SECOND DIVISION

FILIPINAS LIFE ASSURANCE G.R. No. 159489

COMPANY (now AYALA LIFE
Present:
ASSURANCE, INC.),
Petitioner,
QUISUMBING, J., Chairperson,
CARPIO,
- versus CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
CLEMENTE N. PEDROSO,
TERESITA O. PEDROSO and
JENNIFER N. PALACIO thru her
Attorney-in-Fact PONCIANO C. Promulgated:
MARQUEZ,
Respondents.
February 4, 2008
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DECISION
QUISUMBING, J.:
This petition for review on certiorari seeks the reversal of the Decision [1] and
Resolution,[2] dated November 29, 2002 and August 5, 2003, respectively, of the
Court of Appeals in CA-G.R. CV No. 33568. The appellate court had affirmed the
Decision[3] dated October 10, 1989 of the Regional Trial Court (RTC) of Manila,
Branch 3, finding petitioner as defendant and the co-defendants below jointly and
severally liable to the plaintiffs, now herein respondents.
The antecedent facts are as follows:

Respondent Teresita O. Pedroso is a policyholder of a 20-year endowment life

insurance issued by petitioner Filipinas Life Assurance Company (Filipinas
Life). Pedroso claims Renato Valle was her insurance agent since 1972 and Valle
collected her monthly premiums. In the first week of January 1977, Valle told her
that the Filipinas Life Escolta Office was holding a promotional investment
program for policyholders. It was offering 8% prepaid interest a month for certain
amounts deposited on a monthly basis. Enticed, she initially invested and issued a
post-dated check dated January 7, 1977 for P10,000.[4] In return, Valle issued
Pedroso his personal check for P800 for the 8%[5] prepaid interest and a Filipinas
Life Agents Receipt No. 807838.[6]
Subsequently, she called the Escolta office and talked to Francisco
Alcantara, the administrative assistant, who referred her to the branch manager,
Angel Apetrior. Pedroso inquired about the promotional investment and Apetrior
confirmed that there was such a promotion. She was even told she could push
through with the check she issued. From the records, the check, with the
endorsement of Alcantara at the back, was deposited in the account of Filipinas
Life with the Commercial Bank and Trust Company (CBTC), Escolta Branch.
Relying on the representations made by the petitioners duly authorized
representatives Apetrior and Alcantara, as well as having known agent Valle for
quite some time, Pedroso waited for the maturity of her initial investment. A month
after, her investment of P10,000 was returned to her after she made a written request
for its refund. The formal written request, dated February 3, 1977, was written on an
inter-office memorandum form of Filipinas Life prepared by Alcantara. [7] To collect
the amount, Pedroso personally went to the Escolta branch where Alcantara gave her
the P10,000 in cash. After a second investment, she made 7 to 8 more investments in
varying amounts, totaling P37,000 but at a lower rate of 5%[8] prepaid interest a
month. Upon maturity of Pedrosos subsequent investments, Valle would take back
from Pedroso the corresponding yellow-colored agents receipt he issued to the latter.
Pedroso told respondent Jennifer N. Palacio, also a Filipinas Life insurance
policyholder, about the investment plan. Palacio made a total investment
of P49,550[9] but at only 5% prepaid interest. However, when Pedroso tried to
withdraw her investment, Valle did not want to return some P17,000 worth of
it. Palacio also tried to withdraw hers, but Filipinas Life, despite demands, refused

to return her money. With the assistance of their lawyer, they went to Filipinas Life
Escolta Office to collect their respective investments, and to inquire why they had
not seen Valle for quite some time. But their attempts were futile. Hence,
respondents filed an action for the recovery of a sum of money.
After trial, the RTC, Branch 3, Manila, held Filipinas Life and its codefendants Valle, Apetrior and Alcantara jointly and solidarily liable to the
respondents.
On appeal, the Court of Appeals affirmed the trial courts ruling and
subsequently denied the motion for reconsideration.
Petitioner now comes before us raising a single issue:
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR AND GRAVELY ABUSED ITS DISCRETION IN
AFFIRMING THE DECISION OF THELOWER COURT HOLDING FLAC
[FILIPINAS LIFE] TO BE JOINTLY AND SEVERALLY LIABLE WITH ITS
CO-DEFENDANTS ON THE CLAIM OF RESPONDENTS INSTEAD OF
HOLDING ITS AGENT, RENATO VALLE, SOLELY LIABLE TO THE
RESPONDENTS.[10]

Simply put, did the Court of Appeals err in holding petitioner and its codefendants jointly and severally liable to the herein respondents?
Filipinas Life does not dispute that Valle was its agent, but claims that it was
only a life insurance company and was not engaged in the business of collecting
investment money. It contends that the investment scheme offered to respondents
by Valle, Apetrior and Alcantara was outside the scope of their authority as agents
of Filipinas Life such that, it cannot be held liable to the respondents.[11]
On the other hand, respondents contend that Filipinas Life authorized Valle
to solicit investments from them. In fact, Filipinas Lifes official documents and
facilities were used in consummating the transactions. These transactions,
according to respondents, were confirmed by its officers Apetrior and
Alcantara. Respondents assert they exercised all the diligence required of them in
ascertaining the authority of petitioners agents; and it is Filipinas Life that failed in
its duty to ensure that its agents act within the scope of their authority.

Considering the issue raised in the light of the submissions of the parties, we
find that the petition lacks merit. The Court of Appeals committed no reversible
error nor abused gravely its discretion in rendering the assailed decision and
resolution.
It appears indisputable that respondents Pedroso and Palacio had
invested P47,000 and P49,550, respectively. These were received by Valle and
remitted to Filipinas Life, using Filipinas Lifes official receipts, whose authenticity
were not disputed. Valles authority to solicit and receive investments was also
established by the parties. When respondents sought confirmation, Alcantara,
holding a supervisory position, and Apetrior, the branch manager, confirmed that
Valle had authority. While it is true that a person dealing with an agent is put upon
inquiry and must discover at his own peril the agents authority, in this case,
respondents did exercise due diligence in removing all doubts and in confirming
the validity of the representations made by Valle.
Filipinas Life, as the principal, is liable for obligations contracted by its
agent Valle. 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.[12] The general rule is that the principal is
responsible for the acts of its agent done within the scope of its authority, and
should bear the damage caused to third persons.[13] When the agent exceeds his
authority, the agent becomes personally liable for the damage. [14] But even when
the agent exceeds his authority, the principal is still solidarily liable together with
the agent if the principal allowed the agent to act as though the agent had full
powers.[15] In other words, the acts of an agent beyond the scope of his authority do
not bind the principal, unless the principal ratifies them, expressly or impliedly.
[16]
Ratification in agency is the adoption or confirmation by one person of an act
performed on his behalf by another without authority.[17]
Filipinas Life cannot profess ignorance of Valles acts. Even if Valles
representations were beyond his authority as a debit/insurance agent, Filipinas Life
thru Alcantara and Apetrior expressly and knowingly ratified Valles acts. It cannot
even be denied that Filipinas Life benefited from the investments deposited by
Valle in the account of Filipinas Life. In our considered view, Filipinas Life had
clothed Valle with apparent authority; hence, it is now estopped to deny said

authority. Innocent third persons should not be prejudiced if the principal failed to
adopt the needed measures to prevent misrepresentation, much more so if the
principal ratified his agents acts beyond the latters authority. The act of the agent is
considered that of the principal itself. Qui per alium facit per seipsum facere
videtur. He who does a thing by an agent is considered as doing it himself.[18]
WHEREFORE, the petition is DENIED for lack of merit. The Decision
and Resolution, dated November 29, 2002 and August 5, 2003, respectively, of the
Court of Appeals in CA-G.R. CV No. 33568 are AFFIRMED.
Costs against the petitioner.
SO ORDERED.

THIRD DIVISION
EUROTECH INDUSTRIAL
TECHNOLOGIES, INC.,
Petitioner,

G.R. No. 167552

Present:
YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,

- versus -

CHICO-NAZARIO, and
NACHURA, JJ.

Promulgated:

EDWIN
CUIZON
ERWIN CUIZON,

and

April 23, 2007

Respondents.
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DECISION

CHICO-NAZARIO, J.:

Before Us is a petition for review by certiorari assailing the

Decision[1] of the Court of Appeals dated 10 August 2004 and its
Resolution[2] dated 17 March 2005 in CA-G.R. SP No. 71397
entitled, Eurotech Industrial Technologies, Inc. v. Hon. Antonio T.
Echavez. The assailed Decision and Resolution affirmed the
Order[3] dated 29 January 2002rendered by Judge Antonio T.
Echavez ordering the dropping of respondent EDWIN Cuizon
(EDWIN) as a party defendant in Civil Case No. CEB-19672.

The generative facts of the case are as follows:

Petitioner is engaged in the business of importation and

distribution of various European industrial equipment for
customers here in the Philippines. It has as one of its customers
Impact Systems Sales (Impact Systems) which is a sole

proprietorship
owned
by
respondent
ERWIN
Cuizon
(ERWIN). Respondent EDWIN is the sales manager of Impact
Systems and was impleaded in the court a quo in said capacity.

From January to April 1995, petitioner sold to Impact Systems

various products allegedly amounting to ninety-one thousand
three hundred thirty-eight (P91,338.00) pesos.Subsequently,
respondents sought to buy from petitioner one unit of sludge
pump valued at P250,000.00 with respondents making a down
payment of fifty thousand pesos (P50,000.00).[4] When the sludge
pump arrived from the United Kingdom, petitioner refused to
deliver the same to respondents without their having fully settled
their indebtedness to petitioner. Thus, on 28 June 1995,
respondent EDWIN and Alberto de Jesus, general manager of
petitioner, executed a Deed of Assignment of receivables in favor
of petitioner, the pertinent part of which states:

1.) That ASSIGNOR[5] has an outstanding receivables from Toledo

Power Corporation in the amount of THREE HUNDRED SIXTY FIVE
THOUSAND (P365,000.00) PESOS as payment for the purchase of one
unit of Selwood Spate 100D Sludge Pump;
2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and
CONVEY unto the ASSIGNEE[6] the said receivables from Toledo Power
Corporation in the amount of THREE HUNDRED SIXTY FIVE THOUSAND
(P365,000.00) PESOS which receivables the ASSIGNOR is the lawful
recipient;

3.) That the ASSIGNEE does hereby accept this assignment. [7]

Following the execution of the Deed of Assignment, petitioner

delivered to respondents the sludge pump as shown by Invoice
No. 12034 dated 30 June 1995.[8]

Allegedly unbeknownst to petitioner, respondents, despite

the existence of the Deed of Assignment, proceeded to collect

from Toledo Power Company the amount ofP365,135.29 as

evidenced by Check Voucher No. 0933[9] prepared by said power
company and an official receipt dated 15 August 1995 issued by
Impact Systems.[10] Alarmed by this development, petitioner made
several demands upon respondents to pay their obligations. As a
result, respondents were able to make partial payments to
petitioner. On 7 October 1996, petitioners counsel sent
respondents a final demand letter wherein it was stated that as
of 11
June
1996,
respondents
total
obligations
stood
[11]
at P295,000.00 excluding interests and attorneys fees.
Because
of respondents failure to abide by said final demand letter,
petitioner instituted a complaint for sum of money, damages, with
application for preliminary attachment against herein respondents
before the Regional Trial Court of Cebu City.[12]

On 8 January 1997, the trial court granted petitioners prayer

for the issuance of writ of preliminary attachment. [13]

On 25
June
1997,
respondent
EDWIN
filed
his
[14]
Answer
wherein he admitted petitioners allegations with
respect to the sale transactions entered into by Impact Systems
and petitioner between January and April 1995. [15] He, however,
disputed the total amount of Impact Systems indebtedness to
petitioner
which,
according
to
him,
amounted
to
[16]
only P220,000.00.

By way of special and affirmative defenses, respondent

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 petitioners Complaint stating

1.2. Defendant Erwin H. Cuizon, is of legal age, married, a resident

of Cebu City. He is the proprietor of a single proprietorship business
known as Impact Systems Sales (Impact Systems for brevity), with
office located at 46-A del Rosario Street, Cebu City, where he may be
served summons and other processes of the Honorable Court.

1.3. Defendant Edwin B. Cuizon is of legal age, Filipino, married, a

resident of Cebu City. He is the Sales Manager of Impact Systems and
is sued in this action in such capacity. [17]

On 26 June 1998, petitioner filed a Motion to Declare

Defendant ERWIN in Default with Motion for Summary
Judgment. The trial court granted petitioners motion to declare
respondent ERWIN in default for his failure to answer within the
prescribed period despite the opportunity granted [18] but it denied
petitioners motion for summary judgment in its Order of 31
August 2001 and scheduled the pre-trial of the case on 16
October 2001.[19] However, the conduct of the pre-trial conference
was deferred pending the resolution by the trial court of the
special and affirmative defenses raised by respondent EDWIN. [20]

After the filing of respondent EDWINs Memorandum [21] in

support of his special and affirmative defenses and petitioners
opposition[22] thereto, the trial court rendered its assailed Order
dated 29 January 2002 dropping respondent EDWIN as a party
defendant in this case. According to the trial court

A study of Annex G to the complaint shows that in the Deed of

Assignment, defendant Edwin B. Cuizon acted in behalf of or
represented [Impact] Systems Sales; that [Impact] Systems Sale is a
single proprietorship entity and the complaint shows that defendant
Erwin H. Cuizon is the proprietor; that plaintiff corporation is
represented by its general manager Alberto de Jesus in the contract
which is dated June 28, 1995. A study of Annex H to the complaint
reveals that [Impact] Systems Sales which is owned solely by

defendant Erwin H. Cuizon, made a down payment of P50,000.00 that

Annex H is dated June 30, 1995 or two days after the execution of
Annex G, thereby showing that [Impact] Systems Sales ratified the act
of Edwin B. Cuizon; the records further show that plaintiff knew that
[Impact] Systems Sales, the principal, ratified the act of Edwin B.
Cuizon, the agent, when it accepted the down payment of P50,000.00.
Plaintiff, therefore, cannot say that it was deceived by defendant Edwin
B. Cuizon, since in the instant case the principal has ratified the act of
its agent and plaintiff knew about said ratification. Plaintiff could not
say that the subject contract was entered into by Edwin B. Cuizon in
excess of his powers since [Impact] Systems Sales made a down
payment of P50,000.00 two days later.

In view of the Foregoing, the Court directs that defendant Edwin

B. Cuizon be dropped as party defendant. [23]

Aggrieved by the adverse ruling of the trial court, petitioner

brought the matter to the Court of Appeals which, however,
affirmed the 29 January 2002 Order of the court a quo.The
dispositive portion of the now assailed Decision of the Court of
Appeals states:

WHEREFORE, finding no viable legal ground to reverse or modify the

conclusions reached by the public respondent in his Order
dated January 29, 2002, it is hereby AFFIRMED.[24]

Petitioners motion for reconsideration was denied by the

appellate court in its Resolution promulgated on 17 March
2005. Hence, the present petition raising, as sole ground for its
allowance, the following:

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT

RULED THAT RESPONDENT EDWIN CUIZON, AS AGENT OF IMPACT
SYSTEMS SALES/ERWIN CUIZON, IS NOT PERSONALLY LIABLE,

BECAUSE HE HAS NEITHER ACTED BEYOND THE SCOPE OF HIS

AGENCY NOR DID HE PARTICIPATE IN THE PERPETUATION OF A FRAUD.
[25]

To support its argument, petitioner points to Article 1897 of the

New Civil Code which states:

Art. 1897. The agent who acts as such is not personally liable to the
party with whom he contracts, unless he expressly binds himself or
exceeds the limits of his authority without giving such party sufficient
notice of his powers.

Petitioner contends that the Court of Appeals failed to appreciate

the effect of ERWINs act of collecting the receivables from the
Toledo Power Corporation notwithstanding the existence of the
Deed of Assignment signed by EDWIN on behalf of Impact
Systems. While said collection did not revoke the agency relations
of respondents, petitioner insists that ERWINs action repudiated
EDWINs power to sign the Deed of Assignment. 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.[26]

Petitioner also contends that it fell victim to the fraudulent

scheme of respondents who induced it into selling the one unit of
sludge pump to Impact Systems and signing the Deed of
Assignment. Petitioner directs the attention of this Court to the
fact that respondents are bound not only by their principal and
agent relationship but are in fact full-blooded brothers whose
successive contravening acts bore the obvious signs of conspiracy
to defraud petitioner.[27]

In his Comment,[28] respondent EDWIN again posits the argument

that he is not a real party in interest in this case and it was proper
for the trial court to have him dropped as a defendant. He insists
that he was a mere agent of Impact Systems which is owned by
ERWIN and that his status as such is known even to petitioner as
it is alleged in the Complaint that he is being sued in his capacity
as the sales manager of the said business venture. Likewise,
respondent EDWIN points to the Deed of Assignment which
clearly states that he was acting as a representative of Impact
Systems in said transaction.

We do not find merit in the petition.

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 latters consent. [29] 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.[30]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. [31] 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. [32] 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.[33]

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. [34]

In this case, the parties do not dispute the existence of the

agency relationship between respondents ERWIN as principal and
EDWIN as agent. The only cause of the present dispute is whether
respondent EDWIN exceeded his authority when he signed the
Deed of Assignment thereby binding himself personally to pay the
obligations to petitioner.Petitioner firmly believes that respondent
EDWIN acted beyond the authority granted by his principal and
he should therefore bear the effect of his deed pursuant to Article
1897 of the New Civil Code.

We disagree.
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. The
first is when he expressly binds himself to the obligation and the
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. We hold that respondent EDWIN
does not fall within any of the exceptions contained in this
provision.

The Deed of Assignment clearly states that respondent EDWIN

signed thereon as the sales manager of Impact Systems. As
discussed elsewhere, the position of manager is unique in that it
presupposes the grant of broad powers with which to conduct the
business of the principal, thus:

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. x x x.[35]

Applying the foregoing to the present case, we hold that Edwin

Cuizon acted well-within his authority when he signed the Deed
of Assignment. To recall, petitioner refused to deliver the one unit
of sludge pump unless it received, in full, the payment for Impact
Systems indebtedness.[36] We may very well assume that Impact
Systems desperately needed the sludge pump for its business
since after it paid the amount of fifty thousand pesos
(P50,000.00) as down payment on 3 March 1995, [37] it still
persisted in negotiating with petitioner which culminated in the
execution of the Deed of Assignment of its receivables from
Toledo Power Company on 28 June 1995.[38] 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 EDWINs 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.

We likewise take note of the fact that in this case, petitioner is

seeking to recover both from respondents ERWIN, the principal,
and EDWIN, the agent. It is well to state here that Article 1897 of
the New Civil Code upon which petitioner anchors its claim
against respondent EDWIN does not hold that in case of excess of
authority, both the agent and the principal are liable to the other
contracting party.[39] To reiterate, the first part of Article 1897
declares that the principal is liable in cases when the agent acted
within the bounds of his authority. Under this, 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. However, it must be pointed out that

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. [40]

As we declare that respondent EDWIN acted within his authority

as an agent, who did not acquire any right nor incur any liability
arising from the Deed of Assignment, it follows that he is not a
real party in interest who should be impleaded in this case. A real
party in interest is one who stands to be benefited or injured by
the judgment in the suit, or the party entitled to the avails of the
suit.[41] In this respect, we sustain his exclusion as a defendant in
the suit before the court a quo.

WHEREFORE, premises considered, the present petition

is DENIED and the Decision dated 10 August 2004 and Resolution
dated 17 March 2005 of the Court of Appeals in CA-G.R. SP No.
71397, affirming the Order dated 29 January 2002 of the Regional
Trial Court, Branch 8, Cebu City, is AFFIRMED.

Let the records of this case be remanded to the Regional

Trial Court, Branch 8, Cebu City, for the continuation of the
proceedings against respondent ERWIN CUIZON.

SO ORDERED.

SECOND DIVISION

[G.R. No. 124642. February 23, 2004]

ALFREDO CHING and ENCARNACION CHING, petitioners, vs. THE

HON. COURT OF APPEALS and ALLIED BANKING
CORPORATION, respondents.
DECISION
CALLEJO, SR., J.:

This petition for review, under Rule 45 of the Revised Rules of Court, assails the
Decision of the Court of Appeals (CA) dated November 27, 1995 in CA-G.R. SP No.
33585, as well as the Resolution on April 2, 1996 denying the petitioners motion for
reconsideration. The impugned decision granted the private respondents petition
for certiorari and set aside the Orders of the trial court dated December 15, 1993 and
February 17, 1994 nullifying the attachment of 100,000 shares of stocks of the Citycorp
Investment Philippines under the name of petitioner Alfredo Ching.
[1]

[2]

[3]

[4]

The following facts are undisputed:

On September 26, 1978, the Philippine Blooming Mills Company, Inc. (PBMCI)
obtained a loan of P9,000,000.00 from the Allied Banking Corporation (ABC). By virtue
of this loan, the PBMCI, through its Executive Vice-President Alfredo Ching, executed a
promissory note for the said amount promising to pay on December 22, 1978 at an
interest rate of 14% per annum. As added security for the said loan, on September 28,
1978, Alfredo Ching, together with Emilio Taedo and Chung Kiat Hua, executed a
continuing guaranty with the ABC binding themselves to jointly and severally guarantee
the payment of all the PBMCI obligations owing the ABC to the extent
of P38,000,000.00. The loan was subsequently renewed on various dates, the last
renewal having been made on December 4, 1980.
[5]

[6]

[7]

Earlier, on December 28, 1979, the ABC extended another loan to the PBMCI in the
amount of P13,000,000.00 payable in eighteen months at 16% interest per annum. As
in the previous loan, the PBMCI, through Alfredo Ching, executed a promissory note to
evidence the loan maturing on June 29, 1981. This was renewed once for a period of
one month.
[8]

[9]

The PBMCI defaulted in the payment of all its loans. Hence, on August 21, 1981,
the ABC filed a complaint for sum of money with prayer for a writ of preliminary
attachment against the PBMCI to collect the P12,612,972.88 exclusive of interests,
penalties and other bank charges. Impleaded as co-defendants in the complaint were
Alfredo Ching, Emilio Taedo and Chung Kiat Hua in their capacity as sureties of the
PBMCI.
The case was docketed as Civil Case No. 142729 in the Regional Trial Court of
Manila, Branch XVIII. In its application for a writ of preliminary attachment, the ABC
averred that the defendants are guilty of fraud in incurring the obligations upon which
the present action is brought in that they falsely represented themselves to be in a
financial position to pay their obligation upon maturity thereof. Its supporting affidavit
stated, inter alia, that the [d]efendants have removed or disposed of their properties, or
[are] ABOUT to do so, with intent to defraud their creditors.
[10]

[11]

[12]

[13]

On August 26, 1981, after an ex-parte hearing, the trial court issued an Order
denying the ABCs application for a writ of preliminary attachment. The trial court
decreed that the grounds alleged in the application and that of its supporting affidavit
are all conclusions of fact and of law which do not warrant the issuance of the writ
prayed for. On motion for reconsideration, however, the trial court, in an Order dated
September 14, 1981, reconsidered its previous order and granted the ABCs application
for a writ of preliminary attachment on a bond ofP12,700,000. The order, in relevant
part, stated:
[14]

With respect to the second ground relied upon for the grant of the writ of preliminary
attachment ex-parte, which is the alleged disposal of properties by the defendants with
intent to defraud creditors as provided in Sec. 1(e) of Rule 57 of the Rules of Court,
the affidavits can only barely justify the issuance of said writ as against the defendant
Alfredo Ching who has allegedly bound himself jointly and severally to pay plaintiff
the defendant corporations obligation to the plaintiff as a surety thereof.
WHEREFORE, let a writ of preliminary attachment issue as against the defendant
Alfredo Ching requiring the sheriff of this Court to attach all the properties of said
Alfredo Ching not exceedingP12,612,972.82 in value, which are within the
jurisdiction of this Court and not exempt from execution upon, the filing by plaintiff
of a bond duly approved by this Court in the sum of Twelve Million Seven Hundred
Thousand Pesos (P12,700,000.00) executed in favor of the defendant Alfredo Ching to
secure the payment by plaintiff to him of all the costs which may be adjudged in his
favor and all damages he may sustain by reason of the attachment if the court shall
finally adjudge that the plaintiff was not entitled thereto.
SO ORDERED.

[15]

Upon the ABCs posting of the requisite bond, the trial court issued a writ of
preliminary attachment. Subsequently, summonses were served on the defendants,
save Chung Kiat Hua who could not be found.
[16]

Meanwhile, on April 1, 1982, the PBMCI and Alfredo Ching jointly filed a petition for
suspension of payments with the Securities and Exchange Commission (SEC),
docketed as SEC Case No. 2250, at the same time seeking the PBMCIs rehabilitation.
[17]

On July 9, 1982, the SEC issued an Order placing the PBMCIs business, including
its assets and liabilities, under rehabilitation receivership, and ordered that all actions for
claims listed in Schedule A of the petition pending before any court or tribunal are
hereby suspended in whatever stage the same may be until further orders from the
Commission. The ABC was among the PBMCIs creditors named in the said schedule.
[18]

Subsequently, on January 31, 1983, the PBMCI and Alfredo Ching jointly filed a
Motion to Dismiss and/or motion to suspend the proceedings in Civil Case No. 142729
invoking the PBMCIs pending application for suspension of payments (which Ching co-

signed) and over which the SEC had already assumed jurisdiction. On February 4,
1983, the ABC filed its Opposition thereto.
[19]

[20]

In the meantime, on July 26, 1983, the deputy sheriff of the trial court levied on
attachment the 100,000 common shares of Citycorp stocks in the name of Alfredo
Ching.
[21]

Thereafter, in an Order dated September 16, 1983, the trial court partially granted
the aforementioned motion by suspending the proceedings only with respect to the
PBMCI. It denied Chings motion to dismiss the complaint/or suspend the proceedings
and pointed out that P.D. No. 1758 only concerns the activities of corporations,
partnerships and associations and was never intended to regulate and/or control
activities of individuals. Thus, it directed the individual defendants to file their answers.
[22]

Instead of filing an answer, Ching filed on January 14, 1984 a Motion to Suspend
Proceedings on the same ground of the pendency of SEC Case No. 2250. This motion
met the opposition from the ABC.
[23]

[24]

On January 20, 1984, Taedo filed his Answer with counterclaim and cross-claim.
Ching eventually filed his Answer on July 12, 1984.
[25]

On October 25, 1984, long after submitting their answers, Ching filed an Omnibus
Motion, again praying for the dismissal of the complaint or suspension of the
proceedings on the ground of the July 9, 1982 Injunctive Order issued in SEC Case No.
2250. He averred that as a surety of the PBMCI, he must also necessarily benefit from
the defenses of his principal. The ABC opposed Chings omnibus motion.
[26]

Emilio Y. Taedo, thereafter, filed his own Omnibus Motion praying for the dismissal
of the complaint, arguing that the ABC had abandoned and waived its right to proceed
against the continuing guaranty by its act of resorting to preliminary attachment.
[27]

On December 17, 1986, the ABC filed a Motion to Reduce the amount of his
preliminary attachment bond from P12,700,000 to P6,350,000. Alfredo Ching opposed
the motion, but on April 2, 1987, the court issued an Order setting the incident for
further hearing on May 28, 1987 at 8:30 a.m. for the parties to adduce evidence on the
actual value of the properties of Alfredo Ching levied on by the sheriff.
[28]

[29]

[30]

On March 2, 1988, the trial court issued an Order granting the motion of the ABC
and rendered the attachment bond of P6,350,000.
[31]

On November 16, 1993, Encarnacion T. Ching, assisted by her husband Alfredo

Ching, filed a Motion to Set Aside the levy on attachment. She alleged inter alia that the
100,000 shares of stocks levied on by the sheriff were acquired by her and her husband
during their marriage out of conjugal funds after the Citycorp Investment Philippines was
established in 1974.Furthermore, the indebtedness covered by the continuing
guaranty/comprehensive suretyship contract executed by petitioner Alfredo Ching for
the account of PBMCI did not redound to the benefit of the conjugal partnership. She,
likewise, alleged that being the wife of Alfredo Ching, she was a third-party claimant
entitled to file a motion for the release of the properties. She attached therewith a copy
of her marriage contract with Alfredo Ching.
[32]

[33]

The ABC filed a comment on the motion to quash preliminary attachment and/or
motion to expunge records, contending that:

2.1 The supposed movant, Encarnacion T. Ching, is not a party to this present case;
thus, she has no personality to file any motion before this Honorable Court;
2.2 Said supposed movant did not file any Motion for Intervention pursuant to Section
2, Rule 12 of the Rules of Court;
2.3 Said Motion cannot even be construed to be in the nature of a Third-Party Claim
conformably with Sec. 14, Rule 57 of the Rules of Court.
3. Furthermore, assuming in gracia argumenti that the supposed movant has the
required personality, her Motion cannot be acted upon by this Honorable Court as the
above-entitled case is still in the archives and the proceedings thereon still remains
suspended. And there is no previous Motion to revive the same.
[34]

The ABC also alleged that the motion was barred by prescription or by laches
because the shares of stocks were in custodia legis.
During the hearing of the motion, Encarnacion T. Ching adduced in evidence her
marriage contract to Alfredo Ching to prove that they were married on January 8, 1960;
the articles of incorporation of Citycorp Investment Philippines dated May 14, 1979;
and, the General Information Sheet of the corporation showing that petitioner Alfredo
Ching was a member of the Board of Directors of the said corporation and was one of
its top twenty stockholders.
[35]
[36]

On December 10, 1993, the Spouses Ching filed their Reply/Opposition to the
motion to expunge records.
Acting on the aforementioned motion, the trial court issued on December 15, 1993
an Order lifting the writ of preliminary attachment on the shares of stocks and ordering
the sheriff to return the said stocks to the petitioners. The dispositive portion reads:
[37]

WHEREFORE, the instant Motion to Quash Preliminary Attachment, dated

November 9, 1993, is hereby granted. Let the writ of preliminary attachment subject
matter of said motion, be quashed and lifted with respect to the attached 100,000
common shares of stock of Citycorp Investment Philippines in the name of the
defendant Alfredo Ching, the said shares of stock to be returned to him and his
movant-spouse by Deputy Sheriff Apolonio A. Golfo who effected the levy thereon on
July 26, 1983, or by whoever may be presently in possession thereof.
SO ORDERED.

[38]

The plaintiff Allied Banking Corporation filed a motion for the reconsideration of the
order but denied the same on February 17, 1994. The petitioner bank forthwith filed a

petition for certiorari with the CA, docketed as CA-G.R. SP No. 33585, for the
nullification of the said order of the court, contending that:

1. The respondent Judge exceeded his authority thereby acted without

jurisdiction in taking cognizance of, and granting a Motion filed by a
complete stranger to the case.
2. The respondent Judge committed a grave abuse of discretion in lifting the
writ of preliminary attachment without any basis in fact and in law, and
contrary to established jurisprudence on the matter.
[39]

On November 27, 1995, the CA rendered judgment granting the petition and setting
aside the assailed orders of the trial court, thus:

WHEREFORE, premises considered, the petition is GRANTED, hereby setting aside

the questioned orders (dated December 15, 1993 and February 17, 1994) for being
null and void.
SO ORDERED.

[40]

The CA sustained the contention of the private respondent and set aside the
assailed orders. According to the CA, the RTC deprived the private respondent of its
right to file a bond under Section 14, Rule 57 of the Rules of Court. The petitioner
Encarnacion T. Ching was not a party in the trial court; hence, she had no right of action
to have the levy annulled with a motion for that purpose. Her remedy in such case was
to file a separate action against the private respondent to nullify the levy on the 100,000
Citycorp shares of stocks. The court stated that even assuming that Encarnacion T.
Ching had the right to file the said motion, the same was barred by laches.
Citing Wong v. Intermediate Appellate Court, the CA ruled that the presumption in
Article 160 of the New Civil Code shall not apply where, as in this case, the petitionerspouses failed to prove the source of the money used to acquire the shares of stock. It
held that the levied shares of stocks belonged to Alfredo Ching, as evidenced by the
fact that the said shares were registered in the corporate books of Citycorp solely under
his name. Thus, according to the appellate court, the RTC committed a grave abuse of
its discretion amounting to excess or lack of jurisdiction in issuing the assailed
orders. The petitioners motion for reconsideration was denied by the CA in a Resolution
dated April 2, 1996.
[41]

The petitioner-spouses filed the instant petition for review on certiorari, asserting
that the RTC did not commit any grave abuse of discretion amounting to excess or lack
of jurisdiction in issuing the assailed orders in their favor; hence, the CA erred in
reversing the same. They aver that the source of funds in the acquisition of the levied
shares of stocks is not the controlling factor when invoking the presumption of the
conjugal nature of stocks under Art. 160, and that such presumption subsists even if
the property is registered only in the name of one of the spouses, in this case, petitioner
[42]

Alfredo Ching. According to the petitioners, the suretyship obligation was not
contracted in the pursuit of the petitioner-husbands profession or business. And,
contrary to the ruling of the CA, where conjugal assets are attached in a collection suit
on an obligation contracted by the husband, the wife should exhaust her motion to
quash in the main case and not file a separate suit. Furthermore, the petitioners
contend that under Art. 125 of the Family Code, the petitioner-husbands gratuitous
suretyship is null and void ab initio, and that the share of one of the spouses in the
conjugal partnership remains inchoate until the dissolution and liquidation of the
partnership.
[43]

[44]

[45]

[46]

[47]

In its comment on the petition, the private respondent asserts that the CA correctly
granted its petition for certiorari nullifying the assailed order. It contends that the CA
correctly relied on the ruling of this Court in Wong v. Intermediate Appellate
Court. Citing Cobb-Perez v. Lantin and G-Tractors, Inc. v. Court of Appeals, the private
respondent alleges that the continuing guaranty and suretyship executed by petitioner
Alfredo Ching in pursuit of his profession or business. Furthermore, according to the
private respondent, the right of the petitioner-wife to a share in the conjugal partnership
property is merely inchoate before the dissolution of the partnership; as such, she had
no right to file the said motion to quash the levy on attachment of the shares of stocks.
The issues for resolution are as follows: (a) whether the petitioner-wife has the right
to file the motion to quash the levy on attachment on the 100,000 shares of stocks in the
Citycorp Investment Philippines; (b) whether or not the RTC committed a grave abuse
of its discretion amounting to excess or lack of jurisdiction in issuing the assailed orders.
On the first issue, we agree with the petitioners that the petitioner-wife had the right
to file the said motion, although she was not a party in Civil Case No. 142729.
[48]

In Ong v. Tating, we held that the sheriff may attach only those properties of the
defendant against whom a writ of attachment has been issued by the court. When the
sheriff erroneously levies on attachment and seizes the property of a third person in
which the said defendant holds no right or interest, the superior authority of the court
which has authorized the execution may be invoked by the aggrieved third person in the
same case. Upon application of the third person, the court shall order a summary
hearing for the purpose of determining whether the sheriff has acted rightly or wrongly in
the performance of his duties in the execution of the writ of attachment, more
specifically if he has indeed levied on attachment and taken hold of property not
belonging to the plaintiff. If so, the court may then order the sheriff to release the
property from the erroneous levy and to return the same to the third person. In resolving
the motion of the third party, the court does not and cannot pass upon the question of
the title to the property with any character of finality. It can treat the matter only insofar
as may be necessary to decide if the sheriff has acted correctly or not. If the claimants
proof does not persuade the court of the validity of the title, or right of possession
thereto, the claim will be denied by the court. The aggrieved third party may also avail
himself of the remedy of terceria by executing an affidavit of his title or right of
possession over the property levied on attachment and serving the same to the office
making the levy and the adverse party. Such party may also file an action to nullify the
levy with damages resulting from the unlawful levy and seizure, which should be a
[49]

totally separate and distinct action from the former case. The above-mentioned
remedies are cumulative and any one of them may be resorted to by one third-party
claimant without availing of the other remedies.
[50]

In this case, the petitioner-wife filed her motion to set aside the levy on attachment
of the 100,000 shares of stocks in the name of petitioner-husband claiming that the said
shares of stocks were conjugal in nature; hence, not liable for the account of her
husband under his continuing guaranty and suretyship agreement with the PBMCI. The
petitioner-wife had the right to file the motion for said relief.
On the second issue, we find and so hold that the CA erred in setting aside and
reversing the orders of the RTC. The private respondent, the petitioner in the CA, was
burdened to prove that the RTC committed a grave abuse of its discretion amounting to
excess or lack of jurisdiction. The tribunal acts without jurisdiction if it does not have the
legal purpose to determine the case; there is excess of jurisdiction where the tribunal,
being clothed with the power to determine the case, oversteps its authority as
determined by law. There is grave abuse of discretion where the tribunal acts in a
capricious, whimsical, arbitrary or despotic manner in the exercise of its judgment and is
equivalent to lack of jurisdiction.
[51]

It was incumbent upon the private respondent to adduce a sufficiently strong

demonstration that the RTC acted whimsically in total disregard of evidence material to,
and even decide of, the controversy before certiorari will lie. A special civil action for
certiorari is a remedy designed for the correction of errors of jurisdiction and not errors
of judgment. When a court exercises its jurisdiction, an error committed while so
engaged does not deprive it of its jurisdiction being exercised when the error is
committed.
[52]

After a comprehensive review of the records of the RTC and of the CA, we find and
so hold that the RTC did not commit any grave abuse of its discretion amounting to
excess or lack of jurisdiction in issuing the assailed orders.
Article 160 of the New Civil Code provides that all the properties acquired during the
marriage are presumed to belong to the conjugal partnership, unless it be proved that it
pertains exclusively to the husband, or to the wife. In Tan v. Court of Appeals, we held
that it is not even necessary to prove that the properties were acquired with funds of the
partnership. As long as the properties were acquired by the parties during the marriage,
they are presumed to be conjugal in nature. In fact, even when the manner in which the
properties were acquired does not appear, the presumption will still apply, and the
properties will still be considered conjugal. The presumption of the conjugal nature of
the properties acquired during the marriage subsists in the absence of clear, satisfactory
and convincing evidence to overcome the same.
[53]

[54]

In this case, the evidence adduced by the petitioners in the RTC is that the 100,000
shares of stocks in the Citycorp Investment Philippines were issued to and registered in
its corporate books in the name of the petitioner-husband when the said corporation
was incorporated on May 14, 1979. This was done during the subsistence of the
marriage of the petitioner-spouses. The shares of stocks are, thus, presumed to be the
conjugal partnership property of the petitioners. The private respondent failed to adduce

evidence that the petitioner-husband acquired the stocks with his exclusive money.
The barefaced fact that the shares of stocks were registered in the corporate books of
Citycorp Investment Philippines solely in the name of the petitioner-husband does not
constitute proof that the petitioner-husband, not the conjugal partnership, owned the
same. The private respondents reliance on the rulings of this Court in Maramba v.
Lozano and Associated Insurance & Surety Co., Inc. v. Banzon is misplaced. In
the Maramba case, we held that where there is no showing as to when the property was
acquired, the fact that the title is in the wifes name alone is determinative of the
ownership of the property. The principle was reiterated in the Associated
Insurance case where the uncontroverted evidence showed that the shares of stocks
were acquired during the marriage of the petitioners.
[55]

[56]

[57]

[58]

Instead of fortifying the contention of the respondents, the ruling of this Court
in Wong v. Intermediate Appellate Court buttresses the case for the petitioners. In that
case, we ruled that he who claims that property acquired by the spouses during their
marriage is not conjugal partnership property but belongs to one of them as his personal
property is burdened to prove the source of the money utilized to purchase the same. In
this case, the private respondent claimed that the petitioner-husband acquired the
shares of stocks from the Citycorp Investment Philippines in his own name as the owner
thereof. It was, thus, the burden of the private respondent to prove that the source of the
money utilized in the acquisition of the shares of stocks was that of the petitionerhusband alone. As held by the trial court, the private respondent failed to adduce
evidence to prove this assertion.
[59]

The CA, likewise, erred in holding that by executing a continuing guaranty and
suretyship agreement with the private respondent for the payment of the PBMCI loans,
the petitioner-husband was in the exercise of his profession, pursuing a legitimate
business. The appellate court erred in concluding that the conjugal partnership is liable
for the said account of PBMCI under Article 161(1) of the New Civil Code.
Article 161(1) of the New Civil Code (now Article 121[2 and 3] of the Family Code
of the Philippines) provides:
[60]

Art. 161. The conjugal partnership shall be liable for:

(1) All debts and obligations contracted by the husband for the benefit of the conjugal
partnership, and those contracted by the wife, also for the same purpose, in the cases
where she may legally bind the partnership.
The petitioner-husband signed the continuing guaranty and suretyship agreement
as security for the payment of the loan obtained by the PBMCI from the private
respondent in the amount of P38,000,000. In Ayala Investment and Development Corp.
v. Court of Appeals, this Court ruled that the signing as surety is certainly not an
exercise of an industry or profession. It is not embarking in a business. No matter how
often an executive acted on or was persuaded to act as surety for his own employer,
this should not be taken to mean that he thereby embarked in the business of
suretyship or guaranty.
[61]

For the conjugal partnership to be liable for a liability that should appertain to the
husband alone, there must be a showing that some advantages accrued to the
spouses. Certainly, to make a conjugal partnership responsible for a liability that should
appertain alone to one of the spouses is to frustrate the objective of the New Civil Code
to show the utmost concern for the solidarity and well being of the family as a unit. The
husband, therefore, is denied the power to assume unnecessary and unwarranted risks
to the financial stability of the conjugal partnership.
[62]

In this case, the private respondent failed to prove that the conjugal partnership of
the petitioners was benefited by the petitioner-husbands act of executing a continuing
guaranty and suretyship agreement with the private respondent for and in behalf of
PBMCI. The contract of loan was between the private respondent and the PBMCI,
solely for the benefit of the latter.No presumption can be inferred from the fact that when
the petitioner-husband entered into an accommodation agreement or a contract of
surety, the conjugal partnership would thereby be benefited. The private respondent
was burdened to establish that such benefit redounded to the conjugal partnership.
[63]

It could be argued that the petitioner-husband was a member of the Board of

Directors of PBMCI and was one of its top twenty stockholders, and that the shares of
stocks of the petitioner-husband and his family would appreciate if the PBMCI could be
rehabilitated through the loans obtained; that the petitioner-husbands career would be
enhanced should PBMCI survive because of the infusion of fresh capital. However,
these are not the benefits contemplated by Article 161 of the New Civil Code. The
benefits must be those directly resulting from the loan. They cannot merely be a byproduct or a spin-off of the loan itself.
[64]

This is different from the situation where the husband borrows money or receives
services to be used for his own business or profession. In the Ayala case, we ruled that
it is such a contract that is one within the term obligation for the benefit of the conjugal
partnership. Thus:

(A) If the husband himself is the principal obligor in the contract, i.e., he directly
received the money and services to be used in or for his own business or his own
profession, that contract falls within the term obligations for the benefit of the
conjugal partnership. Here, no actual benefit may be proved. It is enough that the
benefit to the family is apparent at the time of the signing of the contract. From the
very nature of the contract of loan or services, the family stands to benefit from the
loan facility or services to be rendered to the business or profession of the husband. It
is immaterial, if in the end, his business or profession fails or does not
succeed. Simply stated, where the husband contracts obligations on behalf of the
family business, the law presumes, and rightly so, that such obligation will redound to
the benefit of the conjugal partnership.
[65]

The Court held in the same case that the rulings of the Court in Cobb-Perez and GTractors, Inc. are not controlling because the husband, in those cases, contracted the
obligation for his own business. In this case, the petitioner-husband acted merely as a
surety for the loan contracted by the PBMCI from the private respondent.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision and
Resolution of the Court of Appeals are SET ASIDE AND REVERSED. The assailed
orders of the RTC are AFFIRMED.
SO ORDERED.
Puno, (Chairman), Quisumbing, Austria-Martinez, and Tinga, JJ., concur.