Agency Finals' Cases 1

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G.R. No. 167552 April 23, 2007

EUROTECH INDUSTRIAL TECHNOLOGIES, INC., Petitioner,vs.EDWIN CUIZON and ERWIN CUIZON, Respondents.

D E C I S I O N

CHICO-NAZARIO,J.:

Before Us is a petition for review by certiorari assailing the Decision1of the Court ofAppealsdated 10 August 2004 and its Resolution2dated 17 March 2005 in CA-G.R.SP No. 71397 entitled, "Eurotech Industrial Technologies, Inc. v. Hon. Antonio T.Echavez." The assailed Decision and Resolution affirmed the Order3dated 29 January2002 rendered by Judge Antonio T. Echavez ordering the dropping of respondentEDWIN Cuizon (EDWIN) as a party defendant in Civil Case No. CEB-19672.

The generative facts of the case are as follows:

PETITIONERis engaged in the business of importation and distribution of variousEuropean industrial equipmentfor customers here in the Philippines. It has as one of itscustomers Impact System s Sales("Impact Systems") which is a sole proprietorshipowned by respondent ERWIN Cuizon (ERWIN).RESPONDENTEDWIN is the salesmanager of Impact Systems and was impleaded in the court a quo in said capacity.

From January to April 1995, petitioner soldto Impact Systems various productsallegedly amounting to ninety-one thousand three hundred thirty-eight (P91,338.00)

pesos. Subsequently, respondents sought to buyfrom petitioner one unit of sludgepumpvalued at P250,000.00 with respondents making a down paymentof fiftythousand pesos (P50,000.00).4When the sludge pump arrived from the UnitedKingdom, petitioner refused to deliver the same to respondents without their having fullysettled their indebtedness to petitioner. Thus, on 28 June 1995, respondent EDWINand Alberto de Jesus, general manager of petitioner, executed a Deed ofAssignmentof receivables in favor of petitioner, the pertinent part of which states:

1.) That ASSIGNOR5has an outstanding receivables from Toledo PowerCorporation in the amount of THREE HUNDRED SIXTY FIVE THOUSAND(P365,000.00) PESOS as payment for the purchase of one unit of Selwood

Spate 100D Sludge Pump;2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and CONVEY untothe ASSIGNEE6the said receivables from Toledo Power Corporation in theamount of THREE HUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOSwhich receivables the ASSIGNOR is the lawful recipient;

3.) That the ASSIGNEE does hereby accept this assignment.7
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Following the execution of the Deed of Assignment, petitioner delivered to respondentsthe sludge pump as shown by Invoice No. 12034 dated 30 June 1995.8

Allegedly unbeknownst to petitioner, respondents, despite the existence of the Deedof Assignment, proceeded to collect from Toledo Power Company the amount

of P365,135.29 as evidenced by Check VoucherNo. 09339

prepared by said powercompany and an official receipt dated 15 August 1995 issued by ImpactSystems.10Alarmed by this development, petitioner made several demandsuponrespondents to pay their obligations. As a result, respondents were able to make partialpayments to petitioner. On 7 October 1996, petitioners counsel sent respondentsa final demand letterwherein it was stated that as of 11 June 1996, respondents totalobligations stood at P295,000.00 excluding interests and attorneys fees.11Because ofrespondents failure to abideby said final demand letter, petitioner instituted acomplaint for sum of money, damages, with application for preliminary attachmentagainst herein respondents before the Regional Trial Court of Cebu City.12

On 8 January 1997, the trial court granted petitioners prayer for the issuance of writ ofpreliminary attachment.13

On 25 June 1997, respondent EDWIN filed his Answer14wherein he admittedpetitioners allegations with respect to the sale transactions entered into by ImpactSystems and petitioner between January and April 1995.15He, however, disputed thetotal amount of Impact Systems indebtedness to petitioner which, according to him,amounted to only P220,000.00.16

By way of special and affirmative defenses, respondent EDWIN allegedthat he is nota real party in interest in this case. According to him, he was act ing as m ere agentof

his principal, which was the Impact Systems, in his transaction with petitioner and thelatter was very much aware of this fact. In support of this argument, petitioner points toparagraphs 1.2 and 1.3 of petitioners Complaint stating

1.2. Defendant Erwin H. Cuizon, is of legal age, married, a resident of Cebu City.He is the proprietor of asingleproprietorship business known as Impact SystemsSales ("Impact Systems" for brevity), with office located at 46-A del RosarioStreet, Cebu City, where he may be served summons and other processes of theHonorable Court.

1.3. Defendant Edwin B. Cuizon is of legal age, Filipino, married, a resident ofCebu City. He is the

Sales Managerof Impact Systems and is sued in this action

in such capacity.17

On 26 June 1998, petitioner filed a Motion to Declare Defendant ERWIN in Defaultwith Motion for Summary Judgment. The trial court granted petitioners motion todeclare respondent ERWIN in default "for his failure to answer within the prescribedperiod despite the opportunity granted"18but it denied petitioners motion for summary

judgment in its Order of 31 August 2001 and scheduled the pre-trial of the case on 16
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October 2001.19However, the conduct of the pre-trial conference was deferred pendingthe resolution by the trial court of the special and affirmative defenses raised byrespondent EDWIN.20

After the filing of respondent EDWINs Memorandum21in support of his special and

affirmative defenses and petitioners opposition22

thereto, the trial court rendered itsassailed Order dated 29 January 2002 dropping respondent EDWINas a partydefendant in this case. According to the trial court

A study of Annex "G" to the complaint shows that in the Deed of Assignment, defendantEdwin B. Cuizon acted in behalf of or represented [Impact] Systems Sales; that [Impact]Systems Sale is a single proprietorship entity and the complaint shows that defendantErwin H. Cuizon is the proprietor; that plaintiff corporation is represented by its generalmanager Alberto de Jesus in the contract which is dated June 28, 1995. A study of

Annex "H" to the complaint reveals that [Impact] Systems Sales which is owned solelyby defendant Erwin H. Cuizon, made a down payment of P50,000.00 that Annex "H" is

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

In view of the Foregoing, the Court directs that defendant Edwin B. Cuizon be dropped

as party defendant.

23

Aggrieved by the adverse rulingof the trial court, petitioner brought the matter tothe Court of Appeals which, however, aff irmedthe 29 January 2002 Order of thecourt a quo. The dispositive portion of the now assailed Decision of the Court of

Appeals states:

WHEREFORE, finding no viable legal ground to reverse or modify the conclusionsreached by the public respondent in his Order dated January 29, 2002, it is hereby

AFFIRMED.24

Petitioners motion for reconsideration was denied by the appellate court in itsResolution promulgated on 17 March 2005. Hence, the present petition raising, as sole

ground for its allowance, the following:

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT RULEDTHAT RESPONDENT EDWIN CUIZON, AS AGENT OF IMPACT SYSTEMSSALES/ERWIN CUIZON, IS NOT PERSONALLY LIABLE, BECAUSE HE HAS
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NEITHER ACTED BEYOND THE SCOPE OF HIS AGENCY NOR DID HEPARTICIPATE IN THE PERPETUATION OF A FRAUD.25

To support its argument, petitioner points to Article 1897 of the New Civil Code whichstates:

Art. 1897. The agent who acts as such is not personally liable to the party with whom hecontracts, unless he expressly binds himself or exceeds the limits of his authoritywithout giving such party sufficient notice of his powers.

Petitioner contends that the Court of Appeals failed to appreciate the effect of ERWINsact of collecting the receivables from the Toledo Power Corporation notwithstanding theexistence of the Deed of Assignment signed by EDWIN on behalf of Impact Systems.While said collection did not revoke the agency relations of respondents, petitionerinsists thatERWINs action repudiated EDWINs power to sign the Deed of

Assignment. As EDWIN did not sufficiently notify it of the extent of his powers as an

agent, petitioner claims that he should be made personally liable for the obligations ofhis principal.26

Petitioner also contends that it fell victim to the fraudulent scheme of respondents whoinduced it into selling the one unit of sludge pump to Impact Systems and signing theDeed of Assignment. Petitioner directs the attention of this Court to the fact thatrespondents are bound not only by their principal and agent relationship but are in factfull-blooded brothers whose successive contravening acts bore the obvious signs ofconspiracy to defraud petitioner.27

In his Comment,28respondent EDWIN again posits the argument that he is not a real

party in interest in this case and it was proper for the trial court to have him dropped asa defendant. He insists that he was a mere agent of Impact Systems which is owned byERWIN and that his status as such is known even to petitioner as it is alleged in theComplaint that he is being sued in his capacity as the sales manager of the saidbusiness venture. Likewise, respondent EDWIN points to the Deed of Assignment whichclearly states that he was acting as a representative of Impact Systems in saidtransaction.

We do not find merit in the petition.

In a contract of agency, a person binds himself to render some service or to do

something in representation or on behalf of another with the latters consent.

29

Theunderlying principle of the contract of agency is to accomplish results by using theservices of othersto do a great variety of things like selling, buying, manufacturing,and transporting.30Its purpose is to extend the personality of the principal or the partyfor whom another acts and from whom he or she derives the authority to act .31It is saidthat the basis of agency is representation, that is, the agent acts for and on behalf of theprincipal on matters within the scope of his authority and said acts have the same legaleffect as if they were personally executed by the principal.32By this legal fiction, the
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actual or real absence of the principal is converted into his legal or juridical presence qui facit per alium facit per se.33

The elements of the contract of agency are: (1) consent, express or implied, of theparties to establish the relationship; (2) the object is the execution of a juridical act in

relation to a third person; (3) the agent acts as a representative and not for himself; (4)the agent acts within the scope of his authority.34

In this case, the parties do not dispute the existence of the agency relationship betweenrespondents ERWIN as principal and EDWIN as agent. The only cause of the presentdispute is whether respondent EDWIN exceeded his authority when he signed the Deedof Assignment thereby binding himself personally to pay the obligations to petitioner.Petitioner firmly believesthat respondent EDWIN acted beyond the authority grantedby his principal and he should therefore bear the effect of his deed pursuant to Article1897 of the New Civil Code.

We disagree.Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is notpersonally liable to the party with whom he contracts. The same provision, however,presents two instances when an agent becomes personally liable to a third person. Thefirst is when he expressly binds himself to the obligation and the second is when heexceeds his authority. In the last instance, the agent can be held liable if he does notgive the third party sufficient notice of his powers. We hold that respondent EDWINdoes not fall within any of the exceptions contained in this provision .

The Deed of Assignment clearly states that respondent EDWIN signed thereon as the

sales manager of Impact Systems. As discussed elsewhere, the position of manager isunique in that it presupposes the grant of broad powers with which to conduct thebusiness of the principal, thus:

The powers of an agent are particularly broad in the case of one acting as a generalagent or manager; such a position presupposes a degree of confidence reposed andinvestiture with liberal powers for the exercise of judgment and discretion in transactionsand concerns which are incidental or appurtenant to the business entrusted to his careand management. In the absence of an agreement to the contrary, a managing agentmay enter into any contracts that he deems reasonably necessary or requisite for theprotection of the interests of his principal entrusted to his management. x x x.35

Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-withinhis authority when he signed the Deed of Assignment. To recall, petitioner refused todeliver the one unit of sludge pump unless it received, in full, the payment for ImpactSystems indebtedness.36We may very well assume that Impact Systems desperatelyneeded the sludge pump for its business since after it paid the amount of fifty thousandpesos (P50,000.00) as down payment on 3 March 1995,37it still persisted in negotiatingwith petitioner which culminated in the execution of the Deed of Assignment of its
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receivables from Toledo Power Company on 28 June 1995.38The significant amount oftime spent on the negotiation for the sale of the sludge pump underscores ImpactSystems perseverance to get hold of the said equipment. There is, therefore, no doubtin our mind that respondent EDWINs participation in the Deed of Assignment was"reasonably necessary" or was required in order for him to protect the business of his

principal. Had he not acted in the way he did, the business of his principal would havebeen adversely affected and he would have violated his fiduciary relation with hisprincipal.

We likewise take note of the fact that in this case, petitioner is seeking to recover bothfrom respondents ERWIN, the principal, and EDWIN, the agent. It is well to state herethat Article 1897 of the New Civil Code upon which petitioner anchors its claim againstrespondent EDWIN "does not hold that in case of excess of authority, both the agentand the principal are liable to the other contracting party."39To reiterate, the first part of

Article 1897 declares that the principal is liable in cases when the agent acted within thebounds of his authority. Under this, the agent is completely absolved of any liability. The

second part of the said provision presents the situations when the agent himselfbecomes liable to a third party when he expressly binds himself or he exceeds the limitsof his authority without giving notice of his powers to the third person. However, it mustbe pointed out that in case of excess of authority by the agent, like what petitionerclaims exists here, the law does not say that a third person can recover from both theprincipal and the agent.40

As we declare that respondent EDWIN acted within his authority as an agent, who didnot acquire any right nor incur any liability arising from the Deed of Assignment, itfollows that he is not a real party in interest who should be impleaded in this case. Areal party in interest is one who "stands to be benefited or injured by the judgment in the

suit, or the party entitled to the avails of the suit."

41

In this respect, we sustain hisexclusion as a defendant in the suit before the court a quo.

WHEREFORE, premises considered, the present petition is DENIED and the Decisiondated 10 August 2004 and Resolution dated 17 March 2005 of the Court of Appeals inCA-G.R. SP No. 71397, affirming the Order dated 29 January 2002 of the Regional TrialCourt, Branch 8, Cebu City, is AFFIRMED.

Let the records of this case be remanded to the Regional Trial Court, Branch 8, CebuCity, for the continuation of the proceedings against respondent Erwin Cuizon.

SO ORDERED.
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G.R. No. 120465 September 9, 1999

WILLIAM UY and RODEL ROXAS, petitioners,vs.COURT OF APPEALS, HON. ROBERT BALAO and NATIONAL HOUSING

AUTHORITY, respondents.

KAPUNAN, J.:

PETITIONERSWilliam Uy and Rodel RoxasARE AGENTSauthorized to sell eightparcels of land by the owners thereof. By virtue of such authority, petitioners offered tosell the lands, located in Tuba, Tadiangan, Benguet TO RESPONDENT NATIONALHousing Authority (NHA) to be utilized and developed as a housing project.

On February 14, 1989, the NHA Board passed Resolution No. 1632approving theacquisition of said lands, with an area of 31.8231 hectares, at the cost of P23.867million, pursuant to which the parties executed a series of Deeds of Absolute Salecovering the subject lands. Of the eight parcels of land, however, only five were paid forby the NHA because of the report 1it received from the Land Geosciences Bureauofthe Department of Environmentand Natural Resources (DENR) that the remainingarea is located at an active landslide area and therefore, not suitable for developmentinto a housing project.

On 22 November 1991, the NHA issued Resolution No. 2352cancelling the sale overthe three parcels of land. The NHA, through Resolution No. 2394, subsecguently

offered the amount of P1.225 million to the landowners as daos perjuicios.On 9 March 1992, petitioners filedbefore the Regional Trial Court(RTC) of QuezonCity a Complaint for Damagesagainst NHA and its General Manager Robert Balao.

After trial, the RTC rendered a decision declaringthe cancellation of the contract tobe justified. The trial court nevertheless awarded damages to plaintiffs in the sum ofP1.255 million, the same amount initially offered by NHA to petitioners asdamages.1wphi1.nt

Upon appeal by petitioners, the Court of Appealsreversedthe decision of the trial

court and entered a new one dismissing the complaint. It held that since there was"sufficient justifiable basis" in cancelling the sale, "it saw no reason" for the award ofdamages. The Court of Appeals also noted that petitioners were mere attorneys-in-factand, therefore, not the real parties-in-interest in the action before the trial court.

. . . In paragraph 4 of the complaint, plaintiffs alleged themselves tobe "sellers' agents" for the several owners of the 8 lotssubjectmatter of the case. Obsviously, William Uy and Rodel Roxas in


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filing this case acted as attorneys-in-fact of the lot owners who arethe real parties in interest but who were omitted to be pleaded asparty-plaintiffs in the case. This omission is fatal. Where the actionis brought by an attorney-in-fact of a land ownerin his name, (as inour present action) and not in the name of his principal, the action

was properly dismissed (Ferrer vs. Villamor, 60 SCRA 406 [1974];Marcelo vs. de Leon, 105 Phil. 1175) because the rule is that everyaction must be prosecuted in the name of the real parties-in-interest(Section 2, Rule 3, Rules of Court).

When plaintiffs UY and Roxas sought paymentof damagesintheir favor in view of the partial rescission of Resolution No. 1632and the Deed of Absolute Sale covering TCT Nos. 10998, 10999and 11292 (Prayer complaint, page 5, RTC records), it becomesobviously indispensable that the lot owners be included, mentionedand named as party-plaintiffs, being the real party-in-interest. UY

and Roxas, as attorneys-in-fact or apoderados, cannot bythemselves lawfully commence this action,moreso, when thesupposed special power of attorney, in their favor, was neverpresented as an evidence in this case. Besides, even if hereinplaintiffs Uy and Roxas were authorized by the lot owners tocommence this action, the same must still be filed in the name ofthe principal, (Filipino Industrial Corporation vs. San Diego, 23SCRA 706 [1968]). As such indispensable party, their joinder in theaction is mandatory and the complaint may be dismissed if not soimpleaded (NDC vs. CA, 211 SCRA 422 [1992]). 2

Their motion for reconsideration having been denied, petitioners seek relief from thisCourt contending that:

I. THE RESPONDENT CA ERRED IN DECLARING THATRESPONDENT NHA HAD ANY LEGAL BASIS FOR RESCINDINGTHE SALE INVOLVING THE LAST THREE (3) PARCELSCOVERED BY NHA RESOLUTION NO. 1632.

II. GRANTING ARGUENDO THAT THE RESPONDENT NHA HADLEGAL BASIS TO RESCIND THE SUBJECT SALE, THERESPONDENT CA NONETHELESS ERRED IN DENYINGHEREIN PETITIONERS' CLAIM TO DAMAGES, CONTRARY TOTHE PROVISIONS OF ART. 1191 OF THE CIVIL CODE.

III. THE RESPONDENT CA ERRED IN DISMISSING THESUBJECT COMPLAINT FINDING THAT THEPETITIONERS FAILEDTO JOIN AS INDISPENSABLE PARTYPLAINTIFF THE SELLING LOT-OWNERS. 3


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We first resolve the issue raised in the the third assignment of error.

Petitioners claimthat they lodged the complaint not in behalf of their principals but intheir own name as agents directly damaged by the termination of the contract. Thedamages prayed for were intended not for the benefit of their principals but to indemnify

petitioners for the losses they themselves allegedly incurred as a result of suchtermination. These damages consist mainly of "unearned income" andadvances. 4Petitioners, thus, attempt to distinguish the case at bar from those involvingagents or apoderedos instituting actions in their own name but in behalf of theirprincipals. 5Petitioners in this case purportedly brought the action for damages in theirown name and in their own behalf.

We find this contention unmeritorious.

Sec. 2, Rule 3 of the Rules of Courtrequires that every action must be prosecutedand defended in the name of the real party-in-interest. The real party-in-interest is the

party who stands to be benefited or injured by the judgment or the party entitled to theavails of the suit. "Interest, within the meaning of the rule, means material interest, aninterest in the issue and to be affected by the decree, as distinguished from mereinterest in the question involved, or a mere incidental interest. 6Cases construing thereal party-in-interest provision can be more easily understood if it is borne in mind thatthe true meaning of real party-in-interest may be summarized as follows: An action shallbe prosecuted in the name of the party who, by the substantive law, has the right soughtto be enforced. 7

Do petitioners, under substantive law, possess the right they seek to enforce? We rulein the negative.

The applicable substantive law in this case is Article 1311 of the Civil Code, whichstates:

Contracts take effect only between the parties, their assigns, andheirs, except in case where the rights and obligations arising fromthe contract are not transmissible by their nature, or by stipulation,or by provision of law. . . .

If a contract should contain some stipulation in favor of a thirdperson, he may demand its fulfillmentprovided he communicated

his acceptance to the obligor before its revocation. A mereincidental benefit or interest of a person is not sufficient. Thecontracting parties must have clearly and deliberately conferred afavor upon a third person. (Emphasis supplied.)

Petitioners are not parties to the contract of sale between their principals and NHA.They are mere agents of the owners of the land subject of the sale. As agents, they onlyrender some service or do something in representation or on behalf of their


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principals. 8The rendering of such service did not make them parties to the contracts ofsale executed in behalf of the latter. Since a contract may be violated only by the partiesthereto as against each other, the real parties-in-interest, either as plaintiff or defendant,in an action upon that contract must, generally, either be parties to said contract. 9

Neither has there been any allegation, much less proof, that petitioners are the heirs oftheir principals.

Are petitioners assignees to the rights under the contract of sale?In McMickingvs. Banco Espaol-Filipino, 10we held that the rule requiring every action to beprosecuted in the name of the real party-in-interest.

. . . recognizes the assignments of rights of action and alsorecognizes that when one has a right of action assigned to him heis then the real party in interest and may maintain an action uponsuch claim or right. The purpose of [this rule] is to require the

plaintiff to be the real party in interest, or, in other words, he mustbe the person to whom the proceeds of the action shall belong, andto prevent actions by persons who have no interest in the result ofthe same. . . .

Thus, an agent, in his own behalf, may bring an action founded on a contract made forhis principal, as an assignee of such contract. We find the following declaration inSection 372 (1) of the Restatement of the Law on Agency (Second): 11

Sec. 372. Agent as Owner of Contract Right

(1) Unless otherwise agreed, an agent who has or who acquires aninterest in a contract which he makes on behalf of his principal can,although not a promisee, maintain such action thereon maintainsuch action thereon as might a transferee having a similar interest.

The Comment on subsection (1) states:

a.Agent a transferee. One who has made a contract on behalf ofanother may become an assignee of the contract and bring suitagainst the other party to it, as any other transferee. The customsof business or the course of conduct between the principal and the

agent may indicate that an agent who ordinarily has merely asecurity interest is a transferee of the principals rights under thecontract and as such is permitted to bring suit. If the agent hassettled with his principal with the understanding that he is tocollect the claim against the obligor by way of reimbursinghimself for his advances and commissions,the agent is in theposition of an assignee who is the beneficial owner of the chose inaction. He has an irrevocable power to sue in his principal's name. .


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. . And, under the statutes which permit the real party in interest tosue, he can maintain an action in his own name. This power to sueis not affected by a settlement between the principal and the obligorif the latter has notice of the agent's interest. . . . Even though theagent has not settled with his principal, he may, by agreement with

the principal, have a right to receive payment and out of theproceeds to reimburse himself for advances and commissionsbefore turning the balance over to the principal. In such a case,although there is no formal assignment, the agent is in the positionof a transferee of the whole claim for security; he has anirrevocable power to sue in his principal's name and, under statuteswhich permit the real party in interest to sue, he can maintain anaction in his own name.

Petitioners, however, have not shown that they are assignees of their principals to thesubject contracts. While they alleged that they made advances and that they suffered

loss of commissions, they have not established any agreement granting them "the rightto receive payment and out of the proceeds to reimburse [themselves] for advances andcommissions before turning the balance over to the principal[s]."

Finally, it does not appear that petitioners are beneficiaries of a stipulation pourautruiunder the second paragraph of Article 1311 of the Civil Code. Indeed, there is nostipulation in any of the Deeds of Absolute Sale "clearly and deliberately" conferring afavor to any third person.

That peti t ioners did not ob tain their commission s or recoup th eir advances

because of the non -performance of the con tract did not ent i t le them to f i le the

action b elow agains t respon dent NHA. Section 372 (2) of the Restatement of theLaw on Agency (Second) states:

(2) An agent does n ot have suc h an interest in a con tract as to ent i t le

him to m aintain an act ion at law upo n i t in his own name merely

because he is ent i t led to a port ion of the proceeds as compensat ion

for making i t or because he is l iable for i ts breach.

The following Comment on the above subsection is illuminating:

The fact that an agent who makes a contract for his principal will gain orsuffer loss by the performance or nonperformance of the contract by theprincipal or by the other party thereto does not entitle him to maintain anaction on his own behalf against the other party for its breach. An agententitled to receive a commission from his principal upon the performanceof a contract which he has made on his principal's account does not, fromthis fact alone, have any claim against the other party for breach of thecontract, either in an action on the contract or otherwise. An agent who isnot a promisee cannot maintain an action at law against a purchaser


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merely because he is entitled to have his compensation or advances paidout of the purchase price before payment to the principal. . . .

Thus, in Hopkins vs. Ives, 12the Supreme Court of Arkansas, citing Section 372 (2)above, denied the claim of a real estate broker to recover his alleged commission

against the purchaser in an agreement to purchase property.

In Goduco vs. Court of appeals, 13this Court held that:

. . . granting that appellant had the authority to sell the property, thesame did not make the buyer liable for the commission sheclaimed. At most, the owner of the property and the one whopromised to give her a commission should be the one liable to paythe same and to whom the claim should have been directed. . . .

As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulationpour

autruiunder the contracts of sale, they do not, under substantive law, possess the rightthey seek to enforce. Therefore, they are not the real parties-in-interest in this case.

Petitioners not being the real parties-in-interest, any decision rendered herein would bepointless since the same would not bind the real parties-in-interest. 14

Nevertheless, to forestall further litigation on the substantive aspects of this case, weshall proceed to rule on me merits. 15

Petitioners submit that respondent NHA had no legal basis to "rescind" the sale of the

subject three parcels of land. The existence of such legal basis, notwithstanding,petitioners argue that they are still entitled to an award of damages.

Petitioners confuse the cancellation of the contract by the NHA as a rescission of thecontract under Article 1191 of the Civil Code. The right of rescission or, moreaccurately, resolution, of a party to an obligation under Article 1191 is predicated on abreach of faith by the other party that violates the reciprocity between them. 16Thepower to rescind, therefore, is given to the injured party. 17Article 1191 states:

The power to rescind obligations is implied in reciprocal ones, in case oneof the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission ofthe obligation, with the payment of damages in either case. He may alsoseek rescission, even after he has chosen fulfillment, if the latter shouldbecome impossible.

In this case, the NHA did not rescind the contract. Indeed, it did not have the right to doso for the other parties to the contract, the vendors, did not commit any breach, much


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less a substantial breach, 18of their obligation. Their obligation was merely to deliver theparcels of land to the NHA, an obligation that they fulfilled. The NHA did not suffer anyinjury by the performance thereof.

The cancellation, therefore, was not a rescission under Article 1191. Rather, the

cancellation was based on the negation of the cause arising from the realization that thelands, which were the object of the sale, were not suitable for housing.1wphi1.nt

Cause is the essential reason which moves the contracting parties to enter into it. 19Inother words, the cause is the immediate, direct and proximate reason which justifies thecreation of an obligation through the will of the contracting parties.20Cause, which is theessential reason for the contract, should be distinguished from motive, which is theparticular reason of a contracting party which does not affect the other party. 21

For example, in a contract of sale of a piece of land, such as in this case, the cause ofthe vendor (petitioners' principals) in entering into the contract is to obtain the price. For

the vendee, NHA, it is the acquisition of the land.22

The motive of the NHA, on the otherhand, is to use said lands for housing. This is apparent from the portion of the Deeds ofAbsolute Sale 23stating:

WHEREAS, under the Executive Order No. 90 dated December 17, 1986,the VENDEE is mandated to focus and concentrate its efforts andresources in providing housing assistance to the lowest thirty percent(30%) of urban income earners, thru slum upgrading and development ofsites and services projects;

WHEREAS, Letters of Instructions Nos. 555 and 557 [as] amended by

Letter of Instruction No. 630, prescribed slum improvement and upgrading,as well as the development of sites and services as the principal housingstrategy for dealing with slum, squatter and other blighted communities;

xxx xxx xxx

WHEREAS, the VENDEE, in pursuit of and in compliance with the above-stated purposes offers to buy and the VENDORS, in a gesture of theirwilling to cooperate with the above policy and commitments, agree to sellthe aforesaid property together with all the existing improvements there orbelonging to the VENDORS;

NOW, THEREFORE, for and in consideration of the foregoing premisesand the terms and conditions hereinbelow stipulated, the VENDORShereby, sell, transfer, cede and convey unto the VENDEE, its assigns, orsuccessors-in-interest, a parcel of land located at Bo. Tadiangan, Tuba,Benguet containing a total area of FIFTY SIX THOUSAND EIGHTHUNDRED NINETEEN (56,819) SQUARE METERS, more or less . . . .


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Ordinarily, a party's motives for entering into the contract do not affect the contract.However, when the motive predetermines the cause, the motive may be regarded asthe cause. In Liguez vs. Court of Appeals, 24this Court, speaking through Justice J.B.L.REYES, HELD:

. . . it is well to note, however, that Manresa himself (Vol. 8, pp.641-642), while maintaining the distinction and upholding theinoperativeness of the motives of the parties to determine thevalidity of the contract, expressly excepts from the rule thosecontracts that are conditioned upon the attainment of the motives ofeither party.

The same view is held by the Supreme Court of Spain, in itsdecisions of February 4, 1941, and December 4, 1946, holding thatthe motive may be regarded as causawhen it predetermines thepurpose of the contract.

In this case, it is clear, and petitioners do not dispute, that NHA would not have enteredinto the contract were the lands not suitable for housing. In other words, the quality ofthe land was an implied condition for the NHA to enter into the contract. On the part ofthe NHA, therefore, the motive was the cause for its being a party to the sale.

Were the lands indeed unsuitable for housing as NHA claimed?

We deem the findings contained in the report of the Land Geosciences Bureau dated 15July 1991 sufficient basis for the cancellation of the sale, thus:

In Tadiangan, Tuba, the housing site is situated in an area ofmoderate topography. There [are] more areas of less slopingground apparently habitable. The site is underlain by . . . thick slidedeposits (4-45m) consisting of huge conglomerate boulders (seePhoto No. 2) mix[ed] with silty clay materials. These clay particleswhen saturated have some swelling characteristics which isdangerous for any civil structures especially mass housingdevelopment. 25

Petitioners contend that the report was merely "preliminary," and not conclusive, asindicated in its title:

MEMORANDUM

TO: EDWIN G. DOMINGO

Chief, Lands Geology Division

FROM: ARISTOTLE A. RILLON


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Geologist II

SUBJECT: Preliminary Assessment of

Tadiangan Housing Project in Tuba, Benguet 26

Thus, page 2 of the report states in part:

xxx xxx xxx

Actually there is a need to conduct further geottechnical [sic]studies in the NHA property. Standard Penetration Test (SPT) mustbe carried out to give an estimate of the degree of compaction (therelative density) of the slide deposit and also the bearing capacityof the soil materials. Another thing to consider is the vulnerability ofthe area to landslides and other mass movements due to thick soil

cover. Preventive physical mitigation methods such as surface andsubsurface drainage and regrading of the slope must be done inthe area. 27

We read the quoted portion, however, to mean only that further tests are required todetermine the "degree of compaction," "the bearing capacity of the soil materials," andthe "vulnerability of the area to landslides," since the tests already conducted wereinadequate to ascertain such geological attributes. It is only in this sense that theassessment was "preliminary."

Accordingly, we hold that the NHA was justified in canceling the contract. The

realization of the mistake as regards the quality of the land resulted in the negation ofthe motive/cause thus rendering the contract inexistent. 28Article 1318 of the Civil Codestates that:

Art. 1318. There is no contract unless the following requisitesconcur:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract;

(3) Causeof the obligation which is established. (Emphasissupplied.)

Therefore, assuming that petitioners are parties, assignees or beneficiaries to thecontract of sale, they would not be entitled to any award of damages.

WHEREFORE, the instant petition is hereby DENIED.


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SO ORDERED.


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G.R. No. 136433 December 6, 2006

ANTONIO B. BALTAZAR,petitioner,vs.HONORABLE OMBUDSMAN, EULOGIO M. MARIANO, JOSE D. JIMENEZ, JR.,

TORIBIO E. ILAO, JR. and ERNESTO R. SALENGA,respondents.

The Case

Ascribing grave abuse of discretion to respondent Ombudsman, this Petition for Reviewon Certiorari,1under Rule 45 pursuant to Section 27 of RA 6770,2seeks to reverse andset aside the November 26, 1997 Order3of the Office of the Special Prosecutor (OSP)in OMB-1-94-3425 duly approved by then Ombudsman Aniano Desierto on August 21,1998, which recommended the dismissal of the Information4in Criminal Case No.23661 filed before the Sandiganbayan against respondents Pampanga Provincial

Adjudicator Toribio E. Ilao, Jr., Chief Legal Officer Eulogio M. Mariano and Legal Officer

Jose D. Jimenez, Jr. (both of the DAR Legal Division in San Fernando, Pampanga), andErnesto R. Salenga. The petition likewise seeks to set aside the October 30, 1998Memorandum5of the OSP duly approved by the Ombudsman on November 27, 1998which denied petitioner's Motion for Reconsideration.6Previously, the filing of theInformation against said respondents was authorized by the May 10, 1996Resolution7and October 3, 1996 Order8of the Ombudsman which found probablecause that they granted unwarranted benefits, advantage, and preference to respondentSalenga in violation of Section 3 (e) of RA 3019.9

The Facts

Paciencia Regalaownsa seven (7)-hectare fishpond located at Sasmuan, Pampanga.Her Attorney-in-FactFaustino R. Mercado leasedthe fishpond for PhP 230,000.00 toEduardo Lapidfor a three (3)-year period, that is, from August 7, 1990 to August 7,1993.10Lessee Eduardo Lapid in turn sub-leasedthe fishpond to Rafael Lopezfor PhP50,000.00 during the last seven (7) months of the original lease, that is, from January10, 1993 to August 7, 1993.11RESPONDENTErnesto Salengawas hired by EduardoLapid as fishpond watchman (bante-encargado). In the sub-lease, Rafael Lopezrehired respondent Salenga.

Meanwhile, on March 11, 1993, respondent Salenga, through a certain FrancisLagman, sent his January 28, 1993 demand letter12to Rafael Lopez and Lourdes Lapidfor unpaid salaries and non-payment of the 10% share in the harvest.

On June 5, 1993, sub-lessee Rafael Lopezwrotea letter to respondent Salengainforming the latter that for the last two (2) months of the sub-lease, he had given therights over the fishpond to Mar io Palad and Am bit Perezfor PhP 20,000.00.13Thisprompted respondent Salenga to file a Complaint14before the Provincial AgrarianReform Adjudication Board (PARAB), Region III, San Fernando, Pampanga docketedas DARAB Case No. 552-P93 entitledErnesto R. Salenga v. Rafael L. Lopez and
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Lourdes L. Lapidfor Maintenance of Peaceful Possession, Collection of Sum of Moneyand Supervision of Harvest. The Complaint was signed by respondent Jose D. Jimenez,Jr., Legal Officer of the Department of Agrarian Reform (DAR) Region III Office in SanFernando, Pampanga, as counsel for respondent Salenga; whereas respondent EulogioM. Mariano was the Chief Legal Officer of DAR Region III. The case was assigned to

respondent Toribio E. Ilao, Jr., Provincial Adjudicator of DARAB, Pampanga.

On May 10, 1993, respondent Salenga amended his complaint.15The amendmentsincluded a prayer for the issuance of a temporary restraining order (TRO) andpreliminary injunction. However, before the prayer for the issuance of a TRO could beacted upon, on June 16, 1993, respondent Salenga filed a Motion to Maintain StatusQuo and to Issue Restraining Order16which was set for hearing on June 22, 1993. Inthe hearing, however, only respondent Salenga with his counsel appeared despitenotice to the other parties. Consequently, the ex-partepresentation of respondentSalengas evidence in support of the prayer for the issuance of a restraining order wasallowed, since the motion was unopposed, and on July 21, 1993, respondent Ilao, Jr.

issued a TRO.17

Thereafter, respondent Salenga asked for supervision of the harvest, which the boardsheriff did. Accordingly, defendants Lopez and Lapid received their respective shareswhile respondent Salenga was given his share under protest. In the subsequent hearingfor the issuance of a preliminary injunction, again, only respondent Salenga appearedand presented his evidence for the issuance of the writ.

Pending resolution of the case, Faustino Mercado, as Attorney-in-Fact of the fishpondowner Paciencia Regala, filed a motion to intervene which was granted by respondentIlao, Jr. through the November 15, 1993 Order. After the trial, respondent Ilao, Jr.

rendered a Decision on May 29, 1995 dismissing the Complaint for lack of merit; butlosing plaintiff, respondent Salenga, appealed the decision before the DARAB AppellateBoard.

Complaint Before the Ombudsman

On November 24, 1994, pending resolution of the agrarian case, the instant case wasinstituted by petitioner Antonio Baltazar, an alleged nephew of Faustino Mercado,through a Complaint-Affidavit18against private respondents before the Office of theOmbudsman which was docketed as OMB-1-94-3425 entitledAntonio B. Baltazar v.Eulogio Mariano, Jose Jimenez, Jr., Toribio Ilao, Jr. and Ernesto Salenga for violation ofRA 3019. Petitioner charged private respondents of conspiracy through the issuance ofthe TRO in allowing respondent Salenga to retain possession of the fishpond, operate it,harvest the produce, and keep the sales under the safekeeping of other privaterespondents. Moreover, petitioner maintains that respondent Ilao, Jr. had no jurisdictionto hear and act on DARAB Case No. 552-P93 filed by respondent Salenga as therewas no tenancy relation between respondent Salenga and Rafael L. Lopez, and thus,the complaint was dismissible on its face.
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Through the December 14, 1994 Order,19the Ombudsman required privaterespondents to file their counter-affidavits,affidavits of their witnesses, and othercontroverting evidence. While the other respondents submitted their counter-affidavits,respondent ILAO, JR. insteadfiled his February 9, 1995 motion to dismiss, February21, 1995 Reply, and March 24, 1995 Rejoinder.

Ombudsmans Determination of Probable Cause

On May 10, 1996, the Ombudsmanissued a Resolution20finding cause to bringrespondents to court, denying the motion to dismiss of respondent Ilao, Jr., andrecommending the filing of an Information for violation of Section 3 (e) of RA 3019.Subsequently, respondent Ilao, Jr. filed his September 16, 1996 Motion forReconsideration and/or Re-investigation21which was denied through the October 3,1996 Order.22Consequently, the March 17, 1997 Information23was filed against all theprivate respondents before the Sandiganbayan which was docketed as Criminal CaseNo. 23661.

Before the graft court, respondent Ilao, Jr. filed his May 19, 1997 Motion forReconsideration and/or Re-investigation which was granted through the August 29,1997 Order.24On September 8, 1997, respondent Ilao, Jr. subsequently filed hisCounter-Affidavit25with attachments while petitioner did not file any reply-affidavitdespite notice to him. The OSP of the Ombudsman conducted the re-investigation; andthe result of the re-investigation was embodied in the assailed November 26, 1997Order26which recommended the dismissal of the complaint in OMB-1-94-3425 againstall private respondents. Upon review, the Ombudsman approved the OSPsrecommendation on August 21, 1998.

Petitioners Motion for Reconsideration

27

was likewise denied by the OSP through theOctober 30, 1998 Memorandum28which was approved by the Ombudsman onNovember 27, 1998. Consequently, the trial prosecutor moved orally before theSandiganbayan for the dismissal of Criminal Case No. 23661 which was grantedthrough the December 11, 1998 Order.29

Thus, the instant petition is before us.

The Issues

Petitioner raises two assignments of errors, to wit:

THE HONORABLE OMBUDSMAN ERRED IN GIVING DUE COURSE AMISPLACED COUNTER-AFFIDAVIT FILED AFTER THE TERMINATION OFTHE PRELIMINARY INVESTIGATION AND/OR THE CASE WAS ALREADYFILED BEFORE THE SANDIGANBAYAN.

ASSUMING OTHERWISE, THE HONORABLE OMBUDSMAN LIKEWISEERRED IN REVERSING HIS OWN RESOLUTION WHERE IT WAS RESOLVED
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THAT ACCUSED AS PROVINCIAL AGRARIAN ADJUDICATOR HAS NOJURISDICTION OVER A COMPLAINT WHERE THERE EXIST [sic] NOTENANCY RELATIONSHIP CONSIDERING [sic] COMPLAINANT IS NOT ATENANT BUT A "BANTE-ENCARGADO" OR WATCHMAN-OVERSEER HIREDFOR A SALARY OF P3,000.00 PER MONTH AS ALLEGED IN HIS OWN

COMPLAINT.30

Before delving into the errors raised by petitioner, we first address the preliminaryprocedural issue of the authority and locus standiof petitioner to pursue the instantpetition.

Preliminary Issue: Legal Standing

Locus standiis defined as "a right of appearance in a court of justice x x x on a givenquestion."31In private suits, standing is governed by the "real-parties-in interest" rulefound in Section 2, Rule 3 of the 1997 Rules of Civil Procedure which provides that

"every action must be prosecuted or defended in the name of the real party in interest."Accordingly, the "real-party-in interest" is "the party who stands to be benefited orinjured by the judgment in the suit or the party entitled to the avails of thesuit."32Succinctly put, the plaintiffs standing is based on their own right to the reliefsought.

The records show that petitioner is a non-lawyer appearing for himself and conductinglitigation in person. Petitioner instituted the instant case before the Ombudsman in hisown name. In so far as the Complaint-Affidavit filed before the Office of theOmbudsman is concerned, there is no question on his authority and legal standing.Indeed, the Office of the Ombudsman is mandated to "investigate and prosecute on its

own or on complaint by any person, any act or omission of any public officer oremployee, office or agency, when such act or omission appears to be illegal, unjust,improper or inefficient (emphasis supplied)."33The Ombudsman can act on anonymouscomplaints andmotu proprioinquire into alleged improper official acts or omissions fromwhatever source, e.g., a newspaper.34Thus, any complainant may be entertained by theOmbudsman for the latter to initiate an inquiry and investigation for alleged irregularities.

However, filing the petition in person before this Court is another matter. The Rulesallow a non-lawyer to conduct litigation in person and appear for oneself only when he isa party to a legal controversy. Section 34 of Rule 138 pertinently provides, thus:

SEC. 34. By whom litigation conducted.In the court of a justice of the peace aparty may conduct his litigation in person, with the aid of an agent or friendappointed by him for that purpose, or with the aid of an attorney. In any othercourt, a partymay conduct his litigation personally or by aid of an attorney,and hisappearancemust be either personalor by a duly authorized member ofthe bar (emphases supplied).

Petitioner has no legal standing
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Is petitioner a party or a real party in interest to have the locus standito pursue theinstant petition? We answer in the negative.

While petitioner may be the complainant in OMB-1-94-3425, he is not a real party ininterest. Section 2, Rule 3 of the 1997 Rules of Civil Procedure stipulates, thus:

SEC. 2. Parties in interest.A real party in interest is the party who stands to bebenefited or injured by the judgment in the suit, or the party entitled to the availsof the suit. Unless otherwise authorized by law or these Rules, every action mustbe prosecuted or defended in the name of the real party in interest.

The same concept is applied in criminal and administrative cases.

In the case at bar which involves a criminal proceeding stemming from a civil (agrarian)case, it is clear that petitioner is not a real party in interest. Except being thecomplainant, the records show that petitioner is a stranger to the agrarian case. It must

be recalled that the undisputed owner of the fishpond is Paciencia Regala, whointervened in DARAB Case No. 552-P93 through her Attorney-in-Fact FaustinoMercado in order to protect her interest. The motion for intervention filed by FaustinoMercado, as agent of Paciencia Regala, was granted by respondent Provincial

Adjudicator Ilao, Jr. through the November 15, 1993 Order in DARAB Case No. 552-P93.

Agency cannot be further delegated

Petitioner assertsthat he is duly authorized by Faustino Mercado to institute the suitand presented a Special Power of Attorney35(SPA) from Faustino Mercado. However,

such SPA is unavailing for petitioner. For one, petitioners principal, Faust ino Mercado,is an agent himsel f and as such cannot fur ther delegate his agency to another.Otherwise put, an agent cannot delegate to another the same agency.The legalmaximpotestas delegata non delegare potest; a power once delegated cannot be re-delegated, while applied primarily in political law to the exercise of legislative power, is aprinciple of agency.36For another, a re-delegation of the agency would be detrimental tothe principal as the second agent has no privity of contract with the former. In the instantcase, petitioner has no privity of contract with Paciencia Regala, owner of the fishpondand principal of Faustino Mercado.

Moreover, while the Civil Code under Article 189237allows the agent to appoint a

substitute, such is not the situation in the instant case. The SPA clearly delegates theagency to petitioner to pursue the case and not merely as a substitute. Besides, it isclear in the aforecited Article that what is allowed is a substitute and not a delegation ofthe agency.

Clearly, petitioner is neither a real party in interest with regard to the agrarian case, noris he a real party in interest in the criminal proceedings conducted by the Ombudsman
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as elevated to the Sandiganbayan. He is not a party who will be benefited or injured bythe results of both cases.

Petitioner: a stranger and not an injured private complainant

Petitioner only surfaced in November 1994 as complainant before the Ombudsman.Aside from that, not being an agent of the parties in the agrarian case, he has no locusstandito pursue this petition. He cannot be likened to an injured private complainant ina criminal complaint who has direct interest in the outcome of the criminal case.

More so, we note that the petition is not pursued as a public suit with petitionerasserting a "public right" in assailing an allegedly illegal official action, and doing so as arepresentative of the general public. He is pursuing the instant case as an agent of anineffective agency.

Petitioner has not shown entitlement to judicial protection

Even if we consider the instant petition as a public suit, where we may considerpetitioner suing as a "stranger," or in the category of a "citizen," or "taxpayer," stillpetitioner has not adequately shown that he is entitled to seek judicial protection. Inother words, petitioner has not made out a sufficient interest in the vindication of thepublic order and the securing of relief as a "citizen" or "taxpayer"; more so when there isno showing that he was injured by the dismissal of the criminal complaint before theSandiganbayan.

Based on the foregoing discussion, petitioner indubitably does not have locus standi topursue this action and the instant petition must be forthwith dismissed on that score.

Even granting arguendo that he has locus standi, nonetheless, petitioner fails to showgrave abuse of discretion of respondent Ombudsman to warrant a reversal of theassailed November 26, 1997 Order and the October 30, 1998 Memorandum.

First Issue: Submission of Counter-Affidavit

The Sandiganbayan, not the Ombudsman, ordered re-investigation

On the substantive aspect, in the first assignment of error, petitioner imputes graveabuse of discretion on public respondent Ombudsman for allowing respondent Ilao, Jr.to submit his Counter-Affidavit when the preliminary investigation was already

concluded and an Information filed with the Sandiganbayan which assumed jurisdictionover the criminal case. This contention is utterly erroneous.

The facts clearly show that it was not the Ombudsman through the OSP who allowedrespondent Ilao, Jr. to submit his Counter-Affidavit. It was the Sandiganbayan whogranted the prayed for re-investigation and ordered the OSP to conduct the re-investigation through its August 29, 1997 Order, as follows:


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Considering the manifestation of Prosecutor Cicero Jurado, Jr. that accusedToribio E. Ilao, Jr. was not able to file his counter-affidavit in the preliminaryinvestigation, there appears to be some basis for granting the motion of saidaccused for reinvestigation.

WHEREFORE, accused Toribio E. Ilao, Jr. may file his counter-affidavit, withdocumentary evidence attached, if any, with the Office of the Special Prosecutorwithin then (10) days from today. The prosecution is ordered to conduct areinvestigationwithin a period of thirty (30) days.38(Emphases supplied.)

As it is, public respondent Ombudsman through the OSP did not exercise any discretionin allowing respondent Ilao, Jr. to submit his Counter-Affidavit. The OSP simply followedthe graft courts directive to conduct the re-investigation after the Counter-Affidavit ofrespondent Ilao, Jr. was filed. Indeed, petitioner did not contest nor question the August29, 1997 Order of the graft court. Moreover, petitioner did not file any reply-affidavit inthe re-investigation despite notice.

Re-investigation upon sound discretion of graft court

Furthermore, neither can we fault the graft court in granting the prayed for re-investigation as it can readily be seen from the antecedent facts that respondent Ilao, Jr.was not given the opportunity to file his Counter-Affidavit. Respondent Ilao, Jr. filed amotion to dismiss with the Ombudsman but such was not resolved before theResolutionfinding cause to bring respondents to trialwas issued. In fact, respondentIlao, Jr.s motion to dismiss was resolved only through the May 10, 1996 Resolutionwhich recommended the filing of an Information. Respondent Ilao, Jr.s Motion forReconsideration and/or Re-investigation was denied and the Information was filed with

the graft court.Verily, courts are given wide latitude to accord the accused ample opportunity topresent controverting evidence even before trial as demanded by due process. Thus,we held in Villaflor v. Vivarthat "[a] component part of due process in criminal justice,preliminary investigation is a statutory and substantive right accorded to the accusedbefore trial. To deny their claim to a preliminary investigation would be to deprive themof the full measure of their right to due process."39

Second Issue: Agrarian Dispute

Anent the second assignment of error, petitioner contends that DARAB Case No. 552-P93 is not an agrarian dispute and therefore outside the jurisdiction of the DARAB. Hemaintains that respondent Salenga is not an agricultural tenant but a mere watchman ofthe fishpond owned by Paciencia Regala. Moreover, petitioner further argues thatRafael Lopez and Lourdes Lapid, the respondents in the DARAB case, are not theowners of the fishpond.

Nature of the case determined by allegations in the complaint
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This argument is likewise bereft of merit. Indeed, as aptly pointed out by respondentsand as borne out by the antecedent facts, respondent Ilao, Jr. could not have actedotherwise. It is a settled rule that jurisdiction over the subject matter is determined bythe allegations of the complaint.40The nature of an action is determined by the materialaverments in the complaint and the character of the relief sought,41not by the defenses

asserted in the answer or motion to dismiss.42

Given that respondent Salengascomplaint and its attachment clearly spells out the jurisdictional allegations that he is anagricultural tenant in possession of the fishpond and is about to be ejected from it,clearly, respondent Ilao, Jr. could not be faulted in assuming jurisdiction as saidallegations characterize an agricultural dispute. Besides, whatever defense asserted inan answer or motion to dismiss is not to be considered in resolving the issue on

jurisdiction as it cannot be made dependent upon the allegations of the defendant.

Issuance of TRO upon the sound discretion of hearing officer

As regards the issuance of the TRO, considering the proper assumption of jurisdiction

by respondent Ilao, Jr., it can be readily culled from the antecedent facts that hisissuance of the TRO was a proper exercise of discretion. Firstly, the averments withevidence as to the existence of the need for the issuance of the restraining order weremanifest in respondent Salengas Motion to Maintain Status Quo and to IssueRestraining Order,43the attached Police Investigation Report,44and MedicalCertificate.45Secondly, only respondent Salenga attended the June 22, 1993 hearingdespite notice to parties. Hence, Salengas motion was not only unopposed but hisevidence adduced ex-partealso adequately supported the issuance of the restrainingorder.

Premises considered, respondent Ilao, Jr. has correctly assumed jurisdiction and

properly exercised his discretion in issuing the TROas respondent Ilao, Jr. aptlymaintained that giving due course to the complaint and issuing the TRO do not reflectthe final determination of the merits of the case. Indeed, after hearing the case,respondent Ilao, Jr. rendered a Decision on May 29, 1995 dismissing DARAB Case No.552-P93 for lack of merit.

Court will not review prosecutors determination of probable cause

Finally, we will not delve into the merits of the Ombudsmans reversal of its initial findingof probable cause or cause to bring respondents to trial. Firstly, petitioner has notshown that the Ombudsman committed grave abuse of discretion in rendering suchreversal. Secondly, it is clear from the records that the initial finding embodied in theMay 10, 1996 Resolution was arrived at before the filing of respondent Ilao, Jr.sCounter-Affidavit. Thirdly, it is the responsibility of the public prosecutor, in this case theOmbudsman, to uphold the law, to prosecute the guilty, and to protect the innocent.Lastly, the function of determining the existence of probable cause is proper for theOmbudsman in this case and we will not tread on the realm of this executive function toexamine and assess evidence supplied by the parties, which is supposed to beexercised at the start of criminal proceedings. In Perez v. Hagonoy Rural Bank,
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Inc.,46as cited in Longos Rural Waterworks and Sanitation Association, Inc. v. Hon.Desierto,47we had occasion to rule that we cannot pass upon the sufficiency orinsufficiency of evidence to determine the existence of probable cause.48

WHEREFORE, the instant petition is DENIED for lack of merit, and the November 26,

1997 Order and the October 30, 1998 Memorandum of the Office of the SpecialProsecutor in Criminal Case No. 23661 (OMB-1-94-3425) are hereby AFFIRMED INTOTO, with costs against petitioner.

SO ORDERED.
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G.R. No. 119858 April 29, 2003

EDWARD C. ONG,petitioner,vs.THE COURT OF APPEALS AND THE PEOPLE OF THE PHILIPPINES,respondents.

CARPIO, J.:

The Case

Petitioner Edward C. Ong ("petitioner") filed this petition for review on certiorari1tonullify the Decision2dated 27 October 1994 of the Court of Appealsin CA-G.R. C.R.No. 14031, and its Resolution3dated 18 April 1995, denying petitioner's motion forreconsideration. The assailed Decision affirmed in totopetitioner's conviction4by theRegional Trial Courtof Manila, Branch 35,5on two counts of estafafor violation of theTrust Receipts Law,6as follows:

WHEREFORE, judgment is rendered: (1) pronouncing accused EDWARD C.ONG guilty beyond reasonable doubton two counts, as principalon bothcounts, of ESTAFAdefined under No. 1 (b) of Article 315 of the Revised PenalCodein relation to Section 13 of Presidential Decree No. 115, and penalizedunder the 1st paragraph of the same Article 315, and sentenced said accused ineach count to TEN (10) YEARS ofprision mayor, as minimum, to TWENTY (20)YEARS of reclusion

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