DAVID V. PELAYO and LORENZA B.

PELAYO, Petitioners,

G.R. No. 141323 Present: PUNO, Chairman, *** AUSTRIA-MARTINEZ, CALLEJO, SR., TINGA, and CHICO-NAZARIO, JJ. Promulgated:
**

- versus -

MELKI E. PEREZ, Respondent. June 8, 2005

x----------------------------------------------------------- x

DECISION

AUSTRIA-MARTINEZ, J.:

This resolves the petition for review on certiorari seeking the reversal of the Decision

[1]

of the

Court of Appeals (CA) promulgated on April 20, 1999 which reversed the Decision of the Regional Trial Court (RTC) of Panabo, Davao, Branch 34, in Civil Case No. 91-46; and the CA Resolution dated December 17, 1999 denying petitioners motion for reconsideration. The antecedent facts as aptly narrated by the CA are as follows: David Pelayo (Pelayo),by a Deed of Absolute Sale executed on January 11, 1988, conveyed to Melki Perez (Perez) two parcels of agricultural land (the lots) situated in Panabo, Davao which are portions of Lot 4192, Cad. 276 covered by OCT P-16873. Loreza Pelayo (Loreza), wife of Pelayo, and another one whose signature is illegible witnessed the execution of the deed. Loreza, however, signed only on the third page in the space provided for witnesses on account of which Perez application for registration of the deed with the Office of the Register of Deeds in Tagum, Davao was denied. Perez thereupon asked Loreza to sign on the first and second pages of the deed but she refused, hence, he instituted on August 8, 1991 the instant complaint for specific performance against her and her husband Pelayo (defendants). The defendants moved to dismiss the complaint on the ground that it stated no cause of action, citing Section 6 of RA 6656 otherwise known as the Comprehensive Agrarian Reform Law which took effect on June 10, 1988 and which provides that contracts executed prior thereto shall be valid only when registered with the Register of Deeds within a period of three (3) months after the effectivity of this Act. The questioned deed having been executed on January 10, 1988, the defendants claimed that Perez had at least up to September 10, 1988 within which to register the same, but as they failed to, it is not valid and, therefore, unenforceable. The trial court thus dismissed the complaint. On appeal to this Court, the dismissal was set aside and the case was remanded to the lower court for further proceedings. In their Answer, the defendants claimed that as the lots were occupied illegally by some persons against whom they filed an ejectment case, they and Perez who is their friend and known at the time as an activist/leftist, hence feared by many, just made it appear in the deed that the lots were sold to him in order to frighten said illegal occupants, with the intentional omission of Lorezas signature so that the deed could not be registered; and that the deed being simulated and bereft of consideration is void/inexistent. Perez countered that the lots were given to him by defendant Pelayo in consideration of his services as his attorney-in-fact to make the necessary representation and negotiation with the illegal occupants-defendants in the ejectment suit; and that after his relationship with defendant Pelayo became sour, the latter sent a letter to the Register of Deeds of Tagum requesting him not to entertain any transaction concerning the lots title to which was entrusted to Perez who misplaced and could [not] locate it.

Defendant Pelayo claimed in any event, in his Pre-trial brief filed on March 19, 1996, that the deed was without his wife Lorezas consent, hence, in light of Art. 166 of the Civil Code which provides: Article 166. Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any real property of the conjugal partnership without the wifes consent . . . it is null and void. The trial court, finding, among others, that Perez did not possess, nor pay the taxes on the lots, that defendant Pelayo was indebted to Perez for services rendered and, therefore, the deed could only be considered as evidence of debt, and that in any event, there was no marital consent to nor actual consideration for the deed, held that the deed was null and void and accordingly rendered judgment the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered ordering and directing the defendants to pay plaintiff Melki Perez the sum of TEN THOUSAND (P10,000.00) Pesos as principal with 12% interest per annum starting from the date of filing of the complaint on August 1, 1991 until plaintiff is fully paid. The defendants shall likewise pay to plaintiff the sum of THREE THOUSAND (P3,000.00) as attorneys fees. The court further orders that the Deed of Absolute Sale, (Annex A) of the complaint and (Annex C) of the plaintiffs Motion for Summary Judgment is declared null and void and without force and it is likewise [2] removed as a cloud over defendants title and property in suit. . . .

The RTC Decision was appealed by herein respondent Perez to the CA. Petitioners failed to file their appellees brief. The CA then promulgated its Decision on April 20, 1999 whereby it ruled that by Lorenzas signing as witness to the execution of the deed, she had knowledge of the transaction and is deemed to have given her consent to the same; that herein petitioners failed to adduce sufficient proof to overthrow the presumption that there was consideration for the deed, and that petitioner David Pelayo, being a lawyer, is presumed to have acted with due care and to have signed the deed with full knowledge of its contents and import. The CA reversed and set aside the RTC Decision, declaring as valid and enforceable the questioned deed of sale and ordering herein petitioner Lorenza Pelayo to affix her signature on all pages of said document. Petitioners moved for reconsideration of the decision but the same was denied per Resolution dated December 17, 1999. The CA found said motion to have been filed out of time and ruled that even putting aside technicality, petitioners failed to present any ground bearing on the merits of the case to justify a reversal or setting aside of the decision. Hence, this petition for review on certiorari on the following grounds: 1. The CA erred in ignoring the specific provision of Section 6, in relation to Section 4 of R.A.

No. 6657 otherwise known as the Comprehensive Agrarian Reform Law of 1988 which took effect on June 15, 1988 and which provides that contracts executed prior thereto shall be valid only when registered with the Register of Deeds within a period of three (3) months after the effectivity of this Act. 2. The CA erred in holding that the deed of sale was valid and considering the P10,000.00

adjudged by the trial court as Perezs remuneration as the consideration for the deed of sale, instead of declaring the same as null and void for being fictitious or simulated and on the basis of Art. 491, Par. 2 of the New Civil Code which prohibits agents from acquiring by purchase properties from his principal under his charge.

3. David Pelayo. 4.

The CA made a novel ruling that there was implied marital consent of the wife of petitioner

Petitioners should have been allowed to f ile their appellees brief to ventilate their side,

considering the existence of peculiar circumstances which prevented petitioners from filing said brief. On the other hand, respondent points out that the CA, in resolving the first appeal docketed as CA-G.R. SP No. 38700
[3]

brought by respondent assailing the RTC Order granting herein petitioners

motion to dismiss, already ruled that under R.A. No. 6657, the sale or transfer of private agricultural land is allowed only when the area of the land being conveyed constitutes or is a part of, the landowner-seller retained area and when the total landholding of the purchaser-transferee, including the property sold, does not exceed five (5) hectares; that in this case, the land in dispute is only 1.3 hectares and there is no proof that the transferees (herein respondent) total landholding inclusive of the subject land will exceed 5 hectares, the landholding ceiling prescribed by R.A. No. 6657; that the failure of respondent to register the instrument was not due to his fault or negligence but can be attributed to Lorenzas unjustified refusal to sign two pages of the deed despite several requests of respondent; and that therefore, the CA ruled that the deed of sale subject of this case is valid under R.A. No. 6657. Respondent further maintains that the CA correctly held in its assailed Decision that there was consideration for the contract and that Lorenza is deemed to have given her consent to the deed of sale. Respondent likewise opines that the CA was right in denying petitioners motion for reconsideration where they prayed that they be allowed to file their appellees brief as their counsel failed to file the same on account of said counsels failing health due to cancer of the liver. Respondent emphasized that in petitioners motion for reconsideration, they did not even cite any errors made by the CA in its Decision. The issues boil down to the question of whether or not the deed of sale was null and void on the following grounds: (a) for not complying with the provision in R.A. No. 6657 that such document must be registered with the Register of Deeds within three months after the effectivity of said law; (b) for lack of marital consent; (c) for being prohibited under Article 1491 (2) of the Civil Code; and (d) for lack of consideration. We rule against petitioners. The issue of whether or not the deed of sale is null and void under R.A. No. 6657, for respondents failure to register said document with the Register of Deeds within three months after the effectivity of R.A. No. 6657, had been resolved with finality by the CA in its Decision dated November 24, 1994 in CA-G.R. SP No. 38700.
[4]

Herein petitioners no longer elevated said CA Decision to this Court

[5]

and the same became final and executory on January 7, 1995.

In said decision, the CA interpreted Section 4, in relation to Section 70 of R.A. No. 6657, to mean thus: . . . the proper interpretation of both sections is that under R.A. No. 6657, the sale or transfer of a private agricultural land is allowed only when said land area constitutes or is a part of the landowner-seller retained area and only when the total landholdings of the purchaser-transferee, including the property sold does not exceed five (5) hectares.

Aside from declaring that the failure of respondent to register the deed was not of his own fault or negligence, the CA ruled that respondents failure to register the deed of sale within three months after

effectivity of The Comprehensive Agrarian Reform Law did not invalidate the deed of sale as the transaction over said property is not proscribed by R.A. No. 6657. Thus, under the principle of law of the case, said ruling of the CA is now binding on petitioners. Such principle was elucidated in Cucueco vs. Court of Appeals,
[6]

to wit:

Law of the case has been defined as the opinion delivered on a former appeal. It is a term applied to an established rule that when an appellate court passes on a question and remands the case to the lower court for further proceedings, the question there settled becomes the law of the case upon subsequent appeal. It means that whatever is once irrevocably established as the controlling legal rule or decision between the same parties in the same case continues to be the law of the case, whether correct on general principles or not, so long as the facts on which such decision was predicated continue to be the facts of the case before the court.

Petitioners not having questioned the Decision of the CA dated November 24, 1994 which then attained finality, the ruling that the deed of sale subject of this case is not among the transactions deemed as invalid under R.A. No. 6657, is now immutable. We agree with the CA ruling that petitioner Lorenza, by affixing her signature to the Deed of Sale on the space provided for witnesses, is deemed to have given her implied consent to the contract of sale. Sale is a consensual contract that is perfected by mere consent, which may either be express or implied.
[7]

A wifes consent to the husbands dis position of conjugal property does not always have to be
[8]

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 indeed given. In the present case, although it appears on the face of the deed of sale

that Lorenza signed only as an instrumental witness, circumstances leading to the execution of said document point to the fact that Lorenza was fully aware of the sale of their conjugal property and consented to the sale. In their Pre-Trial Brief,
[9]

petitioners admitted that even prior to 1988, they have been having

serious problems, including threats to the life of petitioner David Pelayo, due to conflicts with the illegal occupants of the property in question, so that respondent, whom many feared for being a leftist/activist, offered his help in driving out said illegal occupants. Human experience tells us that a wife would surely be aware of serious problems such as threats to her husbands life and the reasons for such threats. As they themselves stated, petitioners problems over the subject property had been going on for quite some time, so it is highly improbable for Lorenza not to be aware of what her husband was doing to remedy such problems. Petitioners do not deny that Lorenza Pelayo was present during the execution of the deed of sale as her signature appears thereon. Neither do they claim that Lorenza Pelayo had no knowledge whatsoever about the contents of the subject document. Thus, it is quite certain that she knew of the sale of their conjugal property between her husband and respondent. Under the rules of evidence, it is presumed that a person takes ordinary care of his concerns.
[10]

Petitioners did not even attempt to overcome the aforementioned presumption as no evidence was ever presented to show that Lorenza was in any way lacking in her mental faculties and, hence, could not have fully understood the ramifications of signing the deed of sale. Neither did petitioners present any evidence that Lorenza had been defrauded, forced, intimidated or threatened either by her own husband or by respondent into affixing her signature on the subject document. If Lorenza had any objections over the conveyance of the disputed property, she could have totally refrained from having any part in the execution of the deed of sale. Instead, Lorenza even affixed her signature thereto.

Moreover, under Article 173, in relation to Article 166, both of the New Civil Code, which was still in effect on January 11, 1988 when the deed in question was executed, the lack of marital consent to the disposition of conjugal property does not make the contract void ab initio but merely voidable. Said provisions of law provide: Art. 166. Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any real property of the conjugal property without the wifes consent. If she refuses unreasonably to give her consent, the court may compel her to grant the same. ... Art. 173. The wife may, during the marriage, and within ten years from the transaction questioned, ask the courts for the annulment of any contract of the husband entered into without her consent, when such consent is required, or any act or contract of the husband which tends to defraud her or impair her interest in the conjugal partnership property. Should the wife fail to exercise this right, she or her heirs, after the dissolution of the marriage, may demand the value of property fraudulently alienated by the husband.

Hence, it has been held that the contract is valid until the court annuls the same and only upon an action brought by the wife whose consent was not obtained.
[11]

In the present case, despite respondents

repeated demands for Lorenza to affix her signature on all the pages of the deed of sale, showing respondents insistence on enforcing said contract, Lorenza still did not file a case for annulment of the deed of sale. It was only when respondent filed a complaint for specific performance on August 8, 1991 when petitioners brought up Lorenzas alleged lack of consent as an affirmative defense. Thus, if the transaction was indeed entered into without Lorenzas consent, we find it quite puzzling why for more than three and a half years, Lorenza did absolutely nothing to seek the nullification of the assailed contract. The foregoing circumstances lead the Court to believe that Lorenza knew of the full import of the transaction between respondent and her

husband; and, by affixing her signature on the deed of sale, she, in effect, signified her consent to the disposition of their conjugal property. With regard to petitioners asseveration that the deed of sale is invalid under Article 1491, paragraph 2 of the New Civil Code, we find such argument unmeritorious. Article 1491 (2) provides: Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: ... (2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; ...

In Distajo vs. Court of Appeals,

[12]

a landowner, Iluminada Abiertas, designated one of her sons

as the administrator of several parcels of her land. The landowner subsequently executed a Deed of Certification of Sale of Unregistered Land, conveying some of said land to her son/administrator. Therein, we held that: Under paragraph (2) of the above article, the prohibition against agents purchasing property in their hands for sale or management is not absolute. It does not apply if the principal consents to the sale of the property in the hands of the agent or

administrator. In this case, the deeds of sale signed by Iluminada Abiertas shows that she gave consent to the sale of the properties in favor of her son, Rufo, who was the administrator of the properties. Thus, the consent of the principal Iluminada Abiertas [13] removes the transaction out of the prohibition contained in Article 1491(2). The above-quoted ruling is exactly in point with this case before us. Petitioners, by signing the Deed of Sale in favor of respondent, are also deemed to have given their consent to the sale of the subject property in favor of respondent, thereby making the transaction an exception to the general rule that agents are prohibited from purchasing the property of their principals. Petitioners also argue that the CA erred in ruling that there was consideration for the sale. We find no error in said appellate courts ruling. The element of consideration for the sale is indeed present. Petitioners, in adopting the trial courts narration of antecedent facts in their petition,
[14]

thereby admitted

that they authorized respondent to represent them in negotiations with the squatters occupying the disputed property and, in consideration of respondents services, they executed the subject deed of sale. Aside from such services rendered by respondent, petitioners also acknowledged in the deed of sale that they received in full the amount of Ten Thousand Pesos. Evidently, the consideration for the sale is respondents services plus the aforementioned cash money. Petitioners contend that the consideration stated in the deed of sale is excessively inadequate, indicating that the deed of sale was merely simulated. in Buenaventura vs. Court of Appeals
[15]

We are not persuaded.

Our ruling

is pertinent, to wit:

. . . Indeed, there is no requirement that the price be equal to the exact value of the subject matter of sale. . . . As we stated in Vales vs. Villa: Courts cannot follow one every step of his life and extricate him from bad bargains, protect him from unwise investments, relieve him from one-sided contracts, or annul the effects of foolish acts. Courts cannot constitute themselves guardians of persons who are not legally incompetent. Courts operate not because one person has been defeated or overcome by another, but because he has been defeated or overcome illegally. Men may do foolish things, make ridiculous contracts, use miserable judgment, and lose money by them indeed, all they have in the world; but not for that alone can the law intervene and restore. There must be, in addition, a violation of the law, the commission of what the law knows as an actionable wrong, before the [16] courts are authorized to lay hold of the situation and remedy it.

Verily, in the present case, petitioners have not presented proof that there has been fraud, mistake or undue influence exercised upon them by respondent. It is highly unlikely and contrary to human

experience that a layman like respondent would be able to defraud, exert undue influence, or in any way vitiate the consent of a lawyer like petitioner David Pelayo who is expected to be more knowledgeable in the ways of drafting contracts and other legal transactions. Furthermore, in their Reply to Respondents Memorandum,
[17]

petitioners adopted the CAs

narration of fact that petitioners stated in a letter they sent to the Register of Deeds of Tagum that they have entrusted the titles over subject lots to herein respondent. Such act is a clear indication that they intended to convey the subject property to herein respondent and the deed of sale was not merely simulated or fictitious. Lastly, petitioners claim that they were not able to fully ventilate their defense before the CA as their lawyer, who was then suffering from cancer of the liver, failed to file their appellees brief. Thus, in their motion for reconsideration of the CA Decision, they prayed that they be allowed to submit such appellees brief. The CA, in its Resolution dated December 17, 1999, stated thus:

By movant-defendant-appellees own information, his counsel rec eived a copy of the decision on May 5, 1999. He, therefore, had fifteen (15) days from said date or up to May 20, 1999 to file the motion. The motion, however, was sent through a private courier and, therefore, considered to have been filed on the date of actual receipt on June 17, 1999 by the addressee Court of Appeals, was filed beyond the reglementary period. Technicality aside, movant has not proffered any ground bearing on the merits of the case why the decision should be set aside.

Petitioners never denied the CA finding that their motion for reconsideration was filed beyond the fifteen-day reglementary period. On that point alone, the CA is correct in denying due course to said motion. The motion having been belatedly filed, the CA Decision had then attained finality. Thus, in Abalos vs. Philex Mining Corporation,
[18]

we held that:

. . . Nothing is more settled in law than that once a judgment attains finality it thereby becomes immutable and unalterable. It may no longer be modified in any respect, even if the modification is meant to correct what is perceived to be an erroneous conclusion of fact or law, and regardless of whether the modification is attempted to be made by the court rendering it or by the highest court of the land.

Moreover, it is pointed out by the CA that said motion did not present any defense or argument on the merits of the case that could have convinced the CA to reverse or modify its Decision. We have consistently held that a petitioners right to due process is not violated where he was able to move for reconsideration of the order or decision in question.
[19]

In this case, petitioners had the

opportunity to fully expound on their defenses through a motion for reconsideration. Petitioners did file such motion but they wasted such opportunity by failing to present therein whatever errors they believed the CA had committed in its Decision. Definitely, therefore, the denial of petitioners motion for reconsideration, praying that they be allowed to file appellees brief, did not infringe petitioners right to due process as any issue that petitioners wanted to raise could and should have been contained in said motion for reconsideration. IN VIEW OF THE FOREGOING, the petition is DENIED and the Decision of the Court of Appeals dated April 20, 1999 and its Resolution dated December 17, 1999 are hereby AFFIRMED. SO ORDERED.

MA. ALICIA AUSTRIA-MARTINEZ Associate Justice

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 158907 February 12, 2007

EDUARDO B. OLAGUER, Petitioner, vs. EMILIO PURUGGANAN, JR. AND RAUL LOCSIN, Respondents. DECISION CHICO-NAZARIO, J.: This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the Decision, 1 dated 30 June 2003, promulgated by the Court of Appeals, affirming the Decision of the Regional Trial Court, dated 26 July 1995, dismissing the petitioners suit. The parties presented conflicting accounts of the facts. EDUARDO B. OLAGUERS VERSION Petitioner Eduardo B. Olaguer alleges that he was the owner of 60,000 shares of stock of Businessday Corporation (Businessday) with a total par value of P600,000.00, with Certificates of Stock No. 005, No. 028, No. 034, No. 070, and No. 100.2 At the time he was employed with the corporation as Executive Vice-President of Businessday, and President of Businessday Information Systems and Services and of Businessday Marketing Corporation, petitioner, together with respondent Raul Locsin (Locsin) and Enrique Joaquin (Joaquin), was active in the political opposition against the Marcos dictatorship. 3 Anticipating the possibility that petitioner would be arrested and detained by the Marcos military, Locsin, Joaquin, and Hector Holifea had an unwritten agreement that, in the event that petitioner was arrested, they would support the petitioners family by the continued payment of his salary.4 Petitioner also executed a Special Power of Attorney (SPA), on 26 May 1979, appointing as his attorneys-in-fact Locsin, Joaquin and Hofilea for the purpose of selling or transferring petitioners shares of stock with Businessday. During the trial, petitioner testified that he agreed to execute the SPA in order to cancel his shares of stock, even before they are sold, for the purpose of concealing that he was a stockholder of Businessday, in the event of a military crackdown against the opposition. 5 The parties acknowledged the SPA before respondent Emilio Purugganan, Jr., who was then the Corporate Secretary of Businessday, and at the same time, a notary public for Quezon City.6 On 24 December 1979, petitioner was arrested by the Marcos military by virtue of an Arrest, Search and Seizure Order and detained for allegedly committing arson. During the petitioners de tention, respondent Locsin ordered fellow respondent Purugganan to cancel the petitioners shares in the books of the corporation and to transfer them to respondent Locsins name.7 As part of his scheme to defraud the petitioner, respondent Locsin sent Rebecca Fernando, an employee of Businessday, to Camp Crame where the petitioner was detained, to pretend to borrow Certificate of Stock No. 100 for the purpose of using it as additional collateral for Businessdays then outstanding loan with the National Investment and Development Corporation. When Fernando returned the borrowed stock certificate, the word "cancelled" was already written therein. When the petitioner became upset, Fernando explained that this was merely a mistake committed by respondent Locsins secretary.8 During the trial, petitioner also agreed to stipulate that from 1980 to 1982, Businessday made regular deposits, each amounting to P10,000.00, to the Metropolitan Bank and Trust Company accounts of Manuel and Genaro Pantig, petitioners in-laws. The deposits were made on every 15th and 30th of the month.9 Petitioner alleged that these funds consisted of his monthly salary, which Businessday agreed to continue paying after his arrest for the financial support of his family.10 After receiving a total of P600,000.00, the payments stopped. Thereafter, respondent Locsin and Fernando went to ask petitioner to endorse and deliver the rest of his stock certificates to respondent Locsin, but petitioner refused. 11 On 16 January 1986, petitioner was finally released from detention. He then discovered that he was no longer registered as stockholder of Businessday in its corporate books. He also learned that Purugganan, as the Corporate Secretary of Businessday, had already recorded the transfer of shares in favor of respondent Locsin, while petitioner was detained. When petitioner demanded that respondents restore to him full ownership of his shares of stock, they refused to do so. On 29 July 1986, petitioner filed a Complaint before the trial court against respondents Purugganan and Locsin to declare as illegal the sale of the shares of stock, to restore to the petitioner full ownership of the shares, and payment of damages.12 RESPONDENT RAUL LOCSINS VERSION In his version of the facts, respondent Locsin contended that petitioner approached him and requested him to sell, and, if necessary, buy petitioners shares of stock in Businessday, to assure support for petitioners family in the event that something should happen to him, particularly if he was jailed, exiled or forced to go underground.13 At the time petitioner was employed with Businessday, respondent Locsin was unaware that

petitioner was part of a group, Light-a-Fire Movement, which actively sought the overthrow of the Marcos government through an armed struggle.14 He denied that he made any arrangements to continue paying the petitioners salary in the event of the latters imprisonment.15 When petitioner was detained, respondent Locsin tried to sell petitioners shares, but nobody wanted to buy them. Petitioners reputation as an oppositionist resulted in the poor financial condition of Businessday and discouraged any buyers for the shares of stock.16 In view of petitioners previous instructions, respondent Locsin decided to buy the shares himself. Although the capital deficiency suffered by Businessday caused the book value of the shares to plummet below par value, respondent Locsin, nevertheless, bought the shares at par value.17 However, he had to borrow from Businessday the funds he used in purchasing the shares from petitioner, and had to pay the petitioner in installments of P10,000.00 every 15th and 30th of each month.18
1awphi 1.net

The trial court in its Decision, dated 26 July 1995, dismissed the Complaint filed by the petitioner. It ruled that the sale of shares between petitioner and respondent Locsin was valid. The trial court concluded that petitioner had intended to sell the shares of stock to anyone, including respondent Locsin, in order to provide for the needs of his family should he be jailed or forced to go underground; and that the SPA drafted by the petitioner empowered respondent Locsin, and two other agents, to sell the shares for such price and under such terms and conditions that the agents may deem proper. It further found that petitioner consented to have respondent Locsin buy the shares himself. It also ruled that petitioner, through his wife, received from respondent Locsin the amount ofP600,000.00 as payment for the shares of stock.19 The dispositive part of the trial courts Decision reads: WHEREFORE, for failure of the [herein petitioner] to prove by preponderance of evidence, his causes of action and of the facts alleged in his complaint, the instant suit is hereby ordered DISMISSED, without pronouncement as to costs. [Herein respondents] counterclaims, however, are hereby DISMISSED, likewise, for dearth of substantial evidentiary support.20 On appeal, the Court of Appeals affirmed the Decision of the trial court that there was a perfected contract of sale.21 It further ruled that granting that there was no perfected contract of sale, petitioner, nevertheless, ratified the sale to respondent Locsin by his receipt of the purchase price, and his failure to raise any protest over the said sale.22 The Court of Appeals refused to credit the petitioners allegation that the money his wife received constituted his salary from Businessday since the amount he received as his salary, P24,000.00 per month, did not correspond to the amount he received during his detention, P20,000.00 per month (deposits of P10,000.00 on every 15th and 30th of each month in the accounts of the petitioners in-laws). On the other hand, the total amount received, P600,000.00, corresponds to the aggregate par value of petitioners shares in Businessday. Moreover, the financial condition of Businessday prevented it from granting any form of financial assistance in favor of the petitioner, who was placed in an indefinite leave of absence, and, therefore, not entitled to any salary. 23 The Court of Appeals also ruled that although the manner of the cancellation of the petitioners certificates of stock and the subsequent issuance of the new certificate of stock in favor of respondent Locsin was irregular, this irregularity will not relieve petitioner of the consequences of a consummated sale. 24 Finally, the Court of Appeals affirmed the Decision of the trial court disallowing respondent Locsins claims for moral and exemplary damages due to lack of supporting evidence.25 Hence, the present petition, where the following issues were raised: I. THE APPELLATE COURT ERRED IN RULING THAT THERE WAS A PERFECTED CONTRACT OF SALE BETWEEN PETITIONER AND MR. LOCSIN OVER THE SHARES; II. THE APPELLATE COURT ERRED IN RULING THAT PETITIONER CONSENTED TO THE ALLEGED SALE OF THE SHARES TO MR. LOCSIN; III. THE APPELLATE COURT ERRED IN RULING THAT THE AMOUNTS RECEIVED BY PETITIONERS IN LAWS WERE NOT PETITIONERS SALARY FROM THE CORPORATION BUT INSTALLMENT PAYMENTS FOR THE SHARES; IV. THE APPELLATE COURT ERRED IN RULING THAT MR. LOCSIN WAS THE PARTY TO THE ALLEGED SALE OF THE SHARES AND NOT THE CORPORATION; AND V.

THE APPELLATE COURT ERRED IN RULING THAT THE ALLEGED SALE OF THE SHARES WAS VALID ALTHOUGH THE CANCELLATION OF THE SHARES WAS IRREGULAR.26 The petition is without merit. The first issue that the petitioner raised is that there was no valid sale since respondent Locsin exceeded his authority under the SPA27 issued in his, Joaquin and Holifenas favor. He alleged that the authority of the afore named agents to sell the shares of stock was limited to the following conditions: (1) in the event of the petitioners absence and incapacity; and (2) for the limited purpose of applying the proceeds of the sale to the satisfaction of petitioners subsisting obligations with the companies adverted to in the SPA. 28 Petitioner sought to impose a strict construction of the SPA by limiting the definition of the word "absence" to a condition wherein "a person disappears from his domicile, his whereabouts being unknown, without leaving an agent to administer his property,"29 citing Article 381 of the Civil Code, the entire provision hereunder quoted: ART 381. When a person disappears from his domicile, his whereabouts being unknown, and without leaving an agent to administer his property, the judge, at the instance of an interested party, a relative, or a friend, may appoint a person to represent him in all that may be necessary. This same rule shall be observed when under similar circumstances the power conferred by the absentee has expired. Petitioner also puts forward that the word "incapacity" would be limited to mean "minority, insanity, imbecility, the state of being deaf-mute, prodigality and civil interdiction."30 He cites Article 38 of the Civil Code, in support of this definition, which is hereunder quoted: ART. 38 Minority, insanity or imbecility, the state of being a deaf-mute, prodigality and civil interdiction are mere restrictions on capacity to act, and do not exempt the incapacitated person, from certain obligations, as when the latter arise from his acts or from property relations, such as easements. Petitioner, thus, claims that his arrest and subsequent detention are not among the instances covered by the terms "absence or incapacity," as provided under the SPA he executed in favor of respondent Locsin. Petitioners arguments are unpersuasive. It is a general rule that a power of attorney must be strictly construed; the instrument will be held to grant only those powers that are specified, and the agent may neither go beyond nor deviate from the power of attorney. However, the rule is not absolute and should not be applied to the extent of destroying the very purpose of the power. If the language will permit, the construction that should be adopted is that which will carry out instead of defeat the purpose of the appointment. Clauses in a power of attorney that are repugnant to each other should be reconciled so as to give effect to the instrument in accordance with its general intent or predominant purpose. Furthermore, the instrument should always be deemed to give such powers as essential or usual in effectuating the express powers.31 In the present case, limiting the definitions of "absence" to that provided under Article 381 of the Civil Code and of "incapacity" under Article 38 of the same Code negates the effect of the power of attorney by creating absurd, if not impossible, legal situations. Article 381 provides the necessarily stringent standards that would justify the appointment of a representative by a judge. Among the standards the said article enumerates is that no agent has been appointed to administer the property. In the present case, petitioner himself had already authorized agents to do specific acts of administration and thus, no longer necessitated the appointment of one by the court. Likewise, limiting the construction of "incapacity" to "minority, insanity, imbecility, the state of being a deaf-mute, prodigality and civil interdiction," as provided under Article 38, would render the SPA ineffective. Article 1919(3) of the Civil Code provides that the death, civil interdiction, insanity or insolvency of the principal or of the agent extinguishes the agency. It would be equally incongruous, if not outright impossible, for the petitioner to require himself to qualify as a minor, an imbecile, a deaf-mute, or a prodigal before the SPA becomes operative. In such cases, not only would he be prevented from appointing an agent, he himself would be unable to administer his property. On the other hand, defining the terms "absence" and "incapacity" by their everyday usage makes for a reasonable construction, that is, "the state of not being present" and the "inability to act," given the context that the SPA authorizes the agents to attend stockholders meetings and vote in behalf of petitioner, to sell the shares of stock, and other related acts. This construction covers the situation wherein petitioner was arrested and detained. This much is admitted by petitioner in his testimony.32 Petitioners contention that the shares may only be sold for the sole purpose of applying the proceeds of the sale to the satisfaction of petitioners subsisting obligations to the company is far -fetched. The construction, which will carry out the purpose, is that which should be applied. Petitioner had not submitted evidence that he was in debt with Businessday at the time he had executed the SPA. Nor could he have considered incurring any debts since he admitted that, at the time of its execution, he was concerned about his possible arrest, death and disappearance. The language of the SPA clearly enumerates, as among those acts that the agents were authorized to do, the act of applying the proceeds of the sale of the shares to any obligations petitioner might have against the Businessday group of companies. This interpretation is supported by the use of the word "and" in enumerating the authorized acts, instead of phrases such as "only for," "for the purpose of," "in order to" or any similar terms to indicate that the petitioner intended that the SPA be used only for a limited purpose, that of paying any liabilities with the Businessday group of companies.

Secondly, petitioner argued that the records failed to show that he gave his consent to the sale of the shares to respondent Locsin for the price of P600,000.00. This argument is unsustainable. Petitioner received from respondent Locsin, through his wife and in-laws, the installment payments for a total of P600,000.00 from 1980 to 1982, without any protest or complaint. It was only four years after 1982 when petitioner demanded the return of the shares. The petitioners claim that he did not instruct respondent Locsin to deposit the money to the bank accounts of his in-laws fails to prove that petitioner did not give his consent to the sale since respondent Locsin was authorized, under the SPA, to negotiate the terms and conditions of the sale including the manner of payment. Moreover, had respondent Locsin given the proceeds directly to the petitioner, as the latter suggested in this petition, the proceeds were likely to have been included among petitioners pro perties which were confiscated by the military. Instead, respondent Locsin deposited the money in the bank accounts of petitioners in-laws, and consequently, assured that the petitioners wife received these amounts. Article 1882 of the Civil Code provides that the limits of an agents authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him. In addition, petitioner made two inconsistent statements when he alleged that (1) respondent Locsin had not asked the petitioner to endorse and deliver the shares of stock, and (2) when Rebecca Fernando asked the petitioner to endorse and deliver the certificates of stock, but petitioner refused and even became upset. 33 In either case, both statements only prove that petitioner refused to honor his part as seller of the shares, even after receiving payments from the buyer. Had the petitioner not known of or given his consent to the sale, he would have given back the payments as soon as Fernando asked him to endorse and deliver the certificates of stock, an incident which unequivocally confirmed that the funds he received, through his wife and his in-laws, were intended as payment for his shares of stocks. Instead, petitioner held on to the proceeds of the sale after it had been made clear to him that respondent Locsin had considered the P600,000.00 as payment for the shares, and asked petitioner, through Fernando, to endorse and deliver the stock certificates for cancellation. As regards the third issue, petitioners allegation that the installment payments he was adjudged to have received for the shares were actually salaries which Businessday promised to pay him during his detention is unsupported and implausible. Petitioner received P20,000.00 per month through his in-laws; this amount does not correspond to his monthly salary at P24,000.00.34 Nor does the amount received correspond to the amount which Businessday was supposed to be obliged to pay petitioner, which was only P45,000.00 to P60,000.00 per annum.35 Secondly, the petitioners wife did not receive funds from respondent Locsin or Businessday for the entire duration of petitioners detention. Instead, when the total amount received by the petitioner reached the aggregate amount of his shares at par value -- P600,000.00 -- the payments stopped. Petitioner even testified that when respondent Locsin denied knowing the petitioner soon after his arrest, he believed respondent Locsins commitment to pay his salaries during his detention to be nothing more than lip-service.36 Granting that petitioner was able to prove his allegations, such an act of gratuity, on the part of Businessday in favor of petitioner, would be void. An arrangement whereby petitioner will receive "salaries" for work he will not perform, which is not a demandable debt since petitioner was on an extended leave of absence, constitutes a donation under Article 72637 of the Civil Code. Under Article 748 of the Civil Code, if the value of the personal property donated exceeds P5,000.00, the donation and the acceptance shall have to be made in writing. Otherwise, the donation will be void. In the present case, petitioner admitted in his testimony 38 that such arrangement was not made in writing and, hence, is void. The fact that some of the deposit slips and communications made to petitioners wife contain the phrase "household expenses" does not disprove the sale of the shares. The money was being deposited to the bank accounts of the petitioners in-laws, and not to the account of the petitioner or his wife, precisely because some of his property had already been confiscated by the military. Had they used the phrase "sale of shares," it would have defeated the purpose of not using their own bank accounts, which was to conceal from the military any transaction involving the petitioners property. Petitioner raised as his fourth issue that granting that there was a sale, Businessday, and not respondent Locsin, was the party to the transaction. The curious facts that the payments were received on the 15th and 30th of each month and that the payor named in the checks was Businessday, were adequately explained by respondent Locsin. Respondent Locsin had obtained cash advances from the company, paid to him on the 15th and 30th of the month, so that he can pay petitioner for the shares. To support his claim, he presented Businessdays financial records and the testimony of Leo Atienza, the Companys Accounting Manager. When asked why the term "shares of stock" was used for the entries, instead of "cash advances," Atienza explained that the term "shares of stock" was more specific rather than the broader phrase "cash advances."39 More to the point, had the entries been for "shares of stock," the issuance of shares should have been reflected in the stock and transfer books of Businessday, which the petitioner presented as evidence. Instead the stock and transfer books reveal that the increase in respondent Locsins shares was a result of the cancellation and transfer of petitioners shares in favor of respondent Locsin. Petitioner alleges that the purported sale between himself and respondent Locsin of the disputed shares of stock is void since it contravenes Article 1491 of the Civil Code, which provides that: ART. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: xxxx (2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; x x x.

It is, indeed, a familiar and universally recognized doctrine that a person who undertakes to act as agent for another cannot be permitted to deal in the agency matter on his own account and for his own benefit without the consent of his principal, freely given, with full knowledge of every detail known to the agent which might affect the transaction.40 The prohibition against agents purchasing property in their hands for sale or management is, however, clearly, not absolute. It does not apply where the principal consents to the sale of the property in the hands of the agent or administrator.>41 In the present case, the parties have conflicting allegations. While respondent Locsin averred that petitioner had permitted him to purchase petitioners shares, petitioner vehemently denies having known of the transaction. However, records show that petitioners position is less credible than that taken by respondent Locsin given petitioners contemporaneous and subsequent acts.42 In 1980, when Fernando returned a stock certificate she borrowed from the petitioner, it was marked "cancelled." Although the petitioner alleged that he was furious when he saw the word cancelled, he had not demanded the issuance of a new certificate in his name. Instead of having been put on his guard, petitioner remained silent over this obvious red flag and continued receiving, through his wife, payments which totalled to the aggregate amount of the shares of stock valued at par. When the payments stopped, no demand was made by either petitioner or his wife for further payments. From the foregoing, it is clear that petitioner knew of the transaction, agreed to the purchase price of P600,000.00 for the shares of stock, and had in fact facilitated the implementation of the terms of the payment by providing respondent Locsin, through petitioners wife, with the information on the bank accounts of his in-laws. Petitioners wife and his son even provided receipts for the payments that were made to them by respondent Locsin,43 a practice that bespeaks of an onerous transaction and not an act of gratuity. Lastly, petitioner claims that the cancellation of the shares and the subsequent transfer thereof were fraudulent, and, therefore, illegal. In the present case, the shares were transferred in the name of the buyer, respondent Locsin, without the petitioner delivering to the buyer his certificates of stock. Section 63 of the Corporation Code provides that: Sec.63. Certificate of stock and transfer of shares. xxx Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred. (Emphasis provided.) The aforequoted provision furnishes the procedure for the transfer of shares the delivery of the endorsed certificates, in order to prevent the fraudulent transfer of shares of stock. However, this rule cannot be applied in the present case without causing the injustice sought to be avoided. As had been amply demonstrated, there was a valid sale of stocks. Petitioners failure to deliver the shares to their rightful buyer is a breach of his duty as a seller, which he cannot use to unjustly profit himself by denying the validity of such sale. Thus, while the manner of the cancellation of petitioners certificates of stock and the issuance of the new certificates in favor of respondent Locsin was highly irregular, we must, nonetheless, declare the validity of the sale between the parties. Neither does this irregularity prove that the transfer was fraudulent. In his testimony, petitioner admitted that they had intended to conceal his being a stockholder of Businessday.44 The cancellation of his name from the stock and transfer book, even before the shares were actually sold, had been done with his consent. As earlier explained, even the subsequent sale of the shares in favor of Locsin had been done with his consent. IN VIEW OF THE FOREGOING, the instant Petition is DENIED. This Court AFFIRMS the assailed Decision of the Court of Appeals, promulgated on 30 June 2003, affirming the validity of the sale of the shares of stock in favor of respondent Locsin. No costs. SO ORDERED.

[G.R. No. 152658. July 29, 2005]

LILY ELIZABETH BRAVO-GUERRERO, BEN MAURICIO P. BRAVO, ROLAND P. BRAVO, JR., OFELIA BRAVO-QUIESTAS, HEIRS OF CORPUSINIA BRAVO-NIOR namely: GERSON U. NIOR, MARK GERRY B. NIOR, CLIFF RICHARD B. NIOR, BRYAN B. NIOR, WIDMARK B. NIOR, SHERRY ANNE B. NIOR, represented by LILY ELIZABETH BRAVO-GUERRERO as their attorney-in-fact, and HONORABLE FLORENTINO A. TUASON, JR., Presiding Judge, Regional Trial Court, Branch 139, Makati City, petitioners, vs. EDWARD P. BRAVO, represented by his attorney-in-fact FATIMA C. BRAVO, respondent, and DAVID B. DIAZ, JR., intervenor-respondent. DECISION CARPIO, J.:

[1]

The Case Before the Court is a petition for review assailing the Decision of 21 December 2001 of the Court [4] of Appeals in CA-G.R. CV No. 67794. The Court of Appeals reversed the Decision of 11 May 2000 of the Regional Trial Court of Makati, Branch No. 139, in Civil Case No. 97-1379 denying respondents prayer to partition the subject properties.
[2] [3]

Antecedent Facts Spouses Mauricio Bravo (Mauricio) and Simona Andaya Bravo (Simona) owned two parcels of land (Properties) measuring 287 and 291 square meters and located along Evangelista Street, Makati City, Metro Manila. The Properties are registered under TCT Nos. 58999 and 59000 issued by the Register of Deeds of Rizal on 23 May 1958. The Properties contain a large residential dwelling, a smaller house and other improvements. Mauricio and Simona had three children - Roland, Cesar and Lily, all surnamed Bravo. Cesar died without issue. Lily Bravo married David Diaz, and had a son, David B. Diaz, Jr. (David Jr.). Roland had six children, namely, Lily Elizabeth Bravo-Guerrero (Elizabeth), Edward Bravo (Edward), Roland Bravo, Jr. (Roland Jr.), Senia Bravo, Benjamin Mauricio Bravo, and their half -sister, Ofelia Bravo (Ofelia). Simona executed a General Power of Attorney (GPA) on 17 June 1966 appointing Mauricio as her attorney-in-fact. In the GPA, Simona authorized Mauricio to mortgage or otherwise hypothecate, sell, assign and dispose of any and all of my property, real, personal or mixed, of any kind whatsoever and [6] wheresoever situated, or any interest therein xxx. Mauricio subsequently mortgaged the Properties to the Philippine National Bank (PNB) and Development Bank of the Philippines (DBP) for P10,000 [7] and P5,000, respectively. On 25 October 1970, Mauricio executed a Deed of Sale with Assumption of Real Estate Mortgage (Deed of Sale) conveying the Properties to Roland A. Bravo, Ofelia A. Bravo and Elizabeth [8] Bravo (vendees). The sale was conditioned on the payment of P1,000 and on the assumption by the vendees of the PNB and DBP mortgages over the Properties. As certified by the Clerk of Court of the Regional Trial Court of Manila, the Deed of Sale was notarized by Atty. Victorio Q. Guzman on 28 October 1970 and entered in his Notarial [9] Register. However, the Deed of Sale was not annotated on TCT Nos. 58999 and 59000. Neither was it presented to PNB and DBP. The mortage loans and the receipts for loan payments issued by PNB and DBP continued to be in Mauricios name even after his death on 20 November 1973. Simona died in 1977. On 23 June 1997, Edward, represented by his wife, Fatima Bravo, filed an action for the judicial partition of the Properties. Edward claimed that he and the other grandchildren of Mauricio and Simona are co-owners of the Properties by succession. Despite this, petitioners refused to share with him the possession and rental income of the Properties. Edward later amended his complaint to include a prayer to annul the Deed of Sale, which he claimed was merely simulated to prejudice the other heirs. In 1999, David Jr., whose parents died in 1944 and who was subsequently raised by Simona, moved to intervene in the case. David Jr. filed a complaint-in-intervention impugning the validity of the Deed of Sale and praying for the partition of the Properties among the surviving heirs of Mauricio and Simona. [10] The trial court allowed the intervention in its Order dated 5 May 1999.
[5]

The Ruling of the Trial Court

The trial court upheld Mauricios sale of the Properties to the vendees. The trial court ruled that the sale did not prejudice the compulsory heirs, as the Properties were conveyed for valuable consideration. The trial court also noted that the Deed of Sale was duly notarized and was in existence for many years without question about its validity. The dispositive portion of the trial courts Decision of 11 May 2000 reads: WHEREFORE, premises considered, the Court hereby DENIES the JUDICIAL PARTITION of the properties covered by TCT Nos. 58999 and 59000 registered with the Office of the Register of Deeds of Rizal. SO ORDERED.
[11]

Dissatisfied, Edward and David Jr. (respondents) filed a joint appeal to the Court of Appeals.

The Ruling of the Court of Appeals Citing Article 166 of the Civil Code (Article 166), the Court of Appeals declared the Deed of Sale void for lack of Simonas consent. The appellate court held that the GPA executed by Simona in 1966 was not sufficient to authorize Mauricio to sell the Properties because Article 1878 of the Civil Code (Article 1878) requires a special power of attorney for such transactions. The appellate court reasoned that the GPA was executed merely to enable Mauricio to mortgage the Properties, not to sell them. The Court of Appeals also found that there was insufficient proof that the vendees made the mortgage payments on the Properties, since the PNB and DBP receipts were issued in Mauricios name. The appellate court opined that the rental income of the Properties, which the vendees never shared with respondents, was sufficient to cover the mortgage payments to PNB and DBP. The Court of Appeals declared the Deed of Sale void and ordered the partition of the Properties in its Decision of 21 December 2001 (CA Decision), as follows: WHEREFORE, the decision of the Regional Trial Court of Makati City, Metro-Manila, Branch 13[9] dated 11 May 2000[,] review of which is sought in these proceedings[,] is REVERSED. 1. The Deed of Sale with Assumption of Real Estate Mortgage (Exh. 4) dated 28 October 1970 is hereby declared null and void; Judicial Partition on the questioned properties is hereby GRANTED in the following manner: A. In representation of his deceased mother, LILY BRAVO-DIAZ, intervenor DAVID DIAZ, JR., is entitled to one-half (1/2) interest of the subject properties; Plaintiff-appellant EDWARD BRAVO and the rest of the five siblings, namely: LILY ELIZABETH, EDWARD, ROLAND, JR., SENIA, BENJAMIN and OFELIA are entitled to one-sixth (1/6) representing the other half portion of the subject properties; Plaintiff-appellant Edward Bravo, intervenor DAVID DIAZ, JR., SENIA and BENJAMIN shall reimburse the defendant-appellees LILY ELIZABETH, OFELIA and ROLAND the sum of One Thousand (P1,000.00) PESOS representing the consideration paid on the questioned deed of sale with assumption of mortgage with interest of six (6) percent per annum effective 28 October 1970 until fully paid.

2.

B.

C.

SO ORDERED.

[12]

The Issues Petitioners seek a reversal of the Decision of the Court of Appeals, raising these issues: 1. WHETHER THE COURT OF APPEALS ERRED IN NOT UPHOLDING THE VALIDITY AND ENFORCEMENT OF THE DEED OF SALE WITH ASSUMPTION OF MORTGAGE. 2. WHETHER THE COURT OF APPEALS ERRED IN ORDERING THE PARTITION OF THE [13] PROPERTY IN QUESTION. At the least, petitioners argue that the subject sale is valid as to Mauricios share in the Properties. On the other hand, respondents maintain that they are co-owners of the Properties by succession. Respondents argue that the sale of the conjugal Properties is void because: (1) Mauricio executed the

Deed of Sale without Simonas consent; and (2) the sale was merely simulated, as shown by the grossly inadequate consideration Mauricio received for the Properties. While this case was pending, Leonida Andaya Lolong (Leonida), David Jr.s aunt, and Atty. Cendaa, respondents counsel, informed the Court that David Jr. died on 14 September 2004. Afterwards, Leonida and Elizabeth wrote separate letters asking for the resolution of this case. Atty. Cendaa later filed an urgent motion to annotate attorneys lien on TCT Nos. 58999 and 59000. In its [14] Resolution dated 10 November 2004, the Court noted the notice of David Jr.s death, the letters written by Leonida and Elizabeth, and granted the motion to annotate attorneys lien on TCT Nos. 58999 and 59000.

The Ruling of the Court The petition is partly meritorious. The questions of whether Simona consented to the Deed of Sale and whether the subject sale was simulated are factual in nature. The rule is factual findings of the Court of Appeals are binding on this Court. However, there are exceptions, such as when the factual findings of the Court of Appeals and the trial court are contradictory, or when the evidence on record does not support the factual [15] findings. Because these exceptions obtain in the present case, the Court will consider these issues.

On the Requirement of the Wifes Consent We hold that the Court of Appeals erred when it declared the Deed of Sale void based on Article 166, which states: Art. 166. Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any real property of the conjugal partnership without the wifes consent. If she refuses unreasonably to give her consent, the court may compel her to grant the same. This article shall not apply to property acquired by the conjugal partnerships before the effective date of this Code. Article 166 expressly applies only to properties acquired by the conjugal partnership after the effectivity of the Civil Code of the Philippines (Civil Code). The Civil Code came into force on 30 August [16] 1950. Although there is no dispute that the Properties were conjugal properties of Mauricio and Simona, the records do not show, and the parties did not stipulate, when the Properties were [17] acquired. Under Article 1413 of the old Spanish Civil Code, the husband could alienate conjugal [18] partnership property for valuable consideration without the wifes consent. Even under the present Civil Code, however, the Deed of Sale is not void. It is well-settled that contracts alienating conjugal real property without the wifes consent are merely voidable under the Civil [19] Code that is, binding on the parties unless annulled by a competent court and not void ab initio. Article 166 must be read in conjunction with Article 173 of the Civil Code (Article 173). The latter prescribes certain conditions before a sale of conjugal property can be annulled for lack of the wifes consent, as follows: Art. 173. The wife may, during the marriage and within ten years from the transaction questioned, ask the courts for the annulment of any contract of the husband entered into without her consent, when such consent is required, or any act or contract of the husband which tends to defraud her or impair her interest in the conjugal partnership property. Should the wife fail to exercise this right, she or her heirs after the dissolution of the marriage, may demand the value of property fraudulently alienated by the husband. (Emphasis supplied) Under the Civil Code, only the wife can ask to annul a contract that disposes of conjugal real property without her consent. The wife must file the action for annulment during the marriage and within ten years from the questioned transaction. Article 173 is explicit on the remedies available if the wife fails to exercise this right within the specified period. In such case, the wife or her heirs can only demand the value of the property provided they prove that the husband fraudulently alienated the property. Fraud is [20] never presumed, but must be established by clear and convincing evidence. Respondents action to annul the Deed of Sale based on Article 166 must fail for having been filed out of time. The marriage of Mauricio and Simona was dissolved when Mauricio died in 1973. More than ten years have passed since the execution of the Deed of Sale. Further, respondents, who are Simonas heirs, are not the parties who can invoke Article 166. Article 173 reserves that remedy to the wife alone. Only Simona had the right to have the sale of the Properties annulled on the ground that Mauricio sold the Properties without her consent.

Simona, however, did not assail the Deed of Sale during her marriage or even after Mauricios death. The records are bereft of any indication that Simona questioned the sale of the Properties at any time. Simona did not even attempt to take possession of or reside on the Properties after Mauricios death. David Jr., who was raised by Simona, testified that he and Simona continued to live in Pasay City [21] after Mauricios death, while her children and other grandchildren resided on the Properties. We also agree with the trial court that Simona authorized Mauricio to dispose of the Properties when she executed the GPA. True, Article 1878 requires a special power of attorney for an agent to execute a contract that transfers the ownership of an immovable. However, the Court has clarified that Article 1878 [22] refers to the nature of the authorization, not to its form. Even if a document is titled as a general power of attorney, the requirement of a special power of attorney is met if there is a clear mandate from the [23] principal specifically authorizing the performance of the act. In Veloso v. Court of Appeals, the Court explained that a general power of attorney could contain a special power to sell that satisfies the requirement of Article 1878, thus: 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. 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. (Emphasis supplied) In this case, Simona expressly authorized Mauricio in the GPA to sell, assign and dispose of any and all of my property, real, personal or mixed, of any kind whatsoever and wheresoever situated, or any interest therein xxx as well as to act as my general representative and agent, with full authority to [25] buy, sell, negotiate and contract for me and in my behalf. Taken together, these provisions constitute a clear and specific mandate to Mauricio to sell the Properties. Even if it is called a general power of attorney, the specific provisions in the GPA are sufficient for the purposes of Article 1878. These provisions in the GPA likewise indicate that Simona consented to the sale of the Properties.
[24]

Whether the Sale of the Properties was Simulated or is Void for Gross Inadequacy of Price We point out that the law on legitime does not bar the disposition of property for valuable consideration to descendants or compulsory heirs. In a sale, cash of equivalent value replaces the [26] property taken from the estate. There is no diminution of the estate but merely a substitution in values. Donations and other dispositions by gratuitous title, on the other hand, must be included in the [27] computation of legitimes. Respondents, however, contend that the sale of the Properties was merely simulated. As proof, respondents point to the consideration of P1,000 in the Deed of Sale, which respondents claim is grossly inadequate compared to the actual value of the Properties. Simulation of contract and gross inadequacy of price are distinct legal concepts, with different effects. When the parties to an alleged contract do not really intend to be bound by it, the contract is [28] [29] simulated and void. A simulated or fictitious contract has no legal effect whatsoever because there is no real agreement between the parties. In contrast, a contract with inadequate consideration may nevertheless embody a true agreement between the parties. A contract of sale is a consensual contract, which becomes valid and binding upon [30] the meeting of minds of the parties on the price and the object of the sale. The concept of a simulated sale is thus incompatible with inadequacy of price. When the parties agree on a price as the actual [31] consideration, the sale is not simulated despite the inadequacy of the price. Gross inadequacy of price by itself will not result in a void contract. Gross inadequacy of price does not even affect the validity of a contract of sale, unless it signifies a defect in the consent or that the [32] parties actually intended a donation or some other contract. Inadequacy of cause will not invalidate a [33] contract unless there has been fraud, mistake or undue influence. In this case, respondents have not proved any of the instances that would invalidate the Deed of Sale. Respondents even failed to establish that the consideration paid by the vendees for the Properties was grossly inadequate. As the trial court pointed out, the Deed of Sale stipulates that, in addition to the payment of P1,000, the vendees should assume the mortgage loans from PNB and DBP. The consideration for the sale of the Properties was thus P1,000 in cash and the assumption of the P15,000 mortgage.

Respondents argue that P16,000 is still far below the actual value of the Properties. To bolster their [34] claim, respondents presented the following: (1) Tax Declarations No. A-001-00905 and A-001[35] 00906 for the year 1979, which placed the assessed value of the Properties at P70,020 and their approximate market value at P244,290; and (2) a certified copy of the Department of Finances [36] [37] Department Order No. 62-97 dated 6 June 1997 and attached guidelines which established the zonal value of the properties along Evangelista Street at P15,000 per square meter. The subject Deed of Sale, however, was executed in 1970. The valuation of the Properties in 1979 or 1997 is of little relevance to the issue of whether P16,000 was a grossly inadequate price to pay for the Properties in 1970. Certainly, there is nothing surprising in the sharp increase in the value of the Properties nine or twenty-seven years after the sale, particularly when we consider that the Properties are located in the City of Makati. More pertinent are Tax Declarations No. 15812 and No. 15813, both issued in 1967, presented by petitioners. These tax declarations placed the assessed value of both Properties atP16,160. Compared to this, the price of P16,000 cannot be considered grossly inadequate, much less so shocking [40] to the conscience as to justify the setting aside of the Deed of Sale. Respondents next contend that the vendees did not make the mortgage payments on the Properties. Respondents allege that the rents paid by the tenants leasing portions of the Properties were sufficient to cover the mortgage payments to DBP and PNB. Again, this argument does not help respondents cause. Assuming that the vendees failed to pay the full price stated in the Deed of Sale, such partial failure would not render the sale void. InBuenaventura [41] v. Court of Appeals, the Court held: xxx If there is a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the manner of payment, or even the breach of that manner of payment. xxx It is not the act of payment of price that determines the validity of a contract of sale. Payment of the price has nothing to do with the perfection of the contract. Payment of the price goes into the performance of the contract. Failure to pay the consideration is different from lack of consideration. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while the latter prevents the existence of a valid contract. (Emphasis supplied.) Neither was it shown that the rentals from tenants were sufficient to cover the mortgage payments. The parties to this case stipulated to only one tenant, a certain Federico M. Puno, who supposedly leased [42] a room on the Properties for P300 per month from 1992 to 1994. This is hardly significant, when we consider that the mortgage was fully paid by 1974. Indeed, the fact that the Properties were mortgaged to DBP and PNB indicates that the conjugal partnership, or at least Mauricio, was short of funds. Petitioners point out that they were duly employed and had the financial capacity to buy the [43] Properties in 1970. Respondents did not refute this. Petitioners presented 72 receipts showing the [44] mortgage payments made to PNB and DBP, and the Release of the Real Estate Mortgage (Mortgage Release) dated 5 April 1974. True, these documents all bear Mauricios name. However, this tends to support, rather than detract from, petitioner-vendees explanation that they initially gave the mortgage payments directly to Mauricio, and then later directly to the banks, without formally advising the bank of the sale. The last 3 mortgage receipts and the Mortgage Release were all issued in Mauricios name even after his death in 1970. Obviously, Mauricio could not have secured the Mortgage Release and made these last payments.
[38] [39]

Presumption of Regularity and Burden of Proof The Deed of Sale was notarized and, as certified by the Regional Trial Court of Manila, entered in the notarial books submitted to that court. As a document acknowledged before a notary public, the Deed [45] [46] of Sale enjoys the presumption of regularity and due execution. Absent evidence that is clear, [47] convincing and more than merely preponderant, the presumption must be upheld. Respondents evidence in this case is not even preponderant. Respondents allegations, testimony and bare denials cannot prevail over the documentary evidence presented by petitioners. These documents the Deed of Sale and the GPA which are both notarized, the receipts, the Mortgage Release and the 1967 tax declarations over the Properties support petitioners account of the sale. As the parties challenging the regularity of the Deed of Sale and alleging its simulation, respondents [48] had the burden of proving these charges. Respondents failed to discharge this burden. Consequentially, the Deed of Sale stands.

On the Partition of the Property Nevertheless, this Court finds it proper to grant the partition of the Properties, subject to modification.

Petitioners have consistently claimed that their father is one of the vendees who bought the Properties. Vendees Elizabeth and Ofelia both testified that the Roland A. Bravo in the Deed of Sale is [49] their father, although their brother, Roland Bravo, Jr., made some of the mortgage payments. [50] Petitioners counsel, Atty. Paggao, made the same clarification before the trial court. As Roland Bravo, Sr. is also the father of respondent Edward Bravo, Edward is thus a compulsory heir of Roland Bravo, and entitled to a share, along with his brothers and sisters, in his fathers portion of the Properties. In short, Edward and petitioners are co-owners of the Properties. As such, Edward can rightfully ask for the partition of the Properties. Any co-owner may demand at any time the partition of the common property unless a co-owner has repudiated the co[51] [52] ownership. This action for partition does not prescribe and is not subject to laches. WHEREFORE, we REVERSE the Decision of 21 December 2001 of the Court of Appeals in CAG.R. CV No. 67794. We REINSTATE the Decision of 11 May 2000 of the Regional Trial Court of Makati, Branch No. 139, in Civil Case No. 97-137, declaring VALID the Deed of Sale with Assumption of Mortgage dated 28 October 1970, with the following MODIFICATIONS: 1. We GRANT judicial partition of the subject Properties in the following manner: a. Petitioner LILY ELIZABETH BRAVO-GUERRERO is entitled to one-third (1/3) of the Properties; Petitioner OFELIA BRAVO-QUIESTAS is entitled to one-third (1/3) of the Properties; and The remaining one-third (1/3) portion of the Properties should be divided equally between the children of ROLAND BRAVO.

b. c.

2. The other heirs of ROLAND BRAVO must reimburse ROLAND BRAVO, JR. for whatever expenses the latter incurred in paying for and securing the release of the mortgage on the Properties. SO ORDERED. Davide, Jr., C.J., (Chairman), Quisumbing, Ynares-Santiago, and Azcuna, JJ., concur

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. L-32473 July 31, 1973 IGNACIO VICENTE and MOISES ANGELES, petitioners, vs. HON. AMBROSIO M. GERALDEZ, as Judge of the Court of First Instance of Bulacan, Branch V (Sta. Maria), and HI CEMENT CORPORATION, respondents G.R. No. L-32483 July 31, 1973 JUAN BERNABE, petitioner, vs. HI CEMENT CORPORATION and THE HON. AMBROSIO M. GERALDEZ, Presiding Judge, Branch V, Court of First Instance of Bulacan, respondents. Librado S. Correa for petitioners Ignacio Vicente and Moises Angeles. Francisco R. Capistrano and Andreciano F. Caballero for petitioner Juan Bernabe. Renato L. Cayetano and Jesus G. Diaz for respondent HI Cement Corporation.

ANTONIO, J.: There are two original actions of certiorari with prayer for preliminary injunction wherein petitioners seek to annul the orders dated April 24, May 18, and July 18, 1970 of respondent Judge of the Court of First Instance of Bulacan in Civil Case No. SM-201 (Hi Cement Corporation vs. Juan Bernabe, Ignacio Vicente and Moises Angeles). The two cases are herein decided jointly because they proceed from the same case and involve in substance the same question of law. On September 9, 1967 herein private respondent Hi Cement Corporation filed with the Court of First Instance of Bulacan a complaint for injunction and damages against herein petitioners Juan Bernabe, Ignacio Vicente and Moises Angeles. In said complaint the plaintiff alleged that it had acquired on October 27, 1965, Placer Lease Contract No. V-90, from the Banahaw Shale Mining Association, under a deed of sale and transfer which was duly registered with the Office of the Mining Recorder of Bulacan on November 4, 1965 and duly approved by the Secretary of Agriculture and Natural Resources on December 15, 1965; that the said Placer Lease Contract No. V-90 was for a period of twenty-five years commencing from August 1, 1960 and covered two mining claims (Red Star VIII & IX) with a combined area of about fifty-one hectares; that within the limits of Placer Mining Claim Red Star VIII are three parcels of land claimed by the defendants Juan Bernabe (about two hectares), Ignacio Vicente (about two hectares) and Moises Angeles (about one-fourth hectare); that the plaintiff had, on several occasions, informed the defendants, thru its representatives, of the plaintiff's acquisition of the aforesaid placer mining claims which included the areas occupied by them; that the plaintiff had requested the defendants to allow its workers to enter the area in question for exploration and development purposes as well as for the extraction of minerals therefrom, promising to pay the defendants reasonable amounts as damages, but the defendants refused to allow entry of the plaintiff's representatives; that the defendants were threatening the plaintiff's workers with bodily harm if they entered the premises, for which reason the plaintiff had suffered irreparable damages due to its failure to work on and develop its claims and to extract minerals therefrom, resulting in its inability to comply with its contractual commitments, for all of which reasons the plaintiff prayed the court to issue preliminary writs of mandatory injunction perpetually restraining the defendants and those cooperating with them from the commission or continuance of the acts complained of, ordering defendants to allow plaintiff, or its agents and workers, to enter, develop and extract minerals from the areas claimed by defendants, to declare the injunction permanent after hearing, and to order the defendants to pay damages to the plaintiff in the amount of P200,000.00, attorney's fees, expenses of litigation and costs. On September 12, 1967 the trial court issued a restraining order and required the defendants to file their answers. The defendants filed their respective answers, which contained the usual admissions and denials and interposed special and affirmative defenses, namely, among others, that they are rightful owners of certain portions of the land covered by the supposed mining claims of the plaintiff; that it was the plaintiff and its workers who had committed acts of force and violence when they entered into and intruded upon the defendants' lands; and that the complaint failed to state a cause of action. The defendants set up counterclaims against the plaintiff for actual and moral damages, as well as for attorney's fees. In another pleading filed on the same date, defendant Juan Bernabe opposed the issuance of a writ of preliminary mandatory or prohibitory injunction. In its Order dated September 30, 1967, the trial court, however, directed the issuance of a writ of preliminary mandatory injunction upon the plaintiff's posting of a bond in the

amount of P100,000.00. In its order, the court suggested the relocation of the boundaries of the plaintiff's claims in relation to the properties of the defendants, and to this end named as Commissioner, a Surveyor from the Office of the District Engineer of Bulacan to relocate the boundaries of the plaintiff's mining claims, to show in a survey plan the location of the areas thereof in conflict with the portions whose ownership is claimed by the defendants and to submit his report thereof to the court on or before October 31, 1967. The court also directed the parties to send their representatives to the place of the survey on the date thereof and to furnish the surveyor with copies of their titles. The Commissioner submitted his report to the Court on November 24, 1967 containing the following findings: 1. In the attached survey plan, the area covered and embraced full and heavy lines is the Placer Mining Claims of the Plaintiff containing an area of 107 hectares while the area bounded by fine-broken lines are the properties of the Defendants. 2. The property of the Defendant MOISES ANGELES, consisting of two (2) parcels known as Lot 1-B and Lot 2 of Psu-103374, both described in O.C.T. No. O-1769 with a total area of 34,984 square meters were totally covered by the Claims of the Plaintiff. 3. The property of the Defendant IGNACIO VICENTE, containing an area of 32,619 square meters, is also inside the Claims of the Plaintiff. 4. The property of the defendant JUAN BERNABE known as Psu-178969, described in O.C.T. No. 0-2050 is partially covered by the Claims of the Plaintiff and the area affected is 57,539 square meters. In an Order issued on December 14, 1967, the court approved the report "with the conformity of all the parties in this case." Thereafter, on April 2, 1968 plaintiff HI Cement Corporation filed a motion to amend the complaint "so as to conform to the facts brought out and/or impliedly admitted in the pre-trial. This motion was granted by the court on April 6, 1968. Accordingly, on October 21, 1968, the plaintiff filed its amended complaint. The amendments consisted in the statement of the correct areas of the land belonging to defendants Bernabe (57,539 square meters), Vicente (32,619 square meters) and Angles (34,984 square meters), as well as the addition of allegations to the effect, among others, that at the pre-trial the defendants Angeles and Vicente declared their willingness to sell to the plaintiff their properties covered by the plaintiff's mining claims for P10.00 per square meter, and that when the plaintiff offered to pay only P0.90 per square meter, the said defendants stated that they were willing to go to trial on the issue of what would be the reasonable price for the properties of defendants sought to be taken by plaintiff. With particular reference to defendant Bernabe, the amended complaint alleged that the said defendant neither protested against nor prohibited the predecessor-in-interest of the plaintiff from prospecting, discovering, locating and contracting minerals from the aforementioned claims, or from conducting the survey thereon, or filed any opposition against the application for lease by the Red Star Mining Association, and that as a result of the failure of said defendant to object to the acts of possession or occupation over the said property by plaintiff, defendant is now estopped from claiming that plaintiff committed acts of usurpation on said property. The plaintiff prayed the court, among other things, to fix the reasonable value of the defendants' properties as reasonable compensation for any resulting damage. Defendant Bernabe filed an amended answer substantially reproducing his original answer and denying the averments concerning him in the amended complaint. The respective counsels of the parties then conferred among themselves on the possibility of terminating the case by compromise, the defendants having previously signified their willingness to sell to the plaintiff their respective properties at reasonable prices. On January 30, 1969 the counsels of the parties executed and submitted to the court for its approval the following Compromise Agreement: COMPROMISE AGREEMENT COME NOW the plaintiff and the defendants, represented by their respective counsel, and respectfully submit the following agreement: 1. That the plaintiff is willing to buy the properties subject of litigation, and the defendants are willing to sell their respective properties; 2. That this Honorable Court authorizes the plaintiff and the defendants to appoint their respective commissioners, that is, one for the plaintiff and one for each defendant; 3. That the parties hereby agree to abide by the decision of the Court based on the findings of the Commissioners; 4. That the fees of the Commissioners shall be paid as follows: For those appointed by the parties shall be paid by them respectively; and for the one appointed by the Court, his fees shall be paid pro-rata by the parties;

5. That the names of the Commissioners to be appointed by the parties shall be submitted to the Court on or before February 8, 1969. WHEREFORE, the undersigned respectfully pray that the foregoing agreement be approved. Sta. Maria, Bulacan, January 30, 1969. For the Plaintiff: (Sgd. ) FRANCI SCO VENTU RA t/ FRANCI SCO VENTU RA. (Sgd.) FLORE NTINO V. CARDE NAS t/ FLORE NTINO V. CARDE NAS (Sgd.) ENRIQ UETO I. MAGPA NTAY t/ ENRIQ UETO I. MAGPA NTAY For Juan Bernabe: (Sgd.) ANDRE CIANO F. CABAL LERO t/ ANDRE CIANO F. CABAL LERO For Ignacio Vicente and Moises Angeles: (Sgd.) CONRA DO MANZA NO t/ CONRA DO MANZA NO

The Clerk of Court CFI, Sta. Maria, Bulacan GREETINGS: Please submit the foregoing Compromise Agreement to the Honorable Court for the consideration and approval immediately upon receipt hereof. VENTURA, CARDENAS & MAGPANTAY By: (Sgd.) FRANCISCO VENTURA t/ FRANCISCO VENTURA On the same date, the foregoing Compromise Agreement was approved by the trial court, which enjoined the parties to comply with the terms and conditions thereof. Pursuant to the terms of the said compromise agreement the counsels of both parties submitted the names of the persons designated by them as their respective commissioners, and in conformity therewith, the trial court, in its Order dated February 26, 1969, appointed the following as Commissioners: Mr. Larry G. Marquez, to represent the plaintiff; Mr. Demetrio M. Aquino, to represent defendant Bernabe; Mr. Moises Correa, to represent defendant Angeles; Mr. Santiago Cabungcal, to represent defendant Vicente; and Mr. Liberato Barrameda, to represent the court, and directed that said Commissioners should appear before the court on March 17, 1969, to take their oath and qualify as such Commissioners, and then meet on March 31, 1969 in the court for their first session and to submit their report not later than April 30, 1969. On September 15, 1969, Commissioner Liberato Barrameda submitted to the court for its approval a Consolidated Report, containing the three reports of the Commissioners of the plaintiff and the three defendants, together with an analysis of the said reports and a summary of the important facts and conclusions. The following unit prices for the three defendants' properties were recommended in the Consolidated Report: A JUAN BERNABE at P12.00 per square meter, wherefrom plaintiff has been extracting its first output, and would still continue to extract therefrom as the property consists of a mountain of limestone and shale; B IGNACIO VICENTE: a) 60% or 19,571.4 sq. m. (mineral land) at P12.00 per sq. m. b) 40% or 13,047.6 sq. m. (riceland) at P8.00 per sq. m. C MOISES ANGELES (riceland) at P8.00 per sq. m. It is worthy of note that in the individual report of the Commissioner nominated by plaintiff HI Cement Corporation, the price recommended for defendant Juan Bernabe's property was P0.60 per square meter, while in the individual report of the Commissioner nominated by the said defendant, the price recommended was P50.00 per square meter. The Commissioners named by defendants Vicente and Angeles recommended was P15.00 per square meter for the lands owned by the said two defendants, while the Commissioners named by the said two defendants, while the Commissioner named by the plaintiff recommended P0.65 per square meter for Vicente's land, and P0.55 per square meter for Angeles' land. On October 21, 1969, Atty. Francisco Ventura, one of the three lawyers for plaintiff HI Cement Corporation, filed with the trial court a manifestation stating that on September 1, 1969 he sent a copy of the Compromise Agreement to Mr. Antonio Diokno, President of the corporation, requesting the latter to intercede with the Board of Directors for the confirmation or approval of the commitment made by the plaintiff's lawyers to abide by the decision of the Court based on the reports of the Commissioners; and that on October 15, 1969 he received a letter from Mr. Diokno, a copy of which was attached to the manifestation. In that letter Mr. Diokno said: While I realize your interest in cooperating with the Court in its desire to expedite the disposition of the case, this commitment would deprive us of the right to appeal if we do not agree with the valuation set by the Court. Our Board, therefore, cannot waive its rights; only when it knows the value set by the Court on the properties can it decide whether to abide by it or appeal therefrom. I would like to stress that, under the law, the compromise agreement requires the express approval of our Board of Directors to be binding on our corporation. Such an approval, I regret to say, cannot be obtained at this time. On November 5, 1969, defendant Bernabe filed an answer to Atty. Ventura's manifestation, praying the court to ignore, disregard and, if possible, order striken from the record, the plaintiff's manifestation on the following grounds: that its filing after the Consolidated Report of the Commissioners had been submitted and approved, and long after the signing of the Compromise Agreement on January 30, 1969, cast suspicion on the sincerity of the plaintiff's motive; that when the Compromise Agreement was being considered, the court inquired from the parties and their respective lawyers if all the attorneys appearing in the case had been duly authorized

and/or empowered to enter into a compromise agreement, and the three lawyers for the plaintiff answered in the affirmative; that in fact it was Atty. Ventura himself who prepared the draft of the Compromise Agreement in his own handwriting and was the first to sign the agreement; that one of the three lawyers for the plaintiff, Atty. Florentino V. Cardenas, who also signed the Compromise Agreement, was the official representative, indeed was an executive official, of plaintiff corporation; that the Compromise Agreement, having been executed pursuant to a pre-trial conference, partakes the nature of a stipulation of facts mutually agreed upon by the parties and approved by the court, hence, was binding and conclusive upon the parties; and that the nomination by the plaintiff of Mr. Larry G. Marquez as its Commissioner pursuant to the Compromise Agreement, was a clear indication of the plaintiff's tacit approval of the terms and conditions of the Compromise Agreement, if not an implied ratification of Atty. Ventura's acts. On March 13, 1970 the court rendered a decision in which the terms and conditions of the Compromise Agreement are reproduced, and the Consolidated Report of the Commissioners is extensively quoted. The rationale and dispositive portion of the decision read: What is fair and just compensation? "Just compensation includes all elements of value that inheres in the property, but it does not exceed market value fairly determined. The sum required to be paid the owner does not depend upon the usage to which he has devoted his land but is to be arrived at upon just consideration of all the uses for which it is suitable. The highest and most profitable use for which the property is adoptable and needed or likely to be needed in the reasonably near future is to be considered, not necessarily as the measure of value, but to the full extent that the prospect of demand for such use affects the market value while the property is privately held." The term fair and just compensation as applied in expropriation or eminent domain proceedings need not necessarily be applied in the present case. In expropriation proceedings the government is the party involved and its use is for public purpose. In the instant case, however, private parties are involved and the use of the land is a private venture and for profit. It appears that defendants' properties are practically adjacent to plaintiff's plant site. It also appears that practically all the surrounding areas were acquired by the plaintiff by purchase. In the report submitted by the commissioner representing the plaintiff, it is claimed that the surrounding areas were acquired thru purchase by the plaintiff in the amount of less than P1.00 per square meter. On the other hand, it appears from the reports submitted by the commissioners representing the defendants that there were some recorded sales around the area from P20.00 to P25.00 per square meter and there were subdivision lots which command even higher prices. The properties are reported to consist of mineral land which are rocky and barren containing limestone and shale. From viewpoint of the owners their property which is described as rocky and barren mineral land must necessarily command a higher price, and this Court believes that the plaintiff will adopt the same attitude from the viewpoint of its business. While it may be true that the plaintiff acquired properties within the area in question at a low price, we cannot overlook the fact that this was so at the time when plaintiff corporation was not yet in operation and that the land owners were not as yet aware of the potential value of their landholdings. Irrespective of the different classifications of the properties owned by the defendants, and considering the benefits that will enure to the plaintiff and bearing in mind the property rights and privileges to which the property owners are entitled both under the constitution and the mining law, coupled with the fact that the plaintiff had already taken advantage of the properties even long before the rightful acquisition of the same, this Court believes that the just and fair market value of the land should be in the amount P15.00 per square meter. In view of the above findings, the plaintiff pursuant to the compromise agreement, is hereby ordered to pay the defendants the amount of P15.00 per square meter for the subject properties, and upon full payment, the restraining order earlier issued by this Court shall be deemed lifted. On March 23, 1970 defendant Juan Bernabe filed an urgent motion for execution of judgment anchored on the proposition that the judgment, being based on a compromise agreement, is not appealable and is, on the other hand, immediately executory. The other two defendants, Moises Angeles and Ignacio Vicente, likewise filed their respective motions for execution. These motions were granted by the court in its Order of April 14, 1970. On April 17, 1970 the plaintiff filed a motion for reconsideration of the April 14, 1970 Order, alleging that it had an opposition to the defendants' motions for execution, and that the Compromise Agreement had been repudiated by the plaintiff corporation through its Vice President, as earlier manifested by the plaintiff. The plaintiff prayed for ten days from the date of the hearing of the motion within which to file its written opposition to the motions for execution. Defendant Juan Bernabe filed an opposition to the plaintiff's motion on April 21, 1970.

On April 22, 1970 the plaintiff filed with the court a motion for new trial on the ground that the decision of the court dated March 13, 1970 is null and void because it was based on the Compromise Agreement of January 30, 1969 which was itself null and void for want of a special authority by the plaintiff's lawyers to enter into the said agreement. The plaintiff also prayed that the decision dated March 13, 1970 and the Order dated April 14, 1970 granting the defendants' motions for execution, be set aside. Defendant Juan Bernabe filed on April 27, 1970 an opposition to the plaintiff's motion on the grounds that the decision of the court is in accordance with law, for three lawyers for the plaintiff signed the Compromise Agreement, and one of them, Atty. Cardenas, was an official representative of plaintiff corporation, hence, when he signed the Compromise Agreement, he did so in the dual capacity of lawyer and representative of the management of the corporation; that the plaintiff itself pursued, enforced and implemented the agreement by appointing Mr. Larry Marquez as its duly accredited Commissioner; and that the plaintiff is conclusively bound by the acts of its lawyers in entering into the Compromise Agreement. In the meantime, or on April 24, 1970, the court issued an Order setting aside its Order of April 14, 1970 under which the defendants' motions for execution of judgment had been granted, and gave the plaintiff ten days within which to file an opposition to the defendants' motions for execution. On May 9, 1970 the plaintiff filed an opposition to the motions for execution of judgment, on the grounds that the decision dated March 13, 1970 is contrary to law for it is based on a compromise agreement executed by the plaintiff's lawyers who had no special power of attorney as required by Article 1878 of the Civil Code, or any special authority as required by Section 23, Rule 138 of the Rules of Court; and that the judgment is void for lack of jurisdiction of the court because the same is based on a void compromise agreement. On May 18, 1970 the court issued an Order setting aside its decision dated March 13, 1970, denying the defendants' motions for execution of judgment, and setting for June 23, 1970 a pre-trial conference in the case. The three defendants moved for reconsideration, but their motions were denied in an Order dated July 18, 1970. It is in these factual premises that the defendants in Civil Case No. SM-201 came to this Court by means of the present petitions. In G.R. No. L-32473, petitioners Vicente and Angeles pray this Court to issue a writ of preliminary injunction, and, after hearing, to annul and set aside the Order dated May 18,1970 issued by respondent Judge setting aside the decision dated March 13, 1970; to declare the said decision legal, effective and immediately executory; to dissolve the writ of preliminary mandatory injunction issued by respondent Judge on September 30, 1967 commanding petitioners to allow private respondent to enter their respective properties and excavate thereon; to make the preliminary injunction permanent; and to award treble costs in favor of petitioners and against private respondent. In G.R. No. L-32483, petitioner Juan Bernabe prays this Court to issue a writ of preliminary injunction or, at least a temporary restraining order, and, after hearing, to annul and set aside the Order dated April 24, 1970 issued by respondent Judge setting aside his Order of April 14, 1970 and allowing private respondent to file an opposition to petitioners' motion for execution, the Order dated May 18, 1970, and the Order dated July 18, 1970. Petitioner Bernabe also seeks the reinstatement of the trial court's decision dated May 13, 1970 and its Order dated April 14, 1970 granting his motion for execution of judgment, and an award in his favor of attorney's fees and of actual, moral and exemplary damages. At issue is whether the respondent court, in setting aside its decision of March 13, 1970 and denying the motions for execution of said decision, had acted without or in excess of its jurisdiction or with grave abuse of discretion. We hold that said court did not, in view of the following considerations: 1. Special powers of attorney are necessary, among other cases, in the following: to compromise and to renounce the right to appeal from a judgment. 1 Attorneys have authority to bind their clients in any case by any agreement in relation thereto made in writing, and in taking appeals, and in all matters of ordinary judicial procedure, but they cannot, without special authority, compromise their clients' litigation, or receive anything in discharge of their clients' claims but the full amount in cash. 2 The Compromise Agreement dated January 30, 1969 was signed only by the lawyers for petitioners and by the lawyers for private respondent corporation. It is not disputed that the lawyers of respondent corporation had not submitted to the Court any written authority from their client to enter into a compromise. This Court has said that the Rules 3 "require, for attorneys to compromise the litigation of their clients, a special authority. And while the same does not state that the special authority be in writing the court has every reason to expect that, if not in writing, the same be duly established by evidence other than the self-serving assertion of counsel himself that such authority was verbally given him." 4 2. The law specifically requires that "juridical persons may compromise only in the form and with the requisites which may be necessary to alienate their property." 5 Under the corporation law the power to compromise or settle claims in favor of or against the corporation is ordinarily and primarily committed to the Board of Directors. The right of the Directors "to compromise a disputed claim against the corporation rests upon their right to manage the affairs of the corporation according to their honest and informed judgment and discretion as to what is for the best interests of the corporation." 6 This power may however be delegated either expressly or impliedly to other corporate officials or agents. Thus it has been stated, that as a general rule an officer or agent of the corporation has no power to compromise or settle a claim by or against the corporation, except to the extent that such power is given to him either expressly or by reasonable implication from the circumstances. 7 It is therefore necessary to ascertain whether from the relevant facts it could be reasonably concluded that the Board of Directors of the HI Cement Corporation had authorized its lawyers to enter into the said compromise agreement.

Petitioners claim that private respondent's attorneys admitted twice in open court on January 30, 1969, that they were authorized to compromise their client's case, which according to them, was never denied by the said lawyers in any of the pleadings filed by them in the case. The claim is unsupported by evidence. On the contrary, in private respondent's "Reply to Defendant Bernabe's Answer Dated November 8, 1969," said counsels categorically denied that they ever represented to the court that they were authorized to enter into a compromise. Indeed, the complete transcript of stenographic notes taken at the proceedings on January 30, 1969 are before Us, and nowhere does it appear therein that respondent corporation's lawyers ever made such a representation. In any event, assuming arguendo that they did, such a self-serving assertion cannot properly be the basis for the conclusion that the respondent corporation had in fact authorized its lawyers to compromise the litigation. 3. Petitioners however insist that there was tacit ratification on the part of the corporation, because it nominated Mr. Larry Marquez as its commissioner pursuant to the agreement, paid his services therefor, and Atty. Florentino V. Cardenas, respondent corporation's administrative manager, not only did not object but even affixed his signature to the agreement. It is also argued that respondent corporation having represented, through its lawyers, to the court and to petitioners that said lawyers had authority to bind the corporation and having induced by such representations the petitioners to sign the compromise agreement, said respondent is now estopped from questioning the same. The infirmity of these arguments is in their assumption that Atty. Cerdenas as administrative manager had authority to bind the corporation or to compromise the case. Whatever authority the officers or agents of a corporation may have is derived from the board of directors, or other governing body, unless conferred by the charter of the corporation. A corporation officer's power as an agent of the corporation must therefore be sought from the statute, the charter, the by-laws, or in a delegation of authority to such officer, from the acts of board of directors, formally expressed or implied from a habit or custom of doing business. 8 In the case at bar no provision of the charter and by-laws of the corporation or any resolution or any other act of the board of directors of HI Cement Corporation has been cited, from which We could reasonably infer that the administrative manager had been granted expressly or impliedly the power to bind the corporation or the authority to compromise the case. Absent such authority to enter into the compromise, the signature of Atty. Cardenas on the agreement would be legally ineffectual. 4. As regards the nomination of Mr. Marquez as commissioner, counsel for respondent corporation has explained and this has not been disproven that Atty. Cardenas, apparently on his own, submitted the same to the court. There is no iota of proof that at the time of the submission to the Court, on February 26, 1969, of the name of Mr. Marquez, respondent corporation knew of the contents of the compromise agreement. As matter of fact, according to the manifestation of Atty. Ventura to the court, it was only on September 1, 1969 that he sent to Mr. Antonio Diokno, Vice-President of the corporation, a copy of the compromise agreement for the approval by the board of directors and on October 22, 1969, Mr. Diokno informed him that the approval of the Board cannot be obtained, as under the agreement the corporation is deprived of its right to appeal from the judgement. In the absence of any proof that the governing body of respondent corporation had knowledge, either actual or constructive, or the contents of the compromise agreement before September 1, 1969, why should the nomination of Mr. Marquez as commissioner, by Attys. Ventura, Cardenas and Magpantay, on February 26, 1969, be considered as a form of tacit ratification of the compromise agreement by the corporation? In order to ratify the unauthorized act of an agent and make it binding on the corporation, it must be shown that the governing body or officer authorized to ratify had full and complete knowledge of all the material facts connected with the transaction to which it relates. 9 It cannot be assumed also that Atty. Cardenas, as administrative manager of the corporation, had authority to ratify. For ratification can never be made "on the part of the corporation by the same persons who wrongfully assume the power to make the contract, but the ratification must be by the officer or governing body having authority to make such contract and, as we have seen, must be with full knowledge." 10 5. Equally inapposite is petitioners' invocation of the principle of estoppel. In the case at bar, except those made by Attys. Ventura, Cardenas and Magpantay, petitioners have not demonstrated any act or declaration of the corporation amounting to false representation or concealment of material facts calculated to mislead said petitioners. The acts or conduct for which the corporation may be liable under the doctrine of estoppel must be those of the corporation, its governing body or authorized officers, and not those of the purported agent who is himself responsible for the misrepresentation. 11 It having been found by the trial court that "the counsel for the plaintiff entered into the compromise agreement without the written authority of his client and the latter did not ratify, on the contrary it repudiated and disowned the same ...", 12 We therefore declare that the orders of the court a quo subject of these two petitions, have not been issued in excess of its jurisdictional authority or in grave abuse of its discretion. WHEREFORE, the petitions in these two cases are hereby dismissed. Costs against the petitioners. Makalintal, Actg. C.J., Castro, Teehankee, Barredo, Makasiar and Esguerra, JJ., concur. Zaldivar, J., is on leave. Fernando, J., took no par

St. Marys Farm, Inc. v. Prima Real PropertiesNachura, J.July 31, 2008 Facts: St. Marys was the registered owner of an originally 25,598 sqm of land in Las Pinas under TCTS-1648. In compliance with a final court decision in another civil case, St. Marys passed and approved in1988 a board resolution authorizing defendant Rodolfo Agana to cede to T.S. Cruz Subdivision4,000 sqm of the abovementioned land. Agana did not return to plaintiff the said title. Instead, allegedly forged a board resolution of St.Marys authorizing Agana to sell the remaining 21,598 sqm of land. This board resolution wasduly notarized. Agana was also with a Special Power of Attorney when it dealt with T.S. Cruz andPrima Real Properties. Eventually, a d e e d o f a b s o l u t e s a l e w a s s i g n e d b y A g a n a a n d P r i m a R e a l P r o p e r t i e s transferring ownership of the land from St. Marys to Prima. Prima effected the cancellation of TCT S-1648 in the name of St. Marys and another TCT T-6175in its name was issued by the Registry of deeds, Villanueva. Prima purchased from T.S. Cruz Subdivision the 4,000 sqm portion of the land. St. Marys filed an action for rescission of the sale and the reconveyance of the property.According to St. Marys:1.Sale of the realty entered into between Agana and Prima is null and void for lack of authority onthe part of Agana to sell the property.2.The board resolution allegedly granting Agana the authority to sell in behalf of the company, ascertified by Corp. Secretary Agcaoili is a forgery as no board meeting was held on June 27, 1988;t h e s a i d d o c u m e n t w a s m e r e l y p r e s e n t e d t o t h e n o t a r y p u b l i c f o r n o t a r i z a t i o n w i t h o u t A t t y . Agcaoili appearing before him.3.Consequently, the deed of absolute sale was void for being a result of a fraudulent transaction. Prima contends:1.It acted in good faith when it relied solely on the face of the authorization of Agana and paid in full the purchase price of P2,567,760.00 making it a buyer in good faitgh and for value. 2. Even assuming that the authorization of Agana was forged, St. Marys, through its president,accepted and received part of the purchase price knowing fully well the same to be the proceedsof the sale of the property, St. Marys is now estopped from asking for rescission. FIRSTISSUE:1 . W h e t h e r o r n o t P r i m a w a s a b u y e r i n b a d f a i t h HELD:No, Prima was a buyer in good faith and for value.On the basis of the board resolution, Prima had every reason to rely on Aganas authority to sellthe land. A buyer for value and in good faith is one who buys property of another, without notice that some other person has a right or interest in such property and pays full and fair pricefor the same, at the same time of such purchase, or before he has notice of the s aidclaim or interest. To prove good faith, a buyer of registered and titled land need onlyshow that he relied on the face of the title of the property. Sufficient that the following conditions concur:a . T h e s e l l e r i s t h e r e g i s t e r e d o w n e r o f t h e l a n d b . O w n e r h a s p o s s e s s i o n o f t h e l a n d c.At the time of the sale, the buyer was not aware of any claim or interest of some other person in the property, or of any defect or restriction in the title of the seller or in his capacity to convey title to the propertyAll the three conditions are present in the case.1.Prima exerted efforts to verify the true background of the subject land

2.Agana presented to Prima the notarized board resolution, separate Certification by St. Marys president authorizing Agana to sell the land, and a TCT of the property SECOND ISSUE: Whether or not Agana was authorized to sell the subject property. HELD:Y e s , A g a n a h a d t h e a u t h o r i t y t o s e l l t h e s u b j e c t p r o p e r t y b y v i r t u e o f t h e n o t a r i z e d b o a r d resolution and the Special Power of Attorney.RATIO:The document under scrutiny is a special power of attorney that is duly notarized. It is a publicdocument where the notarial acknowledgement is prima facie evidence of the fact of its due execution. Abuyer presented with such a document would have no choice between knowing and finding out whether aforger lurks beneath the signature on it. The notarial acknowledgment has removed that choice from himreplacing it with a presumption sanctioned by law that the affiant appeared before the notary public andacknowledged that he executed the document, understood its import and signed it. The buyer is given theluxury to rely on the presumption of regularity of a duly notarized SPA.Prima also relied on the confirmation and certification of the Register of Deeds of Las Pinas andM r . T . S . C r u z . W h e n A g a n a f i r s t s o l d t h e 4 , 0 0 0 s q m p o r t i o n t o T . S . C r u z , h e s h o w e d a s i m i l a r authorization by the petitioner which was also signed by the corporate secretary, Atty. Agcaoili. Aganaacted as St. Marys authorized agent and had full authority to bind the company in that firsttransaction with Cruz. The board resolution also negates the assertion by St. Marys that Aganas authority was onlylimited to negotiate and not to sell. The resolution further averred that Agana was authorized andempowered to sign any and all documents, instruments, papers or writings which may be requiredand necessary for this purpose to bind the corporation in this undertaking.

The certification of St.Marys president also attests to this fact. W ith this, Agana, undeniably had the authority to cede thesubject property, carrying with it all the concomitant powers necessary to implement said transaction

Strong v. Gutierrez Repide (MAI) February 21, 1912 Moreland, J. FACTS: Prior to October 10, 1903, the plaintiff, Eleanor Erica Strong, was the owner of 800 shares of the capital stock of the Philippine Sugar Estates Development Company, Limited, of the par value of P100 each. On October 10, 1903, the defendant, Francisco Gutierrez Repide, by means subsequently found and adjudged to have been fraudulent, obtained possession of said shares and thereafter alleged to be the owner thereof. The CFI of Manila subsequently held that the sale of these shares was made without the authority of Mrs. Strong, that she never ratified the sale but repudiated it as soon as she learned of it, that this sale was induced by fraud on the part of the defendant, and therefore was a fraudulent sale. This judgment was, on appeal to the Supreme Court of the Philippine Islands, reversed, and plaintiff's complaint dismissed on the merits. Thereupon, plaintiff prosecuted an appeal to the Supreme Court of the United States, which court, on the 3rd of May, 1909, rendered its judgment, reversing the decision of the Supreme Court of the Philippine Islands and affirming the judgment of the trial court. From the 10th day of October, 1903, the date of the said fraudulent purchase by the defendant, until the 27th day of July, 1909, the defendant retained said shares in his possession or under his control and after the rendition of said judgment of April 29, 1904, collected the dividends earned by said shares for the years 1905, 1906, 1907, and 1908 at the rate of 6 per cent per annum, amounting to a total of P19,200, which sum the defendant retained and refused to pay over to the plaintiff. ISSUE: Whether or not the agreement entered into.

between him and the plaintiff through her counsel released him from all responsibility in connection with the transaction relating to the stock HELD: NO. There is nothing in the written discharge which could properly be given the legal effects which the appellant in this case assigns to it. It is a discharge of a judgment and nothing more. Being such, it reaches no further than the terms of the judgment itself. It is to be presumed that an instrument satisfying a debt or obligation manifested in another instrument extends no further than the terms of the instrument which manifests the obligation to be discharged, unless, from the terms of the instrument, it is clear that the parties intended something more. So far as the record discloses, at the time this satisfaction was executed nothing whatever occurred between the parties relative to the dividends on the stock which formed the subject-matter of that judgment, nor did anything transpire as to any other relations between the parties than those embraced within the judgment itself. There was nothing in the conduct of the parties, or in their relations or attitudes, from which it could be implied or inferred that they were dealing with aught else than the judgment itself. There is no basis, then, for the contention of the appellant unless it be found in the wording of that instrument itself. 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 on behalf of the principal. Except as may be required by statute, a power of attorney is valid although no notary public intervened in its execution.

PNB v. Paz Agudelo y Gonzaga, et al. (MAI) Villareal, J. Facts: On November 9, 1920, Paz Agudelo y Gonzaga executed in favor of her nephew, Mauro A. Garrucho, a document conferring upon him a special power of attorney sufficiently broad in scope to enable him to sell, alienate and mortgage in the manner and form he might deem convenient, all her real estate situated in the municipalities of Murcia and Bacolod, Occidental Negros, consisting in lots Nos. 61 and 207 of the cadastral survey of Bacolod, Occidental Negros, together with the improvement thereon. On December 22, 1920, Amparo A. Garrucho executed a document whereby she conferred upon her brother Mauro A Garrucho a special power of attorney sufficiently broad in scope to enable him to sell, alienate, mortgage or otherwise encumber, in the manner and form he might deem convenient, all her real estate situated in the municipalities of Murcia and Bago, Occidental Negros. Nothing in the aforesaid powers of attorney expressly authorized Mauro A. Garrucho to contract any loan nor to constitute a mortgage on the properties belonging to the respective principals, to secure his obligations. Subsequently, Mauro A. Garrucho executed in the favor of the Philippine National bank several mortgages on Agudelos properties to secure the payment of credits, loans, commercial overdrafts, etc., together with interest thereon, which he might obtain from the bank, issuing the corresponding promissory notes to that effect. The mortgage deeds, as well as the corresponding promissory notes, were executed in Mauro A. Garrucho's own name and signed by him in his personal capacity, authorizing the mortgage creditor, the Philippine National Bank, to take possession of the mortgaged properties, by means of force if necessary, in case he failed to comply

with any of the conditions stipulated therein Issue: Whether or not Garrucho acted within the authority given to him in obtaining the mortgages Held: NO. A promissory note and two mortgages executed by the agent for and on behalf of his principal, in accordance with a power of attorney executed by the principal in favor of the agent, are valid, and as provided by article 1727 of contracted by the agent; but a mortgage on real property of the principal not made and signed in the name of the principal is not valid as to the principal. The records do not show that the loan obtained by Mauro A. Garrucho, evidenced by the promissory note, was for his principal Paz Agudelo y Gonzaga. The special power of attorney, does not authorize Mauro A. Garrucho to constitute a mortgage on the real estate of his principal to secure his personal obligations. Therefore, in doing so by virtue of the document, he exceeded the scope if his authority and his principal is not liable for his acts.

Tan Tiong Teck v. SEC (REG) Avancea 1939 FACTS: Tan Tiong Gong purchased and sold shares of stock through respondent Cua Oh & Co. as his broker. It was alleged that the respondent purchased shares of stock for P3,649.86 and sold others for P2,385, without the consent or authority of the petitioner ISSUE: WON transactions effected by the respondent are null and void with respect to the petitioner because they were not consented or authorized by the latter. RULING: NO. The Securities and Exchange Commission, after going into evidence, reached the conclusion that the petitioner failed to establish his contention. The appeal from the resolution of the Commission is based upon a pure question of fact, and the factual findings of the commission is final under section 35 of Commonwealth Act No. 83.

Bay View Hotel v. Ker & Co., and Phoneix Assurance Co. Ltd. (ABBY) Facts: Bay View Hotel secured a fidelity guarantee bond from Ker & Co., Ltd., for its accountable employees against acts of fraud and dishonesty whose principal is Phoenix Assurance. One of the EES, Tomas E. Ablaza, while acting in his capacity as cashier, was discovered by plaintiff-appellant to have had a cash shortage and unremitted collections in the total amount of P42,490.95, it filed claims for payments on the said fidelity guarantee bond but Ker & Co. denied and refused indemnification and payment. To enforce its claims, Bay View instituted its complaint at the TC Ker & Co. justified its denial of the claims of plaintiff-appellant on various reasons, such as non-compliance with the conditions stipulated in the insurance policy; non-presentation of evidence regarding the various charges of dishonesty and misrepresentation against Tomas E. Ablaza and non-production of the documents to prove the alleged loss. Ker & Co. likewise averred that it was merely an agent and- as such it was not liable under the policy. (Guys this is procedure so its sort of complicated if we are not there yet) Ker filed a request for admission that it was Phoenix Assurance that actually issued and renewed the policy, and later denied the claim. When Bay View failed to make any answer to the request for admission within the period prescribed by the rules, Ker & Co. filed a Motion to Dismiss on Affirmative Defense, dated July 6, 1966, insisting that since under Sec. 2, Rule 26 of the Rules of Court, plaintiffappellant was deemed to have impliedly admitted each of the matters enumerated in the request for admission, it followed that the proper party in interest against whom plaintiff-appellant might have a claim was the principal Phoenix Assurance Co. (Phoenix) and not the agent Ker & Co. Bay View filed an opposition arguing that the proper remedy, under the circumstances was not to dismiss the complaint but to amend it in order to bring the necessary or indispensable parties to the suit. Ker & Co. filed a reply to the opposition reiterating its stand that since it merely acted as an agent, the case should be dismissed and plaintiff-appellant should file the necessary action against the principal Phoenix. Plaintiff. Bay View filed a Motion for Leave to Admit Amended Complaint, attaching copy of the complaint, as amended, this time impleading Phoenix as party defendant. On August 16, 1966, Ker filed their joint answer to the amended complaint. Again, Ker & Co., Ltd., argued that it was merely an agent and therefore not liable under the policy. On the other hand, Phoenix, averred that under Condition 8 of the insurance policy, plaintiffappellant was deemed to have abandoned its claim in view of the fact that it did not ask for an arbitration of its claim within twelve (12) months from June 22, 1965 the date of receipt of the denial of the claim. Issue: WoN the TC was right to dismiss the case

against both Ker & Co., and Phoenix Assurance 49 . Held: Dismissed against Ker & Co. Remanded as to Phoenix Assurance Admission is in the nature of evidence and its legal effects were already part of the records of the case and therefore could be availed of by any party even by one subsequently impleaded. The amendment of the complaint per se cannot set aside the legal effects of the request for admission since its materiality has not been affected by the amendment. If a fact is admitted to be true at any stage of the proceedings, it is not stricken out through the amendment of the complaint. To allow a party to alter the legal effects of the request for admission by the mere amendment of a pleading would constitute a dangerous and undesirable precedent. The legal effects of plaintiff- appellant's failure to answer the request for admission could and should have been corrected below by its filing a motion to be relieved of the consequences of the implied admission with respect to respondent Phoenix. Since an agent may do such acts as may be conducive to the accomplishment of the purpose of the agency, admissions secured by the agent within the scope of the agency ought to favor the principal. This has to be the rule, for the act or declarations of an agent of the party within the scope of the agency and during its existence are considered and treated in turn as the declarations, acts and representations of his principal and may be given in evidence against such party. But the motion for summary judgment was filed after the complaint had been amended and answer thereto had been filed. The issues, therefore, with respect to Phoenix had already been likewise joined. Moreover, a reading of the said motion for summary judgment, more particularly the prayer thereof, shows that Phoenix did join Ker & Co. in moving for the dismissal of the case and prayed "that the present action be dismissed as against Ker & Co., Ltd., because being purely and simply the agent of the insurer, it is not liable under the policy and as against the Phoenix Assurance Co., Ltd. because by failing to seek an arbitration within twelve months from the date of its receipt of the denial of its claim on June 22, 1965, plaintiff Bay View Hotel, Inc., is deemed under condition 8 of ,, the policy, to have abandoned its claim against said defendant phoenix Assurance Co., Ltd." But under Condition 8, arbitration is only as to amount of the claim so the Court held that the action may proceed against Phoenix. As to appellee Ker & Co., Ltd., however, there appears to be no serious contradiction as to the fact that it merely acted as the agent of its principal, Phoenix. Considering that there was full disclosure of such agency since the insurance policy was actually issued by Phoenix, We find no error in the dismissal of the case against said defendant Ker & Co., Ltd.

Ang v Fulton Fire Insurance (JANCES) Facts: Sally Ang insured her P & S Department Store to Fulton Fire Insurance. Her store consisted mainly of dry goods. Soon after, the goods were destroyed by fire. The plaintiffs executed a claim form. Their claim was however denied subsequent to the filing of charge for arson against Paulo Ang. There received the denial of the claim on April 19, 1956. Mr. Ang was, however, acquitted of the crime. The spouses Ang, then brought an action against the Paramount Surety & Insurance Company on May 11, 1956. It was dismissed without prejudice on September 3, 1957. They then brought an action against Fulton Fire Insurance on May 5, 1958. Fulton Fire Insurance alleges that since paragraph 13 of the policy states that if the claim is made and rejected but no action is commenced within 12 months after such rejection, all benefits under the policy would be forfeited, the spouses Ang can no longer claim the benefits of the policy. Ruling: CFI Plaintiffs committed a procedural mistake in first suing the agent instead of principal but the mistake being merely procedural, decision was rendered in favor of plaintiffs. Issue: WON the action should be dismissed [YES] HELD: The condition contained in the insurance policy is not merely a procedural requirement. The condition is an important matter, essential to a prompt settlement of claims against insurance companies, as it demands that insurance suits be brought by the insured while the evidence as to the origin and cause of destruction have not yet disappeared. It is in the nature of a condition precedent to the liability of the insurer, or in other terms, a resolutory cause, the purpose of which is to terminate all liabilities in case the action is not filed by the insured within the period stipulated. The bringing of the action against Paramount Surety cannot have legal effect except that of notifying the agent of the claim. Disposition: Judgment set aside. Case dismissed.

Commercial Bank v. Republic Armored Car Services Corp. al (MARK) FACTS Defendants were given credit accommodation by Commercial Bank in the form of an overdraft line to which they drew regularly certain amounts. Demands were made for the payment of the drawings but defendants have failed to pay the amounts demanded. Commercial Bank thus filed complaints against them. Defendants in their answer admit the opening of the credit line in their favor and that demands for the indebtedness were made upon them, but allege as special defenses that the directors and officers of the defendant corporation deliberately defrauded and mismanaged the said corporation breach of trust in order to deprive Damaso Perez of his control and majority interest in the defendant corporation, as a result of which fraud, mismanagement and breach of trust the defendants suffered tremendous losses; that the amounts drawn by defendant corporation upon the credit line were received and used by the former directors and officers and same constitute part of the funds of the defendant corporation misapplied and mismanaged by said former officers and directors of said corporation. ISSUES WON the obligation of the defendants-appellants to pay for the amount due under the overdraft line ceases due to the misappropriations on mismanagement of the funds of the corporation by the directors and employees thereof. NO. RATIONALE The obligation of the defendants-appellants to pay for the amount due under the overdraft line is not in any way qualified; there is no statement that the responsibility of the defendants-appellants for the amount taken on overdraft would cease or be defeated or reduced upon misappropriations on mismanagement of the funds of the corporation by the directors and employees thereof. The special defense is, therefore, a sham defense.

Ortega v Bauang Farmers Cooperative (GEN) Dec. 29, 1959 Montemayor, J. FACTS: Ortega sold and delivered to defendant 2,643 kilos of flue-cured Virginia leaf tobacco at P7,136.10. The defendant paid Ortega 2 installments leaving a balance of P3,136.10. In spite of repeated demands made, the defendant has failed and refused to pay. Ortega filed an action against the defendant to collect payment. The defendant admitted the allegations of the complaint but set up the affirmative defense: That the tobacco leaf it bought was shipped and delivered to and received by the ACCFA (Agricultural Credit and Cooperative Financing Administration), in accordance with an agency contract entered into between ACCFA as principal, and the defendant Bauang FACOMA, as agent, for the purchase of local Virginia leaf tobacco; and That final liquidation had not been made between principal and agent. Shortly after filing its answer, defendant filed a "Motion to Bring in Third Party Defendant," attaching thereto its "Third Party Complaint" against the ACCFA praying that judgment be rendered against it for all sums that may be adjudged against defendant in favor of the plaintiff. The trial court, finding the ACCFA to be a necessary party in the case, granted the motion to bring it as a third-party defendant. However, it later ordered that the third-party complaint be stricken out because it was filed without leave of court. The CFI of La Union ordered the defendant to pay Ortega the sum of P3,136.10, with legal interest from the date of the filing of the complaint, plus costs. ISSUE: WON the defendant acted in behalf of ACCFA? HELD: YES. Although at the time of the purchase of the tobacco in question, the attention of the plaintiff was not called to the existence of the agency agreement between the ACCFA and the Bauang FACOMA, there is reason to believe that he actually knew that agency and that the tobacco leaf was purchased not on account of the Bauang FACOMA, but actually for the ACCFA, which is the agency of the Government charged with the purchase of Virginia leaf tobacco, in the implementation of the policy of the Government to buy all Virginia leaf tobacco grown locally, for purposes of aiding Virginia tobacco growers and to foster the tobacco industry. The FACOMA (Farmers Cooperative and Marketing Association) as its name implies, is concerned mainly, if not exclusively, in the sale and marketing of the agricultural produce of the farmers. It is not engaged in the buy and sell business for profit. The P4,000.00 sum total of the two installments of

P1,325.00 and P2,675.00 delivered to plaintiff on account of the total purchase price of P7,136.10 was actually paid by ACCFA itself. Art. 1883 is not applicable because the agent, the defendant, did not act in its name, but rather acted in behalf of the principal, ACCFA. Appealed decision set aside.

Sy Juco v. Sy Juco (MAI) January 12, 1920 Avancea, J. Facts: In 1902, Santiago Sy-juco was appointed by the Vicente and Cipriane Sy-juco as administrator of their property and the former acted as such until June 30, 1916, when his authority was cancelled. The plaintiffs are defendant's father and mother who allege that during his administration the defendant Santiago acquired the property claimed in the complaint in his capacity as plaintiffs' administrator with their money and for their benefit. The trial court ordered Santiago to return the properties in question, which he bought in his name. Issue: Whether or not the plaintiffs have a cause of action Held: YES. From the rule established in article 1717 of the Civil Code that, when an agent acts in his own name, the principal shall have no right of action against the person with whom the agent has contracted, cases involving things belonging to the principal are excepted. According to this exception (when things belonging to the principal are dealt with) the agent is bound to the principal although he does not assume the character of such agent and appears acting in his own name (Decision of the Supreme Court of Spain, May 1, 1900). This means that in the case of this exception the agent's apparent representation yields to the principal's true representation and that, in reality and in effect, the contract must be 52 considered as entered into between the principal and the third person; and, consequently, if the obligations belong to the former, to him alone must also belong the rights arising from the contract. The money with which the launch was bough having come from the plaintiff, the exception established in article 1717 is applicable to the instant case.

Aivad v. Filma Mercantile (EARLA) Dec 24, 1926 Ostrand, J. Facts: E. Awad & Co. delivered to Chua Lioc (operating under the name of Hang Chuan Co.) certain merchandise in the amount of P11,140. Chua Lioc, representing himself as the owner of the merchandise sold them to Filma Mercantile for a total of P12,155.60. After deducting Chua Lioc debts to Filma and to the Phil. Manufacturing Co. (which Filma agreed to pay), Filma is still indebted to Chua Lioc in the amount of P6,657.52. Thereafter, E. Awad obtained authorization from Chua Lioc to collect the P11,140 due it. Filma however refused to directly pay to E. Awad the purchase price. Subsequently, the Phil. Trust Company brought an action against Chua Lioc for the payment of P1,036.36. As a result, the balance due from Filma was attached in that action. This balance was further attached in another action instituted by E. Awad for the payment of P11,140. E. Awad then filed a separate action against Filma, for the payment of the purchase price. Filma however averred that it was a buyer in good faith. It further alleged that it was holding the balance of P6657.52 (having been attached in two separate cases) subject to the orders of the court. The trial court dismissed the complaint on the ground that the plaintiff was only entitled to payment of the sum of P6,657.52, but which sum the defendant had the right to retain subject to the orders of the court in the two separate cases. ISSUE: WON E. Awad can collect from Filma. HELD: No. According to the Court, the law applicable to the case is well settled. Article 246 of the Code of Commerce reads as follows: "When the agent transacts business in his own name, it shall not be necessary for him to state who is the principal and he shall be directly liable, as if the business were for his own account, to the persons with whom he transacts the same, said persons not having any right of action against the principal, not the latter against the former, the liabilities of the principal and of the agent to each other always being reverse." Hence, he can have no right of action against the buyer. Moreover, Awads claim that Filma is not a buyer in good faith and had knowledge of the condition under which the merchandise was entrusted to Chua Lioc, was not supported by evidence.

Maritime Agencies & Services v. CA (ALAIN) July 12, 1990 J. Cruz FACTS: Transaction: shipment of bagged urea from USSR to the Philippines, so need to charter a motor vessel Motor vessel: named Hongkong Island Owner of vessel: Hongkong Island Shipping Co. Charterer: Transcontinental Fertilizer Company of London Consignee in the Philippines: Atlas Fertilizer Company (Manila and Cebu) Insurer of goods: Union Insurance Society of Canton, Ltd (against all risks) Charterers agent: Maritime Agencies & Services, Inc. Owners agent: Macondray Company, Inc. The parties signed for this purpose a Uniform General Charter. But problem occurred in the transaction. Trial court found out that upon receipt of goods, 1,383 bags were damaged or lost on board the vessel before unloading of the shipment. There were also goods that were damaged or lost during unloading. Consignee filed a formal claim, and after its claims rejected, went to Insurer Union, which on demand paid the total indemnity pursuant to the insurance contract. Thus, as subrogee of the consignee, Union filed complaint for reimbursement against Hongkong Island Company, Ltd., Maritime Agencies & Services Inc, and Macondray Company, Inc. Principal Issue: Who should be held liable for the loss or damaged cargos? In order to answer this, the nature of the charter must first be identified whether it is a demise or bareboat charter, a time charter or a voyage charter. According to the court, the agreement entered into (Uniform General Charter) in the cases at bar should be considered. A voyage charter being a private carriage, the parties may freely contract respecting liability for damage to the goods and other matters. The basic principle is that the responsibility for cargo loss falls on the one who agreed to perform the duty involved. This is true in the present cases where the charterer was responsible for loading, stowage and discharging at the ports visited, while the owner was responsible for the care of the cargo during the voyage. As the bags were in good order when received in the vessel, the presumption is that they were damaged or lost during the voyage as a result of their negligent improper stowage. FOR THIS THE SHIP OWNER SHOULD BE LIABLE (so its agent, Macondray is liable, but action has prescribed).

Secondary ISSUE (for our purposes): W/N the charterers agent is liable considering the finding of the court that the other goods were damaged or lost during the unloading, and unloading was the principal duty of the charterer according to the Uniform General Charter? NO. Ratio: The charterer assumed this activity under the charter party. However, the liability imposable against Transcontinental cannot be borned by Maritime, which as a mere agent, is not answerable for injury caused by its principal. It is a wellsettled principle that the agent shall be liable for the act or omission of the principal only if the latter is undisclosed. The agent may be held liable if it represented the vessel when it took charge of the unloading of the cargo and issued cargo receipts in its own name. It should have also received and processed claims against the vessel for the losses/damages sustained by the cargo. If this is the case, the charterers agent is also considered a ship agent and so should be held to be solidarily liable with its principal. The charterer in this case did not represent itself as a carrier and indeed assumed responsibility only for the unloading of the cargo, i.e. after the goods were already outside the custody of the vessel. In supervising the unloading of the cargo and issuing 57 AGENCY 2009 (PASCUAL) vitaminC2012+B1 gen.mai.rog.toff.reg.abby.earla.jances.ivy.jill+alai n Afriends mark.eva.jessa.anj.bambi.rex.tope. Daily Operations Report and Statement of Facts indicating and describing the day-to-day discharge of the cargo, Maritime acted in representation of the charterer and not of the vessel. It thus cannot be considered a ship agent. As a mere charterers agent, it cannot be held solidarily liable with the Transcontinental for the losses/damages to the cargo outside the custody of the vessel. Notably, Transcontinental was disclosed as the charterers principal and there is no question that Maritime acted within the scope of its authority.

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[1984V300] MARIANO DIOLOSA and ALEGRIA VILLANUEVA-DIOLOSA, petitioners, vs. THE HON. COURT OF APPEALS, and QUIRINO BATERNA (As owner and proprietor of QUIN BATERNA REALTY), respondents.1984 Jul 161st DivisionG.R. No. L-36585D E C I S I O N

RELOVA, J.:

Appeal by certiorari from a decision of the then Court of Appeals ordering herein petitioners to pay private respondent "the sum of P10,000.00 as damages and the sum of P2,000.00 as attorney's fees, and the costs."

This case originated in the then Court of First Instance of Iloilo where private respondents instituted a case of recovery of unpaid commission against petitioners over some of the lots subject of an agency agreement that were not sold. Said complaint, docketed as Civil Case No. 7864 and entitled: "Quirino Baterna vs. Mariano Diolosa and Alegria Villanueva-Diolosa", was dismissed by the trial court after hearing. Thereafter, private respondent elevated the case to respondent court whose decision is the subject of the present petition.

The parties - petitioners and respondents - agree on the findings of facts made by respondent court which are based largely on the pre-trial order of the trial court, as follows:

"PRE-TRIAL ORDER When this case was called for a pre-trial conference today, the plaintiff, assisted by Atty. Domingo Laurea, appeared and the defendants, assisted by Atty. Enrique Soriano, also appeared.

"A. During the pre-trial conference the parties, in addition to what have been admitted in the pleadings, have agreed and admitted that the following facts are attendant in this case and that they will no longer adduce evidence to prove them:

"1. That the plaintiff was and still is a licensed real estate broker, and as such licensed real estate broker on June 20, 1968, an agreement was entered into between him as party of the second part and the defendants spouses as party of the first part, whereby the former was constituted as exclusive sales agent of the defendants, its successors, heirs and assigns, to dispose of, sell, cede, transfer and convey the lots included in VILLA ALEGRE SUBDIVISION owned by the defendants, under the terms and conditions embodied in Exhibit "A", and pursuant to said agreement (Exhibit "A"), the plaintiff acted for and in behalf of the defendants as their agent in the sale of the lots included in the VILLA ALEGRE SUBDIVISION; "2. That on September 27, 1968, the defendants terminated the services of plaintiff as their exclusive sales agent per letter marked as Exhibit "B", for the reason stated in the latter.

"B. During the trial of this case on the merit, the plaintiff will adduce by competent evidence the following facts:

"1. That as a real estate broker, he had sold the lots comprised in several subdivisions, to wit: Greenfield Subdivision. the Villa Beach Subdivision, the Juntado Subdivision, the St. Joseph Village, the Ledesma Subdivision, the Brookside Subdivision, the Villa Alegre Subdivision, and Cecilia Subdivision, all in the City of lloilo except St. Joseph which is in Pavia Iloilo.

"2. That the plaintiff, as a licensed real estate broker, has been seriously damaged by the action of the defendants in rescinding, by Exhibit "B", the contract (Exhibit "A") for which the plaintiff suffered moral damages in the amount of P50,000.00, damages to his good will in the amount of P100,000.00, for attorney's fees in the amount of P10,000.00 to protect his rights and interests, plus exemplary damages to be fixed by the Court.

"3. That the plaintiff is entitled to a commission on the lots unsold because of the rescission of the contract.

"C. The defendants during the trial will prove by competent evidence the following:

"1. That the plaintiff's complaint was filed to make money out of the suit from defendants, to harrass and to molest defendants;

"2. That because of the unjustified and unfounded complaint of the plaintiff, the defendants suffered moral damages in the amount of P50,000.00, and that for the public good, the court may order the plaintiff to pay the defendants exemplary damages in the amount of P20,000.00, plus attorney's fees of P10,000.00.

"D. Contentions of the parties:

"1. The plaintiff contends: (a) That under the terms of the contract (Exhibit "A") the plaintiff had unrevocable authority to sell all the lots included in the Villa Alegre Subdivision and to act as exclusive sales agent of the defendants until all the lots shall have been disposed of; (b) That the rescission of the contract under Exhibit "B", contravenes the agreement of the parties.

"2. The defendants contend: (a) That they were within their legal right to terminate the agency on the ground that they needed the undisposed lots for the use of the family; (b) That the plaintiff has no right in law to claim for commission on lots that they have not sold. "E. The parties hereby submit to the Court the following issues:

"1. Whether under the terms of Exhibit "A" the plaintiff has the irrevocable right to sell or dispose of all the lots included within Villa Alegre Subdivision;

"2. Can the defendants terminate their agreement with the plaintiff by a letter like Exhibit "B"?

"F. The plaintiff submitted the following exhibits which were admitted by the defendants:

Exhibit "A" - agreement entered into between the parties on June 20, 1968 whereby the plaintiff had the authority to sell the subdivision lots included in Villa Alegre subdivision;

Exhibit "B" - letter of the defendant Alegria V. Diolosa dated September 27, 1968 addressed to the plaintiff terminating the agency and rescinding Exhibit "A" for the reason that the lots remained unsold lots were for reservation for their grandchildren.

"The Court will decide this case based on the facts admitted in the pleadings, those agreed by the parties during the pre-trial conference, and those which they can prove during the trial of this case, in accordance with the contention of the parties based on the issues submitted by them during the pre-trial conference.

SO ORDERED.

Iloilo City, Philippines, August 14, 1969.

(SGD) VALERIO V. ROVIRA Judge" (pp. 22-25, Rollo)

The only issue in this case is whether the petitioners could terminate the agency agreement, Exhibit "A", without paying damages to the private respondent. Pertinent portion of said Exhibit "A" reads:

"That the PARTY OF THE FIRST PART is the lawful and absolute owner in fee simple of VILLA ALEGRE SUBDIVISION situated in the District of Mandurriao, Iloilo City, which parcel of land is more particularly described as follows, to wit:

"A parcel of land, Lot No. 2110-b-2-C, PSD 74002, Transfer Certificate of Title No. T-situated in the District of Mandurriao, Iloilo, Philippines, containing an area of 39016 square meters, more or less, with improvements thereon.

"That the PARTY OF THE FIRST PART by virtue of these presents, to enhance the sale of the lots of the above-described subdivision, is engaging as their EXCLUSIVE SALES AGENT the PARTY OF THE SECOND PART, its successors, heirs and assigns to dispose of, sell, cede, transfer and convey the above-described property in whatever manner and nature the PARTY OF THE SECOND PART, with the concurrence of the PARTY OF THE FIRST PART, may deem wise and proper under the premises, whether it be in cash or installment basis, until all the subject property as subdivided is fully disposed of . (p. 7 of Petitioner's brief.)

Respondent court, in its decision which is the subject of review said:

"Article 1920 of the Civil Code of the Philippines notwithstanding, the defendants could not terminate the agency agreement, Exh. "A", at will without paying damages. The said agency agreement expressly stipulates . . . until all the subject property as subdivided is fully disposed of . . ." The testimony of Roberto Malundo (t.s.n. p. 99) that the plaintiff agreed to the intention of Mrs. Diolosa to reserve some lots for her own family use cannot prevail over the clear terms of the agency agreement. Moreover, the plaintiff denied that there was an agreement to reserve any of the lots for the family of the defendants. (T.s.n. pp. 16).

"There are twenty seven (27) lots of the subdivision remaining unsold on September 27, 1968 when the defendants rescinded the agency agreement, Exhibit "A". On that day the defendants had only six grandchildren. That the defendants wanted to reserve the twenty seven remaining lots for the six grandchildren is not a legal reason for defendants rescind the agency agreement. Even if the grandchildren were to be given one lot each, there would still be twenty one lots available for sale. Besides it is undisputed that the defendants have other lands which could be reserved for their grandchildren." (pp. 26-27, Rollo)

The present appeal is manifestly without merit.

Under the contract, Exhibit "A", herein petitioners allowed the private respondent "to dispose of, sell, cede, transfer and convey . . . until all the subject property as subdivided is fully disposed of." The authority to sell is not extinguished until all the lots have been disposed of. When, therefore, the petitioners revoked the contract with private respondent in a letter, Exhibit "B" -

"Dear Mr. Baterna:

Please be informed that we have finally decided to reserve the remaining unsold lots, as of this date of our VILLA ALEGRE Subdivision for our grandchildren.

In view thereof, notice is hereby served upon you to the effect that our agreement dated June 20, 1968 giving you the authority to sell as exclusive sales agent of our subdivision is hereby rescinded.

Please be duly guided.

Very truly yours,

(SGD) ALEGRIA V. DIOLOSA Subdivision Owner"

(p. 11 of Petitioner's Brief).

they become liable to the private respondent for damages for breach of contract.

And, it may be added that since the agency agreement, Exhibit "A", is a valid contract, the same may be rescinded only on grounds specified in Articles 1381 and 1382 of the Civil Code, as follows:

"ART. 1381. The following contracts are rescissible:

"(1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof;

"(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number;

"(3) Those undertaken in fraud of creditors when the later cannot in any other manner collect the claims due them;

"(4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority;

"(5) All other contracts specially declared by law to be subject to rescission.

"ART. 1382. Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they were effected, are also rescissible."

In the case at bar, not one of the grounds mentioned above is present which may be the subject of an action of rescission, much less can petitioners say that the private respondent violated the terms of their agreement - such as failure to deliver to them (Subdivision owners) the proceeds of the purchase price of the lots.

ACCORDINGLY, the petition is hereby dismissed without pronouncement as to costs.

SO ORDERED. Teehankee (Chairman), Melencio-Herrera, Plana, Gutierrez, Jr. and De la Fuente, JJ., concur.

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[1992V527] CMS LOGGING, INC., petitioner, vs. THE COURT OF APPEALS and D.R. AGUINALDO CORPORATION, respondents.1992 July 102nd DivisionG.R. No. L-41420D E C I SION

NOCON, J.:

This is a petition for review on certiorari from the decision dated July 31, 1975 of the Court of Appeals in CA-G.R. No. 47763-R which affirmed in toto the decision of the Court of First Instance of Manila, Branch VII, in Civil Case No. 56355 dismissing the complaint filed by petitioner CMS Logging, Inc. (CMS, for brevity) against private respondent D.R. Aguinaldo Corporation (DRACOR, for brevity) and ordering the former to pay the latter attorney's fees in the amount of P1,000.00 and the costs.

The facts of the case are as follows: Petitioner CMS is a forest concessionaire engaged in the logging business, while private respondent DRACOR is engaged in the business of exporting and selling logs and lumber. On August 28, 1957, CMS and DRACOR entered into a contract of agency 1 whereby the former appointed the latter as its exclusive export and sales agent for all logs that the former may produce, for a period of five (5) years. The pertinent portions of the agreement, which was drawn up by DRACOR, 2 are as follows:

"1. SISON [CMS] hereby appoints DRACOR as his sole and exclusive export sales agent with full authority, subject to the conditions and limitations hereinafter set forth, to sell and export under a firm sales contract acceptable to SISON, all logs produced by SISON for a period of five (5) years commencing upon the execution of the agreement and upon the terms and conditions hereinafter provided and DRACOR hereby accepts such appointment;

xxx

xxx

xxx

"3. It is expressly agreed that DRACOR shall handle exclusively all negotiations of all export sales of SISON with the buyers and arrange the procurement and schedules of the vessel or vessels for the shipment of SISON's logs in accordance with SISON's written requests, but DRACOR shall not in anyway [sic] be liable or responsible for any delay, default or failure of the vessel or vessels to comply with the schedules agreed upon;

xxx

xxx

xxx

"9. It is expressly agreed by the parties hereto that DRACOR shall receive five (5%) per cent commission of the gross sales of logs of SISON based on F.O.B. invoice value which commission shall be deducted from the proceeds of any and/or all moneys received by DRACOR for and in behalf and for the account of SISON;"

By virtue of the aforesaid agreement, CMS was able to sell through DRACOR a total of 77,264,672 board feet of logs in Japan, from September 20, 1957 to April 4, 1962.

About six months prior to the expiration of the agreement, while on a trip to Tokyo, Japan, CMS's president, Atty. Carlos Moran Sison, and general manager and legal counsel, Atty. Teodoro R. Dominguez, discovered that DRACOR had used Shinko Trading Co., Ltd. (Shinko for brevity) as agent, representative or liaison officer in selling CMS's logs in Japan for which Shinko earned a commission of U.S. $1.00 per 1,000 board feet from the buyer of the logs. Under this arrangement, Shinko was able to collect a total of U.S. $77,264.67. 3

CMS claimed that this commission paid to Shinko was in violation of the agreement and that it (CMS) is entitled to this amount as part of the proceeds of the sale of the logs. CMS contended that since DRACOR had been paid the 5% commission under the agreement, it is no longer entitled to the additional commission paid to Shinko as this tantamount to DRACOR receiving double compensation for the services it rendered.

After this discovery, CMS sold and shipped logs valued at U.S. $739,321.13 or P2,883,351.90, 4 directly to several firms in Japan without the aid or intervention of DRACOR.

CMS sued DRACOR for the commission received by Shinko and for moral and exemplary damages, while DRACOR counterclaimed for its commission, amounting to P144,167.59, from the sales made by CMS of logs to Japanese firms. In its reply, CMS averred as a defense to the counterclaim that DRACOR had retained the sum of P101,167.59 as part of its commission for the sales made by CMS. 5 Thus, as its counterclaim to DRACOR's counterclaim, CMS demanded DRACOR return the amount it unlawfully retained. DRACOR later filed an amended counterclaim, alleging that the balance of its commission on the sales made by CMS was P42,630.82, 6 thus impliedly admitting that it retained the amount alleged by CMS.

In dismissing the complaint, the trial court ruled that no evidence was presented to show that Shinko received the commission of U.S. $77,264.67 arising from the sale of CMS's logs in Japan, though the trial court stated that "Shinko was able to collect the total amount of $77,264.67 US Dollars (Exhs. M and M-1)." 7 The counterclaim was likewise dismissed, as it was shown that DRACOR had waived its rights to the balance of its commission in a letter dated February 2, 1963 to Atty. Carlos Moran Sison, president of CMS. 8 From said decision, only CMS appealed to the Court of Appeals.

The Court of Appeals, in a 3 to 2 decision, 9 affirmed the dismissal of the complaint since "[t]he trial court could not have made a categorical finding that Shinko collected commissions from the buyers of Sison's logs in Japan, and could not have held that Sison is entitled to recover from Dracor the amount collected by Shinko as commissions, plaintiff-appellant having failed to prove by competent evidence its claims." 10

Moreover, the appellate court held:

"There is reason to believe that Shinko Trading Co. Ltd., was paid by defendant-appellee out of its own commission of 5%, as indicated in the letter of its president to the president of Sison,

dated February 2, 1963 (Exhibit "N"), and in the Agreement between Aguinaldo Development Corporation (ADECOR) and Shinko Trading Co., Ltd. (Exhibit "9"). Daniel R. Aguinaldo stated in his said letter:

"'. . ., I informed you that if you wanted to pay me for the service, then it would be no more than at the standard rate of 5% commission because in our own case, we pay our Japanese agents 2-1/2%. Accordingly, we would only add a similar amount of 2-1/2% for the service which we would render you in the Philippines.'" 11

Aggrieved, CMS appealed to this Court by way of a petition for review on certiorari, alleging (1) that the Court of Appeals erred in not making a complete findings of fact; (2) that the testimony of Atty. Teodoro R. Dominguez, regarding the admission by Shinko's president and director that it collected a commission of U.S. $1.00 per 1,000 board feet of logs from the Japanese buyers, is admissible against DRACOR; (3) that the statement of DRACOR's chief legal counsel in his memorandum dated May 31, 1965, Exhibit "K", is an admission that Shinko was able to collect the commission in question; (4) that the fact that Shinko received the questioned commissions is deemed admitted by DRACOR by its silence under Section 23, Rule 130 of the Rules of Court when it failed to reply to Atty. Carlos Moran Sison's letter dated February 6, 1962; (5) that DRACOR is not entitled to its 5% commission arising from the direct sales made by CMS to buyers in Japan; and (6) that DRACOR is guilty of fraud and bad faith in its dealings with CMS.

With regard to CMS's arguments concerning whether or not Shinko received the commission in question, We find the same unmeritorious.

To begin with, these arguments question the findings of fact made by the Court of Appeals, which are final and conclusive and can not be reviewed on appeal to the Supreme Court. 12

Moreover, while it is true that the evidence adduced establishes the fact that Shinko is DRACOR's agent or liaison in Japan, 13 there is no evidence which established the fact that Shinko did receive the amount of U.S. $77,264.67 as commission arising from the sale of CMS's logs to various Japanese firms.

The fact that Shinko received the commissions in question was not established by the testimony of Atty. Teodoro R. Dominguez to the effect that Shinko's president and director told him that Shinko received a commission of U.S. $1.00 for every 1,000 board feet of logs sold, since the same is hearsay. Similarly, the letter of Mr. K. Shibata of Toyo Menka Kaisha, Ltd. 14 is also hearsay since Mr. Shibata was not presented to testify on his letter.

CMS's other evidence have little or no probative value at all. The statements made in the memorandum of Atty. Simplicio R. Ciocon to DRACOR dated May 31, 1965, 15 the letter dated February 2, 1963 of Daniel R. Aguinaldo, 16 president of DRACOR, and the replyletter dated January 9, 1964 17 by DRACOR's counsel Atty. V. E. Del Rosario to CMS's demand letter dated September 25, 1963 can not be categorized as admissions that Shinko did receive the commissions in question.

The alleged admission made by Atty. Ciocon, to wit

"Furthermore, as per our records, our shipment of logs to Toyo Menka Kaisha, Ltd., is only for a net volume of 67,747,732 board feet which should enable Shinko to collect a commission of US $67,747.73 only."

can not be considered as such since the statement was made in the context of questioning CMS's tally of logs delivered to various Japanese firms.

Similarly, the statement of Daniel R. Aguinaldo, to wit

". . . Knowing as we do that Toyo Menka is a large and reputable company, it is obvious that they paid Shinko for certain services which Shinko must have satisfactorily performed for them in Japan otherwise they would not have paid Shinko."

and that of Atty. V. E. Del Rosario,

". . . It does not seem proper, therefore, for CMS Logging, Inc., as principal, to concern itself with, much less question, the right of Shinko Trading Co., Ltd. with which our client dealt directly, to whatever benefits it might have derived form the ultimate consumer/buyer of these logs, Toyo Menka Kaisha, Ltd. There appears to be no justification for your client's contention that these benefits, whether they can be considered as commissions paid by Toyo Menka Kaisha to Shinko Trading, are to be regarded part of the gross sales."

can not be considered admissions that Shinko received the questioned commissions since neither statements declared categorically that Shinko did in fact receive the commissions and that these arose from the sale of CMS's logs.

As correctly stated by the appellate court:

"It is a rule that 'a statement is not competent as an admission where it does not, under a reasonable construction, appear to admit or acknowledge the fact which is sought to be proved by it'. An admission or declaration to be competent must have been expressed in definite, certain and unequivocal language (Bank of the Philippine Islands vs. Fidelity & Surety Co., 51 Phil. 57, 64)." 18

CMS's contention that DRACOR had admitted by its silence the allegation that Shinko received the commissions in question when it failed to respond to Atty. Carlos Moran Sison's letter dated February 6, 1963, is not supported by the evidence. DRACOR did in fact reply to the letter of Atty. Sison, through the letter dated March 5, 1963 of F.A. Novenario, 19 which stated:

"This is to acknowledge receipt of your letter dated February 6, 1963, and addressed to Mr. D. R. Aguinaldo, who is at present out of the country.

xxx

xxx

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"We have no record or knowledge of any such payment of commission made by Toyo Menka to Shinko. If the payment was made by Toyo Menka to Shinko, as stated in your letter, we knew nothing about it and had nothing to do with it."

The finding of fact made by the trial court, i.e., that "Shinko was able to collect the total amount of $77,264.67 US Dollars," can not be given weight since this was based on the summary prepared by CMS itself, Exhibits "M" and "M-1."

Moreover, even if it was shown that Shinko did in fact receive the commissions in question, CMS is not entitled thereto since these were apparently paid by the buyers to Shinko for arranging the sale. This is therefore not part of the gross sales of CMS's logs.

However, We find merit in CMS's contention that the appellate court erred in holding that DRACOR was entitled to its commission from the sales made by CMS to Japanese firms.

The principal may revoke a contract of agency at will, and such revocation may be express, or implied, 20 and may be availed of even if the period fixed in the contract of agency as not yet expired. 21 As the principal has this absolute right to revoke the agency, the agent can not object thereto; neither may he claim damages arising from such revocation, 22 unless it is shown that such was done in order to evade the payment of agent's commission. 23

In the case at bar, CMS appointed DRACOR as its agent for the sale of its logs to Japanese firms. Yet, during the existence of the contract of agency, DRACOR admitted that CMS sold its logs directly to several Japanese firms. This act constituted an implied revocation of the contract of agency under 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."

In New Manila Lumber Company, Inc. vs. Republic of the Philippines, 24 this Court ruled that the act of a contractor, who, after executing powers of attorney in favor of another empowering the latter to collect whatever amounts may be due to him from the Government, and thereafter demanded and collected from the government the money the collection of which he entrusted to his attorney-in-fact, constituted revocation of the agency in favor of the attorney-in-fact.

Since the contract of agency was revoked by CMS when its sold its logs to Japanese firms without the intervention of DRACOR, the latter is no longer entitled to its commission from the proceeds of such sale and is not entitled to retain whatever moneys it may have received as its commission for said transactions. Neither would DRACOR be entitled to collect damages from CMS, since damages are generally not awarded to the agent for the revocation of the agency, and the case at bar is not one falling under the exception mentioned, which is to evade the payment of the agent's commission.

Regarding CMS's contention that the Court of Appeals erred in not finding that DRACOR had committed acts of fraud and bad faith, We find the same unmeritorious. Like the contention involving Shinko and the questioned commissions, the findings of the Court of Appeals on the matter were based on its appreciation of the evidence, and these findings are binding on this Court.

In fine, We affirm the ruling of the Court of Appeals that there is no evidence to support CMS's contention that Shinko earned a separate commission of U.S. $1.00 for every 1,000 board feet of logs from the buyer of CMS's logs. However, We reverse the ruling of the Court of Appeals with regard to DRACOR's right to retain the amount of P101,536.77 as part of its commission from the sale of logs by CMS, and hold that DRACOR has no right to its commission. Consequently, DRACOR is hereby ordered to remit to CMS the amount of P101,536.77.

WHEREFORE, the decision appealed from is hereby MODIFIED as stated in the preceding paragraph. Costs de officio.

SO ORDERED.

Narvasa, (C.J. Chairman), Padilla and Regalado, JJ., concur. )

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PHILIPPINE NATIONAL BANK, petitioner, vs. The HON. INTERMEDIATE APPELLATE COURT and SPOUSES FERMIN MAGLASANG and ANTONIA SEDIGO, respondents.1990 March 142nd DivisionG.R. No. 75223D E C I S I O N

PARAS, J.:

This is a petition to review on certiorari the decision of the Intermediate Appellate Court, * now Court of Appeals, rendered in AC-G.R. CV No. 07678 modifying the decision of the Regional Trial Court of Ormoc City.

The factual background of this case is as follows:

The petitioner, a government banking institution, extended financial assistance to the private respondents in the form of loans, the total amount of which is P82,682.39 as embodied in the promissory notes that the latter have executed on various dates from February 5, 1976 to May 18, 1979, the payment of which to come from the proceeds of sugar sales of the private respondents. The promissory notes bore 12% interest per annum plus 1% interest as penalty charge in case of default in the payments.

On January 16, 1969, the private respondents mortgaged several real estate properties in favor of the petitioner as security of their loans, which mortgage was amended on December 17, 1969, December 22, 1970 and February 12, 1975, as to the consideration thereof.

When the price of sugar went down in 1977, the private respondents incurred deficits in the payment of their loans. On December 1, 1979, the Monetary Board of the Central Bank, by virtue of Presidential Decree No 116, issued CB Circular No. 705 increasing the ceiling on the rate of interest on both secured and unsecured loans up to no more than 21% per annum. In view of this development, the PNB Board of Directors revised its lending interest rates on the medium and long-term loans effective June 1, 1980, per PNB board resolution dated May 26, 1980.

When the private respondents defaulted in the payments of their loans, the petitioner demanded not only the settlement of their outstanding obligation but also the payment of the new interest rate of 21% per annum beginning June 1, 1980 per the PNB board resolution.

For failure of the private respondents to settle their obligation, then in the amount of P84,743.34, the petitioner foreclosed the mortgage. Since the proceeds of the auction sale, P63,000.00 was not enough to satisfy private respondents' outstanding obligation, the petitioner filed an action for deficiency judgment with the Court of First Instance of Leyte against the private respondents.

After due trial, the trial court ** rendered its judgment on February 20, 1985, in favor of the petitioner and against the private respondents, the dispositive portion of which reads as follows:

"WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of the plaintiff and against the defendants:

"1. Ordering the defendants to pay the plaintiff the amount of P21,743.34; said amount shall earn interest at 21% per annum and 3% penalty charge starting November 27, 1981, unless the whole obligation is fully paid;

2. Ordering the defendants to pay the plaintiff attorney's fees in the amount equivalent to 10% of the total amount due as of November 28, 1981;

3. Ordering the defendants to pay the plaintiff the amount of P700.00 as litigation expenses; and ordering the defendants also to pay the costs of this action.

"SO ORDERED." (Records, p. 235).

The private respondents appealed to the Intermediate Appellate Court, docketed as AC-G.R. CV No. 07678.

On June 30, 1986, the appellate court affirmed the decision of the trial court with modification as follows:

"WHEREFORE, in view of the foregoing consideration, the appealed decision is hereby AFFIRMED with modification as follows:

"1. Ordering the defendants to pay the plaintiff the amount of P12,551.16 which shall earn interest at 12% per annum and 1% penalty charge starting November 27, 1981 until fully paid; and

"2. No other pronouncement as to attorney's fees and costs of suit.

"SO ORDERED." (Rollo, p. 28).

Hence, this petition.

In the resolution of September 14, 1987, the Court gave due course to the petition and required the parties to submit simultaneously their respective memoranda within thirty (30) days from notice (Rollo, p. 80).

The main issue in this case is whether or not the revised rate of interest imposed on the loans of the private respondents is legal.

The petitioner contends that in all the promissory notes executed by the private respondents, it is stipulated that the loans are to be paid together with the interest thereon at the rate of 12% per annum until paid, which interest rate the Bank may, at any time without notice, raise within the limits allowed by law, and also 1% per annum penalty charges by way of liquidated damages should the note be unpaid or is not renewed on due date. Likewise stipulated in the covering Real Estate Mortgage Contracts and the Amendment to Real Estate Mortgage of February 12, 1979 that "this account is also subject to the upward revision of interest rate as may be imposed by the mortgagee PNB." By these explicit contractual clauses, the private respondents fully agreed to an upward revision of interest rates on their accounts depending on the rule, regulation, or policy that the petitioner may adopt. At the time when said promissory notes and Amendment of Real Estate Mortgage were executed by private respondent Fermin Maglasang, Presidential Decree No. 116 (amending further certain sections of Act No. 2655, as amended, otherwise known as the "Usury Law") had long been promulgated on January 29, 1973, and was already in full force and effect in the Philippines.

Pursuant to Presidential Decree No. 116, the Monetary Board issued Central Bank Circular No. 705 on December 1, 1979, prescribing the maximum rate of interest on loan transactions with maturities of more than seven hundred thirty (730) days and shall not exceed twenty-one percent (21%) per annum. Hence, the upward revision of interest rate as stipulated in the Promissory Notes and Amendment of Real Estate Mortgage dated February 12, 1975, is in accordance with Presidential Decree No. 116 promulgated on January 29, 1973 and Central Bank Circular No. 705 issued on December 1, 1979, and the imposition of 21% rate of interest on the loan obligations of private respondents is within the limits prescribed by law.

On the other hand, the private respondents maintain that the collection of service charge and liquidated damages in excess of the maximum 12% interest originally agreed, are illegal and void for being contrary to or prohibited under Section 2 of Act No. 2655, as amended by Act No. 4070.

The private respondents also insist that the Court of Appeals committed mathematical error in computing the 12% interest due their deficiencies. According to them, their total deficiency is P45,427.02 and the total 12% interest of the said amount is P15,731.08, hence, their total liability is in the amount of P61,158.10. Since the proceeds of the sale of their mortgaged properties are P63,000.00, there is still a residue in the amount of P1,841.90 from the proceeds of the sale which is recoverable or collectible by them.

The petition is without merit.

In Insular Bank of Asia and America v. Spouses Salazar, (159 SCRA 133 [1988]), the Court ruled that the Escalation Clause is a valid provision in the loan agreement provided that (1) the increased rate imposed or charged does not exceed the ceiling fixed by law or the Monetary Board; (2) the increase is made effective not earlier than the effectivity of the law or regulation authorizing such an increase; and (3) the remaining maturities of the loans are more than 730 days as of the effectivity of the law or regulation authorizing such an increase.

Likewise in Banco Filipino Savings and Mortgage Bank v. Navarro, (152 SCRA 346 [1987]), the Court said that for an Escalation Clause to be valid, it must include a de-escalation clause. There can be an increase in interest if increased by law or by the Monetary Board; and in order for such stipulation to be valid, it must include a provision for reduction of the stipulated interest "in the event that the applicable maximum rate of interest is reduced by law or by the Monetary Board," as provided for in P.D. No. 1684, promulgated on March 17, 1980. There is no question that PNB board resolution dated May 26, 1980 contains such de-escalation clause, under paragraph 8 thereof, to wit:

"(8) To enable us to adjust interest rates in accordance with CB Circular Letter of March 19, 1980, the covering promissory note for all short/medium/long-term loans shall include the following conditions:

"The Bank reserves the right to increase the interest rate within the limits allowed by law or by the Monetary Board, provided, that the interest rate agreed upon shall be reduced in the event that the applicable maximum interest rate is reduced by law or by the Monetary Board: Provided, further, that the adjustment in the interest rate shall take effect on or after the effectivity of the increase or increase in the maximum rate of interest." (Exhibits, p. 77)

Central Bank Circular No. 705, authorizing the increase from 12% to 21% was issued on December 1, 1979. The promissory notes executed by the private respondents show that they are all payable on demand but the records do not show when payment was demanded. Even granting that it was demanded on the effectivity of law, it is obvious that the period of 730 days has not yet elapsed at the date the mortgaged properties were sold at the public auction on November 27, 1981 (Certificate of Sheriffs Sale, Records of Exhibits, p. 84). Accordingly, as of December 1, 1979, the remaining maturity days of the loans were less than 730 days. Hence, the increased rate imposed or charged is not valid.

The claim of private respondents that the respondent appellate court committed mathematical error in computing the 12% interest due their deficiencies is a factual issue.

Absent the recognized exceptions, finding of facts of the Court of Appeals are conclusive on the parties and Supreme Court on the tenet that this Court decides appeals which only involve questions of law and that it is not the function of the Supreme Court to analyze and to weigh such evidence all over again, its jurisdiction being limited to reviewing errors of law that might have been committed by the lower court (Philippine National Bank v. Court of Appeals, 159 SCRA 433 [1988]).

PREMISES CONSIDERED, the petition is hereby DENIED for lack of merit, and the assailed decision of the Court of Appeals is hereby AFFIRMED.

SO ORDERED.

Melencio-Herrera (Chairman), Padilla, Sarmiento and Regalado, JJ., concur.

Footnotes

* IAC, Third Civil Cases Division, Justice Jorge R. Coquia penned the decision with the concurrence of Justices Floreliana Castro-Bartolome and Bienvenido Ejercito.

Judge Francisco C. Pedrosa rendered the decision.

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(PHILIPPINE NATIONAL BANK, petitioner, vs. The HON. INTERMEDIATE APPELLATE COURT and SPOUSES FERMIN MAGLASANG and ANTONIA SEDIGO, respondents., G.R. No. 75223, 1990 March 14, 2nd Division)

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CENTRAL SURETY & INSURANCE COMPANY, petitioner, vs. C. N. HODGES and THE COURT OF APPEALS, respondents.1971 March 30En BancG.R. No. L-28633D E C I S I O N

CONCEPCION, C.J p:

Appeal by certiorari from a decision of the Court of Appeals, the dispositive part of which reads as follows:

"WHEREFORE, in view of the foregoing considerations, the decision appealed from is modified and judgment is hereby rendered against Central Surety & Insurance Company:

"(a) To pay plaintiff C. N. Hodges the sum of P17,826.08 with interest thereon at the rate of 12% per annum from October 24, 1955 until fully paid;"

(b) To pay plaintiff C. N. Hodges the sum of P1,551.60 as attorney's fees; and

(c) To pay the costs."

The main facts are not disputed. Prior to January 15, 1954, lots Nos. 1226 and 1182 of the Cadastral Survey of Talisay, Negros Occidental, had been sold by C N. Hodges to Vicente M. Layson, for the sum of P43,000.00, payable on installments. As of January 15, 1954, the outstanding balance of Layson's debt, after deducting the installments paid by him prior thereto, amounted to P15,516.00. In order that he could use said lots as security for a loan he intended to apply from a bank, Layson persuaded Hodges to execute in his (Layson's) favor a deed of absolute sale over the properties, with the understanding that he would put up a surety bond to guarantee the payment of said balance. Accordingly, on the date above mentioned, Layson executed, in favor of Hodges, a promissory note for P15,516.00, with interest thereon at the rate of 1% per month, and the sum of P1,551.60, for attorney's fees and costs, in case of default in the payment of the principal or interest of said note. To guarantee the same, on January 23, 1954, the Central Surety and Insurance Company hereinafter referred to as petitioner through the manager of its branch office in Iloilo, Mrs. Rosita Mesa, executed in favor of Hodges the surety bond Annex B, which was good for twelve (12) months from the date thereof. When Layson defaulted in the discharge of his aforesaid obligation, Hodges demanded payment from the petitioner, which, despite repeated extensions of time granted thereto, at its request, failed to honor its commitments under the surety bond. On October 24, 1955, Hodges commenced, therefore, the present action, in the Court of First Instance of Iloilo, against Layson and petitioner herein, to recover from them, jointly and severally, the sums of P17,826.08, representing the principal and interest due up to said date, and P1,551.60, as attorney's fees. In his answer to the complaint, Layson admitted the formal allegations and denied the other allegations thereof.

Having failed to file its answer within the reglementary period, the petitioner was, on January 18, 1956, declared in default. When the case was called for trial, insofar as Layson was concerned, the latter did not appear, and Hodges was allowed to introduce his evidence. Then the trial court rendered a partial decision against Layson, petitioner having, in the meantime, filed a motion to set aside the order of default, which motion was still pending resolution. Thereafter, said motion was denied, and upon presentation of the evidence of Hodges against herein petitioner, judgment was rendered against the latter as prayed for in the complaint. Thereupon, petitioner filed a motion for reconsideration and a motion for relief under Rule 38. Acting thereon, His Honor, the trial Judge, later set aside its decision against the petitioner and admitted its answer, attached to the motion to set aside the order of default.

In its answer, petitioner disclaimed liability under the surety bond in question, upon the ground (a) that the same is null and void, it having been issued by Mrs. Rosita Mesa after her authority therefor had been withdrawn on March 15, 1952; (b) that even under her original authority, Mrs. Mesa could not issue surety bonds in excess of P8,000.00 without the approval of petitioner's main office, which was not given to the surety bond in favor of Hodges; and (c) that the present action is barred by the provision in the surety bond to the effect that all claims and actions thereon should be filed within three (3) months from the date of its expiration on January 23, 1955. Petitioner, moreover, set up a counterclaim for damages. In due course, thereafter, the trial court rendered a decision:

"a) Condenando a la demanda Central Surety & Insurance Co. que pague al demandante la desde la P8,000.00 con intereses legales a contar desde la fecha de la demanda 24 de Octubre de 1955;

"b) Condenando a la misma demanda que pague al demandante la suma de P600.00 en concepto de honorarios de abogado; y

"c) Condenando, ademas, a la misma demanda que pague las costas del juicio."

Hodges appealed to the Court of Appeals (CA-G.R. No. L-24684-R) from this decision, insofar as it limited petitioner's liability to P8,000.00. Petitioner, also, appealed to said Court upon the ground that the trial court had erred: a) in holding petitioner liable under a contract entered into by Its agent in excess of her authority; (b) in sentencing petitioner to pay Hodges the sum of P8.000.00 with interest thereon, in addition to attorney's fees and the costs; and (c) in "not awarding" petitioner's counterclaim.

After appropriate proceedings, the Court of Appeals rendered the decision above referred to, from which petitioner has appealed to this Court, alleging that the Court of Appeals has erred: (1) in finding that petitioner "was liable on a bond issued by an agent whose authority . . . had already been withdrawn and revoked"; (2) "in applying the rule on implied admission by reason of failure to deny under oath the authenticity of a pleaded document" and (3) "in not considering the legal effect of the waiver contained in the disputed bond and in not disposing of this case under the light of such waiver."

The first assignment of error is predicated upon the fact that prior to January 23, 1954, when the surety bond involved in this case was executed, or on March 15, 1952, petitioner herein had withdrawn the authority of its branch manager in the City of Iloilo, Mrs. Rosita Mesa, to issue, inter alia, surety bonds and that, accordingly, the surety bond, copy of which was attached to

the complaint as Annex B, is null and void. On this point, the Court of Appeals had the following to say:

". . . we are of the opinion that said surety bond is valid. In the first place, there appears to be no showing that the revocation of authority was made known to the public in general by publication, nor was Hodges notified of such revocation despite the fact that he was a regular client of the firm. And even if Hodges would have inquired from Mrs. Mesa as to her authority to issue said bond, we doubt if she would disclose the contents of the letter of March 15, 1952 in view of Central Surety's claim that she was committing irregularities in her remittances to the main office. Secondly, some surety bonds issued by Mrs. Mesa in favor of Hodges after her authority had allegedly been curtailed, were honored by the Central Surety despite the fact that these were not reported to the main office at the time of their issuance. These accounts were paid on January 31, 1957, to wit: Felicito and Libertad Parra issued on August 16, 1952; Estrella Auayan issued on November 16, 1953; Dominador Jordan issued on August 26, 1953; and Ladislao Lachica issued on February 28, 1953. (Exhs. F, G, H, I and J). By these acts Central Surety ratified Mrs. Mesa's unauthorized acts and as such it is now estopped from setting forth Mrs. Mesa's lack of authority to issue surety bonds after March 15, 1952. It has been held that although the agent may have acted beyond the scope of his authority, or may have acted without authority at all, the principal may yet subsequently see fit to recognize and adopt the act as his own. Ratification being a matter of assent to and approval of the act as done on account of the person ratifying, any words or acts which show such assent and approval are ordinarily sufficient. (Sta. Catalina vs. Espitero, CA-G.R. No. 27075-R, April 28, 1964, citing IV Padilla, CIVIL CODE 1959 ed., pp. 478-479; Roxas vs. Villanueva, CA-G.R. No. 18928-R, June 20, 1958). Moreover. the revocation of agency does not prejudice third persons who acted in good faith without knowledge of the revocation. (Joson vs. Garcia, CA-G.R. No. 29336-R, Nov. 19, 1962)."

Indeed, Article 1922 of our Civil Code provides: "If the agent had general powers, revocation of the agency does not prejudice third persons who acted in good faith and without knowledge of the revocation. Notice of the revocation in a newspaper of general circulation is a sufficient warning to third persons."

It is not disputed that petitioner has not caused to be published any notice of the revocation of Mrs. Mesa's authority to issue surety bonds on its behalf, notwithstanding the fact that the powers of Mrs. Mesa, as its branch manager in Iloilo, were of a general nature, for she had exclusive authority, in the City of Iloilo, to represent petitioner herein, not with a particular person, but with the public in general, "in all the negotiations, transactions, and business wherein the Company may lawfully transact or engage in," subject only to the restrictions specified in their agreement. copy of which was attached to petitioner's answer as Annex 3. 1 Contrary to petitioner's claim, Article 1922 applies whenever an agent has general powers, not merely when the principal has published the same, apart from the fact that the opening of petitioner's branch office amounted to a publication of the grant of powers to the manager of said office. Then, again, by honoring several surety bonds issued in its behalf by Mrs. Mesa subsequently to March 15, 195 2, petitioner induced the public to believe that she had authority to issue such bonds. As a consequence, petitioner is now estopped from pleading, particularly against a regular customer thereof, like Hodges, the absence of said authority.

Let us now take up the third assignment of error and defer, until after the same has been disposed of, the consideration of the second assignment of error.

Under the third assignment of error, petitioner maintains that, having been instituted on October 24, 1955 or nine (9) months after the expiration of petitioner's surety bond on January 23, 1955 the present action is barred by the provision in said bond to the effect that it:

". . . will not be liable for any claim not discovered and presented to the Company within three (3) months from the expiration of this bond and that the obligee hereby waives his right to file any court action against the surety after the termination of the period of three months abovementioned."

Interpreting an identical provision, 2 this Court has, however, held "that the three-month period" prescribed therein "established only a condition precedent, not a limitation of action," and that, when a claim has been presented within said period, the action to enforce the claim may be "filed within the statutory time of prescription." This view was clarified in a subsequent case, 3 in the sense that the above-quoted provision was ". . . merely interpreted to mean that presentation of the claim within three months was a condition precedent to the filing of a court action. Since the obligee in said case presented his claim seasonably although it did not file the action within the same period, this Court ruled that the stipulation in the bond concerning the limitation being ambiguous, the ambiguity should be resolved against the surety, which drafted the agreement, and that the action could be filed within the statutory period of prescription." 4

In the case at bar, it is not contended that Hodges had not presented his claim within three (3) months from January 23, 1955. In fact, he had repeatedly demanded from petitioner herein compliance with its obligations under the surety bond in question, and, in reply to such demands, petitioner asked extensions of time, on January 29, February 16, March 15, May 3, June 16, July 1 and 15, and October 15, 1955. 5 After thus securing extensions of time, even beyond three (3) months from January 23, 1955, petitioner cannot plead the lapse of said period to bar the present action.

The second assignment of error assails the finding of the Court of Appeals to the effect that the petitioner is liable for the full amount of surety bond despite the fact that it exceeded the sum of P8,000.00 and hence, required, for its validity and binding effect as against petitioner herein, the express approval and confirmation of its Manila office, which were not secured in view of petitioner's failure to deny under oath the genuineness and due execution of said bond, copy of which was attached to the complaint. It is true that, pursuant to section 8 of Rule 8 of the Rules of Court:

"When an action or defense is founded upon a written instrument, copied in or attached to the corresponding pleading as provided in the preceding section, the genuineness and due execution of the instrument shall be deemed admitted unless the adverse party, under oath, specifically denies them, and sets forth what he claims to be the facts; but this provision does not apply when the adverse party does not appear to be a party to the instrument or when compliance with an order for an inspection of the original instrument is refused."

We have however, held that:

". . . where a case has been tried in complete disregard of the rule and the plaintiff having pleaded a document by copy, presents oral evidence to prove the due execution of the document as well as the agent's authority and no objections are made to the defendant's evidence in refutation, the rule will be considered waived." 6

The reason for such view was explained by this Court as follows:

"Before entering upon a discussion of the questions raised by the assignments of error, we may draw attention to a matter which has not been mentioned either by counsel or by the court below, but which, to prevent misunderstanding, should be briefly explained: It is averred in the complaint that it is accompanied by a copy of the contract between the parties (Exhibit A) which copy, by the terms of the complaint, is made a part thereof. The copy is not set forth in the bill of exceptions and aside from said averment, there is no indication that the copy actually accompanied the complaint, but an examination of the record of the case in the Court of First Instance shows that a translation of the contract was attached to the complaint and served upon the defendant. As this translation may be considered a copy and as the defendant failed to deny its authenticity under oath, it will perhaps be said that under section 103 of the Code of Civil Procedure the omission to so deny it constitutes an admission of the genuineness and due execution of the document as well as of the agent's authority to bind the defendant. (Merchant vs. International Banking Corporation, 6 Phil. 314.)

"In ordinary circumstances that would be true. But this case appears to have been tried upon the theory that the rule did not apply; at least, it was wholly overlooked or disregarded by both parties. The plaintiffs at the beginning of the trial presented a number of witnesses to prove the due execution of the document as well as the agent's authority; no objections were made to the defendant's evidence in refutation and no exceptions taken; and the matter is not mentioned in the decision of the trial court.

"The object of the rule is 'to relieve a party of the trouble and expense of proving in the first instance an alleged fact, the existence or nonexistence of which is necessarily within the knowledge of the adverse party, and of the necessity (to his opponent's case) of establishing which such adverse party is notified by his opponent's pleading.' (Nery Lim-Chingco vs. Terariray, 5 Phil., at p. 124.)

"The plaintiff may, of course, waive the rule and that is what he must be considered to have done in the present case by introducing evidence as to the execution of the document and failing to object to the defendant's evidence in refutation; all this evidence is now competent and the case must be decided thereupon. . . .. Nothing of what has here been said is in conflict with former decisions of this court; it will be found upon examination that in all cases where the applicability of the rule has been sustained the party invoking it has relied on it in the court below and conducted his case accordingly." 7 In the case at bar, the parties acted in complete disregard of or wholly overlooked the rule above-quoted. Hodges had neither objected to the evidence introduced by petitioner herein in order to prove that Mrs. Mesa had no authority to issue a surety bond, much less one in excess of P8,000.00, and took no exception to the admission of said evidence. Hence, Hodges must be deemed to have waived the benefits of said rule and petitioner herein cannot be held liable in excess of the sum of P8,000.00.

WHEREFORE, with the modification that petitioner's liability to Hodges is limited to said sum of P8,000.00 the period, the petitioner was, on January 18, 1956, declared it is hereby affirmed in all other respects, without costs. It is so ordered. Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor and Makasiar, JJ., concur.

Central Surety vs Hodges (JESSA)

Facts: Prior to January 15, 1954, lots had been sold by C. N. Hodges to Vicente M. Layson, for the sum of P43,000.90, payable on installments. As of January 15, 1954, the outstanding balance of Layson's debt, after deducting the installments paid by him prior thereto, amounted to P15,516.00. In order that he could use said lots as security for a loan he intended to apply from a bank, Layson persuaded Hodges to execute in his favor a deed of absolute sale over the properties, with the understanding that he would put up a surety bond to guarantee the payment of said balance. Accordingly, Layson executed, in favor of Hodges, a promissory note for P15,516.00, with interest thereon at the rate of 1% per month, and the sum of P1,551.60, for attorney's fees and costs, in case of default in the payment of the principal or interest of said note. To guarantee the same, on January 23, 1954, the petitioner through the manager of its branch office in Iloilo, Mrs. Rosita Mesa, executed in favor of Hodges the surety bond, which was good for 12 months from the date thereof. When Layson defaulted in the discharge of his aforesaid obligation, Hodges demanded payment from the petitioner, which, despite repeated extensions of time granted thereto, at its request, failed to honor its commitments under the surety bond. On October 24, 1955, Hodges commenced, the present action against Layson and petitioner herein, to recover from them, jointly and severally, the sums of P17,826.08, representing the principal and interest due up to said date, and P1,551.60, as attorney's fees. Having failed to file its answer within the reglementary period, the petitioner was, on January 18, 1956, declared in default. When the case was called for trial, insofar as Layson was concerned, the latter did not appear, and Hodges was allowed to introduce his evidence. RTC: rendered a partial decision against Layson (petitioner having, in the meantime, filed a motion to set aside the order of default, which motion was still pending resolution) Thereafter, said motion was denied, and upon presentation of the evidence of Hodges against herein petitioner, judgment was rendered against the latter as prayed for in the

complaint. Thereupon, petitioner filled a motion for reconsideration and a motion for relief under Rule 38. RTC later set aside its decision against the petitioner and admitted its answer, attached to the motion to set aside the order of default. In its answer, petitioner disclaimed liability under the surety bond in question, upon the ground (a) that the same is null and void, it having been issued by Mrs. Rosita Mesa after her authority therefor had been withdrawn on March 15, 1952; (b) that even under her original authority Mrs. Mesa could not issue surety bonds in excess of P8,000.00 without the approval of petitioner's main office which was not given to the surety bond in favor of Hodges; and (c) that the present action is barred by the provision in the surety bond to the effect that all claims and actions thereon should be filed within three (3) months from the date of its expiration on January 23, 1955 RTC: Central Surety ordered to pay Hodges P8000 Hodges appealed insofar as limiting his award to P8000 and upon the ground that the trial court had erred in holding petitioner liable under a contract entered into by its agent in excess of her authority CA: petitioner was liable on a bond issued by an agent petitioner has appealed to SC, alleging that the CA has erred in finding that petitioner was liable on a bond issued by an agent whose authority had already been withdrawn and revoked (this is predicated upon the fact that prior to when the surety bond involved in this case was executed, petitioner herein had withdrawn the authority of its branch manager Mrs. Rosita Mesa, to issue surety bonds) Issues: 1. WON the surety bond issued by Mesa is valid 2. WON Article 1922 is applicable Held: 1. YES Said surety bond is valid. In the first place, there appears to be no showing that the revocation of authority was made known to the public in general by publication, nor was Hodges notified of such revocation despite the fact that he was a regular client of the firm. Secondly, some surety bonds issued by Mrs. Mesa in favor of Hodges after her authority had allegedly been curtailed, were honored by the Central Surety despite the fact that these were not reported to the 116 . main office at the time of their issuance. These accounts were paid and by these acts, Central

Surety ratified Mrs. Mesa's unauthorized acts and as such it is now estopped from setting forth Mrs. Mesa's lack of authority to issue surety bonds. It has been held that although the agent may have acted beyond the scope of his authority, or may have acted without authority at all, the principal may yet subsequently see fit to recognize and adopt the act as his own. Ratification being a matter of assent to and approval of the act as done on account of the person ratifying any words or acts which show such assent and approval are ordinarily sufficient. Moreover, the relocation of agency does not prejudice third persons who acted in good faith without knowledge of the revocation. 2. YES Indeed, Article 1922 of our Civil Code provides: If the agent had general powers, revocation of the agency does not prejudice third persons who acted in good faith and without knowledge of the revocation. Notice of the revocation in a newspaper of general circulation is a sufficient warning to third persons. It is not disputed that petitioner has not caused to be published any notice of the revocation of Mrs. Mesa's authority to issue surety bonds on its behalf, notwithstanding the fact that the powers of Mrs. Mesa, as its branch manager in Iloilo, were of a general nature, for she had exclusive authority, to represent petitioner herein, not with a particular person, but with the public in general, "in all the negotiations, transactions, and business in wherein the Company may lawfully transact or engage on subject only to the restrictions specified in their agreement, copy of which was attached to petitioner's answer. Contrary to petitioner's claim, Article 1922 applies whenever an agent has general powers, not merely when the principal has published the same, apart from the fact that the opening of petitioner's branch office amounted to a publication of the grant of powers to the manager of said office. Then, again, by honoring several surety bonds issued in its behalf by Mrs. Mesa, petitioner induced the public to believe that she had authority to issue such bonds. As a consequence, petitioner is now

estopped from pleading, particularly against a regular customer thereof, like Hodges, the absence of said authority.

Dy Buncio & Co., Inc. v Ong Guan Can (JESSA) FACTS Ong Guan Can JR. as agent of Ong Guan Can sells the rice mill and camarin for p13,000 and gives as power of attorney dated May 23, 1928. A copy of this public instrument is attached to the deed and recorded with the deed in the office of the Registry of Deeds in Capiz Dy Buncio (as creditor) claims that that the property belongs to its judgment creditor, Ong Guan Can, thus can be subject to execution. Defendants Juan Tong and Puan Giok Eng claim as owner and lessee of the owner by virtue of a deed dated July 31, 1931, by Ong Guan Can, Jr. CFI Capiz held that the deed was invalid and that the property was subject to the execution which has been levied on said properties by the judgment creditor of the owner. Juan Tong and Pua Giok appealed. ISSUE: WON the deed of July 31, 1931 is valid. HELD: NO. The 1928 power of attorney is not a general power of attorney but a limited one and does not give the express power to alienate the properties in question. Petioners claim that the that this defect is cured by Exh.1, which purports to be a general power of attoney given to the same agent in 1920. The making and accepting of a new power of attorney, whether it enlarges or decreases the power an agent under a prior power of attorney, must be held to supplant and revoke the latter provided there is INCONSISTENCY or incompatibility. If the new appointment with the limited powers does not revoke the general power of attorney, the execution of the second power of attorney would be a mere futile gesture. The title of Ong Guan Can not having been divested by the so-called deed of July 31, 1931, his properties are subject to attachment and execution.

Garcia v. de Manzano, 39 Phil 577 ANGELA 1919 Moir, J. FACTS Narciso gave a general power of attorney to his son, Angel L. Manzano on the 9th of February, 1910, and on the 25th of March a second general power-of-attorney to his wife, Josefa Samson. Angel, acting under his GPA sold Narcisos half interest to the steamer San Nicolas, and mortgaged 3 parcels of land in Antimonan to Juan Garcia. Upon Narcisos death, Josefa was named administratrix to Narcisos properties. 117 . Garcia brought action against Narcisos Estate to foreclose the mortgage. ISSUES [as raised in Josefas counterclaim] 1. WON the power of attorney of Josefa revoked that of Angel? 2. WON Angels GPA authorize her to sell the boat ? HELD/RATIO: 1. NO Art. 1735 [now 1923a] provides: The appointment of a new agent for the same business produces a revocation of the previous agency from the day on which notice was given to the former agent, excepting the provisions of the next preceding article. There is no proof in the record that the first agent, the son, knew of the power-of-attorney to his mother. It was necessary for the defendants to prove that the son had notice of the second power-of-attorney. As they have not done so, and it must be considered that Angel L. Manzano was acting under a valid powerofattorney from his father which had not been legally revoked on the date of the sale of the half interest in the steamer to the Garcia. 2. YES. The power-of-attorney does not expressly state that the agent may sell the boat, but a power so full and complete authoring the sale of real property, must necessarily carry with it the right to sell a half interest in a small boat. The record further shows the sale was necessary in order to get money or a credit without which it would be impossible to continue the business which was being conducted in the name of Narciso L. Manzano and for his benefit.

Rallos v. Felix Go Chan (MAI) January 31, 1978 Muoz Palma, J. FACTS: Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel of land known as Lot No. 5983. In 1954, they executed a special power of attorney in favor of their brother, Simeon Rallos, authorizing him to sell for and in their behalf the aforementioned parcel of land. On March 1955, Concepcion Rallos died. On

September 1955, Simeon Rallos sold the undivided shares of his sisters in lot 5983 to Felix Go Chan and Sons Realty Corporation. The deed of sale was registered and the previous TCT was cancelled. On May 1956, Ramos Rallos, as administrator of the Intestate Estate of Concepcion Rallos, filed a complaint with the CFI of Cebu, praying (1) that the sale of the undivided share of the deceased Concepcion Rallos be declared unenforceable, and said share be reconveyed to her estate; (2) that the TCT issued in the name of Felix Go Chan and Sons Realty Corporation be cancelled; and (3) that the plaintiff be indemnified by way of attorneys fees and payment of costs of suit. The trial court rendered judgment declaring the deed of sale null and void, insofar as the onehalf pro-indiviso share of Concepcion Rallos in the property in question, and sentencing Juan Borromeo, the administrator of the estate of Simeon Rallos, to pay Felix Go Chan and Sons Realty Corporation the sum representing the price of one-half of the lot. The appellate court reversed the decision and sustained the sale. ISSUE: Whether or not the sale of the agent of the principals property after the latters death is valid HELD: NO. The general rule in Article 1919 of the NCC is that death is one of the causes for the extinguishment of agency. There being an integration of the personality of the principal into that of the agent, it is not possible for the representation to continue once the death of either is established. There are certain exceptions, however, Article 1931 being one of them. Under this provision, an act done by the agent after the death of the principal is valid and effective if two conditions concur: (1) the agent acted without knowledge of the death of the principal; and (2) that the third person who contracted with the agent acted in good faith. But because it was established that Simeon Rallos had knowledge of the death of his principal when he made the sale, Article 1931 will not apply. The general rule shall apply then that any act of an agent after the death of his principal is void ab initio. Simeon Rallos act of selling the share of Concepcion after her death is therefore null and void.

Del Rosario v. Abad, 104 Phil 648 ABBY 1958; Padilla Facts: 120 . Plaintiffs are the children and heirs of Tiburcio del Rosario. Del Rosario was a grantee of a homestead patent in Nueva Ecija. The Certificate was issue Feb 11, 1937. He obtained a loan from Primitivo Abad Feb 24, 1937 (remember the 5 yr prohibition from encumbrance rule) for P2000 at 12% pa payable Dec 1941. The security for the payment was the improvement on the parcel of land. An irrevocable special power of attorney was also executed authorizing Abad to sell and convey the parcel of land. December 1945 Tiburcio died leaving the mortgage debt unpaid. Later, Primitivo sold the land to his son Teodorico Abad for P1. Title now registered in Teodoricos name. Del Rosario heirs filed suit for recovery and possession of the land. Issue: 1. WoN Power of Attorney created an agency coupled with an interest 2. WoN the land was sold validly Held: No. The power of attorney executed by the homesteader in favor of Abad did not create an agency nor did it clothe the agency with irrevocable character. A mere statement in the power of attorney that it is coupled with an interest is not enough. In what does such interest consist must be stated in the power of attorney. The mortgage has nothing to do with the power of attorney and may be foreclosed by the mortgagee upon the failure of the mortgagor to comply with his obligation. As the agency was not coupled with an interest, it was terminated upon the death of the principal, and the agent could no longer validly convey the land. Hence, the sale was null and void. Granting that the PoA in question was valid it would subject the land to an encumbrance. (executed within 5 yrs after issuance of the patent, the same is null and void.)