Apt Digests

8/13/2019 Apt Digests

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Malapit's failure to remit the premiums he received cannot constitute adefense for private respondent insurance company; no exoneration from

liability could result therefrom. The fact that private respondent insurancecompany was itself defrauded due to the anomalies that took place in itsBaguio branch office, such as the non-accrual of said premiums to itsaccount, does not free the same from its obligation to petitioner Areola.

As held inPrudential Bank v. Court of Appeals 13citing the ruling

inMcIntosh v. Dakota Trust Co.: 14

A bank is liable for wrongful acts of its officers done in theinterests of the bank or in the course of dealings of theofficers in their representative capacity but not for acts

outside the scope of their authority. A bank holding out itsofficers and agent as worthy of confidence will not be

permitted to profit by the frauds they may thus be enabled toperpetrate in the apparent scope of their employment; norwill it be permitted to shirk its responsibility for such frauds,

even though no benefit may accrue to the bank therefrom.Accordingly, a banking corporation is liable to innocent thirdpersons where the representation is made in the course of itsbusiness by an agent acting within the general scope of hisauthority even though, in the particular case, the agent issecretly abusing his authority and attempting to perpetrate afraud upon his principal or some other person, for his ownultimate benefit.

Consequently, respondent insurance company is liable by way of damagesfor the fraudulent acts committed by Malapit that gave occasion to the

erroneous cancellation of subject insurance policy. Its earlier act ofreinstating the insurance policy can not obliterate the injury inflicted onpetitioner-insured. Respondent company should be reminded that a contractof insurance creates reciprocal obligations for both insurer and insured.Reciprocal obligations are those which arise from the same cause and inwhich each party is both a debtor and a creditor of the other, such that theobligation of one is dependent upon the obligation of the other.

Under the circumstances of instant case, the relationship as creditor anddebtor between the parties arose from a common cause: i.e., by reason oftheir agreement to enter into a contract of insurance under whose terms,

respondent insurance company promised to extend protection to petitioner-insured against the risk insured for a consideration in the form of premiums

to be paid by the latter. Under the law governing reciprocal obligations,particularly the second paragraph of Article 1191, the injured party,

petitioner-insured in this case, is given a choice between fulfillment orrescission of the obligation in case one of the obligors, such as respondentinsurance company, fails to comply with what is incumbent upon him.However, said article entitles the injured party to payment of damages,regardless of whether he demands fulfillment or rescission of the obligation.Untenable then is reinstatement insurance company's argument, namely, thatreinstatement being equivalent to fulfillment of its obligation, divests

petitioner-insured of a rightful claim for payment of damages.

Spouses Panlilio v Citibank G.R. No. 156335, November 28, 2007

FACTS:

Petitioner Amalia Panlilio visited respondent's Makati City office anddeposited one million pesos in the bank's "Citihi" account, a fixed-termsavings accountwith a higher-than-average interest. Amalia also opened a

current or checking account with respondent, to which interest earnings ofthe Citihi account were to be credited.Respondent assigned one of itsemployees, Jinky Suzara Lee, to personally transact with Amalia and tohandle the accounts.

Amalia opened the accounts as ITF or "in trust for" accounts, as they wereintended to benefit her minor children in case she would meet an untimelydeath. To open these accounts, Amalia signed two documents: a RelationshipOpening Form (ROF)

7and an Investor Profiling and Suitability

Questionnaire (Questionnaire).

Amalia's initial intention was to invest the money in a Citibank productcalled the Peso Repriceable Promissory Note (PRPN), a product which had ahigher interest. However, as the PRPN was not available that day, Amalia put

her money in the Citihi savings account.

More than a month later, Amalia phoned Citibank saying she wanted to placean investment, this time in the amount of three million pesos. Again, shespoke with Lee, the bank employee, who introduced her to Citibank's variousinvestment offerings. After the phone conversation, apparently decided onwhere to invest the money, Amalia went to Citibank bringing a PCIBank

check in the amount of three million pesos (PhP3 million). During the visit,

Amalia instructed Lee on what to do with the PhP3 million. Later, she
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learned that out of the said amount, PhP2,134,635.87 was placed by Citibankin a Long-Term Commercial Paper (LTCP), a debt instrument that paid a

high interest, issued by the corporation Camella and Palmera Homes (C&PHomes).

10The rest of the money was placed in two PRPN accounts, in trust

for each of Amalia's two children.

An LTCP is an evidence of indebtedness, with a maturity period of morethan 365 days, issued by a corporation to any person or entity .13It is in effect

a loan obtained by a corporation (as borrower) from the investing public (aslender)

14and is one of many instruments that investment banks can legally

buy on behalf of their clients, upon the latter's express instructions, for

investment purposes.

On November 28, 1997, the day she made the PhP3million investment,Amalia signed the following documents: a Directional Investment

Management Agreement (DIMA),17

Term Investment Application(TIA),

18and Directional Letter/Specific Instructions.

19Key features of the

DIMA and the Directional Letter are provisions that essentially clear

Citibank of any obligation to guarantee the principal and interest of theinvestment, absent fraud or negligence on the latter's part. The provisionslikewise state that all risks are to be assumed by the investor (petitioner).

Following this investment, respondent claims to have regularly sentconfirmations of investment (COIs) to petitioners.

22A COI is a one-page,

computer generated document informing the customer of the investmentearlier made with the bank. Amalia claims to have called Lee as soon as shereceived the first COI in December 1997, and demanded that the investmentin LTCP be withdrawn and placed in a PRPN.

24Respondent, however, denies

this, claiming that Amalia merely called to clarify provisions in the COI and

did not demand a withdrawal.

25

Petitioners met with respondent's other employee, Lizza Colet, topreterminate the LTCP and their other investments. Petitioners were told thatas to the LTCP, liquidation could be made only if there is a willing buyer, a

prospect which could be difficult at that time because of the economic crisis.Still, petitioners signed three sets of Sales Order Slip to sell the LTCP andleft these with Colet.26

On August 18, 1998, Amalia, through counsel, sent her first formal, writtendemand to respondent "for a withdrawal of her investment as soon as

possible."27

In answer to the letters, respondent noted that the investment

had a 2003 maturity, was not a deposit, and thus, its return to the investorwas not guaranteed by respondent.

Thus, petitioners filed with the RTC their complaint against respondent for a

sum of money and damages.

The Complaint32essentially demanded a return of the investment, alleging

that Amalia never instructed respondent's employee Lee to invest the moneyin an LTCP;and that far from what Lee executed, Amalia's instructions wereto invest the money in a "trust account" with an "interest of around 16.25%

with a term of 91 days."Further, petitioners alleged that it was only later,

or on December 8, 1997, when Amalia received the first confirmation of

investment (COI) from respondent, that she and her husband learned ofLee's infidelity to her orders. Petitioners also claimed that as soon asAmalia received the COI, she immediately called Lee; however, the latter

allegedly convinced her to ignore the COI, that C&P Homes was an Ayalacompany, that the investment was secure, and that it could be easily"withdrawn"; hence, Amalia decided not to immediately "withdraw" the

investment. Several months later, or on August 6, 1998, petitioners allegedlywanted to "withdraw" the investment to buy a property; however, they failedto do so, since respondent told them the LTCP had not yet matured, and thatno buyers were willing to buy it. Hence, they sent various demand letters torespondent, asking for a return of their money; and when these wentunheeded, they filed the complaint.

Respondent admitted that, indeed, Amalia was its client and that she

invested the amounts stated in the complaint. However, respondent

disputed all other claims of Amalia.

ISSUES:

(1) Whether petitioners are bound by the terms and conditions of theDirectional Investment Management Agreement (DIMA), Term

Investment Application (TIA), Directional Letter/SpecificInstructions, and Confirmations of Investment (COIs)

(2) Whether petitioners are entitled to take back the money theyinvested from respondent bank

HELD:
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The documents, characterized by the quoted provisions, generally extricaterespondent from liability in case the investment is lost. Accordingly,

petitioners assumed all risks and the task of collecting from theborrower/issuer C&P Homes.

In addition to the DIMA and Directional Letter, respondent also sent

petitioners the COIs on a regular basis

The DIMA, Directional Letter, TIA and COIs, read together, establish

the agreement between the parties as an investment management

agreement, which created a principal-agent relationship between

petitioners as principals and respondent as agent for investmentpurposes.The agreement is not a trust or an ordinary bank deposit; hence, no

trustor-trustee-beneficiary or even borrower-lender relationship existedbetween petitioners and respondent with respect to the DIMA account.

Respondent purchased the LTCPs only as agent of petitioners; thus, the

latter assumed all obligations or inherent risks entailed by thetransaction under Article 1910 of the Civil Code, which provides:

Article 1910. The principal must comply with all the obligations which theagent may have contracted within the scope of his authority.

As for any obligation wherein the agent has exceeded his power, theprincipal is not bound except when he ratifies it expressly or tacitly.

The transaction is perfectly legal, as investment management activities maybe exercised by a banking institution, pursuant to Republic Act No. 337 orthe General Banking Act of 1948, as amended, which was the law then ineffect. Section 72 of said Act provides:

Sec. 72. In addition to the operations specifically authorized elsewhere in thisAct, banking institutions other than building and loan associations may

perform the following services:

(a) Receive in custody funds, documents, and valuable objects, andrent safety deposit boxes for the safeguarding of such effects;

(b) Act as financial agent and buy and sell, by order of and for

the account of their customers, shares, evidences of indebtedness

and all types of securities;

(c) Make collections and payments for the account of others andperform such other services for their customers as are not

incompatible with banking business.

(d) Upon prior approval of the Monetary Board, act as managingagent, adviser, consultant or administrator of investment

management/ advisory/consultancy accounts.

The banks shall perform the services permitted under subsections (a),

(b) and (c) of this section as depositories or as agents. Accordingly, they

shall keep the funds, securities and other effects which they thus receive

duly separated and apart from the bank's own assets and liabilities.

The Monetary Board may regulate the operations authorized by this sectionin order to insure that said operations do not endanger the interests of thedepositors and other creditors of the banks. (Emphasis supplied.)

while Section 74 prohibits banks from guaranteeing obligations of any

person, thus:

Sec. 74. No bank or banking institution shall enter, directly, or indirectly

into any contract of guaranty or suretyship, or shall guarantee the

interest or principal of any obligation of any person, copartnership,association, corporation or other entity.The provisions of this sectionshall, however, not apply to the following: (a) borrowing of money by

banking institution through the rediscounting of receivables; (b) acceptanceof drafts or bills of exchange (c) certification of checks; (d) transactionsinvolving the release of documents attached to items received for collection;(e) letters of credit transaction, including stand-by arrangements; (f)

repurchase agreements; (g) shipside bonds; (h) ordinary guarantees orindorsements in favor of foreign creditors where the principal obligationinvolves loans and credits extended directly by foreign investment purposes;and (i) other transactions which the Monetary Board may, by regulation,

define or specify as not covered by the prohibition. (Emphasis supplied.)

The evidence also sustains respondent's claim that its trust department

handled the account only because it was the department tasked to

oversee the trust, and other fiduciary and investment management

services of the bank.58

Contrary to petitioners' claim, this did not meanthat petitioners opened a "trust account."This is consistent withBangko

Sentral ng Pilipinas(BSP) regulations, specifically the Manual ofRegulations for Banks (MORB), which groups a bank's trust, and other
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fiduciary and investment management activities under the same set ofregulations.

All the documents signed by Amalia, including the DIMA and

Directional Letter, show that her agreement with respondent is one of

agency, and not a trust.

The DIMA, TIA, Directional Letter and COIs, viewed altogether,establish without doubt the transaction between the parties, that on

November 28, 1997, with PhP3 million in tow, Amalia opened an

investment management account with respondent, under which she

instructed the latter as her agent to invest the bulk of the money in

LTCP.

Anent the second issue, whether petitioners are entitled to recover fromrespondent the amount invested under the LTCP, the Court agrees with the

CA in dismissing the complaint filed by petitioners.

Petitioners may not seek a return of their investment directly from respondentat or prior to maturity. As earlier explained, the investment is not a depositand is not guaranteed by respondent. Absent any fraud or bad faith, therecourse of petitioners in the LTCP is solely against the issuer, C&P Homes,and only upon maturity. The DIMA states, thus:

11. Withdrawal of Income/Principal Subject to availability of funds

and taking into consideration the commitment of this account to third

parties, the PRINCIPAL may withdraw the income/principal of thePortfolio or portion thereof upon request or application thereof from theBank.The INVESTMENT MANAGER shall not be required to inquire as to

the income/principal so withdrawn from the Portfolio. Any income of thePortfolio not withdrawn shall be accumulated and added to the principal ofthe Portfolio for further investment and reinvestment.98(Emphasis supplied.)

It is clear that since the money is committed to C&P Homes via LTCP forfive years, or until 2003, petitioners may not seek its recovery fromrespondent prior to the lapse of this period.

The nature of the DIMA and the other documents signed by the parties callsfor this condition. The DIMA states that respondent is a mere agent of

petitioners and that losses from both the principal and interest of the

investment are strictly on petitioners' account. Meanwhile, the Directional

Letter clearly states that the investment is to be made in an LTCP which, bydefinition, has a term of more than 365 days.99Prior to the expiry of the term,

which in the case of the C&P Homes LTCP is five years, petitioners may notclaim back their investment, especially not from respondent bank.

Having bound themselves under the contract as earlier discussed, petitioners

are governed by its provisions. Petitioners as principals in an agencyrelationship are solely obliged to observe the solemnity of the transaction

entered into by the agent on their behalf, absent any proof that the latter actedbeyond its authority.

100Concomitant to this obligation is that the principal

also assumes the risks that may arise from the transaction.

Lustan v CA G.R. No. 111924, January 27, 1997

Article 1921

FACTS:

Petitioner leased her property to private respondent Nicolas Parangan.Parangan was regularly extending loans in small amounts to petitioner todefray her daily expenses and to finance her daughter's education. On July

29, 1970,petitioner executed a Special Power of Attorney in favor ofParangan to secure an agricultural loan from private respondent Philippine

National Bank (PNB) with the aforesaid lot as collateral. On February 18,1972, a second Special Power of Attorney was executed by petitioner, byvirtue of which, Parangan was able to secure four (4) additional loans, thelast three loans were without the knowledge of herein petitioner and all the

proceeds therefrom were used by Parangan for his own benefit.Theseencumbrances were duly annotated on the certificate of title. On April 16,

1973, petitioner signed a Deed ofPacto de RetroSale2in favor of Paranganwhich was superseded by the Deed of Definite Sale

3 dated May 4, 1979

which petitioner signed upon Parangan's representation that the same merelyevidences the loans extended by him unto the former.

For fear that her property might be prejudiced by the continued borrowing ofParangan, petitioner demanded the return of her certificate of title. Instead ofcomplying with the request, Parangan asserted his rights over the propertywhich allegedly had become his by virtue of the aforementioned Deed ofDefinite Sale. Under said document, petitioner conveyed the subject propertyand all the improvements thereon unto Parangan absolutely for and inconsideration of the sum of Seventy Five Thousand (P75,000.00) Pesos.
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ISSUE :

Whether or not petitioner's property is liable to PNB for the loans contractedby Parangan by virtue of the special power of attorney.

Held: Yes, the outstanding mortgages on the subject property can beenforced against petitioner.

R.D.:

Third persons who are not parties to a loan may secure the latter bypledging or mortgaging their own property.

20So long as valid consent was

given, the fact that the loans were solely for the benefit of Parangan wouldnot invalidate the mortgage with respect to petitioner's property. Inconsenting thereto, even granting that petitioner may not be assuming

personal liability for the debt, her property shall nevertheless secure andrespond for the performance of the principal obligation.

Petitioners argument that the last three mortgages were void for lack ofauthority was not appreciated by the court.

She totally failed to consider that said Special Powers of Attorney are acontinuing one and absent a valid revocation duly furnished to themortgagee, the same continues to have force and effect as against third

persons who had no knowledge of such lack of authority. Article 1921of theCivil Code provides:

Art. 1921. If the agency has been entrusted for the purposeof contracting with specified persons, its revocation shall not

prejudice the latter if they were not given notice thereof.

The Special Power of Attorney executed by petitioner in favor of Paranganduly authorized the latter to represent and act on behalf of the former. Having

done so, petitioner clothed Parangan with authority to deal with PNB on herbehalf and in the absence of any proof that the bank had knowledge that thelast three loans were without the express authority of petitioner, it cannot be

prejudiced thereby. As far as third persons are concerned, an act is deemed tohave been performed within the scope of the agent's authority if such iswithin the terms of the power of attorney as written even if the agent has infact exceeded the limits of his authority according to the understanding

between the principal and the agent. 22The Special Power of Attorney

particularly provides that the same is good not only for the principal

loan but also for subsequent commercial, industrial, agricultural loan or

credit accommodation that the attorney-in-fact may obtain and until the

power of attorney is revoked in a public instrument and a copy of whichis furnished to PNB.

23Even when the agent has exceeded his authority, the

principal is solidarily liable with the agent if the former allowed the latter toact as though he had full powers (Article 1911, Civil Code).

24The mortgage

directly and immediately subjects the property upon which it is

imposed. 25The property of third persons which has been expresslymortgaged to guarantee an obligation to which the said persons are foreign, isdirectly and jointly liable for the fulfillment thereof; it is therefore subject toexecution and sale for the purpose of paying the amount of the debt forwhich it is liable.

26However, petitioner has an unquestionable right to

demand proportional indemnification from Parangan with respect to the sumpaid to PNB from the proceeds of the sale of her property 27in case the sameis sold to satisfy the unpaid debts.

De Castro v CA G.R. No. 115838, July 18, 2002

ART. 1915

FACTS:

Private respondent was authorized by petitioners to act as real estate brokerin the sale of their properties five percent (5%) of which will be given to theagent as commission. It was private respondent who first found Times

Transit Corporation, represented by its president Mr. Rondaris, asprospective buyer which desired to buy two (2) lots only. Eventually, the salewas consummated. Artigo received from appellants P48,893.76 as

commission.

Appellee apparently felt short changed because according to him, his totalcommission 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 forthe two (2) lots, and that it was he who introduced the buyer to appellantsand unceasingly facilitated the negotiation which ultimately led to theconsummation of the sale..nt

Although the De Castro readily concede that it was appellee who firstintroduced Times Transit Corp. to them,Artigo was not designated by themas their exclusive real estate agent but that in fact there were more or less


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eighteen (18) others whose collective efforts in the long run dwarfed those ofappellee's, considering that the first negotiation for the sale where appellee

took active participation failed and it was these other agents who successfullybrokered in the second negotiation.

ISSUES:

1. whether the complaint merits dismissal for failure to implead otherco-owners as indispensable parties

2. whether Artigo's claim has been extinguished by full payment,waiver or abandonment

HELD:

First Issue:No. 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 whom no final determination of the casecan be had.

7 The joinder of indispensable parties is mandatory and courts

cannot proceed without their presence.8Whenever it appears to the court in

the course of a proceeding that an indispensable party has not been joined, itis the duty of the court to stop the trial and order the inclusion of such party.

9

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 firstcome, first serve basis.

Constante De Castro signed the note as owner and as representative of the

other co-owners. Under this note, a contract of agency was clearlyconstituted between Constante and Artigo. Whether Constante appointedArtigo 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 theother co-owners as indispensable parties. The De Castros admit that the

other co-owners are solidarily liable under the contract ofagency,

10citing Article 1915 of the Civil Code, which reads:

Art. 1915. If two or more persons have appointed an agent for acommon 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 asindispensable parties.A noted commentator explained Article 1915 thus

"The rule in this article applies even when the appointments weremade 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 himby 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 onlysome 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 someof which are common and others are not, only those interested ineach transaction shall be liable for it."

11

When the law expressly provides for solidarity of the obligation, as in theliability of co-principals in a contract of agency, each obligor may becompelled to pay the entire obligation.12 The agent may recover the whole

compensation from any one of the co-principals, as in this case.

Indeed, Article 1216 of the Civil Code provides that a creditor maysue anyof the solidary debtors. This article reads:

Art. 1216. The creditor may proceed against any one of the solidarydebtors or some or all of them simultaneously. The demand madeagainst one of them shall not be an obstacle to those which may

subsequently be directed against the others, so long as the debt hasnot been fully collected.


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Thus, the Court has ruled in Operators Incorporated vs. American BiscuitCo., Inc.13that

"x x x solidari ty does not make a soli dary obli gor an i ndispensableparty in a suit f il ed by the creditor. Article 1216 of the Civil Codesays that the creditor `may proceed against anyone of the solidary

debtors or some or all of them simultaneously'."

Second I ssue: No.

A contract of agency which is not contrary to law, public order, publicpolicy, morals or good custom is a valid contract, and constitutes the lawbetween the parties.14The contract of agency entered into by Constante withArtigo is the law between them and both are bound to comply with its termsand conditions in good faith.

The mere fact that "other agents" intervened in the consummation of the saleand were paid their respective commissions cannot vary the terms of the

contract of agency granting Artigo a 5 percent commission based on theselling price. These "other agents" turned out to be employees of TimesTransit, the buyer Artigo introduced to the De Castros. This prompted thetrial court to observe:

"The alleged `second group' of agents came into the picture onlyduring the so-called `second negotiation' and it is amusing to notethat these (sic) second group, prominent among whom are Atty. DelCastillo and Ms. Prudencio, happened to be employees of TimesTransit, the buyer of the properties. And their efforts were limited toconvincing Constante to 'part away' with the properties because the

redemption period of the foreclosed properties is around the corner,so to speak. x x x

To accept Constante's version of the story is to open the floodgatesof fraud and deceit. A seller could always pretend rejection of theoffer and wait for sometime for others to renew it who are muchwilling to accept a commission far less than the original broker. The

immor ali ty in the instant case easily presents itself if one has to

consider that the all eged second group' are the employees of the

buyer, Times Transit and they have not bettered the off er secured

by Mr. Artigo for P7 milli on.

It is to be noted also that while Constante was

In any event, we find that the 5 percent real estate broker's commission isreasonable and within the standard practice in the real estate industry for

transactions of this nature.

(about laches na ito..)

The De Castros also contend that Artigo's inaction as well as failure toprotest estops him from recovering more 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 itsincompleteness and irregularity, and without expressing any protest

or objection, the obligation is deemed fully complied with.

The 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 Article1235 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 orirregular performance. Hence, the mere receipt of a parti al payment

is not equivalent to the requi red acceptance of performance as

would extingui sh the whole obligation."16

There is thus a clear distinction between acceptance and merereceipt.In thiscase, 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 notfile 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 unexplainedlength of time, to do that which by exercising due diligence could or shouldhave been done earlier. It is negligence or omission to assert a right within a


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reasonable time, warranting a presumption that the party entitled to assert iteither has abandoned it or declined to assert it.17

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 inJune 1985. As found by the trial court, Artigo demanded in April and July of

1985 the payment of his commission by Constante on the basis of the sellingprice of P7.05 million but there was no response from Constante.18After it

became clear that his demands for payment have fallen on deaf ears, Artigodecided to sue on May 29, 1989.

Actions upon a written contract, such as a contract of agency, must bebrought within ten years from the time the right of action accrues.19The

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.20

The De Castros admit that Artigo's claim was filed within the ten-year

prescriptive period. The De Castros, however, still maintain that Artigo'scause of action is barred by laches. Laches does not apply because only fouryears had lapsed from the time of the sale in June 1985. Artigo made ademand in July 1985 and filed the action in court on May 29, 1989, well

within the ten-year prescriptive period. This does not constitute anunreasonable delay in asserting one's right. The Court has ruled, " a delay

with in the prescri ptive peri od is sanctioned by law and i s not considered to

be a delay that woul d bar reli ef."21

In explaining that laches applies only inthe absence of a statutory prescriptive period, the Court has stated -

"Laches is recourse in equity.Equi ty, however, is appli ed only in the

absence, never in contraventi on, of statutory law. Thus, laches,cannot, as a rule, be used to abate a collection suit f il ed within the

prescri ptive peri od mandated by the Civil Code."22

Clearly, the De Castros' defense of laches finds no support in law, equity orjurisprudence.

Cuison v CA G.R. No. 88539, October 26, 1993

FACTS:

Petitioner Kue Cuison is a sole proprietorship engaged in the purchase andsale of newsprint, bond paper and scrap. Private respondent Valiant

Investment Associates delivered various kinds of paper products a certainLilian Tan of LT Trading.The deliveries were made by respondent pursuantto orders allegedly placed by Tiu Huy Tiac who was then employed in theBinondo office of petitioner. It was likewise pursuant to Tiac's instructionsthat the merchandise was delivered to Lilian Tan.Upon delivery, Lilian Tan

paid for the merchandise by issuing several checks payable to cash at the

specific request of Tiu Huy Tiac. In turn, Tiac issued nine (9) postdatedchecks to private respondent as payment for the paper products.Unfortunately, sad checks were later dishonored by the drawee bank.

Thereafter, private respondent made several demands upon petitioner to payfor the merchandise in question, claiming that Tiu Huy Tiac was dulyauthorized by petitioner as the manager of his Binondo office, to enter intothe questioned transactions with private respondent and Lilian Tan. Petitionerdenied any involvement in the transaction entered into by Tiu Huy Tiac andrefused to pay private respondent the amount corresponding to the selling

price of the subject merchandise.

ISSUE:

whether or not Tiu Huy Tiac possessed the required authority from petitionersufficient to hold the latter liable for the disputed transaction.

Held: yes. by his own acts and admission, petitioner held out Tiu Huy

Tiac to the public as the manager of his store in Sto. Cristo, Binondo,

Manila.

RD:

it is a well-established rule that one who clothes another with apparent

authority as his agent and holds him out to the public as such cannot be

permitted to deny the authority of such person to act as his agent, to theprejudice of innocent third parties dealing with such person in goodfaith and in the honest belief that he is what he appears to be.

petitioner held out Tiu Huy Tiac to the public as the manager of hisstore:


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1. petitioner explicitly introduced Tiu Huy Tiac to BernardinoVillanueva, respondent's manager, as his branch manager as

testified to by Bernardino Villanueva.

2. Lilian Tan, who has been doing business with petitioner for quitea while, also testified that she knew Tiu Huy Tiac to be the

manager of petitioner's Sto. Cristo, Binondo branch.

3. This general perception of Tiu Huy Tiac as the manager ofpetitioner's Sto. Cristo store is even made manifest by the fact

that Tiu Huy Tiac is known in the community to be the"kinakapatid" (godbrother) of petitioner. In fact, even petitioneradmitted his close relationship with Tiu Huy Tiac when he said thatthey are "like brothers"

There was thus no reason for anybody especially those transactingbusiness with petitioner to even doubt the authority of Tiu Huy Tiacas his manager in the Sto. Cristo Binondo branch.

4. But of even greater weight than any of these testimonies, ispetitioner's categorical admission on the witness stand that Tiu HuyTiac was the manager of his store in Sto. Cristo, Binondo. Such

admission, spontaneous no doubt, and standing alone, is

sufficient to negate all the denials made by petitioner regarding

the capacity of Tiu Huy Tiac to enter into the transaction in

question.5. Furthermore, consistent with and as an obvious indication of the fact

that Tiu Huy Tiac was the manager of the Sto. Cristo branch, three

(3) months after Tiu Huy Tiac left petitioner's employ, petitioner

even sent, communications to its customers notifying them that

Tiu Huy Tiac is no longer connected with petitioner's business.6. petitioner's unexplained delay in disowning the transactions entered

into by Tiu Huy Tiac despite several attempts made by respondent tocollect the amount from him, proved all the more that petitioner was

aware of the questioned commission was tantamount to an admissionby silence under Rule 130 Section 23 of the Rules of Court

All of these point to the fact that at the time of the transaction Tiu Huy Tiacwas admittedly the manager of petitioner's store in Sto. Cristo, Binondo.Consequently, the transaction in question as well as the concomitantobligation is valid and binding upon petitioner.

By his representations, petitioner is now estopped from disclaiming liabilityfor the transaction entered by Tiu Huy Tiac on his behalf. It matters not

whether the representations are intentional or merely negligent so long asinnocent, third persons relied upon such representations in good faith and for

value As held in the case ofManila Remnant Co.Inc.v.Court of Appeals,(191 SCRA 622 [1990]):

More in point, we find that by the principle of estoppel,

Manila Remnant is deemed to have allowed its agent to actas though it had plenary powers. Article 1911 of the Civil

Code provides:

"Even when the agent has exceeded hisauthority, the principal is solidarily liablewith the agent if the former allowed the

latter to act as though he had full powers."(Emphasis supplied).

Tiu Huy Tiac, therefore, by petitioner's own representations andmanifestations, became an agent of petitioner by estoppels. A party

cannot be allowed to go back on his own acts and representations to theprejudice of the other party who, in good faith, relied upon them.

Taken in this light,. petitioner is liable for the transaction entered into by TiuHuy Tiac on his behalf. Thus, even when the agent has exceeded his

authority, the principal is solidarily liable with the agent if the former

allowed the latter to fact as though he had full powers (Article 1911 Civil

Code), as in the case at bar.

Finally, although it may appear that Tiu Huy Tiac defrauded his

principal (petitioner) in not turning over the proceeds of the transaction

to the latter, such fact cannot in any way relieve nor exonerate petitionerof his liability to private respondent.For it is an equitable maxim that as

between two innocent parties, the one who made it possible for the wrong tobe done should be the one to bear the resulting loss.

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