Partnership Digest Day1.v.1.1

Age

ncy

| Day

12

G.R. No. 167552 : April 23, 2007

EUROTECH INDUSTRIAL TECHNOLOGIES, INC., Petitioner, v. EDWIN CUIZON and ERWIN

CUIZON, Respondents.

DOCTRINE:

In a contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another with the latter's consent.

The underlying principle of the contract of agency is to accomplish results by using the services of others - to do a great variety of things like selling, buying, manufacturing, and transporting.

Its purpose is to extend the personality of the principal or the party for whom another acts and from whom he or she derives the authority to act.

It is said that the basis of 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. By this legal fiction, the actual or real absence of the principal is converted into his legal or juridical presence - qui facit per alium facit per se.

The elements of the contract of agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself; (4) the agent acts within the scope of his authority.

The powers of an agent are particularly broad in the case of one acting as a general agent or manager; such a position presupposes a degree of confidence reposed and investiture with liberal powers for the exercise of judgment and discretion in transactions and concerns which are incidental or appurtenant to the business entrusted to his care and management. In the absence of an agreement to the contrary, a managing agent may enter into any contracts that he deems reasonably necessary or requisite for the protection of the interests of his principal entrusted to his management.

FACTS: CHICO-NAZARIO, J.:

Petitioner is in the business of importation and distribution of various European industrial equipment.

Impact Systems Sales ("Impact Systems") which is a sole proprietorship is one of its customers owned by respondent ERWIN Cuizon. EDWIN is the sales manager and was impleaded in said capacity.

From January - April 1995, petitioner sold to Impact Systems various products amounting to P91K. Subsequently, respondents sought to buy from petitioner one unit of sludge pump valued at P250K; dp of P50K. However, petitioner refused to deliver the pump to respondents without their having fully settled their indebtedness to petitioner.

o Thus, EDWIN and Alberto de Jesus, general manager, executed a Deed of Assignment of receivables in favor of petitioner. An outstanding receivables from Toledo Power Corporation (P365,000.00)

Thus, petitioner delivered the sludge pump as shown by the Invoice dated 30 June 1995.

Despite the existence of the DOA, respondents proceeded to collect from Toledo Power as evidenced by Check Voucher (official receipt dated 15 August 1995).

Petitioner made several demands upon respondents to pay their obligations; partial payments were made. Then a final demand letter wherein it was stated that respondents' total obligations stood at P295K excluding interests and attorney's fees. Respondents failed to abide by said final demand letter, thus, petitioner instituted a complaint for sum of money, damages, with application for preliminary attachment before the RTC-Cebu City.

RTC issued the writ of preliminary attachment.

EDWIN disputed the total amount indebtedness (P220K)

Also, EDWIN alleged that he is not a real party in interest in this case. According to him, he was acting as mere agent of his principal, which was the Impact Systems, in his transaction with petitioner and the latter was very much aware of this fact. In support of this argument, petitioner points to paragraphs 1.2 and 1.3 of petitioner's Complaint stating -

1.2. Defendant Erwin H. Cuizon … is the proprietor of a single proprietorship business...

Age

ncy

| Day

12

1.3. Defendant Edwin B. Cuizon … is the Sales Manager … sued in this action in such capacity.

RTC declared respondent ERWIN in default "for his failure to answer.

RTC dropped respondent EDWIN as a party

defendant in this case. According to the trial court: Edwin acted in behalf of Impact Systems where Erwin is the proprietor. Records further show that plaintiff knew that Impact Systems, the principal, ratified the act of Edwin, the agent, when it accepted the dp of P50K. Plaintiff, therefore, cannot say that it was deceived by defendant Edwin

CA affirmed said order. MR was denied.

Petitioner points to Article 1897, NCC to support its argument. That CA failed to appreciate the effect of ERWIN's act of collecting the receivables from the Toledo Power despite the DOA. As EDWIN did not sufficiently notify it of the extent of his powers as an agent, petitioner claims that he should be made personally liable for the obligations of his principal.

That petitioner fell victim to the fraudulent scheme of respondents who induced it into selling the sludge pump and signing the DOA… full-blooded brothers whose successive contravening acts bore the obvious signs of conspiracy to defraud petitioner.

ISSUE: Did EDWIN exceed his authority when he signed the DOA thereby binding himself personally to pay the obligations to petitioner? NO.

HELD:

The parties do not dispute the existence of the agency relationship between respondents ERWIN as principal and EDWIN as agent.

Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the party with whom he contracts. The same provision, however, presents two instances when an agent becomes personally liable to a third person.

first is when he expressly binds himself to the obligation

second is when he exceeds his authority.

In the last instance, the agent can be held liable if he does not give the third party sufficient notice of his

powers. SC hold that respondent EDWIN does not fall within any of the exceptions contained in this provision.

The DOA clearly states that EDWIN signed as the sales manager of Impact Systems. The position of manager is unique in that it presupposes the grant of broad powers with which to conduct the business of the principal.

The significant amount of time spent on the negotiation for the sale of the sludge pump underscores Impact Systems' perseverance to get hold of the said equipment. There is, therefore, no doubt in our mind that respondent EDWIN's participation in the Deed of Assignment was "reasonably necessary" or was required in order for him to protect the business of his principal. Had he not acted in the way he did, the business of his principal would have been adversely affected and he would have violated his fiduciary relation with his principal.

Petitioner is seeking to recover both from respondents ERWIN, the principal, and EDWIN, the agent. However, the first part of Article 1897 declares that the principal is liable in cases when the agent acted within the bounds of his authority. (the agent is completely absolved of any liability). The second part of the said provision presents the situations when the agent himself becomes liable to a third party when he expressly binds himself or he exceeds the limits of his authority without giving notice of his powers to the third person. (in case of excess of authority by the agent, like what petitioner claims exists here, the law does not say that a third person can recover from both the principal and the agent)

WHEREFORE, premises considered, the present petition is DENIED, affirming the Order of the RTC.

Age

ncy

| Day

12

G.R. No. L-24332 January 31, 1978

RAMON RALLOS, Administrator of the Estate of Concepcion Rallos, Petitioner, vs. FELIX GO CHAN

& SONS REALTY CORPORATION and CA, Respondents.

DOCTRINE: A contract entered into in the name of another by one who has no authority or the legal representation or who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other contracting party.

See elements of Agency.

Agency is basically personal representative, and derivative in nature. The authority of the agent to act emanates from the powers granted to him by his principal; his act is the act of the principal if done within the scope of the authority. Qui facit per alium facit se. "He who acts through another acts himself".

By reason of the very nature of the relationship between Principal and agent, agency is extinguished by the death of the principal or the agent. This is the law in this jurisdiction.

This is the prevalent rule in American Jurisprudence where it is well-settled that a power without an interest conferred upon an agent is dissolved by the principal's death, and any attempted execution of the power afterward is not binding on the heirs or representatives of the deceased.

1931 is the applicable law. Under this provision, an act done by the agent after the death of his principal is valid and effective only under two conditions,

(1) that the agent acted without knowledge of the death of the principal and

(2) that the third person who contracted with the agent himself acted in good faith.

GOOD FAITH means that the 3rd person was not aware of the death of the principal at the time he contracted with said agent. These two requisites must concur the absence of one will render the act of the agent invalid and unenforceable.

There are several cases which seem to hold that although, as a general principle, death revokes an agency and renders null every act of the agent thereafter performed, yet that where a payment has been made in

ignorance of the death, such payment will be good. The leading case so holding is that of Cassiday v. McKenzie.

FACTS: MUÑOZ PALMA, J.:

Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel of land (Lot No. 5983) covered by a TCT in Cebu.

April 21, 1954, the sisters executed an SPA in favor of their brother, Simeon Rallos, authorizing him to sell for and in their behalf said lot. Concepcion Rallos died.

September 12, 1955, Simeon Rallos sold the undivided shares of his sisters lot to Felix Go Chan & Sons Realty Corporation for P10,686.90. A new TCT was issued in the name of the vendee.

May 18, 1956, Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos filed a complaint in CFI-Cebu, praying that the sale of the undivided share of the deceased Concepcion Rallos in be declared unenforceable, and said share be reconveyed to her estate; the complaint was amended twice; defendant made a crossclaim against Simon Rallos, the latter filed third-party complaint against his sister, Gerundia.

While the case was pending, both Simon and Gerundia died and were substituted by the respective administrators of their estates.

CFI ruled:

A. On Plaintiffs Complaint -

(1) Declared the deed of sale null and void insofar as the one-half pro-indiviso share of Concepcion Rallos is concerned;

(3) Ordered Felix Go Chan & Sons Realty Corporation to deliver the possession of an undivided (1/2) share of the Lot to the herein plaintiff;

B. On GO CHAN’S Cross-Claim:

(1) Sentenced the co-defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to pay defendant Felix Co Chan & Sons Realty Corporation P5,343.45, representing the (1/2) share of said lot;

C. On Third-Party Complaint against Gerundia Rallos:

Age

ncy

| Day

12

(1) Dismissed the third-party complaint without prejudice to filing either a complaint against the regular administrator of the Estate of Gerundia Rallos or a claim in the Intestate-Estate of Cerundia Rallos, covering the same subject-matter of the third-party complaint.

Felix Go Chan & Sons Realty Corporation appealed the judgment insofar as it set aside the sale of the one-half (1/2) share of Concepcion Rallos.

CA ruled in favor of the appellant corporation sustaining the sale in question.

ISSUE: What is the legal effect of an act performed by an agent after the death of his principal?

Is the fact of knowledge of the death of the principal a material factor in determining the legal effect of an act performed after such death?

HELD:

There are various ways of extinguishing agency, one cause is death of the principal Paragraph 3 of Art. 1919

By the death, civil interdiction, insanity or insolvency of the principal or of the agent;

Manresa explains that the rationale for the law is found in the juridical basis of agency WHICH IS REPRESENTATION. Them being an integration of the personality of the principal integration that of the agent it is not possible for the representation to continue to exist once the death of either is establish.

IS THE INSTANT CASE WITHIN THAT EXCEPTION?

ART. 1930. The agency shall remain in full force and effect even after the death of the principal, if it has been constituted in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor.

ART. 1931. Anything done by the agent, without knowledge of the death of the principal or of any other cause which extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have contracted with him in good faith.

1930 is not involved because the SPA executed in favor of Simeon Rallos was not coupled with an interest.

1931 is the applicable law. See doctrine.

In the instant case, Simeon Rallos knew of the death of his principal at the time he sold the latter's share in the Lot to respondent corporation. (pleadings and findings of CA), that Simon must have known of the death of his sister, and yet he proceeded with the sale without informing appellant (the realty corporation) of the death of the former.

Thus, on the basis of the established knowledge of Simon Rallos concerning the death of his principal Concepcion, Article 1931 of the Civil Code is inapplicable. The law expressly requires for its application lack of knowledge on the part of the agent of the death of his principal; it is not enough that the third person acted in good faith.

Revocation by an act of the principal as a mode of terminating an agency which is to be distinguished from revocation by operation of law such as death of the principal which obtains in this case.

A revocation of a power of attorney to be effective must be communicated to the parties concerned, yet a revocation by operation of law, such as by death of the principal is instantaneously effective inasmuch as "by legal fiction the agent's exercise of authority is regarded as an execution of the principal's continuing will. With death, the principal's will ceases or the authority is extinguished.

The Civil Code does not impose a duty on the heirs to notify the agent of the death of the principal. What the Code provides in Article 1932 is that, if the agent die his heirs must notify the principal thereof, and in the meantime adopt such measures as the circumstances may demand in the interest of the latter. Hence, the fact that no notice of the death of the principal was registered on the certificate of title of the property in the Office of the Register of Deeds, is not fatal to the cause of the estate of the principal

As between two innocent persons, one of whom must suffer the consequence of a breach of trust, the one who made it possible by his act of coincidence bear the loss.

The situation here is expressly covered by a provision of law on agency the terms of which are clear and unmistakable leaving no room for an interpretation contrary to its tenor. Basis in Section 55 of the Land Registration Law:

The production of the owner's duplicate certificate whenever any voluntary instrument is presented for registration shall be conclusive authority from the registered owner to the register of deeds to enter a new certificate or to make a memorandum of

Age

ncy

| Day

12

registration in accordance with such instruments, and the new certificate or memorandum Shall be binding upon the registered owner and upon all persons claiming under him in favor of every purchaser for value and in good faith: Provided however, That in all cases of registration provided by fraud, the owner may pursue all his legal and equitable remedies against the parties to such fraud without prejudice, however, to the right, of any innocent holder for value of a certificate of title. ... (Act No. 496 as amended)

Our statute, the Civil Code, expressly provides for two exceptions to the general rule that death of the principal revokes ipso jure the agency, to wit:

(1) that the agency is coupled with an interest (Art 1930), and

(2) that the act of the agent was executed without knowledge of the death of the principal and the third person who contracted with the agent acted also in good faith (Art. 1931).

SC stresses the indispensable requirement that the agent acted without knowledge or notice of the death of the principal.

Here, the agent Ramon Rallos executed the sale notwithstanding notice of the death of his principal. Accordingly, the agent's act is unenforceable against the estate of his principal.

IN VIEW OF ALL THE FOREGOING, We set aside the decision of CA, CFI decision is affirmed.

G.R. No. L-18058 January 16, 1923

FABIOLA SEVERINO, Plaintiff-Appellee , vs. GUILLERMO SEVERINO, Defendant-Appellant.FELICITAS VILLANUEVA, intervenor-appellee.

DOCTRINE: A receiver, trustee, attorney, agent, or any other person occupying fiduciary relations respecting property or persons, is utterly disabled from acquiring for his own benefit the property committed to his custody for management.

There have been a number of cases before this court in which a title to real property was acquired by a person in his own name, while acting under a fiduciary capacity, and who afterwards sought to take advantage of the confidence reposed in him by claiming the ownership of the property for himself. This court has invariably held such evidence competent as between the fiduciary and the cestui que trust. The proper procedure in such a case, so long as the rights of innocent third persons have not intervened, is to compel a conveyance to the rightful owner. (Camacho vs. Municipality of Baliuag)

An agent is not only estopped from denying his principal's title to the property, but he is also disable from acquiring interests therein adverse to those of his principal during the term of the agency.

FACTS: OSTRAND, J.:

Plaintiff is the natural daughter and sole heir of Melecio Severino; she brought an action to compel the defendant Guillermo Severino to convey the subject 4 parcels of land and to pay P800K in damages. The latter wrongfully registered said land in his own name.

Felicitas Villanueva, administratrix of the estate of Melecio Severino, filed a complaint in intervention; prays that the conveyance be made to the estate of plaintiff Fabiola Severino. The defendant answered both complaints with a general denial.

The lower court recognized plaintiff Fabiola Severino as the acknowledged natural child of Melecio and ordered the defendant to convey 428 ha of the land in question to the intervenor.

HISTORY OF THE LAND (IMPT)

Melecio Severino died (1915); the subject land was recorded in his name (1901) by virtue of possessory information proceedings instituted by his brother Agapito Severino in his behalf;

Age

ncy

| Day

12

During the lifetime of Melecio, the land was worked by the defendant, Guillermo Severino, his brother, as administrator for and on behalf of the said Melecio Severino;

After Melecio's death, Guillermo continued to occupy the land; cadastral proceedings were instituted for the registration of the lands; Roque Hofileña, as lawyer for Guillermo, claimed the lots mentioned as the property of his client; no opposition was presented in the proceedings therefore decreed the title in his favor (1917).

At the time of the cadastral proceedings the plaintiff Fabiola was a minor; Guillermo did not appear personally in the proceedings and did not testify; the only testimony in support of his claims was that of his attorney Hofileña, that he inherited the land from his father.

ISSUE: May an agent or trustee acquire interest/benefit over the property committed to his custody? NO.

HELD:

It is not disputed that the possession enjoyed by the defendant at the time of obtaining his decree was of the same character as that held during the lifetime of his brother, except in so far as shortly before the trial of the cadastral case the defendant had secured from his brothers and sisters a relinquishment in his favor of such rights as they might have in the land.

The relations of an agent to his principal are fiduciary and it is an elementary and very old rule that in regard to property forming the subject-matter of the agency, he is estopped from acquiring or asserting a title adverse to that of the principal. His position is analogous to that of a trustee and he cannot consistently, with the principles of good faith, be allowed to create in himself an interest in opposition to that of his principal or cestui que trust. Upon this ground, and substantially in harmony with the principles of the Civil Law, the English Chancellors held that in general whatever a trustee does for the advantage of the trust estate inures to the benefit of the cestui que trust.

The same principle has been consistently adhered to in so many American cases and is so well established that exhaustive citations of authorities are superfluous and we shall therefore limit ourselves to quoting a few of the numerous judicial expressions upon the subject.

A receiver, trustee, attorney, agent, or any other person occupying fiduciary relations respecting property or persons, is utterly disabled from acquiring for his own

benefit the property committed to his custody for management. This rule is entirely independent of the fact whether any fraud has intervened.

The rule stands on the moral obligation to refrain from placing one's self in positions which ordinarily excite conflicts between self-interest and integrity.. by making it impossible to profit by yielding to temptation. It applies universally to all who come within its principle.

The agent obtained a patent for it in his own name. Thus, the agent who so acts becomes a trustee for his principal. He cannot hold the land under an entry for himself otherwise than as trustee for his principal.

The proper procedure, so long as the rights of innocent third persons have not intervened, is to compel a conveyance to the rightful owner. This can be done under the issues raised and the proof presented in the case at bar.

No reasons of public policy demand that a person guilty of fraud or breach of trust be permitted to use his certificate of title as a shield against the consequences of his own wrong.

The judgment appealed from is affirmed.

Age

ncy

| Day

12

G.R. No. 76931 May 29, 1991

ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, Petitioner, vs. CA and AMERICAN AIR-LINES INCORPORATED,

Respondents.

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

FACTS: PADILLA, J.:

This case is a consolidation of 2 petitions for review on certiorari.

American Airlines, Inc. (American Air) and Orient Air Services and Hotel Representatives (Orient Air), entered into a General Sales Agency Agreement (Agreement) whereby the former authorized the latter to act as its exclusive general sales agent within the Philippines for the sale of air passenger transportation (including any US military installation

11 May 1981, alleging that Orient Air had reneged on its obligations under the Agreement by failing to promptly remit the net proceeds of sales for the months of January to March 1981 (~$254K), American Air undertook the collection of the proceeds and terminated the Agreement.

American Air then instituted suit against Orient Air with the CFI-Manila for Accounting with Preliminary Attachment or Garnishment, Mandatory Injunction and Restraining Order.

Orient Air denied the material allegations contending that plaintiff still owed it a balance in unpaid overriding commissions. That American Air's precipitous conduct had occasioned prejudice to its business interests.

CFI ruled in favor of the defendant (Orient Air).

IAC affirmed the findings of the CFI with some modifications with respect to the monetary awards.

American Air: that such commission is based only on sales of its services actually negotiated or

transacted by Orient Air referred to as "ticketed sales."

Orient Air: contends that the contractual stipulation of a 3% overriding commission covers the total revenue of American Air and not merely that derived from ticketed sales undertaken by Orient Air.

o invokes its designation as the exclusive General Sales Agent of American Air, with the corresponding obligations arising from such agency

ISSUE: What is the extent of Orient Air's right to the 3% overriding commission? TOTAL REVENUE.

HELD: It is a well settled legal principle that in the interpretation of a contract, the entirety thereof must be taken into consideration to ascertain the meaning of its provisions.

The Court finds merit in the contention of Orient Air that the Agreement, when interpreted in accordance with the foregoing principles, entitles it to the 3% overriding commission based on total revenue, or as referred to by the parties, "total flown revenue."

As the designated exclusive General Sales Agent of American Air, Orient Air was responsible for the promotion and marketing of American Air's services for air passenger transportation, and the solicitation of sales therefor.

Orient Air was to be paid commissions of two (2) kinds:

first, a sales agency commission, 7-8% of tariff fares and charges from sales made on American Air ticket stock; and

second, an overriding commission, 3% of tariff fares and charges for all sales of passenger transportation over American Air services.

The precondition attached to the first type of commission does not obtain for the second type of commissions. To rule otherwise would lead to the absurd conclusion that the parties had entered into a contract with meaningless provisions.

*** American Air was the party responsible for the preparation of the Agreement. Consequently, any ambiguity in this "contract of adhesion” is to be construed against the party who caused the ambiguity and could have avoided it by the exercise of a little more care.

Age

ncy

| Day

12

RE propriety of American Air's termination of the Agreement.

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

Re Order to American Air to "reinstate defendant as its general sales agent in accordance with GSA Agreement." ERRONEOUS

IAC in effect, compels American Air to extend its personality to Orient Air which is violative of the principles and essence of agency: defined by law as a contract whereby "a person binds himself to render some service or to do something in representation or on behalf of another, WITH THE CONSENT OR AUTHORITY OF THE LATTER.

Thus, SC sets aside the portion of the ruling of the respondent IAC reinstating Orient Air as general sales agent of American Air.

Age

ncy

| Day

12

[G.R. No. 130148. December 15, 1997]

JOSE BORDADOR and LYDIA BORDADOR, Petitioners, vs. BRIGIDA D. LUZ, ERNESTO M.

LUZ and NARCISO DEGANOS, Respondents.

DOCTRINE: The basis for agency is representation... A person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent.

FACTS: REGALADO, J.:

Petitioners were engaged in the business of purchase and sale of jewelry and respondent Brigida D. Luz, aka Aida D. Luz, was their regular customer.

On several occasions, respondent Narciso Deganos, the brother of Brigida, received several pieces of gold and jewelry from petitioners (items and their prices were indicated in 17 receipts).

Deganos was supposed to sell the items at a profit, then remit the proceeds and return the unsold items to petitioners. Deganos neither paid the balance of the sales proceeds, nor did he return any unsold item to petitioners. The total of his unpaid account to petitioners reached ~ P725K. Petitioners eventually filed a complaint in the barangay court against Deganos to recover said amount.

Brigida who was not impleaded, together with Deganos, signed a compromise agreement with petitioners to pay on installment basis. However, he failed to comply.

(1990) Petitioners instituted a Civil Case against Deganos and Brigida for recovery of a sum of money and damages, with an application for preliminary attachment.

Four years later, they were charged with estafa (Criminal Case)

Petitioners claimed that Deganos acted as the agent of Brigida when he received the subject items of jewelry and, because he failed to pay for the same, Brigida, as principal, and her spouse are solidarily liable.

Deganos claimed that the same was only ~ P383K. He further asserted that it was he alone who was involved in the transaction with the petitioners; that he neither acted as agent for nor was he authorized to act as an agent by Brigida, notwithstanding the fact that six of the receipts indicated that the items were received by him for the latter.

Brigida claimed that she never authorized Deganos to receive any item of jewelry in her behalf.

The trial court found that only Deganos was liable to petitioners. That it was petitioner Lydia Bordador who indicated in the receipts that the items were received by Deganos for Evelyn Aquino and Brigida. That Brigida was behind Deganos, but because there was no memorandum to this effect, the agreement between the parties was unenforceable under the Statute of Frauds.

o Deganos was ordered to pay petitioners ~ P725K. Brigida was ordered to pay P21K representing the interest on her own personal loan.

CA affirmed said judgment.

Evidence does not show that respondent spouses signed any of the subject receipts or authorized Deganos to receive the items of jewelry on their behalf.

Petitioners insist that Deganos was the agent of Brigida as the latter clothed him with apparent authority as her agent and held him out to the public as such, hence Brigida can not be permitted to deny said authority to innocent third parties who dealt with Deganos under such belief.

ISSUE: Are respondent spouses liable? NO.

HELD: The evidence does not support the theory of petitioners that Deganos was an agent of Brigida and that the latter should consequently be held solidarily liable with Deganos in his obligation to petitioners.

While the quoted statement in the findings of fact of the CA decision mentioned that Deganos ostensibly acted as an agent of Brigida, the actual conclusion and ruling of the Court of Appeals categorically stated that, (Brigida Luz) never authorized her brother (Deganos) to act for and in her behalf in any transaction with Petitioners. It is clear that Brigida never authorized him to act on her behalf with regard to the transactions subject of this case.

The basis for agency is representation. There is no showing that Brigida consented to the acts of Deganos or authorized him to act on her behalf, much less with respect to the particular transactions involved.

It was grossly and inexcusably negligent of petitioners to entrust to Deganos on at least six occasions several

Age

ncy

| Day

12

pieces of jewelry of substantial value without requiring a written authorization from his alleged principal.

Petitioners, who were negligent in their transactions with Deganos, cannot seek relief from the effects of their negligence by conjuring a supposed agency relation between the two respondents where no evidence supports such claim.

RE contract of agency and Statute of Frauds

Petitioners’ premise: Statute of Frauds applies only to executory contracts and not to executed or to partially executed ones. They claim that the contract involved in this case was an executed contract as the items had already been delivered, such delivery resulted in the execution of the contract and removed the same from the coverage of the Statute of Frauds.

Petitioners claim is speciously unmeritorious. Neither the trial court nor the appellate court categorically stated that there was such a contractual relation between these two respondents. What was finally proven is that there was no such contract between Brigida D. Luz and Narciso Deganos, executed or partially executed, and no delivery of any of the items subject of this case was ever made to the former.

WHEREFORE, challenged decision and resolution are hereby AFFIRMED.

Age

ncy

| Day

12

G.R. No. 152613 & No. 152628 : June 23, 2006

APEX MINING CO., INC., Petitioner, v. SOUTHEAST MINDANAO GOLD MINING CORP., et al, Respondents.

DOCTRINE: For a contract of agency to exist, it is essential that the principal consents that the other party, the agent, shall act on its behalf, and the agent consents so as to act.

See Elements of agency: Eurotech Case

Concept of agency is distinct from assignment.

AGENCY: the agent acts not on his own behalf but on behalf of his principal.

ASSIGNMENT: there is total transfer or relinquishment of right by the assignor to the assignee. The assignee takes the place of the assignor and is no longer bound to the latter.

FACTS: CHICO-NAZARIO, J.:

1931, a Proclamation established the Agusan-Davao-Surigao Forest Reserve.

The disputed area is inside the said forest reserve encompassed by Mt. Diwata, which is situated in the municipalities of Monkayo and Cateel known as the "Diwalwal Gold Rush Area" Since 1980's, it has been stormed by conflicts brought about by the numerous mining claimants.

1983, Camilo Banad and his group, who claimed to discover traces of gold filed a Declaration of Location (DOL) for 6 mining claims in the area. Banad and some other natives organized the Balite Communal Portal Mining Cooperative (Balite).

Apex Mining Corporation (Apex) entered into operating agreements with Banad and his group.

1984, Marcopper (MMC) filed 16 DOLs or mining claims for areas adjacent to the area covered by the DOL of Banad and his group. Realizing that the area is a forest reserve, MMC instead applied for a prospecting permit with the Bureau of Forest Development (BFD) which was granted, but embraced the areas claimed by Apex and the other individual mining claimants.

MMC thus filed before the Bureau of Mines and Geo-Sciences (BMG) a Petition for the Cancellation of the Mining Claims of Apex, et al, which was

dismissed and sustained the validity of Apex mining claims over the disputed area.

MMC appealed to DENR, which reversed the order of BMG and declared MMC's permit valid and subsisting (Exploration Permit No. 133, EP 133). MR was denied.

Apex appealed before the Office of the President, which affirmed the DENR ruling.

Apex then filed a Petition for Certiorari before SC, which ruled against Apex holding that the disputed area is a forest reserve; hence, the proper procedure in acquiring mining rights therein is by initially applying for a permit to prospect with the BFD and not through a registration of DOL with the BMG.

1991, DENR Sec. Fulgencio Factoran, Jr. issued a Department Administrative Order declaring subject areas as non-forest lands and open to small-scale mining purposes.

Several mining entities filed applications for Mineral Production Sharing Agreement (MPSA).

1993, Monkayo Integrated Small Scale Miners Association (MISSMA) filed an MPSA application which was denied by the BMG on the grounds that the area applied for is within the area covered by MMC EP 133 and that the MISSMA was not qualified to apply for an MPSA.

1994, Rosendo Villaflor and his group filed before the BMG a Petition for Cancellation of EP 133 and for the admission of their MPSA Application. Balite intervened and likewise sought the cancellation of EP 133.

MMC assigned EP 133 to Southeast Mindanao Gold Mining Corporation (SEM), a 100% -owned subsidiary of MMC.

Balite’s application was later on rejected.

1995, BMG accepted and registered SEM's MPSA application and the Deed of Assignment over EP 133. After publication of SEM's application, several group filed their adverse claims or oppositions.

The Panel of Arbitators opined that EP 133 was valid and subsisting. That the BMG Director was authorized to issue exploration permits and to renew the same without limit.

Age

ncy

| Day

12

The adverse claimants appealed to the Mines Adjudication Board (MAB). which considered erroneous the dismissal by the PA of the adverse claims filed against MMC and SEM over a mere technicality of failure to submit a sketch plan. MAB opined that EP 133 has long expired due to its non-renewal and that MMC, was no longer a claimant of the Agusan-Davao-Surigao Forest Reserve having relinquished its right to SEM.

The Villaflor group and Balite appealed that decision to SC. These cases were CA for proper disposition pursuant to Rule 43.

CA affirmed in toto the decision of the PA and declared null and void the MAB decision.

o CA banked on the premise that SEM is the agent of MMC by virtue of its assignment of EP 133 in favor of SEM and the purported fact that SEM is a 100% subsidiary of MMC, ruled that the transfer of EP 133 was valid.

o That since SEM is an agent of MMC, the assignment of EP 133 did not violate the condition prohibiting its transfer except to MMC's duly designated agent.

o That MMC's right to explore under EP 133 is a property right which the 1987 Constitution protects and which cannot be divested without the holder's consent.

Hence, the instant Petitions for Review filed by Apex, Balite and MAB.

During the pendency of these Petitions, during GMA’s term National Task Force Diwalwal was created and was tasked to address the situation.

MAB underscores that SEM did not acquire any right from MMC by virtue of the transfer of EP 133 because the transfer directly violates the express condition of the exploration permit stating that "it shall be for the exclusive use and benefit of the permittee or his duly authorized agents.”

o That while MMC is the permittee, SEM cannot be considered as MMC's duly designated agent as there is no proof on record authorizing SEM to represent MMC in its business dealings or undertakings, and neither did SEM pursue its interest in the permit as an agent of MMC.

It is an undisputed fact that MMC assigned to SEM all its rights under EP 133 pursuant to a Deed of Assignment (1994) subject to the following terms and conditions..

x x x

6. That this permit shall be for the exclusive use and benefit of the permittee or his duly authorized agents and shall be used for mineral exploration purposes only and for no other purpose.

ISSUE: Did CA err in upholding the validity and continuous existence of EP 133 as well as its transfer to SEM? YES.

HELD: Condition number 6 categorically states that the permit shall be for the exclusive use and benefit of MMC or its duly authorized agents. Records are bereft of any evidence showing that the former is the duly authorized agent of the latter.

The existence of the elements of agency is a factual matter that needs to be established or proven by evidence. It must be emphasized that the evidence to prove this fact must be clear, positive and convincing.

It is incumbent upon either MMC or SEM to prove that a contract of agency actually exists between them so as to allow SEM to use and benefit from EP 133 as the agent of MMC. SEM did not claim nor submit proof that it is the designated agent of MMC to represent the latter in its business dealings or undertakings. SEM cannot, therefore, be considered as an agent of MMC which can use EP 133 and benefit from it. Since SEM is not an authorized agent of MMC, it goes without saying that the assignment or transfer of the permit in favor of SEM is null and void as it directly contravenes the terms and conditions of the grant of EP 133.

The deed of assignment clearly stipulates

That for ONE PESO and other valuable consideration received by the ASSIGNOR from the ASSIGNEE, the ASSIGNOR hereby ASSIGNS, TRANSFERS and CONVEYS unto the ASSIGNEE whatever rights or interest the ASSIGNOR may have in the area …

It is obvious that the assignment by MMC of EP 133 in favor of SEM did not make the latter the former's agent. Such assignment involved actual transfer of all rights and obligations MMC have under the permit in favor of SEM making the letter the permittee. It is not a mere grant of authority to SEM, as an agent of MMC, to use the permit. It is a total abdication of MMC's rights

Age

ncy

| Day

12

over the permit. Hence, the assignment in question did not make SEM the authorized agent of MMC to make use and benefit from EP 133.

REASON FOR THE condition stipulating that the permit is for the exclusive use of the permittee or its duly authorized agent : Exploration permits are strictly granted to entities or individuals possessing the resources and capability to undertake mining operations. Without such a condition, non-qualified entities or individuals could circumvent the strict requirements under the law by the simple expediency acquiring the permit from the original permittee.

SC did not lend recognition to the CA's theory that SEM, being a 100% subsidiary of MMC, is automatically an agent of MMC. <corpo, piercing the veil> absent any clear proof to the contrary, SEM is a separate and distinct entity from MMC.

The assignment of the permit in favor of SEM is utilized to circumvent the condition of non-transferability of the exploration permit. To allow SEM to avail itself of this doctrine and to approve the validity of the assignment is tantamount to sanctioning illegal act which is what the doctrine precisely seeks to forestall.

Records indicate that EP 133 was extended until 1994. MMC never renewed its permit prior and after its expiration. Thus, EP 133 expired by non-renewal.

x x x

WHEREFORE, premises considered, the Petitions of Apex, Balite and the MAB are PARTIALLY GRANTED.

that EP 133 of MMC has EXPIRED on 7 July 1994 and that its subsequent transfer to SEM is VOID.

AFFIRM the finding of the CA declaring DAO Order illegal for having been issued in excess of the DENR Secretary's authority.

Consequently, the State, should it so desire, may now award mining operations in the disputed area to any qualified entity it may determine. No costs.

Agency- No. 8- Elements of Agency- De la Cruz vs. Northern Theatrical

G.R. No. L-7089 August 31, 1954

DOMINGO DE LA CRUZ, plaintiff-appellant, vs.NORTHERN THEATRICAL ENTERPRISES INC., ET AL., defendants-appellees

FACTS:

1. In the year 1941 the Northern Theatrical Enterprises Inc., a domestic corporation operated a movie house in Laoag, Ilocos Norte, and among the persons employed by it was the plaintiff DOMINGO DE LA CRUZ, hired as a special guard whose duties were to guard the main entrance of the cine, to maintain peace and order and to report the commission of disorders within the premises. As such guard he carried a revolver.

2. In the afternoon of July 4, 1941, one Benjamin Martin wanted to crash the gate or entrance of the movie house. Infuriated by the refusal of plaintiff De la Cruz to let him in without first providing himself with a ticket, Martin attacked him with a bolo. De la Cruz defendant himself as best he could until he was cornered, at which moment to save himself he shot the gate crasher, resulting in the latter's death.

3. For the killing, De la Cruz was charged with homicide twice, but was acquitted in both cases. In both criminal cases, De la Cruz employed a lawyer to defend him.

4. He demanded from his former employer reimbursement of his expenses but was refused, after which he filed the present action against the movie corporation and the three members of its board of directors, to recover not only the amounts he had paid his lawyers but also moral damages said to have been suffered, due to his worry, his neglect of his interests and his family as well in the supervision of the cultivation of his land, a total of P15,000.

5. The CFI of Ilocos Norte stated that he was not entitled to reimbursement as he was not an agent of the defendants. The principle of representation was no way involved. He was not hired to perform a certain specific duty or task. He was a mere employee hired to perform a certain specific duty, that of acting as a special guard and staying at the main entrance of the movie house to stop gate crashers and to maintain peace and order within the premises.

ISSUE:

Age

ncy

| Day

12

The question posed is whether an employee or servant who in line of duty and while in the performance of the task assigned to him, performs an act which eventually results in his incurring in expenses, caused not directly by his master or employer or his fellow servants or by reason of his performance of his duty, but rather by a third party or stranger not in the employ of his employer, may recover said damages against his employer.

HELD: NO. Complaint by de la Cruz was dismissed.

1. The Court stated that "after studying many laws or provisions of law to find out what law is applicable to the facts submitted and admitted by the parties, has found none and it has no other alternative but to dismiss the complaint." A case involving damages caused to an employee by a stranger or outsider while said employee was in the performance of his duties, presents a novel question which under present legislation the Court is neither able nor prepared to decide in favor of the employee.

2. While it is to the interest of the employer to give legal help to, and defend its employees charged criminally in court, in order to show that he was not guilty of any crime, either deliberately or through negligence, because should the employee be finally held criminally liable and he is found to be insolvent, the employer would be subsidiarily liable, such legal assistance might be regarded as a moral obligation, but it does not, at present count with the sanction of man-made laws. If the employer is not legally obliged to give legal assistance to its employee and provide him with a lawyer, naturally said employee may not recover from his employer the amount he may have paid a lawyer hired by him.

3. If despite his innocence and despite the absence of any criminal responsibility on his part he was accused of homicide, then the responsibility for the improper accusation may be laid at the door of the heirs of the deceased and the State, and so theoretically, they are the parties that may be held responsible civilly for damages and if this is so, we fail to see now this responsibility can be transferred to the employer who in no way intervened, much less initiated the criminal proceedings and whose only connection or relation to the whole affairs was that he employed plaintiff to perform a special duty or task, which task or duty was performed lawfully and without negligence.

Dispositive: In view of the foregoing, the judgment of the lower court is affirmed. No costs.

Agency- No. 9- Elements of Agency

G.R. No. 156262 July 14, 2005

MARIA TUAZON, ALEJANDRO P. TUAZON, MELECIO P. TUAZON, Spouses ANASTACIO and MARY T. BUENAVENTURA, Petitioners, vs.HEIRS OF BARTOLOME RAMOS, Respondents.

FACTS:

1. The heirs of Bartolome Ramos, respondents, alleged that between the period of May 2, 1988 and June 5, 1988, spouses Leonilo and Maria Tuazon purchased a total of 8,326 cavans of rice from [the deceased Bartolome] Ramos [predecessor-in-interest of respondents]. That of this quantity,only 4,437 cavans have been paid for so far, leaving unpaid 3,889 cavans valued at P1,211,919.00. In payment therefor, the spouses Tuazon issued several Traders Royal Bank checks.

Age

ncy

| Day

12

2. When these checks were encashed, all of the checks bounced due to insufficiency of funds. Respondents advanced that before issuing said checks, spouses Tuazon already knew that they had no available fund to support the checks, and they failed to provide for the payment of these despite repeated demands made on them.

3. "Respondents averred that because spouses Tuazon anticipated that they would be sued, they conspired with the other defendants to defraud them as creditors by executing fictitious sales of their properties, as follows:

Sps. Buenaventura- 3 lots , residential lot and house at Nueva Ecoja and Stake Toyota

Melecio Tuason- son- residential lot

Alejandro Tuason- Toyota Willys

Resultantly, by the said ante-dated and simulated sales and the corresponding transfers, there were no more property left registered in the names of spouses Tuason answerable to creditors, to the damage and prejudice of, the respondents. The Tuazons contended that they sold these properties since they were in financial difficulty and the disposals were made for value and in good faith and before the filing of the suit by the respondents.

4. The petitioners denied having purchased rice from Bartolome Ramos. They claimed that it was Magdalena Ramos, wife of Bartolome, who owned and traded the merchandise and that Maria Tuason was merely her agent. They argued that it was Evangeline Santos who was the buyer of the rice and was the one who issued the checks to Maria Tuason as payment thereof.

5. In good faith, Maria Tuason received the checks from Evangeline Santos and turned these over to Ramos, without knowing that these had no funds. It is for this reason that the petitioners were insisting on the inclusion of Evangeline Santos as an indispensable party, and her non-inclusion was a fatal error.

6. To dispute the contention of the petitioners that they were the buyers of the rice, they stated that they did not get any sales invoice, official receipts or any evidence to prove this. They assert that they were merely agents and should not be held answerable.

7. Civil and criminal cases were filed by the respondents. In the interim, Bartolome Ramos died, and hence, substituted by his heirs.

8. The trial court acquitted petitioners on the criminal charges and found them civilly liable to the respondents.

ISSUES:

WON the petitioners are agents of the respondents

HELD: No, the petitioners are not agents of the respondents .

1. In a contract of agency, one binds oneself to render some service or to do something in representation or on behalf of another, with the latter’s consent or authority.

The following are the elements of agency:

(a) the parties’consent, express or implied, to establish the relationship;

(b) the object, which is the execution of a juridical act in relation to a third person;

(c) the representation, by which the one who acts as an agent does so, not for oneself, but as a representative;

(d) the limitation that the agent acts within the scope of his or her authority

.As the basis of agency is representation, there must be, on the part of the principal, an actual intention to appoint, an intention naturally inferable from the principal’s words or actions. In the same manner, there must be an intention on the part of the agent to accept the appointment and act upon it. Absent such mutual intent, there is generally no agency

2. This Court finds no reversible error in the findings of the courts a quo that petitioners were the rice buyers themselves; they were not mere agents of respondents in their rice dealership. The question of whether a contract is one of sale or of agency depends on the intention of the parties.

3. The declarations of agents alone are generally insufficient to establish the fact or extent of their authority. The law makes no presumption of agency; proving its existence, nature and extent is incumbent upon the person alleging it.

4. In the present case, petitioners raise the fact of agency as an affirmative defense, yet fail to prove its existence.

The Court notes that petitioners, on their own behalf, sued Evangeline Santos for collection of the amounts

Age

ncy

| Day

12

represented by the bounced checks, in a separate civil case that they sought to be consolidated with the current one. If, as they claim, they were mere agents of respondents, petitioners should have brought the suit against Santos for and on behalf of their alleged principal, in accordance with Section 2 of Rule 3 of the Rules on Civil Procedure. Their filing a suit against her in their own names negates their claim that they acted as mere agents in selling the rice obtained from Bartolome Ramos.

5. The declaration of agents alone are generally insufficient to establish the fact or extent of their authority. The law makes no presumption of agency, proving its existence, nature and extent is incumbent upon the person alleging it. In the present case, petitioners raise the fact of agency as an affirmative defense, yet fail to prove its existence.

Dispositive: WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioners. So Ordered.

Agency- No. 10- Victorias Milling vs. CA

G.R. No. 117356. June 19, 2000.

VICTORIAS MILLING CO., INC., petitioner, vs. COURT OF APPEALS and CONSOLIDATED SUGAR CORPORATION, respondents

.QUISUMBING, J

FACTS:

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

2. On October 25, 1989, STM sold to private respondent Consolidated Sugar Corporation (CSC) its rights in SLDR No. 1214M for P 14,750,000.00. CSC issued one check dated October 25, 1989 and three checks postdated November 13, 1989 in payment. That same day, CSC wrote petitioner that it had been authorized by STM to withdraw the sugar covered by SLDR No. 1214M. Enclosed in the letter were a copy of SLDR No. 1214M and a letter of authority from STM authorizing CSC "to withdraw for and in our behalf the refined sugar covered by Shipping List/Delivery Receipt-Refined Sugar (SDR) No. 1214 dated October 16, 1989 in the total quantity of 25,000 bags."

Age

ncy

| Day

12

3. On October 27, 1989, STM issued 16 checks in the total amount of P31,900,000.00 with petitioner as payee. The latter, in turn, issued Official Receipt No. 33743 dated October 27, 1989 acknowledging receipt of the said checks in payment of 50,000 bags. Aside from SLDR No. 1214M, said checks also covered SLDR No. 1213.

4. Private respondent CSC surrendered SLDR No. 1214M to the petitioner's NAWACO warehouse and was allowed to withdraw sugar. However, after 2,000 bags had been released, petitioner refused to allow further withdrawals of sugar against SLDR No. 1214M. CSC then sent petitioner a letter dated January 23, 1990 informing it that SLDR No. 1214M had been "sold and endorsed" to it but that it had been refused further withdrawals of sugar from petitioner's warehouse despite the fact that only 2,000 bags had been withdrawn. CSC thus inquired when it would be allowed to withdraw the remaining 23,000 ba

5. Petitioner replied that it could not allow any further withdrawals of sugar against SLDR No. 1214M because STM had already withdrawn all the sugar covered by the cleared checks.

6. On March 2, 1990, CSC sent petitioner a letter demanding the release of the balance of 23,000 bags.

7. Seven days later, petitioner reiterated that all the sugar corresponding to the amount of STM's cleared checks had been fully withdrawn and hence, there would be no more deliveries of the commodity to STM's account. Petitioner also noted that CSC had represented itself to be STM's agent as it had withdrawn the 2,000 bags against SLDR No. 1214M "for and in behalf" of STM.

8. CSC complaint alleged that STM had fully paid the petitioner for the sugar covered by SLDR No. 1214M and sought the award of unrealized profits, exemplary damages and other fees.

9. VMC’s main defense was that it was an unpaid seller for 23,000 pages. STM had already withdrawn in full the 23,000 bags, hence, no further delivery can be made to CSC. VMC claims that it had no privity of contract with CSC.

10. The Trial Court ruled in favor of CSC. VMC failed to present in court any dishonoured check or any replacement check. The CA ordered the delivery to VMC of the sugar covered by SLDR No. 1214M.

ISSUES:

WON the Court of Appeals erred in not ruling that CSC was an agent of STM and hence, estopped to sue upon SLDR No. 1214 as an assignee.

HELD: THE CA did not err in ruling that CSC was NOT an agent of STM and thus can sue VMC.

1. We find from the records that petitioner raised this issue for the first time on appeal. It is settled that an issue which was not raised during the trial in the court below could not be raised for the first time on appeal as to do so would be offensive to the basic rules of fair play, justice, and due process. Nonetheless, the Court of Appeals opted to address this issue, hence, now a matter for our consideration.

Petitioner heavily relies upon STM's letter of authority allowing CSC to withdraw sugar against SLDR No. 1214M to show that the latter was STM's agent. The pertinent portion of said letter reads:

"This is to authorize Consolidated Sugar Corporation or its representative to withdraw for and in our behalf (stress supplied) the refined sugar covered by Shipping List/Delivery Receipt = Refined Sugar (SDR) No. 1214 dated October 16, 1989 in the total quantity of 25, 000 bags."

The Civil Code defines a contract of agency as follows:

"Art.  1868. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter."

It is clear from Article 1868 that the basis of agency is representation. On the part of the principal, there must be an actual intention to appoint or an intention naturally inferable from his words or actions; and on the part of the agent, there must be an intention to accept the appointment and act on it, and in the absence of such intent, there is generally no agency.

One factor which most clearly distinguishes agency from other legal concepts is control; one person - the agent - agrees to act under the control or direction of another - the principal. Indeed, the very word "agency" has come to connote control by the principal. The control factor, more than any other, has caused the courts to put contracts between principal and agent in a separate category. The Court of Appeals, in finding that CSC, was not an agent of STM, opined:

Age

ncy

| Day

12

"This Court has ruled that where the relation of agency is dependent upon the acts of the parties, the law makes no presumption of agency, and it is always a fact to be proved, with the burden of proof resting upon the persons alleging the agency, to show not only the fact of its existence, but also its nature and extent (Antonio vs. Enriquez[CA], 51 O.G. 3536].

Here, defendant-appellant failed to sufficiently establish the existence of an agency relation between plaintiff-appellee and STM. The fact alone that it (STM) had authorized withdrawal of sugar by plaintiff-appellee "for and in our (STM's) behalf" should not be eyed as pointing to the existence of an agency relation ...It should be viewed in the context of all the circumstances obtaining. Although it would seem STM represented plaintiff-appellee as being its agent by the use of the phrase "for and in our (STM's) behalf" the matter was cleared when on 23 January 1990, plaintiff-appellee informed defendant-appellant that SLDFR No. 1214M had been "sold and endorsed" to it by STM (Exhibit I, Records, p. 78).

Further, plaintiff-appellee has shown that the 25, 000 bags of sugar covered by the SLDR No. 1214M were sold and transferred by STM to it ...A conclusion that there was a valid sale and transfer to plaintiff-appellee may, therefore, be made thus capacitating plaintiff-appellee to sue in its own name, without need of joining its imputed principal STM as co-plaintiff."

2. In the instant case, it appears plain to us that private respondent CSC was a buyer of the SLDFR form, and not an agent of STM. Private respondent CSC was not subject to STM's control. The question of whether a contract is one of sale or agency depends on the intention of the parties as gathered from the whole scope and effect of the language employed. That the authorization given to CSC contained the phrase "for and in our (STM's) behalf" did not establish an agency. Ultimately, what is decisive is the intention of the parties. That no agency was meant to be established by the CSC and STM is clearly shown by CSC's communication to petitioner that SLDR No. 1214M had been "sold and endorsed" to it. The use of the words "sold and endorsed" means that STM and CSC intended a contract of sale, and not an agency. Hence, on this score, no error was committed by the respondent appellate court when it held that CSC was not STM's agent and could independently sue petitioner.

3. The aforequoted terms and conditions clearly show that petitioner transferred title to the sugar to the buyer or his assignee upon payment of the purchase

price. Said terms clearly establish a contract of sale, not a contract to sell. Petitioner is now estopped from alleging the contrary. The contract is the law between the contracting parties. And where the terms and conditions so stipulated are not contrary to law, morals, good customs, public policy or public order, the contract is valid and must be upheld.  Having transferred title to the sugar in question, petitioner is now obliged to deliver it to the purchaser or its assignee.

Dispositive: WHEREFORE, the instant petition is DENIED for lack of merit. Costs against petitioner.

Agency- No. 12- Authority to Act

G.R. No. 149353 June 26, 2006

JOCELYN B. DOLES, Petitioner, vs. MA. AURA TINA ANGELES, Respondent.

FACTS:

1. Ma. Aura Tina Angeles (Angeles), respondent, filed a case of specific performance with damages against Jocelyn Doles (Doles), petitioner, with the RTC. Angeles alleged that Doles was indebted to her in the amount of P405,430, representing the principal amount and interest. To satisfy her loan, Doles ceded her parcel of land with an area of 42 sq.m., as well as its improvements in Bacoor, Cavite known as CAmella Townhomes Sorrente.

2. The property was mortgaged with National Home Mortgage Finance Corp. (NHMFC) to secure the petitioner’s loan in the amount of P337,050, and as a condition of the sale, Angeles shall assume the balance

Age

ncy

| Day

12

and pay a monthly amortization of P4,748.11 for 25 years. The arrearages amounted to P26,744.09 and that the property had a tenant paying a monthly rent of P3,000.

3. Doles denied that she had a loan with Angeles. She claimed that she referred her friends to Angeles, who was engaged in the business of lending money in exchange for personal checks through her capitalist, Arsenio Pua. She alleged that her friends borrowed money and issued their personal checks, in payment thereof and which bounced for insufficiency of funds.

4. Doles was threatened by Angeles, thus Doles was forced to issue eight checks amounting to P350,000 to answer for the bounced checks of her friends. Doles stated that she warned Angeles that the checks she issued had no funds. Thus, these were dishonoured and that Angeles threatened her with criminal action. She was thus forced to execute an “Absolute Deed of Sale” over her Bacoor property. She claimed that said deed had no valid consideration, that she did not appear before a notary public and that the Community Tax Certificate on the deed was not hers, and thus, Angeles should be prosecuted for falsification and perjury.

5. The RTC held that the sale was void for lack of cause or consideration. The rule under the Civil Code is that contracts without a cause or consideration produce no effect whatsoever. The CA reversed the RTC decision. The CA concluded that Doles was the borrower and in turn would “re-lend” the amount borrowed from Angeles to her friends. The Deed of Sale was supported by a valid consideration, which is the sum of money owed Angeles amounting to P405,430.

6. In a Motion for Reconsideration, Doles argued that Angeles had admitted in open court that she acted only as agent or representative of Arsenio Pua, the principal financier and hence, had no legal capacity to sue Doles and that the CA failed to consider the fact that Doles’ father co-owned the subject property. Hence, she cannot be made to sign the documents to effect the transfer of ownership over the entire property. CA denied the Motion for Reconsideration.

ISSUES: WON the debt of Doles can be considered as a valid cause or consideration for the sale

HELD:NO. The debt of Doles is not a valid consideration for the sale since she is not a party to the loan, being merely an agent.

The principal issue is whether the Deed of Absolute Sale is supported by a valid consideration.

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

Indeed, the Deed of Absolute Sale purports to be supported by a consideration in the form of a price certain in money and that this sum indisputably pertains to the debt in issue. This Court has consistently held that a contract of sale is null and void and produces no effect whatsoever where the same is without cause or consideration. The question that has to be resolved for the moment is whether this debt can be considered as a valid cause or consideration for the sale.

To restate, the CA cited four instances in the record to support its holding that petitioner "re-lends" the amount borrowed from respondent to her friends:

a. first, the friends of petitioner never presented themselves to respondent and that all transactions were made by and between petitioner and respondent;

b. second; the money passed through the bank accounts of petitioner and respondent;

c. third, petitioner herself admitted that she was "re-lending" the money loaned to other individuals for profit;

d. and fourth, the documentary evidence shows that the actual borrowers, the friends of petitioner, consider her as their creditor and not the respondent.

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

Age

ncy

| Day

12

interested in the transaction in which he or she is engaged.

3. For an agency to arise, it is not necessary that the principal personally encounter the third person with whom the agent interacts. The law, in fact contemplates, and to a great degree, impersonal dealings where the principal need not personally know or meet the third person with whom her agent transacts: precisely, the purpose of agency is to extend the personality of the principal through the facility of the agent.

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

4. With respect to the admission of the petitioner, Doles, that she is re-lending the money loaned from Angeles to other individuals for profit, it must be stressed that the manner in which the parties designate the relationship is NOT controlling. If an act is done by one person in behalf of another is in its essential nature one of agency, the former is the agent of the latter notwithstanding he or she is not so called- it will be an agency whether the parties understood the exact nature of the relation or not.

5. That both parties acted as mere agent is shown by the undisputed fact that the friends of Doles issued checks in payment of the loan in the name of Pua. If it is true that Doles was “re-lending,” then the checks should have been drawn in her name and not directly paid to Pua.

6. In view of the two agency relationships, petitioner and respondent are not privy to the contract of loan between their principals. Since the sale is predicated on that loan, then the sale is void for lack of consideration. In this case, petitioner knew that the financier of respondent is Pua; and respondent knew that the borrowers are friends of petitioner.

7. A further scrutiny of the record shows, however, that the sale might have been backed up by another

consideration that is separate and distinct from the debt: respondent averred in her complaint and testified that the parties had agreed that as a condition for the conveyance of the property the respondent shall assume the balance of the mortgage loan which petitioner allegedly owed to the NHMFC. This Court in the recent past has declared that an assumption of a mortgage debt may constitute a valid consideration for a sale.

8. Although the record shows that petitioner admitted at the time of trial that she owned the property described in the TCT, the Court must stress that the Transfer Certificate of Title No. 382532 on its face shows that the owner of the property which admittedly forms the subject matter of the Deed of Absolute Sale refers neither   to   the  petitioner  nor   to  her   father,   Teodorico Doles, the alleged co-owner. Rather, it states that the property is registered in the name of "Household Development Corporation." Although there is an entry to the effect that the petitioner had been granted a special power of attorney "covering the shares of Teodorico Doles on the parcel of land described in this certificate," it cannot be inferred from this bare notation, nor from any other evidence on the record, that the petitioner or her father held any direct interest on the property in question so as to validly constitute a mortgage thereon and, with more reason, to effect the delivery of the object of the sale at the consummation stage. What is worse, there is a notation that the TCT itself has been "cancelled."

9. In view of these anomalies, the Court cannot entertain the possibility that respondent agreed to assume the balance of the mortgage loan which petitioner allegedly owed to the NHMFC, especially since the record is bereft of any factual finding that petitioner was, in the first place, endowed with any ownership rights to validly mortgage and convey the property. As the complainant who initiated the case, respondent bears the burden of proving the basis of her complaint. Having failed to discharge such burden, the Court has no choice but to declare the sale void for lack of cause. And since the sale is void, the Court finds it unnecessary to dwell on the issue of whether duress or intimidation had been foisted upon petitioner upon the execution of the sale.

10. Moreover, even assuming the mortgage validly exists, the Court notes respondent’s allegation that the mortgage with the NHMFC was for 25 years which began September 3, 1994. Respondent filed her Complaint for Specific Performance in 1997. Since the 25 years had not lapsed, the prayer of respondent to

Age

ncy

| Day

12

compel petitioner to execute necessary documents to effect the transfer of title is premature.

Dispositive: WHEREFORE, the petition is granted. The Decision and Resolution of the Court of Appeals are REVERSED and SET ASIDE. The complaint of respondent in Civil Case No. 97-82716 is DISMISSED.

Agency- No. 13- UY vs CA- Agent not Real Party in Interest

G.R. No. 120465 September 9, 1999

WILLIAM UY and RODEL ROXAS, petitioners, vs.COURT OF APPEALS, HON. ROBERT BALAO and NATIONAL HOUSING AUTHORITY, respondents.

September 9, 1999

FACTS:

1. Petitioners William Uy and Rodel Roxas are agents authorized to sell eight parcels of land by the owners thereof. By virtue of such authority, petitioners offered to sell the lands, located in Tuba, Tadiangan, Benguet to respondent National Housing Authority (NHA) to be utilized and developed as a housing project.

2. On February 14, 1989, the NHA Board passed a Resolution approving the acquisition of said lands, with an area of 31.8231 hectares, at the cost of P23.867 million, pursuant to which the parties executed a series of Deeds of Absolute Sale covering the subject lands. Of the eight parcels of land, however, only five were paid for by the NHA because of the report it received from the Land Geosciences Bureau of the Department of Environment and Natural Resources (DENR) that the remaining area is located at an active landslide area and therefore, not suitable for development into a housing project.

3. On 22 November 1991, the NHA issued Resolution No. 2352 cancelling the sale over the three parcels of land. The NHA, through Resolution No. 2394, subsecguently offered the amount of P1.225 million to the landowners as daños perjuicios.

4. On 9 March 1992, petitioners filed before the Regional Trial Court (RTC) of Quezon City a Complaint for Damages against NHA and its General Manager Robert Balao. After trial, the RTC rendered a decision declaring the cancellation of the contract to be justified. The trial court nevertheless awarded damages to

plaintiffs in the sum of P1.255 million, the same amount initially offered by NHA to petitioners as damages.1âwphi1.nêt

5. Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court and entered a new one dismissing the complaint. It held that since there was "sufficient justifiable basis" in cancelling the sale, "it saw no reason" for the award of damages. The Court of Appeals also noted that petitioners were mere attorneys-in-fact and, therefore, not the real parties-in-interest in the action before the trial court.

ISSUE: WON the petitioners can recover damages

HELD: NO.

1. The petitioners alleged themselves to be "sellers' agents" for   the   several   owners   of   the   8   lots subject matter of the case. Obviously, William Uy and Rodel Roxas in filing this case acted as attorneys-in-fact of the lot owners who are the real parties in interest but who were omitted to be pleaded as party-plaintiffs in the case. This omission is fatal. Where the action is brought by an attorney-in-fact of a land owner in his name, (as in our present action) and not in the name of his principal, the action was properly dismissed (Ferrer vs. Villamor, 60 SCRA 406 [1974]; Marcelo vs. de Leon, 105 Phil. 1175) because the rule is that every action must be prosecuted in the name of the real parties-in-interest (Section 2, Rule 3, Rules of Court).

2. When plaintiffs UY and Roxas sought payment of damages in their favor in view of the partial rescission of Resolution No. 1632 and the Deed of Absolute Sale covering TCT Nos. 10998, 10999 and 11292 (Prayer complaint, page 5, RTC records), it becomes obviously indispensable that the lot owners be included, mentioned and named as party-plaintiffs, being the real party-in-interest. UY and Roxas, as attorneys-in-fact or apoderados, cannot by themselves lawfully commence this action, more so, when the supposed special power of attorney, in their favor, was never presented as an evidence in this case. Besides, even if herein plaintiffs Uy and Roxas were authorized by the lot owners to commence this action, the same must still be filed in the name of the principal, (Filipino Industrial Corporation vs. San Diego, 23 SCRA 706 [1968]). As such indispensable party, their joinder in the action is mandatory and the complaint may be dismissed if not so impleaded (NDC vs. CA, 211 SCRA 422 [1992]).

3. Sec. 2, Rule 3 of the Rules of Court requires that every action must be prosecuted and defended in the name of the real party-in-interest. The real party-in-

Age

ncy

| Day

12

interest is the party who stands to be benefited or injured by the judgment or the party entitled to the avails of the suit. "Interest, within the meaning of the rule, means material interest, an interest in the issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. Cases construing the real party-in-interest provision can be more easily understood if it is borne in mind that the true meaning of real party-in-interest may be summarized as follows: An action shall be prosecuted in the name of the party who, by the substantive law, has the right sought to be enforced.

4. Petitioners are not parties to the contract of sale between their principals and NHA. They are mere agents of the owners of the land subject of the sale. As agents, they only render some service or do something in representation or on behalf of their principals. The rendering of such service did not make them parties to the contracts of sale executed in behalf of the latter. Since a contract may be violated only by the parties thereto as against each other, the real parties-in-interest, either as plaintiff or defendant, in an action upon that contract must, generally, either be parties to said contract.

5. As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulation pour   autrui under the contracts of sale, they do not, under substantive law, possess the right they seek to enforce. Therefore, they are not the real parties-in-interest in this case.

6. Petitioners not being the real parties-in-interest, any decision rendered herein would be pointless since the same would not bind the real parties-in-interest.

7. The NHA was justified in canceling the contract. The realization of the mistake as regards the quality of the land resulted in the negation of the motive/cause thus rendering the contract inexistent. Article 1318 of the Civil Code states that:

Art. 1318. There   is   no   contract   unless   the   following requisites concur:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract;

(3) Cause of the obligation which is established.

Therefore, assuming that petitioners are parties, assignees or beneficiaries to the contract of sale, they would not be entitled to any award of damages.

Dispositive: WHEREFORE, the instant petition is hereby DENIED.

SO ORDERED.

Agency- No. 14- Angeles vs. PNR- Agent Not Real Party in Interest

G.R. No. 150128 August 31, 2006

Age

ncy

| Day

12

LAUREANO T. ANGELES, Petitioner,vs.PHILIPPINE NATIONAL RAILWAYS (PNR) AND RODOLFO FLORES, 1Respondents

FACTS:

1. On May 5, 1980, the respondent Philippine National Railways (PNR) informed a certain Gaudencio Romualdez (Romualdez) that it had accepted the latter’s offer to buy, on an "AS IS, WHERE IS" basis, the PNR’s scrap/unserviceable rails located in Del Carmen and Lubao, Pampanga at P1,300.00 and P2,100.00 per metric ton, respectively, for the total amount of P96,600.00. After paying the stated purchase price, Romualdez addressed a letter to Atty. Cipriano Dizon, PNR’s Acting Purchasing Agent. Bearing date May 26, 1980, the letter reads:

Dear Atty. Dizon:

This is to inform you as President of San Juanico Enterprises, that I have authorized the bearer, LIZETTE R. WIJANCO of No. 1606 Aragon St., Sta. Cruz, Manila, to be my lawful representative in the withdrawal of the scrap/unserviceable rails awarded to me.

For this reason, I have given her the original copy of the award, dated May 5, 1980 and O.R. No. 8706855 dated May 20, 1980 which will indicate my waiver of rights, interests and participation in favor of LIZETTE R. WIJANCO.

Thank you for your cooperation.

Very truly yours,

(Sgd.) Gaudencio Romualdez

2. The Lizette R. Wijanco mentioned in the letter was Lizette Wijanco- Angeles, petitioner's now deceased wife. That very same day – May 26, 1980 – Lizette requested the PNR to transfer the location of withdrawal for the reason that the scrap/unserviceable rails located in Del Carmen and Lubao, Pampanga were not ready for hauling. The PNR granted said request and allowed Lizette to withdraw scrap/unserviceable rails in Murcia, Capas and San Miguel, Tarlac instead. However, the PNR subsequently suspended the withdrawal in view of what it considered as documentary discrepancies coupled by reported pilferages of over P500,000.00 worth of PNR scrap properties in Tarlac.

3. Consequently, the spouses Angeles demanded the refund of the amount of P96,000.00. The PNR, however,

refused to pay, alleging that as per delivery receipt duly signed by Lizette, 54.658 metric tons of unserviceable rails had already been withdrawn which, at P2,100.00 per metric ton, were worth P114,781.80, an amount that exceeds the claim for refund.

4. On August 10, 1988, the spouses Angeles filed suit against the PNR and its corporate secretary, Rodolfo Flores, among others, for specific performance and damages before the Regional Trial Court of Quezon City. In it, they prayed that PNR be directed to deliver 46 metric tons of scrap/unserviceable rails and to pay them damages and attorney's fees.

5. Issues having been joined following the filing by PNR, et al., of their answer, trial ensued. Meanwhile, Lizette W. Angeles passed away and was substituted by her heirs, among whom is her husband, herein petitioner Laureno T. Angeles.

6. The RTC concluded that the Sps. Angeles are not the real parties-in-interest, thus dismissing their complaint. It held that Lizette was merely a representative of Romualdez in the withdrawal of scrap or unserviceable rails and not an assignee to the latter’s rights with respect to the award.

ISSUES:

WON Lizette Angeles was an assignee and thus can sue in her own behalf.

Held: NO. She was not an assignee and therefore, not the real party-in-interest.

1. No. Where agency exists, the third party's (in this case, PNR's) liability on a contract is to the principal and not to the agent and the relationship of the third party to the principal is the same as that in a contract in which there is no agent. Normally, the agent has neither rights nor liabilities as against the third party. He cannot thus sue or be sued on the contract. Since a contract may be violated only by the parties thereto as against each other, the real party-in-interest, either as plaintiff or defendant in an action upon that contract must, generally, be a contracting party.

2. The legal situation is, however, different where an agent is constituted as an assignee. In such a case, the agent may, in his own behalf, sue on a contract made for his principal, as an assignee of such contract. The rule requiring every action to be prosecuted in the name of the real party-in-interest recognizes the assignment of rights of action and also recognizes that when one has a right assigned to him, he is then the

Age

ncy

| Day

12

real party-in-interest and may maintain an action upon such claim or right.

Upon scrutiny of the subject Romualdez's letter to Atty. Cipriano Dizon dated May 26,1980, it is at once apparent that Lizette was to act just as a "representative" of Romualdez in the "withdrawal of rails," and not an assignee.

Other Doctrines:

1 .If Lizette was without legal standing to sue and appear in this case, there is more reason to hold that her petitioner husband, either as her conjugal partner or her heir, is also without such standing.

Petitioner makes much of the fact that the terms "agent" or "attorney-in-fact" were not used in the Romualdez letter aforestated . It bears to stress, however, that the words "principal" and "agent," are not the only terms used to designate the parties in an agency relation. The agent may also be called an attorney, proxy, delegate or, as here, representative.

It cannot be over emphasized that Romualdez's use of the active verb "authorized, "instead of "assigned," indicated an intent on his part to keep and retain his interest in the subject matter. Stated a bit differently, he intended to limit Lizette’s role in the scrap transaction to being the representative of his interest therein

2.A power of attorney is only but an instrument in writing by which a person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts on behalf of the principal. The written authorization itself is the power of attorney, and this is clearly indicated by the fact that it has also been called a "letter of attorney." Its primary purpose is not to define the authority of the agent as between himself and his principal but to evidence the authority of the agent to third parties with whom the agent deals. The letter under consideration is sufficient to constitute a power of attorney.

Except as may be required by statute, a power of attorney is valid although no notary public intervened in its execution. A power of attorney must be strictly construed and pursued. The instrument will be held to grant only those powers which are specified therein, and the agent may neither go beyond nor deviate from the power of attorney.

3. Contextually, all that Lizette was authorized to do was to withdraw the unserviceable/scrap railings. Allowing her authority to sue therefor, especially in her own name, would be to read something not intended, let alone written in the Romualdez letter.

Dispositive Portion:

WHEREFORE, the petition is DENIED and the assailed decision of the CA is AFFIRMED.

Age

ncy

| Day

12

G.R. No. 119858 April 29, 2003

EDWARD C. ONG, petitioner, vs.THE COURT OF APPEALS AND THE PEOPLE OF THE PHILIPPINES, respondents.

CARPIO, J.:

Facts:

Petitioner, representing ARMAGRI International Corporation applied for a letter of credit for P2,532,500.00 with SOLIDBANK Corporation to finance the purchase of differential assemblies from Metropole Industrial Sales.

On 6 July 1990, petitioner, representing ARMAGRI, executed a trust receipt acknowledging receipt from the Bank of the goods valued at P2,532,500.00.

On 12 July 1990, petitioner and Benito Ong, representing ARMAGRI, applied for another letter of credit for P2,050,000.00 to finance the purchase of merchandise from Fertiphil Corporation. The Bank approved the application, opened the letter of credit and paid to Fertiphil Corporation the amount of P2,050,000.00.

On 23 July 1990, petitioner, signing for ARMAGRI, executed another trust receipt in favor of the Bank acknowledging receipt of the merchandise

Both trust receipts contained the same stipulations. Under the trust receipts, ARMAGRI undertook to account for the goods held in trust for the Bank, or if the goods are sold, to turn over the proceeds to the Bank. ARMAGRI also undertook the obligation to keep the proceeds in the form of money, bills or receivables as the separate property of the Bank or to return the goods upon demand by the Bank, if not sold. In addition, petitioner executed the following additional undertaking stamped on the dorsal portion of both trust receipts:

Petitioner signed alone the foregoing additional undertaking in the Trust Receipt for P2,253,500.00, while both petitioner and Benito Ong signed the additional undertaking in the Trust Receipt for P2,050,000.00.

When the trust receipts became due and demandable, ARMAGRI failed to pay or deliver the goods to the Bank despite several demand letters.12 Consequently, as of 31 May 1991, the unpaid account under the first trust receipt amounted to

P1,527,180.66,13 while the unpaid account under the second trust receipt amounted to P1,449,395.71.14

RTC and the Court of Appeals ruled in favor of the respondents. They held that although petitioner is neither a director nor an officer of ARMAGRI, he certainly comes within the term "employees or other x x x persons therein responsible for the offense" in Section 13 of the Trust Receipts Law.

The Court of Appeals also ruled that what made petitioner liable was his failure to account to the entruster Bank what he undertook to perform under the trust receipts. The Court of Appeals held that ARMAGRI, which petitioner represented, could not itself negotiate the execution of the trust receipts, go to the Bank to receive, return or account for the entrusted goods. Based on the representations of petitioner, the Bank accepted the trust receipts and, consequently, expected petitioner to return or account for the goods entrusted.17

Issue/Held:

The Court sustains the conviction of petitioner.

Petitioner contends that the Court of Appeals erred in finding him liable for the default of ARMAGRI, arguing that in signing the trust receipts, he merely acted as an agent of ARMAGRI. Petitioner asserts that nowhere in the trust receipts did he assume personal responsibility for the undertakings of ARMAGRI which was the entrustee.

Petitioner's arguments fail to persuade us.

The pivotal issue for resolution is whether petitioner comes within the purview of Section 13 of the Trust Receipts Law which provides:

x x x . If the violation is committed by a corporation, partnership, association or other juridical entities, the penalty provided for in this Decree shall be imposed upon the directors, officers, employees or other officials or persons therein responsible for the offense, without prejudice to the civil liabilities arising from the offense. (Emphasis supplied)

We hold that petitioner is a person responsible for violation of the Trust Receipts Law.

In the instant case, the Bank was the entruster while ARMAGRI was the entrustee. Being the entrustee, ARMAGRI was the one responsible to account for the goods or its proceeds in case of sale. However, the criminal liability for violation of the Trust Receipts

Age

ncy

| Day

12

Law falls on the human agent responsible for the violation. Petitioner, who admits being the agent of ARMAGRI, is the person responsible for the offense for two reasons. First, petitioner is the signatory to the trust receipts, the loan applications and the letters of credit. Second, despite being the signatory to the trust receipts and the other documents, petitioner did not explain or show why he is not responsible for the failure to turn over the proceeds of the sale or account for the goods covered by the trust receipts.

The Bank released the goods to ARMAGRI upon execution of the trust receipts and as part of the loan transactions of ARMAGRI. The Bank had a right to demand from ARMAGRI payment or at least a return of the goods. ARMAGRI failed to pay or return the goods despite repeated demands by the Bank.

When petitioner signed the trust receipts, he acknowledged receipt of the goods covered by the trust receipts. In addition, petitioner was fully aware of the terms and conditions stated in the trust receipts, including the obligation to turn over the proceeds of the sale or return the goods to the Banks.

True, petitioner acted on behalf of ARMAGRI. However, it is a well-settled rule that the law of agency governing civil cases has no application in criminal cases. When a person participates in the commission of a crime, he cannot escape punishment on the ground that he simply acted as an agent of another party.26 In the instant case, the Bank accepted the trust receipts signed by petitioner based on petitioner's representations. It is the fact of being the signatory to the two trust receipts, and thus a direct participant to the crime, which makes petitioner a person responsible for the offense.

There is no dispute that on 6 July 1990 and on 23 July 1990, petitioner signed the two trust receipts27 on behalf of ARMAGRI. Petitioner, acting on behalf of ARMAGRI, expressly acknowledged receipt of the goods in trust for the Bank. ARMAGRI failed to comply with its undertakings under the trust receipts. On the other hand, petitioner failed to explain and communicate to the Bank what happened to the goods despite repeated demands from the Bank.

G.R. No. 94071 March 31, 1992

NEW LIFE ENTERPRISES and JULIAN SY, petitioners, vs. HON. COURT OF APPEALS, EQUITABLE INSURANCE CORPORATION, RELIANCE SURETY AND INSURANCE CO., INC. and WESTERN GUARANTY CORPORATION, respondents.

REGALADO, J.:

Julian Sy and Jose Sy Bang have formed a business partnership in the City of Lucena with the name of New Life Enterprises, which is engaged in the sale of construction materials at its place of business, a two storey building situated at Iyam, Lucena City. Julian Sy insured the stocks in trade of New Life Enterprises with Western Guaranty Corporation, Reliance Surety and Insurance. Co., Inc., and Equitable Insurance Corporation.

The occupied by the New Life Enterprises was gutted by fire at about 2:00 o'clock in the morning of October 19, 1982, the stocks in the trade inside said building were insured against fire in the total amount of P1,550,000.00. According to the certification issued by the Headquarters, Philippine Constabulary /Integrated National Police, Camp Crame, the cause of fire was electrical in nature. According to the plaintiffs, the building and the stocks inside were burned. After the fire, Julian Sy went to the agent of Reliance Insurance whom he asked to accompany him to the office of the company so that he can file his claim.

The three insurance corporation denied the claim due to breach of policy conditions.

In relation to the case against Reliance Surety and Insurance Company, a certain Atty. Serafin D. Dator, acting in behalf of the plaintiff, sent a letter dated February 13, 1983 (Exhibit "G-l" No 7-84) to Executive Vice-President Mary Dee Co asking that he be informed as to the specific policy conditions allegedly violated by the plaintiff. In her reply-letter dated March 30, 1983, Executive Vice-President Mary Dee Co informed Atty. Dator that Julian Sy violated Policy Condition No. "3" which requires the insured to give notice of any insurance or insurances already effected covering the stocks in trade. 3

Because of the denial of their claims for payment by the three (3) insurance companies, petitioner filed separate civil actions against the former before the

Age

ncy

| Day

12

Regional Trial Court of Lucena City, which cases were consolidated for trial.

The RTC ruled in favor of the petitioners. However, the said ruling was reversed by the CA.

Issue/Held:

Whether or not Conditions Nos. 3 and 27 of the insurance contracts were violated by petitioners thereby resulting in their forfeiture of all the benefits thereunder.

Condition No. 3 of said insurance policies, otherwise known as the "Other Insurance Clause," is uniformly contained in all the aforestated insurance contracts of herein petitioners, as follows:

3. The insured shall give notice to the Company of any insurance or insurances already effected, or which may subsequently be effected, covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated therein or endorsed on this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this policy shall be deemed forfeited, provided however, that this condition shall not apply when the total insurance or insurances in force at the time of loss or damage not more than P200,000.00. 5

The coverage by other insurance or co-insurance effected or subsequently arranged by petitioners were neither stated nor endorsed in the policies of the three (3) private respondents, warranting forfeiture of all benefits thereunder if we are to follow the express stipulation in the aforequoted Policy Condition No. 3.

Petitioners contend that they are not to be blamed for the omissions, alleging that insurance agent Leon Alvarez (for Western) and Yap Kam Chuan (for Reliance and Equitable) knew about the existence of the additional insurance coverage and that they were not informed about the requirement that such other or additional insurance should be stated in the policy, as they have not even read policies. 8 These contentions cannot pass judicial muster.

The terms of the contract are clear and unambiguous. The insured is specifically required to disclose to the insurer any other insurance and its particulars which he may have effected on the same subject matter. The knowledge of such insurance by the insurer's agents, even assuming the acquisition thereof by the former, is not the "notice" that would estop the insurers from

denying the claim. Besides, the so-called theory of imputed knowledge, that is, knowledge of the agent is knowledge of the principal, aside from being of dubious applicability here has likewise been roundly refuted by respondent court whose factual findings we find acceptable.

Thus, it points out that while petitioner Julian Sy claimed that he had informed insurance agent Alvarez regarding the co-insurance on the property, he contradicted himself by inexplicably claiming that he had not read the terms of the policies; that Yap Dam Chuan could not likewise have obtained such knowledge for the same reason, aside from the fact that the insurance with Western was obtained before those of Reliance and Equitable; and that the conclusion of the trial court that Reliance and Equitable are "sister companies" is an unfounded conjecture drawn from the mere fact that Yap Kam Chuan was an agent for both companies which also had the same insurance claims adjuster. Availment of the services of the same agents and adjusters by different companies is a common practice in the insurance business and such facts do not warrant the speculative conclusion of the trial court.

Furthermore, when the words and language of documents are clear and plain or readily understandable by an ordinary reader thereof, there is absolutely no room for interpretation or construction anymore. 9 Courts are not allowed to make contracts for the parties; rather, they will intervene only when the terms of the policy are ambiguous, equivocal, or uncertain. 10 The parties must abide by the terms of the contract because such terms constitute the measure of the insurer's liability and compliance therewith is a condition precedent to the insured's right of recovery from the insurer. 11

While it is a cardinal principle of insurance law that a policy or contract of insurance is to be construed liberally in favor of the insured and strictly against the insurer company, yet contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties themselves have used. If such terms are clear and unambiguous, they must be taken and understood in their plain, ordinary and popular sense. 12 Moreover, obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. 13

Petitioners should be aware of the fact that a party is not relieved of the duty to exercise the ordinary care and prudence that would be exacted in relation to other contracts. The conformity of the insured to the terms of the policy is implied from his failure to express any disagreement with what is provided for. 14 It may be

Age

ncy

| Day

12

true that the majority rule, as cited by petitioners, is that injured persons may accept policies without reading them, and that this is not negligence per se. 15 But, this is not without any exception. It is and was incumbent upon petitioner Sy to read the insurance contracts, and this can be reasonably expected of him considering that he has been a businessman since 1965 16 and the contract concerns indemnity in case of loss in his money-making trade of which important consideration he could not have been unaware as it was pre-in case of loss in his money-making trade of which important consideration he could not have been unaware as it was precisely the reason for his procuring the same.

G.R. No. L-28740 February 24, 1981

FERMIN Z. CARAM, JR., Petitioner, vs. CLARO L. LAURETA, Respondent.

FERNANDEZ, J.:

Marcos Mata conveyed a large tract of agricultural land covered by Original Certificate of Title No. 3019 in favor of Claro Laureta, plaintiff, the respondent herein.

The deed of absolute sale in favor of the plaintiff was not registered because it was not acknowledged before a notary public or any other authorized officer.

However, the defendant Marcos Mata delivered to Laureta the peaceful and lawful possession of the premises of the land together with the pertinent papers thereof such as the Owner's Duplicate Original Certificate of Title No. 3019, sketch plan, tax declaration, tax receipts and other papers related thereto.

The same land was sold by Marcos Mata to defendant Fermin Z. Caram, Jr., petitioner herein.

The deed of sale in favor of Caram was acknowledged before Atty. Abelardo Aportadera.

On May 22, 1947, Marcos Mata, through Attys. Abelardo Aportadera and Gumercindo Arcilla, filed with the Court of First Instance of Davao a petition for the issuance of a new Owner's Duplicate of Original Certificate of Title No. 3019, alleging as ground therefor the loss of said title in the evacuation place of defendant Marcos Mata in Magugpo, Tagum, Davao. On June 5, 1947, the Court of First Instance of Davao issued an order directing the Register of Deeds of Davao to issue a new Owner's Duplicate Certificate of Title No. 3019 in favor of Marcos Mata and declaring the lost title as null and void.

On December 9, 1947, the second sale between Marcos Mata and Fermin Caram, Jr. was registered with the Register of Deeds. On the same date, Transfer Certificate of Title No. 140 was issued in favor of Fermin Caram Jr. 5 On August 29, 1959, the defendants Marcos Mata and Codidi Mata filed their answer with counterclaim admitting the existence of a private absolute deed of sale of his only property in favor of Claro L. Laureta but alleging that he signed the same as he was subjected to duress, threat and intimidation

The defendant Fermin Caram Jr. filed his answer on October 23, 1959 alleging that he has no knowledge or

Age

ncy

| Day

12

information about the previous encumbrances, transactions, and alienations in favor of plaintiff until the filing of the complaints. 8 chanrobles virtual law library

The trial court rendered a decision declaring that the deed of sale, Exhibit A, executed by Marcos Mata in favor of Claro L. Laureta stands and prevails over the deed of sale, Exhibit F, in favor of Fermin Caram, Jr.;

The Court of Appeals promulgated its decision on January 29, 1968 affirming the judgment of the trial court.

Issue/Held:

The petitioner assails the finding of the trial court that the second sale of the property was made through his representatives, Pedro Irespe and Atty. Abelardo Aportadera. He argues that Pedro Irespe was acting merely as a broker or intermediary with the specific task and duty to pay Marcos Mata the sum of P1,000.00

The petitioner contends that he cannot be considered to have acted in bad faith because there is no direct proof showing that Irespe and Aportadera, his alleged agents, had knowledge of the first sale to Laureta. This contention is also without merit. The trial court, in holding that appellant Caram. Jr. was not a purchaser in good faith, at the time he bought the same property from appellant Mata, on May 5, 1947, entirely discredited the testimony of Aportadera. Thus it stated in its decision:

The Court cannot help being convinced that Irespe, attorney-in-fact of Caram, Jr. had knowledge of the prior existing transaction, Exhibit A, between Mata and Laureta over the land, subject matter of this litigation, when the deed, Exhibit F, was executed by Mata in favor of Caram, Jr. And this knowledge has the effect of registration as to Caram, Jr. RA pp. 123-124) chanrobles virtual law library

We agree with His Honor's conclusion on this particular point, on two grounds - the first, the same concerns matters affecting the credibility of a witness of which the findings of the trial court command great weight, and second, the same is borne out by the testimony of Atty. Aportadera himself. (t.s.n., pp. 187-190, 213-215, Restauro).

Even if Irespe and Aportadera did not have actual knowledge of the first sale, still their actions have not satisfied the requirement of good faith. Bad faith is not based solely on the fact that a vendee had knowledge

of the defect or lack of title of his vendor. In the case of Leung Yee vs. F. L. Strong Machinery Co. and Williamson, this Court held: 15

One who purchases real estate with knowledge of a defect or lack of title in his vendor can not claim that he has acquired title thereto in good faith, as against the true owner of the land or of an interest therein, and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor.

In the instant case, Irespe and Aportadera had knowledge of circumstances which ought to have put them an inquiry. Both of them knew that Mata's certificate of title together with other papers pertaining to the land was taken by soldiers under the command of Col. Claro L. Laureta. 16 Added to this is the fact that at the time of the second sale Laureta was already in possession of the land. Irespe and Aportadera should have investigated the nature of Laureta's possession. If they failed to exercise the ordinary care expected of a buyer of real estate they must suffer the consequences. The rule of caveat emptor requires the purchaser to be aware of the supposed title of the vendor and one who buys without checking the vendor's title takes all the risks and losses consequent to such failure.

The principle that a person dealing with the owner of the registered land is not bound to go behind the certificate and inquire into transactions the existence of which is not there intimated 18 should not apply in this case. It was of common knowledge that at the time the soldiers of Laureta took the documents from Mata, the civil government of Tagum was not yet established and that there were no officials to ratify contracts of sale and make them registerable. Obviously, Aportadera and Irespe knew that even if Mata previously had sold the Disputed such sale could not have been registered

There is no doubt then that Irespe and Aportadera, acting as agents of Caram, purchased the property of Mata in bad faith. Applying the principle of agency, Caram as principal, should also be deemed to have acted in bad faith.

Age

ncy

| Day

12

[G.R. No. 142616. July 31, 2001]

PHILIPPINE NATIONAL BANK, Petitioner, v. RITRATO GROUP INC., RIATTO INTERNATIONAL, INC., and DADASAN GENERAL MERCHANDISE, Respondent.

D E C I S I O N

KAPUNAN, J.:

On May 29, 1996, PNB International Finance Ltd. (PNB-IFL), a subsidiary company of PNB, organized and doing business in Hong Kong, extended a letter of credit in favor of the respondents in the amount of US$300,000.00 secured by real estate mortgages constituted over four (4) parcels of land in Makati City. This credit facility was later increased successively to US$1,140,000.00 in September 1996; to US$1,290,000.00 in November 1996; to US$1,425,000.00 in February 1997; and decreased to US$1,421,316.18 in April 1998. Respondents made repayments of the loan incurred by remitting those amounts to their loan account with PNB-IFL in Hong Kong.

However, as of April 30, 1998, their outstanding obligations stood at US$1,497,274.70. Pursuant to the terms of the real estate mortgages, PNB-IFL, through its attorney-in-fact PNB, notified the respondents of the foreclosure of all the real estate mortgages and that the properties subject thereof were to be sold at a public auction on May 27, 1999 at the Makati City Hall.

On May 25, 1999, respondents filed a complaint for injunction with prayer for the issuance of a writ of preliminary injunction and/or temporary restraining order before the Regional Trial Court of Makati. Petitioner filed a motion to dismiss on the grounds of failure to state a cause of action and the absence of any privity between the petitioner and respondents. On October 4, 1999, the motion to dismiss was denied by the trial court judge for lack of merit.

Issue/Held:

THE COURT OF APPEALS PALPABLY ERRED IN NOT DISMISSING THE COMPLAINT A QUO, CONSIDERING THAT BY THE ALLEGATIONS OF THE COMPLAINT, NO CAUSE OF ACTION EXISTS AGAINST PETITIONER, WHICH IS NOT A REAL PARTY IN INTEREST BEING A MERE ATTORNEY-IN-FACT AUTHORIZED TO ENFORCE AN ANCILLARY CONTRACT.

Respondents argue that even assuming arguendo that petitioner and PNB-IFL are two separate entities, petitioner is still the party-in-interest in the application for preliminary injunction because it is tasked to commit acts of foreclosing respondents' properties. [4 Respondents maintain that the entire credit facility is void as it contains stipulations in violation of the principle of mutuality of contracts. [5 In addition, respondents justified the act of the court a quo in applying the doctrine of "Piercing the Veil of Corporate Identity" by stating that petitioner is merely an alter ego or a business conduit of PNB-IFL. [6

The contract questioned is one entered into between respondent and PNB-IFL, not PNB. In their complaint, respondents admit that petitioner is a mere attorney-in-fact for the PNB-IFL with full power and authority to, inter alia, foreclose on the properties mortgaged to secure their loan obligations with PNB-IFL. In other words, herein petitioner is an agent with limited authority and specific duties under a special power of attorney incorporated in the real estate mortgage. It is not privy to the loan contracts entered into by respondents and PNB-IFL.

The issue of the validity of the loan contracts is a matter between PNB-IFL, the petitioner's principal and the party to the loan contracts, and the respondents. Yet, despite the recognition that petitioner is a mere agent, the respondents in their complaint prayed that the petitioner PNB be ordered to re-compute the rescheduling of the interest to be paid by them in accordance with the terms and conditions in the documents evidencing the credit facilities, and crediting the amount previously paid to PNB by herein respondents. [9

Clearly, petitioner not being a party to the contract has no power to re-compute the interest rates set forth in the contract. Respondents, therefore do not have any cause of action against petitioner.

In any case, the parent-subsidiary relationship between PNB and PNB-IFL is not the significant legal relationship involved in this case since the petitioner was not sued because it is the parent company of PNB-IFL. Rather, the petitioner was sued because it acted as an attorney-in-fact of PNB-IFL in initiating the foreclosure proceedings. A suit against an agent cannot without compelling reasons be considered a suit against the principal. Under the Rules of Court, every action must be prosecuted or defended in the name of the real party-in-interest, unless otherwise authorized by law or these Rules. [18 In mandatory terms, the Rules require that "parties-in-interest without whom no final determination can be had, an action shall be joined either as plaintiffs

Age

ncy

| Day

12

or defendants." [19 In the case at bar, the injunction suit is directed only against the agent, not the principal.

G.R. No. L-18287 March 30, 1963

TRINIDAD J. FRANCISCO, plaintiff-appellee, vs.GOVERNMENT SERVICE INSURANCE SYSTEM, defendant-appellant.

-----------------------------

G.R. No. L-18155 March 30, 1963

TRINIDAD J. FRANCISCO, plaintiff-appellant, vs.GOVERNMENT SERVICE INSURANCE SYSTEM, defendant-appellee.

Vicente J. Francisco for plaintiff-appellee.The Government Corporate Counsel for defendant-appellant.

REYES, J.B.L., J.:

Trinidad J. Francisco, in consideration of a loan in the amount of P400,000.00, out of which the sum of P336,100.00 was released to her, mortgaged in favor of the defendant, Government Service Insurance System (hereinafter referred to as the System) a parcel of land containing an area of 18,232 square meters, with twenty-one (21) bungalows, payable within ten (10) years in monthly installments of P3,902.41, and with interest of 7% per annum compounded monthly.

The System extrajudicially foreclosed the mortgage on the ground that up to that date the plaintiff-mortgagor was in arrears on her monthly installments in the amount of P52,000.00..

The plaintiff's father, Atty. Vicente J. Francisco, sent a letter to the general manager of the defendant corporation, Mr. Rodolfo P. Andal stating therein their intention to redeem the foreclosed property with a different scheme which was then approved by the GSIS Board thru Andal via telegram.

In the meantime, the plaintiff are making remittances, all accompanied by letters, corresponding to the months of March, April, May, and June, 1960 and totalling P24,604.81 were also sent by the plaintiff to the defendant from time to time, all of which were received and duly receipted for.

Then the System sent three (3) letters, one dated 29 January 1960, which was signed by its assistant general manager, and the other two letters, dated 19 and 26 February 1960, respectively, which were signed by Andal, asking the plaintiff for a proposal for the payment of her indebtedness, since according to the System the one-year period for redemption had expired.

In reply, Atty. Francisco sent a letter, dated 11 March 1960, protesting against the System's request for proposal of payment and inviting its attention to the concluded contract generated by his offer of 20 February 1959, and its acceptance by telegram of the same date, the compliance of the terms of the offer already commenced by the plaintiff, and the misapplication by the System of the remittances she had made, and requesting the proper corrections.

By letter, dated 31 May 1960, the defendant countered the preceding protest that, by all means, the plaintiff should pay attorney's fees of P35,644.14, publication expenses, filing fee of P301.00, and surcharge of P23.64 for the foreclosure work done; that the telegram should be disregarded in view of its failure to express the contents of the board resolution due to the error of its minor employees in couching the correct wording of the telegram.

Hence, the plaintiff instituted the present suit, for specific performance and damages. The defendant answered, pleading that the binding acceptance of Francisco's offer was the resolution of the Board, and that Andal's telegram, being erroneous, should be disregarded.

Issue/Held:

Whether or not the telegram generated a contract that is valid and binding upon the parties.

Exhibit "A", had been validly accepted, and was binding on the defendant. The terms of the offer were clear, and over the signature of defendant's general manager, Rodolfo Andal, plaintiff was informed telegraphically that her proposal had been accepted. There was nothing in the telegram that hinted at any anomaly, or gave ground to suspect its veracity, and the plaintiff, therefore, can not be blamed for relying upon it. There is no denying that the telegram was within Andal's apparent authority, but the defense is that he did not sign it, but that it was sent by the Board Secretary in his name and without his knowledge. Assuming this to be true, how was appellee to know it? Corporate transactions would speedily come to a standstill were every person dealing with a corporation

Age

ncy

| Day

12

held duty-bound to disbelieve every act of its responsible officers, no matter how regular they should appear on their face.

A person who knows that the officer or agent of the corporation habitually transacts certain kinds of business for such corporation under circumstances which necessarily show knowledge on the part of those charged with the conduct of the corporate business assumes, as he has the right to assume, that such agent or officer is acting within the scope of his authority.

If a private corporation intentionally or negligently clothes its officers or agents with apparent power to perform acts for it, the corporation will be estopped to deny that such apparent authority is real, as to innocent third persons dealing in good faith with such officers or agents. (2 Fletcher's Encyclopedia, Priv. Corp. 255, Perm. Ed.)

Hence, even if it were the board secretary who sent the telegram, the corporation could not evade the binding effect produced by the telegram..

The defendant-appellant does not disown the telegram, and even asserts that it came from its offices, as may be gleaned from the letter, dated 31 May 1960, to Atty. Francisco, and signed "R. P. Andal, general manager by Leovigildo Monasterial, legal counsel", wherein these phrases occur: "the telegram sent ... by this office" and "the telegram we sent your" (emphasis supplied), but it alleges mistake in couching the correct wording. This alleged mistake cannot be taken seriously, because while the telegram is dated 20 February 1959, the defendant informed Atty. Francisco of the alleged mistake only on 31 May 1960, and all the while it accepted the various other remittances, starting on 28 February 1959, sent by the plaintiff to it in compliance with her performance of her part of the new contract.

The inequity of permitting the System to deny its acceptance become more patent when account is taken of the fact that in remitting the payment of P30,000 advanced by her father, plaintiff's letter to Mr. Andal quoted verbatim the telegram of acceptance. This was in itself notice to the corporation of the terms of the allegedly unauthorized telegram, for as Ballentine says:

Knowledge of facts acquired or possessed by an officer or agent of a corporation in the course of his employment, and in relation to matters within the scope of his authority, is notice to the corporation, whether he communicates such knowledge or not. (Ballentine, Law on Corporations, section 112.)

since a corporation cannot see, or know, anything except through its officers.

Yet, notwithstanding this notice, the defendant System pocketed the amount, and kept silent about the telegram not being in accordance with the true facts, as it now alleges. This silence, taken together with the unconditional acceptance of three other subsequent remittances from plaintiff, constitutes in itself a binding ratification of the original agreement (Civil Code, Art. 1393).

ART. 1393. Ratification may be effected expressly or tacitly. It is understood that there is a tacit ratification if, with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right.

Nowhere else do the circumstances call more insistently for the application of the equitable maxim that between two innocent parties, the one who made it possible for the wrong to be done should be the one to bear the resulting loss..

The defendant's assertion that the telegram came from it but that it was incorrectly worded renders unnecessary to resolve the other point on controversy as to whether the said telegram constitutes an actionable document..

Since the terms offered by the plaintiff in the letter of 20 February 1959 (Exhibit "A") provided for the setting aside of the foreclosure effected by the defendant System, the acceptance of the offer left the account of plaintiff in the same condition as if no foreclosure had taken place. It follows, as the lower court has correctly held, that the right of the System to collect attorneys' fees equivalent to 10% of the due (P35,694.14) and the expenses and charges of P3,300.00 may no longer be enforced, since by the express terms of the mortgage contract, these sums were collectible only "in the event of foreclosure."

Age

ncy

| Day

12

G.R. No. 161757 : January 25, 2006

SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC.Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION, Second Division; HON. ERNESTO S. DINOPOL, in his capacity as Labor Arbiter, NLRC; NCR, Arbitration Branch, Quezon City and DIVINA A. MONTEHERMOZO, Respondents.

D E C I S I O N

CARPIO MORALES, J.:

Sunace International Management Services, deployed to Taiwan Divina A. Montehermozo (Divina) as a domestic helper under a 12-month contract effective February 1, 1997.1 The deployment was with the assistance of a Taiwanese broker, Edmund Wang, President of Jet Crown International Co., Ltd.

After her 12-month contract expired on February 1, 1998, Divina continued working for her Taiwanese employer, Hang Rui Xiong, for two more years, after which she returned to the Philippines on February 4, 2000.

Shortly after her return or on February 14, 2000, Divina filed a complaint2 before the National Labor Relations Commission (NLRC) against Sunace, one Adelaide Perez, the Taiwanese broker, and the employer-foreign principal alleging that she was jailed for three months and that she was underpaid.

On April 6, 2000, Divina filed her Position Paper4 claiming that under her original one-year contract and the 2-year extended contract which was with the knowledge and consent of Sunace.

The Labor Arbiter, rejected Sunace's claim that the extension of Divina's contract for two more years was without its knowledge and consent.

He accordingly decided in favor of Divina, by decision of October 9, 2000.

On appeal of Sunace, the NLRC, by Resolution of April 30, 2002,14 affirmed the Labor Arbiter's decision.

Via petition for certiorari,15 Sunace elevated the case to the Court of Appeals which dismissed it outright by Resolution of November 12, 2002,16 the full text of which reads:

The Court of Appeals affirmed the Labor Arbiter and NLRC's finding that Sunace knew of and impliedly

consented to the extension of Divina's 2-year contract. It went on to state that "It is undisputed that [Sunace] was continually communicating with [Divina's] foreign employer." It thus concluded that "[a]s agent of the foreign principal, 'petitioner cannot profess ignorance of such extension as obviously, the act of the principal extending complainant (sic) employment contract necessarily bound it.'"

Issue/Held:

The finding of the Court of Appeals solely on the basis of the above-quoted telefax message, that Sunace continually communicated with the foreign "principal" (sic) and therefore was aware of and had consented to the execution of the extension of the contract is misplaced. The message does not provide evidence that Sunace was privy to the new contract executed after the expiration on February 1, 1998 of the original contract. That Sunace and the Taiwanese broker communicated regarding Divina's allegedly withheld savings does not necessarily mean that Sunace ratified the extension of the contract. As Sunace points out in its Reply20 filed before the Court of Appeals,

As can be seen from that letter communication, it was just an information given to the petitioner that the private respondent had t[aken] already her savings from her foreign employer and that no deduction was made on her salary. It contains nothing about the extension or the petitioner's consent thereto.21 cra

Parenthetically, since the telefax message is dated February 21, 2000, it is safe to assume that it was sent to enlighten Sunace who had been directed, by Summons issued on February 15, 2000, to appear on February 28, 2000 for a mandatory conference following Divina's filing of the complaint on February 14, 2000.

As agent of its foreign principal, [Sunace] cannot profess ignorance of such an extension as obviously, the act of its principal extending [Divina's] employment contract necessarily bound it,

The theory of imputed knowledge ascribes the knowledge of the agent, Sunace, to the principal, employer Xiong, not the other way around.23 The knowledge of the principal-foreign employer cannot, therefore, be imputed to its agent Sunace.

There being no substantial proof that Sunace knew of and consented to be bound under the 2-year employment contract extension, it cannot be said to be privy thereto. As such, it and its "owner" cannot

Age

ncy

| Day

12

be held solidarily liable for any of Divina's claims arising from the 2-year employment extension. As the New Civil Code provides,

Contracts take effect only between the parties, their assigns, and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law.24 cra

Furthermore, as Sunace correctly points out, there was an implied revocation of its agency relationship with its foreign principal when, after the termination of the original employment contract, the foreign principal directly negotiated with Divina and entered into a new and separate employment contract in Taiwan.

The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons.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 -

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

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 . Thus on 25 January 1993 respondent filed a complaint to revive the judgment, docketed as Civil Case No. D-10459.

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.

Forthwith, upon learning of the fraudulent transaction, petitioner sought 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

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.

Issue/Held:

Petitioner 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

Age

ncy

| Day

12

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.

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.

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.