G.R. No. 118375 October 3, 2003 Court.
003 Court.14 A question of law which the Court may pass upon must not
CELESTINA T. NAGUIAT, petitioner,
vs.
COURT OF APPEALS and AURORA QUEAÑO, respondents.
Before us is a Petition for Review on Certiorari under Rule 45,
assailing the decision of the Sixteenth Division of the respondent Court
of Appeals promulgated on 21 December 1994 1 , which affirmed in toto
the decision handed down by the Regional Trial Court (RTC) of Pasay
City.2
The case arose when on 11 August 1981, private respondent Aurora
Queaño (Queaño) filed a complaint before the Pasay City RTC for
cancellation of a Real Estate Mortgage she had entered into with
petitioner Celestina Naguiat (Naguiat). The RTC rendered a decision,
declaring the questioned Real Estate Mortgage void, which Naguiat
appealed to the Court of Appeals. After the Court of Appeals upheld the
RTC decision, Naguiat instituted the present petition.1ªvvphi1.nét
The operative facts follow:
Queaño applied with Naguiat for a loan in the amount of Two Hundred
Thousand Pesos (₱200,000.00), which Naguiat granted. On 11 August
1980, Naguiat indorsed to Queaño Associated Bank Check No.
090990 (dated 11 August 1980) for the amount of Ninety Five
Thousand Pesos (₱95,000.00), which was earlier issued to Naguiat by
the Corporate Resources Financing Corporation. She also issued her
own Filmanbank Check No. 065314, to the order of Queaño, also
dated 11 August 1980 and for the amount of Ninety Five Thousand
Pesos (₱95,000.00). The proceeds of these checks were to constitute
the loan granted by Naguiat to Queaño.3
To secure the loan, Queaño executed a Deed of Real Estate Mortgage
dated 11 August 1980 in favor of Naguiat, and surrendered to the latter
the owner’s duplicates of the titles covering the mortgaged
properties.4 On the same day, the mortgage deed was notarized, and
Queaño issued to Naguiat a promissory note for the amount of TWO
HUNDRED THOUSAND PESOS (₱200,000.00), with interest at 12%
per annum, payable on 11 September 1980. 5Queaño also issued a
Security Bank and Trust Company check, postdated 11 September
1980, for the amount of TWO HUNDRED THOUSAND PESOS
(₱200,000.00) and payable to the order of Naguiat.
Upon presentment on its maturity date, the Security Bank check was
dishonored for insufficiency of funds. On the following day, 12
September 1980, Queaño requested Security Bank to stop payment of
her postdated check, but the bank rejected the request pursuant to its
policy not to honor such requests if the check is drawn against
insufficient funds.6
On 16 October 1980, Queaño received a letter from Naguiat’s lawyer,
demanding settlement of the loan. Shortly thereafter, Queaño and one
Ruby Ruebenfeldt (Ruebenfeldt) met with Naguiat. At the meeting,
Queaño told Naguiat that she did not receive the proceeds of the loan,
adding that the checks were retained by Ruebenfeldt, who purportedly
was Naguiat’s agent.7
Naguiat applied for the extrajudicial foreclosure of the mortgage with
the Sheriff of Rizal Province, who then scheduled the foreclosure sale
on 14 August 1981. Three days before the scheduled sale, Queaño
filed the case before the Pasay City RTC, 8 seeking the annulment of
the mortgage deed. The trial court eventually stopped the auction
sale.9
On 8 March 1991, the RTC rendered judgment, declaring the Deed of
Real Estate Mortgage null and void, and ordering Naguiat to return to
Queaño the owner’s duplicates of her titles to the mortgaged
lots.10 Naguiat appealed the decision before the Court of Appeals,
making no less than eleven assignments of error. The Court of Appeals
promulgated the decision now assailed before us that affirmed in toto
the RTC decision. Hence, the present petition.
Naguiat questions the findings of facts made by the Court of Appeals,
especially on the issue of whether Queaño had actually received the
loan proceeds which were supposed to be covered by the two checks
Naguiat had issued or indorsed. Naguiat claims that being a notarial
instrument or public document, the mortgage deed enjoys the
presumption that the recitals therein are true. Naguiat also questions
the admissibility of various representations and pronouncements of
Ruebenfeldt, invoking the rule on the non-binding effect of the
admissions of third persons.11
The resolution of the issues presented before this Court by Naguiat
involves the determination of facts, a function which this Court does
not exercise in an appeal by certiorari. Under Rule 45 which governs
appeal by certiorari, only questions of law may be raised 12 as the
Supreme Court is not a trier of facts. 13 The resolution of factual issues
is the function of lower courts, whose findings on these matters are
received with respect and are in fact generally binding on the Supreme
involve an examination of the probative value of the evidence
presented by the litigants.15 There is a question of law in a given case
when the doubt or difference arises as to what the law is on a certain
state of facts; there is a question of fact when the doubt or difference
arises as to the truth or the falsehood of alleged facts.16
Surely, there are established exceptions to the rule on the
conclusiveness of the findings of facts of the lower courts. 17 But
Naguiat’s case does not fall under any of the exceptions. In any event,
both the decisions of the appellate and trial courts are supported by the
evidence on record and the applicable laws.
Against the common finding of the courts below, Naguiat vigorously
insists that Queaño received the loan proceeds. Capitalizing on the
status of the mortgage deed as a public document, she cites the rule
that a public document enjoys the presumption of validity and
truthfulness of its contents. The Court of Appeals, however, is correct
in ruling that the presumption of truthfulness of the recitals in a public
document was defeated by the clear and convincing evidence in this
case that pointed to the absence of consideration. 18 This Court has
held that the presumption of truthfulness engendered by notarized
documents is rebuttable, yielding as it does to clear and convincing
evidence to the contrary, as in this case.19
On the other hand, absolutely no evidence was submitted by Naguiat
that the checks she issued or endorsed were actually encashed or
deposited. The mere issuance of the checks did not result in the
perfection of the contract of loan. For the Civil Code provides that the
delivery of bills of exchange and mercantile documents such as checks
shall produce the effect of payment only when they have been
cashed.20 It is only after the checks have produced the effect of
payment that the contract of loan may be deemed perfected. Art. 1934
of the Civil Code provides:
"An accepted promise to deliver something by way of commodatum or
simple loan is binding upon the parties, but the commodatum or simple
loan itself shall not be perfected until the delivery of the object of the
contract."
A loan contract is a real contract, not consensual, and, as such, is
perfected only upon the delivery of the object of the contract. 21 In this
case, the objects of the contract are the loan proceeds which Queaño
would enjoy only upon the encashment of the checks signed or
indorsed by Naguiat. If indeed the checks were encashed or deposited,
Naguiat would have certainly presented the corresponding
documentary evidence, such as the returned checks and the pertinent
bank records. Since Naguiat presented no such proof, it follows that
the checks were not encashed or credited to Queaño’s
account.1awphi1.nét
Naguiat questions the admissibility of the various written
representations made by Ruebenfeldt on the ground that they could
not bind her following the res inter alia acta alteri nocere non debet
rule. The Court of Appeals rejected the argument, holding that since
Ruebenfeldt was an authorized representative or agent of Naguiat the
situation falls under a recognized exception to the rule.22 Still, Naguiat
insists that Ruebenfeldt was not her agent.
Suffice to say, however, the existence of an agency relationship
between Naguiat and Ruebenfeldt is supported by ample evidence. As
correctly pointed out by the Court of Appeals, Ruebenfeldt was not a
stranger or an unauthorized person. Naguiat instructed Ruebenfeldt to
withhold from Queaño the checks she issued or indorsed to Queaño,
pending delivery by the latter of additional collateral. Ruebenfeldt
served as agent of Naguiat on the loan application of Queaño’s friend,
Marilou Farralese, and it was in connection with that transaction that
Queaño came to know Naguiat.23 It was also Ruebenfeldt who
accompanied Queaño in her meeting with Naguiat and on that
occasion, on her own and without Queaño asking for it, Reubenfeldt
actually drew a check for the sum of ₱220,000.00 payable to Naguiat,
to cover for Queaño’s alleged liability to Naguiat under the loan
agreement.24
The Court of Appeals recognized the existence of an "agency by
estoppel25 citing Article 1873 of the Civil Code. 26Apparently, it
considered that at the very least, as a consequence of the interaction
between Naguiat and Ruebenfeldt, Queaño got the impression that
Ruebenfeldt was the agent of Naguiat, but Naguiat did nothing to
correct Queaño’s impression. In that situation, the rule is clear. One
who clothes another with apparent authority as his agent, and holds
him out to the public as such, cannot be permitted to deny the authority
of such person to act as his agent, to the prejudice of innocent third
parties dealing with such person in good faith, and in the honest belief
that he is what he appears to be.27 The Court of Appeals is correct in
invoking the said rule on agency by estoppel.1awphi1.nét
More fundamentally, whatever was the true relationship between
Naguiat and Ruebenfeldt is irrelevant in the face of the fact that the
checks issued or indorsed to Queaño were never encashed or
deposited to her account of Naguiat.
All told, we find no compelling reason to disturb the finding of the
courts a quo that the lender did not remit and the borrower did not
receive the proceeds of the loan. That being the case, it follows that
the mortgage which is supposed to secure the loan is null and void.
The consideration of the mortgage contract is the same as that of the
principal contract from which it receives life, and without which it
cannot exist as an independent contract.28 A mortgage contract being a
mere accessory contract, its validity would depend on the validity of the
loan secured by it.29
WHEREFORE, the petition is denied and the assailed decision is
affirmed. Costs against petitioner.
SO ORDERED.
YUN KWAN BYUNG vs. PHILIPPINE AMUSEMENT AND GAMING
CORPORATION
G.R. No. 163553 December 11, 2009
FACTS
PAGCOR launched its Foreign Highroller Marketing
Program. The Program aims to invite patrons from foreign countries to
play at the dollar pit of designated PAGCOR-operated casinos under
specified terms and conditions and in accordance with industry
practice. Petitioner, a Korean national, alleges that he came to the
Philippines four times to play for high stakes at the Casino Filipino; that
in the course of the games, he was able to accumulate gambling chips
worth US$2.1 million. Petitioner contends that when he presented the
gambling chips for encashment with PAGCORs employees or agents,
PAGCOR refused to redeem them.
PAGCOR claims that petitioner, who was brought into the
Philippines by ABS Corporation, is a junket player who played in the
dollar pit exclusively leased by ABS Corporation for its junket players.
PAGCOR alleges that it provided ABS Corporation with distinct junket
chips. ABS Corporation distributed these chips to its junket players. At
the end of each playing period, the junket players would surrender the
chips to ABS Corporation. Only ABS Corporation would make an
accounting of these chips to PAGCORs casino treasury.
ISSUE
Whether the CA erred in holding that PAGCOR is not liable
to petitioner, disregarding the doctrine of implied agency, or agency by
estoppels
RULING
Petitioner alleges that there is an implied agency.
Alternatively, petitioner claims that even assuming that no actual
agency existed between PAGCOR and ABS Corporation, there is still
an agency by estoppel based on the acts and conduct of PAGCOR
showing apparent authority in favor of ABS Corporation. Petitioners
argument is clearly misplaced. The basis for agency is representation,
that is, the agent acts for and on behalf of the principal on matters
within the scope of his authority and said acts have the same legal
effect as if they were personally executed by the principal. On the part
of the principal, there must be an actual intention to appoint or an
intention naturally inferable from his words or actions, while on the part
of the agent, there must be an intention to accept the appointment and
act on it. Absent such mutual intent, there is generally no agency.
There is no implied agency in this case because PAGCOR
did not hold out to the public as the principal of ABS Corporation.
PAGCORs actions did not mislead the public into believing that an
agency can be implied from the arrangement with the junket operators,
nor did it hold out ABS Corporation with any apparent authority to
represent it in any capacity. The Junket Agreement was merely a
contract of lease of facilities and services.
Pahud vs CA
Facts:
 Spouses Pedro San Agustin and Agatona Genil acquired a
246 m2 land in Brgy. Anos, Los Baños, Laguna. Both died
intestate, survived by their eight (8) children: respondents
Eufemia, Raul, Ferdinand, Zenaida, Milagros, Minerva,
Isabelita and Virgilio.
 Eufemia, Ferdinand and Raul sold the property to the
petitioners, the Pahuds for P525,000.00. 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
 Pahuds paid the balance of the consideration. Virgilio,
however, refused to sign in the extra judicial partition.
 Virgilio’s co-heirs filed a complaint for judicial partition. In the
course of the proceedings, a Compromise Agreement was
signed with seven (7) of the co-heirs agreeing to sell their
undivided shares to Virgilio forP700,000.00.
 Eufemia acknowledged having received P700,000.00 from
Virgilio. Virgilio then sold the entire property to spouses
(Belarminos) sometime in 1994. The Belarminos immediately
constructed a building on the subject property.
 The Pahuds immediately confronted Eufemia who confirmed
to them that Virgilio had sold the property to the Belarminos.
Aggrieved, the Pahuds filed a complaint in intervention in the
pending case for judicial partition.
 After trial, the RTC upheld the validity of the sale to Pahuds.
CA reversed it and ruled in favor of the heirs.
Issue: WON the sale of the property by Eufemia to the Pahuds are
valid?
Held: Yes. We find the transaction to be valid and enforceable.
 Under Art. 1874, a sale of a piece of land or any interest
through an agent, requires that the authority of the latter
shall be in writing; otherwise, the sale shall be void.
 Also, Article 1878, 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.
 The express mandate required by law to enable an
appointee of an agency in general terms to sell must be one
that expressly mentions a sale. A power of attorney must so
express the powers of the agent in clear and unmistakable
language.
 Absence of a written authority to sell a piece of land is, ipso
jure, void, precisely to protect the interest of an unsuspecting
owner from being prejudiced by the unwarranted act of
another.
 In this case, 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.
 While the sale with respect to the 3/8 portion is void by
express provision of law, it is still valid on the basis of the
principle of estoppel. Under 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.
 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, Eufemia and
her other co-heirs denied having sold their shares to the
Pahuds. Later, 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.
 Also, the three heir concerned did not assail the validity of
the sale by Eufemia to the Pahuds on the basis of want of
written authority to sell. 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.
 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.
AF REALTY & DEVELOPMENT, INC. and ZENAIDA R.
RANULLO, petitioners, vs. DIESELMAN FREIGHT SERVICES, CO.,
MANUEL C. CRUZ, JR. and MIDAS DEVELOPMENT
CORPORATION, respondents.
 Manuel Cruz, Jr., a board member of Dieselman Freight
Services, Co. (DFS) authorized Cristeta Polintan to sell a
parcel of land owned by DFS. HE HAS NO WRITTEN
AUTHORITY TO SELL SUCH LAND.
 Polintan in turn authorized Felicisima Noble to sell the same
lot.
 Noble then offered AF Realty & Development, Co.,
represented by Zenaida Ranullo
 AF Realty accepted the offer and issued a check as
downpayment.
 Manuel Cruz, Sr. (father) and president of DFS,
acknowledged the check but modified the offer. He
increased the selling price. AF Realty, had shown its
willingness to pay the balance.
 Later on, Mr. Cruz, Sr. terminated the offer and demanded
from AF Realty the return of the title of the lot earlier
delivered by Polintan.
 Eventually, DFS sold the property to someone else - Midas
Development Corporation (Midas).
 Claiming that there was a perfected contract of sale between
them, AF Realty filed with the RTC, a complaint for specific
performance against Dieselman and Cruz, Jr.. The complaint
prays that Dieselman be ordered to execute and deliver a
final deed of sale in favor of AF Realty and asked for
payment of compensatory damages, attorney’s fees,
exemplary damages.
 Dieselman alleged that there was no meeting of the minds
between the parties in the sale of the property and that it did
not authorize any person to enter into such transaction
on its behalf.
 AF REALTY said that though DFS did not authorize any
person to enter into such transaction on its behalf, DFS
ratified the contract when it accepted the check and
made a counter-offer.
 Constrained to protect its interest in the property, Midas filed
a Motion for Leave to Intervene. Midas alleged that it has
purchased the property and took possession thereof, hence
DFS cannot be compelled to sell and convey it to AF Realty.
Ruling of the RTC: The RTC rendered decision in favor of AF
REALTY on the ground that the acts of Cruz, Jr. bound DFS in the sale
of the lot to AF Realty. It also hold MIDAS acted in bad faith because it
initially paid DFS even without seeing the latter's title to the property.
Consequently, the perfected contract of sale between Dieselman and
AF Realty bars Midas' intervention.
 AF Realty, DFS and MIDAS both appealed to the CA. The
former alleged that the trial court erred in not holding DFS
liable for moral, compensatory and exemplary damages, and
in dismissing its counterclaim against Midas. The latter
claimed that the trial court erred in finding that a contract of
sale between DFS and AF Realty was perfected. Midas
further averred that there was no bad faith on its part when it
purchased the lot from DFS.
Ruling of the CA: CA reversed the judgment of the RTC holding that
since Cruz, Jr. was not authorized in writing by DFS to sell the subject
property to AF Realty, the sale was not perfected; and that the Deed of
Absolute Sale between DFS and Midas is valid, there being no bad
faith on the part of the latter. The CA then declared DFS and Cruz, Jr.
jointly and severally liable to AF Realty for damages.
 Then it was elevated to SC
ISSUE: Whether or not the sale made through an agent was ratified.
HELD: No. There was no valid agency created. The Board of Directors
of DFS never authorized Cruz, Jr. to sell the land. ART. 1874 provides
that when a sale of 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. Hence, the agreement between Cruz, Jr. and
Polintan, as well as the subsequent agreement between Polintan and
Noble, never bound the corporation. Therefore the sale transacted by
Noble purportedly on behalf of Polintan and ultimately purportedly on
behalf of DFS is void.
Also being a void sale, it cannot be ratified even if Cruz, Sr.
accepted the check and made a counter-offer. (Cruz, Sr. returned the
check anyway). Under Article 1409 of the Civil Code, void
transactions can never be ratified because they were void from
the very beginning.
COSMIC LUMBER CORPORATION, vs.COURT OF APPEALS and
PEREZ
FACTS:
The General Manager, Paz G. Villamil-Estrada, of Cosmic
Lumber Corporation on behalf of the company instituted an action for
ejectment against Isidro Perez to recover a portion of Lot No. 443
before the Regional Trial Court of Dagupan, docketed as Civil Case
No. D-7750.2 on 11 March 1985. She was appointed as Attorney-in-
fact through a Special Power of Attorney (28 January 1985) to do the
following:
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.
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.
On 27 November 1985 the "Compromise Agreement" was
approved by the trial court and judgment was rendered in accordance
with its terms. However, after five years from the date of its finality
(even if the decision became final and executory), Paz G. Villamil-
Estrada failed to produce the owner's duplicate copy of Title No. 37649
needed to segregate from Lot No. 443 the portion she sold as attorney-
in-fact. Hence, on 25 January 1993 Isidro Perez filed a complaint to
revive the judgment, docketed as Civil Case No. D-10459.
ISSUE: Whether or Not the actions of Paz G. Villamil-Estrada as
attorney-in-fact bind the principal, Cosmic Lumber Corporation, in the
compromise agreement she entered into with Isidro Perez?
HELD:
A special power of attorney for an agent to institute any
action in court to eject all persons in the principal's lots so that the
principal 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 is protective of the
rights and interests of the principal in the property, does not grant any
power to the agent to sell the subject property nor a portion thereof.—
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.
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 action mentioned.—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. 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. 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.
DECISION:
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.
BAUTISTA VS. SPOUSES JALANDONI, GR NO. 171464, 27
NOVEMBER 2013
FACTS:
In May 1997, the Spouses Jalandoni applied for a loan with
a commercial bank and, as a security thereof, they offered to constitute
a real estate mortgage over the two lots they were allegedly the
absolute owners of.
After a routine credit investigation, it was discovered that their titles
over the two lots had been cancelled and new TCTs were issued in the
names of Spouses Baustista. Upon further investigation, they found
out that the bases for the cancellation of their titles were two deeds of
absolute sale,7 dated April 4, 1996 and May 4, 1996, purportedly
executed and signed by them in favor of Spouses Baustista.
Spouses Bautista claimed that in March 1996, a certain
Teresita Nasino (Nasino) offered to Eliseo Baustista (Eliseo) two
parcels of land located in Muntinlupa City; that the parcels of land were
sold at a bargain price because the owners were in dire need of
money; that upon their request, Nasino showed them the photocopies
of the titles covering the subject lands; that Nasino told them that she
would negotiate with the Spouses Jalandoni, prepare the necessary
documents and cause the registration of the sale with the Register of
Deeds; and that since Nasino was a wife of a friend, Spouses
Baustista trusted her and gave her the authority to negotiate with
Spouses Jalandoni on their behalf.
On December 17, 2004, the RTC rendered judgment
declaring the sale of the subject lots void.
The RTC explained that Nasino had no authority to negotiate
for the Spouses Jalandoni, much less to receive the consideration of
the sale. Spouses Bautista were not innocent purchasers in good faith
and for value for their failure to personally verify the original copies of
the titles of the subject properties and to ascertain the authority of
Nasino since they were not dealing with the registered owner.
The RTC, nonetheless, found MCC a mortgagee in good
faith and upheld the validity of the mortgage contract between Spouses
Bautista and MCC.
ISSUE: Whether or not Nasino has the authority to negotiate for
the Spouses Jalandoni in the contract of sale made to Spouses
Bautista?
RULING:
 No. Article 1874 and Aritcle 1875 (5) explicitly require a
written authority when the sale of a piece of land is through an agent,
whether the sale is gratuitously or for a valuable consideration.
Articles 1874 of the Civil Code provides: 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.
Likewise, A1iicle 1878 paragraph 5 of the Civil Code specifically
mandates that the authority of the agent to sell a real property must be
conferred in writing, to wit:
Art. 1878. Special powers of attorney are necessary in the following
cases:
(5) To enter into any contract by which the ownership of an immovable
is transmitted or acquired either gratuitously or for a valuable
consideration;
Absent such authority in writing, the sale is null and void.
In the case at bar, it is undisputed that the sale of the subject
lots to Spouses Bautista was void. Based on the records, Nasino had
no written authority from Spouses Jalandoni to sell the subject lots.
The testimony of Eliseo that Nasino was empowered by a special
power of attorney to sell the subject lots was bereft of merit as the
alleged special power attorney was neither presented in co urt nor was
it referred to in the deeds of absolute sale. Bare allegations,
unsubstantiated by evidence, are not equivalent to proof under the
Rules of Court.
In additon Spouses Bautista cannot be deemed purchasers
in good faith. There were several circumstances that should have
placed them on guard and prompted them to conduct an investigation
that went beyond the face of the title of the subject lots. Their failure to
take the necessary steps to determine the status ofthe subject lots and
the extent of Nasino’s authority puts them into bad light.
Spouses Bautista’s claim of good faith is negated by their
failure to verify the extent and nature of Nasino’s authority. Since
Spouses Bautista did not deal with the registered owners but with
Nasino, who merely represented herself to be their agent, they should
have scrutinized all factual circumstances necessary to determine her
authority to insure that there are no flaws in her title or her capacity to
transfer the land.They should not have merely relied on her verbal
representation that she was selling the subject lots on behalf of
Spouses Jalandoni.
Moreover, Eliseo’s claim that he did not require Nasino to
give him a copy of the special power of attorney because he trusted
her is unacceptable. Well settled is the rule that persons dealing with
an assumed agency are bound at their peril, if they would hold the
principal liable, to ascertain not only the fact of agency but also the
nature and extent ofauthority, and in case either is controverted, the
burden of proof is upon them to establish it.
As stated, Spouses Bautista’s failure to observe the required
degree of caution in ascertaining the genuineness and extent of
Nasino’s authority is tantamount to bad faith that precludes them from
claiming the rights of a purchaser in good faith.
Heirs of Victorino Sarili vs. Pedro Lagroso ( GR No. 193517; Jan
15, 2014)
Facts: Respondent, through his Attorney in Fact, filed a complaint
against the Spouses Sarili and the Register of Deeds, Caloocan on
Nov 25, 1999 before the RTC-Caloocan. He alleged that he owns a
certain land in Caloocan and, during one of his vacations in the
Philippines, he discovered that a new TCT was issued by the RD in the
name of Mr. Sarili by virtue of a falsified Deed of Absolute Sale dated
Feb. 1978.
The Spouses claim to be innocent purchasers for Value. They claim to
have purchased the property from Mr. Rodriguez who possessed and
presented a Special Power of Attorney (SPA) to sell/dispose of the
same. Such sale was executed Nov 1992 in the Spouses’ favour. They
also denied participation in the preparation of the Feb 1978 deed of
sale which, they claim, may have been merely devised by the fixer they
hired to facilitate the issuance of the title in their names..
During the pendency of the proceedings, Mr. Victorino Sarili passed
away and was substituted by his heirs – the Petitioners.
o RTC – Ruled in favour of the Petitioners. The deed of sale
is valid. The signature of Respondent SPA issued to Mr.
Rodriguez is the same as the SPA in favor of the SPA in
favour of Ms. Mojica – the Attorney in Fact of Respondent
in this case; thus it proves the SPA in favour of Mr.
Rodriguez is genuine. Since Mr. Rodriguez has an SPA to
dispose of the property, the sale and transfer of the
property he executed was valid, genuine, lawful, and
binding.
o Respondent thus appealed the RTC Decision.
o CA – Ruled in favour of Respondent. RTC erred in its
ruling since the Nov 1992 sale was not the source
document for the transfer of the subject property but the
Feb 1978 deed of sale. It claimed that the signature of the
signature of the Respondent and his Spouse in the 1978
sale was falsified. Further, the testimony of the
Respondents as to the authenticity of the signatures was
not rebutted. That being the case, it ruled the Deed of
Sales and the SPA under Mr. Rodriguez as void.
ISSUE: Was the SPA from Mr. Rodriguez clothed with the authority to
dispose of the property?
RULING: NO. The proof of capacity to sell embedded in the SPA shall
determine the strength of the required buyer’s inquiry on the seller’s
capacity to sell. If the SPA is duly notarized, then mere inspection of
the face of the document already constitutes sufficient inquiry. If no
SPA is provided, or there is at least flaws in the notarial
acknowledgment, the buyer must show that his investigation went
beyond the document and into the circumstances of its execution. In
the case, the SPA is flawed for not indicating the Community Tax
Certificate (CTC) of the Respondent Spouses; this in violation of the
RA 7160 (Local Govt Code of 1991). Despite the flaw, the spouses
Sarili failed to show that they conducted further investigation required
of them.
o The Defective Notarization of the should be treated as
a private document and thus can be examined under
the Rule 132, S.20 of the Rules of Court. It provides
that “before any private document offered as authentic
is received in evidence, its due execution and
authenticity must be proved either a) by anyone who
saw the document executed or written; or b) by
evidence of the genuinene of the signature or
handwriting of the maker.” It is settled that a defective
notarization will strip the document of its public
character and reduce it to a private instrument. That
being the case, evidentiary standard of its validity shall
be based on preponderance of evidence.
o In this case, the SPA’s due execution and authenticity were
not sufficiently established. Despite the fact that Mr.
Rodriguez positively identified Respondent’s signature
based on his familiarity with it, he failed to present evidence
to authenticate the signatures of the other signatories of the
Subject SPA aside from the respondent.
ISSUE: WON there was a valid conveyance of the Subject Property to
the Spouses Sarili
PRINCIPLE:
 The general rule is that every person dealing with registered
land may safely rely on the correctness of the certificate of
title issued therefore and the law will in no way oblige him to
go beyond the certificate to determine the condition of the
property. However, a higher degree of prudence is required
from one who buys from a person who is not the registered
owner, although the land object of the transaction is
registered. In such a case, the buyer is expected to examine
not only the certificate of title but all factual circumstances
 necessary for him to determine if there are any flaws in the
title of the transferor. The buyer also has the duty to
ascertain the identity of the person with whom he is dealing
with and the latter’s legal authority to convey the property.

HELD:
There was no valid conveyance of the subject property
to Sps. Sarili.
The strength of the buyer’s inquiry on the seller’s capacity or
legal authority to sell depends on the proof of capacity of the seller. If
the proof of capacity consists of a special power of attorney duly
notarized, mere inspection of the face of such public document already
constitutes sufficient inquiry. If no such special power of attorney is
provided or there is one but there appears to be flaws in its notarial
acknowledgment, mere inspection of the document will not do; the
buyer must show that his investigation went beyond the document and
into the circumstances of its execution.
In the present case, it is undisputed that Sps. Sarili
purchased the subject property from Ramos on the strength of the
latter’s ostensible authority to sell under the subject SPA. The said
document, however, readily indicates flaws in its notarial
acknowledgment since the respondent’s community tax certificate
(CTC) number was not indicated thereon; which is required under the
governing rule on notarial acknowledgements at that time. Despite this
irregularity, however, Sps. Sarili failed to show that they conducted an
investigation beyond the subject SPA and into the circumstances of its
execution as required by prevailing jurisprudence. Hence, Sps. Sarili
cannot be considered as innocent purchasers for value.
Article 1874 of the Civil Code provides that "[w]hen 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." In
other words, if the subject SPA was not proven to be duly executed
and authentic, then it cannot be said that the foregoing requirement
had been complied with; hence, the sale would be void.
The Court also holds that the due execution and authenticity
of the subject SPA were not sufficiently established under Section 20,
Rule 132 of the Rules of Court as above-cited.
Since Sps. Sarili’s claim over the subject property is based
on forged documents, no valid title had been transferred to them (and,
in turn, to petitioners). Verily, when the instrument presented is forged,
even if accompanied by the owner’s duplicate certificate of title, the
registered owner does not thereby lose his title, and neither does the
assignee in the forged deed acquire any right or title to the property.
The Court, however, finds a need to remand the case to the
court a quo in order to determine the rights and obligations of the
parties with respect to the house Sps. Sarili had built on the subject
property in bad faith in accordance with Article 449 in relation to
Articles 450, 451, 452, and the first paragraph of Article 546 of the Civil
Code
To be deemed a builder in good faith, it is essential that a
person asserts title to the land on which he builds, i.e., that he be a
possessor in concept of owner, and that he be unaware that there
exists in his title or mode of acquisition any flaw which invalidates it.
Good faith is an intangible and abstract quality with no technical
meaning or statutory definition, and it encompasses, among other
things, an honest belief, the absence of malice and the absence of
design to defraud or to seek an unconscionable advantage. It implies
honesty of intention, and freedom from knowledge of circumstances
which ought to put the holder upon inquiry. As for Sps. Sarili, they knew
– or at the very least, should have known – from the very beginning
that they were dealing with a person who possibly had no authority to
sell the subject property considering the palpable irregularity in the
subject SPA’s acknowledgment. Yet, relying solely on said document
and without any further investigation on Ramos’s capacity to sell Sps.
Sarili still chose to proceed with its purchase and even built a house
thereon. Based on the foregoing it cannot be seriously doubted that
Sps. Sarili were actually aware of a flaw or defect in their title or mode
of acquisition and have consequently built the house on the subject
property in bad faith under legal contemplation. The case is therefore
remanded to the court a quo for the proper application of the above-
cited Civil Code provisions.