the
courts
may
not
read
into
it
[in]
any
other
intention
that
would
contradict
its
main
import.
The
clear
terms
of
the
contract
should
never
be
the
subject
matter
of
interpretation.
Neither
abstract
justice
nor
the
rule
on
liberal
interpretation
justifies
the
creation
of
a
contract
for
the
parties
which
they
did
not
make
themselves
or
the
imposition
upon
one
party
to
a
contract
or
obligation
not
assumed
simply
or
merely
to
avoid
seeming
hardships.
The
true
meaning
must
be
enforced,
as
it
is
to
be
presumed
that
the
contracting
parties
know
their
scope
and
effects.14
Equally
relevant
is
the
rule
that
a
power
of
attorney
must
be
strictly
construed
and
pursued.
The
instrument
will
be
held
to
grant
only
those
powers
which
are
specified
therein,
and
the
agent
may
neither
go
beyond
nor
deviate
from
the
power
of
attorney.15
Where
powers
and
duties
are
specified
and
defined
in
an
instrument,
all
such
powers
and
duties
are
limited
and
are
confined
to
those
which
are
specified
and
defined,
and
all
other
powers
and
duties
are
excluded.16
This
is
but
in
accord
with
the
disinclination
of
courts
to
enlarge
the
authority
granted
beyond
the
powers
expressly
given
and
those
which
incidentally
flow
or
derive
therefrom
as
being
usual
and
reasonably
necessary
and
proper
for
the
performance
of
such
express
powers.17
Even
the
commentaries
of
renowned
Civilist
Manresa18
supports
a
strict
and
limited
construction
of
the
terms
of
a
power
of
attorney:
The
law,
which
must
look
after
the
interests
of
all,
cannot
permit
a
man
to
express
himself
in
a
vague
and
general
way
with
reference
to
the
right
he
confers
upon
another
for
the
purpose
of
alienation
or
hypothecation,
whereby
he
might
be
despoiled
of
all
he
possessed
and
be
brought
to
ruin,
such
excessive
authority
must
be
set
down
in
the
most
formal
and
explicit
terms,
and
when
this
is
not
done,
the
law
reasonably
presumes
that
the
principal
did
not
mean
to
confer
it.
In
this
case,
we
are
not
convinced
that
the
property
covered
by
TCT
No.
106338
registered
with
the
Registry
of
Deeds
of
Pasig
(now
Makati)
is
the
same
as
the
subject
property
covered
by
TCT
No.
RT-18206
(106338)
registered
with
the
Registry
of
Deeds
of
Quezon
City.
The
records
of
the
case
are
stripped
of
supporting
proofs
to
verify
the
respondents
claim
that
the
two
titles
cover
the
same
property.
It
failed
to
present
any
certification
from
the
Registries
of
Deeds
concerned
to
support
its
assertion.
Neither
did
respondent
take
the
effort
of
submitting
and
making
part
of
the
records
of
this
case
copies
of
TCTs
No.
RT-
106338
of
the
Registry
of
Deeds
of
Pasig
(now
Makati)
and
RT-18206
(106338)
of
the
Registry
of
Deeds
of
Quezon
City,
and
closely
comparing
the
technical
descriptions
of
the
properties
covered
by
the
said
TCTs.
The
bare
and
sweeping
statement
of
respondent
that
the
properties
covered
by
the
two
certificates
of
title
are
one
and
the
same
contains
nothing
but
empty
imputation
of
a
fact
that
could
hardly
be
given
any
evidentiary
weight
by
this
Court.
Having
arrived
at
the
conclusion
that
Julian
was
not
conferred
by
Perla
with
the
authority
to
mortgage
the
subject
property
under
the
terms
of
the
SPA,
the
real
estate
mortgages
Julian
executed
over
the
said
property
are
therefore
unenforceable.
Assuming
arguendo
that
the
subject
property
was
indeed
included
in
the
SPA
executed
by
Perla
in
favor
of
Julian,
the
said
SPA
was
revoked
by
virtue
of
a
public
instrument
executed
by
Perla
on
10
March
1993.
To
address
respondents
assertion
that
the
said
revocation
was
unenforceable
against
it
as
a
third
party
to
the
SPA
and
as
one
who
relied
on
the
same
in
good
faith,
we
quote
with
approval
the
following
ruling
of
the
RTC
on
this
matter:
Moreover,
an
agency
is
extinguished,
among
others,
by
its
revocation
(Article
1999,
New
Civil
Code
of
the
Philippines).
The
principal
may
revoke
the
agency
at
will,
and
compel
the
agent
to
return
the
document
evidencing
the
agency.
Such
revocation
may
be
express
or
implied
(Article
1920,
supra).
In
this
case,
the
revocation
of
the
agency
or
Special
Power
of
Attorney
is
expressed
and
by
a
public
document
executed
on
March
10,
1993.
The
Register
of
Deeds
of
Quezon
City
was
even
notified
that
any
attempt
to
mortgage
or
sell
the
property
covered
by
TCT
No.
[RT-18206]
106338
located
at
No.
21
Hillside
Drive,
Blue
Ridge,
Quezon
City
must
have
the
full
consent
documented
in
the
form
of
a
special
power
of
attorney
duly
authenticated
at
the
Philippine
Consulate
General,
New
York
City,
N.Y.,
U.S.A.
106338,
registered
with
the
Registry
of
Deeds
of
Pasig
(now
Makati)
referred
to
in
the
SPA,
and
the
subject
property,
covered
by
TCT
No.
18206
(106338)
registered
with
the
Registry
of
Deeds
of
Quezon
City,
are
one
and
the
same
property.
From
the
foregoing,
respondent
concluded
that
Julian
was
indeed
authorized
to
constitute
a
mortgage
over
the
subject
property.
We
are
unconvinced.
The
property
listed
in
the
real
estate
mortgages
Julian
executed
in
favor
of
PNB
is
the
one
covered
by
"TCT#RT-18206(106338)."
On
the
other
hand,
the
Special
Power
of
Attorney
referred
to
TCT
No.
"RT-106338
805
Square
Meters
of
the
Registry
of
Deeds
of
Pasig
now
Makati."
The
palpable
difference
between
the
TCT
numbers
referred
to
in
the
real
estate
mortgages
and
Julians
SPA,
coupled
with
the
fact
that
the
said
TCTs
are
registered
in
the
Registries
of
Deeds
of
different
cities,
should
have
put
respondent
on
guard.
Respondents
claim
of
prudence
is
debunked
by
the
fact
that
it
had
conveniently
or
otherwise
overlooked
the
inconsistent
details
appearing
on
the
face
of
the
documents,
which
it
was
relying
on
for
its
rights
as
mortgagee,
and
which
significantly
affected
the
identification
of
the
property
being
mortgaged.
In
Arrofo
v.
Quio,20
we
have
elucidated
that:
[Settled
is
the
rule
that]
a
person
dealing
with
registered
lands
[is
not
required]
to
inquire
further
than
what
the
Torrens
title
on
its
face
indicates.
This
rule,
however,
is
not
absolute
but
admits
of
exceptions.
Thus,
while
its
is
true,
x
x
x
that
a
person
dealing
with
registered
lands
need
not
go
beyond
the
certificate
of
title,
it
is
likewise
a
well-settled
rule
that
a
purchaser
or
mortgagee
cannot
close
his
eyes
to
facts
which
should
put
a
reasonable
man
on
his
guard,
and
then
claim
that
he
acted
in
good
faith
under
the
belief
that
there
was
no
defect
in
the
title
of
the
vendor
or
mortgagor.
His
mere
refusal
to
face
up
the
fact
that
such
defect
exists,
or
his
willful
closing
of
his
eyes
to
the
possibility
of
the
existence
of
a
defect
in
the
vendors
or
mortgagors
title,
will
not
make
him
an
innocent
purchaser
for
value,
if
it
afterwards
develops
that
the
title
was
in
fact
defective,
and
it
appears
that
he
had
such
notice
of
the
defect
as
would
have
led
to
its
discovery
had
he
acted
with
the
measure
of
precaution
which
may
be
required
of
a
prudent
man
in
a
like
situation.
By
putting
blinders
on
its
eyes,
and
by
refusing
to
see
the
patent
defect
in
the
scope
of
Julians
authority,
easily
discernable
from
the
plain
terms
of
the
SPA,
respondent
cannot
now
claim
to
be
an
innocent
mortgagee.
Further,
in
the
case
of
Abad
v.
Guimba,21
we
laid
down
the
principle
that
where
the
mortgagee
does
not
directly
deal
with
the
registered
owner
of
real
property,
the
law
requires
that
a
higher
degree
of
prudence
be
exercised
by
the
mortgagee,
thus:
While
[the]
one
who
buys
from
the
registered
owner
does
not
need
to
look
behind
the
certificate
of
title,
one
who
buys
from
[the]
one
who
is
not
[the]
registered
owner
is
expected
to
examine
not
only
the
certificate
of
title
but
all
factual
circumstances
necessary
for
[one]
to
determine
if
there
are
any
flaws
in
the
title
of
the
transferor,
or
in
[the]
capacity
to
transfer
the
land.
Although
the
instant
case
does
not
involve
a
sale
but
only
a
mortgage,
the
same
rule
applies
inasmuch
as
the
law
itself
includes
a
mortgagee
in
the
term
"purchaser."22
This
principle
is
applied
more
strenuously
when
the
mortgagee
is
a
bank
or
a
banking
institution.
Thus,
in
the
case
of
Cruz
v.
Bancom
Finance
Corporation,23
we
ruled:
Respondent,
however,
is
not
an
ordinary
mortgagee;
it
is
a
mortgagee-bank.
As
such,
unlike
private
individuals,
it
is
expected
to
exercise
greater
care
and
prudence
in
its
dealings,
including
those
involving
registered
lands.
A
banking
institution
is
expected
to
exercise
due
diligence
before
entering
into
a
mortgage
contract.
The
ascertainment
of
the
status
or
condition
of
a
property
offered
to
it
as
security
for
a
loan
must
be
a
standard
and
indispensable
part
of
its
operations.24
Hence,
considering
that
the
property
being
mortgaged
by
Julian
was
not
his,
and
there
are
additional
doubts
or
suspicions
as
to
the
real
identity
of
the
same,
the
respondent
bank
should
have
proceeded
with
its
transactions
with
Julian
only
with
utmost
caution.
As
a
bank,
respondent
must
subject
all
its
transactions
to
the
most
rigid
scrutiny,
since
its
business
is
impressed
with
public
interest
and
its
fiduciary
character
requires
high
standards
of
integrity
and
performance.25
Where
respondent
acted
in
undue
haste
in
granting
the
mortgage
loans
in
favor
of
Julian
and
disregarding
the
apparent
defects
in
the
latters
authority
as
agent,
it
failed
to
discharge
the
degree
of
diligence
required
of
it
as
a
banking
corporation.1awphil
Thus,
even
granting
for
the
sake
of
argument
that
the
subject
property
and
the
one
identified
in
the
SPA
are
one
and
the
same,
it
would
not
elevate
respondents
status
to
that
of
an
innocent
mortgagee.
As
a
banking
institution,
jurisprudence
stringently
requires
that
respondent
should
take
more
precautions
than
an
ordinary
prudent
man
should,
to
ascertain
the
status
and
condition
of
the
properties
offered
as
collateral
and
to
verify
the
scope
of
the
authority
of
the
agents
dealing
with
these.
Had
respondent
acted
with
the
required
degree
of
diligence,
it
could
have
acquired
knowledge
of
the
letter
dated
23
January
1996
sent
by
Perla
to
the
Registry
of
Deeds
of
Quezon
City
which
recorded
the
same.
The
failure
of
the
respondent
to
investigate
into
the
circumstances
surrounding
the
mortgage
of
the
subject
property
belies
its
contention
of
good
faith.
On
a
last
note,
we
find
that
the
real
estate
mortgages
constituted
over
the
subject
property
are
unenforceable
and
not
null
and
void,
as
ruled
by
the
RTC.
It
is
best
to
reiterate
that
the
said
mortgage
was
entered
into
by
Julian
on
behalf
of
Perla
without
the
latters
authority
and
consequently,
unenforceable
under
Article
1403(1)
of
the
Civil
Code.
Unenforceable
contracts
are
those
which
cannot
be
enforced
by
a
proper
action
in
court,
unless
they
are
ratified,
because
either
they
are
entered
into
without
or
in
excess
of
authority
or
they
do
not
comply
with
the
statute
of
frauds
or
both
of
the
contracting
parties
do
not
possess
the
required
legal
capacity.26
An
unenforceable
contract
may
be
ratified,
expressly
or
impliedly,
by
the
person
in
whose
behalf
it
has
been
executed,
before
it
is
revoked
by
the
other
contracting
party.27
Without
Perlas
ratification
of
the
same,
the
real
estate
mortgages
constituted
by
Julian
over
the
subject
property
cannot
be
enforced
by
any
action
in
court
against
Perla
and/or
her
successors
in
interest.
In
sum,
we
rule
that
the
contracts
of
real
estate
mortgage
constituted
over
the
subject
property
covered
by
TCT
No.
RT
18206
(106338)
registered
with
the
Registry
of
Deeds
of
Quezon
City
are
unenforceable.
Consequently,
the
foreclosure
proceedings
and
the
auction
sale
of
the
subject
property
conducted
in
pursuance
of
these
unenforceable
contracts
are
null
and
void.
This,
however,
is
without
prejudice
to
the
right
of
the
respondent
to
proceed
against
Julian,
in
his
personal
capacity,
for
the
amount
of
the
loans.
WHEREFORE,
IN
VIEW
OF
THE
FOREGOING,
the
instant
petition
is
GRANTED.
The
Decision
dated
12
October
2005
and
its
Resolution
dated
15
February
2006
rendered
by
the
Court
of
Appeals
in
CA-G.R.
CV
No.
82636,
are
hereby
REVERSED.
The
Decision
dated
23
September
2003
of
the
Regional
Trial
Court
of
Quezon
City,
Branch
220,
in
Civil
Case
No.
Q-99-37145,
is
hereby
REINSTATED
and
AFFIRMED
with
modification
that
the
real
estate
mortgages
constituted
over
TCT
No.
RT
18206
(106338)
are
not
null
and
void
but
UNENFORCEABLE.
No
costs.
SO
ORDERED.
For
this
reason,
I
have
given
her
the
original
copy
of
the
award,
dated
May
5,
1980
and
O.R.
No.
8706855
dated
May
20,
1980
which
will
indicate
my
waiver
of
rights,
interests
and
participation
in
favor
of
LIZETTE
R.
WIJANCO.
Thank
you
for
your
cooperation.
Very
truly
yours,
D
E
C
I
S
I
O
N
(Sgd.)
Gaudencio
Romualdez
GARCIA,
J.:
Under
consideration
is
this
petition
for
review
under
Rule
45
of
the
Rules
of
Court
assailing
and
seeking
to
set
aside
the
following
issuances
of
the
Court
of
Appeals
(CA)
in
CA-G.R.
CV
No.
54062,
to
wit:
1.
Decision
2
dated
June
4,
2001,
affirming
an
earlier
decision
of
the
Regional
Trial
Court
(RTC)
of
Quezon
City,
Branch
79,
which
dismissed
the
complaint
for
specific
performance
and
damages
thereat
commenced
by
the
petitioner
against
the
herein
respondents;
and
2.
Resolution
3
dated
September
17,
2001,
denying
the
petitioner's
motion
for
reconsideration.
The
facts:
On
May
5,
1980,
the
respondent
Philippine
National
Railways
(PNR)
informed
a
certain
Gaudencio
Romualdez
(Romualdez,
hereinafter)
that
it
has
accepted
the
latters
offer
to
buy,
on
an
"AS
IS,
WHERE
IS"
basis,
the
PNRs
scrap/unserviceable
rails
located
in
Del
Carmen
and
Lubao,
Pampanga
at
P1,300.00
and
P2,100.00
per
metric
ton,
respectively,
for
the
total
amount
of
P96,600.00.
After
paying
the
stated
purchase
price,
Romualdez
addressed
a
letter
to
Atty.
Cipriano
Dizon,
PNRs
Acting
Purchasing
Agent.
Bearing
date
May
26,
1980,
the
letter
reads:
Dear
Atty.
Dizon:
This
is
to
inform
you
as
President
of
San
Juanico
Enterprises,
that
I
have
authorized
the
bearer,
LIZETTE
R.
WIJANCO
of
No.
1606
Aragon
St.,
Sta.
Cruz,
Manila,
to
be
my
lawful
representative
in
the
withdrawal
of
the
scrap/unserviceable
rails
awarded
to
me.
The
Lizette
R.
Wijanco
mentioned
in
the
letter
was
Lizette
Wijanco-
Angeles,
petitioner's
now
deceased
wife.
That
very
same
day
May
26,
1980
Lizette
requested
the
PNR
to
transfer
the
location
of
withdrawal
for
the
reason
that
the
scrap/unserviceable
rails
located
in
Del
Carmen
and
Lubao,
Pampanga
were
not
ready
for
hauling.
The
PNR
granted
said
request
and
allowed
Lizette
to
withdraw
scrap/unserviceable
rails
in
Murcia,
Capas
and
San
Miguel,
Tarlac
instead.
However,
the
PNR
subsequently
suspended
the
withdrawal
in
view
of
what
it
considered
as
documentary
discrepancies
coupled
by
reported
pilferages
of
over
P500,000.00
worth
of
PNR
scrap
properties
in
Tarlac.
Consequently,
the
spouses
Angeles
demanded
the
refund
of
the
amount
of
P96,000.00.
The
PNR,
however,
refused
to
pay,
alleging
that
as
per
delivery
receipt
duly
signed
by
Lizette,
54.658
metric
tons
of
unserviceable
rails
had
already
been
withdrawn
which,
at
P2,100.00
per
metric
ton,
were
worth
P114,781.80,
an
amount
that
exceeds
the
claim
for
refund.
On
August
10,
1988,
the
spouses
Angeles
filed
suit
against
the
PNR
and
its
corporate
secretary,
Rodolfo
Flores,
among
others,
for
specific
performance
and
damages
before
the
Regional
Trial
Court
of
Quezon
City.
In
it,
they
prayed
that
PNR
be
directed
to
deliver
46
metric
tons
of
scrap/unserviceable
rails
and
to
pay
them
damages
and
attorney's
fees.
Issues
having
been
joined
following
the
filing
by
PNR,
et
al.,
of
their
answer,
trial
ensued.
Meanwhile,
Lizette
W.
Angeles
passed
away
and
was
substituted
by
her
heirs,
among
whom
is
her
husband,
herein
petitioner
Laureno
T.
Angeles.
On
April
16,
1996,
the
trial
court,
on
the
postulate
that
the
spouses
Angeles
are
not
the
real
parties-in-interest,
rendered
judgment
dismissing
their
complaint
for
lack
of
cause
of
action.
As
held
by
the
court,
Lizette
was
merely
a
representative
of
Romualdez
in
the
withdrawal
of
scrap
or
unserviceable
rails
awarded
to
him
and
not
an
assignee
to
the
latter's
rights
with
respect
to
the
award.
Aggrieved,
the
petitioner
interposed
an
appeal
with
the
CA,
which,
as
stated
at
the
threshold
hereof,
in
its
decision
of
June
4,
2001,
dismissed
the
appeal
and
affirmed
that
of
the
trial
court.
The
affirmatory
decision
was
reiterated
by
the
CA
in
its
resolution
of
September
17,
2001,
denying
the
petitioners
motion
for
reconsideration.
Hence,
the
petitioners
present
recourse
on
the
submission
that
the
CA
erred
in
affirming
the
trial
court's
holding
that
petitioner
and
his
spouse,
as
plaintiffs
a
quo,
had
no
cause
of
action
as
they
were
not
the
real
parties-in-interest
in
this
case.
If
Lizette
was
without
legal
standing
to
sue
and
appear
in
this
case,
there
is
more
reason
to
hold
that
her
petitioner
husband,
either
as
her
conjugal
partner
or
her
heir,
is
also
without
such
standing.
At
the
crux
of
the
issue
is
the
matter
of
how
the
aforequoted
May
26,
1980
letter
of
Romualdez
to
Atty.
Dizon
of
the
PNR
should
be
taken:
was
it
meant
to
designate,
or
has
it
the
effect
of
designating,
Lizette
W.
Angeles
as
a
mere
agent
or
as
an
assignee
of
his
(Romualdez's)
interest
in
the
scrap
rails
awarded
to
San
Juanico
Enterprises?
The
CAs
conclusion,
affirmatory
of
that
of
the
trial
court,
is
that
Lizette
was
not
an
assignee,
but
merely
an
agent
whose
authority
was
limited
to
the
withdrawal
of
the
scrap
rails,
hence,
without
personality
to
sue.
Petitioner
makes
much
of
the
fact
that
the
terms
"agent"
or
"attorney-in-fact"
were
not
used
in
the
Romualdez
letter
aforestated.
It
bears
to
stress,
however,
that
the
words
"principal"
and
"agent,"
are
not
the
only
terms
used
to
designate
the
parties
in
an
agency
relation.
The
agent
may
also
be
called
an
attorney,
proxy,
delegate
or,
as
here,
representative.
Where
agency
exists,
the
third
party's
(in
this
case,
PNR's)
liability
on
a
contract
is
to
the
principal
and
not
to
the
agent
and
the
relationship
of
the
third
party
to
the
principal
is
the
same
as
that
in
a
contract
in
which
there
is
no
agent.
Normally,
the
agent
has
neither
rights
nor
liabilities
as
against
the
third
party.
He
cannot
thus
sue
or
be
sued
on
the
contract.
Since
a
contract
may
be
violated
only
by
the
parties
thereto
as
against
each
other,
the
real
party-in-interest,
either
as
plaintiff
or
defendant
in
an
action
upon
that
contract
must,
generally,
be
a
contracting
party.
The
legal
situation
is,
however,
different
where
an
agent
is
constituted
as
an
assignee.
In
such
a
case,
the
agent
may,
in
his
own
behalf,
sue
on
a
contract
made
for
his
principal,
as
an
assignee
of
such
contract.
The
rule
requiring
every
action
to
be
prosecuted
in
the
name
of
the
real
party-in-interest
recognizes
the
assignment
of
rights
of
action
and
also
recognizes
that
when
one
has
a
right
assigned
to
him,
he
is
then
the
real
party-in-interest
and
may
maintain
an
action
upon
such
claim
or
right.
4
Upon
scrutiny
of
the
subject
Romualdez's
letter
to
Atty.
Cipriano
Dizon
dated
May
26,
1980,
it
is
at
once
apparent
that
Lizette
was
to
act
just
as
a
"representative"
of
Romualdez
in
the
"withdrawal
of
rails,"
and
not
an
assignee.
For
perspective,
we
reproduce
the
contents
of
said
letter:
whole,
it
is
abundantly
clear
that
the
rights
which
Romualdez
waived
or
ceded
in
favor
of
Lizette
were
those
in
furtherance
of
the
agency
relation
that
he
had
established
for
the
withdrawal
of
the
rails.
At
any
rate,
any
doubt
as
to
the
intent
of
Romualdez
generated
by
the
way
his
letter
was
couched
could
be
clarified
by
the
acts
of
the
main
players
themselves.
Article
1371
of
the
Civil
Code
provides
that
to
judge
the
intention
of
the
contracting
parties,
their
contemporaneous
and
subsequent
acts
shall
be
principally
considered.
In
other
words,
in
case
of
doubt,
resort
may
be
made
to
the
situation,
surroundings,
and
relations
of
the
parties.
The
fact
of
agency
was,
as
the
trial
court
aptly
observed,
5
confirmed
in
subsequent
letters
from
the
Angeles
spouses
in
which
they
themselves
refer
to
Lizette
as
"authorized
representative"
of
San
Juanico
Enterprises.
Mention
may
also
be
made
that
the
withdrawal
receipt
which
Lizette
had
signed
indicated
that
she
was
doing
so
in
a
representative
capacity.
One
professing
to
act
as
agent
for
another
is
estopped
to
deny
his
agency
both
as
against
his
asserted
principal
and
third
persons
interested
in
the
transaction
which
he
engaged
in.
Finally,
the
petitioner's
claim
that
Lizette
paid
the
amount
of
P96,000.00
to
the
PNR
appears
to
be
a
mere
afterthought;
it
ought
to
be
dismissed
outright
under
the
estoppel
principle.
In
earlier
proceedings,
petitioner
himself
admitted
in
his
complaint
that
it
was
Romualdez
who
paid
this
amount.
Petitioner
maintains
that
the
Romualdez
letter
in
question
was
not
in
the
form
of
a
special
power
of
attorney,
implying
that
the
latter
had
not
intended
to
merely
authorize
his
wife,
Lizette,
to
perform
an
act
for
him
(Romualdez).
The
contention
is
specious.
In
the
absence
of
statute,
no
form
or
method
of
execution
is
required
for
a
valid
power
of
attorney;
it
may
be
in
any
form
clearly
showing
on
its
face
the
agents
authority.
7
A
power
of
attorney
is
only
but
an
instrument
in
writing
by
which
a
person,
as
principal,
appoints
another
as
his
agent
and
confers
upon
him
the
authority
to
perform
certain
specified
acts
on
behalf
of
the
principal.
The
written
authorization
itself
is
the
power
of
attorney,
and
this
is
clearly
indicated
by
the
fact
that
it
has
also
been
called
a
"letter
of
attorney."
Its
primary
purpose
is
not
to
define
the
authority
of
the
agent
as
between
himself
and
his
principal
but
to
evidence
the
authority
of
the
agent
to
third
parties
with
whom
the
agent
deals.
8
The
letter
under
consideration
is
sufficient
to
constitute
a
power
of
attorney.
SO
ORDERED.
sixteen
years
later,
or
on
11
May
1994,
under
TCT
No.
109754
of
the
Register
of
Deeds
of
Quezon
City.
Respondent,
while
he
resided
in
the
United
States
of
America,
delegated
to
his
father
the
mere
administration
of
the
property.
Respondent
came
to
know
of
the
assailed
contracts
with
petitioner
only
after
retiring
to
the
Philippines
upon
the
death
of
his
father.
On
9
August
1996,
the
trial
court
dismissed
the
complaint
of
respondent;
it
explained:
"Ordinarily,
a
deed
of
donation
need
not
be
registered
in
order
to
be
valid
between
the
parties.
Registration,
however,
is
important
in
binding
third
persons.
Thus,
when
Felipe
Roque
entered
into
a
leased
contract
with
defendant
corporation,
plaintiff
Efren
Roque
(could)
no
longer
assert
the
unregistered
deed
of
donation
and
say
that
his
father,
Felipe,
was
no
longer
the
owner
of
the
subject
property
at
the
time
the
lease
on
the
subject
property
was
agreed
upon.
"The
registration
of
the
Deed
of
Donation
after
the
execution
of
the
lease
contract
did
not
affect
the
latter
unless
he
had
knowledge
thereof
at
the
time
of
the
registration
which
plaintiff
had
not
been
able
to
establish.
Plaintiff
knew
very
well
of
the
existence
of
the
lease.
He,
in
fact,
met
with
the
officers
of
the
defendant
corporation
at
least
once
before
he
caused
the
registration
of
the
deed
of
donation
in
his
favor
and
although
the
lease
itself
was
not
registered,
it
remains
valid
considering
that
no
third
person
is
involved.
Plaintiff
cannot
be
the
third
person
because
he
is
the
successor-in-interest
of
his
father,
Felipe
Roque,
the
lessor,
and
it
is
a
rule
that
contracts
take
effect
not
only
between
the
parties
themselves
but
also
between
their
assigns
and
heirs
(Article
1311,
Civil
Code)
and
therefore,
the
lease
contract
together
with
the
memorandum
of
agreement
would
be
conclusive
on
plaintiff
Efren
Roque.
He
is
bound
by
the
contract
even
if
he
did
not
participate
therein.
Moreover,
the
agreements
have
been
perfected
and
partially
executed
by
the
receipt
of
his
father
of
the
downpayment
and
deposit
totaling
to
P500,000.00."1
The
Trial
court
ordered
respondent
to
surrender
TCT
No.
109754
to
the
Register
of
Deeds
of
Quezon
City
for
the
annotation
of
the
questioned
Contract
of
Lease
and
Memorandum
of
Agreement.
On
appeal,
the
Court
of
Appeals
reversed
the
decision
of
the
trial
court
and
held
to
be
invalid
the
Contract
of
Lease
and
Memorandum
of
Agreement.
While
it
shared
the
view
expressed
by
the
trial
court
that
a
deed
of
donation
would
have
to
be
registered
in
order
to
bind
third
persons,
the
appellate
court,
however,
concluded
that
petitioner
was
not
a
lessee
in
good
faith
having
had
prior
knowledge
of
the
donation
in
favor
of
respondent,
and
that
such
actual
"Q.
That
being
the
case,
at
the
time
of
the
execution
of
the
agreement
or
soon
before,
did
you
have
such
information
confirmed
by
Dr.
Felipe
C.
Roque
himself?
"Q.
Aside
from
these
two
lots,
the
first
in
the
name
of
Ruben
Roque
and
the
second,
the
subject
of
the
construction
involved
in
this
case,
you
said
there
is
another
lot
which
was
part
of
development
project?
"A.
Yes,
this
was
the
main
concept
of
Dr.
Roque
so
that
the
adjoining
properties
of
his
two
sons,
Ruben
and
Cesar,
will
comprise
one
whole.
The
other
whole
property
belongs
to
Cesar.
"A.
No,
because
I
was
doing
certain
things.
We
were
a
team
and
so
Biglang-awa
did
it
for
us.
"Q.
You
were
informed
by
Dr.
Roque
that
this
property
was
given
to
his
three
(3)
sons;
one
to
Ruben
Roque,
the
other
to
Efren,
and
the
other
to
Cesar
Roque?
"A.
Yes.
"Q.
You
did
the
inquiry
from
him,
how
was
this
property
given
to
them?
"A.
By
inheritance.
"Q.
Inheritance
in
the
form
of
donation?
"A.
I
mean
inheritance.
"Q.
What
I
am
only
asking
you
is,
were
you
told
by
Dr.
Felipe
C.
Roque
at
the
time
of
your
transaction
with
him
that
all
these
three
properties
were
given
to
his
children
by
way
of
donation?
"A.
What
Architect
Biglang-awa
told
us
in
his
exact
word:
"Yang
mga
yan
pupunta
sa
mga
anak.
Yong
kay
Ruben
pupunta
kay
Ruben.
Yong
kay
Efren
palibhasa
nasa
America
sya,
nasa
pangalan
pa
ni
Dr.
Felipe
C.
Roque."
"x
x
x
x
x
x
x
x
x
"Q.
When
was
the
information
supplied
to
you
by
Biglang-awa?
Before
the
execution
of
the
Contract
of
Lease
and
Memorandum
of
Agreement?
"A.
Yes.
Respondent
learned
of
the
contracts
only
in
February
1994
after
the
death
of
his
father,
and
in
the
same
year,
during
November,
he
assailed
the
validity
of
the
agreements.
Hardly,
could
respondent
then
be
said
to
have
neglected
to
assert
his
case
for
unreasonable
length
of
time.
Neither
is
respondent
estopped
from
repudiating
the
contracts.
The
essential
elements
of
estoppel
in
pais,
in
relation
to
the
party
sought
to
be
estopped,
are:
1)
a
clear
conduct
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;
2)
an
intent
or,
at
least,
an
expectation,
that
this
conduct
shall
influence,
or
be
acted
upon
by,
the
other
party;
and
3)
the
knowledge,
actual
or
constructive,
by
him
of
the
real
facts.11
With
respect
to
the
party
claiming
the
estoppel,
the
conditions
he
must
satisfy
are:
1)
lack
of
knowledge
or
of
the
means
of
knowledge
of
the
truth
as
to
the
facts
in
question;
2)
reliance,
in
good
faith,
upon
the
conduct
or
statements
of
the
party
to
be
estopped;
and
3)
action
or
inaction
based
thereon
of
such
character
as
to
change
his
position
or
status
calculated
to
cause
him
injury
or
prejudice.12
It
has
not
been
shown
that
respondent
intended
to
conceal
the
actual
facts
concerning
the
property;
more
importantly,
petitioner
has
been
shown
not
to
be
totally
unaware
of
the
real
ownership
of
the
subject
property.
Altogether,
there
is
no
cogent
reason
to
reverse
the
Court
of
Appeals
in
its
assailed
decision.
WHEREFORE,
the
petition
is
DENIED,
and
the
decision
of
the
Court
of
Appeals
declaring
the
contract
of
lease
and
memorandum
of
agreement
entered
into
between
Dr.
Felipe
C.
Roque
and
Shoppers
Paradise
Realty
&
Development
Corporation
not
to
be
binding
on
respondent
is
AFFIRMED.
No
costs.
SO
ORDERED.
Registered Owner
3-B
3-C
On
August
18,
1997,
the
spouses
Guia
obtained
a
loan
in
the
amount
of
P240,000
from
the
respondent
Malarayat
Rural
Banlc
and
secured
the
loan
with
a
Deed
of
Real
Estate
Mortgage7
over
Lot
3-C.
The
loan
and
Real
Estate
Mortgage
were
made
pursuant
to
the
Special
Power
of
Attorney8
purportedly
executed
by
the
registered
owner
of
Lot
3-C,
Fermina
M.
Guia,
in
favor
of
the
mortgagors,
spouses
Guia.
Moreover,
the
Real
Estate
Mortgage
and
Special
Power
of
Attorney
were
duly
annotated
in
the
memorandum
of
encumbrances
of
TCT
No.
T-83944
covering
Lot
3-C.
The
spouses
Arguelles
alleged
that
it
was
only
in
1997
or
after
seven
years
from
the
date
of
the
unregistered
sale
that
they
discovered
from
the
Register
of
Deeds
of
Batangas
City
the
following
facts:
(1)
subdivision
of
Lot
3
into
Lots
3-A,
3-B,
and
3-C;
(2)
issuance
of
separate
TCTs
for
each
lot;
and
(3)
the
annotation
of
the
Real
Estate
Mortgage
and
Special
Power
of
Attorney
over
Lot
3-C
covered
by
TCT
No.
T-83944.
Two
years
thereafter,
or
on
June
17,
1999,
the
spouses
Arguelles
registered
their
adverse
claim9
based
on
the
unregistered
sale
dated
December
1,
1990
over
Lot
3-C.
On
July
22,
1999,
the
spouses
Arguelles
filed
a
complaint10
for
Annulment
of
Mortgage
and
Cancellation
of
Mortgage
Lien
with
Damages
against
the
respondent
Malarayat
Rural
Banlc
with
the
RTC,
Branch
86,
of
Taal,
Batangas.
In
asserting
the
nullity
of
the
mortgage
lien,
the
spouses
Arguelles
alleged
ownership
over
the
land
that
had
been
mortgaged
in
favor
of
the
respondent
Malarayat
Rural
Bank.
On
August
16,
1999,
the
respondent
Malarayat
Rural
Bank
filed
an
Answer
with
Counterclaim
and
Cross-claim11
against
cross-claim-
defendant
spouses
Gui
a
wherein
it
argued
that
the
failure
of
the
spouses
Arguelles
to
register
the
Deed
of
Sale
dated
December
1,
1990
was
fatal
to
their
claim
of
ownership.
On
July
29,
2008,
the
RTC
rendered
a
Decision,
the
dispositive
portion
of
which
reads
as
follows:
WHEREFORE,
premises
considered
judgment
is
hereby
rendered:
1)
declaring
the
mortgage
made
by
the
defendants
spouses
Eddie
Guia
and
Teresita
Guia
in
favor
of
defendant
Malarayat
Rural
Bank
null
and
void;
2)
setting
aside
the
foreclosure
sale
had
on
December
6,
1999
and
the
corresponding
certificate
of
sale
issued
by
this
Court
dated
May
12,
2000;
3)
ordering
the
Register
of
Deeds
of
the
Province
of
Batangas
to
cancel
the
annotation
pertaining
to
the
memorandum
of
encumbrances
(entries
no.
155686
and
155688)
appearing
in
TCT
No.
T-839[4]4;
4)
ordering
cross
defendants
spouses
Eddie
and
Teresita
Guia
to
pay
the
amount
of
Php240,000.00
to
cross
claimant
Malarayat
Rural
[B]ank
corresponding
to
the
total
amount
of
the
loan
obligation,
with
interest
herein
modified
at
12%
per
annum
computed
from
default;
SO
ORDERED.13
In
granting
the
appeal,
the
CA
held
that
because
of
the
failure
of
the
spouses
Arguelles
to
register
their
deed
of
sale,
the
unregistered
sale
could
not
affect
the
respondent
Malarayat
Rural
Bank.
Thus,
the
respondent
Malarayat
Rural
Bank
has
a
better
right
to
the
land
mortgaged
as
compared
to
spouses
Arguelles
who
were
the
vendees
in
the
unregistered
sale.
In
addition,
the
CA
found
that
the
respondent
Malarayat
Rural
Bank
was
a
mortgagee
in
good
faith
as
it
sufficiently
demonstrated
due
diligence
in
approving
the
loan
application
of
the
spouses
Guia.
Aggrieved,
the
petitioners
filed
the
instant
petition
raismg
the
following
issues
for
resolution:
A
SO
ORDERED.12
The
RTC
found
that
the
spouses
Guia
were
no
longer
the
absolute
owners
of
the
land
described
as
Lot
3-C
and
covered
by
TCT
No.
T-83944
at
the
time
they
mortgaged
the
same
to
the
respondent
Malarayat
Rural
Bank
in
view
of
the
unregistered
sale
in
favor
of
the
vendee
spouses
Arguelles.
Thus,
the
RTC
annulled
the
real
estate
mortgage,
the
subsequent
foreclosure
sale,
and
the
corresponding
issuance
of
the
certificate
of
title.
Moreover,
the
RTC
declared
that
the
respondent
Malarayat
Rural
Bank
was
not
a
mortgagee
in
good
faith
as
it
failed
to
exercise
the
exacting
degree
of
diligence
required
from
banking
institutions.
On
September
16,
2008,
the
respondent
filed
a
notice
of
appeal
with
the
CA.
On
December
19,
2011,
the
CA
reversed
and
set
aside
the
decision
of
the
court
a
quo:
IN
LIGHT
OF
THE
FOREGOING,
premises
considered,
the
instant
appeal
is
GRANTED.
Accordingly,
the
Decision
of
the
RTC
of
Taal,
Batangas,
Branch
86
promulgated
on
July
29,
2008
in
Civil
Case
No.
66
is
hereby
REVERSED
AND
SET
ASIDE
and
the
complaint
below
dismissed.
In
fine,
the
issue
in
this
case
is
whether
the
respondent
Malarayat
Rural
Bank
is
a
mortgagee
in
good
faith
who
is
entitled
to
protection
on
its
mortgage
lien.
Petitioners
imputed
negligence
on
the
part
of
respondent
Malarayat
Rural
Bank
when
it
approved
the
loan
application
of
the
spouses
Guia.
They
pointed
out
that
the
bank
failed
to
conduct
a
thorough
ocular
inspection
of
the
land
mortgaged
and
an
extensive
investigation
of
the
title
of
the
registered
owner.
And
since
the
respondent
Malarayat
Rural
Bank
cannot
be
considered
a
mortgagee
in
good
faith,
petitioners
argued
that
the
unregistered
sale
in
their
favor
takes
precedence
over
the
duly
registered
mortgage
lien.
On
the
other
hand,
respondent
Malarayat
Rural
Bank
claimed
that
it
exercised
the
required
degree
of
diligence
before
granting
the
loan
application.
In
particular,
it
asserted
the
absence
of
any
facts
or
circumstances
that
can
reasonably
arouse
suspicion
in
a
prudent
person.
Thus,
the
respondent
Malarayat
Rural
Bank
argued
that
it
is
a
mortgagee
in
good
faith
with
a
better
right
to
the
mortgaged
land
as
compared
to
the
vendees
to
the
unregistered
sale.
The
petition
is
meritorious.
At
the
outset,
we
note
that
the
issue
of
whether
a
mortgagee
is
in
good
faith
generally
cannot
be
entertained
in
a
petition
filed
under
Rule
45
of
the
1997
Rules
of
Civil
Procedure,
as
amended.15
This
is
because
the
ascertainment
of
good
faith
or
the
lack
thereof,
and
the
determination
of
negligence
are
factual
matters
which
lay
outside
the
scope
of
a
petition
for
review
on
certiorari.16
However,
a
recognized
exception
to
this
rule
is
when
the
RTC
and
the
CA
have
divergent
findings
of
fact17
as
in
the
case
at
bar.
We
find
that
the
respondent
Malarayat
Rural
Bank
is
not
a
mortgagee
in
good
faith.
Therefore,
the
spouses
Arguelles
as
the
vendees
to
the
unregistered
sale
have
a
superior
right
to
the
mortgaged
land.
In
Cavite
Development
Bank
v.
Spouses
Lim,18
the
Court
explained
the
doctrine
of
mortgagee
in
good
faith,
thus:
There
is,
however,
a
situation
where,
despite
the
fact
that
the
mortgagor
is
not
the
owner
of
the
mortgaged
property,
his
title
being
fraudulent,
the
mortgage
contract
and
any
foreclosure
sale
arising
therefrom
are
given
effect
by
reason
of
public
policy.
This
is
the
doctrine
of
"mortgagee
in
good
faith"
based
on
the
rule
that
all
persons
dealing
with
the
property
covered
by
a
Torrens
Certificate
of
Title,
as
buyers
or
mortgagees,
are
not
required
to
go
beyond
what
appears
on
the
face
of
the
title.
The
public
interest
in
upholding
the
indefeasibility
of
a
certificate
of
title,
as
evidence
of
lawful
ownership
of
the
land
or
of
any
encumbrance
thereon,
protects
a
buyer
or
mortgagee
who,
in
good
faith,
relied
upon
what
appears
on
the
face
of
the
certificate
of
title.
We
disagree
with
respondent's
stance
that
the
mere
planting
and
harvesting
of
sugarcane
cannot
reasonably
trigger
suspicion
that
there
is
adverse
possession
over
the
land
offered
as
mortgage.
Indeed,
such
fact
should
have
immediately
prompted
the
respondent
to
conduct
further
inquiries,
especially
since
the
spouses
Guia
were
not
the
registered
owners
of
the
land
being
mortgaged.
They
merely
derived
the
authority
to
mortgage
the
lot
from
the
Special
Power
of
Attorney
allegedly
executed
by
the
late
Fermina
M.
Guia.
Hence,
it
was
incumbent
upon
the
respondent
Malarayat
Rural
Bank
to
be
more
cautious
in
dealing
with
the
spouses
Guia,
and
inquire
further
regarding
the
identity
and
possible
adverse
claim
of
those
in
actual
possession
of
the
property.
Pertinently,
in
Land
Bank
of
the
Philippines
v.
Poblete,31
we
ruled
that
"[w]here
the
mortgagee
acted
with
haste
in
granting
the
mortgage
loan
and
did
not
ascertain
the
ownership
of
the
land
being
mortgaged,
as
well
as
the
authority
of
the
supposed
agent
executing
the
mortgage,
it
cannot
be
considered
an
innocent
mortgagee."
Since
the
subject
land
was
not
mortgaged
by
the
owner
thereof
and
since
the
respondent
Malarayat
Rural
Bank
is
not
a
mortgagee
in
good
faith,
said
bank
is
not
entitled
to
protection
under
the
law.
The
unregistered
sale
in
favor
of
the
spouses
Arguelles
must
prevail
over
the
mortgage
lien
of
respondent
Malarayat
Rural
Bank.
WHEREFORE,
the
petition
for
review
on
certiorari
is
GRANTED.
The
Decision
dated
December
19,
2011
and
Resolution
dated
February
6,
2012
of
the
Court
of
Appeals
in
CA-G.R.
CV
No.
92555
are
REVERSED
and
SET
ASIDE.
The
Decision
dated
July
29,
2008
of
the
Regional
Trial
Court,
Branch
86,
of
Taal,
Batangas,
in
Civil
Case
No.
66
is
REINSTATED
and
UPHELD.
No
pronouncement
as
to
costs.
SO
ORDERED.
were
still
registered
in
the
name
of
their
deceased
father.
Lastly,
Leonardo
attacked
SBCs
imposition
of
penalty
and
interest
on
the
loans
as
being
arbitrary
and
unconscionable.
On
the
other
hand,
the
Spouses
Castillo
insisted
on
the
validity
of
Leonardos
SPA.
They
alleged
that
they
incurred
the
loan
not
only
for
themselves,
but
also
for
the
other
members
of
the
Castillo
family
who
needed
money
at
that
time.
Upon
receipt
of
the
proceeds
of
the
loan,
they
distributed
the
same
to
their
family
members,
as
agreed
upon.
However,
when
the
loan
became
due,
their
relatives
failed
to
pay
their
respective
shares
such
that
Leon
was
forced
to
use
his
own
money
until
SBC
had
to
finally
foreclose
the
mortgage
over
the
lots.6
In
a
Decision
dated
October
16,
2006,
the
RTC
of
San
Pablo
City
ruled
in
Leonardos
favor,
the
dispositive
portion
of
which
reads:
WHEREFORE,
judgment
is
hereby
rendered
in
favor
of
the
plaintiff
Leonardo
C.
Castillo
and
against
the
defendants
SECURITY
BANK
CORPORATION,
and
JRC
POULTRY
FARMS
or
SPS.
LEON
C.
CASTILLO,
JR.
and
TERESITA
FLORES-
CASTILLO
declaring
as
null
and
void
the
Real
Estate
Mortgage
dated
August
5,
1994,
the
Memorandum
of
Agreement
dated
October
28,
1997
and
the
Certificate
of
Sale
dated
August
27,
1999
insofar
as
plaintiffs
property
with
Transfer
Certificate
of
Title
No.
T-28297
is
concerned.
The
Security
Bank
Corporation
is
likewise
ordered
to
return
the
ownership
of
the
Transfer
Certificate
of
Title
No.
T-28297
to
plaintiff
Leonardo
Castillo.
Likewise,
defendants
spouses
Leon
C.
Castillo,
Jr.
and
Teresita
Flores-Castillo
are
hereby
ordered
to
pay
plaintiff
moral
damages
in
the
total
amount
of
P500,000.00
and
exemplary
damages
of
P20,000.00.
All
other
claims
for
damages
and
attorneys
fees
are
DENIED
for
insufficiency
of
evidence.
SO
ORDERED.7
Both
parties
elevated
the
case
to
the
CA.
On
November
26,
2010,
the
CA
denied
Leonardos
appeal
and
granted
that
of
the
Spouses
Castillo
and
SBC.
It
reversed
and
set
aside
the
RTC
Decision,
essentially
ruling
that
the
August
5,
1994
real
estate
mortgage
isvalid.
Leonardo
filed
a
Motion
for
Reconsideration,
but
the
same
was
denied
for
lack
of
merit.
Hence,
Leonardo
brought
the
case
to
the
Court
and
filed
the
instant
Petition
for
Review.1wphi1
The
main
issue
soughtto
be
resolved
here
is
whether
or
not
the
real
estate
mortgage
constituted
over
the
property
under
TCT
No.
T-28297
is
valid
and
binding.
The
Court
finds
the
petition
to
be
without
merit.
As
a
rule,
the
jurisdiction
of
the
Court
over
appealed
cases
from
the
CA
is
limited
to
the
review
and
revision
of
errors
of
law
it
allegedly
committed,
as
its
findings
of
fact
are
deemed
conclusive.
Thus,
the
Court
is
not
duty-bound
to
evaluate
and
weigh
the
evidence
all
over
again
which
were
already
considered
in
the
proceedings
below,
except
when,
as
in
this
case,
the
findings
of
fact
of
the
CAare
contrary
to
the
findings
and
conclusions
of
the
trial
court.8
The
following
are
the
legal
requisites
for
a
mortgage
to
be
valid:
(1)
It
must
be
constituted
to
secure
the
fulfillment
of
a
principal
obligation;
(2)
The
mortgagor
must
be
the
absolute
owner
of
the
thing
mortgaged;
(3)
The
persons
constituting
the
mortgage
must
have
the
free
disposal
of
their
property,
and
in
the
absence
thereof,
they
should
be
legally
authorized
for
the
purpose.9
Leonardo
asserts
that
his
signature
inthe
SPA
authorizing
his
brother,
Leon,
to
mortgage
his
property
covered
by
TCT
No.
T-28297
was
falsified.
He
claims
that
he
was
in
America
at
the
time
of
its
execution.
As
proof
of
the
forgery,
he
focuses
on
his
alleged
CTC
used
for
the
notarization10
of
the
SPA
on
May
5,
1993
and
points
out
that
it
appears
to
have
been
issued
on
January
11,
1993
when,
in
fact,
he
only
obtained
it
on
May
17,
1993.
But
it
is
a
settled
rule
that
allegations
of
forgery,
like
all
other
allegations,
must
be
proved
by
clear,
positive,
and
convincing
evidence
by
the
party
alleging
it.
It
should
not
be
presumed,
but
must
beestablished
by
comparing
the
alleged
forged
signature
with
the
genuine
signatures.11
Here,
Leonardo
simply
relied
on
his
self-serving
declarations
and
refused
to
present
further
corroborative
evidence,
saying
that
the
falsified
document
itself
is
the
best
evidence.12
He
did
not
even
bother
comparing
the
alleged
forged
signature
on
the
SPA
with
samples
of
his
real
and
actual
signature.
What
he
consistently
utilized
as
lone
support
for
his
allegation
was
the
supposed
discrepancy
on
the
date
of
issuance
of
his
CTC
as
reflectedon
the
subject
SPAs
notarial
acknowledgment.
On
the
contrary,
in
view
of
the
great
ease
with
which
CTCs
are
obtained
these
days,13
there
is
reasonable
ground
to
believe
that,
as
the
CA
correctly
observed,
the
CTC
could
have
been
issued
with
the
space
for
the
date
left
blank
and
Leonardo
merelyfilled
it
up
to
accommodate
his
assertions.
Also,
upon
careful
examination,
the
handwriting
appearing
on
the
space
for
the
date
of
issuance
is
different
from
that
on
the
computation
of
fees,
which
in
turn
was
consistent
with
the
rest
of
the
writings
on
the
document.14
He
did
not
likewise
attempt
to
show
any
evidence
that
would
back
up
his
claim
that
at
the
time
of
the
execution
of
the
SPA
on
May
5,
1993,
he
was
actually
in
America
and
therefore
could
not
have
possibly
appeared
and
signed
the
document
before
the
notary.
And
even
if
the
Court
were
to
assume,
simply
for
the
sake
of
argument,
that
Leonardo
indeed
secured
his
CTC
only
on
May
17,
1993,
this
does
not
automatically
render
the
SPA
invalid.
The
appellate
court
aptly
held
that
defective
notarization
will
simply
strip
the
document
of
its
public
character
and
reduce
it
to
a
private
instrument,
but
nonetheless,
binding,
provided
its
validity
is
established
by
preponderance
of
evidence.15
Article
1358
of
the
Civil
Code
requires
that
the
form
of
a
contract
that
transmits
or
extinguishes
real
rights
over
immovable
property
should
be
in
a
public
document,
yet
the
failure
to
observethe
proper
form
does
not
render
the
transaction
invalid.16
The
necessity
of
a
public
document
for
said
contracts
is
only
for
convenience;
it
is
not
essential
for
validity
or
enforceability.17
Even
a
sale
of
real
property,
though
notcontained
in
a
public
instrument
or
formal
writing,
is
nevertheless
valid
and
binding,
for
even
a
verbal
contract
of
sale
or
real
estate
produceslegal
effects
between
the
parties.18
Consequently,
when
there
is
a
defect
in
the
notarization
of
a
document,
the
clear
and
convincing
evidentiary
standard
originally
attached
to
a
dulynotarized
document
is
dispensed
with,
and
the
measure
to
test
the
validity
of
such
document
is
preponderance
of
evidence.19
Here,
the
preponderance
ofevidence
indubitably
tilts
in
favor
of
the
respondents,
still
making
the
SPA
binding
between
the
parties
even
with
the
aforementioned
assumed
irregularity.1wphi1
There
are
several
telling
circumstances
that
would
clearly
demonstrate
that
Leonardo
was
aware
of
the
mortgage
and
he
indeed
executed
the
SPA
to
entrust
Leon
with
the
mortgage
of
his
property.
Leon
had
inhis
possession
all
the
titles
covering
the
eleven
(11)
properties
mortgaged,
including
that
of
Leonardo.20
Leonardo
and
the
rest
of
their
relatives
could
not
have
just
blindly
ceded
their
respective
TCTs
to
Leon.21
It
is
likewise
ridiculous
how
Leonardo
seemed
to
have
been
totally
oblivious
to
the
status
of
his
property
for
eight
(8)
long
years,
and
would
only
find
outabout
the
mortgage
and
foreclosure
from
a
nephew
who
himself
had
consented
to
the
mortgage
of
his
own
lot.22
Considering
the
lapse
of
time
from
the
alleged
forgery
on
May
5,
1993
and
the
mortgage
on
August
5,
1994,
to
the
foreclosure
on
July
29,
1999,
and
to
the
supposed
discovery
in
2001,
it
appears
that
the
suit
is
a
mere
afterthought
or
a
last-ditch
effort
on
Leonardos
part
to
extend
his
hold
over
his
property
and
to
prevent
SBC
from
consolidating
ownership
over
the
same.
More
importantly,
Leonardo
himself
admitted
on
cross-examination
that
he
granted
Leon
authority
to
mortgage,
only
that,
according
to
him,
he
thought
it
was
going
to
be
with
China
Bank,
and
not
SBC.23
But
as
the
CA
noted,
there
is
no
mention
of
a
certainbank
in
the
subject
SPA
with
which
Leon
must
specifically
deal.
Leon,
therefore,
was
simply
acting
within
the
bounds
of
the
SPAs
authority
when
hemortgaged
the
lot
to
SBC.
True,
banks
and
other
financing
institutions,
in
entering
into
mortgage
contracts,
are
expected
to
exercise
due
diligence.24
The
ascertainment
of
the
status
or
condition
of
a
property
offered
to
it
as
security
for
a
loan
must
be
a
standard
and
indispensable
part
of
its
operations.25
In
this
case,
however,
no
evidence
was
presented
to
show
that
SBC
was
remiss
in
the
exercise
of
the
standard
care
and
prudence
required
of
it
or
that
it
was
negligent
in
accepting
the
mortgage.26
SBC
could
not
likewise
befaulted
for
relying
on
the
presumption
of
regularity
of
the
notarized
SPA
when
it
entered
into
the
subject
mortgage
agreement.
Finally,
the
Court
finds
that
the
interest
and
penalty
charges
imposed
by
SBC
are
just,
and
not
excessive
or
unconscionable.
Section
47
of
The
General
Banking
Law
of
200027
thus
provides:
Section
47.
Foreclosure
of
Real
Estate
Mortgage.-
In
the
event
of
foreclosure,
whether
judicially
or
extra-judicially,
of
any
mortgage
on
real
estate
which
is
security
for
any
loan
or
other
credit
accommodation
granted,
the
mortgagor
or
debtor
whose
real
property
has
been
sold
for
the
full
or
partial
payment
of
his
obligation
shall
have
the
right
within
one
year
after
the
sale
of
the
real
estate,
to
redeem
the
property
by
paying
the
amount
due
under
the
mortgage
deed,
with
interest
thereon
at
the
rate
specified
in
the
mortgage,
and
all
the
costs
and
expenses
incurred
by
the
bank
or
institutionfrom
the
sale
and
custody
of
said
property
less
the
income
derived
therefrom.
However,the
purchaser
at
the
auction
sale
concerned
whether
in
a
judicial
or
extra-judicial
foreclosure
shall
have
the
right
to
enter
upon
and
take
possession
of
such
property
immediately
after
the
date
of
the
confirmation
of
the
auction
sale
and
administer
the
same
in
accordance
with
law.
Any
petition
in
court
to
enjoin
or
restrain
the
conduct
of
foreclosure
proceedings
instituted
pursuant
to
this
provision
shall
be
given
due
course
only
upon
the
filing
by
the
petitioner
of
a
bond
in
an
amount
fixed
by
the
court
conditioned
that
he
will
pay
all
the
damages
which
the
bank
may
suffer
by
the
enjoining
or
the
restraint
of
the
foreclosure
proceeding.
Notwithstanding
Act
3135,
juridical
persons
whose
property
is
being
sold
pursuant
to
an
extrajudicial
foreclosure,
shall
have
the
right
to
redeem
the
property
in
accordance
with
this
provision
until,
but
not
after,
the
registration
of
the
certificate
of
foreclosure
sale
with
the
applicable
Register
of
Deeds
which
in
no
case
shall
be
more
than
three
(3)
months
after
foreclosure,
whichever
is
earlier.
Owners
of
property
that
has
been
sold
in
a
foreclosure
sale
prior
to
the
effectivity
of
this
Act
shall
retain
their
redemption
rights
until
their
expiration.28
Verily,
the
redemption
price
comprises
not
only
the
total
amount
due
under
the
mortgage
deed,
but
also
with
interest
at
the
rate
specified
in
the
mortgage,
and
all
the
foreclosure
expenses
incurred
by
the
mortgagee
bank.
To
sustain
Leonardo's
claim
that
their
payment
of
P45,000,000.00
had
already
extinguished
their
entire
obligation
with
SBC
would
mean
that
no
interest
ever
accrued
from
1994,
when
the
loan
was
availed,
up
to
the
time
the
payment
of
P45,000,000.00
was
made
in
2000-2001.
SBC's
16%
rate
of
interest
is
not
computed
per
month,
but
rather
per
annum
or
only
1.33%
per
month.
In
Spouses
Bacolor
v.
Banco
Filipino
Savings
and
Mortgage
Bank,
Dagupan
City
Branch,29
the
Court
held
that
the
interest
rate
of
24%
per
annum
on
a
loan
of
P244,000.00
is
not
considered
as
unconscionable
and
excessive.
As
such,
the
Court
ruled
that
the
debtors
cannot
renege
on
their
obligation
to
comply
with
what
is
incumbent
upon
them
under
the
contract
of
loan
as
they
are
bound
by
its
stipulations.
Also,
the
24o/o
per
annum
rate
or
2%
per
month
for
the
penalty
charges
imposed
on
account
of
default,
cannot
be
considered
as
skyrocketing.
The
enforcement
of
penalty
can
be
demanded
by
the
creditor
in
case
of
non-performance
due
to
the
debtor's
fault
or
fraud.
The
nonperformance
gives
rise
to
the
presumption
of
fault
and
in
order
to
avoid
the
penalty,
the
debtor
has
the
burden
of
proving
that
the
failure
of
the
performance
was
due
to
either
force
majeure
or
the
creditor's
own
acts.30
In
the
instant
case,
petitioner
failed
to
discharge
said
burden
and
thus
cannot
avoid
the
payment
of
the
penalty
charge
agreed
upon.
WHEREFORE,
premises
considered,
the
petition
is
DENIED.
The
Decision
of
the
Court
of
Appeals,
dated
November
26,
2010,
as
well
as
its
Resolution
dated
March
17,
2011
in
CA-G.R.
CV
No.
88914,
are
hereby
AFFIRMED.
SO
ORDERED.
checks
in
payment
of
50,000
bags.
Aside
from
SLDR
No.
1214M,
said
checks
also
covered
SLDR
No.
1213.
Private
respondent
CSC
surrendered
SLDR
No.
1214M
to
the
petitioner's
NAWACO
warehouse
and
was
allowed
to
withdraw
sugar.
However,
after
2,000
bags
had
been
released,
petitioner
refused
to
allow
further
withdrawals
of
sugar
against
SLDR
No.
1214M.
CSC
then
sent
petitioner
a
letter
dated
January
23,
1990
informing
it
that
SLDR
No.
1214M
had
been
"sold
and
endorsed"
to
it
but
that
it
had
been
refused
further
withdrawals
of
sugar
from
petitioner's
warehouse
despite
the
fact
that
only
2,000
bags
had
been
withdrawn.5
CSC
thus
inquired
when
it
would
be
allowed
to
withdraw
the
remaining
23,000
bags.
On
January
31,
1990,
petitioner
replied
that
it
could
not
allow
any
further
withdrawals
of
sugar
against
SLDR
No.
1214M
because
STM
had
already
dwithdrawn
all
the
sugar
covered
by
the
cleared
checks.6
On
March
2,
1990,
CSC
sent
petitioner
a
letter
demanding
the
release
of
the
balance
of
23,000
bags.
Seven
days
later,
petitioner
reiterated
that
all
the
sugar
corresponding
to
the
amount
of
STM's
cleared
checks
had
been
fully
withdrawn
and
hence,
there
would
be
no
more
deliveries
of
the
commodity
to
STM's
account.
Petitioner
also
noted
that
CSC
had
represented
itself
to
be
STM's
agent
as
it
had
withdrawn
the
2,000
bags
against
SLDR
No.
1214M
"for
and
in
behalf"
of
STM.
On
April
27,
1990,
CSC
filed
a
complaint
for
specific
performance,
docketed
as
Civil
Case
No.
90-1118.
Defendants
were
Teresita
Ng
Sy
(doing
business
under
the
name
of
St.
Therese
Merchandising)
and
herein
petitioner.
Since
the
former
could
not
be
served
with
summons,
the
case
proceeded
only
against
the
latter.
During
the
trial,
it
was
discovered
that
Teresita
Ng
Go
who
testified
for
CSC
was
the
same
Teresita
Ng
Sy
who
could
not
be
reached
through
summons.7
CSC,
however,
did
not
bother
to
pursue
its
case
against
her,
but
instead
used
her
as
its
witness.
CSC's
complaint
alleged
that
STM
had
fully
paid
petitioner
for
the
sugar
covered
by
SLDR
No.
1214M.
Therefore,
the
latter
had
no
justification
for
refusing
delivery
of
the
sugar.
CSC
prayed
that
petitioner
be
ordered
to
deliver
the
23,000
bags
covered
by
SLDR
No.
1214M
and
sought
the
award
of
P1,104,000.00
in
unrealized
profits,
P3,000,000.00
as
exemplary
damages,
P2,200,000.00
as
attorney's
fees
and
litigation
expenses.
Petitioner's
primary
defense
a
quo
was
that
it
was
an
unpaid
seller
for
the
23,000
bags.8
Since
STM
had
already
drawn
in
full
all
the
sugar
corresponding
to
the
amount
of
its
cleared
checks,
it
could
no
longer
authorize
further
delivery
of
sugar
to
CSC.
Petitioner
also
contended
that
it
had
no
privity
of
contract
with
CSC.
Petitioner
explained
that
the
SLDRs,
which
it
had
issued,
were
not
documents
of
title,
but
mere
delivery
receipts
issued
pursuant
to
a
series
of
transactions
entered
into
between
it
and
STM.
The
SLDRs
prescribed
delivery
of
the
sugar
to
the
party
specified
therein
and
did
not
authorize
the
transfer
of
said
party's
rights
and
interests.
Petitioner
also
alleged
that
CSC
did
not
pay
for
the
SLDR
and
was
actually
STM's
co-conspirator
to
defraud
it
through
a
misrepresentation
that
CSC
was
an
innocent
purchaser
for
value
and
in
good
faith.
Petitioner
then
prayed
that
CSC
be
ordered
to
pay
it
the
following
sums:
P10,000,000.00
as
moral
damages;
P10,000,000.00
as
exemplary
damages;
and
P1,500,000.00
as
attorney's
fees.
Petitioner
also
prayed
that
cross-defendant
STM
be
ordered
to
pay
it
P10,000,000.00
in
exemplary
damages,
and
P1,500,000.00
as
attorney's
fees.
Since
no
settlement
was
reached
at
pre-trial,
the
trial
court
heard
the
case
on
the
merits.
As
earlier
stated,
the
trial
court
rendered
its
judgment
favoring
private
respondent
CSC,
as
follows:
"WHEREFORE,
in
view
of
the
foregoing,
the
Court
hereby
renders
judgment
in
favor
of
the
plaintiff
and
against
defendant
Victorias
Milling
Company:
"1)
Ordering
defendant
Victorias
Milling
Company
to
deliver
to
the
plaintiff
23,000
bags
of
refined
sugar
due
under
SLDR
No.
1214;
"2)
Ordering
defendant
Victorias
Milling
Company
to
pay
the
amount
of
P920,000.00
as
unrealized
profits,
the
amount
of
P800,000.00
as
exemplary
damages
and
the
amount
of
P1,357,000.00,
which
is
10%
of
the
acquisition
value
of
the
undelivered
bags
of
refined
sugar
in
the
amount
of
P13,570,000.00,
as
attorney's
fees,
plus
the
costs.
"SO
ORDERED."9
to
C-15
inclusive
which
are
post-dated
checks
dated
October
27,
1989
issued
by
St.
Therese
Merchandising
in
favor
of
Victorias
Milling
Company
at
the
time
it
purchased
the
50,000
bags
of
sugar
covered
by
SLDR
No.
1213
and
1214.
Said
checks
appear
to
have
been
honored
and
duly
credited
to
the
account
of
Victorias
Milling
Company
because
on
October
27,
1989
Victorias
Milling
Company
issued
official
receipt
no.
34734
in
favor
of
St.
Therese
Merchandising
for
the
amount
of
P31,900,000.00
(Exhibits
B
and
B-1).
The
testimony
of
Teresita
Ng
Go
is
further
supported
by
Exhibit
F,
which
is
a
computer
printout
of
defendant
Victorias
Milling
Company
showing
the
quantity
and
value
of
the
purchases
made
by
St.
Therese
Merchandising,
the
SLDR
no.
issued
to
cover
the
purchase,
the
official
reciept
no.
and
the
status
of
payment.
It
is
clear
in
Exhibit
'F'
that
with
respect
to
the
sugar
covered
by
SLDR
No.
1214
the
same
has
been
fully
paid
as
indicated
by
the
word
'cleared'
appearing
under
the
column
of
'status
of
payment.'
"On
the
other
hand,
the
claim
of
defendant
Victorias
Milling
Company
that
the
purchase
price
of
the
25,000
bags
of
sugar
purchased
by
St.
Therese
Merchandising
covered
by
SLDR
No.
1214
has
not
been
fully
paid
is
supported
only
by
the
testimony
of
Arnulfo
Caintic,
witness
for
defendant
Victorias
Milling
Company.
The
Court
notes
that
the
testimony
of
Arnulfo
Caintic
is
merely
a
sweeping
barren
assertion
that
the
purchase
price
has
not
been
fully
paid
and
is
not
corroborated
by
any
positive
evidence.
There
is
an
insinuation
by
Arnulfo
Caintic
in
his
testimony
that
the
postdated
checks
issued
by
the
buyer
in
payment
of
the
purchased
price
were
dishonored.
However,
said
witness
failed
to
present
in
Court
any
dishonored
check
or
any
replacement
check.
Said
witness
likewise
failed
to
present
any
bank
record
showing
that
the
checks
issued
by
the
buyer,
Teresita
Ng
Go,
in
payment
of
the
purchase
price
of
the
sugar
covered
by
SLDR
No.
1214
were
dishonored."10
Petitioner
appealed
the
trial
courts
decision
to
the
Court
of
Appeals.
On
appeal,
petitioner
averred
that
the
dealings
between
it
and
STM
were
part
of
a
series
of
transactions
involving
only
one
account
or
one
general
contract
of
sale.
Pursuant
to
this
contract,
STM
or
any
of
its
authorized
agents
could
withdraw
bags
of
sugar
only
against
cleared
checks
of
STM.
SLDR
No.
21214M
was
only
one
of
22
SLDRs
issued
to
STM
and
since
the
latter
had
already
withdrawn
its
full
quota
of
sugar
under
the
said
SLDR,
CSC
was
already
precluded
from
seeking
delivery
of
the
23,000
bags
of
sugar.
Private
respondent
CSC
countered
that
the
sugar
purchases
involving
SLDR
No.
1214M
were
separate
and
independent
transactions
and
that
the
details
of
the
series
of
purchases
were
contained
in
a
single
statement
with
a
consolidated
summary
of
cleared
check
payments
and
sugar
stock
withdrawals
because
this
a
more
convenient
system
than
issuing
separate
statements
for
each
purchase.
The
appellate
court
considered
the
following
issues:
(a)
Whether
or
not
the
transaction
between
petitioner
and
STM
involving
SLDR
No.
1214M
was
a
separate,
independent,
and
single
transaction;
(b)
Whether
or
not
CSC
had
the
capacity
to
sue
on
its
own
on
SLDR
No.
1214M;
and
(c)
Whether
or
not
CSC
as
buyer
from
STM
of
the
rights
to
25,000
bags
of
sugar
covered
by
SLDR
No.
1214M
could
compel
petitioner
to
deliver
23,000
bags
allegedly
unwithdrawn.
On
February
24,
1994,
the
Court
of
Appeals
rendered
its
decision
modifying
the
trial
court's
judgment,
to
wit:
"WHEREFORE,
the
Court
hereby
MODIFIES
the
assailed
judgment
and
orders
defendant-appellant
to:
"1)
Deliver
to
plaintiff-appellee
12,586
bags
of
sugar
covered
by
SLDR
No.
1214M;
"2)
Pay
to
plaintiff-appellee
P792,918.00
which
is
10%
of
the
value
of
the
undelivered
bags
of
refined
sugar,
as
attorneys
fees;
"3)
Pay
the
costs
of
suit.
"SO
ORDERED."11
Both
parties
then
seasonably
filed
separate
motions
for
reconsideration.
In
its
resolution
dated
September
30,
1994,
the
appellate
court
modified
its
decision
to
read:
"WHEREFORE,
the
Court
hereby
modifies
the
assailed
judgment
and
orders
defendant-appellant
to:
"(1)
Deliver
to
plaintiff-appellee
23,000
bags
of
refined
sugar
under
SLDR
No.
1214M;
"(2)
Pay
costs
of
suit.
"SO
ORDERED."12
The
appellate
court
explained
the
rationale
for
the
modification
as
follows:
"There
is
merit
in
plaintiff-appellee's
position.
"Exhibit
F'
We
relied
upon
in
fixing
the
number
of
bags
of
sugar
which
remained
undelivered
as
12,586
cannot
be
made
the
basis
for
such
a
finding.
The
rule
is
explicit
that
courts
should
consider
the
evidence
only
for
the
purpose
for
which
it
was
offered.
(People
v.
Abalos,
et
al,
1
CA
Rep
783).
The
rationale
for
this
is
to
afford
the
party
against
whom
the
evidence
is
presented
to
object
thereto
if
he
deems
it
necessary.
Plaintiff-appellee
is,
therefore,
correct
in
its
argument
that
Exhibit
F'
which
was
offered
to
prove
that
checks
in
the
total
amount
of
P15,950,000.00
had
been
cleared.
(Formal
Offer
of
Evidence
for
Plaintiff,
Records
p.
58)
cannot
be
used
to
prove
the
proposition
that
12,586
bags
of
sugar
remained
undelivered.
"Testimonial
evidence
(Testimonies
of
Teresita
Ng
[TSN,
10
October
1990,
p.
33]
and
Marianito
L.
Santos
[TSN,
17
October
1990,
pp.
16,
18,
and
36])
presented
by
plaintiff-appellee
was
to
the
effect
that
it
had
withdrawn
only
2,000
bags
of
sugar
from
SLDR
after
which
it
was
not
allowed
to
withdraw
anymore.
Documentary
evidence
(Exhibit
I,
Id.,
p.
78,
Exhibit
K,
Id.,
p.
80)
show
that
plaintiff-appellee
had
sent
demand
letters
to
defendant-appellant
asking
the
latter
to
allow
it
to
withdraw
the
remaining
23,000
bags
of
sugar
from
SLDR
1214M.
Defendant-appellant,
on
the
other
hand,
alleged
that
sugar
delivery
to
the
STM
corresponded
only
to
the
value
of
cleared
checks;
and
that
all
sugar
corresponded
to
cleared
checks
had
been
withdrawn.
Defendant-appellant
did
not
rebut
plaintiff-appellee's
assertions.
It
did
not
present
evidence
to
show
how
many
bags
of
sugar
had
been
withdrawn
against
SLDR
No.
1214M,
precisely
because
of
its
theory
that
all
sales
in
question
were
a
series
of
one
single
transaction
and
withdrawal
of
sugar
depended
on
the
clearing
of
checks
paid
therefor.
"After
a
second
look
at
the
evidence,
We
see
no
reason
to
overturn
the
findings
of
the
trial
court
on
this
point."13
Hence,
the
instant
petition,
positing
the
following
errors
as
grounds
for
review:
"1.
The
Court
of
Appeals
erred
in
not
holding
that
STM's
and
private
respondent's
specially
informing
petitioner
that
respondent
was
authorized
by
buyer
STM
to
withdraw
sugar
against
SLDR
No.
1214M
"for
and
in
our
(STM)
behalf,"
(emphasis
in
the
original)
private
respondent's
withdrawing
2,000
bags
of
sugar
for
STM,
and
STM's
empowering
other
persons
as
its
agents
to
withdraw
sugar
against
the
same
SLDR
No.
1214M,
rendered
respondent
like
the
other
persons,
an
agent
of
STM
as
held
in
Rallos
v.
Felix
Go
Chan
&
Realty
Corp.,
81
SCRA
252,
and
precluded
it
from
subsequently
claiming
and
proving
being
an
assignee
of
SLDR
No.
1214M
and
from
suing
by
itself
for
its
enforcement
because
it
was
conclusively
presumed
to
be
an
agent
(Sec.
2,
Rule
131,
Rules
of
Court)
and
estopped
from
doing
so.
(Art.
1431,
Civil
Code).
(3)....Whether
or
not
the
Court
of
Appeals
erred
in
not
ruling
that
the
sale
of
sugar
under
SLDR
No.
1214M
was
a
conditional
sale
or
a
contract
to
sell
and
hence
freed
petitioner
from
further
obligations.
(4)....Whether
or
not
the
Court
of
Appeals
committed
an
error
of
law
in
not
applying
the
"clean
hands
doctrine"
to
preclude
CSC
from
seeking
judicial
relief.
The
issues
will
be
discussed
in
seriatim.
Anent
the
first
issue,
we
find
from
the
records
that
petitioner
raised
this
issue
for
the
first
time
on
appeal.1avvphi1
It
is
settled
that
an
issue
which
was
not
raised
during
the
trial
in
the
court
below
could
not
be
raised
for
the
first
time
on
appeal
as
to
do
so
would
be
offensive
to
the
basic
rules
of
fair
play,
justice,
and
due
process.15
Nonetheless,
the
Court
of
Appeals
opted
to
address
this
issue,
hence,
now
a
matter
for
our
consideration.
Petitioner
heavily
relies
upon
STM's
letter
of
authority
allowing
CSC
to
withdraw
sugar
against
SLDR
No.
1214M
to
show
that
the
latter
was
STM's
agent.
The
pertinent
portion
of
said
letter
reads:
"This
is
to
authorize
Consolidated
Sugar
Corporation
or
its
representative
to
withdraw
for
and
in
our
behalf
(stress
supplied)
the
refined
sugar
covered
by
Shipping
List/Delivery
Receipt
=
Refined
Sugar
(SDR)
No.
1214
dated
October
16,
1989
in
the
total
quantity
of
25,
000
bags."16
The
Civil
Code
defines
a
contract
of
agency
as
follows:
"Art.
1868.
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."
It
is
clear
from
Article
1868
that
the
basis
of
agency
is
representation.17
On
the
part
of
the
principal,
there
must
be
an
actual
intention
to
appoint18
or
an
intention
naturally
inferable
from
his
words
or
actions;19
and
on
the
part
of
the
agent,
there
must
be
an
intention
to
accept
the
appointment
and
act
on
it,20
and
in
the
absence
of
such
intent,
there
is
generally
no
agency.21
One
factor
which
most
clearly
distinguishes
agency
from
other
legal
concepts
is
control;
one
person
-
the
agent
-
agrees
to
act
under
the
control
or
direction
of
another
-
the
principal.
Indeed,
the
very
word
"agency"
has
come
to
connote
control
by
the
principal.22
The
control
factor,
more
than
any
other,
has
caused
the
courts
to
put
contracts
between
principal
and
agent
in
a
separate
category.23
The
Court
of
Appeals,
in
finding
that
CSC,
was
not
an
agent
of
STM,
opined:
"This
Court
has
ruled
that
where
the
relation
of
agency
is
dependent
upon
the
acts
of
the
parties,
the
law
makes
no
presumption
of
agency,
and
it
is
always
a
fact
to
be
proved,
with
the
burden
of
proof
resting
upon
the
persons
alleging
the
agency,
to
show
not
only
the
fact
of
its
existence,
but
also
its
nature
and
extent
(Antonio
vs.
Enriquez
[CA],
51
O.G.
3536].
Here,
defendant-appellant
failed
to
sufficiently
establish
the
existence
of
an
agency
relation
between
plaintiff-
appellee
and
STM.
The
fact
alone
that
it
(STM)
had
authorized
withdrawal
of
sugar
by
plaintiff-appellee
"for
and
in
our
(STM's)
behalf"
should
not
be
eyed
as
pointing
to
the
existence
of
an
agency
relation
...It
should
be
viewed
in
the
context
of
all
the
circumstances
obtaining.
Although
it
would
seem
STM
represented
plaintiff-appellee
as
being
its
agent
by
the
use
of
the
phrase
"for
and
in
our
(STM's)
behalf"
the
matter
was
cleared
when
on
23
January
1990,
plaintiff-appellee
informed
defendant-appellant
that
SLDFR
No.
1214M
had
been
"sold
and
endorsed"
to
it
by
STM
(Exhibit
I,
Records,
p.
78).
Further,
plaintiff-appellee
has
shown
that
the
25,
000
bags
of
sugar
covered
by
the
SLDR
No.
1214M
were
sold
and
transferred
by
STM
to
it
...A
conclusion
that
there
was
a
valid
sale
and
transfer
to
plaintiff-appellee
may,
therefore,
be
made
thus
capacitating
plaintiff-appellee
to
sue
in
its
own
name,
without
need
of
joining
its
imputed
principal
STM
as
co-plaintiff."24
In
the
instant
case,
it
appears
plain
to
us
that
private
respondent
CSC
was
a
buyer
of
the
SLDFR
form,
and
not
an
agent
of
STM.
Private
respondent
CSC
was
not
subject
to
STM's
control.
The
question
of
whether
a
contract
is
one
of
sale
or
agency
depends
on
the
intention
of
the
parties
as
gathered
from
the
whole
scope
and
effect
of
the
language
employed.25
That
the
authorization
given
to
CSC
contained
the
phrase
"for
and
in
our
(STM's)
behalf"
did
not
establish
an
agency.
Ultimately,
what
is
decisive
is
the
intention
of
the
parties.26
That
no
agency
was
meant
to
be
established
by
the
CSC
and
STM
is
clearly
shown
by
CSC's
communication
to
petitioner
that
SLDR
No.
1214M
had
been
"sold
and
endorsed"
to
it.27
The
use
of
the
words
"sold
and
endorsed"
means
that
STM
and
CSC
intended
a
contract
of
sale,
and
not
an
agency.
Hence,
on
this
score,
no
error
was
committed
by
the
respondent
appellate
court
when
it
held
that
CSC
was
not
STM's
agent
and
could
independently
sue
petitioner.
On
the
second
issue,
proceeding
from
the
theory
that
the
transactions
entered
into
between
petitioner
and
STM
are
but
serial
parts
of
one
account,
petitioner
insists
that
its
debt
has
been
offset
by
its
claim
for
STM's
unpaid
purchases,
pursuant
to
Article
1279
of
the
Civil
Code.28
However,
the
trial
court
found,
and
the
Court
of
Appeals
concurred,
that
the
purchase
of
sugar
covered
by
SLDR
No.
1214M
was
a
separate
and
independent
transaction;
it
was
not
a
serial
part
of
a
single
transaction
or
of
one
account
contrary
to
petitioner's
insistence.
Evidence
on
record
shows,
without
being
rebutted,
that
petitioner
had
been
paid
for
the
sugar
purchased
under
SLDR
No.
1214M.
Petitioner
clearly
had
the
obligation
to
deliver
said
commodity
to
STM
or
its
assignee.
Since
said
sugar
had
been
fully
paid
for,
petitioner
and
CSC,
as
assignee
of
STM,
were
not
mutually
creditors
On
February
29,
2000,
Gutierrez
filed
a
case
for
damages
and
injunction
against
petitioners
for
illegally
entering
Legaspis
land.
He
hired
the
legal
services
of
Atty.
Homobono
Adaza.
Their
contract
provided
that
as
legal
fees,
Atty.
Adaza
shall
be
entitled
to
30%
of
Legaspis
share
in
whatever
treasure
may
be
found
in
the
land.
In
addition,
Gutierrez
agreed
to
pay
Atty.
Adaza
P5,000.00
as
appearance
fee
per
court
hearing
and
defray
all
expenses
for
the
cost
of
the
litigation.4
Upon
the
filing
of
the
complaint,
then
Executive
Judge
Perlita
J.
Tria
Tirona
issued
a
72-hour
temporary
restraining
order
(TRO)
against
petitioners.
The
case5
was
subsequently
raffled
to
the
RTC
of
Quezon
City,
Branch
223,
then
presided
by
public
respondent
Judge
Victorino
P.
Evangelista.
On
March
2,
2000,
respondent
judge
issued
another
72-hour
TRO
and
a
summary
hearing
for
its
extension
was
set
on
March
7,
2000.
On
March
14,
2000,
petitioners
filed
a
Motion
to
Dismiss6
contending:
first,
there
is
no
real
party-in-interest
as
the
SPA
of
Gutierrez
to
bring
the
suit
was
already
revoked
by
Legaspi
on
March
7,
2000,
as
evidenced
by
a
Deed
of
Revocation,7
and,
second,
Gutierrez
failed
to
establish
that
the
alleged
armed
men
guarding
the
area
were
acting
on
orders
of
petitioners.
On
March
17,
2000,
petitioners
also
filed
a
Motion
for
Inhibition8
of
the
respondent
judge
on
the
ground
of
alleged
partiality
in
favor
of
private
respondent.
On
March
23,
2000,
the
trial
court
granted
private
respondents
application
for
a
writ
of
preliminary
injunction
on
the
following
grounds:
(1)
the
diggings
and
blastings
appear
to
have
been
made
on
the
land
of
Legaspi,
hence,
there
is
an
urgent
need
to
maintain
the
status
quo
to
prevent
serious
damage
to
Legaspis
land;
and,
(2)
the
SPA
granted
to
Gutierrez
continues
to
be
valid.9
The
trial
court
ordered
thus:
WHEREFORE,
in
view
of
all
the
foregoing,
the
Court
hereby
resolves
to
GRANT
plaintiffs
application
for
a
writ
of
preliminary
injunction.
Upon
plaintiffs
filing
of
an
injunction
bond
in
the
amount
of
ONE
HUNDRED
THOUSAND
PESOS
(P100,000.00),
let
a
Writ
of
Preliminary
Injunction
issue
enjoining
the
defendants
as
well
as
their
associates,
agents
or
representatives
from
continuing
to
occupy
and
encamp
on
the
land
of
the
plaintiff
LEGASPI
as
well
as
the
vicinity
thereof;
from
digging,
tunneling
and
blasting
the
said
land
of
plaintiff
LEGASPI;
from
removing
whatever
treasure
may
be
found
on
the
said
land;
from
preventing
and
threatening
the
plaintiffs
and
their
representatives
from
entering
the
said
land
and
performing
acts
of
ownership;
from
threatening
the
plaintiffs
and
their
representatives
as
well
as
plaintiffs
lawyer.
On
even
date,
the
trial
court
issued
another
Order10
denying
petitioners
motion
to
dismiss
and
requiring
petitioners
to
answer
the
complaint.
On
April
4,
2000,
it
likewise
denied
petitioners
motion
for
inhibition.11
On
appeal,
the
Court
of
Appeals
affirmed
the
decision
of
the
trial
court.12
Hence
this
petition,
with
the
following
assigned
errors:
I
WHETHER
THE
CONTRACT
OF
AGENCY
BETWEEN
LEGASPI
AND
PRIVATE
RESPONDENT
GUTIERREZ
HAS
BEEN
EFFECTIVELY
REVOKED
BY
LEGASPI.
II
WHETHER
THE
COMPLAINT
AGAINST
PETITIONERS
SHOULD
BE
DISMISSED.
III
WHETHER
RESPONDENT
JUDGE
OUGHT
TO
HAVE
INHIBITED
HIMSELF
FROM
FURTHER
PROCEEDING
WITH
THE
CASE.
We
find
no
merit
in
the
petition.
On
the
first
issue,
petitioners
claim
that
the
special
power
of
attorney
of
Gutierrez
to
represent
Legaspi
has
already
been
revoked
by
the
latter.
Private
respondent
Gutierrez,
however,
contends
that
the
unilateral
revocation
is
invalid
as
his
agency
is
coupled
with
interest.
We
agree
with
private
respondent.
Art.
1868
of
the
Civil
Code
provides
that
by
the
contract
of
agency,
an
agent
binds
himself
to
render
some
service
or
do
something
in
representation
or
on
behalf
of
another,
known
as
the
principal,
with
the
consent
or
authority
of
the
latter.13
A
contract
of
agency
is
generally
revocable
as
it
is
a
personal
contract
of
representation
based
on
trust
and
confidence
reposed
by
the
principal
on
his
agent.
As
the
power
of
the
agent
to
act
depends
on
the
will
and
license
of
the
principal
he
represents,
the
power
of
the
agent
ceases
when
the
will
or
permission
is
withdrawn
by
the
principal.
Thus,
generally,
the
agency
may
be
revoked
by
the
principal
at
will.14
However,
an
exception
to
the
revocability
of
a
contract
of
agency
is
when
it
is
coupled
with
interest,
i.e.,
if
a
bilateral
contract
depends
upon
the
agency.15
The
reason
for
its
irrevocability
is
because
the
agency
becomes
part
of
another
obligation
or
agreement.
It
is
not
solely
the
rights
of
the
principal
but
also
that
of
the
agent
and
third
persons
which
are
affected.
Hence,
the
law
provides
that
in
such
cases,
the
agency
cannot
be
revoked
at
the
sole
will
of
the
principal.
In
the
case
at
bar,
we
agree
with
the
finding
of
the
trial
and
appellate
courts
that
the
agency
granted
by
Legaspi
to
Gutierrez
is
coupled
with
interest
as
a
bilateral
contract
depends
on
it.
It
is
clear
from
the
records
that
Gutierrez
was
given
by
Legaspi,
inter
alia,
the
power
to
manage
the
treasure
hunting
activities
in
the
subject
land;
to
file
any
case
against
anyone
who
enters
the
land
without
authority
from
Legaspi;
to
engage
the
services
of
lawyers
to
carry
out
the
agency;
and,
to
dig
for
any
treasure
within
the
land
and
enter
into
agreements
relative
thereto.
It
was
likewise
agreed
upon
that
Gutierrez
shall
be
entitled
to
40%
of
whatever
treasure
may
be
found
in
the
land.
Pursuant
to
this
authority
and
to
protect
Legaspis
land
from
the
alleged
illegal
entry
of
petitioners,
agent
Gutierrez
hired
the
services
of
Atty.
Adaza
to
prosecute
the
case
for
damages
and
injunction
against
petitioners.
As
payment
for
legal
services,
Gutierrez
agreed
to
assign
to
Atty.
Adaza
30%
of
Legaspis
share
in
whatever
treasure
may
be
recovered
in
the
subject
land.
It
is
clear
that
the
treasure
that
may
be
found
in
the
land
is
the
subject
matter
of
the
agency;
that
under
the
SPA,
Gutierrez
can
enter
into
contract
for
the
legal
services
of
Atty.
Adaza;
and,
thus
Gutierrez
and
Atty.
Adaza
have
an
interest
in
the
subject
matter
of
the
agency,
i.e.,
in
the
treasures
that
may
be
found
in
the
land.
This
bilateral
contract
depends
on
the
agency
and
thus
renders
it
as
one
coupled
with
interest,
irrevocable
at
the
sole
will
of
the
principal
Legaspi.16
When
an
agency
is
constituted
as
a
clause
in
a
bilateral
contract,
that
is,
when
the
agency
is
inserted
in
another
agreement,
the
agency
ceases
to
be
revocable
at
the
pleasure
of
the
principal
as
the
agency
shall
now
follow
the
condition
of
the
bilateral
agreement.17
Consequently,
the
Deed
of
Revocation
executed
by
Legaspi
has
no
effect.
The
authority
of
Gutierrez
to
file
and
continue
with
the
prosecution
of
the
case
at
bar
is
unaffected.
On
the
second
issue,
we
hold
that
the
issuance
of
the
writ
of
preliminary
injunction
is
justified.
A
writ
of
preliminary
injunction
is
an
ancilliary
or
preventive
remedy
that
is
resorted
to
by
a
litigant
to
protect
or
preserve
his
rights
or
interests
and
for
no
other
purpose
during
the
pendency
of
the
principal
action.18
It
is
issued
by
the
court
to
prevent
threatened
or
continuous
irremediable
injury
to
the
applicant
before
his
claim
can
be
thoroughly
studied
and
adjudicated.19
Its
aim
is
to
preserve
the
status
quo
ante
until
the
merits
of
the
case
can
be
heard
fully,
upon
the
applicants
showing
of
two
important
conditions,
viz.:
(1)
the
right
to
be
protected
prima
facie
exists;
and,
(2)
the
acts
sought
to
be
enjoined
are
violative
of
that
right.20
Section
3,
Rule
58
of
the
1997
Rules
of
Civil
Procedure
provides
that
a
writ
of
preliminary
injunction
may
be
issued
when
it
is
established:
(a)
that
the
applicant
is
entitled
to
the
relief
demanded,
the
whole
or
part
of
such
relief
consists
in
restraining
the
commission
or
continuance
of
the
act
or
acts
complained
of,
or
in
requiring
the
performance
of
an
act
or
acts,
either
for
a
limited
period
or
perpetually;
(b)
that
the
commission,
continuance
or
non-performance
of
the
act
or
acts
complained
of
during
the
litigation
would
probably
work
injustice
to
the
applicant;
or
(c)
that
a
party,
court,
agency
or
a
person
is
doing,
threatening,
or
is
attempting
to
do,
or
is
procuring
or
suffering
to
be
done,
some
act
or
acts
probably
in
violation
of
the
rights
of
the
applicant
respecting
the
subject
of
the
action
or
proceeding,
and
tending
to
render
the
judgment
ineffectual.
It
is
crystal
clear
that
at
the
hearing
for
the
issuance
of
a
writ
of
preliminary
injunction,
mere
prima
facie
evidence
is
needed
to
establish
the
applicants
rights
or
interests
in
the
subject
matter
of
the
main
action.21
It
is
not
required
that
the
applicant
should
conclusively
show
that
there
was
a
violation
of
his
rights
as
this
issue
will
still
be
fully
litigated
in
the
main
case.22
Thus,
an
applicant
for
a
writ
is
required
only
to
show
that
he
has
an
ostensible
right
to
the
final
relief
prayed
for
in
his
complaint.
23
In
the
case
at
bar,
we
find
that
respondent
judge
had
sufficient
basis
to
issue
the
writ
of
preliminary
injunction.
It
was
established,
prima
facie,
that
Legaspi
has
a
right
to
peaceful
possession
of
his
land,
pendente
lite.
Legaspi
had
title
to
the
subject
land.
It
was
likewise
established
that
the
diggings
were
conducted
by
petitioners
in
the
enclosed
area
of
Legaspis
land.
Whether
the
land
fenced
by
Gutierrez
and
claimed
to
be
included
in
the
land
of
Legaspi
covered
an
area
beyond
that
which
is
included
in
the
title
of
Legaspi
is
a
factual
issue
still
subject
to
litigation
and
proof
by
the
parties
in
the
main
case
for
damages.
It
was
necessary
for
the
trial
court
to
issue
the
writ
of
preliminary
injunction
during
the
pendency
of
the
main
case
in
order
to
preserve
the
rights
and
interests
of
private
respondents
Legaspi
and
Gutierrez.
On
the
third
issue,
petitioners
charge
that
the
respondent
judge
lacked
the
neutrality
of
an
impartial
judge.
They
fault
the
respondent
judge
for
not
giving
credence
to
the
testimony
of
their
surveyor
that
the
diggings
were
conducted
outside
the
land
of
Legaspi.
They
also
claim
that
respondent
judges
rulings
on
objections
raised
by
the
parties
were
biased
against
them.
We
have
carefully
examined
the
records
and
we
find
no
sufficient
basis
to
hold
that
respondent
judge
should
have
recused
himself
from
hearing
the
case.
There
is
no
discernible
pattern
of
bias
on
the
rulings
of
the
respondent
judge.
Bias
and
partiality
can
never
be
presumed.
Bare
allegations
of
partiality
will
not
suffice
in
an
absence
of
a
clear
showing
that
will
overcome
the
presumption
that
the
judge
dispensed
justice
without
fear
or
favor.24
It
bears
to
stress
again
that
a
judges
appreciation
or
misappreciation
of
the
sufficiency
of
evidence
adduced
by
the
parties,
or
the
correctness
of
a
judges
orders
or
rulings
on
the
objections
of
counsels
during
the
hearing,
without
proof
of
malice
on
the
part
of
respondent
judge,
is
not
sufficient
to
show
bias
or
partiality.
As
we
held
in
the
case
of
Webb
vs.
People,25
the
adverse
and
erroneous
rulings
of
a
judge
on
the
various
motions
of
a
party
do
not
sufficiently
prove
bias
and
prejudice
to
disqualify
him.
To
be
disqualifying,
it
must
be
shown
that
the
bias
and
prejudice
stemmed
from
an
extrajudicial
source
and
result
in
an
opinion
on
the
merits
on
some
basis
other
than
what
the
judge
learned
from
his
participation
in
the
case.
Opinions
formed
in
the
course
of
judicial
proceedings,
although
erroneous,
as
long
as
based
on
the
evidence
adduced,
do
not
prove
bias
or
prejudice.
We
also
emphasized
that
repeated
rulings
against
a
litigant,
no
matter
how
erroneously,
vigorously
and
consistently
expressed,
do
not
amount
to
bias
and
prejudice
which
can
be
a
bases
for
the
disqualification
of
a
judge.
Finally,
the
inhibition
of
respondent
judge
in
hearing
the
case
for
damages
has
become
moot
and
academic
in
view
of
the
latters
death
during
the
pendency
of
the
case.
The
main
case
for
damages
shall
now
be
heard
and
tried
before
another
judge.
IN
VIEW
WHEREOF,
the
impugned
Orders
of
the
trial
court
in
Civil
Case
No.
Q-
00-40115,
dated
March
23
and
April
4,
2000,
are
AFFIRMED.
The
presiding
judge
of
the
Regional
Trial
Court
of
Quezon
City
to
whom
Civil
Case
No.
Q-00-
40115
was
assigned
is
directed
to
proceed
with
dispatch
in
hearing
the
main
case
for
damages.
No
pronouncement
as
to
costs.
SO
ORDERED.
LIM,
petitioner,
D
E
C
I
S
I
O
N
TINGA,
J.:
Before
the
Court
is
a
Petition
for
Review
on
Certiorari
assailing
the
Decision1
dated
October
27,
2003
of
the
Court
of
Appeals,
Seventh
Division,
in
CA-G.R.
V
No.
60392.2
The
late
Eduardo
Ybaez
(Ybaez),
the
owner
of
a
1,000-square
meter
lot
in
Cebu
City
(the
"lot"),
entered
into
an
Agreement
and
Authority
to
Negotiate
and
Sell
(Agency
Agreement)
with
respondent
Florencio
Saban
(Saban)
on
February
8,
1994.
Under
the
Agency
Agreement,
Ybaez
authorized
Saban
to
look
for
a
buyer
of
the
lot
for
Two
Hundred
Thousand
Pesos
(P200,000.00)
and
to
mark
up
the
selling
price
to
include
the
amounts
needed
for
payment
of
taxes,
transfer
of
title
and
other
expenses
incident
to
the
sale,
as
well
as
Sabans
commission
for
the
sale.3
Through
Sabans
efforts,
Ybaez
and
his
wife
were
able
to
sell
the
lot
to
the
petitioner
Genevieve
Lim
(Lim)
and
the
spouses
Benjamin
and
Lourdes
Lim
(the
Spouses
Lim)
on
March
10,
1994.
The
price
of
the
lot
as
indicated
in
the
Deed
of
Absolute
Sale
is
Two
Hundred
Thousand
Pesos
(P200,000.00).4
It
appears,
however,
that
the
vendees
agreed
to
purchase
the
lot
at
the
price
of
Six
Hundred
Thousand
Pesos
(P600,000.00),
inclusive
of
taxes
and
other
incidental
expenses
of
the
sale.
After
the
sale,
Lim
remitted
to
Saban
the
amounts
of
One
Hundred
Thirteen
Thousand
Two
Hundred
Fifty
Seven
Pesos
(P113,257.00)
for
payment
of
taxes
due
on
the
transaction
as
well
as
Fifty
Thousand
Pesos
(P50,000.00)
as
brokers
commission.5
Lim
also
issued
in
the
name
of
Saban
four
postdated
checks
in
the
aggregate
amount
of
Two
Hundred
Thirty
Six
Thousand
Seven
Hundred
Forty
Three
Pesos
(P236,743.00).
These
checks
were
Bank
of
the
Philippine
Islands
(BPI)
Check
No.
1112645
dated
June
12,
1994
for
P25,000.00;
BPI
Check
No.
1112647
dated
June
19,
1994
for
P18,743.00;
BPI
Check
No.
1112646
dated
June
26,
1994
for
P25,000.00;
and
Equitable
PCI
Bank
Check
No.
021491B
dated
June
20,
1994
for
P168,000.00.
Subsequently,
Ybaez
sent
a
letter
dated
June
10,
1994
addressed
to
Lim.
In
the
letter
Ybaez
asked
Lim
to
cancel
all
the
checks
issued
by
her
in
Sabans
favor
and
to
"extend
another
partial
payment"
for
the
lot
in
his
(Ybaezs)
favor.6
After
the
four
checks
in
his
favor
were
dishonored
upon
presentment,
Saban
filed
a
Complaint
for
collection
of
sum
of
money
and
damages
against
Ybaez
and
Lim
with
the
Regional
Trial
Court
(RTC)
of
Cebu
City
on
August
3,
1994.7
The
case
was
assigned
to
Branch
20
of
the
RTC.
In
his
Complaint,
Saban
alleged
that
Lim
and
the
Spouses
Lim
agreed
to
purchase
the
lot
for
P600,000.00,
i.e.,
with
a
mark-up
of
Four
Hundred
Thousand
Pesos
(P400,000.00)
from
the
price
set
by
Ybaez.
Of
the
total
purchase
price
of
P600,000.00,
P200,000.00
went
to
Ybaez,
P50,000.00
allegedly
went
to
Lims
agent,
and
P113,257.00
was
given
to
Saban
to
cover
taxes
and
other
expenses
incidental
to
the
sale.
Lim
also
issued
four
(4)
postdated
checks8
in
favor
of
Saban
for
the
remaining
P236,743.00.9
Saban
alleged
that
Ybaez
told
Lim
that
he
(Saban)
was
not
entitled
to
any
commission
for
the
sale
since
he
concealed
the
actual
selling
price
of
the
lot
from
Ybaez
and
because
he
was
not
a
licensed
real
estate
broker.
Ybaez
was
able
to
convince
Lim
to
cancel
all
four
checks.
Saban
further
averred
that
Ybaez
and
Lim
connived
to
deprive
him
of
his
sales
commission
by
withholding
payment
of
the
first
three
checks.
He
also
claimed
that
Lim
failed
to
make
good
the
fourth
check
which
was
dishonored
because
the
account
against
which
it
was
drawn
was
closed.
In
his
Answer,
Ybaez
claimed
that
Saban
was
not
entitled
to
any
commission
because
he
concealed
the
actual
selling
price
from
him
and
because
he
was
not
a
licensed
real
estate
broker.
Lim,
for
her
part,
argued
that
she
was
not
privy
to
the
agreement
between
Ybaez
and
Saban,
and
that
she
issued
stop
payment
orders
for
the
three
checks
because
Ybaez
requested
her
to
pay
the
purchase
price
directly
to
him,
instead
of
coursing
it
through
Saban.
She
also
alleged
that
she
agreed
with
Ybaez
that
the
purchase
price
of
the
lot
was
only
P200,000.00.
Ybaez
died
during
the
pendency
of
the
case
before
the
RTC.
Upon
motion
of
his
counsel,
the
trial
court
dismissed
the
case
only
against
him
without
any
objection
from
the
other
parties.10
On
May
14,
1997,
the
RTC
rendered
its
Decision11
dismissing
Sabans
complaint,
declaring
the
four
(4)
checks
issued
by
Lim
as
stale
and
non-negotiable,
and
absolving
Lim
from
any
liability
towards
Saban.
In
his
Comment,
Saban
maintains
that
Lim
agreed
to
purchase
the
lot
for
P600,000.00,
which
consisted
of
the
P200,000.00
which
would
be
paid
to
Ybaez,
the
P50,000.00
due
to
her
broker,
the
P113,257.00
earmarked
for
taxes
and
other
expenses
incidental
to
the
sale
and
Sabans
commission
as
broker
for
Ybaez.
According
to
Saban,
Lim
assumed
the
obligation
to
pay
him
his
commission.
He
insists
that
Lim
and
Ybaez
connived
to
unjustly
deprive
him
of
his
commission
from
the
negotiation
of
the
sale.21
The
issues
for
the
Courts
resolution
are
whether
Saban
is
entitled
to
receive
his
commission
from
the
sale;
and,
assuming
that
Saban
is
entitled
thereto,
whether
it
is
Lim
who
is
liable
to
pay
Saban
his
sales
commission.
The
Court
gives
due
course
to
the
petition,
but
agrees
with
the
result
reached
by
the
Court
of
Appeals.
The
Court
affirms
the
appellate
courts
finding
that
the
agency
was
not
revoked
since
Ybaez
requested
that
Lim
make
stop
payment
orders
for
the
checks
payable
to
Saban
only
after
the
consummation
of
the
sale
on
March
10,
1994.
At
that
time,
Saban
had
already
performed
his
obligation
as
Ybaezs
agent
when,
through
his
(Sabans)
efforts,
Ybaez
executed
the
Deed
of
Absolute
Sale
of
the
lot
with
Lim
and
the
Spouses
Lim.
To
deprive
Saban
of
his
commission
subsequent
to
the
sale
which
was
consummated
through
his
efforts
would
be
a
breach
of
his
contract
of
agency
with
Ybaez
which
expressly
states
that
Saban
would
be
entitled
to
any
excess
in
the
purchase
price
after
deducting
the
P200,000.00
due
to
Ybaez
and
the
transfer
taxes
and
other
incidental
expenses
of
the
sale.22
In
Macondray
&
Co.
v.
Sellner,23
the
Court
recognized
the
right
of
a
broker
to
his
commission
for
finding
a
suitable
buyer
for
the
sellers
property
even
though
the
seller
himself
consummated
the
sale
with
the
buyer.24
The
Court
held
that
it
would
be
in
the
height
of
injustice
to
permit
the
principal
to
terminate
the
contract
of
agency
to
the
prejudice
of
the
broker
when
he
had
already
reaped
the
benefits
of
the
brokers
efforts.
In
Infante
v.
Cunanan,
et
al.,25
the
Court
upheld
the
right
of
the
brokers
to
their
commissions
although
the
seller
revoked
their
authority
to
act
in
his
behalf
after
they
had
found
a
buyer
for
his
properties
and
negotiated
the
sale
directly
with
the
buyer
whom
he
met
through
the
brokers
efforts.
The
Court
ruled
that
the
sellers
withdrawal
in
bad
faith
of
the
brokers
authority
cannot
unjustly
deprive
the
brokers
of
their
commissions
as
the
sellers
duly
constituted
agents.
The
pronouncements
of
the
Court
in
the
aforecited
cases
are
applicable
to
the
present
case,
especially
considering
that
Saban
had
completely
performed
his
obligations
under
his
contract
of
agency
with
Ybaez
by
finding
a
suitable
buyer
to
preparing
the
Deed
of
Absolute
Sale
between
Ybaez
and
Lim
and
her
co-
vendees.
Moreover,
the
contract
of
agency
very
clearly
states
that
Saban
is
entitled
to
the
excess
of
the
mark-up
of
the
price
of
the
lot
after
deducting
Ybaezs
share
of
P200,000.00
and
the
taxes
and
other
incidental
expenses
of
the
sale.
However,
the
Court
does
not
agree
with
the
appellate
courts
pronouncement
that
Sabans
agency
was
one
coupled
with
an
interest.
Under
Article
1927
of
the
Civil
Code,
an
agency
cannot
be
revoked
if
a
bilateral
contract
depends
upon
it,
or
if
it
is
the
means
of
fulfilling
an
obligation
already
contracted,
or
if
a
partner
is
appointed
manager
of
a
partnership
in
the
contract
of
partnership
and
his
removal
from
the
management
is
unjustifiable.
Stated
differently,
an
agency
is
deemed
as
one
coupled
with
an
interest
where
it
is
established
for
the
mutual
benefit
of
the
principal
and
of
the
agent,
or
for
the
interest
of
the
principal
and
of
third
persons,
and
it
cannot
be
revoked
by
the
principal
so
long
as
the
interest
of
the
agent
or
of
a
third
person
subsists.
In
an
agency
coupled
with
an
interest,
the
agents
interest
must
be
in
the
subject
matter
of
the
power
conferred
and
not
merely
an
interest
in
the
exercise
of
the
power
because
it
entitles
him
to
compensation.
When
an
agents
interest
is
confined
to
earning
his
agreed
compensation,
the
agency
is
not
one
coupled
with
an
interest,
since
an
agents
interest
in
obtaining
his
compensation
as
such
agent
is
an
ordinary
incident
of
the
agency
relationship.26
Sabans
entitlement
to
his
commission
having
been
settled,
the
Court
must
now
determine
whether
Lim
is
the
proper
party
against
whom
Saban
should
address
his
claim.
Sabans
right
to
receive
compensation
for
negotiating
as
broker
for
Ybaez
arises
from
the
Agency
Agreement
between
them.
Lim
is
not
a
party
to
the
contract.
However,
the
record
reveals
that
she
had
knowledge
of
the
fact
that
Ybaez
set
the
price
of
the
lot
at
P200,000.00
and
that
the
P600,000.00the
price
agreed
upon
by
her
and
Sabanwas
more
than
the
amount
set
by
Ybaez
because
it
included
the
amount
for
payment
of
taxes
and
for
Sabans
commission
as
broker
for
Ybaez.
According
to
the
trial
court,
Lim
made
the
following
payments
for
the
lot:
P113,257.00
for
taxes,
P50,000.00
for
her
broker,
and
P400.000.00
directly
to
Ybaez,
or
a
total
of
Five
Hundred
Sixty
Three
Thousand
Two
Hundred
Fifty
Seven
Pesos
(P563,257.00).27
Lim,
on
the
other
hand,
claims
that
on
March
10,
1994,
the
date
of
execution
of
the
Deed
of
Absolute
Sale,
she
paid
directly
to
Ybaez
the
amount
of
One
Hundred
Thousand
Pesos
(P100,000.00)
only,
and
gave
to
Saban
P113,257.00
for
payment
of
taxes
and
P50,000.00
as
his
commission,28
and
One
Hundred
Thirty
Thousand
Pesos
(P130,000.00)
on
June
28,
1994,29
or
a
total
of
Three
Hundred
Ninety
Three
Thousand
Two
Hundred
Fifty
Seven
Pesos
(P393,257.00).
Ybaez,
for
his
part,
acknowledged
that
Lim
and
her
co-vendees
paid
him
P400,000.00
which
he
said
was
the
full
amount
for
the
sale
of
the
lot.30
It
thus
appears
that
he
received
P100,000.00
on
March
10,
1994,
acknowledged
receipt
(through
Saban)
of
the
P113,257.00
earmarked
for
taxes
and
P50,000.00
for
commission,
and
received
the
balance
of
P130,000.00
on
June
28,
1994.
Thus,
a
total
of
P230,000.00
went
directly
to
Ybaez.
Apparently,
although
the
amount
actually
paid
by
Lim
was
P393,257.00,
Ybaez
rounded
off
the
amount
to
P400,000.00
and
waived
the
difference.
Lims
act
of
issuing
the
four
checks
amounting
to
P236,743.00
in
Sabans
favor
belies
her
claim
that
she
and
her
co-vendees
did
not
agree
to
purchase
the
lot
at
P600,000.00.
If
she
did
not
agree
thereto,
there
would
be
no
reason
for
her
to
issue
those
checks
which
is
the
balance
of
P600,000.00
less
the
amounts
of
P200,000.00
(due
to
Ybaez),
P50,000.00
(commission),
and
the
P113,257.00
(taxes).
The
only
logical
conclusion
is
that
Lim
changed
her
mind
about
agreeing
to
purchase
the
lot
at
P600,000.00
after
talking
to
Ybaez
and
ultimately
realizing
that
Sabans
commission
is
even
more
than
what
Ybaez
received
as
his
share
of
the
purchase
price
as
vendor.
Obviously,
this
change
of
mind
resulted
to
the
prejudice
of
Saban
whose
efforts
led
to
the
completion
of
the
sale
between
the
latter,
and
Lim
and
her
co-vendees.
This
the
Court
cannot
countenance.
The
ruling
of
the
Court
in
Infante
v.
Cunanan,
et
al.,
cited
earlier,
is
enlightening
for
the
facts
therein
are
similar
to
the
circumstances
of
the
present
case.
In
that
case,
Consejo
Infante
asked
Jose
Cunanan
and
Juan
Mijares
to
find
a
buyer
for
her
two
lots
and
the
house
built
thereon
for
Thirty
Thousand
Pesos
(P30,000.00)
.
She
promised
to
pay
them
five
percent
(5%)
of
the
purchase
price
plus
whatever
overprice
they
may
obtain
for
the
property.
Cunanan
and
Mijares
offered
the
properties
to
Pio
Noche
who
in
turn
expressed
willingness
to
purchase
the
properties.
Cunanan
and
Mijares
thereafter
introduced
Noche
to
Infante.
However,
the
latter
told
Cunanan
and
Mijares
that
she
was
no
longer
interested
in
selling
the
property
and
asked
them
to
sign
a
document
stating
that
their
written
authority
to
act
as
her
agents
for
the
sale
of
the
properties
was
already
cancelled.
Subsequently,
Infante
sold
the
properties
directly
to
Noche
for
Thirty
One
Thousand
Pesos
(P31,000.00).
The
Court
upheld
the
right
of
Cunanan
and
Mijares
to
their
commission,
explaining
that
[Infante]
had
changed
her
mind
even
if
respondent
had
found
a
buyer
who
was
willing
to
close
the
deal,
is
a
matter
that
would
not
give
rise
to
a
legal
consequence
if
[Cunanan
and
Mijares]
agreed
to
call
off
the
transaction
in
deference
to
the
request
of
[Infante].
But
the
situation
varies
if
one
of
the
parties
takes
advantage
of
the
benevolence
of
the
other
and
acts
in
a
manner
that
would
promote
his
own
selfish
interest.
This
act
is
unfair
as
would
amount
to
bad
faith.
This
act
cannot
be
sanctioned
without
according
the
party
prejudiced
the
reward
which
is
due
him.
This
is
the
situation
in
which
[Cunanan
and
Mijares]
were
placed
by
[Infante].
[Infante]
took
advantage
of
the
services
rendered
by
[Cunanan
and
Mijares],
but
believing
that
she
could
evade
payment
of
their
commission,
she
made
use
of
a
ruse
by
inducing
them
to
sign
the
deed
of
cancellation.This
act
of
subversion
cannot
be
sanctioned
and
cannot
serve
as
basis
for
[Infante]
to
escape
payment
of
the
commission
agreed
upon.31
reciprocal
contract.
Specifically,
she
drew
the
checks
in
payment
of
the
balance
of
the
purchase
price
of
the
lot
subject
of
the
transaction.
And
she
had
to
pay
the
agreed
purchase
price
in
consideration
for
the
sale
of
the
lot
to
her
and
her
co-
vendees.
In
other
words,
the
amounts
covered
by
the
checks
form
part
of
the
cause
or
consideration
from
Ybaezs
end,
as
vendor,
while
the
lot
represented
the
cause
or
consideration
on
the
side
of
Lim,
as
vendee.35
Ergo,
Lim
received
value
for
her
signature
on
the
checks.
The
appellate
court
therefore
had
sufficient
basis
for
concluding
that
Ybaez
and
Lim
connived
to
deprive
Saban
of
his
commission
by
dealing
with
each
other
directly
and
reducing
the
purchase
price
of
the
lot
and
leaving
nothing
to
compensate
Saban
for
his
efforts.
Neither
is
there
any
indication
that
Lim
issued
the
checks
for
the
purpose
of
enabling
Ybaez,
or
any
other
person
for
that
matter,
to
obtain
credit
or
to
raise
money,
thereby
totally
debunking
the
presence
of
the
third
requisite
of
an
accommodation
party.
Considering
the
circumstances
surrounding
the
case,
and
the
undisputed
fact
that
Lim
had
not
yet
paid
the
balance
of
P200,000.00
of
the
purchase
price
of
P600,000.00,
it
is
just
and
proper
for
her
to
pay
Saban
the
balance
of
P200,000.00.
The
appellate
court
however
erred
in
ruling
that
Lim
is
liable
on
the
checks
because
she
issued
them
as
an
accommodation
party.
Section
29
of
the
Negotiable
Instruments
Law
defines
an
accommodation
party
as
a
person
"who
has
signed
the
negotiable
instrument
as
maker,
drawer,
acceptor
or
indorser,
without
receiving
value
therefor,
for
the
purpose
of
lending
his
name
to
some
other
person."
The
accommodation
party
is
liable
on
the
instrument
to
a
holder
for
value
even
though
the
holder
at
the
time
of
taking
the
instrument
knew
him
or
her
to
be
merely
an
accommodation
party.
The
accommodation
party
may
of
course
seek
reimbursement
from
the
party
accommodated.34
As
gleaned
from
the
text
of
Section
29
of
the
Negotiable
Instruments
Law,
the
accommodation
party
is
one
who
meets
all
these
three
requisites,
viz:
(1)
he
signed
the
instrument
as
maker,
drawer,
acceptor,
or
indorser;
(2)
he
did
not
receive
value
for
the
signature;
and
(3)
he
signed
for
the
purpose
of
lending
his
name
to
some
other
person.
In
the
case
at
bar,
while
Lim
signed
as
drawer
of
the
checks
she
did
not
satisfy
the
two
other
remaining
requisites.
The
absence
of
the
second
requisite
becomes
pellucid
when
it
is
noted
at
the
outset
that
Lim
issued
the
checks
in
question
on
account
of
her
transaction,
along
with
the
other
purchasers,
with
Ybaez
which
was
a
sale
and,
therefore,
a
B.
On
GO
CHANTS
Cross-Claim:
(1)
Sentencing
the
co-defendant
Juan
T.
Borromeo,
administrator
of
the
Estate
of
Simeon
Rallos,
to
pay
to
defendant
Felix
Co
Chan
&
Sons
Realty
Corporation
the
sum
of
P5,343.45,
representing
the
price
of
one-half
(1/2)
share
of
lot
5983;
(2)
Ordering
co-defendant
Juan
T.
Borromeo,
administrator
of
the
Estate
of
Simeon
Rallos,
to
pay
in
concept
of
reasonable
attorney's
fees
to
Felix
Go
Chan
&
Sons
Realty
Corporation
the
sum
of
P500.00.
C.
On
Third-Party
Complaint
of
defendant
Juan
T.
Borromeo
administrator
of
Estate
of
Simeon
Rallos,
against
Josefina
Rallos
special
administratrix
of
the
Estate
of
Gerundia
Rallos:
(1)
Dismissing
the
third-party
complaint
without
prejudice
to
filing
either
a
complaint
against
the
regular
administrator
of
the
Estate
of
Gerundia
Rallos
or
a
claim
in
the
Intestate-Estate
of
Cerundia
Rallos,
covering
the
same
subject-matter
of
the
third-party
complaint,
at
bar.
(pp.
98-100,
Record
on
Appeal)
Felix
Go
Chan
&
Sons
Realty
Corporation
appealed
in
due
time
to
the
Court
of
Appeals
from
the
foregoing
judgment
insofar
as
it
set
aside
the
sale
of
the
one-
half
(1/2)
share
of
Concepcion
Rallos.
The
appellate
tribunal,
as
adverted
to
earlier,
resolved
the
appeal
on
November
20,
1964
in
favor
of
the
appellant
corporation
sustaining
the
sale
in
question.
1
The
appellee
administrator,
Ramon
Rallos,
moved
for
a
reconsider
of
the
decision
but
the
same
was
denied
in
a
resolution
of
March
4,
1965.
2
What
is
the
legal
effect
of
an
act
performed
by
an
agent
after
the
death
of
his
principal?
Applied
more
particularly
to
the
instant
case,
We
have
the
query.
is
the
sale
of
the
undivided
share
of
Concepcion
Rallos
in
lot
5983
valid
although
it
was
executed
by
the
agent
after
the
death
of
his
principal?
What
is
the
law
in
this
jurisdiction
as
to
the
effect
of
the
death
of
the
principal
on
the
authority
of
the
agent
to
act
for
and
in
behalf
of
the
latter?
Is
the
fact
of
knowledge
of
the
death
of
the
principal
a
material
factor
in
determining
the
legal
effect
of
an
act
performed
after
such
death?
Before
proceedings
to
the
issues,
We
shall
briefly
restate
certain
principles
of
law
relevant
to
the
matter
tinder
consideration.
1.
It
is
a
basic
axiom
in
civil
law
embodied
in
our
Civil
Code
that
no
one
may
contract
in
the
name
of
another
without
being
authorized
by
the
latter,
or
unless
he
has
by
law
a
right
to
represent
him.
3
A
contract
entered
into
in
the
name
of
another
by
one
who
has
no
authority
or
the
legal
representation
or
who
has
acted
beyond
his
powers,
shall
be
unenforceable,
unless
it
is
ratified,
expressly
or
impliedly,
by
the
person
on
whose
behalf
it
has
been
executed,
before
it
is
revoked
by
the
other
contracting
party.
4
Article
1403
(1)
of
the
same
Code
also
provides:
ART.
1403.
The
following
contracts
are
unenforceable,
unless
they
are
justified:
(1)
Those
entered
into
in
the
name
of
another
person
by
one
who
hi
-
been
given
no
authority
or
legal
representation
or
who
has
acted
beyond
his
powers;
...
Out
of
the
above
given
principles,
sprung
the
creation
and
acceptance
of
the
relationship
of
agency
whereby
one
party,
caged
the
principal
(mandante),
authorizes
another,
called
the
agent
(mandatario),
to
act
for
and
in
his
behalf
in
transactions
with
third
persons.
The
essential
elements
of
agency
are:
(1)
there
is
consent,
express
or
implied
of
the
parties
to
establish
the
relationship;
(2)
the
object
is
the
execution
of
a
juridical
act
in
relation
to
a
third
person;
(3)
the
agents
acts
as
a
representative
and
not
for
himself,
and
(4)
the
agent
acts
within
the
scope
of
his
authority.
5
Agency
is
basically
personal
representative,
and
derivative
in
nature.
The
authority
of
the
agent
to
act
emanates
from
the
powers
granted
to
him
by
his
principal;
his
act
is
the
act
of
the
principal
if
done
within
the
scope
of
the
authority.
Qui
facit
per
alium
facit
se.
"He
who
acts
through
another
acts
himself".
6
2.
There
are
various
ways
of
extinguishing
agency,
7
but
her
We
are
concerned
only
with
one
cause
death
of
the
principal
Paragraph
3
of
Art.
1919
of
the
Civil
Code
which
was
taken
from
Art.
1709
of
the
Spanish
Civil
Code
provides:
ART.
1919.
Agency
is
extinguished.
xxx
xxx
xxx
3.
By
the
death,
civil
interdiction,
insanity
or
insolvency
of
the
principal
or
of
the
agent;
...
(Emphasis
supplied)
By
reason
of
the
very
nature
of
the
relationship
between
Principal
and
agent,
agency
is
extinguished
by
the
death
of
the
principal
or
the
agent.
This
is
the
law
in
this
jurisdiction.
8
Manresa
commenting
on
Art.
1709
of
the
Spanish
Civil
Code
explains
that
the
rationale
for
the
law
is
found
in
the
juridical
basis
of
agency
which
is
representation
Them
being
an
in.
integration
of
the
personality
of
the
principal
integration
that
of
the
agent
it
is
not
possible
for
the
representation
to
continue
to
exist
once
the
death
of
either
is
establish.
Pothier
agrees
with
Manresa
that
by
reason
of
the
nature
of
agency,
death
is
a
necessary
cause
for
its
extinction.
Laurent
says
that
the
juridical
tie
between
the
principal
and
the
agent
is
severed
ipso
jure
upon
the
death
of
either
without
necessity
for
the
heirs
of
the
fact
to
notify
the
agent
of
the
fact
of
death
of
the
former.
9
The
same
rule
prevails
at
common
law
the
death
of
the
principal
effects
instantaneous
and
absolute
revocation
of
the
authority
of
the
agent
unless
the
Power
be
coupled
with
an
interest.
10
This
is
the
prevalent
rule
in
American
Jurisprudence
where
it
is
well-settled
that
a
power
without
an
interest
confer.
red
upon
an
agent
is
dissolved
by
the
principal's
death,
and
any
attempted
execution
of
the
power
afterward
is
not
binding
on
the
heirs
or
representatives
of
the
deceased.
11
3.
Is
the
general
rule
provided
for
in
Article
1919
that
the
death
of
the
principal
or
of
the
agent
extinguishes
the
agency,
subject
to
any
exception,
and
if
so,
is
the
instant
case
within
that
exception?
That
is
the
determinative
point
in
issue
in
this
litigation.
It
is
the
contention
of
respondent
corporation
which
was
sustained
by
respondent
court
that
notwithstanding
the
death
of
the
principal
Concepcion
Rallos
the
act
of
the
attorney-in-fact,
Simeon
Rallos
in
selling
the
former's
sham
in
the
property
is
valid
and
enforceable
inasmuch
as
the
corporation
acted
in
good
faith
in
buying
the
property
in
question.
Articles
1930
and
1931
of
the
Civil
Code
provide
the
exceptions
to
the
general
rule
afore-mentioned.
ART.
1930.
The
agency
shall
remain
in
full
force
and
effect
even
after
the
death
of
the
principal,
if
it
has
been
constituted
in
the
common
interest
of
the
latter
and
of
the
agent,
or
in
the
interest
of
a
third
person
who
has
accepted
the
stipulation
in
his
favor.
ART.
1931.
Anything
done
by
the
agent,
without
knowledge
of
the
death
of
the
principal
or
of
any
other
cause
which
extinguishes
the
agency,
is
valid
and
shall
be
fully
effective
operation
of
law
such
as
death
of
the
principal
which
obtains
in
this
case.
On
page
six
of
this
Opinion
We
stressed
that
by
reason
of
the
very
nature
of
the
relationship
between
principal
and
agent,
agency
is
extinguished
ipso
jure
upon
the
death
of
either
principal
or
agent.
Although
a
revocation
of
a
power
of
attorney
to
be
effective
must
be
communicated
to
the
parties
concerned,
18
yet
a
revocation
by
operation
of
law,
such
as
by
death
of
the
principal
is,
as
a
rule,
instantaneously
effective
inasmuch
as
"by
legal
fiction
the
agent's
exercise
of
authority
is
regarded
as
an
execution
of
the
principal's
continuing
will.
19
With
death,
the
principal's
will
ceases
or
is
the
of
authority
is
extinguished.
The
Civil
Code
does
not
impose
a
duty
on
the
heirs
to
notify
the
agent
of
the
death
of
the
principal
What
the
Code
provides
in
Article
1932
is
that,
if
the
agent
die
his
heirs
must
notify
the
principal
thereof,
and
in
the
meantime
adopt
such
measures
as
the
circumstances
may
demand
in
the
interest
of
the
latter.
Hence,
the
fact
that
no
notice
of
the
death
of
the
principal
was
registered
on
the
certificate
of
title
of
the
property
in
the
Office
of
the
Register
of
Deeds,
is
not
fatal
to
the
cause
of
the
estate
of
the
principal
6.
Holding
that
the
good
faith
of
a
third
person
in
said
with
an
agent
affords
the
former
sufficient
protection,
respondent
court
drew
a
"parallel"
between
the
instant
case
and
that
of
an
innocent
purchaser
for
value
of
a
land,
stating
that
if
a
person
purchases
a
registered
land
from
one
who
acquired
it
in
bad
faith
even
to
the
extent
of
foregoing
or
falsifying
the
deed
of
sale
in
his
favor
the
registered
owner
has
no
recourse
against
such
innocent
purchaser
for
value
but
only
against
the
forger.
20
To
support
the
correctness
of
this
respondent
corporation,
in
its
brief,
cites
the
case
of
Blondeau,
et
al.,
v.
Nano
and
Vallejo,
61
Phil.
625.
We
quote
from
the
brief:
In
the
case
of
Angel
Blondeau
et
al.
v.
Agustin
Nano
et
al.,
61
Phil.
630,
one
Vallejo
was
a
co-owner
of
lands
with
Agustin
Nano.
The
latter
had
a
power
of
attorney
supposedly
executed
by
Vallejo
Nano
in
his
favor.
Vallejo
delivered
to
Nano
his
land
titles.
The
power
was
registered
in
the
Office
of
the
Register
of
Deeds.
When
the
lawyer-husband
of
Angela
Blondeau
went
to
that
Office,
he
found
all
in
order
including
the
power
of
attorney.
But
Vallejo
denied
having
executed
the
power
The
lower
court
sustained
Vallejo
and
the
plaintiff
Blondeau
appealed.
Reversing
the
decision
of
the
court
a
quo,
the
Supreme
Court,
quoting
the
ruling
in
the
case
of
Eliason
v.
Wilborn,
261
U.S.
457,
held:
But
there
is
a
narrower
ground
on
which
the
defenses
of
the
defendant-
appellee
must
be
Amador
E.
Gomez
of
the
Court
of
First
Instance
of
Cebu,
quoted
in
pages
2
and
3
of
this
Opinion,
with
costs
against
respondent
realty
corporation
at
all
instances.
So
Ordered.