Manila Remnant vs. CA G.R. No. 82978. November 22, 1990 Fernan FACTS: Manila Remnant Co.

. owns Capital Homes Subdivision with Artemio Valencia as President A.U. Valencia and Co., is the authorized agent of Manila Remnant to develop the aforesaid subdivision with authority to manage the sales thereof, execute contracts to sell to lot buyers and issue official receipts. Artemio Valencia is also the president of this company. Sometime in March 1970, Manila Remnant thru A.U. Valencia, executed contracts to sell with Ventanilla covering two lots amounting to P66k to paid monthly for 10 years. Ventanilla paid the downpayment. After 10 days, Artemio Valencia sold the same lots without informing Ventanilla to Crisostomo, his sales agent without any consideration. Artemio Valencia then transmitted the fictitious Crisostomo contracts to Manila Remnant while he kept in his files the contracts to sell in favor of the Ventanillas. All the amounts paid by the Ventanillas were deposited in Valencia's bank account and this is remitted to Manila Remnant in favor of Crisostomo. Receipts issued by Manila Remnant in favor of Crisostomo are kept by Valencia. Ventanilla is not aware of Valencias scheme and thus continued paying their monthly installments. Sometime in May 1973, Manila Remnant terminated its collection agreement with AU Valencia due to discrepancies and irregularities discovered in its collections and remittances. Valencia was also removed as the President of Manila Remnant. The Ventanilla couple unaware of the circumstances happened continued paying their installments to Valencia. It is only in 1978 they learned the termination of Valencia, thus they went immediately to Manila Remnant to pay their balance but to their shock they discovered from Gloria Caballes, an accountant of Manila Remnant, that their names did not appear in the records of A.U. Valencia and Co. as lot buyers. Thus, the Ventanillas commenced an action for specific performance, annulment of deeds and damages against Manila Remnant, A.U. Valencia and Co. and Carlos Crisostomo. Lower courts rendered judgment in favor of Ventanilla, and in the decision, the court ordered defendants A.U. Valencia and Co. Inc., Manila Remnant and Carlos Crisostomo jointly and severally to pay the Ventanillas the amount of P100,000.00 as moral damages, P100,000.00 as exemplary damages, and P100,000.00 as attorney's fees and in case the transfer of lots cannot be effected for any legal reason, the defendants should reimburse jointly and severally to the Ventanillas the total amount of P73,122.35 representing the total amount paid for the two lots plus legal interest thereon from March 1970 plus damages. While petitioner Manila Remnant has not refuted the legality of the award of damages per se, it believes that it cannot be made jointly and severally liable with its agent A.U. Valencia and Co. since it was not aware of the illegal acts perpetrated nor did it consent or ratify said acts of its agent. ISSUE: Whether or not petitioner Manila Remnant should be held solidarily liable together with A.U. Valencia and Co. and Carlos Crisostomo for the payment of moral, exemplary damages and attorney's fees in favor of the Ventanillas

RULING: Yes. Due to the following: (1) The unique relationship existing between the principal and the agent at the time of the dual sale must be underscored. Bear in mind that the president then of both firms was Artemio U. Valencia, the individual directly responsible for the sale scam. Hence, despite the fact that the double sale was beyond the power of the agent, Manila Remnant as principal was chargeable with the knowledge or constructive notice of

that fact and not having done anything to correct such an irregularity was deemed to have ratified the same. (2) The principle of estoppel, Manila Remnant is deemed to have allowed its agent to act as though it had plenary powers. Article 1911 of the Civil Code provides: "Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers." Authority by estoppel has arisen in the instant case because by its negligence, the principal, Manila Remnant, has permitted its agent, A.U. Valencia and Co., to exercise powers not granted to it.