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The same thing is true as to the real mortgage to It follows that the opinion of the lower court in
the bank. It was given to secure the note in refusing to set aside and vacate the judgment of
question and was not given for any other the plaintiff bank against the defendant wife is
purpose. The real property described in the reversed, and that judgment is vacated and set
mortgage to the bank was and is the property of aside, and as to the bank the case is remanded
to the lower court, with leave for the wife to file Unless waived, a defendant has a legal right to
an answer to plaintiff's cause of action, and to service of process, to his day in court and to be
have the case tried on its merits and for any heard in his defense.
further proceedings not inconsistent with this
opinion. From what has been said, it follows that, if the
transaction between the Dominican Fathers and
As to the judgment in favor of the Dominican Jean M. Poizat as attorney in fact for his wife was
Fathers, it appears that their plea above quoted an original one and the P125,000 was actually
in the statement of facts was filed on April 24, loaned at the time the note and mortgage were
1924. In that plea they say that they have a first executed and the money was in good faith
mortgage on the property described in delivered to the husband as the agent and
paragraph IV of the complaint for P125,000 with attorney in fact of the wife, it would then be a
interest at 10 per cent per annum. That the valid exercise of the power given to the husband,
mortgagors Jean M. Poizat and Gabriela Andrea regardless of the question as to what he may
de Coster y Roxas have not paid the principal or have done with the money.
the stipulated interest from December 16, 1921,
to date, which up to the 30th day of April, 1924, Paragraph 5 of the power of attorney specifically
amounts to P27,925.34. Wherefore, it is prayed authorizes him to borrow money for and on
that the credit above-mentioned be taken into account of his wife and her name, "and making
account when the second mortgage is all these transactions with or without mortgages,
foreclosed. pledges or personal guaranty."
No other plea of any kind, nature or description It follows that the judgment of the lower court in
was filed by it. The record shows that a copy of favor of La Orden de Dominicos or PP.
this alleged plea was served upon the attorneys Predicadores de la Provincia del Santisimo
for the plaintiff bank. There is nothing in the Rosario is reversed, without prejudice to its right
record which shows or tends to show that a copy to either file an original suit to foreclose its
of it was ever served on either one of the mortgage or to file a good and sufficient plea as
defendants. Neither is there any evidence that intervenor in the instant suit, setting forth the
either of the defendants ever appeared in the facts upon which it relies for a judgment on its
original action. In fact, judgment was rendered note and the foreclosure of its mortgage, copies
against them by default. of which should be served upon the defendants.
Under such a state of facts, the judgment in favor Neither party to recover costs. So ordered.
of the Dominican Fathers cannot be sustained. In
the first place, the plea above quoted filed on
April 24, 1924, would not be sufficient to sustain
a judgment. It does not even ask for a judgment HE DIRECTOR OF PUBLIC WORKS, plaintiff-
of the foreclosure of its mortgage. In the second appellee,
place, no copy of the plea was ever served upon vs.
either of the defendants, who were the real SING JUCO, ET AL., defendants.
parties in interest, and against whom a judgment SING JUCO, SING BENGCO and PHILIPPINE
was rendered for the full amount of the note and NATIONAL BANK,
the foreclosure of the mortgage. Such a
proceeding cannot be sustained on any legal From Torrens certificate of title No. 1359 relating
principle. 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 (1) The Bureau of Public Works agreed to deposit
Sing Bengco. The interest vested by said the material to be dredged by it from the Iloilo
certificate in Mariano de la Rama was River, in connection with the contempted
subsequently transferred to sale to Enrique improvement, upon the lot of the land, already
Enchaus. It further appears that on November described as covered by certificate No. 1359, at
23, 1020, the owners of the property covered by a price to be determined at the actual cost of the
the said certificate conveyed it by way of a filling, with certain surcharges to be determined
mortgage to the Philippine National Bank for the by the Director of Public Works. It was
purpose of securing a credit in current account in contemplated in the original draft of the contract
a mount not in excess of P170,000, with interest that the Bureau would be able to furnish some
at a rate of 12 percent per annum. The 250,000 cubic meters of dredged material for
indebtedness covered by this mortgage has not filling in the land, was limited to the material
been satisfied, and upon the date of the decision which should be dredged from the river as a
of the court below it amounted to the sum of result of the proposed improvement. To this
P170,000, plus interest at 12 percent per annum stipulation the four owners of the property
from November 24, 1920. assented on March 14, 1921.
The land above referred to contains an area of (2) With respect to the compensation it was
nearly 16 hectares, or to be exact, 158,589.44 agreed that the amount due should be
square meters according to the certificate. It is determined by the Director of Public Works,
located on "Point Llorente" at the mouth of Iloilo under certain conditions mentioned in the
river, near the City of Iloilo, and it is of so low a contract, of an amount of not less that 20 nor
level that, prior to the improvement to which more than 75 centavos per cubic meter. It was
reference is to be made, it was subject to further agreed that, when the work should be
frequent flooding. In 1921, the Government of finished, the cost thereof should be paid by the
the Philippine Islands was planning extensive owners in 5 annual installments and that for
harbor improvements in this vicinity, requiring failure to pay such installment the whole of the
extensive dredging by the Bureau of Public amount thereafter to accrue should become at
Works in the mouth of said river. The conduct of once due. This contract was noted in the Torrens
these dredging operations made it necessary for certificate of title on January 8, 1924.
the Director of Public Works to find a place of
In connection with the making of the contract
deposit for the dirt and mud taken from the
place, or places, dredged. As the land already abovementioned, the, Director of Public Works
referred to was low and easily accessible to the required a bond to be supplied by the owners in
spot where dredging was to be conducted, it was the penal amount of P150,000, approximately
obviously for the interest of the Government and twice the estimated cost of the filling,
the said owners of the land that the material conditioned for the payment of the amount due
taken out by the dredges should be deposited on from the owners. This bond was executed
the said property. Accordingly, after preliminary contemporaneously with the main contract; and
negotiations to this effect have been conducted, in connection therewith it should be noted that
a contract was made between the Director of one of the names appearing upon said contract
Public Works, representing the Government of was that of "Casa Viuda de Tan Toco," purporting
the Philippine Islands, and the four owners, M. to be signed by M. de la Rama.
de la Rama, Sing Juco, G. M. Tanboontien, and The dredging operation were conducted by the
Seng Bengco, of which, as modified by some Bureau of Public Works in substantial
respects by subsequent agreement, the accomplice, we find, with the terms of said
following features are noteworthy. agreement; and after the account with the
owners were liquidated and the amount due
from them determined, demand was made upon of counterclaim the bank asked that its mortgage
them for the payment of the first installment. No be foreclosed for the amount of its mortgage
such payment was, however, made as a credit, and that the four mortgagors, Sing Juco,
consequence this action was instituted by the Sing Bengco, M. de la Rama and G.M.
Director of Public Works on October 14, 1926, Tanboontien, be required to pay the amount due
for the purpose of recovering the amount due to to the bank, and that in case of their failure to do
the Government under the contract from the so the mortgaged property should be sold and
original owners of the property from the sureties the proceeds paid preferentially to the bank
whose names were signed to the contract of upon its mortgage.
suretyship, and to enforce the obligation as a
real lien upon the property. In said action the Upon hearing the cause the trial court, ignoring
Philippine National Bank was made a party that part of the original complaint wherein the
defendant, as having an interest under its prior Government seeks to enforce its lien in
mortgage upon the property, while Enrique subordination to its first mortgage, made
Enchaus was made defendant as successor in pronouncements:
interest of M. de la Rama, and Tan Ong Sze (1) Declaring Sing Juco, Sing Bengco, M. de la
widow of Tan Toco, was also made defendant by Rama and G. M. Tanboontien indebted to the
reason of her supposed liability derived from the Government in the amount of P70, 938, with
act of De la Rama in signing the firm "Casa Viuda interest from the date of the filing of the
de Tan Toco" as a surety on bond. It was complaint, and requiring them to pay the said
noteworthy that in the complaint it was asked sum to the plaintiff;
that, in the enforcement of the government's
lien, the property should be sold "subject to the (2) Declaring, in effect, that the lien of the
first mortgage in favor of the Philippine National Government for the filing improvement was
Bank." superior to the mortgage of the Philippine
National Bank; and finally
To this complaint different defenses were set up,
as follows: On behalf of the owners of the (3) Declaring the defendant Tan Ong Sze, Viuda
property, it was contended that the government de Tan Toco, personally liable upon the contract
has not complied with that contract, in that of suretyship, in case the four principal obligors
dredged material deposited on the land had not should not satisfy their indebtedness to the
been sufficient in quantity to raise the level of Government, or if the land should not sell
the land above high water, and that, as a enough to satisfy the same.
consequence, the land had not been much From this judgment various parties defendant
benefited. It is therefore asserted that the appealed as follows: All of the defendants,
owners of the property are not obligated to pay except the Philippine National Bank, appealed
the filling operation. These defendants sought to from so much of the decision as held that the
recover further damages by way of cross- defendant owners and signatories to the
complaint for the same supposed breach of contract of suretyship has not been released by
contract on the part of the Government. On the non-performance of the contract on the part of
part of Viuda de Tan Toco the defense was the Bureau of Public Works, and from the refusal
interposed that the name "Casa Viuda de Tan of the court to give to the defendant owners
Toco" signed to the contract of suretyship by damages for breach of contract on the part of
Mariano de la Rama was signed without the Government. On the part of Tan Ong Sze,
authority; while on the part of the Philippine Viuda de Tan Toco, error is assigned to the action
National Bank was asserted that the mortgage of the court in holding said defendant liable upon
credit pertaining to the bank is superior to the the contract of suretyship. Finally, the Philippine
Governments lien for improvement, and by way National Bank appealed from so much of the
decision as gave the lien of the Government for the Government deposited in the period covered
improvement priority over the mortgagee by the contract 236,460 cubic meters, and after
executed in favor of the bank. the amount thus deposited had been reduced by
21,840 cubic meters, owing to the natural
Dealing with these contentions in the order process of drying, the Bureau of Public Works
indicated, we find the contention of the further deposited 53,000 cubic meters on the
appellants (except the Philippine National Bank), same land. In this connection, the district
to the effect that the Director of Public Works engineer testified that the filling which has been
has failed to comply with the obligations charged to the owners at P70,938 actually cost
imposed upon the government by the contract, the Government the amount of P88,297.85. The
is wholly untenable. By said contract, the charge made for the work was evidently
Government was not obligated to raise the land computed on a very moderate basis; and the
on which the dredged material was deposited to owners of the property have no just ground of
any specified level. The Government only complaint whatever.
obligated itself upon said land the material
should be dredged from the mouth of the Iloilo The contention of Tan Ong Sze, widow of Tan
River in the course of the improvement Toco, to the effect that she was not, and is not,
undertaken by the Government in and near that bound by the contract of suretyship, is our
place. Under the original contract as originally pinion, well-founded. It will be remembered that
drafted, the Government agreed to furnish said contract purports to have been signed by
250,000 cubic meters, more or less, of dredged Mariano de la Rama, acting for this defendant
material; but on Mar. 14, 1921, the owners of under the power of attorney. But the
the property indicated their acceptance of a Government has exhibited no power of attorney
modification of the contract effected by the which would authorize the creation, by the
Director of Public Works and the Secretary of attorney-in-fact, of an obligation in the nature of
Commerce and Communications, in which it was suretyship binding upon this principal.
made clear that the material to be supplied
would be such only as should be dredged from It is true that the Government introduced in
the river as a result of the proposed evidence 2 documents exhibiting powers of
improvement. In the endorsement of the attorney, conferred by these documents (Exhibit
Director of Public Works, thus accepted by the K, identical with Exhibit 5) Mariano de la Rama
was given the power which reads as follows:
owners, it was made clear that the Bureau of
Public Works did not undertake to furnish . . . and also for me and in my name to sign, seal
material to complete the filling of the land to any and execute, and as my act and deed deliver, any
specified level. Proof submitted on the part of lease or any other deed for the conveying any
the owners tends to show that parts of the filled real or personal property or the other matter or
land are still subject to inundation in rainy thing wherein I am or may be personally
weather; and it is contended, that the owners interested or concerned. And I do hereby further
have, for this reason, been able to sell in lots the authorize and empower my said attorney to
property to individual occupants. the sum of substitute and point any other attorney or
P15,000, which is claimed upon this account, as attorneys under him for the purposes aforesaid,
damages by the owners, is the amount of and the same again and pleasure to revoke; and
interest alleged to have been accrued upon their generally for me and in my name to do, perform,
investment, owing to their inability to place the and execute all and any other lawful and
land advantageously upon the market. The claim reasonable acts and things whatsoever as fully
is, as already suggested, untenable. There has and effectually as I, the said Tan Ong Sze might
been no breach on the part of the Government or could do if personally present.
in fulfilling the contract. In fact it appears that
In another document, (Exhibits L and M), Government Upon entering into the discussion
executed in favor of the same Mariano de la of the feature of the case it is well to recall the
Rama by his uncle Tan Lien Co, attorney-in-fact fact that the bank's mortgage was registered in
of Tan Ong Sze, with power of substitution, there the office of the Register of Deeds of the
appears the following: province of Iloilo on November 26, 1920, while
the filing contract was registered on January 8,
. . . and also for her and for her name to sign, seal 1924, that is to say, there is a priority of more
and execute, and as her act and deed deliver, any than three years, in point of time, in the
lease, release, bargain, sale, assignment, inscription of the mortgage credit under the
conveyance or assurance, any other deed for the filling contract was made an express lien upon
conveying any real or personal property or other the property which was the subject of
matter or thing wherein she or may be improvement.
personally interested or concerned.
In the brief submitted in behalf of the bank it
Neither of these powers officially confers upon appears to be assumed that the Government
Mariano de la Rama the power to bind a principal credit under the filling contract is a true
by a contract of suretyship. The clauses noted refectionary credit (credito refacionario) under
relate more specifically to the execution of subsection 2 of Article 1923 of the Civil Code. It
contracts relating to property; and the more may be observed, however, that in a precise and
general words at the close of the quoted clauses technical sense, this credit is not exactly of the
should be interpreted, under the general nature of the refectionary credit as known to the
rule ejusdem generis, as referring to the
civil law. In the civil law the refectionary credit is
contracts of like character. Power to execute a
primarily an indebtedness incurred in the repair
contract so exceptional a nature as a contract of or reconstruction of something previously made,
suretyship or guaranty cannot be inferred from such repair or reconstruction being made
the general words contained in these powers. necessary by the deterioration or destruction as
In article 1827 of the Civil Code it is declared that it formerly existed. The conception does not
guaranty shall not be presumed; it must be ordinarily include an entirely new work, though
expressed and cannot be extended beyond its Spanish jurisprudence appears to have
specified limits. By analogy a power of attorney sanctioned this broader conception in certain
to execute a contract of guaranty should not be cases as may be gathered from the decision in
inferred from vague or general words, especially the Enciclopedia Juridica Espanola (vol. 26, pp.
when such words have their origin and 888-890) s. v. Refaccionario. The question
explanation in particular powers of a wholly whether the credit we are considering falls
different nature. It results that the trial court was precisely under the conception of the
in error in giving personal judgment against Tan refectionary credit in the civil law is in this case
Ong Sze upon the bond upon which she was sued academic rather than practical, for the reason
in this case. that by the express terms of the filling contract
the credit was constituted a lien upon the
We now proceed to consider the last important improved property. But assuming, as might be
disputed question involved in this case, which is, tenable in the state of jurisprudence, that said
whether the indebtedness owing to the credit is a refectionary credit enjoying
Government under the contract for filling the preference under subsection 3 or article 1923 of
parcel of land already mentioned is entitled to the Civil code , then the mortgage credit must be
preference over the mortgage credit due to the given priority under subsection 2 of the article
Philippine National Bank, as the trial judge held, 1927 of the same code, for the reason that the
or whether on the contrary, the latter claim is mortgage was registered first.
entitled to priority over the claim of the
Possibly the simpler view of the situation is to proceeded upon the idea that, at the time the
consider the Government's right under the mortgage was created, the new soil had yet been
stipulation expressly making the credit a lien deposited under the filling contract and that as a
upon the property, for it was certainly lawful for consequence the mortgage lien should not been
the parties to the filling contract to declare the considered as attaching to the value added by
credit a lien upon the property to be improved deposit of the additional material. This
— to the extent hereinafter define — whether proposition, however, overlooks the fact that
the credit precisely fulfills the conception of the deposited material became an irremovable
refectionary credit or not. In this aspect we have fixture, by the act and intention of the parties to
before us a competition between the real lien the filling contract, and the lien of the mortgage
created by the filling contract of the later undoubtedly attached to the increment thus
registration. The true solution to the problem is, spread over and affixed to the mortgaged land.
in our opinion, not open to doubt; and again the If the idea which prevailed in the trial court
result is that priority must be conceded to the should be accepted as law upon this point, the
mortgage. The mortgage was created by the result would be that a mortgage creditor could,
lawful owners at a time when no other by the act of strangers, be entirely proved out of
competing interest existed in the property. The his property by making of improvements to
lien of the mortgage therefore attached to the which he has not assented. This cannot be
fee, or unlimited interest of the owners in the accepted as good law.
property. On the other hand, the lien created by
the filling contract was created after the We may add that the case cannot, on this point,
mortgage had been made and registered, and be resolved favorably to the contention of the
therefore, after the owners of the property had Director of Public Works, upon the authority of
parted with the interest created by the Unson vs. Urquijo, Zuluoaga and Escubi (50 Phil.,
mortgage. The Government's lien owes its origin 160), for the reason that upon the deposit of the
to the contract, and derives its efficacy from the dredged material on the land such material lost
volition of the contracting parties. But no party its identity. In the case cited the machinery in
can by contract create a right in another respect to which the vendor's preference was
intrinsically greater than that which he himself upheld by this court retained its separate
possess. The owners, at the time this contract existence and remained perfectly capable of
was made, were owners of the equity of identification at all times.
redemption only and not of the entire interest in From what it has been said it results that the
the property, and the lien created by the appealed judgment must be affirmed, and the
contract could only operate upon the equity of same is hereby affirmed, in dismissing, in effect,
redemption. the cross-complaint filed by some of the
In this connection, we observed that, as the new defendants against the plaintiff, the Director of
material was deposited from the Government Public Works. Such judgment is further affirmed
dredges upon the property in question, it in its findings, which are not dispute, with
became an integral part of the soil and an respect to the amount of the Government's
irremovable fixture; and the deposit having been claim under the filling contract and the amount
made under contract between the Government of mortgage credit of the bank, as it is also
and the owners of the equity of redemption, affirmed in respect to the joint and several
without the concurrence of the mortgage judgment entered in favor of the plaintiff against
creditor in said contract the latter could not be Sing Juco, Sing Bengco, Tanboontien and
prejudiced thereby. The trial court, in declaring Mariano de la Rama Tanbunco (alias Mariano de
that the Government's lien should have la Rama) for the amount due to the Government
preference over the mortgage, seems to have
Said judgment, however, must be reversed and latter amount at the rate of 6 per centum per
the same is being reversed in so far as it holds annum. From this judgment Guillermo Garcia
that Tan Ong Sze, Viuda de Tan Toco, is liable Bosque, as principal, and R. G. France and F.H.
upon the contract of suretyship, and she is Goulette, as sureties. appealed.
hereby absolved from the complaint. The
judgment must also be reversed in so far as it It appears that prior to September 17, 1919, the
declares that the Government's lien under the plaintiff, Rosa Villa y Monna, viuda de E. Bota,
filling contract is entitled to priority over the was the owner of a printing establishment and
bank's mortgage. On the contrary it is hereby bookstore located at 89 Escolta, Manila, and
declared that the bank's credit is entitled to known as La Flor de Cataluna, Viuda de E.
priority out of the proceeds of the foreclosure Bota, with the machinery, motors, bindery, type
sale, the residue, if any, to be applied to the material furniture, and stock appurtenant
Government's lien created by the filling contract thereto. Upon the date stated, the plaintiff, then
and otherwise in accordance with law. For and now a resident of Barcelona, Spain, acting
further proceedings in conformity with this through Manuel Pirretas, as attorney in fact, sold
opinion, the cause is hereby remanded to the the establishment above-mentioned to the
cause of origin, without pronouncements as to defendants Guillermo Garcia Bosque and Jose
costs. So ordered. Pomar Ruiz, residents of the City of Manila, for
the stipulated sum of P55,000, payable as
ROSA VILLA MONNA, plaintiff-appellee, follows: Fifteen thousand pesos (P15,000) on
vs. November 1, next ensuing upon the execution of
GUILLERMO GARCIA BOSQUE, ET AL., the contract, being the date when the
purchasers were to take possession; ten
This action was instituted in the Court of First thousand pesos (P10,000) at one year from the
Instance of Manila by Rosa Villa y Monna, widow same date; fifteen thousand pesos (P15,000) at
of Enrique Bota, for the purpose of recovering two years; and the remaining fifteen thousand
from the defendants, Guillermo Garcia Bosque pesos (P15,000) at the end of three years. By the
and Jose Romar Ruiz, as principals, and from the contract of sale the deferred installments bear
defendants R. G. France and F. H. Goulette, as interest at the rate of 7 per centum per annum.
solidary sureties for said principals, the sum of In the same document the defendants France
P20,509.71, with interest, as a balance alleged to and Goulette obligated themselves as solidary
be due to the plaintiff upon the purchase price
sureties with the principals Bosque and Ruiz, to
of a printing establishment and bookstore answer for any balance, including interest, which
located at 89 Escolta, Manila, which had been should remain due and unpaid after the dates
sold to Bosque and Ruiz by the plaintiff, acting stipulated for payment of said installments,
through her attorney in fact, one Manuel expressly renouncing the benefit of exhaustion
Pirretas y Monros. The defendant Ruiz put in no of the property of the principals. The first
appearance, and after publication judgment by installment of P15,000 was paid conformably to
default was entered against him. The other agreement.
defendants answered with a general denial and
various special defenses. Upon hearing the cause In the year 1920, Manuel Pirretas y Monros, the
the trial judge gave judgment in favor of the attorney in fact of the plaintiff, absented himself
plaintiff, requiring all of the defendants, jointly from the Philippine Islands on a prolonged visit
and severally, to pay to the plaintiff the sum of to Spain; and in contemplation of his departure
P19,230.01, as capital, with stipulated interest at he executed a document, dated January 22,
the rate of 7 per centum per annum, plus the 1920, purporting to be a partial substitution of
further sum of P1,279.70 as interest already agency, whereby he transferred to "the
accrued and unpaid upon the date of the mercantile entity Figueras Hermanos, or the
institution of the action, with interest upon the person, or persons, having legal representation
of the same," the powers that had been dilatoriness on the part the debtor and
previously conferred on Pirretas by the plaintiff supposedly animated by a desire to get the
"in order that," so the document runs, "they may matter into better shape, M. T. Figueras entered
be able to effect the collection of such sums of into the agreement attached as Exhibit 1 to the
money as may be due to the plaintiff by reason answer of Bosque. In this document it is recited
of the sale of the bookstore and printing that Guillermo Garcia Bosque. S. en C., is
establishment already mentioned, issuing for indebted to Rosa Villa, viuda de E. Bota, in the
such purpose the receipts, vouchers, letters of amount of P32,000 for which R. G. France and F.
payment, and other necessary documents for H. Goulette are bound as joint and several
whatever they shall have received and collected sureties, and that the partnership mentioned
of the character indicated." had transferred all its assets to the Bota Printing
Company, Inc., of which one George Andrews
When the time came for the payment of the was a principal stockholder. It is then stipulated
second installment and accrued interest due at that France and Goulette shall be relieved from
the time, the purchasers were unable to comply all liability on their contract as sureties and that
with their obligation, and after certain in lieu thereof the creditor, Doña Rosa Villa y
negotiations between said purchasers and one Monna, accepts the Bota Printing Company, Inc.,
Alfredo Rocha, representative of Figueras as debtor to the extent of P20,000, which
Hermanos, acting as attorney in fact for the indebtedness was expressly assumed by it, and
plaintiff, an agreement was reached, whereby George Andrews as debtor to the extent of
Figueras Hermanos accepted the payment of P12,000, which he undertook to pay at the rate
P5,800 on November 10, 1920, and received for of P200 per month thereafter. To this contract
the balance five promissory notes payable, the name of the partnership Guillermo Garcia
respectively, on December 1, 1920, January 1, Bosque, S. en C., was affixed by Guillermo Garcia
1921, February 1, 1921, March 1, 1921, and April Bosque while the name of the Bota Printing
1, 1921. The first three of these notes were in the Company, Inc., was signed by G. Andrews, the
amount of P1,000 each, and the last two for latter also signing in his individual capacity. The
P2,000 each, making a total of P7,000. It was name of the plaintiff was affixed by M.T. Figueras
furthermore agreed that the debtors should pay in the following style: "p.p. Rosa Villa, viuda de E.
9 per centum per annum on said deferred Bota, M. T. Figueras, party of the second part."
installments, instead of the 7 per centum
mentioned in the contract of sale. These notes No question is made as to the authenticity of this
were not paid promptly at maturity but the document or as to the intention of Figueras to
balance due upon them was finally paid in full by release the sureties; and the latter rely upon the
Bosque on December 24, 1921. discharge as complete defense to the action. The
defendant Bosque also relies upon the same
About this time the owners of the business La agreement as constituting a novation such as to
Flor de Cataluña, appear to have converted it relieve him from personal liability. All of the
into a limited partnership under the style of defendants furthermore maintain that even
Guillermo Garcia Bosque, S. en C.;" and presently supposing that M. T. Figueras authority to
a corporation was formed to take over the novate the original contract and discharge the
business under the name "Bota Printing sureties therefrom, nevertheless the plaintiff has
Company, Inc." By a document executed on April ratified the agreement by accepting part
21, 1922, the partnership appears to have payment of the amount due thereunder with full
conveyed all its assets to this corporation for the knowledge of its terms. In her amended
purported consideration of P15,000, Meanwhile complaint the plaintiff asserts that Figueras had
the seven notes representing the unpaid balance no authority to execute the contract containing
of the second installment and interest were
failing due without being paid. Induced by this
the release (Exhibit 1) and that the same had execution of Exhibit 1, M. T. Figueras intervenes
never been ratified by her. as purpoted attorney in fact without anything
whatever to show that he is in fact the legal
The question thus raised as to whether the representative of Figueras Hermanos or that he
plaintiff is bound by Exhibit 1 constitutes the is there acting in such capacity. The act of
main controversy in the case, since if this point substitution conferred no authority whatever on
should be determined in the affirmative the M. T. Figueras as an individual. In view of these
plaintiff obviously has no right of action against defects in the granting and exercise of the
any of the defendants. We accordingly address substituted power, we agree with the trial judge
ourselves to this point first. that the Exhibit 1 is not binding on the plaintiff.
The partial substitution of agency (Exhibit B to Figueras had no authority to execute the
amended complaint) purports to confer on contract of release and novation in the manner
Figueras Hermanos or the person or persons attempted; and apart from this it is shown that
exercising legal representation of the same all of in releasing the sureties Figueras acted contrary
the powers that had been conferred on Pirretas to instructions. For instance, in a letter from
by the plaintiff in the original power of attorney. Figueras in Manila, dated March 4, 1922, to
This original power of attorney is not before us, Pirretas, then in Barcelona, the former stated
but assuming, as is stated in Exhibit B, that this that he was attempting to settle the affair to the
document contained a general power to Pirretas best advantage and expected to put through an
to sell the business known as La Flor de arrangement whereby Doña Rosa would receive
Cataluña upon conditions to be fixed by him and P20,000 in cash, the balance to be paid in
power to collect money due to the plaintiff upon installments, "with the guaranty of France and
any account, with a further power of Goulette." In his reply of April 29 to this letter,
substitution, yet it is obvious upon the face of Pirretas expresses the conformity of Doña Rosa
the act of substitution (Exhibit B) that the sole in any adjustment of the claim that Figueras
purpose was to authorize Figueras Hermanos to should see fit to make, based upon payment of
collect the balance due to the plaintiff upon the P20,000 in cash, the balance in installments,
price of La Flor de Cataluña, the sale of which payable in the shortest practicable periods, it
had already been affected by Pirretas. The words being understood, however, that the guaranty of
of Exhibit B on this point are quite explicit ("to Messrs. France and Goulette should remain
the end that the said lady may be able to collect intact. Again, on May 9, Pirretas repeats his
the balance of the selling price of the Printing assurance that the plaintiff would be willing to
Establishment and Bookstore above-mentioned, accept P20,000 down with the balance in
which has been sold to Messrs. Bosque and interest-bearing installments "with the guaranty
Pomar"). There is nothing here that can be of France and Goulette." From this it is obvious
construed to authorize Figueras Hermanos to that Figueras had no actual authority whatever
discharge any of the debtors without payment or to release the sureties or to make a novation of
to novate the contract by which their obligation the contract without their additional guaranty.
was created. On the contrary the terms of the But it is asserted that the plaintiff ratified the
substitution shows the limited extent of the contract (Exhibit 1) by accepting and retaining
power. A further noteworthy feature of the the sum of P14,000 which, it is asserted, was
contract Exhibit 1 has reference to the paid by the Bota Printing Co., Inc., under that
personality of the purported attorney in fact and contract. In this connection it should be noted
the manner in which the contract was signed. that when the firm of Guillermo Garcia Bosque,
Under the Exhibit B the substituted authority S. en C., conveyed all it assets on April 21, 1922
should be exercised by the mercantile entity to the newly formed corporation, Bota Printing
Figueras Hermanos or the person duly Co., Inc., the latter obligated itself to pay al the
authorized to represent the same. In the actual
debts of the partnership, including the sum of of these new promissory notes undoubtedly
P32,000 due to the plaintiff. On April 23, constituted and extension of time as to the
thereafter, Bosque, acting for the Bota Printing obligation included therein, such as would
Co., Inc., paid to Figueras the sum of P8,000 upon release a surety, even though of the solidary
the third installment due to the plaintiff under type, under article 1851 of the Civil Code.
the original contract of sale, and the same was Nevertheless it is to be borne in mind that said
credited by Figueras accordingly. On May 16 a extension and novation related only to the
further sum of P5,000 was similarly paid and second installment of the original obligation and
credited; and on May 25, a further sum of P200 interest accrued up to that time. Furthermore,
was likewise paid, making P14,000 in all. Now, it the total amount of these notes was afterwards
will be remembered that in the contract (Exhibit paid in full, and they are not now the subject of
1), executed on May 17, 1922, the Bota Printing controversy. It results that the extension thus
Co., Inc., undertook to pay the sum of P20,00; effected could not discharge the sureties from
and the parties to the agreement considered their liability as to other installments upon which
that the sum of P13,800 then already paid by the alone they have been sued in this action. The
Bota Printing Co., Inc., should be treated as a rule that an extension of time granted to the
partial satisfaction of the larger sum of P20,000 debtor by the creditor, without the consent of
which the Bota Printing Co., Inc., had obligated the sureties, extinguishes the latter's liability is
itself to pay. In the light of these facts the common both to Spanish jurisprudence and the
proposition of the defendants to the effect that common law; and it is well settled in English and
the plaintiff has ratified Exhibit 1 by retaining the American jurisprudence that where a surety is
sum of P14,000, paid by the Bota Printing Co., liable for different payments, such as
Inc., as above stated, is untenable. By the installments of rent, or upon a series of
assumption of the debts of its predecessor the promissory notes, an extension of time as to one
Bota Printing Co., Inc., had become a primary or more will not affect the liability of the surety
debtor to the plaintiff; and she therefore had a for the others. (32 Cyc., 196; Hopkirk vs.
right to accept the payments made by the latter McConico, 1 Brock., 220; 12 Fed. Cas., No. 6696;
and to apply the same to the satisfaction of the Coe vs. Cassidy, 72 N. Y., 133; Cohn vs. Spitzer,
third installment of the original indebtedness. 129 N. Y. Supp., 104; Shephard Land Co. vs.
Nearly all of this money was so paid prior to the Banigan, 36 R. I., 1; I. J. Cooper Rubber Co. vs.
execution of Exhibit 1 and although the sum of Johnson, 133 Tenn., 562; Bleeker vs. Johnson,
P200 was paid a few days later, we are of the 190, N. W. 1010.) The contention of the sureties
opinion that the plaintiff was entitled to accept on this point is therefore untenable.
and retain the whole, applying it in the manner
above stated. In other words the plaintiff may There is one stipulation in the contract (Exhibit
lawfully retain that money notwithstanding her A) which, at first suggests a doubt as to propriety
refusal to be bound by Exhibit 1. of applying the doctrine above stated to the case
before us. We refer to cause (f) which declares
A contention submitted exclusively in behalf of that the non-fulfillment on the part of the
France and Goulette, the appellant sureties, is debtors of the stipulation with respect to the
that they were discharged by the agreement payment of any installment of the indebtedness,
between the principal debtor and Figueras with interest, will give to the creditor the right to
Hermanos, as attorney in fact for the plaintiff, treat and declare all of said installments as
whereby the period for the payment of the immediately due. If the stipulation had been to
second installment was extended, without the the effect that the failure to pay any installment
assent of the sureties, and new promissory notes when due would ipso facto cause to other
for unpaid balance were executed in the manner installments to fall due at once, it might be
already mentioned in this opinion. The execution plausibly contended that after default of the
payment of one installment the act of the mortgage would operate for the protection of
creditor in extending the time as to such the sureties came from the principal and not
installment would interfere with the right of the from any representative of the plaintiff.
surety to exercise his legal rights against the
debtor, and that the surety would in such case As a result of our examination of the case we find
be discharged by the extension of time, in no error in the record prejudicial to any of the
conformity with articles 1851 and 1852 of the appellants, and the judgment appealed from will
Civil Code. But it will be noted that in the be affirmed, So ordered, with costs against the
contract now under consideration the appellants.
stipulation is not that the maturity of the later
installments shall be ipso facto accelerated by
default in the payment of a prior installment, but GERMANN & CO., plaintiff-appellees,
only that it shall give the creditor a right to treat vs.
the subsequent installments as due, and in this DONALDSON, SIM & CO., defendants-appellants.
case it does not appear that the creditor has This is an incident of want of personality of the
exercised this election. On the contrary, this plaintiff's attorney. The action is to recover a
action was not instituted until after all of the sum claimed to be due for freight under a charter
installments had fallen due in conformity with party. It was brought by virtue of a general
the original contract. It results that the power for suits, executed in Manila October 27,
stipulation contained in paragraph (f) does not 1900, by Fernando Kammerzell, and purporting
affect the application of the doctrine above to be a substitution in favor of several attorneys
enunciated to the case before us. of powers conferred upon Kammerzell in an
Finally, it is contended by the appellant sureties instrument executed in Berlin, Germany,
that they were discharged by a fraud practiced February 5, 1900, by Max Leonard Tornow, the
upon them by the plaintiff in failing to require sole owner of the business carried on in Berlin
the debtor to execute a mortgage upon the and Manila under the name of Gemann & Co.
printing establishment to secure the debt which The first-named instrument was authenticated
is the subject of this suit. In this connection t is by a notary with the formalities required by the
insisted that at the time France and Goulette domestic laws. The other was not so
entered into the contract of suretyship, it was authenticated. Both Tornow and Kammerzell are
represented to them that they would be citizens of Germany. Tornow is a resident of
protected by the execution of a mortgage upon Berlin and Kammerzell of Manila.
the printing establishment by the purchasers The defendants claim that the original power is
Bosque and Pomar. No such mortgage was in invalid under article 1280, No. 5, of the Civil
fact executed and in the end another creditor Code, which provides that powers for suits must
appears to have obtained a mortgage upon the be contained in a public instrument. No claim is
plant which is admitted to be superior to the made that the document was not executed with
claim of the plaintiff. The failure of the creditor the formalities required by the German law in
to require a mortgage is alleged to operate as a the case of such an instrument. We see no
discharge of the sureties. With this insistence we reason why the general principle that the formal
are unable to agree, for the reason that the proof validity of contracts is to be tested by the laws of
does not show, in our opinion, that the creditor, the country where they are executed should not
on her attorney in fact, was a party to any such apply. (Civil Code, art. 11.)
agreement. On the other hand it is to be
collected from the evidence that the suggestion The defendants also claim that the original
that a mortgage would be executed on the plant power can not be construed as conferring upon
to secure the purchase price and that this Kammerzell authority to institute or defend
suits, from which contention, if correct, it would We should not be inclined to regard in institution
of course follow that the delegated power is of a suit like the present, which appears to be
invalid. In support of this contention reliance is brought to collect a claim accruing in the
placed upon article 1713 of the Civil Code, by ordinary course of the plaintiff's business, as
which it is provided that "an agency stated in properly belonging to the class of acts described
general terms only includes acts of in article 1713 of the Civil Code as acts "of strict
administration," and that "in order to ownership." It seems rather to be something
compromise, alienate, mortgage, or to execute which is necessarily a part of the mere
any other act of strict ownership an express administration of such a business as that
commission is required." described in the instrument in question and only
incidentally, if at all, involving a power to dispose
It has been argued by counsel for the plaintiff of the title to property.
that these provisions of the domestic law are not
applicable to the case of an agency conferred, as But whether regarded as an act of strict
was that in question, by one foreigner upon ownership or not, it appears to be expressly and
another in an instrument executed in the specially authorized by the clause conferring the
country of which both were citizens. We shall not power to "exact the payment" of sums of money
pass upon this question, since we are clearly of "by legal means." This must mean the power to
opinion that the instrument contains an explicit exact the payment of debts due the concern by
grant of a power broad enough to authorize the means of the institution of suits for their
bringing of the present action, even assuming recovery. If there could be any doubt as to the
the applicability of the domestic law as claimed meaning of this language taken by itself, it would
by the defendants. lawphil.net be removed by a consideration of the general
scope and purpose of the instrument in which it
By this instrument Tornow constitutes occurs. (See Civil Code, art. 1286.) The main
Kammerzell his "true and lawful attorney with object of the instrument is clearly to make
full power to enter the firm name of Germann & Kammerzell the manager of the Manila branch of
Co. in the Commercial Registry of the city of the plaintiff's business, with the same general
Manila as a branch of the house of Germann & authority with reference to its conduct which his
Co. in Berlin, it being the purpose of this power principal would himself possess if he were
to invest said attorney will full legal powers and personally directing it. It can not be reasonably
authorization to direct and administer in the city
supposed, in the absence of very clear language
of Manila for us and in our name a branch of our to that effect, that it was the intention of the
general commercial business of important and principal to withhold from his agent a power so
exportation, for which purpose he may make essential to the efficient management of the
contracts of lease and employ suitable business entrusted to his control as that to sue
assistants, as well as sign every kind of for the collection of debts.
documents, accounts, and obligations connected
with the business which may be necessary, take
charge in general of the receipt and delivery of
FELIX FANLO AZNAR, Petitioner, v. W. F. NORRIS,
merchandise connected with the business, sign judge of the Court of First Instance of
all receipts for sums of money and collect them Capiz, Respondent.
and exact their payment by legal means, and in
Alfredo Chicote, for Petitioner.
general execute all the acts and things necessary
for the perfect carrying on of the business Hon. W . F . Norris, in his own behalf.
committed to his charge in the same manner as
SYLLABUS
we could do ourselves if we were present in the
same place." 1. PLEADINGS AND PRACTICE; EXCEPTIONS. — An
exception to the final judgment entitles the party
excepting to bring the case before the appellate MAPA, J. :
court for review. Such an exception authorizes the
appellate court to determine whether or not the
decision is justified by the findings.
2. ID.; NOTICE OF JUDGMENT; ATTORNEY IN Under the circumstances of the case we consider
FACT. — An attorney in fact of one of the parties that the exception to the judgment rendered
litigant is not the proper person upon whom to February 28, 1903, by the Court of First Instance
serve a notice of the decision. at Capiz in the case brought by the petitioner
against Rafael Rodriguez, and the bill of exceptions
3. ATTORNEY AND CLIENT; AUTHORITY OF presented by the petitioner in due time and
ATTORNEY. — The fact that a second attorney therefore produce the legal affects. By virtue of
enters an appearance on behalf of a litigant does this exception and the presentation of the bill of
not authorize a presumption that the authority of exceptions, the right of the petitioner to have the
the first attorney has been withdrawn. case brought before this court by bill of exceptions
was perfected.
April 30, 1903, Don Felix Fanlo presented to the
Supreme Court a petition in which he alleged that The fact that the petitioner did not take ay
on the 28th of February, 1903, judgment for the exceptions in the course of the trial is no obstacle
defendant was rendered by the Court of First to this conclusion. Section 143 of the Code of Civil
Instance of Capiz, in a suit in which the petitioner Procedure does not establish any such
was plaintiff and one Rodriguez defendant; that the requirement, as erroneously contended by the
petitioner received notice of the decision in the city respondent in his answer. An exception to the final
of Manila the 18th of March, 1903; that on the 25th decision, although it may be the only exception
of the same month a written notice of his exception taken in the course of the trial, as in the present
to the said decision was mailed to the clerk of the case by bill of exceptions to this court, provided
Court of First Instance of Capiz through the office that the exception is taken as in this case within
of the clerk of the Court of Manila; that on the 2d the period and in the manner prescribed by the
day of April, 1903, a draft of a bill of exceptions law. The contention of the respondent upon this
was mailed to the clerk of the Court of First point can not, therefor, supported.
Instance of Capiz, which was duly received by the
judge of the said court, who refused to allow or Nor can we assent to his contention with respect to
sign the same. Upon this facts the petitioner the supposed lack of capacity on the part of the
prayed that the writ of mandamus issue, in attorney, Don Alfredo Chicote, to represent the
accordance with the provisions of section 499 of petitioner at the trial. He was the petitioner’s
the Code of Civil Procedure, requiring the attorney from the beginning, as appears from the
respondent judge to state his reasons for refusing complaint signed by him, and it does not appear
to allow and sign the said bill of exceptions. that the plaintiff has withdrawn from Señor Chicote
his authority to continue to represent him in the
The writ having issued, on March 29, 1904, the case. The intervention in the case of the attorney,
respondent filed an answer, in which he admitted Don Jose Gay, does not in itself necessarily imply
that the petitioner had excepted to the judgment such a result, because there is nothing to indicate
in question as alleged in the petition, and stated that he did not act with Mr. Chicote by delegation
that he had "refused to sign the document alleged from him, as was stated at the hearing. At all
to be a bill of exceptions for the reason that there events the utmost that could be said, even giving
had been included therein, in addition to the the utmost possible scope to the supposition of the
findings of fact and the judgment rendered in the respondent, would be that the plaintiff reemployed
said cause, certain documents presented as Señor Chicote after having employed Mr. Gay, and
evidence at the trial i the Court of First Instance this the petitioner was certainly fully entitled to do
and admitted as such without objection on the part under the law. Upon this supposition there would
of the petitioner," and further "because said be no ground for questioning Mr. Chicote’s
alleged bill of exceptions is not in law such bill of authority.
exceptions." The other facts are stated in the
opinion of the court. Nor is there any merit in the contention of the
respondent that Don Vicente Alonso did not except
to the decision. An attempt was made to serve
notice of the decision upon this person and he
refused to accept the notice, stating that although
DECISION he was an attorney in fact of Don Felix Fanlo, he
believed he had no authority to represent him in
the case, as Señor Fanlo’s lawyers were those who
represented him, and that any notice to be given
should be given to them. From this answer it DE CASTRO, * J.:
clearly appears that Don Vicente Alonso, although
he had a power of attorney from the petitioner, had This is a petition for review by way of certiorari
not appeared for him and did not desire to appear
in the trial. This being so, it is obvious that he could
of the decision 1 of the Court of Appeals in CA-
not be obliged to receive a notification against his G.R. No. 39760-R entitled "Maxima Castro,
will, nor was he the person called upon to except plaintiff-appellee, versus Severino Valencia, et
to the judgment, notice of which it was improperly
al., defendants; Rural Bank of Caloocan, Inc., Jose
attempted to serve upon him.
Desiderio, Jr. and Arsenio Reyes, defendants-
It is not necessary to make a motion for a new trial appellants," which affirmed in toto the decision
in order to be entitled to present a bill of of the Court of First Instance of Manila in favor
exceptions, as the respondent contends in his
answer. The error of such a theory is self-evident. of plaintiff- appellee, the herein private
The motion for a new trial produces the effect of respondent Maxima Castro.
giving this court authority to review the evidence
taken at the trial, but is not a requisite necessary On December 7, 1959, respondent Maxima
to the allowance of the bill of exceptions presented Castro, accompanied by Severino Valencia, went
in due time. In the latter case, that is to say, in
case no such motion has been made, the to the Rural Bank of Caloocan to apply for an
jurisdiction of the court is limited solely to industrial loan. It was Severino Valencia who
determining the questions of law presented in the arranged everything about the loan with the
bill of exceptions, upon the basis of the facts found
in the judgment of the trial court and those
bank and who supplied to the latter the personal
admitted in the pleadings. (Sec. 497, Code of the data required for Castro's loan application. On
Civil Procedure.) December 11, 1959, after the bank approved the
loan for the amount of P3,000.00, Castro,
In the present case the petitioner made no motion
for a new trial, and consequently is not entitled to accompanied by the Valencia spouses, signed a
include in his bill of exceptions the evidence taken promissory note corresponding to her loan in
at the trial, either oral or documentary. The court favor of the bank.
could not review them, as has been stated, and
therefore it would be entirely useless to bring them On the same day, December 11, 1959, the
here.
Valencia spouses obtained from the bank an
Consequently the projected bill of exceptions equal amount of loan for P3,000.00. They signed
presented by the petitioner is modified so as to a promissory note (Exhibit "2") corresponding to
include only the following papers: (1) The
complaint filed by the plaintiff against Rafael
their loan in favor of the bank and had Castro
Rodriguez, pages 1 to 4 of the bill of exceptions; affixed thereon her signature as co-maker.
(2) the answer of Rafael Rodriguez, pages 4 to 7
of the bill of exceptions; (3) the decision of the The two loans were secured by a real-estate
court, on pages 12 to 16 of the bill; and (4) the mortgage (Exhibit "6") on Castro's house and lot
exception to the decision as expressed on page 16
of the bill, and the certificate of its allowance. No
of 150 square meters, covered by Transfer
part of the evidence taken at the trial can be Certificate of Title No. 7419 of the Office of the
included in the bill of exceptions. Register of Deeds of Manila.
It is ordered that the bill of exceptions so modified On February 13, 1961, the sheriff of Manila, thru
be certified in due form by the respondent judge.
Acting Chief Deputy Sheriff Basilio Magsambol,
sent a notice of sheriff's sale addressed to
Castro, announcing that her property covered by
RURAL BANK OF CALOOCAN, INC. and JOSE O.
T.C.T. No. 7419 would be sold at public auction
DESIDERIO, JR., petitioners,
on March 10, 1961 to satisfy the obligation
vs.
covering the two promissory notes plus interest
THE COURT OF APPEALS and MAXIMA
and attorney's fees.
CASTRO, respondents.
Upon request by Castro and the Valencias and
with conformity of the bank, the auction sale
that was scheduled for March 10, 1961 was said complaint, with damages, attorney's fees
postponed for April 10, 1961. But when April 10, and costs. 2
1961 was subsequently declared a special
holiday, the sheriff of Manila sold the property The pertinent facts arrived from the stipulation
covered by T.C.T. No. 7419 at a public auction of facts entered into by the parties as stated by
sale that was held on April 11, 1961, which was respondent Court of Appeals are as follows:
the next succeeding business day following the Spawning the present litigation are the facts
special holiday. contained in the following stipulation of facts
Castro alleged that it was only when she received submitted by the parties themselves:
the letter from the Acting Deputy Sheriff on 1. That the capacity and addresses of all the
February 13, 1961, when she learned for the first parties in this case are admitted .
time that the mortgage contract (Exhibit "6")
which was an encumbrance on her property was 2. That the plaintiff was the registered owner of
for P6.000.00 and not for P3,000.00 and that she a residential house and lot located at Nos. 1268-
was made to sign as co-maker of the promissory 1270 Carola Street, Sampaloc, Manila,
note (Exhibit "2") without her being informed of containing an area of one hundred fifty (150)
this. square meters, more or less, covered by T.C.T.
No. 7419 of the Office of the Register of Deeds
On April 4, 1961, Castro filed a suit denominated of Manila;
"Re: Sum of Money," against petitioners Bank
and Desiderio, the Spouses Valencia, Basilio 3. That the signatures of the plaintiff appearing
Magsambol and Arsenio Reyes as defendants in on the following documents are genuine:
Civil Case No. 46698 before the Court of First a) Application for Industrial Loan with the Rural
Instance of Manila upon the charge, amongst Bank of Caloocan, dated December 7, 1959 in the
others, that thru mistake on her part or fraud on amount of P3,000.00 attached as Annex A of this
the part of Valencias she was induced to sign as partial stipulation of facts;
co-maker of a promissory note (Exhibit "2") and
to constitute a mortgage on her house and lot to b) Promissory Note dated December 11, 1959
secure the questioned note. At the time of filing signed by the plaintiff in favor of the Rural Bank
her complaint, respondent Castro deposited the of Caloocan for the amount of P3,000.00 as per
amount of P3,383.00 with the court a quo in full Annex B of this partial stipulation of facts;
payment of her personal loan plus interest.
c) Application for Industrial Loan with the Rural
In her amended complaint, Castro prayed, Bank of Caloocan, dated December 11, 1959,
amongst other, for the annulment as far as she is signed only by the defendants, Severino Valencia
concerned of the promissory note (Exhibit "2") and Catalina Valencia, attached as Annex C, of
and mortgage (Exhibit "6") insofar as it exceeds this partial stipulation of facts;
P3,000.00; for the discharge of her personal
d) Promissory note in favor of the Rural Bank of
obligation with the bank by reason of a deposit
Caloocan, dated December 11, 1959 for the
of P3,383.00 with the court a quo upon the filing
amount of P3000.00, signed by the spouses
of her complaint; for the annulment of the
Severino Valencia and Catalina Valencia as
foreclosure sale of her property covered by
borrowers, and plaintiff Maxima Castro, as a co-
T.C.T. No. 7419 in favor of Arsenio Reyes; and for
maker, attached as Annex D of this partial
the award in her favor of attorney's fees,
stipulation of facts;
damages and cost.
e) Real estate mortgage dated December 11,
In their answers, petitioners interposed
1959 executed by plaintiff Maxima Castro, in
counterclaims and prayed for the dismissal of
favor of the Rural Bank of Caloocan, to secure
the obligation of P6,000.00 attached herein as attached as Annex I of this partial stipulation of
Annex E of this partial stipulation of facts; facts;
All the parties herein expressly reserved their 11. That the Register of Deeds of the City of
right to present any evidence they may desire on Manila issued the Transfer Certificate of Title No.
the circumstances regarding the execution of the 67297 in favor of the defendant, Arsenio Reyes,
above-mentioned documents. in lieu of Transfer Certificate of Title No. 7419
which was in the name of plaintiff, Maxima
4. That the sheriff of Manila, thru Acting Chief Castro, which was cancelled;
Deputy Sheriff, Basilio Magsambol, sent a notice
of sheriff's sale, address to the plaintiff, dated 12. That after defendant, Arsenio Reyes, had
February 13, 1961, announcing that plaintiff's consolidated his title to the property as per T.C.T.
property covered by TCT No. 7419 of the Register No. 67299, plaintiff filed a notice of lis pendens
of Deeds of the City of Manila, would be sold at with the Register of Deeds of Manila and the
public auction on March 10, 1961 to satisfy the same was annotated in the back of T.C.T. No.
total obligation of P5,728.50, plus interest, 67299 as per Annex J of this partial stipulation of
attorney's fees, etc., as evidenced by the Notice facts; and
of Sheriff's Sale and Notice of Extrajudicial
Auction Sale of the Mortgaged property, 13. That the parties hereby reserved their rights
attached herewith as Annexes F and F-1, to present additional evidence on matters not
respectively, of this stipulation of facts; covered by this partial stipulation of facts.
5. That upon the request of the plaintiff and WHEREFORE, it is respectfully prayed that the
defendants-spouses Severino Valencia and foregoing partial stipulation of facts be approved
Catalina Valencia, and with the conformity of the and admitted by this Honorable Court.
Rural Bank of Caloocan, the Sheriff of Manila As for the evidence presented during the trial,
postponed the auction sale scheduled for March We quote from the decision of the Court of
10, 1961 for thirty (30) days and the sheriff re- Appeals the statement thereof, as follows:
set the auction sale for April 10, 1961;
In addition to the foregoing stipulation of facts,
6. That April 10, 1961 was declared a special plaintiff claims she is a 70-year old widow who
public holiday; (Note: No. 7 is omitted upon cannot read and write the English language; that
agreement of the parties.) she can speak the Pampango dialect only; that
8. That on April 11, 1961, the Sheriff of Manila, she has only finished second grade (t.s.n., p. 4,
sold at public auction plaintiff's property covered December 11, 1964); that in December 1959, she
by T.C.T. No. 7419 and defendant, Arsenio Reyes, needed money in the amount of P3,000.00 to
was the highest bidder and the corresponding invest in the business of the defendant spouses
certificate of sale was issued to him as per Annex Valencia, who accompanied her to the
G of this partial stipulation of facts; defendant bank for the purpose of securing a
loan of P3,000.00; that while at the defendant
9. That on April 16, 1962, the defendant Arsenio bank, an employee handed to her several forms
Reyes, executed an Affidavit of Consolidation of already prepared which she was asked to sign on
Ownership, a copy of which is hereto attached as the places indicated, with no one explaining to
Annex H of this partial stipulation of facts; her the nature and contents of the documents;
that she did not even receive a copy thereof; that
10. That on May 9, 1962, the Rural Bank of she was given a check in the amount of
Caloocan Incorporated executed the final deed P2,882.85 which she delivered to defendant
of sale in favor of the defendant, Arsenio Reyes, spouses; that sometime in February 1961, she
in the amount of P7,000.00, a copy of which is received a letter from the Acting Deputy Sheriff
of Manila, regarding the extrajudicial foreclosure other papers pertinent to the loan after she was
sale of her property; that it was then when she interviewed by the manager of the defendant.
learned for the first time that the mortgage After the application of plaintiff was made,
indebtedness secured by the mortgage on her defendant spouses had their application for a
property was P6,000.00 and not P3,000.00; that loan also prepared and signed (see Exh. 13). In
upon investigation of her lawyer, it was found his interview of plaintiff and defendant spouses,
that the papers she was made to sign were: the manager of the bank was able to gather that
plaintiff was in joint venture with the defendant
(a) Application for a loan of P3,000.00 dated spouses wherein she agreed to invest P3,000.00
December 7, 1959 (Exh. B-1 and Exh. 1); as additional capital in the laboratory owned by
(b) Promissory note dated December 11, 1959 said spouses (t.s.n., pp. 16-17) 3
for the said loan of P3,000.00 (Exh- B-2); The Court of Appeals, upon evaluation of the
(c) Promissory note dated December 11, 1959 evidence, affirmed in toto the decision of the
for P3,000.00 with the defendants Valencia Court of First Instance of Manila, the dispositive
spouses as borrowers and appellee as co-maker portion of which reads:
(Exh. B-4 or Exh. 2). FOR ALL THE FOREGOING CONSIDERATIONS, the
The auction sale set for March 10, 1961 was Court renders judgment and:
postponed co April 10, 1961 upon the request of (1) Declares that the promissory note, Exhibit '2',
defendant spouses Valencia who needed more is invalid as against plaintiff herein;
time within which to pay their loan of P3,000.00
with the defendant bank; plaintiff claims that (2) Declares that the contract of mortgage,
when she filed the complaint she deposited with Exhibit '6', is null and void, in so far as the
the Clerk of Court the sum of P3,383.00 in full amount thereof exceeds the sum of P3,000.00
payment of her loan of P3,000.00 with the representing the principal obligation of plaintiff,
defendant bank, plus interest at the rate of 12% plus the interest thereon at 12% per annum;
per annum up to April 3, 1961 (Exh. D).
(3) Annuls the extrajudicial foreclosure sale at
As additional evidence for the defendant bank, public auction of the mortgaged property held
its manager declared that sometime in on April 11, 1961, as well as all the process and
December, 1959, plaintiff was brought to the actuations made in pursuance of or in
Office of the Bank by an employee- (t.s.n., p 4, implementation thereto;
January 27, 1966). She wept, there to inquire if
she could get a loan from the bank. The claims (4) Holds that the total unpaid obligation of
he asked the amount and the purpose of the loan plaintiff to defendant Rural Bank of Caloocan,
and the security to he given and plaintiff said she Inc., is only the amount of P3,000.00, plus the
would need P3.000.00 to be invested in a interest thereon at 12% per annum, as of April 3,
drugstore in which she was a partner (t.s.n., p. 1961, and orders that plaintiff's deposit of
811. She offered as security for the loan her lot P3,383.00 in the Office of the Clerk of Court be
and house at Carola St., Sampaloc, Manila, which applied to the payment thereof;
was promptly investigated by the defendant (5) Orders defendant Rural Bank of Caloocan,
bank's inspector. Then a few days later, plaintiff Inc. to return to defendant Arsenio Reyes the
came back to the bank with the wife of purchase price the latter paid for the mortgaged
defendant Valencia A date was allegedly set for property at the public auction, as well as
plaintiff and the defendant spouses for the reimburse him of all the expenses he has
processing of their application, but on the day incurred relative to the sale thereof;
fixed, plaintiff came without the defendant
spouses. She signed the application and the
(6) Orders defendants spouses Severino D. THE COURT OF APPEALS ERRED IN IMPUTING
Valencia and Catalina Valencia to pay defendant UPON AND CONSIDERING PREJUDICIALLY
Rural Bank of Caloocan, Inc. the amount of AGAINST PETITIONERS, AS BASIS FOR THE
P3,000.00 plus the corresponding 12% interest PARTIAL ANNULMENT OF THE CONTRACTS
thereon per annum from December 11, 1960 AFORESAID ITS FINDING OF FRAUD
until fully paid; and PERPETRATED BY THE VALENCIA SPOUSES UPON
RESPONDENT CASTRO IN UTTER VIOLATION OF
Orders defendants Rural Bank of Caloocan, Inc., THE RES INTER ALIOS ACTA RULE.
Jose Desiderio, Jr. and spouses Severino D.
Valencia and Catalina Valencia to pay plaintiff, III
jointly and severally, the sum of P600.00 by way
of attorney's fees, as well as costs. THE COURT OF APPEAL ERRED IN NOT HOLDING
THAT, UNDER THE FACTS FOUND BY IT,
In view of the conclusion that the court has thus RESPONDENT CASTRO IS UNDER ESTOPPEL TO
reached, the counterclaims of defendant Rural IMPUGN THE REGULARITY AND VALIDITY OF HER
Bank of Caloocan, Inc., Jose Desiderio, Jr. and QUESTIONED TRANSACTION WITH PETITIONER
Arsenio Reyes are hereby dismissed, as a BANK.
corollary
IV
The Court further denies the motion of
defendant Arsenio Reyes for an Order requiring THE COURT OF APPEALS ERRED IN NOT FINDING
Maxima Castro to deposit rentals filed on THAT, BETWEEN PETITIONERS AND
November 16, 1963, resolution of which was RESPONDENT CASTRO, THE LATTER SHOULD
held in abeyance pending final determination of SUFFER THE CONSEQUENCES OF THE FRAUD
the case on the merits, also as a consequence of PERPETRATED BY THE VALENCIA SPOUSES, IN AS
the conclusion aforesaid. 4 MUCH AS IT WAS THRU RESPONDENT CASTRO'S
NEGLIGENCE OR ACQUIESCENSE IF NOT ACTUAL
Petitioners Bank and Jose Desiderio moved for CONNIVANCE THAT THE PERPETRATION OF SAID
the reconsideration 5 of respondent court's FRAUD WAS MADE POSSIBLE.
decision. The motion having been denied, 6 they
now come before this Court in the instant V
petition, with the following Assignment of THE COURT OF APPEALS ERRED IN UPHOLDING
Errors, to wit: THE VALIDITY OF THE DEPOSIT BY RESPONDENT
I CASTRO OF P3,383.00 WITH THE COURT BELOW
AS A TENDER AND CONSIGNATION OF PAYMENT
THE COURT OF APPEALS ERRED IN UPHOLDING SUFFICIENT TO DISCHARGE SAID RESPONDENT
THE PARTIAL ANNULMENT OF THE PROMISSORY FROM HER OBLIGATION WITH PETITIONER
NOTE, EXHIBIT 2, AND THE MORTGAGE, EXHIBIT BANK.
6, INSOFAR AS THEY AFFECT RESPONDENT
MAXIMA CASTRO VIS-A-VIS PETITIONER BANK VI
DESPITE THE TOTAL ABSENCE OF EITHER THE COURT OF APPEALS ERRED IN NOT
ALLEGATION IN THE COMPLAINT OR DECLARING AS VALID AND BINDING UPON
COMPETENT PROOF IN THE EVIDENCE OF ANY RESPONDENT CASTRO THE HOLDING OF THE
FRAUD OR OTHER UNLAWFUL CONDUCT SALE ON FORECLOSURE ON THE BUSINESS DAY
COMMITTED OR PARTICIPATED IN BY NEXT FOLLOWING THE ORIGINALLY SCHEDULED
PETITIONERS IN PROCURING THE EXECUTION OF DATE THEREFOR WHICH WAS DECLARED A
SAID CONTRACTS FROM RESPONDENT CASTRO. HOLIDAY WITHOUT NECESSITY OF FURTHER
II NOTICE THEREOF.
The issue raised in the first three (3) assignment that the decision was silent regarding the
of errors is whether or not respondent court participation of the bank in the fraud is,
correctly affirmed the lower court in declaring therefore, correct.
the promissory note (Exhibit 2) invalid insofar as
they affect respondent Castro vis-a-vis petitioner We cannot agree with the contention of
bank, and the mortgage contract (Exhibit 6) valid petitioners that the bank was defrauded by the
up to the amount of P3,000.00 only. Valencias. For one, no claim was made on this in
the lower court. For another, petitioners did not
Respondent court declared that the consent of submit proof to support its contention.
Castro to the promissory note (Exhibit 2) where
she signed as co-maker with the Valencias as At any rate, We observe that while the Valencias
principal borrowers and her acquiescence to the defrauded Castro by making her sign the
mortgage contract (Exhibit 6) where she promissory note (Exhibit 2) and the mortgage
encumbered her property to secure the amount contract (Exhibit 6), they also misrepresented to
of P6,000.00 was obtained by fraud perpetrated the bank Castro's personal qualifications in order
on her by the Valencias who had abused her to secure its consent to the loan. This must be
confidence, taking advantage of her old age and the reason which prompted the bank to contend
ignorance of her financial need. Respondent that it was defrauded by the Valencias. But to
court added that "the mandate of fair play reiterate, We cannot agree with the contention
decrees that she should be relieved of her for reasons above-mentioned. However, if the
obligation under the contract" pursuant to contention deserves any consideration at all, it is
in indicating the admission of petitioners that
Articles 24 7 and 1332 8 of the Civil Code.
the bank committed mistake in giving its consent
The decision in effect relieved Castro of any to the contracts.
liability to the promissory note (Exhibit 2) and
the mortgage contract (Exhibit 6) was deemed Thus, as a result of the fraud upon Castro and the
valid up to the amount of P3,000.00 only which misrepresentation to the bank inflicted by the
was equivalent to her personal loan to the bank. Valencias both Castro and the bank committed
mistake in giving their consents to the contracts.
Petitioners argued that since the Valencias were In other words, substantial mistake vitiated their
solely declared in the decision to be responsible consents given. For if Castro had been aware of
for the fraud against Castro, in the light of the res what she signed and the bank of the true
inter alios acta rule, a finding of fraud qualifications of the loan applicants, it is evident
perpetrated by the spouses against Castro that they would not have given their consents to
cannot be taken to operate prejudicially against the contracts.
the bank. Petitioners concluded that respondent
court erred in not giving effect to the promissory Pursuant to Article 1342 of the Civil Code which
note (Exhibit 2) insofar as they affect Castro and provides:
the bank and in declaring that the mortgage Art. 1342. Misrepresentation by a third person
contract (Exhibit 6) was valid only to the extent does not vitiate consent, unless such
of Castro's personal loan of P3,000.00. misrepresentation has created substantial
The records of the case reveal that respondent mistake and the same is mutual.
court's findings of fraud against the Valencias is We cannot declare the promissory note (Exhibit
well supported by evidence. Moreover, the 2) valid between the bank and Castro and the
findings of fact by respondent court in the mortgage contract (Exhibit 6) binding on Castro
matter is deemed final. 9 The decision declared beyond the amount of P3,000.00, for while the
the Valencias solely responsible for the contracts may not be invalidated insofar as they
defraudation of Castro. Petitioners' contention affect the bank and Castro on the ground of
fraud because the bank was not a participant Petitioners' argument utterly disregards the
thereto, such may however be invalidated on the findings of respondent Court of Appeals wherein
ground of substantial mistake mutually petitioners' negligence in the contracts has been
committed by them as a consequence of the aptly demonstrated, to wit:
fraud and misrepresentation inflicted by the
Valencias. Thus, in the case of Hill vs. A witness for the defendant bank, Rodolfo
Veloso, 10 this Court declared that a contract may Desiderio claims he had subjected the plaintiff-
be annulled on the ground of vitiated consent if appellee to several interviews. If this were true
deceit by a third person, even without why is it that her age was placed at 61 instead of
connivance or complicity with one of the 70; why was she described in the application
contracting parties, resulted in mutual error on (Exh. B-1-9) as drug manufacturer when in fact
the part of the parties to the contract. she was not; why was it placed in the application
that she has income of P20,000.00 when
Petitioners argued that the amended complaint according to plaintiff-appellee, she his not even
fails to contain even a general averment of fraud given such kind of information -the true fact
or mistake, and its mention in the prayer is being that she was being paid P1.20 per picul of
definitely not a substantial compliance with the the sugarcane production in her hacienda and
requirement of Section 5, Rule 8 of the Rules of 500 cavans on the palay production. 11
Court. The records of the case, however, will
show that the amended complaint contained a From the foregoing, it is evident that the bank
particular averment of fraud against the was as much , guilty as Castro was, of negligence
in giving its consent to the contracts. It
Valencias in full compliance with the provision of
apparently relied on representations made by
the Rules of Court. Although, the amended
complaint made no mention of mistake being the Valencia spouses when it should have
incurred in by the bank and Castro, such mention directly obtained the needed data from Castro
is not essential in order that the promissory note who was the acknowledged owner of the
(Exhibit 2) may be declared of no binding effect property offered as collateral. Moreover,
between them and the mortgage (Exhibit 6) valid considering Castro's personal circumstances –
up to the amount of P3,000.00 only. The reason her lack of education, ignorance and old age –
is that the mistake they mutually suffered was a she cannot be considered utterly neglectful for
mere consequence of the fraud perpetrated by having been defrauded. On the contrary, it is
demanded of petitioners to exercise the highest
the Valencias against them. Thus, the fraud
particularly averred in the complaint, having order of care and prudence in its business
been proven, is deemed sufficient basis for the dealings with the Valencias considering that it is
declaration of the promissory note (Exhibit 2) engaged in a banking business –a business
invalid insofar as it affects Castro vis-a-vis the affected with public interest. It should have
bank, and the mortgage contract (Exhibit 6) valid ascertained Castro's awareness of what she was
only up to the amount of P3,000.00. signing or made her understand what obligations
she was assuming, considering that she was
The second issue raised in the fourth assignment giving accommodation to, without any
of errors is who between Castro and the bank consideration from the Valencia spouses.
should suffer the consequences of the fraud
perpetrated by the Valencias. Petitioners further argue that Castro's act of
holding the Valencias as her agent led the bank
In attributing to Castro an consequences of the to believe that they were authorized to speak
loss, petitioners argue that it was her negligence and bind her. She cannot now be permitted to
or acquiescence if not her actual connivance that deny the authority of the Valencias to act as her
made the fraud possible. agent for one who clothes another with
apparent authority as her agent is not permitted that Castro's consignation in court of the amount
to deny such authority. of P3,383.00 was validly made. It is contended
that the consignation was made without prior
The authority of the Valencias was only to offer or tender of payment to the Bank, and it
follow-up Castro's loan application with the therefore, not valid. In holding that there is a
bank. They were not authorized to borrow for substantial compliance with the provision of
her. This is apparent from the fact that Castro Article 1256 of the Civil Code, respondent court
went to the Bank to sign the promissory note for considered the fact that the Bank was holding
her loan of P3,000.00. If her act had been Castro liable for the sum of P6,000.00 plus 12%
understood by the Bank to be a grant of an interest per annum, while the amount consigned
authority to the Valencia to borrow in her behalf, was only P3,000.00 plus 12% interest; that at the
it should have required a special power of time of consignation, the Bank had long
attorney executed by Castro in their favor. Since foreclosed the mortgage extrajudicially and the
the bank did not, We can rightly assume that it sale of the mortgage property had already been
did not entertain the notion, that the Valencia scheduled for April 10, 1961 for non-payment of
spouses were in any manner acting as an agent the obligation, and that despite the fact that the
of Castro. Bank already knew of the deposit made by
When the Valencias borrowed from the Bank a Castro because the receipt of the deposit was
personal loan of P3,000.00 evidenced by a attached to the record of the case, said Bank had
promissory note (Exhibit 2) and mortgaged not made any claim of such deposit, and that
(Exhibit 6) Castro's property to secure said loan, therefore, Castro was right in thinking that it was
the Valencias acted for their own behalf. futile and useless for her to make previous offer
Considering however that for the loan in which and tender of payment directly to the Bank only
the Valencias appeared as principal borrowers, it in the aforesaid amount of P3,000.00 plus 12%
was the property of Castro that was being interest. Under the foregoing circumstances, the
mortgaged to secure said loan, the Bank should consignation made by Castro was valid. if not
have exercised due care and prudence by making under the strict provision of the law, under the
proper inquiry if Castro's consent to the more liberal considerations of equity.
mortgage was without any taint or defect. The The final issue raised is the validity or invalidity
possibility of her not knowing that she signed the of the extrajudicial foreclosure sale at public
promissory note (Exhibit 2) as co-maker with the
auction of the mortgaged property that was held
Valencias and that her property was mortgaged on April 11, 1961.
to secure the two loans instead of her own
personal loan only, in view of her personal Petitioners contended that the public auction
circumstances – ignorance, lack of education and sale that was held on April 11, 1961 which was
old age – should have placed the Bank on the next business day after the scheduled date
prudent inquiry to protect its interest and that of of the sale on April 10, 1961, a special public
the public it serves. With the recent occurrence holiday, was permissible and valid pursuant to
of events that have supposedly affected the provisions of Section 31 of the Revised
adversely our banking system, attributable to Administrative Code which ordains:
laxity in the conduct of bank business by its
officials, the need of extreme caution and Pretermission of holiday. – Where the day, or the
prudence by said officials and employees in the last day, for doing any act required or permitted
discharge of their functions cannot be over- by law falls on a holiday, the act may be done on
emphasized. the next succeeding business day.
Question is, likewise, raised as to the propriety Respondent court ruled that the aforesaid sale is
of respondent court's decision which declared null and void, it not having been carried out in
accordance with Section 9 of Act No. 3135, which CHUA, EDDIE CHUA, SIMON CHUA, AND
provides: ERNESTO CHUA, petitioners,
vs.
Section 9. – Notice shall be given by posting THE INTERMEDIATE APPELLATE COURT, VICENTE
notices of the sale for not less than twenty days GO, VICTORIA T. GO, AND HERMINIGILDA
in at least three public places of the municipality HERRERA, respondents.
or city where the property is situated, and if such
property is worth more than four hundred pesos,
such notice shall also be published once a week
for at least three consecutive weeks in a This is an appeal by certiorari under Rule 45 of
newspaper of general circulation in the the Revised Rules of Court from the decision of
municipality or city. the Court of Appeals in AC-G.R. CV No. 67692
entitled "Conchita Vda. de Chua, et al. v.
We agree with respondent court. The Herminigilda Herrera, et al.," affirming with
pretermission of a holiday applies only "where modification the decision of the Court of First
the day, or the last day for doing any act required Instance of Cebu in Civil Case No. R-16589.
or permitted by law falls on a holiday," or when
the last day of a given period for doing an act falls The facts as found by the Court of Appeals, are
on a holiday. It does not apply to a day fixed by summarized as follows:
an office or officer of the government for an act Sometime in 1950, defendant Herminigilda
to be done, as distinguished from a period of Herrera executed a Contract of Lease (Exh. "A")
time within which an act should be done, which in favor of Tian On (sic) (or Sy Tian On) whereby
may be on any day within that specified period. the former leased to the latter Lots. Nos. 620 and
For example, if a party is required by law to file 7549 containing an area of 151 square meters,
his answer to a complaint within fifteen (15) days located at Manalili Street (now V. Gullas Street)
from receipt of the summons and the last day Cebu City, for a term of ten (10) years, renewable
falls on a holiday, the last day is deemed moved for another five (5) years. The contract of lease
to the next succeeding business day. But, if the (Exh. "A") contains a stipulation giving the lessee
court fixes the trial of a case on a certain day but an option to buy the leased property (Exh. A-2)
the said date is subsequently declared a public and that the lessor guarantees to leave the
holiday, the trial thereof is not automatically possession of said property to the lessee for a
transferred to the next succeeding business day. period of ten (10) years or as long as the lessee
Since April 10, 1961 was not the day or the last faithfully fulfills the terms and conditions of their
day set by law for the extrajudicial foreclosure contract (Exh. A-5).
sale, nor the last day of a given period but a date
fixed by the deputy sheriff, the aforesaid sale In accordance with the said contract of lease, the
cannot legally be made on the next succeeding lessee, Tian On, erected a residential house on
business day without the notices of the sale on the leased premises.
that day being posted as prescribed in Section 9, On February 2, 1954, or within four (4) years
Act No. 3135. from the execution of the said contract of lease
WHEREFORE, finding no reversible error in the (Exh. "A"), the lessee, Sy Tian On, executed a
judgment under review, We affirm the same in Deed of Absolute Sale of Building (Exh. "B") in
toto. No pronouncement as to cost. favor of Chua Bok, the predecessor-in-interest of
the plaintiffs herein, whereby the former sold to
SO ORDERED. the latter the aforesaid residential house for and
CONCHITA T. VDA. DE CHUA, THELMA CHUA, in consideration of the sum of P8,000.00.
assisted by her husband, CHARLIE DY, CHARLITO Pertinent provisions of this deed of sale (Exh.
CHUA, REYNALDO CHUA, SUSAN CHUA, ALEX "B") read as follows:
. . . That with the sale of the said house and as a After the said sale transaction, Chua Bok and his
legal consequence, I hereby assign all my rights family
and privileges as a lessee of the lot on which the (plaintiffs herein) resided in the said residential
said building is constructed together with its building and they faithfully and religiously paid
corresponding obligations as contained and the rentals thereof.
expressly stipulated in the Contract of Lease
executed in 1950 between myself and the lot When the Original Contract of Lease expired in
owner, Herminigilda Herrera, to the said vendee, 1960, Chua Bok and defendant Herminigilda
Chua Bok who hereby accepts the said Herrera, through her alleged attorney-in-fact
assignment of the said lease and hereby executed the following —
promises and bind himself to abide by all the CONTRACT OF LEASE.
terms and conditions thereof, a copy of the
Lease Contract is hereby attached as THIS CONTRACT OF LEASE made and entered
Appendix "A" and made a part hereof. into
this ___ day of August, 1960, in the City of Cebu,
That the present sale is made with the Philippines, by and between:
knowledge and express consent of the lot-owner
and lessor, Herminigilda Herrera who is HERMINIGILDA HERRERA, of legal age, single,
represented herein by her attorney-in-fact, Filipino and a resident of Cebu City, Philippines,
Vicenta R. de Reynes who hereby also honors the hereinafter known as Party of the First Part;
annulment of the lease made by Sy Tian On in and
favor of Chua Bok, and hereby promises and
binds herself to respect and abide by all the CHUA BOK of legal age, married and a resident of
terms and conditions of the lease contract which Cebu City, Philippines, hereinafter known as the
is now assigned to the said Chua Bok. Party of the Second Part.
IN WITNESS WHEREOF, the parties have WITNESSETH:
hereunto affixed their signatures on this 2nd day
That the Party of the First Part who is the owner
of February 1954, in the City of Cebu, Philippines.
of a parcel of land located at Manalili Street,
(Sgd.) CHUA BOK Cebu City containing of an area of about 151
Vendee-Lessee-Assignee (One Hundred Fifty-One) square meters, more or
less, known as Lot. No. ________ of the
(Sgd.) SY TIAN ON Cadastral Survey of Cebu, hereby lets and leases
Vendor-Lessor-Assignor unto the Party of the Second Part who hereby
HERMINIGILDA HERRERA accepts in lease the abovementioned lot under
the following terms and conditions:
By:
1. That the term of this contract shall be for a
(Sgd.) VICENTA R. DE REYNES period of FIVE (5) years from August 1, 1960 to
Attorney-in-fact August 1, 1965, at a monthly rental of SIXTY
Lot-owner-Lessor PESOS (P60.00) Philippine Currency;
SIGNED IN THE PRESENCE OF: 2. That the rental of P60.00 will be paid within
(Sgd.) ILLEGIBLE the first 10 days of every month, to the Party of
the First Part without express demand and in
AND advance;
(Sgd.) ILLEGIBLE xxx xxx xxx
4. That the Party of the Second Part is given an meanwhile died) continued possession of the
option to buy the said leased premises if he is premises up to
qualified and when the Party of the First Part April 1978, with adjusted rental rate of
decides to sell the same and that the Party of the P1,000.00 (Exh. "D"); later readjusted to
second Part is also given the option to renew the P2,000.00.
Contract of Lease upon terms and conditions to
be agreed by both parties; On July 26, 1977, defendant Herrera through her
attorney-in-fact, Mrs. Luz Tormis, who was
xxx xxx xxx authorized with a special power of attorney, sold
the lots in question to defendants-spouses,
6. That it is hereby expressly reserved that Vicente and Victoria Go. The defendants-
should the property leased be sold by the Party spouses were able to have aforesaid sale
of the First part to any other party, the terms and registered with the Register of Deeds of the City
conditions of this Contract shall be valid and will of Cebu and the titles of the two parcels of land
continue for the duration of this contract. The were transferred in their names (Exhs. "5-
Third party shall be expressed (sic) bound to Herrera", or "5-Go" and
respect the terms of this Contract of Lease; "6-Herrera" or "6-Go").
xxx xxx xxx Thereafter, or on November 18, 1977, plaintiffs
That the parties herein, do hereby mutually and filed the instant case seeking the annulment of
reciprocally stipulate that they will comply with the said sale between Herminigilda Herrera and
the terms and conditions herein before set forth. spouses Vicente and Victoria Go, alleging that
That the Party of the First Part hereby (sic) these the conveyance was in violation of the plaintiffs'
presents guarantees that she will leave the right of option to buy the leased premises as
property in the possession of the Party of the provided in the Contract of Lease (Exh. "C") and
Second Part for five (5) years or as long as the that the defendants-spouses acted in bad faith in
Party of the second Part faithfully fulfills with the purchasing the said lots knowing fully well that
terms and conditions herein set forth. the said plaintiffs have the option to buy those
lots.
IN WITNESS WHEREOF, we have hereunto
affixed our signatures on this 9th day of After due trial, the lower court rendered
September, 1960, in the City of Cebu, judgment, the dispositive portion of which reads
Philippines. as follows:
(Sgd.) VICENTA R. DE REYNES 2) The plaintiffs to VACATE Lot No. 620 and
Attorney-in-Fact Lot No. 7549, ownership over by which
defendants Vicente and Victoria Go being found
SIGNED IN THE PRESENCE OF: valid and legitimate, and to peacefully turn over
(Sgd.) ILLEGIBLE the same to said spouses, and to REMOVE the
building thereon at plaintiffs' own expense, or
(Sgd.) B.E. SUN such removal may be done by the declared land-
owners, likewise at plaintiffs' expense.
After the expiration of the contract of lease in
question (Exh. "C") the plaintiffs herein, who are
the successors-in-interest of Chua Bok (who had
3) Defendant Herrera to pay the spouses Go, the ejectment from the premises in question and the
sum of P15,000.00 as reimbursement to them demolition of the improvements introduced
for what they already paid to their lawyer; thereon.
4) Defendant Herrera to pay plaintiffs the sum of In support of their right to possess the premises
P50,000.00 (later reduced to P20,000.00, on in question, petitioners rely on the contract of
motion of defendant Herrera, which the court a lease (Exh. "C") entered into by and between
quo granted) in concept of moral damages Chua Bok and Vicenta R. de Reynes, as attorney-
suffered by the latter; and in-fact of respondent Herrera, as well as on the
tacit renewal thereof by respondent Herrera
5) Defendant Herrera to pay the costs of the (Rollo, pp. 35-48).
proceedings (Record on Appeal, pp. 229-230)
(Rollo, pp. 63-68). In declaring the contract of lease (Exh. "C") void,
the Court of Appeals noted that Vicenta R. de
Plaintiffs and defendant Herrera appealed from Reynes was not armed with a special power of
the decision of the trial court to the Court of attorney to enter into a lease contract for a
Appeals. period of more than one year.
In said court, plaintiffs-appellants claimed that We agree with the Court of Appeals.
the trial court erred: (a) in dismissing their
complaint as against defendants-spouses Go, (b) The lease contract (Exh. "C"), the linchpin of
in ordering them to vacate the lots in question petitioners' cause of action, involves the lease of
and to remove the improvements they had real property for a period of more than one year.
introduced in the premises, and (c) in ordering The contract was entered into by the agent of
the execution of the judgment pending appeal. the lessor and not the lessor herself. In such a
Defendant-appellant Herrera, on her part, case, the law requires that the agent be armed
claimed that the trial court erred in ordering her with a special power of attorney to lease the
to pay P15,000.00 as attorney's fees to premises.
defendants-spouses Go and P50,000.00 as moral
damages to plaintiffs-appellants. Article 1878 of the New Civil Code, in pertinent
part, provides:
The Court of Appeals affirmed with modification
the decision of the trial court, thus: Special Power of Attorney are necessary in the
following cases:
WHEREFORE, premises considered the appealed
decision is hereby MODIFIED by eliminating the xxx xxx xxx
award of P20,000.00 moral damages in favor of (8) To lease any real property to another person
the plaintiffs-appellants, the award of for more than one year.
P15,000.00 attorney's fees in favor of
defendants-appellees (Go spouses) and the costs It is true that respondent Herrera allowed
of the proceedings. In all other respects the petitioners to occupy the leased premises after
appealed decision is hereby AFFIRMED (Rollo, p. the expiration of the lease contract (Exh. "C")
78). and under
Article 1670 of the Civil Code of the Philippines,
In their petition filed with us, petitioners a tacit renewal of the lease (tacita reconduccion)
(plaintiffs-appellants in AC-G.R. No. 67692) gave is deemed to have taken place. However, as held
up their demand for the nullification of the sale in Bernardo M. Dizon v. Ambrosio Magsaysay,
of the lots in question to respondent-spouses Go 57 SCRA 250 (1974), a tacit renewal is limited
and limited their appeal to questioning the only to the terms of the contract which are
affirmance by the Court of Appeals of the germane to the lessee's right of continued
decision of the trial court, ordering their
enjoyment of the property and does not extend This is a reasonable construction of the
to alien matters, like the option to buy the leased provision, which is based on the presumption
premises. that when the lessor allows the lessee to
continue enjoying possession of the property for
In said case, Magsaysay leased to Dizon a parcel fifteen days after the expiration of the contract
of land for a term of two years, expiring on April he is willing that such enjoyment shall be for the
1, 1951. Under the lease contract, Dizon was entire period corresponding to the rent which is
given the preferential right to purchase the land customarily paid — in this case up to the end of
under the same conditions as those offered to the month because the rent was paid monthly.
other buyers. After the lease contract expired, Necessarily, if the presumed will of the parties
Dizon continued to occupy the leased premises refers to the enjoyment of possession, the
and to pay the monthly rentals, which presumption covers the other terms of the
Magsaysay accepted. On March 24, 1954, Dizon contract related to such possession, such as the
learned that Magsaysay had sold the property to amount of the rental, the date when it must be
a third party without giving him the opportunity paid, the care of the property, the responsibility
to exercise the preferential right to purchase of repairs, etc. But no such presumption may be
given him under the lease contract. Dizon then indulged in with respect to special agreements
filed an action against Magsaysay and the buyer which by nature are foreign to the right of
to annul the sale of the property or in the occupancy or enjoyment inherent in a contract
alternative, to recover damages from of lease.
Magsaysay. The trial court dismissed the action
and the Court of Appeals affirmed the dismissal. Petitioners also question the jurisdiction of the
In the Supreme Court, Dizon claimed that a new trial court in Civil Case No. R-16589 in ordering
lease contract was impliedly created when their ejectment from the leased premises and
Magsaysay allowed him to continue to occupy the removal of the improvements introduced
the premises after the expiration of the original thereon by them. They claim that the action in
lease contract and that the other terms of the Civil Case No. R-16589 was for the annulment of
said contract, including the lessee's preferential the sale of the property by defendant Herrera to
right to purchase, were deemed revived. Dizon defendants-spouses Go, and not an appropriate
invoked Article 1670 of the Civil Code of the case for an ejectment. The right of possession of
Philippines, which provides: petitioners of the leased premises was squarely
put in issue by defendants-spouse Go in their
Art. 1670. If at the end of the contract the lessee counterclaim to petitioner's complaint, where
should continue enjoying the thing leased for they asked that ". . . the plaintiff should vacate
fifteen days with the acquiescence of the lessor, their premises as soon as feasible or as the
and unless a notice to the contrary by either Honorable Court may direct" (Record on Appeal,
party has previously been given, it is understood CA-G.R. No. 67692-R; p. 45).
that there is an implied new lease, not for the
period of the original contract, but for the time The said counterclaim in effect was an accion
established in Articles 1682 and 1687. The other publiciana for the recovery of the possession of
terms of the original contract shall be the leased premises.
revived (Emphasis supplied).
Clearly the Court of First Instance had
We dismissed Dizon's appeal and sustained the jurisdiction over actions which involve the
interpretation of the Court of Appeals that "the possession of real property or any interest
other terms of the original contract" mentioned therein, except forcible entry and detainer
in Article 1670, are only those terms which are actions (Section 44[b], Judiciary Act of 1948;
germane to the lessee's right of continued Concepcion v. Presiding Judge, Br. V, CFI Bulacan,
enjoyment of the property leased. We held: 119 SCRA 222 [1982]).
A counterclaim is considered a complaint, only squatters to remove their houses and
this time, it is the original defendant who vacate the premises in order that the
becomes the plaintiff (Valisno v. Plan, 143 SCRA
502 [1986]). It stands on the same footing and is corporation may take material
to be tested by the same rules as if it were an possession of the entire lot, and for this
independent action. Hence, the same rules on purpose, to appear at the pre-trial
jurisdiction in an independent action apply to a conference and enter into any
counterclaim (Vivar v. Vivar, 8 SCRA 847 [1963];
Calo v. Ajax International, Inc. v. 22 SCRA 996
stipulation of facts and/or compromise
[1968]; Javier v. Intermediate Appellate Court, agreement so far as it shall protect the
171 SCRA 605 [1989]; Quiason, Philippine Courts rights and interest of the corporation in
and Their Jurisdictions, 1993 ed., p. 203). the aforementioned lots.[1]
Finally, petitioners claim that the Court of
On 11 March 1985 Paz G. Villamil-
Appeals erred in eliminating the award of moral
damages in the amount of P20,000.00 given to Estrada, by virtue of her power of
them by the trial court (Rollo, pp. 48-52). The attorney, instituted an action for the
elimination of said award is a logical ejectment of private respondent Isidro
consequence of the finding that petitioners had Perez and recover the possession of a
no right of option to purchase the leased
premises that can be enforced against portion of Lot No. 443 before the
respondent Herrera. Regional Trial Court of Dagupan,
docketed as Civil Case No. D-7750.[2]
WHEREFORE, the petition is DENIED.
SO ORDERED. On 25 November 1985 Villamil-Estrada
entered into a Compromise Agreement
COSMIC LUMBER with respondent Perez, the terms of
CORPORATION, petitioner, vs. COURT which follow:
OF APPEALS and ISIDRO
PEREZ, respondents. 1. That as per relocation sketch plan
dated June 5, 1985 prepared by
DECISION Engineer Rodolfo dela Cruz the area at
BELLOSILLO, J.: present occupied by defendant
wherein his house is located is 333
COSMIC LUMBER CORPORATION
square meters on the easternmost part
through its General Manager executed
of lot 443 and which portion has been
on 28 January 1985 a Special Power of
occupied by defendant for several years
Attorney appointing Paz G. Villamil-
now;
Estrada as attorney-in-fact -
2. That to buy peace said defendant
x x x to initiate, institute and file any
pays unto the plaintiff through herein
court action for the ejectment of third
attorney-in-fact the sum of P26,640.00
persons and/or squatters of the entire
computed at P80.00/square meter;
lot 9127 and 443 and covered by TCT
Nos. 37648 and 37649, for the said
3. That plaintiff hereby recognizes 1993 in Civil Case No. D-
ownership and possession of the 7750. Forthwith, upon learning of the
defendant by virtue of this compromise fraudulent transaction, petitioner
agreement over said portion of 333 sought annulment of the decision of the
square m. of lot 443 which portion will trial court before respondent Court of
be located on the easternmost part as Appeals on the ground that the
indicated in the sketch as annex A; compromise agreement was void
because: (a) the attorney-in-fact did
4. Whatever expenses of subdivision,
not have the authority to dispose of,
registration, and other incidental
sell, encumber or divest the plaintiff of
expenses shall be shouldered by the
its ownership over its real property or
defendant.[3]
any portion thereof; (b) the authority of
On 27 November 1985 the the attorney-in-fact was confined to the
Compromise Agreement was approved institution and filing of an ejectment
by the trial court and judgment was case against third persons/squatters on
rendered in accordance therewith.[4] the property of the plaintiff, and to
cause their eviction therefrom; (c) while
Although the decision became final and
the special power of attorney made
executory it was not executed within
mention of an authority to enter into a
the 5-year period from date of its
compromise agreement, such authority
finality allegedly due to the failure of
was in connection with, and limited to,
petitioner to produce the owners
the eviction of third persons/squatters
duplicate copy of Title No. 37649
thereat, in order that the corporation
needed to segregate from Lot No. 443
may take material possession of the
the portion sold by the attorney-in-fact,
entire lot; (d) the amount of P26,640.00
Paz G. Villamil-Estrada, to private
alluded to as alleged consideration of
respondent under the compromise
said agreement was never received by
agreement. Thus on 25 January
the plaintiff; (e) the private defendant
1993 respondent filed a complaint to
acted in bad faith in the execution of
revive the judgment, docketed as Civil
said agreement knowing fully well the
Case No. D-10459.[5]
want of authority of the attorney-in-
Petitioner asserts that it was only when fact to sell, encumber or dispose of the
the summons in Civil Case No. D-10459 real property of plaintiff; and, (f) the
for the revival of judgment was served disposal of a corporate property
upon it that it came to know of the indispensably requires a Board
compromise agreement entered into Resolution of its Directors, a fact which
between Paz G. Villamil-Estrada and is wanting in said Civil Case No. D-7750,
respondent Isidro Perez upon which the and the General Manager is not the
trial court based its decision of 26 July
proper officer to encumber a corporate houses and vacate the premises in order
property.[6] that the corporation may take material
possession of the entire lot x x x x
On 29 October 1993 respondent court
dismissed the complaint on the basis of We agree with petitioner. The authority
its finding that not one of the grounds granted Villamil-Estrada under the
for annulment, namely, lack of special power of attorney was explicit
jurisdiction, fraud or illegality was and exclusionary: for her to institute
shown to exist.[7] It also denied the any action in court to eject all persons
motion for reconsideration filed by found on Lots Nos. 9127 and 443 so that
petitioner, discoursing that the alleged petitioner could take material
nullity of the compromise judgment on possession thereof, and for this
the ground that petitioners attorney in purpose, to appear at the pre-trial and
fact Villamit-Estrada was not enter into any stipulation of facts
authorized to sell the subject property and/or compromise agreement but
may be raised as a defense in the only insofar as this was protective of
execution of the compromise judgment the rights and interests of petitioner in
as it does not bind petitioner, but not as the property. Nowhere in this
a ground for annulment of judgment authorization was Villamil-Estrada
because it does not affect the granted expressly or impliedly any
jurisdiction of the trial court over the power to sell the subject property nor a
action nor does it amount to extrinsic portion thereof.Neither can a
fraud.[8] conferment of the power to sell be
validly inferred from the specific
Petitioner challenges this verdict. It
authority to enter into a compromise
argues that the decision of the trial
agreement because of the explicit
court is void because the compromise
limitation fixed by the grantor that the
agreement upon which it was based is
compromise entered into shall only
void. Attorney-in-fact Villamil-Estrada
be so far as it shall protect the rights
did not possess the authority to sell or
and interest of the corporation in the
was she armed with a Board Resolution
aforementioned lots. In the context of
authorizing the sale of its property. She
the specific investiture of powers to
was merely empowered to enter into a
Villamil-Estrada, alienation by sale of an
compromise agreement in the recovery
immovable certainly cannot be deemed
suit she was authorized to file against
protective of the right of petitioner to
persons squatting on Lot No. 443, such
physically possess the same, more so
authority being expressly confined to
when the land was being sold for a price
the ejectment of third persons or
of P80.00 per square meter, very much
squatters of x x x lot x x x (No.) 443 x x x
less than its assessed value of P250.00
for the said squatters to remove their
per square meter, and considering agreement, Villamil-Estrada acted
further that petitioner never received without or in obvious authority. The
the proceeds of the sale. sale ipso jure is consequently void. So is
the compromise agreement. This being
When the sale of a piece of land or any
the case, the judgment based thereon
interest thereon is through an agent,
is necessarily void. Antipodal to the
the authority of the latter shall be in
opinion expressed by respondent court
writing; otherwise, the sale shall be
in resolving petitioners motion for
void.[9] Thus the authority of an agent to
reconsideration, the nullity of the
execute a contract for the sale of real
settlement between Villamil-Estrada
estate must be conferred in writing and
and Perez impaired the jurisdiction of
must give him specific authority, either
the trial court to render its decision
to conduct the general business of the
based on the compromise
principal or to execute a binding
agreement. In Alviar v. Court of First
contract containing terms and
Instance of La Union,[14] the Court held -
conditions which are in the contract he
did execute.[10] A special power of x x x x this court does not hesitate to
attorney is necessary to enter into any hold that the judgment in question is
contract by which the ownership of an null and void ab initio. It is not binding
immovable is transmitted or acquired upon and cannot be executed against
either gratuitously or for a valuable the petitioners. It is evident that the
consideration.[11] The express mandate compromise upon which the judgment
required by law to enable an appointee was based was not subscribed by them
of an agency (couched) in general terms x x x x Neither could Attorney Ortega
to sell must be one that expressly bind them validly in the compromise
mentions a sale or that includes a sale because he had no special authority x x
as a necessary ingredient of the act xx
mentioned.[12] For the principal to
As the judgment in question is null and
confer the right upon an agent to sell
void ab initio, it is evident that the court
real estate, a power of attorney must so
acquired no jurisdiction to render it,
express the powers of the agent in clear
much less to order the execution
and unmistakable language. When
thereof x x x
there is any reasonable doubt that the
language so used conveys such power, x x x x A judgment, which is null and
no such construction shall be given the void ab initio, rendered by a court
document.[13] without jurisdiction to do so, is without
legal efficacy and may properly be
It is therefore clear that by selling to
impugned in any proceeding by the
respondent Perez a portion of
petitioners land through a compromise
party against whom it is sought to be Under authority of Sec. 9, par. (2), of
enforced x x x x B.P. Blg. 129, a party may now petition
the Court of Appeals to annul and set
This ruling was adopted in Jacinto v.
aside judgments of Regional Trial
Montesa,[15] by Mr. Justice J.B.L. Reyes,
Courts.[16] Thus, the Intermediate
a much-respected authority on civil law,
Appellate Court (now Court of Appeals)
where the Court declared that a
shall exercise x x x x (2) Exclusive
judgment based on a compromise
original jurisdiction over action for
entered into by an attorney without
annulment of judgments of the
specific authority from the client is
Regional Trial Courts x x x x However,
void. Such judgment may be impugned
certain requisites must first be
and its execution restrained in any
established before a final and executory
proceeding by the party against whom
judgment can be the subject of an
it is sought to be enforced. The Court
action for annulment. It must either be
also observed that a defendant against
void for want of jurisdiction or for lack
whom a judgment based on a
of due process of law, or it has been
compromise is sought to be enforced
obtained by fraud.[17]
may file a petition for certiorari to
quash the execution. He could not Conformably with law and the above-
move to have the compromise set aside cited authorities, the petition to annul
and then appeal from the order of the decision of the trial court in Civil
denial since he was not a party to the Case No. D-7750 before the Court of
compromise. Thus it would appear that Appeals was proper. Emanating as it did
the obiter of the appellate court that from a void compromise agreement,
the alleged nullity of the compromise the trial court had no jurisdiction to
agreement should be raised as a render a judgment based thereon.[18]
defense against its enforcement is not
It would also appear, and quite contrary
legally feasible. Petitioner could not be
to the finding of the appellate court
in a position to question the
that the highly reprehensible conduct
compromise agreement in the action to
of attorney-in-fact Villamil-Estrada in
revive the compromise judgment since
Civil Case No. 7750 constituted an
it was never privy to such
extrinsic or collateral fraud by reason of
agreement. Villamil-Estrada who
which the judgment rendered thereon
signed the compromise agreement may
should have been struck down. Not all
have been the attorney-in-fact but she
the legal semantics in the world can
could not legally bind petitioner thereto
becloud the unassailable fact that
as she was not entrusted with a special
petitioner was deceived and betrayed
authority to sell the land, as required in
by its attorney-in-fact. Villamil-Estrada
Art. 1878, par. (5), of the Civil Code.
deliberately concealed from petitioner,
her principal, that a compromise opponent.[19] Fraud is extrinsic where
agreement had been forged with the the unsuccessful party has been
end-result that a portion of petitioners prevented from exhibiting fully his case,
property was sold to the deforciant, by fraud or deception practiced on him
literally for a song. Thus completely by his opponent, as by keeping him
kept unaware of its agents artifice, away from court, a false promise of a
petitioner was not accorded even a compromise; or where the defendant
fighting chance to repudiate the never had knowledge of the suit, being
settlement so much so that the kept in ignorance by the acts of the
judgment based thereon became final plaintiff; or where an attorney
and executory. fraudulently or without authority
connives at his defeat; these and similar
For sure, the Court of Appeals restricted
cases which show that there has never
the concept of fraudulent acts within
been a real contest in the trial or
too narrow limits. Fraud may assume
hearing of the case are reasons for
different shapes and be committed in
which a new suit may be sustained to
as many different ways and here lies
set aside and annul the former
the danger of attempting to define
judgment and open the case for a new
fraud. For man in his ingenuity and
and fair hearing.[20]
fertile imagination will always contrive
new schemes to fool the unwary. It may be argued that petitioner knew
of the compromise agreement since the
There is extrinsic fraud within the
principal is chargeable with and bound
meaning of Sec. 9, par. (2), of B.P. Blg.
by the knowledge of or notice to his
129, where it is one the effect of which
agent received while the agent was
prevents a party from hearing a trial, or
acting as such. But the general rule is
real contest, or from presenting all of
intended to protect those who exercise
his case to the court, or where it
good faith and not as a shield for unfair
operates upon matters, not pertaining
dealing. Hence there is a well-
to the judgment itself, but to the
established exception to the general
manner in which it was procured so that
rule as where the conduct and dealings
there is not a fair submission of the
of the agent are such as to raise a clear
controversy.In other words, extrinsic
presumption that he will not
fraud refers to any fraudulent act of the
communicate to the principal the facts
prevailing party in the litigation which is
in controversy.[21] The logical reason for
committed outside of the trial of the
this exception is that where the agent is
case, whereby the defeated party has
committing a fraud, it would be
been prevented from exhibiting fully his
contrary to common sense to presume
side of the case by fraud or deception
or to expect that he would
practiced on him by his
communicate the facts to the OF DEEDS FOR THE CITY OF
principal. Verily, when an agent is MANILA, respondents.
engaged in the perpetration of a fraud
upon his principal for his own exclusive
DECISION
benefit, he is not really acting for the TORRES, JR., J.:
principal but is really acting for himself, This petition for review assails the
entirely outside the scope of his decision of the Court of Appeals, dated
agency.[22] Indeed, the basic tenets of July 29, 1991, the dispositive portion of
agency rest on the highest which reads:
considerations of justice, equity and fair
WHEREFORE, the decision appealed from is hereby
play, and an agent will not be permitted AFFIRMED IN TOTO. Costs against appellant.[1]
to pervert his authority to his own
personal advantage, and his act in The following are the antecedent facts:
secret hostility to the interests of his Petitioner Francisco Veloso was the
principal transcends the power owner of a parcel of land situated in the
afforded him.[23] district of Tondo, Manila, with an area
WHEREFORE, the petition is of one hundred seventy seven (177)
GRANTED. The decision and resolution square meters and covered by Transfer
of respondent Court of Appeals dated Certificate of Title No. 49138 issued by
29 October 1993 and 10 March 1994, the Registry of Deeds of Manila. The [2]
in Civil Case No. D-7750 dated 27 4, 1957. The said title was
[4]
November 1985, are NULLIFIED and SET subsequently canceled and a new one,
ASIDE. The Compromise Agreement Transfer Certificate of Title No. 180685,
entered into between Attorney-in-fact was issued in the name of Aglaloma B.
Paz G. Villamil-Estrada and respondent Escario, married to Gregorio L. Escario,
Isidro Perez is declared VOID. This is on May 24, 1988. [5]
order be issued to prevent the transfer married Irma Lazatin on January 20,
of the subject property; that the 1962. Hence, the property did not
[11]
litem that she was of unsound The trial judge held that
mind at the time when the although the defendant,
various transactions evidenced Manuela de Jesus, was shown to
by these instruments are be an ignorant old woman, the
alleged to have taken place. chanrob lesvi rtual awlib rary cha nrob les evidence failed to establish the
allegations of her attorney ad
virtua l law lib rary
twelve full years which had The power of attorney from the
expired from the date of the defendant wife in favor of the
contract to the date of the defendant husband authorized
judgment, less 50 pilones of merely:
sugar which he found to be
By means of a mortgage of my
equivalent of P300 admittedly
real property, to borrow and
paid on account thereof, at the
lend sums in cash, at such
rate of P6 a pilon.
interest and for such periods
chanrob les vi rtual law lib rary
If the parties actually enter into 1279, and 1280 of the Civil
such an agreement, the lender Code touching the conditions
of the money is legally and essential to the validity of
morally bound to fulfill it. Of contracts, and the necessity for
course such an oral contract the execution of certain
does not give the borrower a contracts, including
real right in the lands unless it conveyances of real estate, in
is executed in compliance with public documents:
the formalities prescribed by
law. If entered into orally, it
Neither this article, the In this appeal certified to this Court by the Court
of Appeals as involving purely legal issues, we
preceding one, nor the following
hold that a special power of attorney to
one requires that the exercise of mortgage real estate is limited to such authority
the action to compel the to mortgage and does not bind the grantor
execution of the deed must personally to other obligations contracted by the
precede the bringing of the grantee, in the absence of any ratification or
other similar act that would estop the grantor
action derived from the from questioning or disowning such other
contract. (Decisions of July 4, obligations contracted by the grantee.
1899, and October 19, 1901).
Plaintiff bank filed this action on February 10,
Twenty days hereafter let 1961 against defendant Maximo Sta. Maria and
his six brothers and sisters, defendants-
judgment be entered reversing
appellants, Valeriana, Emeteria, Teofilo, Quintin,
the judgment entered in the Rosario and Leonila, all surnamed Sta. Maria,
court below without costs in this and the Associated Insurance & Surety Co., Inc.
instance, and ten days as surety, for the collection of certain amounts
thereafter let the record be representing unpaid balances on two
agricultural sugar crop loans due allegedly from
returned to the court below defendants. 1
where judgment will be entered
The said sugar crop loans were obtained by
in favor of the plaintiffs and
defendant Maximo Sta. Maria from plaintiff bank
against the defendants, for the under a special power of attorney, executed in
sum of P5,000 together with his favor by his six brothers and sisters,
interest thereon at the rate of defendants-appellants herein, to mortgage a 16-
P720 a year from the 1st of odd hectare parcel of land, jointly owned by all
of them, the pertinent portion of which reads as
June, 1903, until paid, less follows:
P300, and providing for the sale
of the land in question and the That we, VALERIANA, EMETERIA, TEOFILO,
QUINTIN, ROSARIO and LEONILA all surnamed
application of the proceeds of STA. MARIA, sole heirs of our deceased parents
the sale, so far as may be CANDIDO STA. MARIA and FRANCISCA DE LOS
necessary to the judgment REYES, all of legal age, Filipinos, and residents of
indebtedness. So ordered. chanroble svi rtualaw lib rary chan rob les vi rtual law lib rary
Dinalupihan, Bataan, do hereby name,
constitute and appoint Dr. MAXIMO STA. MARIA,
PHILIPPINE NATIONAL BANK, plaintiff-appellee, of legal age, married, and residing at
vs. Dinalupihan, Bataan to be our true and lawful
MAXIMO STA. MARIA, ET AL., defendant, attorney of and in our place, name and stead to
VALERIANA, EMETERIA, TEOFILO, QUINTIN, mortgage, or convey as security to any bank,
ROSARIO and LEONILA, all surnamed STA. company or to any natural or juridical person,
MARIA,defendants-appellants. our undivided shares over a certain parcel of land
together the improvements thereon which
Tomas Besa and Jose B. Galang for plaintiff-
parcel of land is more particularly described as
appellee.
follows, to wit:
G.P. Nuguid, Jr. for defendants-appellants.
TEEHANKEE, J.:
"Situated in the Barrio of Pinulot, Municipality of including, the parcel of land jointly owned by
Dinalupihan, Bataan, containing an area of Maximo and his six brothers and sisters herein
16.7249 hectares and bounded as follows to wit: for the 1952-1953 crop loan, with the notation
North by property of Alejandro Benito; on the that the bank already held a first mortgage on
Northeast, by public land and property of Tomas the same properties for the 1951-1952 crop loan
Tulop; on the southeast, by property of Ramindo of Maximo, 4 and a 3rd mortgage on the same
Agustin; on the southwest, by properties of Jose properties for the 1953-1954 crop loan. 5
V. Reyes and Emilio Reyes; and on the northwest,
by excluded portion claimed by Emilio Reyes." The trial court rendered judgment in favor of
plaintiff and against defendants thus:1äwphï1.ñët
By virtue of the two above powers, Maximo Sta. 3. On both causes of action the further sum
Maria applied for two separate crop loans, for equivalent to 10% of the total amount due as
the 1952-1953 and 1953-1954 crop years, with attorney's fee as of the date of the execution of
plaintiff bank, one in the amount of P15,000.00, this decision, and the costs.6
of which only the sum of P13,216.11 was actually Defendant Maximo Sta. Maria and his surety,
extended by plaintiff, and the other in the defendant Associated Insurance & Surety Co.,
amount of P23,000.00, of which only the sum of Inc. who did not resist the action, did not appeal
P12,427.57 was actually extended by plaintiff. As the judgment. This appeals been taken by his six
security for the two loans, Maximo Sta. Maria brothers and sisters, defendants-appellants who
executed in his own name in favor of plaintiff reiterate in their brief their main contention in
bank two chattel mortgages on the standing their answer to the complaint that under this
crops, guaranteed by surety bonds for the full special power of attorney, Exh. E, they had not
authorized amounts of the loans executed by the given their brother, Maximo, the authority to
Associated Insurance & Surety Co., Inc. as surety borrow money but only to mortgage the real
with Maximo Sta. Maria as principal. The records estate jointly owned by them; and that if they
of the crop loan application further disclose that are liable at all, their liability should not go
among the securities given by Maximo for the beyond the value of the property which they had
loans were a "2nd mortgage on 25.3023 Has. of authorized to be given as security for the loans
sugarland, including sugar quota rights therein" obtained by Maximo. In their answer,
defendants-appellants had further contended Appellant claims that the trial court erred in
that they did not benefit whatsoever from the holding that only Cesario A. Fabricante is liable
loans, and that the plaintiff bank's only recourse to pay the mortgage debt and not his wife who
against them is to foreclose on the property is exempt from liability. The trial court said:
which they had authorized Maximo to mortgage. "Only the defendant Cesario A. Fabricante is
liable for the payment of this amount because it
We find the appeal of defendants-appellants, does not appear that the other defendant Maria
except for defendant Valeriana Sta. Maria who G. de Fabricante had authorized Cesario A.
had executed another special power of attorney, Fabricante to contract the debt also in her name.
Exh. E-1, expressly authorizing Maximo to The power of attorney was not presented and it
borrow money on her behalf, to be well taken. is to be presumed that the power (of attorney)
1. Plaintiff bank has not made out a cause of was limited to a grant of authority to Cesario A.
action against defendants-appellants (except Fabricante to mortgage the parcel of land
Valeriana), so as to hold them liable for the covered by Transfer Certificate of Title in the
unpaid balances of the loans obtained by name of Maria G. de Fabricante.
Maximo under the chattel mortgages executed We went over the contents of the deed of
by him in his own name alone. In the early case mortgage executed by Cesario Fabricante in
of Bank of P.I. vs. De Coster, this Court, in holding favor of Appellant on April 18, 1944, and there is
that the broad power of attorney given by the really nothing therein from which we may infer
wife to the husband to look after and protect the that Cesario was authorized by his wife to
wife's interests and to transact her business did
construct the obligation in her name. The deed
not authorize him to make her liable as a surety
shows that the authority was limited to the
for the payment of the pre-existing debt of a execution of the mortgage insofar as the
third person, cited the fundamental construction property of the wife is concerned. There is a
rule that "where in an instrument powers and difference between authority to mortgage and
duties are specified and defined, that all of such authority to contract obligation. Since the power
powers and duties are limited andconfined to of attorney was not presented as evidence, the
those which are specified and defined, and all trial court was correct in presuming that the
other powers and duties are excluded." 7 This is power was merely limited to a grant of authority
but in accord with the disinclination of courts to to mortgage unless the contrary is shown.9
enlarge an authority granted beyond the powers
expressly given and those which incidentally 2. The authority granted by defendants-
flow or derive therefrom as being usual or appellants (except Valeriana) unto their brother,
reasonably necessary and proper for the Maximo, was merely to mortgage the property
performance of such express powers. Even jointly owned by them. They did not grant
before the filing of the present action, this Court Maximo any authority to contract for any loans
in the similar case of De Villa vs. Fabricante 8 had in their names and behalf. Maximo alone, with
already ruled that where the power of attorney Valeriana who authorized him to borrow money,
given to the husband by the wife was limited to must answer for said loans and the other
a grant of authority to mortgage a parcel of land defendants-appellants' only liability is that the
titled in the wife's name, the wife may not be real estate authorized by them to be mortgaged
held liable for the payment of the mortgage debt would be subject to foreclosure and sale to
contracted by the husband, as the authority to respond for the obligations contracted by
mortgage does not carry with it the authority to Maximo. But they cannot be held personally
contract obligation. This Court thus held in the liable for the payment of such obligations, as
said case: erroneously held by the trial court.
3. The fact that Maximo presented to the Quintin Sta. Maria testified that he and his co-
plaintiff bank Valeriana's additional special defendants executed the authority to mortgage
power of attorney expressly authorizing him to "to accommodate (my) brother Dr. Maximo Sta.
borrow money, Exh. E-1, aside from the Maria ... and because he is my brother, I signed
authority to mortgage executed by Valeriana it to accommodate him as security for whatever
together with the other defendants-appellants he may apply as loan. Only for that land, we gave
also in Maximo's favor, lends support to our view him as, security" and that "we brothers did not
that the bank was not satisfied with the receive any centavo as benefit." 11 The record
authority to mortgage alone. For otherwise, such further shows plaintiff bank itself admitted
authority to borrow would have been deemed during the trial that defendants-appellants "did
unnecessary and a surplusage. And having failed not profit from the loan" and that they "did not
to require that Maximo submit a similar receive any money (the loan proceeds) from
authority to borrow, from the other defendants- (Maximo)." 12 No estoppel, therefore, can be
appellants, plaintiff, which apparently was claimed by plaintiff as against defendants-
satisfied with the surety bond for repayment put appellants.
up by Maximo, cannot now seek to hold said
defendants-appellants similarly liable for the 5. Now, as to the extent of defendant Valeriana
unpaid loans. Plaintiff's argument that "a Sta. Maria's liability to plaintiff. As already stated
mortgage is simply an accessory contract, and above, Valeriana stands liable not merely on the
that to effect the mortgage, a loan has to be mortgage of her share in the property, but also
secured" 10 falls, far short of the mark. Maximo for the loans which Maximo had obtained from
had indeed, secured the loan on his own account plaintiff bank, since she had expressly granted
and the defendants-appellants had authorized Maximo the authority to incur such loans. (Exh.
him to mortgage their respective undivided E-1.) Although the question has not been raised
shares of the real property jointly owned by in appellants' brief, we hold that Valeriana's
them as security for the loan. But that was the liability for the loans secured by Maximo is
extent of their authority land consequent not joint and several or solidary as adjudged by
liability, to have the real property answer for the the trial court, but only joint, pursuant to the
loan in case of non-payment. It is not unusual in provisions of Article 1207 of the Civil Code that
family and business circles that one would allow "the concurrence ... of two or more debtors in
his property or an undivided share in real estate one and the same obligation does not imply that
to be mortgaged by another as security, either as ... each one of the (debtors) is bound to render
an accommodation or for valuable entire compliance with the prestation. There is a
consideration, but the grant of such authority solidary liability only when the obligation
does not extend to assuming personal liability, expressly so states, or when the law or the
much less solidary liability, for any loan secured nature of the obligation requires solidarity." It
by the grantee in the absence of express should be noted that in the additional special
authority so given by the grantor. power of attorney, Exh. E-1, executed by
Valeriana, she did not grant Maximo the
4. The outcome might be different if there had authority to bind her solidarity with him on any
been an express ratification of the loans by loans he might secure thereunder.
defendants-appellants or if it had been shown
that they had been benefited by the crop loans 6. Finally, as to the 10% award of attorney's fees,
so as to put them in estoppel. But the burden of this Court believes that considering the
establishing such ratification or estoppel falls resources of plaintiff bank and the fact that the
squarely upon plaintiff bank. It has not only principal debtor, Maximo Sta. Maria, had not
failed to discharge this burden, but the record contested the suit, an award of five (5%) per cent
stands undisputed that defendant-appellant of the balance due on the principal, exclusive of
interests, i.e., a balance of P6,100.00 on the first
cause of action and a balance of P9,346.44 on for the satisfaction of the judgment. With regard
the second cause of action, per the bank's to the property covered by Transfer Certificate
statements of August 20, 1963, (Exhs. Q-1 and of Title No. 15, the foreclosure of the mortgage
BB-1, respectively) should be sufficient. was not decreed it appearing that the property
had been sold to the spouses Jose Jacob and
WHEREFORE, the judgment of the trial court Cecilia Baduria and they were not made parties
against defendants-appellants Emeteria, Teofilo, defendant in the case. From this decision,
Quintin, Rosario and Leonila, all surnamed Sta. plaintiff appealed to the Court of Appeals, but
Maria is hereby reversed and set aside, with because the amount involved is more than
costs in both instances against plaintiff. The P50,000.00, the case was certified to us under
judgment against defendant-appellant Valeriana Section 17 of Republic Act. No. 296.
Sta. Maria is modified in that her liability is held
to be joint and not solidary, and the award of Appellant claims that the trial court erred in
attorney's fees is reduced as set forth in the holding that only Cesario A. Fabricante is liable
preceding paragraph, without costs in this to pay the mortgage debt and not his wife who
instance. is exempt from liability. The trial court said:
"Only the defendant Cesario A. Fabricante is
.R. No. L-13063 April 30, 1959 liable for the payment of this amount because it
FELIX DE VILLA, plaintiff-appellant, does not appear that the other defendant Maria
vs. G. de Fabricante had authorized Cesario A.
CESARIO A. FABRICANTE, ET AL., defendants- Fabricante to contract the debt also in her name.
appellees. The power of attorney was not presented and it
is to be presumed that the power was limited to
M. H. de Joya and Ed. Espinosa Antona for a grant of authority to Cesario A. Fabricante to
appellant. mortgage the parcel of land covered by Transfer
Cesario A. Fabricante for appellees. Certificate of Title in the name of Maria G. de
BAUTISTA ANGELO, J.: Fabricante."
Plaintiff filed this action before the Court of First We went over the contents of the deed of
Instance of Camarines Sur to foreclose the mortgage executed by Cesario Fabricante in
mortgage executed by defendants covering two favor of appellant on April 18, 1944, and there is
parcels of land situated in the same province. really nothing therein from which we may infer
Defendants, after having been duly served with that Cesario was authorized by his wife to
summons, filed a motion to dismiss, which was contract the obligation in her name. The deed
sustained, but, on appeal, this Court set aside the shows that the authority was limited to the
sustaining order and remanded the case to the execution of the mortgage insofar as the
trial court for further proceedings. property of the wife is concerned. There is a
difference between authority to mortgage and
As defendants failed to answer the complaint authority to contract obligation. Since the power
within the reglementary period, they were of attorney was not presented as evidence, the
declared in default, and forthwith, plaintiff trial court was correct in presuming that the
presented his evidence. Thereupon, the trial power was merely limited to a grant of authority
court rendered decision ordering Cesario A. to mortgage unless the contrary is shown.
Fabricante to pay the plaintiff the sum of
P16,666.66 (as amended), with interest at the Appellant also contends that the trial court erred
rate of 6 per cent per annum from April 18, 1944 in applying the Ballantyne Scale of Values in
and, upon his failure to pay the same within the determining the liability of the appellee and in
period of 90 days, to have the property covered consequently ordering him to pay merely the
by Transfer Certificate of Title No. RT-29 (50) sold sum of P16,666.66 instead of the sum of
P150,000.00 as stated in the contract. The or the Philippine currency. (Vol. II. o. 4, pp. 220-
conditions under which the loan of P150,000.00 221, JURISPRUDENCE, April 30, 1954.)
shall be paid appear in the contract of mortgage
as follows. The loan should therefore be paid in accordance
with the present currency, and not in accordance
(1) That the right to redeem this mortgage shall with the Ballantyne Scale of Values as
begin after the lapse of four (4) years from the erroneously applied by the trial court. This
date hereof, and shall be within two years from means that the appellee should pay to plaintiff
the lapse of the said four years; in other words, the sum of P150,000.00 according to the present
the period of redemption shall begin from April legal tender, plus 6 per cent interest thereon
19, 1948, and shall last until April, 1950. from the filing of the complaint. With regard to
the compounding of interest as stipulated in the
(2) That the interest of six per cent (6) per annum contract, we consider it unreasonable and so it
of the principal sum of ONE HUNDRED AND FIFTY should be disregarded. Evidently, appellee has
THOUSAND PESOS accumulated and shall be been persuaded to enter into this onerous
added to the principal sum at the end of the said stipulation in view of his financial precarious
period, such that at the beginning of the fifth situation.
year or on April 19, 1948, the total mortgage
indebtedness shall be ONE HUNDRED AND With regard to the expenses incurred be
EIGHTY-SIX THOUSAND PESOS (P186,000.00), appellant in securing the reconstitution of the
which shall bear the interest of six per cent (6) certificates of title covering the properties
per annum payable at the end of each year until mortgaged which were lost during the liberation,
the total indebtedness is fully paid. we agree with the trial court that said expenses
are not within the purview of the contract for the
It thus appears from the contract that the right thereto merely refers to any suit or judicial
appellee can only repay the loan within two proceeding that may affect the title or
years after the lapse of four years from date ownership of said properties. The reconstitution
thereof, or from April 19, 1948 to April 19, 1950. of title is not of the nature therein contemplated.
This period falls after the liberation of the
Philippines, and following the ruling laid down by It appears that the land covered by Transfer
this Court in a long line of decisions, the loan Certificate of Title No. 15 in the name of Maria
shall be paid in accordance with the currency G. Fabricante had already been cancelled and in
then prevailing on the date of maturity.1 Thus, in lieu thereof a new one was issued in the name of
the case of Londres vs. The National Life Jose Jacob and Cecilia Baduria because the
Insurance Company of the Philippines, 94 Phil., property was sold to the latter during the period
672, this Court said: of the mortgage. The encumbrance was however
annotated on the back of the new certificate of
Accordingly, as decided by the Supreme Court in title. Nevertheless, when this foreclosure case
other cases, where the parties have agreed that was instituted, only the mortgagor was included,
the payment of the obligation shall be made in while the subsequent purchasers were not made
the currency that would prevail by the end of the parties defendants. For this reason, the trial
stipulated period, and this takes place after court found that the foreclosure of the mortgage
liberation, the obligation shall be paid in insofar as said parcel is concerned cannot be
accordance with the currency then prevailing, or decreed in view of the non-inclusion of said
Philippine currency. (Roño vs. Gomez, 46 Off. purchasers. This is now assigned as error.
Gaz., Sup. 11, 339; Gomez vs. Tabia, 47 Off. Gaz.,
641). Therefore, the present claim should be This contention must be overruled, for we agree
paid in accordance with the present legal tender with the trial court that said purchasers are
necessary parties to this action. This is clear from
Section 1, Rule 70, of the Rules of the Court prays for judgment against the defendant for the
which provides that "All persons having or amount of the debt with interest and attorney's
claiming an interest in the premises subordinate fees, and that the property described in the
in the right to that of the holder of the mortgage mortgage be sold and the proceeds of sale
. . . shall be made defendants in the action." And applied to the satisfaction of the debt, and for
this Court has held that if the mortgaged the judgment over for any deficiency which may
property is sold to another person, the mortgage remain, and for costs.
debtor, as well as the person to whom it is sold,
must both be made defendants.2 For answer the defendant made a general and
specific denial under oath as to the genuineness
Wherefore, with the modification that appellee and execution of both the note and the
Cesario A. Fabricante be ordered to pay plaintiff mortgage and of the debt.
the sum of P150,000.00, plus 6 per cent interest
thereon from the filing of the complaint, the At the first trial the lower court dismissed the
decision appealed from is affirmed in all other complaint for and on account of the failure of the
respects, without pronouncement as to costs. plaintiff to present the original document, the
power of attorney, upon which its action was
PHILIPPINE NATIONAL BANK, plaintiff-appellee, based. From that judgment the plaintiff
vs. appealed to this court which on December 31,
TAN ONG SZE, Viuda de Tan Toco, defendant- 1927,1 sustained that decision of the lower court
appellant. upon the legal questions involved, but due to the
importance of the case and in the interest of
justice, it ordered a new trial, and remanded the
The plaintiff is a domestic corporation with its case to the lower court, with leave to the plaintiff
principal office and place of business in the City to present the power of attorney and such other
of Manila. The defendant is a Chinese citizen. evidence as it might have and wish to present. A
second trial was then had, and the lower court
The complaint alleges that the defendant rendered judgment in favor of the plaintiff and
received from the plaintiff a loan of P300,000, against the defendant for the sum of
for which she executed and delivered to the P414,333.35, with interest at the rate of P66.67
plaintiff her certain promissory note dated May a day from April 1, 1927, and for the further sum
23, 1922, a copy of which is set out and made a of 5 per cent of that amount as attorney's fees,
parts of the complaint. That to secure its and that the defendant should pay the judgment
payment with interests thereon at the rate of 9 on or before November 18, 1928, and for failure
per cent per annum, the defendant executed to to do so, the property described in the mortgage
the plaintiff a mortgage on certain real property should be sold and the proceeds of sale applied
in the City and Province of Iloilo, which to the satisfaction of the judgment, and for any
instrument was duly registered in the registry of deficiency, the plaintiff might have judgment
deeds of that province, a copy of which is over, for which execution should issue, and also
attached to, and made a part of, the complaint, for costs.
marked Exhibit A. That the mortgage provided
that if the terms or conditions, the plaintiff could On appeal the defendant assigns the following
foreclose it, for which it should receive the errors:
further sum of 10 per cent of the amount due I. The trial court erred in declaring that the
and owing for and on account of attorney's fees, power of attorney, Exhibit K, conferred upon Tan
expenses and costs. That the amount of Bunco the authority to borrow money and
defendant's debt to the plaintiff with interest mortgage the defendant's properties.
until November 14, 1924, was P357,075.80, no
part of which has been paid, and the plaintiff
II. The trial court erred in assuming that Tan lawful attorney of the shop Hock Bee (Chinese
Bunco has mortgaged the defendant's characters) at Iloilo, Philippine Islands, . . . and
properties to the plaintiff, has executed the also for me and in my name to sign, seal and
promissory note, Exhibit B, and has received the execute, and as my act and deed, deliver, any
value thereof. lease, any other deed for the conveying and real
or personal property or other matter or thing
III. The trial court erred in not declaring that even wherein I am or may be personally interested or
supposing that the mortgage, Exhibit E, and the concerned. And I do hereby further authorize
promissory note, Exhibit B had been executed by and empower my said attorney to substitute and
Tan Bunco, nevertheless, the defendant is not appoint any other attorney or attorneys under
liable for the amount of said note and the him, for the purpose aforesaid and the same
mortgage does not affect her properties. again and pleasure to revoke (and generally for
IV. The trial court erred in declaring that the me and in my name to do, perform and execute
defendant has ratified the acts of Tan Bunco and all and every other lawful and reasonable acts
has been benefited by them. and things whatsoever as fully and effectually as
I the said Tan Ong Sze (———) might or could do
V. The trial court erred in not dismissing the if personally present. And I do hereby ratify and
complaint, in sentencing the defendant to pay to confirm all and whatsoever my said attorneys or
the plaintiff the amounts stated in its judgement attorney or his or their substitute or substitutes,
and in ordering the foreclosure sale of the or any of them, shall lawfully do, or cause to be
defendant's properties upon her failure to pay done, in or about the premises, by virtue of these
said amounts in full. presents. It is apparent that a clerical error was
made in the preparation of the instrument or an
error was made in its translation, and in so far as
it is material to this opinion, it should read:
JOHNS, J.:p
1 . . . and also for me and in my name to sign, seal
The defendant at all the times alleged was the and execute, and as my act and deed, deliver any
owner of two parcels of land in the City and lease, any other deed for conveying any real or
Province of Iloilo, known as lots Nos. 279 and personal property or other matter or thing
572, of the Iloilo cadastral survey, evidenced by wherein I am or may be personally interested or
certificate of title No. 329. September 14, 1916, concerned;
in Amoy, China, she executed before the United
States Vice Consul at that place the power of 2 . . . and also for me and my name to sign, seal
attorney, known in the record as Exhibit K, in and execute, and as my act and deed, deliver any
which she made and constituted Tan Bunco as lease, any other deed for the conveying of any
her attorney-in-fact, the material provisions of real or personal property or other matter or
which are as follows: thing wherein I am or may be personally
interested or concerned.
Know all men by these presents,
It is very apparent that the words "for the
That I, Tan Ong Sze (Chinese characters) widow conveying and real or personal property" should
of late Tan Tek Co (Chinese characters) of Ng read for the conveying of real or personal
Chung Village in the Tong An District, Chuancho, property." That is to say, the defendant executed
Perfecture, who died in H.T. 2d year 8th month a power of attorney to Tan Bunco in which she
3d day (6th September, 1910) have made vested him with the power "for me and in my
ordained, constituted and appointed, and by name to sign, seal and execute, and as my act
these presents do make, ordain, constitute and and deed, deliver any lease, any other deed for
appoint Tan Bunco (Chinese characters) to be my conveying any real or personal property" or "any
other deed for the conveying of any real or The power to sell and convey lands as a general
personal property." rule carries no implied power to charge the
principal with the responsibilities and liabilities
Plaintiff's complaint is founded upon the of a mortgagor. (Citing decisions from the
promissory note, known in the record as Exhibit Supreme Courts of Kansas, Michigan, Minnesota,
B, which purports to have been executed in Iloilo North Dakota, Wisconsin, and a large number of
on May 23, 1922, by her attorney-in-fact under English authorities.)
and by virtue of the power of attorney above
described, and the mortgage which purports to And on page 1395, it is said:
have executed to plaintiff to secure the payment
of the note, known in the record as Exhibit E. (IV) TO LEND OR BORROW MONEY. Power to
lend or borrow money, like most other special
The question is thus squarely presented whether power of an agent, it is not to be inferred without
or not under his power the attorney-in-fact had clear evidence of such a grant.
the authority to execute the promissory note or
to execute the mortgage on real property to And on page 1396, it is said:
secure its payment. It will be noted that the . . . And when the authority is conferred whether
language used in the power of attorney is expressly or impliedly, it must be exercised
confined and limited to the authority "to sign, within the limits prescribed, and burdens
seal and execute, and as my act and deed, deliver assumed by the agent but not authorized by the
any lease, any other deed of conveying any real principal cannot bind the latter. . . . No authority
or personal property," or "to sign, seal and to borrow money is to be implied from a power
execute, as my act and deed, deliver any lease, to lend, nor merely from a power to act for the
any other deed for the conveying of any real or principal in his business generally or in other
personal property." Hence, does this power specific matters.
carry with it and imply the authority of the
attorney- in-fact to borrow money and to And in the notes, it is said:
execute the promissory note to the defendant . . . The authority to borrow money, conferred on
and mortgage her real property to secure its an agent, must be created by express terms or
payment? necessarily implied from the nature of the
In an exhaustive opinion the lower court held agency, for authority to borrow money is one of
that the power to convey real property carried the most dangerous powers a principal can
with it the power to mortgage, and the confer upon an agent.
defendant was liable on both the note and the Thus such power is not to be implied from the
mortgage. power to manage the principal's business, even
Cyclopedia of Law and Procedure, vol. 31, p. though with authority to buy goods on credit
1390, says: (Hayness vs. Carpenter, 86 Mo. App., 30;
Bickford vs. Menier, 107 N.Y., 490; 14 N.E., 438
(II) TO MORTGAGE OR PLEDGE. Authority to (reversing 36 Hun., 446); Weekes vs. A.F.
mortgage the property of a principal is rarely to Shapleigh hardware Co., 23 Tex. Civ. App., 577;
be inferred. It is not to be implied from general 57 S. W.., 67; Spooner vs. Thompson, 48 Vt., 259
authority to manage, or even to sell, the ), or from authority to draw checks to make the
principal's property. payments for property bought by the agent
Under which, in the notes, decisions are cited (Mordhurst vs. Boies, 24 Iowa, 99).
from the Supreme Courts of California, Florida, Ruling Case Law, vol. 21, p. 885, says:
Kansas, Missouri, South Carolina, and Texas, and
it is said:
An instrument empowering an attorney, among A POWER OF ATTORNEY TO SELL AND CONVEY
other things, 'to buy and sell real estate, and in real estate does not include a power to
my name to receive and execute all necessary mortgage.
contracts and conveyances therefor,' does not
authorize such attorney to sell and convey lands POWER OF ATTORNEY — INTERPRETATION. — A
to which, as the record shows, the principal had written instrument, not ambiguous either in its
acquired title before execution of the power. . . . literal sense or in the application of its language
The attorney may not mortgage the property; to the subject or purpose thereof, must be taken
nor has he authority to execute an option. to mean what it says.
The case of Hawzhurst vs. Rathgeb (51 Pacific, In that case the language in the power was this:
846), decided by the Supreme Court of In my name, place and stead to sell and convey
California, is square in point. The syllabus laid any real estate and personal property which I
down this rule: may now own or may hereafter acquire in the
2. The language, in a power of attorney, to sell, State of Wisconsin and Washington.
transfer and release two certain mortgages . . .; Construing which, the court, on page 928 of the
to endorse and transfer the notes secured by opinion says:
said mortgages; to sell and transfer my claims for
said notes and mortgages . . .; and to receive The power of attorney was a mere power to sell
payments . . . and give acquittances thereof,' — and convey, importing authority to sell out for
confers the power to sell and transfer the title to cash and not power to mortgage. That is
the securities absolutely, or to collect them, but elementary: Jones on Mortgages, sec. 129;
does not confer power to pledge them. Devlin on Deeds, sec. 363a; Morris vs. Watson,
15 Minn., 212; Colesbury vs. Dart, 61 Ga., 620;
3. The act of an attorney in fact in pledging Wood vs. Goodridge, 6 Cush., 117; 52 Am. Dec.,
securities, when his authority only gave him 771; Hoyt vs. Jaques, 129 Mass., 286; Perry on
power to sell or collect, is void. Trusts, sec. 768. No departure from such general
And the opinion says: rule, worthy of consideration, we venture to say,
can be found.
The effect of this language was to confer a power
to sell and transfer the title to the securities And in the case of Campbell vs. Foster Home
absolutely, or if not so sold, to collect them from Association, 26 L. R. A.., p. 117; 163 Pa., 609, the
the estate of Kunz. There is nothing in the Supreme Court of the States says:
language which by any proper construction 1. A power to mortgage land is not included in a
purports to confer a power to pledge or power of attorney to sell and convey, uncoupled
hypothecate the securities for any purpose, or to with any interest in the land or the fund.
borrow money thereon. The words 'sell and
transfer,' as there used, are of no broader And on page 122, among other authorities, the
signification than the words 'sell and convey,' opinion quotes with approval the decision of
used with reference to a conveyance of real Justice Cooley, in Jeffrey vs. Hursh (49 Mich., 31)
estate ; and the latter, employed as the in which it is said:
operative words in a power to convey land, do J. M. Hursh had power to sell the land, but not to
not carry authority to mortgage or otherwise mortgage it. The power is not to be extended by
dispose of the property. construction. The principal determines for
The case of Minnesota Stoneware Co. vs. himself what authority he will confirm upon his
McCrossen, 110 Wisconsin, 316; 84 American agent, and there can be no implication from his
State Reports, p. 927, in the syllabus says: authorizing a sale of his lands that he intends
that his agent may at discretion charge him with The lower court also cites 46 California,
the responsibilities and duties of a mortgagor. 603,3 from a reading of which it will be found
that the real question involved in that case was
In fact the authorities are overwhelming that the the priority of mortgages which involved the
power to sell and convey does not carry with it construction of section 1215 of the Code which
or imply the power to borrow money or to defines the terms of the conveyance:
execute a mortgage on real property.
As embracing every instrument in writing by
The lower court in its opinion holds that, legally which any estate or interest in real property is
speaking, a mortgage is a conveyance and that created, aliened, mortgaged or incumbered, or
the power to convey carries with it the power to by which the title to any property maybe
mortgage. The theory is not sustained by any affected, except wills.
authority. By its express terms and provisions
the instrument itself, upon which plaintiff relies, It did not involve the construction of a power of
provides for the foreclosure of the mortgage, attorney, and neither of those cases are even
and the whole purpose and tenor of plaintiff's mentioned in the decision of that court above
complaint is to foreclose the mortgage. If in truth quoted, which was rendered January 5, 1898.
and in fact it was a conveyance of the legal title
to the property, there would be no reason why The case of Golinsky vs. Allison (46 Pacific, 295),
the plaintiff should apply to the court to also decided by the Supreme Court of California
foreclose it as a mortgage. on October 7,1896, is a square in point. The
syllabus says:
The authorities cited in the opinion of the lower
court are not point, and that is specially true of 1. A power of attorney to an agent authorizing
47 California, 242,2 in which the syllabus says: him to 'superintend' property of his principals,
and to 'preserve, manage, sell, and dispose of'
CONSTRUCTION OF POWER OF ATTORNEY. — A the same, and to 'manage, work, sell, and
power of attorney in which the principal dispose of' other property, did not confer
authorizes the agent to make contracts, to settle authority on the agent to execute a promissory
outstanding debts, and generally to do all things note in the name of his principals, or to mortgage
that concern his interest in any way, real and their property to secure the same, though the
personal, to use the principal's name to release note was given in settlement of an antecedent
others, to bind the principal as he may deem debt contracted by the agent in the
proper and expedient, and making the agent as management of the property.
his general attorney and agent, and ratifying and
confirming whatever the attorney may do by And in the opinion it is said:
virtue of the power, authorizes the attorney to A power of attorney, like any other instrument,
execute a lease of the principal's real estate for a is to be construed according to the natural
term exceeding one year, and to execute any import of its language; and the authority which
instrument affecting the real estate of the the principal has conferred upon his agent is not
principal, unless, it may be, a conveyance of it. to be extended by implication beyond the
It will be noted that this case was decided in natural and ordinary significance of the terms in
January, 1874. which that authority has been given. The
attorney has only such authority as the principal
Note the marked distinction between the has chosen to confer upon him, and one dealing
powers conferred in that case and in this. Yet it with him must ascertain at his own risk whether
was there held that the agent did not have the his acts will bind the principal. By the above
power to convey. The case was decided in letter of attorney given by Allison and Sackett to
January, 1874 Barron, he had the authority to 'superintend' the
property of his principals, and to ' preserve, no legal principle upon which can be sustained,
manage, sell, and dispose of the same, and also from which it follows that the judgment from the
to locate mill sites, mining claims, and water lower court must be reversed. It is true that on
rights, and to manage, work, sell, and dispose of the former appeal and in the interest of justice,
them.' A power to sell and convey real estate this case was remanded to the lower court, with
does not authorize the attorney to mortgage it. leave to the plaintiff to introduced the power of
(Jeffrey vs. Hursh, 49 Mich., 31;12 N. W. ., 898; attorney in question and any other evidence
Wood vs. Goodridge, 6 Cush., 117; Brown vs. which it might have to sustain its cause of action
Rouse, 93 Cal., 237; 28 Pac., 1044.) For an and that there should be an end to litigation. Be
exhaustive discussion of the subject, see that as it may, the amount involved is now about
Campbell vs. Association (163 Pa. St., 609; 30 one half million pesos, and it is apparent that the
Atl., 222,224). 'The power is not to be extended Bank acted in good faith.
by construction. The principal determines for
himself what authority he will confer upon his The judgment of the lower court is reversed and
agent, and there can be no implication, from his the complaint is dismissed, but for such reasons
authorizing a sale of his lands, that he intends and in the interest of justice, such dismissal is
that his agent may, at discretion, charged him without prejudice to any legal rights or remedies,
with the responsibilities and duties of a of any kind or nature, which the plaintiff may
mortgagor. have against the defendant, with costs in favor
of the appellant. So ordered.
No authority of any court has been cited and
N.TDEEN, plaintiff-appellee,
none will ever be found holding that a power "to
vs.
sign, seal, and execute, and as may act and deed,
deliver, any lease, any other deed for conveying PACIFIC COMMERCIAL CO., defendant-
any real or personal property" or "to sign, seal, appellant.
and execute, and as my act and deed, deliver,
any lease, any other deed for conveying of any
real or personal property," or any similar It is undisputed that the plaintiff is a resident of
language, standing alone and within itself, Cebu and duly licensed as real estate broker in
carries with it or implies the power to borrow the Philippine Islands. That the Pacific
money or to execute a real mortgage to secure Commercial Company, to which we will
the payment of a debt. hereafter refer as the Company, is a duly
organized corporation and authorized to do
The trial court also found that by her actions and business in the Philippine Islands, with its
conduct, the defendant had ratified and principal office and place of business in the city
approved the acts of her agent in the execution of Manila. That it has numerous branch houses,
of both the note and the mortgage. Upon that one of which is in Cebu, and does more or less
point, we have read and reread the record, and business all over the Philippine Islands. That the
there is no legal evidenced to sustain that defendant L.J. Francisco is a resident of Cebu and
finding. In fact there is nothing in the record the local manager of the Company at that place.
which shows or tends to show that the That at the time specified, the Company was the
defendant ever knew of the execution or the owner of a concrete cement warehouse in
existence of the note or the mortgage, or that sections 4 and 5 of block 6 on the water front of
she ever had any knowledge of the transaction in Cebu, which is used and rented as a bodega. That
question. H.B. Pond was a resident of Manila and the vice-
With all due respect to the exhaustive opinion of president and general manager of the Company.
the lower court, we are clearly of the opinion That on October 15, 1919, he wrote a letter to
that it is fundamentally wrong, and that there is Francisco at Cebu, enclosing a blueprint of the
property which the Company owned there, and secure other bodega space and arrange the
stating that it was offered for the sum of transfer of our hemp press, etc."
P300,000 and our warehouse P100,000," in
which he further said: "If this property is sold December 12, 1919, the plaintiff wrote the
arrangements will of course have to be made to following letter to Francisco:
protect us and also to protect the leases at Re the sale of Bodegas as per your letter of Dec.
present on the property of the Cebu Warehouse 1st/19, I beg to inform you that I have set the ball
Co. As you know, it is our plan to occupy the rolling. Am I right in assuming that there is no
warehouse at present leased to Messrs. Macleod other person authorized to offer these Bodegas
and Co. which adjoins our Cebu Office. Will you for sale? I, furthermore, beg to request that no
please look around Cebu and see if you can find prices be given to any person directly, but any
buyers for this property?" inquiries made be referred to me.
December 1, 1919, Francisco wrote the following It appears that, as Francisco construed the letter
letter to the plaintiff: of vice-president Pond to him of date October
I attach blueprint which will show P. C. C. 15th, he did not think it prudent for the
properties for sale on the waterfront. Dr. Pond is Company to dispose of its property in section 4
familiar with the terms of the Government and 5 of block 6 in Cebu, and that on December
leases. They were to run for 100 years, I believe, tenth, he wrote to Pond, as vice-president,
from 1910, and are subject to re-valuation each advising against the sale. December 16th, vice-
ten years. Dr. Pond has recently investigated the president Pond wrote a letter to Francisco, in
subject and will give you details, I am sure. which, among other things, he said:
Block No. 4. — The Pacific Commercial Company Your letter leads me to believe that you have
has for sale sections Nos. 1, 2, and 3. The area is misunderstood the basis on which we were
considering the sale of your warehouse No. 2. In
given in the sections. Sections Nos. 1 and 2 are at
selling this warehouse we have, therefore,
present occupied by Stevenson and Co. and
section No. 3, by Macleod and Co. Stevenson and considered all along that it would be only on the
Co. pay P750 a month for section 1 and 2, and understanding that we shall be permitted to
Macleod and Company pay P375, for section No. occupy this warehouse until the lease of
3. The Pacific Commercial Company is asking Macleod and Company on their present
P200,000 net to them for these three sections. premises expires. On any other basis it would of
Our offer to any one is that these three sections course be foolish for us to dispose of the
are subject to leases with Macleod and Co. and property.
Stevenson and Co. These leases expire In view of recent developments I suggest that
December 31, 1921. you discontinue making any efforts to dispose of
Block No. 6. — The Pacific Commercial Company warehouse No. 2. We shall take up our future
now owns and occupies a bodega on areas Nos. policy in connection with our warehouses in
4 and 5 in Block No. 6. The areas are given on the Cebu at the time Mr. Loewenstain and I visit
blueprint. Cebu in January.
The Pacific Commercial Company is placing this This letter was received by Francisco at Cebu on
property for sale at P100,000 net to them. the morning of December 19th, and he at once
telephoned the plaintiff the substance of the
In case a sale is consummated it must be letter, and that the property was withdrawn
understood that we shall be permitted to from the market.
continue to occupy this warehouse for a
reasonable length of time in order that we may December 19th, the plaintiff wrote Francisco, as
manager of the Company, the following letter:
With reference to our telephone conversation is now offering to buy that the writer alone was
this morning, the deal for the sale of your not authorized to consummate this sale.
Bodega has gone so far and in accordance with
the terms of your letter to me, that I don't see A lease of this character for this period is
how I can repudiate the agreement I have made essential to consummate this deal for the reason
with the buyer. The entire transaction will be that the Pacific Commercia Company is now
terminated and the money paid to you within occupying the property was are discussing and
ten days or less. no other suitable bodega space is available in
Cebu and will not be, according to our
On the same day, Francisco, as manager, wrote information, until about December 31, 1921, and
the plaintiff the following letter: the Company does not propose to be put out
into the street. The writer regrets that you
I have your letter of the 19th of December with misunderstood his letter of December 1st which
reference to the sale of our Warehouse No. 2. As was intended to have you secure offers which
soon as we receive the offer it will be placed were to be submitted and forwarded to Manila.
before our Manila Executives for acceptance. ...
I beg to state — outside of this particular deal — The plaintiff claiming that he had a buyer who
that this property was withdrawn from sale in was able, ready and willing to purchase the
accordance with the instructions received today property and pay P120,000 for it, and the
from our Manila Office. Company refusing to sell and convey the
And on December 20th, wrote him another property, after certain negotiations, for the
letter, the material portions of which are as purpose of trying to settle the dispute between
follows: them, the plaintiff commenced this action.
Replying to your letters of December 19th and The complaint alleges that on December 1, 1919,
December 20th, we beg to state that our offer to the defendant Francisco, as manager of the
you to negotiate on our behalf a sale of defendant Company, and complying with its
waterfront property in Cebu was subject to instructions, offered in writing to plaintiff for
confirmation of the agreement to sell by our sale sections 4 and 5 of block of 6 of the Cebu
head office in Manila. This branch has no Reclaimed Lands for the sum of P100,000, "and
authority to close a deal of this character without utilized in effect plaintiff in his capacity already
express approval of the Manila office and in fact cited to negotiate the sale of the property."
assignment of the lease to the land must be That said defendant, L. J. Francisco, in offering
approved by the Bureau of Lands. On December and recommending to plaintiff the negotiation
19th the writer telephoned you and talked to for the sale of the property already mentioned,
you withdrawing this property from sale and you agreed with the latter that, if he could sell said
replied on the same day by letter that the deal property for the fixed sum of P100,000, the
for the sale had gone too far for you to then plaintiff would receive, as remuneration for his
withdraw your offer. Not until December 20th services in the negotiation of the sale, any
was a definite offer made to us and then you amount which could be obtained from the buyer
quoted a price of P100,000 in cash and stated in excess of the said sum, whatever may be the
that the money would be paid as soon as the value of the difference.
necessary documents are drawn up. We again
call your attention to the fact that the necessary That on the 18th of December, 1919, the plaintiff
documents cannot be drawn up until the Manila effected the negotiation of the sale said
office approves this sale, that is to say, you were warehouse, and promised in the name of his
notified before you closed with the person who principal with the Roman Catholic Bishop of
Cebu, that he would sell to him for the sum of
P120,000 the warehouse referred to, having was the only officer of the Company in the
closed the agreement with the Roman Catholic Philippine Islands who had authority to make
Bishop referred to on the same date; and that such a conveyance.
the defendant L. J. Francisco was immediately
notified of the execution of this agreement. The defendant Francisco, being only the local
manager of the branch office of the Company at
It is then alleged that the defendants "have Cebu and not an officer or director, unless
refused to pay the plaintiff his commission of otherwise empowered, would not have any
P20,000, notwithstanding the demands made by authority to sell or convey the real property of
the plaintiff, which sum is due and payable by the Company, or make a contract for a sale or
the defendants jointly and severally." conveyance. That power was primarily vested in
the Board of Directors and the executive officers
As a second cause of action, the plaintiff alleges of the Company, and it appears from the record
in substance that the defendants have formed a that at the time of the alleged acts, it was
conspiracy to defeat plaintiff's claim against the delegated to, and vested in, Mr. Pond, who was
Company, and to place all liability upon the the vice-president and general manager of the
defendant Francisco. Company, and that he alone was authorized by
The defendants filed a general demurrer to the the Board of Directors to exercise that power.
complaint which was overruled. An answer was Francisco, as local manager, not having any
then filed, in which they admit the formal authority to make contracts for the sale or
allegations of the complaint, and make a general conveyance of the real property of the Company,
denial of all the others. Testimony was taken his authority, if any, must come from the
upon such issues, and the trial court dismissed Company or Pond, its general manager. Any
the action as to Francisco, and rendered a authority of Francisco must be found in the letter
judgment against the Company for P20,000, with to him of October 15, 1919, from vice-president
interest and costs, from which is appealed, Pond, in which, after speaking of the value of
making eighteen assignments of error. The relative areas, and that the value of the property
plaintiff did not appeal. in question would figure out P100,000, he says:
"If this property is sold arrangements will of
Although the trial court found for the plaintiff course have to be made to protect us and also to
and against the Company, and there is a sharp protect the leases at present, on the property of
conflict in much of the evidence, there is no the Cebu Warehouse Co. As you know, it is our
dispute about any of the matters above stated. plan to occupy the warehouse at present leased
Neither is there any allegation or proof that to Messrs. Macleod and Co. which adjoins our
Francisco was an officer or director of the Cebu Office. Will you please look around Cebu
Company, or that he had any authority to convey and see if you can find buyers for this property."
the property, or that his signature was necessary By the express terms of this letter, the authority
to the conveyance. It is also undisputed that the of Francisco was limited to "look around Cebu
fee to the property was in the Government, and and see if you can find buyers for this property."
that the Company had a ninety-nine-year lease It did not authorize him to sell the property or to
from the Government, dating from 1910, subject contract for its sale. His instructions were to look
to certain terms and provisions, among which around and see if he could find a buyer. Again,
was the fact that the lease could not be assigned the letter clearly says that an agreement will
without the consent of the Government. It is also "have to be made to protect us and also to
undisputed that at the time in question Mr. Pond protect the leases at present on the property of
was vice-president and general manager of the the Cebu Warehouse Co." That it was the plan of
Company, and that his signature was necessary the Company to occupy the warehouse which
to any conveyance of real property. In fact, he adjoint its Cebu office. By the very terms of the
latter, any sale of the property was subject to the sell or contract to sell the real property of the
approval of the home office at Manila, and no Company, and that any power which he had or
sale could be made without its approval, and yet, claimed to have in such matters must be
under the record, any authority of Francisco to expressly conferred.
sell or contract for the sale of the property must
be found in this letter. This letter was followed In Mechem on Agency, 2d ed., vol. 1, section 797,
by the one of Francisco to the plaintiff of it is said:
December 1, 1919, above quoted, which was Authority to sell rather than merely to find a
written on the stationery of the Company, and is purchaser; mere broker no authority to make a
signed merely "L. J. Francisco." The letterhead binding contract. — It is to be noted also that the
shows upon its face that the head office of the case here contemplated is that in which the
Company is in Manila, and that it has branch agent is really authorized to sell, and not merely
offices at Sydney, Kobe, Cebu, Iloilo and employed to find a purchaser to whom the
Zamboanga. After stating that the property is principal may sell. The distinction is one of
held under Government leases and placing the consequence, because one employed as a mere
value of the property at P200,000 on block 4, this real estate broker to `sell' land, even though
letter says: The Company "now owns and employed by writing, is usually held to have no
occupies a bodega on areas Nos. 4 and 5 in block power to make a binding contract (much less a
No. 6. The areas are given on the blueprint," and deed of conveyance), but is confined to the
it "is placing this property for sale at P100,000 finding of a person ready, willing and able to buy
net to them." Also, that in the event of a sale, "it from the principal on the terms proposed by
must be understood that we shall be permitted him. . . .
to continue to occupy this warehouse for a
reasonable length of time in order that we may In section 800, the same author says:
secure other bodega space and arrange the Mere preliminary correspondence or
transfer of our hemp press, etc." Here again, this negotiations not enough to confer authority. —
letter expressly says any sale of the property It is obvious also that before the questions here
would be conditional. Although this letter is not suggested can be determined, the authority
as clear and explicit on that point as that of vice- intended to be conferred must be completely
president Pond of October 15th, it does clearly agreed upon and vested. If, therefore, the
point out that, as one of the conditions of the dealings between the principal and the agent
sale, the Company must have an agreement have not passed beyond the stage of preliminary
satisfactory to it for the continued possession of correspondence, if the terms upon which the
the property. By the very terms of this letter, the authority is to be executed or the property sold
right was reserved to the Company to say what are not yet fully determined, if further
terms would be and would not be satisfactory, communications are to be had with the principal,
and what would be a reasonable length of time, or further assent given, before the authority is to
for its continued possession of the property. The be exercised, and the like, there can ordinarily be
power to do that was never delegated by the no present authority to sell in such wise as to
Company, or in the letter to Deen. Again, the bind the principal.
plaintiff either knew or it was his business to
know that he was dealing with a corporation It is Horn-Book law that a person dealing with an
which had executive officers and a board of agent is put upon inquiry as to the power and
directors, and whose principal office was in authority of the agent.
Manila, and that Francisco was not an officer or
Corpus Juris, vol. 2, p. 562, section 204, says:
director of the corporation, and that he was only
a local manager of the Company's property at Duty of third person to ascertain authority;
Cebu, and that as such he had no legal right to general rule. — It follows from the above rules
that as a general rule every person who authority, whether it is required or not, and such
undertakes to deal with an alleged agent is, by person has, or is charged with knowledge
the mere fact of the agency, put upon inquiry, thereof, it is his duty to ascertain the nature and
and must discover at his peril that it is in its extent of the authority conferred, and whether
nature and extent sufficient to permit the agent the agent is acting within its scope, unless he is
to do the proposed act, and that its source can excused from inspecting the written authority by
be traced to the will of the alleged principal, a statement from the principal himself defining
particularly where he is dealing with an agent the authority. When the authority is by law
whose authority he knows to be special, or required to be in writing he is charged with
where it is his first transaction with the agent, or knowledge of that fact, and of the limitations
the circumstances connected with the agency upon the agent's power contained in such
are such as should put him on inquiry, as where writing. . . .
it appears from the circumstances of the
particular business that the interests of the The same rule is laid down in Mechem on
agent and principal are necessarily adverse, or Agency, vol. 1, section 758.
that the authority is of an unusual, improbable, As a matter of law, it must follow, upon the
or extraordinary nature. Such a person is to be undisputed facts, that the plaintiff does not have
regarded as dealing with the power before him, a cause of action against the Company. The
and must, at his peril, observe that the act done lower court dismissed the case as to the
by the agent is legally identical with the act defendant Francisco. The plaintiff did not appeal,
authorized by the power. and that decision is now final. In the final analysis
of the facts, Francisco did nothing more than to
Source of information. — The person dealing
with the agent should ascertain the extent of his advise and represent to the plaintiff that this
authority from the principal, or from some other Company was willing to sell the property in
person who will have a motive to tell the truth in question for P100,000, and on condition that the
the interests of the principal, and he cannot rely Company would have the right to continue in the
upon the agent's statement or assumption of use and possession of the property upon such
authority, or upon the mere presumption of terms and conditions, and for such a length of
authority. time, as the Company would approve. That
statement was true when it was made, and upon
Failure to inquire. — If such person makes no a change in the policy of the Company, Francisco
inquiry but chooses to rely on the agent's at once notified the plaintiff.
statements he is chargeable with knowledge of
the agent's authority, and his ignorance of its The judgment of the lower court against the
extent will be no excuse to him, and the fault defendant Pacific Commercial Company will be
cannot be thrown upon the principal who never reversed, and one entered here in favor of the
authorized the act or contract, although he was Company and against the plaintiff for the costs
and disbursements of this action.
careless in reposing confidence in his agent.
Section 207 says: CORAZON CH. VELOSO Y RICABLANCA and
ROBUSTIANO M. ROSALES, plaintiff-appellee,
Where authority is, or required to be, in writing. vs.
— Where a third person dealing with an agent LA URBANA, Mutual Building and Loan
has knowledge that his authority must Association, and JOSE MARIA DEL
necessarily be in writing in order to bind the MAR, defendants.
principal, it is his duty to ascertain whether the LA URBANA, Mutual Building and Loan
agent has such authority and whether it is in Association,
proper form; and where there is written
The plaintiffs herein brought this action to annul cancelled said mortgage and transferred it to the
certain mortgages constituted by Jose Maria del defendant La Urbana which granted him a loan
Mar in the name of the plaintiff, Corazon Ch. of P10,600. Upon mortgaging the said
Veloso in favor of the defendant corporation, participations of the plaintiff to the aforesaid
and recover damages amounting to P2,000 from defendant, Del Mar delivered to the mortgage
the defendants. creditor the owner's duplicates of the
certificates of title whereon the mortgage in
La Urbana, one of the defendants herein, question was noted. On November 14 of the
appealed from the judgment rendered in this same year. Del Mar obtained from the same
case, the dispositive part of which reads as defendant an additional loan, of P2,875 and
follows: executing another mortgage deed which was
For the reasons above stated, the deeds of likewise noted or, the aforesaid duplicates of the
mortgage executed by Jose del Mar in the name certificates of title. Del Mar later violated the
of Corazon Ch. Veloso in favor of La Urbana are conditions of the mortgages whereupon La
declared null and void in so far as they purport Urbana foreclosed them and purchased the said
to bind the plaintiffs or their property; the sale properties at public auction for the sum of
of the said property to La Urbana by virtue of P10,051.82 which was the total amount of Del
these mortgages is also hereby declared null and Mar's indebtedness at that time. The plaintiffs
void; and it is further ordered and adjudged that herein learned of del Mar's fraudulent
the registration of the said deeds in the office of transactions from the advertisement of the sale
the register of deeds of Manila be cancelled, and thereof, and in addition to this civil action, they
that La Urbana and Jose del Mar pay the costs of instituted criminal proceedings against him
this suit. resulting in his conviction of the crime of
falsification and the imposition upon him of a
This decision is without prejudice to any right of sentence of two (2) years, four (4) months and
action which La Urbana may have against Jose one (1) day of prision correccional.
Maria del Mar or the Insular Treasurer, or both,
under the provisions of sections 99 to 107 of Act In view of the foregoing facts, the court held that
No. 496. So ordered. lawphil.net
pursuant to article 1714 of the Civil Code and
under the Torrens Act in force in this jurisdiction,
The plaintiff Corazon Ch. Veloso was the owner the forged powers of attorney prepared by Del
of certain undivided portions of the five parcels Mar were without force and effects and that the
of land in question together with the registration of the mortgages constituted by
improvements thereon, situated in the City of virtue thereof were likewise null and void and
Manila, and described in certificates of title Nos. without force and effect, and that they could not
5767 and 33360. In the month of May, 1929, the in any way prejudice the rights of the plaintiff as
defendant herein Jose Maria del Mar, plaintiff's the registered owners of her participations in the
brother-in-law, forged two powers of attorney properties in question.
purporting to have been executed by the
plaintiffs, as husband and wife, conferring upon The defendant-appellant herein assign various
him ample authority to mortgage the plaintiff's alleged errors in its brief consideration thereof.
participation in the aforementioned properties Inasmuch as Del Mar is not the registered owner
described in said certificates of title. These of the mortgaged properties and inasmuch as
powers of attorney were duly registered in the the appellant was fully aware of the fact that it
office of the register of deeds. Acting under was dealing with him on the strength of the
these powers of attorney, Del Mar succeeded in alleged powers of attorney purporting to have
mortgaging the plaintiff's participations to La been conferred upon him by the plaintiff, it was
Previsora Filipina. On February 6, 1929, he its duty to ascertain the genuineness of said
instruments and not the said powers of attorney
appeared to have been registered. In view of its
failure to proceed in this manner, it acted
negligently and should suffer the consequences
and damages resulting from such transactions. lawph!l.net