G.R. No. 114311. November 29, 1996]
Forthwith, upon learning of the fraudulent transaction, petitioner sought
COSMIC LUMBER CORPORATION, petitioner, vs. COURT OF APPEALS and
ISIDRO PEREZ, respondents.
D E C I S I O N - BELLOSILLO, J.:
COSMIC LUMBER CORPORATION through its General Manager executed on 28
January 1985 a Special Power of Attorney appointing Paz G. Villamil-Estrada as
attorney-in-fact -
x x x to initiate, institute and file any court action for the ejectment of third
persons and/or squatters of the entire lot 9127 and 443 and covered by TCT
Nos. 37648 and 37649, for the said squatters to remove their houses and
vacate the premises in order that the corporation may take material
possession of the entire lot, and for this purpose, to appear at the pre-trial
conference and enter into any stipulation of facts and/or compromise
agreement so far as it shall protect the rights and interest of the corporation in
the aforementioned lots.[1]
On 11 March 1985 Paz G. Villamil-Estrada, by virtue of her power of attorney,
instituted an action for the ejectment of private respondent Isidro Perez and recover
the possession of a portion of Lot No. 443 before the Regional Trial Court of
Dagupan, docketed as Civil Case No. D-7750.[2]
On 25 November 1985 Villamil-Estrada entered into a Compromise Agreement with
respondent Perez, the terms of which follow:
1. That as per relocation sketch plan dated June 5, 1985 prepared by Engineer
Rodolfo dela Cruz the area at present occupied by defendant wherein his house
is located is 333 square meters on the easternmost part of lot 443 and which
portion has been occupied by defendant for several years now;
2. That to buy peace said defendant pays unto the plaintiff through herein
attorney-in-fact the sum of P26,640.00 computed at P80.00/square meter;
3. That plaintiff hereby recognizes ownership and possession of the defendant
by virtue of this compromise agreement over said portion of 333 square m. of
lot 443 which portion will be located on the easternmost part as indicated in
the sketch as annex A;
4. Whatever expenses of subdivision, registration, and other incidental
expenses shall be shouldered by the defendant.[3]
On 27 November 1985 the Compromise Agreement was approved by the trial court
and judgment was rendered in accordance therewith.[4]
Although the decision became final and executory it was not executed within the 5-
year period from date of its finality allegedly due to the failure of petitioner to
produce the owners duplicate copy of Title No. 37649 needed to segregate from Lot
No. 443 the portion sold by the attorney-in-fact, Paz G. Villamil-Estrada, to private
respondent under the compromise agreement. Thus on 25 January 1993 respondent
filed a complaint to revive the judgment, docketed as Civil Case No. D-10459.[5]
Petitioner asserts that it was only when the summons in Civil Case No. D-10459 for
the revival of judgment was served upon it that it came to know of the compromise
agreement entered into between Paz G. Villamil-Estrada and respondent Isidro
Perez upon which the trial court based its decision of 26 July 1993 in Civil Case No.
D-7750.
annulment of the decision of the trial court before respondent Court of Appeals on
the ground that the compromise agreement was void because: (a) the attorney-in-
fact did not have the authority to dispose of, sell, encumber or divest the plaintiff of
its ownership over its real property or any portion thereof; (b) the authority of the
attorney-in-fact was confined to the institution and filing of an ejectment case
against third persons/squatters on the property of the plaintiff, and to cause their
eviction therefrom; (c) while the special power of attorney made mention of an
authority to enter into a compromise agreement, such authority was in connection
with, and limited to, the eviction of third persons/squatters thereat, in order
that the corporation may take material possession of the entire lot; (d) the amount
of P26,640.00 alluded to as alleged consideration of said agreement was never
received by the plaintiff; (e) the private defendant acted in bad faith in the
execution of said agreement knowing fully well the want of authority of the
attorney-in-fact to sell, encumber or dispose of the real property of plaintiff; and,
(f) the disposal of a corporate property indispensably requires a Board Resolution of
its Directors, a fact which is wanting in said Civil Case No. D-7750, and the General
Manager is not the proper officer to encumber a corporate property.[6]
On 29 October 1993 respondent court dismissed the complaint on the basis of its
finding that not one of the grounds for annulment, namely, lack of jurisdiction, fraud
or illegality was shown to exist.[7] It also denied the motion for reconsideration filed
by petitioner, discoursing that the alleged nullity of the compromise judgment on
the ground that petitioners attorney in fact Villamit-Estrada was not authorized to
sell the subject property may be raised as a defense in the execution of the
compromise judgment as it does not bind petitioner, but not as a ground for
annulment of judgment because it does not affect the jurisdiction of the trial court
over the action nor does it amount to extrinsic fraud.[8]
Petitioner challenges this verdict. It argues that the decision of the trial court is void
because the compromise agreement upon which it was based is void. Attorney-in-
fact Villamil-Estrada did not possess the authority to sell or was she armed with a
Board Resolution authorizing the sale of its property. She was merely empowered to
enter into a compromise agreement in the recovery suit she was authorized to file
against persons squatting on Lot No. 443, such authority being expressly confined
to the ejectment of third persons or squatters of x x x lot x x x (No.) 443 x x x for
the said squatters to remove their houses and vacate the premises in order that the
corporation may take material possession of the entire lot x x x x
We agree with petitioner. The authority granted Villamil-Estrada under the special
power of attorney was explicit and exclusionary: for her to institute any action in
court to eject all persons found on Lots Nos. 9127 and 443 so that petitioner could
take material possession thereof, and for this purpose, to appear at the pre-trial
and enter into any stipulation of facts and/or compromise agreement but only
insofar as this was protective of the rights and interests of petitioner in the
property. Nowhere in this authorization was Villamil-Estrada granted expressly or
impliedly any power to sell the subject property nor a portion thereof. Neither can a
conferment of the power to sell be validly inferred from the specific authority to
enter into a compromise agreement because of the explicit limitation fixed by the
grantor that the compromise entered into shall only be so far as it shall protect the
rights and interest of the corporation in the aforementioned lots. In the context of
the specific investiture of powers to Villamil-Estrada, alienation by sale of an
immovable certainly cannot be deemed protective of the right of petitioner to
physically possess the same, more so when the land was being sold for a price
of P80.00 per square meter, very much less than its assessed value of P250.00 per
square meter, and considering further that petitioner never received the proceeds of
the sale.
When the sale of a piece of land or any interest thereon is through an agent, the
authority of the latter shall be in writing; otherwise, the sale shall be void.[9] Thus
the authority of an agent to execute a contract for the sale of real estate must be
conferred in writing and must give him specific authority, either to conduct the
general business of the principal or to execute a binding contract containing terms
and conditions which are in the contract he did execute.[10] A special power of
attorney is necessary to enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a valuable
consideration.[11] The express mandate required by law to enable an appointee of an
agency (couched) in general terms to sell must be one that expressly mentions a
sale or that includes a sale as a necessary ingredient of the act mentioned.[12] For
the principal to confer the right upon an agent to sell real estate, a power of
attorney must so express the powers of the agent in clear and unmistakable
language. When there is any reasonable doubt that the language so used conveys
such power, no such construction shall be given the document.[13]
It is therefore clear that by selling to respondent Perez a portion of petitioners land
through a compromise agreement, Villamil-Estrada acted without or in obvious
authority. The sale ipso jure is consequently void. So is the compromise
agreement. This being the case, the judgment based thereon is necessarily
void. Antipodal to the opinion expressed by respondent court in resolving petitioners
motion for reconsideration, the nullity of the settlement between Villamil-Estrada
and Perez impaired the jurisdiction of the trial court to render its decision based on
the compromise agreement. In Alviar v. Court of First Instance of La Union,[14] the
Court held -
x x x x this court does not hesitate to hold that the judgment in question is
null and void ab initio. It is not binding upon and cannot be executed against
the petitioners. It is evident that the compromise upon which the judgment
was based was not subscribed by them x x x x Neither could Attorney Ortega
bind them validly in the compromise because he had no special authority x x x
x different ways and here lies the danger of attempting to define fraud. For man in his
As the judgment in question is null and void ab initio, it is evident that the
court acquired no jurisdiction to render it, much less to order the execution
thereof x x x
x x x x A judgment, which is null and void ab initio, rendered by a court
without jurisdiction to do so, is without legal efficacy and may properly be
impugned in any proceeding by the party against whom it is sought to be
enforced x x x x
This ruling was adopted in Jacinto v. Montesa,[15] by Mr. Justice J.B.L. Reyes, a
much-respected authority on civil law, where the Court declared that a judgment
based on a compromise entered into by an attorney without specific authority from
the client is void.Such judgment may be impugned and its execution restrained in
any proceeding by the party against whom it is sought to be enforced. The Court
also observed that a defendant against whom a judgment based on a compromise is
sought to be enforced may file a petition for certiorari to quash the execution. He
could not move to have the compromise set aside and then appeal from the order of
denial since he was not a party to the compromise. Thus it would appear that the
obiter of the appellate court that the alleged nullity of the compromise agreement
should be raised as a defense against its enforcement is not legally
feasible. Petitioner could not be in a position to question the compromise agreement
in the action to revive the compromise judgment since it was never privy to such
agreement. Villamil-Estrada who signed the compromise agreement may have been
the attorney-in-fact but she could not legally bind petitioner thereto as she was not
entrusted with a special authority to sell the land, as required in Art. 1878, par. (5),
of the Civil Code.
Under authority of Sec. 9, par. (2), of B.P. Blg. 129, a party may now petition the
Court of Appeals to annul and set aside judgments of Regional Trial Courts.[16] Thus,
the Intermediate Appellate Court (now Court of Appeals) shall exercise x x x x (2)
Exclusive original jurisdiction over action for annulment of judgments of the
Regional Trial Courts x x x x However, certain requisites must first be established
before a final and executory judgment can be the subject of an action for
annulment. It must either be void for want of jurisdiction or for lack of due process
of law, or it has been obtained by fraud.[17]
Conformably with law and the above-cited authorities, the petition to annul the
decision of the trial court in Civil Case No. D-7750 before the Court of Appeals was
proper. Emanating as it did from a void compromise agreement, the trial court had
no jurisdiction to render a judgment based thereon.[18]
It would also appear, and quite contrary to the finding of the appellate court that
the highly reprehensible conduct of attorney-in-fact Villamil-Estrada in Civil Case
No. 7750 constituted an extrinsic or collateral fraud by reason of which the
judgment rendered thereon should have been struck down. Not all the legal
semantics in the world can becloud the unassailable fact that petitioner was
deceived and betrayed by its attorney-in-fact. Villamil-Estrada deliberately
concealed from petitioner, her principal, that a compromise agreement had been
forged with the end-result that a portion of petitioners property was sold to the
deforciant, literally for a song. Thus completely kept unaware of its agents artifice,
petitioner was not accorded even a fighting chance to repudiate the settlement so
much so that the judgment based thereon became final and executory.
For sure, the Court of Appeals restricted the concept of fraudulent acts within too
narrow limits. Fraud may assume different shapes and be committed in as many
ingenuity and fertile imagination will always contrive new schemes to fool the
unwary.
There is extrinsic fraud within the meaning of Sec. 9, par. (2), of B.P. Blg. 129,
where it is one the effect of which prevents a party from hearing a trial, or real
contest, or from presenting all of his case to the court, or where it operates upon
matters, not pertaining to the judgment itself, but to the manner in which it was
procured so that there is not a fair submission of the controversy. In other words,
extrinsic fraud refers to any fraudulent act of the prevailing party in the litigation
which is committed outside of the trial of the case, whereby the defeated party has
been prevented from exhibiting fully his side of the case by fraud or deception
practiced on him by his opponent.[19] Fraud is extrinsic where the unsuccessful party
has been prevented from exhibiting fully his case, by fraud or deception practiced
on him by his opponent, as by keeping him away from court, a false promise of a
compromise; or where the defendant never had knowledge of the suit, being kept in
ignorance by the acts of the plaintiff; or where an attorney fraudulently or without
authority connives at his defeat; these and similar cases which show that there has
never been a real contest in the trial or hearing of the case are reasons for which a
new suit may be sustained to set aside and annul the former judgment and open
the case for a new and fair hearing.[20]
It may be argued that petitioner knew of the compromise agreement since the
principal is chargeable with and bound by the knowledge of or notice to his agent
received while the agent was acting as such. But the general rule is intended to
protect those who exercise good faith and not as a shield for unfair dealing. Hence
there is a well-established exception to the general rule as where the conduct and
dealings of the agent are such as to raise a clear presumption that he will not
communicate to the principal the facts in controversy.[21] The logical reason for this
exception is that where the agent is committing a fraud, it would be contrary to
common sense to presume or to expect that he would communicate the facts to the
principal. Verily, when an agent is engaged in the perpetration of a fraud upon his
principal for his own exclusive benefit, he is not really acting for the principal but is
really acting for himself, entirely outside the scope of his agency.[22] Indeed, the
basic tenets of agency rest on the highest considerations of justice, equity and fair
play, and an agent will not be permitted to pervert his authority to his own personal
advantage, and his act in secret hostility to the interests of his principal transcends
the power afforded him.[23]
WHEREFORE, the petition is GRANTED. The decision and resolution of respondent
Court of Appeals dated 29 October 1993 and 10 March 1994, respectively, as well
as the decision of the Regional Trial Court of Dagupan City in Civil Case No. D-7750
dated 27 November 1985, are NULLIFIED and SET ASIDE. The Compromise
Agreement entered into between Attorney-in-fact Paz G. Villamil-Estrada and
respondent Isidro Perez is declared VOID. This is without prejudice to the right of
petitioner to pursue its complaint against private respondent Isidro Perez in Civil
Case No. D-7750 for the recovery of possession of a portion of Lot No. 443.
SO ORDERED.
G.R. No. 160346 August 25, 2009
PURITA PAHUD, SOLEDAD PAHUD, and IAN LEE CASTILLA (represented by
Mother and Attorney-in-Fact VIRGINIA CASTILLA), Petitioners,
vs. COURT OF APPEALS, SPOUSES ISAGANI BELARMINO and LETICIA
OCAMPO, EUFEMIA SAN AGUSTIN-MAGSINO, ZENAIDA SAN AGUSTIN-
McCRAE, MILAGROS SAN AGUSTIN-FORTMAN, MINERVA SAN AGUSTIN-
ATKINSON, FERDINAND SAN AGUSTIN, RAUL SAN AGUSTIN, ISABELITA
SAN AGUSTIN-LUSTENBERGER and VIRGILIO SAN AGUSTIN, Respondents.
D E C I S I O N - NACHURA, J.:
For our resolution is a petition for review on certiorari assailing the April 23, 2003
Decision1 and October 8, 2003 Resolution2 of the Court of Appeals (CA) in CA-G.R.
CV No. 59426. The appellate court, in the said decision and resolution, reversed and
set aside the January 14, 1998 Decision3 of the Regional Trial Court (RTC), which
ruled in favor of petitioners.
The dispute stemmed from the following facts.
During their lifetime, spouses Pedro San Agustin and Agatona Genil were able to
acquire a 246-square meter parcel of land situated in Barangay Anos, Los Baños,
Laguna and covered by Original Certificate of Title (OCT) No. O-(1655) 0-
15.4 Agatona Genil died on September 13, 1990 while Pedro San Agustin died on
September 14, 1991. Both died intestate, survived by their eight (8) children:
respondents Eufemia, Raul, Ferdinand, Zenaida, Milagros, Minerva, Isabelita and
Virgilio.
Sometime in 1992, Eufemia, Ferdinand and Raul executed a Deed of Absolute Sale
of Undivided Shares5conveying in favor of petitioners (the Pahuds, for brevity) their
respective shares from the lot they inherited from their deceased parents for
₱525,000.00.6 Eufemia also signed the deed on behalf of her four (4) other co-heirs,
namely: Isabelita on the basis of a special power of attorney executed on
September 28, 1991,7 and also for Milagros, Minerva, and Zenaida but without their
apparent written authority.8 The deed of sale was also not notarized.9
On July 21, 1992, the Pahuds paid ₱35,792.31 to the Los Baños Rural Bank where
the subject property was mortgaged.10 The bank issued a release of mortgage and
turned over the owner’s copy of the OCT to the Pahuds.11 Over the following
months, the Pahuds made more payments to Eufemia and her siblings totaling to
₱350,000.00.12 They agreed to use the remaining ₱87,500.0013 to defray the
payment for taxes and the expenses in transferring the title of the property.14 When
Eufemia and her co-heirs drafted an extra-judicial settlement of estate to facilitate
the transfer of the title to the Pahuds, Virgilio refused to sign it.15
On July 8, 1993, Virgilio’s co-heirs filed a complaint16 for judicial partition of the
subject property before the RTC of Calamba, Laguna. On November 28, 1994, in the
course of the proceedings for judicial partition, a Compromise Agreement17 was
signed with seven (7) of the co-heirs agreeing to sell their undivided shares to
Virgilio for ₱700,000.00. The compromise agreement was, however, not approved
by the trial court because Atty. Dimetrio Hilbero, lawyer for Eufemia and her six (6)
co-heirs, refused to sign the agreement because he knew of the previous sale made
to the Pahuds.18lawphil.net
On December 1, 1994, Eufemia acknowledged having received ₱700,000.00 from
Virgilio.19 Virgilio then sold the entire property to spouses Isagani Belarmino and
Leticia Ocampo (Belarminos) sometime in 1994. The Belarminos immediately
constructed a building on the subject property.
Alarmed and bewildered by the ongoing construction on the lot they purchased, the
Pahuds immediately confronted Eufemia who confirmed to them that Virgilio had
sold the property to the Belarminos.20 Aggrieved, the Pahuds filed a complaint in
intervention21 in the pending case for judicial partition.1avvphil
After trial, the RTC upheld the validity of the sale to petitioners. The dispositive
portion of the decision reads:
WHEREFORE, the foregoing considered, the Court orders:
1. the sale of the 7/8 portion of the property covered by OCT No. O (1655) O-15 by
the plaintiffs as heirs of deceased Sps. Pedro San Agustin and Agatona Genil in
favor of the Intervenors-Third Party plaintiffs as valid and enforceable, but
obligating the Intervenors-Third Party plaintiffs to complete the payment of the
purchase price of ₱437,500.00 by paying the balance of ₱87,500.00 to defendant Fe
(sic) San Agustin Magsino. Upon receipt of the balance, the plaintiff shall formalize
the sale of the 7/8 portion in favor of the Intervenor[s]-Third Party plaintiffs;
2. declaring the document entitled "Salaysay sa Pagsang-ayon sa Bilihan" (Exh. "2-
a") signed by plaintiff Eufemia San Agustin attached to the unapproved Compromise
Agreement (Exh. "2") as not a valid sale in favor of defendant Virgilio San Agustin;
3. declaring the sale (Exh. "4") made by defendant Virgilio San Agustin of the
property covered by OCT No. O (1655)-O-15 registered in the names of Spouses
Pedro San Agustin and Agatona Genil in favor of Third-party defendant Spouses
Isagani and Leticia Belarmino as not a valid sale and as inexistent;
4. declaring the defendant Virgilio San Agustin and the Third-Party defendants
spouses Isagani and Leticia Belarmino as in bad faith in buying the portion of the
property already sold by the plaintiffs in favor of the Intervenors-Third Party
Plaintiffs and the Third-Party Defendant Sps. Isagani and Leticia Belarmino in
constructing the two-[storey] building in (sic) the property subject of this case; and
5. declaring the parties as not entitled to any damages, with the parties shouldering
their respective responsibilities regarding the payment of attorney[’]s fees to their
respective lawyers.
No pronouncement as to costs.
SO ORDERED.22
Not satisfied, respondents appealed the decision to the CA arguing, in the main,
that the sale made by Eufemia for and on behalf of her other co-heirs to the Pahuds
should have been declared void and inexistent for want of a written authority from
her co-heirs. The CA yielded and set aside the findings of the trial court. In
disposing the issue, the CA ruled:
WHEREFORE, in view of the foregoing, the Decision dated January 14, 1998,
rendered by the Regional Trial Court of Calamba, Laguna, Branch 92 in Civil Case
No. 2011-93-C for Judicial Partition is hereby REVERSED and SET ASIDE, and a new
one entered, as follows:
(1) The case for partition among the plaintiffs-appellees and appellant Virgilio is now
considered closed and terminated;
(2) Ordering plaintiffs-appellees to return to intervenors-appellees the total amount
they received from the latter, plus an interest of 12% per annum from the time the
complaint [in] intervention was filed on April 12, 1995 until actual payment of the
same;
(3) Declaring the sale of appellant Virgilio San Agustin to appellants spouses,
Isagani and Leticia Belarmino[,] as valid and binding;
(4) Declaring appellants-spouses as buyers in good faith and for value and are the
owners of the subject property.
No pronouncement as to costs.
SO ORDERED.23
Petitioners now come to this Court raising the following arguments:
I. The Court of Appeals committed grave and reversible error when it did not apply
the second paragraph of Article 1317 of the New Civil Code insofar as ratification is
concerned to the sale of the 4/8 portion of the subject property executed by
respondents San Agustin in favor of petitioners;
II. The Court of Appeals committed grave and reversible error in holding that
respondents spouses Belarminos are in good faith when they bought the subject
property from respondent Virgilio San Agustin despite the findings of fact by the
court a quo that they were in bad faith which clearly contravenes the presence of
long line of case laws upholding the task of giving utmost weight and value to the
factual findings of the trial court during appeals; [and]
III. The Court of Appeals committed grave and reversible error in holding that
respondents spouses Belarminos have superior rights over the property in question
than petitioners despite the fact that the latter were prior in possession thereby
misapplying the provisions of Article 1544 of the New Civil Code.24
The focal issue to be resolved is the status of the sale of the subject property by
Eufemia and her co-heirs to the Pahuds. We find the transaction to be valid and
enforceable.
Article 1874 of the Civil Code plainly provides:
Art. 1874. When a sale of a piece of land or any interest therein is through an
agent, the authority of the latter shall be in writing; otherwise, the sale shall be
void.
Also, under Article 1878,25 a special power of attorney is necessary for an agent to
enter into a contract by which the ownership of an immovable property is
transmitted or acquired, either gratuitously or for a valuable consideration. Such
stringent statutory requirement has been explained in Cosmic Lumber Corporation
v. Court of Appeals:26
[T]he authority of an agent to execute a contract [of] sale of real estate must be
conferred in writing and must give him specific authority, either to conduct the
general business of the principal or to execute a binding contract containing terms
and conditions which are in the contract he did execute. A special power of attorney
is necessary to enter into any contract by which the ownership of an immovable is
transmitted or acquired either gratuitously or for a valuable consideration. The
express mandate required by law to enable an appointee of an agency (couched) in
general terms to sell must be one that expressly mentions a sale or that includes a
sale as a necessary ingredient of the act mentioned. For the principal to confer the
right upon an agent to sell real estate, a power of attorney must so express the
powers of the agent in clear and unmistakable language. When there is any
reasonable doubt that the language so used conveys such power, no such
construction shall be given the document.27
In several cases, we have repeatedly held that the absence of a written authority to
sell a piece of land is, ipso jure, void,28 precisely to protect the interest of an
unsuspecting owner from being prejudiced by the unwarranted act of another.
Based on the foregoing, it is not difficult to conclude, in principle, that the sale
made by Eufemia, Isabelita and her two brothers to the Pahuds sometime in 1992
should be valid only with respect to the 4/8 portion of the subject property. The sale
with respect to the 3/8 portion, representing the shares of Zenaida, Milagros, and
Minerva, is void because Eufemia could not dispose of the interest of her co-heirs in
the said lot absent any written authority from the latter, as explicitly required by
law. This was, in fact, the ruling of the CA.
Still, in their petition, the Pahuds argue that the sale with respect to the 3/8 portion
of the land should have been deemed ratified when the three co-heirs, namely:
Milagros, Minerva, and Zenaida, executed their respective special power of
attorneys29 authorizing Eufemia to represent them in the sale of their shares in the
subject property.30
While the sale with respect to the 3/8 portion is void by express provision of law
and not susceptible to ratification,31we nevertheless uphold its validity on the basis
of the common law principle of estoppel.
Article 1431 of the Civil Code provides:
Art. 1431. Through estoppel an admission or representation is rendered conclusive
upon the person making it, and cannot be denied or disproved as against the person
relying thereon.
True, at the time of the sale to the Pahuds, Eufemia was not armed with the
requisite special power of attorney to dispose of the 3/8 portion of the property.
Initially, in their answer to the complaint in intervention,32 Eufemia and her other
co-heirs denied having sold their shares to the Pahuds. During the pre-trial
conference, however, they admitted that they had indeed sold 7/8 of the property
to the Pahuds sometime in 1992.33 Thus, the previous denial was superseded, if not
accordingly amended, by their subsequent admission.34 Moreover, in their
Comment,35 the said co-heirs again admitted the sale made to petitioners.36
Interestingly, in no instance did the three (3) heirs concerned assail the validity of
the transaction made by Eufemia to the Pahuds on the basis of want of written
authority to sell. They could have easily filed a case for annulment of the sale of
their respective shares against Eufemia and the Pahuds. Instead, they opted to
remain silent and left the task of raising the validity of the sale as an issue to their
co-heir, Virgilio, who is not privy to the said transaction. They cannot be allowed to
rely on Eufemia, their attorney-in-fact, to impugn the validity of the first transaction
because to allow them to do so would be tantamount to giving premium to their
sister’s dishonest and fraudulent deed. Undeniably, therefore, the silence and
passivity of the three co-heirs on the issue bar them from making a contrary claim.
It is a basic rule in the law of agency that a principal is subject to liability for loss
caused to another by the latter’s reliance upon a deceitful representation by an
agent in the course of his employment (1) if the representation is authorized; (2) if
it is within the implied authority of the agent to make for the principal; or (3) if it is
apparently authorized, regardless of whether the agent was authorized by him or
not to make the representation.37
By their continued silence, Zenaida, Milagros and Minerva have caused the Pahuds
to believe that they have indeed clothed Eufemia with the authority to transact on
their behalf. Clearly, the three co-heirs are now estopped from impugning the
validity of the sale from assailing the authority of Eufemia to enter into such
transaction.
Accordingly, the subsequent sale made by the seven co-heirs to Virgilio was void
because they no longer had any interest over the subject property which they could
alienate at the time of the second transaction.38 Nemo dat quod non habet. Virgilio,
however, could still alienate his 1/8 undivided share to the Belarminos.
The Belarminos, for their part, cannot argue that they purchased the property from
Virgilio in good faith. As a general rule, a purchaser of a real property is not
required to make any further inquiry beyond what the certificate of title indicates on
its face.39 But the rule excludes those who purchase with knowledge of the defect in
the title of the vendor or of facts sufficient to induce a reasonable and prudent
person to inquire into the status of the property.40Such purchaser cannot close his
eyes to facts which should put a reasonable man on guard, and later claim that he
acted in good faith on the belief that there was no defect in the title of the vendor.
His mere refusal to believe that such defect exists, or his obvious neglect by closing
his eyes to the possibility of the existence of a defect in the vendor’s title, will not
make him an innocent purchaser for value, if afterwards it turns out that the title
was, in fact, defective. In such a case, he is deemed to have bought the property at
his own risk, and any injury or prejudice occasioned by such transaction must be
borne by him.41
In the case at bar, the Belarminos were fully aware that the property was registered
not in the name of the immediate transferor, Virgilio, but remained in the name of
Pedro San Agustin and Agatona Genil.42 This fact alone is sufficient impetus to make
further inquiry and, thus, negate their claim that they are purchasers for value in
good faith.43 They knew that the property was still subject of partition proceedings
before the trial court, and that the compromise agreement signed by the heirs was
not approved by the RTC following the opposition of the counsel for Eufemia and her
six other co-heirs.44 The Belarminos, being transferees pendente lite, are deemed
buyers in mala fide, and they stand exactly in the shoes of the transferor and are
bound by any judgment or decree which may be rendered for or against the
transferor.45 Furthermore, had they verified the status of the property by asking the
neighboring residents, they would have been able to talk to the Pahuds who occupy
an adjoining business establishment46 and would have known that a portion of the
property had already been sold. All these existing and readily verifiable facts are
sufficient to suggest that the Belarminos knew that they were buying the property
at their own risk.
WHEREFORE, premises considered, the April 23, 2003 Decision of the Court of
Appeals as well as its October 8, 2003 Resolution in CA-G.R. CV No. 59426, are
REVERSED and SET ASIDE. Accordingly, the January 14, 1998 Decision of Branch
92 of the Regional Trial Court of Calamba, Laguna is REINSTATED with the
MODIFICATION that the sale made by respondent Virgilio San Agustin to respondent
spouses Isagani Belarmino and Leticia Ocampo is valid only with respect to the 1/8
portion of the subject property. The trial court is ordered to proceed with the
partition of the property with dispatch.
SO ORDERED.
G.R. No. L-1849. October 25, 1949.
Testate estate of the deceased Raymundo Melliza y Angulo. LAUREANA
GABIN, claimant-appellant, v. MARIA MELLIZA ET AL., Oppositors-
Appellees.
Fulgencio Vega for Appellant.
V. Sian Melliza and Juan Jamora, Jr. for Appellees.
SYLLABUS
1. EXECUTORS AND ADMINISTRATORS; CLAIMS AGAINST ESTATE; CASE AT BAR.
— In his lifetime M contracted the services of G to administer certain haciendas
belonging to M for a period of thirty years at a compensation of 350 cavans of palay
per agricultural year, with the stipulation that G cannot be dismissed from the
service without just and legal cause during the time she cared to serve within the
said period of thirty years, and in case of dismissal she shall have the right to be
indemnified for the rest of the period at the rate of 150 cavans of palay for each
agricultural year. After M’s death his executrix took from G the administration of
said haciendas, and G filed a claim against the estate for the payment of 150
cavans of palay per agricultural year for twenty-nine years. Held: That the claim is
not allowable, first, because it arose after the death of the decedent and, second,
because it is not a claim for money falling under Rule 87 of the Rules of Court.
D E C I S I O N - OZAETA, J.
On January 19, 1944, Raymundo Melliza and Laureana Gabin entered into a written
agreement whereby the former contracted the personal services of the latter to
administer certain haciendas owned by Raymundo Melliza for a period of thirty
years from said date, at the option of Laureana Gabin. As compensation for said
personal services Melliza agreed to pay Gabin 350 cavans of palay every agricultural
year. It was further stipulated that Laureana Gabin cannot be dismissed from the
service without just and legal cause during the time she cared to serve within the
said period of thirty years, and in case of dismissal she shall have the right to be
indemnified for the rest of the period at the rate of 150 cavans of palay for each
agricultural year.
Raymundo Melliza died on December 11, 1945, and testamentary proceedings were
thereafter instituted in the Court of First Instance of Iloilo for the administration and
distribution of his estate.
Having been deprived by the executrix Remedios S. de Villanueva of the
administration of the haciendas in question, Laureana Gabin presented to the
probate court a claim against the estate of the deceased Raymundo Melliza for the
payment to her by the executrix of 150 cavans of palay beginning the agricultural
year 1945-1946 until the termination of the testamentary proceedings, and that
thereafter the heir or heirs to whom the haciendas may be adjudicated be ordered
to pay the claimant the same amount of palay every year until the expiration of
thirty years from the agricultural year 1945-1946.
The heirs of the deceased opposed said claim on the following grounds: (1) That,
not being a claim for money, it is not a proper claim under section 5 of Rule 87; (2)
that the agreement or contract on which it is based is one of agency which was
terminated by the death of the principal; (3) that Raymundo Melliza could not,
except by will, dispose of the administration of his properties after his death; and
(4) that there was no consideration for the granting of such administration for 30
years with remuneration.
The probate court sustained the first ground of the opposition and denied the claim.
Hence this appeal.
The question to determine is whether appellant’s claim for 150 cavans of palay a
year for the remainder of the thirty-year period mentioned in the agreement Exhibit
A is a proper claim which may be allowed in the testamentary proceedings under
Rule 87. Section 1 of said rule provides that immediately after the granting of
letters testamentary or of administration the court shall issue a notice requiring all
persons having money claims against the decedent to file them in the office of the
clerk of said court; and section 5 provides that all claims for money against the
decedent arising from contract, express or implied, whether the same be due, not
due, or contingent, all claims for funeral expenses and expenses of the last sickness
of the decedent, and judgment for money against the decedent, must be filed within
the time limited in the notice. "By money claims, is meant any claim for ’money,
debt, or interest thereon,’ according to section 21 of Rule 3 and section 1 of Rule
88. Not all money claims may, however, be presented, but only those which are
proper against the decedent, that is, claims upon a liability contracted by the
decedent before his death. Accordingly, claims arising after his death cannot thus be
presented, except funeral expenses." (Moran on the Rules of Court, Volume 2,
second edition, p. 347.)
Upon the facts and the law involved in this case, we find no valid reason to reverse
the order appealed from.
In the first place, the claim in question arose after the death of the decedent.
Assuming without deciding that the contract on which the claim is based is valid, the
decedent appears to have complied with it up to the time of his death. It was the
executrix who dismissed the claimant from the service as administratrix or manager
of the haciendas of the deceased.
In the second place, the claim is not for money, debt, or interest thereon but for
150 cavans of palay a year for twenty-nine agricultural years (one agricultural year
having elapsed before the death of Raymundo Melliza). Even if it wanted to, the
probate court could not determine in advance the value of the palay in money
because the price of palay varies from year to year.
It appears from the record that before presenting the claim in question the claimant
filed a motion in the probate court praying that she be appointed coadministratrix of
the estate of the deceased on the strength of the contract of service hereinabove
mentioned. But Judge Blanco denied said motion without prejudice to the right of
the claimant to present a claim in due form against the estate. Appellant now
contends in her third assignment of error that said order of Judge Blanco not having
been appealed from, "the lower court erred in not holding that the question of the
presentation and admission of the claimant’s claim has become res judicata." This
assignment of error is without merit because the mere reservation by Judge Blanco
to the claimant of her right to present the claim in question in lieu of her
appointment as coadministratrix of the estate of the deceased did not preclude the
court from denying said claim if, after hearing, it found the same to be improper or
not allowable in these proceedings.
Wherefore, without deciding whether or not the contract claimed upon is valid and
binding against the heirs of the decedent, and without prejudice to any proper
action that the appellant may bring upon said contract, we affirm the order
appealed from, with costs against the Appellant.
Moran, C.J., Paras, Feria, Padilla, Tuason, Montemayor, Reyes and Torres, JJ.,
concur.
GENEVIEVE LIM, G.R. No. 163720 December 16, 2004
Petitioner, v. Chairman, AUSTRIA-MARTINEZ, CALLEJO, SR., TINGA, and
FLORENCIO SABAN, CHICO-NAZARIO, JJ.
D E C I S I O N - TINGA, J.:
Before the Court is a Petition for Review on Certiorari assailing the Decision[1] dated
October 27, 2003 of the Court of Appeals, Seventh Division, in CA-G.R. V No.
60392.[2]
The late Eduardo Ybaez (Ybaez), the owner of a 1,000-square meter lot in Cebu City
(the lot), entered into an Agreement and Authority to Negotiate and Sell (Agency
Agreement) with respondent Florencio Saban (Saban) on February 8, 1994. Under
the Agency Agreement, Ybaez authorized Saban to look for a buyer of the lot for
Two Hundred Thousand Pesos (P200,000.00) and to mark up the selling price to
include the amounts needed for payment of taxes, transfer of title and other
expenses incident to the sale, as well as Sabans commission for the sale.[3]
Through Sabans efforts, Ybaez and his wife were able to sell the lot to the petitioner
Genevieve Lim (Lim) and the spouses Benjamin and Lourdes Lim (the Spouses Lim)
on March 10, 1994. The price of the lot as indicated in the Deed of Absolute Sale is
Two Hundred Thousand Pesos (P200,000.00).[4] It appears, however, that the
vendees agreed to purchase the lot at the price of Six Hundred Thousand Pesos
(P600,000.00), inclusive of taxes and other incidental expenses of the sale. After
the sale, Lim remitted to Saban the amounts of One Hundred Thirteen Thousand
Two Hundred Fifty Seven Pesos (P113,257.00) for payment of taxes due on the
transaction as well as Fifty Thousand Pesos (P50,000.00) as brokers
commission.[5] Lim also issued in the name of Saban four postdated checks in the
aggregate amount of Two Hundred Thirty Six Thousand Seven Hundred Forty Three
Pesos (P236,743.00). These checks were Bank of the Philippine Islands (BPI) Check
No. 1112645 dated June 12, 1994 for P25,000.00; BPI Check No. 1112647 dated
June 19, 1994 for P18,743.00; BPI Check No. 1112646 dated June 26, 1994
for P25,000.00; and Equitable PCI Bank Check No. 021491B dated June 20, 1994
for P168,000.00.
Subsequently, Ybaez sent a letter dated June 10, 1994 addressed to Lim. In the
letter Ybaez asked Lim to cancel all the checks issued by her in Sabans favor and to
extend another partial payment for the lot in his (Ybaezs) favor.[6]
After the four checks in his favor were dishonored upon presentment, Saban filed
a Complaint for collection of sum of money and damages against Ybaez and Lim
with the Regional Trial Court (RTC) of Cebu City on August 3, 1994.[7] The case was
assigned to Branch 20 of the RTC.
In his Complaint, Saban alleged that Lim and the Spouses Lim agreed to purchase
the lot for P600,000.00, i.e., with a mark-up of Four Hundred Thousand Pesos
(P400,000.00) from the price set by Ybaez. Of the total purchase price
of P600,000.00, P200,000.00 went to Ybaez, P50,000.00 allegedly went to Lims
agent, and P113,257.00 was given to Saban to cover taxes and other expenses
incidental to the sale. Lim also issued four (4) postdated checks[8] in favor of Saban
for the remaining P236,743.00.[9]
Saban alleged that Ybaez told Lim that he (Saban) was not entitled to any
commission for the sale since he concealed the actual selling price of the lot from
Ybaez and because he was not a licensed real estate broker. Ybaez was able to
convince Lim to cancel all four checks.
Saban further averred that Ybaez and Lim connived to deprive him of his sales
commission by withholding payment of the first three checks. He also claimed that
Lim failed to make good the fourth check which was dishonored because the
account against which it was drawn was closed.
In his Answer, Ybaez claimed that Saban was not entitled to any commission
because he concealed the actual selling price from him and because he was not a
licensed real estate broker.
Lim, for her part, argued that she was not privy to the agreement between Ybaez
and Saban, and that she issued stop payment orders for the three checks because
Ybaez requested her to pay the purchase price directly to him, instead of coursing it
through Saban. She also alleged that she agreed with Ybaez that the purchase price
of the lot was only P200,000.00.
Ybaez died during the pendency of the case before the RTC. Upon motion of his
counsel, the trial court dismissed the case only against him without any objection
from the other parties.[10]
On May 14, 1997, the RTC rendered its Decision[11] dismissing Sabans complaint,
declaring the four (4) checks issued by Lim as stale and non-negotiable, and
absolving Lim from any liability towards Saban.
Saban appealed the trial courts Decision to the Court of Appeals.
On October 27, 2003, the appellate court promulgated its Decision[12] reversing the
trial courts ruling. It held that Saban was entitled to his commission amounting
to P236,743.00.[13]
The Court of Appeals ruled that Ybaezs revocation of his contract of agency with
Saban was invalid because the agency was coupled with an interest and Ybaez
effected the revocation in bad faith in order to deprive Saban of his commission and
to keep the profits for himself.[14]
The appellate court found that Ybaez and Lim connived to deprive Saban of his
commission. It declared that Lim is liable to pay Saban the amount of the purchase
price of the lot corresponding to his commission because she issued the four checks
knowing that the total amount thereof corresponded to Sabans commission for the
sale, as the agent of Ybaez. The appellate court further ruled that, in issuing the
checks in payment of Sabans commission, Lim acted as an accommodation party.
She signed the checks as drawer, without receiving value therefor, for the purpose
of lending her name to a third person. As such, she is liable to pay Saban as the
holder for value of the checks.[15]
Lim filed a Motion for Reconsideration of the appellate courts Decision, but
her Motion was denied by the Court of Appeals in a Resolution dated May 6,
2004.[16]
Not satisfied with the decision of the Court of Appeals, Lim filed the present
petition.
Lim argues that the appellate court ignored the fact that after paying her
agent and remitting to Saban the amounts due for taxes and transfer of title, she
paid the balance of the purchase price directly to Ybaez.[17]
She further contends that she is not liable for Ybaezs debt to Saban under
the Agency Agreement as she is not privy thereto, and that Saban has no one but
himself to blame for consenting to the dismissal of the case against Ybaez and not
moving for his substitution by his heirs.[18]
Lim also assails the findings of the appellate court that she issued the
checks as an accommodation party for Ybaez and that she connived with the latter
to deprive Saban of his commission.[19]
Lim prays that should she be found liable to pay Saban the amount of his
commission, she should only be held liable to the extent of one-third (1/3) of the
amount, since she had two co-vendees (the Spouses Lim) who should share such
liability.[20]
In his Comment, Saban maintains that Lim agreed to purchase the lot
for P600,000.00, which consisted of the P200,000.00 which would be paid to Ybaez,
the P50,000.00 due to her broker, the P113,257.00 earmarked for taxes and other
expenses incidental to the sale and Sabans commission as broker for Ybaez.
According to Saban, Lim assumed the obligation to pay him his commission. He
insists that Lim and Ybaez connived to unjustly deprive him of his commission from
the negotiation of the sale.[21]
The issues for the Courts resolution are whether Saban is entitled to receive his
commission from the sale; and, assuming that Saban is entitled thereto, whether it
is Lim who is liable to pay Saban his sales commission.
The Court gives due course to the petition, but agrees with the result reached by
the Court of Appeals.
The Court affirms the appellate courts finding that the agency was not revoked
since Ybaez requested that Lim make stop payment orders for the checks payable to
Saban only after the consummation of the sale on March 10, 1994. At that time,
Saban had already performed his obligation as Ybaezs agent when, through his
(Sabans) efforts, Ybaez executed the Deed of Absolute Sale of the lot with Lim and
the Spouses Lim.
To deprive Saban of his commission subsequent to the sale which was
consummated through his efforts would be a breach of his contract of agency with
Ybaez which expressly states that Saban would be entitled to any excess in the
purchase price after deducting the P200,000.00 due to Ybaez and the transfer taxes
and other incidental expenses of the sale.[22]
In Macondray & Co. v. Sellner,[23] the Court recognized the right of a broker to his
commission for finding a suitable buyer for the sellers property even though the
seller himself consummated the sale with the buyer.[24] The Court held that it would
be in the height of injustice to permit the principal to terminate the contract of
agency to the prejudice of the broker when he had already reaped the benefits of
the brokers efforts.
In Infante v. Cunanan, et al.,[25] the Court upheld the right of the brokers to their
commissions although the seller revoked their authority to act in his behalf after
they had found a buyer for his properties and negotiated the sale directly with the
buyer whom he met through the brokers efforts. The Court ruled that the sellers
withdrawal in bad faith of the brokers authority cannot unjustly deprive the brokers
of their commissions as the sellers duly constituted agents.
The pronouncements of the Court in the aforecited cases are applicable to the
present case, especially considering that Saban had completely performed his
obligations under his contract of agency with Ybaez by finding a suitable buyer to
preparing the Deed of Absolute Sale between Ybaez and Lim and her co-vendees.
Moreover, the contract of agency very clearly states that Saban is entitled to the
excess of the mark-up of the price of the lot after deducting Ybaezs share
of P200,000.00 and the taxes and other incidental expenses of the sale.
However, the Court does not agree with the appellate courts pronouncement that
Sabans agency was one coupled with an interest. Under Article 1927 of the Civil
Code, an agency cannot be revoked if a bilateral contract depends upon it, or if it is
the means of fulfilling an obligation already contracted, or if a partner is appointed
manager of a partnership in the contract of partnership and his removal from the
management is unjustifiable. Stated differently, an agency is deemed as one
coupled with an interest where it is established for the mutual benefit of the
principal and of the agent, or for the interest of the principal and of third persons,
and it cannot be revoked by the principal so long as the interest of the agent or of a
third person subsists. In an agency coupled with an interest, the agents interest
must be in the subject matter of the power conferred and not merely an interest in
the exercise of the power because it entitles him to compensation. When an agents
interest is confined to earning his agreed compensation, the agency is not one
coupled with an interest, since an agents interest in obtaining his compensation as
such agent is an ordinary incident of the agency relationship.[26]
Sabans entitlement to his commission having been settled, the Court must
now determine whether Lim is the proper party against whom Saban should address
his claim.
Sabans right to receive compensation for negotiating as broker for Ybaez arises
from the Agency Agreement between them. Lim is not a party to the contract.
However, the record reveals that she had knowledge of the fact that Ybaez set the
price of the lot at P200,000.00 and that the P600,000.00the price agreed upon by
her and Sabanwas more than the amount set by Ybaez because it included the
amount for payment of taxes and for Sabans commission as broker for Ybaez.
According to the trial court, Lim made the following payments for the
lot: P113,257.00 for taxes, P50,000.00 for her broker, and P400.000.00 directly to
Ybaez, or a total of Five Hundred Sixty Three Thousand Two Hundred Fifty Seven
Pesos (P563,257.00).[27] Lim, on the other hand, claims that on March 10, 1994, the
date of execution of the Deed of Absolute Sale, she paid directly to Ybaez the
amount of One Hundred Thousand Pesos (P100,000.00) only, and gave to
Saban P113,257.00 for payment of taxes and P50,000.00 as his commission,[28] and
One Hundred Thirty Thousand Pesos (P130,000.00) on June 28, 1994,[29] or a total
of Three Hundred Ninety Three Thousand Two Hundred Fifty Seven Pesos
(P393,257.00). Ybaez, for his part, acknowledged that Lim and her co-vendees paid
him P400,000.00 which he said was the full amount for the sale of the lot.[30] It thus
appears that he received P100,000.00 on March 10, 1994, acknowledged receipt
(through Saban) of the P113,257.00 earmarked for taxes and P50,000.00 for
commission, and received the balance of P130,000.00 on June 28, 1994. Thus, a
total of P230,000.00 went directly to Ybaez. Apparently, although the amount
actually paid by Lim was P393,257.00, Ybaez rounded off the amount
to P400,000.00 and waived the difference.
Lims act of issuing the four checks amounting to P236,743.00 in Sabans favor belies
her claim that she and her co-vendees did not agree to purchase the lot
at P600,000.00. If she did not agree thereto, there would be no reason for her to
issue those checks which is the balance of P600,000.00 less the amounts
of P200,000.00 (due to Ybaez), P50,000.00 (commission), and the P113,257.00
(taxes). The only logical conclusion is that Lim changed her mind about agreeing to
purchase the lot at P600,000.00 after talking to Ybaez and ultimately realizing that
Sabans commission is even more than what Ybaez received as his share of the
purchase price as vendor. Obviously, this change of mind resulted to the prejudice
of Saban whose efforts led to the completion of the sale between the latter, and Lim
and her co-vendees. This the Court cannot countenance.
The ruling of the Court in Infante v. Cunanan, et al., cited earlier, is enlightening for
the facts therein are similar to the circumstances of the present case. In that case,
Consejo Infante asked Jose Cunanan and Juan Mijares to find a buyer for her two
lots and the house built thereon for Thirty Thousand Pesos (P30,000.00) . She
promised to pay them five percent (5%) of the purchase price plus whatever
overprice they may obtain for the property. Cunanan and Mijares offered the
properties to Pio Noche who in turn expressed willingness to purchase the
properties. Cunanan and Mijares thereafter introduced Noche to Infante. However,
the latter told Cunanan and Mijares that she was no longer interested in selling the
property and asked them to sign a document stating that their written authority to
act as her agents for the sale of the properties was already cancelled. Subsequently,
Infante sold the properties directly to Noche for Thirty One Thousand Pesos
(P31,000.00). The Court upheld the right of Cunanan and Mijares to their
commission, explaining that
[Infante] had changed her mind even if respondent had found a buyer who
was willing to close the deal, is a matter that would not give rise to a legal
consequence if [Cunanan and Mijares] agreed to call off the transaction in
deference to the request of [Infante]. But the situation varies if one of the
parties takes advantage of the benevolence of the other and acts in a
manner that would promote his own selfish interest. This act is unfair as
would amount to bad faith. This act cannot be sanctioned without
according the party prejudiced the reward which is due him. This is the
situation in which [Cunanan and Mijares] were placed by [Infante].
[Infante] took advantage of the services rendered by [Cunanan and
Mijares], but believing that she could evade payment of their commission,
she made use of a ruse by inducing them to sign the deed of
cancellation.This act of subversion cannot be sanctioned and cannot serve
as basis for [Infante] to escape payment of the commission agreed
upon.[31]
The appellate court therefore had sufficient basis for concluding that Ybaez and Lim
connived to deprive Saban of his commission by dealing with each other directly and
reducing the purchase price of the lot and leaving nothing to compensate Saban for
his efforts.
Considering the circumstances surrounding the case, and the undisputed fact that
Lim had not yet paid the balance of P200,000.00 of the purchase price
of P600,000.00, it is just and proper for her to pay Saban the balance
of P200,000.00.
Furthermore, since Ybaez received a total of P230,000.00 from Lim, or an excess
of P30,000.00 from his asking price of P200,000.00, Saban may claim such excess
from Ybaezs estate, if that remedy is still available,[32] in view of the trial courts
dismissal of Sabans complaint as against Ybaez, with Sabans express consent, due
to the latters demise on November 11, 1994.[33]
The appellate court however erred in ruling that Lim is liable on the checks because
she issued them as an accommodation party. Section 29 of the Negotiable
Instruments Law defines an accommodation party as a person who has signed the
negotiable instrument as maker, drawer, acceptor or indorser, without receiving
value therefor, for the purpose of lending his name to some other person. The
accommodation party is liable on the instrument to a holder for value even though
the holder at the time of taking the instrument knew him or her to be merely an
accommodation party. The accommodation party may of course seek
reimbursement from the party accommodated.[34]
As gleaned from the text of Section 29 of the Negotiable Instruments Law,
the accommodation party is one who meets all these three requisites, viz: (1) he
signed the instrument as maker, drawer, acceptor, or indorser; (2) he did not
receive value for the signature; and (3) he signed for the purpose of lending his
name to some other person. In the case at bar, while Lim signed as drawer of the
checks she did not satisfy the two other remaining requisites.
The absence of the second requisite becomes pellucid when it is noted at
the outset that Lim issued the checks in question on account of her transaction,
along with the other purchasers, with Ybaez which was a sale and, therefore, a
reciprocal contract. Specifically, she drew the checks in payment of the balance of
the purchase price of the lot subject of the transaction. And she had to pay the
agreed purchase price in consideration for the sale of the lot to her and her co-
vendees. In other words, the amounts covered by the checks form part of the cause
or consideration from Ybaezs end, as vendor, while the lot represented the cause or
consideration on the side of Lim, as vendee.[35] Ergo, Lim received value for her
signature on the checks.
Neither is there any indication that Lim issued the checks for the purpose
of enabling Ybaez, or any other person for that matter, to obtain credit or to raise
money, thereby totally debunking the presence of the third requisite of an
accommodation party.
WHEREFORE, in view of the foregoing, the petition is DISMISSED.
SO ORDERED.
G.R. No. 8238. December 2, 1913.
ANTONIO M. BARRETTO, Plaintiff-Appellee, v. JOSE SANTA
MARINA, Defendant-Appellant. V. William A. Kincaid and Thomas L.
Hartigan, for Appellant. Haussermann, Cohn & Fisher, for Appellee.
SYLLABUS
1. CONTRACTS; INTERPRETATION. — The whole contract must be interpreted or
read together in order to arrive at its true meaning. Certain stipulations cannot be
segregated and then made to control, neither do particular words and phrases
necessarily determine the character of the contract. The legal effect of the contract
is not to be determined alone by any particular provision disconnected from all
other, but in the ruling intention of the parties as gathered from all the language
they have used and from their contemporaneous and subsequent acts.
2. SALES; REQUISITES OF PERFECTED SALE. — It is necessary to a perfected sale
that the parties agree upon the thing sold and that the price be fixed, it being
sufficient for the latter purpose that the price be left to the judgment of a specified
person. (Articles 1450 and 1447, Civil Code.)
3. ID.; ID.; FACTS IN THIS CASE. — Plaintiff executed a document whereby he
agreed to transfer to the defendant "the whole of the right, title, and interest" he
had in a joint stock association, at the same time agreeing that the ascertainment
of the price of his share should depend unreservedly upon the appraisement made
by three appraisers of the total value of the association’s property. The appraisers
occupied about six months in making the appraisement and in their report there
was no indication that any attempt had been made to segregate accumulated profits
from other assets of the association. Plaintiff had participated in the last distribution
of profits made by the association prior to the time he accepted payment for his
share. Upon the completion of the defendant’s report plaintiff executed a document
whereby he acknowledged receipt of the price arrived at by the appraisers, and
further stated that he relinquished from that date all intervention, claim, right or
action that he had in said business. Held, That plaintiff sold his share of the
accumulated profits.
D E C I S I O N - TRENT, J. :
The La Insular cigar and cigarette factory is a joint account association with a
nominal capital of P865,000, the plaintiff’s share being P20,000, or 4/173 of the
whole. On March 14, 1910, the plaintiff’s attorneys wrote the defendant’s local
representative a letter offering to sell to the defendant plaintiff’s participation in the
factory. The result of the correspondence between the parties and their
representatives was that Exhibit G was duly executed on May 3, 1910. In
accordance with the terms of this exhibit a committee of appraisers was appointed
to ascertain and fix the actual value of La Insular. The committee rendered its
report on November 14, 1910, fixing the net value at P4,428,194.44. Of this
amount 4/173 part represented the plaintiff’s share on his P20,000 of the nominal
capital. In Exhibit J which was executed on November 22, 1910, the plaintiff
acknowledged to have received from the defendant that amount.
Subsequently to the execution of Exhibit J, demand was made by the plaintiff upon
the defendant for his share of the profits from June 30, 1909, to November 22,
1910. This demand was refused and thereupon this action was instituted to recover
said profits. Upon the evidence submitted at the hearing, the court below held: (1)
That the agreement of May 3, 1910, was by its terms a contract to sell in the future
and did not pass title and (2) that the sale of plaintiff’s interests did not include the
profits in question. Judgment was rendered accordingly, with interest and costs. The
defendant appealed.
The important issue in this case is whether the sale in question included that
proportionate share of the profits due the plaintiff by reason of his investment in the
concern. It is admitted that no distribution of profits had taken place during the
period from June 30, 1909, to November 22, 1910. We will inquire (1) into the
nature and character of the agreement of May 3, 1910, and (2) whether the
appraisers included in their appraisement the accumulated profits since June 30,
1909.
The plaintiff admits that if the agreement of May 3, 1910, was a perfected sale he
cannot recover any profits after that date; while on the other hand the defendant
concedes that if said agreement was only a promise to sell in the future it, standing
alone, would not prevent recovery in this action.
The plaintiff and defendant were both interested in La Insular. The plaintiff was the
local general manager from November 14, 1906, to January 8, 1910. The plaintiff’s
attorneys wrote the defendant’s representative a letter on January 14, 1910,
saying:jgc:chanrobles.com.ph
"On behalf of Sr. D. Antonio M. Barretto, we beg leave to offer for sale to your
principal, at their actual market value, the participation of Sr. Barretto in the joint
venture known as La Insular and the one-half interest of the letter in the
participation therein which stands in the name of Messrs. Barreto & Co. As you are
doubtless aware these participations represent nominal values of P20,000 and
P69,400, making a total nominal value of P54,700 which is hereby offered."cralaw
virtua1aw library
Again, the plaintiff’s attorneys after acknowledging the receipt of the balance sheet
of the profits for the year ending June 30, 1909, stated in their letter to the
defendant’s representative, dated March 2, 1910, that, "Now that the accord
between the interested parties no longer exists we do not deem it feasible to
subscribe a balance of this nature, unless . . ."cralaw virtua1aw library
And again, the plaintiff himself, in his letter of April 7, 1910, addressed to the
defendant’s representative, said: "In view of the relations that have come about
between Mr. Santa Marina and myself, I believe it would suit both of us that our
interest in the La Insular business should be separated, and that the only point to
be discussed is that of the amount that should be paid me for my share."cralaw
virtua1aw library
From the correspondence above mentioned it appears that the plaintiff offered to
sell the defendant his participation in La Insular. This offer was made on account of
the strained relations existing between the parties at that time and the desire on
the part of the plaintiff to separate himself from that business. In the offer the
plaintiff’s interest or participation was definitely defined and stated to be P20,000 in
the nominal capital of P865,000. (We are not now dealing with the plaintiff’s interest
in the P69,400 of Barretto & Company.)
Article 1450 of the Civil Code reads: "The sale shall be perfected between vendor
and vendee and shall be binding on both of them, if they have agreed upon the
thing which is the object of the contract and upon the price, even when neither has
been delivered."cralaw virtua1aw library
This is supplemented by article 1447 of the Code which reads as follows: "In order
that the price may be considered fixed, it shall be sufficient that it be fixed with
regard to another determine thing also specific, or that the determination of the
same be left to the judgment of a specified person."cralaw virtua1aw library
The contract of May 3, 1910, after reciting the fact that each of the contracting
parties is a participant in the joint account association known as La Insular, provides
that:jgc:chanrobles.com.ph
"Whereas the respective contracting parties have agreed, the one to sell and the
other to buy the whole of the right, title and interest of the said Antonio Maria
Barretto in and to the said joint account association, including not only the
individual participation of the said party of the second part standing on the books of
the association in the name of Antonio M. Barretto, but also one-half of the share in
the business which stands on the books in the name of Barretto & Company
constituting a total nominal share of P54,700 Philippine currency in the total
nominal capital of P865,000 Philippine currency; and
"Whereas the respective contracting parties have been unable to agree as to the
true present value of the said interest of the party of the second part, but have
agreed upon the method of fixing and determining the said value for which the
party of the first part is to buy and the party of the second part is to sell that
interest;
"Wherefore, by reason and in consideration of the foregoing and of the mutual
promises and agreements hereinafter set forth, the respective parties herein
contracting do hereby mutually stipulate, agree, and provide the
following:jgc:chanrobles.com.ph
"(1) That a board of assessors, composed of Enrique Barrera y Caldes, D. M.
Fleming, J. H. Gibson, all of the city of Manila, Philippine Islands, by mutual
agreement is hereby appointed, commissioned, and designated for the purpose of
hearing the respective claims of the one and the other party relative to the value of
the business known and designated by the name of La Insular tobacco factory, and
the respective assets of said business; and in accordance with the proof adduced
relative to said values to fix and determine the same for the purposes of the
purchase and sale above mentioned.
"(5) That the decision and conclusion of said board with reference to the total value
of the business known and designated by the name of La Insular Cigar Factory shall
be conclusive, final, and binding upon each of the contracting parties herein; and
the party of the first part will immediately buy for cash and the party of the second
part will immediately sell to the party of the first part all the right, title and interest
of the party of the second part in and to the said business; and the party of the first
part will pay therefor such proportional part of the total net value of said business
as equals the proportion that the sum of fifty-four thousand seven hundred peso
(P54,700) Philippine currency bears to the sum of eight hundred and sixty-five
thousand pesos (P865,000), Philippine currency."cralaw virtua1aw library
The following appears in the contract of November 22, 1910: "Antonio M. Barretto
hereby declares to have received from John D. MacGavin as legal representative of
Jose Santa Marina as the price of the cession and transfer of the said shares, the
sum of P280,025.70 Philippine currency by check No. 528525 drawn by the said
MacGavin in his above-stated capacity upon the Hongkong & Shanghai Bank of this
city, for which sum the first named issues to him a mist legal bill of sale. Antonio M.
Barretto also acknowledges by virtue of the present sale, cession, and transfer that
he has from this date relinquished (separado) all intervention, claim, right, or action
that he has in said factory by reason of the shares under consideration."cralaw
virtua1aw library
Under article 1450, supra there are two indispensable requisites in a perfected sale:
(1) There must be an agreement upon the thins which is the object of the contract;
and (2) the contracting parties must agree upon the price. The object of the
contract in the case at bar was the whole of the plaintiff’s right, title, and interest in
La Insular. This whole was 4/173 of the entire net value of the business. The parties
agreed that the price should be 4/173 of the total net value. The fixing of such net
value was unreservedly left to the judgment of the appraisers. As to the thing and
the price the minds of the contracting parties met, and all questions relating thereto
were settled. Nothing was left unfinished in so far as the contracting parties were
concerned. Neither party could withdraw from the contract without the consent of
the other. The result is that the two essential requisites necessary to constitute a
perfected sale were present.
But the plaintiff strongly insists that the language used in the contracts of May 3,
and November 22 and the fact that the appraisers did not take into consideration in
fixing the value of the business the profits accruing after June 30, 1909, show
beyond a doubt that the first named contract constitutes an agreement to sell in the
future and not a perfected sale and that this is clearly in harmony with the intention
of the parties.
In support of the above proposition the plaintiff calls our attention to the recital in
the first paragraph of the excerpt from the contract of May 3, 1910, to the effect
that the parties "have agreed, the one to sell and the other to buy" and the words
of the fifth paragraph where it is stated that "the party of the first part of the
second part (the plaintiff) will immediately sell" the plaintiff’s entire interest in the
business; cites Alcantara v. Alinea Et. Al. (8 Phil. Rep., 112); and quotes the
following from the report of the appraisers:jgc:chanrobles.com.ph
". . . proceed to make a valuation of the property, stock, securities, and credits
which compose the assets of the said business known and designated as the Insular
Cigar Factory, taking as a basis therefor the assets of the said business on June 30,
1909, and in order to act with greater certainly in the discharge of their duties have
had the real estate in Manila appraised by a civil engineer, Mr. Irureta Goyena, the
machinery by an engineer, Mr. Loader, and the stocks of tobacco by tobacco experts
recommended by the managers of the cigar factories called Flor de la Isabela, La
Commercial, and Maria Cristina, and these experts have discharged the duties
imposed upon them in the manner shown in the respective reports filed by them.
With respect to the real estate in the Provinces of Cagayan and Isabela, and the
steam launch Santa Marina, the undersigned, after hearing evidence of persons
whom they deem to be competent, have fixed the valuation of those properties in a
manner deemed by them to be fair and equitable. with regard to the ’Sundry
Debtors’ account, they have proceeded to make an examination of the same and
have disregarded the accounts which in their judgment may be regarded as
uncollectible and deducted 25 per cent from those which in their opinion are
doubtful. In view of the difference between the value placed by the parties on the
furniture and fixtures, they have taken the average of those valuations so as to
avoid the expense of an expert appraisal. And, finally, with respect to the rest of the
items which make up the assets of the said business, they have accepted the
figures at which they stand in the said inventory as these have been accepted by
both parties."cralaw virtua1aw library
For the purposes of determining the soundness of the plaintiff’s position with
reference to the intention of the parties, we will examine (1) the contract of May 3,
and (2) the report of the appraisers.
1. The recitals in the first and fifth paragraphs relied upon by the plaintiff standing
alone indicate that it was the intention of the parties to make a contract to sell in
the future, but it must be remembered that the whole contract must be interpreted
or read together in order to arrive at its true meaning. Certain stipulations cannot
be segregated and then made to control, neither do particular words and phrases
necessarily determine the character of the contract. As to whether or not the
parties, when they executed the contract of May 3, made a perfected sale or only an
agreement to sell in the future is not to be determined alone by any particular
provision the said contract contains, disconnected from all others, but in the ruling
intention of the parties as gathered from all the language they have used and from
their contemporaneous and subsequent acts.
In the contract of May 3, we find that the parties did not only agree "the one to sell
and the other to buy" and that "one will immediately sell and the other will
immediately buy" the whole of the plaintiff’s interest but that they were unable to
agree "as to the true present value of the said interest;" they did agree, however,
upon the method of fixing and determining such value by appointing appraisers for
this purpose. It was the duty of the appraisers to hear the respective claims of the
one and the other party relative to the value and assets of the business, "and in
accordance with the proof adduced relative to said values to fix and determine the
same for the purposes of the purchase and sale above mentioned." They did not say
for the purpose of a sale to be made in the future. Is the language, "for the
purposes of the purchase and sale above mentioned" any the less significant or
controlling than that relied upon by the plaintiff found in the first and fifth
paragraph? When the parties used this language they had in mind the purchase and
sale which they had just made. According to the ordinary and well-understood use
of the words "purchase" and "sale" they mean, in the absence of any expression to
limit their significance, a transmutation of property from one party to another in
consideration of some price or recompense in value; a transmission of property by a
voluntary act or agreement, founded on a valuable consideration; divesting the title
out of the vendor and vesting it in the vendee. Again, not only was the title of the
plaintiff’s interest vested in the defendant on the execution of the contract of May 3
but the possession of that interest was also then transferred to the defendant. (Art.
1462, Civil Code; Uy Piaoco v. McMicking, 10 Phil. Rep., 286.)
The total value of the business as fixed by the appraisers was final and conclusive
and binding upon each of the parties. Neither could question the correctness of such
value when once thus fixed. The only thing which either could then do was the one
to tender and the other accept the cash. The one could not "immediately sell" and
the other could not "immediately buy" because the purchase and sale had already
taken place. If they could have done this then the plaintiff could have sold his
interest to any other person at any time after the execution of the contract of May 3
and before November 22 for the reason that by a contract to sell only a jus in
personam is created; while, by a sale a jus in rem is transferred.
Now, did the parties intend to include the profits in question in the purchase and
sale, and did the appraisers include said profits when they fixed the total net value
of La Insular?
In the second paragraph of the contract of May 3 this language was used: "Whereas
the respective contracting parties have been made to agree as to the true present
value of said interest of the party of the second part, . . ."cralaw virtua1aw library
The "said interest" was the whole of the right, title, and interest of the plaintiff in
the factory. The "true present value" was the actual value of the plaintiff’s entire
interest on that date, May 3. The appraisers were appointed to ascertain and fix the
total net value so that the true present value, 4/173 of the whole net value, of the
plaintiff’s interest might be segregated and paid for.
The plaintiff delivered to the defendant or his predecessor in interest a sum of
money in order to participate in the profits and losses that might accrue from the
business denominated La Insular. An obligation was thereby created between the
parties by virtue of which the plaintiff because the creditor and the defendant the
debtor. The plaintiff was a creditor in a double sense, to wit: (a) For the capital
invested, and (b) for the profits which that capital might produce.
This juridical relation existed on May 3, 1910, when that contract was executed and
signed by the parties. On this date the plaintiff had:jgc:chanrobles.com.ph
"1. Right to and right of action for his capital invested in the business of La Insular.
"2. Right to participate, in proportion to his investment, in the expansion and
increase of the company’s capital.
"3. Right in proportion to his capital in all the trademarks, credit, and good will of
the business.
"4. Right to a proportional share in the annual dividends of the business on his
capital invested, after deduction of the 20 per cent of said dividends to which Santa
Marina is entitled in his capacity of managing partner.
"5. Right to revise, approve or impugn the annual statements rendered by the
managing partner, Santa Marina."cralaw virtua1aw library
The sum total of these constituted on May 3, 1910, the whole of the plaintiff’s right,
title, and interest in the "La Insular." In the absence of something in the contract
showing that the word "whole" (totalidad) was not used in its ordinary sense it must
be understood so to have been used, and we find nothing of that kind. All the
authorities agree that when the word "whole" is thus used it means the entire thing;
the entire assemblage of parts; totality; all of a thing without defect or exception;
comprising all the parts; complete; entire. Exclude one part, the remainder would
not be the whole. "The whole of the right, title, and interest of the said Antonio
Maria Barretto in and to said joint account association" means what it says if it
means anything at all. Language will not admit of a clearer and more expressive
statement of what was sold. Exclude the profits sought to be recovered then the
plaintiff did not sell the whole of his right, title, and interest, he only sold a part,
and a part is never equal to the whole. That the profits were a part of the plaintiff’s
interest is self-evident.
In the case of Alcantara v. Alinea Et. Al. (supra), the defendants borrowed P480
from the plaintiff to be returned at the expiration of an agreed period, at the same
time promised that in the event of their failure to pay the borrowed money within
that time they would sell him certain property for the amount of the loan, the court
holding that it was a contract of loan and a promise of sale of a house and lot. In
this case, however, the consummation of the contract of sale depended upon the
failure to pay the loan. If the loan was repaid the sale did not take place. It was
uncertain whether the sale of the house and lot would be consummated until after
the loan was due. In the case at bar was there any such uncertainly as to the sale
of the property? The one agreed to sell and the other agreed to buy a certain
specified interest in La Insular. This agreement was carried into effect. No
subsequent contingency could affect the sale. The distinction between the two cases
is apparent. It is therefore clear that the recitals from the contract and the case
cited do not support the contention of the plaintiff.
2. The appraisers were appointed, as we have said, to ascertain and fix the total net
value of the factory for the purpose of determining the true present value of the
plaintiff’s entire interest therein. The profits for the year ending June 30, 1910, were
not ascertained until some twelve days after the appraisers submitted their report.
Such profits were in the possession of the association during the entire period from
May 3 to November 22, and had not been segregated from the general mass of
property up to the latter date. It is true that the appraisers said that they made a
valuation of the assets of the business, "taking as a basis therefor the assets of said
business on June 30, 1909." The appraisers could not have based their valuation
exclusively upon the assets of that date for the reason that the books of the concern
had not been balanced when they concluded their work. In fact, we find the
appraisers saying in the very same paragraph in which the above quotation appears
that "in order to act with greater certainty in the discharge of their duties they had
the real estate and the machinery appraised by civil engineers and the stock of
tobacco by tobacco experts."cralaw virtua1aw library
The value of the real estate in the provinces and a certain small launch was fixed by
the appraisers upon the testimony of competent witnesses. The appraisers disposed
of the accounts of various debtors not in accordance with the inventory or the books
of the company but according to their own judgment, excluding those which they
found were uncollectible and deducting 25 per cent from the doubtful ones. So it is
clear from the quotation relied upon by the plaintiff that the appraisers paid very
little attention to the assets of the business on June 30, 1909, in fixing the valuation
of the property. The stock of tobacco which was appraised by tobacco expert was
not that on hand on June 30, 1909, but was the amount belonging to the
association at the time the appraisement was made. This item alone was fixed at
P1,140,259.77. Another item of assets was the cash on hand of P323,235.20. This
was the actual amount of cash in the possession of the association at the time the
appraisement was made and was considered as part of the assets. In fact,
according to the report of the appraisers the books of the concern showed that the
total assets, not including the trade-mark and good will, amounted to
P2,505,767.83 while the appraisers fixed the value at P3,049,394.07 a difference of
a little over a half million pesos. That the appraisers in fixing the total the value
included the accumulated profits we think there can be no question. These profits
formed for that purpose a part of the assets. The appraisers could not distinguish
the profits from the other personal property as such profits had not at that time
been set aside and the appraisers were instructed to ascertain and fix the total net
value so that the entire present value of the plaintiff’s interest might be
ascertained.
The contracts and the report of the appraisers are so clear and cover the entire
subject matter so fully that we are convinced that the subsequent demand for the
profits in question was an afterthought. If there had been any doubt in the mind of
the plaintiff about the inclusion of the accrued profits in the sale of May 3 or that
the appraisers were authorized to take into consideration such profits in fixing the
total net value of the business so that the entire present value of the plaintiff’s
interest might be ascertained, the plaintiff would certainly have raised the question
at the time. He remained perfectly quiet until after he had received the full value for
the whole of his right, title, and interest in the factory and had solemnly declared
that he "relinquished all intervention, claim, right, or action in said factory by
reason of the shares under consideration." After this he came forward for the first
time and demanded his share of the profits which he had sold and received payment
therefor. Surely he does not expect to be paid twice for the same thing.
For the foregoing reasons the judgment appealed from is reversed upon the merits
and the complaint dismissed without costs in either instance.
Arellano, C.J., Torres, Johnson, and Moreland, JJ., concur.
G.R. No. L-10881. September 30, 1958.
EULOGIO DEL ROSARIO, AURELIO DEL ROSARIO, BENITO DEL ROSARIO,
BERNARDO DEL ROSARIO, ISIDRA DEL ROSARIO, DOMINGA DEL ROSARIO
and CONCEPCION BORROMEO, Plaintiffs-Appellees, v. PRIMITIVO ABAD
and TEODORICO ABAD, Defendants-Appellants. Bautista & Bautista
for Appellees. Agustin C. Bagasao for appellants.
SYLLABUS
1. AGENCY; POWER OF ATTORNEY WHEN COUPLED WITH INTEREST; TERMINATION
OF; CASE AT BAR. — Within the prohibitive period of five years, the homesteader
mortgaged the improvements of the homestead in favor of defendant P. A. At the
same time, he executed an "irrevocable special power of attorney coupled with
interest" in favor of the mortgagee authorizing him to sell the land. After the lapse
of the prohibitive period, the mortgagor died leaving the mortgage debt unpaid.
Thereafter, acting on the power of attorney, the mortgagee sold the land. Held: The
power of attorney executed by the homesteader in favor of defendant did not create
an agency with interest nor did it clothe the agency with irrevocable character. A
mere statement in the power of attorney that it is coupled with interest is not
enough. In what does such interest consist must be stated in the power of attorney.
The mortgage has nothing to do with the power of attorney and may be foreclosed
by the mortgagee upon failure of the mortgagor to comply with his obligation. As
the agency was not coupled with an interest, it was terminated upon the death of
the principal, and the agent could no longer validly convey the land. Hence, the sale
was null and void.
2. PUBLIC LAND; ENCUMBRANCE MADE WITHIN PROHIBITIVE PERIOD, NULL AND
VOID. — Granting that the power of attorney in question was valid it would subject
the land to an encumbrance. And the encumbrance having been executed within the
five-year period from and after the issuance of the patent, the same is null and
void.
D E C I S I O N - PADILLA, J.:
Appeal from a judgment rendered by the Court of First Instance of Nueva Ecija in
civil case No. 1084.
The facts are undisputed, the parties having entered into an agreed statement
thereof, the pertinent and materials part of which are: The plaintiffs are the children
and heirs of the late Tiburcio del Rosario. On 12 December 1936, the Secretary of
Agriculture and Commerce, by authority of the President of the Commonwealth of
the Philippines, issued under the provisions of the Public Land Act (Act No. 2874)
homestead patent No. 40596 to Tiburcio del Rosario. The homestead with an area of
9 hectares, 43 ares and 14 centares is situate in barrio San Mauricio, municipality of
San José, province of Nueva Ecija. On 11 February 1937, the Registrar of Deeds in
and for the province of Nueva Ecija issued original certificate of title No. 4820 in the
name of the homesteader (Annex A, stipulation of facts, pp. 25-30, Rec. on App.) .
On 24 February 1937, Tiburcio del Rosario obtained a loan from Primitivo Abad in
the sum of P2,000 with interest at the rate of 12% per annum, payable on 31
December 1941. As security for the payment thereof he mortgaged the
improvements of the parcel of land in favor of the creditor (Annex B, complaint, pp.
10-13, Rec. on App.) . On the same day, 24 February, the mortgagor executed an
‘irrevocable special power of attorney coupled with interest" in favor of the
mortgagee, authorizing him, among others, to sell and convey the parcel of land
(Annex A, complaint, pp. 7-9, Rec. on App.) . Thereafter the mortgagor and his
family moved to Santiago, Isabela, and there established a new residence.
Sometime in December 1945 the mortgagor died leaving the mortgage debt unpaid.
On 9 June 1947, Primitivo Abad, acting as attorney-in-fact of Tiburcio del Rosario,
sold the parcel of land to his son Teodorico Abad for and in consideration of the
token sum of P1.00 and the payment by the vendee of the mortgage debt of
Tiburcio del Rosario to Primitivo Abad (Annex C, complaint, pp. 13-16, Rec. on
App.) . The vendee took possession of the parcel of land. Upon the filing and
registration of the last deed of sale, the Registrar of Deeds in and for the province
of Nueva Ecija cancelled original certificate of title No. 4820 in the name of Tiburcio
del Rosario and in lieu thereof issued transfer certificate of title No. 1882 in favor of
the vendee Teodorico Abad.
On 29 December 1952 the plaintiffs brought suit against the defendants to recover
possession and ownership of the parcel of land, damages, attorney’s fees and costs.
The defendants answered the complaint and prayed for the dismissal thereof,
damages, attorney’s fees and costs.
On 25 October 1954, after the parties had submitted the case upon a stipulation of
facts, the Court rendered judgment, the dispositive part of which is:chanrob1es
virtual 1aw library
WHEREFORE, the deed of sale executed by Primitivo Abad in favor of Teodorico,
Abad, Annex C, is hereby declared null and void; and Teodorico Abad is hereby
ordered to execute a deed of reconveyance of the land originally with OCT No.
4820, now covered by Transfer Certificate of Title No. 1880, in favor of the
plaintiffs. No pronouncement as to costs.
The defendants appealed to the Court of Appeals, which certified the case to this
Court as no question of fact is involved.
Section 116 of the Public Land Act (Act No. 2874), under which the homestead was
granted to the appellees’ father, provides:chanrob1es virtual 1aw library
Lands acquired under the free patent or homestead provisions shall not be subject
to encumbrance or alienation from the date of the approval of the application and
for a term of five years from and after the date of the issuance of the patent or
grant, nor shall they become liable to the satisfaction of any debt contracted prior to
the expiration of said period; but the improvements or crops on the land may be
mortgaged or pledged to qualified persons, associations, or corporations.
The encumbrance or alienation of lands acquired by free patent or homestead in
violation of this section is null and void. 1
There is no question that the mortgage on the improvements of the parcel of land
executed by Tiburcio del Rosario in favor of Primitivo Abad (Annex B, complaint, pp.
10-13, Rec. on App) is valid.
The power of attorney executed by Tiburcio del Rosario in favor of Primitivo Abad
(Annex A, complaint, pp. 7-9, Rec. on App.) providing, among others, that is
coupled with an interest in the subject matter thereof in favor of the said attorney
and are therefore irrevocable, and . . . conferring upon my said attorney full and
ample power and authority to do and perform all things reasonably necessary and
proper for the due carrying out of the said powers according to the true tenor and
purport of the same, . . ." does not create an agency coupled with an interest nor
does it clothe the agency with an irrevocable character. A mere statement in the
power of attorney that it is coupled with an interest is not enough. In what does
such interest consist must be stated in the power of attorney. The fact that Tiburcio
del Rosario, the principal, had mortgaged the improvements of the parcel of land to
Primitivo Abad, the agent, (Annex B, complaint, pp. 10-13, Rec. on App.) is not
such an interest as could render irrevocable the power of attorney executed by the
principal in favor of the agent. In fact no mention of it is made in the power of
attorney. The mortgage on the improvements of the parcel of land has nothing to
do with the power of attorney and may be foreclosed by the mortgagee upon failure
of the mortgagor to comply with his obligation. As the agency was not coupled with
an interest, it was terminated upon the death of Tiburcio del Rosario, the principal,
sometime in December 1945, and Primitivo Abad, the agent, could no longer validly
convey the parcel of land to Teodorico Abad on 9 June 1947. The sale, therefore, to
the latter was null and void. But granting that the irrevocable power of attorney was
lawful and valid it would subject the parcel of land to an encumbrance. As the
homestead patent was issued on 12 December 1936 and the power of attorney was
executed on 24 February 1937, it was in violation of the law that prohibits the
alienation or encumbrance of lands acquired by homestead from the date of the
approval of the application and for a term of five years from and after the issuance
of the patent or grant. Appellants contend that the power of attorney was to be
availed of by the agent after the lapse of the prohibition period of five years, and
that in fact Primitivo Abad sold the parcel of land on 9 June 1947, after the lapse of
such period. Nothing to that effect is found in the power of attorney.
Appellants claim that the trial court should have directed the appellees to reimburse
Teodorico Abad for what he had paid to Primitivo Abad to discharge the mortgage in
the latter’s favor as part of the consideration of the sale. As the sale to Teodorico
Abad is null and void, the appellees can not be compelled to reimburse Teodorico
Abad for what he had paid to Primitivo Abad. The former’s right of action is against
the latter, without prejudice to the right of Primitivo Abad to foreclose the mortgage
on the improvements of the parcel of land if the mortgage debt is not paid by the
appellees, as heirs and successors-in-interest of the mortgagor.
The judgment appealed from is affirmed, with costs against the appellants.
GR No. 13414, Feb 04, 1919
JUAN GARCIA Y PALICIO v. JOSEFA DE MANZANO
DECISION - MOIR, J.:
In order to understand this case, a brief explanation of the facts is considered
necessary. Narciso Lopez Manzano was a merchant in Atimonan, Tayabas, who went
to Spain in May, 1910, and died there the 8th of September, 1913. He gave a
general power-of-attorney to his son, Angel L. Manzano on the 9th of February,
1910, and on the 25th of March a second general power-of-attorney to his wife,
Josefa Samson.
Narciso L. Manzano had had various commercial dealings with the plaintiff in this
case and renewed these dealings before leaving for Spain.
Manzano was the owner of a half interest in a small steamer, the San Nicolas, the
other half being owned by Ocejo, Perez & Co., with whom there was a partnership
agreement to run the steamer for a few years. When this period expired Ocejo,
Perez & Co., refused to continue the contract and demanded that Manzano buy or
sell. As he did not want to sell at the price offered and could not buy, Juan Garcia
bought the half interest held by Ocejo, Perez & Co., on the 15th of October, 1910.
Angel L. Manzano, acting under his power-of-attorney, sold in July, 1911, the other
half of the boat to the plaintiff, but as Garcia is a Spaniard and could not register
the boat in his name at the Custom House, the boat was registered in the name of
Agustin Garcia, a son of the plaintiff, who at that time, July 2d, 1913, was a minor
about twenty years old. Agustin Garcia shortly thereafter died, leaving his parents
as his heirs at law, and as such heirs plaintiff's wife was made a party.
On the 23d of July, 1912, Angel L. Manzano, by virtue of the power-of-attorney
from his father, Narciso L. Manzano, executed a contract, Exhibit A, made a part of
the complaint, by which Juan Garcia agreed to extend a credit to Narciso L.
Manzano in the sum of P12,000, and this credit was used by the house of Manzano.
To secure it a mortgage was given in the same document on three parcels of land in
Atimonan, with their improvements. The registration of this mortgage was refused
by the registrar.
The court of First Instance of Tayabas, on the 18th of April, 1914, named Josef a
Samson y San Pedro, administratrix of the property of Narciso L. Manzano, and
commissioners were duly appointed, and notice was published, and no claims
having been presented against the estate to the commissioners, they so reported to
the court on the 7th of December, 1914.
On the 29th of July, 1915, the Court of First Instance ordered the partition of the
property amongst the heirs of Narciso L. Manzano.
On the 15th day of May, 1915, the plaintiff filed his action in the Court of First
Instance of Tayabas to foreclose the so-called mortgage in Exhibit A. Josefa de
Manzano filed a pleading stating that the estate had already been divided; that the
property mentioned in Exhibit A of the plaintiff had been assigned, A and B, to her
and her children and C entirely to her; that her son Angel had ceded his share to
her; that all the other children were minors and suggesting that she be made
guardian ad litem for the minors. In a second motion filed the 25th of August, 1915,
the defendant's attorney states the amended complaint had not been presented as
stipulated in open court and prays the court that instead of the administratrix the
heirs of Narciso L. Manzano be considered defendants and the names of the heirs
including Josefa de Manzano are given.
Plaintiff filed his amended complaint on the 2tfh of August, making them individually
defendants, the minors to be represented by their guardian ad litem, and asking for
a judgment against each and all of them for P14,087.59, being the amount then due
on the open account and for P2,700 as attorney's fees, all secured by the so-called
mortgage; and that in case the judgment was not paid, that the mortgaged
property be sold to pay the debt.
The defendants, "Josefa de Manzano y otros," filed an answer on September 4,
1915, stating they knew such a mortgage document set up in the complaint existed,
but as they were not certain that Exhibit A was an exact copy, they denied, the
document; they denied its efficacy and legal effect; they denied the jurisdiction of
the court to hear and decide the case, and alleged that the action had prescribed.
They alleged no facts in their answer.
The defendants also filed a counter-claim against Juan Garcia and his wife,
Conception Castro, in which they allege that Narciso L. Manzano was the owner of
one-half of the small steamer San Nicolas and Juan Garcia the owner of the other
half; that Garcia taking advantage of the youtl^ and inexperience of Angel L.
Manzano falsely and maliciously made him believe that he had authority under the
powerof-attorney from his father to sell the half interest in the San Nicolas, and that
he did so. That Angel L. Manzano had no authority to sell the interest in the
steamer, but that since the date of said sale, July, 1912, (1911?) the plaintiff had
illegally appropriated all rents and profits of the boat to his own use, which amount
to P30,000 per year, after paying for all repairs, etc., and they ask the court to
absolve them from the complaint, to declare them the owners of one-half of the
steamer San Nicolas, and to order the plaintiffs to render a detailedaccount of all
the profits received from the San Nicolas, arid to order onehalf of the profits paid to
the defendants.
There are other immaterial questions presented by the counterclaim.
The trial court held there was no legal mortgage and gave judgment for the plaintiff
against Josefa Samson only, for the amount admitted by her letter to be due, i. e.,
P12,752.85, and dismissed the claim against the other defendants and also
dismissed the counterclaim of defendants. The plaintiffs did not appeal. All of the
defendants presented a motion for a new trial, but only the defendant Josefa de
Manzano excepted to the order of the court denying the motion for a new trial, and
she sets up the following assignments of error in the decision giving judgment
against her individually. (The alleged errors of the trial court regarding the
counterclaim are set out later.)
"1. The court exceeded its jurisdiction in deciding a question and granting a relief
not comprised within the pleadings and contentions of the parties.
"2. The trial court acted without jurisdiction in judging and holding that there was a
novation of the debt.
"3. The trial court erred in an essential matter in holding that there was a novation
of the debt."
The argument presented in support of the first error assigned is that the action was
against the administratrix of the estate and not against the heirs individually. What
are the facts? The original action was presented against Josefa de Manzano as
administratrix of her deceased husband, Narciso L. Manzano, on May 15, 1915. The
defendants attorneys on the 6th of August filed a pleading stating that the estate
had been distributed by the court on the 27th of July, and giving the names of the
heirs and stating that some are minors for whom the mother "is the guardian" and
agreeing that she be named guardian ad litem for the minors which was done by
the court's order dated the 4th of September, and she took the oath prescribed by
law for such guardian.
On the 25th of August the same attorneys filed another pleading saying the time
stipulated by the parties in open court for filing an amended complaint had passed,
that the complaint had not been presented and "Wherefore they respectfully request
the Honorable Court that, in place of the defendant-administratrix, the heirs of the
late Narciso L. Manzano, whose names are Josefa Samson de Manzano, widow, Paz
Manzano, Matilde Manzano, Soledad Manzano, Carmelo Manzano, Narcisa Manzano,
and Jose Manzano, be considered defendants in this case" The first two of legal age
and the others minors, and they pray that Josefa Samson be named guardian ad
litem for the minors, which the court did. The plaintiff's amended complaint making
all the.above heirs and Angel L. Manzano defendants by name had been filed in the
clerk's office the day before, but it is assumed the defendants were not then aware
of the fact.
The defendants filed their answer on September 4th, 1915, which is headed "Josefa
de Manzano y Otros, demandados." The court's judgment is against them
individually.
It is difficult to conceive what more defendants could want in order to make them
individually defendants, or what effect they intended their pleadings to have if they
were not to be considered as defendants. The only thing that might be considered
as lacking is an order of the court admitting the amended complaint, but this
admission was supplied by the facts of defendants themselves. All the parties were
before the court individually and the court could only give judgment against them
individually if they were obligated individually.
When the whole record shows that the trial proceeded on the theory set up in an
amended complaint this court will not inquire as to whether the court actually
entered an order admitting the amended complaint. There is no error in this part of
the decision.
The other two errors assigned will be considered together.
The nature of the action having been changed from one against the administratrix
to one against the heirs individually, the action against the other heirs was
dismissed and judgment was given by the Court against Josefa Samson de Manzano
individually, basing its decision on the following letter:
"September 10, 1913.
"Mr. JUAN GARCIA,
Manila, Philippine Islands.
"DEAR SIR: In reply to your favor, which I have received together with a copy of my
current account kept in your city, showing a balance of P12,752.85, I have to state
that I find the same entirely satisfactory.
"I hope to be able to remit a part of the sum during the month of October.
"I remain,
"Yours respectfully,
(Sgd.) "JOSEFA DE MANZANO."
This letter was written two days after the death of Narciso L. Manzano. Is it a
novation of the obligation of her husband ?
Article 1205 of the Civil Code reads as follows:
"Novation which consists in the substitution of a new debtor in the place of the
original one may be made without the knowledge of the latter, but not without the
consent of the creditor."
If the creditor Garcia had consented to the substitution of debtors in this case, he
would not have presented his original action against the administratrix of Narciso L.
Manzano and later against all the heirs, but against Josefa de Manzano only.
As much as justice may plead for it, we can see nothing in the letter which would
make appellant personally liable.
There is no denial that the debt is a just one against the estate. The judgment is
based on the letter which was not intended by the writer to make her personally
liable, and was not considered by the plaintiff to make her personally responsible.
There was no novation of the obligation and the part of the judgment holding her
liable must be reversed.
The defendants set up the following assignment of errors as to their counterclaim
against plaintiffs:
"1. The trial court erred in holding that the power of attorney executed in favor of
Angel L. Manzano was not revoked at least in so far as it might concern the plaintiff
Juan Garcia Palicio.
"2. The court below erred in holding that the power of attorney executed by Narciso
L. Manzano in favor of Angel L. Manzano authorized the latter to alienate the vessel
San Nicolas.
"3. The trial court erred in holding that the sale of the vessel San Nicolas was
approved by Narciso L. Manzano.
"4. The trial court erred in holding that Angel L. Manzano, in executing the sale, did
not do so under the pressure of undue influences."
As to the first two alleged errors the defendants argue that the power-of-attorney to
the wife revoked the one to the son, in accordance with article 1735 of the Civil
Code, and that even if not revoked the power-of-attorney did not authorize the sale
of the boat by Angel L. Manzano. Article 1735 of the Civil Code is as follows:
"The appointment of a new agent for the same business produces a revocation of
the previous agency from the day on which notice was given to the former agent,
excepting the provisions of the next preceding article"
There is no proof in the record that the first agent, the son, knew of the power-of-
attorney to his mother.
It was necessary under the law for the defendants, in order to establish their
counterclaim, to prove that the son had notice of the second power-of-attorney.
They have not done so, and it must be considered that Angel L. Manzano was acting
under a valid power-of-attorney from his father which had riot been legally revoked
on the date of the sale of the half interest in the steamer to the plaintiff's son, which
half interest was legally inherited by the plaintiffs.
The defendant's next argument is that the power-ofattorney, if valid, does not
authorize the sale of the half interest in the boat to the plaintiff.
There is no pretense that the boat was not sold for a fair price, there is no denial
that the value was received in full, but the defendants allege that the power-of-
attorney under which Angel L. Manzano acted, even if a valid power, did not
authorize the sale of the boat, and they want it back with one-half of the profits
derived from its use by the plaintiff.
The document under which Angel L. Manzano sold the boat reads in part as follows:
"To enable him to buy or sell, absolutely or under pacto de retra, any of the rural or
urban estates that I now own and may acquire in the future, at such price as he
may deem most advantageous, which he shall collect in cash or by installments and
under such conditions as he may consider proper, and he shall set forth the
encumbrances on the properties and their origin. I bind myself to warrant and
defend, in accordance with law, the titles to such properties; and if the properties
alienated by this agreement should be redeemed, he is empowered to redeem them
by paying the price that may have been fixed, and, for this purpose, shall execute
the proper instrument."
The power-of-attorney authorizes the sale of real property, the buying of real
property and mortgaging the same, the borrowing of money and in fact is general
and complete.
The power does not expressly state that the agent may sell the boat, but a power so
full and complete and authorizing the sale of real property; must necessarily carry
with it the right to sell a half interest in a small boat. The record further shows the
sale was necessary in order to get money or a credit without which it would be
impossible to continue the business which was being conducted in the name of
Narciso L. Manzano and for his benefit.
We consider that the authorization is so complete that it carries with it full authority
to sell the one-half interest in the boat which was then owned by Narciso L.
Manzano.
The last assignment of error is not supported by any reasonable evidence in the
record.
That part of the judgment ordering the defendant Josefa Samson de Manzano to
pay the plaintiff P12,752.85 is revoked, and the judgment in so far as it dismisses
the counterclaim of the defendants is affirmed, without any declaration of costs. So
ordered.
Arellano, C.J., Carson, Street, and Avanceña, JJ., concur.
Johnson, J., did not take part.
TORRES, J., with whom concurs ARAULLO, J., dissenting in part:
The undersigned, regretting not to be entirely in accord with the majority opinion,
with due respect thereto, is of the opinion that the defendant Josefa Samson, widow
of the late Narciso Lopez Manzano, should be obliged to pay one-half of the sum
stated in her letter of September 10, 1913, with interest at the rate of 6 per cent
per annum from January 10, 1917, the date on which the amended complaint was
filed.
It is contended that the conjugal partnership prdperty is directly liable for the
payment of the debts of such partnership and that in order to determine what this
property is, in case of the death of one of the spouses, it is indispensable that a
liquidation be made of the property that may have been left by the deceased
husband or wife, for the purpose of classifying and separating in the estate the
private property of each' spouse and such property as partakes of the nature of
community property.
The record shows that, not only was the liquidation made, but also that the partition
of the estate left by Narciso Lopez Manzano at his death, had already been effected,
so that it appears duly determined what property as community property would
have pertained to the widow, Josefa Samson; and, as it is a proven fact, and one
not discussed, that, on the death of the husband Manzano, the dissolved conjugal
partnership was in debt to the plaintiff in the sum of P12,752,85. Under this
premise it is unquestionable that the1 widow Samson, the surviving member of that
partnership, should be obliged to pay one-half of this sum, that is P6,376.425, for it
would not be right for her to enrich herself by keeping possession of this amount, to
the prejudice of the plaintiff creditor.
Although, on the death of the husband, the property of the conjugal partnership
was in a mass and pro indiviso, after the liquidation and partition of this property
had been made, the widow, a member of the dissolved partnership, received her
share of the community property, and it would not be just that, for the collection of
one-half of the debt, for which she is liable, the creditor should be forced to subject
himself to and observe the proceedings prescribed for the collection of the amount
owing him, from the testate or intestate estate of the deceased debtor.
We abstain in this opinion from an examination of the right which the plaintiff
creditor may have had to collect the debt owing him from the estate of the
deceased debtor, and we restrict our opinion solely to the debt which the defendant
Josefa Samson, on her part, had the obligation to pay, not in her capacity of
administratrix, but in that of widow member of the partnership, the property of
which is directly liable for the debts contracted by her; and if the defendant
Samson, as lawful owner of one-half of the community property, was entitled to
receive it, and in fact did receive it, nothing could be more just than that she
should, in turn, be compelled to pay, out of the property she received, the one-half
of the debts for which part thereof she is liable.
The defendant Josefa Samson should, therefore, be ordered to pay the aforesaid
sum of P6,376.425, with interest thereon at the rate of 6 per cent per annum from
January 10, 1917. That part of the judgment whereby this defendant is ordered to
pay the other one-half of the sum mentioned therein, should be reversed, and the
dismissal of the counterclaim should be affirmed, without special finding as to costs.
Judgment modified.