Filipinas Life Assurance Co. (now Ayala Life Assurance, Inc.) v.

Clemente Pedrosa, TeresitaPedrosa and Jennifer

Palacio
FACTS: Teresita Pedroso is a policyholder of a 20-year endowment life insurance issued by Filipinas LifeAssurance
Co. Pedroso claims Renato Valle was her insurance agent since 1972 and Valle collectedher monthly premiums. In
the first week of January 1977, Valle told her that the Filipinas Life EscoltaOffice was holding a promotional
investment program for policyholders. It was offering 8% prepaidinterest a month for certain amounts deposited on a
monthly basis. Enticed, she initially investedand issued a post-dated check for P10,000. In return, Valle issued
Pedroso his personal check forP800 for the 8% prepaid interest and a Filipinas Life Agent receipt.
Pedroso called the Escolta office and talked to Francisco Alcantara, the administrative assistant, whoreferred
her to the branch manager, Angel Apetrior. Pedroso inquired about the promotionalinvestment and Apetrior confirmed
that there was such a promotion. She was even told she couldpush through with the check she issued. From the
records, the check, with the endorsement of Alcantara at the back, was deposited in the account of Filipinas Life with
the Commercial Bank and Trust Company, Escolta Branch.
Relying on the representations made by Filipinas Lifes duly authorized representatives Apetrior andAlcantara, as
well as having known agent Valle for quite some time, Pedroso waited for the maturityof her initial
investment. A month after, her investment of P10,000 was returned to her after shemade a written request for its
refund. To collect the amount, Pedroso personally went to the Escoltabranch where Alcantara gave her the P10,000
in cash. After a second investment, she made 7 to 8more investments in varying amounts, totaling P37,000 but at a
lower rate of 5% prepaid interest amonth. Upon maturity of Pedrosos subsequent investments, Valle would take back
from Pedroso thecorresponding agents receipt he issued to the latter.
Pedroso told respondent Jennifer Palacio, also
a Filipinas Life insurance policyholder, about theinvestment plan. Palacio made a total investment of P49,550
but at only 5% prepaid interest.However, when Pedroso tried to withdraw her investment, Valle did not want to return
some P17,000worth of it. Palacio also tried to withdraw hers, but Filipinas Life, despite demands, refused to returnher
money.
ISSUE:WON Filipinas Life is jointly and severally liable with Apetrior and Alcantara on the claim of Pedroso and
Palacio or WON its agent Renato Valle is solely liable to Pedroso and Palacio
HELD:Pedroso and Palacio had invested P47,000 and P49,550, respectively. These were received by Valleand
remitted to Filipinas Life, using Filipinas Lifes official receipts. Valles authority to solicit
andreceive investments was also established by the parties. When Pedroso and Palacio soughtconfirmation,
Alcantara, holding a supervisory position, and Apetrior, the branch manager, confirmedthat Valle had authority. While
it is true that a person dealing with an agent is put upon inquiry andmust discover at his own peril the agents
authority, in this case, Pedroso and Palacio did exercisedue diligence in removing all doubts and in confirming the
validity of the representations made byValle.
Filipinas Life, as the principal, is liable for obligations contracted by its agent Valle. By the contract of agency, a
person binds himself to render some service or to do something in representation or onbehalf of another, with the
consent or authority of the latter. The general rule is that the principal isresponsible for the acts of its agent done
within the scope of its authority, and should bear
thedamage caused to third persons. When the agent exceeds his authority, the agent becomespersonally liable for

the damage. But even when the agent exceeds his authority, the principal is stillsolidarily liable together with the
agent if the principal allowed the agent to act as though the agenthad full powers. The acts of an agent beyond the
scope of his authority do not bind the principal,unless the principal ratifies them, expressly or impliedly.
Ratification
adoption or confirmation by one person of an act performed on his behalf by anotherwithout authority
Even if Valles representations were beyond his authority as a debit/insurance agent, Filipinas Lifethru Alcantara and
Apetrior expressly and knowingly ratified Valles acts. Filipinas Life benefited fromthe investments deposited by Valle
in the account of Filipinas Life.
PLEASANTVILLE DEVELOPMENT CORPORATION VS. COURT OF APPEALS
G.R. NO. 79688

253 SCRA 10

FEBRUARY 1, 1996

PONENTE: PANGANIBAN, J.
Doctrine: Good faith consists in the belief of the builder that he land he is building on is his and his ignorance of any
defect or flaw in his title. The burden of proving bad faith belongs to the one asserting it.
Facts: Edith Robillo purchased from Pleasantville Development Corporation, herein petitioner a parcel of land at
Pleasantville Subdivision, Bacolod City. The property was designated as Lot 9, Phase II. In 1975, herein respondent
Eldred Jardinico bought the said subject lot from the former purchaser. Eldred later discovered that the property he
purchased had improvements introduced therein by respondent Wilson Kee.
Kee on the other hand bought on installments Lot 8 of the same subdivision from C.T. Torres Enterprises,
Inc. (CTTEI) which is the exclusive real estate agent of the petitioner. Under the contract Kee was allowed to take
possession of the property even before full payment of the price. CTTEI through an employee, Zenaida Octaviano
accompanied Kees wife Donabelle to inspect Lot No. 8. Octaviano however mistakenly pointed towards Lot 9. Hence
spouses Kee had their residence, an auto repair shop, a store and other improvements constructed on the wrong lot.
Upon discovery of the blunder both Kee and Jardinico tried to reach an amicable settlement but they failed.
Jardinico demanded that the improvements be removed but as Kee refused, Jardinico filed a complaint for ejectment
with damages against Kee at the Municipal Trial Court in Cities (MTCC) of Bacolod City. Kee filed a third-party
complaint against herein petitioner and CTTEI.
The MTCC found that the error was attributable to CTTEI also since at present the contract with Kee has
rescinded for Kees failure to pay installments. Kee no longer had any right over the subject property and must pay
rentals for its use. The Regional Trial Court (RTC) of Bacolod City ruled that petitioner and CTTEI were not at fault or
were not negligent. It argued that Kee was a builder in bad faith. Even if assuming that he was in good faith, he was

no longer so and must pay rentals from the time that he was given notice to vacate the lot. The Court of Appeals
ruled that Kee was a builder in good faith as he was unaware of the mix-up when he constructed the improvements.
It was in fact due to the negligence and wrongful delivery of CTTEI which included its principal the herein petitioner. It
further ruled that the award of rental was without basis.
Pending the resolution of the case at the Court of Appeals Jardinico and Kee entered into a deed of sale,
wherein Lot 9 was sold to Kee. In the said deed a provision stating that regardless of the outcome of the decision,
such shall not be pursued by the parties and shall be considered dismissed and without effect. The appellate court
was not informed of this deal.
Issue: Whether or not a lot buyer who constructs improvements on the wrong property erroneously delivered by the
owners agent, a builder in good faith?
Held: Yes. Article 527 of the Civil Code provides the presumption that petitioner has the burden of proving that Kee
was a builder in bad faith. Kee may be made liable for the violation of the contract with CTTEI but this may not be
used as a basis of bad faith and as a sufficient ground to negate the presumption of good faith. Jardinico is presently
only allowed to file a complaint for unlawful detainer. Good faith is based on the belief of the builder that the land he
is building on is his and his ignorance of any flaw or defect in is title. Since at the time when Kee constructed his
improvements on Lot 8, he was not aware that it was actually Lot 9 that was delivered to him. Petitioner further
contends that Kee was negligent as a provision in the Contract of Sale on Installment stated that the vendee must
have personally examined the property and shall bear on his own the consequential expenses in the changes that
may happen thereon. The court held that such provision cannot be interpreted as a waiver of the vendees right to
recover damages resulting from petitioners negligence. Such interpretation of the waiver is contrary to law and public
policy and cannot be allowed. Petitioner cannot claim and excuse itself from liability by claiming that it was not
directly involved in the delivery of the property. The principal must be responsible for the acts of the agent done within
the scope of his authority. CTTEI was the sole real estate representative of the petitioner when the delivery was
made. Wilson Kee is therefore declared a builder in good faith. Petitioner and respondent CTTEI are declared
solidarily liable for damages due to negligence. The award of rentals to Jardinico is dispensed with.
Manila Remnant vs. CA
FACTS:
Manila Remnant Co. owns Capital Homes Subdivision with Artemio Valencia as President
A.U. Valencia and Co., is the authorized agent of Manila Remnant to develop the aforesaid subdivision with
authority to manage the sales thereof, execute contracts to sell to lot buyers and issue official receipts.
Artemio Valencia is also the president of this company.

Sometime in March 1970, Manila Remnant thru A.U. Valencia, executed contracts to sell with Ventanilla
covering two lots amounting to P66k to paid monthly for 10 years. Ventanilla paid the downpayment.
After 10 days, Artemio Valencia sold the same lots without informing Ventanilla to Crisostomo, his sales
agent without any consideration.
Artemio Valencia then transmitted the fictitious Crisostomo contracts to Manila Remnant while he kept in his
files the contracts to sell in favor of the Ventanillas. All the amounts paid by the Ventanillas were deposited
in Valencia's bank account and this is remitted to Manila Remnant in favor of Crisostomo. Receipts issued
by Manila Remnant in favor of Crisostomo are kept by Valencia. Ventanilla is not aware of Valencias
scheme and thus continued paying their monthly installments.
Sometime in May 1973, Manila Remnant terminated its collection agreement with AU Valencia due to
discrepancies and irregularities discovered in its collections and remittances. Valencia was also removed as
the President of Manila Remnant.
The Ventanilla couple unaware of the circumstances happened continued paying their installments to
Valencia. It is only in 1978 they learned the termination of Valencia, thus they went immediately to Manila
Remnant to pay their balance but to their shock they discovered from Gloria Caballes, an accountant of
Manila Remnant, that their names did not appear in the records of A.U. Valencia and Co. as lot buyers.
Thus, the Ventanillas commenced an action for specific performance, annulment of deeds and damages
against Manila Remnant, A.U. Valencia and Co. and Carlos Crisostomo.
Lower courts rendered judgment in favor of Ventanilla, and in the decision, the court ordered defendants
A.U. Valencia and Co. Inc., Manila Remnant and Carlos Crisostomo jointly and severally to pay the
Ventanillas the amount of P100,000.00 as moral damages, P100,000.00 as exemplary damages, and
P100,000.00 as attorney's fees and in case the transfer of lots cannot be effected for any legal reason, the
defendants should reimburse jointly and severally to the Ventanillas the total amount of P73,122.35
representing the total amount paid for the two lots plus legal interest thereon from March 1970 plus
damages.
While petitioner Manila Remnant has not refuted the legality of the award of damages per se, it believes that
it cannot be made jointly and severally liable with its agent A.U. Valencia and Co. since it was not aware of
the illegal acts perpetrated nor did it consent or ratify said acts of its agent.

ISSUE: Whether or not petitioner Manila Remnant should be held solidarily liable together with A.U. Valencia and
Co. and Carlos Crisostomo for the payment of moral, exemplary damages and attorney's fees in favor of the
Ventanillas
RULING: Yes. Due to the following:
(1) The unique relationship existing between the principal and the agent at the time of the dual sale must be
underscored. Bear in mind that the president then of both firms was Artemio U. Valencia, the individual
directly responsible for the sale scam. Hence, despite the fact that the double sale was beyond the power of
the agent, Manila Remnant as principal was chargeable with the knowledge or constructive notice of that
fact and not having done anything to correct such an irregularity was deemed to have ratified the same.
(2) The principle of estoppel, Manila Remnant is deemed to have allowed its agent to act as though it had
plenary powers. Article 1911 of the Civil Code provides:
"Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former
allowed the latter to act as though he had full powers."
Authority by estoppel has arisen in the instant case because by its negligence, the principal, Manila
Remnant, has permitted its agent, A.U. Valencia and Co., to exercise powers not granted to it.