aj.amin.cha.janz.krizel.paco.vien.yen A&P Compiled Digests No.

2
PNB v. STA. MARIA 29 SCRA 303 QUICK FACTS: [6 brothers and sisters executed PA in favor of Maximo Sta. Maria; power to mortgage does not include power to loan] Disinclination of courts to enlarge an authority granted beyond the powers expressly given and those incidentally flowing therefrom as being usual or reasonably necessary and proper for the performance of such express powers. The authority granted by defendants-appellants (except Valeriana) unto their brother, Maximo, was merely to mortgage the property jointly owned by them, not to contract for any loans in their names and behalf. Maximo alone, with Valeriana who authorized him to borrow money, must answer for them; other defendants-appellants' only liability is that the real estate authorized by them to be mortgaged would be subject to foreclosure and sale to respond for the obligations contracted by Maximo. But they cannot be held personally liable. Facts: The said sugar crop loans were obtained by defendant Maximo Sta. Maria from plaintiff bank under a special power of attorney, executed in his favor by his six brothers and sisters, defendants-appellants herein, to mortgage a 16-odd hectare parcel of land, jointly owned by all of them In addition, Valeriana Sta. Maria alone also executed in favor of her brother, Maximo, a special power of attorney to borrow money and mortgage any real estate owned by her Maximo Sta. Maria applied for two separate crop loans, for the 1952-1953 and 1953-1954 crop years, with plaintiff bank, one in the amount of P15,000.00, of which only the sum of P13,216.11 was actually extended by plaintiff, and the other in the amount of P23,000.00, of which only the sum of P12,427.57 was actually extended by plaintiff. As security for the two loans, Maximo Sta. Maria executed in his own name in favor of plaintiff bank two chattel mortgages on the standing crops, guaranteed by surety bonds for the full authorized amounts of the loans executed by the Associated Insurance & Surety Co., Inc. as surety with Maximo Sta. Maria as principal. Held: a special power of attorney to mortgage real estate is limited to such authority to mortgage and does not bind the grantor personally to other obligations contracted by the grantee, in the absence of any ratification or other similar act that would estop the grantor from questioning or disowning such other obligations contracted by the grantee. Ratio: 1. Plaintiff bank has not made out a cause of action against defendants-appellants (except Valeriana), so as to hold them liable for the unpaid balances of the loans obtained by Maximo under the chattel mortgages executed by him in his own name alone. This is but in accord with the disinclination of courts to enlarge an authority granted beyond the powers expressly given and those which incidentally flow or derive therefrom as being usual or reasonably necessary and proper for the performance of such express powers. 2. The authority granted by defendants-appellants (except Valeriana) unto their brother, Maximo, was merely to mortgage the property jointly owned by them. They did not grant Maximo any authority to contract for any loans in their names and behalf. Maximo alone, with Valeriana who authorized him to borrow money, must answer for said loans and the other defendants-appellants' only liability is that the real estate authorized by them to be mortgaged would be subject to foreclosure and sale to respond for the obligations contracted by Maximo. But they cannot be held personally liable for the payment of such obligations, as erroneously held by the trial court. 3. The fact that Maximo presented to the plaintiff bank Valeriana's additional special power of attorney expressly authorizing him to borrow money, Exh. E-1, aside from the authority to mortgage executed by Valeriana together with the other defendants-appellants also in Maximo's favor, lends 4. support to our view that the bank was not satisfied with the authority to mortgage alone. The outcome might be different if there had been an express ratification of the loans by defendants-appellants or if it had been shown that they had been benefited by the crop loans so as to put them in estoppel. Valeriana's liability for the loans secured by Maximo is not joint and several or solidary as adjudged by the trial court, but only joint, pursuant to the provisions of Article 1207 of the Civil Code that "the concurrence ... of two or more debtors in one and the same obligation does not imply that ... each one of the (debtors) is bound to render entire compliance with the prestation. BPI v. DE COSTER 47 PHIL 594 Facts: That on Dec. 29, 1921, for value, the defendant Gabriela Andrea de Coster y Roxas, having the consent and permission of her husband, and he acting as her agent, said defendants made to the plaintiff a certain promissory note for P292,000, payable one year after date, with interest of 9 per cent per annum, payable monthly. that to secure the payment thereof, the defendants Jean M. Poizat and J. M. Poizat and Co. executed a chattel mortgage to the plaintiff on the steamers Roger Poizat and Gabrielle Poizat, with the machinery and materials belonging to the Poizat Vegetable Oil Mills and certain merchandise; that at the same time and for the same purpose, the defendant Gabriela Andrea de Coster y Roxas, having the consent and permission of her husband, and he acting as her agent, they acknowledged and delivered to this plaintiff a mortgage on certain real property lying and being situated in the City of Manila. that the real property was subject to a prior mortgage in favor of La Orden de Dominicos or PP. Predicadores de la Provincia del Santisimo Rosario, hence it is made a party defendant That the promissory not in question is long past due and owing, thus the plaintiff brought action against the defendants. the court rendered judgment against the defendants Gabriela Andrea de Coster y Roxas, Jean M. Poizat and J. M. Poizat and Co. jointly and severally for P292,000, with interest at the rate of 9 per cent per annum from the 31st of August, 1923, P10,000 as attorney's fees, and P2,500 for and in account of insurance upon the steamer Gabrielle Poizat, with interest on that amount from February 9, 1924, at the rate of 9 per cent per annum, and costs; Wherefore, plaintiff prays for an order of the court to direct the sheriff of the City of Manila to take immediate possession of the property described in the chattel mortgage and sell the same according to the Chattel Mortgage Law; that the property described in the real mortgage or so much thereof as may be required to pay the amount due the plaintiff be sold according to law; that out of such sales plaintiff shall be paid the amount due and owing it; and that such defendants be adjudged to pay any remaining deficiency. May 3, 1924, on motion by the plaintiff, for failure to appear or answer, the defendants Gabriela Andrea de Coster y Roxas and Jean M. Poizat and J.M. Poizat & Co. were declared in default. The court rendered decision in favor of the plaintiffs On Aug. 26, 1924, Gabriela Andrea de Coster y Roxas, claimed that she had been residing in Paris, France from 1908 until April 30, 1924 and that sheonly found out about the case from the newspapers. She claims that she was never given any summons by the sheriff and that her husband exceeded his authority under the powers given to him under his power of attorney. She prayed that the judgement be annulled and set aside and the case be reopend and that she be permitted to file an answer, and that the case be tried on its merits, and that a final judgement be rendered, absolving her from all liability. ISSUES: 1. WON proper summons were made 2. WON Jean M. Poizat, husband of the defendant exceeded his authority as an agent of his wife

5.

aj.amin.cha.janz.krizel.paco.vien.yen A&P Compiled Digests No. 2

3. WON the case should be remanded interest thereon at 12 per cent per annum payable annually in advance, to which effect he signed a promissory note for said amount and executed a deed of mortgage of the real property described in transfer certificate of title No. 3335 and the improvements thereon consisting in concrete buildings. It was stated in the deed that in case the defendants failed to pay the stipulated interest and the taxes on the real property mortgaged and if the plaintiff were compelled to bring an action to recover his credit, said defendants would be obliged to pay 10 per cent more on the unpaid capital, as fees for the plaintiff's attorneys. The mortgage so constituted was registered in the registry of deeds of the Province of Occidental Negros and noted on the back of the transfer certificate of title. The defendants failed to pay at maturity the interest stipulated which should have been paid one year in advance. All the sums paid by them on account of accrued interest up to March 27, 1934, on which the complaint was filed.

HELD/RATIO: 1. No, In the ordinary course of business the wife is absent from the residence of husband on a pleasure trip or for business reasons or to visit friends or relatives that, in the nature of such things, the residence of the wife would continue and remain to be that of the husband. That is not this case. For sixteen years the residence of the husband was in the City of Manila, and the residence of the wife was in the City of Paris. 2. Yes, The following the specific powers of attorney that the wife gave her husband Paragraph 5 of the power of attorney authorizes the husband for in the name of his wife to "loan or borrow any sums of money or fungible things, etc." This should be construed to mean that the husband had power only to loan his wife's money and to borrow money for or on account of his wife as her agent and attorney in fact. That does not carry with it or imply that he had the legal right to make his wife liable as a surety for the preexisting debt of a third person. Paragraph 6 authorizes him to "enter into any kind of contracts whether civil or mercantile, giving due form thereof either by private documents or public deeds, etc." Paragraph 7 authorizes him to "draw, endorse, accept, issue and negotiate any drafts, bills of exchange, letters of credit, letters of payment, bills, vales, promissory notes, etc." The foregoing are the clauses in the power of attorney upon which the bank relies for the authority of the husband to execute promissory notes for and on behalf of his wife and as her agent. It will be noted that there is no provision in either of them which authorizes or empowers him to sign anything or to do anything which would make his wife liable as a surety for a pre-existing debt. It is fundamental rule of construction that where in an instrument powers and duties are specified and defined, that all of such powers and duties are limited and confined to those which are specified and defined, and that all other powers and duties are excluded. It is very apparent from the face of the instrument that the whole purpose and intent of the power of attorney was to empower and authorize the husband to look after and protect the interests of the wife and for her and in her name to transact any and all of her business. But nowhere does it provide or authorize him to make her liable as a surety for the payment of the pre-existing debt of a third person. Hence, it follows that the husband was not authorized or empowered to sign the note in question for and on behalf of the wife as her act and deed, and that as to her the note is void for want of power of her husband to execute it. The same thing is true as to the real mortgage to the bank. It was given to secure the note in question and was not given for any other purpose. The real property described in the mortgage to the bank was and is the property of the wife. The note being void as to her, it follows that as to her the real mortgage to the bank is also void for want of power to execute it. Yes, the case is remanded to the lower court, with leave for the wife to file an answer to plaintiff's cause of action, and to have the case tried on its merits and for any further proceedings not inconsistent with this opinion. HODGES v. SALAS 63 PHIL 567 FACTS: On September 2, 1923, the defendants executed a power of attorney in favor of their brother-in-law Felix S. Yulo to enable him to obtain a loan and secure it with a mortgage on the real property described in transfer certificate of title No. 3335. The power of attorney was registered in the registry of deeds of the Province of Occidental Negros and the pertinent clauses thereof read as follows: Acting under said power of attorney, Felix S. Yulo obtained a loan of P28,000 from the plaintiff, binding his principals jointly and severally, to pay it within ten (10) years, together with

ISSUES/HELD: FIRST ISSUE: WON THE CASE IS ONLY A PERSONAL ACTION (BECAUSE ONLY ORAL EVIDENCE WAS OFFERED)- NO Section 284 of the Code of Civil Procedure requires the contents of a writing to be proven by the writing itself, except in cases therein specified. Section 313, No. 6, provides that official or public documents must be proven by presenting the original or a copy certified by the legal keeper thereof. According to this, the plaintiff was obliged to present the original or a certified copy of the mortgage deed showing the registration thereof, as well as the owner's transfer certificate of title. Both would have been the best evidence to prove the registration of the mortgage and the notation thereof on the back of the title. Had the defendants objected to the oral evidence offered, there is no doubt that it would have been rejected as incompetent. But it is universally accepted that when secondary or incompetent evidence is presented and accepted without any objection on the part of the other party, the latter is bound thereby and the court is obliged to grant it, the probatory value it deserves. SECOND ISSUE: WON THE LOAN AND MORTGAGE WERE USURIOUS AND ILLEGAL- NO We have examined Exhibits 8 to 17 of the defendants, which are the evidence offered to establish the fact that compound interest had been charged, and we have, without any difficulty, arrived at the conclusion that the plaintiff has really charged said unauthorized and unstipulated interest. If there is any doubt on this fact, it is dispelled by Exhibit 10, in the handwriting of the plaintiff himself, wherein it appears that the sum of P33.60 was charged by him on account of interest on unpaid interest. But the fact of charging illegal interest that may be charged, does not make the loan or the mortgage usurious because the transactions took place subsequent to the execution of said contracts and the latter do not appear to be void ab initio Said interest should be applied first to the payment of the stipulated and unpaid interest and, later, to that of the capital. Section 5 of Act No. 2655, as amended by section 3 of Act No. 3291, expressly permit a creditor to charge in advance interest corresponding to not more than one year, whatever the duration of the loan. What is prohibited is the charging in advance of interest for more than one year. Section 6 reiterates said rule in exempting a creditor found guilty of usury from the obligation to return the interest and commissions collected by him in advance, provided said interest and commissions are not for a period of more than one year and the rate of interest does not exceed the maximum limit fixed by law. THIRD ISSUE: WON THE ACTION FOR THE USURY IS BARRED BY STATUTE OF LIMITATIONS- YES, BUT HE FAILED TO ALLEGE IT It is true that according to the evidence more than two years have already elapsed from the time the defendants paid and the plaintiff received the usurious interest to the registration of the cross-complaint, but the plaintiff cannot successfully invoke the defense of prescription because he failed to allege it in his reply to the cross-complaint.

3.

aj.amin.cha.janz.krizel.paco.vien.yen A&P Compiled Digests No. 2

In order that prescription may constitute a valid defense and it may be considered on appeal, it must be specifically pleaded in the answer and proven with the same degree of certainty with which an essential allegation in a civil action is established. Otherwise it will not be taken into consideration, much less if it is alleged for the first time on appeal. FOURTH ISSUE: WON ATTORNEYS FEES SHOULD BE PAID- YES The plaintiff violated the Usury Law in charging compound interest notwithstanding the fact that it has not been so stipulated and that adding these sums to the stipulated interest the average exceeds the maximum rate of interest that may be charged for the loan which has been the subject matter of the transaction. This violation falls under the precept of section 6 of the Usury Law and the plaintiff is obliged to pay the fees of the attorney for the defendants. FIFTH ISSUE (AGENCY RELEVANT): WON DEFENDANTS RATIFIED ALL THE OBLIGATIONS CONTRACTED BY THEIR ATTY-IN-FACT AND WHAT IS THE LATTERS SCOPE OF AUTHORITY-NO; ONLY LIMITED The terms of the power of atty are limited; the agent was thereby authorized only to borrow any amount of money which he deemed necessary. There is nothing, however, to indicate that the defendants had likewise authorized him to convert the money obtained by him to his personal use. With respect to a power of attorney of special character, it cannot be interpreted as also authorizing the agent to dispose of the money as he pleased, particularly when it does not appear that such was the intention of the principals, and in applying part of the funds to pay his personal obligations, he exceeded his authority (art. 1714, Civil Code; Bank of the Philippine Islands vs. De Coster, 47 Phil., 594 and 49 Phil., 574). In the case like the present one, it should be understood that the agent was obliged to turn over the money to the principals or, at least, place it at their disposal. The plaintiff contends that the agent's act of employing part of the loan to pay his personal debts was ratified by the defendants in their letter to him dated August 21, 1927 (Exhibit E). This court has carefully read the contents of said document and has found nothing implying ratification or approval of the agent's act. In it the defendants confined themselves to stating that they would notify their agent of the maturity of the obligation contracted by him. They said nothing about whether or not their agent was authorized to use the funds obtained by him in the payment of his personal obligations. Of the loan of P28,000, the agent applied the sum of P10,188.29 to the payment of his personal debt to the plaintiff. The balance of P17,811.71 constitutes the capital which the defendants are obliged to pay by virtue of the power conferred upon their agent and the mortgage deed. STRONG v. GUTIERREZ RUPIDE 6 PHIL 680 Facts: Mrs. Strong owned 800 shares of the capital stock of Philippine Sugar Estates Development Co., Limited, an anonymous society formed to hold the Dominican friar lands. Repide bought them through a broker who dealt with Mrs. Strong's agent, Jones, who was in possession of the script and who had made the sale without Mrs. Strong's knowledge. Repide was a director, was the managing agent and was the majority stockholder of the society. Plaintiffs brought this case to recover the 800 shares. Issues: 1. (Relevant) WON her agent had the power to sell or deliver the stocks. NO 2. WON its sale, through her agent, was procured by fraud on the part of Repide. NO Ratio: 1. Based on OCC 1712, an agency stated in general terms only includes acts of administration. In order to compromise, alienate, mortgage, or to execute any, other act of strict ownership an express mandate is required. The express mandate required by law to enable an appointee of an agency couched in general terms to sell must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned. The right to sell shall be express. Here, there was no proof of an effective power given Jones to dispose of this stock. European civil law and American common law established that acts of agents, beyond the limitation of their power are null and that third persons dealt with them at their peril and are bound to inquire as to the extent of the power of the agent with whom they contract and that where neither the actual power not the appearance of it, for which the principal is responsible, exists, a third party is not protected without such inquiry. Here, Repide relied unquestioningly upon Jones' assumption of authority and took the risk. The case also discussed that in a certain Dalloz' annotation, after laying down the admitted proposition of the acts of an agent beyond his limited powers are null, states 3 qualifications whereby the principal is held bound: 1) where his acts have contributed to deceive a third person in good faith; 2) where the limitations upon the power created by him could not have been known by a third person, and 3) where he has placed in the hands of the agent an instrument signed by him in blank. The defendant violated no duty in not communicating to the plaintiff his purpose in buying her shares and has been guilty of no fraud. Managers are not given the duty to the members in respect to their individual stock, which is fully recognized as a separate property, whose character and transmission is provided for in laws peculiar to it. KATIGBAK v. TAI HUNG CO. 52 PHIL 622 FACTS: Nov 9, 1921 - Po Tecsi executed a general power of attorney in favor of his brother Po Ejap, empowering and authorizing him to perform on his behalf and as his lawful agent the following: to buy, sell, or barter, assign or admit in acquittance an instrument, or in any other manner to acquire or convey all sorts of property, real and personal, usinesses and industries, credits, rights, and actions belonging to me, for whatever prices and under the conditions which he may stipulate, paying and receiving payment in cash or in installments, and to execute the proper instruments with the formalities provided by the law. On Dec 15, 1921, Po Tecsi acknowledged in an instrument an indebtedness to Po Ejap in the amount of P68,000 for the properties Po Ejap had sold to him. Mar 31, 1923 Po Ejap executed a second mortgage on his own land in favor of Limjenco. This land, which is the subject of the case, was at that time, mortgaged to PNB to secure the payment of the sum of P60,000 with 7% interest. He thereafter sold the land with all its improvements to Po Tecsi. Nov 22, 1923 Acting on behalf of Po Tecsi and with the special power granted to him, he sold the subject land with all its improvements to Katigbak. The only mortgage mentioned in the instrument was the one executed with PNB. He sold the land without recording his power of attorney or the sale in the title. At the time of the sale, Po Tecsi was in possession of the land. Oct 22, 1924 Po Tecsi leased a part of the land to Uy Chia for a period of 5 years. Po Tecsi sent letters complaining of Po Ejaps pressuring him to pay the rent and also to call the attention of Po Ejap for leasing the land without consulting him. In 1925, the second mortgage was cancelled. Po Tecsi died, and his son Po Sun Suy sent a liquidation of accounts over the propert to Po Ejap. Po Sun Suy was appointed administrator of Po Tecsis estate, and he included the land as one of hid dads properties. In 1927, Po Ejap assigned all his rights and actions in the credit of P68,000 against Po Tecsi to Po Sun Boo (Po Ejaps son) who bought the land from Katigbak. This purchase was made known by Po Sun Boo to Po Sun Suy to deal with him regarding the payment of the rent.

2.

aj.amin.cha.janz.krizel.paco.vien.yen A&P Compiled Digests No. 2

As there were rent in arrears from the time Po Tecsi was still alive, an action for recovery of rent was filed in court agains Tai Hing Co. (which I assume is Po Tecsis company?). Po Sun Suy filed an intervention praying that the court declare that Katigbak was not the owner of the property and was not, therefore, entitled to rent. o When the Original Contract of Lease expired in 1960, CHUA and defendant HERRERA, through her alleged attorney-in-fact executed a new Contract of Lease o After the expiration of the renewed Contract of Lease, the petitioners who are the successors-in-interest of CHUA BOK (who had died) continued possession of the premises up to April 1978, with adjusted rental rate of P1,000; later readjusted to P2,000 o But on July 1977, HERRERA through her attorney-in-fact (LUZ TORMIS, who was authorized with a special power of attorney) sold the lots in question to private respondents SPOUSES GO. Vendees (GO) were able to have aforesaid sale registered with the Register of Deeds of the City of Cebu and the titles of the two parcels of land were transferred in their names o Thereafter, herein petitioners (heirs of CHUA BOK) filed the instant case seeking the annulment of the said sale between HERRERA and the SPS. GO, alleging that the conveyance was in violation of the petitioners' right of option to buy the leased premises as provided in the Contract of Lease and that the SPS. GO acted in bad faith in purchasing the said lots knowing fully well that the CHUAs have the option to buy those lots o After due trial, TC rendered judgment DISMISSING the CHUAS complaint and ordered instead that they vacate the premises in question and remove the improvements thereon. But while TC recognized the validity of the subject propertys conveyance to the SPS. GO, it nevertheless awarded moral damages in favor of the CHUAs and attorneys fees in favor of the SPS. GO (against HERRERA) o Both the CHUAs and HERRERA appealed from the TC decision to the CA. The appellate court affirmed with modification the TC decision. The award of moral damages in favor of the CHUAs was deleted hence, this petition *Note that in this appeal before the SC, the CHUAs already gave up their demand to annul the sale made between HERRERA and the SPS. GO. The CHUAs here only raise concern of the order for their ejectment from the premises in question and the demolition of the improvements introduced thereon. ISSUE/HELD: WON the CHUAs are entitled to continue possession of the disputed property and exercise the option to buy the leased premises in accordance with the Lease Contract between them and HERRERA NO, simply because the Lease Contract is VOID! RATIO: [only relevant point with respect to AGENCY] o In support of their right to possess the premises in question, the CHUAs rely on the Contract of Lease entered into by and between CHUA BOK and a certain DE REYNES, as attorney-in-fact of landowner HERRERA o HOWEVER, the petitioners (CHUAs) lose sight of the fact that said Contract of Lease is VOID. As the CA correctly ruled, DE REYNES was not armed with a special power of attorney to enter into a lease contract for a period of more than one year when the alleged lease contract with and between CHUA BOK was constituted o The lease contract in question involves the lease of real property for a period of more than one year. The contract was entered into by the agent of the lessor and not the lessor herself. In such a case, the law requires that the agent be armed with a special power of attorney to lease the premises (Art 1878, CC) ON (IMPLIED) NEW LEASE [not too relevant] o It is true that HERRERA allowed the CHUAs to occupy the leased premises after the expiration of the renewed lease contract and under Art 1670, CC, a tacit renewal of the lease (tacita reconduccion) is deemed to have taken place HOWEVER, a tacit renewal is limited only to the terms of the contract which are germane to the lessee's right of continued enjoyment of the property and does not extend to alien matters, like the option to buy the leased premises (Art 1670, CC) OTHER MATTERS RESPECTING THE LAW ON PROPERTY o The CHUAs also question the jurisdiction of the trial court in ordering their ejectment from the leased premises and the removal of the improvements introduced thereon by them they claim that the action therein was for the annulment of the sale of the property and not an appropriate case for an ejectment o Suffice it to say that the right of possession of the CHUAs of the leased premises was squarely put in issue by the SPS. GO in their

ISSUE/HELD: Was the land validly acquired by Katigbak? Yes. Appellant: Po Ejap was not authorized under the power of attorney to sell the particular land because it was acquired by Po Tecsi after the execution of the power of attorney. Court: The power is general and authorizes Po Ejap to sell any kind of realty belonging to Po Tecsi. This includes not only the properties that Po Tecsi already owned at the time of the execution of the power, but also such as he might afterwards have during the time it was in force. Appellant: The power was not registered in the registry of deeds, and the authority granted to sell is therefore ineffective. Court: While it is true that a power of authority not recorded in the registry of deeds is ineffective in order that an agent or attorney-in-fact may validly perform acts in the name of his principal, and that any act performed by the agent by virtue of said power with respect to the land is ineffective against a third person who, in good faith, may have acquired a right thereto, it does, however, bind the principal to acknowledge the acts performed by his attorney-in-fact regarding said property. o The record contains many indications that Po Tecsi was not unaware of the sale. Letters, remittance of rent were a tacit acknowledgment that he occupied that land in question no longer as an owner but only as lessee. Appellants tried to explain that this was in payment of the P68,000 debt, but nothing in the letter said so. Po Sun Suy, when Po Tecsi died, also acknowledged that he was occupying as a lessee when he sent a letter to Po Ejap explaining why he could not pay rent. Extra: lease of Uy Chua valid because it was recorded, and it does not appear that he had any knowledge of the sale. CHUA v. IAC 229 SCRA 99 o Sometime in 1950, private respondent Herminigilda HERRERA executed a Contract of Lease in favor of SY TIAN ON, whereby the former leased to the latter a parcel of land located somewhere at Cebu City for a term of 10 years, renewable for another 5 years o The contract of lease contains a stipulation giving the lessee an option to buy the leased property and that the lessor guarantees to leave the possession of said property to the lessee for a period of 10 years or as long as the lessee faithfully fulfills the terms and conditions of their contract o Eventually, the lessee (TIAN ON) erected a residential house on the leased premises. Within 4 years from the execution of the said contract of lease, the lessee (TIAN ON), executed a Deed of Absolute Sale of the building in favor of CHUA BOK, the predecessor-in-interest of the petitioners herein, whereby the TIAN sold to CHUA the aforesaid residential house for and in consideration of the sum of P8,000 o In said Deed of Absolute Sale, TIAN also assigned all his rights and privileges as a lessee of the lot on which the said building is constructed together with its corresponding obligations as contained in the Contract of Lease executed in 1950 between him and the lot owner, HERRERA, to CHUA o Moreover, the same Deed of Absolute Sale contained a stipulation that the sale was made with the knowledge and express consent of the lot-owner and lessor (HERRERA) who was represented by her attorney-in-fact (a certain DE REYNES) where she also honored the annulment of the lease made by TIAN in favor of CHUA o Thereafter, CHUA and his family (herein petitioners) resided in the said residential building and they faithfully and religiously paid the rentals thereof

aj.amin.cha.janz.krizel.paco.vien.yen A&P Compiled Digests No. 2

counterclaim, where they specifically asked that the CHUAs should vacate their premises as soon as feasible or as the Honorable Court may direct in effect, the counterclaim was an accion publiciana for the recovery of the possession of the leased premises! o Surely, the CFI had jurisdiction over actions which involve the possession of real property or any interest therein, except forcible entry and detainer actions. So, theres no point questioning their jurisdiction in this case o It does not matter that the accion publiciana only came in the form of a counterclaim because the same is considered a complaint anyway, only that, it is the original defendant who becomes the plaintiff. It stands on the same footing and is to be tested by the same rules as if it were an independent action. Hence, the same rules on jurisdiction in an independent action apply to a counterclaim o Finally, the CHUAs claim that the CA erred in eliminating the award of moral damages given to them by the TC It must be borne in mind that the elimination of said award is only a logical consequence of the finding that the CHUAs had no right of option to purchase the leased premises that can be enforced against HERRERA. There being no such ground, the prayer for moral damages consequently cannot stand DUNGO v. LOPENA 6 SCRA 1007 FACTS: Anastacio Dungo and Rodrigo Gonzales purchased 3 parcels of land from Adriano Lopena and Rosa Ramos for the total price of P269,804.00. P28.000.00 was given as down payment with the agreement that the balance of P241,804.00 would be paid in 6 monthly installments. To secure the payment of the balance, the Dungo and Gonzales executed over the same parcels of land Deed of Real Estate Mortgage in favor of Lopena and Ramos. This deed was duly registered with the Office of the Register of Deeds Rizal, with the condition that failure of the vendees to pay any of the installments on their maturity dates shall automatically cause the entire unpaid balance to become due and demandable. Dungo and Gonzales defaulted on the 1st installment. Lopena and Ramos filed a complaint for the foreclosure of the real estate mortgage with the CFI of Rizal There were 2 other civil cases filed in the same lower court against the same defendants Dugo and Gonzales. The plaintiff in one was a certain Dionisio Lopena, and in the other case, the complainants were Bernardo Lopena and Maria de la Cruz. All 3 cases arose out of one transaction. In view of the identical nature of the cases, they were consolidated by the lower court into just one proceeding. This present decision refers solely to the interests and claim of Adriano Lopena against Anastacio Dugo alone. Before the cases could be tried, a compromise agreement1 was submitted to the lower court for approval. It was signed by Lopena and Ramos on one hand, and Gonzales, on the other. It was not signed by Dungo. However, Gonzales represented that his signature was for both himself and the Dugno. Moreover, Dugo's counsel of record, Atty. Chan, the same lawyer who signed and submitted for him the answer to the complaint, was present at the preparation of the compromise agreement and this counsel affixed his signature thereto.This compromise agreement was approved by the lower court on the same day it was submitted Subsequently a so-called Tri-Party Agreement2 was drawn. The signatories to it were Dugo and Gonzales as debtors, Lopena and Ramos as creditors, and, one Emma R. Santos as payor. When Dugo and Gonzales failed to pay the balance, Lopena and Ramos filed a Motion for the Sale of Mortgaged Property. Although this last motion was filed ex parte, Dugo and Gonzales were notified of it by the lower court. Neither of them filed any opposition thereto. The lower court granted the above motion and ordered the sale of the mortgaged property. The 3 parcels of land were sold by the Sheriff at a public auction where at herein petitioners, together with the plaintiffs of the other two cases won as the highest bidders. The said sheriff's sale was later confirmed by the lower court. Before confirming the sale, the lower court gave due notice of the motion for the confirmation to the herein petitioner who filed no opposition therefore. Dugo filed a motion to set aside all the proceedings on the ground that the compromise agreement was void ab initio with respect to him because he did not sign the same. Consequently, he argued, all subsequent proceedings under and by virtue of the compromise agreement, including the foreclosure sale, were void and null as regards him. This motion to set aside was denied by the lower court Dugo filed a Notice of Appeal from the order approving the foreclosure sale, as well as the order denying his motion to set aside. The approval of the record on appeal however, was opposed by the respondent spouses who claimed that the judgment was not appealable having been rendered by virtue of the compromise agreement. The opposition was contained in a motion to dismiss the appeal. The lower court dismissed the appeal

ISSUES/HELD Was the compromise agreement, the Order of the same date approving the same, and, all the proceedings subsequent thereto, valid or void insofar as Dungo is concerned? YES Dugo - the Compromise Agreement was void ab initio and could have no effect whatsoever against him because he did not sign the same. Furthermore, as it was void, all the proceedings subsequent to its execution, including the Order approving it, were similarly void and could not result to anything adverse to his interest.chanroblesvirtualawlibrary chanrobles virtual law library It is true that a compromise is, in itself, a contract. ART. 2028. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. Moreover, under Art. 18783 of the Civil Code, a third person cannot bind another to a compromise agreement unless he, the third person, has obtained a special power of attorney for that purpose from the party intended to be bound. Although the Civil Code expressly requires a special power of attorney in order that one may compromise an interest of another, it is neither accurate nor correct to conclude that its absence renders the compromise agreement void. In such a case, the compromise is merely unenforceable. It must be governed by the rules and the law on contracts. ART. 1403. The following contracts are unenforceable, unless they are ratified: Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers;

That, the plaintiffs, have agreed to give the defendants up to June 30, 1960 to pay the mortgage indebtedness in each of the said cases; That, should the defendants fail to pay the said mortgage indebtedness, judgments of foreclosure shall thereafter be entered against the said defendants; That, the defendants hereby waive the period of redemption provided by law after entry of judgments; That, in the event of sale of the properties involved in these three cases, the defendants agree that the said properties shall be sold at one time at public auction, that is, one piece of property cannot be sold without the others.
1

WHEREAS, the PAYOR, hereby submits and binds herself to the force and effect of the Order dated January 15, 1960, of the Court of First Instance of Pasig, Rizal, Branch VI, which order is hereby made an integral part of this agreement as ANNEX "A"; WHEREAS, the PAYOR with due knowledge and consent of the DEBTOR, hereby proposes to pay the aforesaid indebtedness in the sum of P503,000.00 to the CREDITOR for and in behalf of the DEBTOR. 3 ART. 1878. Special powers of attorney are necessary in the following cases: (3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired;
2

aj.amin.cha.janz.krizel.paco.vien.yen A&P Compiled Digests No. 2

WON Dugo had ratified the compromise agreement. YES The ratification of the compromise agreement was conclusively established by the Tri-Party Agreement. It is to be noted that the compromise agreement was submitted to and approved by the lower court. Now, the Tri-Party Agreement referred itself to that order4. Rivero v. Rivero - When it appears that the client, on becoming aware the compromise and the judgment thereon, fails to repudiate promptly the action of his attorney, he will not afterwards be heard to contest its validity This Court has not overlooked the fact that which indeed Dugo was not a signatory to the compromise agreement, the principal provision of the said instrument was for his benefit. Originally, Dugo's obligation matured and became demandable on October 10, 1959. However, the compromise agreement extended the date of maturity to June 30, 1960. More than anything the compromise agreement operated to benefit of Dungo because it afforded him more time and opportunity to fulfill his monetary obligations under the contract. If only for this reason, this Court believes that the herein petitioner should not be heard to repudiate the said agreement. The compromise agreement stated "that, should the defendants fail to pay the said mortgage indebtedness, judgment of foreclosure shall thereafter be entered against the said defendants:" Beyond doubt, this was ratified by the TriParty Agreement when it covenanted that - If the MAYOR defaults or fails to pay anyone of the installments in the manner stated above, the MAYOR and the DEBTOR hereby permit the CREDITOR to execute the order of sale referred to above (the Judgment of Foreclosure), and they (PAYOR and DEBTOR) hereby waive any and all objections or oppositions to the propriety of the public auction sale and to the confirmation of the sale to be made by the Court. Dugo - even assuming that the compromise agreement was valid, it nevertheless could not be enforced against him because it has been novated by the Tri-Party Agreement which brought in a third party, Santos, who assumed the mortgaged obligation of Dungo. Novation by presumption has never been favored. To be sustained, it need be established that the old and new contracts are incompatible in all points, or that the will to novate appears by express agreement of the parties or in acts of similar import. An obligation to pay a sum of money is not novated, in a new instrument wherein the old is ratified, by changing only the term of payment and adding other obligations not incompatible with the old one or wherein the old contract is merely supplemented by the new one Dungo claims that when a third party, Santos, came in and assumed the mortgaged obligation, novation resulted thereby inasmuch as a new debtor was substituted in place of the original one. In this kind of novation, however, it is not enough that the juridical relation of the parties to the original contract is extended to a third person; it is necessary that the old debtor be released from the obligation, and the third person or new debtor take his place in the new relation. Without such release, there is no novation; the third person who has assumed the obligation of the debtor merely becomes a co-debtor or surety. If there is no agreement as to solidarity, the first and the new debtors are considered obligation jointly. There was no such release of the original debtor in the Tri-Party Agreement. It is a very common thing in the business affairs for a stranger to a contract to assume its obligations; while this may have the effect of adding to the number of persons liable, it does not necessarily imply the extinguishment of the liability of the first debtor). The mere fact that the creditor receives a guaranty or accepts payments from a third person who has agreed to assume the obligation, when there is no agreement that the first debtor shall be released from responsibility, do not constitute a novation, and the creditor can still enforce the obligation against the original debtor . The Tri-Party Agreement was an instrument intended to render effective the compromise agreement. It merely complemented and ratified the same. That a third person was involved in it is inconsequential. Nowhere in the new agreement may the release of Dungo be even inferred. VICENTE v. GERALDEZ 52 SCRA 210 Quickie: Hi-cement Corporation acquired Placer Lease Contract (which is essentially mining claims). Vicente, et. al were claiming some parts of the mining claims as theirs. So they were suing each other, etc. and then the Corporations lawyers finally agreed to settle with Vicente, et. al, through a compromise agreement. However, the Corporations VP refused to sign such compromise agreement. SC ruled that: It having been found by the trial court that "the counsel for the plaintiff entered into the compromise agreement without the written authority of his client and the latter did not ratify, on the contrary it repudiated and disowned the same ...", 12 We therefore declare that the orders of the court a quo subject of these two petitions, have not been issued in excess of its jurisdictional authority or in grave abuse of its discretion. Rationale: 1. Special powers of attorney are necessary to compromise and to renounce the right to appeal from a judgment. Attorneys cannot compromise their clients litigation. It is not disputed that the lawyers of Hi Cement had not submitted to the Court any written authority from their client to enter into a compromise. 2. Juridical persons may compromise only in the form and with the requisites which may be necessary to alienate their property. As a general rule an officer or agent of the corporation has no power to compromise or settle a claim by or against the corporation, except to the extent that such power is given to him either expressly or by reasonable implication from the circumstances. 3. To ratify the unauthorized contract of an agent and make it binding on the corporation, it must be shown that the governing body or officer authorized to ratify had full and complete knowledge of all the material facts connected with the transaction to which it relates. Ratification must be by the officer or governing body having authority to make such contract, and must be with full knowledge. Nature: There are two original actions of certiorari with prayer for preliminary injunction wherein petitioners seek to annul the orders dated April 24, May 18, and July 18, 1970 of respondent Judge of the Court of First Instance of Bulacan in Civil Case No. SM201 (Hi Cement Corporation vs. Juan Bernabe, Ignacio Vicente and Moises Angeles). Facts: On September 9, 1967 herein private respondent Hi Cement Corporation filed with the Court of First Instance of Bulacan a complaint for injunction and damages against herein petitioners Juan Bernabe, Ignacio Vicente and Moises Angeles. In said complaint the plaintiff alleged that: o Under a deed of sale and transfer, It had acquire the Placer Lease Contract No. V-90, from the Banahaw Shale Mining Association. The deed was duly registered with the Office of the Mining Recorder of Bulacan, and duly approved by the DENR Secretary. o The said Placer Lease Contract No. V-90 was for a period of twenty-five years commencing from August 1, 1960 and covered two mining claims (Red Star VIII & IX) with a combined area of about fifty-one hectares o However, within the boundaries of the Red Star VIII are 3 parcels of land which are veing claimed by defendants Juan Bernabe (about two hectares), Ignacio Vicente (about two hectares) and Moises Angeles (about onefourth hectare)

WHEREAS, the MAYOR, hereby submits and binds herself to the force and effect of the order dated January 15, 1960, of the Court of First Instance of Pasig, Rizal, Branch which order is hereby made an integral part of this agreement as Annex "A".
4

aj.amin.cha.janz.krizel.paco.vien.yen A&P Compiled Digests No. 2

The plaintiff had requested the defendants to allow its workers to enter the area in question for exploration and development purposes as well as for the extraction of minerals therefrom, promising to pay the defendants reasonable amounts as damages, but the defendants refused to allow entry of the plaintiff's representatives o that the defendants were threatening the plaintiff's workers with bodily harm if they entered the premises, for which reason the plaintiff had suffered irreparable damages due to its failure to work on and develop its claims and to extract minerals therefrom, resulting in its inability to comply with its contractual commitments Trial Court: issued a restraining order and required the defendants to file an answer o Defendants (herein petitioners) answer: They are rightful owners of certain portions of the land covered by the supposed mining claims of the plaintiff It was the plaintiff and its workers who had committed acts of force and violence when they entered into and intruded upon the defendants' lands; and that the complaint failed to state a cause of action. The court then suggested the relocation of the boundaries of the plaintiff's claims in relation to the properties of the defendants, and to this end named as Commissioner, a Surveyor from the Office of the District Engineer of Bulacan to relocate the boundaries of the plaintiff's mining claims, to show in a survey plan the location of the areas thereof in conflict with the portions whose ownership is claimed by the defendants and to submit his report thereof to the court on or before October 31, 1967. The court also directed the parties to send their representatives to the place of the survey on the date thereof and to furnish the surveyor with copies of their titles. The report found that Angeles and Vicentes properties were totally covered by Corporations claim. Bernabes property was only partially covered. In an Order issued on December 14, 1967, the court approved the report "with the conformity of all the parties in this case. On January 30, 1969 the counsels of the parties executed and submitted to the court for its approval the following Compromise Agreement On the same date, the foregoing Compromise Agreement was approved by the trial court, which enjoined the parties to comply with the terms and conditions thereof. On October 21, 1969, Atty. Francisco Ventura, one of the three lawyers for plaintiff HI Cement Corporation, filed with the trial court a manifestation stating that on September 1, 1969 he sent a copy of the Compromise Agreement to Mr. Antonio Diokno, President of the corporation, requesting the latter to intercede with the Board of Directors for the confirmation or approval of the commitment made by the plaintiff's lawyers to abide by the decision of the Court based on the reports of the Commissioners However, the corporations president answered through a letter stating that they do not agree with the valuation set be the court. But, TC rendered a judgment the plaintiff pursuant to the compromise agreement, is hereby ordered to pay the defendants the amount of P15.00 per square meter for the subject properties, and upon full payment, the restraining order earlier issued by this Court shall be deemed lifted. On April 22, 1970 the plaintiff filed with the court a motion for new trial on the ground that the decision of the court dated March 13, 1970 is null and void because it was based on the Compromise Agreement of January 30, 1969 which was itself null and void for want of a special authority by the plaintiff's lawyers to enter into the said agreement. appeal from a judgment. Attorneys have authority to bind their clients in any case by any agreement in relation thereto made in writing, and in taking appeals, and in all matters of ordinary judicial procedure, but they cannot, without special authority, compromise their clients' litigation, or receive anything in discharge of their clients' claims but the full amount in cash. The Compromise Agreement dated January 30, 1969 was signed only by the lawyers for petitioners and by the lawyers for private respondent corporation. It is not disputed that the lawyers of respondent corporation had not submitted to the Court any written authority from their client to enter into a compromise. This Court has said that the Rules 3 "require, for attorneys to compromise the litigation of their clients, a special authority. And while the same does not state that the special authority be in writing the court has every reason to expect that, if not in writing, the same be duly established by evidence other than the self-serving assertion of counsel himself that such authority was verbally given him." The law specifically requires that "juridical persons may compromise only in the form and with the requisites which may be necessary to alienate their property." Under the corporation law the power to compromise or settle claims in favor of or against the corporation is ordinarily and primarily committed to the Board of Directors. The right of the Directors "to compromise a disputed claim against the corporation rests upon their right to manage the affairs of the corporation according to their honest and informed judgment and discretion as to what is for the best interests of the corporation." 6 This power may however be delegated either expressly or impliedly to other corporate officials or agents. Thus it has been stated, that as a general rule an officer or agent of the corporation has no power to compromise or settle a claim by or against the corporation, except to the extent that such power is given to him either expressly or by reasonable implication from the circumstances. 7 It is therefore necessary to ascertain whether from the relevant facts it could be reasonably concluded that the Board of Directors of the HI Cement Corporation had authorized its lawyers to enter into the said compromise agreement. Whatever authority the officers or agents of a corporation may have is derived from the board of directors, or other governing body, unless conferred by the charter of the corporation. A corporation officer's power as an agent of the corporation must therefore be sought from the statute, the charter, the by-laws, or in a delegation of authority to such officer, from the acts of board of directors, formally expressed or implied from a habit or custom of doing business. In the case at bar no provision of the charter and by-laws of the corporation or any resolution or any other act of the board of directors of HI Cement Corporation has been cited, from which We could reasonably infer that the administrative manager had been granted expressly or impliedly the power to bind the corporation or the authority to compromise the case. Absent such authority to enter into the compromise, the signature of Atty. Cardenas on the agreement would be legally ineffectual. Equally inapposite is petitioners' invocation of the principle of estoppel. In the case at bar, except those made by Attys. Ventura, Cardenas and Magpantay, petitioners have not demonstrated any act or declaration of the corporation amounting to false representation or concealment of material facts calculated to mislead said petitioners. The acts or conduct for which the corporation may be liable under the doctrine of estoppel must be those of the corporation, its governing body or authorized officers, and not those of the purported agent who is himself responsible for the misrepresentation.

2.

3.

4.

ISSUE: Whether the compromise agreement entered into by the corporations lawyer is valid. Held/Ratio: No. 1. Special powers of attorney are necessary, among other cases, in the following: to compromise and to renounce the right to

aj.amin.cha.janz.krizel.paco.vien.yen A&P Compiled Digests No. 2

INSULAR DRUG CO. v. NATIONAL BANK 58 PHIL 684 Quick Facts: Former salesman had anomalous transactions, committed suicide The argument that Foerster had implied authority to indorse all checks made out in the name of the Insular Drug Co., Inc., has even less force. Not only did the bank permit Foerster to indorse checks and then place them to his personal account, but it went farther and permitted Foerster's wife and clerk to indorse the checks. The right of an agent to indorse commercial paper is a very responsible power and will not be lightly inferred. A salesman with authority to collect money belonging to his principal does not have the implied authority to indorse checks received in payment. Any person taking checks made payable to a corporation, which can act only by agent does so at his peril, and must same by the consequences if the agent who indorses the same is without authority. Facts: Foerster acted as a collector for the company. He was instructed to take the checks which came to his hands for the drug company to the Iloilo branch of the Chartered Bank of India, Australia and China and deposit the amounts to the credit of the drug company. Instead, Foerster deposited checks, including those of Juan Llorente, Dolores Salcedo, Estanislao Salcedo, and a fourth party, with the Iloilo branch of the PNB. The checks were in that bank placed in the personal account of Foerster. After the indorsements on the checks was written "Received payment prior indorsement guaranteed by the Philippine National Bank, Iloilo Branch, Angel Padilla, Manager." As a consequence of the indorsements on the checks the amounts therein stated were subsequently withdrawn by U. E. Foerster and Carmen E. de Foerster. Eventually the Manila office of the drug company investigated the transactions of Foerster. Upon the discovery of anomalies, Foerster committed suicide. Argument of Insular Drug: it never received the face value of the 132 checks in question covering a total of P18,285.92 The drug company sued PNB for the amount covered by the checks which was improperly and illegally cashed by Foerster. Issue: WON Foerster had implied authority to indorse all checks made out in the name of the Insular Drug Co., Inc. Held: NO. Right of agent to indorse a very responsible power and not lightly inferred The right of an agent to indorse commercial paper is a very responsible power and will not be lightly inferred. A salesman with authority to collect money belonging to his principal does not have the implied authority to indorse checks received in payment. Any person taking checks made payable to a corporation, which can act only by agents does so at his peril, and must abide by the consequences if the agent who indorses the same is without authority. In the present case, PNB not only permitted Foerster to indorse the checks and place them in his personal account but also permitted Foerster's wife and clerk to indorse the checks. Good faith does not excuse responsibility Bank made itself responsible for amounts represented by checks PNB could tell by the checks brought to PNB Iloilo by Foerster, his wife and his clerk, that the money belonged to the Insular Drug Co. Inc., and not to Foerster of his wife or his clerk. When the bank credited those checks to the personal account of Foerster and permitted Foerster and his wife to make withdrawals without there being any authority from the drug company to do so, the bank made itself responsible to the drug company for the amounts represented by the checks. The bank could relieve itself from responsibility by pleading and proving that after the money was withdrawn from the bank it passed to the drug company which thus suffered no loss, but the bank has not done so. Thus, the bank will have to stand the loss occasioned by the negligence of its agents.