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VOL. 384, JULY 18, 2002 607

De Castro vs. Court of Appeals

*
G.R. No. 115838. July 18, 2002.

CONSTANTE AMOR DE CASTRO and CORAZON AMOR

DE CASTRO, petitioners, vs. COURT OF APPEALS and
FRANCISCO ARTIGO, respondents.

Civil Law; Actions; Parties; The joinder of indispensable

parties is mandatory and courts cannot proceed without their
presence.—An indispensable party is one whose interest will be
affected by the court’s action in the litigation, and without whom
no final determination of the case can be had. The joinder of
indispensable parties is mandatory and courts cannot proceed
without their presence. Whenever it appears to the court in the
course of a proceeding that an indispensable party has not been
joined, it is the duty of the court to stop the trial and order the
inclusion of such party.

______________

* THIRD DIVISION.

608

608 SUPREME COURT REPORTS ANNOTATED

De Castro vs. Court of Appeals

Same; Same; Same; Solidarity does not make a solidary

obligor an indispensable party in a suit filed by the creditor.—
Thus, the Court has ruled in Operators Incorporated vs. American
Biscuit Co., Inc. that—“x x x solidarity does not make a solidary
obligor an indispensable party in a suit filed by the creditor.
Article 1216 of the Civil Code says that the creditor ‘may proceed
against anyone of the solidary debtors or some or all of them
simultaneously.’ ”

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Same; Same; Same; When the law expressly provides for

solidarity of the obligation, as in the liability of co-principals in a
contract of agency, each obligor may be compelled to pay the entire
obligation.—When the law expressly provides for solidarity of the
obligation, as in the liability of coprincipals in a contract of
agency, each obligor may be compelled to pay the entire
obligation. The agent may recover the whole compensation from
any one of the co-principals, as in this case.
Same; Contracts; Agency; A contract of agency which is not
contrary to law, public order, public policy, morals or good custom
is a valid contract, and constitutes the law between the parties.—A
contract of agency which is not contrary to law, public order,
public policy, morals or good custom is a valid contract, and
constitutes the law between the parties. The contract of agency
entered into by Constante with Artigo is the law between them
and both are bound to comply with its terms and conditions in
good faith.
Same; Actions; Laches; Laches is negligence or omission to
assert a right within a reasonable time, warranting a presumption
that the party entitled to assert it either has abandoned it or
declined to assert it.—Laches means the failure or neglect, for an
unreasonable and unexplained length of time, to do that which by
exercising due diligence could or should have been done earlier. It
is negligence or omission to assert a right within a reasonable
time, warranting a presumption that the party entitled to assert
it either has abandoned it or declined to assert it.
Same; Same; Same; Actions upon a written contract, such as a
contract of agency, must be brought within ten years from the time
the right of action accrues.—Actions upon a written contract, such
as a contract of agency, must be brought within ten years from
the time the right of action accrues. The right of action accrues
from the moment the breach of right or duty occurs. From this
moment, the creditor can institute the action even as the ten-year
prescriptive period begins to run.

609

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De Castro vs. Court of Appeals

Same; Same; Same; A delay within the prescriptive period is

sanctioned by law and is not considered to be a delay that would
bar relief.—Laches does not apply because only four years had
lapsed from the time of the sale in June 1985. Artigo made a
demand in July 1985 and filed the action in court on May 29,
1989, well within the ten-year prescriptive period. This does not
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constitute an unreasonable delay in asserting one’s right. The

Court has ruled, “a delay within the prescriptive period is
sanctioned by law and is not considered to be a delay that would
bar relief.”In explaining that laches applies only in the absence of
a statutory prescriptive period, the Court has stated—“Laches is
recourse in equity. Equity, however, is applied only in the absence,
never in contravention, of statutory law. Thus, laches, cannot, as a
rule, be used to abate a collection suit filed within the prescriptive
period mandated by the Civil Code.”
Same; Damages; The award of damages and attorney’s fees is
left to the sound discretion of the court, and if such discretion is
well exercised, it will not be disturbed on appeal; Moral damages
may be awarded when in a breach of contract the defendant acted
in bad faith, or in wanton disregard of his contractual obligation.
—Law and jurisprudence support the award of moral damages
and attorney’s fees in favor of Artigo. The award of damages and
attorney’s fees is left to the sound discretion of the court, and if
such discretion is well exercised, as in this case, it will not be
disturbed on appeal. Moral damages may be awarded when in a
breach of contract the defendant acted in bad faith, or in wanton
disregard of his contractual obligation. On the other hand,
attorney’s fees are awarded in instances where “the defendant
acted in gross and evident bad faith in refusing to satisfy the
plaintiff’s plainly valid, just and demandable claim.”

PETITION for review on certiorari of a decision of the

Court of Appeals.

The facts are stated in the opinion of the Court.

          Bacobo, Rondain, Mendiola, Cruz & Formoso for
petitioner.
          Inocentes and Associates Law Office for private
respondent.
610

610 SUPREME COURT REPORTS ANNOTATED

De Castro vs. Court of Appeals

CARPIO, J.:

The Case
1
Before us is a Petition for Review on Certiorari
2
seeking to
annul the Decision of the Court of Appeals dated May 4,
1994 in 3CA-G.R. CV No. 37996, which affirmed in toto the
decision of the Regional Trial Court of Quezon City,
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Branch 80, in Civil Case No. Q-89-2631. The trial court

disposed as follows:

“WHEREFORE, the Court finds defendants Constante and

Corazon Amor de Castro jointly and solidarily liable to plaintiff
the sum of:

a) P303,606.24 representing unpaid commission;

b) P25,000.00 for and by way of moral damages;
c) P45,000.00 for and by way of attorney’s fees;
d) To pay the cost of this suit.

Quezon City, Metro Manila, December 20, 1991.”

The Antecedent Facts

On May 29, 1989, private respondent Francisco Artigo

(“Artigo” for brevity) sued petitioners Constante A. De
Castro (“Constante” for brevity) and Corazon A. De Castro
(“Corazon” for brevity) to collect the unpaid4 balance of his
broker’s commission from the De Castros. The Court of
Appeals summarized the facts in this wise:
5
“x x x. Appellants were co-owners of four (4) lots located at EDSA
corner New York and Denver Streets in Cubao, Quezon City. In a
letter dated
6
January 24, 1984 (Exhibit “A-1, p. 144, Records),
appellee was authorized by appellants to act as real estate broker
in the sale of these properties for the amount of P23,000,000.00,
five percent (5%) of which

______________

1 Under Rule 45 of the Rules of Court.

2 Seventh Division composed of Justices Ricardo J. Francisco (Chairman and
Ponente); Salome A. Montoya and Ramon A. Barcelona (Members).
3 Penned by Judge Benigno T. Dayaw.
4 When referred to collectively.
5 Referring to the De Castros.
6 Referring to Artigo.

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De Castro vs. Court of Appeals

will be given to the agent as commission. It was appellee who first

found Times Transit Corporation, represented by its president
Mr. Rondaris, as prospective buyer which desired to buy two (2)
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lots only, specifically lots 14 and 15. Eventually, sometime in May

of 1985, the sale of lots 14 and 15 was consummated. Appellee
received from appellants P48,893.76 as commission.
It was then that the rift between the contending parties soon
emerged. Appellee apparently felt short changed because
according to him, his total commission should be P352,500.00
which is five percent (5%) of the agreed price of P7,050,000.00
paid by Times Transit Corporation to appellants for the two (2)
lots, and that it was he who introduced the buyer to appellants
and unceasingly facilitated the negotiation which ultimately led
to the consummation of the sale. Hence, he sued below to collect
the balance of P303,606.24 after having received P48,893.76 in
advance.
On the other hand, appellants completely traverse appellee’s
claims and essentially argue that appellee is selfishly asking for
more than what he truly deserved as commission to the prejudice
of other agents who were more instrumental in the consummation
of the sale. Although appellants readily concede that it was
appellee who first introduced Times Transit Corp. to them,
appellee was not designated by them as their exclusive real estate
agent but that in fact there were more or less eighteen (18) others
whose collective efforts in the long run dwarfed those of
appellee’s, considering that the first negotiation for the sale where
appellee took active participation failed and it was these other
agents who successfully brokered in the second negotiation. But
despite this and out of appellants’ “pure liberality, beneficence
and magnanimity”, appellee nevertheless was given the largest
cut in the commission (P48,893.76), although on the principle of
quantum meruit he would have certainly been entitled to less. So
appellee should not have been heard to complain of getting only a
pittance when he actually got the lion’s share of the commission
and worse, he should not have been allowed to get the entire
commission. Furthermore, the purchase price for the two lots was
only P3.6 million as appearing in the deed of sale and not P7.05
million as alleged by appellee. Thus, even assuming that appellee
is entitled to the entire commission, he would only be getting 5%
of the P3.6 million, or P180,000.00.”

Ruling of the Court of Appeals

The Court of Appeals affirmed in toto the decision of the

trial court.
First. The Court of Appeals found that Constante
authorized Artigo to act as agent in the sale of two lots in
Cubao, Quezon City.

612

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De Castro vs. Court of Appeals

The handwritten authorization letter signed by Constante

clearly established a contract of agency between Constante
and Artigo. Thus, Artigo sought prospective buyers and
found Times Transit Corporation (“Times Transit” for
brevity). Artigo facilitated the negotiations which
eventually led to the sale of the two lots. Therefore, the
Court of Appeals decided that Artigo is entitled to the 5%
commission on the purchase price as provided in the
contract of agency.
Second. The Court of Appeals ruled that Artigo’s
complaint is not dismissible for failure to implead as
indispensable parties the other co-owners of the two lots.
The Court of Appeals explained that it is not necessary to
implead the other co-owners since the action is exclusively
based on a contract of agency between Artigo and
Constante.
Third. The Court of Appeals likewise declared that the
trial court did not err in admitting parol evidence to prove
the true amount paid by Times Transit to the De Castros
for the two lots. The Court of Appeals ruled that evidence
aliunde could be presented to prove that the actual
purchase price was P7.05 million and not P3.6 million as
appearing in the deed of sale. Evidence aliunde is
admissible considering that Artigo is not a party, but a
mere witness in the deed of sale between the De Castros
and Times Transit. The Court of Appeals explained that,
“the rule that oral evidence is inadmissible to vary the
terms of written instruments is generally applied only in
suits between parties to the instrument and strangers to
the contract are not bound by it.” Besides, Artigo was not
suing under the deed of sale, but solely under the contract
of agency. Thus, the Court of Appeals upheld the trial
court’s finding that the purchase price was P7.05 million
and not P3.6 million.
Hence, the instant petition.

The Issues

According to petitioners, the Court of Appeals erred in—

I. NOT ORDERING THE DISMISSAL OF THE COMPLAINT

FOR FAILURE TO IMPLEAD INDISPENSABLE PARTIES-IN-
INTEREST;

613

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VOL. 384, JULY 18, 2002 613

De Castro vs. Court of Appeals

II. NOT ORDERING THE DISMISSAL OF THE

COMPLAINT ON THE GROUND THAT ARTIGO’S
CLAIM HAS BEEN EXTINGUISHED BY FULL
PAYMENT, WAIVER, OR ABANDONMENT;
III. CONSIDERING INCOMPETENT EVIDENCE;
IV. GIVING CREDENCE TO PATENTLY PERJURED
TESTIMONY;
V. SANCTIONING AN AWARD OF MORAL DAMAGES
AND ATTORNEY’S FEES;
VI. NOT AWARDING THE DE CASTRO’S MORAL AND
EXEMPLARY DAMAGES, AND ATTORNEY’S FEES.

The Court’s Ruling

The petition is bereft of merit.

First Issue: whether the complaint merits dismissal

for failure to implead other co-owners as
indispensable parties

The De Castros argue that Artigo’s complaint should have

been dismissed for failure to implead all the co-owners of
the two lots. The De Castros claim that Artigo always knew
that the two lots were co-owned by Constante and Corazon
with their other siblings Jose and Carmela whom
Constante merely represented. The De Castros contend
that failure to implead such indispensable parties is fatal
to the complaint since Artigo, as agent of all the four
coowners, would be paid with funds co-owned by the four
co-owners.
The De Castros’ contentions are devoid of legal basis.
An indispensable party is one whose interest will be
affected by the court’s action in the litigation, and without
7
whom no final determination of the case can be had. The
joinder of indispensable parties is mandatory 8
and courts
cannot proceed without their presence. Whenever it
appears to the court in the course of a proceed-

______________

7 Rule 3, Section 7 of the Rules of Court; Seno vs. Mangubat, 156 SCRA
113 (1987); Quisumbing vs. Court of Appeals, 189 SCRA 325 (1990);
Lozano vs. Ballesteros, 195 SCRA 681 (1991).

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8 Ibid.

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ing that an indispensable party has not been joined, it is

the duty of the court9 to stop the trial and order the
inclusion of such party.
However, the rule on mandatory joinder of indispensable
parties is not applicable to the instant case.
There is no dispute that Constante appointed Artigo in a
handwritten note dated January 24, 1984 to sell the
properties of the De Castros for P23 million at a 5 percent
commission. The authority was on a first come, first serve
basis. The authority reads in full:

“24 Jan. 84

To Whom It May Concern:

This is to state that Mr. Francisco Artigo is authorized

as our real estate broker in connection with the sale of
our property located at Edsa Corner New York &
Denver, Cubao, Quezon City.
Asking price P23,000,000.00 with
5% commission as agent’s fee.
C.C. de Castro
owner & representing
co-owners
This authority is on a first-come
First serve basis—CAC”

Constante signed the note as owner and as representative

of the other co-owners. Under this note, a contract of
agency was clearly constituted between Constante and
Artigo. Whether Constante appointed Artigo as agent, in
Constante’s individual or representative capacity, or both,
the De Castros cannot seek the dismissal of the case for
failure to implead the other co-owners as indispensable
parties. The De Castros admit that the other10co-owners are
solidarily liable under the contract of agency, citing Article
1915 of the Civil Code, which reads:

______________

9 Vicente J. Francisco, The Revised Rules of Court, Vol. 1, p. 271, 1973

ed.
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10 Memorandum of Petitioner dated April 23, 1997, p. 8; Rollo, p. 175.

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Art. 1915. If two or more persons have appointed an agent

for a common transaction or undertaking, they shall be
solidarily liable to the agent for all the consequences of the
agency.
The solidary liability of the four co-owners, however,
militates against the De Castros’ theory that the other co-
owners should be impleaded as indispensable parties. A
noted commentator explained Article 1915 thus—

“The rule in this article applies even when the appointments were
made by the principals in separate acts, provided that they are for
the same transaction. The solidarity arises from the common
interest of the principals, and not from the act of constituting the
agency. By virtue of this solidarity, the agent can recover from any
principal the whole compensation and indemnity owing to him by
the others. The parties, however, may, by express agreement,
negate this solidary responsibility. The solidarity does not
disappear by the mere partition effected by the principals after
the accomplishment of the agency.

If the undertaking is one in which several are interested, but only some
create the agency, only the latter are solidarily liable, without prejudice
to the effects of negotiorum gestio with respect to the others. And if the
power granted includes various transactions some of which are common
and others are not, only those interested in each transaction shall be
11

liable for it.”

When the law expressly provides for solidarity of the

obligation, as in the liability of co-principals in a contract of
agency, each12
obligor may be compelled to pay the entire
obligation. The agent may recover the whole
compensation from any one of the co-principals, as in this
case.

______________

11 Arturo M. Tolentino, Commentaries and Jurisprudence on the Civil

Code of the Philippines, Vol. 5, pp. 428-429, 1992 ed.
12 Art. 1207 of the Civil Code provides as follows: “Art. 1207. The
concurrence of two or more creditors or of two or more debtors in one and
the same obligation does not imply that each one of the former has a right
to demand, or that each one of the latter is bound to render, entire
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compliance with the prestation. There is solidary liability only when the
obligation expressly so states, or when the law or the nature of the
obligation requires solidarity.”

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Indeed, Article 1216 of the Civil Code provides that a

creditor may sue any of the solidary debtors. This article
reads:

Art. 1216. The creditor may proceed against any one of the
solidary debtors or some or all of them simultaneously. The
demand made against one of them shall not be an obstacle to
those which may subsequently be directed against the others, so
long as the debt has not been fully collected.

Thus, the Court has ruled 13

in Operators Incorporated vs.
American Biscuit Co., Inc. that—

“x x x solidarity does not make a solidary obligor an indispensable

party in a suit filed by the creditor. Article 1216 of the Civil Code
says that the creditor ‘may proceed against anyone of the solidary
debtors or some or all of them simultaneously.’ ” (Emphasis
supplied)

Second Issue: whether Artigo’s claim has been

extinguished by full payment, waiver or
abandonment

The De Castros claim that Artigo was fully paid on June

14, 1985, that is, Artigo was given “his proportionate share
and no longer entitled to any balance.” According to them,
Artigo was just one of the agents involved in the sale and
entitled to a “proportionate share” in the commission. They
assert that Artigo did absolutely nothing during the second
negotiation but to sign as a witness in the deed of sale. He
did not even prepare the documents for the transaction as
an active real estate broker usually does.
The De Castros’ arguments are flimsy.
A contract of agency which is not contrary to law, public
order, public policy, morals or good custom is a 14valid
contract, and constitutes the law between the parties. The
contract of agency entered into by Constante with Artigo is
the law between them and both are bound to comply with
its terms and conditions in good faith.
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The mere fact that “other agents” intervened in the

consummation of the sale and were paid their respective
commissions cannot

______________

13 154 SCRA 738 (1987), reiterated in Republic vs. Sandiganbayan, 173

SCRA 72 (1989).
14 San Andres vs. Rodriguez, 332 SCRA 769 (2000).

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De Castro vs. Court of Appeals

vary the terms of the contract of agency granting Artigo a 5

percent commission based on the selling price. These “other
agents” turned out to be employees of Times Transit, the
buyer Artigo introduced to the De Castros. This prompted
the trial court to observe:

“The alleged ‘second group’ of agents came into the picture only
during the so-called ‘second negotiation’ and it is amusing to note
that these (sic) second group, prominent among whom are Atty.
Del Castillo and Ms. Prudencio, happened to be employees of
Times Transit, the buyer of the properties. And their efforts were
limited to convincing Constante to ‘part away’ with the properties
because the redemption period of the foreclosed properties is
around the corner, so to speak. (tsn, June 6, 1991).
xxx
To accept Constante’s version of the story is to open the
floodgates of fraud and deceit. A seller could always pretend
rejection of the offer and wait for sometime for others to renew it
who are much willing to accept a commission far less than the
original broker. The immorality in the instant case easily presents
itself if one has to consider that the alleged ‘second group’ are the
employees of the buyer, Times Transit and they have not bettered
the offer secured by Mr. Artigo for P7 million.
It is to be noted also that while Constante was too particular
about the unrenewed real estate broker’s license of Mr. Artigo, he
did not bother at all to inquire as to the 15licenses of Prudencio and
Castillo. (tsn, April 11, 1991, pp. 39-40).” (Emphasis supplied)

In any event, we find that the 5 percent real estate broker’s

commission is reasonable and within the standard practice
in the real estate industry for transactions of this nature.
The De Castros also contend that Artigo’s inaction as
well as failure to protest estops him from recovering more

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than what was actually paid him. The De Castros cite

Article 1235 of the Civil Code which reads:

Art. 1235. When the obligee accepts the performance, knowing its
incompleteness and irregularity, and without expressing any
protest or objection, the obligation is deemed fully complied with.

______________

15 Decision dated December 20, 1991 of RTC Judge Benigno T. Dayan,

Rollo, pp. 33-34.

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618 SUPREME COURT REPORTS ANNOTATED

De Castro vs. Court of Appeals

De Castros’ reliance on Article 1235 of the Civil Code is

misplaced. Artigo’s acceptance of partial payment of his
commission neither amounts to a waiver of the balance nor
puts him in estoppel. This is the import of Article 1235
which was explained in this wise:

“The word accept, as used in Article 1235 of the Civil Code, means
to take as satisfactory or sufficient, or agree to an incomplete or
irregular performance. Hence, the mere receipt of a partial
payment is not equivalent to the required acceptance of 16
performance as would extinguish the whole obligation.”
(Emphasis supplied)

There is thus a clear distinction between acceptance and

mere receipt. In this case, it is evident that Artigo merely
received the partial payment without waiving the balance.
Thus, there is no estoppel to speak of.
The De Castros further argue that laches should apply
because Artigo did not file his complaint in court until May
29, 1989, or almost four years later. Hence, Artigo’s claim
for the balance of his commission is barred by laches.
Laches means the failure or neglect, for an unreasonable
and unexplained length of time, to do that which by
exercising due diligence could or should have been done
earlier. It is negligence or omission to assert a right within
a reasonable time, warranting a presumption that the
party entitled to assert
17
it either has abandoned it or
declined to assert it.
Artigo disputes the claim that he neglected to assert his
rights. He was appointed as agent on January 24, 1984.
The two lots were finally sold in June 1985. As found by the
trial court, Artigo demanded in April and July of 1985 the
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payment of his commission by Constante on the basis of the

selling price of 18P7.05 million but there was no response
from Constante. After it became clear that his demands
for payment have fallen on deaf ears, Artigo decided to sue
on May 29, 1989.

______________

16 Tolentino, supra, see note 11, Vol. 4, p. 279.

17 Republic vs. Court of Appeals, 301 SCRA 366 (1999); Ochagabia vs.
Court of Appeals, 304 SCRA 587 (1999).
18 RTC Decision, p. 7; Rollo, pp. 20-36, see p. 35.

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De Castro vs. Court of Appeals

Actions upon a written contract, such as a contract of

agency, must be brought19 within ten years from the time the
right of action accrues. The right of action accrues from
the moment the breach of right or duty occurs. From this
moment, the creditor can institute the action
20
even as the
ten-year prescriptive period begins to run.
The De Castros admit that Artigo’s claim was filed
within the ten-year prescriptive period. The De Castros,
however, still maintain that Artigo’s cause of action is
barred by laches. Laches does not apply because only four
years had lapsed from the time of the sale in June 1985.
Artigo made a demand in July 1985 and filed the action in
court on May 29, 1989, well within the ten-year
prescriptive period. This does not constitute an
unreasonable delay in asserting one’s right. The Court has
ruled, “a delay within the prescriptive period is sanctioned
by law21and is not considered to be a delay that would bar
relief.” In explaining that laches applies only in the
absence of a statutory prescriptive period, the Court has
stated—

“Laches is recourse in equity. Equity, however, is applied only in

the absence, never in contravention, of statutory law. Thus,
laches, cannot, as a rule, be used to abate a collection suit
22
filed
within the prescriptive period mandated by the Civil Code.”

Clearly, the De Castros’ defense of laches finds no support

in law, equity or jurisprudence.

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