NIELSON & COMPANY, INC., plaintiff-appellant, vs.

LEPANTO CONSOLIDATED MINING defendant-

appellee.

* management contract whether it is a contract of agency or a contract of lease of services.

Agency, is distinguished from lease of work or services in that the basis of agency is representation,
while in the lease of work or services the basis is employment

Lepanto claims this Court had overlooked the real nature of the management contract entered into by
and between Lepanto and Nielson, and the law that is applicable on said contract. Lepanto now asserts
for the first time and this is done in a motion for reconsideration - that the management contract in
question is a contract of agency such that it has the right to revoke and terminate the said contract, as
it did terminate the same, under the law of agency, and particularly pursuant to Article 1733 of the Old
Civil Code (Article 1920 of the New Civil Code).

it has the right to terminate the management contract because that contract is one of agency which it
could terminate at will. If Lepanto had thought of considering the management contract as one of
agency it could have amended its answer by stating exactly its position. It could have asserted its theory
of agency in its memorandum for the lower court and in its brief on appeal. This, Lepanto did not do. It is
the rule, and the settled doctrine of this Court, that a party cannot change his theory on appeal that
is, that a party cannot raise in the appellate court any question of law or of fact that was not raised in
the court below or which was not within the issue made by the parties in their pleadings

At any rate, even if we allow Lepanto to assert its new theory at this very late stage of the proceedings,
this Court cannot sustain the same.

Lepanto contends that the management contract in question (Exhibit C) is one of agency because: (1)
Nielson was to manage and operate the mining properties and mill on behalf, and for the account, of
Lepanto; and (2) Nielson was authorized to represent Lepanto in entering, on Lepanto's behalf, into
contracts for the hiring of laborers, purchase of supplies, and the sale and marketing of the ores
mined. Lepanto then maintains that an agency is revocable at the will of the principal (Article 1733 of
the Old Civil Code),

determine the nature of the management contract whether it is a contract of agency or a contract of
lease of services.

Article 1709 of the Old Civil Code, defining contract of agency, provides:

By the contract of agency, one person binds himself to render some service or do something for
the account or at the request of another.

Article 1544, defining contract of lease of service, provides:

In a lease of work or services, one of the parties binds himself to make or construct something or
to render a service to the other for a price certain.
. Agency, however, is distinguished from lease of work or services in that the basis of agency is
representation, while in the lease of work or services the basis is employment.

Agency is a preparatory contract, as agency "does not stop with the agency because the purpose is to
enter into other contracts." The most characteristic feature of an agency relationship is the agent's
power to bring about business relations between his principal and third persons. "The agent is
destined to execute juridical acts (creation, modification or extinction of relations with third parties).
Lease of services contemplate only material (non-juridical) acts."

the work undertaken by Nielson was to take complete charge subject at all times to the general control
of the Board of Directors of Lepanto, of the exploration and development of the mining claims, of the
hiring of a sufficient and competent staff and of sufficient and capable laborers, of the prospecting and
development of the mine, of the erection and operation of the mill, and of the benefication and
marketing of the minerals found on the mining properties; and in carrying out said obligation Nielson
should proceed diligently and in accordance with the best mining practice. In connection with its work
Nielson was to submit reports, maps, plans and recommendations with respect to the operation and
development of the mining properties, make recommendations and plans on the erection or
enlargement of any existing mill, dispatch mining engineers and technicians to the mining properties
as from time to time may reasonably be required to investigate and make recommendations without
cost or expense to Lepanto. Nielson was also to "act as purchasing agent of supplies, equipment and
other necessary purchases by Lepanto, provided, however, that no purchase shall be made without
the prior approval of Lepanto; to make contracts subject to the prior approve of Lepanto for the sale
and marketing of the minerals mined from said properties,

It thus appears that the principal and paramount undertaking of Nielson under the management
contract was the operation and development of the mine and the operation of the mill. All the other
undertakings mentioned in the contract are necessary or incidental to the principal undertaking these
other undertakings being dependent upon the work on the development of the mine and the operation
of the mill. In the performance of this principal undertaking Nielson was not in any way executing
juridical acts for Lepanto, destined to create, modify or extinguish business relations between Lepanto
and third persons. In other words, in performing its principal undertaking Nielson was not acting as an
agent of Lepanto, but as one who was performing material acts for an employer, for a compensation.

Nielson could not execute juridical acts which would bind Lepanto without first securing the approval of
Lepanto..

the employment by Lepanto of Nielson to operate and manage its mines was principally in
consideration of the know-how and technical services that Nielson offered Lepanto. The contract thus
entered into pursuant to the offer made by Nielson and accepted by Lepanto was a "detailed operating
contract". It was not a contract of agency. Nowhere in the record is it shown that Lepanto considered
Nielson as its agent and that Lepanto terminated the management contract because it had lost its trust
and confidence in Nielson.

The contention of Lepanto that it had terminated the management contract in 1945because the relation
between it and Nielson was one of agency and as such it could terminate the agency at will, is,
therefore, untenable.
2. In the second, third and fifth grounds of its motion for reconsideration, Lepanto maintains that this
Court erred, in holding that paragraph 11 of the management contract suspended the period of said
contract, , the operation of the contract is suspended for as long as the adverse effects of the
happening of any of those events had impeded or obstructed the work of mining and milling., the war
had adversely affected and wholly at that the work of mining and milling. We have clearly stated in
Our decision the circumstances brought about by the war which caused the whole or total suspension of
the agreement or of the management contract.

When we talk of a contract that has been suspended we certainly mean that the contract temporarily
ceased to be operative, and the contract becomes operative again upon the happening of a condition
or when a situation obtains which warrants the termination of the suspension of the contract.

IThe period of suspension should, therefore, be reckoned from February 1942 until June 26, 1948,
because it was during this period that the war and the adverse effects of the war on the work of mining
and milling had lasted. The mines and the installations had to be rehabilitated because of the adverse
effects of the war.

Lepanto contending that the effects of the war should cease upon the liberation of the mines from the
enemy. This contention cannot be sustained, because the period of rehabilitation was still a period
when the physical effects of the war

We, therefore, reiterate the ruling in Our decision that the management contract in the instant case was
suspended from February, 1942 to June 26, 1948, and that from the latter date the contract had yet five
years to go.

AMON TRADING VS CA 2005

*TRI REALTY (respondent) failed to establish deterrent measures entrusting Sanchez

Private respondent Tri-Realty is a developer and contractor with projects in Bulacan and Quezon
City. It had difficulty in purchasing cement needed for its projects. Lines & Spaces, represented by Eleanor
Bahia Sanchez, informed private respondent that it could obtain cement to its satisfaction from
petitioners, Amon Trading Corporation and its sister company, Juliana Marketing. On the strength of
such representation, private respondent proceeded to order from Sanchez Six Thousand Fifty (6,050) bags
of cement from petitioner Amon Trading Corporation, and from Juliana Marketing, Six Thousand (6,000)
bags at P98.00/bag.

There were deliveries to private respondent from Amon Trading Corporation and Juliana
Marketing. However, the balance of 2,200 bags from Amon Trading Corporation and 3,000 bags from
Juliana Marketing, or a total of 5,200 bags, was not delivered. Private respondent, thus, sent petitioners
written demands but in reply, petitioners stated that they have already refunded the amount of
undelivered bags of cement to Lines and Spaces per written instructions of Eleanor Sanchez.
Left high and dry, with news reaching it that Eleanor Sanchez had already fled abroad, private respondent
filed this case for sum of money against petitioners and Lines & Spaces.

Petitioners plead in defense lack of right or cause of action, alleging that private respondent had
no privity of contract with them and respondent corporation are distinct and separate entities. They
added that there were purchases or orders made by Lines & Spaces/Tri-Realty which they were about to
deliver, but were cancelled by Mrs. Sanchez and the consideration of the cancelled purchases or orders
was later reimbursed to Lines & Spaces. The refund was in the form of a check payable to Lines & Spaces.

Lines & Spaces pleads in defense lack of cause of action and in the alternative, it raised the
defense that it was only an intermediary between the private respondent and petitioners.[2] Soon after,
though, counsel for Lines & Spaces moved to withdraw from the case for the reason that its client was
beyond contact.

RTC found Lines & Spaces solely liable to private respondent and absolved petitioners of any
liability.
Private Respondent Tri-Realty partially appealed from the trial courts decision absolving Amon
Trading Corporation and Juliana Marketing . CA reversed the decision of the trial court and held
petitioners Amon Trading Corporation and Juliana Marketing to be jointly and severally liable with Lines
& Spaces

WHETHER OR NOT THERE WAS A CONTRACT OF AGENCY BETWEEN LINES AND SPACES
INTERIOR CENTER AND RESPONDENT;

AMON strongly assert that they did not have a hint that Lines & Spaces and Tri-Realty are two
different and distinct entities inasmuch as Eleanor Sanchez whom they have dealt with just represented
herself to be from Lines & Spaces/Tri-Realty when she placed her order for the delivery of the bags of
cement.
TRI REALTY, on the other hand, claims that petitioners had knowledge that Lines & Spaces, as
represented by Eleanor Sanchez, was a separate and distinct entity from Tri-Realty.[8]

Primarily, there was no written contract entered into between petitioners and private
respondent for the delivery of the bags of cement. While the managers check issued by respondent
company was eventually paid to petitioners for the delivery of the bags of cement, there is obviously
nothing from the face of said managers check to hint that private respondent was the one making the
payments. There was likewise no intimation from Sanchez that the purchase order placed by her was for
private respondents benefit. The meeting of minds, therefore, was between private respondent Tri
REALTY and Eleanor Sanchez of Lines & Spaces. This contract is distinct and separate from the contract
of sale between AMON and Eleanor Sanchez who represented herself to be from Lines & Spaces/Tri-
Realty, which, per her representation, was a single account or entity.

voucher payable to Amon Trading is a check voucher bearing the name of Juliana Marketing as
payee,
Also on record are the receipts issued by Lines & Spaces, signed by Eleanor Bahia Sanchez,
covering the said managers checks. As Engr. Guido Ganhinhin of respondent Tri-Realty testified, it was
Lines & Spaceswhich issued to them a receipt for the two (2) managers checks.

Without doubt, no connection could be said to exist between petitioners and private respondent.

inasmuch as the delivery receipts as well as the purchase order were for the account of Lines &
Spaces/Tri-Realty, then petitioners should have been placed on guard that it was private respondent
which is the principal of Sanchez. the term and/or was held to mean that effect shall be given to both
the conjunctive and and the disjunctive or; or that one word or the other may be taken accordingly as
one or the other will best effectuate the intended purpose. It was accordingly ordinarily held that in using
the term "and/or" the word "and" and the word "or" are to be used interchangeably.

By analogy, the words Lines & Spaces/Tri-Realty mean that effect shall be given to both Lines &
Spaces and Tri-Realty or that Lines & Spaces and Tri-Realty may be used interchangeably. Hence,
petitioners were not remiss when they believed Eleanor Sanchezs representation that Lines &
Spaces/Tri-Realty refers to just one entity. There was, therefore, no error attributable to petitioners
when they refunded the value of the undelivered bags of cement to Lines & Spaces only.

Neither Eleanor Sanchez nor Lines & Spaces was an agent for TRI REALTY, but rather a supplier
for the latters cement needs. 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.

. . . On the part of the principal, there must be an actual intention to appoint or

an intention naturally inferable from his words or actions and on the part of the agent,
there must be an intention to accept the appointment and act on it, otherwise no
agency.

Here, the intention of TRI REALTY, was merely for Lines & Spaces to supply them with the needed
bags of cement.
 Sanchez represented herself to be from Lines & Spaces/Tri-Realty, purportedly a single entity.
Inasmuch as they have never directly dealt with private respondent and there is no paper trail on record
to doubt the request of Eleanor Sanchez later on to refund the value of the undelivered bags of cement
to Lines & Spaces.
But this Court finds plausible the stance of petitioners that they had no inkling of the deception
that was forthcoming.

TRI REALTY private respondent was the one who had reposed too much trust on Eleanor Sanchez
for the latter to source its cement needs. Second, it failed to employ safety nets to steer clear of the rip-
off. For such huge sums of money involved in this case, it is surprising that a corporation such as private
respondent would pay its construction materials in advance instead of in credit thus opening a window
of opportunity for Eleanor Sanchez or Lines & Spaces to pocket the remaining balance of the amount
paid corresponding to the undelivered materials. Private respondent likewise paid in advance the
commission of Eleanor Sanchez for the materials that have yet to be delivered so it really had no means
of control over her. Finally, there is no paper trail linking private respondent to petitioners thereby
leaving the latter clueless that private respondent was their true client. Private respondent should have,
at the very least, required petitioners to sign the check vouchers or to issue receipts for the advance
payments so that it could have a hold on petitioners. In this case, it was the representative of Lines &
Spaces who signed the check vouchers. For its failure to establish any of these deterrent measures,
private respondent incurred the risk of not being able to recoup the value of the materials it had paid
good money for.

ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, petitioner, vs. COURT OF APPEALS and AMERICAN
AIR-LINES INCORPORATED, respondents.

AMERICAN AIRLINES, INCORPORATED, petitioner,

vs.COURT OF APPEALS and ORIENT AIR SERVICES & HOTEL REPRESENTATIVES,
INCORPORATED,respondents.

*RTCs decision ordering American Air to "reinstate defendant as its general sales agent is violative of
the principles and essence of agency

(a) soliciting and promoting passenger traffic for the services of American and, if
necessary, employing staff competent and sufficient to do so;

(b) providing and maintaining a suitable area in its place of business to be used
exclusively for the transaction of the business of American;

(c) arranging for distribution of American's timetables, tariffs and promotional material
to sales agents and the general public in the assigned territory;

(d) servicing and supervising of sales agents (including such sub-agents as may be
appointed by Orient Air Services with the prior written consent of American) in the
 assigned territory including if required by American the control of remittances and
commissions retained; and

(e) holding out a passenger reservation facility to sales agents and the general public in
the assigned territory.

In connection with scheduled or non-scheduled air passenger transportation within the United
States, neither Orient Air Services nor its sub-agents will perform services for any other air
carrier similar to those to be performed hereunder for American without the prior written
consent of American. Subject to periodic instructions and continued consent from American,
Orient Air Services may sell air passenger transportation to be performed within the United
States by other scheduled air carriers provided American does not provide substantially
equivalent schedules between the points involved.

4. Remittances

Orient Air Services shall remit in United States dollars to American the ticket stock or exchange
orders, less commissions to which Orient Air Services is entitled hereunder, not less frequently
than semi-monthly, on the 15th and last days of each month for sales made during the
preceding half month.

All monies collected by Orient Air Services for transportation sold hereunder on American's
ticket stock or on exchange orders, less applicable commissions to which Orient Air Services is
entitled hereunder, are the property of American and shall be held in trust by Orient Air Services
until satisfactorily accounted for to American.

5. Commissions

American will pay Orient Air Services commission on transportation sold hereunder by Orient
Air Services or its sub-agents as follows:

(a) Sales agency commission

American will pay Orient Air Services a sales agency commission for all sales of transportation
by Orient Air Services or its sub-agents over American's services and any connecting through air
transportation, when made on American's ticket stock, equal to the following percentages of
the tariff fares and charges:

(i) For transportation solely between points within the United States and between such
points and Canada: 7% or such other rate(s) as may be prescribed by the Air Traffic
Conference of America.

(ii) For transportation included in a through ticket covering transportation between

points other than those described above: 8% or such other rate(s) as may be prescribed
by the International Air Transport Association.

(b) Overriding commission

 In addition to the above commission American will pay Orient Air Services an overriding
commission of 3% of the tariff fares and charges for all sales of transportation over American's
service by Orient Air Service or its sub-agents.

xxx xxx xxx

10. Default

If Orient Air Services shall at any time default in observing or performing any of the provisions of
this Agreement or shall become bankrupt or make any assignment for the benefit of or enter
into any agreement or promise with its creditors or go into liquidation, or suffer any of its goods
to be taken in execution, or if it ceases to be in business, this Agreement may, at the option of
American, be terminated forthwith and American may, without prejudice to any of its rights
under this Agreement, take possession of any ticket forms, exchange orders, traffic material
or other property or funds belonging to American.

11. IATA and ATC Rules

The provisions of this Agreement are subject to any applicable rules or resolutions of the
International Air Transport Association and the Air Traffic Conference of America, and such rules
or resolutions shall control in the event of any conflict with the provisions hereof.

xxx xxx xxx

13. Termination

American may terminate the Agreement on two days' notice in the event Orient Air Services is
unable to transfer to the United States the funds payable by Orient Air Services to American
under this Agreement. Either party may terminate the Agreement without cause by giving the
other 30 days' notice by letter, telegram or cable.

xxx xxx x x x3

Orient Air had reneged on its obligations under the Agreement by failing to promptly remit the net
proceeds of sales for the months of January to March in the amount of US $254,400.40, American Air
by itself undertook the collection of the proceeds of tickets sold originally by Orient Air and terminated
forthwith the Agreement in accordance with Paragraph 13 thereof (Termination). American Air
instituted suit against Orient Air with the Court of First Instance of Manila, Branch 24, for Accounting
with Preliminary Attachment or Garnishment, Mandatory Injunction and Restraining Order4 averring the
aforesaid basis for the termination of the Agreement as well as therein defendant's previous record of
failures "to promptly settle past outstanding refunds of which there were available funds in the
possession of the defendant, . . . to the damage and prejudice of plaintiff."5

Orient Air denied the material allegations of the complaint with respect to plaintiff's entitlement to
alleged unremitted amounts, counterclaiming that after application thereof to the commissions due it
under the Agreement, plaintiff in fact still owed Orient Air a balance in unpaid overriding commissions.
RTC ruled in favour of ORIENTAIR: holding the termination made by the latter as affecting the GSA
agreement illegal and improper

CA affirmed the findings with some modifications with respect to the monetary awards granted.

As the designated exclusive General Sales Agent of American Air, Orient Air was responsible for the
promotion and marketing of American Air's services for air passenger transportation, and the solicitation
of sales therefor. In return for such efforts and services, Orient Air was to be paid commissions of two
(2) kinds: first, a sales agency commission, ranging from 7-8% of tariff fares and charges from sales by
Orient Air when made on American Air ticket stock; and second, an overriding commission of 3% of
tariff fares and charges for all sales of passenger transportation over American Air services.. The latter
type of commissions would accrue for sales of American Air services made not on its ticket stock but
on the ticket stock of other air carriers sold by such carriers or other authorized ticketing facilities or
travel agents. To rule otherwise, would erase any distinction between the two (2) types of commissions
and would lead to the absurd conclusion that the parties had entered into a contract with meaningless
provisions.

American Air was the party responsible for the preparation of the Agreement. Consequently, any
ambiguity in this "contract of adhesion" is to be taken "contra proferentem", i.e., construed against
the party who caused the ambiguity and could have avoided it by the exercise of a little more care. Thus,
Article 1377 of the Civil Code provides that the interpretation of obscure words or stipulations in a
contract shall not favor the party who caused the obscurity.

Air was entitled to an overriding commission based on total flown revenue. Since the latter was still
obligated to Orient Air by way of such commissions. Orient Air was clearly justified in retaining and
refusing to remit the sums claimed by American Air. The latter's termination of the Agreement was,
therefore, without cause and basis,

RTCs decision ordering American Air to "reinstate defendant as its general sales agent for passenger
transportation in the Philippines in accordance with said GSA Agreement." By affirming this ruling of the
trial court, respondent appellate court, in effect, compels American Air to extend its personality to
Orient Air. Such would be violative of the principles and essence of agency, defined by law as a contract
whereby "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 .17 (

In an agent-principal relationship, the personality of the principal is extended through the facility of the
agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts
which the latter would have him do. Such a relationship can only be effected with the consent of the
principal, which must not, in any way, be compelled by law or by any court.

therefore, set aside the portion of the ruling of the respondent appellate court reinstating Orient Air as
general sales agent of American Air.
JOCELYN B. DOLES, Petitioner,vs.MA. AURA TINA ANGELES, Respondent.

* Respondent is estopped to deny that she herself acted as agent of a certain Arsenio Pua, and deny
that petitioner acted as agent for the alleged debtors,

Ma. Aura Tina Angeles (respondent) filed with the RTC a complaint for Specific Performance with
Damages against Jocelyn B. Doles (petitioner), alleging that petitioner was indebted in concept of a
personal loan amounting to P405,430.00 representing the principal amount and interest;

By Deed of Absolute Sale",3 petitioner sold to respondent, a parcel of land, in Camella Townhomes
Sorrente in Bacoor, Cavite,

Property was mortgaged to National Home Mortgage Finance Corporation (NHMFC) to secure
petitioners loan in the sum of P337,050.00 with that entity;

that as a condition for the foregoing sale, respondent shall assume the undue balance of the mortgage
and pay the monthly amortization of P4,748.11 for the remainder of the 25 years which began on
September 3, 1994; that the property was at that time being occupied by a tenant paying a monthly
rent of P3,000.00;

that upon verification with the NHMFC, respondent learned that petitioner had incurred arrearages
amounting to P26,744.09, inclusive of penalties and interest; that upon informing the petitioner of her
arrears, petitioner denied that she incurred them and refused to pay the same; that despite repeated
demand, petitioner refused to cooperate with respondent to execute the necessary documents and
other formalities required by the NHMFC to effect the transfer of the title over the property; that
petitioner collected rent over the property for the month of January 1997 and refused to remit the
proceeds to respondent; and that respondent suffered damages as a result and was forced to litigate.

Petitioner denied that she borrowed money from respondent, instead, she referred her friends to
respondent whom she knew to be engaged in the business of lending . She alleged that her friends,
borrowed money from respondent and issued personal checks in payment of the loan; that the checks
bounced for insufficiency of funds; that despite her efforts to assist respondent to collect from the
borrowers, she could no longer locate them; that, because of this, respondent became furious and
threatened petitioner that if the accounts were not settled, a criminal case will be filed against her;
that she was forced to issue eight checks but were not sufficiently funded but the latter nonetheless
deposited the checks and for which reason they were subsequently dishonored; that respondent then
threatened to initiate a criminal case against her for violation of Batas Pambansa Blg. 22; that she was
forced by respondent to execute an "Absolute Deed of Sale" over her property in Bacoor, Cavite, to
avoid criminal prosecution; that the said deed had no valid consideration; that she did not appear
before a notary public;

The RTC identified the issues as follows: first, whether the Deed of Absolute Sale is valid; second; if
valid, whether petitioner is obliged to sign and execute the necessary documents to effect the transfer
of her rights over the property to the respondent;

RTC dismissed the complaint for insufficiency of evidence. The RTC held that the sale was void for lack
of cause or consideration:5
Contracts without a cause or consideration produce no effect whatsoever.

CA GRANTED the appeal. ordering defendant-appellee to execute all necessary documents to effect
transfer of subject property to plaintiff-appellant with the arrearages of the formers loan with the
NHMFC, at the latters expense.

The CA concluded that petitioner was the borrower and, in turn, would "re-lend" the amount
borrowed from the respondent to her friends. Hence, the Deed of Absolute Sale was supported by a
valid consideration,

The CA took into account the following circumstances in their entirety: the supposed friends of
petitioner never presented themselves to respondent and that all transactions were made by and
between petitioner and respondent;7 She was "re-lending" the money loaned from respondent to
other individuals for profit;9 and that the documentary evidence shows that the actual borrowers, the
friends of petitioner, consider her as their creditor and not the respondent.10

Petitioner filed her Motion for Reconsideration with the CA, arguing that respondent categorically
admitted in open court that she acted only as agent or representative of Arsenio Pua, the principal
financier and, hence, she had no legal capacity to sue petitioner;

WHETHER OR NOT THE PETITIONER CAN BE CONSIDERED AS A DEBTOR OF THE RESPONDENT.

WHETHER OR NOT AN AGENT WHO WAS NOT AUTHORIZED BY THE PRINCIPAL TO COLLECT
DEBT IN HIS BEHALF COULD DIRECTLY COLLECT PAYMENT FROM THE DEBTOR.

The Petition is meritorious.

1. Petitioner argues that since she is merely the agent or representative of the alleged debtors, then she
is not a party to the loan; and that the Deed of Sale executed between her and the respondent in their
own names, which was predicated on that pre-existing debt, is void for lack of consideration.

The question that has to be resolved for the moment is whether this debt can be considered as a valid
cause or consideration for the sale.

Based on the records, Respondent is estopped to deny that she herself acted as agent of a certain
Arsenio Pua, her disclosed principal. She is also estopped to deny that petitioner acted as agent for the
alleged debtors,

This Court has affirmed that, under Article 1868 of the Civil Code, the basis of agency is
representation.25 The question of whether an agency has been created is ordinarily a question
which may be established in the same way as any other fact, either by direct or circumstantial evidence.
The question is ultimately one of intention.26 Agency may even be implied from the words and conduct
of the parties and the circumstances of the particular case.27Though the fact or extent of authority of
the agents may not, as a general rule, be established from the declarations of the agents alone, if one
professes to act as agent for another, she may be estopped to deny her agency both as against the
asserted principal and the third persons interested in the transaction in which he or she is engaged.28

it is sufficient that petitioner disclosed to respondent that the former was acting in behalf of her
principals, her friends whom she referred to respondent. For an agency to arise, it is not necessary that
the principal personally encounter the third person with whom the agent interacts. The law in fact
contemplates, and to a great degree, impersonal dealings where the principal need not personally know
or meet the third person with whom her agent transacts: precisely, the purpose of agency is to extend
the personality of the principal through the facility of the agent.29

In the case at bar, both petitioner and respondent have undeniably disclosed to each other that they
are representing someone else, and so both of them are estopped to deny the same. It is evident from
the record that petitioner merely refers actual borrowers and then collects and disburses the amounts
of the loan upon which she received a commission; and that respondent transacts on behalf of her
"principal financier", a certain Arsenio Pua. If their respective principals do not actually and personally
know each other, such ignorance does not affect their juridical standing as agents, especially since the
very purpose of agency is to extend the personality of the principal through the facility of the agent.

if relations exist which will constitute an agency, it will be an agency whether the parties understood the
exact nature of the relation or not.31

Petition is granted. The complaint of respondent in Civil Case No. 97-82716 is DISMISSED.

MANILA MEMORIAL PARK CEMETERY, INC., petitioner, vs. PEDRO L. LINSANGAN, respondent.

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

Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State at the Holy Cross
Memorial Park owned by petitioner (MMPCI). According to Baluyot, a former owner of a memorial lot was
no longer interested in acquiring the lot and opted to sell his rights subject to reimbursement of the
amounts he already paid. The contract was for P95,000.00. Baluyot reassured Atty. Linsangan that once
reimbursement is made to the former buyer, the contract would be transferred to him. Atty. Linsangan
agreed and gave Baluyot P35,295.00 representing the amount to be reimbursed to the original buyer and
to complete the down payment to MMPCI.[3] Baluyot issued handwritten and typewritten receipts for
these payments.[4]
Sometime in March 1985, Baluyot informed Atty. Linsangan that he would be issued a new contract
covering the subject lot in the name of the latter instead of old Contract . Atty. Linsangan protested, but
Baluyot assured him that he would still be paying the old price of P95,000.00 with P19,838.00 credited as
full down payment leaving a balance of about P75,000.00.[5]
Subsequently Baluyot brought an Offer to Purchase Lot No. A11 (15), Block 83, Garden Estate I
denominated as Contract No. 28660 and the Official Receipt No. 118912 dated 6 April 1985 for the amount
of P19,838.00. Contract No. 28660 has a listed price of P132,250.00. Atty. Linsangan objected to the new
contract price, as the same was not the amount previously agreed upon. To convince Atty. Linsangan,
Baluyot executed a document[6] confirming that while the contract price is P132,250.00, Atty. Linsangan
would pay only the original price of P95,000.00.
The document reads in part:

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

Prepared by:

(Signed)
(MRS.) FLORENCIA C. BALUYOT
Agency Manager
Holy Cross Memorial Park
4/18/85

Dear Atty. Linsangan:

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

(Signed)
FLORENCIA C. BALUYOT
By virtue of this letter, Atty. Linsangan signed Contract No. 28660 and accepted Official Receipt No.
118912. As requested by Baluyot, Atty. Linsangan issued twelve (12) postdated checks of P1,800.00 each
in favor of MMPCI. The next year, or on 29 April 1986, Atty. Linsangan again issued twelve (12) postdated
checks in favor of MMPCI.
On 25 May 1987, Baluyot verbally advised Atty. Linsangan that Contract No. 28660 was cancelled for
reasons the latter could not explain, and presented to him another proposal for the purchase of an
equivalent property. He refused the new proposal and insisted that Baluyot and MMPCI honor their
undertaking.
For the alleged failure of MMPCI and Baluyot to conform to their agreement, Atty. Linsangan filed
a Complaint[7] for Breach of Contract and Damages against the former.
Baluyot did not present any evidence. For its part, MMPCI alleged that Contract No. 28660 was
cancelled conformably with the terms of the contract[8] because of non-payment of
arrearages.[9] MMPCI stated that Baluyot was not an agent but an independent contractor, and as such
was not authorized to represent MMPCI or to use its name except as to the extent expressly stated in
the Agency Manager Agreement.[10] Moreover, MMPCI was not aware of the arrangements entered into
by Atty. Linsangan and Baluyot, as it in fact received a down payment and monthly installments as
indicated in the contract.[11]
 The trial court held MMPCI and Baluyot jointly and severally liable.[13] It found that Baluyot was an
agent of MMPCI and that the latter was estopped from denying this agency, having received and enchased
the checks issued by Atty. Linsangan and given to it by Baluyot. While MMPCI insisted that Baluyot was
authorized to receive only the down payment, it allowed her to continue to receive postdated checks from
Atty. Linsangan, which it in turn consistently encashed.[14]

MMPCI appealed to the Court of Appeals.[16] It claimed that Atty. Linsangan is bound by the written
contract with MMPCI, , is presumed to know his contractual obligations and is fully aware that he cannot
belatedly and unilaterally change the terms of the contract without the consent, much less the knowledge
of the other contracting party, which was MMPCI.
MMPCI further alleged that it cannot be held jointly and solidarily liable with Baluyot as the latter
exceeded the terms of her agency, neither did MMPCI ratify Baluyots acts.
Imputing negligence on the part of Atty. Linsangan, MMPCI claimed that it was the formers
obligation, as a party knowingly dealing with an alleged agent, to determine the limitations of such
agents authority,
The Court of Appeals affirmed the decision of the trial court. It upheld the trial courts finding that
Baluyot was an agent of MMPCI at the time the disputed contract was entered into, having represented
MMPCIs interest and acting on its behalf in the dealings with clients and customers. Hence, MMPCI is
considered estopped when it allowed Baluyot to act and represent MMPCI even beyond her
authority.[20] The CA noted that innocent third persons such as Atty. Linsangan should not be prejudiced
where the principal failed to adopt the needed measures to prevent misrepresentation.
SC ruled for the petitioner MMPCI.

elements of agency are (i) consent, express or implied, of the parties to establish the relationship; (ii)
the object is the execution of a juridical act in relation to a third person; (iii) the agent acts as a
representative and not for himself; and (iv) the agent acts within the scope of his authority.[34]
MMPCI cannot be bound by the contract procured by Atty. Linsangan and solicited by Baluyot.
Baluyot was authorized to solicit and remit to MMPCI offers to purchase interment spaces obtained
on forms provided by MMPCI. The terms of the offer to purchase, therefore, are contained in such forms
and, when signed by the buyer and an authorized officer of MMPCI, becomes binding on both parties.
The Offer to Purchase duly signed by Atty. Linsangan, and accepted and validated by MMPCI showed
a total list price of P132,250.00. Likewise, it was clearly stated therein that Purchaser agrees that he has
read or has had read to him this agreement, that he understands its terms and conditions, and that there
are no covenants, conditions, warranties or representations other than those contained herein.[37] By
signing the Offer to Purchase, Atty. Linsangan signified that he understood its contents. That he and
Baluyot had an agreement different from that contained in the Offer to Purchase is of no moment, and
should not affect MMPCI, as it was obviously made outside Baluyots authority. To repeat, Baluyots
authority was limited only to soliciting purchasers. She had no authority to alter the terms of the written
contract provided by MMPCI. The document/letter confirming the agreement that Atty. Linsangan would
have to pay the old price was executed by Baluyot alone. Nowhere is there any indication that the same
came from MMPCI or any of its officers.
The basis for agency is representation and a person dealing with an agent is put upon inquiry and
must discover upon his peril the authority of the agent.[39] If he does not make such an inquiry, he is
chargeable with knowledge of the agents authority and his ignorance of that authority will not be any
excuse.[40]
It has not been established that Atty. Linsangan even bothered to inquire whether Baluyot was
authorized to agree to terms contrary to those indicated in the written contract, much less bind MMPCI
by her commitment with respect to such agreements.

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

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

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

Thus, the acts of an agent beyond the scope of his authority do not bind the principal, unless he
ratifies them, expressly or impliedly. Only the principal can ratify; the agent cannot ratify his own
unauthorized acts. Moreover, the principal must have knowledge of the acts he is to ratify.[44]
Ratification in agency is the adoption or confirmation by one person of an act performed on his
behalf by another without authority. No ratification can be implied in the instant case.
Neither is there estoppel in the instant case. The essential elements of estoppel are (i) conduct of a
party amounting to false representation or concealment of material facts or at least calculated to convey
the impression that the facts are otherwise than, and inconsistent with, those which the party
subsequently attempts to assert; (ii) intent, or at least expectation, that this conduct shall be acted upon
by, or at least influence, the other party; and (iii) knowledge, actual or constructive, of the real facts.[51]
One who claims the benefit of an estoppel on the ground that he has been misled by the
representations of another must not have been misled through his own want of reasonable care and
circumspection.[52] Even assuming that Atty. Linsangan was misled by MMPCIs actuations, he still cannot
invoke the principle of estoppel, as he was clearly negligent in his dealings with Baluyot, and could have
easily determined, had he only been cautious and prudent, whether said agent was clothed with the
authority to change the terms of the principals written contract.
However, this does not preclude Atty. Linsangan from instituting a separate action to recover
damages from Baluyot, not as an agent of MMPCI, but in view of the latters breach of their separate
agreement.

DOMINION INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS, RODOLFO S.

GUEVARRA, and FERNANDO AUSTRIA, respondents.
* Respondent Guevarra was authorized to pay the claim of the insured as per MOA, but the payment shall
come from the revolving fund or collection in his possession.
*Having deviated from the instructions of the principal, the expenses (advanced in his own funds) that
respondent Guevarra incurred in the settlement of the claims of the insured may not be reimbursed from petitioner Dominion.
 *Justified by Article 1236, second paragraph, Civil Code, provides: Whoever pays for another may demand from the debtor
what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only insofar
as the payment has been beneficial to the debtor.

To rule otherwise would result in unjust enrichment of petitioner.

Plaintiff Rodolfo S. Guevarra instituted Civil Case for sum of money against defendant Dominion
Insurance Corporation to recover P156,473.90 which he claimed to have advanced in his capacity as
manager of defendant to satisfy certain claims filed by defendants clients.

In its traverse, defendant denied any liability to plaintiff and asserted a counterclaim for P249,672.53,
representing premiums that plaintiff allegedly failed to remit.

Defendant corporation filed a MOTION TO LIFT ORDER OF DEFAULT. It alleged therein that the failure of
counsel to attend the pre-trial conference was due to an unavoidable circumstance and that counsel
had sent his representative on that date to inform the trial court of his inability to appear. The Motion
was vehemently opposed by plaintiff.

RTC denied defendants motion for reasons, among others, that it was neither verified nor supported by
an affidavit of merit and that it further failed to allege or specify the facts constituting his meritorious
defense.

Defendant moved for reconsideration of the aforesaid order. For the first time counsel revealed to the
trial court that the reason for his nonappearance at the pre-trial conference was his illness. An
Affidavit of Merit executed by its Executive Vice-President purporting to explain its meritorious defense
was attached to the said Motion.

RTC rendered decision against The defendant Dominion Insurance Corporation and ordered to pay
plaintiff the sum of P156,473.90 representing the total amount advanced by plaintiff in the payment of
the claims of defendants clients;

Court of Appeals promulgated a decision affirming that of the trial court.[6]

Whether respondent Guevarra acted within his authority as agent for petitioner, and (2) whether
respondent Guevarra is entitled to reimbursement of amounts he paid out of his personal money in
settling the claims of several insured.
Petition is without Merit. SC affirms decision of CA
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.[10] The basis for agency
is representation.[11] On the part of the principal, there must be an actual intention to appoint[12] or an
intention naturally inferrable from his words or actions;[13] and on the part of the agent, there must be an
intention to accept the appointment and act on it,[14] and in the absence of such intent, there is generally
no agency.[15]
A perusal of the Special Power of Attorney[16] would show that petitioner (represented by third-party
defendant Austria) and respondent Guevarra intended to enter into a principal-agent relationship.
Despite the word special in the title of the document, the contents reveal that what was constituted was
actually a general agency. The terms of the agreement read:

appoint RSG Guevarra Insurance Services represented by Mr. Rodolfo Guevarra xxx to be our Agency
Manager to do and perform the following acts and things:

1. To conduct, sign, manager (sic), carry on and transact Bonding and Insurance business as
usually pertain to a Agency Office, or FIRE, MARINE, MOTOR CAR, PERSONAL ACCIDENT, and
BONDING with the right, upon our prior written consent, to appoint agents and sub-agents.
2. To accept, underwrite and subscribed (sic) cover notes or Policies of Insurance and Bonds for
and on our behalf.
3. To demand, sue, for (sic) collect, deposit, enforce payment, deliver and transfer for and receive
and give effectual receipts and discharge for all money to which the FIRST CONTINENTAL
ASSURANCE COMPANY, INC.,[18] may hereafter become due, owing payable or transferable
to said Corporation by reason of or in connection with the above-mentioned appointment.
4. To receive notices, summons, and legal processes for and in behalf of the FIRST CONTINENTAL
ASSURANCE COMPANY, INC., in connection with actions and all legal proceedings against the
said Corporation.[19] [Emphasis supplied]
The agency comprises all the business of the principal,[20] but, couched in general terms, it is limited
only to acts of administration.[21]
A general power permits the agent to do all acts for which the law does not require a special
power.[22]
Article 1878. Special powers of attorney are necessary in the following cases:
(1) To make such payments as are not usually considered as acts of administration;
xxx xxx xxx
(15) Any other act of strict dominion.
The payment of claims is not an act of administration. The settlement of claims is not included
among the acts enumerated in the Special Power of Attorney, neither is it of a character similar to the
acts enumerated therein. A special power of attorney is required before respondent Guevarra could
settle the insurance claims of the insured.
Respondent Guevarras authority to settle claims is embodied in the Memorandum of Management
Agreement[23] dated which enumerates the scope of respondent Guevarras duties and responsibilities

. You are hereby given authority to settle and dispose of all motor car claims in the amount of P5,000.00
with prior approval of the Regional Office. 2. Full authority is given you on TPPI claims settlement.

In settling the claims mentioned above, respondent Guevarras authority is further limited by the
written standard authority to pay,[25] which states that the payment shall come from
respondent Guevarras revolving fund or collection. The authority to pay is worded as follows:
This is to authorize you to withdraw from your revolving fund/collection the amount of PESOS
__________________ (P ) representing the payment on the _________________ claim of assured
_______________ under Policy No. ______ in that accident of ___________ at ____________.

The instruction of petitioner as the principal could not be any clearer. Respondent Guevarra was
authorized to pay the claim of the insured, but the payment shall come from the revolving fund
or collection in his possession.
Having deviated from the instructions of the principal, the expenses (advanced in his own funds) that
respondent Guevarra incurred in the settlement of the claims of the insured may not be reimbursed from
petitioner Dominion. This conclusion is in accord with Article 1918, Civil Code, which states that:

The principal is not liable for the expenses incurred by the agent in the following cases:

(1) If the agent acted in contravention of the principals instructions, unless the latter should wish to avail
himself of the benefits derived from the contract;

xxx xxx xxx

However, while the law on agency prohibits respondent Guevarra from obtaining reimbursement,
his right to recover may still be justified under the general law on obligations and contracts.
Article 1236, second paragraph, Civil Code, provides: Whoever pays for another may demand from
the debtor what he has paid, except that if he paid without the knowledge or against the will of the
debtor, he can recover only insofar as the payment has been beneficial to the debtor.
To rule otherwise would result in unjust enrichment of petitioner.
IN VIEW WHEREOF, we DENY the Petition. that petitioner is ordered to pay respondent Guevarra the
amount of P112,672.11 representing the total amount advanced by the latter in the payment of the claims
of petitioners clients.

REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA, ESTER ABAD DIZON and JOSEPH
ANTHONY DIZON, RAYMUND A. DIZON, GERARD A. DIZON, and JOSE A. DIZON, JR., petitioners,
vs. COURT OF APPEALS and OVERLAND EXPRESS LINES, INC., respondents.

There was no valid consent by the petitioners (as co-owners of the leased premises) on the supposed
sale entered into by Alice A. Dizon, as petitioners alleged agent,

Overland Express Lines, Inc. entered into a Contract of Lease with Option to Buy with petitioners
involving a 1,755.80 square meter parcel of land situated at corner MacArthur Highway and South H
Street, Diliman, Quezon City. The term of the lease was for 1 year commencing from May 16, 1974 up
to May 15, 1975. During this period, Overland Express Lines was granted an option to purchase for the
amount of P3,000.00 per square meter. Thereafter, the lease shall be on a per month basis with a
monthly rental of P3,000.00.
here was a contract of lease for one (1) year with option to purchase. The contract of lease expired
without the private respondent, as lessee, purchasing the property but remained in possession thereof.
Hence, there was an implicit renewal of the contract of lease on a monthly basis. The other terms of
 the original contract of lease which are revived in the implied new lease under Article 1670 of the New
Civil Code 22 are only those terms which are germane to the lessee's right of continued enjoyment of
the property leased. 23 Therefore, an implied new lease does not ipso facto carry with it any implied
revival of private respondent's option to purchase (as lessee thereof) the leased premises. The
provision entitling the lessee the option to purchase the leased premises is not deemed incorporated
in the impliedly renewed contract because it is alien to the possession of the lessee. Private
respondent's right to exercise the option to purchase expired with the termination of the original
contract of lease for one year.
For failure of Overland Express Lines to pay the increased rental of P8,000.00 per month effective June
1976, petitioners filed an action for ejectment against it. The lower court rendered judgment ordering
Overland Express Lines to vacate the leased premises and to pay the sum of P624,000.00 representing
rentals in arrears and/or as damages in the form of reasonable compensation for the use and occupation
of the premises during the period of illegal detainer from June 1976 to November 1982
ISSUE: WON Overland Express Lines actually paid the alleged P300,000.00 to Fidela Dizon, as
representative (agent) of petitioners in consideration of the option

HELD: No.
CA opined that the payment by Overland Express Lines of P300,000.00 as partial payment for the leased
property, which petitioners accepted (through Alice A. Dizon) and for which an official receipt was
issued, was the operative act that gave rise to a perfected contract of sale, and that for failure of
petitioners to deny receipt thereof, Overland Express Lines can therefore assume that Alice A. Dizon,
acting as agent of petitioners, was authorized by them to receive the money in their behalf. CA went
further by stating that in fact, what was entered into was a conditional contract of sale wherein
ownership over the leased property shall not pass to the Overland Express Lines until it has fully paid
the purchase price. Since Overland Express Lines did not consign to the court the balance of the
purchase price and continued to occupy the subject premises, it had the obligation to pay the amount
of P1,700.00 in monthly rentals until full payment of the purchase price.
In an attempt to resurrect the lapsed option, Overland Express Lines gave P300,000.00 to petitioners
(thru Alice A. Dizon) on the erroneous presumption that the said amount tendered would constitute a
perfected contract of sale pursuant to the contract of lease with option to buy. There was no valid
consent by the petitioners (as co-owners of the leased premises) on the supposed sale entered into
by Alice A. Dizon, as petitioners alleged agent, and Overland Express Lines. The basis for agency is
representation and a person dealing with an agent is put upon inquiry and must discover upon his
peril the authority of the agent. As provided in Article 1868 of the New Civil Code, there was no showing
that petitioners consented to the act of Alice A. Dizon nor authorized her to act on their behalf with
regard to her transaction with private respondent. The most prudent thing private respondent should
have done was to ascertain the extent of the authority of Alice A. Dizon. Being negligent in this regard,
private respondent cannot seek relief on the basis of a supposed agency.
Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority
of the agent. If he does not make such inquiry, he is chargeable with knowledge of the agents authority,
and his ignorance of that authority will not be any excuse. Persons dealing with an assumed agency,
whether the assumed agency be a general or special one, are bound at their peril, if they would hold
the principal, to ascertain not only the fact of the agency but also the nature and extent of the authority,
and in case either is controverted, the burden of proof is upon them to establish it.

However, petitioners are ordered to REFUND to private respondent the amount of P300,000.00
which they received through Alice A. Dizon on June 20, 1975.
VICTORIAS MILLING CO., INC., petitioner, vs. COURT OF APPEALS and CONSOLIDATED SUGAR
CORPORATION, respondents.

St. Therese Merchandising (hereafter STM) regularly bought sugar from petitioner Victorias
Milling Co., Inc., (VMC). In the course of their dealings, petitioner issued several Shipping
List/Delivery Receipts (SLDRs) to STM as proof of purchases. SLDR No. 1214M covers 25,000
bags of sugar. Each bag contained 50 kilograms and priced at P638.00 per bag as "per sales
order VMC Marketing No. 042 dated October 16, 1989."[1] The transaction it covered was a
"direct sale."[2] The SLDR also contains an additional note which reads: "subject for (sic)
availability of a (sic) stock at NAWACO (warehouse)."[3]

On October 25, 1989, STM sold to private respondent Consolidated Sugar Corporation (CSC) its
rights in SLDR No. 1214M for P 14,750,000.00. CSC issued one check dated October 25, 1989
and three checks postdated November 13, 1989 in payment. That same day, CSC wrote
petitioner that it had been authorized by STM to withdraw the sugar covered by SLDR No.
1214M. Enclosed in the letter were a copy of SLDR No. 1214M and a letter of authority from
STM authorizing CSC "to withdraw for and in our behalf 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."[4]

On October 27, 1989, STM issued 16 checks in the total amount of P31,900,000.00 with
petitioner as payee. The latter, in turn, issued Official Receipt No. 33743 dated October 27,
1989 acknowledging receipt of the said 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 withdrawn all the sugar covered by the
cleared checks.[6]

, CSC sent petitioner a letter demanding the release of the balance of 23,000 bags.

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.
 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.

RTC favoured CSC Ordering defendant Victorias Milling Company to deliver to the plaintiff
23,000 bags of refined sugar due under SLDR No. 1214;

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.

(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.

Court of Appeals concurred with modifications.

ISSUE: W/N CA erred in not ruling that CSC was an agent of STM and hence, estopped to sue
upon SLDR No. 1214M as assignee.

NO. CSC was not an agent of STM. VMC heavily relies on STMs letter of authority that said CSC is
authorized to withdraw sugar for and in our behalf. It is clear from Art. 1868 that the: basis of agency
is representation. On the part of the principal, there must be an actual intention to appoint or an
intention naturally inferable from his words or actions, and on the part of the agent, there must be an
intention to accept the appointment and act on it, and in the absence of such intent, there is generally
NO agency. 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. The control factor, more than any
other, has caused the courts to put contracts between principal and agent in a separate category.. It
appears that CSC was a buyer and not an agent of STM. CSC was not subject to STMs control. The terms
for and in our behalf should not be eyed as pointing to the existence of an agency relation. Whether or
not 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. Ultimately, what is decisive is the intention of the
parties. (In fact, CSC even informed VMC that the SLDR was sold and endorsed to it.) Agency distinguished
from sale.

In an agency to sell, the agent, in dealing with the thing received, is bound to act according to the
instructions of his principal, while in a sale, the buyer can deal with the thing as he pleases, being the
owner. The elementary notion of sale is the transfer of title to a thing from one to another, while the
essence of agency involves the idea of an appointment of one to act for another. Agency is a relationship
which often results in a sale, but the sale is a subsequent step in the transaction. (Teller, op. cit., p. 26; see
Commissioner of Internal Revenue vs. Manila Machinery & Supply Co., 135 SCRA 8 [1985].) An
authorization given to another containing the phrase for and in our behalf does not necessarily
establish an agency, as ultimately what is decisive is the intention of the parties. Thus, the use of the
words sold and endorsed may mean that the parties intended a contract of sale, and not a contract of
agency.

WHEREFORE, the instant petition is DENIED for lack of merit.

DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,

vs.THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO, and SEGUNDINA
NOGUERA, respondents-appellees.

* employment is determined by the right-of-control test and certain economic parameters. But titles are weak
indicators.

Tourist World Service, Inc., represented by Mr. Eliseo Canilao leased the premises belonging to the
Segundina Noguera at Mabini St., Manila for the former-s use as a branch office. branch office was
opened, run by the herein appellant Una 0. Sevilla payable to Tourist World Service Inc. by any airline
for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to be
withheld by the Tourist World Service, Inc.

Tourist World Service, Inc. appears to have been informed that Lina Sevilla was connected with a rival
firm, the Philippine Travel Bureau, and, since the branch office was anyhow losing, the Tourist World
Service considered closing down its office.

on Jan. 3, 1962, the contract with the appellees for the use of the Branch Office premises was
terminated and while the effectivity thereof was Jan. 31, 1962, the appellees no longer used it.

corporate secretary Gabino Canilao went over to the branch office, and, finding the premises locked,
and, being unable to contact Lina Sevilla, he padlocked the premises on June 4, 1962 to protect the
interests of the Tourist World Service. When neither the appellant Lina Sevilla nor any of her employees
could enter the locked premises, a complaint was filed by the herein appellants against the appellees

RTC dismissed:

In this appeal, appellant Lina Sevilla claims that a joint business venture was entered into by and
between her and appellee TWS with offices at the Ermita branch office and that she was not an
employee of the TWS to the end that her relationship with TWS was one of a joint business venture
appellant made declarations showing:
Upon the other hand, appellee TWS contend that the appellant was an employee of the appellee Tourist
World Service, Inc. and as such was designated manager.

The Court finds the resolution of the issue material, for if, as the private respondent, Tourist World
Service, Inc., maintains, that the relation between the parties was in the character of employer and
employee, the courts would have been without jurisdiction to try the case, labor disputes being the
exclusive domain of the Court of Industrial Relations, later, the Bureau of Labor Relations, pursuant to
statutes then in force.

In this jurisdiction, there has been no uniform test to determine the existence of an employer-employee
relation. In general, we have relied on the so-called right of control test, "where the person for whom
the services are performed reserves a right to control not only the end to be achieved but also the
means to be used in reaching such end." Subsequently, however, we have considered, in addition to
the standard of right-of-control, the existing economic conditions prevailing between the parties, like
the inclusion of the employee in the payrolls, in determining the existence of an employer-employee
relationship.

The records will show that the petitioner, Lina Sevilla, was not subject to control by the private
respondent Tourist World Service, Inc., either as to the result of the enterprise or as to the means used
in connection therewith. In the first place, under the contract of lease covering the Tourist World's
Ermita office, she had bound herself in solidum as and for rental payments, an arrangement that would
belie claims of a master-servant relationship.

In the second place, and as found by the Appellate Court, "[w]hen the branch office was opened, the
same was run by the herein appellant Lina O. Sevilla payable to Tourist World Service, Inc. by any airline
for any fare brought in on the effort of Mrs. Lina Sevilla." Under these circumstances, it cannot be said
that Sevilla was under the control of Tourist World Service, Inc. "as to the means used." Sevilla in
pursuing the business, obviously relied on her own gifts and capabilities.

It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained 4% in
commissions from airline bookings, the remaining 3% going to Tourist World. Unlike an employee
then, who earns a fixed salary usually, she earned compensation in fluctuating amounts depending on
her booking successes.

employment is determined by the right-of-control test and certain economic parameters. But titles are
weak indicators.

It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to man the private
respondent, Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to a contract of
agency. It is the essence of this contract that the agent renders services "in representation or on behalf
of another."In the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her
principal, Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept
of commissions. And as we said, Sevilla herself, based on her letter of November 28, 1961, presumed
her principal's authority as owner of the business undertaking.
But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible
with the intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an
interest, the agency having been created for the mutual interest of the agent and

Sevilla is a bona fide travel agent herself, and as such, she had acquired an interest in the business
entrusted to her. Moreover, she had assumed a personal obligation for the operation thereof, holding
herself solidarily liable for the payment of rentals. She continued the business, using her own name,
after Tourist World had stopped further operations. Her interest, obviously, is not limited to the
commissions she earned as a result of her business transactions, but one that extends to the very
subject matter of the power of management delegated to her. It is an agency that, as we said, cannot be
revoked at the pleasure of the principal.

Lina Sevilla, had acquired a personal stake in the business itself, and necessarily, in the equipment
pertaining thereto. Furthermore, Sevilla was not a stranger to that contract having been explicitly
named therein as a third party in charge of rental payments (solidarily with Tourist World, Inc.). She
could not be ousted from possession as summarily as one would eject an interloper.

We rule, therefore, that for its unwarranted revocation of the contract of agency, the private
respondent, Tourist World Service, Inc., should be sentenced to pay damages. Under the Civil Code,
moral damages may be awarded for "breaches of contract where the defendant acted ... in bad faith."

WHEREFORE, The private respondent, Tourist World Service, Inc., and Eliseo Canilao, are ORDERED
jointly and severally to indemnify the petitioner, Lina Sevilla, the sum of P25,000.00, as and for moral
damages, the sum of P10,000.00, as and for exemplary damages, and the sum of P5,000.00, as and for
nominal and/or temperate damages.

LOURDES VALERIO LIM, petitioner, vs.PEOPLE OF THE PHILIPPINES, respondent.

* appellant received the tobacco to be sold at P1.30 per kilo and the proceeds to be given to
complainant as soon as it was sold, strongly negates transfer of ownership of the goods to the
petitionera

Petitioner Lourdes Valerio Lim was found guilty of the crime of estafa

Court of Appeals affirmed the decision of the lower court but modified the penalty imposed by
sentencing her "to suffer an indeterminate penalty of one (1) month and one (1) day of arresto mayor as
minimum to one (1) year and one (1) day of prision correccional as maximum, to indemnify the
complainant in the amount of P550.50 without subsidiary imprisonment, and to pay the costs of suit
The question involved in this case is whether the receipt, Exhibit "A", is a contract of agency to sell or a
contract of sale of the subject tobacco between petitioner and the complainant, Maria de Guzman Vda.
de Ayroso, thereby precluding criminal liability of petitioner for the crime charged.

appellant went to the house of Maria Ayroso and proposed to sell Ayroso's tobacco. Ayroso agreed to
the proposition of the appellant to sell her tobacco consisting of 615 kilos at P1.30 a kilo. The appellant
was to receive the overprice for which she could sell the tobacco. This agreement was made in the
presence of plaintiff's sister,

This is to certify that I have received from Mrs. Maria de Guzman Vda. de Ayroso. of Gapan, Nueva Ecija,
six hundred fifteen kilos of leaf tobacco to be sold at Pl.30 per kilo. The proceed in the amount of
Seven Hundred Ninety Nine Pesos and 50/100 (P 799.50) will be given to her as soon as it was sold.

. Of the total value of P799.50, the appellant had paid to Ayroso only P240.00, and this was paid on
three different times. Demands for the payment of the balance of the value of the tobacco were made
upon the appellant by Ayroso,

1. Whether or not the Honorable Court of Appeals was legally right in holding that the foregoing
document (Exhibit "A") "fixed a period" and "the obligation was therefore, immediately demandable as
soon as the tobacco was sold" (Decision, p. 6) as against the theory of the petitioner that the
obligation does not fix a period, but from its nature and the circumstances it can be inferred that a
period was intended in which case the only action that can be maintained is a petition to ask the court
to fix the duration thereof;

It is clear in the agreement, Exhibit "A", that the proceeds of the sale of the tobacco should be turned
over to the complainant as soon as the same was sold, or, that the obligation was immediately
demandable as soon as the tobacco was disposed of. Hence, Article 1197 of the New Civil Code, which
provides that the courts may fix the duration of the obligation if it does not fix a period, does not
apply.

The fact that appellant received the tobacco to be sold at P1.30 per kilo and the proceeds to be given
to complainant as soon as it was sold, strongly negates transfer of ownership of the goods to the
petitioner. The agreement (Exhibit "A') constituted her as an agent with the obligation to return the
tobacco if the same was not sold.

EDUARDO V. LINTONJUA, JR. and ANTONIO K. LITONJUA, Petitioners,

vs.ETERNIT CORPORATION (now ETERTON MULTI-RESOURCES CORPORATION), ETEROUTREMER, S.A.
and FAR EAST BANK & TRUST COMPANY, Respondents.

* 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 or agents duly authorized
for the purpose by corporate by-laws or by specific acts of the board of directors.28 Absent not binding
on the corporation.29
The Eternit Corporation is engaged in the manufacture of roofing materials and pipe products. Its
manufacturing operations were conducted on eight parcels of land with a total area of 47,233 square
meters. The properties, located in Mandaluyong City, are under the name of Far East Bank & Trust
Company, as trustee. Ninety (90%) percent of the shares of stocks of EC were owned by Eteroutremer
S.A. Corporation (ESAC), registered under the laws of Belgium.3 Jack Glanville, an Australian citizen, was
the General Manager and President of EC, while Claude Frederick Delsaux was the Regional Director for
Asia of ESAC.

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.

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

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

The Litonjua brothers deposited the amount of US$1,000,000.00 with the Security Bank & Trust
Company, Ermita Branch, and drafted an Escrow Agreement to expedite the sale.

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

Meanwhile, with the assumption of Corazon C. Aquino as President of the Republic of the Philippines,
the political situation in the Philippines had improved. Marquez received a telephone call from
Glanville, advising that the sale would no longer proceed. Glanville followed it up with a Letter dated
May 7, 1987, confirming that he had been instructed by his principal to inform Marquez that "the
decision has been taken at a Board Meeting not to sell the properties on which Eternit Corporation is
situated."10
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:

Litonjuas, 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.

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.

RTC decided in favour of EC on the ground that there is no valid and binding sale between the plaintiffs
and said defendants.

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.

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, 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 Since the sale involved substantially all of the corporations assets, it would
necessarily need the authority from the stockholders.

CA rendered judgment affirming the decision of the RTC.

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 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.
Petitioners insist that it is incongruous for Glanville and Delsaux to make a counter-offer to petitioners
offer and thereafter reject such offer unless they were authorized to do so by respondent EC. Petitioners
insist that Delsaux confirmed his authority to sell the properties in his letter to Marquez,

The petition has no merit.

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

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.

Indeed, a corporation is a juridical person separate and distinct from its members or stockholders and
is not affected by the personal rights,

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

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 or agents duly authorized
for the purpose by corporate by-laws or by specific acts of the board of directors.28 Absent 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.

to create or convey real rights over immovable property, a special power of attorney is
necessary.36 Thus, when a sale of a piece of land or any portion thereof is through an agent, the
authority of the latter shall be in writing, otherwise, the sale shall be void.37

In this case, the petitioners as plaintiffs below, failed to adduce in evidence any resolution of the Board
of Directors of respondent EC empowering Marquez, Glanville or Delsaux as its agents, to sell, let
alone offer for sale, for and in its behalf, the eight parcels of land owned by respondent EC including
the improvements thereon.

While Glanville was the President and General Manager of respondent EC, and Adams and Delsaux were
members of its Board of Directors, the three acted for and in behalf of respondent ESAC, and not as
duly authorized agents of respondent EC; a board resolution evincing the grant of such authority is
needed to bind EC to any agreement regarding the sale of the subject properties. Such board resolution
is not a mere formality but is a condition sine qua non to bind respondent EC.

The settled rule is that, persons dealing with an assumed agent are bound at their peril, and if they
would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent of
authority, and in case either is controverted, the burden of proof is upon them to prove it.46 In this case,
the petitioners failed to discharge their burden; hence, petitioners are not entitled to damages from
respondent EC.

For an agency by estoppel to exist, the following must be established: (1) the principal manifested a
representation of the agents authority or knowlingly allowed the agent to assume such authority; (2)
the third person, in good faith, relied upon such representation; (3) relying upon such representation,
such third person has changed his position to his detriment.48 An agency by estoppel, which is similar to
the doctrine of apparent authority, requires proof of reliance upon the representations, and that, in
turn, needs proof that the representations predated the action taken in reliance.49 Such proof is
lacking in this case. Glanville and Delsaux positively and unequivocally declared that they were acting
for and in behalf of respondent ESAC.

The transactions and the various communications inter se were never submitted to the Board of
Directors of respondent EC for ratification.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit.

1869-1883

DOMINGA CONDE, petitioner,

vs.THE HONORABLE COURT OF APPEALS, MANILA PACIENTE CORDERO, together with his wife,

Margarita Conde, Bernardo Conde and the petitioner Dominga Conde, as heirs of Santiago Conde, sold
with right of repurchase, within ten (10) years from said date, a parcel of agricultural land located in
Maghubas Burauen Leyte, area of one (1) hectare, to Casimira Pasagui, married to Pio Altera
(hereinafter referred to as the Alteras), for P165.00. The "Pacto de Retro Sale" further provided at the
end of 10 years the said land is not repurchased, a new agreement shall be made between the parties
and in no case title and ownership shall be vested in the hand of the Alteras.

To be noted is the fact that neither of the vendees-a-retro, Pio Altera nor Casimira Pasagui, was a
signatory to the deed. Petitioner maintains that because Pio Altera was very ill at the time, Paciente
Cordero executed the deed of resale for and on behalf of his father-in-law. Petitioner further states that
she redeemed the property with her own money as her co-heirs were bereft of funds for the purpose.

The pacto de retro document was eventually found.

On 30 June 1965 Pio Altera sold the disputed lot to the spouses Ramon Conde and Catalina T. Conde,
who are also private respondents herein.

Contending that she had validly repurchased the lot in question in 1945, petitioner filed, on 16 January
1969, in the Court of First Instance of Leyte, Branch IX, Tacloban City, a against Paciente Cordero and his
wife Nicetas Altera, Ramon Conde and his wife Catalina T. Conde, and Casimira Pasagui Pio Altera having
died in 1966), for quieting of title to real property and declaration of ownership.

Petitioner's evidence is that Paciente Cordero signed the Memorandum of Repurchase in representation
of his father-in-law Pio Altera, who was seriously sick on that occasion, and of his mother-in-law who
was in Manila at the time, and that Cordero received the repurchase price of P65.00.

Private respondents, for their part, adduced evidence that Paciente Cordero signed the document of
repurchase merely to show that he had no objection to the repurchase; and that he did not receive the
amount of P165.00 from petitioner inasmuch as he had no authority from his parents-in-law who were
the vendees-a-retro.

RTC dismissed the Complaint and ordering petitioner "to vacate the property in dispute

CA upheld the findings of the RTC that petitioner had failed to validly exercise her right of repurchase in
view of the fact that the Memorandum of Repurchase was signed by Paciente Cordero and not by Pio
Altera, the vendee-a-retro, and that there is nothing in said document to show that Cordero was
specifically authorized to act for and on behalf of the vendee a retro, Pio Altera.

ISSUE: WON there was an implied agency when Cordero signed the repurchase agreement

YES.

If petitioner had done nothing to formalize her repurchase, by the same token, neither have the
vendees-a-retro done anything to clear their title of the encumbrance therein regarding petitioner's
right to repurchase. No new agreement was entered into by the parties as stipulated in the deed
of pacto de retro, if the vendors a retro failed to exercise their right of redemption after ten years.
If, petitioner exerted no effort to procure the signature of Pio Altera after he had recovered from
his illness, neither did the Alteras repudiate the deed that their son-in-law had signed. Thus,
an implied agency must be held to have been created from their silence or lack of action,
or their failure to repudiate the agency.

Possession of the lot in dispute having been adversely and uninterruptedly with petitioner from
1945 when the document of repurchase was executed, to 1969, when she instituted this action,
or for 24 years, the Alteras must be deemed to have incurred in laches. Wherefore, Dominga
is declared the owner of the land in question.

INSULAR DRUG CO., INC., plaintiff-appellee,

vs.THE PHILIPPINE NATIONAL BANK, ET AL., defendants. THE PHILIPPINE NATIONAL BANK, appellant.
The Insular Drug Co., Inc., is a Philippine corporation with offices in the City of Manila. U.E. Foerster was
formerly a salesman of drug company for the Islands of Panay and Negros. Foerster also 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
Philippine National Bank. The checks were in that bank placed in the personal account of Foerster.
Some of the checks were drawn against the Bank of Philippine National Bank. After the indorsement on
the checks was written "Received payment prior indorsement guaranteed by Philippine National bank,
Iloilo Branch, Angel Padilla, Manager." The indorsement on the checks took various forms, some being
"Insular Drug Company, Inc., As a consequence of the indorsements on 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. But there is no evidence showing that the bank
knew that Foerster was misappropriating the funds of his principal. The Insular Drug Company claims
that it never received the face value of 132 checks here in the question covering a total of P18,285.92.

In first place, the bank argues that the drug company was never defrauded at all. While the evidence on
the extent of the loss suffered by the drug company is not nearly as clear as it should be, it is a sufficient
answer to state that no such special defense was relied upon by the bank in the trial court. The drug
company saw fit to stand on the proposition that checks drawn in its favor were improperly and illegally
cashed by the bank for Foerster and placed in his personal account, thus making it possible for Foerster
to defraud the drug company, and the bank did not try to go back of this proposition.

The next point relied upon by the bank, to the effect 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.

Further speaking to the errors specified by the bank, it is sufficient to state that no trust fund was
involved; that the fact that bank acted in good faith does not relieve it from responsibility; that no proof
was adduced, admitting that Foerster had right to indorse the checks, indicative of right of his wife and
clerk to do the same , and that the checks drawn on the Bank of the Philippine Islands can not be
differentiated from those drawn on the Philippine National Bank because of the indorsement by the
latter.

In brief, this is a case where 132 checks made out in the name of the Insular Drug Co., Inc., were
brought to the branch office of the Philippine National Bank in Iloilo by Foerster, a salesman of the
drug company, Foerster's wife, and Foerster's clerk. The bank could tell by the checks themselves that
the money belonged to the Insular Drug Co., Inc., and not to Foerster or 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 made 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. Much
more could be said about this case, but it suffices to state in conclusion that bank will have to stand the
loss occasioned by the negligence of its agents.

ALLIED FREE WORKERS' UNION (PLUM), petitioner,

vs.COMPAIA MARITIMA, Manager JOSE C. TEVES, and CIR, respondents.

COMPAIA MARITIMA and Manager JOSE C. TEVES, petitioners, vs.

ALLIED FREEWORKERS' (PLUM) and COURT OF INDUSTRIAL RELATIONS, respondents.

* 'In determining the existence of employer-employee relationship, the following elements are generally
considered, namely: (1) the selection and engagement of the employees; (2) the payment of wages; (3)
the power of dismissal; and (4) the power to control the employee's conduct is the most important
element

MARITIMA is a local corporation engaged in the shipping business. Teves is its branch manager in the
port of Iligan City. And AFWU is duly registered legitimate labor organization with 225 members.

MARITIMA, entered into a STEVEDORING CONTRACT 4 with AFWU to do and perform all the work of
stevedoring and arrastre services of all its vessels or boats calling in the port of Iligan City,

harmonious relations between MARITIMA and AFWU lasted up to the latter part of 1953 when the
former complained to the latter of unsatisfactory and inefficient service by the laborers doing the
arrastre and stevedoring work. This deteriorating situation was admitted as a fact by AFWU's president.
To remedy the situation since MARITIMA's business was being adversely affected Teves was forced to
hire extra laborers from among "stand-by" workers not affiliated to any union to help in the stevedoring
and arrastre work. The wages of these extra laborers were paid by MARITIMA through separate
vouchers and not by AFWU. Moreover, said wages were not charged to the consignees or owners of the
cargoes.

AFWU presented to MARITIMA a written proposal5 for a collective bargaining agreement.No reply was
made by MARITIMA.

AFWU instituted proceedings in the Industrial Court6 praying that it be certified as the sole and
exclusive bargaining agent in the bargaining unit composed of all the laborers doing the arrastre and
stevedoring work in connection with MARITIMA's vessels in Iligan City. MARITIMA answered, alleging
lack of employer-employee relationship between the parties.

MARITIMA informed AFWU of the termination of the CONTRACT because of the inefficient service
rendered by the latter which had adversely affected its business. MARITIMA then contracted with the
Iligan Stevedoring Union for the arrastre and stevedoring work. The latter agreed to perform the work
subject to the same terms and conditions of the CONTRACT

upon the instance of AFWU, MARITIMA found itself charged before the Industrial Court7 of unfair labor
practices MARITIMA answered, again denying the employer-employee relationship between the parties.

AFWU formed a picket line at the wharf of Iligan City, thus preventing the Iligan Stevedoring Union from
carrying out the arrastre and stevedoring work it contracted for.

MARITIMA filed an action9 to rescind the CONTRACT , enjoin AFWU members from doing arrastre and
stevedoring work in connection with its, vessels,

CFI ordered the rescission of the CONTRACT and permanently enjoined AFWU members from
performing work in connection with MARITIMA's vessels

whether there is an employer-employee relationship between MARITIMA, on the one hand,

and AFWU and/or its members-laborers who do the actual stevedoring and arrastre work on the
other hand.

The court a quo held that under the CONTRACT , AFWU was an independent contractor of MARITIMA.

The petitioner union operated as a labor contractor under the so-called "cabo" system; and as such it has
a complete set of officers and office personnel (Exhs. "F" and "F-1") and its organizational structure
includes the following: General President, with the following under him one vice-president, legal
counsel, general treasurer, general manager and the board of directors. Under the general manager is
the secretary, the auditor, and the office staff composing of the general foreman, general checker,
general timekeeper, and the respective subordinates like assistant foreman, capataz, assistant general
checker, field checker, office timekeeper, and field timekeeper all appointed by the general manager of
the union and are paid in accordance with the union payroll exclusively prepared by the union in the
office. (See t.s.n. pp. 32-36, June 9, 1960; pp. 78-80, February 16, 1961; pp. 26-28, August 9, 1960). The
payrolls where laborers are listed and paid were prepared by the union itself without the intervention or
control of the respondent company and/or its agent at Iligan City. The respondent never had any
knowledge of the individual names of laborers and/or workers listed in the union payroll or in their roster
of membership.

8. The union engaged the services of their members in undertaking the work of arrastre and
stevedoringeither to haul shippers' goods from their warehouses in Iligan City to
the MARITIMA boat or from the boat to the different consignees. The charges for such service
were known by the union and collected by them through their bill collector. This is shown by the
preparation of the union forms known as "conduci" or delivery receipts. These "conduci" or
receipts contain informations as to the number and/or volume of cargoes handled by the union,
the invoice number, the name of the vessel and the number of bills of lading covering the
cargoes to be delivered. Those delivery receipts are different and separate from the bills of
lading and delivery receipts issued by the company to the consignees or shippers. Cargoes
carried from the warehouses to the boat or from the boat to the consignees were always
accompanied by the union checker who hand-carry the "conduci". Once goods are delivered to
their destination the union through its bill collectors prepare the bills of collection and the
 charges thereon are collected by the union bill collectors who are employees of the union and not
of the respondent. The respondent had no intervention whatsoever in the collection of those
charges as the same are clearly indicated and described in the labor CONTRACT , Exhibit "A".
There were, however, instances when the respondents were requested to help the union in the
collection of charges for services rendered by members of the union when fertilizers and
gasoline drums were loaded aboard the Compaia MARITIMA boats. This was necessary in order
to facilitate the collection of freight and handling charges from the government for auditing
purposes. When cargoes are to be loaded, the shipper usually notifies the petitioner union when
to load their cargoes aboard Compaia MARITIMA boats calling in the port of Iligan City; and
when a boat docks in said port, the union undertakes to haul the said shipper's goods to the
boat. In doing this work, the union employs their own trucks or other vehicles or conveyance
from shipper's warehouse to the boat or vice-versa. The respondent has no truck of any kind for
the service of hauling cargoes because such service is included in the CONTRACT executed
between the parties. (See Exh. "A").

9. The union members who were hired by the union to perform arrastre and stevedoring work on
respondents' vessels at Iligan port were being supervised and controlled by the general foreman
of the petitioner union or by any union assistant or capataz responsible for the execution of the
labor CONTRACT when performing arrastre and/or stevedoring work aboard vessels of the
Compaia MARITIMA docking at Iligan City. The foreman assigned their laborers to perform the
required work aboard vessels of the respondent. For instance, when a boat arrives, the general
foreman requests the cargo report from the chief mate of the vessel in order to determine
where the cargoes are located in the hold of the boat and to know the destination of these
cargoes. All the laborers and/or workers hired for said work are union members and are only
responsible to their immediate chief who are officers and/or employees of the union. The
respondent firm have their own separate representatives like checkers who extend aid to the
union officers and members in checking the different cargoes unloaded or loaded aboard
vessels of the Compaia MARITIMA. There were no instances where offices and employees of the
respondent Compaia MARITIMA and/or its agent had interferred in the giving of instructions to
the laborers performing the arrastre and/or stevedoring work either aboard vessels or at the
wharf of Iligan City. As contractor, the union does not receive instructions as to what to do, how
to do, and works without specific instructions. They have no fixed hours of work required by the
MARITIMA.

10. While cargoes were in transit either from the warehouse to the boat or from the boat to the
different consignees, any losses or damages caused with the said cargoes were charged to the
account of the union; and the union likewise imposed the penalty or fine to any employee who
caused or committed the damages to cargoes in transit. Other disciplinary measures imposed on
laborers performing the said work were exercised by the general foreman of the union who has
blanket authority from the union general manager to exercise disciplinary control over their
members who were assigned to perform the work in a group of laborers assigned by the union to
perform loading or unloading cargoes when a Compaia MARITIMA boat docked at Iligan City.
The respondents have not at any time interferred in the imposition of disciplinary action upon
the laborers who are members of the union. In one instance, under this situation, the president
of the union himself dismissed one inefficient laborer found to have been performing inefficient
service at the time(t.s.n. pp. 17-18, February 15, 1961).

And in absolving MARITIMA of the unfair labor charge

The Court finds no interference in the union activities, if any, of the members of the Allied Free Workers
Union as these persons engaged in the stevedoring and arrastre service were employed by the Allied Free
Workers Union as independent contractor subject to the terms and conditions of their then existing labor
CONTRACT Exhibit "A

"An independent contractor is one who, in rendering services, exercises an independent employment or
occupation and represents the will of his employer only as to the results of his work and not as to the
means whereby it is accomplished; one who exercising an independent employment, contracts to do a
piece of work according to his own methods, without being subject to the control of his employer
except as to the result of his work; and who engaged to perform a certain service for another, according
to his own manner and methods, free from the control and direction of his employer in all matters
connected with the performance of the service except as to the result of the work." (see 56 C.J.S. pp. 41-
43; Cruz, et al. vs. Manila Hotel et al., G.R. No. L-9110, April 30, 1957). These factors were present in the
relation of the parties as described in their CONTRACT Exhibit "A".

'In determining the existence of employer-employee relationship, the following elements are generally
considered, namely: (1) the selection and engagement of the employees; (2) the payment of wages; (3)
the power of dismissal; and (4) the power to control the employee's conduct is the most important
element

No direct employment relationship between MARITIMA and the laborers. The latter have no separate
individual contracts with MARITIMA. In fact, the court a quo found that it was AFWU that hired them.
Their only possible connection with MARITIMA is through AFWU which contracted with the latter.
Hence, they could not possibly be in a better class than AFWU which dealt with MARITIMA.18

AFWU goes to the extent of insisting that it be considered a mere "agent" of MARITIMA. Suffice it to
say on this point that an agent can not represent two conflicting interests that are diametrically
opposed. And that the cases did not involve representatives of opposing interests.

Under the "Cabo" system, the union was an independent contractor. This is shown by the court a quo's
own finding that prior to the CONTRACT between MARITIMA and AFWU, the former had an oral arrastre
and stevedoring agreement with another union. This agreement was also based on the "cabo" system.
As found by the court a quo:

(1) the union was an independent contractor which engaged the services of its members as laborers; (2)
the charges against the consignees and owners of cargoes were made directly by the union; and (3) the
laborers were paid on union payrolls and MARITIMA had nothing to do with the preparation of the
same. These are the principal characteristics of the "cabo" system on which the parties based their
relationship after the termination of the CONTRACT.

The four elements generally regarded as indicating the employer-employee relationship or at the very
least, the element of "control" must be shown to sustain the conclusion that there came about such
relationship. The lack of such a showing in the case at bar is fatal to AFWU's contention.

Wherefore, the appealed decision of the Court of Industrial Relations is hereby affirmed
NATIONAL FOOD AUTHORITY, (NFA), petitioner,
vs.INTERMEDIATE APPELLATE COURT, SUPERIOR (SG) SHIPPING CORPORATION, respondents.

*when things belonging to the principal (in this case, Superior Shipping Corporation) are dealt with, the
agent is bound to the principal although he does not assume the character of such agent and appears
acting in his own name

Gil Medalla, as commission agent of the plaintiff Superior Shipping Corporation, entered into a contract
for hire of ship known as "MV Sea Runner" with defendant National Grains Authority. Under the said
contract Medalla obligated to transport on the "MV Sea Runner" 8,550 sacks of rice belonging to
defendant National Grains Authority from the port of San Jose, Occidental Mindoro, to Malabon,
Metro Manila.

Upon completion plaintiff wrote requesting defendant NGA that it be allowed to collect the amount
stated in its statement of account specifically requesting that the payment for freightage and other
charges be made to it and not to defendant Medalla because plaintiff was the owner of the vessel " NGA
informed plaintiff that it could not grant its request because the contract to transport the rice was
entered into by defendant NGA and defendant Medalla who did not disclose that he was acting as a
mere agent of plaintiff (Exhibit "F"). Thereupon on November 19, 1979, defendant NGA paid defendant
Medalla the sum of P25,974.90, for freight services in connection with the shipment of 8,550 sacks of
rice (Exhibit "A").

plaintiff wrote defendant Medalla demanding that he turn over to plaintiff the amount of P27,000.00
paid to him by defendant NFA. Defendant Medalla, however, "ignored the demand."

RTC Judgment was rendered in favor of the plaintiff. Defendant National Food Authority appealed to this
court on the sole issue as to whether it is jointly and severally liable with defendant Gil Medalla for
freightage.

It is contended by petitioner NFA that it is not liable under the exception to the rule (Art. 1883) since it
had no knowledge of the fact of agency between respondent Superior Shipping and Medalla at the
time when the contract was entered into between them (NFA and Medalla). Petitioner submits that
"(A)n undisclosed principal cannot maintain an action upon a contract made by his agent unless such
principal was disclosed in such contract. One who deals with an agent acquires no right against the
undisclosed principal."

It is an undisputed fact that Gil Medalla was a commission agent of respondent Superior Shipping
Corporation which owned the vessel "MV Sea Runner" that transported the sacks of rice belonging to
petitioner NFA. The context of the law is clear. Art. 1883, which is the applicable law in the case at bar
provides:

Art. 1883. If an agent acts in his own name, the principal has no right of action against the
persons with whom the agent has contracted; neither have such persons against the principal.
 In such case the agent is the one directly bound in favor of the person with whom he has
contracted, as if the transaction were his own, except when the contract involves things
belonging to the principal.

The provision of this article shall be understood to be without prejudice to the actions between
the principal and agent.

Consequently, when things belonging to the principal (in this case, Superior Shipping Corporation) are
dealt with, the agent is bound to the principal although he does not assume the character of such
agent and appears acting in his own name. In other words, the agent's apparent representation yields
to the principal's true representation and that, in reality and in effect, the contract must be considered
as entered into between the principal and the third person Corollarily, if the principal can be obliged to
perform his duties under the contract, then it can also demand the enforcement of its rights arising from
the contract.

NFA petition is hereby DENIED

RURAL BANK OF BOMBON (CAMARINES SUR), INC., petitioner, vs.HON. COURT OF APPEALS,
EDERLINDA M. GALLARDO, DANIEL MANZO and RUFINO S. AQUINO, respondents.

* There is no principle of law by which a person can become liable on a real mortgage which she never
executed either in person or by attorney in fact

Ederlinda M. Gallardo, married to Daniel Manzo, executed a special power of attorney in favor of Rufina
S. Aquino authorizing To secure a loan from any bank or lending institution for any amount or otherwise
mortgage the property situated at Las Pias, Rizal, the same being my paraphernal property, and in that
connection, to sign, or execute any deed of mortgage and sign other document requisite and necessary
in securing said loan and to receive the proceeds thereof in cash or in check and to sign the receipt
therefor and thereafter endorse the check representing the proceeds of loan. (p. 10, Rollo.)

Deed of Real Estate Mortgage was executed by Rufino S. Aquino in favor of the Rural Bank of Bombon
(Camarines Sur), Inc. (hereafter, defendant Rural Bank). The deed stated that the property was being
given as security for the payment of "certain loans, advances, or other accommodations obtained by the
mortgagor from the mortgagee in the total sum of Three Hundred Fifty Thousand Pesos only

spouses Ederlinda Gallardo and Daniel Manzo filed an action against Rufino Aquino and the Bank
because property was mortgaged to pay personal loans obtained by Aquino from the Bank solely for
personal use and benefit of Aquino; that the mortgagor in the deed was defendant Aquino instead of
plaintiff Gallardo) and in the deed vesting power of attorney to Aquino; that correspondence relative to
the mortgage was sent to Aquino's address at "Sta. Isabel, Calabanga, Camarines Sur" instead of
Gallardo's postal address at Las Pias, Metro Manila; and that defendant Aquino, in the real estate
mortgage, appointed defendant Rural Bank as attorney in fact, and in case of judicial foreclosure as
receiver with corresponding power to sell and that although without any express authority from
Gallardo, defendant Aquino waived Gallardo's rights under Section 12, Rule 39, of the Rules of Court
and the proper venue of the foreclosure suit.
RTC issued TRO to Rural Bank "from enforcing the real estate mortgage and from foreclosing it either
judicially or extrajudicially until further orders from the court

Rufino S. Aquino in his answer said that the plaintiff authorized him to mortgage her property to a bank
so that he could use the proceeds to liquidate her obligation of P350,000 to him. The obligation to pay
the Rural Bank devolved on Gallardo. Of late, however, she asked him to pay the Bank but defendant
Aquino set terms and conditions which plaintiff did not agree to.

filed a complaint against Ederlinda Gallardo and Rufino Aquino for "Foreclosure of Mortgage"

RTC, dismissing the complaint for annulment of mortgage and declaring the Rural Bank entitled to
damages the amount of which will be determined in appropriate proceedings. The court lifted the writ
of preliminary injunction it previously issued.

Court of Appeals, reversed the trial court. declaring the deed of real estate executed between Rufino S.
with the appellee Rural Bank of Bombon, Camarines Sur, unauthorized, void and unenforceable against
plaintiff Ederlinda Gallardo

ISSUE: Is the Real Estate Mortgage executed by Rufino S. Aquino as attorney-in-fact

for Gallardo, in favor of the Rural Bank of Bombon valid?

The Rural Bank contends that the real estate mortgage executed by respondent Aquino is valid
because he was expressly authorized by Gallardo to mortgage her property under the special power of
attorney she made in his favor which was duly registered and annotated on Gallardo's title. Since the
Special Power of Attorney did not specify or indicate that the loan would be for Gallardo's benefit, then
it could be for the use and benefit of the attorney-in-fact, Aquino.

SC: The SPA sjhows the extent of authority given by the plaintiff to defendant Aquino. But did not state
that the deed was for and in behalf of Ederlinda Gallardo in his capacity as her attorney-in-fact. Same
with the Promissory Note.

The decision of the Court of Appeals is correct. This case is governed by the general rule in the law of
agency which this Court, It is a general rule in the law of agency that, in order to bind the principal by a
mortgage on real property executed by an agent, it must upon its face purport to be made, signed and
sealed in the name of the principal, otherwise, it will bind the agent only. It is not enough merely that
the agent was in fact authorized to make the mortgage, if he has not acted in the name of the principal.
Neither is it ordinarily sufficient that in the mortgage the agent describes himself as acting by virtue of a
power of attorney, if in fact the agent has acted in his own name and has set his own hand and seal to
the mortgage. This is especially true where the agent himself is a party to the instrument. However
clearly the body of the mortgage may show and intend that it shall be the act of the principal, yet, unless
in fact it is executed by the agent for and on behalf of his principal and as the act and deed of the
principal, it is not valid as to the principal.

In view of this rule, Aquino's act of signing the Deed of Real Estate Mortgage in his name alone as
mortgagor, without any indication that he was signing for and in behalf of the property owner,
Ederlinda Gallardo, bound himself alone in his personal capacity as a debtor of the petitioner Bank
and not as the agent or attorney-in-fact of Gallardo.
Rural Bank appeared to have ignored the representative capacity of Aquino and dealt with him and
his wife in their personal capacities. Said appellee Rural Bank also did not conduct an inquiry on
whether the subject loans were to benefit the interest of the principal (plaintiff Gallardo) rather than
that of the agent although the deed of mortgage was explicit that the loan was for purpose of the
bangus and sugpo production of defendant Aquino.

Bank claims that the Deed of Real Estate Mortgage is enforceable against Gallardo since it was executed
in accordance with Article 1883 which provides: If an agent acts in his own name, the principal has no
right of action against the persons with whom the agent has contracted; neither have such persons
against the principal.

Not applicable. Aquino acted purportedly as an agent of Gallardo, but actually acted in his personal
capacity.

There is no principle of law by which a person can become liable on a real mortgage which she never
executed either in person or by attorney in fact. It should be noted that this is a mortgage upon real
property, the title to which cannot be divested except by sale on execution or the formalities of a will or
deed. For such reasons, the law requires that a power of attorney to mortgage or sell real property
should be executed with all of the formalities required in a deed. For the same reason that the personal
signature of Poizat, standing alone, would not convey the title of his wife in her own real property, such
a signature would not bind her as a mortgagor in real property, the title to which was in her name. (p.
548.)

PRIMITIVO SIASAT and MARCELINO SIASAT, petitioners,

vs.INTERMEDIATE APPELLATE COURT and TERESITA NACIANCENO, respondents.

* An agent, therefore, who is empowered to transact all the business of his principal of a particular
kind or in a particular place, would, for this reason, be ordinarily deemed a general agent.

Teresita Nacianceno succeeded in convincing officials of the then Department of Education and Culture,
hereinafter called Department, to purchase without public bidding, one million pesos worth of national
flags for the use of public schools throughout the country.

Nacianceno was informed by the Chief of the Budget Division of the Department that the purchase
orders could not be released unless a formal offer to deliver the flags in accordance with the required
specifications was first submitted for approval, she contacted the owners of the United Flag Industry
after the transaction was discussed, the following document was drawn up:

Mrs. Tessie Nacianceno,

This is to formalize our agreement for you to represent United Flag Industry to deal with any entity or
organization, private or government in connection with the marketing of our products-flags and all its
accessories.For your service, you will be entitled to a commission of thirty(30%) percent.

SignedMr. Primitive SiasatOwner and Gen. Manager

1st delivery of 7,933 flags was made by the United Flag Industry. The next day, the respondent's
authority to represent the United Flag Industry was revoked by petitioner Primitivo Siasat.

Siasat, after receiving the payment of P469,980.00 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 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.

RTC decided in favor of the respondent. The decision was affirmed by CA

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. The
revocation of agency effected by the parties forecloses the respondent's claim of 30% commission on
the second transaction;

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.

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 place, would, for this reason, be ordinarily deemed a general agent.

A special agent is one authorized to do some particular act or to act upon some particular occasion. lie
acts usually in accordance with specific instructions or under limitations necessarily implied from the
nature of the act to be done.

The power granted to the respondent was so broad that it practically covers the negotiations leading
to, and the execution of, a contract of sale of petitioners' merchandise with any entity or organization.

"when the terms of an agreement have been reduced to writing, it is to be considered as containing all
such terms, and, therefore, there can be between the parties and their successors-in-interest, no
evidence of the terms of the agreement other than the contents of the writing",
WHEREFORE, the decision of the respondent court is hereby MODIFIED. The petitioners are ordered to
pay the respondent the amount of ONE HUNDRED FOURTY THOUSAND NINE HUNDRED AND NINETY
FOUR PESOS (P140,994.00) as her commission on the second delivery of flags

B. H. MACKE, ET AL., plaintiffs-appellees, vs. JOSE CAMPS, defendant-appellant.

The plaintiffs in this action, B. H. Macke and W. H. Chandler, partners doing business under the firm
name of Macke, Chandler & Company, allege that during the months of February and March, 1905, they
sold to the defendant and delivered at his place of business, known as the "Washington Cafe," various
bills of goods amounting to P351.50; that the defendant has only paid P174; that there is still due them
on account of said goods the sum of P177.50; demands made. Refused.

B. H. Macke, one of the plaintiffs, testified that on the order of one Ricardo Flores, who represented
himself to be agent of the defendant, he shipped the said goods to the defendants at the Washington
Cafe; that Flores later acknowledged the receipt of said goods and made various payments thereon
amounting in all to P174; that on demand for payment of balance of the account Flores informed him
that he did not have the necessary funds on hand, and that he would have to wait the return of his
principal, the defendant, who was at that time visiting in the provinces; that Flores acknowledged the
bill for the goods furnished and the credits being the amount set out in the complaint; that when the
goods were ordered they were ordered on the credit of the defendant and that they were shipped by
the plaintiffs after inquiry which satisfied the witness as to the credit of the defendant and as to the
authority of Flores to act as his agent; that the witness always believed and still believes that Flores was
the agent of the defendant; and that when he went to the Washington Cafe for the purpose of collecting
his bill he found Flores, in the absence of the defendant in the provinces, apparently in charge of the
business and claiming to be the business manager of the defendant, said business being that of a hotel
with a bar and restaurant annexed.

A written contract dated May 25, 1904, was introduced in evidence, from which it appears that one
Galmes, the former owner of the business now know as the "Washington Cafe," subrented the building
wherein the business was conducted, to the defendant for a period of one year, for the purpose of
carrying on that business, the defendant obligating himself not to sublet or subrent the building or the
business without the consent of the said Galmes. This contract was signed by the defendant and the
name of Ricardo Flores appears thereon as a witness, and attached thereto is an inventory of the
furniture and fittings which also is signed by the defendant with the word "sublessee"
(subarrendatario) below the name, and at the foot of this inventory the word "received" (recibo)
followed by the name "Ricardo Flores," with the words "managing agent" (el manejante encargado)
immediately following his name.

Galmes was called to the stand and identified the above- described document as the contract and
inventory delivered to him by the defendant, and further stated that he could not tell whether Flores
was working for himself or for some one else that it to say, whether Flores was managing the
business as agent or sublessee.

The defendant contented the fact that he received the goods for which payment is demanded.
In the absence of proof of the contrary we think that this evidence is sufficient to sustain a finding that
Flores was the agent of the defendant in the management of the bar of the Washington Cafe with
authority to bind the defendant, his principal, for the payment of the goods mentioned in the complaint.

The contract introduced in evidence sufficiently establishes the fact that the defendant was the owner
of business and of the bar, and the title of "managing agent" attached to the signature of Flores which
appears on that contract, together with the fact that, at the time the purchases in question were
made, Flores was apparently in charge of the business, performing the duties usually entrusted to
managing agent, leave little room for doubt that he was there as authorized agent of the defendant.
One who clothes another apparent authority as his agent, to the public as such, can not be permitted
to deny the authority of such person to act as his agent, to the prejudice of innocent third parties
dealing with such person in good faith and in the following preassumptions or deductions, which the law
expressly directs to be made from particular facts, are deemed conclusive:

"Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led
another to believe a particular thing true, and to act upon such belief, he can not, in any litigation
arising out such declaration, act, or omission, be permitted to falsify it"

That Flores, as managing agent of the Washington Cafe, had authority to buy such reasonable
quantities of supplies as might from time to time be necessary in carrying on the business of hotel bar
may fairly be presumed from the nature of the business, especially in view of the fact that his principal
appears to have left him in charge during more or less prolonged periods of absence; from an
examination of the items of the account attached to the complaint, we are of opinion that he was acting
within the scope of his authority in ordering these goods are binding on his principal, and in the
absence of evidence to the contrary, furnish satisfactory proof of their delivery as alleged in the
complaint.

The judgment of the trial court is affirmed with the costs of his instance against the appellant. After
expiration of twenty days judgment will be rendered in accordance herewith, and ten days thereafter
the case remanded to the lower court for proper action. So ordered.

GERMANN & CO., plaintiff-appellees, vs.DONALDSON, SIM & CO., defendants-appellants.

* The original power cannot be construed as conferring upon Kammerzell authority to institute or defend suits*
*The main object of the instrument is clearly to make Kammerzell the manager of the Manila branch of the
plaintiff's business, with the same general authority with reference to its conduct which his principal would
himself possess if he were personally directing it.

This is an incident of want of personality of the plaintiff's attorney. The action is to recover a sum claimed to be
due for freight under a charter party. It was brought by virtue of a general power for suits, executed in Manila by
Fernando Kammerzell, and purporting to be a substitution in favor of several attorneys of powers conferred upon
Kammerzell in an instrument executed in Berlin, Germany, February 5, 1900, by Max Leonard Tornow, the sole
owner of the business carried on in Berlin and Manila under the name of Gemann & Co. The first-named instrument
was authenticated by a notary with the formalities required by the domestic laws. The other was not so
authenticated. Both Tornow and Kammerzell are citizens of Germany. Tornow is a resident of Berlin and Kammerzell
of Manila.

The defendants claim that the original power is invalid which provides that powers for suits must be contained in
a public instrument. No claim is made that the document was not executed with the formalities required by the
German law in the case of such an instrument. In support of this contention reliance is placed upon article 1713 of
the Civil Code, by which it is provided that "an agency stated in general terms only includes acts of administration,"
and that "in order to compromise, alienate, mortgage, or to execute any other act of strict ownership an express
commission is required."

The defendants also claim that the original power cannot be construed as conferring upon Kammerzell authority to
institute or defend suits, from which contention, if correct, it would of course follow that the delegated power is
invalid.

ISSUE:
WON the Article 1280 and Article 1713 will apply

RULING:
We should not be inclined to regard in institution of a suit like the present, which appears to be brought to collect a
claim accruing in the ordinary course of the plaintiff's business, as properly belonging to the class of acts described
in article 1713 of the Civil Code as acts "of strict ownership." It seems rather to be something which is necessarily a
part of the mere administration of such a business as that described in the instrument in question and only
incidentally, if at all, involving a power to dispose of the title to property.

But whether regarded as an act of strict ownership or not, it appears to be expressly and specially authorized by the
clause conferring the power to "exact the payment" of sums of money "by legal means." This must mean the power
to exact the payment of debts due the concern by means of the institution of suits for their recovery. If there could
be any doubt as to the meaning of this language taken by itself, it would be removed by a consideration of the
general scope and purpose of the instrument in which it occurs. (See Civil Code, art. 1286.) The main object of the
instrument is clearly to make Kammerzell the manager of the Manila branch of the plaintiff's business, with the
same general authority with reference to its conduct which his principal would himself possess if he were
personally directing it. It can not be reasonably supposed, in the absence of very clear language to that effect, that
it was the intention of the principal to withhold from his agent a power so essential to the efficient management
of the business entrusted to his control as that to sue for the collection of debts.

THE MUNICIPAL COUNCIL OF ILOILO, plaintiff-appellee, vs.JOSE EVANGELISTA, ET AL., defendants-

appellees. TAN ONG SZE VDA. DE TAN TOCO, appellant.

CFI rendered judgment in a civil case wherein the appellant herein, Tan Ong Sze Vda. de Tan Toco was
the plaintiff, and the municipality of Iloilo the defendant, and the former sought to recover of the latter
the value of a strip of land belonging to said plaintiff taken by the defendant to widen a public street;
On appeal to this court (the judgment was affirmed
After the case was remanded to the court of origin, and rendered final and executory, Attorney Jose
Evangelista, as counsel for the administratrix of Jose Ma .Arroyo's intestate estate, filed a claim in the
same case for professional services rendered by him, which the court, acting with the consent of the
appellant widow, fixed at 15 per cent of the amount of the judgment

Philippine National Bank, prayed that the amount of the judgment be turned over to it because the land
taken over had been mortgaged to it. Antero Soriano also appeared claiming the amount of the
judgment as it had been assigned to him, and by him, in turn, assigned to Mauricio Cruz & Co., Inc.

After hearing all the adverse claims on the amount of the judgment the court ordered that the
attorney's lien in the amount of 15 per cent of the judgment, be recorded in favor of Attorney Jose
Evangelista and directed the municipality of Iloilo to file an action of interpleading against the adverse
claimants, the Philippine National Bank, Antero Soriano, Mauricio Cruz & Co.,

Municipal treasurer of Iloilo paid the late Antero Soriano the amount of P6,000 in part payment of the
judgment mentioned above, assigned to him by Tan Boon Tiong, as attorney-in-fact of the appellant
Tan Ong Sze Vda. de Tan Toco.

With these two payments of P6,000 each making a total of P12,000, the judgment for P42,966.44
against the municipality of Iloilo was reduced to P30,966.40, which was adjudicated by said court to
Mauricio Cruz & Co.

This appeal, then, is confined to the claim of Mauricio Cruz & Co. as alleged assignee of the rights of the
late Attorney Antero Soriano by virtue of the said judgment in payment of professional services
rendered by him to the said widow and her coheirs.

The only question to be decided in this appeal is the legality of the assignment made by Tan Boon Tiong
to Attorney Antero Soriano, of all the credits, rights and interests belonging to said appellant Tan Ong
Sze Viuda de Tan Toco by virtue of the judgment rendered in civil case No .3514 of the Court of First
Instance of Iloilo, entitled Viuda de Tan Toco vs. The Municipal Council of Iloilo, adjudicating to said
widow the amount of P42,966.40, plus the costs of court, against said municipal council of Iloilo, in
consideration of the professional services rendered by said attorney to said widow of Tan Toco and
her coheirs, by virtue of the deed Exhibit 2.

Municipality said assignments was not made in consideration of professional services by Attorney
Antero Soriano, for they had already been satisfied before the execution of said deed of assignment, but
in order to facilitate the collection of the amount of said judgment in favor of the appellant, for the
reason that, being Chinese, she had encountered many difficulties in trying to collect.

In support of her contention on this point, the appellant alleges that the payments admitted by the
court in its judgment, as made by Tan Toco's widow to Attorney Antero Soriano for professional services
rendered to her and to her coheirs, amounting to P2,900, must be added to the P700 evidenced by
Exhibits 4-A, Tan Toco, and 4-B Tan Toco, respectively, which exhibits the court below rejected as
evidence, on the ground that they were considered as payments made for professional services
rendered, not by Antero Soriano personally, by the firm of Soriano & Arroyo.
A glance at these receipts shows that those amounts were received by Attorney Antero Soriano for the
firm of Soriano & Arroyo, which is borne out by the stamp on said receipts reading, "Befete Soriano &
Arroyo," and the manner in which said attorney receipted for them, "Soriano & Arroyo, by A. Soriano."

Therefore, the appellant's contention that the amounts of P200 and P500 evidence by said receipts
should be considered as payments made to Attorney Antero Soriano for professional services rendered
by him personally to the interests of the widow of Tan Toco, is untenable.

Besides, if at the time of the assignments to the late Antero Soriano his professional services to the
appellant widow of Tan Toco had already been paid for, no reason can be given why it was necessary to
write him money in payment of professional services on March 14, 1928 (Exhibit 5-G Tan Toco) and
December 15, of the same year (Exhibit 5-H Tan Toco) after the deed of assignment, (Exhibit 2-Cruz)
dated September 27, 1927, had been executed. In view of the fact that the amounts involved in the
cases prosecuted by Attorney Antero Soriano as counsel for Tan Toco's widow, some of which cases
have been appealed to this court, run into the hundreds of thousands of pesos, and considering that
said attorney had won several of those cases for his clients, the sum of P10,000 to date paid to him for
professional services is wholly inadequate, and shows, even if indirectly, that the assignments of the
appellant's rights and interests made to the late Antero Soriano and determined in the judgment
aforementioned, was made in consideration of the professional services rendered by the latter to the
aforesaid widow and her coheirs.

The defendant-appellant also contends that the deed of assignment Exhibit 2-Cruz was drawn up in
contravention of the prohibition contained in article 1459, case 5, of the Civil Code, which reads as
follows:

It does not appear that the Attorney Antero Soriano was counsel for the herein appellant in civil case
No. 3514 of the Court of First Instance of Iloilo, which she instituted against the municipality of Iloilo,
Iloilo, for the recovery of the value of a strip of land expropriated by said municipality for the
widening of a certain public street. The only lawyers who appear to have represented her in that case
were Arroyo and Evangelista, who filed a claim for their professional fees .When the appellant's credit,
right, and interests in that case were assigned by her attorney-in-fact Tan Boon Tiong, to Attorney
Antero Soriano in payment of professional services rendered by the latter to the appellant and her
coheirs in connection with other cases, that particular case had been decided, and the only thing left to
do was to collect the judgment. There was no relation of attorney and client, then, between Antero
Soriano and the appellant, in the case where that judgment was rendered; and therefore the
assignment of her credit, right and interests to said lawyer did not violate the prohibition cited above.

As to whether Tan Boon Tiong as attorney-in-fact of the appellant, was empowered by his principal to
make as assignment of credits, rights and interests, in payment of debts for professional services
rendered by lawyers, in paragraph VI of the power of attorney, Exhibit 5-Cruz, Tan Boon Tiong is
authorized to employ and contract for the services of lawyers upon such conditions as he may deem
convenient, to take charge of any actions necessary or expedient for the interests of his principal, and
to defend suits brought against her. This power necessarily implies the authority to pay for the
professional services thus engaged. In the present case, the assignment made by Tan Boon Tiong, as
Attorney-in-fact for the appellant, in favor of Attorney Antero Soriano for professional services rendered
in other cases in the interests of the appellant and her coheirs, was that credit which she had against the
municipality of Iloilo, and such assignment was equivalent to the payment of the amount of said credit
to Antero Soriano for professional services.
With regard to the failure of the other attorney-in-fact of the appellant, Tan Montano, authorized by
Exhibit 1 Tan Toco, to consent to the deed of assignment, the latter being also authorized to pay, in
the name and behalf of the principal, all her debts and the liens and encumbrances her property, the
very fact that different letters of attorney were given to each of these two representatives shows that it
was not the principal's intention that they should act jointly in order to make their acts valid.
Furthermore, the appellant was aware of that assignment and she not only did not repudiate it, but she
continued employing Attorney Antero Soriano to represent her in court.

For the foregoing considerations, the court is of opinion and so holds: (1) That an agent of attorney-in -
fact empowered to pay the debts of the principal, and to employ lawyers to defend the latter's
interests, is impliedly empowered to pay the lawyer's fees for services rendered in the interests of
said principal, and may satisfy them by an assignment of a judgment rendered in favor of said
principal; (2) that when a person appoints two attorneys-in-fact independently, the consent of the one
will not be required to validate the acts of the other unless that appears positively to have been the
principal's attention;

judgment appealed from, the same is affirmed

ANTONIO CABALLERO and CONCORDIA CABALLERO, plaintiffs-appellants,

vs.ALMA DEIPARINE, TOMAS RAGA, OLIMPIO RAGA, ADRIANO RAGA, and MAGDALENA RAGA,

* unless the attorney has expressly been granted authority with respect thereto, the power to deal
with or surrender these matters is regarded as remaining exclusively in the client

That Plaintiffs Antonio and Concordia, all surnamed Caballero, and Defendant Tomas, Olimpio, Adriano
and Magdalena, all surnamed Raga, are the children of Vicenta Bucao now deceased, the first two
named being the children by the first marriage and the last four named being the children by the second
marriage;

That during the lifetime of Vicenta Bucao she with her second husband Casimero Raga and her son
Tomas Raga acquired by joint purchase a parcel of land from the Talisay-Minglanilla Estate.Tomas Raga
is the owner of undivided one-half thereof;

Vicenta Bucao and Tomas Raga executed jointly a notarial instrument identified as Annex "B" wherein
they acknowledged that Antonio Caballero had contributed the amount therein stated for the purchase
of the property and they sold 1/4 of the lot to him; when the title to said lot was issued, Vicenta Bucao
and Tomas Raga held it in trust for their co-owner;

That the portion mentioned as sold to plaintiff Antonio Caballero remained unsegregated from Lot 2072
and the deed of sale, Annex "B" of the Complaint; nor had it been registered in the Register of Deeds;
but he, had been in occupation of a portion of this lot peacefully until the present;

That the Tax Declaration of the property remained in the name of Vicenta Bucao; That during the
lifetime of Vicenta Bucao, she, with the conformity of her husband, sold her undivided 1/2 of the above
parcel to her co-owner, Tomas Raga;
defendants Olimpio Raga, Adriano Raga, Magdalena Raga and Tomas Raga executed an instrument
known as "Declaration and confirmation of sale" without the participation of plaintiffs Antonio
Caballero and Concordia Caballero, wherein they stated that they are the heirs of Vicenta Bucao of the
1/2 of the property to Tomas Raga,

Alma Deiparine acquired in good faith, with a just title and for a valuable consideration, the whole of
Lot 2072 from Tomas Raga as per deed of absolute sale identified as Annex "C"

. That defendant Alma Deiparine came to know only of Annex "B" when it was presented by plaintiff
Antonio Caballero at the trial of an ejectment case filed by the former in the Municipal Court of Talisay,

a) Whether the plaintiffs could ask for the rescission of the declaration of heirs and confirmation of
sale identified as Annex "E" in the complaint;

b) Whether the deed of sale in favor of Alma Deiparine can be annulled

This case was decided in favor of Antonio Caballero but the decision was appealed by Alma Deiparine
tothe Court of First Instance of Cebu which affirmed the decision for Caballero. The case is now in the
Court of Appeals on appeal by Alma Deiparine

Caballero and the defendant parties entered into a compromise agreement. And the lawyer of
Caballero admitted to certain statement of facts without the authority of his client, Caballero.

ISSUE: Is the compromise valid, considering that the lawyer admitted to facts which were not
authorized by his client to make.

No. A reading of the stipulation of facts convinced the court that it is a compromise agreement of the
parties. The stipulation concludes with this prayer: "WHEREFORE, it is most respectfully prayed that
theforegoing Stipulation of Facts be approved and that a decision be handed down on the legal issues
submitted on the basis of said Stipulation of Facts." Apparently it is intended to terminate the case.
Attorneys have authority to bind their clients in any case by any agreement in relation thereto made
inwriting, and in taking appeals, and in all matters of ordinary judicial procedure. But they cannot,
withoutspecial authority, compromise their client's litigation, or receive anything in discharge of a
client's claim but the full amount in cash It may be true that during the pre-trial hearing held on
February 3, 1968, the parties concerned agreed to execute a stipulation of facts but it does not mean
that the respective counsels of the contending parties can prepare a stipulation of facts the contents
of which is prejudicial to the interest of their clients and sign it themselves without the intervention of
their clients. Counsel for plaintiffs-appellants, Atty. Melecio C. Guba, agreed that defendant-appellee
Alma Deiparine bought the land in question in good faith and for a valuable consideration; that during
the lifetime of their mother Vicenta Bucao, she, with the conformity of her husband, sold her undivided
of the land in question to her co-owner and son, Tomas Raga. All these adverse facts were made the
basis of the appealed decision against the plaintiffs. No further evidence was presented as there was no
hearing. The attorney for the plaintiffs in making such admission went beyond the scope of his
authority as counsel and practically gave away the plaintiffs' case. The admission does not refer to a
matter of judicial procedure related to the enforcement of the remedy. It related to the very subject
matter of the cause of action, or to a matter on which the client alone can make the admission binding
on him. The broad implied or apparent powers of an attorney with respect to the conduct or control
of litigation are, however, limited to matters which relate only to the procedure or remedy. The
employment of itself confers upon the attorney no implied or power or authority over the subjectmatter
of the cause of action or defense; and, unless the attorney has expressly been granted authority with
respect thereto, the power to deal with or surrender these matters is regarded as remaining
exclusively in the client

PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs.MAXIMO STA. MARIA, ET AL., defendant,

VALERIANA, EMETERIA, TEOFILO, QUINTIN, ROSARIO and LEONILA, all surnamed STA.
MARIA,defendants-appellants.

*"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 all other powers and
duties are excluded."

*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.

Plaintiff PNB filed this action against defendant Maximo Sta. Maria and his six brothers and sisters,
and the Associated Insurance & Surety Co., Inc. as surety, for the collection of certain amounts
representing unpaid balances on two agricultural sugar crop loans due allegedly from defendants. 1

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, the pertinent portion
of which reads as follows:

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, granting him the following
authority:

For me and in my name to borrow money and make, execute, sign and deliver mortgages of real
estate now owned by me standing in my name and to make, execute, sign and deliver any and
all promissory notes necessary in the premises. (Exh. E-I)3

By virtue of the two above powers, Maximo Sta. Maria applied for two separate crop loans, 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. The records of the crop loan application further disclose that among the securities given by
Maximo for the loans were a "2nd mortgage on 25.3023 Has. of sugarland, including sugar quota rights
therein" including, the parcel of land jointly owned by Maximo and his six brothers and sisters herein for
the 1952-1953 crop loan, with the notation that the bank already held a first mortgage on the same
properties for the 1951-1952 crop loan of Maximo, 4 and a 3rd mortgage on the same properties for the
1953-1954 crop loan. 5
RTC rendered judgment in favor of bank

Defendants-appellants reiterate in their brief their main contention in their answer to the complaint
that under this special power of attorney, they had not given their brother, Maximo, the authority to
borrow money but only to mortgage the real estate jointly owned by them; and that if they are liable at
all, their liability should not go beyond the value of the property which they had authorized to be given
as security for the loans obtained by Maximo. In their answer, defendants-appellants had further
contended that they did not benefit whatsoever from the loans, and that the plaintiff bank's only
recourse against them is to foreclose on the property which they had authorized Maximo to mortgage.

SC find the appeal of defendants-appellants, be well taken.

"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 all other powers and duties are
excluded." 7 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.

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

Plaintiff's argument that "a mortgage is simply an accessory contract, and that to effect the mortgage, a
loan has to be secured" 10 falls, far short of the mark. Maximo had indeed, secured the loan on his own
account and the defendants-appellants had authorized him to mortgage their respective undivided
shares of the real property jointly owned by them as security for the loan

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. But the burden of establishing such ratification or estoppel falls squarely upon plaintiff bank. It
has not only failed to discharge this burden, but the record stands undisputed that defendant-appellant
Quintin Sta. Maria testified that he and his co-defendants executed the authority to mortgage "to
accommodate (my) brother Dr. Maximo Sta. Maria ... and because he is my brother, I signed it to
accommodate him as security for whatever he may apply as loan. Only for that land, we gave him as,
security" and that "we brothers did not receive any centavo as benefit." 11 The record further shows
plaintiff bank itself admitted during the trial that defendants-appellants "did not profit from the loan"
and that they "did not receive any money (the loan proceeds) from (Maximo)." 12 No estoppel,
therefore, can be claimed by plaintiff as against defendants-appellants.

defendant Valeriana Sta. Maria's liability to plaintiff expressly granted Maximo the authority to incur
such loans. (Exh. E-1.) Although the question has not been raised in appellants' brief, we hold that
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. There is a solidary liability
only when the obligation expressly so states, or when the law or the nature of the obligation requires
solidarity." It should be noted that in the additional special power of attorney, Exh. E-1, executed by
Valeriana, she did not grant Maximo the authority to bind her solidarity with him on any loans he might
secure thereunder.

WHEREFORE, the judgment of the trial court against defendants-appellants is set aside. Valeriana Sta.
Maria is modified in that her liability is held to be joint and not solidary,

BA FINANCE CORPORATION, petitioner, vs.HON. COURT OF APPEALS and TRADERS ROYAL

BANK, respondents.

* The rule is clear that an agent who exceeds his authority is personally liable for damages

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

Philip Wong as credit administrator of BA Finance Corporation for and in behalf of the latter, undertook
to guarantee the loan of the Gaytano spouses. The letter reads:

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

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

RTC rendered in favor of plaintiff and against defendants/Gaytano spouses, ordering the latter to jointly
and severally pay the plaintiff the following:

CA rendered ordering the defendants Gaytano spouses and alternative defendant BA Finance
Corporation, jointly and severally, to pay the plaintiff

PETITIONER IS JOINTLY AND SEVERALLY LIABLE WITH GAYTANO SPOUSES DESPITE ITS FINDINGS THAT
THE LETTER IS "INVALID AT ITS INCEPTION?

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

NOT RULING THAT SUCH LETTER GUARANTY BEING PATENTLY ULTRA VIRES, IS UNENFORCEABLE;

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

We find the petitioner's contentions meritorious. It is a settled rule that burden is on respondent bank
to satisfactorily prove that the credit administrator with whom they transacted acted within the
authority given to him by his principal, petitioner corporation. The only evidence presented by
respondent bank was the testimony of Philip Wong, credit administrator, who testified that he had
authority to issue guarantees as can be deduced from the wording of the memorandum given to him by
petitioner corporation on his lending authority. The said memorandum which allegedly authorized
Wong not only to approve and grant loans but also to enter into contracts of guaranty in behalf of the
corporation, partly reads:

To: Philip H. Wong, SAM

Credit Administrator

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

Head of Credit Administration

Re: Lending Authority

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

a) P650,000.00 Secured Loans

b) P550,000.00 Supported Loans
c) P350,000.00 Truck Loans/Contracts/Leases
d) P350,000.00 Auto Loan Contracts/Leases
e) P350,000.00 Appliance Loan Contracts
f) P350,000.00 Unsecured Loans

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

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

xxx xxx xxx

LEVELS OF APPROVAL

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

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

Although Wong was clearly authorized to approve loans even up to P350,000.00 without any security
requirement, which is far above the amount subject of the guaranty in the amount of P60,000.00,
nothing in the said memorandum expressly vests on the credit administrator power to issue
guarantees. We cannot agree with respondent's contention that the phrase "contingent commitment"
set forth in the memorandum means guarantees. It has been held that a power of attorney or authority
of an agent should not be inferred from the use of vague or general words. Guaranty is not presumed, it
must be expressed and cannot be extended beyond its specified limits (Director v. Sing Juco, 53 Phil.
205).

Wong's testimony that he had entered into similar transactions of guaranty in the past for and in behalf
of the petitioner, lacks credence due to his failure to show documents or records of the alleged past
transactions. The actuation of Wong in claiming and testifying that he has the authority is
understandable. He would naturally take steps to save himself from personal liability for damages to
respondent bank considering that he had exceeded his authority. The rule is clear that an agent who
exceeds his authority is personally liable for damages (

the petition is GRANTED.

THE DIRECTOR OF PUBLIC WORKS, plaintiff-appellee,

vs.SING JUCO, ET AL., defendants. SING JUCO, SING BENGCO and PHILIPPINE NATIONAL
BANK, appellants.

From Torrens certificate of title No. 1359 relating to land in the municipality of Iloilo, it appears that on
September 28, 1920, the title of the property described therein was owned, in undivided shares, by
Mariano de la Rama, Gonzalo Mariano Tanboontien, Sing Juco and Sing Bengco. The interest vested by
said certificate in Mariano de la Rama was subsequently transferred to sale to Enrique Enchaus. It
further appears that on November 23, 1020, the owners of the property covered by the said certificate
conveyed it by way of a mortgage to the Philippine National Bank for the purpose of securing a credit in
current account in a mount not in excess of P170,000, with interest at a rate of 12 percent per annum.
The indebtedness covered by this mortgage has not been satisfied, and upon the date of the decision of
the court below it amounted to the sum of P170,000, plus interest at 12 percent per annum from
November 24, 1920.

The land above referred to contains an area of nearly 16 hectares, or to be exact, 158,589.44 square
meters according to the certificate. It is located on "Point Llorente" at the mouth of Iloilo river, near the
City of Iloilo, and it is of so low a level that, prior to the improvement to which reference is to be made,
it was subject to frequent flooding. In 1921, the Government of the Philippine Islands was planning
extensive harbor improvements in this vicinity, requiring extensive dredging by the Bureau of Public
Works in the mouth of said river. The conduct of these dredging operations made it necessary for the
Director of Public Works to find a place of deposit for the dirt and mud taken from the place, or places,
dredged. As the land already referred to was low and easily accessible to the spot where dredging was
to be conducted, it was obviously for the interest of the Government and the said owners of the land
that the material taken out by the dredges should be deposited on the said property. Accordingly, after
preliminary negotiations to this effect have been conducted, a contract was made between the Director
of Public Works, representing the Government of the Philippine Islands, and the four owners, M. de la
Rama, Sing Juco, G. M. Tanboontien, and Seng Bengco, of which, as modified by some respects by
subsequent agreement, the following features are noteworthy.
(1) The Bureau of Public Works agreed to deposit the material to be dredged by it from the Iloilo River,
in connection with the contempted improvement, upon the lot of the land, already described as covered
by certificate No. 1359, at a price to be determined at the actual cost of the filling, with certain
surcharges to be determined by the Director of Public Works. It was contemplated in the original draft
of the contract that the Bureau would be able to furnish some 250,000 cubic meters of dredged material
for filling in the land, was limited to the material which should be dredged from the river as a result of
the proposed improvement. To this stipulation the four owners of the property assented on March 14,
1921.

(2) With respect to the compensation it was agreed that the amount due should be determined by the
Director of Public Works, under certain conditions mentioned in the contract, of an amount of not less
that 20 nor more than 75 centavos per cubic meter. It was further agreed that, when the work should be
finished, the cost thereof should be paid by the owners in 5 annual installments and that for failure to
pay such installment the whole of the amount thereafter to accrue should become at once due. This
contract was noted in the Torrens certificate of title on January 8, 1924.

In connection with the making of the contract abovementioned, the, Director of Public Works required a
bond to be supplied by the owners in the penal amount of P150,000, approximately twice the estimated
cost of the filling, conditioned for the payment of the amount due from the owners. This bond was
executed contemporaneously with the main contract; and in connection therewith it should be noted
that one of the names appearing upon said contract was that of "Casa Viuda de Tan Toco," purporting to
be signed by M. de la Rama.

The dredging operation were conducted by the Bureau of Public Works in substantial accomplice, we
find, with the terms of said agreement; and after the account with the owners were liquidated and the
amount due from them determined, demand was made upon them for the payment of the first
installment. No such payment was, however, made as a consequence this action was instituted by the
Director of Public Works on October 14, 1926, for the purpose of recovering the amount due to the
Government under the contract from the original owners of the property from the sureties whose
names were signed to the contract of suretyship, and to enforce the obligation as a real lien upon the
property. In said action the Philippine National Bank was made a party defendant, as having an interest
under its prior mortgage upon the property, while Enrique Enchaus was made defendant as successor in
interest of M. de la Rama, and Tan Ong Sze widow of Tan Toco, was also made defendant by reason of
her supposed liability derived from the act of De la Rama in signing the firm "Casa Viuda de Tan Toco" as
a surety on bond. It was noteworthy that in the complaint it was asked that, in the enforcement of the
government's lien, the property should be sold "subject to the first mortgage in favor of the Philippine
National Bank."

To this complaint different defenses were set up, as follows: On behalf of the owners of the property, it
was contended that the government has not complied with that contract, in that dredged material
deposited on the land had not been sufficient in quantity to raise the level of the land above high water,
and that, as a consequence, the land had not been much benefited. It is therefore asserted that the
owners of the property are not obligated to pay the filling operation. These defendants sought to
recover further damages by way of cross-complaint for the same supposed breach of contract on the
part of the Government. On the part of Viuda de Tan Toco the defense was interposed that the name
"Casa Viuda de Tan Toco" signed to the contract of suretyship by Mariano de la Rama was signed
without authority; while on the part of the Philippine National Bank was asserted that the mortgage
credit pertaining to the bank is superior to the Governments lien for improvement, and by way of
counterclaim the bank asked that its mortgage be foreclosed for the amount of its mortgage credit, and
that the four mortgagors, Sing Juco, Sing Bengco, M. de la Rama and G.M. Tanboontien, be required to
pay the amount due to the bank, and that in case of their failure to do so the mortgaged property
should be sold and the proceeds paid preferentially to the bank upon its mortgage.

Upon hearing the cause the trial court, ignoring that part of the original complaint wherein the
Government seeks to enforce its lien in subordination to its first mortgage, made pronouncements:

(1) Declaring Sing Juco, Sing Bengco, M. de la Rama and G. M. Tanboontien indebted to the
Government in the amount of P70, 938, with interest from the date of the filing of the
complaint, and requiring them to pay the said sum to the plaintiff;

(2) Declaring, in effect, that the lien of the Government for the filing improvement was superior
to the mortgage of the Philippine National Bank; and finally

(3) Declaring the defendant Tan Ong Sze, Viuda de Tan Toco, personally liable upon the contract
of suretyship, in case the four principal obligors should not satisfy their indebtedness to the
Government, or if the land should not sell enough to satisfy the same.

From this judgment various parties defendant appealed as follows: All of the defendants, except the
Philippine National Bank, appealed from so much of the decision as held that the defendant owners and
signatories to the contract of suretyship has not been released by non-performance of the contract on
the part of the Bureau of Public Works, and from the refusal of the court to give to the defendant
owners damages for breach of contract on the part of the Government. On the part of Tan Ong Sze,
Viuda de Tan Toco, error is assigned to the action of the court in holding said defendant liable upon the
contract of suretyship. Finally, the Philippine National Bank appealed from so much of the decision as
gave the lien of the Government for improvement priority over the mortgagee executed in favor of the
bank.

Dealing with these contentions in the order indicated, we find the contention of the appellants (except
the Philippine National Bank), to the effect that the Director of Public Works has failed to comply with
the obligations imposed upon the government by the contract, is wholly untenable. By said contract, the
Government was not obligated to raise the land on which the dredged material was deposited to any
specified level. The Government only obligated itself upon said land the material should be dredged
from the mouth of the Iloilo River in the course of the improvement undertaken by the Government in
and near that place. Under the original contract as originally drafted, the Government agreed to furnish
250,000 cubic meters, more or less, of dredged material; but on Mar. 14, 1921, the owners of the
property indicated their acceptance of a modification of the contract effected by the Director of Public
Works and the Secretary of Commerce and Communications, in which it was made clear that the
material to be supplied would be such only as should be dredged from the river as a result of the
proposed improvement. In the endorsement of the Director of Public Works, thus accepted by the
owners, it was made clear that the Bureau of Public Works did not undertake to furnish material to
complete the filling of the land to any specified level. Proof submitted on the part of the owners tends
to show that parts of the filled land are still subject to inundation in rainy weather; and it is contended,
that the owners have, for this reason, been able to sell in lots the property to individual occupants. the
sum of P15,000, which is claimed upon this account, as damages by the owners, is the amount of
interest alleged to have been accrued upon their investment, owing to their inability to place the land
advantageously upon the market. The claim is, as already suggested, untenable. There has been no
breach on the part of the Government in fulfilling the contract. In fact it appears that the Government
deposited in the period covered by the contract 236,460 cubic meters, and after the amount thus
deposited had been reduced by 21,840 cubic meters, owing to the natural process of drying, the Bureau
of Public Works further deposited 53,000 cubic meters on the same land. In this connection, the district
engineer testified that the filling which has been charged to the owners at P70,938 actually cost the
Government the amount of P88,297.85. The charge made for the work was evidently computed on a
very moderate basis; and the owners of the property have no just ground of complaint whatever.

The contention of Tan Ong Sze, widow of Tan Toco, to the effect that she was not, and is not, bound by
the contract of suretyship, is our pinion, well-founded. It will be remembered that said contract purports
to have been signed by Mariano de la Rama, acting for this defendant under the power of attorney. But
the Government has exhibited no power of attorney which would authorize the creation, by the
attorney-in-fact, of an obligation in the nature of suretyship binding upon this principal.

It is true that the Government introduced in evidence 2 documents exhibiting powers of attorney,
conferred by these documents (Exhibit K, identical with Exhibit 5) Mariano de la Rama was given the
power which reads as follows:

. . . and also for me and in my name to sign, seal and execute, and as my act and deed deliver,
any lease or any other deed for the conveying any real or personal property or the other matter
or thing wherein I am or may be personally interested or concerned. And I do hereby further
authorize and empower my said attorney to substitute and point any other attorney or
attorneys under him for the purposes aforesaid, and the same again and pleasure to revoke; and
generally for me and in my name to do, perform, and execute all and any other lawful and
reasonable acts and things whatsoever as fully and effectually as I, the said Tan Ong Sze might or
could do if personally present.

In another document, (Exhibits L and M), executed in favor of the same Mariano de la Rama by his uncle
Tan Lien Co, attorney-in-fact of Tan Ong Sze, with power of substitution, there appears the following:

. . . and also for her and for her name to sign, seal and execute, and as her act and deed deliver,
any lease, release, bargain, sale, assignment, conveyance or assurance, any other deed for the
conveying any real or personal property or other matter or thing wherein she or may be
personally interested or concerned.

Neither of these powers officially confers upon Mariano de la Rama the power to bind a principal by a
contract of suretyship. The clauses noted relate more specifically to the execution of contracts relating
to property; and the more general words at the close of the quoted clauses should be interpreted, under
the general rule ejusdem generis, as referring to the contracts of like character. Power to execute a
contract so exceptional a nature as a contract of suretyship or guaranty cannot be inferred from the
general words contained in these powers.

In article 1827 of the Civil Code it is declared that guaranty shall not be presumed; it must be expressed
and cannot be extended beyond its specified limits. By analogy a power of attorney to execute a
contract of guaranty should not be inferred from vague or general words, especially when such words
have their origin and explanation in particular powers of a wholly different nature. It results that the trial
court was in error in giving personal judgment against Tan Ong Sze upon the bond upon which she was
sued in this case.

We now proceed to consider the last important disputed question involved in this case, which is,
whether the indebtedness owing to the Government under the contract for filling the parcel of land
already mentioned is entitled to preference over the mortgage credit due to the Philippine National
Bank, as the trial judge held, or whether on the contrary, the latter claim is entitled to priority over the
claim of the Government Upon entering into the discussion of the feature of the case it is well to recall
the fact that the bank's mortgage was registered in the office of the Register of Deeds of the province of
Iloilo on November 26, 1920, while the filing contract was registered on January 8, 1924, that is to say,
there is a priority of more than three years, in point of time, in the inscription of the mortgage credit
under the filling contract was made an express lien upon the property which was the subject of
improvement.

In the brief submitted in behalf of the bank it appears to be assumed that the Government credit under
the filling contract is a true refectionary credit (credito refacionario) under subsection 2 of Article 1923
of the Civil Code. It may be observed, however, that in a precise and technical sense, this credit is not
exactly of the nature of the refectionary credit as known to the civil law. In the civil law the refectionary
credit is primarily an indebtedness incurred in the repair or reconstruction of something previously
made, such repair or reconstruction being made necessary by the deterioration or destruction as it
formerly existed. The conception does not ordinarily include an entirely new work, though Spanish
jurisprudence appears to have sanctioned this broader conception in certain cases as may be gathered
from the decision in the Enciclopedia Juridica Espanola (vol. 26, pp. 888-890) s. v. Refaccionario. The
question whether the credit we are considering falls precisely under the conception of the refectionary
credit in the civil law is in this case academic rather than practical, for the reason that by the express
terms of the filling contract the credit was constituted a lien upon the improved property. But assuming,
as might be tenable in the state of jurisprudence, that said credit is a refectionary credit enjoying
preference under subsection 3 or article 1923 of the Civil code , then the mortgage credit must be given
priority under subsection 2 of the article 1927 of the same code, for the reason that the mortgage was
registered first.

Possibly the simpler view of the situation is to consider the Government's right under the stipulation
expressly making the credit a lien upon the property, for it was certainly lawful for the parties to the
filling contract to declare the credit a lien upon the property to be improved to the extent hereinafter
define whether the credit precisely fulfills the conception of refectionary credit or not. In this aspect
we have before us a competition between the real lien created by the filling contract of the later
registration. The true solution to the problem is, in our opinion, not open to doubt; and again the result
is that priority must be conceded to the mortgage. The mortgage was created by the lawful owners at a
time when no other competing interest existed in the property. The lien of the mortgage therefore
attached to the fee, or unlimited interest of the owners in the property. On the other hand, the lien
created by the filling contract was created after the mortgage had been made and registered, and
therefore, after the owners of the property had parted with the interest created by the mortgage. The
Government's lien owes its origin to the contract, and derives its efficacy from the volition of the
contracting parties. But no party can by contract create a right in another intrinsically greater than that
which he himself possess. The owners, at the time this contract was made, were owners of the equity of
redemption only and not of the entire interest in the property, and the lien created by the contract
could only operate upon the equity of redemption.
In this connection, we observed that, as the new material was deposited from the Government dredges
upon the property in question, it became an integral part of the soil and an irremovable fixture; and the
deposit having been made under contract between the Government and the owners of the equity of
redemption, without the concurrence of the mortgage creditor in said contract the latter could not be
prejudiced thereby. The trial court, in declaring that the Government's lien should have preference over
the mortgage, seems to have proceeded upon the idea that, at the time the mortgage was created, the
new soil had yet been deposited under the filling contract and that as a consequence the mortgage lien
should not been considered as attaching to the value added by deposit of the additional material. This
proposition, however, overlooks the fact that the deposited material became an irremovable fixture, by
the act and intention of the parties to the filling contract, and the lien of the mortgage undoubtedly
attached to the increment thus spread over and affixed to the mortgaged land. If the idea which
prevailed in the trial court should be accepted as law upon this point, the result would be that a
mortgage creditor could, by the act of strangers, be entirely proved out of his property by making of
improvements to which he has not assented. This cannot be accepted as good law.

We may add that the case cannot, on this point, be resolved favorably to the contention of the Director
of Public Works, upon the authority of Unson vs. Urquijo, Zuluoaga and Escubi (50 Phil., 160), for the
reason that upon the deposit of the dredged material on the land such material lost its identity. In the
case cited the machinery in respect to which the vendor's preference was upheld by this court retained
its separate existence and remained perfectly capable of identification at all times.

From what it has been said it results that the appealed judgment must be affirmed, and the same is
hereby affirmed, in dismissing, in effect, the cross-complaint filed by some of the defendants against the
plaintiff, the Director of Public Works. Such judgment is further affirmed in its findings, which are not
dispute, with respect to the amount of the Government's claim under the filling contract and the
amount of mortgage credit of the bank, as it is also affirmed in respect to the joint and several judgment
entered in favor of the plaintiff against Sing Juco, Sing Bengco, Tanboontien and Mariano de la Rama
Tanbunco (alias Mariano de la Rama) for the amount due to the Government

Said judgment, however, must be reversed and the same is being reversed in so far as it holds that Tan
Ong Sze, Viuda de Tan Toco, is liable upon the contract of suretyship, and she is hereby absolved from
the complaint. The judgment must also be reversed in so far as it declares that the Government's lien
under the filling contract is entitled to priority over the bank's mortgage. On the contrary it is hereby
declared that the bank's credit is entitled to priority out of the proceeds of the foreclosure sale, the
residue, if any, to be applied to the Government's lien created by the filling contract and otherwise in
accordance with law. For further proceedings in conformity with this opinion, the cause is hereby
remanded to the cause of origin, without pronouncements as to costs. So ordered.
HE PHILIPPINE SUGAR ESTATES DEVELOPMENT CO., LTD., INC., plaintiff-appellee,
vs.
JUAN M. POIZAT, ET AL., defendants.
GABRIELA ANDREA DE COSTER, appellant.

Antonio M. Opisso for appellant.

Eusebio Orense and Fisher, DeWitt, Perkins & Brady for appellee.

STATEMENT

August 25, 1905, the appellant, with his consent executed to and in favor of her husband, Juan M.
Poizat, a general power of attorney, which among other things, authorized him to do in her name, place
and stead, and making use of her rights and actions, the following things:

To loan or borrow any amount in cash or fungible conditions he may deem convenient collecting
or paying the principal or interest, for the time, and under the principal of the interest, when
they respectively should or private documents, and making there transactions with or without
mortgage, pledge or personal securities.

November 2, 1912, Juan M. Poizat applied for and obtained from the plaintiff a credit for the sum of
10,000 Pounds Sterling to be drawn on the" Banco Espanol del Rio de la Plata" in London not later than
January, 1913. Later, to secure the payment of the loan, he executed a mortgage upon the real property
of his wife, the material portions of which are as follows:

This indenture entered into the City of Manila, P.I., by and between Juan M. Poizat, merchant, of
legal age, married and residing in the City of Manila, in his own behalf and in his capacity also as
attorney in fact of his wife Dona Gabriela Andrea de Coster by virtue of the authority vested in
him by the power of attorney duly executed and acknowledge in this City of Manila, etc.

First. That in the name of Dona Gabriela Andrea de Coster, wife of Don Juan M. Poizat, there is
registered on page 89 (back) of Book 3, Urban Property consisting of a house and six adjacent
warehouse, all of strong material and constructed upon her own land, said property being Nos.
5, 3, and 1 of Calle Urbiztondo, and No. 13 of Calle Barraca in the District of Binondo in the City
of Manila, etc.

Second. That the marriage of Don Juan M. Poizat and Dona Gabriela Andrea de Coster being
subsisting and undissolved, and with the object of constructing a new building over the land
hereinabove described, the aforesaid house with the six warehouse thereon constructed were
demolished and in their stead a building was erected, by permission of the Department of
Engineering and Public Works of this City issued November 10, 1902, said building being of
strong material which, together with the land, now forms only one piece of real estate, etc;
which property must be the subject of a new description in which it must appear that the land
belongs in fee simple and in full ownership as paraphernal property to the said Dona Gabriela
Andrea de Coster and the new building thereon constructed to the conjugal partnership of Don
Juan M. Poizat and the said Dona Gabriela Andrea de Coster, etc.
Third. That the Philippine Sugar Estates Development Company, Ltd., having granted to Don
Juan M. Poizat a credit of Ten Thousand Pounds Sterling with a mortgage upon the real property
above described, etc.

(a) That the Philippine sugar Estated Development Company, Ltd. hereby grants Don Juan M.
Poizat a credit in the amount of Ten Thousand Pounds sterling which the said Mr. Poizat may
use within the entire month of January of the coming year, 1913, upon the bank established in
the City of London, England, known as 'Banco Espanol del Rio de la Plata, which shall be duly
advised, so as to place upon the credit of Mr. Poizat the said amount of Ten Thousand Pounds
Sterling, after executing the necessary receipts therefore.

(c) That Don Juan M. Poizat personally binds himself and also binds his principal Dona Gabriela
Andrea de Coster to pay the Philippine Sugar Estates Development Company, Ltd., for the said
amount of Ten Thousand Pounds Sterling at the yearly interest of 9 per cent which shall be paid
at the end of each quarter, etc.

(d) Don Juan M. Poizat also binds himself personally and his principal Dona Gabriela Andrea de
Coster to return to the Philippine Sugar Estates Development Company, Ltd., the amount of Ten
Thousand Pounds Sterling within four years from the date that the said Mr. Poizat shall receive
the aforesaid sum as evidenced by the receipt that he shall issue to the 'BAnco Espanol del Rio
de la Plata.'

(e) As security for the payment of the said credit, in the case Mr. Poizat should receive the
money, together with its interest hereby constitutes a voluntary especial mortgage upon the
Philippine Sugar Estates Development Company, Ltd., f the urban property above described, etc.

(f) Don Juan M. Poizat in the capacity above mentioned binds himself, should he receive the
amount of the credit, and while he may not return the said amount of Ten thousand Pounds
Sterling to the Philippine Sugar Estates Development Company, Ltd., to insure against fire the
mortgaged property in an amount not less than One hundred Thousand Pesos, etc.

Fourth. Don Buenaventura Campa in the capacity that he holds hereby accepts this indenture in
the form, manner, and condition executed by Don Juan M. Poizat by himself personally and in
representation of his wife Dona Gabriela Andrea de Coster, in favor of the Philippine Sugar
Estates Development Company, Ltd.,

In witness whereof, we have signed these presents in Manila, this November 2, 1912.

(Sgd.) JUAN M. POIZAT

THE PHILIPPINE SUGAR ESTATES
DEVELOPMENT COMPANY, LTD.
The President
BUENAVENTURA CAMPA

Signed in the presence of:

 (Sgd.) MANUEL SAPSANO
JOSE SANTOS

UNITED STATES OF AMERICA

PHILIPPINE ISLANDS
CITY OF MANILA

In the City of Manila P.I., this November 2, 1912, before me Enrique Barrera y Caldes, a Notary
Public for said city, personally appeared before me Don Juan M. Poizat and Don Buenaventura
Campa, whom i know to be the persons who executed the foregoing document and
acknowledged same before me as an act of their free will and deed; the first exhibited to me his
certificate of registry No. 14237, issued in Manila, February 6, 1912, the second did not exhibit
any cedula, being over sixty years old; this document bears No. 495, entered on page 80 of my
Notarial registry.

Before me:
(Sgd.) Dr. ENRIQUE BARRERA Y CALDES
[NOTARIAL SEAL]

Notary Public
Up to the 31st of December , 1912

For failure to pay the loan, on November 12, 1923, the plaintiff brought an action against the defendants
to foreclose the mortgage. In this action, the summons was served upon the defendant Juan M. Poizat
only, who employed the services of Antonio A. Sanz to represent the defendants. The attorneys filed a
general appearance for all of them, and later an answer in the nature of a general denial.

February 18, 1924, when the case was called for trial, Jose Galan y Blanco in open court admitted all of
the allegations made in the compliant, and consented that judgment should be rendered as prayed for .
Later, Juan M. Poizat personally, for himself and his codefendants, file an exception to the judgment and
moved for a new trial, which was denied March 31, 1924.

August 22, 1924, execution was issued directing the sale of the mortgaged property to satisfy the
judgment.itc@alf

September 18, 1924, the property, which had an assessed value of P342,685, was sold to the plaintiff for
the sum of P100,000.

September 23, 1924, and for the first time, the appellant personally appeared by her present attorney,
and objected to the confirmation of the sale, among other things, upon illegally executed, and is null and
void, because the agent of this defendant was not authorized to execute it. That there was no
consideration. That the plaintiff, with full knowledge that J. M. Poizat was acting beyond the scope of his
authority, filed this action to subject the property of this defendant to the payment of the debt which,
as to appellant, was not a valid contract. That the judgment was rendered by confession when the
plaintiff and J. M. Poizat knew that Poizat was not authorized to confess judgment, and that the
proceeding was a constructive fraud. That at the time the action was filed and the judgment rendered,
this defendant was absent from the Philippine Islands, and had no knowledge of the execution of the
mortgage. That after the judgment of foreclosure became final and order of the sale of the property was
made, that this defendant for the first time learned that he mortgage contract was tainted with fraud,
and that she first knew and learned of such things on the 11th of September, 1924. That J. M. Poizat was
not authorized to bind her property to secure the payment of his personal debts. That the plaintiff knew
that the agent of the defendant was not authorized to bind her or her property. That the mortgage was
executed to secure a loan of 10,000 Pounds which was not made to this defendant or for her benefit,
but was made to him personally and for the personal use and benefit of J. M. Poizat.

Among other things, the mortgage in question, marked Exhibit B, was introduced in evidence, and made
a part of the record.

All of such objections to the confirmation of the sale were overruled, from which Gabriela Andrea de
Coster appealed and assigns the following errors:

I. The lower court erred in finding that Juan M. Poizat was, under the power of attorney which
he had from Gabriela Andrea de Coster, authorized to mortgage her paraphernal property as
security for a loan made to him personally by the Philippine Sugar Estates Development
Company, Ltd., to him;

II. The lower court erred in not finding that under the power of attorney, Juan M. Poizat had no
authority to make Gabriela Andrea de Coster jointly liable with him for a loan of 10,000 pound
made by the Philippine Sugar Estates Development Co., Ltd., to him;

III. The lower court erred in not finding that the Philippine Sugar Estates Development Company,
Ltd., had knowledge and notice of the lack of authority of Don Juan M. Poizat to execute the
mortgage deed Exhibit A of the plaintiff;

IV. The lower court erred in holding that Gabriela Andrea de Coster was duly summoned in this
case; and in holding that Attorney Jose Galan y Blanco could lawfully represent her or could,
without proof of express authority, confess judgment against Gabriela Andrea de Coster;

V. The court erred in holding that the judgment in this case has become final and res judicata;

VI. The court erred in approving the judicial sale made by the sheriff at an inadequate price;

VII. The lower court erred in not declaring these proceedings, the judgment and the sale null
and void.

JOHNS, J.:

For the reasons stated in the decision of this court in the Bank of the Philippine Islands vs. De Coster, the
alleged service of the summons in the foreclosure suit upon the appellant was null and void. In fact, it
was made on J. M. Poizat only, and there is no claim or pretense that any service of summons was ever
made upon her. After service was made upon him, the attorneys in question entered their appearance
for all of the defendants in the action, including the appellant upon whom no service was ever made,
and file an answer for them. Later, in open court, it was agreed that judgment should be entered for the
plaintiff as prayed for in its complaint.

The appellant contends that the appearance made by the attorneys for her was collusive and fraudulent,
and that it was made without her authority, and there maybe some truth in that contention. It is very
apparent that t the attorneys made no effort to protect or defend her legal rights, but under our view of
the case, that question is not material to this decision.

The storm center of this case is the legal force and effect of the real mortgage in question , by whom
and for whom it was executed, and upon whom is it binding, and whether or not it is null and void as to
the appellant.

It is admitted that the appellant gave her husband, J. M. Poizat, the power of attorney in question, and
that it is in writing and speaks for itself. If the mortgage was legally executed by her attorney in fact for
her and in her name as her act and deed, it would be legal and binding upon her and her property. If not
so executed, it is null and void.

It appears upon the face of the instrument that J. M. Poizat as the husband of the wife, was personally a
party to the mortgage, and that he was the only persona who signed the mortgage. and the he was the
only person who signed the mortgage. It does not appear from his signature that he signed it for his wife
or as her agent or attorney in fact, and there is nothing in his signature that would indicate that in the
signing of it by him, he intended that his signature should bind his wife. It also appears from the
acknowledgment of the instrument that he executed it as his personal act and deed only, and there is
nothing to show that he acknowledge it as the agent or attorney in fact of his wife, or as her act and
deed.

The mortgage recites that it was entered into by and between Juan M. Poizat in his own behalf and as
attorney in fact of his wife. That the record title of the mortgaged property is registered in the name of
his wife, Dona Gabriela Andrea de Coster. That they were legally married, and that the marriage
between them has never been dissolved. That with the object of constructing a new building on the
land. the six warehouses thereon were demolished, and that a new building was erected. That the
property is the subject of a new registration in which it must be made to appear that the land belongs in
fee simple and in full ownership as the paraphernal property of the wife, and that the new building
thereon is the property of the conjugal partnership. "That the Philippine Sugar Estates Development
Company, Ltd., having granted to Don Juan M. Poizat a credit of 10,000 Pounds Sterling with the
mortgage upon the real property above described," that the Development Company "hereby grants Don
Juan M. Poizat a credit in the amount of 10,000 Pounds Sterling which the said Mr. Poizat may use, etc."
That should he personally or on behalf of his wife use the credit he acknowledges, that he and his
principal are indebted to the Development Company in the sum of 10,000 Pounds Sterling which "they
deem to have received as a loan from the said commercial entity." That he binds himself and his wife to
pay that amount with a yearly interest of 9 per cent, payable quarterly. That as security for the payment
of said credit in the case Mr. Poizat should receive the money at any time, with its interest, "the said Mr.
Poizat in the dual capacity that above mentioned binds himself, should he receive the amount of the
credit."

It thus appears that at the time the power of attorney and the mortgage were executed, Don Juan M.
Poizat and Gabriela Andrea de Coster were husband and wife, and that the real property upon which the
mortgage was her sole property before her marriage, and that it was her paraphernal property at the
time the mortgage was executed, and that the new building constructed on the land was the property of
the conjugal partnership.

The instrument further recites that the Development Company "hereby grants Don Juan M. Poizat a
credit in the amount of 10,000 Pounds Sterling which the said Mr. Poizat may use within the entire
month of January of the coming year, 1913." In other words, it appears upon the face of the mortgage
that the loan was made to the husband with authority to use the money for his sole use and benefit.
With or without a power of attorney, the signature of the husband would be necessary to make the
instrument a valid mortgage upon the property of the wife, even though she personally signed the
mortgage.

It is contended that the instrument upon its face shows that its purpose and intent was to bind the wife.
But it also shows upon its face that the credit was granted to Don Juan M. Poizat which he might use
within the "entire month of January."

Any authority which he had to bind his wife should be confined and limited to his power of attorney.

Giving to it the very broadest construction, he would not have any authority to mortgage her property,
unless the mortgage was executed for her "and in her name, place or stead," and as her act and deed.
The mortgage in question was not so executed. it was signed by Don Juan M. Poizat in his own name, his
own proper person, and by him only, and it was acknowledge by him in his personal capacity, and there
is nothing in either the signature or acknowledgment which shows or tends to show that it was executed
for or on behalf of his wife or "in her name, place or stead."

It is contended that the instrument shows upon its face that it was intended to make the wife liable for
his debt, and to mortgage her property to secure its payment, and that his personal signature should
legally be construed as the joined or dual signature of both the husband and that of the wife as her
agent. That is to say, construing the recitals in the mortgage and the instrument as a whole, his lone
personal signature should be construed in a double capacity and binding equally and alike both upon the
husband and the wife. No authority has been cited, and none will ever be found to sustain such a
construction.

As the husband of the wife, his signature was necessary to make the mortgage valid. In other words, to
make it valid, it should have been signed by the husband in his own proper person and by him as
attorney in fact for his wife, and it should have been executed by both husband and wife, and should
have been so acknowledged.

There is no principle of law by which a person can become liable on a real mortgage which she never
executed either in person or by attorney in fact. It should be noted that this is a mortgage upon real
property, the title to which cannot be divested except by sale on execution or the formalities of a will or
deed. For such reasons, the law requires that a power of attorney to mortgage or sell real property
should be executed with all of the formalities required in a deed. For the same reason that the personal
signature of Poizat, standing alone, would not convey the title of his wife in her own real property, such
a signature would not bind her as a mortgagor in real property, the title to which was in her name.

We make this broad assertion that upon the facts shown in the record, no authority will ever be found
to hold the wife liable on a mortgage of her real property which was executed in the form and manner
in which the mortgage in question was executed. The real question involved is fully discussed in
Mechem on Agency, volume 1, page 784, in which the author says:

It is to be observed that the question here is not how but how such an authority is to be
executed. it is assumed that the agent was authorized to bind his principal, but the question is,
has he done so.

That is the question here.

Upon that point, there is a full discussion in the following sections, and numerous authorities are cited:

SEC. 1093. Deed by agent must purport to be made and sealed in the name of the principal. It
is a general rule in the law of agency that in order to bind the principal by a deed executed by an
agent, the deed must upon its grace purport to be made, signed and sealed in the name of the
principal. If, on the contrary, though the agent describes name, the words of grant, covenant
and the like, purport upon the face of the instrument to be his, and the seal purports to be his
seal, the deed will bind the agent if any one and not the principal.

SEC. 1101. Whose deed is a given deed. How question determined. In determining whether
a given deed is the deed of the principal, regard may be had First, to the party named as
grantor. Is the deed stated to be made by the principal or by some other person? Secondly, to
the granting clause. Is the principal or the agent the person who purports to make the
grant? Thirdly, to the covenants, if any. Are these the covenants of the principal? Fourthly, to
the testimonium clause. Who is it who is to set his name and seal in testimony of the grant? Is it
the principal or the agent? And Fifthly, to the signature and seal. Whose signature and seal are
these? Are they those of the principal or of the agent?

If upon such an analysis the deed does not upon its face purport to be the deed of the principal,
made, signed, sealed and delivered in his name and his deed, it cannot take effect as such.

SEC. 1102. Not enough to make deed the principal's that the agent is described as such. It is
not enough merely that not acted in the name of the principal. Nor is it ordinarily sufficient that
he describes himself in the deed as acting by virtue of a power of attorney or otherwise, or for
or in behalf, or as attorney, of the principal, or as a committee, or as trustee of a corporation,
etc.; for these expressions are usually but descriptio personae, and if, in fact, he has acted of
action thereon accrue to and against him personally and not to or against the principal, despite
these recital.

SEC. 1103. Not principal's deed where agent appears as grantor and signer. Neither can the
deed ordinarily be deemed to be the deed of the principal where the agent is the one who is
named as the grantor or maker, and he is also the one who signs and seals it. . . .

SEC. 1108. . . . But however clearly the body of the deed may show an intent that it shall be the
act of he principal, yet unless its executed by his attorney for him, it is not his deed, but the
deed of the attorney or of no one. The most usual and approved form of executing a deed by
attorney is by his writing the name of the principal and adding by A B his attorney or by his
attorney A B.'
That is good law. Applying it to the facts, under his power of attorney, Juan M. Poizat may have had
authority to borrow money and mortgage the real property of his wife, but the law specifies how and in
what manner it must be done, and the stubborn fact remains that, as to the transaction in question, that
power was never exercised. The mortgage in question was executed by him and him only, and for such
reason, it is not binding upon the wife, and as to her, it is null and void.

It follows that the whole decree against her and her paraphernal property and the sale of that property
to satisfy the mortgage are null and void, and that any title she may have had in or to her paraphernal
property remains and is now vested in the wife as fully and as absolutely as if the mortgage had never
been executed, the decree rendered or the property sold. As to Don Juan M. Poizat, the decree is valid
and binding, and remains in full force and effect.

It is an undisputed fact, which appears in the mortgage itself, that the land in question was the
paraphernal property of the wife, but after the marriage the old buildings on the property were torn
down and a new building constructed and, in the absence of evidence to the contrary, it must be
presumed that the new building is conjugal property of the husband and wife. As such, it is subject of
the debts of the conjugal partnership for the payment or security of which the husband has the power
to mortgage or otherwise encumber the property .

It is very probable that his particular question was not fully presented to or considered by the lower
court.

The mortgage as to the paraphernal property of the wife is declared null and void ab initio, and as to her
personally, the decree is declared null and void, and as to her paraphernal property, the sale is set aside
and vacated, and held for naught, leaving it free and clear from the mortgage, decree and sale, and in
the same condition as if the mortgage had never been executed, with costs in favor of the appellant. So
ordered.

Johnson, Malcolm, Ostrand, and Romualdez, JJ., concur.

Separate Opinions

STREET, J., with whom concur AVANCEA, C.J., VILLAMOR, and VILLA- REAL, JJ., dissenting:

In the year 1913 the plaintiff, the Philippine Sugar Estates Development Company, Ltd., let J. M. Poizat
have nearly P100,000 of money on the supposed security of a mortgage on property belonging to his
wife, Gabriela Andrea de Coster, executed by Poizat under a power of attorney from her. The plaintiff
has now to learn that the security on which it relied is worthless and that it did not even so much as
have Gabriela Andrea de Coster in court in the foreclosure proceeding. In the decision so holding the
undersigned are unable to concur.

To dispose first of the point as to the jurisdiction of the court over the person and property of Gabriela
Andrea de Coster, it is only necessary to the third paragraph from the end of the power of attorney
(Exhibit A to the opposition of Gabriela Andrea de Coster) under which Poizat acted. To express in a few
words the substance of this paragraph in the part relevant to the present discussion, Poizat is given full
authority to represent his wife in all judicial proceedings in Philippine courts, including among other
things, the making of appearances, submission of answers, receiving of service of process, and to take in
her behalf any procedural steps and measures required by law of procedure in order to make effective
and bring to termination the matters in which he, as attorney in fact, may be concerned. If this power is
not sufficient to authorize Poizat to accept the service and employ a lawyer to appear in court for the
principal, as was done in this case their ingenuity in the attempt to draft such authority.

But the disastrous feature of the decision is found in the pronouncement that the mortgage on which
the plaintiff's money was obtained is a nullity; and upon this point the court holds that Gabriela Andrea
de Coster was not bound because the contract signed "Juan M. Poizat." But the documents expressly
recites in its preamble that it is executed by Juan M. Poizat, acting both in representation of himself and
in the character of attorney in fact of his wife, Gabriela Andrea de Coster, in virtue of the authority
conferred upon him in the power of attorney already mentioned. Furthermore, throughout the body of
the document the idea is repeatedly expressed that J. M. Poizat obligates both himself and his wife. We
submit that under the doctrine informing the Civil Code which should control in this jurisdiction
the mortgage instrument was lawfully executed and in a form sufficient to bind the principal as well as
the agent. Certainly it would never occur to a civilian lawyer that the documents in question is informally
executed; and the circumstance that a learned Spanish notary (Don Enrique Barrera y Caldes) intervened
in the execution of this instrument would alone suffice to show that it is done in conformity with
approved Spanish models a fact otherwise apparent.

Even in the United States and Great Britain, where strict doctrines might be expected to prevail in such
matters, owing to the technical ruled involving the real property in those countries, ample authority is
found to the effect that the principal will be bound by a contract signed by the agent only, when it
appears from the face of the instrument that he is acting in the character of agent. (2 C. L., 672.)

From the portentous way in which the opinion of the courts refers to the question of the sufficiency of
the signature to the mortgage as the "storm center of the case," one would suppose that this question
had been the subject of discussion in the lower court as well as in the briefs of the attorneys here.
Nothing of the sort is true, for this capital point, on which the case is made principally to turn, has been
jumped up exclusively in this court; and the voluminous briefs will be searched in vain for the slightest
reference to the subject. In fact both parties appear to have assumed that the mortgage was executed
with all proper formality. Apart from the fact that the question was not raised in the lower court, no
assignment of error in this court calls in question the sufficiency of the mode of execution of the
instrument. Under these circumstances this court should have confined itself to the matters put in issue
by the litigants; and it should not have gone out of its way to take up a point not discussed by the
parties, and upon which in fact the losing party has never been heard. It is a good rule of practice--
sometimes respected by us--that an appellate court will not permit an appellant to raise a point upon
appeal which was not put in issue in the court below and upon which no assignment of error has been
made. In our opinion the order appealed from should be affirmed.
 DECISION UPON PETITION FOR REHEARING

February 15, 1926

JOHNS, J.:

The plaintiff has filed a very able, vigorous and exhaustive petition for rehearing, which we have given
the careful consideration which the importance of the questions deserve.

The first proposition advanced is that the mortgage in question is valid not only as to the buildings, but
also as to the land on which they are constructed. The previous decision of this court is to the effect
that, the buildings being conjugal property, the mortgage is valid, which is the paraphernal property of
the wife.

Plaintiff contends that the land is conjugal property under the provisions of article 1404 of the Civil
Code. That article does not apply to the instant case. It does not appear that the buildings are of the
nature therein specified. The commentator Manresa, cited in the motion for reconsideration, rightly
distinguishes those buildings which, by reason of their importance, convert the land on which, on
account of their small relative value, continue to remain as accessories to the land on which they are
constructed, and for such reason partake of the land.

The word building is a generic term for all architectural work with roof built for the purpose
used as man's dwelling, or for offices, clubs, theaters, etc. When the structure does not
constitute a building, then the rule must be followed. The article cannot but be interpreted
strictly. An inclosure for cattle or a 'tinada,' a stone barn, etc., follow the soil as accessories
thereto. (9 Manresa, 626, 1919 ed.)

It appears from the mortgaged that the buildings in question to be constructed are warehouses, and as
the circumstances and details do not appear in the record, such warehouses could not be construed as
the class of buildings mentioned in article 1404. Hence, the facts are not sufficient to justify the court in
holding that the exceptional provision applies to this case in the sense of considering the soil as an
accessory to the building, contrary to the general rule contained in the Civil Code (arts. 358-364 and
1368). But conceding that article 1404 does apply, yet under the provisions of that article, the owner of
the land is entitled to an indemnity for its value. Since, according to the spirit of the law contained in
article 349 of the Civil Code, no one can be deprived of his property without previous indemnity, and it
not appearing in the instant case that such indemnity was never paid, the land in question cannot now
be considered as conjugal property. But it further appears that the mortgage upon which plaintiff relies
contains the following recitals:

. . . which property must be the subject of a new registration wherein it must be stated that the
lot forming apart thereof pertains to said Dona Gabriela Andrea de Coster in full ownership and
fee simple as paraphernal property, and the building newly erected thereon to the conjugal;
partnership between Don Juan M. Poizat and his wife, the aforesaid Dona Gabriela Andrea de
Coster . . . (Emphasis ours.)
The plaintiff, having taken and accepted the mortgage is bound by those recitals. It further appears that
this property is registered under the Torrens System, and that the title to the land is vested in the wife,
and is not conjugal property, and that the wife is at least the owner of the land.

In a supplemental plea filed January 21, 1926, petitioner cites and relies on the case of the National
Bank vs. Quintos and Ansaldo (46 Phil., 370), in which article 1408 of the Civil Code was construed and
applied. It must be conceded that this article applies only to those cases wherein there is a presumption
that the debt contracted by the husband is for the common benefit of both spouses, but this
presumption may be overcome by evidence to the contrary.

All debts and obligations contracted during the marriage by the husband, the legal
representative of the partnership in the normal condition thereof, are deemed contracted by the
partnership. The law presumes that they are contracted for the common benefit of both.
However, this presumption may be overthrown by evidence to the contrary, as we shall see
when we take up article 1413. (9 Manresa, 648.)

For this reason, where, as in the instant case, it appears that the loan obtained by the husband was not
only not obtained for the common benefit of the conjugal partnership, but was obtained to the damage
of the wife, there is no such presumption, and that article does not apply. It is further contended that
the mortgage was executed with all of the legal necessary formalities, and in accord with the established
practice and custom in the Philippine Islands, from which plaintiff's counsel contends that it is not
required that the attorney in fact, who executes a document in his own name and that of his principal,
must show in his signature his double capacity by writing first his own signature and then the name of
his principal, and say "by" and thereafter his own signature as attorney in fact.

The Act should be construed with reference to section 81 of Act No. 136, which says:

After the enactment of a new system of registration of land titles, the notarial law of the
Philippine Islands of February fifth, eighteen hundred and eighty-nine, its regulations of April
eleventh, eighteen hundred and ninety, and the general instructions for drafting instruments
subject to record in the Philippine Islands, of October third, eighteen hundred and eighty-nine,
and the modifications thereof, by General Order Number Forty, issued from the office of the
United States Military Governor, on September twenty-third, eighteen hundred and ninety-nine,
and by General Order Number Twenty, issued from the office of the Military Governor on
February third, nineteen hundred, shall be repealed and shall be of no effect after the date of
such enactment, and thereafter appointments of notaries public and the performance of official
duties by them shall be regulated by the subsequent provisions of this Act.

The old Spanish notarial law and system of conveyances was repealed in the Philippines, and another
and a different notarial law and system became the law of the land with the enactment of Act No. 496.
One of the fundamental differences between the two systems consists in this. Under the Spanish
system, the documents were executed in the form of minutes, wherein the notary was the one who
spoke, and under Act No. 496, the notary is not the one who speaks, and there is no record kept of the
minutes, and the intervention of a notary is limited to the acknowledgment only of the document.
Under the Spanish System, to determine the capacity in which a person executed a document, it was
sufficient to look at the text of the document, because its whole text was attended with the solemnity of
the notary authorizing its execution. Under the present system, it is necessary to resort to the form in
which the parties sign an instrument, because it is the signature rather than the text which bears the
stamp of authenticity.

Neither does section 127 of Act No. 496 bear the construction for which the plaintiff contends. It
provides in legal effect that were one or more persons executed a conveyance, the instrument must be
executed by all of the parties to the conveyance, and that if there are two or more persons, the
instrument must not only be signed by all of the parties to the conveyance, but it must be acknowledged
by all of them. That clearly appears from the certificate of acknowledgment in which it is recited:

. . . personally appeared ________________________ known to me to be the same person (or

persons) who executed the foregoing instrument, and acknowledge that the same in his (or
their) free act and deed.

The construction for which plaintiff contends would nullify the words " or persons" and the words "or
their." The fact that those words are used in the manner in which they are used in section 127, must
mean that where two or more persons give a deed or mortgage on real property, that all of them should
not only sign the mortgage, but that all of them should acknowledge it as "their free act and deed.

Again, in the instant case, the power of attorney was given by the wife to the husband, and the husband
himself was a party to the mortgage, and the money was paid to him for and on his personal account,
and his signature was necessary to bind any interest which he had in the land as the husband of the
wife, and the signature of the wife in some form was necessary to bind her interest in the land. Here,
you have the signature upon the face of it which shows that in the signing of it, the husband ever
intended to bind his wife. If Poizat had not been the husband of his wife, and if he himself was not a
party to the instrument and did not have any interest in the land mortgaged, another and a very
different question would be presented, and his lone signature might then bind the property of the wife.

With all due respect to the learned counsel, no law, either Spanish or American, has been cited or will
ever be found which, upon the facts shown in the record, will construe the lone unqualified signature of
the husband as the joint and dual signing of both the husband and the wife, so as to make it binding
upon the paraphernal property of the wife.

Although not cited in the petition during the discussion of this case in conference, attention was called
to article 1717 of the Civil Code which provides as follows:

When an agent acts in his own name, the principal shall have no right of action against the
persons with whom the agent has contracted, or such persons against the principal.

In such case, the agent is directly liable to the person with whom he has contracted, as if the
transactions were his own. Cases involving things belonging to the principal are excepted.

The provisions of this article shall be understood to be without prejudice to actions between
principal and agent.

In the instant case, this section should be construed with article 1713, which among other things
provides that:
 In order to compromise, alienate, mortgage, or to execute any other act of strict ownership, an
express power is required.

The mortgage in question was upon real property, and it was not a "simple contract, " and where an
agency is created by an express power, it must be executed with the formalities of an express power.

Again, although the wife was a party to the body of the mortgage, Poizat himself had an interest in the
real property, and was a party to the instrument, and his personal signature was necessary to the
mortgage to bind his own personal interest, and the interest of the conjugal partnership. The power of
attorney from the wife gave her husband the express power defined in article 1713, and that power
should have been exercised, and the mortgage should have been executed "in the name, place, and
stead of the wife." That was not done.

The authorities cited in the petition for a rehearing and in the majority opinion are based upon, and
refer to, the execution by the agent of a "simple contract," and for such reason are not in point. There is
a very marked legal distinction between the authority of an agent to make a "simple contract," and his
authority to convey or mortgage real property and the manner in which the power should be executed.

It may be true that the decision of this court is based upon questions that are not as fully discussed in
the appellant's brief, as they should have been, but the fact remains that they were pointed out, and
attention was called to them in the argument in the brief, and that they are expressly covered by the
assignments of error.

Although ably presented, we are clearly of the opinion that the petition for a rehearing must be denied.
So ordered.

Johnson, Malcolm, Ostrand, and Romualdez, JJ., concur.

AVANCEA, C.J., STREET, VILLAMOR, and VILLA-REAL, JJ., dissenting:

We insist in our dissenting opinion and reference is hereby made to what we briefly said in our separate
opinion. We wish, however, to emphasize our point of view on the merits of the case with regard to
appellant's liability.

The theory of the majority is contained in the following paragraph of its decision upon the motion for
reconsideration:

. . . If Poizat had not been the husband of his wife, and if he himself was not a party to the
instrument and did not have any interest in the land mortgaged, another and a very different
question would be presented, and his lone signature might then bind the property of the wife.

It follows from this point that the power given by the appellant to her husband Juan M. Poizat is held
sufficient to mortgage the land in question, that the contract entered into by him with the plaintiff,
mortgaging this land, is within the scope of this power, and that the contract thus signed by Poizat might
be sufficient to bind the appellant. But it is said that it is not, by reason of the fact that Poizat was also a
party to the contract and has an interest in the property mortgaged. We do not see the importance of
this fact. If Poizat were not a party to the contract and had no interest in the property mortgaged, the
document would, as it stands, signed by him alone, be sufficient to bind the appellant, not by what
his signature says, since it says nothing, but because the document shows that he was acting on behalf
of the appellant. This being the case, we see no reason why the document should not have full effect
and that of the appellant. The most that can be said is that it was necessary that Poizat should have
signed twice, but again we do not see the necessity of this duplicity. The signature serves only to
authenticate the document, and for this purpose one is enough, and not to express the nature and
extent of the obligation, which must be determined by the document itself.

But whether this be the effect of the majority opinion, or that it is necessary, in order to bind the
appellant, that Poizat should have signed the document twice, the first time on his own behalf, and the
second on that of the appellant, or should have signed it only once, stating that he did so in his own
behalf and that of the appellant, with all due respect to the majority, we believe that the decision
rendered is erroneous.

The doctrine laid down by the majority is openly repugnant to the spiritualistic conception which
informs article 1278 of the Civil Code, according to which contracts shall be binding whatever may be the
form in which they may have been entered into, provided that the essential requisites for their validity
are present.

In some contracts, a public document is required as a special form for convenience of evidence (art.
1280, Civil Code), but not as an essential requisite for its validity, but only for its efficaciousness (art.
1279, Civil Code). in very few cases does the Civil Code require a certain form for special reasons, as a
requisite to the validity of the contract as for instance in the donation, in which a public document is
required (art. 633, Civil Code), and in the mortgage, which must be registered (art. 1875, Civil Code). But
except in these cases, and even in these cases, once the required special form is complied with, the
question as to form in the former, or the question as to other formalities in the latter, falls under the
broad rule established in article 1278, and losses all its influence on the effects of the contract, it being
enough that the contract be proven. In this connection, we are not unmindful of the amendments
introduced by the Code of Civil Procedure to the Civil Code as to the form of contracts for their
efficaciousness, but nevertheless we believe that the rule provided by article 1278 of the Civil Code
subsists.

In the instant case, the power given by the appellant to Poizat, as well as the mortgage executed by the
latter in his own behalf and that of the appellant with the plaintiff was executed in the form required by
the law, that is, in a public document registered in the registry of property. Under such circumstances, it
is not proper to destroy the effects of these contracts and ignore the rights and obligations which the
parties thereby desired to acquire and assume, merely by reason of a formality which no law requires,
and does not seem to answer any purpose. The theory of agency, according to the Civil Code, is based
on representation and its characteristic is the subrogation of the agent in the place of his principal
whom he substitutes, in matters constituting the subject-matter of the agency. Thus, once it is stated in
the document that the agent acts by virtue of the agency, he absorbs the personality of the principal,
and by a legal fiction, he appears as the principal himself, and whatever he does within the agency is
considered as done by the principal.

At any rate, even supposing that Poizat acted in his own name in executing the contract with the
plaintiff, as he acted within the limits of the agency or power granted him by the appellant and the
contract relates to things belonging to her, the plaintiff has an action against the appellant under article
1717 of the Civil Code.
118 Phil. 436

LABRADOR, J.:
The above-entitled cases are appeals from judgments rendered by the Court of First Instance of Manila
through Judges Gustavo Victoriano and Conrado M. Vasquez, respectively, of said Court.
In G.R. No. L-18223 plaintiff-appellee filed a complaint alleging that the defendants-appellants were
granted by it credit accommodations in the form of an overdraft line for an amount not exceeding
P80,000, with interest (paragraph 2, Complaint); that defendants or either of them drew regularly upon
the above credit line and as of February 10, 1960, the total of their drawings and interest due amounted
to P79,943.80 (par 3, id.); that repeated demands were made upon defendants to pay for the drawings
but said demands were ignored (par. 4, id.). In their answer to the complaint the defendants admit
having drawn upon the credit line extended to them as alleged in the complaint; claim they have not
ignored the demands for the payment of the sums demanded and have instituted actions against the
former officers of defendant corporation who had defrauded the latter; etc, (par. 4, Answer). By way of
special affirmative defenses, they allege that the former officers and directors of the defendant
corporation had deliberately defrauded and mismanaged the corporation, as a part of their scheme to
wrest control of various corporations owned by Damaso Perez, from the latter, and as a result of said
frauds or mismanagements the defendants have instituted actions for damages for breach of trust; and
that the amounts drawn on the credit line subject of the complaint were received and used by the
former directors and officers of the defendant corporations and constitute part of the funds misapplied
by them. Upon motion, Judge Victoriano entered for the plaintiff a judgment on the pleadings, holding
that the "special affirmative defenses (of the answer) failed to show any allegation respecting the extent
of defendants' drawings, although they have admitted having drawn against the credit line, subject of
the action, so that said denial, not being a specific denial in the true sense, does not controvert the
allegation at which it is aimed," etc. The Court also further held that the alleged mismanagement and
fraud of the former directors and officials of defendant corporation and the action now pending in court
regarding the same are merely internal affairs of the corporation which cannot affect or diminish the
liability of the defendant corporation to the plaintiff. The defendants appealed from the decision to the
Court of Appeals, but this Court certified the case to Us.
In G. R. No. L-18224 the complaint also alleges that the defendants were given credit accommodation in
the form of an overdraft line in an amount not exceeding P150,000 and drew regularly upon said credit
line amounts which with their interest reach the sum of P133,453.17; that demands were made for the
payment of the drawings but defendants have failed to pay the amounts demanded. Defendants in their
answer admit the opening of the credit line in their favor and that demands tor the indebtedness were
made upon them, but allege as special defenses that the directors and officers of the defendant
corporation deliberately defrauded and mismanaged the said corporation in breach of trust in order to
deprive Damaso Perez of his control and majority interest in the defendant corporation, as a result of
which fraud, mismanagement and breach of trust the defendants suffered tremendous losses; that the
amounts drawn by defendant corporation upon the credit line were received and used by the former
directors and officers and same constitute part of the funds of the defendant corporation misapplied
and mismanaged by said former officers and directors of said corporation. Upon the presentation of the
answer the plaintiff presented a motion for judgment on the pleadings which the court sustained,
holding:
"The defendants having admitted the indebtedness in question, its liability to pay the plaintiff the
amount of the said indebtedness is beyond question. The alleged fact that the money borrowed from
the plaintiff was misappropriated or misapplied by some officers of the defendant corporation is no
defense against the liability of the defendants to the plaintiff. It is,an internal matter of the defendant
corporation in which the plaintiff has no concern or participation whatsoever. This is specially so with
respect to the defendant Damaso Perez who appears to have executed the agreement, Annex A, in his
own personal capacity and not as an officer of the defendant Republic Credit Corporation. The allegation
that the defendants have a right to claim indemnity or contribution from the erring directors and
officers of the defendant corporation is a matter which may be the subject of a separate action, and in
which the plaintiff is not concerned." (p. 37, Record on Appeal)

Against the above judgment the defendants also have prosecuted this appeal. The Court of Appeals
certified the same to Us in accordance with law.
In G. R. No. L-18223, the defendants-appellants argue that the admission made by the defendants in
their answer that the amount demanded was due, is qualified "in the sense that whatever amounts
were drawn from the overdraft line in question were part of those corporate funds of Philippine
Armored Car, Inc., misused and misapplied by Ramon Racelis, et al., former directors and executive
officers of said corporation." (p. 13, Appellee's Brief) In answer to this argument we call attention to the
fact that in the agreement attached to the complaint Exhibit "A" the obligation of the defendants-
appellants to pay for the amount due under the overdraft line is not in any way qualified; there is no
statement that the responsibility of the defendants-appellants for the amounts taken on overdraft
would cease or be defeated or reduced upon misappropriation or mismanagement of the funds of the
corporation by the directors and employees thereof. The special defense is, therefore, a sham defense.
Furthermore, under general rules and principles of law the mismanagement of the business of a party by
his agents does not relieve said party from the responsibility that he had contracted to third persons,
especially in the case at bar where the written agreement contains no limitation to defendants-
appellants' liability.
The so-called special defense contained in the answer is, therefore, no special defense to the liability of
the defendants-appellants, nor the action, and the court's action or judgment on the pleadings was
properly taken. The argument contained in the brief of the defendants-appellants that the defendants
contemplated a third-party complaint is of no weight, because a third-party complaint was not available
to the defendants under the facts of the case. A third-party complaint is, under the Rules, available only
if the defendant has a right to demand contribution, indemnity, subrogation or any other relief from the
supposed third-party defendants in respect to the plaintiff's claim. (Sec. 1, Rule 12, Rules of Court) The
supposed parties defendants or alleged officers of the defendants corporation had nothing to do with
the overdraft account of defendant corporation with the plaintiff-appellee. Consequently, they cannot
be made parties defendants in a third-party complaint. Anyway the filing of a third party complaint is no
hindrance to the issuance of the order of the court declaring that the defendants answer presented no
issue or defense and that, therefore, plaintiff-appellee was entitled to judgment.
In G. R. No. L-18224, our ruling in the first case is also applicable. In this second case, it is also alleged
that at the time of the agreement for credit in current account the defendant corporation was under the
management of Roman Racelis and others who defrauded and mismanaged the corporation, in breach
of trust, etc., etc. Again we declare that the written agreement for credit in current account, Annex "A",
contains no limitation about the liability of the defendants-appellants, nor an express agreement that
the responsibility of the defendants-appellants, should be conditioned upon the lawful management of
the business of the defendant corporation. The same rulings in the first case are applicable in this
second case.
Wherefore, the judgments appealed from are hereby affirmed, with costs against the defendants-
appellants.
Padilla, Bautista Angelo, Conception, Reyes, J. B. L., Barrera, Paredes, Dizon, Regala, and Makalintal,
JJ., concur.

Sept. 30, 1963

RESOLUTION ON MOTION FOR NEW TRIAL
LABRADOR, J.:
Defendant-appellant Damaso Perez has presented a motion for new trial on the ground of newly
discovered evidence. It is claimed that movant was not aware of the nature of the power of attorney
that Ramon Racelis used, purportedly signed by him, to secure the loans for the Republic Armored Car
Service Corporation and the Republic Credit Corporation. In the motion it is claimed that a photostatic
copy of the power of attorney used by Ramon Racelis was presented at the trial. This phostostatic copy
or a copy thereof has not been submitted to us; for this reason we cannot rule upon his claim and
contention that Ramon Racelis had no authority to bind the movant as surety for the loans obtained
from the appellee Commercial Bank & Trust Company. Not having before Us the supposed photostatic
copy of the power of attorney used to secure the loans, there is no reason for Us to rule, in accordance
with his contention, that Racelis exceeded his authority in securing the loans subject of the present
actions.
The motion for reconsideration, however, presents a copy of a power on October 22, 1952. It is not
expressly mentioned that this is the precise power of attorney that Ramon Racelis utilized to secure the
loans the collection of which is sought in these cases. But assuming, for the sake of argument, that the
said power of attorney incorporated in the motion for reconsideration was the one used to obtain the
loans, We find that the movant's contention has no merit. In accordance with the document, Racelis was
authorized to negotiate for a loan or various loans * * * with other banking institution, financing
corporation, insurance companies or investment corporations, in such sum or sums, aforesaid Attorney-
in-fact Mr. Ramon Racelis, may deem proper and convenient to my interests, * * * and to execute any
and all documents he deems requisite and necessary in order to obtain such loans, always having in
mind my best interest; * * *" We hold that this general power of attorney to secure loans from any
banking institution was "sufficient authority for Ramon Racelis to obtain the credits subject of the
present suits.
It will be noted furthermore that Racelis, as agent of Damaso Perez, executed the documents evidencing
the loans signing the same "Damaso Perez by Ramon Racelis," and in the said contracts Damaso Perez
agreed jointly and severally to be responsible for the loans. As the documents as signed makes Perez
jointly and severally responsible, there is no merit in the contention that Perez was only being held liable
as a guarantor.
Furthermore, the promissory notes evidencing the loans are attached to the complaint in G. R. Nos. L-
18223 and L-18224. If the movant Perez claims that Racelis had no authority to execute the said
promisory notes, the authenticity of said documents should have been specially denied under oath in
defendant's answers in the lower court. This was not done; consequently Perez could not and may not
now claim that his agent did not have authority to execute the loan agreements.
Motion for new trial is denied.

LIM TIU, LIM SUNTIAN and LIM KAENG JO, operating under the name of "Lim Juco y
Compaia," plaintiffs-appellants,
vs.
RUIZ Y REMENTERIA, a concern operating under the name of "La Isla de Cuba," defendant-appellee.

Thos. D. Aitken, for appellants.

Sanz & Opisso, for appellee.

JOHNSON, J.:

On the 6th day of July, 1908, the plaintiffs commenced an action against the defendants in the Court of
First Instance of the city of Manila, alleging that upon the 26th day of May, 1908, the 5th day of June,
1908, and the 12th day of June, 1908, they sold to the defendant certain merchandise, amounting to the
sum of P1,043.57; that said amount was due and unpaid, and prayed judgment for said sum (P1,043.57)
with interest and cost.

To this petition the defendants filed a general denial.

After hearing the evidence, the lower court, found as a fact that "the defendants purchased the
merchandise in question from Domingo Tim Bun Liu and paid the said Domingo Tim Bun Liu for the
merchandise."

The lower court further said: "The conclusions are that the defendants have paid for the merchandise
described in the complaint, and that they are not liable for payment for the value thereof," and
rendered judgment in favor of the defendant and against the plaintiffs and dismissed said complaint,
with costs against the plaintiffs.

From this decision of the lower court the plaintiffs appealed and made the following assignments of
error:

First. The lower court erred in holding as follows: "It also clearly appears that the defendants purchased
the merchandise in question from Domingo Tim Bun Liu and paid Domingo Tim Bun Liu for the
merchandise."

Second. The lower court erred in holding that the plaintiffs never notified the defendants, in any way,
that their employee, Domingo Tim Bun Liu, could sell their merchandise, but could not receive payment
for it, and that the defendants never had notice that their business transactions with Domingo Tim Bun
Liu were by him as agent or employee of the plaintiffs.

Third. The court erred in holding that the plaintiffs accepted payment through Domingo Tim Bun Liu.

Fourth. The court erred in holding that "the defendants having in good faith purchased the goods upon
an agreement to pay for them in merchandise of their own, under an agreement with the person from
whom they received the goods, to so pay for them, could not be held responsible for the failure of the
plaintiffs' employee to deliver to his employers, that which was received in payment."

Fifth. The court erred in admitting as evidence Exhibit D (1), Exhibit D (2), and Exhibit D (3).

Sixth. The court erred in dismissing the plaintiffs' complaint and in deciding in favor of the defendants.

Upon these assignments of error the plaintiffs and appellants present three questions:

First. Did the defendants purchase directly from the plaintiffs?

Second. If not, did the defendants have sufficient notice of Domingo Tim Bun Liu's relation with the
plaintiffs to place them on their guard?

Third. If the last is answered affirmatively, then was the payment by the defendants to Domingo Tim
Bun Liu, in something other than cash, binding on the plaintiffs?

With reference to the first question, "Did the defendants purchase directly from the plaintiffs?" there is
much conflict in the testimony. The lower court answered this question in the negative. It appears that
the defendants had been buying merchandise from Domingo Tim Bun Liu for a period covering several
months, and paying for said merchandise in exchange, and from time to time settling their accounts by
the defendants paying to the said Domingo Tim Bun Liu the difference, if any, in his favor, and by
Domingo paying to the defendants the difference of the accounts, if there was found to be due them
any balance on such settlements. The defendant claim that they had no knowledge or information that
the merchandise which they were receiving from Domingo Tim Bun Liu was the merchandise of the
plaintiffs. This contention of the defendants is supported by the fact that during all of the period during
which they were doing business with Domingo, their which they were kept with Domingo Tim Bun Liu,
and not with the plaintiffs. The plaintiffs contend that for certain of the merchandise sold by Domingo
Tim Bun Liu to the defendants Domingo presented a bill in their favor. In this proof the plaintiffs attempt
to establish the fact that the defendants knew that they were dealing with them and not with Domingo
Tim Bun Liu.

In answer to this contention, the defendants contend that the only bill Domingo presented to them for
merchandise belonging to the plaintiffs was for the purpose of showing that he, Domingo, was charging
the defendants for the merchandise in question the same price which he had been obliged to pay to the
plaintiffs.

The fact is not disputed that Domingo Tim Bun Liu purchased all or nearly all of the goods which he sold
to the defendants, from the plaintiffs. We think a fair preponderance of the evidence shows that the
defendants, in their dealings with Domingo Tim Bun Liu, believed that they were dealing with him and
not with the plaintiffs. There is no proof that Domingo ever notified the defendants that he was acting
as the agent of the plaintiffs. Neither does the proof show that the plaintiffs ever notified the
defendants that Domingo Tim Bun Liu was acting as their agent in selling the merchandise in question. It
is not disputed that the defendants have paid to Domingo Tim Bun Liu, in full, for all the merchandise
which they purchased of him.
It being established by a preponderance of the evidence that Domingo Tim Bun Liu acted in his own
name selling the merchandise to the defendants, and that the defendants fully believed that they were
dealing with the said Domingo Tim Bun Liu, without any knowledge of the fact that he was the agent of
the plaintiffs, and having paid him in full for the merchandise purchased, they are not liable to the
plaintiffs, for said merchandise, even though it be admitted that Domingo Tim Bun Liu was in fact the
agent of the plaintiffs in selling the merchandise in question. This is true whether the transaction is
covered by the provisions of the Civil Code (art. 1717) or by the provisions of the Commercial Code (art.
246). Said article 1717 provides:

When an agent acts in his own name the principal shall have no action against the persons with
whom the agent has contracted, nor the said persons against the principal.

Said article 246 provides that: "When an agent transacts business in his own name, it shall not be
necessary for him to state who is the principal, and he shall be directly liable, as if the business were for
his own account, to the persons with whom he transacts the same, said persons not having any right of
action against the principal, nor the latter against the former, the liabilities of the principal and the
agent to each other reserved."

(Castle Brothers, Wolf & Sons vs. Go Juno, 7 Phil. Rep., 144; Pastell & Regordosa vs. Hollman & Co., 2
Phil. Rep., 235; 11 Manresa, 470; Munroe vs. Kearney, 17 Ohio, 572.)

Having reached the above conclusions, we deem it unnecessary to further discuss the assignments of
error and the questions presented by the appellant.

In view of the foregoing reasons, the judgment of the lower court should be and is hereby affirmed. So
ordered.

THE PHILIPPINE NATIONAL BANK, plaintiff-appellee,

vs.
PAZ AGUDELO Y GONZAGA, ET AL., defendants.
PAZ AGUDELO Y GONZAGA, appellant.

Hilado and Hilado and Norberto Romualdez for appellant.

Roman J. Lacson for appellee.

VILLA-REAL, J.:

The defendant Paz Agudelo y Gonzaga appeals to this court from the judgment rendered by the Court of
First Instance of Occidental Negros, the dispositive part of which reads as follows:

Wherefore, judgment is rendered herein absolving the defendant Mauro A. Garrucho from the
complaint and ordering the defendant Paz Agudelo y Gonzaga to pay to the plaintiff the sum of
P31,091.55, Philippine currency, together with the interest on the balance of P20,774.73 at 8
 per cent per annum of P4.55 daily from July 16, 1929, until fully paid, plus the sum of P1,500 as
attorney's fees, and the costs of this suit.

It is hereby ordered that in case the above sums adjudged in favor of the defendant by virtue of
this judgment are not paid to the Philippine National Bank or deposited in the office of the clerk
of this court, for delivery to the plaintiff, within three months from the date of this decision, the
provincial sheriff of Occidental Negros shall set at public auction the mortgaged properties
described in annex E of the second amended complaint, and apply the proceeds thereof to the
payment of the sums in question.

It is further ordered that in case the proceeds of the mortgaged properties are not sufficient to
cover the amount of this judgment, a writ of execution be issued against any other property
belonging to the defendant Paz Agudelo y Gonzaga, not otherwise exempt from execution, to
cover the balance resulting therefrom.

In support of her appeal, the appellant assigns six alleged errors as committed by the trial court, which
we shall discuss in the course of this decision.

The following pertinent facts, which have been proven without dispute during the trial, are necessary for
the decision of the questions raised in the present appeal, to wit:

On November 9, 1920, the defendant-appellant Paz Agudelo y Gonzaga executed in favor of her
nephew, Mauro A. Garrucho, the document Exhibit K conferring upon him a special power of attorney
sufficiently broad in scope to enable him to sell, alienate and mortgage in the manner and form he
might deem convenient, all her real estate situated in the municipalities of Murcia and Bacolod,
Occidental Negros, consisting in lots Nos. 61 and 207 of the cadastral survey of Bacolod, Occidental
Negros, together with the improvement thereon.

On December 22, 1920, Amparo A. Garrucho executed the document Exhibit H whereby she conferred
upon her brother Mauro A Garrucho a special power of attorney sufficiently broad in scope to enable
him to sell, alienate, mortgage or otherwise encumber, in the manner and form he might deem
convenient, all her real estate situated in the municipalities of Murcia and Bago, Occidental Negros.

Nothing in the aforesaid powers of attorney expressly authorized Mauro A. Garrucho to contract any
loan nor to constitute a mortgage on the properties belonging to the respective principals, to secure his
obligations.

On December 23, 1920, Mauro A. Garrucho executed in the favor of the plaintiff entity, the Philippine
National bank, the document Exhibit G, whereby he constituted a mortgage on lot No. 878 of the
cadastral survey of Murcia, Occidental Negros, with all the improvements thereon, described in transfer
certificate of title No. 2415 issued in the name of Amparo A. Garrucho, to secure the payment of credits,
loans, commercial overdrafts, etc., not exceeding P6,000, together with interest thereon, which he
might obtain from the aforesaid plaintiff entity, issuing the corresponding promissory note to that
effect.
During certain months of the year 1921 and 1922, Mauro A. Garrucho maintained a personal current
account with the plaintiff bank in the form of a commercial credit withdrawable through checks (Exhibits
S, 1 and T).

On August 24, 1931, the said Mauro A. Garrucho executed in favor of the plaintiff entity, the Philippine
National Bank, the document Exhibit J whereby he constituted a mortgage on lots Nos. 61 and 207 of
the cadastral survey of Bacolod together with the buildings and improvements thereon, described in
original certificates of title Nos. 2216 and 1148, respectively, issued in the name of Paz Agudelo y
Gonzaga, to secure the payment of credits, loans and commercial overdrafts which the said bank might
furnish him to the amount of P16,00, payable on August 24, 1922, executing the corresponding
promissory note to that effect.

The mortgage deeds Exhibit G and J as well as the corresponding promissory notes for P6,000 and
P16,000, respectively, were executed in Mauro A. Garrucho's own name and signed by him in his
personal capacity, authorizing the mortgage creditor, the Philippine National Bank, to take possession of
the mortgaged properties, by means of force if necessary, in case he failed to comply with any of the
conditions stipulated therein.

On January 4, 1922, the manager of the Iloilo branch of the Philippine National Bank notified Mauro A.
Garrucho that his promissory note for P6,000 of 10 days within which to make payment thereof (Exhibit
O).1awphil.net

On May 9, 1922, the said manager notified Mauro A. Garrucho that his commercial credit was closed
from that date (Exhibit S).

Inasmuch as Mauro A. Garrucho had overdrawn his credit with the plaintiff-appellee, the said manager
thereof, in a letter dated June 27, 1922 (Exhibit T), requested him to liquidate his account amounting to
P15,148.15, at the same time notifying him that his promissory note for P16,000 giving as security for
the commercial overdraft in question, had fallen due some time since.

On July 15, 1922, Mauro A. Garrucho, executed in favor of the plaintiff entity the deed Exhibit C whereby
he constituted a mortgage on lots Nos. 61 and 207 of the cadastral survey of Bacolod, together with the
improvements thereon, described in transfer certificates of title Nos. 2216 and 1148, respectively,
issued in the name of Paz Agudelo y Gonzaga, and on lot No. 878 of the cadastral survey of Murcia,
described in transfer certificate of title No. 2415, issued in the name of Amparo A. Garrucho.

In connection of the credits, loans, and commercial overdrafts amounting to P21,000 which had been
granted him, Mauro A. Garrucho, on the said date July 15, 1922, executed the promissory note, Exhibit
B, for P21,000 as a novation of the former promissory notes for P6,000 and P16,000, respectively.

In view of the aforesaid consolidated mortgage, Exhibit C, the Philippine National Bank, on the said date
of July 15, 1922, cancelled the mortgages constituted on lots Nos. 61, 207 and 878 described in Torrens
titles Nos. 2216, 1148 and 2415, respectively.

On November 25, 1925, Amparo A. Garrucho sold lot No. 878 described in certificate of title No. 2415, to
Paz Agudelo y Gonzaga (Exhibit M).
On January 15, 1926, in the City of Manila, Paz Agudelo y Gonzaga signed the affidavit, Exhibit N, which
reads as follows:

Know all men by these presents: That I, Paz Agudelo y Gonzaga, single, of age, and
resident of the City of Manila, P. I., by these present do hereby agree and consent to the
transfer in my favor of lot No. 878 of the Cadastre of Murcia, Occidental Negros, P. I., by
Miss Amparo A. Garrucho, as evidenced by the public instrument dated November 25,
1925, executed before the notary public Mr. Genaro B. Benedicto, and do hereby
further agree to the amount of the lien thereon stated in the mortgage deed executed
by Miss Amparo A. Garrucho in favor of the Philippine National Bank.

In testimony whereof, I hereunto affix my signature in the City of Manila, P.I., this 15th
of January, 1926.

(Sgd.) PAZ AGUDELO Y GONZAGA.

Pursuant to the sale made by Amparo A. Garrucho in favor of Paz Agudelo y Gonzaga, of lot No. 878 of
the cadastral survey of Murcia, described in certificate of title No. 2145 issued in the name of said
Amparo A. Garrucho, and to the affidavit, Exhibit N, transfer certificate of title No. 5369 was issued in
the name of Paz Agudelo y Gonzaga.

Without discussing and passing upon whether or not the powers of attorney issued in favor of Mauro A.
Garrucho by his sister, Amparo A. Garrucho, and by his aunt, Paz Agudelo y Gonzaga, respectively, to
mortgage their respective real estate, authorized him to obtain loans secured by mortgage in the
properties in question, we shall consider the question of whether or not Paz Agudelo y Gonzaga is liable
for the payment of the loans obtained by Mauro A. Garrucho from the Philippine National Bank for the
security of which he constituted a mortgage on the aforesaid real estate belonging to the defendant-
appellant Paz Agudelo y Gonzaga.

Article 1709 of the Civil Code provides the following:

ART. 1709. By the contract of agency, one person binds himself to render some service, or to do
something for the account or at the request of another.

And article 1717 of the same Code provides as follows:

ART. 1717. When an agent acts in his own name, the principal shall have no right of action
against the persons with whom the agent has contracted, or such persons against the principal.

In such case, the agent is directly liable to the person with whom he has contracted, as if the
transaction were his own. Cases involving things belonging to the principal are excepted.

The provisions of this article shall be understood to be without prejudice to actions between
principal and agent.

Aside from the phrases "attorney in fact of his sister, Amparo A. Garrucho, as evidenced by the power of
attorney attached hereto" and "attorney in fact of Paz Agudelo y Gonzaga" written after the name of
Mauro A. Garrucho in the mortgage deeds, Exhibits G. and J, respectively, there is nothing in the said
mortgage deeds to show that Mauro A. Garrucho is attorney in fact of Amparo A. Garrucho and of Paz
Agudelo y Gonzaga, and that he obtained the loans mentioned in the aforesaid mortgage deeds and
constituted said mortgages as security for the payment of said loans, for the account and at the request
of said Amparo A. Garrucho and Paz Agudelo y Gonzaga. The above-quoted phrases which simply
described his legal personality, did not mean that Mauro A. Garrucho obtained the said loans and
constituted the mortgages in question for the account, and at the request, of his principals. From the
titles as well as from the signatures therein, Mauro A. Garrucho, appears to have acted in his personal
capacity. In the aforesaid mortgage deeds, Mauro A. Garrucho, in his capacity as mortgage debtor,
appointed the mortgage creditor Philippine National Bank as his attorney in fact so that it might take
actual and full possession of the mortgaged properties by means of force in case of violation of any of
the conditions stipulated in the respective mortgage contracts. If Mauro A. Garrucho acted in his
capacity as mere attorney in fact of Amparo A. Garrucho and of Paz Agudelo y Gonzaga, he could not
delegate his power, in view of the legal principle of "delegata potestas delegare non potest" (a
delegated power cannot be delegated), inasmuch as there is nothing in the records to show that he has
been expressly authorized to do so.

He executed the promissory notes evidencing the aforesaid loans, under his own signature, without
authority from his principal and, therefore, were not binding upon the latter (2 Corpus Juris, pp. 630-
637, par. 280). Neither is there anything to show that he executed the promissory notes in question for
the account, and at the request, of his respective principals (8 Corpus Juris, pp. 157-158).

Furthermore, it is noted that the mortgage deeds, Exhibits C and J, were cancelled by the documents,
Exhibits I and L, on July 15, 1922, and in their stead the mortgage deed, Exhibit C, was executed, in
which there is absolutely no mention of Mauro A. Garrucho being attorney in fact of anybody, and which
shows that he obtained such credit fro himself in his personal capacity and secured the payment thereof
by mortgage constituted by him in his personal capacity, although on properties belonging to his
principal Paz Agudelo y Gonzaga.

Furthermore, the promissory notes executed by Mauro A. Garrucho in favor of the Philippine National
Bank, evidencing loans of P6,000 and P16,000 have been novated by the promissory notes for P21,000
(Exhibit B) executed by Mauro A. Garrucho, not only without express authority from his principal Paz
Agudelo y Gonzaga but also under his own signature.

In the case of National Bank vs. Palma Gil (55 Phil., 639), this court laid down the following doctrine:

A promissory note and two mortgages executed by the agent for and on behalf of his principal,
in accordance with a power of attorney executed by the principal in favor of the agent, are valid,
and as provided by article 1727 of contracted by the agent; but a mortgage on real property of
the principal not made and signed in the name of the principal is not valid as to the principal.

It has been intimated, and the trial judge so stated. that it was the intention of the parties that Mauro A.
Garrucho would execute the promissory note, Exhibit B, and the mortgage deed, Exhibit C, in his
capacity as attorney in facts of Paz Agudelo y Gonzaga, and that although the terms of the aforesaid
documents appear to be contrary to the intention of the parties, such intention should prevail in
accordance with article 1281 of the Civil Code.
Commenting on article 1281 of the Civil Code, Manresa, in his Commentaries to the Civil Code, says the
following:

IV. Intention of the contracting parties; its appreciation. In order that the intention may
prevail, it is necessary that the question of interpretation be raised, either because the words
used appear to be contrary thereto, or by the existence of overt acts opposed to such words, in
which the intention of the contracting parties is made manifest. Furthermore, in order that it
may prevail against the terms of the contract, it must be clear or, in other words, besides the
fact that such intention should be proven by admissible evidence, the latter must be of such
charter as to carry in the mind of the judge an unequivocal conviction. This requisite as to the
kind of evidence is laid down in the decision relative to the Mortgage Law of September 30,
1891, declaring that article 1281 of the Civil Code gives preference to intention only when it is
clear. When the aforesaid circumstances is not present in a document, the only thing left for the
register of deeds to do is to suspend the registration thereof, leaving the solution of the
problem to the free will of the parties or to the decision of the courts.

However, the evident intention which prevails against the defective wording thereof is not that
of one of the parties, but the general intent, which, being so, is to a certain extent equivalent to
mutual consent, inasmuch as it was the result desired and intended by the contracting parties.
(8 Manresa, 3d edition, pp. 726 and 727.)

Furthermore, the records do not show that the loan obtained by Mauro A. Garrucho, evidenced by the
promissory note, Exhibit B, was for his principal Paz Agudelo y Gonzaga. The special power of attorney,
Exhibit K, does not authorize Mauro A. Garrucho to constitute a mortgage on the real estate of his
principal to secure his personal obligations. Therefore, in doing so by virtue of the document, Exhibit C,
he exceeded the scope if his authority and his principal is not liable for his acts. (2 Corpus Juris, p. 651;
article 1714, Civil Code.)

It is further claimed that inasmuch as the properties mortgaged by Mauro A. Garrucho belong to Paz
Agudelo y Gonzaga, the latter is responsible for the acts of the former although he acted in his own
name, in accordance with the exception contained in article 1717 of the Civil Code. It would be an
exception with the properties of his own name in connection with the properties of his principal, does
so within the scope of his authority. It is noted that Mauro A. Garrucho was not authorized to execute
promissory notes even in the name of his principal Paz Agudelo y Gonzaga, nor to constitute a mortgage
on her real properties to secure such promissory notes. The plaintiff Philippine National Bank should
know this inasmuch as it is in duty bound to ascertain the extent of the agent's authority before dealing
with him. Therefore, Mauro A. Garrucho and not Paz Agudelo y Gonzaga is personally liable for the
amount of the promissory note Exhibit B. (2 Corpus Juris, pp. 563-564.)

However, Paz Agudelo y Gonzaga in an affidavit dated January 15, 1926 (Exhibit AA), and in a letter
dated January 16, 1926 (Exhibit Z), gave her consent to the lien on lot No. 878 of the cadastre of Murcia,
Occidental Negros, described in Torrens title No. 5369, the ownership of which was transferred to her by
her niece Amparo A. Garrucho. This acknowledgment, however, does not extend to lots Nos. 207 and 61
of the cadastral survey of Bacolod, described in transfer certificates of title Nos. 1148 and 2216,
respectively, inasmuch as, although it is true that a mortgage is indivisible as to the contracting parties
and as top their successors in interest (article 1860, Civil Code), it is not so with respect to a third person
who did not take part in the constitution thereof either personally or through an agent, inasmuch as he
can make the acknowledgment thereof in the form and to the extent he may deem convenient, on the
ground that he is not in duty bound to acknowledge the said mortgage. Therefore, the only liability of
the defendant-appellant Paz Agudelo y Gonzaga is that which arises from the aforesaid
acknowledgment, but only with respect to the lien and not to the principal obligation secured by the
mortgage acknowledged by her to have been constituted on said lot No. 878 of the cadastral survey of
Murcia, Occidental Negros. Such liability is not direct but a subsidiary one.

Having reach this contention, it is unnecessary to pass upon the other questions of law raised by the
defendant- appellant in her brief and upon the law cited therein.

In view of the foregoing consideration, we are of the opinion and so hold that when an agent negotiates
a loan in his personal capacity and executes a promissory note under his own signature, without express
authority from his principal, giving as security therefor real estate belonging to the letter, also in his own
name and not in the name and representation of the said principal, the obligation do constructed by him
is personal and does not bind his aforesaid principal.

Wherefore, it is hereby held that the liability constructed by the aforesaid defendant-appellant Paz
Agudelo y Gonzaga is merely subsidiary to that of Mauro A. Garrucho, limited lot No. 878 of the
cadastral survey of Murcia, Occidental Negros, described in Torrens title No. 2415. However, inasmuch
as the principal obligator, Mauro A. Garrucho, has been absolved from the complaint and the plaintiff-
appellee has not appealed from the judgment absolving him, the law does not afford any remedy
whereby Paz Agudelo y Gonzaga may be required to comply with the said subsidiary obligation in view
of the legal maxim that the accessory follows the principal. Wherefore, the defendant herein should also
be absolved from the complaint which is hereby dismissed, with the costs against the appellee. So
ordered.

ALVIN PATRIMONIO, Petitioner,

vs.
NAPOLEON GUTIERREZ and OCTAVIO MARASIGAN III, Respondents.

DECISION

BRION, J.:

Assailed in this petition for review on certiorari1 under Rule 45 of the Revised Rules of Court is the
decision2 dated September 24, 2008 and the resolution3 dated April 30, 2009 of the Court of Appeals
(CA) in CA-G.R. CV No. 82301. The appellate court affirmed the decision of the Regional Trial Court (RTC)
of Quezon City, Branch 77, dismissing the complaint for declaration of nullity of loan filed by petitioner
Alvin Patrimonio and ordering him to pay respondent Octavio Marasigan III (Marasigan) the sum of
200,000.00.

The Factual Background

The facts of the case, as shown by the records, are briefly summarized below.

The petitioner and the respondent Napoleon Gutierrez (Gutierrez) entered into a business venture
under the name of Slam Dunk Corporation (Slum Dunk), a production outfit that produced mini-concerts
and shows related to basketball. Petitioner was already then a decorated professional basketball player
while Gutierrez was a well-known sports columnist.

In the course of their business, the petitioner pre-signed several checks to answer for the expenses of
Slam Dunk. Although signed, these checks had no payees name, date or amount. The blank checks were
entrusted to Gutierrez with the specific instruction not to fill them out without previous notification to
and approval by the petitioner. According to petitioner, the arrangement was made so that he could
verify the validity of the payment and make the proper arrangements to fund the account.

In the middle of 1993, without the petitioners knowledge and consent, Gutierrez went to Marasigan
(the petitioners former teammate), to secure a loan in the amount of 200,000.00 on the excuse that
the petitioner needed the money for the construction of his house. In addition to the payment of the
principal, Gutierrez assured Marasigan that he would be paid an interest of 5% per month from March
to May 1994.

After much contemplation and taking into account his relationship with the petitioner and Gutierrez,
Marasigan acceded to Gutierrez request and gave him 200,000.00 sometime in February 1994.
Gutierrez simultaneously delivered to Marasigan one of the blank checks the petitioner pre-signed with
Pilipinas Bank, Greenhills Branch, Check No. 21001764 with the blank portions filled out with the words
"Cash" "Two Hundred Thousand Pesos Only", and the amount of "200,000.00". The upper right portion
of the check corresponding to the date was also filled out with the words "May 23, 1994" but the
petitioner contended that the same was not written by Gutierrez.

On May 24, 1994, Marasigan deposited the check but it was dishonored for the reason "ACCOUNT
CLOSED." It was later revealed that petitioners account with the bank had been closed since May 28,
1993.

Marasigan sought recovery from Gutierrez, to no avail. He thereafter sent several demand letters to the
petitioner asking for the payment of 200,000.00, but his demands likewise went unheeded.
Consequently, he filed a criminal case for violation of B.P. 22 against the petitioner, docketed as Criminal
Case No. 42816.

On September 10, 1997, the petitioner filed before the Regional Trial Court (RTC) a Complaint for
Declaration of Nullity of Loan and Recovery of Damages against Gutierrez and co-respondent Marasigan.
He completely denied authorizing the loan or the checks negotiation, and asserted that he was not
privy to the parties loan agreement.

Only Marasigan filed his answer to the complaint. In the RTCs order dated December 22, 1997,Gutierrez
was declared in default.

The Ruling of the RTC

The RTC ruled on February 3,2003 in favor of Marasigan.4 It found that the petitioner, in issuing the pre-
signed blank checks, had the intention of issuing a negotiable instrument, albeit with specific
instructions to Gutierrez not to negotiate or issue the check without his approval. While under Section
14 of the Negotiable Instruments Law Gutierrez had the prima facie authority to complete the checks by
filling up the blanks therein, the RTC ruled that he deliberately violated petitioners specific instructions
and took advantage of the trust reposed in him by the latter.

Nonetheless, the RTC declared Marasigan as a holder in due course and accordingly dismissed the
petitioners complaint for declaration of nullity of the loan. It ordered the petitioner to pay Marasigan
the face value of the check with a right to claim reimbursement from Gutierrez.

The petitioner elevated the case to the Court of Appeals (CA), insisting that Marasigan is not a holder in
due course. He contended that when Marasigan received the check, he knew that the same was without
a date, and hence, incomplete. He also alleged that the loan was actually between Marasigan and
Gutierrez with his check being used only as a security.

The Ruling of the CA

On September 24, 2008, the CA affirmed the RTC ruling, although premised on different factual findings.
After careful analysis, the CA agreed with the petitioner that Marasigan is not a holder in due course as
he did not receive the check in good faith.

The CA also concluded that the check had been strictly filled out by Gutierrez in accordance with the
petitioners authority. It held that the loan may not be nullified since it is grounded on an obligation
arising from law and ruled that the petitioner is still liable to pay Marasigan the sum of 200,000.00.

After the CA denied the subsequent motion for reconsideration that followed, the petitioner filed the
present petition for review on certiorari under Rule 45 of the Revised Rules of Court.

The Petition

The petitioner argues that: (1) there was no loan between him and Marasigan since he never authorized
the borrowing of money nor the checks negotiation to the latter; (2) under Article 1878 of the Civil
Code, a special power of attorney is necessary for an individual to make a loan or borrow money in
behalf of another; (3) the loan transaction was between Gutierrez and Marasigan, with his check being
used only as a security; (4) the check had not been completely and strictly filled out in accordance with
his authority since the condition that the subject check can only be used provided there is prior approval
from him, was not complied with; (5) even if the check was strictly filled up as instructed by the
petitioner, Marasigan is still not entitled to claim the checks value as he was not a holder in due course;
and (6) by reason of the bad faith in the dealings between the respondents, he is entitled to claim for
damages.

The Issues

Reduced to its basics, the case presents to us the following issues:

1. Whether the contract of loan in the amount of 200,000.00 granted by respondent Marasigan
to petitioner, through respondent Gutierrez, may be nullified for being void;

2. Whether there is basis to hold the petitioner liable for the payment of the 200,000.00 loan;
 3. Whether respondent Gutierrez has completely filled out the subject check strictly under the
authority given by the petitioner; and

4. Whether Marasigan is a holder in due course.

The Courts Ruling

The petition is impressed with merit.

We note at the outset that the issues raised in this petition are essentially factual in nature. The main
point of inquiry of whether the contract of loan may be nullified, hinges on the very existence of the
contract of loan a question that, as presented, is essentially, one of fact. Whether the petitioner
authorized the borrowing; whether Gutierrez completely filled out the subject check strictly under the
petitioners authority; and whether Marasigan is a holder in due course are also questions of fact, that,
as a general rule, are beyond the scope of a Rule 45 petition.

The rule that questions of fact are not the proper subject of an appeal by certiorari, as a petition for
review under Rule 45 is limited only to questions of law, is not an absolute rule that admits of no
exceptions. One notable exception is when the findings off act of both the trial court and the CA are
conflicting, making their review necessary.5 In the present case, the tribunals below arrived at two
conflicting factual findings, albeit with the same conclusion, i.e., dismissal of the complaint for nullity of
the loan. Accordingly, we will examine the parties evidence presented.

I. Liability Under the Contract of Loan

The petitioner seeks to nullify the contract of loan on the ground that he never authorized the
borrowing of money. He points to Article 1878, paragraph 7 of the Civil Code, which explicitly requires a
written authority when the loan is contracted through an agent. The petitioner contends that absent
such authority in writing, he should not be held liable for the face value of the check because he was not
a party or privy to the agreement.

Contracts of Agency May be Oral Unless The Law Requires a Specific Form

Article 1868 of the Civil Code defines a contract of agency as a contract whereby 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." Agency may be express, or implied from the acts of the principal, from his
silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on
his behalf without authority.

As a general rule, a contract of agency may be oral.6 However, it must be written when the law requires
a specific form, for example, in a sale of a piece of land or any interest therein through an agent.

Article 1878 paragraph 7 of the Civil Code expressly requires a special power of authority before an
agent can loan or borrow money in behalf of the principal, to wit:

Art. 1878. Special powers of attorney are necessary in the following cases:
 xxxx

(7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of
the things which are under administration. (emphasis supplied)

Article 1878 does not state that the authority be in writing. As long as the mandate is express, such
authority may be either oral or written. We unequivocably declared in Lim Pin v. Liao Tian, et al.,7 that
the requirement under Article 1878 of the Civil Code refers to the nature of the authorization and not to
its form. Be that as it may, the authority must be duly established by competent and convincing
evidence other than the self serving assertion of the party claiming that such authority was verbally
given, thus:

The requirements of a special power of attorney in Article 1878 of the Civil Code and of a special
authority in Rule 138 of the Rules of Court refer to the nature of the authorization and not its form. The
requirements are met if there is a clear mandate from the principal specifically authorizing the
performance of the act. As early as 1906, this Court in Strong v. Gutierrez-Repide (6 Phil. 680) stated
that such a mandate may be either oral or written, the one vital thing being that it shall be express. And
more recently, We stated that, if the special authority is not written, then it must be duly established by
evidence:

x x x the Rules 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.(Home Insurance Company vs.
United States lines Company, et al., 21 SCRA 863; 866: Vicente vs. Geraldez, 52 SCRA 210; 225).
(emphasis supplied).

The Contract of Loan Entered Into by Gutierrez in Behalf of the Petitioner Should be Nullified for Being
Void; Petitioner is Not Bound by the Contract of Loan.

A review of the records reveals that Gutierrez did not have any authority to borrow money in behalf of
the petitioner.1wphi1Records do not show that the petitioner executed any special power of attorney
(SPA) in favor of Gutierrez. In fact, the petitioners testimony confirmed that he never authorized
Gutierrez (or anyone for that matter), whether verbally or in writing, to borrow money in his behalf, nor
was he aware of any such transaction:

ALVIN PATRIMONIO (witness)

ATTY. DE VERA: Did you give Nap Gutierrez any Special Power of Attorney in writing authorizing him to
borrow using your money?

WITNESS: No, sir. (T.S.N., Alvin Patrimonio, Nov. 11, 1999, p. 105)8

xxxx
Marasigan however submits that the petitioners acts of pre-signing the blank checks and releasing them
to Gutierrez suffice to establish that the petitioner had authorized Gutierrez to fill them out and
contract the loan in his behalf.

Marasigans submission fails to persuade us.

In the absence of any authorization, Gutierrez could not enter into a contract of loan in behalf of the
petitioner. As held in Yasuma v. Heirs of De Villa,9 involving a loan contracted by de Villa secured by real
estate mortgages in the name of East Cordillera Mining Corporation, in the absence of an SPA conferring
authority on de Villa, there is no basis to hold the corporation liable, to wit:

The power to borrow money is one of those cases where corporate officers as agents of the corporation
need a special power of attorney. In the case at bar, no special power of attorney conferring authority
on de Villa was ever presented. x x x There was no showing that respondent corporation ever authorized
de Villa to obtain the loans on its behalf.

xxxx

Therefore, on the first issue, the loan was personal to de Villa. There was no basis to hold the
corporation liable since there was no authority, express, implied or apparent, given to de Villa to borrow
money from petitioner. Neither was there any subsequent ratification of his act.

xxxx

The liability arising from the loan was the sole indebtedness of de Villa (or of his estate after his death).
(citations omitted; emphasis supplied).

This principle was also reiterated in the case of Gozun v. Mercado,10 where this court held:

Petitioner submits that his following testimony suffices to establish that respondent had authorized
Lilian to obtain a loan from him.

xxxx

Petitioners testimony failed to categorically state, however, whether the loan was made on behalf of
respondent or of his wife. While petitioner claims that Lilian was authorized by respondent, the
statement of account marked as Exhibit "A" states that the amount was received by Lilian "in behalf of
Mrs. Annie Mercado.

It bears noting that Lilian signed in the receipt in her name alone, without indicating therein that she
was acting for and in behalf of respondent. She thus bound herself in her personal capacity and not as
an agent of respondent or anyone for that matter.

It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real
property executed by an agent, it must upon its face purport to be made, signed and sealed in the name
of the principal, otherwise, it will bind the agent only. It is not enough merely that the agent was in fact
authorized to make the mortgage, if he has not acted in the name of the principal. x x x (emphasis
supplied).

In the absence of any showing of any agency relations or special authority to act for and in behalf of the
petitioner, the loan agreement Gutierrez entered into with Marasigan is null and void. Thus, the
petitioner is not bound by the parties loan agreement.

Furthermore, that the petitioner entrusted the blank pre-signed checks to Gutierrez is not legally
sufficient because the authority to enter into a loan can never be presumed. The contract of agency and
the special fiduciary relationship inherent in this contract must exist as a matter of fact. The person
alleging it has the burden of proof to show, not only the fact of agency, but also its nature and
extent.11 As we held in People v. Yabut:12

Modesto Yambao's receipt of the bad checks from Cecilia Que Yabut or Geminiano Yabut, Jr., in
Caloocan City cannot, contrary to the holding of the respondent Judges, be licitly taken as delivery of the
checks to the complainant Alicia P. Andan at Caloocan City to fix the venue there. He did not take
delivery of the checks as holder, i.e., as "payee" or "indorsee." And there appears to beno contract of
agency between Yambao and Andan so as to bind the latter for the acts of the former. Alicia P. Andan
declared in that sworn testimony before the investigating fiscal that Yambao is but her "messenger" or
"part-time employee." There was no special fiduciary relationship that permeated their dealings. For a
contract of agency to exist, the consent of both parties is essential, the principal consents that the other
party, the agent, shall act on his behalf, and the agent consents so to act. It must exist as a fact. The law
makes no presumption thereof. The person alleging it has the burden of proof to show, not only the fact
of its existence, but also its nature and extent. This is more imperative when it is considered that the
transaction dealt with involves checks, which are not legal tender, and the creditor may validly refuse
the same as payment of obligation.(at p. 630). (emphasis supplied)

The records show that Marasigan merely relied on the words of Gutierrez without securing a copy of the
SPA in favor of the latter and without verifying from the petitioner whether he had authorized the
borrowing of money or release of the check. He was thus bound by the risk accompanying his trust on
the mere assurances of Gutierrez.

No Contract of Loan Was Perfected Between Marasigan And Petitioner, as The Latters Consent Was Not
Obtained.

Another significant point that the lower courts failed to consider is that a contract of loan, like any other
contract, is subject to the rules governing the requisites and validity of contracts in general.13 Article
1318 of the Civil Code14enumerates the essential requisites for a valid contract, namely:

1. consent of the contracting parties;

2. object certain which is the subject matter of the contract; and

3. cause of the obligation which is established.

In this case, the petitioner denied liability on the ground that the contract lacked the essential element
of consent. We agree with the petitioner. As we explained above, Gutierrez did not have the petitioners
written/verbal authority to enter into a contract of loan. While there may be a meeting of the minds
between Gutierrez and Marasigan, such agreement cannot bind the petitioner whose consent was not
obtained and who was not privy to the loan agreement. Hence, only Gutierrez is bound by the contract
of loan.

True, the petitioner had issued several pre-signed checks to Gutierrez, one of which fell into the hands
of Marasigan. This act, however, does not constitute sufficient authority to borrow money in his behalf
and neither should it be construed as petitioners grant of consent to the parties loan agreement.
Without any evidence to prove Gutierrez authority, the petitioners signature in the check cannot be
taken, even remotely, as sufficient authorization, much less, consent to the contract of loan. Without
the consent given by one party in a purported contract, such contract could not have been perfected;
there simply was no contract to speak of.15

With the loan issue out of the way, we now proceed to determine whether the petitioner can be made
liable under the check he signed.

II. Liability Under the Instrument

The answer is supplied by the applicable statutory provision found in Section 14 of the Negotiable
Instruments Law (NIL) which states:

Sec. 14. Blanks; when may be filled.- Where the instrument is wanting in any material particular, the
person in possession thereof has a prima facie authority to complete it by filling up the blanks therein.
And a signature on a blank paper delivered by the person making the signature in order that the paper
may be converted into a negotiable instrument operates as a prima facie authority to fill it up as such for
any amount. In order, however, that any such instrument when completed may be enforced against any
person who became a party thereto prior to its completion, it must be filled up strictly in accordance
with the authority given and within a reasonable time. But if any such instrument, after completion, is
negotiated to a holder in due course, it is valid and effectual for all purposes in his hands, and he may
enforce it as if it had been filled up strictly in accordance with the authority given and within a
reasonable time.

This provision applies to an incomplete but delivered instrument. Under this rule, if the maker or drawer
delivers a pre-signed blank paper to another person for the purpose of converting it into a negotiable
instrument, that person is deemed to have prima facie authority to fill it up. It merely requires that the
instrument be in the possession of a person other than the drawer or maker and from such possession,
together with the fact that the instrument is wanting in a material particular, the law presumes agency
to fill up the blanks.16

In order however that one who is not a holder in due course can enforce the instrument against a party
prior to the instruments completion, two requisites must exist: (1) that the blank must be filled strictly
in accordance with the authority given; and (2) it must be filled up within a reasonable time. If it was
proven that the instrument had not been filled up strictly in accordance with the authority given and
within a reasonable time, the maker can set this up as a personal defense and avoid liability. However, if
the holder is a holder in due course, there is a conclusive presumption that authority to fill it up had
been given and that the same was not in excess of authority.17
In the present case, the petitioner contends that there is no legal basis to hold him liable both under the
contract and loan and under the check because: first, the subject check was not completely filled out
strictly under the authority he has given and second, Marasigan was not a holder in due course.

Marasigan is Not a Holder in Due Course

The Negotiable Instruments Law (NIL) defines a holder in due course, thus:

Sec. 52 A holder in due course is a holder who has taken the instrument under the following
conditions:

(a) That it is complete and regular upon its face;

(b) That he became the holder of it before it was overdue, and without notice that it had been
previously dishonored, if such was the fact;

(c) That he took it in good faith and for value;

(d) That at the time it was negotiated to him he had no notice of any infirmity in the instrument
or defect in the title of the person negotiating it.(emphasis supplied)

Section 52(c) of the NIL states that a holder in due course is one who takes the instrument "in good faith
and for value." It also provides in Section 52(d) that in order that one may be a holder in due course, it is
necessary that at the time it was negotiated to him he had no notice of any infirmity in the instrument
or defect in the title of the person negotiating it.

Acquisition in good faith means taking without knowledge or notice of equities of any sort which could
beset up against a prior holder of the instrument.18 It means that he does not have any knowledge of
fact which would render it dishonest for him to take a negotiable paper. The absence of the defense,
when the instrument was taken, is the essential element of good faith.19

As held in De Ocampo v. Gatchalian:20

In order to show that the defendant had "knowledge of such facts that his action in taking the
instrument amounted to bad faith," it is not necessary to prove that the defendant knew the exact fraud
that was practiced upon the plaintiff by the defendant's assignor, it being sufficient to show that the
defendant had notice that there was something wrong about his assignor's acquisition of title, although
he did not have notice of the particular wrong that was committed.

It is sufficient that the buyer of a note had notice or knowledge that the note was in some way tainted
with fraud. It is not necessary that he should know the particulars or even the nature of the fraud, since
all that is required is knowledge of such facts that his action in taking the note amounted bad faith.

The term bad faith does not necessarily involve furtive motives, but means bad faith in a commercial
sense. The manner in which the defendants conducted their Liberty Loan department provided an easy
way for thieves to dispose of their plunder. It was a case of "no questions asked." Although gross
negligence does not of itself constitute bad faith, it is evidence from which bad faith may be inferred.
The circumstances thrust the duty upon the defendants to make further inquiries and they had no right
to shut their eyes deliberately to obvious facts. (emphasis supplied).

In the present case, Marasigans knowledge that the petitioner is not a party or a privy to the contract of
loan, and correspondingly had no obligation or liability to him, renders him dishonest, hence, in bad
faith. The following exchange is significant on this point:

WITNESS: AMBET NABUS

Q: Now, I refer to the second call after your birthday. Tell us what you talked about?

A: Since I celebrated my birthday in that place where Nap and I live together with the other crew, there
were several visitors that included Danny Espiritu. So a week after my birthday, Bong Marasigan called
me up again and he was fuming mad. Nagmumura na siya. Hinahanap niya si hinahanap niya si Nap,
dahil pinagtataguan na siya at sinabi na niya na kailangan I-settle na niya yung utang ni Nap, dahil

xxxx

WITNESS: Yes. Sinabi niya sa akin na kailangan ayusin na bago pa mauwi sa kung saan ang tsekeng
tumalbog (He told me that we have to fix it up before it) mauwi pa kung saan

xxxx

Q: What was your reply, if any?

A: I actually asked him. Kanino ba ang tseke na sinasabi mo?

(Whose check is it that you are referring to or talking about?)

Q: What was his answer?

A: It was Alvins check.

Q: What was your reply, if any?

A: I told him do you know that it is not really Alvin who borrowed money from you or what you want to
appear

xxxx

Q: What was his reply?

A: Yes, it was Nap, pero tseke pa rin ni Alvin ang hawak ko at si Alvin ang maiipit dito.(T.S.N., Ambet
Nabus, July 27, 2000; pp.65-71; emphasis supplied)21

Since he knew that the underlying obligation was not actually for the petitioner, the rule that a
possessor of the instrument is prima facie a holder in due course is inapplicable. As correctly noted by
the CA, his inaction and failure to verify, despite knowledge of that the petitioner was not a party to the
loan, may be construed as gross negligence amounting to bad faith.

Yet, it does not follow that simply because he is not a holder in due course, Marasigan is already totally
barred from recovery. The NIL does not provide that a holder who is not a holder in due course may not
in any case recover on the instrument.22 The only disadvantage of a holder who is not in due course is
that the negotiable instrument is subject to defenses as if it were non-negotiable.23 Among such
defenses is the filling up blank not within the authority.

On this point, the petitioner argues that the subject check was not filled up strictly on the basis of the
authority he gave. He points to his instruction not to use the check without his prior approval and argues
that the check was filled up in violation of said instruction.

Check Was Not Completed Strictly Under The Authority Given by The Petitioner

Our own examination of the records tells us that Gutierrez has exceeded the authority to fill up the
blanks and use the check.1wphi1 To repeat, petitioner gave Gutierrez pre-signed checks to be used in
their business provided that he could only use them upon his approval. His instruction could not be any
clearer as Gutierrez authority was limited to the use of the checks for the operation of their business,
and on the condition that the petitioners prior approval be first secured.

While under the law, Gutierrez had a prima facie authority to complete the check, such prima facie
authority does not extend to its use (i.e., subsequent transfer or negotiation)once the check is
completed. In other words, only the authority to complete the check is presumed. Further, the law used
the term "prima facie" to underscore the fact that the authority which the law accords to a holder is a
presumption juris tantumonly; hence, subject to subject to contrary proof. Thus, evidence that there
was no authority or that the authority granted has been exceeded may be presented by the maker in
order to avoid liability under the instrument.

In the present case, no evidence is on record that Gutierrez ever secured prior approval from the
petitioner to fill up the blank or to use the check. In his testimony, petitioner asserted that he never
authorized nor approved the filling up of the blank checks, thus:

ATTY. DE VERA: Did you authorize anyone including Nap Gutierrez to write the date, May 23, 1994?

WITNESS: No, sir.

Q: Did you authorize anyone including Nap Gutierrez to put the word cash? In the check?

A: No, sir.

Q: Did you authorize anyone including Nap Gutierrez to write the figure 200,000 in this check?

A: No, sir.

Q: And lastly, did you authorize anyone including Nap Gutierrez to write the words 200,000 only xx in
this check?
A: No, sir. (T.S.N., Alvin Patrimonio, November 11, 1999).24

Notably, Gutierrez was only authorized to use the check for business expenses; thus, he exceeded the
authority when he used the check to pay the loan he supposedly contracted for the construction of
petitioner's house. This is a clear violation of the petitioner's instruction to use the checks for the
expenses of Slam Dunk. It cannot therefore be validly concluded that the check was completed strictly in
accordance with the authority given by the petitioner.

Considering that Marasigan is not a holder in due course, the petitioner can validly set up the personal
defense that the blanks were not filled up in accordance with the authority he gave. Consequently,
Marasigan has no right to enforce payment against the petitioner and the latter cannot be obliged to
pay the face value of the check.

WHEREFORE, in view of the foregoing, judgment is hereby rendered GRANTING the petitioner Alvin
Patrimonio's petition for review on certiorari. The appealed Decision dated September 24, 2008 and the
Resolution dated April 30, 2009 of the Court of Appeals are consequently ANNULLED AND SET ASIDE.
Costs against the respondents.

EDUARDO B. OLAGUER, Petitioner,

vs.
EMILIO PURUGGANAN, JR. AND RAUL LOCSIN, Respondents.

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the
Decision,1 dated 30 June 2003, promulgated by the Court of Appeals, affirming the Decision of the
Regional Trial Court, dated 26 July 1995, dismissing the petitioners suit.

The parties presented conflicting accounts of the facts.

EDUARDO B. OLAGUERS VERSION

Petitioner Eduardo B. Olaguer alleges that he was the owner of 60,000 shares of stock of Businessday
Corporation (Businessday) with a total par value of 600,000.00, with Certificates of Stock No. 005, No.
028, No. 034, No. 070, and No. 100.2 At the time he was employed with the corporation as Executive
Vice-President of Businessday, and President of Businessday Information Systems and Services and of
Businessday Marketing Corporation, petitioner, together with respondent Raul Locsin (Locsin) and
Enrique Joaquin (Joaquin), was active in the political opposition against the Marcos
dictatorship.3 Anticipating the possibility that petitioner would be arrested and detained by the Marcos
military, Locsin, Joaquin, and Hector Holifea had an unwritten agreement that, in the event that
petitioner was arrested, they would support the petitioners family by the continued payment of his
salary.4 Petitioner also executed a Special Power of Attorney (SPA), on 26 May 1979, appointing as his
attorneys-in-fact Locsin, Joaquin and Hofilea for the purpose of selling or transferring petitioners
shares of stock with Businessday. During the trial, petitioner testified that he agreed to execute the SPA
in order to cancel his shares of stock, even before they are sold, for the purpose of concealing that he
was a stockholder of Businessday, in the event of a military crackdown against the opposition.5 The
parties acknowledged the SPA before respondent Emilio Purugganan, Jr., who was then the Corporate
Secretary of Businessday, and at the same time, a notary public for Quezon City.6

On 24 December 1979, petitioner was arrested by the Marcos military by virtue of an Arrest, Search and
Seizure Order and detained for allegedly committing arson. During the petitioners detention,
respondent Locsin ordered fellow respondent Purugganan to cancel the petitioners shares in the books
of the corporation and to transfer them to respondent Locsins name.7

As part of his scheme to defraud the petitioner, respondent Locsin sent Rebecca Fernando, an employee
of Businessday, to Camp Crame where the petitioner was detained, to pretend to borrow Certificate of
Stock No. 100 for the purpose of using it as additional collateral for Businessdays then outstanding loan
with the National Investment and Development Corporation. When Fernando returned the borrowed
stock certificate, the word "cancelled" was already written therein. When the petitioner became upset,
Fernando explained that this was merely a mistake committed by respondent Locsins secretary.8

During the trial, petitioner also agreed to stipulate that from 1980 to 1982, Businessday made regular
deposits, each amounting to 10,000.00, to the Metropolitan Bank and Trust Company accounts of
Manuel and Genaro Pantig, petitioners in-laws. The deposits were made on every 15th and 30th of the
month.9 Petitioner alleged that these funds consisted of his monthly salary, which Businessday agreed to
continue paying after his arrest for the financial support of his family.10 After receiving a total of
600,000.00, the payments stopped. Thereafter, respondent Locsin and Fernando went to ask petitioner
to endorse and deliver the rest of his stock certificates to respondent Locsin, but petitioner refused. 11

On 16 January 1986, petitioner was finally released from detention. He then discovered that he was no
longer registered as stockholder of Businessday in its corporate books. He also learned that Purugganan,
as the Corporate Secretary of Businessday, had already recorded the transfer of shares in favor of
respondent Locsin, while petitioner was detained. When petitioner demanded that respondents restore
to him full ownership of his shares of stock, they refused to do so. On 29 July 1986, petitioner filed a
Complaint before the trial court against respondents Purugganan and Locsin to declare as illegal the sale
of the shares of stock, to restore to the petitioner full ownership of the shares, and payment of
damages.12

RESPONDENT RAUL LOCSINS VERSION

In his version of the facts, respondent Locsin contended that petitioner approached him and requested
him to sell, and, if necessary, buy petitioners shares of stock in Businessday, to assure support for
petitioners family in the event that something should happen to him, particularly if he was jailed, exiled
or forced to go underground.13 At the time petitioner was employed with Businessday, respondent
Locsin was unaware that petitioner was part of a group, Light-a-Fire Movement, which actively sought
the overthrow of the Marcos government through an armed struggle.14 He denied that he made any
arrangements to continue paying the petitioners salary in the event of the latters imprisonment.15

When petitioner was detained, respondent Locsin tried to sell petitioners shares, but nobody wanted to
buy them. Petitioners reputation as an oppositionist resulted in the poor financial condition of
Businessday and discouraged any buyers for the shares of stock.16 In view of petitioners previous
instructions, respondent Locsin decided to buy the shares himself.1awphi1.net Although the capital
deficiency suffered by Businessday caused the book value of the shares to plummet below par value,
respondent Locsin, nevertheless, bought the shares at par value.17 However, he had to borrow from
Businessday the funds he used in purchasing the shares from petitioner, and had to pay the petitioner in
installments of 10,000.00 every 15th and 30th of each month.18

The trial court in its Decision, dated 26 July 1995, dismissed the Complaint filed by the petitioner. It
ruled that the sale of shares between petitioner and respondent Locsin was valid. The trial court
concluded that petitioner had intended to sell the shares of stock to anyone, including respondent
Locsin, in order to provide for the needs of his family should he be jailed or forced to go underground;
and that the SPA drafted by the petitioner empowered respondent Locsin, and two other agents, to sell
the shares for such price and under such terms and conditions that the agents may deem proper. It
further found that petitioner consented to have respondent Locsin buy the shares himself. It also ruled
that petitioner, through his wife, received from respondent Locsin the amount of 600,000.00 as
payment for the shares of stock.19 The dispositive part of the trial courts Decision reads:

WHEREFORE, for failure of the [herein petitioner] to prove by preponderance of evidence, his causes of
action and of the facts alleged in his complaint, the instant suit is hereby ordered DISMISSED, without
pronouncement as to costs.

[Herein respondents] counterclaims, however, are hereby DISMISSED, likewise, for dearth of substantial
evidentiary support.20

On appeal, the Court of Appeals affirmed the Decision of the trial court that there was a perfected
contract of sale.21It further ruled that granting that there was no perfected contract of sale, petitioner,
nevertheless, ratified the sale to respondent Locsin by his receipt of the purchase price, and his failure
to raise any protest over the said sale.22 The Court of Appeals refused to credit the petitioners
allegation that the money his wife received constituted his salary from Businessday since the amount he
received as his salary, 24,000.00 per month, did not correspond to the amount he received during his
detention, 20,000.00 per month (deposits of 10,000.00 on every 15th and 30th of each month in the
accounts of the petitioners in-laws). On the other hand, the total amount received, 600,000.00,
corresponds to the aggregate par value of petitioners shares in Businessday. Moreover, the financial
condition of Businessday prevented it from granting any form of financial assistance in favor of the
petitioner, who was placed in an indefinite leave of absence, and, therefore, not entitled to any salary. 23

The Court of Appeals also ruled that although the manner of the cancellation of the petitioners
certificates of stock and the subsequent issuance of the new certificate of stock in favor of respondent
Locsin was irregular, this irregularity will not relieve petitioner of the consequences of a consummated
sale.24

Finally, the Court of Appeals affirmed the Decision of the trial court disallowing respondent Locsins
claims for moral and exemplary damages due to lack of supporting evidence.25

Hence, the present petition, where the following issues were raised:

I.
THE APPELLATE COURT ERRED IN RULING THAT THERE WAS A PERFECTED CONTRACT OF SALE BETWEEN
PETITIONER AND MR. LOCSIN OVER THE SHARES;

II.

THE APPELLATE COURT ERRED IN RULING THAT PETITIONER CONSENTED TO THE ALLEGED SALE OF THE
SHARES TO MR. LOCSIN;

III.

THE APPELLATE COURT ERRED IN RULING THAT THE AMOUNTS RECEIVED BY PETITIONERS IN LAWS
WERE NOT PETITIONERS SALARY FROM THE CORPORATION BUT INSTALLMENT PAYMENTS FOR THE
SHARES;

IV.

THE APPELLATE COURT ERRED IN RULING THAT MR. LOCSIN WAS THE PARTY TO THE ALLEGED SALE OF
THE SHARES AND NOT THE CORPORATION; AND

V.

THE APPELLATE COURT ERRED IN RULING THAT THE ALLEGED SALE OF THE SHARES WAS VALID
ALTHOUGH THE CANCELLATION OF THE SHARES WAS IRREGULAR.26

The petition is without merit.

The first issue that the petitioner raised is that there was no valid sale since respondent Locsin exceeded
his authority under the SPA27 issued in his, Joaquin and Holifenas favor. He alleged that the authority of
the afore-named agents to sell the shares of stock was limited to the following conditions: (1) in the
event of the petitioners absence and incapacity; and (2) for the limited purpose of applying the
proceeds of the sale to the satisfaction of petitioners subsisting obligations with the companies
adverted to in the SPA.28

Petitioner sought to impose a strict construction of the SPA by limiting the definition of the word
"absence" to a condition wherein "a person disappears from his domicile, his whereabouts being
unknown, without leaving an agent to administer his property,"29 citing Article 381 of the Civil Code, the
entire provision hereunder quoted:

ART 381. When a person disappears from his domicile, his whereabouts being unknown, and without
leaving an agent to administer his property, the judge, at the instance of an interested party, a relative,
or a friend, may appoint a person to represent him in all that may be necessary.

This same rule shall be observed when under similar circumstances the power conferred by the
absentee has expired.
Petitioner also puts forward that the word "incapacity" would be limited to mean "minority, insanity,
imbecility, the state of being deaf-mute, prodigality and civil interdiction."30 He cites Article 38 of the
Civil Code, in support of this definition, which is hereunder quoted:

ART. 38 Minority, insanity or imbecility, the state of being a deaf-mute, prodigality and civil interdiction
are mere restrictions on capacity to act, and do not exempt the incapacitated person, from certain
obligations, as when the latter arise from his acts or from property relations, such as easements.

Petitioner, thus, claims that his arrest and subsequent detention are not among the instances covered
by the terms "absence or incapacity," as provided under the SPA he executed in favor of respondent
Locsin.

Petitioners arguments are unpersuasive. It is a general rule that a power of attorney must be strictly
construed; the instrument will be held to grant only those powers that are specified, and the agent may
neither go beyond nor deviate from the power of attorney. However, the rule is not absolute and should
not be applied to the extent of destroying the very purpose of the power. If the language will permit, the
construction that should be adopted is that which will carry out instead of defeat the purpose of the
appointment. Clauses in a power of attorney that are repugnant to each other should be reconciled so
as to give effect to the instrument in accordance with its general intent or predominant purpose.
Furthermore, the instrument should always be deemed to give such powers as essential or usual in
effectuating the express powers.31

In the present case, limiting the definitions of "absence" to that provided under Article 381 of the Civil
Code and of "incapacity" under Article 38 of the same Code negates the effect of the power of attorney
by creating absurd, if not impossible, legal situations. Article 381 provides the necessarily stringent
standards that would justify the appointment of a representative by a judge. Among the standards the
said article enumerates is that no agent has been appointed to administer the property. In the present
case, petitioner himself had already authorized agents to do specific acts of administration and thus, no
longer necessitated the appointment of one by the court. Likewise, limiting the construction of
"incapacity" to "minority, insanity, imbecility, the state of being a deaf-mute, prodigality and civil
interdiction," as provided under Article 38, would render the SPA ineffective. Article 1919(3) of the Civil
Code provides that the death, civil interdiction, insanity or insolvency of the principal or of the agent
extinguishes the agency. It would be equally incongruous, if not outright impossible, for the petitioner to
require himself to qualify as a minor, an imbecile, a deaf-mute, or a prodigal before the SPA becomes
operative. In such cases, not only would he be prevented from appointing an agent, he himself would be
unable to administer his property.

On the other hand, defining the terms "absence" and "incapacity" by their everyday usage makes for a
reasonable construction, that is, "the state of not being present" and the "inability to act," given the
context that the SPA authorizes the agents to attend stockholders meetings and vote in behalf of
petitioner, to sell the shares of stock, and other related acts. This construction covers the situation
wherein petitioner was arrested and detained. This much is admitted by petitioner in his testimony.32

Petitioners contention that the shares may only be sold for the sole purpose of applying the proceeds of
the sale to the satisfaction of petitioners subsisting obligations to the company is far-fetched. The
construction, which will carry out the purpose, is that which should be applied. Petitioner had not
submitted evidence that he was in debt with Businessday at the time he had executed the SPA. Nor
could he have considered incurring any debts since he admitted that, at the time of its execution, he was
concerned about his possible arrest, death and disappearance. The language of the SPA clearly
enumerates, as among those acts that the agents were authorized to do, the act of applying the
proceeds of the sale of the shares to any obligations petitioner might have against the Businessday
group of companies. This interpretation is supported by the use of the word "and" in enumerating the
authorized acts, instead of phrases such as "only for," "for the purpose of," "in order to" or any similar
terms to indicate that the petitioner intended that the SPA be used only for a limited purpose, that of
paying any liabilities with the Businessday group of companies.

Secondly, petitioner argued that the records failed to show that he gave his consent to the sale of the
shares to respondent Locsin for the price of 600,000.00. This argument is unsustainable. Petitioner
received from respondent Locsin, through his wife and in-laws, the installment payments for a total of
600,000.00 from 1980 to 1982, without any protest or complaint. It was only four years after 1982
when petitioner demanded the return of the shares. The petitioners claim that he did not instruct
respondent Locsin to deposit the money to the bank accounts of his in-laws fails to prove that petitioner
did not give his consent to the sale since respondent Locsin was authorized, under the SPA, to negotiate
the terms and conditions of the sale including the manner of payment. Moreover, had respondent
Locsin given the proceeds directly to the petitioner, as the latter suggested in this petition, the proceeds
were likely to have been included among petitioners properties which were confiscated by the military.
Instead, respondent Locsin deposited the money in the bank accounts of petitioners in-laws, and
consequently, assured that the petitioners wife received these amounts. Article 1882 of the Civil Code
provides that the limits of an agents authority shall not be considered exceeded should it have been
performed in a manner more advantageous to the principal than that specified by him.

In addition, petitioner made two inconsistent statements when he alleged that (1) respondent Locsin
had not asked the petitioner to endorse and deliver the shares of stock, and (2) when Rebecca Fernando
asked the petitioner to endorse and deliver the certificates of stock, but petitioner refused and even
became upset.33 In either case, both statements only prove that petitioner refused to honor his part as
seller of the shares, even after receiving payments from the buyer. Had the petitioner not known of or
given his consent to the sale, he would have given back the payments as soon as Fernando asked him to
endorse and deliver the certificates of stock, an incident which unequivocally confirmed that the funds
he received, through his wife and his in-laws, were intended as payment for his shares of stocks.
Instead, petitioner held on to the proceeds of the sale after it had been made clear to him that
respondent Locsin had considered the 600,000.00 as payment for the shares, and asked petitioner,
through Fernando, to endorse and deliver the stock certificates for cancellation.

As regards the third issue, petitioners allegation that the installment payments he was adjudged to
have received for the shares were actually salaries which Businessday promised to pay him during his
detention is unsupported and implausible. Petitioner received 20,000.00 per month through his in-
laws; this amount does not correspond to his monthly salary at 24,000.00.34 Nor does the amount
received correspond to the amount which Businessday was supposed to be obliged to pay petitioner,
which was only 45,000.00 to 60,000.00 per annum.35 Secondly, the petitioners wife did not receive
funds from respondent Locsin or Businessday for the entire duration of petitioners detention. Instead,
when the total amount received by the petitioner reached the aggregate amount of his shares at par
value -- 600,000.00 -- the payments stopped. Petitioner even testified that when respondent Locsin
denied knowing the petitioner soon after his arrest, he believed respondent Locsins commitment to pay
his salaries during his detention to be nothing more than lip-service.36
Granting that petitioner was able to prove his allegations, such an act of gratuity, on the part of
Businessday in favor of petitioner, would be void. An arrangement whereby petitioner will receive
"salaries" for work he will not perform, which is not a demandable debt since petitioner was on an
extended leave of absence, constitutes a donation under Article 72637 of the Civil Code. Under Article
748 of the Civil Code, if the value of the personal property donated exceeds 5,000.00, the donation and
the acceptance shall have to be made in writing. Otherwise, the donation will be void. In the present
case, petitioner admitted in his testimony38 that such arrangement was not made in writing and, hence,
is void.

The fact that some of the deposit slips and communications made to petitioners wife contain the
phrase "household expenses" does not disprove the sale of the shares. The money was being deposited
to the bank accounts of the petitioners in-laws, and not to the account of the petitioner or his wife,
precisely because some of his property had already been confiscated by the military. Had they used the
phrase "sale of shares," it would have defeated the purpose of not using their own bank accounts, which
was to conceal from the military any transaction involving the petitioners property.

Petitioner raised as his fourth issue that granting that there was a sale, Businessday, and not respondent
Locsin, was the party to the transaction. The curious facts that the payments were received on the 15th
and 30th of each month and that the payor named in the checks was Businessday, were adequately
explained by respondent Locsin. Respondent Locsin had obtained cash advances from the company,
paid to him on the 15th and 30th of the month, so that he can pay petitioner for the shares. To support
his claim, he presented Businessdays financial records and the testimony of Leo Atienza, the Companys
Accounting Manager. When asked why the term "shares of stock" was used for the entries, instead of
"cash advances," Atienza explained that the term "shares of stock" was more specific rather than the
broader phrase "cash advances."39 More to the point, had the entries been for "shares of stock," the
issuance of shares should have been reflected in the stock and transfer books of Businessday, which the
petitioner presented as evidence. Instead the stock and transfer books reveal that the increase in
respondent Locsins shares was a result of the cancellation and transfer of petitioners shares in favor of
respondent Locsin.

Petitioner alleges that the purported sale between himself and respondent Locsin of the disputed shares
of stock is void since it contravenes Article 1491 of the Civil Code, which provides that:

ART. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either
in person or through the mediation of another:

xxxx

(2) Agents, the property whose administration or sale may have been entrusted to them, unless the
consent of the principal has been given; x x x.

It is, indeed, a familiar and universally recognized doctrine that a person who undertakes to act as agent
for another cannot be permitted to deal in the agency matter on his own account and for his own
benefit without the consent of his principal, freely given, with full knowledge of every detail known to
the agent which might affect the transaction.40 The prohibition against agents purchasing property in
their hands for sale or management is, however, clearly, not absolute. It does not apply where the
principal consents to the sale of the property in the hands of the agent or administrator.>41
In the present case, the parties have conflicting allegations. While respondent Locsin averred that
petitioner had permitted him to purchase petitioners shares, petitioner vehemently denies having
known of the transaction. However, records show that petitioners position is less credible than that
taken by respondent Locsin given petitioners contemporaneous and subsequent acts.42 In 1980, when
Fernando returned a stock certificate she borrowed from the petitioner, it was marked "cancelled."
Although the petitioner alleged that he was furious when he saw the word cancelled, he had not
demanded the issuance of a new certificate in his name. Instead of having been put on his guard,
petitioner remained silent over this obvious red flag and continued receiving, through his wife,
payments which totalled to the aggregate amount of the shares of stock valued at par. When the
payments stopped, no demand was made by either petitioner or his wife for further payments.

From the foregoing, it is clear that petitioner knew of the transaction, agreed to the purchase price of
600,000.00 for the shares of stock, and had in fact facilitated the implementation of the terms of the
payment by providing respondent Locsin, through petitioners wife, with the information on the bank
accounts of his in-laws. Petitioners wife and his son even provided receipts for the payments that were
made to them by respondent Locsin,43 a practice that bespeaks of an onerous transaction and not an act of gratuity.

Lastly, petitioner claims that the cancellation of the shares and the subsequent transfer thereof were fraudulent, and, therefore, illegal. In the present case, the
shares were transferred in the name of the buyer, respondent Locsin, without the petitioner delivering to the buyer his certificates of stock. Section 63 of the
Corporation Code provides that:

Sec.63. Certificate of stock and transfer of shares. xxx Shares of stock so issued are personal property and may be transferred by delivery of the certificate or
certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as
between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction, the date of the transfer, the
number of the certificate or certificates and the number of shares transferred. (Emphasis provided.)

The aforequoted provision furnishes the procedure for the transfer of shares the delivery of the endorsed certificates, in order to prevent the fraudulent transfer
of shares of stock. However, this rule cannot be applied in the present case without causing the injustice sought to be avoided. As had been amply demonstrated,
there was a valid sale of stocks. Petitioners failure to deliver the shares to their rightful buyer is a breach of his duty as a seller, which he cannot use to unjustly
profit himself by denying the validity of such sale. Thus, while the manner of the cancellation of petitioners certificates of stock and the issuance of the new
certificates in favor of respondent Locsin was highly irregular, we must, nonetheless, declare the validity of the sale between the parties. Neither does this
irregularity prove that the transfer was fraudulent. In his testimony, petitioner admitted that they had intended to conceal his being a stockholder of
Businessday.44 The cancellation of his name from the stock and transfer book, even before the shares were actually sold, had been done with his consent. As earlier
explained, even the subsequent sale of the shares in favor of Locsin had been done with his consent.

IN VIEW OF THE FOREGOING, the instant Petition is DENIED. This Court AFFIRMS the assailed Decision of the Court of Appeals, promulgated on 30 June 2003,
affirming the validity of the sale of the shares of stock in favor of respondent Locsin. No costs.

VICENTE SY-JUCO and CIPRIANA VIARDO, plaintiffs-appellants,

vs.
SANTIAGO V. SY-JUCO, defendant-appellant.

Sumulong and Estrada for plaintiffs and appellants.

Delgado and Delgado for defendant and appellant.

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

Wherefore, the court give judgment for the plaintiffs and orders:

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

2. That the defendant return to the plaintiffs the casco No. 2584, or pay to them the value
thereof which has been fixed at the sum of P3,000, and should the return of said casco be made,
execute all the necessary instruments and documents for its registration in plaintiffs' name at
the Custom House; and

3. That the defendant return to the plaintiffs the automobile No. 2060 and execute the
necessary instruments and documents for its registration at the Bureau of Public Works. And
judgment is hereby given for the defendant absolving him from the complaint so far concerns:

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

2. The return of the casco No. 2545;

3. The return of the typewriting machine;

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

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

Both parties appealed from this judgment.

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

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

The defendant invokes the decision of this Court in the case of Martinez vs. Martinez (1 Phil. Rep., 647),
which we do not believe is applicable to the present case. In said case, Martinez, Jr., bought a vessel in
his own name and in his name registered it at the Custom House. This court then said that although the
funds with which the vessel was bought belonged to Martinez Sr., Martinez Jr. is its sole and exclusive
owner. But in said case the relation of principal and agent, which exists between the plaintiffs and the
defendant in the present case, did not exist between Martinez, Sr., and Martinez, Jr. By this agency the
plaintiffs herein clothed the defendant with their representation in order to purchase the launch in
question. However, the defendant acted without this representation and bought the launch in his own
name thereby violating the agency. If the result of this transaction should be that the defendant has
acquired for himself the ownership of the launch, it would be equivalent to sanctioning this violation
and accepting its consequences. But not only must the consequences of the violation of this agency not
be accepted, but the effects of the agency itself must be sought. If the defendant contracted the
obligation to but the launch for the plaintiffs and in their representation, but virtue of the agency,
notwithstanding the fact that he bought it in his own name, he is obliged to transfer to the plaintiffs the
rights he received from the vendor, and the plaintiffs are entitled to be subrogated in these rights.

There is another point of view leading us to the same conclusion. From the rule established in article
1717 of the Civil Code that, when an agency acts in his own name, the principal shall have no right of
action against the person with whom the agent has contracted, cases involving things belonging to the
principal are excepted. According to this exception (when things belonging to the principal are dealt
with) the agent is bound to the principal although he does not assume the character of such agent and
appears acting in his own name (Decision of the Supreme Court of Spain, May 1, 1900). This means that
in the case of this exception the agent's apparent representation yields to the principal's true
representation and that, in reality and in effect, the contract must be considered as entered into
between the principal and the third person; and, consequently, if the obligations belong to the former,
to him alone must also belong the rights arising from the contract. The money with which the launch
was bough having come from the plaintiff, the exception established in article 1717 is applicable to the
instant case.

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

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

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

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

2. The court erred in absolving the defendant from his obligation to render an account of his
administration to the plaintiffs, and to pay to the latter the amount of the balance due in their
favor.

3. The court erred in not condemning the defendant to pay to the plaintiffs the value of the
woods, windows and doors taken from their lumber-year by the defendant and used in the
construction of the house on calle Real of the barrio of La Concepcion, municipality of Malabon,
Rizal.

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

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

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

Concerning the rendition of accounts which the plaintiffs require of the defendant, we likewise find
correct the trial court's decision absolving the latter from this petition, for it appears, from the plaintiffs'
own evidence, that the defendant used to render accounts of his agency after each transactions, to the
plaintiffs' satisfaction.
From the foregoing considerations, we affirm the judgment appealed from in all its parts except in so far
as the casco No. 2545 is concerned, and as to this we declare that, it having been sold by the plaintiffs to
the defendant, the latter is absolved. No special findings as to costs. So ordered.

E. AWAD, plaintiff-appellant,
vs.
FILMA MERCANTILE CO., INC., defendant-appellee.

M. H. de Joya and Ramon P. Gomez for appellant.

Crossfield and O'Brien for appellee.

OSTRAND, J.:

Early in the month of September, 1924, the plaintiff, doing business in the Philippine Islands under the
name of E. Awad & Co., delivered certain merchandise of the invoice value of P11,140 to Chua Lioc, a
merchant operating under the name of Hang Chua Co. in Manila, said merchandise to be sold on
commission by Chua Lioc. Representing himself as being the owner of the merchandise, Chua Lioc, on
September 8, 1924, sold it to the defendant for the sum of P12,155.60. He owed the Philippine
Manufacturing Co., the sum of P3,480, which the defendant agreed to pay, and was also indebted to the
defendant itself in the sum of P2,017.98. The total amount of the two debts, P5,497.98, was deducted
from the purchase price, leaving a balance of P6,657.52 which the defendant promised to pay to Chua
Lioc on or before October 9, 1924.

The merchandise so purchased on September 9, was delivered to the defendant, who immediately
offered it for sale. Three days later D. J. Awad, the representative of the plaintiff in the Philippine
Islands; having ascertained that the goods entrusted to Chua Lioc was being offered for sale by the
defendant, obtained authorization from Chua Lioc to collect the sum of P11,707 from said defendant
and informed the latter's treasurer of the facts above set forth. On September 15, D. J. Awad, in behalf
of E. Awad & Co., wrote a letter to the defendant corporation advising it that, inasmuch as the
merchandise belonged to E. Awad & Co., the purchase price should be paid to them, to which letter, the
defendant, on September 18, 1924, made the following answer:

Messrs. E. AWAD & CO.

435 Juan Luna Manila.

GENTLEMEN: We are in receipt of your letter of September 15, 1924, in which you state that certain
blankets and shirts were brought from you by the Chinaman Chua Lioc under false pretenses on
consignment, basis, and in which you say that the merchandise is yours and we should make payment to
you for said merchandise. In answer to your letter, we beg to say to you that the blankets and shirts in
question, together with other merchandise, were purchased and received by us from the Chinaman
Chua Lioc on September 9, 1924, in the ordinary course of business, and that there is now due from us
to the said Chinaman a balance of P6,657.52, which is payable on October 9, 1924. In view of these
facts, we are unable to comply with your request, and would advise you, in case this Chinaman is
indebted to you for said merchandise, to take the necessary steps through the Court to secure the
payment of this balance due to him to your firm, inasmuch as if you do not do so, we shall be obliged to
pay the balance which we owe for said merchandise directly to him.

Yours respectfully,

FILMA MERCHANTILE CO. INC.

On the same date, September 18, 1924, the Philippine Trust Company, brought an action, civil case No.
26934, against Chua Lioc for the recovery of the sum of P1,036.36 and under a writ of attachment
garnished the balance due Chua Lioc from the defendant. On October 7, E. Awad also brought an action,
civil case No. 27016, against Chua Lioc for the recovery of the sum of P11,140, the invoice value of the
merchandise above-mentioned and also obtained a writ of attachment under which notice of
garnishment of the said aforesaid balance we served upon the herein defendant.

The complaint in the present action was filed on November 26, 1924, the plaintiff demanding payment
of the same sum of P11,140 for which action had already been brought against Chua Lioc. The
defendant, its answer, set up as special defense that it brought the merchandise in good faith and
without any knowledge whether of the person from whom or the condition under which the said
merchandise had been acquired by Chua Lioc or Hang Chuan Co.; that the defendant therefore had
acquired title to the merchandise purchased; that the balance of P6,657.52, now in the hands of the
defendant had been attached in the two actions brought on September 18, and October 7, respectively,
and garnishment served upon the defendant, who therefore, holds the money subject to the orders of
the court in the cases above-mentioned, but which sum the defendant is able and willing to pay at any
time when the court decides to whom the money lawfully pertains.1awphil.net

Upon trial, the court below dismissed the case without costs on the ground that the plaintiff was only
entitled to payment of the sum of P6,657.52, but which sum the defendant had the right to retain
subject to the orders of the court in cases Nos. 26134 and 27016. From this judgment the plaintiff
appealed.

The law applicable to the case is well settled. Article 246 of the Code of Commerce reads as follows:

When the agent transacts business in his own name, it shall not be necessary for him to state
who is the principal and he shall be directly liable, as if the business were for his own account, to
the persons with whom he transacts the same, said persons not having any right of action
against the principal, nor the latter against the former, the liabilities of the principal and of the
agent to each other always being reserved.

The rule laid down in the article quoted is contrary to the general rule in the United States as to
purchases of merchandise from agents with undisclosed principal, but it has been followed in a number
of cases and is the law in its jurisdiction. (Pastells & Regordosa vs. Hollman & Co., 2 Phil., 235; Castle
Bros., Wolf & Sons vs. Go-Juno, & Phil., 144; Lim Tiu vs. Ruiz y Rementeria, 15 Phil., 367.) But the
appellant points out several circumstances which, in his opinion, indicate that the defendant-appellee
was aware of the condition under which the merchandise was entrusted to the agent Chua Lioc and
therefore did not purchase the goods in good faith. This, if true, would, of course, lead to a decision of
the case in favor of the plaintiff, but there is, in our opinion, nothing conclusive about the circumstances
referred to and they are not sufficient to overcome the presumption of good faith.

The appealed judgment is in accordance with the law and the facts and is affirmed with the costs against
the appellant. So ordered.