CASE NO. 1 -CA: Affirmed decision of RTC Eurotech ...docshare01.docshare.tips/files/28329/283295790.pdf · that respondents’ obligations stood at P295K excluding interests and

CASE NO. 1Eurotech Industrial Technologies, Inc. v. Edwin Cuizon, Erwin CuizonG.R. No. 167552, April 23, 2007

FACTS-Petitioner is engaged in the importation and distribution of various European

industrial equipment for customers in the Philippines.-One of petitioner’s customers is Impact Systems Sales (“ISS”), a sole

proprietorship owned by respondent Erwin Cuizon (“ERWIN”) (NOTE: sinceit’s a sole proprietorship, the principal may be ERWIN or ISS). EDWIN is themanager of ISS and was impleaded in the court in that capacity.

-January to April 1995: petitioner soled to ISS various products allegedlyamounting to P91,338. Respondents also sought to buy from petitioner onunit of sludge pump valued at P250K. Respondents made a down paymentof P50K for said sludge pump.

-Petitioner refused to deliver the sludge pump to respondents without the latterfirst having settled their indebtedness.

-June 28, 1995, respondent EDWIN and Alberto the Jesus, general manager ofpetitioner, executed an Assignment of receivables in favor of petitioner. Thedocument stated that the assignor (EDWIN in his capacity as manager ofISS) had oustanding receivables from Toledo Power Corp amounting toP365K and that it conveyed said receivables to assignee (petitioner).

-Following the assignment, the sludge pump was delivered to respondents.-Respondents, despite the Deed of Assignment, proceeded to collect from

Toledo Power Corp the amount of P365K (evidenced by a Check Voucherand an official receipt dated August 15, 1995). This was done without theknowledge of petitioner.

-Petitioner made several demands upon respondents to pay their obligation.Respondents were only able to make partial payments.

-June 11, 1996: Through counsel, petitioner sent a final demand letter statingthat respondents’ obligations stood at P295K excluding interests andattorney’s fees.

-Petitioner filed a complaint for sum of money, damages, with application forpreliminary attachment with the RTC, Cebu City.

-The RTC granted the prayer for the issuance of writ of preliminary attachment.-CONTENTION OF RESPONDENT: EDWIN alleged that he is not a real party of

interest because he was acting as a mere agent of his principal (ISS) andthat in his transactions with the petitioner, the latter was aware of that fact.

-CONTENTION OF PETITIONER: EDWIN exceeded his authority as an agentand should bear the effect of the deed of assignment

-RTC: January 29, 2002 – dropped respondent EDWIN as a party defendant onthe ground that he was acting on behalf of ISS in the June 28, 1995transaction, that the principal (ISS) ratified the act and that petitioner knewabout said ratification. Petitioner cannot claim that the subject contract wasentered into by EDWIN in excess of his powers since ISS made a downpayment of P50K two days later (implied ratification).

-CA: Affirmed decision of RTC

ISSUES- W/N respondent EDWIN was an agent acting on behalf of ISS, incurred no

personal liability and should be dropped as defendant from the instant case.

RULINGThe petition is DENIED and the decision of the RTC is AFFIRMED.

EDWIN acted within his authority as an agent. He did not acquire or incur anyliability arising from the Deed of Assignment. Therefore, he is not a real party ininterest in this case. The SC sustain his exclusion from the suit.

(NOTE: the parties admit of the existence of the agency and all its elements: (1)consent of the parties to establish the relationship, (2) object is the execution ofa juridical act in relation to a third person, (3) the agent acts as a representativeand not for himself, (4) the agent acts within the scope of his authority)

In a contract of agency, an agent is not personally liable to the party with whomhe contracts. However, there are two instances when an agent is personallyliable to a third person: (a) when he expressly binds himself to the obligation or(b) when he exceeds his authority and he does not give the other partysufficient notice of his powers. EDWIN does not fall within either instance. TheDeed of Assignment clearly stated that EDWIN signed thereon as the salesmanager of ISS. The position of sales managers presupposes the grant ofbroad powers necessary to conduct the business of the principal. In theabsence of a contrary agreement, a managing agent can enter into contractsthat he deems reasonably necessary for the protection of the interests of theprincipal entrusted to him.

EDWIn acted within his authority when he signed the Deed of Assignment.Petitioner had refused to deliver the sludge pump until full payment. It can beassumed that ISS needed the pump for its business since it paid the downpayment of P50K and persisted in negotiating with the petitioner (culminating inthe execution of the Deed ofi Assignment). EDWIN’s participation in the deedwas “reasonably necessary” in order for him to protect the business of ISS. Hadhe not acted in the way he did, the business of ISS would have been adverselyaffected.

It was also noted that petitioner sought to recover from both ERWIN andEDWIN (agent). Under Art. 1897, NCC, a party may recover from the principal ifthe agent acted within his authority, or from the agent in the instancesmentioned above. However, the law does not provide that, in case of excessauthority by the agent, the third party can recover from both principal andagent.

AGENCY AND TRUST CASE DIGESTS ATTY. JOSH CAROL VENTURA 1

CASE NO. 2RALLOS v FELIX GO CHAN & SONS REALTY CORPORATIONG.R. No. L-24332, January 31, 1978

SYLLABUS

1. AGENCY; DEFINED. — Agency is a relationship between two partieswhereby one party, called the principal, authorizes another, called the agent, toact for and in his behalf on transactions with third persons.

2. ID.; ELEMENTS. — The essential elements of agency are: (1) there isconsent, express or implied, of the parties to establish the relationship; (2) theobject is the execution of a juridical act in relation to a third person; (3) theagent acts as a representative and not for himself; and (4) the agent acts withinthe scope of his authority.

3. ID.; DEATH AS MODE OF EXTINGUISHMENT; EXCEPTIONS. — By reasonof the very nature of the relationship between principal and agent, agency isextinguished by the death of the principal or of the agent and any act of anagent after the death of his principal is void ab initio, except as explicitlyprovided for in the New Civil Code: (1) when the agency is coupled with aninterest (Art. 1930); and (2) when the agent performed an act for the principalwithout knowledge of the principal's death and the third person who contractedwith him acted in good faith. (Art. 1931)

4. ID.; REVOCATION BY PRINCIPAL DISTINGUISHED FROM REVOCATIONBY OPERATION OF LAW. — Although a revocation of a power of attorney tobe effective must be communicated to the parties concerned, yet a revocationby operation of law, such as death of the principal is, as a rule, instantaneouslyeffective inasmuch as "by legal fiction the agent's exercise of authority isregarded as an execution of the principal's continuing will." With death, theprincipal's will ceases or is terminated; the source of authority is extinguished.

5. ID.; AGENT'S HEIRS MUST NOTIFY PRINCIPAL OF AGENT'S DEATH. —The heirs of the agent who dies must notify the principal of his death and in themeantime adopt such measures as circumstances may demand in the interestof the latter, but the heirs of the principal are not duty-bound to give notice ofthe principal's death to the agent.

FACTS:

1. Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel of land.

2. In 1954, they executed an SPA in favor of their brother, Simeon Rallos,authorizing him to sell for and in their behalf the said parcel of land.

3. On March 1955, Concepcion died.4. On September 1955, Simeon sold the undivided shares of his sisters to

Felix Go Chan and Sons realty Corp.5. The deed of sale was registered and the previous TCT was cancelled.6. On May 1956, Ramon Rallos, as administrator of the Intestate Estate of

Concepcion, filed a complaint with the CFI of Cebu, praying:a. that the sale be declared unenforceable, and said share be

reconveyed to the deceased estate;b. that the TCT issued in the name of Felix Go Chan and Sons Realty

Corporation be cancelled; andc. that the plaintiff be indemnified by way of attorney’s fees and

payment of costs of suit.7. The Trial Court- declared that the absolute sale is null and void, insofar

as the ½ pro-indiviso share of Concepcion in the property, cancel theTCT issued to Felix Go Chan and Sons Realty Corp., and sentencingthe defendant Juan Borromeo, the administrator of the estate ofSimeon Rallos, to pay the plaintiff (estate of Concepcion).

8. Felix Go Chan and Sons Realty Corp, appealed to the CA, andresolved in favor of the corporation.

9. Ramon Rallos filed MR but was denied, hence this petition.

ISSUE:WON the sale of the undivided share of Concepcion Rallos valid when it wasexecuted by her agent after Concepcion’s (principal) death.

HELD:NO. The sale is null and void.

Extinguishment of Agency:The general rule in Article 1919 of the NCC is that death is one of the causesfor the extinguishment of agency. There being an integration of the personalityof the principal into that of the agent, it is not possible for the representation tocontinue once the death of either is established.

There are certain exceptions,

a. that the agency is couple with an interest (Article 1930)b. the agent acted without knowledge of the death of the principal, and

that the 3rd person who contracted with the agent acted in good faith.(Article 1931)


In this case, Article 1930 is not involved because admittedly the SPA executedin favor of Simeon was not coupled with an interest. However, under Article1931, an act done by the agent after the death of the principal is valid andeffective if the 2 conditions mentioned concur. It was established that SimeonRallos had knowledge of his principal’s death (Concepcion) when he made thesale, Article 1931 will not apply. The general rule shall apply then that any act ofan agent after the death of the principal is void ab initio. Simeon’s act of sellingthe share of Concepcion after her death is therefore null and void.

Revocation by principal distinguished from revocation by operation of law:The respondent argued that no notice of the death was annotated on the OCTregarding the death of Concepcion hence the heirs must suffer theconsequences of such omission. The SC ruled that although a revocation of apower of attorney to be effective must be communicated to the partiesconcerned, yet a revocation by operation of law, such as death of the principalis, as a rule, instantaneously effective inasmuch as “by legal fiction the agent’sexercise of authority is regarded as an execution of the principal’s continuingwill.” With death, the principal’s will ceases or is terminated; the source ofauthority is extinguished.

Agency:The relationship of agency is whereby one party called the principal (mandate),authorizes another, called the agent (mandatario), to act for and his behalf intransactions with 3rd persons.

The essential elements of agency are:

a. there is consent, express or implied, of the parties to establish therelationship;

b. the object is the execution of a juridical act in relation to a third person;c. the agent acts as a representative and not for himself; andd. the agent acts within the scope of his authority.

Agency is basically personal, representative, and derivative in nature. Theauthority of the agent to act emanates from the powers granted to him by hisprincipal; his act is the act of the principal if done within the scope of theauthority. Qui facit per alium facit per se. “He who acts through another actshimself.”

DISPOSITION:in view of all the foregoing, we set aside the decision of respondent appellatecourt, and affirm en toto the judgment rendered by then Hon. Amador E. Gomezof the CFI of Cebu, quoted in pages 2 and 3 of this Opinion, with cost againstrespondent corporation at all instances. So ordered.

CASE NO. 3

Inland Reality Investment Service, Inc. vs. CAG.R. No. 76969, June 9, 1997

SYLLABUS

3. CIVIL LAW; AGENCY; COMMISSION; WHEN BROKER IS ENTITLEDTHERETO; CASE AT BAR. — The Court of Appeals cannot be faulted foremphasizing the lapse of more than one (1) year and five (5) months betweenthe expiration of petitioners' authority to sell and the consummation of the saleto Stanford, to be a significant index of petitioners' non-participation in the reallycritical events leading to the consummation of said sale, i.e., the negotiations toconvince Stanford to sell at Araneta, Inc.'s asking price, the finalization of theterms and conditions of the sale, the drafting of the deed of sale, the processingof pertinent documents, and the delivery of the shares of stock to Stanford.Certainly, when the lapse of the period of more than one (1) year and five (5)months between the expiration of petitioners' authority to sell and theconsummation of the sale, is viewed in the context of the utter lack of evidenceof petitioners' involvement in the negotiations between Araneta, Inc. andStanford during that period and in the subsequent processing of the documentspertinent to said sale, it becomes undeniable that the respondent Court ofAppeals did not at all err in affirming the trial court's dismissal of petitioners'claim for unpaid brokerage commission. Petitioners were not the efficientprocuring cause in bringing about the sale in question on July 8, 1977 and are,therefore, not entitled to the stipulated broker's commission of "5% on the totalprice."

FACTS:Herein petitioner, Inland Reality Investment Service, Inc., was engaged

in a real estate business and brokerage. Herein respondent, Araneta Inc., wasselling its 9,800 shares in Archeticts’ Building, Inc. The latter, thru its assistantgeneral manager, herein co-respondent, J. Armando Eduque, granted topetitioners a 30-day authority to sell said stocks at P1,500 per share or for atotal of P9,800,000. Petitioners were able to look for prospective buyers, amongthem was Stanford Microsystems, Inc. which counter-proposed that the stocksshould be sold to them at P1,000 per share payable in five years with aninterest of 12% per annum.

Upon petitioners’ receipt of the counter-proposal, Inland Reality notifiedthe respondents. However, the latter replied that the price was too low andsuggested that plaintiffs see if the price and terms of payment could beimproved upon by Stanford. Thereafter, the authority to sell was extendedseveral times: (1) October, 2, 1975 for 30 days from said date, (2) October 28,


1975 for 30 days from said date, and (3) December 2, 1975 for 30 days fromsaid date.

On July 8, 1977, petitioner finally sold the 9,800 shares of stock inArchitects' Bldg., Inc. to Stanford Microsystems, Inc. for P13,500,000.00. OnSeptember 6, 1977, plaintiffs demanded formally from respondents, through aletter of demand, for payment of their 5% broker's commissionat P13,500,000.00 or a total amount of P675,000.00 x x x which was declinedby respondents on the ground that the claim has no factual or legal basis.Respondents contend that, after their authority to sell expired thirty (30) daysfrom December 2, 1975, or on January 1, 1976, petitioners abandoned thesales transaction and were no longer privy to the consummation anddocumentation thereof. Petitioners interposed that Greogorio Araneta III, inbehalf of Araneta, Inc., renewed that authority to sell granted to the petitionersfor another 30 days after the last extension stated above.

RTC: Dismissed the petitioners’ complaint for collection of unpaidbroker’s commission.

CA: Dismissed the petioners’ appeal. CA found the contention of therespondents meritorious. There was nothing in the record or in the testimonialevidence that the authority extended 30 days from the last date of extensionwas ever reserved nor extended, nor has there been any communication madeto defendants that the plaintiff was actually negotiating with Stanford a betterprice than what was previously offered by it.

ISSUE: Whether or not plaintiffs are entitled to broker’s commission regardlessof the expiration of their contract of agency and their authority to sell.

RULING:

SC ruled in favor of the respondents. . From September 16, 1975 toJanuary 1, 1976, when petitioners' authority to sell was subsisting, if at all,petitioners had nothing to show that they actively served their principal'sinterests, pursued to sell the shares in accordance with their principal's termsand conditions, and performed substantial acts that proximately and causativelyled to the consummation of the sale to Stanford of Araneta, Inc.'s 9,800 sharesin Architects'.

The Court of Appeals cannot be faulted for emphasizing the lapse ofmore than one (1) year and five (5) months between the expiration ofpetitioners' authority to sell and the consummation of the sale to Stanford, to bea significant index of petitioners' non-participation in the really critical eventsleading to the consummation of said sale, i.e., the negotiations to convince

Stanford to sell at Araneta, Inc.'s asking price, the finalization of the terms andconditions of the sale, the drafting of the deed of sale, the processing ofpertinent documents, and the delivery of the shares of stock toStanford. Certainly, when the lapse of the period of more than one (1) year andfive (5) months between the expiration of petitioners' authority to sell and theconsummation of the sale, is viewed in the context of the utter lack of evidenceof petitioners' involvement in the negotiations between Araneta, Inc. andStanford during that period and in the subsequent processing of the documentspertinent to said sale, it becomes undeniable that the respondent Court ofAppeals did not at all err in affirming the trial court's dismissal of petitioners'claim for unpaid brokerage commission.

CASE NO. 4

Doles v. Angeles, 492 SCRA 607 (2006); AGENCY IS A PREPARATORYCONTRACT

Facts:

Angeles filed a complaint on April 1, 1997 for Specific Performance withDamages against Doles, alleging that Doles was indebted to her by personalloan in the amount of P405,430.00. On October 5, 1996, by virtue of a Deed ofAbsolute Sale, Doles ceded to Angeles a parcel of land in order to satisfy herloan, and that this was mortgaged to National Home Mortgaged FinanceCorporation (NHMFC) to secure another loan of Doles to the entity, with thecondition that Angeles shall assume the undue balance and pay the monthlyamortization. Angeles then learned that Doles had incurred arrearages butdenied and refused to pay the same. Angeles also alleged that Doles refused toremit the rent collected from the tenant occupying the property, and alsorefused to cooperate with NHMFC for the transfer of the title of the property.

Doles denied that she borrowed money from Angeles, but only that she referredher friends to Angeles whom she knew to be engaged in the business oflending money in exchange of personal checks through her capitalist Arsenio


Pua. She also averred that some of her friends borrowed money from Angelesand issued personal checks in payment of the loans, but the checks bouncedfor insufficiency of funds. Although she tried to assist Angeles to collect from theborrowers, she could no longer locate them. Because of this, Angeles becamefurious and threatened her with a criminal case. Thus, Doles alleged that shewas forced to issue eight checks amounting to P350,000 to answer to thebounced checks of the borrowers she referred, and although she informedAngeles that they were not sufficiently funded, the latter still deposited thechecks and such were dishonored. Under the threat of a criminal case forviolation of BP 22, Doles alleged that she was forced to execute the AbsoluteDeed of Sale over her property, that there was no valid consideration, that shedid not appear before a notary public, and that the CTC on the deed was nothers.

RTC Ruling:

Sale was void for lack of cause or consideration. Angeles’ admission that theborrowers are friends of Doles and that the checks issued by them in paymentof the loan negates the cause or consideration of the contract of sale betweenAngeles and Doles. Moreover, property is not solely owned by Doles.

CA Ruling:

RTC decision is reversed and set aside. Doles is really the borrower and in turnwould “re-lend” the amount to her friends. Hence, the deed of absolute salewas supported by valid consideration. All transactions were made by andbetween Doles and Angeles, and Doles’ friends never presented themselves torespondent. In fact, the money borrowed was deposited in Doles’ bank account,and payments for the loan were deposited by Doles to the bank account ofAngeles. Doles herself admitted that she was “re-lending” the money loanedfrom Angeles to other individuals for profit.

Doles filed for Motion for Reconsideration with the CA, arguing that Angelescategorically admitted in open court that she acted only as agent of ArsenioPua, the principal financier, and hence she has no legal capacity to sue Doles.Motion was denied.

Issue:

Whether or not the Deed of Absolute Sale was supported by valid cause orconsideration

Held:

No, the deed was not supported by valid cause or consideration.

Doles is merely the agent of the debtors, some of whom are her friends andothers were merely referred. On the other hand, Angeles is estopped to denythat she herself acted only as an agent of Arsenio Pua, her disclosed principal.In this case, Doles knew that the financier of Angeles is Pua; and Angeles knewthat the borrowers are friends of Doles.

The CA is incorrect when it considered the fact that the "supposed friends ofDoles, the actual borrowers, did not present themselves to Angeles" asevidence that negates the agency relationship—it is sufficient that Dolesdisclosed to Angeles that the former was acting in behalf of her principals, herfriends whom she referred.

With respect to the admission of petitioner that she is "re-lending" the moneyloaned from respondent to other individuals for profit, it must be stressed thatthe manner in which the parties designate the relationship is not controlling. It


will be an agency whether the parties understood the exact nature of therelation or not.

That both parties acted as mere agents is shown by the undisputed fact that thefriends of petitioner issued checks in payment of the loan in the name of Pua. Ifit is true that petitioner was "re-lending", then the checks should have beendrawn in her name and not directly paid to Pua.

The finding of the CA that the disbursements and payments for the loan weremade through the bank accounts of Doles and Angeles, it is merely for reasonsof convenience and practical utility.

With regards to the conveyance of the property and the condition that Angelesshall assume the balance of the mortgage loan, the petitioner nor her father didnot hold any direct interest on the property in question so as to validly constitutea mortgage thereon and to effect the delivery of the object of the sale. What isworse, there is a notation that the TCT itself has been "cancelled."

WHEREFORE, the petition is granted. The Decision and Resolution of theCourt of Appeals are REVERSED and SET ASIDE. The complaint isDISMISSED.

CASE NO. 5The Shell Company of the Philippines, LTD. vs. Firemen’s InsuranceCompany Newark, New Jersey Commercial Casualty Insurance Co.,Salvador Sision, Porfirio de la Fuente & CA

SYLLABUS

1. PRINCIPAL AND AGENT; WHEN AGENCY EXISTS AND NOT ANINDEPENDENT CONTRACTOR. — Where the operator of a gasoline andservice station owed his position to the company and the latter could removehim or terminate his services at will; that the service station belonged to the

company and bore its tradename and the operator sold only the products of thecompany; that the equipment used by the operator belonged to the companyand were just loaned to the operator and the company took charge of theirrepair and maintenance; that an employee of the company supervised theoperator and conducted periodic inspection of the company's gasoline andservice station; that the price of the products sold by the operator was fixed bythe company and not by the operator; and that the receipts signed by theoperator indicated that he was a mere agent. Held: that the operator is an agentof the company and not an independent contractor.

2. CONTRACTS; NATURE OF CONTRACT; COURTS NOT BOUND UPONTHE NAME GIVEN BY PARTIES. — To determine the nature of a contractscourts do not have or are not bound to rely upon the name or title given it by thecontracting parties, should there be a controversy as to what they really hadintended to enter into, but the way the contracting parties do or perform theirrespective obligations stipulated or agreed upon may be shown and inquiredinto, and should such performance conflict with the name or title given thecontract by the parties, the former must prevail over the later.

FACTS:

On September 3, 1947, Salvador Sison brought his Plymouth car to theShell Gasoline and Service Station for washing, greasing and spraying. Aftermore than an hour of washing and greasing, the job was about to be completedexcept for an ungreased portion underneath the vehicle which could not bereached. So, the lifter was lowered a little by Alfonso Adriano and while doingso, the car for unknown reason accidentally fell and suffered damage.

The owner of the car forth with notified the insurers who ordered theiradjustor to investigate the said incident and was brought to the PhilippineMotors Inc. The car was restored to running condition after repairs whichamounted to P 1651.88 and returned to the owner who assigned his right tocollect to the Firemen’s Insurance Company and the Commercial CasualtyInsurance Company.

On December 6, 1947 the owners and the insurers brought an actionagainst Shell and Porfirio de la fuente (operator) in the Court of First Instance torecover from them, jointly and severally the sum mentioned above.

The Trial court dismissed the complaint but the CA reversed andsentenced the defendant to pay the sum with legal interests and costs.

ISSUE:


WON the CA was correct in concluding that Porfirio Dela Fuente is an agentand not an independent contractor of the Shell Company.

RULING:

Yes. The court assented to the reasoning given by the CA. Asexplained, where the operator of a gasoline and service station owed hisposition to the company and the latter could remove him or terminate hisservices at will; that the service station belonged to the company and bore itstradename and the operator sold only the products of the company; that theequipment used by the operator belonged to the company and were just loanedto the operator and the company took charge of their repair and maintenance;that an employee of the company supervised the operator and conductedperiodic inspection of the company's gasoline and service station; that the priceof the products sold by the operator was fixed by the company and not by theoperator; and that the receipts signed by the operator indicated that he was amere agent. The operator is an agent of the company and not anindependent contractor.

Applying the law on agency, it was stated that the act of the agent orhis employees acting within the scope of his authority is the act of the principal,the breach of the undertaking by the agent, in the case, is one for which theprincipal is answerable. Moreover, the company undertook to "answer and seeto it that the equipments are in good running order and usable condition;" andthe Court of Appeals found that the Company's mechanic failed to do its job orwas negligent so the company must answer for the negligent act of itsmechanic which was the cause of the fall of the car from the hydraulic lifter. Sohere the court affirmed the judgment of the CA .

On the other note, it is noteworthy to include that in determining thenature of a contracts, courts are not bound to rely upon the name or title givenby the contracting parties. Should there be a controversy as to what they reallyhad intended to enter into and should performance conflict with the name ortitle given the contract by the parties, the former must prevail over thelater.

CASE NO. 6QUIROGA VS PARSONS (AGENCY DIFFERENTIATED FROM SALE)

SYLLABUS

1. SALES; INTERPRETATION OF CONTRACT. — For the classification ofcontracts, due regard must be paid to their essential clauses. In the contract inthe instant case, what was essential, constituting its cause and subject matter,was that the plaintiff was to furnish the defendant with the beds which the lattermight order, at the stipulated price, and that the defendant was to pay this price

in the manner agreed upon. These are precisely the essential features of acontract of purchase and sale. There was the obligation on the part of theplaintiff to supply the beds, and, on that of the defendant, to pay their price.These features exclude the legal conception of an agency or older to sellwhereby the mandatary or agent receives the thing to sell it, and does not payits price, but delivers to the principal the price he obtains from the sale of thething to a third person, and if he does not succeed in selling it, he returns it,Held: That this contract is one of purchase and sale, and not of commercialagency.

2. ID., ID. — The testimony of the person who drafted this contract, to the effectthat his purpose was to be an agent for the beds and to collect a commissionon the sales, is of no importance to prove that the contract was one of agency,inasmuch as the agreements contained in the contract constitute, according tolaw, covenants of purchase and sale, and not of commercial agency. It must beunderstood that a contract is what the law defines it to be, and not what it iscalled by the contracting parties.

3. ID.; ID. — The fact that the contracting parties did not perform the contract inaccordance with its terms, only shows mutual tolerance and gives no right tohave the contract considered, not as the parties stipulated it, but as theyperformed it.

4. ID.; ID. — Only the acts of the contracting parties, subsequent to and inconnection with, the performance of the contract must be considered in theinterpretation of the contract when such interpretation is necessary, but notwhen, as in the instant case its essential agreements are clearly set forth andplainly show that the contract belongs to a certain kind and not to another

5. ID.; ID. — The defendant obligated itself to order the beds from the plaintiffby the dozen. Held: That the effect of a breach of this clause by the defendantwould only entitle the plaintiff to disregard the orders which the defendant mightplace under other conditions, but if the plaintiff consents to fill them, he waiveshis right and cannot complain for having acted thus at his own free will.

Facts:

1. CONTENTS OF THE CONTRACT

On January 24, 1911, in the City of Manila, a contract in the following tenor wasentered into by and between the plaintiff, as party of the first part, and J.Parsons (to whose rights and obligations the present defendant latersubrogated itself), as party of the second part:


CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J.PARSONS, BOTH MERCHANTS ESTABLISHED IN MANILA, FOR THEEXCLUSIVE SALE OF "QUIROGA" BEDS IN THE VISAYAN ISLANDS.

ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds inthe Visayan Islands to J. Parsons under the following conditions:

(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for thelatter's establishment in Iloilo, and shall invoice them at the same price he hasfixed for sales, in Manila, and, in the invoices, shall make and allowance of adiscount of 25 per cent of the invoiced prices, as commission on the sale; andMr. Parsons shall order the beds by the dozen, whether of the same or ofdifferent styles.

(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within aperiod of sixty days from the date of their shipment.

(C) The expenses for transportation and shipment shall be borne by M.Quiroga, and the freight, insurance, and cost of unloading from the vessel atthe point where the beds are received, shall be paid by Mr. Parsons.

(D) If, before an invoice falls due, Mr. Quiroga should request its payment, saidpayment when made shall be considered as a prompt payment, and as such adeduction of 2 per cent shall be made from the amount of the invoice.

The same discount shall be made on the amount of any invoice which Mr.Parsons may deem convenient to pay in cash.

(E) Mr. Quiroga binds himself to give notice at least fifteen days before hand ofany alteration in price which he may plan to make in respect to his beds, andagrees that if on the date when such alteration takes effect he should have anyorder pending to be served to Mr. Parsons, such order shall enjoy theadvantage of the alteration if the price thereby be lowered, but shall not beaffected by said alteration if the price thereby be increased, for, in this lattercase, Mr. Quiroga assumed the obligation to invoice the beds at the price atwhich the order was given.

(F) Mr. Parsons binds himself not to sell any other kind except the "Quiroga"beds.

ART. 2. In compensation for the expenses of advertisement which, for thebenefit of both contracting parties, Mr. Parsons may find himself obliged tomake, Mr. Quiroga assumes the obligation to offer and give thepreference toMr. Parsons in case anyone should apply for the exclusive agency for anyisland not comprisedwith the Visayan group.

ART. 3. Mr. Parsons may sell, or establish branches of his agency for the saleof "Quiroga" beds in all the towns of the Archipelago where there are noexclusive agents, and shall immediately report such action to Mr. Quiroga for

his approval.

ART. 4. This contract is made for an unlimited period, and may be terminatedby either of the contracting parties on a previous notice of ninety days to theother party.

2. VIOLATIONS OF THE CONTRACT

Of the three causes of action alleged by the plaintiff in his complaint, only two ofthem constitute the subject matter of this appeal and both substantially amountto the averment that the defendant violated the following obligations:

a. not to sell the beds at higher prices than those of the invoices; b. to have an open establishment in Iloilo; c. itself to conduct the agency; d. to keep the beds on public exhibition, ande. to pay for the advertisement expenses for the same; f. and to order the beds by the dozen and in no other manner.

As may be seen, with the exception of the obligation on the part of thedefendant to order the beds by the dozen and in no other manner, none of theobligations imputed to the defendant in the two causes of action are expresslyset forth in the contract. But the plaintiff alleged that the defendant was hisagent for the sale of his beds in Iloilo, and that said obligations are implied in acontract of commercial agency.

ISSUE: Whether or not the defendant, by reason of the contract transcribedwas a purchaser or an agent of the plaintiff for the sale of his beds.

HELD:

In order to classify a contract, due regard must be given to its essential clauses.In the contract in question, what was essential, as constituting its cause andsubject matter, is that the plaintiff was to furnish the defendant with the bedswhich the latter might order, at the price stipulated, and that the defendant wasto pay the price in the manner stipulated. The price agreed upon was the onedetermined by the plaintiff for the sale of these beds in Manila, with a discountof from 20 to 25 per cent, according to their class. Payment was to be made atthe end of sixty days, or before, at the plaintiff's request, or in cash, if thedefendant so preferred, and in these last two cases an additional discount wasto be allowed for prompt payment. These are precisely the essential features ofa contract of purchase and sale. There was the obligation on the part of theplaintiff to supply the beds, and, on the part of the defendant, to pay their price.These features exclude the legal conception of an agency or order to sellwhereby the mandatory or agent received the thing to sell it, and does not payits price, but delivers to the principal the price he obtains from the sale of the


thing to a third person, and if he does not succeed in selling it, he returns it. Byvirtue of the contract between the plaintiff and the defendant, the latter, onreceiving the beds, was necessarily obliged to pay their price within the termfixed, without any other consideration and regardless as to whether he had orhad not sold the beds.

It would be enough to hold, as we do, that the contract by and between thedefendant and the plaintiff is one of purchase and sale, in order to show that itwas not one made on the basis of a commission on sales, as the plaintiff claimsit was, for these contracts are incompatible with each other. But, besides,examining the clauses of this contract, none of them is found that substantiallysupports the plaintiff's contention. Not a single one of these clauses necessarilyconveys the idea of an agency. The words commission on sales used in clause(A) of article 1 mean nothing else, as stated in the contract itself, than a merediscount on the invoice price. The word agency, also used in articles 2 and 3,only expresses that the defendant was the only one that could sell the plaintiff'sbeds in the Visayan Islands. With regard to the remaining clauses, the least thatcan be said is that they are not incompatible with the contract of purchase andsale.

The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-president of the defendant corporation and who established and managed thelatter's business in Iloilo. It appears that this witness, prior to the time of histestimony, had serious trouble with the defendant, had maintained a civil suitagainst it, and had even accused one of its partners, Guillermo Parsons, offalsification. He testified that it was he who drafted the contract Exhibit A, and,when questioned as to what was his purpose in contracting with the plaintiff,replied that it was to be an agent for his beds and to collect a commission onsales. However, according to the defendant's evidence, it was Mariano LopezSantos, a director of the corporation, who prepared Exhibit A. But, evensupposing that Ernesto Vidal has stated the truth, his statement as to what washis idea in contracting with the plaintiff is of no importance, inasmuch as theagreements contained in Exhibit A which he claims to have drafted, constitute,as we have said, a contract of purchase and sale, and not one of commercialagency. This only means that Ernesto Vidal was mistaken in his classification ofthe contract. But it must be understood that a contract is what the law defines itto be, and not what it is called by the contracting parties.

The plaintiff also endeavored to prove that the defendant had returned bedsthat it could not sell; that, without previous notice, it forwarded to the defendantthe beds that it wanted; and that the defendant received its commission for thebeds sold by the plaintiff directly to persons in Iloilo. But all this, at the most onlyshows that, on the part of both of them, there was mutual tolerance in theperformance of the contract in disregard of its terms; and it gives no right tohave the contract considered, not as the parties stipulated it, but as theyperformed it. Only the acts of the contracting parties, subsequent to, and in

connection with, the execution of the contract, must be considered for thepurpose of interpreting the contract, when such interpretation is necessary, butnot when, as inconsidered for the purpose of interpreting the contract, whensuch interpretation is necessary, but not when, as in the instant case, itsessential agreements are clearly set forth and plainly show that the contractbelongs to a certain kind and not to another. Furthermore, the return made wasof certain brass beds, and was not effected in exchange for the price paid forthem, but was for other beds of another kind; and for the letter Exhibit L-1,requested the plaintiff's prior consent with respect to said beds, which showsthat it was not considered that the defendant had a right, by virtue of thecontract, to make this return. As regards the shipment of beds without previousnotice, it is insinuated in the record that these brass beds were precisely theones so shipped, and that, for this very reason, the plaintiff agreed to theirreturn. And with respect to the so-called commissions, we have said that theymerely constituted a discount on the invoice price, and the reason for applyingthis benefit to the beds sold directly by the plaintiff to persons in Iloilo wasbecause, as the defendant obligated itself in the contract to incur the expensesof advertisement of the plaintiff's beds, such sales were to be considered as aresult of that advertisement.

In respect to the defendant's obligation to order by the dozen, the only oneexpressly imposed by the contract, the effect of its breach would only entitle theplaintiff to disregard the orders which the defendant might place under otherconditions; but if the plaintiff consents to fill them, he waives his right andcannot complain for having acted thus at his own free will.

For the foregoing reasons, we are of opinion that the contract by andbetween the plaintiff and the defendant was one of purchase and sale,and that the obligations the breach of which is alleged as a cause ofaction are not imposed upon the defendant, either by agreement or bylaw.

CASE NO. 7Schmid and Oberly, Inc. v. RJL Martinez Fishing Corp.G.R. No. 75198, October 18, 1988SYLLABUS 1. REMEDIAL LAW; JUDGMENT; FACTUAL FINDINGS OF THE COURT OFAPPEALS; CONCLUSIVE; EXCEPTION; CASE AT BAR. — Ordinarily, theCourt will not disturb the findings of fact of the Court of Appeals in petitions toreview the latter's decisions under Rule 45 of the Revised Rules of Court, thescope of the Court's inquiry being limited to a review of the imputed errors oflaw. However, when, as in this case, it is the petitioner's position that theappealed judgment is premised on a misapprehension of facts, the Court is


compelled to review the Court of Appeal's factual findings. Respondent RJLMARTINEZ FISHING CORP. purchased fifteen (15) "Nagata" brand generators,three by direct purchase from petitioner SCHMID & OBERLY, INC. and twelveby indent order from NAGATA CO. through SCHMID. RJL MARTINEZ paidNAGATA CO, for the twelve generators, which the latter invoiced and shippeddirectly to the former. SCHMID acted as intermediary by processing an orderfrom RJL MARTINEZ and forwarding it to NAGATA for which SCHMID receiveda commission. The three Nagata generators which SCHMID sold directly to RJLMARTINEZ came from the former's own stock (which it had earlier importedfrom NAGATA) and for which SCHMID issued its own invoice and collectedpayment. RJL MARTINEZ sough a refund of the purchase price of the twelveNAGATA generators obtained by indent order and found to be factory defective,plus damages and attorneys fees from SCHMID. 2. CIVIL LAW; CONTRACTS; NATURE THEREOF DEFINED BY LAW. — Acontract is what the law defines it to be, considering its essential elements, andnot what it is called by the contracting parties [Quiroga v. Parsons HardwareCo., 38 Phil. 501 (1918).] 3. ID.; SALE; ART. 1458, CIVIL CODE; NATURE AND ESSENCE. — The CivilCode defines a contract of sale, thus: By the contract of sale one of thecontracting parties obligates himself to transfer the ownership of and to delivera determinate thing, and the other to pay therefor a price certain in money or itsequivalent. (Art. 1458). It has been said that the essence of the contract of saleis transfer of title or agreement to transfer it for a price paid or promised. "Ifsuch transfer puts the transferee in the attitude or position of an owner andmakes him liable to the transferor as a debtor for the agreed price, and notmerely as an agent who must account for the proceeds of a resale, thetransaction is a sale." [Commissioner of Internal Revenue v. Constantino, G.R.No. L- 25926, February 27, 1970, 31 SCRA 779, 785, citing Salisbury v. Brooks,94 SE 117, 118-19.] 4. MERCANTILE LAW; OMNIBUS INVESTMENT CODE (PD. 1789);"INDENTORS"; DEFINED. — There is no statutory definition of "indent" in thisjurisdiction. However, the Rules and Regulations to Implement PresidentialDecree No. 1789 (the Omnibus Investments Code) lumps "indentors" togetherwith "commercial brokers" and "commission merchants" in this manner: . . . Aforeign firm which does business through the middlemen acting in their ownnames, such as indentors, commercial brokers or commission merchants, shallnot be deemed doing business in the Philippines. But such indentors,commercial brokers or commission merchants shall be the ones deemed to bedoing business in the Philippines [Part I, Rule 1, Section 1, par. g (1).]Therefore, an indentor is a middleman in the same class as commercial brokersand commission merchants. Thus, the chief feature of a commercial broker anda commercial merchant is that in effecting a sale, they are merelyintermediaries or middlemen, and act in a certain sense as the agent of bothparties to the transaction. Indent is defined as "a purchase order for goodsespecially when sent from a foreign country." [Webster's Ninth New CollegiateDictionary 612 (1986).] It would appear that there are three parties to an indent

transaction, namely, the buyer, the indentor, and the supplier who is usually anonresident manufacturer residing in the country where the goods are to bebought [Commissioner of Internal Revenue v. Cadwallader Pacific Company,G.R. No. L- 20343, September 29, 1976, 73 SCRA 59.] An indentor maytherefore be best described as one who, for compensation, acts as amiddleman in bringing about a purchase and sale of goods between a foreignsupplier and a local purchaser. 5. ID.; CORPORATION LAW; SECTION 69; PURPOSE; DOES NOT COVER"INDENTORS"; CASE AT BAR. — Sec. 69 of the old Corporation Law whichpenalizes any office or agent of a corporation or any person transactingbusiness for any foreign corporation not licensed to do business in thePhilippines, finds no application to SCHMID and its officers and employeesrelative to the transactions in the instant case. What the law seeks to prevent,through said provision, is the circumvention by foreign corporations of licensingrequirements through the device of employing local representatives. Anindentor, acting in his own name, is not, however, covered by the above-quotedprovision. In fact, the provision of the Rules and Regulations implementing theOmnibus Investments Code quoted above, which was copied from the Rulesimplementing Republic Act No. 5455, recognizes the distinct role of an indentor,such that when a foreign corporation does business through such indentor, theforeign corporation is not deemed doing business in the Philippines. 6. CIVIL LAW; SALE; ART. 1561, CIVIL CODE; WARRANTY FOR HIDDENDEFECTS; NOT APPLICABLE TO "INDENTORS"; CASE AT BAR. — In view ofthe above considerations, this Court rules that SCHMID was merely acting asan indentor in the purchase and sale of the twelve (12) generators subject ofthe second transaction. Not being the vendor, SCHMID cannot be held liable forthe implied warranty for hidden defects under the Civil Code [Art. 1561, et seq.].7. ID.; AGENCY; ART. 1897, CIVIL CODE; AGENT MAY UNDERTAKE THEOBLIGATIONS OF HIS PRINCIPAL; CASE AT BAR. — However, even asSCHMID was merely an indentor, there was nothing to prevent it fromvoluntarily warranting that twelve (12) generators subject of the secondtransaction are free from any hidden defects. In other words, SCHMID may beheld answerable for some other contractual obligation, if indeed it had so bounditself. As stated above, an indentor is to some extent an agent of both thevendor and the vendee. As such agent, therefore, he may expressly obligatehimself to undertake the obligations of his principal [See Art. 1897, Civil Code.]8. REMEDIAL LAW; PAROL EVIDENCE; EXTRINSIC PAROL EVIDENCEUNAVAILING. — The Quotation [Exhibit "A"] is in writing. It is the repository ofthe contract between RJL MARTINEZ and SCHMID. Notably, nowhere is itstated therein that SCHMID did bind itself to answer for the defects of the thingssold. There being no allegation nor any proof that the Quotation does notexpress the true intent and agreement of the contracting parties, extrinsic parolevidence of warranty will be to no avail [See Rule 130, Sec. 7.] 9. CIVIL LAW;SALE; WARRANTY; EXPRESSION OF OPINION, NOT A WARRANTY; CASEAT BAR. — Moreover, a closer examination of the statements allegedly madeby the representative of SCHMID reveals that they merely constituted an


expression of opinion which cannot by any means be construed as a warranty[See Art. 1546, Civil Code.]

Facts:

There was a misapprehension of facts in the RTC and CA, so SC reopened thefacts again. (SC facts nani).

RJL Martinez Fishing Corp (RJL Martinez) is engaged in deep-sea fishing, andin the course of its business needed electrical generators for the operation of itsbusiness.It then negotiated with Schmid&Oberly (Schmid) who is engaged inthe business of selling electric generators of different brands. The two partieshad two different transactions. The first transaction resulted in the sale of 3Nagata generators which came from Schmid’s stockroom. Schmid invoiced thesaid sale.

The second transaction involves 12 Nagata generators which give rise to thecontroversy. As RJL Martinez was canvassing for generators, Schmid gave theformer a quotation for 12 Nagata generators. The parties agreed that the modeof payment would be through an irrevocable letter of credit in favor of Nagata,Co. (the manufacturer of the generators).

Accordingly, on November 20,1975, SCHMID transmitted to NAGATA CO. anorderfor the twelve (12) generators to be shipped directly to RJL MARTINEZ.NAGATA CO. thereafter sent RJL MARTINEZ the bill of lading and its owninvoiceand, in accordance with the order, shipped the generators directly to RJLMARTINEZ. The invoice states that "one (1) case of 'NAGATA' AC Generators"consisting of twelve sets was—bought by order and for account risk of Messrs.RJL Martinez Fishing Corporation.

For its efforts, SCHMID received from NAGATA CO. a commission of $1,752.00for the sale of the twelve generators to RJL MARTINEZ.

All fifteen (15) generators subject of the two transactions burned out aftercontinuous use. RJL MARTINEZ informed SCHMID about this development. Inturn, SCHMID brought the matter to the attention of NAGATA CO. In July 1976,NAGATA CO. sent two technical representatives who made an ocularinspection and conducted tests on some of the burned out generators, which bythen had been delivered to the premises of SCHMID. It was found out that thedescription of the generators (in the quotation and invoice) was 5 KVA, but thegenerators turned out to be actually only 4 KVA.

SCHMID replaced the three (3) generators subject of the first sale withgenerators of a different brand. As for the 12 others, Nagata, Co. only repaired3, while the remaining 9 remained unrepaired. As a result, RJL Martinez suedSchmid.

In its defense, Schmid refuses liability on the account that it was not the sellerfor the 12 generators.

Both the trial court and the Court of Appeals upheld the contention of RJLMARTINEZ that SCHMID was the vendor in the second transaction and wasliable under its warranty. Accordingly, the courts a quo rendered judgment infavor of RJL MARTINEZ. Hence, the instant recourse to this Court.

Issue:WON the second transaction between RJL Martinez and Schmid was asale, or Schmid was merely an indent (broker/ intermediary) of RJL Martinezand Nagata, Co.

Held: SCHMID was merely an indentor, not a vendor in the secondtransaction.

Nature of Sale

At the outset, it must be understood that a contract is what the law defines it tobe, considering its essential elements, and not what it is caged by thecontracting parties.

It has been said that the essence of the contract of sale is transfer of title oragreement to transfer it for a price paid or promised. If such transfer puts thetransferee in the attitude or position of an owner and makes him liable to thetransferor as a debtor for the agreed price, and not merely as an agent whomust account for the proceeds of a resale, the transaction is, a sale.

What is an Indentor:

On the other hand, there is no statutory definition of "indent" in this jurisdiction.However, the Rules and Regulations to Implement Presidential Decree No.1789 (the Omnibus Investments Code) lumps "indentors" together with"commercial brokers" and "commission merchants" in this manner:

... A foreign firm which does business through the middlemen acting intheir own names, such asindentors, commercial brokers or commissionmerchants, shall not be deemed doing business in the Philippines. Butsuch indentors, commercial brokers or commission merchants shall bethe ones deemed to be doing business in the Philippines.

Therefore, an indentor is a middlemen in the same class as commercial brokersand commission merchants. To get an Idea of what an indentor is, a look at thedefinition of those in his class may prove helpful.


A broker is generally defined as one who is engaged, for others, on acommission, negotiating contracts relative to property with the custody of whichhe has no concern; the negotiator between other parties, never acting in hisown name but in the name of those who employed him; he is strictly amiddleman and for some purpose the agent of both parties.

A broker is one whose occupation it is to bring parties together to bargain, or tobargain for them, in matters of trade, commerce or navigation.

Judge Storey, in his work on Agency, defines a broker as an agent employed tomake bargains and contracts between other persons, in matters of trade,commerce or navigation, for compensation commonly called brokerage.

Commission Merchant:

A commission merchant is one engaged in the purchase or sale for another ofpersonal property which, for this purpose, is placed in his possession and at hisdisposal. He maintains a relation not only with his principal and the purchasersor vendors, but also with the property which is subject matter of the transaction.

Thus, the chief feature of a commercial broker and a commercial merchant isthat in effecting a sale, they are merely intermediaries or middle-men, and act ina certain sense as the agent of both parties to the transaction.

Indent Relationships

Webster defines an indent as "a purchase order for goods especially when sentfrom a foreign country. It would appear that there are three parties to an indenttransaction, namely, the buyer, the indentor, and the supplier who is usually anon-resident manufacturer residing in the country where the goods are to bebought. An indentor may therefore be best described as one who, forcompensation, acts as a middleman in bringing about a purchase and sale ofgoods between a foreign supplier and a local purchaser.

In the case at bar:

The evidences show that RJL Martinez admitted that Schmid was merely anindent for the purchase of the 12 generators. The evidence also show that RJLMARTINEZ paid directly NAGATA CO, for the generators, and that the latter

company itself invoiced the sale, and shipped the generators directly to theformer. The only participation of SCHMID was to act as an intermediary ormiddleman between NAGATA CO. and RJL MARTINEZ, by procuring an orderfrom RJL MARTINEZ and forwarding the same to NAGATA CO. for which thecompany received a commission from NAGATA CO.

The above transaction is significantly different from the first transaction whereinSCHMID delivered the goods from its own stock (which it had itself importedfrom NAGATA CO.), issued its own invoice, and collected payment directly fromthe purchaser.

RJL Martinez still insists that Schmid was a seller, and not a mere brokerbecause when the latter was informed of the defects, it acted immediately,provided tools, labor, and equipment to resolve the matter. The SC howeversaid that: no indentor will just fold its hands when a client complains about thegoods it has bought upon the indentor's mediation. In its desire to promote theproduct of the seller and to retain the goodwill of the buyer, a prudent indentordesirous of maintaining his business would have to act considerably towardshis clients.Note that in contrast to its act of replacing the three (3) generatorssubject of the first transaction, SCHMID did not replace any of the twelve (12)generators, but merely rendered assistance to both RJL TINES and NAGATACO. so that the latter could repair the defective generators.

Liability for Warranty

However, even as SCHMID was merely an indentor, there was nothing toprevent it from voluntarily warranting that twelve (12) generators subject of thesecond transaction are free from any hidden defects. In other words, SCHMIDmay be held answerable for some other contractual obligation, if indeed it hadso bound itself. As stated above, an indentor is to some extent an agent of boththe vendor and the vendee. As such agent, therefore, he may expresslyobligate himself to undertake the obligations of his principal.

In this case however, there was no express agreement between the parties thatSchmid warrants in anyway the condition of the generators, hence the court didnot make the latter liable for any warranty.

CASE NO. 8

HARRY E. KEELER ELECTRIC CO., INC., vs. DOMINGO RODRIGUEZ


1. BURDEN OF PROOF. — The defendant, having alleged that the plaintiffsoldand delivered the plant to him, and that he paid the purchase price to theplaintiff, it devolved upon him to prove such payment by a preponderance ofthe evidence.

2. TO WHOM PAYMENT SHOULD BE MADE. — Payment must be made tothe person in whose favor the obligation is constituted, or to another authorizedto receive it in his name. (Article 1162, Civil Code.)

3. ID. — The repayment of a debt must be made to the person in whose favorthe obligation is constituted, to another expressly authorized to receive thepayment, in his name. (Ormachea Tin-Congco vs. Trillana, 13 Phil., 194.)

4. DUTIES OF PERSONS DEALING WITH AN ASSUMED AGENT. — Personsdealing with an assumed agent, whether the assumed agency be a general orspecial one, rare bound at their peril, if they would, if they would hold theprincipal, to ascertain not only the fact of the agency but the nature and extentof the authority, and in case either is controverted, the burden of proof is uponthem to establish it.

5. AGENT ALONE CANNOT ENLARGE HIS AUTHORITY. — The agent aloneremove limitations or waive conditions imposed by his principal. To charge theprincipal in such a case, the principal's consent or concurrence must be shown.

6. PAYMENT AT OWN RISK. — Where a person in making payment solelyrelied upon the representation of an agent a to his authority to receive andreceipt for the money, such payment is made at his own risk, and where theagent was not so authorized, such payment is not a valid defense against theprincipal.

The plaintiff is a domestic corporation with its principal office in the city ofManila and engaged in the electrical business, and among other things in thesale of what is known as the "Matthews" electric plant, and the defendant is aresident of Talisay, Occidental Negros, and A. C. Montelibano was a resident ofIloilo.

Montelibano approached plaintiff at its Manila office, claiming that he was fromIloilo and lived with Governor Yulo; that he could find purchaser for the"Matthews" plant, and was told by the plaintiff that for any plant that he couldsell or any customer that he could find he would be paid a commission of 10per cent for his services, if the sale was consummated. Montelibano interviewsthe defendant, and, through his efforts, one of the "Matthews" plants was soldby the plaintiff to the defendant, and was shipped from Manila to Iloilo, and laterinstalled on defendant's premises after which, without the knowledge of theplaintiff, the defendant paid the purchase price to Montelibano. As a result,plaintiff commenced this action against the defendant, alleging that aboutAugust 18, 1920, it sold and delivered to the defendant the electric plant at theagreed price of P2,513.55 no part of which has been paid, the demandsjudgment for the amount with interest from October 20, 1920.

It appears from the testimony of H. E. Keeler that he was president of theplaintiff company and that the plant in question was shipped from Manila toIloilo and consigned to the plaintiff itself, and that at the time of the shipment theplaintiff sent Juan Cenar, one of its employees, with the shipment, for thepurpose of installing the plant on defendant's premises. That plaintiff gaveCenar a statement of the account, including some extras and the expenses ofthe mechanic, making a total of P2,563,95. That Montelibano had no authorityfrom the plaintiff to receive or receipt for money. That in truth and in fact hisservices were limited and confined to the finding of purchasers for the"Matthews" plant to whom the plaintiff would later make and consummate thesale. That Montelibano was not an electrician, could not install the plant and didnot know anything about its mechanism.


Cenar, testified that he went with shipment of the plant from Manila to Iloilo, forthe purpose of installing, testing it, and to see that everything was satisfactory.That he was there about nine days, and that he installed the plant, and that itwas tested and approved by the defendant. He also says that he personallytook with him the statement of account of the plaintiff against the defendant.That after the plant was installed and approved, he delivered it to the defendantand returned to Manila.

The only testimony on the part of the defendant is that of himself in the form ofa deposition in which he says that Montelibano sold and delivered the plant tohim, and "was the one who ordered the installation of that electrical plant," andhe introduced in evidence as part of his deposition a statement and receiptwhich Montelibano signed to whom he paid the money.

There is nothing on the face of the receipt to show that Montelibano was theagent of, or that he was acting for, the plaintiff. It was his personal receipt andhis own personal signature. Outside of the fact that Montelibano received themoney and signed this receipt, there is no evidence that he had any authority,real or apparent, to receive or receipt for the money. Neither is there anyevidence that the plaintiff ever delivered the statement to Montelibano, orauthorized anyone to deliver it to him, and it is very apparent that the statementin question is the one which was delivered by the plaintiff to Cenar, and is theone which Cenar delivered to the defendant at the request of the defendant.

This claim must be for the expenses of Cenar in going to Iloilo from Manila andreturn, to install the plant, and is strong evidence that it was Cenar and notMontelibano who installed the plant. If Montelibano installed the plant, asdefendant claims, there would not have been any necessity for Cenar to makethis trip at the expense of the defendant. After Cenar's return to Manila, theplaintiff wrote a letter to the defendant requesting the payment of its account.

This is in direct conflict with the receipted statement, which the defendantoffered in evidence, signed by Montelibano. That shows upon its face that itwas an itemized statement of the account of plaintiff with the defendant. Again,it will be noted that the receipt which Montelibano signed is not dated, and itdoes not show when the money was paid: Speaking of Montelibano, thedefendant also testified: "and he assured me that he was duly authorized tocollect the value of the electrical plant." This shows upon its face that thequestion of Montelibano's authority to receive the money must have beendiscussed between them, and that, in making the payment, defendant reliedupon Montelibano's own statements and representation, as to his authority, toreceipt for the money.

In the final analysis, the plant was sold by the plaintiff to the defendant, and wasconsigned by the plaintiff to the plaintiff at Iloilo where it was installed by Cenar,acting for, and representing, the plaintiff, whose expense for the trip is includedin, and made a part of, the bill which was receipted by Montelibano.

There is no evidence that the plaintiff ever delivered any statements toMontelibano, or that he was authorized to receive or receipt for the money, anddefendant's own telegram shows that the plaintiff "did not present bill" todefendant. He now claims that at the very time this telegram was sent, he hadthe receipt of Montelibano for the money upon the identical statement ofaccount which it is admitted the plaintiff did render to the defendant.

Article 1162 of the Civil Code provides:

Payment must be made to the persons in whose favor the obligation isconstituted, or to another authorized to receive it in his name.

And article 1727 provides:


The principal shall be liable as to matters with respect to which theagent has exceeded his authority only when he ratifies the sameexpressly or by implication.

Applying the above rules, the testimony is conclusive that the plaintiff neverauthorized Montelibano to receive or receipt for money in its behalf, and thatthe defendant had no right to assume by any act or deed of the plaintiff thatMontelibano was authorized to receive the money, and that the defendant madethe payment at his own risk and on the sole representations of Montelibano thathe was authorized to receipt for the money.

CASE NO. 9Bad Faith of an AgentColeongco vs. Claparols

SYLLABUS 1. PARTNERSHIP; POWER OF ATTORNEY COUPLED WITH INTERESTREVOCABLE FOR CAUSE. — A power of attorney although coupled withinterest in a partnership can be revoked for a just cause, such as when theattorney-in-fact betrays the interest of the principal as happened in the case atbar. 2. DAMAGES; MORAL DAMAGES FOR MALICIOUSLY UNDERMININGPLAINTIFF'S BANK CREDIT. — Material, moral and exemplary damages maybe awarded a plaintiff for a defendant's acts in maliciously undermining saidplaintiff's credit that led the bank to secure an unwarranted writ of executionagainst said plaintiff.

Facts:

Eduardo L. Claparols, operated a factory for the manufacture ofnails in Talisay, Occidental Negros, under the style of "ClaparolsSteel & Nail Plant". The raw material, nail wire, was imported fromforeign sources, specially from Belgium; and Claparols had a regulardollar allocation therefor, granted by the Import Control Commission andthe Central Bank. The marketing of the nails was handled by the "ABCDCommercial" of Bacolod, which was owned by a Chinaman named KhoTo.1äwphï1

Losses compelled Claparols in 1953 to look for someone to financehis imports of nail wires. At first, Kho To agreed to do the financing,but on April 25, 1953, the Chinaman introduced his compadre, appellantVicente Coleongco, to the appellee, recommending said appellant to bethe financier in the stead of Kho To. . Claparols agreed, and on April 25 ofthat year a contract (Exhibit B) was perfected between them wherebyColeongco undertook to finance and put up the funds required for theimportation of the nail wire, which Claparols bound himself to convert intonails at his plant.

. It was agreed that Coleongco would have the exclusivedistribution of the product, and the "absolute care in themarketing of these nails and the promotion of sales all over thePhilippines", except the Davao Agency; that Coleongco would"share the control of all the cash" from sales or deposited inbanks; that he would have a representative in themanagement; that all contracts and transactions should bejointly approved by both parties; that proper books would bekept and annual accounts rendered; and that profits and losseswould be shared "on a 50-50 basis". The contract was renewedfrom one year to year until 1958, and Coleongco's sharesubsequently increased by 5% of the net profit of the factory.

Two days after the execution of the basic agreement, Exhibit "B", on April

27, 1953, Claparols executed in favor of Coleongco, at the latter'sbehest a special power of attorney (Exhibit C) to open and negotiateletters of credit, to sign contracts, bills of lading, invoices, and paperscovering transactions; to represent appellee and the nail factory; and toaccept payments and cash advances from dealers and distributors.Thereafter, Coleongco also became the assistant manager of the factory,and took over its business transactions, while Claparols devoted most ofhis time to the nail manufacture processes.

Around mid-November of 1956- Claparols was disagreeably surprised

by service of an alias writ of execution to enforce a judgment obtainedagainst him by the Philippine National Bank, despite the fact that on thepreceding September he had submitted an amortization plan to settle theaccount. Worried and alarmed, Claparols immediately left for Manila toconfer with the bank authorities. Upon arrival, he learned to his dismaythat the execution had been procured because of derogatory informationagainst appellee that had reached the bank from his associate, appellantColeongco.


On July 6, 1956, Coleongco , without Claparol’s knowledge,

had written to the bank — in connection with the verbal offer —for the acquisition by me of the whole interest of Mr. EduardoL. Claparols in the Claparols Steel & Nail Plant and theClaparols Hollow Blocks Factory" (Exhibit 36);

and later, on October 29, 1956, Coleongco had written again

the bank another letter (Exhibit 35), also behind the back ofappellee, wherein Coleongco charged Claparols with takingmachines mortgaged to the bank, and added

In my humble personal opinion I presume that Mr. Eduardo L.Claparols is not serious in meeting his obligations with your bank,otherwise he had not taken these machines and equipments a sign ofbad faith since the factory is making a satisfactory profit of myadministration

In the meantime, Claparols had found in the factory files certain

correspondence in February, 1955 between Coleongco and the naildealer Kho To whereby the former proposed to Kho that the latter shouldcut his monthly advances to Claparols from P2,000 to P1,000 a month,because —

I think it is time that we do our plan to take advantage of the difficulties ofEddie with the banks for our benefit. If we can squeeze him more. I amsure that we can extend our contract with him before it ends next year,and perhaps on better terms. If we play well our cards we might yet ownhis factory (Exhibit 32);

and conformably to Coleongco's proposal, Kho To had written toClaparols that "due to present business conditions" the latter could onlybe allowed to draw P1,000 a month beginning April, 1955 (Exhibit 33).

As the parties could not amicably settle their accounts, Coleongco filed a

suit against Claparols charging breach of contract, asking for accounting,and praying for P528,762.19 as damages, and attorney's fees, to whichClaparols answered, denying the charge, and counter-claiming for therescission of the agreement with Coleongco for P561,387.99 by way ofdamages. After trial, the court rendered judgment, as stated at thebeginning of this opinion.

RULING og CFI of Negros Occidental (in its Civil Case No.4170) dismissed plaintiff's action for damages, and ordered himto pay defendant Eduardo Claparols the amount of P81,387.27plus legal interest from the filing of the counterclaim tillpayment thereof; P50,000 as moral and compensatorydamages suffered by defendant; and cost.

Coleongco appeled and contended that the power of attorney (Exhibit"C") was made to protect his interest under the financing agreement(Exhibit "B") and was one coupled with an interest that the appelleeClaparols had no legal power to revoke.

ISSUE:

Whether or not the Claparols has legal basis to revoke the power of attorney.

HELD:

Yes . The financing agreement itself already contained clauses for theprotection of appellant's interest, and did not call for the execution of any powerof attorney in favor of Coleongco. But granting appellant's view, it must not beforgotten that a power of attorney can be made irrevocable by contractonly in the sense that the principal may not recall it at his pleasure; butcoupled with interest or not, the authority certainly can be revoked for ajust cause, such as when the attorney-in-fact betrays the interest of theprincipal, as happened in this case. It is not open to serious doubt thatthe irrevocability of the power of attorney may not be used to shield theperpetration of acts in bad faith, breach of confidence, or betrayal of trust,by the agent for that would amount to holding that a power coupled withan interest authorizes the agent to commit frauds against the principal.

Our new Civil Code, in Article 1172, expressly provides the contrary inprescribing that responsibility arising from fraud is demandable in allobligations, and that any waiver of action for future fraud is void. It is also onthis principle that the Civil Code, in its Article 1800, declares that the powers ofa partner, appointed as manager, in the articles of co-partnershipare irrevocable without just or lawful cause; and an agent with power coupledwith an interest can not stand on better ground than such a partner in so far asirrevocability of the power is concerned.

That the appellee Coleongco acted in bad faith towards his principal Claparolsis, on the record, unquestionable. His letters to the Philippine National Bank


(Exhibits 35 and 36) attempting to undermine the credit of the principal and toacquire the factory of the latter, without the principal's knowledge; Coleongco'sletter to his cousin, Kho To (Exhibit 32), instructing the latter to reduce to one-half the usual monthly advances to Claparols on account of nail sales in orderto squeeze said appellee and compel him to extend the contract entitlingColeongco to share in the profits of the nail factory on better terms, andultimately "own his factory", a plan carried out by Kho's letter, Exhibit 33,reducing the advances to Claparols; Coleongco's attempt to, have RomuloAgsam pour acid on the machinery; his illegal diversion of the profits of thefactory to his own benefit; and the surreptitious disposition of the Yates bandresaw machine in favor of his cousin's Hong Shing Lumber Yard, made whileClaparols was in Baguio in July and August of 1956, are plain acts of deliberatesabotage by the agent that fully justified the revocation of the power of attorney(Exhibit "C") by Claparols and his demand for an accounting from his agentColeongco.

Appellant attempts to justify his letter to the Philippine National Bank (Exhibits35 and 36), claiming that Claparols' mal-administration of the businessendangered the security for the advances that he had made under the financingcontract (Exhibit "B"). But if that were the case, it is to be expected thatColeongco would have first protested to Claparols himself, which he never did.Appellant likewise denies the authorship of the letter to Kho (Exhibit 32) as wellas the attempt to induce Agsam to damage the machinery of the factory.Between the testimony of Agsam and Claparols and that of Coleongco, thecourt below whose to believe the former, and we see no reason to alter thelower court's conclusion on the value of the evidence before it, considering thatKho's letter to Claparols (Exhibit 33) plainly corroborates and dovetails with theplan outlined in Coleongco's own letter (Exhibit 32), signed by him, and that thecredibility of Coleongco is affected adversely by his own admission of hishaving been previously convicted of estafa (t.s.n., pp. 139, 276), a crime thatimplies moral turpitude. Even disregarding Coleongco's letter to his son-in-law(Exhibit 82) that so fully reveals Coleongco's lack of business scruples, theclear preponderance of evidence is against appellant.

CASE NO. 10 Kerr & Co. LTd v. Collector

Facts:

This is an appeal that seeks to determine whether a trader tax paid by theappellant under oath was legally enforceable.

Plaintiff offered a price to Shaw Wallace & Co. of Calcutta for a certainmerchandize;

The latter accepted the offer;

Subsequently, plaintiff entered into a contract of sale with home buyerswhere the former fixed a price higher than that agreed upon by the formerwith Calcutta;

After the contract was entered into, Calcutta instructed plaintiff to send thegoods to, and draw a draft on the home buyers.

The draft contains the price agreed between the plaintiff and home buyers,which was drawn against the local bank in accordance with the letter ofguarantee executed by the plaintiff and the home buyers.

After receiving the draft and the shipping documents, the local bankreleased the merchandise to the buyer by virtue of a trust receipt.

The draft was paid by the buyers to the bank, and the proceeds of the draftwere received by Calcutta.

Calcutta paid the plaintiff the difference between the price agreed uponbetween the latter and plaintiff, and that price for which the merchandisewas sold to the home buyers.

The Court decided the case stating that the appellant in the abovetransactions should be considered as a trader, in accordance with theprovisions of Article 1459 of the Revised Administrative Code, whichprovides:

. "SEC 1459. Percentage sales tax on merchants. - All merchants HEREINSpecifically Exempted Shall not pay a tax of one per centum on the gross valueof the commodities in money, goods, wares, and merchandise sold, bartered,Exchanged, or consigned abroad by them, Such tax to be based on the currentselling price or value of the things in question at the time They are disposed ofor consigned, Whether Consisting of raw materials or of manufactured orpartially manufactured products, and Whether of domestic or foreign origin. Thetax upon things consigned abroad Shall be refunded upon satisfactory proof ofthe return thereof to the Philippine Islands unsold.

"Merchants, as used here, means a person engaged in the sale, barter, orexchange of personal property of whatever character. Except as speciallyprovided, the term includes manufacturers of articles Who Sell Their Ownproduction, and commission merchants Having establishments of Their own forthe keeping and disposal of goods Of which sales or exchanges are effected,but does not include merchandise brokers.”

The appellant contends that the Court erred in failing to declare that shehad bought the goods of Shaw Wallace & Co. of Calcutta, India, and hadsold to local buyers on their own, and they acted as merchant transactionsabove and as such should pay tax.

The contention of the appellant is that she acted in such transactions as atrade corridor.


ISSUE: In what capacity the appellant made the sales of the subjectmerchandise to local buyers.

To address this question, we must consider not the legal relationshipbetween the appellant and local buyers but the relationships mediatedbetween the appellant and Shaw Wallace & Co. Of Calcutta, becausetransactions with that firm began and ended the same.

The contention of the appellant is that she acted in such transactions as abroker.

HELD:

The broker never hires in name but in that of his client. In this case, Kerr &Company entered into a contract of sale when it offered to buy certaingoods at a price that Shaw Wallace & Co. of Calcutta accepted.

Never mind that the goods have not passed into the possession of Kerr &Company because the what is necessary is the consent given for thecontract of sale to be perfected being a consensual contract.

After the contract of sale, Kerr & Company, on its own behalf, agreed tosell to the home buyers. Therefore, Kerr & Company, contracts with localmerchants on its own name independently, after the transaction with ShawWallace. Evidenced by the fact that the former offers to the home buyers aprice different from that it offered to Shaw Wallace.

The broker executes the transaction with a third party on behalf of hisclient, based on a fixed commission determined. In this case, Kerr &Company and Shaw Wallace & Company at no time had set a commissionwhich would effect the sale of goods to local merchants.

Kerr & Company made after the sale of goods to local buyers for a higherprice than had been agreed with Shaw Wallace & Company, charging thedifference to their advantage, a difference that can not be conceptualizedas a commission because he amount charged depended solely from Kerr& Company, according to the price she had set for it to goods sold.

A commission is a bit of money to be concluded between the broker andthe client, which is not true in this case because the price difference inuresto the benefit of Kerr solely to the exclusion of Shaw Wallace.

The broker does not guarantee payment of the goods it sells to a thirdparty, because it's only a mediator who deals in getting the concernedparties are understood in a business or trade or business navigationissues.

In the present case, Kerr & Company guarantee to Shaw Wallace &Company to pay drafts drawn by this company against 108 local buyers.

In addition, in the case of breach of Kerr & Company the contract awardedto local buyers, they would have no recourse whatsoever to go againstShaw Wallace & Company to require this company to fulfill the contract.

The facts show that Kerr & Company first contract in its own name withShaw Wallace & Company, and later also contract in its own name withlocal buyers.

All these considerations demonstrate the same and only one proposition:Kerr & Company contract in its own name and for its own account withShaw Wallace & Company as a trader, and sold as a merchant in his ownname; and therefore is subject to tax trader.

CASE NO. 11

EDUARDO V. LINTONJUA, JR. and ANTONIO K. LITONJUA, Petitioners, vs. ETERNIT CORPORATION (now ETERTON MULTI-RESOURCESCORPORATION), ETEROUTREMER, S.A. and FAR EAST BANK & TRUSTCOMPANY,

Facts:

The Eternit Corporation (EC) is a corporation duly organized and registeredunder Philippine laws. Since 1950, it had been engaged in the manufacture ofroofing materials and pipe products. Its manufacturing operations wereconducted on eight parcels of land. The properties, located in MandaluyongCity, Metro Manila, were covered by Transfer Certificates of Title under thename of Far East Bank & Trust Company, as trustee.

Ninety (90%) percent of the shares of stocks of EC were owned byEteroutremer S.A. Corporation (ESAC), a corporation organized and registeredunder the laws of Belgium.

Jack Glanville, an Australian citizen, was the General Manager and Presidentof EC, while Claude Frederick Delsaux was the Regional Director for Asia ofESAC. Both had their offices in Belgium.

The management of ESAC grew concerned about the political situation in thePhilippines and wanted to stop its operations in the country. The Committee forAsia of ESAC instructed Michael Adams, a member of EC’s Board of Directors,to dispose of the eight parcels of land. Adams engaged the services ofrealtor/broker Lauro G. Marquez so that the properties could be offered for saleto prospective buyers. Glanville later showed the properties to Marquez.


Marquez thereafter offered the parcels of land and the improvements thereon toEduardo B. Litonjua, Jr. of the Litonjua & Company, Inc. In a letter, Marquezdeclared that he was authorized to sell the properties for P27,000,000.00 andthat the terms of the sale were subject to negotiation.

Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property toEduardo Litonjua, Jr., and his brother Antonio K. Litonjua. The Litonjua siblingsoffered to buy the property for P20,000,000.00 cash. Marquez apprisedGlanville of the Litonjua siblings’ offer and relayed the same to Delsaux inBelgium, but the latter did not respond.

On October 28, 1986, Glanville telexed Delsaux in Belgium, inquiring on hisposition/ counterproposal to the offer of the Litonjua siblings. It was only onFebruary 12, 1987 that Delsaux sent a telex to Glanville stating that, based onthe "Belgian/Swiss decision," the final offer was "US$1,000,000.00 andP2,500,000.00 to cover all existing obligations prior to final liquidation."

Marquez furnished Eduardo Litonjua, Jr. with a copy of the telex sent byDelsaux. Litonjua, Jr. accepted the counterproposal of Delsaux. Marquezconferred with Glanville, and in a Letter that the Litonjua siblings had acceptedthe counter-proposal of Delsaux. He also stated that the Litonjua siblings wouldconfirm full payment within 90 days after execution and preparation of alldocuments of sale, together with the necessary governmental clearances

The Litonjua brothers deposited the amount of US$1,000,000.00 with theSecurity Bank & Trust Company.

Marquez and the Litonjua brothers inquired from Glanville when the sale wouldbe implemented. In a telex dated April 22, 1987, Glanville informed Delsauxthat he had met with the buyer, which had given him the impression that "he isprepared to press for a satisfactory conclusion to the sale."

He also emphasized to Delsaux that the buyers were concerned because theywould incur expenses in bank commitment fees as a consequence of prolongedperiod of inaction.

Meanwhile, with the assumption of Corazon C. Aquino as President of theRepublic of the Philippines, the political situation in the Philippines hadimproved. Marquez received a telephone call from Glanville, advising that the

sale would no longer proceed. Glanville followed it up with a Letter dated May7, 1987, confirming that he had been instructed by his principal to informMarquez that "the decision has been taken at a Board Meeting not to sell theproperties on which Eternit Corporation is situated."

Delsaux himself later sent a letter dated May 22, 1987, confirming that theESAC Regional Office had decided not to proceed with the sale of the subjectland, to wit:

The Committee for Asia of our Group met recently (meeting every sixmonths) and examined the position as far as the Philippines are (sic)concerned. Considering [the] new political situation since the departureof MR. MARCOS and a certain stabilization in the Philippines, theCommittee has decided not to stop our operations in Manila. In fact,production has started again last week

When apprised of this development, the Litonjuas, through counsel, wrote EC,demanding payment for damages they had suffered on account of the abortedsale. EC, however, rejected their demand.

The Litonjuas then filed a complaint for specific performance and damagesagainst EC (now the Eterton Multi-Resources Corporation) and the Far EastBank & Trust Company, and ESAC

In their answer to the complaint, EC and ESAC alleged that the Board andstockholders of EC never approved any resolution to sell subject properties norauthorized Marquez to sell the same; and the telex dated October 28, 1986 ofJack Glanville was his own personal making which did not bind EC.

RTC: The trial court rendered judgment in favor of defendants and dismissedthe amended complaint.

The trial court declared that since the authority of the agents/realtors was not inwriting, the sale is void and not merely unenforceable, and as such, could nothave been ratified by the principal.

The Litonjuas appealed the decision to the CA, alleging that Marquez actedmerely as a broker or go-between and not as agent of the corporation; hence, itwas not necessary for him to be empowered as such by any written authority.


They further claimed that an agency by estoppel was created when thecorporation clothed Marquez with apparent authority to negotiate for the sale ofthe properties. However, since it was a bilateral contract to buy and sell, it wasequivalent to a perfected contract of sale, which the corporation was obliged toconsummate.

CA rendered judgment affirming the decision of the RTC

Petitioners assert that there was no need for a written authority from the Boardof Directors of EC for Marquez to validly act as broker/middleman/intermediary.As broker, Marquez was not an ordinary agent because his authority was of aspecial and limited character in most respects. His only job as a broker was tolook for a buyer and to bring together the parties to the transaction. He was notauthorized to sell the properties or to make a binding contract to respondentEC;

Petitioners posit that the testimonial and documentary evidence on recordamply shows that Glanville, who was the President and General Manager ofrespondent EC, and Delsaux, who was the Managing Director for ESAC Asia,had the necessary authority to sell the subject property or, at least, had beenallowed by respondent EC to hold themselves out in the public as having thepower to sell the subject properties.

Ruling:

The petition has no merit. While a corporation may appoint agents to negotiatefor the sale of its real properties, the final say will have to be with the board ofdirectors through its officers and agents as authorized by a board resolution orby its by-laws.

An unauthorized act of an officer of the corporation is not binding on it unlessthe latter ratifies the same expressly or impliedly by its board of directors. Anysale of real property of a corporation by a person purporting to be an agentthereof but without written authority from the corporation is null and void. Thedeclarations of the agent alone are generally insufficient to establish the fact orextent of his/her authority.

By the contract of agency, a person binds himself to render some service or todo something in representation on behalf of another, with the consent or

authority of the latter. Consent of both principal and agent is necessary tocreate an agency. The principal must intend that the agent shall act for him; theagent must intend to accept the authority and act on it, and the intention of theparties must find expression either in words or conduct between them.

An agency may be expressed or implied from the act of the principal, from hissilence or lack of action, or his failure to repudiate the agency knowing thatanother person is acting on his behalf without authority. Acceptance by theagent may be expressed, or implied from his acts which carry out the agency,or from his silence or inaction according to the circumstances.

Agency may be oral unless the law requires a specific form. However, to createor convey real rights over immovable property, a special power of attorney isnecessary. Thus, when a sale of a piece of land or any portion thereof isthrough an agent, the authority of the latter shall be in writing, otherwise, thesale shall be void.

In this case, the petitioners as plaintiffs below, failed to adduce in evidence anyresolution of the Board of Directors of respondent EC empowering Marquez,Glanville or Delsaux as its agents, to sell, let alone offer for sale, for and in itsbehalf, the eight parcels of land owned by respondent EC including theimprovements thereon. The bare fact that Delsaux may have been authorizedto sell to Ruperto Tan the shares of stock of respondent ESAC, on June 1,1997, cannot be used as basis for petitioners’ claim that he had likewise beenauthorized by respondent EC to sell the parcels of land.

While Glanville was the President and General Manager of respondent EC, andAdams and Delsaux were members of its Board of Directors, the three acted forand in behalf of respondent ESAC, and not as duly authorized agents ofrespondent EC; a board resolution evincing the grant of such authority isneeded to bind EC to any agreement regarding the sale of the subjectproperties. Such board resolution is not a mere formality but is a condition sinequa non to bind respondent EC.

Admittedly, respondent ESAC owned 90% of the shares of stocks ofrespondent EC; however, the mere fact that a corporation owns a majority ofthe shares of stocks of another, or even all of such shares of stocks, takenalone, will not justify their being treated as one corporation.


In an agent-principal relationship, the personality of the principal is extendedthrough the facility of the agent. In so doing, the agent, by legal fiction,becomes the principal, authorized to perform all acts which the latter wouldhave him do. Such a relationship can only be effected with the consent of theprincipal, which must not, in any way, be compelled by law or by any court.

The petitioners cannot feign ignorance of the absence of any regular and validauthority of respondent EC empowering Adams, Glanville or Delsaux to offerthe properties for sale and to sell the said properties to the petitioners. A persondealing with a known agent is not authorized, under any circumstances, blindlyto trust the agents; statements as to the extent of his powers; such person mustnot act negligently but must use reasonable diligence and prudence toascertain whether the agent acts within the scope of his authority. Personsdealing with an assumed agent are bound at their peril, and if they would holdthe principal liable, the burden of proof is upon them to prove it. In this case, thepetitioners failed to discharge their burden; hence, petitioners are not entitled todamages from respondent EC.

More so, Marquez had no authority to bind respondent EC to sell the subjectproperties. A real estate broker is one who negotiates the sale of realproperties. His business, generally speaking, is only to find a purchaser who iswilling to buy the land upon terms fixed by the owner. He has no authority tobind the principal by signing a contract of sale. Indeed, an authority to find apurchaser of real property does not include an authority to sell.

Equally barren of merit is petitioners’ contention that respondent EC isestopped to deny the existence of a principal-agency relationship between itand Glanville or Delsaux. For an agency by estoppel to exist, the following mustbe established:

(1) the principal manifested a representation of the agent’s authority orknowlingly allowed the agent to assume such authority;

(2) the third person, in good faith, relied upon such representation;

(3) relying upon such representation, such third person has changed hisposition to his detriment.

An agency by estoppel, which is similar to the doctrine of apparent authority,requires proof of reliance upon the representations, and that, in turn, needsproof that the representations predated the action taken in reliance. Such proofis lacking in this case

Neither may respondent EC be deemed to have ratified the transactionsbetween the petitioners and respondent ESAC, through Glanville, Delsaux andMarquez. The transactions and the various communications inter se were neversubmitted to the Board of Directors of respondent EC for ratification.

CASE NO. 12

LILLIAN N. MERCADO, CYNTHIA M. FEKARIS, and JULIAN MERCADO,JR., represented by their Attorney-In-Fact, ALFREDO M. PEREZ,Petitioners, vs.ALLIED BANKING CORPORATION, Respondent.G.R. No. 171460 July 24, 2007

Facts:Perla executed a Special Power of Attorney (SPA) in favor of herhusband, Julian D. Mercado (Julian) over several pieces of real propertyregistered under her name, authorizing the latter to perform the followingacts:1. To act in my behalf, to sell, alienate, mortgage, lease and deal otherwiseover the different parcels of land described hereinafter x xx2. To sign for and inmy behalf any act of strict dominion or ownership any sale, disposition,mortgage, lease or any other transactions including quit-claims, waiver andrelinquishment of rights x xx3. To exercise any or all acts of strict dominion orownership over the above-mentioned properties, rights and interest therein.

On the strength of the aforesaid SPA, Julian obtained a loan from therespondent. Still using the subject property as security, Julian obtained anadditional loan from the respondent.It appears, however, that there was no property identified in the SPA andregistered with the Registry of Deeds. What was identified in the SPA insteadwas the property different from the one used as security for loan.

Julian defaulted on the payment of his loan obligations. Thus,respondent initiated extra-judicial foreclosure proceedings over the subjectproperty which was subsequently sold at public auction wherein the respondentwas declared as the highest bidder.Petitioners initiated an action for theannulment of REM constituted over the subject property on the ground that thesame was not covered by the SPA and that the said SPA, at the time the loanobligations were contracted, no longer had force and effect since it waspreviously revoked by Perla. In the absence of authority to do so, the REM


constituted by Julian over the subject property was null and void; thus,petitioners likewise prayed that the subsequent extra-judicial foreclosureproceedings and the auction sale of the subject property be also nullified.

Issues: (1) Whether or not there was a valid mortgage constituted oversubject property.

(2) Whether or not there was a valid revocation of SPA.(3) Construction of powers of attorney.

Rulings:(1) In the case at bar, it was Julian who obtained the loanobligations from respondent which he secured with the mortgage of the subjectproperty. The property mortgaged was owned by his wife, Perla, considered athird party to the loan obligations between Julian and respondent. It was, thus,a situation recognized by the last paragraph of Article 2085 of the Civil Codethat third persons who are not parties to the principal obligation may secure thelatter by pledging or mortgaging their own property.There is no questiontherefore that Julian was vested with the power to mortgage the pieces ofproperty identified in the SPA, however, the subject property was not amongthose enumerated therein.Julian was not conferred by Perla with the authorityto mortgage the subject property under the terms of the SPA, the real estatemortgages Julian executed over the said property are therefore unenforceable.

(2) The said SPA was revoked by virtue of a public instrument executedby Perla. To address respondent’s assertion that the said revocation wasunenforceable against it as a third party to the SPA and as one who relied onthe same in good faith, the rule is that an agency is extinguished, amongothers, by its revocation (Article 1999, New Civil Code of the Philippines). Theprincipal may revoke the agency at will, and compel the agent to return thedocument evidencing the agency. Such revocation may be express or implied(Article 1920, supra).

(3) Rule of strict construction- where the terms of the contract are clearas to leave no room for interpretation, resort to circumstantial evidence toascertain the true intent of the parties, is not countenanced. The law is that ifthe terms of a contract are clear and leave no doubt upon the intention of thecontracting parties, the literal meaning of its stipulation shall control. The clearterms of the contract should never be the subject matter of interpretation.Equally relevant is the rule that a power of attorney must be strictly construedand pursued. The instrument will be held to grant only those powers which arespecified therein, and the agent may neither go beyond nor deviate from thepower of attorney.Where powers and duties are specified and defined in aninstrument, all such powers and duties are limited and are confined to thosewhich are specified and defined, and all other powers and duties are excluded.

Qualification of the rule- this is but in accord with the disinclination ofcourts to enlarge the authority granted beyond the powers expressly given and

those which incidentally flow or derive therefrom as being usual and reasonablynecessary and proper for the performance of such express powers.

CASE NO. 13

NELITA M. BACALING, represented by her attorney-in-fact JOSE JUANTONG, and JOSE JUAN TONG, in his personal capacity, petitioners, vs. FELOMINO MUYA, CRISPIN AMOR, WILFREDO JEREZA, RODOLFOLAZARTE and NEMESIO TONOCANTE, respondents .

Petition for Review of the of the Court of Appeals and of its Resolutionsreversing the Decisions and of the Office of the President.

SYLLABUS 1. REMEDIAL LAW; ACTIONS; "INTEREST," DEFINED; CASE AT BAR. —Under our rules of procedure, interest means material interest, that is, aninterest in issue and to be affected by the judgment, while a real party-in-interest is the party who would be benefited or injured by the judgment or theparty entitled to the avails of the suit. There should be no doubt that astransferee of the one hundred ten (110) sublots through a contract of sale andas the attorney-in-fact of Nelita Bacaling, former owner of the subject lots,under an irrevocable special power of attorney, petitioner Tong stands to bebenefited or injured by the judgment in the instant case as well as the ordersand decisions in the proceedings a quo. The deed of sale categorically statesthat petitioner Tong and his co-sellers have fully paid for the subject parcels ofland. The said payment has been duly received by Bacaling. Hence, it stands toreason that he has adequate and material interest to pursue the presentpetition to finality. 2. ID.; ID.; PARTY, NOT PERMITTED TO CHANGE HIS THEORY ON APPEAL.— It is a matter of law that when a party adopts a certain theory in the courtbelow, he will not be permitted to change his theory on appeal, for to permit himto do so would not only be unfair to the other party but it would also beoffensive to the basic rules of fair play, justice and due process. 3. CIVIL LAW; OBLIGATIONS AND CONTRACTS; AGENCY; PARTY CANNOTREVOKE AGENCY COUPLED WITH INTEREST; CASE AT BAR. —Substantively, we rule that Bacaling cannot revoke at her whim and pleasurethe irrevocable special power of attorney which she had duly executed in favorof petitioner Jose Juan Tong and duly acknowledged before a notary public.The agency, to stress, is one coupled with interest which is explicitly irrevocablesince the deed of agency was prepared and signed and/or accepted bypetitioner Tong and Bacaling with a view to completing the performance of thecontract of sale of the one hundred ten (110) sub-lots. It is for this reason thatthe mandate of the agency constituted Tong as the real party-in-interest toremove all clouds on the title of Bacaling and that, after all these cases areresolved, to use the irrevocable special power of attorney to ultimately "causeand effect the transfer of the aforesaid lots in the name of the vendees [Tong


with two (2) other buyers] and execute and deliver document/s or instrument ofwhatever nature necessary to accomplish the foregoes acts and deeds." Thefiduciary relationship inherent in ordinary contracts of agency is replaced bymaterial consideration which in the type of agency herein established bars theremoval or dismissal of petitioner Tong as Bacaling's attorney-in-fact on theground of alleged loss of trust and confidence. 4. ID.; ID.; ID.; FRAUD; MUST BE DULY PROVED TO SUPPORTREVOCATION; CASE AT BAR. — While Bacaling alleges fraud in theperformance of the contract of agency to justify its revocation, it is significant tonote that allegations are not proof, and that proof requires the intervention ofthe courts where both petitioners Tong and Bacaling are heard. Statedotherwise, Bacaling cannot vest in herself just like in ordinary contracts theunilateral authority of determining the existence and gravity of grounds to justifythe rescission of the irrevocable special power of attorney. The requirement of ajudicial process all the more assumes significance in light of the dismissal withprejudice, hence, res judicata, of Bacaling's complaint to annul the contract ofsale which in turn gave rise to the irrevocable special power of attorney. It isclear that prima facie there are more than sufficient reasons to deny therevocation of the said special power of attorney which is coupled with interest.Inasmuch as no judgment has set aside the agency relationship betweenBacaling and Tong, we rule that petitioner Tong maintains material interest toprosecute the instant petition with or without the desired cooperation ofBacaling. The requirement of a judicial process all the more assumessignificance in light of the dismissal with prejudice, hence, res judicata, ofBacaling's complaint to annul the contract of sale which in turn gave rise to theirrevocable special power of attorney. It is clear that prima facie there are morethan sufficient reasons to deny the revocation of the said special power ofattorney which is coupled with interest. Inasmuch as no judgment has set asidethe agency relationship between Bacaling and Tong, we rule that petitionerTong maintains material interest to prosecute the instant petition with or withoutthe desired cooperation of Bacaling. 5. LABOR AND SOCIAL LEGISLATION; LABOR LAWS; AGRICULTURALLEASEHOLD RELATIONSHIP; REQUISITES. — The requisites in order tohave a valid agricultural leasehold relationship are: (1) The parties are thelandowner and the tenant or agricultural lessee; (2) The subject matter of therelationship is agricultural land; (3) There is consent between the parties to therelationship; (4) the purpose of the relationship is to bring about agriculturalproduction; (5) There is personal cultivation on the part of the tenant oragricultural lessee; and (6) The harvest is shared between the landowner andthe tenant or agricultural lessee. 6. CIVIL LAW; OBLIGATIONS AND CONTRACTS; REAL ESTATEMORTGAGE; JUDICIAL FORECLOSURE; NO RIGHT OF REDEMPTIONAFTER CONFIRMATION OF PUBLIC AUCTION. — There was no longer anyright of redemption in a judicial foreclosure proceeding after the confirmation ofthe public auction. Only foreclosures of mortgages in favor of bankinginstitutions and those made extrajudicially are subject to legal redemption.

Since GSIS is not a banking institution and the procedure of the foreclosure isnot extrajudicial in nature, no right of redemption exists after the judicialconfirmation of the public auction sale of the said lots. 7. REMEDIAL LAW; EVIDENCE; CERTIFICATE OF LAND TRANSFER, NOTABSOLUTE EVIDENCE OF OWNERSHIP. — It is well settled that thecertificates of land transfer are not absolute evidence of ownership of thesubject lots and consequently do not bar the finding that their issuance is voidfrom inception since they cover residential lands contrary to the mandate ofP.D. No. 27. It follows from the fact of nullity of the certificates of land transfer inrespondents' names that the respondents are not entitled to occupy andpossess the one hundred ten (110) sublots or portions thereof without theconsent of the owner, herein petitioner Tong.

FACTS:Petitioner Nelita M. Bacaling and her spouse Ramon Bacaling were

the owners of three (3) parcels of land in Iloilo City. In 1955 the landholding wassubdivided into one hundred ten (110) sub-lots covered and was processed andapproved as "residential" or "subdivision" by the National Urban PlanningCommission (NUPC). 7 On May 24, 1955 the Bureau of Lands approved thecorresponding subdivision plan for purposes of developing the said propertyinto a low-cost residential community which the spouses referred to as theBacaling-Moreno Subdivision. In 1957, a real estate was granted to thespouses Bacaling by the Government Service Insurance System (GSIS) for thedevelopment of the subdivision secured by a real estate mortgage over theirparcels of land including the 110 sub-lots. The Bacalings failed to pay and themortgage was foreclosed by the GSIS. Nelita Bacaling in 1989 was able torestore to herself ownership of the sub-lots. According to the findings of theOffice of the President, in 1972 and thereafter, respondents Felomino Muya,Crispin Amor, Wilfredo Jereza, Rodolfo Lazarte and Nemesio Tonocanteclandestinely entered and occupied the entire one hundred ten (110) sub-lotsand sowed the lots as if the same were their own, and altered the roads,drainage, boundaries and monuments established thereon. Respondents, onthe other hand, claim that in 1964 they were legally instituted by Bacaling'sadministrator/overseer as tenant-tillers of the subject parcels of land on sharingbasis. In 1974, their relationship with the landowner was changed to one ofleasehold. They religiously delivered their rental payments to Bacaling asagricultural lessor. In 1980, they secured certificates of land transfer in theirnames for the 110 sub-lots. They have made various payments to the LandBank of the Philippines as amortizing owners-cultivators of their respectivetillage.

In 1977, the City Council of Iloilo enacted Zoning Ordinance No. 212declaring the one hundred ten (110) sub-lots as "residential" and"nonagricultural,"which was consistent with the conversion effected in 1955 by the NUPC andthe Bureau of Lands. In 1978, Nelita Bacaling was able to register the subjectproperty as the Bacaling-Moreno Subdivision with the National Housing


Authority and to obtain therefrom a license to sell the subject 110 sub-lotscomprising the said subdivision to consummate the original and abiding designto develop a low-cost residential community. In August 21, 1990, petitioner JoseJuan Tong, together with Vicente Juan and Victoria Siady, bought from NelitaBacaling the subject 110 sub- lots. The said sale was effected after Bacalinghas repurchased the subject property from the GSIS. To secure performance ofthe contract of absolute sale and facilitate the transfer of title of the lots to JoseJuan Tong, Bacaling appointed him in 1992 as her attorney-in-fact, under anirrevocable special power of attorney.

Following the sale, petitioner Tong (together with Bacaling) filed anaction against respondents for allegedly entering and occupying the lots.Respondents in their answer alleged that they were instituted as tenant-tillersbefore the property was subdivided into 110 sub-lots and that they have in theirpossession certificates of land transfer. The DAR dismissed the petition on theground that there had been no legitimate conversion of the classification ofthe 110 sub-lots from agricultural to residential prior to October 21, 1972when Operation Land Transfer under P.D. No. 72 took effect. Bacaling andTong appealed to the DAR Central Office but their appeal was similarlyrejected. Bacaling and Tong appealed to the Office of the President (OP)which reversed them in toto. The order of the Regional Director, DAR RegionVI, as well as the orders of the DAR Secretary were REVERSED AND SETASIDE and subject landholdings declared exempt from coverage of theCARL. The Certificates of Land Transfer (CLTs) issued to the appellees arehereby cancelled. Respondents elevated the OP Decision to the Court ofAppeals on a petition for review. During the pendency of the appeal with theCourt of Appeals, Bacaling revoked the special power of attorney and admittedthe status of respondents as her tenants. The appellate court, without ruling onthe lack of material interest in the case, reversed the OP Decision andvalidated the certificates of land transfer of respondents. Motion for itsreconsideration was denied. Hence this petition for review on certiorari. After 10years, petitioner Nelita Bacaling resurrected her manifestation with the Court ofAppeals and moved to withdraw/dismiss the present petition on the ground thatthe irrevocable power of attorney in favor of petitioner Jose Juan Tong hadbeen nullified by her, that Tong lacked the authority to appear before thisCourt and that respondents were tenants of the one hundred ten (110) sub-lotswhich were allegedly agricultural and not residential pieces of realty.

ISSUE:(1) Does petitioner Tong have the requisite interest to litigate this petition forreview on certiorari? ; (2) Are the respondents agricultural lessees? ; and (3) Are the 110 sub-lots classified for residential use by the NUPC and theBureau of Lands prior to October 21, 1972 covered by the Operation LandTransfer under P.D. No. 72?

HELD:

Yes, there should be no doubt that as transferee through a contract ofsale and as the attorney-in-fact of Nelita Bacaling under an irrevocable specialpower of attorney, petitioner Tong stands to be benefited or injured by thejudgment in the instant case as well as the orders and decisions in theproceedings a quo. The deed of sale states that petitioner Tong and his co-sellers have fully paid for the subject parcels of land. The said payment hasbeen duly received by Bacaling. When a party adopts a certain theory in thecourt below, he will not be permitted to change his theory on appeal, for topermit him to do so would not only be unfair to the other party but it would alsobe offensive to the basic rules of fair play, justice and due process. Bacalingcannot revoke at will the irrevocable special power of attorney which she hadduly executed in favor of petitioner Jose Juan Tong and duly acknowledgedbefore a notary public. The agency is one coupled with interest which isexplicitly irrevocable since the deed of agency was prepared and signedand/or accepted by petitioner Tong and Bacaling with a view to completing theperformance of the contract of sale of the 110 sub-lots. It is for this reason thatthe mandate of the agency constituted Tong as the real party-in-interest toremove all clouds on the title of Bacaling and to effect the transfer of theaforesaid lots in the name of the vendees. The fiduciary relationship inherent inordinary contracts of agency is replaced by material consideration which in thetype of agency herein established bars the removal or dismissal of petitionerTong as Bacaling's attorney-in-fact on the ground of alleged fraud in theperformance of the contract of agency. Bacaling cannot vest in herself just likein ordinary contracts the unilateral authority of determining the existence andgravity of grounds to justify the rescission of the irrevocable special power ofattorney. The reason is that it is one coupled with an interest, the agency havingbeen created for the mutual interest of the agent and the principal.

No. It lacks the requisites in order to have a valid agricultural leaseholdrelationship. GSIS, not Bacaling, was the owner of the subject properties from1961 up to 1989 as a result of the foreclosure and confirmation of the sale ofthe subject properties. The agreement to till the land was not with GSIS, thereal landowner. There is no showing that GSIS consented to such tenancyrelationship nor is there proof that GSIS received a share in the harvest of thetenants. Consequently, the respondents cannot claim security of tenure andother rights accorded by our agrarian laws considering that they have not beenvalidly instituted as agricultural lessees of the subject parcels of land. And fromthe time Bacaling recovered the subject properties from GSIS up to the time theformer changed her legal position in the instant case, Bacaling has consistentlydisclaimed respondents as her alleged tenants.

Yes. The sub-lots have been officially classified as residential since1955. The classification began when the NUPC and the Bureau of Landsapproved the subdivision of the original three (3) parcels of land into 110 sub-lots each covered with transfer certificates of title. The City Council of Iloilo alsorecognized the residential classification of the same 110 sub-lots when itpassed the Land Use Plan and Zoning Ordinance. In 1990, Bacaling sold thesame parcels of land to petitioner Tong who bought the property for residential


and not agricultural purposes. Clearly, both intention and overt actions show theclassification of the 110 sub-lots for residential use. One cannot imagine NelitaBacaling borrowing the substantial amount of P600,000.00 from the GSIS andspending P250,000.00 for the purpose of developing and subdividing theoriginal 3 parcels of land into 110 homelots, with individual transfer certificatesof title ready and available for sale, if her purported desire were to keep thelandholding for agricultural purposes. One cannot also deny the consistentofficial government action which decreed the said 110 sub-lots for severaltimes beginning in 1955 and in accordance with relevant laws and regulations,the said landholding was reserved as a residential subdivision.By virtue of the official classification made by NUPC and the othercircumstances convincingly proved herein, the only fair and legally acceptabledecision in the instant case would be to declare, as we now indeed rule, thatthe 110 sub-lots are truly residential in character as well as in purpose and arethus excluded from the coverage of P.D. No. 27.

The Certificates of Land Transfer (CLT) issued in respondents' namesare not valid. The respondents cannot rely on said CLTS as proof of security oftenure. It is well settled that the certificates of land transfer are not absoluteevidence of ownership of the subject lots and consequently do not bar thefinding that their issuance is void from inception since they cover residentiallands contrary to the mandate of P.D. No. 27. It follows from the fact of nullity ofthe certificates of land transfer in respondents' names that the respondents arenot entitled to occupy and possess the 110 sub-lots or portions thereof withoutthe consent of the owner, herein petitioner Tong.

Petition for Review is GRANTED. 1. The certificates of land transfer over the 110 sub-lots located in the name ofrespondents and/or their successors-in-interest are hereby DECLARED VOIDAB INITIO. The 110 sub-lots are declared outside the coverage and operationof P.D. No. 27 and other land reform laws.2. The CA Decision and its Resolution denying petitioners' Motion forReconsideration are REVERSED AND SET ASIDE.3. The Decision of the Office of the President are REINSTATED with themodification in that the respondents are not entitled to disturbancecompensation; and4. Respondents Felomino Muya, Crispin Amor, Wilfredo Jereza, RodolfoLazarte and Nemesio Tonocante together with their assigns and successors-in-interest are ordered to vacate and surrender peacefully the possession of the110 sub-lots to petitioner Jose Juan Tong within 30 days from notice of thisDecision.

CASE NO. 14

[G.R. No. 112872. April 19, 2001]

THE INTESTATE ESTATE OF ALEXANDER T. TY, represented by theAdministratrix, SYLVIA S. TY, petitioner, vs. COURT OF APPEALS, HON.ILDEFONSO E. GASCON, and ALEJANDRO B. TY, respondents.

Facts:

Petitioner Sylvia S. Ty was married to Alexander T. Ty, Son of privaterespondent Alejandro B. Ty.

Alexander died of leukemia and was survived by his wife, petitioner Sylvia,and only child, Krizia Katrina. In the settlement of his estate, petitioner wasappointed administratrix of her late husbands intestate estate.

Petitioner filed a motion for leave to sell or mortgage estate property inorder to generate funds for the payment of deficiency estate taxes in the sum ofP4,714,560.00.

Private respondent filed two complaints for the recovery of the propertiesthat were included in the inventory in the RTC of Quezon City and for thedeclaration of the nullity of the deed of absolute sale of the shares of stock heexecuted in favor of the deceased. A Civil Case was also filed for the recoveryof the pieces of property that were placed in the name of deceased which weresought to be sold out, mortgaged, or disposed of by petitioner.

Private respondent claimed that the properties were acquired through hismoney, without any cause or consideration from deceased Alexander.

Motions to dismiss were filed by petitioner. Both motions alleged lack ofjurisdiction for the trial court, claiming that the cases involved intra-corporatedisputes cognizable by the (SEC). Another ground is that there is an expresstrust between private respondent Alejandro and his deceased son Alexander.

RTC denied the motion. CA also dismissed the petitions for certiorari forlack of merit.


Issue: WON RTC has jurisdiction to try the case.

WON an express trust exist between Alejandro and Alexander.

Ruling:

First Issue: Yes. It should also be noted that under the newly enacted SecuritiesRegulation Code (Republic Act No. 8799), this issue is now moot and academicbecause whether or not the issue is intra-corporate, it is the regional trial courtand no longer the SEC that takes cognizance of the controversy.

Second Issue: No. Private respondent contends that the pieces of propertywere transferred in the name of the deceased Alexander for the purpose oftaking care of the property for him and his siblings. Such transfer having beeneffected without cause of consideration, a resulting trust was created.

If a trust was then created, it was an implied, not an express trust, whichmay be proven by oral evidence and it matters not whether property is real orpersonal.

Express trust are those that are created by the direct and positive acts ofthe parties, by some writing or deed or will or by words evidencing an intentionto create a trust. On the other hand, implied trusts are those which, withoutbeing expressed, are deducible from the nature of the transaction by operationof law as matters of equity, independently of the particular intention of theparties.

Petitioners assertion that private respondents action is barred by thestatute of limitations is erroneous. The statue of limitations cannot apply in thiscase.Resulting trusts generally do not prescribe except when the trusteerepudiates the trust. Further, an action to reconvey will not prescribe so long asthe property stands in the name of the trustee. To allow prescription would be topermit a trustee to acquire title against his principal and the true owner.

Petition for Certiorari is dismissed.

CASE NO. 15Topic: Perpetual TrustOrendain v. Trusteeship of Dona Margarita Rodriguez (G.R. No. 168660-June 30, 2009)Petitioners: Hilarion Jr and Enrico Orendain, represented by Fe Orendain(HEIRS OF HILARION ORENDAIN)

Respondent: Trusteeship of Dona Margarita Rodriguez

Case: [Originally] Petition for certiorari (Rule 65) [But was later on change bySC to Petition for Review on Certiorari under Rule 45, stating that theoriginal motion was erroneously labeled] assailing the Order of the RTC Manilawhich denied petitioner’s Motion to Dissolve the Trusteeship of the Estate ofDoña Margarita Rodriguez.

FACTS:

On July 19, 1960, the decedent, Doña Margarita Rodriguez, died in Manila,leaving a last will and testament. In September, the will was admitted to probateand in 1962, CFI Manila approved the project of partition presented by theexecutor of the will. There were no compulsory heirs so it was free to disposethe properties w/o regard to legitimes. Some testamentary dispositionscontemplated the creation of a trust to manage the income from her propertiesfor distribution to beneficiaries specified in the will, to wit:

1. Clause 2 instructed the creation of trust;

2. Clause 3 instructed that the remaining income from specified properties,after the necessary deductions for expenses, including the estate tax, bedeposited in a fund with a bank;

3. Clause 10 enumerated the properties to be placed in trust for perpetualadministration (pangasiwaan sa habang panahon);

4. Clauses 11 and 12 directed how the income from the properties ought tobe divided among, and distributed to the different beneficiaries; and


5. Clause 24 instructed the administrators to provide medical support tocertain beneficiaries, to be deducted from the fund deposits in the bankmentioned in Clauses 2 and 3.

Citing the case of Rodriguez, etc., et al. v. CA, et al., [with regard to Clause 10]that the clause on perpetual administration is valid only insofar as the first 20year period is concerned so as not to violate Art.870 of the NCC. TheRodriguez case also mentioned that the will of the testatrix is the law, and mustbe given effect. It’s interpretation must be so as to give effect and makeoperative the disposition in the will.

However, 4 decades have passed hence petitioners Orendain now assail thatthe ruling in the Rodriguez case is now contrary to the Civil Code provision 870.Hence they move to dissolve the decedent’s estate.

RTC Decision:

Art.870 is not applicable in this present motion to dissolve. While it is true thatthe clause 10 shall be void because of the lapse of 20 years, it cannot causethe invalidity of clause 12, 13 and 24. What is declared void by 870 is thetestamentary disposition of the prohibiting alienation after the twenty yearperiod. Hence, the trustees may dispose of the properties left by the testatrix inorder to carry out the latter’s testamentary disposition (in other clauses).

As to the question as to whether a trust can be perpetual, the same findssupport in Article 1013[,] paragraph 4 of the Civil Code, which provides that "theCourt, at the instance of an interested party or its motion, may order theestablishment of a permanent trust so that only the income from the propertyshall be used." In the present case, the testatrix directed that all the twenty five(25) pieces of property listed in the tenth clause should be placed under thetrusteeship and should be perpetually administered by the trustees and acertain percentage of the income from the trust estate should be deposited in abank and should be devoted for the purposes specifically indicated in theclauses 12, 13 and 24.

ISSUES:

WON trusteeship of the properties can be dissolved using Arts. 867 and 870

WON RTC ruled correctly in stating that the Civil Code provisions are notapplicable in this case

WON Art 1013 (4) was properly applied

HELD:

The petition is impressed with merit.

Clause 10 created a perpetual trust for the administration of her properties andthe income accruing therefrom, for specified beneficiaries. Some propertieswere listed and in fact, decedent forbade alienation or mortgage of theproperties, but only sought to bequeath the income derived therefrom to varioussets of beneficiaries.

In the previously quoted case of Rodriguez, the court only said that the wishesof the testatrix must be upheld because the 20 year period has not yet lapsed.BUT IN THIS CASE, the period has undoubtedly lapsed. Even with thislapse of period, RTC still ruled otherwise.

Plainly, the RTC was mistaken in denying petitioners’ motion to dissolve andordering the disposition of the properties in Clause 10 according to thetestatrix’s wishes. As regards these properties, intestacy should apply as thedecedent did not institute an heir therefor. Article 782, in relation to paragraph2, Article 960 of the Civil Code, provides:

Art. 782. An heir is a person called to the succession either by the provision of awill or by operation of law.

Art. 960. Legal or intestate succession takes place:

(2) When the will does not institute an heir to, or dispose of all the propertybelonging to the testator. In such case, legal succession shall take place onlywith respect to the property of which the testator has not disposed;

We find as erroneous the RTC’s holding that paragraph 4, Article 1013 of thesame code specifically allows a perpetual trust, because this provision of law isinapplicable.


- Under this article, the allowance for a permanent trust, approved by acourt of law, covers property inherited by the State by virtue of intestatesuccession. The article cannot be applied to dispose of hereindecedent’s properties.

RULING: Petition granted, RTC decision set aside.

Remanded to lower court to determine the ff:

1. The properties listed in Clause 10 of the will, constituting theperpetual trust, which are still within reach and have not been disposedof as yet; and

2. The intestate heirs of the decedent, with the nearest relative of thedeceased entitled to inherit the remaining properties.

Note: Even with the dissolution of the trust, the petitioners are not necessarilydeclared as intestate heirs of decedent. Remanding the case to the RTC, trialcourt must make the determination of heirship and all others claiming to beheirs must prove their status.

CASE NO. 16

PAZ GARCIA vda. de MAPA, * SEGUNDO MAPA, PRISCILLA M. MONZON,TERESA MAPA, IGNACIO SALAZAR AND JOSE SALAZAR, petitioners, vs.COURT OF APPEALS, LUIS HIDROSOLLO and TEODORO HIDROSOLLO,in their own behalf and as Joint Administrators of the testate estate ofLudovico Hidrosollo, and VICTORIA ** HIDROSOLLO, CORAZONHIDROSOLLO, ROSARIO HIDROSOLLO and MAGDALENA HIDROSOLLO,respondents

Facts:

- The deceased Concepcion Mapa de Hidrosollo, in her last will andtestament dated June 2, 1951 and admitted to probate in SpecialProceedings No. 46015, instituted Ludovico Hidrosollo as universal heirto the residue of her estate with the obligation as trustee to hold thesame in trust for petitioners herein who are nephews and nieces of the

deceased Concepcion Mapa de Hidrosollo and for the respondentswho are nephews and nieces of Ludovico Hidrosollo;

- That Ludovico, however, died without fulfilling the obligation so that theestate of Concepcion formed part of the estate of Ludovico.

- Petitioners Paz Garcia Vda. de Mapa, et al. instituted Civil CaseNo. 59566 before the then Court of First Instance of Manila to recoverfrom the estate of the late Ludovico Hidrosollo the properties leftby the late Concepcion Mapa de Hidrosollo.

- Respondents, in their Answer, denied the existence of a trust andalleged that Ludovico Hidrosollo, being the surviving spouse of thedeceased Concepcion Mapa de Hidrosollo became the latter'suniversal heir when she died without descendants or ascendants; thatas such universal heir, Ludovico stepped into the rights, title and claimsof the deceased Concepcion Mapa de Hidrosollo, so that thecontroverted properties became part of his own estate subject ofsettlement in Special Proceedings No. 52229.

- The lower court ruled that a trust was created over the properties ofpetitioners' claim. Thus, the lower court ordered respondents orwhoever of the rest of therein defendants had disposition of theproperties to reconvey the same in favor of petitioners, to render anaccounting of the income of said properties and to deliver to petitionersthe net proceeds of such income.

- The court of appeals reversed the decision of the lower court andruled instead that no trust nor fideicommissary substitution was createdin Concepcion Mapa de Hidrosollo's Will and that petitioners' claim wasbarred by a final judgment, i.e., the order denying their motion tointervene in Special Proceedings No. 52229 from which no appeal wastaken.

ISSUE: WON a Trust is created.

HELD:Yes, a careful perusal and scrutiny of the pertinent provisions ofConcepcion Mapa de Hidrosollo's Will reveal that she intended to create atrust in favor of both petitioners and private respondents. Thus, underparagraph 8 of the Will, Ludovico Hidrosollo was instituted as sole anduniversal heir to the rest of the properties not covered by the legacies in thepreceding paragraphs. Under paragraph 9, however, said LudovicoHidrosollo was charged (encargo) with the obligation to deliver the rest ofthe estate in equal parts to the Mapa, Salazar and Hidrosollo nephews andnieces.

Art. 1444, The Civil Code of the Philippines provides that “No particularwords are required for the creation of an express trust, it being sufficientthat a trust is clearly intended”


In the instant case although the word "trust" itself does not appear in theWill, the testatrix's intent to create one is nonetheless clearly demonstratedby the stipulations in her Will. In designating her husband LudovicoHidrosollo as universal and sole heir with the obligation to deliver theproperties to petitioners and private respondents, she intended that thelegal title should vest in him, and in significantly referring to petitioners andprivate respondents as "beneficiarios," she intended that the beneficial orequitable interest to these properties should repose in them. To our mind,these designations, coupled with the other provisions for co-ownership andjoint administration of the properties, as well as the other conditionsimposed by the testatrix effectively created a trust in favor of the partiesover the properties adverted to in the Will.

CASE NO. 17

[G.R. No. 181844. September 29, 2010.]

SPS. FELIPE & JOSEFA PARINGIT, petitioner, vs. MARCIANA P. BAJIT,ADOLIO PARINGIT & ROSARIO PARINGIT ORDOÑO, respondents.

This case is about the existence of an implied trust in a transaction where aproperty was bought by one sibling supposedly for the benefit of all. The othersiblings now want to recover their share in the property by reimbursing theirbrother for their share in the purchase price.

FACTS

Spouses Julian&Aurelia Paringit leased a lot on Norma Street, Sampaloc,Manila from Terocel Realty, Inc. They built their home there & raised fivechildren;Florencio, Felipe, Marciana, Adolio, &Rosario. Aurelia passed away.

1984 - Terocel Realty offered to sell the lot to Julian for their long occupancy,but he did not have enough money at the time. Julian sought help from hischildren but only Felipe & wife Josefa had the financial resources at thattime. Julian executed a deed of assignment of leasehold right in favor of Felipe& Josefa that would enable them to acquire the lot. The latter bought the samefrom Terocel Realty to be paid in installments. Thenafter the realty companyexecuted a Deed of Absolute Sale in their favor & turned over the title to them.

1985 - Due to issues regarding the ownership of the lot, Julian executed anaffidavit clarifying the nature of Felipe & Josefa's purchase of the lot. Claiming

that it was bought for the benefit of all his children. Expressing theirconcurrence with his affidavit, Marciana, Rosario, & Adolio (Marciana, et al.)signed the same. Josefa also signed the affidavit for Felipe who was inSaudi. Florencio did not sign.

1987 -Felipe & Josefa registered their purchase of the lot,& a TCTwas issued intheir names.Despite this, the spouses moved to another house on the samestreet.Marciana, et al. continued to freely occupy the lot with their families. Thiswas the situation when Julian died in 1994. HcaDTE

1995 -Felipe & Josefa sent a demand letter to Marciana, et al., asking them topay rentals from March 1990 to December 1995.Marciana, et al., refused to payor reply to the letter, believing that they had the right to occupy the house & lot,it being their inheritance. Felipe & Josefa filed an ejectment suit against themwhich prospered, resulting in the ejectment of Marciana, et al. Shortly after,Felipe & Josefa moved into the same.

Marciana, et al., filed the present action against Felipe & Josefa for annulmentof title & reconveyance of property before the RTC.Felipe denied knowledge ofthe agreement among the siblings that the property would devolve to themall.Josefaclaimed that she signed the affidavit only because Marciana, etal., were going to get mad at her had she refused, and that she signed thedocument only to prove having received it.

Marciana, et al., insists that the agreement was that Felipe & Josefa wouldacquire the lot for the benefit of all the siblings. They even tried to reimburse thespouses for their shares in the lot's price.And denied pressuring Josefa intosigning the document in question.

2004 - RTC rendered a decision, finding the evidence of Marciana, etal., insufficient to prove by preponderance of evidence that Felipe & Josefabought the subject lot for all of the siblings.

2007 - CA reversed the decision of the RTC & ordering Felipe & Josefa toreconvey to Marciana, et al., their proportionate share in the lot uponreimbursement of what the spouses paid to acquire it plus legal interest.

ISSUE/S

1.WoN the CA erred in finding that Felipe & Josefa purchased the subject lotunder an implied trust for the benefit of all the children of Julian

2.WoN the CA erred in failing to hold that Marciana, et al.'s right of action wasbarred by prescription or laches.


HELD

Implied trust under Article 1450 presupposes a situation where aperson, using his own funds, buys property on behalf of another, who in themeantime may not have the funds to purchase it. Title to the property is forthe time being placed in the name of the trustee, the person who pays forit, until he is reimbursed by the beneficiary, the person for whom the trusteebought the l&. It is only after the beneficiary reimburses the trustee of thepurchase price that the former cancompel conveyance of the propertyfrom the latter.

The circumstances of this case areactually what implied trust is about.Although no express agreementcovered Felipe &Josefa's purchase ofthe lot for the siblings & their father, itcame about by operation of law & isprotected by it. The nature of thetransaction established the implied trust& this in turn gave rise to the rights &obligations provided by law. Impliedtrust is a rule of equity, independentof the particular intention of theparties.

Evidence shows that Felipe &Josefabought the lot for the benefit of Julian &his children, rather than for themselves.Thus:

1 st. When Terocel Realty granted themthe right to acquire the lots, that righttechnically belonged to Julian & all hischildren. If Julian really intended to sellthe entire house & assign the right toacquire the lot to Felipe & Josefa, hewould have arranged for Felipe's othersiblings to give their conformity as co-owners to such sale. And if Felipe &Josefa intended to buy the lot forthemselves, they would have, knowingthat Felipe's siblings co-owned thesame.

2 nd. Julian said in his affidavit that Felipe & Josefa bought the lot from TerocelRealty on his behalf & on behalf of his other children. Felipe & Josefa advancedthe payment because Julian & his other children did not then have the money

needed to meet the realty company's deadline for the purchase. Julian addedthat his other children were to reimburse Felipe for the money he advanced forthem.

Felipe, acting through his wife, countersigned Julian's affidavit in the mannerthe other siblings did. The document expressly acknowledged the parties'intention to establish an implied trust between them. Josefa claims that shesigned the document only to show that she received a copy of it. But her

signature did not indicate that fact. Shesigned the document s.

3 rd. If Felipe & Josefa really believe theirallegations, then their moving out of thehouse in 1988 & letting Marciana, etal., continue to occupy the house doesnot make sense. Unless the lot wasactually acquired only in trust for Julian &all the children. TCIDSa

4 th. Felipe & Josefa demanded rent only ayear after Julian's death. This shows thatfor over 10 years, Felipe & Josefarespected the right of the siblings toreside on the property. This isincompatible with their claim that theybought the house & lot for themselvesback in 1984.

In the matter concerning the prescriptionof the action to recover their portions ofthe house & lot, an implied trustprescribes within 10 years from the timethe right of action accrues. A right ofaction implies the existence of a causeof action & a cause of action has threeelements: a) the existence of a right inplaintiff's favor; b) defendant's obligationto respect such right;&c) defendant's actor omission that violates the plaintiff'sright. Only when the last element occursor takes place can it be said in law that acause of action has arisen.

In an implied trust, the beneficiary's cause of action arises when thetrustee repudiates the trust, not when the trust was created. Theregistration of the lot in their names could not be said to have repudiated the


Petitioner’s Complaint: Respondent’s Answer:

1. She bought the parcel ofland in 1939 fromCrisogono Limpiado,although the transactionwas not reduced intowriting. Thereafter, sheimmediately tookpossession of the property.

2. When she and her husbandleft for Mindanao in 1948,she entrusted the saidland to her father, CrispuloRojas, who tookpossession of, andcultivated, the property.

3. In 1980, she found out thatthe respondent, herstepmother, was inpossession of the propertyand was cultivating thesame.

4. She also discovered thatthe tax declaration overthe property was alreadyin the name of CrispuloRojas.

1. Contrary to the petitioner'sclaim, it was her husband,Crispulo Rojas, whobought the property fromCrisogono Limpiado in1948, which accounts forthe tax declaration being inCrispulo's name. From thenon, until his death in 1978,Crispulo possessed andcultivated the property.

2. Upon his death, theproperty was included inhis estate, which wasadministered by a specialadministrator.

3. The petitioner, as heir, evenreceived her share in theproduce of the estate.

4. She also argued that the factthat petitioner filed thecomplaint only in 1997means that she had alreadyabandoned her right overthe property.

implied trust by that registration. Their purchase of the land& registration of itstitle in their names are not incompatible with implied trust. It was understoodthat they did this for the benefit of Julian & all the children.

Assuming arguendo that Felipe & Josefa's registration of the lot in their namesconstituted a hostile act or a violation of the implied trust, Marciana, et al., had10 years or until January of 1997 within which to bring their action. They filedsuch action in July 1996 well within the period allowed them.

Felipe & Josefa also claim that Marciana, et al.'s action was barred by lacheshas no basis. Laches is defined as the failure or neglect, for an unreasonable &unexplained length of time, to do that which, by exercising due diligence couldor should have been done earlier.Marciana, et al., had no reason to file anearlier suit against Felipe & Josefa since the latter had not bothered themdespite their purchase of the lot in their names. Only about 12 years later whenthey wrote their demand letter did the spouses take an adverse attitude againstMarciana, et al. The latter filed their action to annul Felipe & Josefa's title &have the same transferred to their names not too long later on July 24, 1996.

CASE NO. 18Cañezo v. Rojas, G.R. No. 148788, [November 23, 2007], 563 PHIL 551-572Principle/s: Trusts, Laches, Estoppel en pais

FACTS:

The subject property is an unregistered land with an area of 4,169 squaremeters, situated at Higatangan, Naval, Biliran.

January 29, 1997- Petitioner Soledad Cañezo filed a Complaint for the recoveryof real property plus damages with the MTC of Naval, Biliran, against herfather's second wife, respondent Concepcion Rojas.

July 3, 1998 - the MTC rendered a Decision in favor of the petitioner,making her the real and lawful owner of the land.

MTC Findings:

1. Gave credence to the testimony of the petitioners' two witnessesattesting to the fact that Crisogono Limpiado sold the property to thepetitioner in 1939.

2. Found no evidence to show that Crispulo Rojas bought the property from

Crisogono Limpiado in 1948.3. Held that the 1948 tax declaration in Crispulo's name had little

significance on respondent's claim, considering that in 1948, the"country was then rehabilitating itself from the ravages of the SecondWorld War" and "the government was more interested in the increase intax collection than the observance of the niceties of law."

The respondent appealed the case to the Regional Trial Court (RTC) of Naval,Biliran.

October 12, 1998 - the RTC reversed the MTC decision on the ground that theaction had already prescribed and acquisitive prescription had set in. Statingfurther that The said property remains as the legitime of Concepcion Rojas andher children.

December 14, 1998 - acting on petitioner's motion for reconsideration, the RTCamended its original decision.

RTC Findings after Motion for Recon:

It held that the action had not yet prescribed considering that the petitionermerely entrusted the property to her father. The ten-year prescriptive period forthe recovery of a property held in trust would commence to run only from thetime the trustee repudiates the trust. Found that there is no evidence on recordshowing that Crispulo Rojas ever ousted the petitioner from the property.

April 25, 1999 - The respondent filed a motion to reconsider the AmendedDecision but the RTC denied the same in an Order.

September 7, 2000 - Respondent filed a petition for review with the CA, whichreversed the Amended Decision of the RTC.

CA Findings:

1. The petitioner's inaction for several years casts a serious doubt on herclaim of ownership over the parcel of land.

a) It noted that 17 years lapsed since she discovered that respondentwas in adverse possession of the property before she instituted anaction to recover the same.

b) And during the probate proceedings, the petitioner did not evencontest the inclusion of the property in the estate of Crispulo Rojas.


2. Convinced that Crispulo Rojas owned the property, having bought thesame from Crisogono Limpiado in 1948.

a) To Support Conclusion, said Court cited the ff. Circumstances:

i. the property was declared for taxation purposes in Crispulo'sname and he had been paying the taxes thereon from 1948 untilhis death in 1978;

ii. Crispulo adversely possessed the same property from 1948until his death in 1978;

iii. upon his death in 1978, the property was included in his estate,the proceeds of which were distributed among his heirs.

3. And further held that, assuming that there was an implied trustbetween the petitioner and her father over the property, her rightof action to recover the same would still be barred by prescriptionsince 49 years had already lapsed since Crispulo adverselypossessed the contested property in 1948.

Hence, this Petition for Review.

ISSUES:

1. Whether there is an existence ofTrust over the Property -Express or Implied between thepetitioner and her father?

2. Whether or not the petitioner’s right ofaction to recover the property is barredby prescription or laches and/orestoppel?

HELD:

1. There is None. A trust is the legalrelationship between one personhaving an equitable ownershipof property and another personowning the legal title to suchproperty, the equitable

ownership of the former entitling him to the performance of certainduties and the exercise of certain powers by the latter.

Trusts are either express or implied. Express trusts are those which arecreated by the direct and positive acts of the parties, by some writing or deed,or will, or by words evincing an intention to create a trust. Implied trusts arethose which, without being expressed, are deducible from the nature of thetransaction as matters of intent or, independently, of the particular intention ofthe parties, as being superinduced on the transaction by operation of lawbasically by reason of equity. (either be a resulting trust or a constructive trust).

As a rule, however, the burden of proving the existence of a trust is on the partyasserting its existence, and such proof must be clear and satisfactorily show theexistence of the trust and its elements.

*The presence of the following elements must be proved:(1) a trustor or settlor who executes the instrument creating the trust; (2) a trustee, who is the person expressly designated to carry out the trust; (3) the trust res, consisting of duly identified and definite real properties; and (4) the cestui que trust, or beneficiaries whose identity must be clear.

Accordingly, it was incumbent upon petitioner to prove the existence of the trustrelationship. And petitioner sadly failed to discharge that burden.

The existence of express trusts concerning real property may not beestablished by parol evidence. It must beproven by some writing or deed. In thiscase, the only evidence to support theclaim that an express trust existedbetween the petitioner and her father wasthe self-serving testimony of thepetitioner. Bare allegations do notconstitute evidence adequate to supporta conclusion. They are not equivalent toproof.

Although no particular words are requiredfor the creation of an express trust, aclear intention to create a trust must beshown; and the proof of fiduciaryrelationship must be clear andconvincing. The creation of an expresstrust must be manifested withreasonable certainty and cannot beinferred from loose and vague


Petioner’s Argument: Respondent’s Answer:

Prescription and lachesare unavailing becausethere was an expresstrust relationshipbetween the petitionerand Crispulo Rojas andhis heirs, and expresstrusts do notprescribe.

Even assuming that itwas not an expresstrust, there was aresulting trust whichgenerally does notprescribe unless thereis repudiation by thetrustee.

Asserts that the complaint is barred byprescription, laches and estoppel.

From 1948 until his death in 1978, Crispulocultivated the property and was in adverse,peaceful and continuous possession thereof inthe concept of owner.

It took the petitioner 49 years from 1948before she filed the complaint for recovery ofthe property in 1997.

Granting that it was only in 1980 that shefound out that the respondent adverselypossessed the property, still petitionerallowed 17 years to elapse before sheasserted her alleged right over theproperty.

declarations or from ambiguous circumstances susceptible of otherinterpretations.

While implied trusts may be proved by oral evidence, the evidence must betrustworthy and received by the courts with extreme caution, and should not bemade to rest on loose, equivocal or indefinite declarations. Trustworthyevidence is required because oral evidence can easily be fabricated. In order toestablish an implied trust in real property by parol evidence, the proof should beas fully convincing as if the acts giving rise to the trust obligation are proven byan authentic document. An implied trust, in fine, cannot be established uponvague and inconclusive proof. In the present case, there was no evidence ofany transaction between the petitioner and her father from which it can beinferred that a resulting trust was intended. The petitioner testified only to theeffect

that her agreement with her father was that she will be given a share in theproduce of the property. This allegation, standing alone as it does, isinadequate to establish the existence of a trust because profit-sharing per se,does not necessarily translate to a trust relation.

In light of the disquisitions, we hold that there was no express trust or resultingtrustestablished between the petitioner and her father. Thus, in the absence ofa trust relation, we can only conclude that Crispulo's uninterrupted possession

of the subject \property for 49 years, coupled with the performance of acts ofownership, such as payment of real estate taxes, ripened into ownership.

2.1. Yes. Petitioner is guilty of Estopel.

The principle of estoppel in pais applies when — by one's acts, representations,admissions, or silence when there is a need to speak out — one, intentionallyor through culpable negligence, induces another to believe certain facts toexist; and the latter rightfully relies and acts on such belief, so as to beprejudiced if the former is permitted to deny the existence of those facts. Sucha situation obtains in the instant case.

2.2. Yes, the action is barred of Laches.

The petitioner allegedly discovered that the property was being possessed bythe respondent in 1980. However, it was only in 1997 that she filed the action torecover the property. Laches is negligence or omission to assert a right within areasonable time, warranting a presumption that the party entitled to it has eitherabandoned or declined to assert it.

WHEREFORE, the petition is DENIED. CA is AFFIRMED.


Documents

CASE NO. 1 -CA: Affirmed decision of RTC Eurotech ...docshare01.docshare.tips/files/28329/283295790.pdf · that respondents’ obligations stood at P295K excluding interests and