- Patrimonio vs. Gutierrez, G.R. No. 187769, June 4, 2104, 724 SCRA 636.

Facts: The petitioner and the respondent Napoleon Gutierrez (Gutierrez) entered into a business venture under
the name of Slam Dunk Corporation (Slum Dunk), a production outfit that produced mini-concerts and shows
related to basketball. Petitioner was already then a decorated professional basketball player while Gutierrez was a
well-known sports columnist.
In the course of their business, the petitioner pre-signed several checks to answer for the expenses of Slam Dunk.
Although signed, these checks had no payees name, date or amount. The blank checks were entrusted to
Gutierrez with the specific instruction not to fill them out without previous notification to and approval by the
petitioner. According to petitioner, the arrangement was made so that he could verify the validity of the payment
and make the proper arrangements to fund the account.
In the middle of 1993, without the petitioners knowledge and consent, Gutierrez went to Marasigan (the
petitioners former teammate), to secure a loan in the amount of P200,000.00 on the excuse that the petitioner
needed the money for the construction of his house. In addition to the payment of the principal, Gutierrez assured
Marasigan that he would be paid an interest of 5% per month from March to May 1994.
After much contemplation and taking into account his relationship with the petitioner and Gutierrez, Marasigan
acceded to Gutierrez request and gave him P200,000.00 sometime in February 1994. Gutierrez simultaneously
delivered to Marasigan one of the blank checks the petitioner pre-signed with Pilipinas Bank, Greenhills Branch,
Check No. 21001764 with the blank portions filled out with the words "Cash" "Two Hundred Thousand Pesos Only",
and the amount of "P200,000.00". The upper right portion of the check corresponding to the date was also filled
out with the words "May 23, 1994" but the petitioner contended that the same was not written by Gutierrez.
On May 24, 1994, Marasigan deposited the check but it was dishonored for the reason "ACCOUNT CLOSED." It was
later revealed that petitioners account with the bank had been closed since May 28, 1993.
Marasigan sought recovery from Gutierrez, to no avail. He thereafter sent several demand letters to the petitioner
asking for the payment of P200,000.00, but his demands likewise went unheeded. Consequently, he filed a
criminal case for violation of B.P. 22 against the petitioner, docketed as Criminal Case No. 42816.
On September 10, 1997, the petitioner filed before the Regional Trial Court (RTC) a Complaint for Declaration of
Nullity of Loan and Recovery of Damages against Gutierrez and co-respondent Marasigan. He completely denied
authorizing the loan or the checks negotiation, and asserted that he was not privy to the parties loan agreement.
The Ruling of the RTC
RTC declared Marasigan as a holder in due course and accordingly dismissed the petitioners complaint for
declaration of nullity of the loan. It ordered the petitioner to pay Marasigan the face value of the check with a
right to claim reimbursement from Gutierrez.
The petitioner elevated the case to the Court of Appeals (CA), insisting that Marasigan is not a holder in due
course. He contended that when Marasigan received the check, he knew that the same was without a date, and
hence, incomplete. He also alleged that the loan was actually between Marasigan and Gutierrez with his check
being used only as a security.
The Ruling of the CA
On September 24, 2008, the CA affirmed the RTC ruling, although premised on different factual findings. After
careful analysis, the CA agreed with the petitioner that Marasigan is not a holder in due course as he did not
receive the check in good faith.

The Issues
Reduced to its basics, the case presents to us the following issues:
1. Whether the contract of loan in the amount of P200,000.00 granted by respondent Marasigan to petitioner,
through respondent Gutierrez, may be nullified for being void;
2. Whether there is basis to hold the petitioner liable for the payment of the P200,000.00 loan;
3. Whether respondent Gutierrez has completely filled out the subject check strictly under the authority given by
the petitioner; and
4. Whether Marasigan is a holder in due course.
The Courts Ruling
I. Liability Under the Contract of Loan
The petitioner seeks to nullify the contract of loan on the ground that he never authorized the
borrowing of money. He points to Article 1878, paragraph 7 of the Civil Code, which explicitly
requires a written authority when the loan is contracted through an agent. The petitioner contends
that absent such authority in writing, he should not be held liable for the face value of the check
because he was not a party or privy to the agreement.
Contracts of Agency May be Oral Unless The Law Requires a Specific Form
Article 1868 of the Civil Code defines a contract of agency 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." Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or
his failure to repudiate the agency, knowing that another person is acting on his behalf without authority.
As a general rule, a contract of agency may be oral. 6 However, it must be written when the law requires a specific
form, for example, in a sale of a piece of land or any interest therein through an agent.
Article 1878 paragraph 7 of the Civil Code expressly requires a special power of authority before an agent can
loan or borrow money in behalf of the principal, to wit:
Art. 1878. Special powers of attorney are necessary in the following cases:
xxxx
(7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation
of the things which are under administration. (emphasis supplied)
Article 1878 does not state that the authority be in writing. As long as the mandate is express, such authority may
be either oral or written. We unequivocably declared in Lim Pin v. Liao Tian, et al., 7 that the requirement under
Article 1878 of the Civil Code refers to the nature of the authorization and not to its form. Be that as it may, the
authority must be duly established by competent and convincing evidence other than the self serving assertion of
the party claiming that such authority was verbally given, thus:
The requirements of a special power of attorney in Article 1878 of the Civil Code and of a special authority in Rule
138 of the Rules of Court refer to the nature of the authorization and not its form. The requirements are met if

there is a clear mandate from the principal specifically authorizing the performance of the act. As
early as 1906, this Court in Strong v. Gutierrez-Repide (6 Phil. 680) stated that such a mandate may be either oral
or written, the one vital thing being that it shall be express.
The Contract of Loan Entered Into by Gutierrez in Behalf of the Petitioner Should be Nullified for
Being Void; Petitioner is Not Bound by the Contract of Loan.
A review of the records reveals that Gutierrez did not have any authority to borrow money in behalf of the
petitioner. Records do not show that the petitioner executed any special power of attorney (SPA) in favor of
Gutierrez. In fact, the petitioners testimony confirmed that he never authorized Gutierrez (or anyone for that
matter), whether verbally or in writing, to borrow money in his behalf, nor was he aware of any such transaction.
In the absence of any authorization, Gutierrez could not enter into a contract of loan in behalf of the petitioner. As
held in Yasuma v. Heirs of De Villa, 9 involving a loan contracted by de Villa secured by real estate mortgages in the
name of East Cordillera Mining Corporation, in the absence of an SPA conferring authority on de Villa, there is no
basis to hold the corporation liable, to wit:
The power to borrow money is one of those cases where corporate officers as agents of the corporation need a
special power of attorney. In the case at bar, no special power of attorney conferring authority on de Villa was
ever presented. x x x There was no showing that respondent corporation ever authorized de Villa to obtain the
loans on its behalf.
xxxx
Therefore, on the first issue, the loan was personal to de Villa. There was no basis to hold the corporation liable
since there was no authority, express, implied or apparent, given to de Villa to borrow money from petitioner.
Neither was there any subsequent ratification of his act.
The liability arising from the loan was the sole indebtedness of de Villa (or of his estate after his death). (citations
omitted; emphasis supplied).
It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real
property executed by an agent, it must upon its face purport to be made, signed and sealed in the
name of the principal, otherwise, it will bind the agent only. It is not enough merely that the agent
was in fact authorized to make the mortgage, if he has not acted in the name of the principal. x x x
(emphasis supplied).
In the absence of any showing of any agency relations or special authority to act for and in behalf of the
petitioner, the loan agreement Gutierrez entered into with Marasigan is null and void. Thus, the petitioner is not
bound by the parties loan agreement.
Furthermore, that the petitioner entrusted the blank pre-signed checks to Gutierrez is not legally
sufficient because the authority to enter into a loan can never be presumed. The contract of agency
and the special fiduciary relationship inherent in this contract must exist as a matter of fact. The
person alleging it has the burden of proof to show, not only the fact of agency, but also its nature
and extent.11
The records show that Marasigan merely relied on the words of Gutierrez without securing a copy of the SPA in
favor of the latter and without verifying from the petitioner whether he had authorized the borrowing of money or
release of the check. He was thus bound by the risk accompanying his trust on the mere assurances of Gutierrez.
No Contract of Loan Was Perfected Between Marasigan And Petitioner, as The Latters Consent Was Not Obtained.

Another significant point that the lower courts failed to consider is that a contract of loan, like any other contract,
is subject to the rules governing the requisites and validity of contracts in general. 13 Article 1318 of the Civil
Code14enumerates the essential requisites for a valid contract, namely:
1. consent of the contracting parties;
2. object certain which is the subject matter of the contract; and
3. cause of the obligation which is established.
In this case, the petitioner denied liability on the ground that the contract lacked the essential
element of consent. We agree with the petitioner. As we explained above, Gutierrez did not have the
petitioners written/verbal authority to enter into a contract of loan. While there may be a meeting of
the minds between Gutierrez and Marasigan, such agreement cannot bind the petitioner whose
consent was not obtained and who was not privy to the loan agreement. Hence, only Gutierrez is
bound by the contract of loan.
True, the petitioner had issued several pre-signed checks to Gutierrez, one of which fell into the hands of
Marasigan. This act, however, does not constitute sufficient authority to borrow money in his behalf and neither
should it be construed as petitioners grant of consent to the parties loan agreement. Without any evidence to
prove Gutierrez authority, the petitioners signature in the check cannot be taken, even remotely, as sufficient
authorization, much less, consent to the contract of loan. Without the consent given by one party in a purported
contract, such contract could not have been perfected; there simply was no contract to speak of. 15
With the loan issue out of the way, we now proceed to determine whether the petitioner can be made liable under
the check he signed.
II. Liability Under the Instrument
The answer is supplied by the applicable statutory provision found in Section 14 of the Negotiable Instruments
Law (NIL) which states:
Sec. 14. Blanks; when may be filled.- Where the instrument is wanting in any material particular, the
person in possession thereof has a prima facie authority to complete it by filling up the blanks
therein. And a signature on a blank paper delivered by the person making the signature in order that
the paper may be converted into a negotiable instrument operates as a prima facie authority to fill it
up as such for any amount. In order, however, that any such instrument when completed may be
enforced against any person who became a party thereto prior to its completion, it must be filled up
strictly in accordance with the authority given and within a reasonable time. But if any such
instrument, after completion, is negotiated to a holder in due course, it is valid and effectual for all
purposes in his hands, and he may enforce it as if it had been filled up strictly in accordance with the
authority given and within a reasonable time.
This provision applies to an incomplete but delivered instrument. Under this rule, if the maker or drawer delivers a
pre-signed blank paper to another person for the purpose of converting it into a negotiable instrument, that
person is deemed to have prima facie authority to fill it up. It merely requires that the instrument be in the
possession of a person other than the drawer or maker and from such possession, together with the fact that the
instrument is wanting in a material particular, the law presumes agency to fill up the blanks. 16
In order however that one who is not a holder in due course can enforce the instrument against a
party prior to the instruments completion, two requisites must exist: (1) that the blank must be
filled strictly in accordance with the authority given; and (2) it must be filled up within a reasonable
time. If it was proven that the instrument had not been filled up strictly in accordance with the authority given

and within a reasonable time, the maker can set this up as a personal defense and avoid liability. However, if the
holder is a holder in due course, there is a conclusive presumption that authority to fill it up had been given and
that the same was not in excess of authority.17
Marasigan is Not a Holder in Due Course
The Negotiable Instruments Law (NIL) defines a holder in due course, thus:
Sec. 52 A holder in due course is a holder who has taken the instrument under the following conditions:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without notice that it had been previously
dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the
title of the person negotiating it.(emphasis supplied)
Section 52(c) of the NIL states that a holder in due course is one who takes the instrument "in good
faith and for value." It also provides in Section 52(d) that in order that one may be a holder in due
course, it is necessary that at the time it was negotiated to him he had no notice of any infirmity in
the instrument or defect in the title of the person negotiating it.
Acquisition in good faith means taking without knowledge or notice of equities of any sort which could be set up
against a prior holder of the instrument. 18 It means that he does not have any knowledge of fact which would
render it dishonest for him to take a negotiable paper. The absence of the defense, when the instrument was
taken, is the essential element of good faith.19
As held in De Ocampo v. Gatchalian:20
In order to show that the defendant had "knowledge of such facts that his action in taking the instrument
amounted to bad faith," it is not necessary to prove that the defendant knew the exact fraud that was practiced
upon the plaintiff by the defendant's assignor, it being sufficient to show that the defendant had notice that there
was something wrong about his assignor's acquisition of title, although he did not have notice of the particular
wrong that was committed.
It is sufficient that the buyer of a note had notice or knowledge that the note was in some way tainted with fraud.
It is not necessary that he should know the particulars or even the nature of the fraud, since all that is required is
knowledge of such facts that his action in taking the note amounted bad faith.
The term bad faith does not necessarily involve furtive motives, but means bad faith in a commercial sense. The
manner in which the defendants conducted their Liberty Loan department provided an easy way for thieves to
dispose of their plunder. It was a case of "no questions asked." Although gross negligence does not of itself
constitute bad faith, it is evidence from which bad faith may be inferred. The circumstances thrust
the duty upon the defendants to make further inquiries and they had no right to shut their eyes
deliberately to obvious facts. (emphasis supplied).
In the present case, Marasigans knowledge that the petitioner is not a party or a privy to the contract of loan, and
correspondingly had no obligation or liability to him, renders him dishonest, hence, in bad faith.

Since he knew that the underlying obligation was not actually for the petitioner, the rule that a possessor of the
instrument is prima facie a holder in due course is inapplicable. As correctly noted by the CA , his inaction and
failure to verify, despite knowledge of that the petitioner was not a party to the loan, may be construed as gross
negligence amounting to bad faith.
Yet, it does not follow that simply because he is not a holder in due course, Marasigan is already totally barred
from recovery. The NIL does not provide that a holder who is not a holder in due course may not in any case
recover on the instrument.22 The only disadvantage of a holder who is not in due course is that the negotiable
instrument is subject to defenses as if it were non-negotiable. 23 Among such defenses is the filling up blank not
within the authority.
On this point, the petitioner argues that the subject check was not filled up strictly on the basis of the authority he
gave. He points to his instruction not to use the check without his prior approval and argues that the check was
filled up in violation of said instruction.
Check Was Not Completed Strictly Under The Authority Given by The Petitioner
Our own examination of the records tells us that Gutierrez has exceeded the authority to fill up the blanks
and use the check. To repeat, petitioner gave Gutierrez pre-signed checks to be used in their business provided
that he could only use them upon his approval. His instruction could not be any clearer as Gutierrez authority was
limited to the use of the checks for the operation of their business, and on the condition that the petitioners prior
approval be first secured.
While under the law, Gutierrez had a prima facie authority to complete the check, such prima facie
authority does not extend to its use (i.e., subsequent transfer or negotiation)once the check is
completed. In other words, only the authority to complete the check is presumed. Further, the law used the term
"prima facie" to underscore the fact that the authority which the law accords to a holder is a presumption juris
tantumonly; hence, subject to subject to contrary proof. Thus, evidence that there was no authority or that the
authority granted has been exceeded may be presented by the maker in order to avoid liability under the
instrument.
In the present case, no evidence is on record that Gutierrez ever secured prior approval from the petitioner to fill
up the blank or to use the check. In his testimony, petitioner asserted that he never authorized nor approved the
filling up of the blank checks.
Notably, Gutierrez was only authorized to use the check for business expenses; thus, he exceeded the authority
when he used the check to pay the loan he supposedly contracted for the construction of petitioner's house. This
is a clear violation of the petitioner's instruction to use the checks for the expenses of Slam Dunk. It cannot
therefore be validly concluded that the check was completed strictly in accordance with the authority given by the
petitioner.
Considering that Marasigan is not a holder in due course, the petitioner can validly set up the personal defense
that the blanks were not filled up in accordance with the authority he gave. Consequently, Marasigan has no right
to enforce payment against the petitioner and the latter cannot be obliged to pay the face value of the check.
- Yoshizaki v. Joy Training Center of Aurora, Inc., 702 SCRA 631 (July 31, 2013).
Facts: Respondent Joy Training Center of Aurora, Inc. (Joy Training) is a non-stock, non-profit religious educational
institution. It was the registered owner of a parcel of land and the building thereon (real properties) located in San
Luis Extension Purok No. 1, Barangay Buhangin, Baler, Aurora. The parcel of land was designated as Lot No. 125-L
and was covered by Transfer Certificate of Title (TCT) No. T-25334. 4

On November 10, 1998, the spouses Richard and Linda Johnson sold the real properties, a Wrangler
jeep, and other personal properties in favor of the spouses Sally and Yoshio Yoshizaki. On the same
date, a Deed of Absolute Sale 5 and a Deed of Sale of Motor Vehicle 6 were executed in favor of the spouses
Yoshizaki. The spouses Johnson were members of Joy Trainings board of trustees at the time of sale. On
December 7, 1998, TCT No. T-25334 was cancelled and TCT No. T-26052 7 was issued in the name of the spouses
Yoshizaki.
On December 8, 1998, Joy Training, represented by its Acting Chairperson Reuben V. Rubio, filed an
action for the Cancellation of Sales and Damages with prayer for the issuance of a Temporary Restraining
Order and/or Writ of Preliminary Injunction against the spouses Yoshizaki and the spouses Johnson before the
Regional Trial Court of Baler, Aurora (RTC). 8 In the complaint, Joy Training alleged that the spouses
Johnson sold its properties without the requisite authority from the board of directors. 10 It assailed
the validity of a board resolution dated September 1, 1998 11 which purportedly granted the spouses
Johnson the authority to sell its real properties. It averred that only a minority of the board,
composed of the spouses Johnson and Alexander Abadayan, authorized the sale through the
resolution. It highlighted that the Articles of Incorporation provides that the board of trustees consists of seven
members, namely: the spouses Johnson, Reuben, Carmencita Isip, Dominador Isip, Miraflor Bolante, and Abelardo
Aquino.12
Cecilia and the spouses Johnson were declared in default for their failure to file an Answer within the reglementary
period.13 On the other hand, the spouses Yoshizaki filed their Answer with Compulsory Counterclaims on
June 23, 1999. They claimed that Joy Training authorized the spouses Johnson to sell the parcel of
land. They asserted that a majority of the board of trustees approved the resolution. They maintained
that the actual members of the board of trustees consist of five members, namely: the spouses Johnson, Reuben,
Alexander, and Abelardo. Moreover, Connie Dayot, the corporate secretary, issued a certification dated February
20, 199814 authorizing the spouses Johnson to act on Joy Trainings behalf. Furthermore, they highlighted that
the Wrangler jeep and other personal properties were registered in the name of the spouses
Johnson.15 Lastly, they assailed the RTCs jurisdiction over the case. They posited that the case is an intracorporate dispute cognizable by the Securities and Exchange Commission (SEC). 16
After the presentation of their testimonial evidence, the spouses Yoshizaki formally offered in evidence
photocopies of the resolution and certification, among others. 17 Joy Training objected to the formal offer of the
photocopied resolution and certification on the ground that they were not the best evidence of their contents. 18
The Issues
The case comes to us with the following issues:
1) Whether or not the RTC has jurisdiction over the present case; and
2) Whether or not there was a contract of agency to sell the real properties between Joy Training and the spouses
Johnson.
3) As a consequence of the second issue, whether or not there was a valid contract of sale of the real properties
between Joy Training and the spouses Yoshizaki.
Our Ruling
The RTC has jurisdiction over disputes concerning the application of the Civil Code
Jurisdiction over the subject matter is the power to hear and determine cases of the general class to which the
proceedings before a court belong.28 It is conferred by law. The allegations in the complaint and the status or

relationship of the parties determine which court has jurisdiction over the nature of an action. 29 The same test
applies in ascertaining whether a case involves an intra-corporate controversy. 30
The CA correctly ruled that the RTC has jurisdiction over the present case. Joy Training seeks to nullify the sale of
the real properties on the ground that there was no contract of agency between Joy Training and the spouses
Johnson. This was beyond the ambit of the SECs original and exclusive jurisdiction prior to the enactment of
Republic Act No. 8799 which only took effect on August 3, 2000. The determination of the existence of a contract
of agency and the validity of a contract of sale requires the application of the relevant provisions of the Civil Code.
It is a well-settled rule that "disputes concerning the application of the Civil Code are properly cognizable by
courts of general jurisdiction."31 Indeed, no special skill requiring the SECs technical expertise is necessary for the
disposition of this issue and of this case.
There is no contract of agency between Joy Training and the spouses Johnson to sell the parcel of
land with its improvements.
Article 1868 of the Civil Code defines a contract of agency 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." It may be express, or implied from the acts of the principal, from
his silence or lack of action, or his failure to repudiate the agency, knowing that another person is
acting on his behalf without authority.
As a general rule, a contract of agency may be oral. However, it must be written when the law requires a specific
form.33 Specifically, Article 1874 of the Civil Code provides that the contract of agency must be written for the
validity of the sale of a piece of land or any interest therein. Otherwise, the sale shall be void. A related provision,
Article 1878 of the Civil Code, states that special powers of attorney are necessary to convey real rights over
immovable properties.
The special power of attorney mandated by law must be one that expressly mentions a sale or that
includes a sale as a necessary ingredient of the authorized act. We unequivocably declared in Cosmic
Lumber Corporation v. Court of Appeals34 that a special power of attorney must express the powers of the agent in
clear and unmistakable language for the principal to confer the right upon an agent to sell real estate. When there
is any reasonable doubt that the language so used conveys such power, no such construction shall be given the
document. The purpose of the law in requiring a special power of attorney in the disposition of
immovable property is to protect the interest of an unsuspecting owner from being prejudiced by the
unwarranted act of another and to caution the buyer to assure himself of the specific authorization
of the putative agent.35
In the present case, Sally presents three pieces of evidence which allegedly prove that Joy Training specially
authorized the spouses Johnson to sell the real properties: (1) TCT No. T-25334, (2) the resolution, (3) and the
certification. We quote the pertinent portions of these documents for a thorough examination of Sallys claim. TCT
No. T-25334, entered in the Registry of Deeds on March 5, 1998, states:
A parcel of land x x x is registered in accordance with the provisions of the Property Registration Decree in the
name of JOY TRAINING CENTER OF AURORA, INC., Rep. by Sps. RICHARD A. JOHNSON and LINDA S. JOHNSON, both
of legal age, U.S. Citizen, and residents of P.O. Box 3246, Shawnee, Ks 66203, U.S.A. 36(emphasis ours)
On the other hand, the fifth paragraph of the certification provides:
Further, Richard A. and Linda J. Johnson were given FULL AUTHORITY for ALL SIGNATORY purposes for the
corporation on ANY and all matters and decisions regarding the property and ministry here. They will follow
guidelines set forth according to their appointment and ministerial and missionary training and in that, they will
formulate and come up with by-laws which will address and serve as governing papers over the center and

corporation. They are to issue monthly and quarterly statements to all members of the corporation. 37 (emphasis
ours)
The resolution states:
We, the undersigned Board of Trustees (in majority) have authorized the sale of land and building owned by
spouses Richard A. and Linda J. Johnson (as described in the title SN No. 5102156 filed with the Province of Aurora
last 5th day of March, 1998. These proceeds are going to pay outstanding loans against the project and the
dissolution of the corporation shall follow the sale. This is a religious, non-profit corporation and no profits or
stocks are issued.38 (emphasis ours)
The above documents do not convince us of the existence of the contract of agency to sell the real properties.
TCT No. T-25334 merely states that Joy Training is represented by the spouses Johnson. The title does not
explicitly confer to the spouses Johnson the authority to sell the parcel of land and the building thereon. Moreover,
the phrase "Rep. by Sps. RICHARD A. JOHNSON and LINDA S. JOHNSON" 39 only means that the spouses Johnson
represented Joy Training in land registration.
The lower courts should not have relied on the resolution and the certification in resolving the case. The spouses
Yoshizaki did not produce the original documents during trial. They also failed to show that the production of
pieces of secondary evidence falls under the exceptions enumerated in Section 3, Rule 130 of the Rules of
Court.40 Thus, the general rule that no evidence shall be admissible other than the original document itself when
the subject of inquiry is the contents of a document applies. 41
Nonetheless, if only to erase doubts on the issues surrounding this case, we declare that even if we consider the
photocopied resolution and certification, this Court will still arrive at the same conclusion.
The resolution which purportedly grants the spouses Johnson a special power of attorney is negated by the phrase
"land and building owned by spouses Richard A. and Linda J. Johnson." 42 Even if we disregard such phrase, the
resolution must be given scant consideration. We adhere to the CAs position that the basis for determining the
board of trustees composition is the trustees as fixed in the articles of incorporation and not the actual members
of the board. The second paragraph of Section 25 43 of the Corporation Code expressly provides that a majority of
the number of trustees as fixed in the articles of incorporation shall constitute a quorum for the transaction of
corporate business.
Moreover, the certification is a mere general power of attorney which comprises all of Joy Trainings
business. Article 1877 of the Civil Code clearly states that "an agency couched in general terms
comprises only acts of administration, even if the principal should state that he withholds no power
or that the agent may execute such acts as he may consider appropriate, or even though the agency
should authorize a general and unlimited management.
The contract of sale is unenforceable
Necessarily, the absence of a contract of agency renders the contract of sale unenforceable; Joy
Training effectively did not enter into a valid contract of sale with the spouses Yoshizaki. Sally cannot
also claim that she was a buyer in good faith. She misapprehended the rule that persons dealing with a registered
land have the legal right to rely on the face of the title and to dispense with the need to inquire further, except
when the party concerned has actual knowledge of facts and circumstances that would impel a reasonably
cautious man to make such inquiry. This rule applies when the ownership of a parcel of land is disputed and not
when the fact of agency is contested.
At this point, we reiterate the established principle that persons dealing with an agent must
ascertain not only the fact of agency, but also the nature and extent of the agents authority. 48 A
third person with whom the agent wishes to contract on behalf of the principal may require the

presentation of the power of attorney, or the instructions as regards the agency. 49 The basis for
agency is representation and a person dealing with an agent is put upon inquiry and must discover
on his own peril the authority of the agent. 50 Thus, Sally bought the real properties at her own risk;
she bears the risk of injury occasioned by her transaction with the spouses Johnson.
- Spouses Alcantara vs. Nido, 618 SCRA 333[2010]
The Facts
Revelen, who is respondents daughter and of legal age, is the owner of an unregistered land with an area of 1,939
square meters located in Cardona, Rizal. Sometime in March 1984, respondent accepted the offer of petitioners to
purchase a 200-square meter portion of Revelens lot (lot) at P200 per square meter. Petitioners paid P3,000 as
downpayment and the balance was payable on installment. Petitioners constructed their houses in 1985. In 1986,
with respondents consent, petitioners occupied an additional 150 square meters of the lot. By 1987, petitioners
had already paid P17,500[5] before petitioners defaulted on their installment payments.
On 11 May 1994, respondent, acting as administrator and attorney-in-fact of Revelen, filed a complaint for
recovery of possession with damages and prayer for preliminary injunction against petitioners with the RTC.
Issues
Petitioners raise the following arguments:
1. The appellate court gravely erred in ruling that the contract entered into by respondent, in representation of
her daughter, and former defendant Eduardo Rubi (deceased), is void; and
2. The appellate court erred in not ruling that the petitioners are entitled to their counterclaims, particularly
specific performance.[15]
Ruling of the Court
Petitioners submit that the sale of land by an agent who has no written authority is not void but merely voidable
given the spirit and intent of the law. Being only voidable, the contract may be ratified, expressly or impliedly.
Petitioners argue that since the contract to sell was sufficiently established through respondents admission
during the pre-trial conference, the appellate court should have ruled on the matter of the counterclaim for
specific performance.[16]
Respondent argues that the appellate court cannot lawfully rule on petitioners counterclaim because there is
nothing in the records to sustain petitioners claim that they have fully paid the price of the lot. [17] Respondent
points out that petitioners admitted the lack of written authority to sell. Respondent also alleges that there was
clearly no meeting of the minds between the parties on the purported contract of sale. [18]
Sale of Land through an Agent
Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter
shall be in writing; otherwise, the sale shall be void.
Art. 1878. Special powers of attorney are necessary in the following cases:
xxx
(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either
gratuitously or for a valuable consideration;
xxx
Article 1874 of the Civil Code explicitly requires a written authority before an agent can sell an immovable
property. Based on a review of the records, there is absolutely no proof of respondents written authority to sell
the lot to petitioners. In fact, during the pre-trial conference, petitioners admitted that at the time of the
negotiation for the sale of the lot, petitioners were of the belief that respondent was the owner of lot.

[19]

Petitioners only knew that Revelen was the owner of the lot during the hearing of this case. Consequently, the
sale of the lot by respondent who did not have a written authority from Revelen is void. A void contract produces
no effect either against or in favor of anyone and cannot be ratified. [20]
A special power of attorney is also necessary to enter into any contract by which the ownership of
an immovable is transmitted or acquired for a valuable consideration. Without an authority in
writing, respondent cannot validly sell the lot to petitioners. Hence, any sale in favor of the
petitioners is void.
Our ruling in Dizon v. Court of Appeals[21] is instructive:
When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter shall be in
writing; otherwise, the sale shall be void. Thus the authority of an agent to execute a contract for the sale of real
estate must be conferred in writing and must give him specific authority, either to conduct the general business of
the principal or to execute a binding contract containing terms and conditions which are in the contract he did
execute. A special power of attorney is necessary to enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a valuable consideration. The express mandate
required by law to enable an appointee of an agency (couched) in general terms to sell must be one that
expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned. For the principal
to confer the right upon an agent to sell real estate, a power of attorney must so express the powers of the agent
in clear and unmistakable language. When there is any reasonable doubt that the language so used conveys such
power, no such construction shall be given the document.
Further, Article 1318 of the Civil Code enumerates the requisites for a valid contract, namely:
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.

Respondent did not have the written authority to enter into a contract to sell the lot. As the consent of Revelen,
the real owner of the lot, was not obtained in writing as required by law, no contract was perfected. Consequently,
petitioners failed to validly acquire the lot.
General Power of Attorney
On 25 March 1994, Revelen executed a General Power of Attorney constituting respondent as her attorney-in-fact
and authorizing her to enter into any and all contracts and agreements on Revelens behalf. The General Power of
Attorney was notarized by Larry A. Reid, Notary Public in California, U.S.A.
Unfortunately, the General Power of Attorney presented as Exhibit C [22] in the RTC cannot also be the basis of
respondents written authority to sell the lot.
Sec. 25. Proof of public or official record. An official record or an entry therein, when admissible for any purpose,
may be evidenced by an official publication thereof or by a copy attested by the officer having the legal custody
of the record, or by his deputy, and accompanied, if the record is not kept in the Philippines, with a certificate that
such officer has the custody. If the office in which the record is kept is in a foreign country, the certificate may be
made by a secretary of embassy or legation consul general, consul, vice consul, or consular agent or by any
officer in the foreign service of the Philippines stationed in the foreign country in which the record is kept, and
authenticated by the seal of his office.
In Teoco v. Metropolitan Bank and Trust Company,[23] quoting Lopez v. Court of Appeals,[24] we explained:
From the foregoing provision, when the special power of attorney is executed and acknowledged before a notary
public or other competent official in a foreign country, it cannot be admitted in evidence unless it is certified as
such in accordance with the foregoing provision of the rules by a secretary of embassy or legation, consul general,
consul, vice consul, or consular agent or by any officer in the foreign service of the Philippines stationed in the
foreign country in which the record is kept of said public document and authenticated by the seal of his office. A
city judge-notary who notarized the document, as in this case, cannot issue such certification. [25]

Since the General Power of Attorney was executed and acknowledged in the United States of America, it cannot
be admitted in evidence unless it is certified as such in accordance with the Rules of Court by an officer in the
foreign service of the Philippines stationed in the United States of America. Hence, this document has no
probative value.
Specific Performance
Petitioners are not entitled to claim for specific performance. It must be stressed that when specific performance
is sought of a contract made with an agent, the agency must be established by clear, certain and specific proof.
[26]
To reiterate, there is a clear absence of proof that Revelen authorized respondent to sell her lot.
Jurisdiction of the RTC
Section 33 of Batas Pambansa Bilang 129,[27] as amended by Republic Act No. 7691 provides:
Section 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in Civil
Cases. Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts shall exercise:
xxx
(3) Exclusive original jurisdiction in all civil actions which involve title to, possession of, real property, or any
interest therein where the assessed value of the property or interest therein does not exceed Twenty thousand
pesos (P20,000.00) or, in civil actions in Metro Manila, where such assessed value does not exceed Fifty thousand
pesos (P50,000.00) exclusive of interest, damages of whatever kind, attorneys fees, litigation expenses and costs:
xxx
In Geonzon Vda. de Barrera v. Heirs of Vicente Legaspi,[28] the Court explained:
Before the amendments introduced by Republic Act No. 7691, the plenary action of accion publiciana was to be
brought before the regional trial court. With the modifications introduced by R.A. No. 7691 in 1994, the jurisdiction
of the first level courts has been expanded to include jurisdiction over other real actions where the assessed value
does not exceed P20,000, P50,000 where the action is filed in Metro Manila. The first level courts thus have
exclusive original jurisdiction over accion publiciana and accion reivindicatoria where the assessed value of the
real property does not exceed the aforestated amounts. Accordingly, the jurisdictional element is the assessed
value of the property.
Assessed value is understood to be the worth or value of property established by taxing authorities on the basis of
which the tax rate is applied. Commonly, however, it does not represent the true or market value of the property.
The appellate court correctly ruled that even if the complaint filed with the RTC involves a question of ownership,
the MTC still has jurisdiction because the assessed value of the whole lot as stated in Tax Declaration No. 09-0742
is P4,890.[29] The MTC cannot be deprived of jurisdiction over an ejectment case based merely on the assertion of
ownership over the litigated property, and the underlying reason for this rule is to prevent any party from trifling
with the summary nature of an ejectment suit.[30]
The general rule is that dismissal of a case for lack of jurisdiction may be raised at any stage of the
proceedings since jurisdiction is conferred by law. The lack of jurisdiction affects the very authority
of the court to take cognizance of and to render judgment on the action; otherwise, the inevitable
consequence would make the courts decision a lawless thing. [31] Since the RTC has no jurisdiction
over the complaint filed, all the proceedings as well as the Decision of 17 June 2002 are void. The
complaint should perforce be dismissed.
- Estate of Lino Olaguer vs. Ongjoco, 563 SCRA 373 (2008)
Facts: Lino Olaguer died on October 3, 1957 so Special Proceedings No. 528 for probate of will was filed in the
then Court of First Instance of Albay. Defendant Olivia P. Olaguer was appointed as administrator pursuant to the
will. Later, defendant Eduardo Olaguer was appointed as co-administrator.
In the order of the probate court dated April 4, 1961, some properties of the estate were authorized to be sold to
pay obligations of the estate.

Relying upon the order, but without prior notice or permission from the Probate Court, defendants Olivia P.
Olaguer and Eduardo Olaguer on November 1, 1965 sold to Estanislao Olaguer 10 parcels of land. The sale was
approved by the Probate Court on November 12, 1965.
On July 7, 1966, defendant Olivia P. Olaguer executed a Special Power of Attorney in favor of defendant Jose A.
Olaguer, authorizing the latter to "sell, mortgage, assign, transfer, endorse and deliver" of 6 properties.
On July 7, 1966, Estanislao Olaguer executed a Special Power of Attorney in favor of Jose A. Olaguer authorizing
the latter to "sell, mortgage, assign, transfer, endorse and deliver" the 9 properties.
By virtue of this Special Power of Attorney, on March 1, 1967, Jose A. Olaguer as Attorney-in-Fact of Estanislao
Olaguer mortgaged Lots 7589, 7593 and 7396 to defendant PNB as security for a loan of 10,000 Pesos. The
mortgage was foreclosed by the PNB on June 13, 1973 and the properties mortgage were sold at public auction to
PNB. On December 10, 1990, the PNB transferred the properties to the Republic of the Philippines pursuant to
Exec. Order No. 407 dated June 14, 1990 for agrarian reform purposes.
On October 29, 1966, Estanislao Olaguer executed a General Power of Attorney in favor of Jose A. Olaguer,
authorizing the latter to exercise general control and supervision over all of his business and properties, and
among others, to sell or mortgage any of his properties.
On December 29, 1966, Estanislao Olaguer sold to Jose A. Olaguer for 15,000 the 10 parcels of land he bought
from Olivia P. Olaguer and Eduardo Olaguer.
On March 16, 1968, Estanislao Olaguer sold to Jose A. Olaguer for 1 Peso and other valuable consideration 2
parcels of land which have a total area of 2.5 hectares.
On June 5, 1968, Estanislao Olaguer sold another 2 lots to Jose A. Olaguer for 1 Peso and other valuable
consideration.
On May 13, 1971, Jose A. Olaguer in his capacity as Attorney in-Fact of Estanislao Olaguer sold to his son Virgilio
Olaguer for 1 Peso and other valuable consideration.
On July 15, 1974, Jose A. Olaguer sold to his son Virgilio Olaguer Lot No. 4521 and Lot No. 4522 for 1,000 Pesos.
On September 16, 1978 Virgilio Olaguer executed a General Power of Attorney in favor of Jose A. Olaguer
authorizing the latter to exercise general control and supervision over all of his business and properties and
among others, to sell or mortgage the same.
Olivia P. Olaguer and Eduardo Olaguer were removed as administrators of the estate and on February 12, 1980,
plaintiff Ma. Linda Olaguer Montayre was appointed administrator by the Probate Court.
The decedent Lino Olaguer have had three marriages. He was first married to Margarita Ofemaria who died April
6, 1925. His second wife was Gloria Buenaventura who died on July 2, 1937. The third wife was the defendant
Olivia P. Olaguer.
Jose Olaguer acting upon the general power of attorney sold 8 parcels of land to Emilio Ongjoco.
On 28 January 1980, the Estate of Lino Olaguer filed an action for the Annulment of Sales of Real Property and/or
Cancellation of Titles in the then Court of First Instance of Albay. The plaintiffs therein alleged that the sales of the
following properties belonging to the Estate of Lino Olaguer to Estanislao Olaguer were absolutely simulated or
fictitious, the plaintiffs likewise prayed that the resulting Transfer Certificates of Title issued to Jose Olaguer,
Virgilio Olaguer, Cipriano Duran and the PNB be annulled.
Essentially, the question that has been brought before us for consideration is whether or not, under
the facts and circumstances of this case, respondent Ongjoco can be considered an innocent
purchaser for value.
Petitioners agree with the pronouncement of the trial court that respondent Ongjoco could not have been a buyer
in good faith since he did not bother to verify the title and the capacity of his vendor to convey the properties
involved to him. Knowing that Olivia P. Olaguer owned the properties in 1973 and that he merely dealt with Jose A.

Olaguer as an agent in January 1976, Ongjoco should have ascertained the extent of Joses authority, as well as
the title of Virgilio as the principal and owner of the properties.
Petitioners likewise cite the following incidents that were considered by the trial court in declaring that
respondent was a buyer in bad faith, namely: (1) that Virgilio Olaguer executed an affidavit, [30] wherein he denied
having bought any property from the estate of Lino Olaguer, and that if there are documents showing that fact, he
does not know how they came about; (2) that the power of attorney referred to by Jose A. Olaguer as his authority
for the sale of Lots 1 and 2 (formerly Lots 76-B and 76-C) was not presented or offered in evidence; (3) that there
are two deeds of sale[31] over Lot 76-D in favor of Ongjoco; (4) that there are two deeds of sale [32] over Lots 76-E
and 76-F in favor of Ongjoco; (5) that there are two deeds of sale [33] over Lot 76-G in favor of Ongjoco; and (6) that
while Lot 76-D was already sold to Ongjoco in 1979, it was still Jose A. Olaguer as attorney in fact of Virgilio
Olaguer who filed on 8 August 1980 a petition for the issuance of a second owners copy [34] of the title to the
property, and no mention was made about the sale to Ongjoco.
Respondent Ongjoco, on the other hand, invokes the ruling of the Court of Appeals that he was an innocent
purchaser for value. His adamant stance is that, when he acquired the subject properties, the same were already
owned by Virgilio Olaguer. Respondent insists that Jose A. Olaguer was duly authorized by a written power of
attorney when the properties were sold to him (Ongjoco). He posits that this fact alone validated the sales of the
properties and foreclosed the need for any inquiry beyond the title to the principal.All the law requires,
respondent concludes, is that the agents authority be in writing in order for the agents transactions to be
considered valid.
Respondent Ongjocos posture is only partly correct.
According to the provisions of Article 1874 [35] of the Civil Code on Agency, when the sale of a piece of
land or any interest therein is made through an agent, the authority of the latter shall be in
writing. Absent this requirement, the sale shall be void. Also, under Article 1878,[36] a special power
of attorney is necessary in order for an agent to enter into a contract by which the ownership of an
immovable property is transmitted or acquired, either gratuitously or for a valuable consideration.
We note that the resolution of this case, therefore, hinges on the existence of the written power of attorney upon
which respondent Ongjoco bases his good faith.
When Lots Nos. 1 and 2 were sold to respondent Ongjoco through Jose A. Olaguer, the Transfer Certificates of Title
of said properties were in Virgilios name. [37] Unfortunately for respondent, the power of attorney that was
purportedly issued by Virgilio in favor of Jose Olaguer with respect to the sale of Lots Nos. 1 and 2 was never
presented to the trial court. Neither was respondent able to explain the omission. Other than the self-serving
statement of respondent, no evidence was offered at all to prove the alleged written power of attorney. This of
course was fatal to his case.
As it stands, there is no written power of attorney to speak of. The trial court was thus correct in disregarding the
claim of its existence. Accordingly, respondent Ongjocos claim of good faith in the sale of Lots Nos. 1 and 2 has no
leg to stand on.
As regards Lots Nos. 76-D, 76-E, 76-F and 76-G, Ongjoco was able to present a general power of attorney that was
executed by Virgilio Olaguer. While the law requires a special power of attorney, the general power of attorney
was sufficient in this case, as Jose A. Olaguer was expressly empowered to sell any of Virgilios properties; and to
sign, execute, acknowledge and deliver any agreement therefor. [38] Even if a document is designated as a
general power of attorney, the requirement of a special power of attorney is met if there is a clear
mandate from the principal specifically authorizing the performance of the act. [39] The special power
of attorney can be included in the general power when the act or transaction for which the special
power is required is specified therein.[40]
On its face, the written power of attorney contained the signature of Virgilio Olaguer and was duly
notarized. As such, the same is considered a public document and it has in its favor the presumption of
authenticity and due execution, which can only be contradicted by clear and convincing evidence. [41]
No evidence was presented to overcome the presumption in favor of the duly notarized power of
attorney. Neither was there a showing of any circumstance involving the said document that would arouse the
suspicion of respondent and spur him to inquire beyond its four corners, in the exercise of that reasonable degree

of prudence required of a man in a similar situation. We therefore rule that respondent Ongjoco had every right to
rely on the power of attorney in entering into the contracts of sale of Lots Nos. 76-D to 76-G with Jose A. Olaguer.
With respect to the affidavit of Virgilio Olaguer in which he allegedly disavowed any claim or participation
in the purchase of any of the properties of the deceased Lino Olaguer, we hold that the same is rather
irrelevant. The affidavit was executed only on 1 August 1986 or six years after the last sale of the properties was
entered into in 1980. In the determination of whether or not a buyer is in good faith, the point in time to be
considered is the moment when the parties actually entered into the contract of sale.
Furthermore, the fact that Lots Nos. 76-D to 76-G were sold to respondent Ongjoco twice does not warrant
the conclusion that he was a buyer in bad faith. While the said incidents might point to other obscured motives
and arrangements of the parties, the same do not indicate that respondent knew of any defect in the title of the
owner of the property.
As to the petition filed by Jose A. Olaguer for the issuance of a second owners copy of the title to Lot No.
76-D, after the property was already sold to respondent Ongjoco, the same does not inevitably indicate that
respondent was in bad faith. It is more likely that Jose A. Olaguer was merely compiling the documents necessary
for the transfer of the subject property. Indeed, it is to be expected that if the title to the property is lost before
the same is transferred to the name of the purchaser, it would be the responsibility of the vendor to cause its
reconstitution.
In sum, we hold that respondent Emiliano M. Ongjoco was in bad faith when he bought Lots
Nos. 1 and 2 from Jose A. Olaguer, as the latter was not proven to be duly authorized to sell the said
properties.
However, respondent Ongjoco was an innocent purchaser for value with regard to Lots Nos.
76-D, 76-E, 76-F and 76-G since it was entirely proper for him to rely on the duly notarized written
power of attorney executed in favor of Jose A. Olaguer.

- Wee vs. Castro, 562 SCRA 695 (2008)

LEO WEE, petitioner, vs. GEORGE DE CASTRO (on his behalf and as attorney-in-fact of ANNIE DE CASTRO and FELOMINA
UBAN) and MARTINIANA DE CASTRO, respondents.
FACTS: In their Complaint5 filed on 1 July 2002 with the MTC of Alaminos City, docketed as Civil Case No. 1990,

respondents alleged that they are the registered owners of the subject property, a two-storey building erected on a parcel of
land registered under Transfer Certificate of Title (TCT) No. 16193 in the Registry of Deeds of Pangasinan, described and
bounded as follows:
A parcel of land (Lot 13033-D-2, Psd-01550-022319, being a portion of Lot 13033-D, Psd-018529, LRC Rec. No.
____) situated in Pob., Alaminos City; bounded on the NW. along line 1-2 by Lot 13035-D-1 of the subdivision
plan; on the NE. along line 2-3 by Vericiano St.; on the SE. along line 3-4 by Lot 13033-D-2 of the subdivision plan;
on the SW. along line 4-1 by Lot 575, Numeriano Rabago. It is coverd by TCT No. 16193 of the Register of Deeds
of Pangasinan (Alaminos City) and declared for taxation purposes per T.D. No. 2075, and assessed in the sum of
P93,400.00.6
Respondents rented out the subject property to petitioner on a month to month basis for P9,000.00 per month.7 Both
parties agreed that effective 1 October 2001, the rental payment shall be increased from P9,000.00 to P15,000.00. Petitioner,
however, failed or refused to pay the corresponding increase on rent when his rental obligation for the month of 1 October
2001 became due. The rental dispute was brought to the Lupon Tagapagpamayapa of Poblacion, Alaminos, Pangasinan, in an
attempt to amicably settle the matter but the parties failed to reach an agreement, resulting in the issuance by the Barangay
Lupon of a Certification to file action in court on 18 January 2002. On 10 June 2002, respondent George de Castro sent a
letter to petitioner terminating their lease agreement and demanding that the latter vacate and turn over the subject property to
respondents. Since petitioner stubbornly refused to comply with said demand letter, respondent George de Castro, together
with his siblings and co-respondents, Annie de Castro, Felomina de Castro Uban and Jesus de Castro, filed the Complaint for
ejectment before the MTC.

It must be noted, at this point, that although the Complaint stated that it was being filed by all of the respondents, the
Verification and the Certificate of Non-Forum Shopping were signed by respondent George de Castro alone. He would
subsequently attach to his position paper filed before the MTC on 28 October 2002 the Special Powers of Attorney (SPAs)
executed by his sisters Annie de Castro and Felomina de Castro Uban dated 7 February 2002 and 14 March 2002
respectively, authorizing him to institute the ejectment case against petitioner.
Petitioner, on the other hand, countered that there was no agreement between the parties to increase the monthly
rentals and respondents' demand for an increase was exorbitant. The agreed monthly rental was only for the amount of
P9,000.00 and he was religiously paying the same every month. Petitioner then argued that respondents failed to comply with
the jurisdictional requirement of conciliation before the Barangay Lupon prior to the filing of Civil Case. No. 1990, meriting
the dismissal of their Complaint therein. The Certification to file action issued by the Barangay Lupon appended to the
respondents' Complaint merely referred to the issue of rental increase and not the matter of ejectment. Petitioner asserted
further that the MTC lacked jurisdiction over the ejectment suit, since respondents' Complaint was devoid of any allegation
that there was an "unlawful withholding" of the subject property by the petitioner.8
During the Pre-Trial Conference9 held before the MTC, the parties stipulated that in May 2002, petitioner tendered
to respondents the sum of P9,000.00 as rental payment for the month of January 2002; petitioner paid rentals for the months
of October 2001 to January 2002 but only in the amount of P9,000.00 per month; respondents, thru counsel, sent a letter to
petitioner on 10 June 2002 terminating their lease agreement which petitioner ignored; and the Barangay Lupon did issue a
Certification to file action after the parties failed to reach an agreement before it.
After the submission of the parties of their respective Position Papers, the MTC, on 21 November 2002, rendered a
Decision10 dismissing respondents' Complaint in Civil Case No. 1990 for failure to comply with the prior conciliation
requirement before the Barangay Lupon.
On appeal, docketed as Civil Case No. A-2835, the RTC of Alaminos, Pangasinan, Branch 54, promulgated its
Decision11 dated 27 June 2005 affirming the dismissal of respondents' Complaint for ejectment after finding that the appealed
MTC Decision was based on facts and law on the matter. The RTC declared that since the original agreement entered into by
the parties was for petitioner to pay only the sum of P9.000.00 per month for the rent of the subject property, and no
concession was reached by the parties to increase such amount to P15.000.00, petitioner cannot be faulted for paying only the
originally agreed upon monthly rentals. Adopting petitioner's position, the RTC declared that respondents' failure to refer the
matter to the Barangay court for conciliation process barred the ejectment case, conciliation before the Lupon being a
condition sine qua non in the filing of ejectment suits. The RTC likewise agreed with petitioner in ruling that the allegation in
the Complaint was flawed, since respondents failed to allege that there was an "unlawful withholding" of possession of the
subject property, taking out Civil Case No. 1990 from the purview of an action for unlawful detainer. Finally, the RTC
decreed that respondents' Complaint failed to comply with the rule that a co-owner could not maintain an action without
joining all the other co-owners.
Undaunted, respondents filed a Petition for Review on Certiorari13 with the Court of Appeals where it was docketed
as CA-G.R. SP No. 90906. Respondents argued in their Petition that the RTC gravely erred in ruling that their failure to
comply with the conciliation process was fatal to their Complaint, since it is only respondent George de Castro who resides in
Alaminos City, Pangasinan, while respondent Annie de Castro resides in Pennsylvania, United States of America (USA);
respondent Felomina de Castro Uban, in California, USA; and respondent Jesus de Castro, now substituted by his wife,
Martiniana, resides in Manila. Respondents further claimed that the MTC was not divested of jurisdiction over their
Complaint for ejectment because of the mere absence therein of the term "unlawful withholding" of their subject property,
considering that they had sufficiently alleged the same in their Complaint, albeit worded differently. Finally, respondents
posited that the fact that only respondent George de Castro signed the Verification and the Certificate of Non-Forum
Shopping attached to the Complaint was irrelevant since the other respondents already executed Special Powers of Attorney
(SPAs) authorizing him to act as their attorney-in-fact in the institution of the ejectment suit against the petitioner.

On 19 September 2006, the Court of Appeals rendered a Decision granting the respondents' Petition and ordering petitioner to
vacate the subject property and turn over the same to respondents.
In a Resolution dated 25 January 2007, the appellate court denied the Motion for Reconsideration interposed by

petitioner for lack of merit.

Petitioner is now before this Court via the Petition at bar.
ISSUE/S:
NOTE: IM NOT SURE ABOUT THE ISSUES. I AM SURE ABOUT THE FIRST ONE, DI KO ALAM YUNG IBA.
LINAGAY KO NALANG LAHAT YUNG HELD IF EVER.
1

WON respondents failed to go through the conciliation process before the Barangay Lupon, a jurisdictional defect
that bars the legal action for ejectment

WON an action for ejectment will prosper without joining all other co-owners.

WON failure to allege unlawful withoulding is fatal to the cause of action

HELD:
1. NO. Petitioner avers that respondents failed to go through the conciliation process before the Barangay Lupon, a
jurisdictional defect that bars the legal action for ejectment. The Certification to file action dated 18 January 2002 issued by
the Barangay Lupon, appended by the respondents to their Complaint in Civil Case No. 1990, is of no moment, for it attested
only that there was confrontation between the parties on the matter of rental increase but not on unlawful detainer of the
subject property by the petitioner. If it was the intention of the respondents from the very beginning to eject petitioner from
the subject property, they should have brought up the alleged unlawful stay of the petitioner on the subject property for
conciliation before the Barangay Lupon.
The barangay justice system was established primarily as a means of easing up the congestion of cases in the judicial courts.
This could be accomplished through a proceeding before the barangay courts which, according to the one who conceived of
the system, the late Chief Justice Fred Ruiz Castro, is essentially arbitration in character; and to make it truly effective, it
should also be compulsory. With this primary objective of the barangay justice system in mind, it would be wholly in
keeping with the underlying philosophy of Presidential Decree No. 1508 (Katarungang Pambarangay Law), which would be
better served if an out-of-court settlement of the case is reached voluntarily by the parties. 16 To ensure this objective, Section
6 of Presidential Decree No. 1508 requires the parties to undergo a conciliation process before the Lupon Chairman or the
Pangkat ng Tagapagkasundo as a precondition to filing a complaint in court subject to certain exceptions. The said section
has been declared compulsory in nature.17
Presidential Decree No. 1508 is now incorporated in Republic Act No. 7160 (The Local Government Code), which took
effect on 1 January 1992.
The pertinent provisions of the Local Government Code making conciliation a precondition to the filing of complaints in
court are reproduced below:
SEC. 412. Conciliation.- (a) Pre-condition to filing of complaint in court. - No complaint, petition, action, or
proceeding involving any matter within the authority of the lupon shall be filed or instituted directly in court or any
other government office for adjudication, unless there has been a confrontation between the parties before the lupon
chairman or the pangkat, and that no conciliation or settlement has been reached as certified by the lupon secretary
or pangkat secretary as attested to by the lupon or pangkat chairman or unless the settlement has been repudiated by
the parties thereto.
(b) Where parties may go directly to court. - The parties may go directly to court in the following instances:
(1) Where the accused is under detention;
(2) Where a person has otherwise been deprived of personal liberty calling for habeas corpus proceedings;

(3) Where actions are coupled with provisional remedies such as preliminary injunction, attachment, delivery of
personal property, and support pendente lite; and
(4) Where the action may otherwise be barred by the statute of limitations.
(c) Conciliation among members of indigenous cultural communities. - The customs and traditions of indigenous
cultural communities shall be applied in settling disputes between members of the cultural communities.
SEC. 408. Subject Matter for Amicable Settlement; Exception Thereto. - The lupon of each barangay shall have
authority to bring together the parties actually residing in the same city or municipality for amicable settlement of all
disputes except:
(a) Where one party is the government or any subdivision or instrumentality thereof;
(b) Where one party is a public officer or employee, and the dispute relates to the performance of his official
functions;
(c) Offenses punishable by imprisonment exceeding one (1) year or a fine exceeding Five thousand pesos
(P5,000.00);
(d) Offenses where there is no private offended party;
(e) Where the dispute involves real properties located in different cities or municipalities unless the parties thereto
agree to submit their differences to amicable settlement by an appropriate lupon;
(f) Disputes involving parties who actually reside in barangays of different cities or municipalities, except where
such barangay units adjoin each other and the parties thereto agree to submit their differences to amicable settlement
by an appropriate lupon;
(g) Such other classes of disputes which the President may determine in the interest of justice or upon the
recommendation of the Secretary of Justice.
There is no question that the parties to this case appeared before the Barangay Lupon for conciliation proceedings. There is
also no dispute that the only matter referred to the Barangay Lupon for conciliation was the rental increase, and not the
ejectment of petitioner from the subject property. This is apparent from a perusal of the Certification to file action in court
issued by the Barangay Lupon on 18 January 2002, to wit:
CERTIFICATION TO FILE COMPLAINTS
This is to certify that:
1. There was personal confrontation between parties before the barangay Lupon regarding rental increase of a
commercial building but conciliation failed;
2. Therefore, the corresponding dispute of the above-entitled case may now be filed in Court/Government Office. 18
(Emphasis ours.)
The question now to be resolved by this Court is whether the Certification dated 18 January 2002 issued by the
Barangay Lupon stating that no settlement was reached by the parties on the matter of rental increase sufficient to
comply with the prior conciliation requirement under the Katarungang Pambarangay Law to authorize the
respondents to institute the ejectment suit against petitioner.
The Court rules affirmatively.
While it is true that the Certification to file action dated 18 January 2002 of the Barangay Lupon refers only to rental increase
and not to the ejectment of petitioner from the subject property, the submission of the same for conciliation before the
Barangay Lupon constitutes sufficient compliance with the provisions of the Katarungang Pambarangay Law. Given the
particular circumstances of the case at bar, the conciliation proceedings for the amount of monthly rental should logically and

reasonably include also the matter of the possession of the property subject of the rental, the lease agreement, and the
violation of the terms thereof.
OTHER RULINGS THAT MAY SOLVE THE OTHER ISSUES:
The contract of lease between the parties did not stipulate a fixed period. Hence, the parties agreed to the payment of rentals
on a monthly basis. On this score, Article 1687 of the Civil Code provides:
Art. 1687. If the period for the lease has not been fixed, it is understood to be from year to year, if the rent
agreed upon is annual; from month to month, if it is monthly; from week to week, if the rent is weekly; and from
day to day, if the rent is to be paid daily. However, even though a monthly rent is paid, and no period for the lease
has been set, the courts may fix a longer term for the lease after the lessee has occupied the premises for over one
year. If the rent is weekly, the courts may likewise determine a longer period after the lessee has been in possession
for over six months. In case of daily rent, the courts may also fix a longer period after the lessee has stayed in the
place for over one month. (Emphasis supplied.)
The rentals being paid monthly, the period of such lease is deemed terminated at the end of each month. Thus, respondents
have every right to demand the ejectment of petitioners at the end of each month, the contract having expired by operation of
law. Without a lease contract, petitioner has no right of possession to the subject property and must vacate the same.
Respondents, thus, should be allowed to resort to an action for ejectment before the MTC to recover possession of the subject
property from petitioner.
Corollarily, petitioner's ejectment, in this case, is only the reasonable consequence of his unrelenting refusal to comply with
the respondents' demand for the payment of rental increase agreed upon by both parties. Verily, the lessor's right to rescind
the contract of lease for non-payment of the demanded increased rental was recognized by this Court in Chua v. Victorio:
The right of rescission is statutorily recognized in reciprocal obligations, such as contracts of lease. In addition to the
general remedy of rescission granted under Article 1191 of the Civil Code, there is an independent provision
granting the remedy of rescission for breach of any of the lessor or lessee's statutory obligations. Under Article 1659
of the Civil Code, the aggrieved party may, at his option, ask for (1) the rescission of the contract; (2) rescission and
indemnification for damages; or (3) only indemnification for damages, allowing the contract to remain in force.
Payment of the rent is one of a lessee's statutory obligations, and, upon non-payment by petitioners of the
increased rental in September 1994, the lessor acquired the right to avail of any of the three remedies outlined
above. (Emphasis supplied.)
Petitioner next argues that respondent George de Castro cannot maintain an action for ejectment against petitioner,
without joining all his co-owners.
Article 487 of the New Civil Code is explicit on this point:
ART. 487. Any one of the co-owners may bring an action in ejectment.
This article covers all kinds of action for the recovery of possession, i.e., forcible entry and unlawful detainer
(accion interdictal), recovery of possession (accion publiciana), and recovery of ownership (accion de
reivindicacion). As explained by the renowned civilist, Professor Arturo M. Tolentino 20:
A co-owner may bring such an action, without the necessity of joining all the other co-owners as co-plaintiffs,
because the suit is deemed to be instituted for the benefit of all. If the action is for the benefit of the plaintiff
alone, such that he claims possession for himself and not for the co-ownership, the action will not prosper.
(Emphasis added.)
In the more recent case of Carandang v. Heirs of De Guzman, 21 this Court declared that a co-owner is not even a necessary
party to an action for ejectment, for complete relief can be afforded even in his absence, thus:
In sum, in suits to recover properties, all co-owners are real parties in interest. However, pursuant to Article 487 of
the Civil Code and the relevant jurisprudence, any one of them may bring an action, any kind of action for the recovery of co-

owned properties. Therefore, only one of the co-owners, namely the co-owner who filed the suit for the recovery of the coowned property, is an indispensable party thereto. The other co-owners are not indispensable parties. They are not even
necessary parties, for a complete relief can be afforded in the suit even without their participation, since the suit is presumed
to have been filed for the benefit of all co-owners.
Moreover, respondents Annie de Castro and Felomina de Castro Uban each executed a Special Power of Attorney,
giving respondent George de Castro the authority to initiate Civil Case No. 1990.
A power of attorney is an instrument in writing by which one person, as principal, appoints another as his agent and
confers upon him the authority to perform certain specified acts or kinds of 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."22

Even then, the Court views the SPAs as mere surplusage, such that the lack thereof does not in any way affect the
validity of the action for ejectment instituted by respondent George de Castro. This also disposes of petitioner's contention
that respondent George de Castro lacked the authority to sign the Verification and the Certificate of Non-Forum Shopping. As
the Court ruled in Mendoza v. Coronel:

We likewise hold that the execution of the certification against forum shopping by the attorney-in-fact in the case at
bar is not a violation of the requirement that the parties must personally sign the same. The attorney-in-fact, who has
authority to file, and who actually filed the complaint as the representative of the plaintiff co-owner, pursuant to a Special
Power of Attorney, is a party to the ejectment suit. In fact, Section 1, Rule 70 of the Rules of Court includes the
representative of the owner in an ejectment suit as one of the parties authorized to institute the proceedings. (Emphasis
supplied.)
Failure by respondent George de Castro to attach the said SPAs to the Complaint is innocuous, since it is undisputed that he
was granted by his sisters the authority to file the action for ejectment against petitioner prior to the institution of Civil Case
No. 1990. The SPAs in his favor were respectively executed by respondents Annie de Castro and Felomina de Castro Uban
on 7 February 2002 and 14 March 2002; while Civil Case No. 1990 was filed by respondent George de Castro on his own
behalf and on behalf of his siblings only on 1 July 2002, or way after he was given by his siblings the authority to file said
action. The Court quotes with approval the following disquisition of the Court of Appeals:
Moreover, records show that [herein respondent] George de Castro was indeed authorized by his sisters Annie de Castro and
Felomina de Castro Uban, to prosecute the case in their behalf as shown by the Special Power of Attorney dated February 7,
2002 and March 14, 2002. That these documents were appended only to [respondent George de Castro's] position paper is of
no moment considering that the authority conferred therein was given prior to the institution of the complaint in July, 2002. x
x x.24
Respondent deceased Jesus de Castro's failure to sign the Verification and Certificate of Non-Forum Shopping may be
excused since he already executed an Affidavit 25 with respondent George de Castro that he had personal knowledge of the
filing of Civil Case No. 1990. In Torres v. Specialized Packaging Development Corporation, 26 the Court ruled that the
personal signing of the verification requirement was deemed substantially complied with when, as in the instant case, two out
of 25 real parties-in-interest, who undoubtedly have sufficient knowledge and belief to swear to the truth of the allegations in
the petition, signed the verification attached to it.
In the same vein, this Court is not persuaded by petitioner's assertion that respondents' failure to allege the jurisdictional fact
that there was "unlawful withholding" of the subject property was fatal to their cause of action.
It is apodictic that what determines the nature of an action as well as which court has jurisdiction over it are the allegations in
the complaint and the character of the relief sought. In an unlawful detainer case, the defendant's possession was originally
lawful but ceased to be so upon the expiration of his right to possess. Hence, the phrase "unlawful withholding" has been held
to imply possession on the part of defendant, which was legal in the beginning, having no other source than a contract,

express or implied, and which later expired as a right and is being withheld by defendant. 27
In Barba v. Court of Appeals,28 the Court held that although the phrase "unlawfully withholding" was not actually used by
therein petitioner in her complaint, the Court held that her allegations, nonetheless, amounted to an unlawful withholding of
the subject property by therein private respondents, because they continuously refused to vacate the premises even after
notice and demand.
In the Petition at bar, respondents alleged in their Complaint that they are the registered owners of the subject property; the
subject property was being occupied by the petitioner pursuant to a monthly lease contract; petitioner refused to accede to
respondents' demand for rental increase; the respondents sent petitioner a letter terminating the lease agreement and
demanding that petitioner vacate and turn over the possession of the subject property to respondents; and despite such
demand, petitioner failed to surrender the subject property to respondents. 29 The Complaint sufficiently alleges the unlawful
withholding of the subject property by petitioner, constitutive of unlawful detainer, although the exact words "unlawful
withholding" were not used. In an action for unlawful detainer, an allegation that the defendant is unlawfully withholding
possession from the plaintiff is deemed sufficient, without necessarily employing the terminology of the law.30
Petitioner's averment that the Court of Appeals should have dismissed respondents' Petition in light of the failure of their
counsel to attach the Official Receipt of his updated payment of Integrated Bar of the Philippines (IBP) dues is now moot and
academic, since respondents' counsel has already duly complied therewith. It must be stressed that judicial cases do not come
and go through the portals of a court of law by the mere mandate of technicalities. 31 Where a rigid application of the rules will
result in a manifest failure or miscarriage of justice, technicalities should be disregarded in order to resolve the case. 32
Finally, we agree in the ruling of the Court of Appeals that petitioner is liable for the payment of back rentals, attorney's fees
and cost of the suit. Respondents must be duly indemnified for the loss of income from the subject property on account of
petitioner's refusal to vacate the leased premise

- Oesmer vs. Paraiso Devt. Corp., 514 SCRA 228 (2007)

SHORT VERSION:

DETAILED VERSION
FACTS: Petitioners Rizalino, Ernesto, Leonora, Bibiano, Jr., Librado, and Enriqueta, all surnamed Oesmer, together with
Adolfo Oesmer (Adolfo) and Jesus Oesmer (Jesus), are brothers and sisters, and the co-owners of undivided shares of two
parcels of agricultural and tenanted land situated in Barangay Ulong Tubig, Carmona, Cavite, identified as Lot 720 with an
area of 40,507 square meters (sq. m.) and Lot 834 containing an area of 14,769 sq. m., or a total land area of 55,276 sq. m.
Both lots are unregistered and originally owned by their parents, Bibiano Oesmer and Encarnacion Durumpili, who declared
the lots for taxation purposes under Tax Declaration No. 3438 3 (cancelled by I.D. No. 6064-A) for Lot 720 and Tax
Declaration No. 34374 (cancelled by I.D. No. 5629) for Lot 834. When the spouses Oesmer died, petitioners, together with
Adolfo and Jesus, acquired the lots as heirs of the former by right of succession.

Respondent Paraiso Development Corporation is known to be engaged in the real estate business.
Sometime in March 1989, Rogelio Paular, a resident and former Municipal Secretary of Carmona, Cavite, brought
along petitioner Ernesto to meet with a certain Sotero Lee, President of respondent Paraiso Development Corporation, at
Otani Hotel in Manila. The said meeting was for the purpose of brokering the sale of petitioners properties to respondent
corporation.
Pursuant to the said meeting, a Contract to Sell 5 was drafted by the Executive Assistant of Sotero Lee, Inocencia Almo. On 1
April 1989, petitioners Ernesto and Enriqueta signed the aforesaid Contract to Sell. A check in the amount of P100,000.00,
payable to Ernesto, was given as option money. Sometime thereafter, Rizalino, Leonora, Bibiano, Jr., and Librado also signed
the said Contract to Sell. However, two of the brothers, Adolfo and Jesus, did not sign the document.
On 5 April 1989, a duplicate copy of the instrument was returned to respondent corporation. On 21 April 1989,
respondent brought the same to a notary public for notarization.
In a letter6 dated 1 November 1989, addressed to respondent corporation, petitioners informed the former of their
intention to rescind the Contract to Sell and to return the amount of P100,000.00 given by respondent as option money.
Respondent did not respond to the aforesaid letter. On 30 May 1991, herein petitioners, together with Adolfo and
Jesus, filed a Complaint7 for Declaration of Nullity or for Annulment of Option Agreement or Contract to Sell with Damages
before the Regional Trial Court (RTC) of Bacoor, Cavite. The said case was docketed as Civil Case No. BCV-91-49.
During trial, petitioner Rizalino died. Upon motion of petitioners, the trial court issued an Order, 8 dated 16
September 1992, to the effect that the deceased petitioner be substituted by his surviving spouse, Josefina O. Oesmer, and his
children, Rolando O. Oesmer and Fernando O. Oesmer. However, the name of Rizalino was retained in the title of the case
both in the RTC and the Court of Appeals.
After trial on the merits, the lower court rendered a Decision9 dated 27 March 1996 in favor of the respondent.
Unsatisfied, respondent appealed the said Decision before the Court of Appeals. On 26 April 2002, the appellate
court rendered a Decision modifying the Decision of the court a quo by declaring that the Contract to Sell is valid and
binding with respect to the undivided proportionate shares of the six signatories of the said document, herein petitioners,
namely: Ernesto, Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer).
Aggrieved by the above-mentioned Decision, petitioners filed a Motion for Reconsideration of the same on 2 July
2002. Acting on petitioners Motion for Reconsideration, the Court of Appeals issued a Resolution dated 4 March 2003,
maintaining its Decision dated 26 April 2002, with the modification that respondent tender payment to petitioners in the
amount of P3,216,560.00, representing the balance of the purchase price of the subject parcels of land.
Hence, this Petition for Review on Certiorari.
Petitioners assert that the signatures of five of them namely: Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora,
on the margins of the supposed Contract to Sell did not confer authority on petitioner Ernesto as agent to sell their respective
shares in the questioned properties, and hence, for lack of written authority from the above-named petitioners to sell their
respective shares in the subject parcels of land, the supposed Contract to Sell is void as to them. Neither do their signatures
signify their consent to directly sell their shares in the questioned properties. Assuming that the signatures indicate consent,
such consent was merely conditional. The effectivity of the alleged Contract to Sell was subject to a suspensive condition,
which is the approval of the sale by all the co-owners.
Petitioners also assert that the supposed Contract to Sell (Exhibit D), contrary to the findings of the Court of
Appeals, is not couched in simple language.
They further claim that the supposed Contract to Sell does not bind the respondent because the latter did not sign the
said contract as to indicate its consent to be bound by its terms. Furthermore, they maintain that the supposed Contract to Sell
is really a unilateral promise to sell and the option money does not bind petitioners for lack of cause or consideration distinct
from the purchase price.

ISSUE:
1

WON the contact to sell is not binding upon petitioner Ernesto Oesmers co-owners

WON the supposed Contract to Sell (Exhibit D) is void altogether considering that respondent itself did not sign it as
to indicate its consent to be bound by its terms. Moreover, Exhibit D is really a unilateral promise to sell without
consideration distinct from the price, and hence, void.

HELD: PETITION IS BEREFT OF MERIT.

It is true that the signatures of the five petitioners, namely: Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora, on the
Contract to Sell did not confer authority on petitioner Ernesto as agent authorized to sell their respective shares in the
questioned properties because of Article 1874 of the Civil Code, which expressly provides that:
Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in
writing; otherwise, the sale shall be void.
The law itself explicitly requires a written authority before an agent can sell an immovable. The conferment of such an
authority should be in writing, in as clear and precise terms as possible. It is worth noting that petitioners signatures are
found in the Contract to Sell. The Contract is absolutely silent on the establishment of any principal-agent relationship
between the five petitioners and their brother and co-petitioner Ernesto as to the sale of the subject parcels of land. Thus, the
Contract to Sell, although signed on the margin by the five petitioners, is not sufficient to confer authority on petitioner
Ernesto to act as their agent in selling their shares in the properties in question.
However, despite petitioner Ernestos lack of written authority from the five petitioners to sell their shares in the subject
parcels of land, the supposed Contract to Sell remains valid and binding upon the latter.
As can be clearly gleaned from the contract itself, it is not only petitioner Ernesto who signed the said Contract to Sell; the
other five petitioners also personally affixed their signatures thereon. Therefore, a written authority is no longer necessary in
order to sell their shares in the subject parcels of land because, by affixing their signatures on the Contract to Sell, they were
not selling their shares through an agent but, rather, they were selling the same directly and in their own right.
The Court also finds untenable the following arguments raised by petitioners to the effect that the Contract to Sell is not
binding upon them, except to Ernesto, because: (1) the signatures of five of the petitioners do not signify their consent to sell
their shares in the questioned properties since petitioner Enriqueta merely signed as a witness to the said Contract to Sell, and
that the other petitioners, namely: Librado, Rizalino, Leonora, and Bibiano, Jr., did not understand the importance and
consequences of their action because of their low degree of education and the contents of the aforesaid contract were not read
nor explained to them; and (2) assuming that the signatures indicate consent, such consent was merely conditional, thus, the
effectivity of the alleged Contract to Sell was subject to a suspensive condition, which is the approval by all the co-owners of
the sale.
It is well-settled that contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made by the
offeror. From that moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to
all the consequences which, according to their nature, may be in keeping with good faith, usage and law. To produce a
contract, the acceptance must not qualify the terms of the offer. However, the acceptance may be express or implied. For a
contract to arise, the acceptance must be made known to the offeror. Accordingly, the acceptance can be withdrawn or
revoked before it is made known to the offeror.13
In the case at bar, the Contract to Sell was perfected when the petitioners consented to the sale to the respondent of their
shares in the subject parcels of land by affixing their signatures on the said contract. Such signatures show their acceptance of
what has been stipulated in the Contract to Sell and such acceptance was made known to respondent corporation when the
duplicate copy of the Contract to Sell was returned to the latter bearing petitioners signatures.
As to petitioner Enriquetas claim that she merely signed as a witness to the said contract, the contract itself does not say so.
There was no single indication in the said contract that she signed the same merely as a witness. The fact that her signature

appears on the right-hand margin of the Contract to Sell is insignificant. The contract indisputably referred to the "Heirs of
Bibiano and Encarnacion Oesmer," and since there is no showing that Enriqueta signed the document in some other capacity,
it can be safely assumed that she did so as one of the parties to the sale.
Emphasis should also be given to the fact that petitioners Ernesto and Enriqueta concurrently signed the Contract to Sell. As
the Court of Appeals mentioned in its Decision, 14 the records of the case speak of the fact that petitioner Ernesto, together
with petitioner Enriqueta, met with the representatives of the respondent in order to finalize the terms and conditions of the
Contract to Sell. Enriqueta affixed her signature on the said contract when the same was drafted. She even admitted that she
understood the undertaking that she and petitioner Ernesto made in connection with the contract. She likewise disclosed that
pursuant to the terms embodied in the Contract to Sell, she updated the payment of the real property taxes and transferred the
Tax Declarations of the questioned properties in her name. 15 Hence, it cannot be gainsaid that she merely signed the Contract
to Sell as a witness because she did not only actively participate in the negotiation and execution of the same, but her
subsequent actions also reveal an attempt to comply with the conditions in the said contract.

With respect to the other petitioners assertion that they did not understand the importance and consequences of their action
because of their low degree of education and because the contents of the aforesaid contract were not read nor explained to
them, the same cannot be sustained.
We only have to quote the pertinent portions of the Court of Appeals Decision, clear and concise, to dispose of this issue.
Thus,
First, the Contract to Sell is couched in such a simple language which is undoubtedly easy to read and understand. The terms
of the Contract, specifically the amount of P100,000.00 representing the option money paid by [respondent] corporation, the
purchase price of P60.00 per square meter or the total amount of P3,316,560.00 and a brief description of the subject
properties are well-indicated thereon that any prudent and mature man would have known the nature and extent of the
transaction encapsulated in the document that he was signing.
Second, the following circumstances, as testified by the witnesses and as can be gleaned from the records of the case clearly
indicate the [petitioners] intention to be bound by the stipulations chronicled in the said Contract to Sell.
As to [petitioner] Ernesto, there is no dispute as to his intention to effect the alienation of the subject property as he in fact
was the one who initiated the negotiation process and culminated the same by affixing his signature on the Contract to Sell
and by taking receipt of the amount of P100,000.00 which formed part of the purchase price.
xxxx
As to [petitioner] Librado, the [appellate court] finds it preposterous that he willingly affixed his signature on a document
written in a language (English) that he purportedly does not understand. He testified that the document was just brought to
him by an 18 year old niece named Baby and he was told that the document was for a check to be paid to him. He readily
signed the Contract to Sell without consulting his other siblings. Thereafter, he exerted no effort in communicating with his
brothers and sisters regarding the document which he had signed, did not inquire what the check was for and did not
thereafter ask for the check which is purportedly due to him as a result of his signing the said Contract to Sell. (TSN, 28
September 1993, pp. 22-23)
The [appellate court] notes that Librado is a 43 year old family man (TSN, 28 September 1993, p. 19). As such, he is
expected to act with that ordinary degree of care and prudence expected of a good father of a family. His unwitting testimony
is just divinely disbelieving.
The other [petitioners] (Rizalino, Leonora and Bibiano Jr.) are likewise bound by the said Contract to Sell. The theory
adopted by the [petitioners] that because of their low degree of education, they did not understand the contents of the said
Contract to Sell is devoid of merit. The [appellate court] also notes that Adolfo (one of the co-heirs who did not sign) also
possess the same degree of education as that of the signing co-heirs (TSN, 15 October 1991, p. 19). He, however, is
employed at the Provincial Treasury Office at Trece Martirez, Cavite and has even accompanied Rogelio Paular to the
Assessors Office to locate certain missing documents which were needed to transfer the titles of the subject properties.

(TSN, 28 January 1994, pp. 26 & 35) Similarly, the other co-heirs [petitioners], like Adolfo, are far from ignorant, more so,
illiterate that they can be extricated from their obligations under the Contract to Sell which they voluntarily and knowingly
entered into with the [respondent] corporation.
The Supreme Court in the case of Cecilia Mata v. Court of Appeals (207 SCRA 753 [1992]), citing the case of Tan Sua Sia v.
Yu Baio Sontua (56 Phil. 711), instructively ruled as follows:
"The Court does not accept the petitioners claim that she did not understand the terms and conditions of the transactions
because she only reached Grade Three and was already 63 years of age when she signed the documents. She was literate, to
begin with, and her age did not make her senile or incompetent. x x x.
At any rate, Metrobank had no obligation to explain the documents to the petitioner as nowhere has it been proven that she is
unable to read or that the contracts were written in a language not known to her. It was her responsibility to inform herself of
the meaning and consequence of the contracts she was signing and, if she found them difficult to comprehend, to consult
other persons, preferably lawyers, to explain them to her. After all, the transactions involved not only a few hundred or
thousand pesos but, indeed, hundreds of thousands of pesos.
As the Court has held:
x x x The rule that one who signs a contract is presumed to know its contents has been applied even to contracts of illiterate
persons on the ground that if such persons are unable to read, they are negligent if they fail to have the contract read to them.
If a person cannot read the instrument, it is as much his duty to procure some reliable persons to read and explain it to him,
before he signs it, as it would be to read it before he signed it if he were able to do and his failure to obtain a reading and
explanation of it is such gross negligence as will estop from avoiding it on the ground that he was ignorant of its contents."16
That the petitioners really had the intention to dispose of their shares in the subject parcels of land, irrespective of whether or
not all of the heirs consented to the said Contract to Sell, was unveiled by Adolfos testimony as follows:
ATTY. GAMO: This alleged agreement between you and your other brothers and sisters that unless everybody will
agree, the properties would not be sold, was that agreement in writing?
WITNESS: No sir.
ATTY. GAMO: What you are saying is that when your brothers and sisters except Jesus and you did not sign that
agreement which had been marked as [Exhibit] "D", your brothers and sisters were grossly violating your
agreement.
WITNESS: Yes, sir, they violated what we have agreed upon.17

We also cannot sustain the allegation of the petitioners that assuming the signatures indicate consent, such consent was
merely conditional, and that, the effectivity of the alleged Contract to Sell was subject to the suspensive condition that the
sale be approved by all the co-owners. The Contract to Sell is clear enough. It is a cardinal rule in the interpretation of
contracts that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulation shall control. 18 The terms of the Contract to Sell made no mention of the condition that before it can
become valid and binding, a unanimous consent of all the heirs is necessary. Thus, when the language of the contract is
explicit, as in the present case, leaving no doubt as to the intention of the parties thereto, the literal meaning of its stipulation
is controlling.
In addition, the petitioners, being owners of their respective undivided shares in the subject properties, can dispose of their
shares even without the consent of all the co-heirs. Article 493 of the Civil Code expressly provides:
Article 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he
may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal
rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the
portion which may be allotted to him in the division upon the termination of the co-ownership. [Emphases supplied.]

Consequently, even without the consent of the two co-heirs, Adolfo and Jesus, the Contract to Sell is still valid and binding
with respect to the 6/8 proportionate shares of the petitioners, as properly held by the appellate court.
Therefore, this Court finds no error in the findings of the Court of Appeals that all the petitioners who were signatories in the
Contract to Sell are bound thereby.
The final arguments of petitioners state that the Contract to Sell is void altogether considering that respondent itself did not
sign it as to indicate its consent to be bound by its terms; and moreover, the Contract to Sell is really a unilateral promise to
sell without consideration distinct from the price, and hence, again, void. Said arguments must necessarily fail.
The Contract to Sell is not void merely because it does not bear the signature of the respondent corporation. Respondent
corporations consent to be bound by the terms of the contract is shown in the uncontroverted facts which established that
there was partial performance by respondent of its obligation in the said Contract to Sell when it tendered the amount of
P100,000.00 to form part of the purchase price, which was accepted and acknowledged expressly by petitioners. Therefore,
by force of law, respondent is required to complete the payment to enforce the terms of the contract. Accordingly, despite the
absence of respondents signature in the Contract to Sell, the former cannot evade its obligation to pay the balance of the
purchase price.
As a final point, the Contract to Sell entered into by the parties is not a unilateral promise to sell merely because it used the
word option money when it referred to the amount of P100,000.00, which also form part of the purchase price.
Settled is the rule that in the interpretation of contracts, the ascertainment of the intention of the contracting parties is to be
discharged by looking to the words they used to project that intention in their contract, all the words, not just a particular
word or two, and words in context, not words standing alone.19
In the instant case, the consideration of P100,000.00 paid by respondent to petitioners was referred to as "option money."
However, a careful examination of the words used in the contract indicates that the money is not option money but earnest
money. "Earnest money" and "option money" are not the same but distinguished thus: (a) earnest money is part of the
purchase price, while option money is the money given as a distinct consideration for an option contract; (b) earnest money is
given only where there is already a sale, while option money applies to a sale not yet perfected; and, (c) when earnest money
is given, the buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not required to buy,
but may even forfeit it depending on the terms of the option.20
The sum of P100,000.00 was part of the purchase price. Although the same was denominated as "option money," it is actually
in the nature of earnest money or down payment when considered with the other terms of the contract. Doubtless, the
agreement is not a mere unilateral promise to sell, but, indeed, it is a Contract to Sell as both the trial court and the appellate
court declared in their Decisions.

- Regina Dizon et. al. vs. CA, G.R. No. 122544, Jan. 28, 2003
NOTE: The first case presented is the ruling as provided for in the syllabus (January 28, 2003). FULL TEXT MAIKLI
LANG NAMAN. The second case is the January 28, 1999 ruling if interested ka lang basahin.
YNARES-SANTIAGO, J.:
On January 28, 1999, this Court rendered judgment in these consolidated cases as follows:
WHEREFORE, in view of the foregoing, both petitions are GRANTED. The decision dated March 29, 1994 and the
resolution dated October 19, 1995 in CA-G.R. CV Nos. 25153-54, as well as the decision dated December 11, 1995 and the
resolution dated April 23, 1997 in CA-G.R. SP No. 33113 of the Court of Appeals are hereby REVERSED and SET ASIDE.
Let the records of this case be remanded to the trial court for immediate execution of the judgment dated November 22, 1982
in Civil Case No. VIII-29155 of the then City Court (now Metropolitan Trial Court) of Quezon City, Branch III as affirmed in

the decision dated September 26, 1984 of the then Intermediate Appellate Court (now Court of Appeals) and in the resolution
dated June 19, 1985 of this Court.
However, petitioners are ordered to REFUND to private respondent the amount of P300,000.00 which they received through
Alice A. Dizon on June 20, 1975.
SO ORDERED.
Private respondent filed a Motion for Reconsideration, Second Motion for Reconsideration, and Motion to Suspend
Procedural Rules in the Higher Interest of Substantial Justice, all of which have been denied by this Court. This
notwithstanding, the cases were set for oral argument on March 21, 2001, on the following issues:
1. WHETHER THERE ARE CIRCUMSTANCES THAT WOULD JUSTIFY SUSPENSION OF THE RULES OF COURT;
2. WHETHER THE SUM OF P300,000.00 RECEIVED BY ALICE DIZON FROM PRIVATE RESPONDENT WAS
INTENDED AS PARTIAL PAYMENT OF THE PURCHASE PRICE OF THE PROPERTY, OR AS PAYMENT OF BACK
RENTALS ON THE PROPERTY;
3. WHETHER ALICE DIZON WAS AUTHORIZED TO RECEIVE THE SUM OF P300,000.00 ON BEHALF OF
PETITIONERS;
4. (A) IF SO, WHETHER PETITIONERS ARE ESTOPPED FROM QUESTIONING THE BELATED EXERCISE BY
PRIVATE RESPONDENT OF ITS OPTION TO BUY WHEN THEY ACCEPTED THE SAID PARTIAL PAYMENT;
(B) IF SO, WHETHER ALICE DIZON CAN VALIDLY BIND PETITIONERS IN THE ABSENCE OF A WRITTEN
POWER OF ATTORNEY;
5. (A) WHETHER THERE WAS A PERFECTED CONTRACT OF SALE BETWEEN THE PARTIES;
(B) WHETHER THERE WAS A CONTRACT OF SALE AT LEAST WITH RESPECT TO THE SHARES OF FIDELA
AND ALICE DIZON; AND
6. WHETHER PRIVATE RESPONDENTS ACTION FOR SPECIFIC PERFORMANCE HAS PRESCRIBED.
In order to resolve the first issue, it is necessary to pass upon the other questions which relate to the merits of the case. It is
only where there exist strong compelling reasons, such as serving the ends of justice and preventing a miscarriage thereof,
that this Court can suspend the rules.[if !supportFootnotes][1][endif]

After reviewing the records, we find that, despite all of private respondents protestations, there is absolutely no written proof
of Alice Dizons authority to bind petitioners. First of all, she was not even a co-owner of the property. Neither was she
empowered by the co-owners to act on their behalf.
The acceptance of the amount of P300,000.00, purportedly as partial payment of the purchase price of the land, was an act
integral to the sale of the land. As a matter of fact, private respondent invokes such receipt of payment as giving rise to a
perfected contract of sale. In this connection, Article 1874 of the Civil Code is explicit that: When a sale of a piece of land or
any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void.
When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter shall be in writing;
otherwise, the sale shall be void. Thus the authority of an agent to execute a contract for the sale of real estate must be
conferred in writing and must give him specific authority, either to conduct the general business of the principal or to execute
a binding contract containing terms and conditions which are in the contract he did execute. A special power of attorney is
necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or
for a valuable consideration. The express mandate required by law to enable an appointee of an agency (couched) in general
terms to sell must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned.
For the principal to confer the right upon an agent to sell real estate, a power of attorney must so express the powers of the
agent in clear and unmistakable language. When there is any reasonable doubt that the language so used conveys such power,

no such construction shall be given the document.[if !supportFootnotes][2][endif]

It necessarily follows, therefore, that petitioners cannot be deemed to have received partial payment of the supposed purchase
price for the land through Alice Dizon. It cannot even be said that Alice Dizons acceptance of the money bound at least the
share of Fidela Dizon, in the absence of a written power of attorney from the latter. It should be borne in mind that the
Receipt dated June 20, 1975, while made out in the name of Fidela Dizon, was signed by Alice Dizon alone.
Moreover, there could not have been a perfected contract of sale. As we held in our Decision dated January 28, 1999, the
implied renewal of the contract of lease between the parties affected only those terms and conditions which are germane to
the lessees right of continued enjoyment of the property. The option to purchase afforded private respondent expired after the
one-year period granted in the contract. Otherwise stated, the implied renewal of the lease did not include the option to
purchase. We see no reason to disturb our ruling on this point, viz:
In this case, there was a contract of lease for one (1) year with option to purchase. The contract of lease expired without the
private respondent, as lessee, purchasing the property but remained in possession thereof. Hence, there was an implicit
renewal of the contract of lease on a monthly basis. The other terms of the original contract of lease which are revived in the
implied new lease under Article 1670 of the New Civil Code are only those terms which are germane to the lessees right of
continued enjoyment of the property leased. Therefore, an implied new lease does not ipso facto carry with it any implied
revival of private respondent's option to purchase (as lessee thereof) the leased premises. The provision entitling the lessee
the option to purchase the leased premises is not deemed incorporated in the impliedly renewed contract because it is alien to
the possession of the lessee. Private respondents right to exercise the option to purchase expired with the termination of the
original contract of lease for one year. The rationale of this Court is that:
This is a reasonable construction of the provision, which is based on the presumption that when the lessor allows the lessee to
continue enjoying possession of the property for fifteen days after the expiration of the contract he is willing that such
enjoyment shall be for the entire period corresponding to the rent which is customarily paid in this case up to the end of the
month because the rent was paid monthly. Necessarily, if the presumed will of the parties refers to the enjoyment of
possession the presumption covers the other terms of the contract related to such possession, such as the amount of rental, the
date when it must be paid, the care of the property, the responsibility for repairs, etc. But no such presumption may be
indulged in with respect to special agreements which by nature are foreign to the right of occupancy or enjoyment inherent in
a contract of lease.[if !supportFootnotes][3][endif]
There being no merit in the arguments advanced by private respondent, there is no need to suspend the Rules of Court and to
admit the motion for reconsideration. While it is within the power of the Court to suspend its own rules, or to except a
particular case from its operation, whenever the interest of justice require it, however, the movant must show strong
compelling reasons such as serving the ends of justice and preventing a grave miscarriage thereof, [if !supportFootnotes][4][endif] none of
which obtains in this case.
Litigation must end sometime and somewhere. An effective and efficient administration of justice requires that, once a
judgment has become final, the winning party be not, through a mere subterfuge, deprived of the fruits of the verdict. Courts
must, therefore, guard against any scheme calculated to bring about that result. Constituted as they are to put an end to
controversies, courts should frown upon any attempt to prolong them.[if !supportFootnotes][5][endif]
ACCORDINGLY, the Motion to Suspend Procedural Rules in the Higher Interest of Substantial Justice filed by private
respondent is DENIED WITH FINALITY. No further pleadings will be entertained in these cases.
SO ORDERED.
JANUARY 28, 1999 RULING
FACTS: Two consolidated petitions were filed before us seeking to set aside and annul the decisions and resolutions of
respondent Court of Appeals. What seemed to be a simple ejectment suit was juxtaposed with procedural intricacies which
finally found its way to this Court.
G. R. NO. 122544:
On May 23, 1974, private respondent Overland Express Lines, Inc. (lessee) entered into a Contract of Lease with Option to

Buy with petitioners[if !supportFootnotes][1][endif] (lessors) involving a 1,755.80 square meter parcel of land situated at corner
MacArthur Highway and South "H" Street, Diliman, Quezon City. The term of the lease was for one (1) year commencing
from May 16, 1974 up to May 15, 1975. During this period, private respondent was granted an option to purchase for the
amount of P3,000.00 per square meter. Thereafter, the lease shall be on a per month basis with a monthly rental of P3,000.00.
For failure of private respondent to pay the increased rental of P8,000.00 per month effective June 1976, petitioners filed an
action for ejectment (Civil Case No. VIII-29155) on November 10, 1976 before the then City Court (now Metropolitan Trial
Court) of Quezon City, Branch VIII. On November 22, 1982, the City Court rendered judgment [if !supportFootnotes][2][endif] ordering
private respondent to vacate the leased premises and to pay the sum of P624,000.00 representing rentals in arrears and/or as
damages in the form of reasonable compensation for the use and occupation of the premises during the period of illegal
detainer from June 1976 to November 1982 at the monthly rental of P8,000.00, less payments made, plus 12% interest per
annum from November 18, 1976, the date of filing of the complaint, until fully paid, the sum of P8,000.00 a month starting
December 1982, until private respondent fully vacates the premises, and to pay P20,000.00 as and by way of attorney's fees.
Private respondent filed a certiorari petition praying for the issuance of a restraining order enjoining the enforcement of said
judgment and dismissal of the case for lack of jurisdiction of the City Court.]
On September 26, 1984, the then Intermediate Appellate Court [if
decision[if !supportFootnotes][4][endif] stating that:

!supportFootnotes][3][endif]

(now Court of Appeals) rendered a

"x x x, the alleged question of whether petitioner was granted an extension of the option to buy the property;
whether such option, if any, extended the lease or whether petitioner actually paid the alleged P300,000.00 to Fidela
Dizon, as representative of private respondents in consideration of the option and, whether petitioner thereafter
offered to pay the balance of the supposed purchase price, are all merely incidental and do not remove the unlawful
detainer case from the jurisdiction of respondent court. In consonance with the ruling in the case of Teodoro, Jr. vs.
Mirasol (supra), the above matters may be raised and decided in the unlawful detainer suit as, to rule otherwise,
would be a violation of the principle prohibiting multiplicity of suits. (Original Records, pp. 38-39)."

The motion for reconsideration was denied. On review, this Court dismissed the petition in a resolution dated June 19, 1985
and likewise denied private respondent's subsequent motion for reconsideration in a resolution dated September 9, 1985. [if !
supportFootnotes][5][endif]

On October 7, 1985, private respondent filed before the Regional Trial Court (RTC) of Quezon City (Civil Case No. Q45541) an action for Specific Performance and Fixing of Period for Obligation with prayer for the issuance of a restraining
order pending hearing on the prayer for a writ of preliminary injunction. It sought to compel the execution of a deed of sale
pursuant to the option to purchase and the receipt of the partial payment, and to fix the period to pay the balance. In an Order
dated October 25, 1985, the trial court denied the issuance of a writ of preliminary injunction on the ground that the decision
of the then City Court for the ejectment of the private respondent, having been affirmed by the then Intermediate Appellate
Court and the Supreme Court, has become final and executory.
Unable to secure an injunction, private respondent also filed before the RTC of Quezon City, Branch 102 (Civil Case No. Q46487) on November 15, 1985 a complaint for Annulment of and Relief from Judgment with injunction and damages. In its
decision[if !supportFootnotes][6][endif] dated May 12, 1986, the trial court dismissed the complaint for annulment on the ground of res
judicata, and the writ of preliminary injunction previously issued was dissolved. It also ordered private respondent to pay
P3,000.00 as attorney's fees. As a consequence of private respondent's motion for reconsideration, the preliminary injunction
was reinstated, thereby restraining the execution of the City Court's judgment on the ejectment case.
The two cases were thereafter consolidated before the RTC of Quezon City, Branch 77. On April 28, 1989, a decision [if !
supportFootnotes][7][endif]
was rendered dismissing private respondent's complaint in Civil Case No. Q-45541 (specific performance
case) and denying its motion for reconsideration in Civil Case No. 46487 (annulment of the ejectment case). The motion for
reconsideration of said decision was likewise denied.
On appeal,[if !supportFootnotes][8][endif] respondent Court of Appeals rendered a decision [if !supportFootnotes][9][endif] upholding the jurisdiction
of the City Court of Quezon City in the ejectment case. It also concluded that there was a perfected contract of sale between

the parties on the leased premises and that pursuant to the option to buy agreement, private respondent had acquired the rights
of a vendee in a contract of sale. It opined that the payment by private respondent of P300,000.00 on June 20, 1975 as partial
payment for the leased property, which petitioners accepted (through Alice A. Dizon) and for which an official receipt was
issued, was the operative act that gave rise to a perfected contract of sale, and that for failure of petitioners to deny receipt
thereof, private respondent can therefore assume that Alice A. Dizon, acting as agent of petitioners, was authorized by them
to receive the money in their behalf. The Court of Appeals went further by stating that in fact, what was entered into was a
"conditional contract of sale" wherein ownership over the leased property shall not pass to the private respondent until it has
fully paid the purchase price. Since private respondent did not consign to the court the balance of the purchase price and
continued to occupy the subject premises, it had the obligation to pay the amount of P1,700.00 in monthly rentals until full
payment of the purchase price.
Upon denial of the motion for partial reconsideration (Civil Case No. Q-45541) by respondent Court of Appeals, [if !supportFootnotes]
[10][endif]
petitioners elevated the case via petition for certiorari questioning the authority of Alice A. Dizon as agent of
petitioners in receiving private respondent's partial payment amounting to P300,000.00 pursuant to the Contract of Lease with
Option to Buy. Petitioners also assail the propriety of private respondent's exercise of the option when it tendered the said
amount on June 20, 1975 which purportedly resulted in a perfected contract of sale.
G. R. NO. 124741:
Petitioners filed with respondent Court of Appeals a motion to remand the records of Civil Case No. 38-29155 (ejectment
case) to the Metropolitan Trial Court (MTC), then City Court of Quezon City, Branch 38, for execution of the judgment [if !
supportFootnotes][11][endif]
dated November 22, 1982 which was granted in a resolution dated June 29, 1992. Private respondent filed a
motion to reconsider said resolution which was denied.
Aggrieved, private respondent filed a petition for certiorari, prohibition with preliminary injunction and/or restraining order
with this Court (G.R. Nos. 106750-51) which was dismissed in a resolution dated September 16, 1992 on the ground that the
same was a refiled case previously dismissed for lack of merit. On November 26, 1992, entry of judgment was issued by this
Court.
On July 14, 1993, petitioners filed an urgent ex-parte motion for execution of the decision in Civil Case No. 38-29155 with
the MTC of Quezon City, Branch 38. On September 13, 1993, the trial court ordered the issuance of a third alias writ of
execution. In denying private respondent's motion for reconsideration, it ordered the immediate implementation of the third
writ of execution without delay.
On December 22, 1993, private respondent filed with the Regional Trial Court (RTC) of Quezon City, Branch 104 a petition
for certiorari and prohibition with preliminary injunction/restraining order (SP. PROC. No. 93-18722) challenging the
enforceability and validity of the MTC judgment as well as the order for its execution.
On January 11, 1994, RTC of Quezon City, Branch 104 issued an order [if !supportFootnotes][12][endif] granting the issuance of a writ of
preliminary injunction upon private respondent's posting of an injunction bond of P50,000.00.
Assailing the aforequoted order after denial of their motion for partial reconsideration, petitioners filed a petition [if !supportFootnotes]
[13][endif]
for certiorari and prohibition with a prayer for a temporary restraining order and/or preliminary injunction with the
Court of Appeals. In its decision,[if !supportFootnotes][14][endif] the Court of Appeals dismissed the petition and ruled that:
"The avowed purpose of this petition is to enjoin the public respondent from restraining the ejectment of the private
respondent. To grant the petition would be to allow the ejectment of the private respondent. We cannot do that now in view of
the decision of this Court in CA-G.R. CV Nos. 25153-54. Petitioners' alleged right to eject private respondent has been
demonstrated to be without basis in the said civil case. The petitioners have been shown, after all, to have no right to eject
private respondents.
WHEREFORE, the petition is DENIED due course and is accordingly DISMISSED.
SO ORDERED."[if !supportFootnotes][15][endif]
Petitioners' motion for reconsideration was denied in a resolution[if !supportFootnotes][16][endif] by the Court of Appeals stating that:

"This court in its decision in CA-G.R. CV Nos. 25153-54 declared that the plaintiff-appellant (private respondent
herein) acquired the rights of a vendee in a contract of sale, in effect, recognizing the right of the private respondent
to possess the subject premises. Considering said decision, we should not allow ejectment; to do so would disturb
the status quo of the parties since the petitioners are not in possession of the subject property. It would be unfair and
unjust to deprive the private respondent of its possession of the subject property after its rights have been established
in a subsequent ruling.
WHEREFORE, the motion for reconsideration is DENIED for lack of merit.
SO ORDERED."
Hence, this instant petition.
ISSUE: WON Overland Express Lines actually paid the alleged P300,000.00 to Fidela Dizon, as representative (agent) of
petitioners in consideration of the option.
HELD: NO. First. Petitioners have established a right to evict private respondent from the subject premises for non-payment
of rentals. The term of the Contract of Lease with Option to Buy was for a period of one (1) year (May 16, 1974 to May 15,
1975) during which the private respondent was given an option to purchase said property at P3,000.00 per square meter. After
the expiration thereof, the lease was for P3,000.00 per month.
Admittedly, no definite period beyond the one-year term of lease was agreed upon by petitioners and private
respondent. However, since the rent was paid on a monthly basis, the period of lease is considered to be from month to month
in accordance with Article 1687 of the New Civil Code. [if !supportFootnotes][18][endif] Where the rentals are paid monthly, the lease,
even if verbal may be deemed to be on a monthly basis, expiring at the end of every month pursuant to Article 1687, in
relation to Article 1673 of the Civil Code. [if !supportFootnotes][19][endif] In such case, a demand to vacate is not even necessary for
judicial action after the expiration of every month.[if !supportFootnotes][20][endif]
When private respondent failed to pay the increased rental of P8,000.00 per month in June 1976, the petitioners had a
cause of action to institute an ejectment suit against the former with the then City Court. In this regard, the City Court (now
MTC) had exclusive jurisdiction over the ejectment suit. The filing by private respondent of a suit with the Regional Trial
Court for specific performance to enforce the option to purchase did not divest the then City Court of its jurisdiction to take
cognizance over the ejectment case. Of note is the fact that the decision of the City Court was affirmed by both the
Intermediate Appellate Court and this Court.
Second. Having failed to exercise the option within the stipulated one-year period, private respondent cannot enforce
its option to purchase anymore. Moreover, even assuming arguendo that the right to exercise the option still subsists at the
time private respondent tendered the amount on June 20, 1975, the suit for specific performance to enforce the option to
purchase was filed only on October 7, 1985 or more than ten (10) years after accrual of the cause of action as provided under
Article 1144 of the New Civil Code.[if !supportFootnotes][21][endif]
In this case, there was a contract of lease for one (1) year with option to purchase. The contract of lease expired
without the private respondent, as lessee, purchasing the property but remained in possession thereof. Hence, there was an
implicit renewal of the contract of lease on a monthly basis. The other terms of the original contract of lease which are
revived in the implied new lease under Article 1670 of the New Civil Code[if !supportFootnotes][22][endif] are only those terms which are
germane to the lessees right of continued enjoyment of the property leased. [if !supportFootnotes][23][endif] Therefore, an implied new
lease does not ipso facto carry with it any implied revival of private respondent's option to purchase (as lessee thereof) the
leased premises. The provision entitling the lessee the option to purchase the leased premises is not deemed incorporated in
the impliedly renewed contract because it is alien to the possession of the lessee. Private respondents right to exercise the
option to purchase expired with the termination of the original contract of lease for one year. The rationale of this Court is
that:
This is a reasonable construction of the provision, which is based on the presumption that when the lessor allows the lessee to
continue enjoying possession of the property for fifteen days after the expiration of the contract he is willing that such
enjoyment shall be for the entire period corresponding to the rent which is customarily paid in this case up to the end of the
month because the rent was paid monthly. Necessarily, if the presumed will of the parties refers to the enjoyment of

possession the presumption covers the other terms of the contract related to such possession, such as the amount of rental, the
date when it must be paid, the care of the property, the responsibility for repairs, etc. But no such presumption may be
indulged in with respect to special agreements which by nature are foreign to the right of occupancy or enjoyment inherent in
a contract of lease.[if !supportFootnotes][24][endif]
Third. There was no perfected contract of sale between petitioners and private respondent. Private respondent argued
that it delivered the check of P300,000.00 to Alice A. Dizon who acted as agent of petitioners pursuant to the supposed
authority given by petitioner Fidela Dizon, the payee thereof. Private respondent further contended that petitioners filing of
the ejectment case against it based on the contract of lease with option to buy holds petitioners in estoppel to question the
authority of petitioner Fidela Dizon. It insisted that the payment of P300,000.00 as partial payment of the purchase price
constituted a valid exercise of the option to buy.
Under Article 1475 of the New Civil Code, the contract of sale is perfected at the moment there is a meeting of minds
upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the form of contracts. Thus, the elements of a contract of sale are
consent, object, and price in money or its equivalent. It bears stressing that the absence of any of these essential elements
negates the existence of a perfected contract of sale. Sale is a consensual contract and he who alleges it must show its
existence by competent proof.[if !supportFootnotes][25][endif]
In an attempt to resurrect the lapsed option, private respondent gave P300,000.00 to petitioners (thru Alice A. Dizon)
on the erroneous presumption that the said amount tendered would constitute a perfected contract of sale pursuant to the
contract of lease with option to buy. There was no valid consent by the petitioners (as co-owners of the leased premises) on
the supposed sale entered into by Alice A. Dizon, as petitioners alleged agent, and private respondent. The basis for agency is
representation and a person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the
agent.[if !supportFootnotes][26][endif] As provided in Article 1868 of the New Civil Code, [if !supportFootnotes][27][endif] there was no showing that
petitioners consented to the act of Alice A. Dizon nor authorized her to act on their behalf with regard to her transaction with
private respondent. The most prudent thing private respondent should have done was to ascertain the extent of the authority
of Alice A. Dizon. Being negligent in this regard, private respondent cannot seek relief on the basis of a supposed agency.
In Bacaltos Coal Mines vs. Court of Appeals,[if !supportFootnotes][28][endif] we explained the rule in dealing with an agent:
Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. If
he does not make such inquiry, he is chargeable with knowledge of the agents authority, and his ignorance of that
authority will not be any excuse. Persons dealing with an assumed agent, whether the assumed agency be a general or
special one, are bound at their peril, if they would hold the principal, to ascertain not only the fact of the agency but
also the nature and extent of the authority, and in case either is controverted, the burden of proof is upon them to
establish it.
For the long years that private respondent was able to thwart the execution of the ejectment suit rendered in favor of
petitioners, we now write finis to this controversy and shun further delay so as to ensure that this case would really attain
finality.

- Citylite Realty Corp. vs. CA, et al., 325 SCRA 385 (2000)
SHORTER VERSION:
FACTS * Private Respondent F.P. Holdings and Realty Corporation (F.P. Holdings), formerly the Sparta Holdings Inc, was
the registered owner of a parcel of land situated along E. Rodriguez Avenue, Quezon City also known as the Violago
Property or the San Lorenzo Ruiz Commercial Center, with an area of 71,754 sqm
* The property was offered for sale to the general public through the circulation of a sales brochure containing the
description of the property and the asking price of P6,250/sqm with terms of payment negotiable. In addition, brokers
commission was 2% of selling price, net of withholding taxes and other charges. Contact person was Meldin Al G. Roy,
Metro Drug Inc.

* The front portion consisting of 9,192 sqm is the subject of this litigation
* Al G. Roy sent a sales brochure, together with the location plan and copy of the TCT to Atty. Gelacio Mamaril, a
practicing lawyer and a licensed real estate broker. Mamaril passed in turn passed on these documents to Antonio Teng,
Executive Vice President, and Atty Victor Villanueva, Legal Counsel of City-Lite
* City-Lite conveyed its interest to purchase a portion or one-half (1/2) of the front lot of the Violago Property
Apparently, Roy subsequently informed City-Lites representative that it would take time to subdivide the lot and F.P.
HOLDINGS was not receptive to the purchase of only half of the front lot
* Atty. Mamaril wrote Metro Drug (Al G. Roy) expressing City-Lites desire to buy the entire front lot of the subject
property instead of only half thereof provided the asking price of P6,250/sqm was reduced and that payment be in installment
for a certain period
* The parties reached an agreement and Roy agreed to sell the property to City-Lite provided only the latter submit
its acceptance in writing to the terms and conditions of the sale
* For some reason or another and despite demand, F.P. HOLDINGS refused to execute the corresponding deed of
sale in favor of City-Lite of the front lot of the property
* Trial court ruled in favor of City-Lite ordering F.P. HOLDINGS to execute a deed of sale of the property in favor
of the former for the total consideration of P55,056,250 payable as follows: P15 M as downpayment to be payable
immediately upon execution of the deed of sale and the balance within 6 months from downpayment without interest
* CA reversed TCs decision
ISSUE: W/N there was a perfected contract of sale between City-Lite and respondent F.P. HOLDINGS because of a lack of
definite agreement on the manner of paying the purchase price and that Metro Drug and Meldin Al G. Roy were not
authorized to sell the property to City-Lite, and that the authority of Roy was only limited to that of mere liaison or contact
person
RULING: No, Roy mere contact person
Art. 1874 of NCC: When the sale of a piece of land or any interest therein is through an agent, the authority of the
latter shall be in writing, otherwise, the sale shal be void.
The absence of authority to sell can be determined from the written memorandum issued by respondent F.P.
HOLDINGS President requesting Metro Drugs assistance in finding buyers for the property
Memorandum indicates that Meldin G. Roy and/or Metro Drug was only to assist F.P. Holdings in looking for
buyers and referring to them possible prospects whom they were supposed to endorse to F.P. Holdings.
But the final evaluation, appraisal and acceptance of the transaction could be made only by F.P. Holdings. In other
words, Roy and/or Metro Drug was only a contact person with no authority to conclude a sale of the property
Roy and/or Metro Drug was a mere broker and Roy/s only job was to bring parties the parties together for a possible
transaction
SC: for lack of a written authority to sell the Violago Property on the part of Roy and/or Metro Drug, the sale
should be as it is declared null and void
DIGEST (FULL TEXT APPROACH)
FACTS: Private respondent F. P. HOLDINGS AND REALTY CORPORATION (F.P. HOLDINGS), formerly the Sparta
Holdings Inc., was the registered owner of a parcel of land situated along E. Rodriguez Avenue, Quezon City, also known as
the "Violago Property" or the "San Lorenzo Ruiz Commercial Center," with an area of 71,754 square meters, more or less,
and covered by Transfer Certificate of Title No. T-19599. The property was offered for sale to the general public through the
circulation of a sales brochure containing the following information:

A parcel of land including buildings and other improvements thereon located along E. Rodriguez Avenue, Quezon City, with
a total lot area of 71,754 square meters - 9,192 square meters in front, 23,332 square meters in the middle, and 39,230
square meters at the back. But the total area for sale excludes 5,000 square meters covering the existing chapel and
adjoining areas which will be donated to the Archdiocese of Manila thus reducing the total saleable area to 66,754 square
meters. Asking price was P6,250.00/square meter with terms of payment negotiable. Broker's commission was 2.0% of
selling price, net of withholding taxes and other charges. As advertised, contact person was Meldin Al G. Roy, Metro Drug
Inc., with address at 5/F Metro House, 345 Sen. Gil Puyat Avenue, Makati City.
The front portion consisting of 9,192 square meters is the subject of this litigation.
On 22 August 1991 respondent Meldin Al G. Roy sent a sales brochure, together with the location plan and copy of the
Transfer Certificate of Title No. T-19599 of the Register of Deeds of Quezon City, to Atty. Gelacio Mamaril, a practicing
lawyer and a licensed real estate broker. Atty. Mamaril in turn passed on these documents to Antonio Teng, Executive VicePresident, and Atty. Victor P. Villanueva, Legal Counsel, of CITY-LITE.
In a letter dated 19 September 1991 sent to Metro Drug (ATTN: MELDIN AL ROY) after an initial meeting with Meldin Al
Roy that day, CITY-LITE conveyed its interest to purchase a portion or one-half (1/2) of the front lot of the "Violago
Property." Apparently, Roy subsequently informed CITY-LITE's representative that it would take time to subdivide the lot
and respondent F. P. HOLDINGS was not receptive to the purchase of only half of the front lot. After a few days, Atty.
Mamaril wrote Metro Drug (ATTN: MELDIN AL ROY) expressing CITY-LITE's desire to buy the entire front lot of the
subject property instead of only half thereof provided the asking price of P6,250.00/square meter was reduced and that
payment be in installment for a certain period. Roy made a counter offer dated 25 September 1991 as follows:
Dear Atty. Mamaril,
This has reference to your letter dated September 24, 1991 in connection with the interest of your clients, Mr.
Antonio Teng/City-Lite Realty Corporation and/or any of their subsidiaries to buy a portion of the Violago Property
fronting E. Rodriguez Sr. Avenue with an area of 9,192 square meters.
We are pleased to inform you that we are prepared to consider the above offer subject to the following major terms
and conditions: 1. The price shall be P6,250.00/square meter or a total of P57,450,000.00; 2. The above purchase
price shall be paid to the owner as follows: (a) P15.0 Million downpayment; (b) balance payable within six (6)
months from date of downpayment without interest. Should your client find the above major terms and conditions
acceptable, please advise us in writing by tomorrow, September 26, 1991, so that we can start formal discussions on
the matter x x x xnovero
Very truly yours,
MELDIN AL G. ROY
On 26 September 1991 CITY-LITE's officers and Atty. Mamaril met with Roy at the Manila Mandarin Hotel in Makati to
consummate the transaction. After some discussions, the parties finally reached an agreement and Roy agreed to sell the
property to CITY-LITE provided only that the latter submit its acceptance in writing to the terms and conditions of the sale as
contained in his letter of 25 September 1991. Later that afternoon after meeting with Roy at the Manila Mandarin Hotel, Atty.
Mamaril and Antonio Teng of CITY-LITE conveyed their formal acceptance of the terms and conditions set forth by Roy in
separate letters both dated 26 September 1991.
However, for some reason or another and despite demand, respondent F. P. HOLDINGS refused to execute the corresponding
deed of sale in favor of CITY-LITE of the front lot of the property. Upon its claim of protecting its interest as vendee of the
property in suit, CITY-LITE registered an adverse claim to the title of the property with the Register of Deeds of Quezon City
which was annotated in the Memorandum of Encumbrance of Transfer Certificate of Title No. T-19599 under Entry No. PE1001 dated 27 September 1991.
On 30 September 1991 CITY-LITE's counsel demanded in writing that Metro Drug (ATTN: MELDIN AL G. ROY) comply
with its commitment to CITY-LITE by executing the proper deed of conveyance of the property under pain of court action.
On 4 October 1991 F. P. HOLDINGS filed a petition for the cancellation of the adverse claim against CITY-LITE with the

Regional Trial Court of Quezon City, docketed as LRC Case No. 91-10257, which was raffled to Br. 84.
On 8 October 1991 Edwin Fernandez, President of F. P. HOLDINGS, in a move to amicably settle with CITY-LITE, met with
the latter's officers during which he offered properties located in Caloocan City and in Quezon Boulevard, Quezon City, as
substitute for the property, but CITY-LITE refused the offer because "it did not suit its business needs." With the filing of the
petition of F. P. HOLDINGS for the cancellation of the adverse claim, CITY-LITE caused the annotation of the first notice of
lis pendens which was recorded in the title of the property under Entry No. 4605.
On 2 December 1991 the RTC-Br. 84 of Quezon City dismissed F. P. HOLDINGS' petition declaring that CITY-LITE's
adverse claim had factual basis and was not "sham and frivolous." Meanwhile, F. P. HOLDINGS caused the resurvey and
segregation of the property and asked the Register of Deeds of Quezon City to issue separate titles which the latter did on 17
January 1992 by issuing Transfer Certificate of Title No. T-51671.
Following the dismissal of F. P. HOLDINGS' petition for the cancellation of the adverse claim, CITY-LITE instituted a
complaint against F. P. HOLDINGS originally for specific perfomance and damages and caused the annotation of the second
notice of lis pendens on the new certificate of title. After the annotation of the second lis pendens, the property was transfered
to defendant VIEWMASTER CONSTRUCTION CORP. (VIEWMASTER) for which Transfer Certificate of Title No. T52398 was issued. However the notice of lis pendens was carried over and annotated on the new certificate of title.
In view of the conveyance during the pendency of the suit, the original complaint for specific performance and damages was
amended with leave of court to implead VIEWMASTER as a necessary party and the Register of Deeds of Quezon City as
nominal defendant with the additional prayer for the cancellation of VIEWMASTER's certificate of title. The case was
thereafter raffled to Br. 85 of the Regional Trial Court of Quezon City.
On 4 October 1995 the court a quo rendered its decision in favor of CITY-LITE ordering F. P. HOLDINGS to execute a deed
of sale of the property in favor of CITY-LITE for the total consideration of P55,056,250.00 payable as follows: P15 Million
as downpayment to be payable immediately upon execution of the deed of sale and the balance within six (6) months from
downpayment, without interest. The court also directed the Register of Deeds of Quezon City to cancel Transfer Certificate of
Title No. T-52398 or any subsequent title it had issued affecting the subject property, and to issue a new one in the name of
CITY-LITE upon the presentation of the deed of sale and other requirements for the transfer. It likewise ordered the
defendants, except VIEWMASTER and the Register of Deeds of Quezon City, to pay CITY-LITE jointly and severally
P800,000.00 by way of nominal damages, P250,000.00 for attorney's fees, and to pay the costs.
On 30 October 1995 VIEWMASTER filed a motion for reconsideration of the decision of the lower court questioning its
ruling that a perfected contract of sale existed between CITY-LITE and F. P. HOLDINGS as there was no definite agreement
over the manner of payment of the purchase price, citing in support thereof Toyota Shaw Inc. v. Court of Appeals.[if !
supportFootnotes][3][endif]
However the motion for reconsideration was denied.
In the challenged Decision of 20 October 1998 the Court of Appeals reversed and set aside the judgment of the Regional Trial
Court of Quezon City. On 10 May 1999 the Court of Appeals denied CITY-LITE's motion to reconsider its decision.
ISSUE: W/N there was a perfected contract of sale between City-Lite and respondent F.P. HOLDINGS because of a lack of
definite agreement on the manner of paying the purchase price and that Metro Drug and Meldin Al G. Roy were not
authorized to sell the property to City-Lite, and that the authority of Roy was only limited to that of mere liaison or contact
person
HELD: We cannot sustain petitioner. On the issue of whether a contract of sale was perfected between petitioner CITY-LITE
and respondent F. P. HOLDINGS acting through its agent Meldin Al G. Roy of Metro Drug, Art. 1874 of the Civil Code
provides: "When the sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in
writing; otherwise, the sale shall be void." Petitioner anchors the authority of Metro Drug and Meldin Al G. Roy on (a) the
testimonies of petitioner's three (3) witnesses and the admissions of Roy and the lawyer of Metro Drug; (b) the sales brochure
specifying Meldin Al G. Roy as a contact person; (c) the guard posted at the property saying that Metro Drug was the
authorized agent; and, (d) the common knowledge among brokers that Metro Drug through Meldin Al G. Roy was the
authorized agent of F. P. HOLDINGS to sell the property. However, and more importantly, the Civil Code requires that an
authority to sell a piece of land shall be in writing. The absence of authority to sell can be determined from the written
memorandum issued by respondent F. P. HOLDINGS' President requesting Metro Drug's assistance in finding buyers for the

property. The memorandum in part stated: "We will appreciate Metro Drug's assistance in referring to us buyers for the
property. Please proceed to hold preliminary negotiations with interested buyers and endorse formal offers to us for our final
evaluation and appraisal." This obviously meant that Meldin Al G. Roy and/or Metro Drug was only to assist F. P.
HOLDINGS in looking for buyers and referring to them possible prospects whom they were supposed to endorse to F. P.
HOLDINGS. But the final evaluation, appraisal and acceptance of the transaction could be made only by F. P. HOLDINGS.
In other words, Meldin Al G. Roy and/or Metro Drug was only a contact person with no authority to conclude a sale of the
property. In fact, a witness for petitioner even admitted that Roy and/or Metro Drug was a mere broker, [if !supportFootnotes][4][endif] and
Roy's only job was to bring the parties together for a possible transaction. [if !supportFootnotes][5][endif] Consequently, we hold that for
lack of a written authority to sell the "Violago Property" on the part of Meldin Al G. Roy and/or Metro Drug, the sale should
be as it is declared null and void. Therefore the sale could not produce any legal effect as to transfer the subject property from
its lawful owner, F. P. HOLDINGS, to any interested party including petitioner CITY-LITE.
- Jimenez vs. Rabat 38 Phil. 378
SHORTER VERSION:
FACTS: * Gregorio Jimenez filed this action to recover from Rabot, a parcel of land situated in Alaminos, Pangasinan
* The property in question, together with two other parcels in the same locality originally belonged to Jimenez,
having been assigned to him as one of the heirs in the division of the estate of his father
* It further appears that while Gregorio Jimenez was staying at Vigan, Ilocos Sur, his property in Alaminos was
confided by him to the care of his elder sister Nicolasa Jimenez.
* He wrote his sister a letter from Vigan in which he informed her that he was pressed for money and requested her
to sell one of his parcels of land and send him the money in order that he might pay his debts. The letter contains no
description of the land to be sold other than is indicated in the words one of my parcels of land.
* Acting upon this letter, Nicolasa approached Rabot and the latter agreed to buy the property for the sum of P500.
P250 was paid at once, with the understanding that a deed of conveyance would be executed when the balance should be
paid.
* Nicolasa admits having received this payment but there is no evidence that she sent it to her brother
* After one year, Gregorio Jimenez went back to Alaminos and demanded that his sister surrender the piece of land
to him, it being then in her possession.
* She refused upon some pretext or other to do so and as a result, plaintiff instituted an action to recover the land
from her control
* Meanwhile, Nicolasa executed and delivered to Rabot a deed purporting to convey to him the parcel of land
ISSUE: W/N the authority conferred on Nicolasa by the letter was sufficient to enable her to bind her brother of the sale
made in favor of Rabot

RULING: Yes
As a matter of formality, a power of attorney to convey real property ought to appear in a public document, just as
any other instrument intended to transmit or convey an interest in such property ought to appear in a public document
Art. 1713 of the Civil Code requires that the authority to alienate land shall be contained in an express mandate
Subsection 5 of section 335 of Code of Civil Procedure say that the authority of the agent must be in writing and
subscribed by the party to be charged
SC: the authority expressed in the letter is a sufficient compliancw tih both requirements

The purpose in giving a power of attorney is to substitute the mind and hand of the agent for the mind and hand of
the principal; and if the character and extent of the power is so defined as to leave no doubt as to the limits within which the
agent is authorized to act, and he acts within those limits, the principal cannot question the validity of his act
The general rule here applicable is that the description must be sufficiently definite to identify the land either from
the recitals of the contract or deed or from external facts referred to in the document, thereby enabling one to determine the
identity of the land and if the description is uncertain on its face or is shown to be applicable with equal plausibility to more
than one tract, it is insufficient.
DIGEST (FULL TEXT APPROACH)
FACTS: This action was instituted by the plaintiff, Gregorio Jimenez, to recover from the defendant, Pedro Rabot, a parcel
of land situated in the municipality of Alaminos, in the Province of Pangasinan, and described in the complaint as follows:
Approximate area of three hectares; bounded on the north and west with land of Pedro Reynoso, on the south with
land of Nicolasa Jimenez, and on the east with land of Calixta Apostol before, at present with that of Juan
Montemayor and Simon del Barrio. It is situated in Dinmayat Tancaran, barrio of Alos of this same municipality of
Alaminos, Pangasinan.

From a judgment rendered in favor of the plaintiff, Pedro Rabot has appealed; but his co-defendants, Nicolasa Jimenez and
her husband, who were cited by the defendant for the purpose of holding her liable upon her warranty in case of his eviction,
have not appealed.
It is admitted that the parcel of land in question, together with two other parcels in the same locality originally belonged of
the heirs in the division of the estate of his father. It is further appears that while Gregorio was staying at Vigan, in the
Province of Ilocos Sur, during the year 1911, his property in Alaminos was confided by him to the care of his elder sister
Nicolasa Jimenez. On February 7 of that year he wrote this sister a letter from Vigan in which he informed her that he was
pressed for money and requested her to sell one of his parcels of land and send him the money in order that he might pay his
debts. This letter contains no description of the land to be sold other than is indicated in the words "one of my parcels of
land" ("uno de mis terrenos").
Acting upon this letter Nicolasa approached the defendant Pedro Rabot, and the latter agreed to buy the parcel in question for
the sum of P500. Two hundred and fifty peso were paid at once, with the understanding that a deed of conveyance would be
executed when the balance should be paid. Nicolasa admits having received this payment of P250 at the time stated; but there
is no evidence that she sent any of it to her brother.
About one year later Gregorio came down to Alaminos and demanded that his sister should surrender this piece of land to
him, it being then in her possession. She refused upon some pretext or other to do so; and as a result Gregorio, in conjunction
with others of his brothers and sisters, whose properties were also in the hands of Nicolasa, instituted an action in the Court
of First Instance for the purpose of recovering their land from her control. This action was decided favorably to the plaintiffs
upon August 12, 1913; and no appeal was taken from the judgment.
Meanwhile, upon May 31, 1912, Nicolasa Jimenez executed and delivered to Pedro Rabot a deed purporting to convey to him
the parcel of land which is the subject of this controversy. The deed recites that the sale was made in consideration of the sum
of P500, the payment of which is acknowledged. Pedro Rabot went into possession, and the property was found in his hands
at the time when final judgment was entered in favor of the plaintiffs in the action above mentioned. It will thus be seen that
Pedro Rabot acquired possession under the deed from Nicolasa during the pendency of the litigation appear that he was at the
time cognizant of that circumstance.
In considering the questions presented by this appeal one or two preliminary observations may be made. The first is that, as a
matter of formality, a power of attorney to convey real property ought to appear in a public document, just as any other
instrument intended to transmit or convey an interest in such property ought to appear in a public document. (Art. 1280, Civil
Code.) But inasmuch as it is an established doctrine that a private document is competent to create, transmit, modify, or
extinguish a right in real property (Thunga Chui vs. Que Bentec, 2 Phil. Rep., 561; Couto Soriano vs. Cortes, 8 Phil. Rep.,

459), it follows that a power of attorney to convey such property, even though in the form of a private document, will operate
with effect. Again, supposing that the letter contained adequate authority for Nicolasa to sell the property in question, her
action in conveying the property in her own name, without showing the capacity in which she acted, was doubtless irregular.
Nevertheless, such deed would in any event operate to bind her brother, the plaintiff in its character as a contract (Lyon vs.
Pollock, 99 U.S., 668; 25 L. ed., 265), and supposing that the authority was sufficient, he could be compelled by a proper
judicial proceeding to execute a document to carry such contract into effect. (Art. 1279, Civil Code.)

ISSUE: WON the authority conferred on Nicolasa by the letter of February 7, 1911, was sufficient to enable her to bind her
brother.
HELD: YES. The only provisions of law bearing on this point are contained in article 1713 of the Civil Code and in section
335 of the Code of Civil Procedure. Article 1713 of the Civil Code requires that the authority to alienate land shall be
contained in an express mandate; while subsection 5 of section 335 of the Code of Civil Procedure says that the authority of
the agent must be in writing and subscribed by the party to be charged. We are of the opinion that the authority expressed in
the letter is a sufficient compliance with both requirements.
It has been urged here that in order for the authority to be sufficient under section 335 of the Code of Civil Procedure the
authorization must contain a particular description of the property which the agent is to be permitted to sell. There is no such
requirement in subsection 5 of section 335; and we do not believe that it would be legitimate to read such a requirement into
it. The purpose in giving a power of attorney is to substitute the mind and hand of the agent for the mind and hand of the
principal; and if the character and extent of the power is so far defined as to leave no doubt as to the limits within which the
agent is authorized to act, and he acts within those limits, the principal cannot question the validity of his act. It is not
necessary that the particular act to be accomplished should be predestinated by the language of the power. The question to be
answered always, after the power has been exercised, is rather this: Was the act which the agent performed within the scope
of his authority? In the case before us, if the question is asked whether the act performed by Nicolasa Jimenez was within the
scope of the authority which had been conferred upon her, the answer must be obviously in the affirmative.
It should not escape observation that the problem with which we are here concerned relates to the sufficiency of the power of
attorney under subsection 5 of section 335 of the Code of Civil Procedure and not to the sufficiency of the note or
memorandum of the contract, or agreement of sale, required by the same subsection, in connection with the first paragraph of
the same section. It is well-settled in the jurisprudence of England and the United States that when the owner, or his agent,
comes to make a contract to sell, or a conveyance to effect a transfer, there must be a description of the property which is the
subject of the sale or conveyance. This is necessary of course to define the object of the contract. (Brockway vs. Frost, 40
Minn., 155; Carr vs. Passaic Land etc. Co., 19 N. J. Eq., 424; Lippincott vs. Bridgewater, 55 N. J. Eq., 208; Craig vs. Zelian,
137 Cal., 105; 20 Cyc., 271.)
The general rule here applicable is that the description must be sufficiently definite to identify the land either from the recitals
of the contract or deed or from external facts referred to in the document, thereby enabling one to determine the identity of
the land and if the description is uncertain on its face or is shown to be applicable with equal plausibility to more than one
tract, it is insufficient. The principle embodied in these decisions is not, in our opinion, applicable to the present case, which
relates to the sufficiency of the authorization, not to the sufficiency of the contract or conveyance. It is unquestionable that
the deed which Nicolasa executed contains a proper description of the property which she purported to convey.
There is ample authority to the effect that a person may by a general power of attorney an agent to sell "all" the land
possessed by the principal, or all that he possesses in a particular city, county, or state. (Roper vs. McFadden, 48 Cal., 346;
Rownd vs. Davidson, 113 La., 1047; Carson vs. Ray, 52 N. C., 609; 78 Am. Dec., 267; 31 Cyc., 1229.) It is also held that
where a person authorizes an agent to sell a farm ("my farm") in a certain county, this is sufficient, if it be shown that such
party has only one farm in that country. (Marriner vs. Dennison, 78 Cal., 202.) In Linton vs. Moorhead (209 Pa. St., 646), the
power authorized the agent to sell or convey "any or all tracts, lots, or parcels" of land belonging to the plaintiff. It was held
that this was adequate. In Lyon vs. Pollock (99 U.S., 668), the owner in effect authorized an agent to sell everything he had in
San Antonio Texas. The authority was held sufficient. In Linan vs. Puno (31 Phil. Rep., 259), the authority granted was to the
effect that the agent might administer "the interests" possessed by the principal in the municipality of Tarlac and to that end
he was authorized to purchase, sell, collect, and pay, etc. It was held that this was a sufficient power.

In the present case the agent was given the power to sell either of the parcels of land belonging to the plaintiff. We can see no
reason why the performance of an act within the scope of this authority should not bind the plaintiff to the same extent as if
he had given the agent authority to sell "any or all" and she had conveyed only one.
From what have been said it is evident that the lower court should have absolved the defendant Pedro Rabot from the
complaint. Judgment will accordingly be reversed, without any express adjudication of costs this instance. So ordered.
iii. Extent of Business Covered
a. general Arts. 1876; 1877
ART. 1876. An agency is either general or special. The former comprises all the business
of the principal. The latter, one or more specific transactions. (1712)

General and special agencies.

The distinction here is based on the scope of the business covered. A general agency must
not be confused with one couched in general terms (Art. 1877.) which is a special agency when it
involves only one or more specifi c transactions. (Art. 1876.)
Classes and kinds of agents.
Agents may be classifi ed as express or implied, according to the manner in which the
agency is created; or as actual or ostensible, with reference to their authority in fact. (2 C.J.S.
1035.)
According to the nature and extent of their authority agents have been classified into
universal, general, and special or particular.
(1) A universal agent is one employed to do all acts that the principal may personally do,
and which he can lawfully delegate to another the power of doing. (Ibid., 1037.) A contract creating
a universal agency normally includes the following delegation: full power and authority to do and
perform any and every act that I may legally do and every power necessary to carry out the
purposes for which it is granted.
(2) A general agent is one employed to transact all the business of his principal, or all
business of a particular kind or in a particular place, or in other words, to do all acts, connected with
a particular trade, business, or employment. (Ibid., 1036.)
He has authority to do all acts connected with or necessary to accomplish a certain job. A manager
of a store is an example of a general agent.
(3) A special or particular agent is one authorized to act in one or more specific transactions,
or to do one or more specific acts, or to act upon a particular occasion. (Ibid.) An agent with
authority to sell a house is an illustration of a special agent. He has no authority to act in matters
other than that for which he has been employed. His authority is to do only a particular act or a
series of acts of very limited scope. He has less power than a general agent.
A universal agent may be viewed as an unlimited general agent. Cases of universal agencies
are rare since they can be created only by clear and unequivocal language; and while a principal
may have as many special agents as occasions may require and may have a general agent in each
line of his business and each of several places, he can only have one universal agent. (3 Am. Jur. 2d
422-425.)
Special types of agents.

The more common special types of agents are the following:

(1) Attorney at law, or one whose business is to represent clients in legal proceedings;
(2) Auctioneer, or one whose business is to sell property for others to the highest bidder at a
public sale;
(3) Broker, or one whose business is to act as intermediary between two other parties such
as insurance broker and real estate broker;
(4) Factor (synonymous with commission merchant), or one whose business is to receive and
sell goods for a commission, being entrusted with the possession of the goods involved in the
transaction. (see Art. 1903.);
(5) Cashier in bank, or one whose business is to represent a banking institution in its
financial transactions; and;
(6) Attorney-in-fact, infra.
Attorney-in-fact defined.
An attorney-in-fact is one who is given authority by his principal to do a particular act not of
a legal character. The term is, in loose language, used to include agents of all kinds, but in its strict
legal sense, it means an agent having a special authority created by deed. (3 C.J.S. 1037.)
Distinctions between a general agentand a special agent.
(1) Scope of authority. A general agent is usually authorized to do all acts connected with
the business or employment in which the principal is engaged (e.g., manager of a shop), while a
special agent is authorized to do only one or more specific acts (e.g., delivering of goods sold to a
customer) in pursuance of particular instructions or with restrictions necessarily implied from the
act to be done. (3 Am. Jur. 2d 422.)
(2) Continuous nature of service authorized. A general agent is one who is authorized to
conduct a series of transactions over time involving a continuity of service, while a special agent is
one authorized to conduct a single transaction or a series of transactions not involving continuity of
service (Ibid.) and covering a relatively limited period of time. Thus, one is a general agent if he is
in continuous employment, although the employment consists of purchasing articles as the
employer directs with no discretion as to the kinds, amounts or pieces to be paid, while one
employed to purchase a single article would be a special agent although given the widest discretion
as where one is directed to purchase any suitable article as a wedding gift. (Restatement of Law of
Agency, Sec. 3[c].)
(3) Extent to which agent may bind principal. A general agent may bind his principal by
an act within the scope of his authority although it may be contrary to his special instructions, while
a special agent cannot bind his principal in a manner beyond or outside the specific acts which he is
authorized to perform on behalf of the principal. (3 Am. Jur. 2d 422.)
(4) Knowledge/disclosure of limitations of power. A special agency is in its nature
temporary and naturally suggests limitations of power of which third persons must inform
themselves. A general agency is in its general nature, continuing and unrestricted by limitations
other than those which confine the authority within the bounds of what is usual, proper, and
necessary under like circumstances. If there are other limitations, the principal must disclose them.
(Mechem on Agency, Sec. 739.) The expertise of the agent or the amount of discretion given to him
is not relevant in making a distinction between general and special agents.

(5) Termination of authority. The apparent authority created in a general agent does not
terminate by the mere revocation of his authority without notice to the third party. (see Art. 1922.)
In the case of special agent, the duty imposed upon the third party to inquire makes termination of
the relationship as between the principal and agent effective as to such third party unless the
agency has been entrusted for the purpose of contracting with such third party. (see Art. 1921.)
(6) Construction of instructions of principal. It is a general rule that the authority of a
special agent must be strictly pursued. Persons dealing with such an agent must at their peril
inquire into the nature and extent of his authority. (2 C.J. Sec. 223.) Where the agent is general,
statement by the principal with respect to formers authority would ordinarily be regarded as
advisory in nature only. Where the agent is special, they would be regarded as words limiting the
authority of the agent. This is but natural for it should not be presumed in the absence of
countervailing circumstances that a general agency, with its consequent broad powers and
reposing of confidence is, without more, intended to be limited in the extent of its authority by the
principals statements. (Teller, op. cit., pp. 19-20.)
Be that as it may, a general agency does not import unqualified authority, and the implied
power of any agent, however general, must be limited to such acts as are proper for an agent to do,
and cannot extend to acts clearly adverse to the interests of the principal, or for the benefit of the
agent personally; and an agent has no implied authority to do acts not usually done by agents in
that sort of business. The most general authority is limited to the business or purpose for which the
agency was created. (2 C.J.
Sec. 222.)
ART. 1877. An agency couched in general terms comprises only acts of administration,
even if the principal should state that he withholds no power or that the agent may
execute such acts as he may consider appropriate, or even though the agency should
authorize a general and unlimited management. (n)
Agency couched in general terms.
As to the extent of the power conferred, agency may be couched in general terms (Art.
1877.) or couched in specifi c terms. (Art. 1878.)
An agency couched in general terms may be a general agency (Art. 1876, par. 1.) or a
special agency. (Ibid., par. 2.) It includes only acts of administration and an express power is
necessary to perform any act of strict ownership (Art. 1878.), even if the principal states that (1) he
withholds no power, or that (2) the agent may execute such acts as he may consider appropriate, or
that (3) he authorizes a general or unlimited management. (Art. 1877.)
Whether the instrument be denominated as general power of attorney or special power of
attorney, what matters is the extent of the power or powers conferred upon the agent or attorneyin-fact. If the power is couched in general terms, then only acts of administration may be deemed
granted although the instrument may be captioned as special power of attorney; but where the
power, for example, to sell or mortgage, is specifi ed, there can be no doubt that the agent may
execute the act, although the instrument is denominated as a general power of attorney. (Veloso vs.
Court of Appeals, 260 SCRA 593 [1996].)
Meaning of acts of administration.
It seems easy to answer that acts of administration are those which do not imply the
authority to alienate for the exercise of which an express power is necessary. Yet what are acts of
administration will always be a question of fact, rather than of law, because there can be no doubt
that sound management will sometimes require the performance of an act of ownership. (12
Manresa 468.) But, unless the contrary appears, the authority of an agent is presumed to include all

the necessary and usual means to carry out the agency into effect. (Macke vs. Camps, 7 Phil. 553
[1907].)
(1) A person employed to sell goods in a retail store can sell without special power of
attorney because selling itself is an act of administration.
(2) It has been held that the right to sue for the collection of debts owing to the principal is
not an incident of strict ownership, which must be conferred in express terms. (German & Co. vs.
Donaldson, Sim & Co., 1 Phil. 63 [1901].)
(3) An attorney-in-fact empowered to pay the debts of the principal and to employ attorneys
to defend the latters interests is impliedly empowered to pay attorneys fees for services rendered
in the interests of the principal. (Municipal Council of
Iloilo vs. Evangelista, 55 Phil. 290 [1930].)
(4) A person who is made an attorney-in-fact with the same power and authority to deal with
property which the principal might or could have done if personally present, may engage the
services of a lawyer to preserve the ownership and possession of the principals property.
(5) Except where the authority for employing agents and employees is expressly vested in
the board of directors or trustees of a corporation, an officer or agent who has control and
management of the corporations business, or a specific part thereof, may bind the corporation by
the employment of such agents and employees as are usual and necessary in the conduct of such
business. But the contracts of employment must be reasonable. (Yu Chuck vs. Kong Li Po, 46 Phil.
608 [1924].)
(6) The authority to take charge of certain properties includes, unless it is otherwise agreed,
the implied authority to take reasonable measures appropriate to the subject matter, to protect it
against loss or destruction, to keep it in reasonable repair, to recover it if lost or stolen, and, if the
subject matter is ordinarily insured by the owners, to insure it. (2 Am. Jur. 122.) The authority to
manage or administer a land does not include the authority to sell the same. (Caeda vs.
Puentespina, CA-G.R. No. 52855-R, May 29, 1978.)
(7) An agent to manage, supervise, or oversee the business or property of his principal has
powers co-extensive in scope with the business instructed to him, that is to say, implied authority
to do in that business or with the property whatever is usually and customarily done in business or
property of the same kind in the same locality. (2 C.J.S. 1241-1242.)
(8) When the agent is entrusted with the custody of goods which he delivers himself to the
purchaser, there is implied authority to collect and receive payment therefor. (Boice-Perrine Co. vs.
Kelley, 243 Mass. 327, 137 N.E. 731.)
(9) The pertinent portion of the special power of attorney executed by the client expressly
authorized its counsel to appear for and in its behalf in the above entitled case in all circumstances
where its appearance is required and to bind it in all said instances. Although the power of
attorney does not specifically mention the authority of counsel to appear and bind the client at the
pre-trial conference, the terms of the said power of attorney are comprehensive enough as to
include said authority. (Tropical Homes, Inc. vs. Villaluz, 170 SCRA 577 [1989].)
(10) The authority to sell includes authority to make customary warranties and
representations, but to sell only for cash unless a course of dealing justifies the inference that the
agent had authority to sell on credit. Authority to buy is interpreted to mean only for money if the
principal has supplied the agent with funds; otherwise, the agent can pledge the principals credit
on reasonable terms. (Babb & Martin, op. cit., p. 138.)

(11) The right of an agent to indorse commercial papers is a responsible power and will not
be lightly inferred. A salesman with authority to collect money belonging to his principal does not
have the implied authority to indorse checks received in payment. Any person taking checks made
payable to a corporation, which can only act by agents, does so at his peril, and must abide by the
consequences if the agent who indorses the same is without authority. (Insular Drug Co. vs.
National Bank, 58 Phil. 683 [1933].) But the principal is liable on checks issued by an agent with a
general power of attorney to issue checks, where such checks were issued for the agents own
benefit. The rule is that the principal is liable on contracts entered into by his general agent from
improper motives or on contracts which represent violation of his fi duciary duty to the principal.
(Empire Trust Co. vs. Cahan, 274 U.S. 474, cited in Teller, p. 228.)
(12) It is the general rule that an agent who solicits orders and transmits them to his
principal to be filled has no implied authority to collect or to receive payment for the goods sold.
The purchaser will not be discharged by payment to him without proof of further authority in the
agent than the making of sales. (Boice-Perrine Co. vs. Kelley, 243 Mass. 327, 137 N.E. 731.) Under
this principle, brokers and travelling salesmen who do not have the possession of goods, and who
sell for future delivery to be paid for on delivery or a future time, are without authority to collect
payment for the goods. If the payment is made to a person occupying that relation, the purchaser
makes him his agent to pay the seller, and, if he fails, it is the purchasers loss and not the sellers.
(Fairbanks Morse & Co. vs. Dole & Co.,159 So 859 [Miss.] 1925.)
(13) In a case where an agent with a power of attorney was authorized to take, sue for,
recover, collect, and receive any and all sums of money and other things of value due his principal
(lessor) from the lessee, it was held that said power of attorney did not authorize the agent to take
articles belonging to the lessee, hiding them in his house and denying to the owner of the articles
and the police authorities that he had them in his possession, these being illegal acts not covered
by his power of attorney, and the agent, in the absence of satisfactory explanation as to his
possession, was liable for the crime of theft of such properties. (Soriano vs. People, 88 Phil. 368
[1951].)
(14) The powers of the managing partner are not defined under the provisions of the Civil
Code on partnership. (see Arts. 1800-1803, 1818.) Since according to well-known authorities, the
relationship between a managing partner and the partnership is substantially the same as that of
agent and the principal, the extent of the power of the managing partner must, therefore, be
determined under the general principles of agency. And, on this point, the law says that an agency
created in general terms includes only acts of administration, but with regard to the power to
compromise, sell, mortgage, and other acts of strict ownership, an express power of attorney is
required.
Of course, there is authority to the effect that a managing partner, even without express power of
attorney, may perform acts affecting ownership if the same are necessary to promote or accomplish
a declared object of the partnership. But a sale by a managing partner of real properties of the
partnership to pay its obligation without first obtaining the consent of the other partners is invalid
being in excess of his authority, as the transaction is not for the purpose of promoting the object of
the partnership. (Goquiolay vs. Sycip, 108 Phil. 984 [1960] and 9 SCRA 603 [1963].)
(15) The authority to make a contract does not include authority to alter, rescind, waive
conditions, render or receive performance, assign or sue upon it, for none of these acts is necessary
or incidental to the making of the contract. (Babb & Martin, op. cit., p. 138.)
(16) See Article 1878, Nos. 6, 7, and 8.
Construction of contracts of agency.

(1) Contracts of agency as well as general powers of attorney must be interpreted in

accordance with the language used by the parties. (see Art. 1370.)
(2) The real intention of the parties is primarily to be determined from the language used
and gathered from the whole instrument. (see Art. 1374.)
(3) In case of doubt, resort must be had to the situation, surroundings, and relations of the
parties. (see Art. 1371.)
(4) The intention of the parties must be sustained rather than be defeated. (see Art. 1370.)
So, if the contract be open to two constructions, one of which would uphold while the other would
overthrow it, the former is to be chosen. (see Art. 1373.)
(5) The acts of the parties in carrying out the contract will be presumed to have been done
in good faith and in conformity with and not contrary to the intent of the contract. (Lian vs. Puno,
31 Phil. 259 [1951].)

PRIMITIVO SIASAT and MARCELINO SIASAT, petitioners,

APPELLATE COURT and TERESITA NACIANCENO, respondents.

vs.

INTERMEDIATE

Facts:
Sometime in 1974, respondent Teresita Nacianceno succeeded in convincing officials of the then
Department of Education and Culture, hereinafter called Department, to purchase without public
bidding, one million pesos worth of national flags for the use of public schools throughout the
country. The respondent was able to expedite the approval of the purchase by handcarrying the
different indorsements from one office to another, so that by the first week of September, 1974, all
the legal requirements had been complied with, except the release of the purchase orders. When
Nacianceno was informed by the Chief of the Budget Division of the Department that the purchase
orders could not be released unless a formal offer to deliver the flags in accordance with the
required specifications was first submitted for approval, she contacted the owners of the United
Flag Industry on September 17, 1974. The next day, after the transaction was discussed, the
following document (Exhibit A) was drawn up:
"Mrs. Tessie Nacianceno,
"This is to formalize our agreement for you to represent United Flag Industry to deal with any entity or organization, private
or government in connection with the marketing of our products - flags and all its accessories.
"For your service, you will be entitled to a commission of thirty (30%) percent.
Signed
Mr. Primitivo Siasat
Owner and Gen. Manager"

On October 16, 1974, the first delivery of 7,933 flags was made by the United Flag Industry. The
next day, on October 17, 1974, the respondent's authority to represent the United Flag Industry
was revoked by petitioner Primitivo Siasat.
According to the findings of the courts below, Siasat, after receiving the payment of P469,980.00 on
October 23, 1974 for the first delivery, tendered the amount of P23,900.00 or five percent (5%) of
the amount received, to the respondent as payment of her commission. The latter allegedly
protested. She refused to accept the said amount insisting on the 30% commission agreed upon.
The respondent was prevailed upon to accept the same, however, because of the assurance of the
petitioners that they would pay the commission in full after they delivered the other half of the

order. The respondent states that she later on learned that petitioner Siasat had already received
payment for the second delivery of 7,833 flags. When she confronted the petitioners, they
vehemently denied receipt of the payment, at the same time claiming that the respondent had no
participation whatsoever with regard to the second delivery of flags and that the agency had
already been revoked.
The respondent originally filed a complaint with the Complaints and Investigation Office in
Malacaang but when nothing came of the complaint, she filed an action in the Court of First
Instance of Manila to recover the following commissions: 25% as balance on the first delivery and
30% on the second delivery.
The trial court decided in favor of the respondent.

The decision was affirmed in toto by the Intermediate Appellate Court. After their motion for
reconsideration was denied, the petitioners went to this Court on a petition for review on August 6,
1984.
Issue:
Whether or not the respondent is still entitled to 30% commission to petitioners second transaction
after the agency has been revoked.
Held:
Yes.
In assailing the appellate court's decision, the petition tenders the following arguments: first, the
authorization making the respondent the petitioner's representative merely states that she could
deal with any entity in connection with the marketing of their products for a commission of 30%.
There was no specific authorization for the sale of 15,666 Philippine flags to the Department;
second, there were two transactions involved evidenced by the separate purchase orders and
separate delivery receipts, Exhibit 6-C for the purchase and delivery on October 16, 1974, and
Exhibits 7 to 7-C, for the purchase and delivery on November 6, 1974. The revocation of agency
effected by the parties with mutual consent on October 17, 1974, therefore, forecloses the
respondent's claim of 30% commission on the second transaction;
This petition was initially dismissed for lack of merit in a minute resolution. On a motion for
reconsideration, however, this Court gave due course to the petition on November 14, 1984.
After a careful review of the records, we are constrained to sustain with some modifications the
decision of the appellate court.
We find petitioners' argument regarding respondent's incapacity to represent them in the
transaction with the Department untenable. There are several kinds of agents. To quote a
commentator on the matter:
"An agent may be (1) universal; (2) general, or (3) special. A universal agent is one
authorized to do all acts for his principal which can lawfully be delegated to an agent.
So far as such a condition is possible, such an agent may be said to have universal
authority. (Mec. Sec. 58).

"A general agent is one authorized to do all acts pertaining to a business of a certain
kind or at a particular place, or all acts pertaining to a business of a particular class or

series. He has usually authority either expressly conferred in general terms or in effect
made general by the usages, customs or nature of the business which he is authorized
to transact.
"An agent, therefore, who is empowered to transact all the business of his principal of a
particular kind or in a particular place, would, for this reason, be ordinarily deemed a
general agent. (Mec. Sec. 60).
"A special agent is one authorized to do some particular act or to act upon some
particular occasion. He acts usually in accordance with specific instructions or under
limitations necessarily implied from the nature of the act to be done." (Mec. Sec. 61)
(Padilla, Civil Law, The Civil Code Annotated, Vol. VI, 1969 Edition, p. 204).
One does not have to undertake a close scrutiny of the document embodying the agreement
between the petitioners and the respondent to deduce that the latter was instituted as a general
agent. Indeed, it can easily be seen by the way general words were employed in the agreement
that no restrictions were intended as to the manner the agency was to be carried out or in the place
where it was to be executed. The power granted to the respondent was so broad that it practically
covers the negotiations leading to, and the execution of, a contract of sale of petitioners'
merchandise with any entity or organization.
There is no merit in petitioners' allegations that the contract of agency between the parties was
entered into under fraudulent representation because respondent "would not disclose the agency
with which she was supposed to transact and made the petitioner believe that she would be dealing
with the Visayas", and that "the petitioner had known of the transactions and/or project for the said
purchase of the Philippine flags by the Department of Education and Culture and precisely it was
the one being followed up also by petitioner."
If the circumstances were as claimed by the petitioners, they would have exerted efforts to protect
their interests by limiting the respondent's authority. There was nothing to prevent the petitioners
from stating in the contract of agency that the respondent could represent them only in the
Visayas. Or to state that the Department of Education and Culture and the Department of National
Defense, which alone would need a million pesos worth of flags, are outside the scope of the
agency. As the trial court opined, it is incredible that they could be so careless after being in the
business for fifteen years. LLphil
A cardinal rule of evidence embodied in Section 7 Rule 130 of our Revised Rules of Court states that
"when the terms of an agreement have been reduced to writing, it is to be considered as containing
all such terms, and, therefore, there can be between the parties and their successors-in-interest, no
evidence of the terms of the agreement other than the contents of the writing", except in cases
specifically mentioned in the same rule. Petitioners have failed to show that their agreement falls
under any of these exceptions. The respondent was given ample authority to transact with the
Department in behalf of the petitioners. Equally without merit is the petitioners' proposition that the
transaction involved two separate contracts because there were two purchase orders and two
deliveries. The petitioners' evidence is overcome by other pieces of evidence proving that there
was only one transaction.
The indorsement of then Assistant Executive Secretary Roberto Reyes to the Budget Commission on
September 3, 1974 (Exhibit "C") attests to the fact that out of the total budget of the Department
for the fiscal year 1975, "P1,000,000.00 is for the purchase of national flags." This is also reflected
in the Financial and Work Plan Request for Allotment (Exhibit "F") submitted by Secretary Juan
Manuel for fiscal year 1975 which however, divided the allocation and release of the funds into
three, corresponding to the second, third, and fourth quarters of the said year. Later
correspondence between the Department and the Budget Commission (Exhibits "D" and "E") show
that the first allotment of P500,000.00 was released during the second quarter. However, due to the

necessity of furnishing all of the public schools in the country with the Philippine flag, Secretary
Manuel requested for the immediate release of the programmed allotments intended for the third
and fourth quarters. These circumstances explain why two purchase orders and two deliveries had
to be made on one transaction
The petitioners' evidence does not necessarily prove that there were two separate transactions.
Exhibit "6" is a general indorsement made by Secretary Manuel for the purchase of the national
flags for public schools. It contains no reference to the number of flags to be ordered or the amount
of funds to be released. Exhibit "7" is a letter request for a "similar authority" to purchase flags from
the United Flag Industry. This was, however, written by Dr. Narciso Albarracin who was appointed
Acting Secretary of the Department after Secretary Manuel's tenure, and who may not have known
the real nature of the transaction.
If the contracts were separate and distinct from one another, the whole or at least a substantial
part of the government's supply procurement process would have been repeated. In this case, what
were issued were mere indorsements for the release of funds and authorization for the next
purchase.

Since only one transaction was involved, we deny the petitioners' contention that respondent
Nacianceno is not entitled to the stipulated commission on the second delivery because of the
revocation of the agency effected after the first delivery. The revocation of agency could not
prevent the respondent from earning her commission because as the trial court opined, it came too
late, the contract of sale having been already perfected and partly executed. LLphil
In Macondray & Co. v. Sellner (33 Phil. 370, 377), a case analogous to this one in principle, this
Court held:
"We do not mean to question the general doctrine as to the power of a principal to revoke the
authority of his agent at will, in the absence of a contract fixing the duration of the agency (subject,
however, to some well defined exceptions). Our ruling is that at the time fixed by the manager of
the plaintiff company for the termination of the negotiations, the defendant real estate agent had
already earned the commissions agreed upon, and could not be deprived thereof by the arbitrary
action of the plaintiff company in declining to execute the contract of sale for some reason personal
to itself.".
The principal cannot deprive his agent of the commission agreed upon by cancelling the agency
and, thereafter, dealing directly with the buyer. (Infante v. Cunanan, 93 Phil. 691).
The appellate court's citation of its previous ruling in Heimbrod et al. v. Ledesma (C.A. 49 O.G.
1507) is correct:
"The appellee is entitled to recovery. No citation is necessary to show that the general law of
contracts the equitable principle of estoppel, and the expense of another, uphold payment of
compensation for services rendered."
There is merit, however, in the petitioners' contention that the agent's commission on the first
delivery was fully paid. The evidence does not sustain the respondent's claim that the petitioners
paid her only 5% and that their right to collect another 25% commission on the first delivery must
be upheld.
When respondent Nacianceno asked the Malacaang Complaints and Investigation Office to help
her collect her commission, her statement under oath referred exclusively to the 30% commission
on the second delivery. The statement was emphatic that "now" her demand was for the 30%
commission on the second release of P469,980.00. The demand letter of the respondent's lawyer

dated November 13, 1984 asked petitioner Siasat only for the 30% commission due from the
second delivery. The fact that the respondent demanded only the commission on the second
delivery without reference to the alleged unpaid balance which was only slightly less than the
amount claimed can only mean that the commission on the first delivery was already fully paid.
Considering the sizeable sum involved, such an omission is too glaringly remiss to be regarded as
an oversight.
Moreover, the respondent's authorization letter (Exhibit "5") bears her signature with the
handwritten words "Fully Paid", inscribed above it.
The respondent contested her signature as a forgery. Handwriting experts from two government
agencies testified on the matter. The reason given by the trial court in ruling for the respondent is
too flimsy to warrant a finding of forgery. LLpr
The court stated that in thirteen documents presented as exhibits, the private respondent signed
her name as "Tessie Nacianceno" while in this particular instance, she signed as "T. Nacianceno."
The stated basis is inadequate to sustain the respondent's allegation of forgery. A variance in the
manner the respondent signed her name can not be considered as conclusive proof that the
questioned signature is a forgery. The mere fact that the respondent signed thirteen documents
using her full name does not rule out the possibility of her having signed the notation. "Fully Paid",
with her initial for the given name and the surname written in full. What she was signing was a
mere acknowledgment.
This leaves the expert testimony as the sole basis for the verdict of forgery.
In support of their allegation of full payment as evidenced by the signed authorization letter (Exhibit
"5-A"), the petitioners presented as witness Mr. Francisco Cruz, Jr. a senior document examiner of
the Philippine Constabulary Crime Laboratory. In rebuttal, the respondent presented Mr. Arcadio
Ramos, a junior document examiner of the National Bureau of Investigation.
While the experts testified in a civil case, the principles developed in criminal cases involving
forgery are applicable. Forgery cannot be presumed. It must be proved.

In Borromeo v. Court of Appeals (131 SCRA 318, 326) we held that:

xxx xxx xxx
". . . Where the evidence, as here, gives rise to two probabilities, one consistent with the
defendant's innocence and another indicative of his guilt, that which is favorable to the accused
should be considered. The constitutional presumption of innocence continues until overthrown by
proof of guilt beyond reasonable doubt, which requires moral certainty which convinces and
satisfies the reason and conscience of those who are to act upon it. (People v. Clores, et al., 125
SCRA 67; People v. Bautista, 81 Phil. 78).
We ruled in another case that where the supposed expert's testimony would constitute the sole
ground for conviction and there is equally convincing expert testimony to the contrary, the
constitutional presumption of innocence must prevail. (Lorenzo Ga. Cesar v. Hon. Sandiganbayan
and People of the Philippines, 134 SCRA 105) In the present case, the circumstances earlier
mentioned taken with the testimony of the PC senior document examiner lead us to rule against
forgery.
We also rule against the respondent's allegation that the petitioners acted in bad faith when they
revoked the agency given to the respondent.

Fraud and bad faith are matters not to be presumed but matters to be alleged with sufficient facts.
To support a judgment for damages, facts which justify the inference of a lack or absence of good
faith must be alleged and proven. (Bacolod-Murcia Milling Co., Inc. vs. First Farmers Milling Co., Inc.,
Etc., 103 SCRA 436). llcd
There is no evidence on record from which to conclude that the revocation of the agency was
deliberately effected by the petitioners to avoid payment of the respondent's commission. What
appears before us is only the petitioner's use in court of such a factual allegation as a defense
against the respondent's claim. This alone does not per se make the petitioners guilty of bad faith
for that defense should have been fully litigated.

DOMINION INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS, RODOLFO S.

GUEVARRA, and FERNANDO AUSTRIA, respondents.

Facts:
"On January 25, 1991, plaintiff Rodolfo S. Guevarra instituted Civil Case No. 8855 for sum of money
against defendant Dominion Insurance Corporation. Plaintiff sought to recover thereunder the sum
of P156,473.90 which he claimed to have advanced in his capacity as manager of defendant to
satisfy certain claims filed by defendant's clients.
"In its traverse, defendant denied any liability to plaintiff and asserted a counterclaim for
P249,672.53, representing premiums that plaintiff allegedly failed to remit.
"On August 8, 1991, defendant filed a third-party complaint against Fernando Austria, who, at the
time relevant to the case, was its Regional Manager for Central Luzon area.
"In due time, third-party defendant Austria filed his answer.
"On November 18, 1992, the court a quo rendered judgment as follows:
"WHEREFORE, premises considered, judgment is hereby rendered ordering:
"1. The defendant Dominion Insurance Corporation to pay plaintiff the sum of P156,473.90
representing the total amount advanced by plaintiff in the payment of the claims of defendant's
clients;
"2. The defendant to pay plaintiff P10,000.00 as and by way of attorney's fees;
"3. The dismissal of the counter-claim of the defendant and the third-party complaint;
"4. The defendant to pay the costs of suit." 4
On December 14, 1992, Dominion appealed the decision to the Court of Appeals. 5

The Court of Appeals promulgated a decision affirming that of the trial court. Dominion filed with
the Court of Appeals a motion for reconsideration. the Court of Appeals denied the motion.
Issues:
1. Whether respondent Guevarra acted within his authority as agent for petitioner, and

2. whether respondent Guevarra is entitled to reimbursement of amounts he paid out of his

personal money in settling the claims of several insured.
Held:
1
2

No
Yes

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. 10 The basis for
agency is representation. 11 On the part of the principal, there must be an actual intention to
appoint 12 or an intention naturally inferrable from his words or actions; 13 and on the part of the
agent, there must be an intention to accept the appointment and act on it, 14 and in the absence of
such intent, there is generally no agency. 15
A perusal of the Special Power of Attorney 16 would show that petitioner (represented by third-party
defendant Austria) and respondent Guevarra intended to enter into a principal-agent relationship.
Despite the word "special" in the title of the document, the contents reveal that what was
constituted was actually a general agency. The terms of the agreement read:
"That we, FIRST CONTINENTAL ASSURANCE COMPANY, INC., 17 a corporation duly organized and
existing under and by virtue of the laws of the Republic of the Philippines, . . . represented by the
undersigned as Regional Manager, . . . do hereby appoint RSG Guevarra Insurance Services
represented by Mr. Rodolfo Guevarra . . . to be our Agency Manager in San Fdo., for our place and
instead, to do and perform the following acts and things:
"1. To conduct, sign, manager (sic), carry on and transact Bonding and Insurance business as
usually pertain to a Agency Office, or FIRE, MARINE, MOTOR CAR, PERSONAL ACCIDENT, and
BONDING with the right, upon our prior written consent, to appoint agents and sub-agents.

"2. To accept, underwrite and subscribed (sic) cover notes or Policies of Insurance and Bonds for
and on our behalf.
"3. To demand, sue, for (sic) collect, deposit, enforce payment, deliver and transfer for and receive
and give effectual receipts and discharge for all money to which the FIRST CONTINENTAL
ASSURANCE COMPANY, INC., 18 may hereafter become due, owing payable or transferable to said
Corporation by reason of or in connection with the above-mentioned appointment.
"4. To receive notices, summons, and legal processes for and in behalf of the FIRST CONTINENTAL
ASSURANCE COMPANY, INC., in connection with actions and all legal proceedings against the said
Corporation." 19 [Italics supplied]
The agency comprises all the business of the principal, but, couched in general terms, it is limited
only to acts of administration.
A general power permits the agent to do all acts for which the law does not require a special power.
Thus, the acts enumerated in or similar to those enumerated in the Special Power of Attorney do
not require a special power of attorney.

Article 1878, Civil Code, enumerates the instances when a special power of attorney is required.
The pertinent portion that applies to this case provides that:

"Article 1878. Special powers of attorney are necessary in the following cases:
"(1) To make such payments as are not usually considered as acts of administration;
xxx xxx xxx
"(15) Any other act of strict dominion."

The payment of claims is not an act of administration. The settlement of claims is not
included among the acts enumerated in the Special Power of Attorney, neither is it of a
character similar to the acts enumerated therein. A special power of attorney is
required before respondent Guevarra could settle the insurance claims of the insured.
Respondent Guevarra's authority to settle claims is embodied in the Memorandum of Management
Agreement 23 dated February 18, 1987 which enumerates the scope of respondent Guevarra's
duties and responsibilities as agency manager for San Fernando, Pampanga, as follows:
"1. You are hereby given authority to settle and dispose of all motor car claims in the amount of P5,000.00 with prior
approval of the Regional Office.
"2. Full authority is given you on TPPI claims settlement.

In settling the claims mentioned above, respondent Guevarra's authority is further limited by the
written standard authority to pay, 25 which states that the payment shall come from respondent
Guevarra's revolving fund or collection. The authority to pay is worded as follows:
"This is to authorize you to withdraw from your revolving fund/collection the amount of PESOS __________________(P _______)
representing the payment on the _______________ claim of assured ________________ under Policy No. ________ in that accident
of __________ at __________________________.
"It is further expected, release papers will be signed and authorized by the concerned and attached to the corresponding
claim folder after effecting payment of the claim.
"(sgd.) FERNANDO C. AUSTRIA
Regional Manager" 26

The instruction of petitioner as the principal could not be any clearer. Respondent
Guevarra was authorized to pay the claim of the insured, but the payment shall come
from the revolving fund or collection in his possession.

Having deviated from the instructions of the principal, the expenses that respondent Guevarra
incurred in the settlement of the claims of the insured may not be reimbursed from petitioner
Dominion. This conclusion is in accord with Article 1918, Civil Code, which states that:
"The principal is not liable for the expenses incurred by the agent in the following cases:
"(1) If the agent acted in contravention of the principal's instructions, unless the latter should wish
to avail himself of the benefits derived from the contract;
"xxx xxx xxx"
However, while the law on agency prohibits respondent Guevarra from obtaining reimbursement,
his right to recover may still be justified under the general law on obligations and contracts.
Article 1236, second paragraph, Civil Code, provides:

"Whoever pays for another may demand from the debtor what he has paid, except that
if he paid without the knowledge or against the will of the debtor, he can recover only
insofar as the payment has been beneficial to the debtor."
In this case, when the risk insured against occurred, petitioner's liability as insurer
arose. This obligation was extinguished when respondent Guevarra paid the claims and
obtained Release of Claim Loss and Subrogation Receipts from the insured who were
paid.
Thus, to the extent that the obligation of the petitioner has been extinguished, respondent
Guevarra may demand for reimbursement from his principal. To rule otherwise would result in
unjust enrichment of petitioner.
The extent to which petitioner was benefited by the settlement of the insurance claims could best
be proven by the Release of Claim Loss and Subrogation Receipts 27 which were attached to the
original complaint as Annexes C-2, D-1, E-1, F-1, G-1, H-1, I-1 and J-1, in the total amount of
P116,276.95.

However, the amount of the revolving fund/collection that was then in the possession of respondent
Guevarra as reflected in the statement of account dated July 11, 1990 would be deducted from the
above amount.
The outstanding balance and the production/remittance for the period corresponding to the claims
was P3,604.84. Deducting this from P116,276.95, we get P112,672.11. This is the amount that may
be reimbursed to respondent Guevarra.
b. special Arts. 1876 (see above); 1878
ART. 1878. Special powers of attorney are necessary in the following cases:
(1) To make
administration;

such

payments

as

are

not

usually

considered

as

acts

of

(2) To effect novations which put an end to obligations already in existence at the
time the agency was constituted;
(3) To compromise, to submit questions to arbitration, to renounce the right to
appeal from judgment, to waive objections to the venue of an action or to abandon a
prescription already acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the ownership of an immovable is
transmitted or acquired either gratuitously or for a valuable consideration;
(6) To make gifts, except customary ones for charity or those made to employees
in the business managed by the agent;
(7) To loan or borrow money, unless the latter act be urgent and indispensable for
the preservation of the things which are under administration;
(8) To lease any real property to another person for more than one year;
(9) To bind the principal to render some service without compensation;
(10) To bind the principal in a contract of partnership;

(11) To obligate the principal as a guarantor or surety;

(12) To create or convey real rights over immovable property;
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations contracted before the agency;
(15) Any other act of strict dominion. (n)

When special powers are necessary.

(1) Acts of strict dominion. In the fi fteen cases enumerated are general acts of strict dominion or
ownership as distinguished from acts of administration. Hence, a special power of attorney is
necessary for their execution through an agent.
(2) Construction of powers of attorney. Powers of attorney are generally construed strictly and
courts will not infer or presume broad powers from deeds which do not sufficiently include property
or subject under which the agent is to deal. The act done must be legally identical with that
authorized to be done. (Woodchild Holdings, Inc. vs. Roxas Electric & Construction Co., Inc., 436
SCRA 235 [2004].) However, the rule is not absolute and should not be applied to the extent of
destroying the very purpose of the power. Furthermore, the instrument should always be deemed to
give such powers as are essential or usual in effectuating the express powers. (Olaguer vs.
Purugganan, Jr.,
575 SCRA 460 [2007].) Authority in the cases enumerated in Article 1878 must be couched in clear
and unmistakable language.37 In other cases, the authority need not be with special power, but
may arise by implication if it is reasonably necessary to the exercise of other powers which are
bestowed.
(3) Nature, not form of authorization. Article 1878 refers to the nature of the authorization, not its
form. (Lim Pin vs. Liao Tan, 115 SCRA 290 [1982]; Bravo-Guerrero vs. Bravo, 465 SCRA 244 [2005];
Gozun vs. Mercado, 511 SCRA 305 [2006].)
(a) A power of attorney is valid although no notary public intervened in its execution.
(Barretto vs. Tuason, 59 Phil. 845 [1934].) Article 1878 does not state that the special authority be
in writing. Be that as it may, the same must be duly established by evidence other than the selfserving assertion of the party claiming that such authority was verbally given him. (see Home
Insurance Co. vs. United States Lines Co., 21
SCRA 863 [1967].) A notarized power of attorney, however, carries the evidentiary weight conferred
upon it with respect to its due execution. (Veloso vs. Court of Appeals, 260 SCRA593 [1996].)
(b) The special power of attorney can be included in a general power of attorney (hence,
there is no need to execute a separate and special power) when it specifies therein the act or
transaction (e.g., special power to sell) for which the special power is required. The requirement of
a special power of attorney is met if there is a clear mandate from the principal specifically
authorizing the performance of act (Ibid.; BravoGuerrero vs. Bravo, supra; Estate of Lino Olaguer vs. Ongjico, 563 SCRA 373 [2009].)

To make payment.

Payment is the delivery of money or the performance in any other manner of an obligation.
(Art. 1232.) It is an act of ownership because it involves the conveyance of ownership of money or
property.
But when payment is made in the ordinary course of management, it is considered a mere
act of administration. It is included in an agency couched in general terms (Art. 1877.) and hence,
no special power of attorney is needed. Thus, a special power to make payment is implied from the
authority to buy a designated piece of land at a certain price. The authority to execute or to indorse
negotiable paper is ordinarily inferred only when indispensable to the accomplishment of the acts
the agent
is authorized to perform. Particularly rare is the situation in which the agent could bind the principal
by an accommodation signature. (Babb & Martin, op. cit., p. 139.)

To effect novation.
Novation is the extinction of an obligation through the creation of a new one which
substitutes it by changing the object or principal conditions thereof, substituting a debtor, or
subrogating another in the right of the creditor. (Art. 1291.) Note
that the obligations must already be in existence at the time the
agency was constituted.

To compromise, etc.
A compromise must, be strictly construed. The grant of special power regarding one of the
acts mentioned in No. 3 of Article 1878 is not enough to authorize the others. A judgment based on
a compromise entered into by an attorney without specific authority from the client is null and void.
Such judgment may be impugned and its execution restrained in any proceeding by the party
against whom it is sought to be enforced. (Cosmic Lumber Corp. vs. Court of Appeals, 265 SCRA
168 [1996]; see Philippine Aluminum Wheels, Inc. vs. FASGI Enterprises, Inc., 342 SCRA 722 [2000];
Rivero vs. Court of Appeals, 458 SCRA 714 [2005].)
(1) Compromise is a contract whereby the parties, by making reciprocal concessions, avoid a
litigation or put an end to one already commenced. (Art. 2028.) Arbitration is where the parties
submit their controversies to one or more arbitrators for decision.
(Art. 2024; see Art. 1880.) These are acts of ownership since they involve the possibility of
disposing of the thing or right subject of the compromise38 (see Vicente vs. Geraldez, 52 SCRA 210
[1973]; Caballero vs. Deiparine, 60 SCRA 136 [1974].) or arbitration.
Confession of judgment stands on the same footing as compromise of causes; so a counsel may not
confess judgment except with the knowledge and at the instance of the client. (Acener vs. Sison,
8SCRA 711 [1963].)
But although the law expressly requires a special power of attorney in order that one may
compromise an interest of another, it is neither accurate nor correct to conclude that its absence
renders the compromise agreement void. In such a case, the compromise is merely unenforceable.
This results from its nature as a contract. It must be governed by the rules and the law on
contracts. (Dungo vs. Lopena, 6 SCRA 1007 [1962].)
(2) A special power of attorney is also necessary with respect to the authority of the agent to waive:

the right to appeal from a judgment; objections to the venue of an action; and a prescription
already acquired. By prescription, one acquires ownership and other real rights through the lapse of
time. In the same way,rights and actions are lost by prescription. (Art. 1106.)

To waive an obligation gratuitously.

This is condonation or remission. (Art. 1270.) The agent cannot waive a right belonging to the
principal without valuable consideration or even for a nominal consideration. He cannot bind the
principal who is the obligee unless especially authorized to do so.
A waiver may not be inferred when the terms thereof do not explicitly and clearly prove an intent to
abandon the right.

To convey or acquire immovable.

Note that No. (5) applies whether the contract is gratuitous or onerous. (see Art. 1874.) Note also
that it refers only to immovables. (see No. 15.) Nos. (5) and (12) (infra.) refer to sales made by an
agent for a principal and not to sales made by the owner personally to another, whether that other
be acting personally or through a representative. (Rodriguez vs. Court of Appeals, 29 SCRA 419
[1969].)
It has been held that a wife, by affixing her signature to a deed of sale on the space provided for
witnesses, is deemed to have given her implied consent to the contract of sale. A wifes consent to
the husbands disposition of conjugal property does not always have to be explicit or set forth in
any particular document so long as it is shown by acts of the wife that such consent or approval
was given. (Pelayo vs. Perez, 459 SCRA 475 [2005].)
A buyer has every reason to rely on a persons authority to sell a particular property owned by a
corporation on the basis of a notarized board resolution. The notarial acknowledgment in a
document is a prima facie evidence of the fact of its due execution. (St. Marys Farm, Inc. vs. Prima
Real Properties, Inc., 560 SCRA 704 [2008].)

To make gifts.
Gift or donation is an act of liberality whereby a person disposes gratuitously of a thing or right in
favor of another who accepts it. (Art. 725.) An agent without special power from the principal
cannot make gifts.39 But the making of customary gifts for charity, or those made to employees in
the business managed by the agent, are considered acts of administration.

To loan or borrow money.

In a loan of money, the borrower is bound to pay to the creditor an equal amount of the same kind
and quality. (Art. 1953.) The power to lend or borrow money is one with much great possibility of
abuse and is not ordinarily incident to a general managerial agency. (2 C.J.S. 1294.)
(1) The power to borrow any amount of money which the agent deems necessary cannot be
interpreted as also authorizing him to use the money as he pleases. (Hodges vs. Salas, 63 Phil. 567
[1936].)

(2) The exception in No. (7) refers to borrow and not to loan. The agent, however, may be
empowered to borrow money. (Art. 1890.) But the authority to borrow money for the principal is not
to be implied from the special power of attorney
to mortgage real estate. (Phil. National Bank vs. Maximo Sta. Maria, 29 SCRA 303 [1969].)
(3) The creditor should require the execution of a power of attorney in order that one may be
understood to have granted another the authority to borrow on behalf of the former. (Rural Bank of
Caloocan, Inc. vs. Court of Appeals, 104 SCRA 151 [1981].)
(4) Authority to borrow money is rarely inferred unless such borrowing is usually incident to the
performance of acts which the agent is authorized to perform for the principal (Restatement of
Agency, Sec. 74.), or unless it is impossible for the agent to communicate with his principal and
borrowing is indispensable to the continuance of the business or to prevent a very considerable
loss. (Babb & Martin, op. cit., p. 139.)
Where the loans were contracted by the agent and the purchases on credit were made to pay the
wages of the laborers and supply them with their needs, otherwise a stoppage of the mining
operations without having completed the extraction of the ore therefrom would certainly have
meant considerable losses to the principal, the loans contracted by the agent were held urgent and
indispensable and a special power of attorney was not imperative under the circumstances to bind
the principal, pursuant to Article 1878, par. 7. (Sta. Catalina vs. Espitero, 15 C.A. Rep. 1202, April
28, 1964.)
Note that No. 7 refers only to money and not to other fungible things. (see Art. 1253.)

To lease realty for more than one year.

In the lease of things, the lessor gives to the lessee the enjoyment or use of a thing for a price
certain, and for a period which may be definite or indefinite. (Art. 1643.)
(1) An unrecorded lease of real estate is not binding upon third persons. (Art. 1648.) By implication,
the lease of realty to another person for one year or less is an act of mere administration provided
the lease is not registered.
(2) The requirement of special power of attorney extends to renewal or extension of lease of real
property to another.
(3) An agreement for the leasing of real property for a longer period than one year is unenforceable
unless made in writing. (Art. 1403[2, e].) It follows that even if the agent is especially authorized,
the lease is not enforceable against the principal if it is not in writing.
Note that No. 8 does not refer to lease of real property from another person and to lease of personal
property.

To bind the principal to render service gratuitously.

The agent may, by contract, bind himself to render service without compensation. (Art. 1875.)
However, to bind the principal to that effect, a special power is necessary.
If the service is for compensation, the power may be implied.

To bind the principal in a contract of partnership.

By the contract of partnership, the partners bind themselves to contribute money, property, or
industry to a common fund with the intention of dividing the profits among themselves. (Art. 1767.)
The contract of partnership thus creates obligations the fulfllment of which requires an act of strict
ownership.
Furthermore, the principal must personally have trust and confidence in the proposed partners.

To obligate principal as guarantor or surety.

By the contract of guaranty, the guarantor binds himself to fulfill the obligation of the principal
debtor in case the latter should fail to do so. If the person binds himself solidarily, he is a surety and
the contract is called a suretyship. (Art. 2047.)
It has been held that a contract of guaranty or surety cannot be inferred from the use of vague or
general words. Thus, the phrase contingent commitment set forth in the power of attorney
cannot be interpreted to mean guaranty. (BA Finance Corp. vs. Court of Appeals, 211 SCRA 112
[1992].) A power of attorney given to sell or to lease the property of the principal and generally to
perform and execute all and every lawful and reasonable act as fully and effectively as I might or
could do if personally present does not operate to authorize the agent to sign in behalf of the
principal a surety bond in favor of the government in connection with the purchase of certain
materials dredged from a fish pond. The power to create a contract of suretyship cannot be
inferred; it must be expressed. (Director of Public Works vs. Sing Juco, 53 Phil. 205 [1929].)
A power of attorney to loan money does not authorize the agent to make the principal liable as a
surety for the payment of the debt of a third person. (Bank of the Phil. Islands vs. Coster, 47 Phil.
594 [1925].) Similarly, the authority given by a corporation to approve loans up to P350,000
without any security requirement does not include the authority to issue guarantees even for an
amount much less than P350,000. (BA Finance Corp. vs. Court of Appeals, supra.)
A contract of guaranty is unenforceable unless it is made in writing. (Art. 1403[2, b].)

To create or convey real rights over immovable property.

An agent cannot create or convey real rights like mortgage, usufruct, easement, etc., over
immovable property belonging to his principal without special power. That is an act of strict
ownership. (see No. 5.) There is no principle of law by which a person can become liable on a real
estate mortgage which he never executed either in person or by attorney-in-fact. (Philippine Sugar
Estates Development Co. vs. Poizat, 48 Phil. 536 [1926]; Rural Bank of Bombon, Inc. vs. Court of
Appeals, 212 SCRA 25 [1992].)

To accept or repudiate an inheritance.

Any person having the free disposal of his property may accept or repudiate an inheritance.40 (Art.
1044.) This act is one of strict dominion; hence, the necessity of a special authority.

To ratify obligations contracted before the agency.

An agent cannot effect novation (supra.) of obligations existing at the time of the constitution of the
agency unless he be specially authorized to do so. On the same principle, he cannot ratify or
recognize obligations contracted before the agency without special power from the principal.

Any other act of strict dominion.

Generally, a sale or purchase of personal property is an act of strict dominion. Hence, a special
power is necessary in order that the act shall be binding on the principal.
Thus, an agent appointed to manage a printing establishment of his principal cannot sell a printing
machine in said establishment. (Yu Eng Yu vs. Ranson Phil. Corp., [C.A.] 40 O.G. No. 8, Supp. 65.)
But a sale or purchase made in the ordinary course of management is merely an act of
administration and, therefore, included in an agency couched in general terms. (Art. 1877.)

WOODCHILD HOLDINGS, INC., petitioner, vs. ROXAS ELECTRIC AND CONSTRUCTION

COMPANY, INC., respondent.
Facts:
The respondent Roxas Electric and Construction Company, Inc. (RECCI), formerly the Roxas Electric
and Construction Company, was the owner of two parcels of land, identified as Lot No. 491-A-3-B-1
covered by Transfer Certificate of Title (TCT) No. 78085 and Lot No. 491-A-3-B-2 covered by TCT No.
78086. A portion of Lot No. 491-A-3-B-1 which abutted Lot No. 491-A-3-B-2 was a dirt road accessing
to the Sumulong Highway, Antipolo, Rizal.
At a special meeting on May 17, 1991, the respondents Board of Directors approved a resolution
authorizing the corporation, through its president, Roberto B. Roxas, to sell Lot No. 491-A-3-B-2
covered by TCT No. 78086, with an area of 7,213 square meters, at a price and under such terms
and conditions which he deemed most reasonable and advantageous to the corporation; and to
execute, sign and deliver the pertinent sales documents and receive the proceeds of the sale for
and on behalf of the company. 3
Petitioner Woodchild Holdings, Inc. (WHI) wanted to buy Lot No. 491-A-3-B-2 covered by TCT No.
78086 on which it planned to construct its warehouse building, and a portion of the adjoining lot,
Lot No. 491-A-3-B-1, so that its 45-foot container van would be able to readily enter or leave the
property. In a Letter to Roxas dated June 21, 1991, WHI President Jonathan Y. Dy offered to buy Lot
No. 491-A-3-B-2 under stated terms and conditions for P1,000 per square meter or at the price of
P7,213,000.
Roxas indicated his acceptance of the offer on page 2 of the deed. Less than a month later or on
July 1, 1991, Roxas, as President of RECCI, as vendor, and Dy, as President of WHI, as vendee,
executed a contract to sell in which RECCI bound and obliged itself to sell to Dy Lot No. 491-A-3-B-2
covered by TCT No. 78086 for P7,213,000. 6 On September 5, 1991, a Deed of Absolute Sale 7 in
favor of WHI was issued, under which Lot No. 491-A-3-B-2 covered by TCT No. 78086 was sold for
P5,000,000, receipt of which was acknowledged by Roxas.

On September 10, 1991, the Wimbeco Builders, Inc. (WBI) submitted its quotation for P8,649,000
to WHI for the construction of the warehouse building on a portion of the property with an area of
5,088 square meters. WBI proposed to start the project on October 1, 1991 and to turn over the
building to WHI on February 29, 1992.
In a Letter dated September 16, 1991, Ponderosa Leather Goods Company, Inc. confirmed its lease
agreement with WHI of a 5,000-square-meter portion of the warehouse yet to be constructed at the
rental rate of P65 per square meter. Ponderosa emphasized the need for the warehouse to be ready
for occupancy before April 1, 1992. 11 WHI accepted the offer. However, WBI failed to commence
the construction of the warehouse in October 1, 1991 as planned because of the presence of
squatters in the property and suggested a renegotiation of the contract after the squatters shall
have been evicted. 12 Subsequently, the squatters were evicted from the property.
On March 31, 1992, WHI and WBI executed a Letter-Contract for the construction of the warehouse
building for P11,804,160. 13 The contractor started construction in April 1992 even before the
building officials of Antipolo City issued a building permit on May 28, 1992. After the warehouse was
finished, WHI issued on March 21, 1993 a certificate of occupancy by the building official. Earlier, or
on March 18, 1993, WHI, as lessor, and Ponderosa, as lessee, executed a contract of lease over a
portion of the property for a monthly rental of P300,000 for a period of three years from March 1,
1993 up to February 28, 1996. 14
In the meantime, WHI complained to Roberto Roxas that the vehicles of RECCI were parked on a
portion of the property over which WHI had been granted a right of way. Roxas promised to look
into the matter. Dy and Roxas discussed the need of the WHI to buy a 500-square-meter portion of
Lot No. 491-A-3-B-1 covered by TCT No. 78085 as provided for in the deed of absolute sale.
However, Roxas died soon thereafter. On April 15, 1992, the WHI wrote the RECCI, reiterating its
verbal requests to purchase a portion of the said lot as provided for in the deed of absolute sale,
and complained about the latters failure to eject the squatters within the three-month period
agreed upon in the said deed.
The WHI demanded that the RECCI sell a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085
for its beneficial use within 72 hours from notice thereof, otherwise the appropriate action would be
filed against it. RECCI rejected the demand of WHI. WHI reiterated its demand in a Letter dated May
29, 1992. There was no response from RECCI.
On June 17, 1992, the WHI filed a complaint against the RECCI with the Regional Trial Court of
Makati, for specific performance and damages.
WHEREFORE, it is respectfully prayed that judgment be rendered in favor of Woodchild Holdings.
In its answer to the complaint, the RECCI alleged that it never authorized its former president,
Roberto Roxas, to grant the beneficial use of any portion of Lot No. 491-A-3-B-1, nor agreed to sell
any portion thereof or create a lien or burden thereon. It alleged that, under the Resolution
approved on May 17, 1991, it merely authorized Roxas to sell Lot No. 491-A-3-B-2 covered by TCT
No. 78086. As such, the grant of a right of way and the agreement to sell a portion of Lot No. 491-A3-B-1 covered by TCT No. 78085 in the said deed are ultra vires. The RECCI further alleged that the

provision therein that it would sell a portion of Lot No. 491-A-3-B-1 to the WHI lacked the essential
elements of a binding contract.
In its amended answer to the complaint, the RECCI alleged that the delay in the construction of its
warehouse building was due to the failure of the WHIs contractor to secure a building permit
thereon.
During the trial, Dy testified that he told Roxas that the petitioner was buying a portion of Lot No.
491-A-3-B-1 consisting of an area of 500 square meters, for the price of P1,000 per square meter.
On November 11, 1996, the trial court rendered judgment in favor of the WHI.
The trial court ruled that the RECCI was estopped from disowning the apparent authority of Roxas
under the May 17, 1991 Resolution of its Board of Directors. The court reasoned that to do so would
prejudice the WHI which transacted with Roxas in good faith, believing that he had the authority to
bind the WHI relating to the easement of right of way, as well as the right to purchase a portion of
Lot No. 491-A-3-B-1 covered by TCT No. 78085.
The RECCI appealed the decision to the CA, which rendered a decision on November 9, 1999
reversing that of the trial court, and ordering the dismissal of the complaint. The CA ruled that,
under the resolution of the Board of Directors of the RECCI, Roxas was merely authorized to sell Lot
No. 491-A-3-B-2 covered by TCT No. 78086, but not to grant right of way in favor of the WHI over a
portion of Lot No. 491-A-3-B-1, or to grant an option to the petitioner to buy a portion thereof. The
appellate court also ruled that the grant of a right of way and an option to the respondent were so
lopsided in favor of the respondent because the latter was authorized to fix the location as well as
the price of the portion of its property to be sold to the respondent. Hence, such provisions
contained in the deed of absolute sale were not binding on the RECCI. The appellate court ruled
that the delay in the construction of WHIs warehouse was due to its fault.
Issue:
Whether or not Roxas is authorized to sell 500-square-meter portion of Lot No. 491-A-3-B-1 covered
by TCT No. 78085.
Held.
No.
On the first issue, the petitioner avers that, under its Resolution of May 17, 1991, the respondent
authorized Roxas, then its president, to grant a right of way over a portion of Lot No. 491-A-3-B-1 in
favor of the petitioner, and an option for the respondent to buy a portion of the said property. The
petitioner contends that when the respondent sold Lot No. 491-A-3-B-2 covered by TCT No. 78086, it
(respondent) was well aware of its obligation to provide the petitioner with a means of ingress to or
egress from the property to the Sumulong Highway, since the latter had no adequate outlet to the
public highway. The petitioner asserts that it agreed to buy the property covered by TCT No. 78085
because of the grant by the respondent of a right of way and an option in its favor to buy a portion
of the property covered by TCT No. 78085. It contends that the respondent never objected to Roxas
acceptance of its offer to purchase the property and the terms and conditions therein; the
respondent even allowed Roxas to execute the deed of absolute sale in its behalf. The petitioner
asserts that the respondent even received the purchase price of the property without any objection

to the terms and conditions of the said deed of sale. The petitioner claims that it acted in good
faith, and contends that after having been benefited by the said sale, the respondent is estopped
from assailing its terms and conditions. The petitioner notes that the respondents Board of
Directors never approved any resolution rejecting the deed of absolute sale executed by Roxas for
and in its behalf. As such, the respondent is obliged to sell a portion of Lot No. 491-A-3-B-1 covered
by TCT No. 78085 with an area of 500 square meters at the price of P1,000 per square meter, based
on its evidence and Articles 649 and 651 of the New Civil Code.
For its part, the respondent posits that Roxas was not so authorized under the May 17, 1991
Resolution of its Board of Directors to impose a burden or to grant a right of way in favor of the
petitioner on Lot No. 491-A-3-B-1, much less convey a portion thereof to the petitioner. Hence, the
respondent was not bound by such provisions contained in the deed of absolute sale. Besides, the
respondent contends, the petitioner cannot enforce its right to buy a portion of the said property
since there was no agreement in the deed of absolute sale on the price thereof as well as the
specific portion and area to be purchased by the petitioner.
We agree with the respondent.
In San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals, 21 we held that:
A corporation is a juridical person separate and distinct from its stockholders or members.
Accordingly, the property of the corporation is not the property of its stockholders or members and
may not be sold by the stockholders or members without express authorization from the
corporations board of directors. Section 23 of BP 68, otherwise known as the Corporation Code of
the Philippines, provides:

SEC. 23. The Board of Directors or Trustees. Unless otherwise provided in this Code, the
corporate powers of all corporations formed under this Code shall be exercised, all business
conducted and all property of such corporations controlled and held by the board of directors or
trustees to be elected from among the holders of stocks, or where there is no stock, from among
the members of the corporation, who shall hold office for one (1) year and until their successors are
elected and qualified.
Indubitably, a corporation may act only through its board of directors or, when authorized either by
its by-laws or by its board resolution, through its officers or agents in the normal course of business.
The general principles of agency govern the relation between the corporation and its officers or
agents, subject to the articles of incorporation, by-laws, or relevant provisions of law. . . 22
Generally, the acts of the corporate officers within the scope of their authority are binding on the
corporation. However, under Article 1910 of the New Civil Code, acts done by such officers beyond
the scope of their authority cannot bind the corporation unless it has ratified such acts expressly or
tacitly, or is estopped from denying them:
Art. 1910. The principal must comply with all the obligations which the agent may have contracted
within the scope of his authority.

As for any obligation wherein the agent has exceeded his power, the principal is not bound except
when he ratifies it expressly or tacitly.
Thus, contracts entered into by corporate officers beyond the scope of authority are unenforceable
against the corporation unless ratified by the corporation. 23
In BA Finance Corporation v. Court of Appeals, 24 we also ruled that persons dealing with an
assumed agency, whether the assumed agency be a general or special one, are bound at their
peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the
nature and extent of authority, and in case either is controverted, the burden of proof is upon them
to establish it.
In this case, the respondent denied authorizing its then president Roberto B. Roxas to sell a portion
of Lot No. 491-A-3-B-1 covered by TCT No. 78085, and to create a lien or burden thereon. The
petitioner was thus burdened to prove that the respondent so authorized Roxas to sell the same
and to create a lien thereon.
Central to the issue at hand is the May 17, 1991 Resolution of the Board of Directors of the
respondent, which is worded as follows:
RESOLVED, as it is hereby resolved, that the corporation, thru the President, sell to any interested
buyer, its 7,213-sq.-meter property at the Sumulong Highway, Antipolo, Rizal, covered by Transfer
Certificate of Title No. N-78086, at a price and on terms and conditions which he deems most
reasonable and advantageous to the corporation;
FURTHER RESOLVED, that Mr. ROBERTO B. ROXAS, President of the corporation, be, as he is hereby
authorized to execute, sign and deliver the pertinent sales documents and receive the proceeds of
sale for and on behalf of the company. 25
Evidently, Roxas was not specifically authorized under the said resolution to grant a
right of way in favor of the petitioner on a portion of Lot No. 491-A-3-B-1 or to agree to
sell to the petitioner a portion thereof. The authority of Roxas, under the resolution, to
sell Lot No. 491-A-3-B-2 covered by TCT No. 78086 did not include the authority to sell a
portion of the adjacent lot, Lot No. 491-A-3-B-1, or to create or convey real rights
thereon. Neither may such authority be implied from the authority granted to Roxas to
sell Lot No. 491-A-3-B-2 to the petitioner on such terms and conditions which he deems
most reasonable and advantageous. Under paragraph 12, Article 1878 of the New Civil Code,
a special power of attorney is required to convey real rights over immovable property. 26 Article
1358 of the New Civil Code requires that contracts which have for their object the creation of real
rights over immovable property must appear in a public document. 27 The petitioner cannot feign
ignorance of the need for Roxas to have been specifically authorized in writing by the Board of
Directors to be able to validly grant a right of way and agree to sell a portion of Lot No. 491-A-3-B-1.
The rule is that if the act of the agent is one which requires authority in writing, those dealing with
him are charged with notice of that fact.

Powers of attorney are generally construed strictly and courts will not infer or presume broad
powers from deeds which do not sufficiently include property or subject under which the agent is to
deal. 29 The general rule is that the power of attorney must be pursued within legal strictures, and
the agent can neither go beyond it; nor beside it. The act done must be legally identical with that
authorized to be done. 30 In sum, then, the consent of the respondent to the assailed provisions in
the deed of absolute sale was not obtained; hence, the assailed provisions are not binding on it.
We reject the petitioners submission that, in allowing Roxas to execute the contract to sell and the
deed of absolute sale and failing to reject or disapprove the same, the respondent thereby gave
him apparent authority to grant a right of way over Lot No. 491-A-3-B-1 and to grant an option for
the respondent to sell a portion thereof to the petitioner. Absent estoppel or ratification, apparent
authority cannot remedy the lack of the written power required under the statement of frauds. 31 In
addition, the petitioners fallacy is its wrong assumption of the unproved premise that the
respondent had full knowledge of all the terms and conditions contained in the deed of absolute
sale when Roxas executed it.
It bears stressing that apparent authority is based on estoppel and can arise from two instances:
first, the principal may knowingly permit the agent to so hold himself out as having such authority,
and in this way, the principal becomes estopped to claim that the agent does not have such
authority; second, the principal may so clothe the agent with the indicia of authority as to lead a
reasonably prudent person to believe that he actually has such authority. 32 There can be no
apparent authority of an agent without acts or conduct on the part of the principal and such acts or
conduct of the principal must have been known and relied upon in good faith and as a result of the
exercise of reasonable prudence by a third person as claimant and such must have produced a
change of position to its detriment. The apparent power of an agent is to be determined by the acts
of the principal and not by the acts of the agent.
For the principle of apparent authority to apply, the petitioner was burdened to prove
the following: (a) the acts of the respondent justifying belief in the agency by the
petitioner; (b) knowledge thereof by the respondent which is sought to be held; and, (c)
reliance thereon by the petitioner consistent with ordinary care and prudence. In this
case, there is no evidence on record of specific acts made by the respondent 35 showing
or indicating that it had full knowledge of any representations made by Roxas to the
petitioner that the respondent had authorized him to grant to the respondent an option
to buy a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085, or to create a burden
or lien thereon, or that the respondent allowed him to do so.
The petitioners contention that by receiving and retaining the P5,000,000 purchase price of Lot No.
491-A-3-B-2, the respondent effectively and impliedly ratified the grant of a right of way on the
adjacent lot, Lot No. 491-A-3-B-1, and to grant to the petitioner an option to sell a portion thereof, is
barren of merit. It bears stressing that the respondent sold Lot No. 491-A-3-B-2 to the petitioner,
and the latter had taken possession of the property. As such, the respondent had the right to retain
the P5,000,000, the purchase price of the property it had sold to the petitioner. For an act of the
principal to be considered as an implied ratification of an unauthorized act of an agent, such act
must be inconsistent with any other hypothesis than that he approved and intended to adopt what
had been done in his name. 36 Ratification is based on waiver the intentional relinquishment of a
known right. Ratification cannot be inferred from acts that a principal has a right to do

independently of the unauthorized act of the agent. Moreover, if a writing is required to grant an
authority to do a particular act, ratification of that act must also be in writing. 37 Since the
respondent had not ratified the unauthorized acts of Roxas, the same are unenforceable. 38 Hence,
by the respondents retention of the amount, it cannot thereby be implied that it had ratified the
unauthorized acts of its agent, Roberto Roxas.

SHOPPER'S PARADISE REALTY & DEVELOPMENT CORPORATION, petitioner, vs. EFREN

ROQUE, respondent.
Facts:
On 23 December 1993, petitioner Shopper's Paradise Realty & Development Corporation,
represented its president, Veredigno Atienza, entered into a twenty-five year lease with Dr. Felipe C.
Roque, now deceased, over a parcel of land, with an area of two thousand and thirty six (2,036)
square meters, situated at Plaza Novaliches, Quezon City, covered by Transfer of Certificate of Title
(TCT) No. 30591 of the Register of Deeds of Quezon City in the name of Dr. Roque. Petitioner issued
to Dr. Roque a check for P250,000.00 by way of "reservation payment." Simultaneously, petitioner
and Dr. Roque likewise entered into a memorandum of agreement for the construction,
development and operation of a commercial building complex on the property. Conformably with
the agreement, petitioner issued a check for another P250,000.00 "downpayment" to Dr. Roque.
The contract of lease and the memorandum of agreement, both notarized, were to be annotated on
TCT No. 30591 within sixty (60) days from 23 December 1993 or until 23 February 1994. The
annotations, however, were never made because of the untimely demise of Dr. Felipe C. Roque. The
death of Dr. Roque on 10 February 1994 constrained petitioner to deal with respondent Efren P.
Roque, one of the surviving children of the late Dr. Roque, but the negotiations broke down due to
some disagreements. In a letter, dated 3 November 1994, respondent advised petitioner "to desist
from any attempt to enforce the aforementioned contract of lease and memorandum of
agreement". On 15 February 1995, respondent filed a case for annulment of the contract of lease
and the memorandum of agreement, with a prayer for the issuance of a preliminary injunction,
before Branch 222 of the Regional Trial Court of Quezon City. Efren P. Roque alleged that he had
long been the absolute owner of the subject property by virtue of a deed of donation inter vivos
executed in his favor by his parents, Dr. Felipe Roque and Elisa Roque, on 26 December 1978, and
that the late Dr. Felipe Roque had no authority to enter into the assailed agreements with petitioner.
The donation was made in a public instrument duly acknowledged by the donor-spouses before a
notary public and duly accepted on the same day by respondent before the notary public in the
same instrument of donation. The title to the property, however, remained in the name of Dr. Felipe
C. Roque, and it was only transferred to and in the name of respondent sixteen years later, or on 11
May 1994, under TCT No. 109754 of the Register of Deeds of Quezon City. Respondent, while he
resided in the United States of America, delegated to his father the mere administration of the
property. Respondent came to know of the assailed contracts with petitioner only after retiring to
the Philippines upon the death of his father. DcTSHa
On 9 August 1996, the trial court dismissed the complaint of respondent; it explained:
"Ordinarily, a deed of donation need not be registered in order to be valid between the parties.
Registration, however, is important in binding third persons. Thus, when Felipe Roque entered into a

lease contract with defendant corporation, plaintiff Efren Roque (could) no longer assert the
unregistered deed of donation and say that his father, Felipe, was no longer the owner of the
subject property at the time the lease on the subject property was agreed upon.
"The registration of the Deed of Donation after the execution of the lease contract did not affect the
latter unless he had knowledge thereof at the time of the registration which plaintiff had not been
able to establish. Plaintiff knew very well of the existence of the lease. He, in fact, met with the
officers of the defendant corporation at least once before he caused the registration of the deed of
donation in his favor and although the lease itself was not registered, it remains valid considering
that no third person is involved. Plaintiff cannot be the third person because he is the successor-ininterest of his father, Felipe Roque, the lessor, and it is a rule that contracts take effect not only
between the parties themselves but also between their assigns and heirs (Article 1311, Civil Code)
and therefore, the lease contract together with the memorandum of agreement would be
conclusive on plaintiff Efren Roque. He is bound by the contract even if he did not participate
therein. Moreover, the agreements have been perfected and partially executed by the receipt of his
father of the downpayment and deposit totaling to P500,000.00." 1
The trial court ordered respondent to surrender TCT No. 109754 to the Register of Deeds of Quezon
City for the annotation of the questioned Contract of Lease and Memorandum of Agreement.
On appeal, the Court of Appeals reversed the decision of the trial court and held to be invalid the
Contract of Lease and Memorandum of Agreement. While it shared the view expressed by the trial
court that a deed of donation would have to be registered in order to bind third persons, the
appellate court, however, concluded that petitioner was not a lessee in good faith having had prior
knowledge of the donation in favor of respondent, and that such actual knowledge had the effect of
registration insofar as petitioner was concerned. The appellate court based its findings largely on
the testimony of Veredigno Atienza during cross-examination.
Issue:
Whether or not the contract of lease between the petitioner and Dr. Roque should be respected
notwithstanding the fact that the subject land has already been donated to latters son Efren
because the father in this case is an agent of his son.
Held:
No.
The existence, albeit unregistered, of the donation in favor of respondent is undisputed. The trial
court and the appellate court have not erred in holding that the non-registration of a deed of
donation does not affect its validity. As being itself a mode of acquiring ownership, donation results
in an effective transfer of title over the property from the donor to the donee. 3 In donations of
immovable property, the law requires for its validity that it should be contained in a public
document, specifying therein the property donated and the value of the charges which the donee
must satisfy. 4 The Civil Code provides, however, that "titles of ownership, or other rights over
immovable property, which are not duly inscribed or annotated in the Registry of Property (now
Registry of Land Titles and Deeds) shall not prejudice third persons." 5 It is enough, between the
parties to a donation of an immovable property, that the donation be made in a public document
but, in order to bind third persons, the donation must be registered in the Registry of Property
(Registry of Land Titles and Deeds). 6 Consistently, Section 50 of Act No. 496 (Land Registration
Act), as so amended by Section 51 of P.D. No. 1529 (Property Registration Decree), states:

"SECTION 51. Conveyance and other dealings by registered owner. An owner of registered land
may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing
laws. He may use such forms of deeds, mortgages, leases or other voluntary instruments as are
sufficient in law. But no deed, mortgage, lease, or other voluntary instrument, except a will
purporting to convey or affect registered land shall take effect as a conveyance or bind the land,
but shall operate only as a contract between the parties and as evidence of authority to the
Register of Deeds to make registration.
"The act of registration shall be the operative act to convey or affect the land insofar as third
persons are concerned, and in all cases under this Decree, the registration shall be made in the
office of the Register of Deeds for the province or city where the land lies.
A person dealing with registered land may thus safely rely on the correctness of the certificate of
title issued therefor, and he is not required to go beyond the certificate to determine the condition
of the property but, where such party has knowledge of a prior existing interest which is
unregistered at the time he acquired a right thereto, his knowledge of that prior unregistered
interest would have the effect of registration as regards to him.
The appellate court was not without substantial basis when it found petitioner to have had
knowledge of the donation at the time it entered into the two agreements with Dr. Roque. During
their negotiation, petitioner, through its representatives, was apprised of the fact that the subject
property actually belonged to respondent.
It was not shown that Dr. Felipe C. Roque had been an authorized agent of respondent.
In a contract of agency, the agent acts in representation or in behalf of another with the
consent of the latter. Article 1878 of the Civil Code expresses that a special power of
attorney is necessary to lease any real property to another person for more than one
year. The lease of real property for more than one year is considered not merely an act
of administration but an act of strict dominion or of ownership. A special power of
attorney is thus necessary for its execution through an agent.
Neither is respondent estopped from repudiating the contracts. The essential elements of estoppel
in pais, in relation to the party sought to be estopped, are: 1) a clear conduct amounting to false
representation or concealment of material facts or, at least, calculated to convey the impression
that the facts are otherwise than, and inconsistent with, those which the party subsequently
attempts to assert; 2) an intent or, at least, an expectation, that this conduct shall influence, or be
acted upon by, the other party; and 3) the knowledge, actual or constructive, by him of the real
facts. 11 With respect to the party claiming the estoppel, the conditions he must satisfy are: 1) lack
of knowledge or of the means of knowledge of the truth as to the facts in question; 2) reliance, in
good faith, upon the conduct or statements of the party to be estopped; and 3) action or inaction
based thereon of such character as to change his position or status calculated to cause him injury
or prejudice. 12 It has not been shown that respondent intended to conceal the actual facts
concerning the property; more importantly, petitioner has been shown not to be totally unaware of
the real ownership of the subject property.

- Veloso vs. CA, 260 SCRA 593 (1996)

FACTS
This petition for review assails the decision of the Court of Appeals, dated July 29, 1991,
the dispositive portion of which reads:
The following are the antecedent facts:
Petitioner Francisco Veloso was the owner of a parcel of land situated in the district of Tondo,
Manila, with an area of one hundred seventy seven (177) square meters and covered by
Transfer Certificate of Title No. 49138 issued by the Registry of Deeds of Manila. [2] The title
was registered in the name of Francisco A. Veloso, single, [3] on October 4, 1957.[4] The said title
was subsequently canceled and a new one, Transfer Certificate of Title No. 180685, was
issued in the name of Aglaloma B. Escario, married to Gregorio L. Escario, on May 24, 1988. [5]
On August 24, 1988, petitioner Veloso filed an action for annulment of documents,
reconveyance of property with damages and preliminary injunction and/or restraining
order. The complaint, docketed as Civil Case No. 88-45926, was raffled to the Regional Trial
Court, Branch 45, Manila. Petitioner alleged therein that he was the absolute owner of the
subject property and he never authorized anybody, not even his wife, to sell it. He alleged that
he was in possession of the title but when his wife, Irma, left for abroad, he found out that his
copy was missing. He then verified with the Registry of Deeds of Manila and there he
discovered that his title was already canceled in favor of defendant Aglaloma Escario. The
transfer of property was supported by a General Power of Attorney[6] dated November 29, 1985
and Deed of Absolute Sale, dated November 2, 1987, executed by Irma Veloso, wife of the
petitioner and appearing as his attorney-in-fact, and defendant Aglaloma Escario. [7] Petitioner
Veloso, however, denied having executed the power of attorney and alleged that his signature
was falsified. He also denied having seen or even known Rosemarie Reyes and Imelda
Santos, the supposed witnesses in the execution of the power of attorney. He vehemently
denied having met or transacted with the defendant. Thus, he contended that the sale of the
property, and the subsequent transfer thereof, were null and void. Petitioner Veloso, therefore,
prayed that a temporary restraining order be issued to prevent the transfer of the subject
property; that the General Power of Attorney, the Deed of Absolute Sale and the Transfer
Certificate of Title No. 180685 be annulled; and the subject property be reconveyed to him.
Defendant Aglaloma Escario in her answer alleged that she was a buyer in good faith and
denied any knowledge of the alleged irregularity. She allegedly relied on the general power of
attorney of Irma Veloso which was sufficient in form and substance and was duly
notarized. She contended that plaintiff (herein petitioner), had no cause of action against
her. In seeking for the declaration of nullity of the documents, the real party in interest was
Irma Veloso, the wife of the plaintiff. She should have been impleaded in the case. In fact,

Plaintiffs cause of action should have been against his wife, Irma. Consequently, defendant
Escario prayed for the dismissal of the complaint and the payment to her of damages. [8]
Pre-trial was conducted. The sole issue to be resolved by the trial court was whether or not
there was a valid sale of the subject property.[9]
During the trial, plaintiff (herein petitioner) Francisco Veloso testified that he acquired the
subject property from the Philippine Building Corporation, as evidenced by a Deed of Sale
dated October 1, 1957.[10] He married Irma Lazatin on January 20, 1962. [11] Hence, the property
did not belong to their conjugal partnership. Plaintiff further asserted that he did not sign the
power of attorney and as proof that his signature was falsified, he presented Allied Bank
Checks Nos. 16634640, 16634641 and 16634643, which allegedly bore his genuine signature.
Witness for the plaintiff Atty. Julian G. Tubig denied any participation in the execution of the
general power of attorney. He attested that he did not sign thereon, and the same was never
entered in his Notarial Register on November 29, 1985.
In the decision of the trial court dated March 9, 1990,[12] defendant Aglaloma Escaro was
adjudged the lawful owner of the property as she was deemed an innocent purchaser for
value. The assailed general power of attorney was held to be valid and sufficient for the
purpose. The trial court ruled that there was no need for a special power of attorney when the
special power was already mentioned in the general one. It also declared that plaintiff failed to
substantiate his allegation of fraud. The court also stressed that plaintiff was not entirely
blameless for although he admitted to be the only person who had access to the title and other
important documents, his wife was still able to possess the copy. Citing Section 55 of Act 496,
the court held that Irmas possession and production of the certificate of title was deemed a
conclusive authority from the plaintiff to the Register of Deeds to enter a new certificate. Then
applying the principle of equitable estoppel, plaintiff was held to bear the loss for it was he who
made the wrong possible.Thus:
WHEREFORE, the Court finds for the defendants and against plaintiffa. declaring that there was a valid sale of the subject property in favor of the defendant;
b. denying all other claims of the parties for want of legal and factual basis.
Without pronouncement as to costs.
Not satisfied with the decision, petitioner Veloso filed his appeal with the Court of
Appeals. The respondent court affirmed in toto the findings of the trial court.

ISSUE: Whether a general power of attorney may authorize an agent to sell real property.
HELD:

An examination of the records showed that the assailed power of attorney was valid and
regular on its face. It was notarized and as such, it carries the evidentiary weight conferred
upon it with respect to its due execution. While it is true that it was denominated as a general
power of attorney, a perusal thereof revealed that it stated an authority to sell, to wit:
2. To buy or sell, hire or lease, mortgage or otherwise hypothecate lands, tenements and
hereditaments or other forms of real property, more specifically TCT No. 49138, upon such
terms and conditions and under such covenants as my said attorney shall deem fit and proper.
[16]

Thus, there was no need to execute a separate and special power of attorney since the
general power of attorney had expressly authorized the agent or attorney in fact the power to
sell the subject property. The special power of attorney can be included in the general power
when it is specified therein the act or transaction for which the special power is required.
The general power of attorney was accepted by the Register of Deeds when the title to the
subject property was canceled and transferred in the name of private respondent.In LRC
Consulta No. 123, Register of Deeds of Albay, Nov. 10, 1956, it stated that:
Whether the instrument be denominated as general power of attorney or special power of
attorney, what matters is the extent of the power or powers contemplated upon the agent or
attorney in fact. If the power is couched in general terms, then such power cannot go beyond
acts of administration. However, where the power to sell is specific, it not being merely implied,
much less couched in general terms, there can not be any doubt that the attorney in fact may
execute a valid sale. An instrument may be captioned as special power of attorney but if the
powers granted are couched in general terms without mentioning any specific power to sell or
mortgage or to do other specific acts of strict dominion, then in that case only acts of
administration may be deemed conferred.
Petitioner contends that his signature on the power of attorney was falsified. He also
alleges that the same was not duly notarized for as testified by Atty. Tubig himself, he did not
sign thereon nor was it ever recorded in his notarial register. To bolster his argument, petitioner
had presented checks, marriage certificate and his residence certificate to prove his alleged
genuine signature which when compared to the signature in the power of attorney, showed
some difference.
We found, however, that the basis presented by the petitioner was inadequate to sustain
his allegation of forgery. Mere variance of the signatures cannot be considered as conclusive
proof that the same were forged. Forgery cannot be presumed. [17] Petitioner, however, failed to
prove his allegation and simply relied on the apparent difference of the signatures. His denial
had not established that the signature on the power of attorney was not his.
We agree with the conclusion of the lower court that private respondent was an innocent
purchaser for value. Respondent Aglaloma relied on the power of attorney presented by
petitioners wife, Irma. Being the wife of the owner and having with her the title of the property,
there was no reason for the private respondent not to believe in her authority. Moreover, the

power of attorney was notarized and as such, carried with it the presumption of its due
execution. Thus, having had no inkling on any irregularity and having no participation thereof,
private respondent was a buyer in good faith. It has been consistently held that a purchaser in
good faith is one who buys property of another, without notice that some other person has a
right to, or interest in such property and pays a full and fair price for the same, at the time of
such purchase, or before he has notice of the claim or interest of some other person in the
property.[18]
Documents acknowledged before a notary public have the evidentiary weight with respect
to their due execution. The questioned power of attorney and deed of sale, were notarized and
therefore, presumed to be valid and duly executed. Atty. Tubig denied having notarized the
said documents and alleged that his signature had also been falsified. He presented samples
of his signature to prove his contention. Forgery should be proved by clear and convincing
evidence and whoever alleges it has the burden of proving the same. Just like the petitioner,
witness Atty. Tubig merely pointed out that his signature was different from that in the power of
attorney and deed of sale. There had never been an accurate examination of the signature,
even that of the petitioner. To determine forgery.

(i) acts of strict dominion or ownership;

(ii) gratuitous contracts;

(a) gratuitous. one where the agent receives no compensation for his services (Art. 1875.

(iii) contracts where personal trust or confidence is of the essence.

iv. As to effects
(a) ostensible or representative. one where the agent acts in the name and representation
of the principal (Art. 1868.);
ARTICLE 1868. By the contract of agency a person binds himself to render some
service or to do some- thing in representation or on behalf of another, with the consent
or authority of the latter.

- Sargasso Construction & Devt. Corp., et al. vs. PPA, 623 SCRA 260 [2010] doctrine of
apparent authority holding out theory.

Doctrines:

- Under the law on agency, however, "apparent authority" is defined as the power to affect the
legal relations of another person by transactions with third persons arising from the other's
manifestations to such third person such that the liability of the principal for the acts and
contracts of his agent extends to those which are within the apparent scope of the authority
conferred on him, although no actual authority to do such acts or to make such contracts has
been conferred.

Facts:
Plaintiffs Sargasso Construction and Development Corporation, Pick and Shovel, Inc.
and Atlantic Erectors, Inc. (a joint venture now referred to as "the Consortium") was awarded
by the Philippine Ports Authority (PPA) the construction of Pier 2 and the rock causeway (R.C.
Pier 2) for the port of San Fernando, La Union. Adjacent to Pier 2 is an area intended for the
reclamation project as part of the port development plan.

On Oct. 1, the Consortium through its director Mr. Melecio Go, offered to work on the
reclamation between Pier 2 and Timber Per. Extra work for a price amounting to Php 36
million. Defendant PPA, through Asst. General Manager Mr. Landicho, denied plaintiffs
proposal and made a counter-offer lowering the Php 36M to Php 30M, but approval of
such is subject to the approval of higher authority.

On Aug 26, PPA General Manager Mr. Rogelio Dayan sent the approved Notice of
Award for Php 30M Supplemental Agreement with several conditions:
- Fendering of Pier No. 2 Port of San Fernando and the Port of Tobacco is completed
before approval of the reclamation contract.
- Acceptance by the contractor that mobilization/demobilization cost shall not be included in the
contract and that escalation shall be reckoned upon approval of the Supplemental Agreement.

The purpose of awarding the contract as a supplemental project was to save on mobilization
costs. On September 9, the PPA board advised the management to have the
reclamation project for bidding, which rejected the proposal, "since there is no strong legal
basis to award the supplemental contract through negotiation." The

terms of the original contract, which was for construction of Pier 2, cannot be
compared with a totally different project, which was the reclamation project.
Apparently, the rejection of the supplemental agreement was not properly communicated
to the consortium.

Through Mr. Go, the consortium sent a letter requesting a review of the agreement but
no reply was received from the
defendant.
June 30, the consortium filed a complaint for specific performance against the PPA for unjust
refusal of the Supplemental Agreement. They claim that such refusal lead to the delay
of their other projects and prayed for a reconsideration of the Aug 9 decision. They
allocated resources and man power in accordance with the Notice of Award approved by PPAs
general manager. They also claim that because of the late notice of the bidding, they were not
able to join the bidding for lack of a permit. Their other companies have undertaken projects
similar to what is specified in the
Supplemental Agreement.

Defendant PPA, through the OGCC, filed its answer with Compulsory Counterclaim
contending that the Notice of Award was revoked when the board rejected such
proposal. The consortium's cannot hold defendant PPA liable for their lack of a permit
to bid for the project. And their act of allocating men and resources for the
reclamation project was due to them "jumping the gun" prior to the PPA's approval.

The trial court sided with the plaintiff, claiming that the higher authority referred to in the
counter-offer refers to the approval of the General Manager, Mr. Dayan, was deemed sufficient
enough to perfect the contract based on PD 857, amending PD 505 which created the PPA.
CA sided with the trial court, but later on reversed its decision claiming that the authority of the
General Manager to sign contracts is overpowered by the PPA Board's power to enter into
contracts. The CA held that the Notice of Award signed by the General Manager was
only a part of the contract, not an acceptance thereof.

Hence this petition.

Issues:
1. W/N the Notice of Award has perfected the contract between the consortium and the PPA.

2. W/N the general manager of PPA is vested with the authority to enter into a contract for and
on behalf of PPA.

Held/Ratio:
1. NO. The higher authority contemplated is the PPA's board.
The Notice of Award signed by the general manager was a mere supporting
document, not an evidence of perfection. EO 380 is clear when it stated that approval of
entering into contracts with GOCCs requires the governing board's approval.
Since the contract between the Consortium and the General Manager lacked an
important requisite to perfect contracts, which is the consent from the board of PPA.
"# NO. The doctrine of apparent authority invoked by the petitioners is misplaced,
because this doctrine is intended only to mean that the government is NOT bound by
unauthorized acts of its agents, even though within the apparent scope of their authority.
Furthermore, Sec. 51 of the Revised Administrative Code states that "contracts in
behalf of the political subdivisions and corporate agencies shall be approved by their
respective boards."
The indicators of apparent authority is seen through (1) the general manner in which the
corporation holds out an officer or agent as having the power to act or, in other words,
the apparent authority to act in general, with which it clothes him; or (2) the
acquiescence in his acts of a particular nature, with actual or constructive knowledge
thereof, whether within or beyond the scope of his ordinary powers. It requires
presentation of evidence of similar act(s) executed either in its favor or in favor of other
parties. Not a single act of respondent PPA, acting through its Board of Directors, was
cited as having clothed its general manager with apparent authority to execute the contracts
with petitioner.
- Professional Services, Inc. vs. CA, G.R. No. 126297, Feb. 11, 2008
FACTS: On 14 April 1984, Natividad Agana was rushed to The Medical City General Hospital
due to bowel movement difficulty and bloody anal discharge. She was diagnosed by Dr. Miguel
Ampil to be suffering from cancer of the sigmoid. Upon performing anterior resection surgery
on Natividad, Dr. Ampil found that cancer had spread on her left ovary. Dr. Ampil sought the
consent of Enrique Agana (Natividads husband) to permit Dr. Juan Fuentes to perform
hysterectomy on her. After Dr. Fuentes completed hysterectomy, Dr. Ampil took over to
complete the operation and to close the incision. However, the operation appeared to be
flawed. A couple of days after her release, Natividad complained of excruciating pain in her
anal region. Her doctors told her that said pain was the consequence of her operation. Dr.
Ampil recommended that she consult an oncologist to examine the cancerous node they were
not able to remove. Natividad then went to the US for further treatment and was later found
free from cancer. She then returned to the Philippines. Two weeks after Natividads arrival, her

daughter found a piece of gauze protruding from her vagina. Dr. Ampil removed said piece,
and assured her that the pains would vanish soon. Still suffering from pain, Natividad sought
help from Polymedic General Hospital where it was found that another piece of gauze badly
infected her vaginal vault. She took another surgery to remove the same. The spouses Agana
then filed a complaint for damages against Professional Services, Inc (owner of The Medical
City), Dr. Ampil and Dr. Fuentes. Enrique likewise filed administrative cases against Dr. Ampil
(who was unfortunately abroad at that time, so case did not proceed) and Dr. Fuentes.
Pending said cases, Natividad died and was substituted by her children. RTC favored the
spouses, but the administrative complaint against Dr. Fuentes was dismissed. CA affirmed that
Dr. Ampil was liable for damages but exonerated Dr. Fuentes from liability. Hence, these three
consolidated petitions for review on certiorari.

ISSUE Whether PSI should be liable for the negligence of Dr. Ampil.

HELD: YES.
Courts came to realize that modern hospitals are increasingly taking active role in supplying
and regulating medical care to patients. No longer were a hospitals functions limited to
furnishing room, food, facilities for treatment and operation, and attendants for its
patients. Thus, in Bing v. Thunig, the New York Court of Appeals deviated from
the Schloendorff doctrine, noting that modern hospitals actually do far more than provide
facilities for treatment. Rather, they regularly employ, on a salaried basis, a large staff of
physicians, interns, nurses, administrative and manual workers. They charge patients for
medical care and treatment, even collecting for such services through legal action, if
necessary. The court then concluded that there is no reason to exempt hospitals from the
universal rule of respondeat superior.
In our shores, the nature of the relationship between the hospital and the physicians is
rendered inconsequential in view of our categorical pronouncement in Ramos v. Court of
Appealsthat for purposes of apportioning responsibility in medical negligence cases, an
employer-employee relationship in effect exists between hospitals and their attending
and visiting physicians.
But the Ramos pronouncement is not our only basis in sustaining PSIs liability. Its liability
is also anchored upon the agency principle ofapparent authority or agency by estoppel and
the doctrine of corporate negligence which have gained acceptance in the determination of a
hospitals liability for negligent acts of health professionals. The present case serves as a
perfect platform to test the applicability of these doctrines, thus, enriching our jurisprudence.
Apparent authority, or what is sometimes referred to as the holding out theory, or
doctrine of ostensible agency or agency by estoppel, has its origin from the law of
agency. It imposes liability, not as the result of the reality of a contractual relationship, but
rather because of the actions of a principal or an employer in somehow misleading the public

into believing that the relationship or the authority exists. The concept is essentially one of
estoppel and has been explained in this manner:
The principal is bound by the acts of his agent with the apparent authority
which he knowingly permits the agent to assume, or which he holds the agent
out to the public as possessing. The question in every case is whether the
principal has by his voluntary act placed the agent in such a situation that a
person of ordinary prudence, conversant with business usages and the nature of
the particular business, is justified in presuming that such agent has authority to
perform the particular act in question.
The applicability of apparent authority in the field of hospital liability was upheld long time
ago in Irving v. Doctor Hospital of Lake Worth, Inc. There, it was explicitly stated that there
does not appear to be any rational basis for excluding the concept of apparent authority
from the field of hospital liability. Thus, in cases where it can be shown that a hospital, by
its actions, has held out a particular physician as its agent and/or employee and that a patient
has accepted treatment from that physician in the reasonable belief that it is being rendered in
behalf of the hospital, then the hospital will be liable for the physicians negligence. Our
jurisdiction recognizes the concept of an agency by implication or estoppel. Article 1869 of the
Civil Code reads:
ART. 1869. Agency may be express, or implied from the acts of the principal,
from his silence or lack of action, or his failure to repudiate the agency, knowing
that another person is acting on his behalf without authority.
In this case, PSI publicly displays in the lobby of the Medical City Hospital the names and
specializations of the physicians associated or accredited by it, including those of Dr. Ampil
and Dr. Fuentes. We concur with the Court of Appeals conclusion that it is now estopped
from passing all the blame to the physicians whose names it proudly paraded in the
public directory leading the public to believe that it vouched for their skill and
competence. Indeed, PSIs act is tantamount to holding out to the public
that Medical City Hospital, through its accredited physicians, offers quality health care
services. By accrediting Dr. Ampil and Dr. Fuentes and publicly advertising their qualifications,
the hospital created the impression that they were its agents, authorized to perform medical or
surgical services for its patients. As expected, these patients, Natividad being one of them,
accepted the services on the reasonable belief that such were being rendered by the hospital
or its employees, agents, or servants. The trial court correctly pointed out:
x x x regardless of the education and status in life of the patient, he ought
not be burdened with the defense of absence of employer-employee
relationship between the hospital and the independent physician whose
name and competence are certainly certified to the general public by the
hospitals act of listing him and his specialty in its lobby directory, as in the
case herein. The high costs of todays medical and health care should at
least exact on the hospital greater, if not broader, legal responsibility for the
conduct of treatment and surgery within its facility by its accredited
physician or surgeon, regardless of whether he is independent or
employed.[33]

The wisdom of the foregoing ratiocination is easy to discern. Corporate entities, like PSI,
are capable of acting only through other individuals, such as physicians. If these accredited
physicians do their job well, the hospital succeeds in its mission of offering quality medical
services and thus profits financially. Logically, where negligence mars the quality of its
services, the hospital should not be allowed to escape liability for the acts of its ostensible
agents.

(b) simple or commission. one where the agent acts in his own name but for the account of
the principal.

Cosmic Lumber vs. CA, 265 SCRA 168 (1996);

FACTS
Cosmic Corporation, through its General Manager executed a Special Power of
Attorney appointing Paz G. Villamil-Estrada as attorney-in-fact to initiate, institute and file any
court action for the ejectment of third persons and/or squatters of the entire lot 9127 and 443
for the said squatters to remove their houses and vacate the premises in order that the
corporation may take material possession of the entire lot.

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 443
before the RTC

Estrada entered into a Compromise Agreement with Perez, the terms and conditions
such as:
In order for Perez to buy the said lot he is presently occupying, he has to pay to
plaintiff through Estada the sum of P26,640 computed at P80/square meter and that Cosmic
Lumber recognizes ownership and possession of Perez by virtue of this compromise
agreement over said portion of 333 sqm of lot 443 and whatever expenses of subdivision,
registration and other incidental expenses shall be shouldered by Perez

Although the agreement was approved by the trial court and 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 Cosmic Lumber to produce the owners duplicate copy of title needed to

segregate from lot 443 the portion sold by the attorney-in-fact, Paz Estrada to Perez under the
compromise agreement

ISSUE:

W/N there is a contract of agency between Cosmic Lumber, principal and Paz Estrada, agent
thus binding the principal over the compromise agreement made by the agent to a third
person, Perez in selling the portion of the said property

RULING: No

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
number 9127 and 443 so that Cosmic Lumber 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
Cosmic Lumber 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 special investiture of powers to Villamil-Estrada, alienation by sale of

an immovable certainly cannot be deemed protective of the right of Cosmic Lumber to
physically possess the same, more so when the land was being sold for a price of P80/sqm ,
very much less than its assessed value of P250/sqm and considering further that plaintiff never
received the proceeds of the sale

When the sale of a piece of land or any interest thereon is through an agent, the
authority of the latter shall be in writing; otherwise, the sale should be void. Thus, the authority
of an agent to execute a contract for the sale of real estate must be conferred in writing and
must give him specific authority, either to conduct the general business of the principal or to
execute a binding contract containing terms and conditions which are in the contract he did
execute

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

It is therefore clear that by selling to Perez a portion of Cosmic Lumbers land through a
compromise agreement, Villamil-Estrada acted without or in obvious authority. The sale ipso
jure is consequently void and so is the compromise agreement. This being the case, the
judgment based thereon is necessarily void

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

Phil. Aluminum Wheels, Inc. vs. FASGI Ent., 342 SCRA 722

Facts:
On 01 June 1978, FASGI Enterprises Incorporated (FASGI), a corporation organized and
existing under and by virtue of the laws of the State of California, United States of America,
entered into a distributorship arrangement with Philippine Aluminum Wheels, Incorporated
(PAWI), a Philippine corporation, and Fratelli Pedrini Sarezzo S.P.A. (FPS), an Italian
corporation. The agreement provided for the purchase, importation and distributorship in the
United States of aluminium wheels manufactured by PAWI. FASGI then paid PAWI the FOB
value of the wheels. Unfortunately, FASGI later found the shipment to be defective and in noncompliance with the contract.
On 21 September 1979, FASGI instituted an action against PAWI and FPS for breach of
contract and recovery of damages in the amount of US$2,316,591.00 before the United States

District Court for the Central District of California. In the interim, two agreements were entered
by the parties but PAWI kept on failing to discharge its obligations therein. Irked by PAWIs
persistent default, FASGI filed with the US District Court of the Central District of California the
agreements for judgment against PAWI.
On 24 August 1982, FASGI filed a notice of entry of judgment. Unable to obtain satisfaction of
the final judgment within the United States, FASGI filed a complaint for enforcement of foreign
judgment, before RTC Makati. The Makati court, however, dismissed the case, on the ground
that the decree was tainted with collusion, fraud, and clear mistake of law and fact. The lower
court ruled that the foreign judgment ignored the reciprocal obligations of the parties. While the
assailed foreign judgment ordered the return by PAWI of the purchase amount, no similar order
was made requiring FASGI to return to PAWI the third and fourth containers of wheels. This
situation amounted to an unjust enrichment on the part of FASGI. Furthermore, the RTC said,
agreements which the California court had based its judgment were a nullity for having been
entered into by Mr. Thomas Ready, counsel for PAWI, without the latters authorization.
However, the Court of Appeals reversed this decision.
Issue: WON the Philippine Court may enforce the said foreign judgment.
Held:
In this jurisdiction, a valid judgment rendered by a foreign tribunal may be recognized insofar
as the immediate parties and the underlying cause of action are concerned so long as it is
convincingly shown that there has been an opportunity for a full and fair hearing before a court
of competent jurisdiction; that trial upon regular proceedings has been conducted, following
due citation or voluntary appearance of the defendant and under a system of jurisprudence
likely to secure an impartial administration of justice; and that there is nothing to indicate either
a prejudice in court and in the system of laws under which it is sitting or fraud in procuring the
judgment. PAWI claims that its counsel, Mr. Ready, has acted without its authority. Verily, in this
jurisdiction, it is clear that an attorney cannot, without a clients authorization, settle the action
or subject matter of the litigation even when he honestly believes that such a settlement will
best serve his clients interest. However, PAWI failed to substantiate this complain with
sufficient evidence. Hence, the foreign judgment must be enforced.
Even if PAWI assailed that fraud tainted the agreements which the US Court based its
judgment, this cannot prevent the enforcement of said judgment. PAWI claimed that there was

collusion and fraud in the signing of the agreements. Although the US Court already
adjudicated on this matter, PAWI insisted on raising it again in this Court. Fraud, to hinder the
enforcement within this jurisdiction of a foreign judgment, must be extrinsic, i.e., fraud based
on facts not controverted or resolved in the case where judgment is rendered, or that which
would go to the jurisdiction of the court or would deprive the party against whom judgment is
rendered a chance to defend the action to which he has a meritorious case or defense. In fine,
intrinsic fraud, that is, fraud which goes to the very existence of the cause of action such as
fraud in obtaining the consent to a contract is deemed already adjudged, and it, therefore,
cannot militate against the recognition or enforcement of the foreign judgment.

Nichimen Corporation (Manila Branch) vs. CA, CTA, G.R. No. 139674, March 6, 2002

[G.R. No. 139674. March 6, 2002]

NICHIMEN CORPORATION (MANILA BRANCH), petitioner, vs. THE HON. COURT OF
APPEALS, THE HON. COURT OF TAX APPEALS AND THE HONORABLE
COMMISSIONER OF INTERNAL REVENUE, respondents.
Facts: Petitioner Nichimen Corporation is a resident foreign corporation, organized and
existing under the laws of Japan, authorized to do business in the Philippines. It maintains
a Manila branch in dealing with its Philippine customers.
Petitioner received from the Commissioner of Internal Revenue a demand letter with an
accompanying notice assessing it for deficiency income tax, fixed tax, expanded
withholding tax, and percentage tax in the aggregate amount of P1,092,459.94, inclusive
of increments, for the fiscal year ended 31 March 1987.
(di ko na nilagay yung break down yung mga total na lang)
FY-3-31-87 Deficiency Income Tax - TOTAL AMOUNT DUE AND COLLECTIBLE P34,005.03
FY-3-31-87 Deficiency Fixed Tax (As Importer/Exporter) - TOTAL AMOUNT DUE AND
COLLECTIBLE P 975.00
FY-3-31-87 Deficiency Expanded
COLLECTIBLE P 25,237.90

Withholding

Tax

TOTAL

AMOUNT

DUE

AND

FY-3-31-87 Deficiency Withholding Tax on Compensation - TOTAL AMOUNT DUE AND

COLLECTIBLE P264,710.91
FY-3-31-87
Deficiency
Percentage
COLLECTIBLE P767,531.10[1]

Tax

TOTAL

AMOUNT

DUE

AND

Petitioner, through its external auditors Sycip, Gorres Velayo & Co. (SGV & Co.), protested
the foregoing assessment in its letter. Respondent Commissioner withdrew the assessment
for fixed tax but sustained the other assessments.[2] On 07 November 1991, petitioner
finally agreed to pay in full its deficiency income tax, expanded withholding tax, and
withholding tax on compensation. The payment was shown per Central Bank Confirmation
Receipt No. B24068532 in the total amount of P313,953.84. Petitioner, however, continued
to oppose the assessment for deficiency percentage tax amounting to P767,531.10.
On 06 November 1991, it filed with the Court of Tax Appeals a petition for review, alleging
materially that the subject assessment was devoid of legal basis. It submitted:
The assessment for deficiency percentage tax (brokers tax) is based on respondents
allegations that the compensation received by petitioner from its Head Office for soliciting
orders from Philippine customers should be subject to brokers tax. We most respectfully
disagree with this position.
The liaising activities of the Branch is performed for its own Head Office. Hence, it is not an
activity that is rendered for another person, but for itself because NICHIMEN (Head Office)
and NICHIMEN (Manila Branch) are but one, single entity.
A broker is one who acts as a negotiator or middleman to close a deal between one person
and another. A broker is necessarily distinct from the party for which he renders service. In
a transaction involving a broker there are three (3) separate and distinct entities; the
principal, the broker, and the buyer.
In the case at bar only two parties are involved NICHIMEN (Head Office) and the Philippine
customers, the Manila branch being an integral part of the Head Office. Therefore, there
could be no broker/agency transaction in instant case. Accordingly, the amounts received
by the Branch from its Head Office cannot be considered commission or brokerage fees
subject to brokers tax.[4]
Respondent Commissioner maintained that the assessment for deficiency percentage tax
was based on the findings of the Bureau of Internal Revenue which showed that certain
sales entered into between Philippine customers and foreign manufacturers resulted from
the liaising services rendered by petitioner, and contended that the branch office should
thus be considered a commercial broker in accordance with Revenue Audit Memorandum
Order No. 1-86, par. 3, subpar. 3.2., to wit:
3. Branch Operation and Consequences
3.2. The branch solicits purchase orders from local buyers, relays the information to its
home office, the home office solicits prospective sellers abroad and eventually received
compensation for services rendered.
The Court of Tax Appeals, in its decision of 12 September 1996, sustained the
Commissioner
Issue: WON petitioner should be held liable to the deficiency percentage tax (brokers tax)
or not

Held: the Court of Appeals, in its decision promulgated on 13 August 1999, sustained the
findings of the Court of Tax Appeals. Holding petitioner to be a commercial broker, the
appellate court ratiocinated:
After assiduously evaluating the respective positions of the parties, we have come to the
conclusion that the assailed decision of the CTA is free from any reversible error. It is
essentially based on facts and information disclosed by petitioners own documents as
testified to by tax examiner Myrna Lou Tabije, to wit:
Ms. Myrna Lou Tabije, one of the examiners who investigated the instant tax case,
explained:
Q Now, according to this report, one of your findings is for deficiency brokers tax in the
amount of P718,851.68. Could you explain briefly the basis of this assessment?
A As stated here in the report, the brokers tax assessment here in this report is based on
the compensation, these are share of commission of the branch from the head office or
transactions wherein the branch solicits orders from local customers, Philippine customers
and notify the head office who in turn look for the commodities that the Philippine branch
needs. And another instance wherein the head office orders the branch to look for local
products wherein the branch merely monitors the shipping to the importer of these local
products. And the documents presented there show that the[y] are merely the agent of
the buyer and the seller. The head office does not have records of sale and purchases of
these imports and exports.
Q Now, you recommended a deficiency of P718,000.00 (sic) as brokers tax. How did you
arrive at this amount?
A In this docket, on page 181, this is the computation how we arrived at the deficiency tax.
Q Where did you base the amount appearing in this computation of yours?
A These are taken from the documents presented to us by the taxpayer. This amount was
also computed here as shown in pages 155 to 158. (pp. 6-8, TSN, Hearing on March 23,
1995.)[8]
Of particular interest are the Notes to Financial Statements submitted by the petitioner no
less which demonstrate that it had been receiving compensations and commissions from
its home office, the Nichimen Corporation in Japan, over and above its fixed periodical
subsidy. These compensations and commissions, by petitioners own description,
represented income computed at certain percentages of invoice amounts of import-export
transactions in the Philippines of the petitioner and others, and import-export transactions
in the Philippines of certain affiliates of the Nichimen Corporation (Japan) and other
parties. These are clearly indicative of acts of a commercial broker. Above all, Mr. C. C.
Gison of the Tax Division of SGV & Co., external auditors of the petitioner, let the cat out of
the bag, so to speak, when in his letter of August 3, 1989, cited in the challenged CTA
decision, he stated, inter alia, that the petitioner is not liable for the deficiency fixed tax
`as it is only engaging in business as a broker. The petitioner never bothered to disown or
neutralize this highly damaging admission.

Section 157(t) of the National Internal Revenue Code defines a commercial broker to
include all persons, other than importers, manufacturers, producers, or bona
fide employees, who, for compensation or profit, sell or bring about sales or purchases of
merchandise for other persons, or bring proposed buyers and sellers together, or
negotiate freights or other business for owners of vessels, or other means of
transportation, or for the shippers, or consignors or consignees of freight carried by
vessels or other means of transportation. The term includes commission merchant.
A broker, in general, is a middleman who acts for others, on a commission, negotiating
contracts relative to property with the custody of which he has no concern; he is, in more
ways than one, an agent of both parties.[10] His task is to bring the parties together and
to get them to come to an agreement.[11] A basic characteristic of a broker is that he acts
not for himself, but for a third person, regardless of whether the fee paid to him is a fixed
amount, regular or not, or whether the act performed by him can be performed by the
principal or not.[12] Strictly, a commission merchant differs from a broker in that he may
buy and sell in his own name without having to disclose his principal, for which purpose,
the goods are placed in his possession and at his disposal, features that are not true in the
case of a broker.[13] The commission merchant thus maintains a relation not only with the
parties but also with the property subject matter of the transaction.[14] A dealer buys and
sells for his own account.

v.
a. gratuitous Art. 1875

Compensation

ART. 1875. Agency is presumed to be for a compensation, unless there is proof

to the contrary. (n)
Agency presumed to be with compensation.
This article changes the rule in the old Civil Code (Art. 1711.) under which an agency was
presumed to be gratuitous. Hence, the agent does not have to prove that the agency is for
compensation. The prima facie presumption that the agency is for a compensation may be
contradicted by contrary evidence.
Necessity of compensation.
The relation of principal and agent can be created although the agent receives no
compensation.
A person who agrees to act as an agent without compensation is a gratuitous agent.
Ordinarily, the promise of a gratuitous agent to perform is not enforceable. He is, however,
bound by his acceptance to carry out the agency. (Art. 1884, par. 1.) The fact that he is
acting without compensation has no effect upon his rights and duties with reference to the
principal and to third parties.
However, the circumstance that the agency was for compensation or not, shall be
considered by the court in determining the extent of liability of an agent for fraud or for
negligence. (Art. 1909.)
The principal is liable for the damage to third persons caused by the torts of the gratuitous
agent whose services he accepted.
Liability of principal to pay compensation.
(1) Amount. The principal must pay the agent the compensation agreed upon, or the
reasonable value of the agents services if no compensation was specified. 33

(2) Compliance by agent with his obligations. The liability of the principal to pay
commission presupposes that the agent has complied with his obligation as such to the
principal.
Accordingly, a broker is entitled to the usual commissions whenever he brings to his
principal a party who is able and willing to take the property and enter into a valid contract
upon the terms then named by the principal, although the particulars may be arranged
and the matter negotiated and consummated between the principal and the purchaser
directly. It would be the height of injustice to permit the principal then to withdraw the
authority as against an express provision of the contract, and reap the benefits of the
agents labors, without being liable to him for his commission. This would be to make the
contract an unconscionable one, and would offer a premium for fraud by enabling one of
the parties to take advantage of his own wrong and secure the labor of the other without
remuneration. (Macondray & Co. vs. Sellner, 33 Phil. 370 [1916]; Lim vs. Saban, 447 SCRA
232 [2004]; Perez de Tagle vs. Luzon Surety Co., [C.A.] 28 O.G. 1213.) A broker is never
entitled to commission for unsuccessful efforts.
(a) Thus, a broker whose job is to effect a transaction in behalf of the principal is not
entitled to commission even if he finds or first contacts the buyer, shows him the property
involved, interests him in it, negotiates with him or even indirectly influences him to come
to terms, if he did not succeed in bringing about the sale subsequently made on those
terms by the principal to the same person through another broker. (Quijano vs. Esguerra,
[C.A.] 40 O.G. [Sup.
11] 166.)
(b) A broker or agent engaged in the sale of real estate is not limited to bring vendor and
vendee together and arranging the terms and conditions of a sale of real estate. He must
bring about the consummation of the contract of sale as to be entitled to collect a
commission. He is not entitled to compensation for merely perfecting the contract, unless
that right is clearly stipulated in the agreement with the owner.
As sales of real estate must be in writing, the preparation of the necessary documents for
the transfer of the property sold in the absence of any contrary agreement, is part of the
functions of the broker. If he abandons the transaction before the execution of such
documents, he is not entitled to commission. (Quijano vs. Soriano, 10 C.A. Rep. 198; J.M.
Tuason & Co. vs. Collector of Internal Revenue, 108 Phil. 700 [1960].)
(c) An agent employed to secure a purchaser may sue for commission upon showing that a
purchaser whom he secured bought his principals property, even though the principal did
not know that the agent had referred the purchaser; but he is not entitled to commission
where the principal made a sale at a reduced price to one whom he believed in good faith
to be unconnected with the broker. (Teller, p. 153, citing 142 A.L.R. 270; Offutt & Oldham
vs. Winters, 227 Ky. 56.) Common practice is for a buyer to inform the seller who referred
him. Likewise, agents working on commission basis will not normally pass up a
commission by not informing their principal of a referred buyer. (People vs. Castillo, 333
SCRA 506 [2000].)
(3) Procurring cause of the transaction. In many cases, complex negotiations are
involved in which it is difficult to determine whether the agent has been the one
responsible for the sale or purchase or other transaction. The governing rule is that the
agent must prove that he was the guiding cause for the transaction or, as has been said,
the procuring cause thereof, depending upon the facts of the particular case (Teller, op.
cit., p. 153, citing Note, 36 Harv. L. Rev. 875.); otherwise, he is not entitled to the
stipulated brokers commission. (Inland Realty Investment Service, Inc. vs. Court of
Appeals, 273 SCRA 70 [1997].) The term procuring cause in describing a brokers
activity, refers to a cause originating a series of events which, without break in their
continuity, result in the accomplishment of the prime objective of the employment of the
broker producing a purchaser ready, willing and able to buy on the owners terms.
The brokers efforts must have been the foundation on which the negotiations resulting in
a sale began. In other words, the broker must be instrumental in the consummation of the

sale to be entitled to a commission. (Philippine Health Care Providers, Inc. vs. Estrada, 542
SCRA 616 [2008].)
(4) Evasion of commission in bad faith. The principal cannot evade the payment of the
commission agreed upon by inducing the agent to sign a deed of cancellation of the
written authority given him after the agent had found a buyer who was able, ready, and
willing to close the deal under the terms prescribed by the principal on the ground that she
was no longer interested in the deal which was a mere subterfuge, and later selling the
property to said buyer. Such act is unfair as would amount to bad faith, and cannot be
sanctioned without according to the agent the compensation which is due him. The sellers
withdrawal in bad faith of the brokers authority cannot unjustly deprive the broker of his
commission as the sellers duly constituted agent. (Infante vs. Cunanan, 93 Phil. 693
[1953]; Lim vs. Saban, 447 SCRA 232 [2004].)
(5) Compensation contingent on profits. Where the compensation is contingent or
dependent upon the realization of profit, the agent is not entitled to compensation until
the principal realizes the profit, and there is no profit as yet, through the mere signing of
the contract of sale. (Fiege & Brown vs. Smith, Bell & Co., 43 Phil. 118 [1922].)
(6) Reduction by principal of overprice. In a case, the principal agreed to give the sales
agent a commission equivalent to the overprice. The principal accepted a lower price with
the result that the principal was reduced from 2% to 1/2%. It was held that the principal
was liable for only 1/2% overprice as commission in the absence of bad faith, fraud or fault
on his part, which was not imputed to him. He would be liable for the difference if he
accepted the reduced price to prejudice the agent. (Ramos vs. Court of Appeals, 63 SCRA
331 [1975].)
(7) Commission payable by owner of property sold. In a sale of real property where a
commission is payable to the agent, it is the owner and not the buyer who must pay. (see
Goduco vs. Court of Appeals and M.B. Castro, 10 SCRA 275 [1964].)
(8) Grant of compensation on equitable ground. The general rule is that a broker or
agent is not entitled to any commission until he has successfully done the job given to him
(see Ramos vs. Court of Appeals, supra.), especially where his authority had already
expired. Conversely, where his efforts are unsuccessful or where there was no effort on his
part, he has no right to demand compensation.
(9) Right of agents companion to compensation. Where there was no understanding,
express or implied, between the principal and his agent that no part of the compensation
to which the latter and as there is no prohibition in law against the employment of a
companion to look for a buyer of the principals land nor is it against public policy such
companion or helper is entitled to compensation and may, therefore be joined with the
agent as party to a case against the principal for recovery of compensation, even if the
principal never dealt, directly or indirectly with such companion or helper. 35 (L.G. Marquez &
Gutierrez Lora vs.
Varela, 92 Phil. 373 [1952]; see Arts. 1892-1893.)
(10) Termination of agency contract. Where no time for the continuance of the contract
is fixed by its terms, either party is at liberty to terminate it at will, subject only to the
ordinary requirements of good faith. (Danon vs. Brimo & Co., 42 Phil. 133 [1921]; Ramos
vs. Court of Appeals, 63 SCRA 331 [1975].)
(11) Validity of exclusive sales agency agreement. An exclusive sales agency
agreement providing that during the continuance of the agreement, the broker is entitled
to the commission irrespective as to whether the property is sold by the broker, the seller,
or a third party without the aid of the broker and that for a period of three (3) months
following its expiration, the broker may still be entitled to the commission if the property
were sold by the seller to a purchaser to whom it was submitted by you (broker) during
the continuance of such agency with notice to me (seller) has been upheld as not
contrary to law, good customs, or public policy. (see Art. 1306.) Such agreement aims to
pin down the seller to his obligation to give what is due to his broker for his efforts during
the life of the agency. It seeks to prevent bad faith among calculating customers to the
prejudice of the broker particularly when the negotiations have reached that stage where

it would be unfair effected after the expiration of the brokers contract. (F. Calero & Co. vs.
Navarette, [C.A.] 540 O.G. 705, Nov. 14, 1957.)
(12) Sale through another agent. Where, however, no definite period was fixed by the
principal within which the broker might effect the sale of principals property nor was he
given by the principal the exclusive agency on such sale, it was held that the broker
cannot complain of the principals conduct in selling the property through another agent
before the brokers efforts were crowned with success for one who has employed a broker
can himself sell the property to a purchaser whom he has procured, without any aid from
the broker. (Subido vs. Iglesia ni Cristo, [C.A.] No. 9910-R, June 27, 1955.)
b. compensated Sec. 12, Canons of Professional Ethics;
CANONS OF PROFESSIONAL ETHICHS

12. Fixing the amount of the fee

In fixing fees, lawyers should avoid charges which over estimate their advice and
services, as well as those which undervalue them. A client's ability to pay cannot justify a
charge in excess of the value of the service, though his poverty may require a less charge,
or even none at all. The reasonable requests of brother lawyers, and of their widows and
orphans without ample means, should receive special and kindly consideration.
In determining the amount of the fees, it is proper to consider: ( 1 ) the time and labor
required, the novelty and difficulty of the questions involved and the skill required to
properly conduct the cause; (2) whether the acceptance of employment in the particular
case will preclude the lawyer's appearance for others in cases likely to arise out of the
transaction, and in which there is a reasonable expectation that otherwise he would be
employed in the particular case or antagonisms with other clients; (3) the customary
charges of the bar for similar services; (4) the amount involved in the controversy and the
benefits resulting to the client from the services; (5) the contingency or the certainty of
the compensation; and (6) the character of the employment, whether casual or for an
established and constant client. Not one of these considerations in itself is controlling.
They are mere guides in ascertaining the real value of the service.
In determining the customary charges of the bar for similar services, it is proper for a
lawyer to consider a schedule of minimum fees adopted by a bar association, but no
lawyer should permit himself to be controlled thereby or to follow it as his sole guide in
determining the amount of his fee.
In fixing fees, it should not be forgotten that the profession is a branch of the
administration of justice and not a mere money-getting trade.ch
- Tan v. Heirs of Antonio Yamson, 684 SCRA 442 [2012]
G.R. No. 163182
October 24, 2012

TOM TAN, ANNIE U. TAN and NATHANIEL TAN, Petitioners,

ANTONIO F. YAMSON, Respondents.

vs. HEIRS OF

Facts: This case arose from the Complaint for Collection of Sum of Money and Damages
filed by Antonio F. Yamson (Yamson) against petitioners Tom Tan, Annie Tan and Nathaniel
Tan (petitioners) before the Regional Trial Court, Cebu City, Branch 58 (RTC).3

Petitioners were owners of seven parcels of land located in Mandaue City. In order to raise
funds to meet their unpaid obligations to a certain Philip Lo, they decided to sell their
properties.4 They issued the Authority to Look for Buyer/Buyers on May 19, 1998 in favor
of Yamson to facilitate their search for prospective buyers, the terms of which are as
follows:
I. Description of Lot: (no need to put it here because it talks only about the lot, area, TCT,
and T.D.#, and Total Area. However for you to know the Total Area, here it goes. = 13,116
sq.m)
II. Price: Two Thousand Pesos (P 2,000.00) per sq.m.
III. Commission: Five Percent (5%)
IV. Expenses: All expenses shall be borne by the seller except transfer tax, re-survey fee
which will for (sic) the buyers account. It is expressly understood that if the selling price
(as stated above) is of (sic) the owner, overpricing by Mr. Antonio F. Yamson and Co. is
allowed, provided Capital Gains Tax & other related fees of the said overprice shall be
borne by Mr. Antonio F. Yamson and Co., Furthermore, in the event of an overprice, brokers
commission is waived.
V. Terms of Payment: Spot Cash
VI. Nature of Authority: Non-exclusive
VII. Period of Authority: Good up to June 30, 1998
VIII. Protection Clause: After Agent reports the name of his buyer to the Seller in writing,
he is entitled to his commission even after the expiration of his authority provided the sale
is consumed (sic) between the same buyer and seller within a period of one year from
date of submission of buyers name to the seller.5
Yamson informed petitioners in writing that he had found an interested buyer. The letter,
the text of which is quoted herein, was signed by petitioner Annie Tan to acknowledge the
registration of Oscar Chua (Chua) as Yamsons buyer:
Dear Miss Annie Tan,
We are pleased to register our buyer Simon Enterprises and or Mr. Simon Chuahe, Mr.
Oscar Chuahe of your properties known as Lot nos. 2309-B-2, 2309-C-2-A, 2309-C-1, 2318B, 2309-C-2-B, 2316, 2309-B-1, situated along Pakna-an St., Mandaue city.
The property has been inspected by the officials of the company and are (sic) interested to
acquire for their corporate expansion in the near future.
Please acknowledge this registration.6
Subsequently, two lots were sold to Kimhee Realty Corporation, represented by
Chua,7 and the relevant parties executed the Deed of Absolute Sale, dated June 22,
1998.8 The remaining five (5) lots became the subject of a Memorandum of Agreement
between Lo and petitioners wherein the parties agreed to transfer the said properties to Lo
as payment for petitioners outstanding obligations.9

Yamson then demanded his commission from petitioners for the sale of the lots to his
registered buyer. Petitioners, however, refused to pay him, arguing that he was not
entitled to his commission because it was petitioners themselves who introduced Yamson
to Chua and that the agreement was for Yamson to sell all seven lots, which he failed to
accomplish.10
The issues can be reduced to a single pivotal question whether Yamson was entitled to
the payment by petitioners of his brokers commission.
Held: The petition is without merit.
As the CA correctly discerned, a plain reading of the Authority to Look for Buyer/Buyers
reveals that nowhere in the said document is it indicated that the sale of all seven lots was
a prerequisite to the payment by petitioners of Yamsons commission. If petitioners
intention was for Yamson to locate a buyer for all their properties, then they should have
had this condition reduced to writing and included in the Authority to Look for
Buyer/Buyers that they executed. Since no such stipulation appears, then it would be fair
to conclude that the petitioners had no such intention, following Section 9, Rule 130 of the
Revised Rules on Evidence which provides:
Sec. 9. Evidence of written agreements. When the terms of an agreement have been
reduced to writing, it is considered as containing all the terms agreed upon and there can
be, between the parties and their successors in interest, no evidence of such terms other
than the contents of the written agreement.
A perusal of the cited case of Reyes relied on by petitioners reveals that the sale in the
said case was consummated and the price and the terms agreed upon by the contracting
parties without the (unread text) of the broker, who resorted to trickery in order to obtain
from the seller an authority to look for a buyer. Furthermore, the seller therein presented
the buyer of the property as a witness to refute the allegations of their broker who was
seeking to claim her commission.
In contrast, petitioners purposely engaged Yamson as their broker and knowingly
authorized him to look for a buyer for their properties. More importantly, petitioners
offered no other testimony but their own to broker their allegations. If, as they already
knew of Chua as their witness. Unfortunately, Their sole witness was Annie Tan, whose
testimony was uncorroborated by any other documentary or testimonial evidence and
could only be assessed as self-serving.
On the basis of the foregoing, Yamson is entitled to his commission for the sale of the two
lots.

- Urban Bank vs. Pena, et al., 659 SCRA 418 [2011]

G.R. No. 145817

October 19, 2011

URBAN
BANK,
vs.
MAGDALENO M. PEA, Respondent.

INC, Petitioner,

x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 145822
DELFIN C. GONZALEZ, JR., BENJAMIN L. DE LEON, and ERIC L. LEE, Petitioners,
vs.
MAGDALENO M. PEA, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 162562
MAGDALENO
M.
PEA, Petitioner,
vs.
URBAN BANK, INC., TEODORO BORLONGAN, DELFIN C. GONZALEZ, JR., BENJAMIN
L. DE LEON, P. SIERVO H. DIZON, ERIC L. LEE, BEN T. LIM, JR., CORAZON BEJASA,
and ARTURO MANUEL, JR.,Respondents.
These consolidated petitions began as a simple case for payment of services rendered and
for reimbursement of costs. The case spun a web of suits and counter-suits because of: (1)
the size of the award for agents fee rendered in favor of Atty. Magdaleno Pea (Pea)
PhP24,000,000 rendered by the trial court; (2) the controversial execution of the full
judgment award of PhP28,500,000 (agents fee plus reimbursement for costs and other
damages) pending appeal; and (3) the finding of solidary liability against Urban Bank, Inc.,
and several of its corporate officers and directors together with the concomitant levying
and sale in execution of the personal (even conjugal) properties of those officers and
directors; and (4) the fact that assets with declared conservative values of at least PhP181
Million which, together with those with undeclared values could reach very much more
than such amount,1 were levied or sold on execution pending appeal to satisfy the
PhP28.5 Million award in favor of Atty. Pea. Incidentally, two supersedeas bonds worth
PhP80 Million (2.8 times the amount of the judgment) were filed by Urban Bank and some
of its officers and directors to stay the execution pending appeal.
Facts: Urban Bank, Inc. (both petitioner and respondent in these two consolidated
cases),4 was a domestic Philippine corporation, engaged in the business of banking.5 The
eight individual respondents in G. R. No. 162562 were officers and members of Urban
Banks board of directors, who were sued in their official and personal capacities.6On the
other hand, Benjamin L. De Leon, Delfin C. Gonzalez, Jr., and Eric L. Lee, (hereinafter the
de Leon Group), are the petitioners in G. R. No. 145822 and are three of the same bank
officers and directors, who had separately filed the instant Petition before the Court.
Petitioner-respondent Atty. Magdaleno M. Pea (Pea)7 is a lawyer by profession and was
formerly a stockholder, director and corporate secretary of Isabel Sugar Company, Inc.
(ISCI).8
ISCI owned a parcel of land9 located in Pasay City (the Pasay property).10 In 1984, ISCI
leased the Pasay property for a period of 10 years.11 Without its consent12 and in
violation of the lease contract,13 the lessee subleased the land to several tenants, who in
turn put up 23 establishments, mostly beer houses and night clubs, inside the
compound.14 In 1994, a few months before the lease contract was to expire, ISCI informed

the lessee15and his tenants16 that the lease would no longer be renewed and that it
intended to take over the Pasay property17 for the purpose of selling it.18
Two weeks before the lease over the Pasay property was to expire, ISCI and Urban Bank
executed a Contract to Sell, whereby the latter would pay ISCI the amount of
PhP241,612,000 in installments for the Pasay property.19Both parties agreed that the final
installment of PhP25,000,000 would be released by the bank upon ISCIs delivery of full
and actual possession of the land, free from any tenants.20 In the meantime, the amount
of the final installment would be held by the bank in escrow.
ISCI then instructed Pea, who was its director and corporate secretary, to take over
possession of the Pasay property22 against the tenants upon the expiration of the lease.
ISCIs president, Mr. Enrique G. Montilla III (Montilla), faxed a letter to Pea, confirming the
latters engagement as the corporations agent to handle the eviction of the tenants from
the Pasay property, to wit:23

MEMORANDUM
TO: Atty. Magdaleno M. Pena
Director
FROM: Enrique G. Montilla III
President
DATE: 26 November 1994
You are hereby directed to recover and take possession of the property of the corporation
situated at Roxas Boulevard covered by TCT No. 5382 of the Register of Deeds for Pasay
City immediately upon the expiration of the contract of lease over the said property on 29
November 1994. For this purpose you are authorized to engage the services of security
guards to protect the property against intruders. You may also engage the services of a
lawyer in case there is a need to go to court to protect the said property of the
corporation. In addition you may take whatever steps or measures are necessary to ensure
our continued possession of the property.
(sgd.)
President24

ENRIQUE

G.

MONTILLA

III

On 29 November 1994, the day the lease contract was to expire, ISCI and Urban Bank
executed a Deed of Absolute Sale25 over the Pasay property for the amount agreed upon
in the Contract to Sell, but subject to the above escrow provision.26 The title to the land
was eventually transferred to the name of Urban Bank on 05 December 1994.27
On 30 November 1994, the lessee duly surrendered possession of the Pasay property to
ISCI,28 but the unauthorized sub-tenants refused to leave the area.29 Pursuant to his
authority from ISCI, Pea had the gates of the property closed to keep the sub-tenants
out.30 He also posted security guards at the property,31 services for which he advanced
payments.32 Despite the closure of the gates and the posting of the guards, the sub-

tenants would come back in the evening, force open the gates, and proceed to carry on
with their businesses.33 On three separate occasions, the sub-tenants tried to break down
the gates of the property, threw stones, and even threatened to return and inflict greater
harm on those guarding it.34
In the meantime, a certain Marilyn G. Ong, as representative of ISCI, faxed a letter to
Urban Bank addressed to respondent Corazon Bejasa, who was then the banks Senior
Vice-President requesting the issuance of a formal authority for Pea.35 Two days
thereafter, Ms. Ong faxed another letter to the bank, this time addressed to its president,
respondent Teodoro Borlongan.36 She repeated therein the earlier request for authority for
Pea, since the tenants were questioning ISCIs authority to take over the Pasay
property.37
In response to the letters of Ms. Ong, petitioner-respondent bank, through individual
respondents Bejasa and Arturo E. Manuel Senior Vice-President and Vice-President,
respectively advised Pea38 that the bank had noted the engagement of his services by
ISCI and stressed that ISCI remained as the lawyers principal.39
To prevent the sub-tenants from further appropriating the Pasay property,40 petitionerrespondent Pea, as director and representative of ISCI, filed a complaint for
injunction41 (the First Injunction Complaint) with the RTC-Pasay City.42 Acting on ISCIs
prayer for preliminary relief, the trial court favorably issued a temporary restraining order
(TRO),43 which was duly implemented.44 At the time the First Injunction Complaint was
filed, a new title to the Pasay property had already been issued in the name of Urban
Bank.45
On 19 December 1994, when "information reached the judge that the Pasay property had
already been transferred by ISCI to Urban Bank, the trial court recalled the TRO and issued
a break-open order for the property. According to Pea, it was the first time that he was
apprised of the sale of the land by ISCI and of the transfer of its title in favor of the
bank."46 It is not clear from the records how such information reached the judge or what
the break-open order was in response to.
The facts regarding the following phone conversation and correspondences are highlycontroverted. Immediately after talking to respondent Bejasa, Pea got in touch with
Urban Banks president, respondent Borlongan. Pea explained that the policemen in
Pasay City were sympathetic to the tenants and were threatening to force their way into
the premises. He expressed his concern that violence might erupt between the tenants,
the city police, and the security guards posted in the Pasay property. Respondent
Borlongan supposedly assured him that the bank was going to retain his services, and that
the latter should not give up possession of the subject land. Nevertheless, petitionerrespondent Pea demanded a written letter of authority from the bank. Respondent
Borlongan acceded and instructed him to see respondent Bejasa for the letter.50
Later that afternoon, Pea received the banks letter dated 19 December 1994, which was
signed by respondents Bejasa and Manuel, and is quoted below:
This is to confirm the engagement of your services as the authorized representative of
Urban Bank, specifically to hold and maintain possession of our abovecaptioned property
[Pasay property] and to protect the same from former tenants, occupants or any other

person who are threatening to return to the said property and/or interfere with your
possession of the said property for and in our behalf.
You are likewise authorized to represent Urban Bank in any court action that you may
institute to carry out the aforementioned duties, and to prevent any intruder, squatter or
any other person not otherwise authorized in writing by Urban [B]ank from entering or
staying in the premises.52 (Emphasis supplied)
It is understood that any attorneys fees, cost of litigation and any other charges or
expenses that may be incurred relative to the exercise by Atty. Pea of his
abovementioned duties shall be for the account of Isabela Sugar Company and any loss or
damage that may be incurred to third parties shall be answerable by Isabela Sugar
Company.53 (Emphasis supplied)
The following narration of subsequent proceedings is uncontroverted.
Pea then moved for the dismissal of ISCIs First Injunction Complaint, filed on behalf of
ISCI, on the ground of lack of personality to continue the action, since the Pasay property,
subject of the suit, had already been transferred to Urban Bank.54 The RTC-Pasay City
dismissed the complaint and recalled its earlier break-open order.55
Thereafter, petitioner-respondent Pea, now in representation of Urban Bank, filed a
separate complaint56 (the Second Injunction Complaint) with the RTC-Makati City, to
enjoin the tenants from entering the Pasay property.57Acting on Urban Banks preliminary
prayer, the RTC-Makati City issued a TRO.58
While the Second Injunction Complaint was pending, Pea made efforts to settle the issue
of possession of the Pasay property with the sub-tenants. During the negotiations, he was
exposed to several civil and criminal cases they filed in connection with the task he had
assumed for Urban Bank, and he received several threats against his life.59 The subtenants eventually agreed to stay off the property for a total consideration of
PhP1,500,000.60Pea advanced the payment for the full and final settlement of their
claims against Urban Bank.61
Pea claims to have borrowed PhP3,000,000 from one of his friends in order to maintain
possession thereof on behalf of Urban Bank.62 According to him, although his creditorfriend granted him several extensions, he failed to pay his loan when it became due, and it
later on became the subject of a separate collection suit for payment with interest and
attorneys fees.63 This collection suit became the basis for Atty. Peas request for
discretionary execution pending appeal later on.
On 07 February 1995, within the four-month period allegedly agreed upon in the telephone
conversation, Pea formally informed Urban Bank that it could already take possession of
the Pasay property.64 There was however no mention of the compensation due and owed
to him for the services he had rendered.
On 31 March 1995, the bank subsequently took actual possession of the property and
installed its own guards at the premises.65
Pea thereafter made several attempts to contact respondents Borlongan and Bejasa by
telephone, but the bank officers would not take any of his calls. On 24 January 1996, or

nearly a year after he turned over possession of the Pasay property, Pea formally
demanded from Urban Bank the payment of the 10% compensation and attorneys fees
allegedly promised to him during his telephone conversation with Borlongan for securing
and maintaining peaceful possession of the property.66
Issue: 1. What is the legal basis for an award in favor of Pea for the services he rendered
to Urban Bank? Should it be a contract of agency the fee for which was orally agreed on as
Pea claims? Should it be the application of the Civil Code provisions on unjust
enrichment? Or is it to be based on something else or a combination of the legal findings
of both the RTC and the CA? How much should the award be?
2. Are the officers and directors of Urban Bank liable in their personal capacities for the
amount claimed by Pea?
3. What are the effects of our answers to questions (1) and (2), on the various results of
the execution pending appeal that happened here?
Held:
I
Pea is entitled to payment for compensation for services rendered as agent of Urban
Bank, but on the basis of the principles of unjust enrichment and quantum meruit, and not
on the purported oral contract.
The Court finds that Pea should be paid for services rendered under the agency
relationship that existed between him and Urban Bank based on the civil law principle
against unjust enrichment, but the amount of payment he is entitled to should be made,
again, under the principle against unjust enrichment and on the basis of quantum meruit.
In a contract of agency, agents bind themselves to render some service or to do
something in representation or on behalf of the principal, with the consent or authority of
the latter.250 The basis of the civil law relationship of agency is representation, 251 the
elements of which include the following: (a) the relationship is established by the parties
consent, express or implied; (b) the object is the execution of a juridical act in relation to a
third person; (c) agents act as representatives and not for themselves; and (d) agents act
within the scope of their authority.252
Whether or not an agency has been created is determined by the fact that one is
representing and acting for another.253 The law makes no presumption of agency; proving
its existence, nature and extent is incumbent upon the person alleging it.254
With respect to the status of Atty. Peas relationship with Urban Bank, the trial and the
appellate courts made conflicting findings that shall be reconciled by the Court. On one
end, the appellate court made a definitive ruling that no agency relationship existed at all
between Pea and the bank, despite the services performed by Pea with respect to the
Pasay property purchased by the bank. Although the Court of Appeals ruled against an
award of agents compensation, it still saw fit to award Pea with Ph3,000,000 for
expenses incurred for his efforts in clearing the Pasay property of tenants.255 On the
other extreme, the trial court heavily relied on the sole telephone conversation between
Pea and Urban Banks President to establish that the principal-agent relationship created

between them included an agreement to pay Pea the huge amount of PhP24,000,000. In
its defense, Urban Bank insisted that Pea was never an agent of the bank, but an agent
of ISCI, since the latter, as seller of the Pasay property committed to transferring it free
from tenants. Meanwhile, Pea argues on the basis of his successful and peaceful
ejectment of the sub-tenants, who previously occupied the Pasay property.
Based on the evidence on records and the proceedings below, the Court concludes that
Urban Bank constituted Atty. Pea as its agent to secure possession of the Pasay property.
This conclusion, however, is not determinative of the basis of the amount of payment that
must be made to him by the bank. The context in which the agency was created lays the
basis for the amount of compensation Atty. Pea is entitled to.
The transactional history and context of the sale between ISCI and Urban Bank of the
Pasay property, and Atty. Peas participation in the transfer of possession thereof to
Urban Bank provide crucial linkages that establish the nature of the relationship between
the lawyer and the landowner-bank.
ISCI undertook in the Contract to Sell, to physically deliver the property to Urban Bank,
within 60 days from 29 November 1994,256 under conditions of "full and actual
possession and control ..., free from tenants, occupants, squatters or other structures or
from any liens, encumbrances, easements or any other obstruction or impediment to the
free use and occupancy by the buyer of the subject Property or its exercise of the rights to
ownership over the subject Property...."257 To guarantee this undertaking, ISCI agreed to
the escrow provision where PhP25,000,000 (which is a little over 10% of the value of the
Pasay property) would be withheld by Urban Bank from the total contract price until there
is full compliance with this undertaking.
Apparently to ensure that ISCI is able to deliver the property physically clean to Urban
Bank, it was ISCIs president, Enrique Montilla who directed on 26 November 1994 one of
its directors, Pea, to immediately recover and take possession of the property upon
expiration of the contract of lease on 29 November 1994.258 Pea thus first came into the
picture as a director of ISCI who was constituted as its agent to recover the Pasay property
against the lessee as well as the sub-tenants who were occupying the property in violation
of the lease agreement.259 He was able to obtain possession of the property from the
lessee on the following day, but the unauthorized sub-tenants refused to vacate the
property.
It was only on 7 December 1994, that Urban Bank was informed of the services that Pea
was rendering for ISCI. The faxed letter from ISCIs Marilyn Ong reads:
Atty. Magdaleno M. Pea, who has been assigned by Isabela Sugar Company, Inc., to take
charge of inspecting the tenants would like to request an authority similar to this from the
Bank, as new owners. Can you please issue something like this today as he needs this.260
Two days later, on 9 December 1994, ISCI sent Urban Bank another letter that reads:
Dear Mr. Borlongan, I would like to request for an authorization from Urban Bank as per
attached immediately as the tenants are questioning the authority of the people there
who are helping us to take over possession of the property. (Emphasis supplied)261

It is clear from the above that ISCI was asking Urban Bank for help to comply with ISCIs
own contractual obligation with the bank under the terms of the sale of the Pasay property.
Urban Bank could have ignored the request, since it was exclusively the obligation of ISCI,
as the seller, to deliver a clean property to Urban Bank without any help from the latter.
Urban Bank thus chose to cooperate with ISCI without realizing the kind of trouble that it
would reap in the process. In an apparent attempt to allow the efforts of ISCI to secure the
property to succeed, it recognized Peas role in helping ISCI, but stopped short of
granting him authority to act on its behalf. In response to the two written requests of ISCI,
Urban Bank sent this letter to Pea on 15 December 1994:
This is to advise you that we have noted the engagement of your services by Isabela
Sugar Company to recover possession of the Roxas Boulevard property formerly covered
by TCT No. 5382, effective November 29, 1994. It is understood that your services have
been contracted by and your principal remains to be the Isabela Sugar Company, which as
seller of the property and under the terms of our Contract to Sell dated November 29,
1994, has committed to deliver the full and actual possession of the said property to the
buyer, Urban Bank, within the stipulated period. 262 (Emphasis supplied)
Up to this point, it is unmistakable that Urban Bank was staying clear from making any
contractual commitment to Pea and conveyed its sense that whatever responsibilities
arose in retaining Pea were to be shouldered by ISCI.
In any case, the subsequent actions of Urban Bank resulted in the ratification of Peas
authority as an agent acting on its behalf with respect to the Pasay property. By
ratification, even an unauthorized act of an agent becomes an authorized act of the
principal.266
Both sides readily admit that it was Pea who was responsible for clearing the property of
the tenants and other occupants, and who turned over possession of the Pasay property to
petitioner-respondent bank.267 When the latter received full and actual possession of the
property from him, it did not protest or refute his authority as an agent to do so. Neither
did Urban Bank contest Peas occupation of the premises, or his installation of security
guards at the site, starting from the expiry of the lease until the property was turned over
to the bank, by which time it had already been vested with ownership thereof.
Furthermore, when Pea filed the Second Injunction Complaint in the RTC-Makati City
under the name of petitioner-respondent bank, the latter did not interpose any objection
or move to dismiss the complaint on the basis of his lack of authority to represent its
interest as the owner of the property. When he successfully negotiated with the tenants
regarding their departure from its Pasay property, still no protest was heard from it. After
possession was turned over to the bank, the tenants accepted PhP1,500,000 from Pea, in
"full and final settlement" of their claims against Urban Bank, and not against ISCI.268
Indeed, the Civil Code expressly acknowledged instances when two or more principals
have granted a power of attorney to an agent for a common transaction.269 The agency
relationship between an agent and two principals may even be considered extinguished if
the object or the purpose of the agency is accomplished.270 In this case, Peas services
as an agent of both ISCI and Urban Bank were engaged for one shared purpose or
transaction, which was to deliver the property free from unauthorized sub-tenants to the
new owner a task that Pea was able to achieve and is entitled to receive payment for.

Agency is presumed to be for compensation. But because in this case we find no evidence
that Urban Bank agreed to pay Pea a specific amount or percentage of amount for his
services, we turn to the principle against unjust enrichment and on the basis of quantum
meruit.
Since there was no written agreement with respect to the compensation due and owed to
Atty. Pea under the letter dated 19 December 1994, the Court will resort to determining
the amount based on the well-established rules on quantum meruit.
Agency is presumed to be for compensation.273 Unless the contrary intent is shown, a
person who acts as an agent does so with the expectation of payment according to the
agreement and to the services rendered or results effected.274 We find that the agency of
Pea comprised of services ordinarily performed by a lawyer who is tasked with the job of
ensuring clean possession by the owner of a property. We thus measure what he is entitled
to for the legal services rendered.
A stipulation on a lawyers compensation in a written contract for professional services
ordinarily controls the amount of fees that the contracting lawyer may be allowed to
collect, unless the court finds the amount to be unconscionable.275 In the absence of a
written contract for professional services, the attorneys fees are fixed on the basis
of quantum meruit,276 i.e., the reasonable worth of the attorneys services.277 When an
agent performs services for a principal at the latters request, the law will normally imply a
promise on the part of the principal to pay for the reasonable worth of those
services.278 The intent of a principal to compensate the agent for services performed on
behalf of the former will be inferred from the principals request for the agents.279
In this instance, no extra-ordinary skills employing advanced legal training nor
sophisticated legal maneuvering were required to be employed in ejecting 23 sub-tenants
who have no lease contract with the property owner, and whose only authority to enter
the premises was unlawfully given by a former tenant whose own tenancy has clearly
expired. The 23 sub-tenants operated beer houses and nightclubs, ordinary retail
establishments for which no sophisticated structure prevented easy entry. After Pea
succeeded in locking the gate of the compound, the sub-tenants would open the padlock
and resume their businesses at night. Indeed, it appears that only security guards, chains
and padlocks were needed to keep them out. It was only the alleged connivance of Pasay
City policemen that Peas ability to retain the possession was rendered insecure. And how
much did it take Pea to enter into a settlement agreement with them and make all these
problems go away? By Peas own account, PhP1,500,000 only. That means that each
tenant received an average of PhP65,217.40 only. Surely, the legal services of Pea cannot
be much more than what the sub-tenants were willing to settle for in the first place. We
therefore award him the equivalent amount of PhP1,500,000 for the legal and other
related services he rendered to eject the illegally staying tenants of Urban Banks property.
We now come to the reasonableness of the compensation prayed for by the plaintiff which
is 10% of the current market value which defendants claim to be preposterous and
glaringly excessive. Plaintiff [Pea] testified that defendant Borlongan agreed to such an
amount and this has not been denied by Ted Borlongan. The term "current market value of
the property" is hereby interpreted by the court to mean the current market value of the
property at the time the contract was entered into. To interpret it in accordance with the
submission of the plaintiff that it is the current market value of the property at the time

payment is made would be preposterous. The only evidence on record where the court can
determine the market value of the property at the time the contract of agency was
entered into between plaintiff and defendant is the consideration stated in the sales
agreement between Isabela Sugar Company, Inc. and Urban bank which
is P241,612,000.00. Ten percent of this amount is a reasonable compensation of the
services rendered by the plaintiff considering the "no cure, no pay" arrangement between
the parties and the risks which plaintiff had to undertake.281
In any case, 10% of the purchase price of the Pasay property a staggering
PhP24,161,200 is an unconscionable amount, which we find reason to reduce. Neither
will the Court accede to the settlement offer of Pea to Urban Bank of at least
PhP38,000,000 for alleged legal expenses incurred during the course of the
proceedings,282 an amount that he has not substantiated at any time.
Lawyering is not a business; it is a profession in which duty to public service, not money, is
the primary consideration.283 The principle of quantum meruit applies if lawyers are
employed without a price agreed upon for their services, in which case they would be
entitled to receive what they merit for their services, or as much as they have
earned.284 In fixing a reasonable compensation for the services rendered by a lawyer on
the basis of quantum meruit, one may consider factors such as the time spent and extent
of services rendered; novelty and difficulty of the questions involved; importance of the
subject matter; skill demanded; probability of losing other employment as a result of
acceptance of the proffered case; customary charges for similar services; amount involved
in the controversy and the resulting benefits for the client; certainty of compensation;
character of employment; and professional standing of the lawyer.285
Hence, the Court affirms the appellate courts award of PhP3,000,000 to Pea, for
expenses incurred corresponding to the performance of his services. An additional award
of PhP1,500,000 is granted to him for the services he performed as a lawyer in securing
the rights of Urban Bank as owner of the Pasay property.
II
The corporate officers and directors of Urban Bank are not solidarily or personally liable
with their properties for the corporate liability of Urban Bank to Atty. Pea.
The obligation to pay Peas compensation, however, falls solely on Urban Bank. Absent
any proof that individual petitioners as bank officers acted in bad faith or with gross
negligence or assented to a patently unlawful act, they cannot be held solidarily liable
together with the corporation for services performed by the latters agent to secure
possession of the Pasay property. Thus, the trial court had indeed committed grave abuse
of discretion when it issued a ruling against the eight individual defendant bank directors
and officers and its Decision should be absolutely reversed and set aside.
A corporation, as a juridical entity, may act only through its directors, officers and
employees.286 Obligations incurred as a result of the acts of the directors and officers as
corporate agents are not their personal liabilities but those of the corporation they
represent.287 To hold a director or an officer personally liable for corporate obligations,
two requisites must concur: (1) the complainant must allege in the complaint that the
director or officer assented to patently unlawful acts of the corporation, or that the officer
was guilty of gross negligence or bad faith; and (2) the complainant must clearly and

convincingly prove such unlawful acts, negligence or bad faith.288 "To hold a director, a
trustee or an officer personally liable for the debts of the corporation and, thus, pierce the
veil of corporate fiction, bad faith or gross negligence by the director, trustee or officer in
directing the corporate affairs must be established clearly and convincingly."289
Pea failed to allege and convincingly show that individual defendant bank directors and
officers assented to patently unlawful acts of the bank, or that they were guilty of gross
negligence or bad faith. Contrary to his claim, the Complaint290 in the lower court never
alleged that individual defendants acquiesced to an unlawful act or were grossly negligent
or acted in bad faith.291 Neither is there any specific allegation of gross negligence or
action in bad faith that is attributable to the individual defendants in performance of their
official duties.
III
Considering the absolute nullification of the trial courts Decision, the proceedings arising
from the execution pending appeal based on the said Decision is likewise completely
vacated.
Since the trial courts main Decision awarding PhP28,500,000 in favor of Pea has been
nullified above, the execution pending appeal attendant thereto, as a result, no longer has
any leg to stand on and is thus completely vacated.
To recall, prior to the filing of Urban Bank of its notice of appeal in the main case, 296 Pea
moved on 07 June 1999 for execution pending appeal297 of the Decision,298 which had
awarded him a total of PhP28,500,000 in compensation and damages.299 In supporting
his prayer for discretionary execution, Pea cited no other reason than the pending
separate civil action for collection filed against him by a creditor, who was demanding
payment of a PhP3,000,000 loan.300 According to him, he had used the proceeds of the
loan for securing the banks Pasay property.301 In opposition to the motion, Urban Bank
countered that the collection case was not a sufficient reason for allowing execution
pending appeal.302
WHEREFORE, the Court DENIES Atty. Magdaleno Peas Petition for Review dated 23 April
2004 (G. R. No. 162562) and AFFIRMS WITH MODIFICATION the Court of Appeals Decision
dated 06 November 2003 having correctly found that the Regional Trial Court of Bago City
gravely abused its discretion in awarding unconscionable damages against Urban Bank,
Inc., and its officers. The Decision of the Regional Trial Court of Bago City dated 28 May
1999 is hence VACATED.
Nevertheless, Urban Bank, Inc., is ORDERED to pay Atty. Pea the amount of PhP3,000,000
as reimbursement for his expenses and an additional PhP1,500,000 as compensation for
his services, with interest at 6% per annum from 28 May 1999, without prejudice to the
right of Urban Bank to invoke payment of this sum under a right of set-off against the
amount of PhP25,000,000 that has been placed in escrow for the benefit of Isabela Sugar
Company, Inc. The Complaint against the eight other individual petitioners, namely
Teodoro Borlongan (+), Delfin C. Gonzales, Jr., Benjamin L. de Leon, P. Siervo G. Dizon, Eric
L. Lee, Ben Y. Lim, Jr., Corazon Bejasa, and Arturo Manuel, Jr., is hereby DISMISSED.

The Petitions for Review on Certiorari filed by petitioners Urban Bank (G. R. No. 145817)
and Benjamin L. de Leon, Delfin Gonzalez, Jr., and Eric L. Lee (G. R. No. 145822) are
hereby GRANTED

- Phil. Health-Care Providers vs. Estrada, 542 SCRA 616 [2008]

G.R. No. 171052

January 28, 2008

PHILIPPINE HEALTH-CARE PROVIDERS, INC. (MAXICARE), petitioner, vs. CARMELA

ESTRADA/CARA HEALTH SERVICES, respondent.
Facts: [Maxicare] is a domestic corporation engaged in selling health insurance plans
whose Chairman Dr. Roberto K. Macasaet, Chief Operating Officer Virgilio del Valle, and
Sales/Marketing Manager Josephine Cabrera were impleaded as defendants-appellants.
On September 15, 1990, [Maxicare] allegedly engaged the services of Carmela Estrada
who was doing business under the name of CARA HEALTH [SERVICES] to promote and sell
the prepaid group practice health care delivery program called MAXICARE Plan with the
position of Independent Account Executive. [Maxicare] formally appointed [Estrada] as its
"General Agent," evidenced by a letter-agreement dated February 16, 1991. The letter
agreement provided for plaintiff-appellees [Estradas] compensation in the form of
commission, viz.:
Commission
In consideration of the performance of your functions and duties as specified in this letteragreement, [Maxicare] shall pay you a commission equivalent to 15 to 18% from
individual, family, group accounts; 2.5 to 10% on tailored fit plans; and 10% on standard
plans of commissionable amount on corporate accounts from all membership dues
collected and remitted by you to [Maxicare].
[Maxicare] alleged that it followed a "franchising system" in dealing with its agents
whereby an agent had to first secure permission from [Maxicare] to list a prospective
company as client. [Estrada] alleged that it did apply with [Maxicare] for the MERALCO
account and other accounts, and in fact, its franchise to solicit corporate accounts,
MERALCO account included, was renewed on February 11, 1991.
Plaintiff-appellee [Estrada] submitted proposals and made representations to the officers
of MERALCO regarding the MAXICARE Plan but when MERALCO decided to subscribe to the
MAXICARE Plan, [Maxicare] directly negotiated with MERALCO regarding the terms and
conditions of the agreement and left plaintiff-appellee [Estrada] out of the discussions on
the terms and conditions.
On March 24, 1992, plaintiff-appellee [Estrada], through counsel, demanded from
[Maxicare] that it be paid commissions for the MERALCO account and nine (9) other
accounts. In reply, [Maxicare], through counsel, denied [Estradas] claims for commission
for the MERALCO and other accounts because [Maxicare] directly negotiated with
MERALCO and the other accounts(,) and that no agent was given the go signal to
intervene in the negotiations for the terms and conditions and the signing of the service
agreement with MERALCO and the other accounts so that if ever [Maxicare] was indebted

to [Estrada], it was only for P1,555.00 andP43.l2 as commissions on the accounts of

Overseas Freighters Co. and Mr. Enrique Acosta, respectively.
[Estrada] filed a complaint with the Regional Trial Court (RTC) of Makati City. After trial, the
RTC found Maxicare liable for breach of contract and ordered it to pay Estrada actual
damages in the amount equivalent to 10% of P20,169,335.00, representing her
commission for the total premiums paid by Meralco to Maxicare from the year 1991 to
1996, plus legal interest computed from the filing of the complaint on March 18, 1993, and
attorneys fees in the amount of P100,000.00. On appeal, the CA affirmed in toto the RTCs
decision. Hence, this petition.
issues, to wit:
1. Whether the Court of Appeals committed serious error in affirming Estradas entitlement
to commissions for the execution of the service agreement between Meralco and
Maxicare.
2. Corollarily, whether Estrada is entitled to commissions for the two (2) consecutive
renewals of the service agreement effective on December 1, 19925 and December 1,
1995.6
Held: Estrada is entitled to commissions for the premiums paid under the service
agreement between Meralco and Maxicare from 1991 to 1996.
Well-entrenched in jurisprudence is the rule that factual findings of the trial court,
especially when affirmed by the appellate court, are accorded the highest degree of
respect and are considered conclusive between the parties.7A review of such findings by
this Court is not warranted except upon a showing of highly meritorious circumstances,
such as: (1) when the findings of a trial court are grounded entirely on speculation,
surmises or conjectures; (2) when a lower courts inference from its factual findings is
manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion in
the appreciation of facts; (4) when the findings of the appellate court go beyond the issues
of the case, or fail to notice certain relevant facts which, if properly considered, will justify
a different conclusion; (5) when there is a misappreciation of facts; (6) when the findings
of fact are conclusions without mention of the specific evidence on which they are based,
are premised on the absence of evidence, or are contradicted by evidence on
record.8 None of the foregoing exceptions which would warrant a reversal of the assailed
decision obtains in this instance.
There is no dispute as to the role that plaintiff-appellee [Estrada] played in selling
[Maxicares] health insurance plan to Meralco. Plaintiff-appellee [Estradas] efforts
consisted in being the first to offer the Maxicare plan to Meralco, using her connections
with some of Meralco Executives, inviting said executives to dinner meetings, making
submissions and representations regarding the health plan, sending follow-up letters, etc.
These efforts were recognized by Meralco as shown by the certification issued by its
Manpower Planning and Research Staff Head Ruben A. Sapitula on September 5, 1991, to
wit:
"This is to certify that Ms. Carmela Estrada has initiated talks with us since November
1990 with regards (sic) to the HMO requirements of both our rank and file employees,

managers and executives, and that it was favorably recommended and the same be
approved by the Meralco Management Committee."
xxxx
This Court finds that plaintiff-appellee [Estradas] efforts were instrumental in introducing
the Meralco account to [Maxicare] in regard to the latters Maxicare health insurance
plans. Plaintiff-appellee [Estrada] was the efficient "intervening cause" in bringing about
the service agreement with Meralco. As pointed out by the trial court in its October 8,
1999 Decision, to wit:
"xxx Had not [Estrada] introduced Maxicare Plans to her bosom friends, Messrs. Lopez and
Guingona of Meralco, PHPI would still be an anonymity. xxx"10
Under the foregoing circumstances, we are hard pressed to disturb the findings of the RTC,
which the CA affirmed.
In Tan v. Gullas,14 we had occasion to define a broker and distinguish it from an agent,
thus:
[O]ne who is engaged, for others, on a commission, negotiating contracts relative to
property with the custody of which he has no concern; the negotiator between the other
parties, never acting in his own name but in the name of those who employed him. [A]
broker is one whose occupation is to bring the parties together, in matter of trade,
commerce or navigation.15
An agent receives a commission upon the successful conclusion of a sale. On the other
hand, a broker earns his pay merely by bringing the buyer and the seller together, even if
no sale is eventually made.16
In relation thereto, we have held that the term "procuring cause" in describing a brokers
activity, refers to a causeoriginating a series of events which, without break in their
continuity, result in the accomplishment of the prime objective of the employment of the
brokerproducing a purchaser ready, willing and able to buy on the owners terms.17 To
be regarded as the "procuring cause" of a sale as to be entitled to a commission, a
brokers efforts must have been the foundation on which the negotiations resulting in a
sale began.18 Verily, Estrada was instrumental in the sale of the Maxicare health plans to
Meralco. Without her intervention, no sale could have been consummated.
In this case, the letter, although part of Estradas Complaint, is not, ipso facto, an
admission of the statements contained therein, especially since the bone of contention
relates to Estradas entitlement to commissions for the sale of health plans she claims to
have brokered. It is more than obvious from the entirety of the records that Estrada has
unequivocally and consistently declared that her involvement as broker is the proximate
cause which consummated the sale between Meralco and Maxicare.
WHEREFORE, premises considered and finding no reversible error committed by the Court
of Appeals, the petition is hereby DENIED. Costs against the petitioner.

- Sanchez vs. Medicard Phils. Inc., et al., 469 SCRA 347 (2005)
[G.R. NO. 141525 September 2, 2005]

CARLOS SANCHEZ, Petitioners, v. MEDICARD PHILIPPINES, INC., DR. NICANOR

MONTOYA and CARLOS EJERCITO, Respondent.
Facts: Medicard Philippines, Inc. (Medicard), respondent, appointed petitioner as its special
corporate agent. As such agent, Medicard gave him a commission based on the "cash
brought in."
through petitioner's efforts, Medicard and United Laboratories Group of Companies
(Unilab) executed a Health Care Program Contract. Under this contract, Unilab shall pay
Medicard a fixed monthly premium for the health insurance of its personnel. Unilab paid
MedicardP4,148,005.00 representing the premium for one (1) year. Medicard then handed
petitioner 18% of said amount or P746,640.90 representing his commission.
Again, through petitioner's initiative, the agency contract between Medicard and Unilab
was renewed for another year, or from October 1, 1989 to September 30, 1990,
incorporating therein the increase of premium from P4,148,005.00 to P7,456,896.00.
Medicard paid petitioner P1,342,241.00 as his commission.
Prior to the expiration of the renewed contract, Medicard proposed to Unilab, through
petitioner, an increase of the premium for the next year. Unilab rejected the proposal "for
the reason that it was too high," prompting Dr. Nicanor Montoya (Medicard's president and
general manager), also a respondent, to request petitioner to reduce his commission, but
the latter refused.
Meanwhile, in order not to prejudice its personnel by the termination of their health
insurance, Unilab, through respondent Ejercito, negotiated with Dr. Montoya and other
officers of Medicard, to discuss ways in order to continue the insurance coverage of those
personnel.
Under the new scheme, Unilab shall pay Medicard only the amount corresponding to the
actual hospitalization expenses incurred by each personnel plus 15% service fee for using
Medicard facilities, which amount shall not be less than P780,000.00.
Medicard did not give petitioner any commission under the new scheme.
petitioner demanded from Medicard payment of P338,000.00 as his commission plus
damages, but the latter refused to heed his demand. Thus, petitioner filed with the
Regional Trial Court (RTC), After hearing, the RTC rendered its Decision dismissing
petitioner's complaint and respondents' counterclaim.
On appeal, the Court of Appeals affirmed the trial court's assailed Decision. The Appellate
Court held that there is no proof that the execution of the new contract between the
parties under the "cost plus" system is a strategy to deprive petitioner of his commission;
that Medicard did not commit any fraudulent act in revoking its agency contract with
Sanchez; that when Unilab rejected Medicard's proposal for an increase of premium, their
Health Care Program Contract on its third year was effectively revoked; and that where the
contract is ineffectual, then the agent is not entitled to a commission.

Petitioner filed a motion for reconsideration, but this was denied by the Court of Appeals.
Hence, the instant Petition for Review on Certiorari .
Issue: whether the Court of Appeals erred in holding that the contract of agency has been
revoked by Medicard, hence, petitioner is not entitled to a commission.
Held: It is dictum that in order for an agent to be entitled to a commission, he must be the
procuring cause of the sale, which simply means that the measures employed by him and
the efforts he exerted must result in a sale.2 In other words, an agent receives his
commission only upon the successful conclusion of a sale.3 Conversely, it follows that
where his efforts are unsuccessful, or there was no effort on his part, he is not entitled to a
commission.
In Prats v. Court of Appeals,4 this Court held that for the purpose of equity, an agent who
is not the efficient procuring cause is nonetheless entitled to his commission, where said
agent, notwithstanding the expiration of his authority, nonetheless, took diligent steps to
bring back together the parties, such that a sale was finalized and consummated between
them. In Manotok Borthers v. Court of Appeals,5 where the Deed of Sale was only
executed after the agent's extended authority had expired, this Court, applying its ruling
in Prats, held that the agent (in Manotok) is entitled to a commission since he was the
efficient procuring cause of the sale, notwithstanding that the sale took place after his
authority had lapsed. The proximate, close, and causal connection between the agent's
efforts and the principal's sale of his property can not be ignored.
It is clear that since petitioner refused to reduce his commission, Medicard directly
negotiated with Unilab, thus revoking its agency contract with petitioner. We hold that
such revocation is authorized by Article 1924 of the Civil Code which provides:
"Art. 1924. The agency is revoked if the principal directly manages the business entrusted
to the agent, dealing directly with third persons."
Moreover, as found by the lower courts, petitioner did not render services to Medicard, his
principal, to entitle him to a commission. There is no indication from the records that he
exerted any effort in order that Unilab and Medicard, after the expiration of the Health
Care Program Contract, can renew it for the third time. In fact, his refusal to reduce his
commission constrained Medicard to negotiate directly with Unilab. We find no reason in
law or in equity to rule that he is entitled to a commission. Obviously, he was not the
agent or the "procuring cause" of the third Health Care Program Contract between
Medicard and Unilab.
WHEREFORE, the petition is DENIED. The challenged Decision and Resolution of the Court
of Appeals in CA-G.R. CV No. 47681 are AFFIRMED IN TOTO. Costs against petitioner. SO
ORDERED.
- Inland Realty Investment vs. CA, 273 SCRA 70 (1997)
FACTS:
Herein petitioners Inland Realty Investment Service, Inc. and Ramon de los Reyes seek the
reversal of the decision of intermediate appellate court (now CA) w/c affirmed the trial courts
dismissal of petitioners claim for unpaid agents commission for brokering the sales transaction
involving 9,800 shares of stock in Architects Bldg between private respondent Gregorio Araneta as
seller and Stanford Microsystems as buyer.

Petitioners come to us with a two-fold agenda: (1) to obtain from us a declaration that the
trial court and the respondent appellate court gravely erred when appreciating the facts of the case
by disregarding a letter signed by Gregorio Araneta II, renewing petitioners' authority to act as sales
agent for a period of thirty (30) days from same date, and a letter signed by petitioner de los Reyes,
naming four (4) other prospective buyers, respectively; and (2) to obtain from us a categorical
ruling that a broker is automatically entitled to the stipulated commission merely upon securing for,
and introducing to, the seller the particular buyer who ultimately purchases from the former the
object of the sale, regardless of the expiration of the broker's contract of agency and authority to
sell.
Before we proceed to address petitioners' objectives, there is a need to unfold the facts of
the case. For that purpose, we quote hereunder the findings of fact of the Court of Appeals with
which petitioners agree, except as to the respondent appellate court's non-inclusion of the
aforementioned letters.
Plaintiff Inland Realty Investment Service, Inc. is a corporation engaged [in], among others . .
. the real estate business [and] brokerages, duly licensed by the Bureau of Domestic Trade . . .
planned their sales campaign, sending proposal letters to prospective buyers. One such prospective
buyer to whom a proposal letter was sent to was Stanford Microsystems, Inc. . . . [that] counterproposed to buy 9,800 shares offered at P1,000.00 per share or for a total of P9,800,000.00,
P4,900,000.00 payable in five years at 12% per annum interest until fully paid.
Upon plaintiffs' receipt of the said counter-proposal, it immediately [sic] wrote defendant a
letter to register Stanford Microsystems, Inc. as one of its prospective buyers . . . Defendant
Araneta, Inc., thru its Assistant General Manager J. Armando Eduque, replied that the price offered
by Stanford was too low and suggested that plaintiffs see if the price and terms of payment can be
improved upon by Stanford . . . Other prospective buyers were submitted to defendants among
whom were Atty. Maximo F. Belmonte and Mr. Joselito Hernandez. The authority to sell given to
plaintiffs by defendants was extended several times.
Plaintiff Roman de los Reyes, manager of Inland Realty's brokerage division, who by contract
with Inland Realty would be entitled to 1/2 of the claim asserted herein, testified that when his
company was initially granted the authority to sell, he asked for an exclusive authority and for a
longer period but Armando Eduque would not give, but according to this witness, the life of the
authority could always be extended for the purpose of negotiation that would be continuing.
Plaintiffs finally sold the 9,800 shares of stock
[in] Architects' [Bldg.], Inc. to Stanford Microsystems, Inc. and demanded formally from defendants,
through a letter, for payment of their 5% brokers commission. But it was declined by defendants on
the ground that the claim has no factual or legal basis.
Trial Court dismissed petitioners complaint for collection of unpaid commission. Upon
appeal, the CA affirmed the decision of the trial court.
ISSUE: Whether or not Inland Realty is entitled for the 5% brokers commission.
HELD: NO.
The court ruled that since Inland Realty was not the efficient procuring cause in the bringing
about the sale, therefore it is not entitled to the 5% commission. During the subsistence of its
authority to sell, Inland had nothing to show that they performed substantial acts that proximately
and causatively led to the consummation of the sale to Stanford of Araneta Incs 9,80 shares in
Architects. Inland Realty failed in selling said shares under the terms and conditions set out by
Araneta. It did nothing but submit Stanfords name as prospective buyer.

Certainly, when the lapse of the period of more than one (1) year and five (5) months
between the expiration of petitioners' authority to sell and the consummation of the sale, is viewed
in the context of the utter lack of evidence of petitioners' involvement in the negotiations between
Araneta, Inc. and Stanford during that period and in the subsequent processing of the documents
pertinent to said sale, it becomes undeniable that the respondent Court of Appeals did not at all err
in affirming the trial court's dismissal of petitioners' claim for unpaid brokerage commission.
Therefore, the Court dismissed Inlands petition.
- Prats vs. CA, 81 SCRA 360;
FACTS:
In 1968, Antonio Prats, under the name of Philippine Real Estate Exchange instituted against
Alfonso Doronilla and PNB a case to recover a sum of money and damages. Doronilla had for
sometime tried to sell his 300 ha land and he had designated several agents for that purpose at
one time. He offered the property to the Social Security System but was unable to consummate the
sale. Subsequently he gave a written authority in writing to Prats to negotiate the sale of the
property. Such authorization was published by Prats in the Manila Times. The parties agreed that
Prats will be entitled to 10% commission and if he will be able to sell it over its price, the excess
shall be credited to the latter plus his commission. Thereafter, Prats negotiated the land to the SSS.
SSS invited Doronilla for a conference but the latter declined and instead instructed that the former
should deal with Prats directly. Doronilla had received the full payment from SSS. When Prats
demanded from him his professional fees as real estate broker, Doronilla refused to pay. Doronilla
alleged that Prats had no right to demand the payment not rendered according to their agreement
and that the authority extended to Prats had expired prior to the closing of the sale.
ISSUE: Whether petitioner was the efficient procuring cause in bringing about the sale of
respondents land to the SSS.
HELD:
The Supreme Court ruled that Prats was not the efficient procuring cause of the sale. It was not
categorical that it was through Prats efforts that meeting with the SSS official to close the sale took
place. The court concluded that the meeting took place independently because the SSS had
manifested disinterest in Prats intervention. However, in equity, the court noted that Prats had
diligently taken steps to bring back together Doronilla and SSS. Prats efforts somehow were
instrumental in bringing them together again and finally consummating the sale although such
finalization was after the expiration of Prats extended exclusive authority. Doronilla was ordered to
pay Prats for his efforts and assistance in the transaction.
- Reyes vs. Mosqueda, 99 Phil. 241;
- Henry vs. Velasco, 34 Phil. 587;
vi. Power to Sell vs. Power to Mortgage Art. 1879;
ART. 1879. A special power to sell excludes the power to mortgage; and a special power to
mortgage does not include the power to sell. (n)
- Bucton vs. Rural Bank of El Salvador, Inc., Misamis Oriental, G.R. No. 179625, February 24, 2014,
717 SCRA 278.
FACTS:
petitioner Nicanora G. Bucton filed with the Regional Trial Court (RTC) of Cagayan de Oro a case 4
for Annulment of Mortgage, Foreclosure, and Special Power of Attorney (SPA) against Erlinda
Concepcion (Concepcion) and respondents Rural Bank of El Salvador, Misamis Oriental, and Sheriff
Reynaldo Cuyong.
Petitioner alleged that she is the owner of a parcel of land located in Cagayan de Oro City;
Concepcion borrowed the title on the pretext that she was going to show it to an interested buyer; 7
that Concepcion obtained a loan in the amount of P30,000.00 from respondent bank; 8 that as
security for the loan, Concepcion mortgaged petitioners house and lot to respondent bank using a
SPA9 allegedly executed by petitioner in favor of Concepcion;10 that Concepcion failed to pay the
loan;11 that petitioners house and lot were foreclosed by respondent sheriff without a Notice of

ExtraJudicial Foreclosure or Notice of Auction Sale;12 and that petitioners house and lot were sold
in an auction sale in favor of respondent bank.
Respondent bank filed an Answer14 interposing lack of cause of action as a defense.15 It denied
the allegation of petitioner that the SPA was forged16 and averred that petitioner went to the bank
and promised to settle the loan of Concepcion. As to the alleged irregularities in the foreclosure
proceedings, respondent bank asserted that it complied with the requirements of the law in
foreclosing the house and lot. By way of crossclaim, respondent bank prayed that in the event of
an adverse judgment against it, Concepcion, its codefendant, be ordered to indemnify it for all
damages.
Since summons could not be served upon Concepcion, petitioner moved to drop her as a
defendant,20 which the RTC granted in its Order.
This prompted respondent bank to file a ThirdParty Complaint22 against spouses Concepcion
and Agnes Bucton Lugod (Lugod), the daughter of petitioner. Respondent bank claimed that it
would not have granted the loan and accepted the mortgage were it not for the assurance of
Concepcion and Lugod that the SPA was valid.23 Thus, respondent bank prayed that in case it be
adjudged liable, it should be reimbursed by thirdparty defendants.
Spouses Concepcion were declared in default for failing to file a responsive pleading.
petitioner testified that a representative of respondent bank went to her house to inform her
that the loan secured by her house and lot was long overdue.26 Since she did not mortgage any of
her properties nor did she obtain a loan from respondent bank, she decided to go to respondent
bank to inquire about the matter.27 It was only then that she discovered that her house and lot was
mortgaged by virtue of a forged SPA.28 She insisted that her signature and her husbands signature
on the SPA were forged29 and that ever since she got married, she no longer used her maiden
name, Nicanora Gabar, in signing documents. 30 Petitioner also denied appearing before the notary
public, who notarized the SPA.31 She also testified that the property referred to in the SPA is a
vacant lot and that the house, which was mortgaged and foreclosed, is covered by a different title.
Petitioner presented Emma Nagac who testified that when she was at Concepcions boutique,
she was asked by the latter to sign as a witness to the SPA; 33 that when she signed the SPA, the
signatures of petitioner and her husband had already been affixed; 34 and that Lugod instructed her
not to tell petitioner about the SPA.
Respondent bank, on the other hand, presented the testimonies of its employees 36 and
respondent sheriff.
RTC issued a Decision46 sustaining the claim of petitioner that the SPA was forged as the
signatures appearing on the SPA are different from the genuine signatures presented by petitioner. 47
The RTC opined that the respondent bank should have conducted a thorough inquiry on the
authenticity of the SPA considering that petitioners residence certificate was not indicated in the
acknowledgement of the SPA.
CA reversed the findings of the RTC.
ISSUE: Whether or not a mortgage signed by an agent who signed it under his own name and
failed to indicate that he did so in behalf of another is binding upon the principal.
HELD:
The Petition is meritorious.
The Real Estate Mortgage was entered into by Concepcion in her own personal capacity.
As early as the case of Philippine Sugar Estates Development Co. v. Poizat,76 we already ruled
that in order to bind the principal by a deed executed by an agent, the deed must upon its face
purport to be made, signed and sealed in the name of the principal.

In other words, the mere fact that the agent was authorized to mortgage the property is not
sufficient to bind the principal, unless the deed was executed and signed by the agent for and on
behalf of his principal.
Similarly, in this case, the authorized agent failed to indicate in the mortgage that she was
acting for and on behalf of her principal. The Real Estate Mortgage, explicitly shows on its face,
that it was signed by Concepcion in her own name and in her own personal capacity. In fact, there
is nothing in the document to show that she was acting or signing as an agent of petitioner. Thus,
consistent with the law on agency and established jurisprudence, petitioner cannot be bound by the
acts of Concepcion.
In light of the foregoing, there is no need to delve on the issues of forgery of the SPA and the nullity
of the foreclosure sale. For even if the SPA was valid, the Real Estate Mortgage would still not bind
petitioner as it was signed by Concepcion in her personal capacity and not as an agent of
petitioner. Simply put, the Real Estate Mortgage is void and unenforceable against petitioner.
- Bicol Savings Loan vs. CA, 171 SCRA 630 (1989)
FACTS:
Juan de Jesus was the owner of a parcel of land situated in Naga City. He executed a Special
Power of Attorney in favor of his son, Jose de Jesus, "To negotiate, mortgage my real property in any
bank either private or public entity preferably in the Bicol Savings Bank, Naga City, in any amount
that may be agreed upon between the bank and my attorney-in-fact."
By virtue thereof, Jose de Jesus obtained a loan of twenty thousand pesos (P20,000.00) from
petitioner bank. To secure payment, Jose de Jesus executed a deed of mortgage on the real property
referred to in the Special Power of Attorney.
Juan de Jesus died in the meantime on a date that does not appear of record.
By reason of his failure to pay the loan obligation even during his lifetime, petitioner bank
caused the mortgage to be extrajudicially foreclosed.
In the subsequent public auction, the mortgaged property was sold to the bank as the
highest bidder to whom a Provisional Certificate of Sale was issued.
Private respondents herein, including Jose de Jesus, who are all the heirs of the late Juan de Jesus,
failed to redeem the property within one year from the date of the registration of the Provisional
Certificate of Sale. Hence, a Definite Certificate of Sale was issued in favor of the bank.
Notwithstanding, private respondents still negotiated with the bank for the repurchase of the
property. Offers and counter-offers were made, but no agreement was reached, as a consequence
of which, the bank sold the property instead to other parties in installments. Conditional deeds of
sale were executed between the bank and these parties. A Writ of Possession prayed for by the
bank was granted by the Regional Trial Court.
private respondents herein filed a Complaint with the then Court of First Instance of Naga
City for the annulment of the foreclosure sale or for the repurchase by them of the property. That
Court, noting that the action was principally for the annulment of the Definite Deed of Sale issued
to petitioner bank, dismissed the case.
On appeal, the Trial Court was reversed by respondent Court of Appeals.

ISSUE: Whether or not the agent-son exceeded the scope of his authority in agreeing to a
stipulation in the mortgage deed that petitioner bank could extra judicially foreclose the mortgaged
property.
HELD:
The sale proscribed by a special power to mortgage under Article 1879 is a voluntary and
independent contract, and not an auction sale resulting from extrajudicial foreclosure, which is
precipitated by the default of a mortgagor. The stipulation granting an authority to extrajudicially
foreclose a mortgage is an ancillary stipulation supported by the same cause or consideration for
the mortgage and forms an essential or inseparable part of that bilateral agreement.
It matters not that the authority to extrajudicially foreclose was granted by an attorney-in-fact and
not by the mortgagor personally. The stipulation in that regard, although ancillary, forms an
essential part of the mortgage contract and is inseparable therefrom. No creditor will agree to enter
into a mortgage contract without that stipulation intended for its protection.