Types of Agency - Cases

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G.R. No. 95909 August 16, 1991

UNILAND RESOURCES, petitioner,vs.DEVELOPMENT BANK O T!E P!ILIPPINES,* respondent.

Romeo G. Roxas for petitioner.

GANCA"CO, J.:p

In the law on agency, it is elementary that when the maintransaction between the principal parties does notmaterialize, the claim for commission of the duly authorizedbroker is disallowed. 1 !o# $%out t&' ()st$)*' #&') t&'s$+' #$s '')tu$++- *o)su$t'/ %'t#'') $t('s

()to/u*'/ %- $ (//+'$) #&o, () t&' 2st +$*', &$/

)o $ut&o(t-, '3'ss o (+('/, 4o t&' s'++' to

%o' t&' t$)s$*t(o) S&ou+/ t&' ()t'+o' %'

$++o#'/ $ *o(ss(o) O) t&'s' s(+(2'/ t's 'sts

t&' )$tu' o4 t&' *o)to's- o) #&(*& t&(s *$s' tu)s.

As stated by the respondent Court of Appeals, 7 the ambientcircumstances of this case are as follows:

!" #$etitioner% &niland 'esources is a private

corporation engaged in real estate brokerage andlicensed as such p. (, 'ec.", while #respondent% )$,as we all know #sic%, is a government corporationengaged in +nance and banking in a proprietarycapacity.

(" ong before this case arose, -arinduue -iningCorporation obtained a loan from the )$ and assecurity therefor, mortgaged certain real propertiesto the latter, among them two lots located in -akati,-.-., described as follows:

a" Corner lot, covered by /C/ 0o. !!1!23, located at$asong /amo, -akati with an area of 2,224 s. mts.on which is constructed a #four%5story concretebuilding, etc., which, for brevity, shall be called theo6ce building lot7 and

b" ot covered by /C/ 0o. !8(9 with !(,2;; s.mts located at $asong /amo, -akati, on which isconstructed a concrete<steel warehouse, etc., which,for brevity, shall be called the warehouse lot.

/he aforesaid lots had, however, beenpreviously mortgaged by -arinduue -iningCorp., to Calte=, and the mortgage in favorof )$ was entered on their titles as asecond mortgage $re5/rial >rder, p. 29,'ec.".

/he account of the -arinduue -iningCorp., with the )$ was later transferred tothe Assets $rivatization /rust 8A$/" pursuantto $roclamation 0o. ;4.

2 o 4$(+u' o4 t&' M$()/u:u'

M()()g Co. to $- (ts o%+(g$t(o)s to

C$+t'3, t&' +$tt' 4o'*+os'/ (ts

otg$g' o) t&' $4o's$(/ t#o +ots

pp.29523, 'ec.". A$/ on the other hand, torecover its investment on the -arinduueAccount, o?ered for sale to the publicthrough )$ its right of redemption on saidtwo lots by public bidding @=hs. ! and(".

1" Considering, however, that Calte= hadreuired that both lots be redeemed, thebidding guidelines set by )$ provided thatany bid to purchase either of the two lotswould be considered only should there betwo bids or a bid for the two items which,when combined, would fully cover the saleof the two lots in uestion @=h. !".

;" /he aforesaid bidding was held on -ay;, !39 with only one bidder, the Counsel'ealty Corp. #an a6liate of Bla=o,$hilippines, the client of petitioner%, whicho?ered a bid only for the warehouse lot in

the amount of $(2,44,444.44. aid bid wasthus reDected by )$.

8" eeing, however, that it would make a pro+t if it redeemed the two lots and then o?er them forsale, and as its right to redeem said lots fromCalte= would e=pire on -ay 3, !39, )$ retrievedthe account from A$/ and, on the last day for thee=ercise of its right of redemption, -ay 3, !39,redeemed said lots from Calte= for $22,48,2(!.8(@=h. ;", thus acuiring them as its physical

assets.

9" In preparation for the sale of the two lots inuestion, )$ called a pre5bidding conferencewherein a new set of bidding guidelines wereformulated @=h. 2". /hen, on Euly 24,!39, thepublic bidding for the sale of the two lots was heldand again, there was only one bidder, the Charges'ealty Corp. #another a6liate of Bla=o,$hilippines%, for only the warehouse lot and for theamount of $(1,494,444.44, which is slightly higherthan the amount previously o?ered by Counsel'ealty Corp., therefor at the -ay ;, !39 biddingsee @=h. ;, p. ! 44, 'ec.". 0o bid was submittedfor the o6ce building lot id.".

3" 0otwithstanding that there was no bidder forthe o6ce building lot, the DBP $o'/ t&'

s$+' o4 t&' #$'&ous' +ot to C&$g's R'$+t-

Co., $)/ o) No'%' 7;, 19<=, t&' o'

/o*u')t$t(o) o4 t&' s$+' #$s $/' @=h.)". As for the o6ce building lot, it was later soldby )$ in a negotiated sale to the ank of $.I. astrustee for the $erpetual Care Fund of the -anila-emorial $ark for $!9,184,444.44, and properdocumentation of the sale was made on 0ovember!9, !39 @=h. @ and submarkings". T&' DBP$/(tt'/+- $(/ t&' 82' '*')t %o'>s

4'' o) t&(s s$+' to t&' DBP M$)$g'')t

Coo$t(o), #&(*& $*t'/ $s %o' 4o s$(/

)'got($t'/ s$+'

p. !;, Appellant )$Gs brief".

" After the aforesaid sale, #petitioner%, through its$resident, wrote two letters to #respondent )$%,the +rst through its enior Hice $resident @=h.C", and, the second through its Hice Chairman@=h. 1 #sic%, $s()g 4o t&' $-')t o4 (ts

%o'>s 4'' () ()stu')t()g t&' s$+' o4 (ts

8DBP>s #$'&ous' +ot to C&$g's R'$+t-

Co. T&' *+$( #$s '4''/ to t&' B(//()g

Co(tt'' *&$('/ %- A$)/$ S. Gu($

#&(*& 't o) No'%' 9, 19<=, $)/ #&(*&,

o) No'%' 1<, 19<=, (ssu'/ $ /'*(s(o)

/')-()g ?'t(t(o)'>s@ *+$(

@=h. ;". ence,the instant case +led by #petitioner% to recoverfrom #respondent% )$ the aforesaid brokerGs fee.

After trial, the lower court, on >ctober (;, !33,rendered Dudgment

>')@'I0B #respondent )$% to pay #petitioner%the sum of $!,(42,;44,44 which is the euivalentof #+ve percent% brokerGs fee plus legal interestthereto sic" from the +ling of the complaint onFebruary !3, !33 until fully paid and the sum of $;4,444.44 as and for attorneyGs fees. Costsagainst #respondent )$%. p. !((, 'ec.". ;

>n appeal, the Court of Appeals reversed the Dudgment of thelower court

and dismissed the complaint. /he motion forreconsideration +led by petitioner was also subseuentlydenied. 5

$etitioner is now before this Court alleging that the petition'AI@ A J&@/I>0 >F AK I0 /@ @0@ /A/ /@'@$>0)@0/ C>&'/ >F A$$@A A@) I/ )@CII>0 >0L>0 /@ C>0/'>H@'IA FAC/ FAH>'A@ /> /@ $'IHA/@'@$>0)@0/ )$, 6 primarily making capital of the disparitybetween the factual conclusions of the trial court and of theappellate court. $etitioner asserts that the respondent Courtof Appeals disregarded evidence in its favor consisting of itsletters to respondent )$Gs higher o6cers sent prior to thebidding and sale, wherein petitioner reuested accreditationas a broker and, in the process of informing that it had o?eredthe )$ properties for sale, also volunteered the name of itsclient, Bla=o, $hilippines, as an interested prospective buyer. =



/he rule is that in petitions for certiorari as a mode of appeal,only uestions of law distinctly set forth may be raised.< uchuestions have been de+ned as those that do not call for anye=amination of the probative value of the evidence presentedby the parties. 9 $etitionerGs singular assignment of errorwould, however, have this Court go over the facts of this casebecause it necessarily involves the e=amination of theevidence and its subseuent reevaluation. &nder the presentproceeding, the same, therefore, cannot be done.

It bears emphasizing that mere disagreement between theCourt of Appeals and the trial court as to the facts of a casedoes not of itself warrant this CourtGs review of the same. Ithas been held that the doctrine that the +ndings of fact madeby the Court of Appeals, being conclusive in nature, arebinding on this Court, applies even if the Court of Appeals wasin disagreement with the lower court as to the weight of evidence with a conseuent reversal of its +ndings of fact, solong as the +ndings of the Court of Appeals are borne out bythe record or based on substantial evidence. 10 while theforegoing doctrine is not absolute, petitioner has notsu6ciently proved that his case falls under the knowne=ceptions. 11

e that as it may, the Court has perused the assailed decisionof the Court of Appeals and still +nds the primary assertion of petitioner to be unfounded. /he Court of Appeals has

addressed all the factual contentions of petitioner and chosenot to give credence to petitionerGs version. -oreover, the+ndings of the Court of Appeals are consistent with, andsu6ciently supported by, the records of this case.

It is obvious that petitioner was never able to secure thereuired accreditation from respondent )$ to transactbusiness on behalf of the latter. T&' +'tt's s')t %-'t(t(o)' to t&' &(g&' o*'s o4 t&' DBP $)/ t&' APT$' ''+- ()/(*$t(' o4 't(t(o)'>s /'s(' to s'*u'su*& $**'/(t$t(o). At best these missives are self5serving7the most that they prove is that they were sent by petitionerand received by respondent )$, which clearly never agreedto be bound thereto. As declared by the trial court even whenit found in favor of petitioner, there was no e=press reply fromthe )$ or the A$/ as to the accreditation sought by

petitioner.17

From the very beginning, therefore, petitionerwas aware that it had no e=press authority from )$ to +ndbuyers of its properties.

In its reply submitted pursuant to the resolution reuiring thesame 1; petitioner also invokes Article !38 of the new CivilCode 1 in contending that an implied agency e=isted.$etitioner argues that it should have been stopped,

disauthorized and outrightly prevented from dealing the

!(,2;; s. m with warehouse" #

sic% by the )$ from the

inception.

15 >n the contrary, these steps were nevernecessary. In the course of petitionerGs dealings with the )$,it was always made clear to petitioner that only accreditedbrokers may look for buyers on behalf of respondent )$. /hisis not a situation wherein a third party was preDudiced by therefusal of respondent )$ to recognize petitioner as its broker.

T&' *o)to's- (s o)+- %'t#'') t&' DBP $)/

't(t(o)', to #&o (t #$s '&$s('/ () )o u)*'t$()

t's t&$t t&' $$)g'')t soug&t /(/ )ot '3(st.

At(*+' 1<69, t&''4o', &$s )o oo 4o o'$t(o) ()

t&(s *$s'.

$etitioner would also disparage the formality of accreditationas merely a mechanical act, which reuires not muchdiscretion, as long as a person or entity looks for a buyer#and% initiate or promote #sic% the interests of theseller. 16eing engaged in business, petitioner should dobetter to adopt the opposite attitude and appreciate thatformalities, such as the need for accreditation, result from theevolution of sound business practices for the protection andbene+t of all parties concerned. /hey are designed andadopted speci+cally to prevent the occurrence of situations

similar to that obtaining in this case.

Mo' (ot$)t+-, 't(t(o)'>s st$)*' go's $g$()st t&'

%$s(* $3(o () C((+ L$# t&$t )o o)' $- *o)t$*t ()

t&' )$' o4 $)ot&' #(t&out %'()g $ut&o('/ %- t&'

+$tt', u)+'ss t&' 4o' &$s %- +$# $ (g&t to

''s')t &(.

1= o t&(s ()*(+', $o)g ot&'s,

s()gs t&' '+$t(o)s&( o4 $g')*- #&(*&, $s #(t& ot&'

*o)t$*ts, (s o)' 4ou)/'/ o) utu$+ *o)s')t t&'

()*($+ $g''s to %' %ou)/ %- t&' $*ts o4 t&' $g')t

$)/ t&' +$tt' () tu) *o)s')ts to ')/' s'(*' o)%'&$+4 o () ''s')t$t(o) o4 t&' ()*($+

. 1<

$etitioner, however, also invokes euity considerations, and ineuity, the Court recognizes the e?orts of petitioner inbringing together respondent )$ and an interested and+nancially5able buyer. &(+' )ot $*t('+- ()o+'/ () t&'

$*tu$+ %(//()g $)/ t$)s4' o4 o#)'s&( o4 t&'

#$'&ous' o't-, 't(t(o)' $- %' s$(/ to &$'

()(t($t'/, $+%'(t #(t&out o' $ut&o(t-, t&'

t$)s$*t(o) t&$t '')tu$++- too +$*'.

/he Court is alsoaware that respondent )$ was able to realize a substantialpro+t from the sale of its two properties. Khile purelycircumstantial, there is su6cient reason to believe that the)$ became more con+dent to venture and redeem the

properties from the A$/ due to the presence of a ready andwilling buyer, as communicated and assured by petitioner.

In Prats v. Court of Appeals, 19 t&'' #$s $ 2)/()g t&$t t&'

't(t(o)' t&''() $s t&' $g')t #$s )o +o)g' t&'

'*(')t o*u()g *$us' () %()g()g $%out t&' s$+'

o*''/()g 4o t&' 4$*t o4 '3($t(o) o4 &(s '3*+us('

$ut&o(t-.

/here was therefore no basis in law to grant therelief sought. 0evertheless, this Court in euity granted thesum of $!44,444.44, out of the $!,234,444.44 claimed ascommission, by way of compensation for the e?orts andassistance rendered by the agent in the transaction prior tothe e=piration of his authority. /hese consist in o?ering the lotfor sale to the eventual buyer, sending follow5up letters,inviting the buyer to dinner and luncheon meetings, etc.

$arallel circumstances obtain in the case at bar. It waspetitioner who advised Bla=o, $hilippines of the availability of the warehouse property and aroused its interest over thesame. /hrough petitioner, respondent )$ was directlyinformed of the e=istence of an interested buyer. $etitionerGspersistence in communicating with respondent )$ reinforcedthe seriousness of the o?er. /his piece of information no doubthad a bearing on the subseuent decisions made byrespondent )$ as regards the disposition of its properties.

$etitioner claims the amount of $!,(42,;44.44 awarded by thetrial court as commission computed at +ve percent of the saleprice of the warehouse property. &nder the foregoingdisuisition and following the precedent, as well as roughlythe proportion, set in Prats, the Court in euity grants

petitioner the sum of >ne undred /housand $esos$l44,444.44" for the role it played in the transaction betweenrespondent )$ and buyer Bla=o, $hilippines. It (s'&$s('/, &o#'', t&$t t&' *(*ust$)*'s t&$t

*$' ()to +$- () t&(s *$s' /o )ot ''t t&' ()(u

+'g$+ st$)/$/s ':u('/ 4o t&' '3(st')*' o4 $) $g')*-

'+$t(o)s&( $)/ t&$t t&' $#$/ (s %$s'/ u'+- o)

':u(t- *o)s(/'$t(o)s.

Accordingly, petitionerGs otherarguments need not now be discussed.

K@'@F>'@, the decision appealed from is hereby AFFI'-@),with the ->)IFICA/I>0 that in euity respondent )$ isordered to pay petitioner the amount of >ne undred

/housand $esos $!44,444.44". 0o pronouncement as tocosts.

> >')@'@).

Narvasa (Chairman), Cruz, GriñoA!uino and "edialdea, ##.,concur.



G.R. No. 1;<6;9 '%u$- 10, 7000

CIT"FLITE REALT" CORPORATION, petitioner,vs.COURT O APPEALS $)/ .P. !OLDINGS REALT"CORP., METRO DRUG INC., MELDIN AL G. RO",VIEMASTER CONSTRUCTION CORP., $)/ t&' REGISTERO DEEDS O HUEON CIT", respondent.

BELLOSILLO, J.:

/his is a petition for review on certiorari +led by CI/L5I/@'@A/L C>'$>'A/I>0 CI/L5I/@" seeking to annul the (4>ctober !3 )ecision of the Court of Appeals! whichreversed the )ecision of the 'egional /rial Court of JuezonCity in its Civil Case 0o. J5(5!!483 declaring that a contractof sale over the subDect property was perfected and that -etro)rug Inc. and -eldin Al B. 'oy had the authority to sell theproperty.(

$rivate respondent F. $. >)I0B A0) '@A/L C>'$>'A/I>0F.$. >)I0B", formerly the parta oldings Inc., was theregistered owner of a parcel of land situated along @.'odriguez Avenue, Juezon City, also known as the Hiolago

$roperty or the an orenzo 'uiz Commercial Center, withan area of 9!,9;1 suare meters, more or less, and coveredby /ransfer Certi+cate of /itle 0o. /5!;. /he property waso?ered for sale to the general public through the circulation of a sales brochure containing the following information:

A parcel of land including buildings and otherimprovements thereon located along @. 'odriguezAvenue, Juezon City, with a total lot area of 9!,9;1suare meters M ,!( suare meters in front,(2,22( suare meters in the middle, and 2,(24suare meters at the back. ut the total area for salee=cludes ;,444 suare meters covering the e=istingchapel and adDoining areas which be donated to theArchdiocese of -anila thus reducing the totalsaleable area to 88,9;1 suare meters. Asking pricewas $8,(;4.44<suare meter with terms of paymentnegotiable. rokerGs commission was (.4N of sellingprice, net of withholding ta=es and other charges. Asadvertised, contact person was -eldin Al B. 'oy,-etro )rug Inc., with address at ;<F -etro ouse,21; en. Bil $uyat Avenue, -akati City.

/he front portion consisting of ,!( suare meters is thesubDect of this litigation.

O) 77 August 1991 'so)/')t M'+/() A+ G. Ro- s')t $s$+'s %o*&u', tog't&' #(t& t&' +o*$t(o) +$) $)/*o- o4 t&' T$)s4' C't(2*$t' o4 T(t+' No. TF19599 o4 t&' R'g(st' o4 D''/s o4 Hu'o) C(t-, to Att-. G'+$*(oM$$(+, $ $*t(*()g +$#-' $)/ $ +(*')s'/ '$+ 'st$t'

%o'. Att-. M$$(+ () tu) $ss'/ o) t&'s'/o*u')ts to A)to)(o T')g, E3'*ut(' V(*'FP's(/')t,$)/ Att-. V(*to P. V(++$)u'$, L'g$+ Cou)s'+, o4 CIT"FLITE.

In a letter dated ! eptember !! sent to -etro )rugA//0: -@)I0 A '>L" after an initial meeting with -eldin Al'oy that day, CI/L5I/@ conveyed its interest to purchase aportion or one5half !<(" of the front lot of the Hiolago$roperty. Apparently, Ro- su%s':u')t+- ()4o'/ CIT"FLITE>s ''s')t$t(' t&$t (t #ou+/ t$' t(' tosu%/((/' t&' +ot $)/ 'so)/')t .P. !OLDINGS #$s)ot '*'t(' to t&' u*&$s' o4 o)+- &$+4 o4 t&' 4o)t+ot. After a few days, Atty. -amaril wrote -etro )rug A//0:-@)I0 A '>L" e=pressing CI/L5I/@Gs desire to buy theentire front lot of the subDect property instead of only half

thereof provided the asking price of $8,(;4.44<suare meterwas reduced and that payment be in installment for a certainperiod. 'oy made a counter o?er dated (; eptember !!as follows:

)ear Atty. -amaril,

/his has reference to your letter datedeptember (1, !! in connection with theinterest of your clients, -r. Antonio

/eng<City5ite 'ealty Corporation and<or anyof their subsidiaries to buy a portion of theHiolago $roperty fronting @. 'odriguez r.

Avenue with an area of ,!( suaremeters.

Ke are pleased to inform you that we areprepared to consider the above o?er subDectto the following maDor terms and conditions:!. /he price shall be $8,(;4.44<suaremeter or a total of $;9,1;4,444.447 (. /heabove purchase price shall be paid to theowner as follows: a" $!;.4 -illiondownpayment7 b" balance payable withinsi= 8" months from date of downpaymentwithout interest. hould your client +nd theabove maDor terms and conditionsacceptable, please advise us in writing bytomorrow, eptember (8, !!, so that wecan start formal discussions on thematter . . . .

>n (8 eptember !! CI/L5I/@Gs o6cers and Atty. -amarilmet with 'oy at the -anila -andarin otel in -akati toconsummate the transaction. After some discussions, theparties +nally reached an agreement and 'oy agreed to sellthe property to CI/L5I/@ provided only that the latter submitits acceptance in writing to the terms and conditions of thesale as contained in his letter of (; eptember !!. aterthat afternoon after meeting with 'oy at the -anila -andarinotel, Atty. -amaril and Antonio /eng of CI/L5I/@ conveyedtheir formal acceptance of the terms and conditions set forthby 'oy in separate letters both dated (8 eptember !!.

owever, for some reason or another and despite demand,'so)/')t .P. !OLDINGS '4us'/ to '3'*ut' t&'*o'so)/()g /''/ o4 s$+' () 4$o o4 CIT"FLITE o4 t&'4o)t +ot o4 t&' o't-. &pon its claim of protecting itsinterest as vendee of the property in suit, CI/L5I/@ registeredan adverse claim to the title of the property with the 'egister

of )eeds of Juezon City which was annotated in the-emorandum of @ncumbrance of /ransfer Certi+cate of /itle0o. /5!; under @ntry 0o. $@5!44! dated (9 eptember!!.

>n 24 eptember !! CI/L5I/@Gs counsel demanded inwriting that -etro )rug A//0: -@)I0 A B. '>L" complywith its commitment to CI/L5I/@ by e=ecuting the properdeed of conveyance of the property under pain of courtaction. >n 1 >ctober !! F.$. >)I0B +led a petition forthe cancellation of the adverse claim against CI/L5I/@ withthe 'egional /rial Court of Juezon City, docketed as 'C Case0o. !5!4(;9, which was raOed to r. 31.

>n 3 >ctober !! @dwin Fernandez, $resident of F.$.>)I0B, in a move to amicably settle with CI/L5I/@, metwith the latterGs o6cers during which he o?ered propertieslocated in Caloocan City and in Juezon oulevard, JuezonCity, as substitute for the property, but CI/L5I/@ refused theo?er because it did not suit its business needs. Kith the+ling of the petition of F.$. >)I0B for the cancellation of the adverse claim, CI/L5I/@ caused the annotation of the +rstnotice of lis pendens which was recorded in the title of theproperty under @ntry 0o. 184;.

>n ( )ecember !! the '/C5r. 31 of Juezon City dismissedF.$. >)I0BG petition declaring that CI/L5I/@Gs adverseclaim had factual basis and was not sham and frivolous.-eanwhile, F.$. >)I0B caused the resurvey andsegregation of the property and asked the 'egister of )eedsof Juezon City to issue separate titles which the latter did on!9 Eanuary !( by issuing /ransfer Certi+cate of /itle 0o. /5;!89!.

Following the dismissal of F.$. >)I0BG petition for thecancellation of the adverse claim, CI/L5I/@ instituted acomplaint against F.$. >)I0B originally for speci+cperformance and damages and caused the annotation of thesecond notice of lis pendens on the new certi+cate of title.After the annotation of the second lis pendens, the propertywas transfered to defendant HI@K-A/@' C>0/'&C/I>0C>'$. HI@K-A/@'" for which /ransfer Certi+cate of /itle 0o.

/5;(23 was issued. owever the notice of lis pendens wascarried over and annotated on the new certi+cate of title.

Hery truly yours,

-@)I0 A B. '>L



In view of the conveyance during the pendency of the suit, theoriginal complaint for speci+c performance and damages wasamended with leave of court to implead HI@K-A/@' as anecessary party and the 'egister of )eeds of Juezon City asnominal defendant with the additional prayer for thecancellation of HI@K-A/@'Gs certi+cate of title. /he case wasthereafter raOed to r. 3; of the 'egional /rial Court of Juezon City.

>n 1 >ctober !; the court a !uo rendered its decision infavor of CI/L5I/@ ordering F.$. >)I0B to e=ecute a deed of sale of the property in favor of CI/L5I/@ for the totalconsideration of $;;,4;8,(;4.44 payable as follows: $!;-illion as downpayment to be payable immediately upone=ecution of the deed of sale and the balance within si= 8"months from downpayment, without interest. /he court alsodirected the 'egister of )eeds of of Juezon City to cancel

/ransfer Certi+cate of /itle 0o. /5;(23 or any subseuenttitle it had issued a?ecting the subDect property, and to issuea new one in the name of CI/L5I/@ upon the presentation of the deed of sale and other reuirements for the transfer. Itlikewise ordered the defendants, e=cept HI@K-A/@' and the'egister of )eeds of Juezon City, to pay CI/L5I/@ Dointly andseverally $344,444.44 by way of nominal damage,$(;4,444.44 for attorneyGs fees, and to pay the costs.

>n 24 >ctober !; HI@K-A/@' +led a motion for

reconsideration of the decision of the lower court uestioningits ruling that a perfected contract of sale e=isted betweenCI/L5I/@ and F.$. >)I0B as there was no de+niteagreement over the manner of payment of the purchaseprice, citing in support thereof $o%ota &ha' nc. v . Court of

Appeals.2 owever the motion for reconsideration was denied.

In the challenged )ecision of (4 >ctober !3 the Court of Appeals reversed and set aside the Dudgment of the 'egional

/rial Court of Juezon City. >n !4 -ay ! the Court of Appeals denied CI/L5I/@Gs motion to reconsider its decision.

$etitioner CI/L5I/@ is now before us assailing the Court of Appeals for declaring that no contract of sale was perfectedbetween it and respondent F.$. >)I0B because of lack of ade+nite agreement on the manner of paying the purchaseprice and that respondents M'to Dug $)/ M'+/() A+ G.Ro- #'' )ot $ut&o('/ to s'++ t&' o't- to CIT"FLITE, $)/ t&$t t&' $ut&o(t- o4 Ro- #$s o)+- +((t'/ tot&$t o4 $ '' +($(so) o *o)t$*t 'so).

Ke cannot sustain petitioner. >n the issue of whether acontract of sale was perfected between petitioner CI/L5I/@and respondent F.$. >)I0B acting through its agent -eldinAl B. 'oy of -etro )rug, Art. !391 of the Civil Code provides:J&') t&' s$+' o4 $ ('*' o4 +$)/ o $)- ()t''stt&''() (s t&oug& $) $g')t, t&' $ut&o(t- o4 t&' +$tt's&$++ %' () #(t()g ot&'#(s', t&' s$+' s&$++ %' o(/.JP't(t(o)' $)*&os t&' $ut&o(t- o4 M'to Dug $)/M'+/() A+ G. Ro- o) 8$ t&' t'st(o)('s o4 't(t(o)'>st&'' 8; #(t)'ss's $)/ t&' $/(ss(o)s o4 Ro- $)/ t&'+$#-' o4 M'to Dug 8% t&' s$+'s %o*&u' s'*(4-()gM'+/() A+ G. Ro- $s $ *o)t$*t 'so) 8* t&' gu$/ost'/ $t t&' o't- s$-()g t&$t M'to Dug #$s t&'$ut&o('/ $g')t $)/, 8/ t&' *oo) )o#+'/g'$o)g %o's t&$t M'to Dug t&oug& M'+/() A+ G.Ro- #$s t&' $ut&o('/ $g')t o4 .P. !OLDINGS to s'++t&' o't-.

owever, and more importantly, the Civil Code reuires thatan authority to sell a piece of land shall be in writing. /heabsence of authority to sell can be determined from thewritten memorandum issued by respondent F.$. >)I0BG$resident reuesting -etro )rugGs assistance in +nding buyersfor the property. /he memorandum in part stated: Ke willappreciate -etro )rugGs assistance in referring to us buyersfor the property. $lease proceed to hold preliminary

negotiations with interested buyers and endorse formal o?ersto us for our +nal evaluation and appraisal. /his obviouslymeant that -eldin Al B. 'oy and<or -etro )rug was only toassist F.$. >)I0B in looking for buyers and referring tothem possible prospects whom they were supposed toendorse to F.$. >)I0B.

But t&' fnal evaluation, appraisal and acceptance o4 t&' t$)s$*t(o) *ou+/ %' $/' o)+- %- .P. !OLDINGS.I) ot&' #o/s, M'+/() A+ G. Ro- $)/o M'to Dug#$s o)+- $ contact person #(t& )o $ut&o(t- to*o)*+u/' $ s$+' o4 t&' o't-. In fact, a witness forpetitioner even admitted that 'oy and<or -etro )rug was amere broker,1 and 'oyGs only Dob was to bring the parties

together for a possible transaction.; Conseuently, we holdthat for lack of a written authority to sell the Hiolago$roperty on the part of -eldin Al B. 'oy and<or -etro )rug,the sale should be as it is declared null and void. /hereforethe sale could not produce any legal e?ect as to transfer thesubDect property from its lawful owner, F.$. >)I0B, to anyinterested party including petitioner CI/L5I/@.

K@'@F>'@, the appealed )ecision of the Court of Appealsbeing in accord with law and the evidence is AFFI'-@). Costsagainst petitioner CI/L5I/@ '@A/LC>'$>'A/I>0.*'phi.n+t

> >')@'@).

"endoza, uisum-in, /uena and 0e 1eon, #r., ##., concur.



FI'/ )IHII>0

?G. R. No. 179919. '%u$- 6, 7007@DOMINION INSURANCE CORPORATION, petitioner,

vs. COURT O APPEALS, RODOLO S.GUEVARRA, $)/ ERNANDOAUSTRIA, respondents.

D E C I S I O N

PARDO, J.

T&' C$s'

/his is an appeal via certiorari#!% from the decision of theCourt of Appeals#(% a6rming the decision#2% of the 'egional /rialCourt, ranch 11, an Fernando, $ampanga, which orderedpetitioner Do()(o) I)su$)*' Coo$t(o) 8Do()(o)to $- Ro/o+4o S. Gu'$$ 8 Gu'$$ t&' su o4 P156,=;.90 ''s')t()g t&' tot$+ $ou)t $/$)*'/%- Gu'$$ () t&' $-')t o4 t&' *+$(s o4 Do()(o)s *+(')ts.

T&' $*ts

/he facts, as found by the Court of Appeals, are asfollows:

P>n Eanuary (;, !!, plainti? 'odolfo . Buevarra institutedCivil Case 0o. 33;; for sum of money against defendant)ominion Insurance Corporation. $lainti? sought torecover thereunder the sum of $!;8,192.4 which he claimedto have advanced in his capacity as manager of defendant tosatisfy certain claims +led by defendantQs clients.

PIn its traverse, defendant denied any liability to plainti? andasserted a counterclaim for $(1,89(.;2, representingpremiums that plainti? allegedly failed to remit.

P>n August 3, !!, defendant +led a third5party complaintagainst Fernando Austria, who, at the time relevant to thecase, was its 'egional -anager for Central uzon area.

PIn due time, third5party defendant Austria +led his answer.

P/hereafter the pre5trial conference was set on the followingdates: >ctober !3, !!, 0ovember !(, !!, -arch (,!!, )ecember !(, !!, Eanuary !9, !(, Eanuary (,!(, February (3, !(, -arch !9, !( and April 8, !(, inall of which dates no pre5trial conference was held. /he recordshows that e=cept for the settings on >ctober !3,!!, Eanuary !9, !( and -arch !9, !( which werecancelled at the instance of defendant, third5party defendantand plainti?, respectively, the rest were postponed upon Dointreuest of the parties.

P>n -ay ((, !( the case was again called for pre5trialconference. >nly plainti? and counsel were present. )espitedue notice, defendant and counsel did not appear, although amessenger, 'oy Bamboa, submitted to the trial court ahandwritten note sent to him by defendantQs counsel whichinstructed him to reuest for postponement. $lainti?Qs counselobDected to the desired postponement and moved to havedefendant declared as in default. /his was granted by the trialcourt in the following order:

P>')@'

PKhen this case was called for pre5trial this afternoon onlyplainti? and his counsel Atty. 'omeo -aglalang appeared.Khen shown a note dated -ay (!, !( addressed to acertain 'oy who was reuested to ask for postponement,Atty.-aglalang vigorously obDected to any postponement onthe ground that the note is but a mere scrap of paper andmoved that the defendant corporation be declared as indefault for its failure to appear in court despite due notice.

PFinding the verbal motion of plainti?Qs counsel to bemeritorious and considering that the pre5trial conference has

been repeatedly postponed on motion of the defendantCorporation, the defendant )ominion Insurance Corporation ishereby declared as" in default and plainti? is allowed topresent his evidence on Eune !8, !( at :44 oQclock in themorning.

P/he plainti? and his counsel are noti+ed of this order in opencourt.

P> >')@'@).

P$lainti? presented his evidence on Eune !8, !(. /his wasfollowed by a written o?er of documentary e=hibits on Euly 3and a supplemental o?er of additional e=hibits on Euly !2,!(. /he e=hibits were admitted in evidence in an orderdated Euly !9, !(.

P>n August 9, !( defendant corporation +led a R->/I>0 />IF/ >')@' >F )@FA&/.Q It alleged therein that the failure of counsel to attend the pre5trial conference was Rdue to anunavoidable circumstanceQ and that counsel had sent hisrepresentative on that date to inform the trial court of hisinability to appear. /he -otion was vehemently opposed byplainti?.

P>n August (;, !( the trial court denied defendantQs

motion for reasons, among others, that it was neither veri+ednor supported by an a6davit of merit and that it further failedto allege or specify the facts constituting his meritoriousdefense.

P>n eptember (3, !( defendant moved forreconsideration of the aforesaid order. For the +rst timecounsel revealed to the trial court that the reason for hisnonappearance at the pre5trial conference was his illness. AnA6davit of -erit e=ecuted by its @=ecutive Hice5$residentpurporting to e=plain its meritorious defense was attached tothe said -otion. Eust the same, in an >rder dated 0ovember!2, !(, the trial court denied said -otion.

P>n 0ovember !3, !(, the court a uo rendered Dudgment

as follows:

PK@'@F>'@, premises considered, Dudgment is herebyrendered ordering:

P!. /he defendant )ominion Insurance Corporation to payplainti? the sum of $!;8,192.4 representing the totalamount advanced by plainti? in the payment of the claims of defendantQs clients7

P(. /he defendant to pay plainti? $!4,444.44 as and by wayof attorneyQs fees7

P2. /he dismissal of the counter5claim of the defendant andthe third5party complaint7

P1. /he defendant to pay the costs of suit.S#1%

>n )ecember !1, !(, )ominion appealed the decisionto the Court of Appeals.#;%

>n Euly !, !8, the Court of Appeals promulgated adecision a6rming that of the trial court.#8% >n eptember 2,!8, )ominion +led with the Court of Appeals a motion forreconsideration.#9% >n Euly !8, !9, the Court of Appealsdenied the motion.#3%

ence, this appeal.#%

T&' Issu's

T&' (ssu's $(s'/ $' 81 #&'t&''so)/')t Gu'$$ $*t'/ #(t&() &(s $ut&o(t- $s$g')t 4o 't(t(o)', $)/ 87 #&'t&''so)/')t Gu'$$ (s ')t(t+'/ to '(%us'')t o4 $ou)ts &' $(/ out o4 &(s 'so)$+ o)'- () s'tt+()gt&' *+$(s o4 s''$+ ()su'/.

T&' Cout>s Ru+()g

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/he petition is without merit.

y the contract of agency, a person binds himself torender some service or to do something in representation oron behalf of another, with the consent or authority of thelatter.?10@ T&' %$s(s 4o $g')*- (s ''s')t$t(o).#!!% >nthe part of the principal, there must be an actual intention toappoint#!(% or an intention naturally inferrable from his words oractions7#!2% and on the part of the agent, there must be anintention to accept the appointment and act on it, #!1% and inthe absence of such intent, there is generally no agency.#!;%

A perusal of the pecial $ower of Attorney

#!8%

would showthat petitioner represented by third5party defendant Austria"and respondent Buevarra intended to enter into a principal5agent relationship. D's(t' t&' #o/ s'*($+ () t&' t(t+'o4 t&' /o*u')t, t&' *o)t')ts ''$+ t&$t #&$t #$s*o)st(tut'/ #$s $*tu$++- $ g')'$+ $g')*-. /he terms of the agreement read:

P/hat 'e, FI'/ C>0/I0@0/A A&'A0C@ C>-$A0L, I0C.,#!9% a corporation duly organized and e=isting under and byvirtue of the laws of the 'epublic of the $hilippines, ===represented by the undersigned as 'egional -anager, ===do here-% appoint R&G Guevarra nsurance &ervicesrepresented -% "r. Rodolfo Guevarra === to -e our Aenc% "anaer in an Fdo., for our place and stead, to do and

perform the follo'in acts and thins2

P!. /o conduct, sin, manaer (sic), carr% on andtransact /ondin and nsurance -usiness asusually pertain to a Agency >6ce, or FI'@,-A'I0@, ->/>' CA', $@'>0A ACCI)@0/,and >0)I0B 'ith the riht, upon our prior 'ritten consent, to appoint aents and su-aents.

P(. /o accept, under'rite and su-scri-ed (sic)cover notes or Policies of Insurance and ondsfor and on our behalf.

P2. /o demand, sue, for (sic) collect, deposit,enforce pa%ment, deliver and transfer for andreceive and ive e3ectual receipts anddischare for all money to which the FI'/C>0/I0@0/A A&'A0C@ C>-$A0L, I0C.,#!3% may hereafter become due, owing payableor transferable to said Corporation by reason of or in connection with the above5mentionedappointment.

P1. /o receive notices, summons, and leal processes for and in behalf of the FI'/C>0/I0@0/A A&'A0C@ C>-$A0L, I0C., inconnection with actions and all legalproceedings against the saidCorporation.S#!% #@mphasis supplied%

/he agency comprises all the business of the principal,#(4% but, couched in general terms, it is limited only to acts of administration.#(!%

A g')'$+ o#' '(ts t&' $g')t to /o $++ $*ts4o #&(*& t&' +$# /o's )ot ':u(' $ s'*($+ o#' .#((% /hus, the acts enumerated in or similar to thoseenumerated in the pecial $ower of Attorney do not reuire aspecial power of attorney.

Article !393, Civil Code, enumerates the instances whena special power of attorney is reuired. /he pertinent portionthat applies to this case provides that:

PArticle !393. pecial powers of attorney are necessary in thefollowing cases:

P!" /o make such payments as are not usuallyconsidered as acts of administration7

P=== === ===

P!;" Any other act of strict dominion.S

/he payment of claims is not an act of administration. /he settlement of claims is not included among the actsenumerated in the pecial $ower of Attorney, neither is it of acharacter similar to the acts enumerated therein. A specialpower of attorney is reuired beforerespondent Buevarra could settle the insurance claims of theinsured.

'espondent BuevarraQs authority to settle claims isembodied in the -emorandum of -anagementAgreement#(2% dated February !3, !39 which enumerates the

scope of respondent BuevarraQs duties and responsibilities asagency manager for an Fernando, $ampanga, as follows:

P=== === ===

P!. Lou are hereby given authority to settle and dispose of allmotor car claims in the amount of P4,555.55 'ith prior approval of the Reional 67ce.

P(. 8ull authorit% is given you on $PP claims settlement.

P=== === ===S#(1%

In settling the claims mentioned above,respondent BuevarraQs authority is further limited by thewritten standard authority to pay,#(;% which states that thepayment shall come from respondent BuevarraQs revolvingfund or collection. /he authority to pay is worded as follows:

P/his is to authorize you to 'ithdra' from %our revolvinfund9collection the amount of $@> TTTTTTTTTTTTTTTTTT $ "representing the payment on the TTTTTTTTTTTTTTTTT claim of assured TTTTTTTTTTTTTTT under $olicy 0o. TTTTTT in thataccident of TTTTTTTTTTT at TTTTTTTTTTTT.

PIt is further e=pected, release papers will be signed and

authorized by the concerned and attached to thecorresponding claim folder after e?ecting payment of theclaim.

Psgd." F@'0A0)> C. A&/'IA

'egional -anagerS#(8%

#@mphasis supplied%

/he instruction of petitioner as the principal could not beany clearer. R'so)/')t Gu'$$ #$s $ut&o('/ to $-t&' *+$( o4 t&' ()su'/, %ut t&' $-')t s&$++ *o'4o t&' 'o+()g 4u)/ o *o++'*t(o) () &(s oss'ss(o).

aving deviated from the instructions of the principal,the e=penses that respondent Buevarra incurred in thesettlement of the claims of the insured may not bereimbursed from petitioner )ominion. /his conclusion is inaccord with Article !!3, Civil Code, which states that:

P/he principal is not liable for the e=penses incurred by theagent in the following cases:

P!" If the aent acted in contravention of the principal:sinstructions, unless the latter should wish to avail himself of the bene+ts derived from the contract7

P=== === ===S

owever, while the law on agency prohibitsrespondent Buevarra from obtaining reimbursement, his rightto recover may still be Dusti+ed under the general law onobligations and contracts.

Article !(28, second paragraph, Civil Code, provides:

PKhoever pays for another may demand from the debtor whathe has paid, e=cept that if he paid 'ithout the ;no'lede or aainst the 'ill of the de-tor, he can recover onl% insofar asthe pa%ment has -een -ene<cial to the de-tor.=

In this case, when the risk insured against occurred,petitionerQs liability as insurer arose. /his obligation wase=tinguished when respondent Buevarra paid the claims andobtained 'elease of Claim oss and ubrogation 'eceipts fromthe insured who were paid.

/hus, to the e=tent that the obligation of the petitionerhas been e=tinguished, respondent Buevarra may demand forreimbursement from his principal. /o rule otherwise wouldresult in unDust enrichment of petitioner.

/he e=tent to which petitioner was bene+ted by thesettlement of the insurance claims could best be proven bythe 'elease of Claim oss and ubrogation 'eceipts #(9% whichwere attached to the original complaint as Anne=es C5(, )5!,@5!, F5!, B5!, 5!, I5! and E5l, in the total amount of $!!8,(98.;.




















































owever, the amount of the revolving fund<collectionthat was then in the possession of respondent Buevarra asreUected in the statement of account dated Euly !!,!4 would be deducted from the above amount.

/he outstanding balance and the production<remittancefor the period corresponding to the claims was $2,841.31.)educting this from $!!8,(98.;, we get $!!(,89(.!!. /his isthe amount that may be reimbursed to respondent Buevarra.

T&' $++o

IN VIE !EREO, we )@0L the $etition. owever, we->)IFL the decision of the Court of Appeals #(3% and that of the'egional /rial Court, ranch 11, an Fernando, $ampanga,#(% in that petitioner is ordered to payrespondent Buevarra the amount of $!!(,89(.!! representingthe total amount advanced by the latter in the payment of theclaims of petitionerQs clients.

0o costs in this instance.

SO ORDERED.

0avide, #r., (Chairman), Puno, >apunan, and ?nares&antiao, ##., concur








@C>0) )IHII>0

?G.R. No. 1;111. August 79, 7000@

GLORIA A. ANACLETO, petitioner, vs. ALEANDER VANTEST $)/o EUROCEANIC RAINBOENTERPRISES P!ILIPPINES, INC., respondents.

D E C I S I O N

MENDOA, J.

/his is a petition for review on certiorari of the decisionof the Court of Appeals, dated Eune (4, !9. /he facts arenot disputed. /hey are as follows:

>n February 8, !;, a complaint for reconveyance of title was +led in the name of Ale=ander Han /west and@uroceanic 'ainbow @nterprises $hilippines, Inc. @uroceanic"against petitioner Bloria A. Anacleto and Isaias -.

ongar. /he complaint +led by Atty. @rnesto H. $erez statedthat Ale=ander Han /west Phas been reported missing since

Eune !8, !( but is duly represented herein by undersignedcounsel as his agent and<or general counsel.S

>n -arch 2!, !;, Atty. $erez, in representation of Han /west, entered into a compromise agreement with Anacletoand ongar, then represented by Atty. )iosdado -.Allado. /he te=t of the agreement reads:#!%

C>-$'>-I@ AB'@@-@0/

/his Agreement e=ecuted this 2!st day of -arch, !; at-akati, -etro -anila, by and between:

A@VA0)@' HA0 /K@/, elizean, of legal age with addressat ( -ontclair treet, -erville $ark, $araWaue, -etro -anila,represented herein by Atty. @rnesto H. $erez hereinafterreferred to as Pthe plainti?S".

5and5

B>'IA A. A0AC@/> and IAIA -. >0BA', Filipinos, of legal age with address at c<o 2rd Floor, /ower , Bold oop

/win /owers, X! Bold oop treet, >rtigas Center, $asig, -etro-anila, represented herein by Atty. )iosdado Eose -. Alladohereinafter referred to as Pthe defendantsS".

ITNESSET! T&$t F

K@'@A, the plainti? Han /west and defendant Anacletohave instituted several actions against each other in the past.

K@'@A, the plainti? Han /west instituted the present actionfor reconveyance of real property, annulment of deed of saleand accounting of income of property.

K@'@A, the parties desire to buy peace and wish to avoid aprotracted litigation in this case.

0>K /@'@F>'@, in consideration of the foregoing and thefurther covenants hereinafter set forth, the parties agree asfollows:

!. $lainti? shall be paid the sum of F>&' -II>0 @IB/&0)'@) />&A0) $@> $1,344,444.44" in accordancewith the following schedule:

a. Initial payment 5 FIH@ &0)'@) />&A0) $@>$;44,444.44" shall be paid to the plainti? by defendant>0BA' upon the signing and due e=ecution of thisCompromise Agreement, $rovided, however, that the initialpayment by defendant >0BA' shall be delivered into thecustody and possession of a third party, Atty. Crispulo C.'osacia, who shall act as escrow5trustee of the parties andwho shall only deliver the said initial payment to the plainti? through plainti?Qs counsel upon the +ling in Court of thisCompromise Agreement.

b. /he balance of F>&' -II>0 /'@@ &0)'@) />&A0)$@> $1,244,444.44" shall be paid by defendant A0AC@/>as follows:

econd payment 5 >0@ -II>0 /'@@ &0)'@) />&A0)$@> $!!,244,444.44" within si=ty 84" days after the dateof the +rst payment.

/hird payment 5 >0@ -II>0 $@> $!,444,444.44" withinforty5+ve 1;" days after the date of the second payment.

Fourth payment 5 >0@ -II>0 $@> $!,444,444.44" withinforty5+ve 1;" days after the date of the third payment.

Fifth payment 5 >0@ -II>0 $@> $!,444,444.44" withinforty5+ve 1;" days after the date of the fourth payment.

(. /he initial payment by defendant >0BA' shall be made incash. /he +ve payments on the balance shall be covered bypost5dated checks drawn by defendant A0AC@/> as payableto A//L. @'0@/> H. $@'@Y who shall hold and account forsaid payments in trust for plainti? Han /west.

2. /his Compromise Agreement shall not a?ect nor preDudiceany case or cases between the parties not speci+cally referred

to herein.

1. &pon delivery of the initial payment made by defendant>0BA' and delivered to the escrow5trustee of the parties,the parties shall seek Court approval of this CompromiseAgreement and the cancellation or lifting of the notice of lis

pendens issued by the Court over the property subDect of theaction.

;. /he signatories to this Agreement hereby represent andwarrant that they are duly authorized to e=ecute thisAgreement.

8. /he parties or their assigns hereby waive, renounce andforever uitclaim all their respective claims and counterclaims

subDect of the instant action as well as those that may arisetherefrom, in connection therewith or in relation thereto.

9. /he foregoing covenants are not contrary to law, morals, orpublic policy and the parties bind themselves to complystrictly with their undertakings.

>n April 8, !;, the trial court rendered Dudgmentbased on the compromise agreement. $etitioner later +led amanifestation, submitting a copy of a special power of attorney $A".

>n Eune (, !;, petitioner, represented by new counsel,Atty. -arvin . errera, +led an urgent omnibus motion askingthe court to order Atty. $erez to submit an $A and, in themeantime, to defer petitionerQs compliance with her obligation

under the compromise agreement.

In his comment dated Eune (2, !;, Atty. $erezadmitted he had no $A from Han /west to enter into acompromise agreement. owever, he claimed thatpetitionerQs former counsel, the law +rm of alonga,ernandez and Allado, had been informed of this fact.

In an order dated -arch !9, !8, the trial court deniedpetitionerQs motion on the ground that she was estopped touestion the validity of the compromise agreementconsidering that, during the negotiations which led to thesigning of the compromise agreement, Atty. $erez haddisclosed the fact that he had no $A.

>n -ay !4, !8, petitioner +led a motion to vacate the Dudgment, but her motion was denied by the trial court. er

motion for reconsideration was likewise denied. he then +leda notice of appeal, but it was denied by the trial court on theground that the notice of appeal was +led twelve dayslate. $etitioner +led a petition for certiorari in the Court of Appeals uestioning the denial of her notice of appeal andasking that the order of the trial court denying her motion tovacate the compromise agreement be set aside. As herpetition was dismissed by the appellate court, petitioner +ledthis petition for review on certiorari.

Ke +nd the petition meritorious.

/he basic issue to be resolved here is whether a partywho enters into a compromise agreement with anotherallegedly represented by a lawyer who has no authority to

http://sc.judiciary.gov.ph/jurisprudence/2000/aug2000/131411.htm#_ftn1




institute a litigation, much less enter into a compromiseagreement, is estopped from uestioning the validity of suchagreement.

&nder the facts of this case, and for reasons to behereafter discussed, we hold that she is not.

(st. A compromise is a contract whereby parties, bymaking reciprocal concessions, avoid a litigation or put an endto one already commenced.#(% ike any other contract,therefore, it must comply with the reuisites provided in Art.!2!3 of the Civil Code, to wit: !" consent of the contracting

parties7 (" obDect certain which is the subDect matter of thecontract7 and 2" cause of the obligation which is established.#2%

0ow, it is admitted by Atty. $erez that his only authorityto represent Han /west and @uroceanic is the retaineragreement he had with Han /west. /his agreement reads:#1%

!! Euly !4

-'. A@VA0)@' HA0 /K@/-anila

)ear. -r. Han /west:

/hank you for deciding to retain our law +rm as generalcounsel to handle your civil and criminal cases.

/he retainer will amount to $9,;44.44 per month. In order tofacilitate your account, we shall bill this retainer monthly,starting Euly, !4, if agreeable to you.

/he retainer will cover o6ce conferences, drawing of ordinarybusiness documents, contracts, deeds, and the like as well aslegal advise not reuiring substantial time e=pense on ourpart. /he retainer will not cover the trial of any litigatedmatters in court or before any administrative body. /he casesthat we will handle for you shall be subDect of a separateprogressive billings. In such cases we cannot usually

determine in advance the amount of work that will bereuired. owever, any e=traordinary matters will bediscussed with you in advance so that you may have anestimate of the amount that might be involved before makingany commitments.

If the above arrangement is acceptable to you, please sign,date and return the enclosed duplicate copy of this letter forour +le.

Hery truly yours,

-A'/I0@Y Z $@'@Y

AK >FFIC@

by:

igned"

@'0@/> H. $@'@Y

/he above arrangement is acceptable:

igned"!4 Euly !4

It is clear from this agreement that Atty. $erezQs authorityto represent Han /west does not include a special authority toenter into the uestioned compromise agreement as reuiredby 'ule !23, [(2 which provides:

Authorit% of attorne%s to -ind clients. Attorneys haveauthority to bind their clients in any case by any agreement inrelation thereto made in writing, and in taking appeals, and inall matters of ordinary Dudicial procedure. ut they cannot,without special authority, compromise their clientQs litigation,or receive anything in discharge of a clientQs claim but the fullamount in cash.

Indeed, a special power of attorney constituting Atty.$erez as attorney5in5fact is necessary. Art. !393 of the CivilCode provides:

A'/. !393. pecial powers of attorney are necessary in thefollowing cases:

!" /o make such payments as are not usually considered asacts of administration7

(" /o e?ect novations which put an end to obligationsalready in e=istence at the time the agency was constituted7

2" /o compromise, to submit uestions to arbitration, torenounce the right to appeal from a Dudgment, to waiveobDections to the venue of an action or to abandon aprescription already acuired7

. . . .

It is noteworthy that the action for reconveyance +led byAtty. $erez was brought not only in behalf of Han /west butalso of @uroceanic, a Duridical person from which he shouldhave secured the necessary authority to institute this caseand enter into a compromise agreement. /he law speci+cally

reuires that Duridical persons may enter into a compromiseonly in the form and with the reuisites which may benecessary to alienate their property.#;% /he power tocompromise or settle claims in favor of or against thecorporation is vested in the board of directors. #8% ence, in theabsence of any authorization from the board of directors of @uroceanic, Atty. $erez could not +le any suit in its behalf,regardless of the fact that Han /west was the former chairmanof its board.

As Atty. $erez had no authority to litigate or enter into acompromise agreement in behalf of Han /west or @uroceanic,the compromise agreement is void. In ui-an v. /utalid,#9% itwas held that a compromise agreement entered into by aperson not duly authorized to do so by the principal is voidand has no legal e?ect.

/he same is true as regards the Dudgment based on thecompromise agreement. In Alviar v. Court of 8irst nstance of 1a @nion,#3% it was held that a Dudgment based upon acompromise entered by an attorney without a specialauthority from the client is null and void. uch Dudgment maybe impugned and its e=ecution may be enDoined in anyproceeding by the party against whom it is sought to beenforced. /his principle was reiterated in #acinto v."ontesa#% and Cosmic 1um-er Corporation v. Court of

Appeals.#!4%

S'*o)/. /he Court of Appeals held that petitioner isestopped to deny the authority of Atty. $erez to represent Han

/west because petitioner knew from the start of thenegotiations for the compromise agreement that Atty. $erezhad no special power of attorney.

/he appellate court appears to have based its +nding onthe a6davit of Atty. Crispulo C. 'osacia, the lawyer whomediated the compromise agreement between Atty. $erez andpetitionerQs former counsel, Atty. )iosdado -. Allado. /hea6davit states:#!!%

AFFI)AHI/

I, C'I$&> C. '>ACIA, Filipino, of legal age and with o6cesat $enthouse, 0ortheast /ower, the Boldloop towers, >neBoldloop $laza, >rtigas Center, $asig City, after being dulysworn, depose and state that:

!. I was served a subpoena from ranch 9 of the 'egional /rial Court of -anila to appear and testify in the case

entitled: Ale=ander Han /west vs. Bloria Anacleto and Isaiasongar, Civil Case 0o. ;59(3(8 pending before said Court. Inobedience to the subpoena, I appeared before the said Courton )ecember 8, !; and learned that I was subpoenaed toattest regarding the events and discussions prior to thee=ecution of the compromise agreement among the parties insaid case, particularly on the matter of the representation of the plainti? by Atty. @rnesto H. $erez. I have been asked toe=ecute an a6davit in lieu of testimony regarding theaforesaid matter. ence, this a6davit.

(. I am a practicing lawyer and partner at the Hillareal'osacia )iWo amson and $atag aw >6ces with o6ces at the































$enthouse, 0ortheast /ower, the Boldloop /owers, >neBoldloop $laza, >rtigas Center, $asig City.

2. ometime around February or -arch !;, I was reuestedby Atty. @rnesto H. $erez, counsel of Ale=ander Han /west, tocheck with Atty. 'oberto . -endoza, a partner of the alongaernandez and Allado aw >6ces if their clients, BloriaAnacleto and Isaias ongar, would consider amicablesettlement in the case of Ale=ander Han /west vs. BloriaAnacleto and Isaias ongar, Civil Case 0o. ;59(3(8 of the'egional /rial Court of -anila.

1. Atty. -endoza informed me over the telephone that theyare open to settlement and Atty. Allado came up to our o6ceto discuss it. I then set up a meeting between Atty. $erez andAtty. Allado at my o6ce.

;. )uring the initial meeting in my o6ce, Atty. Allado askedAtty. $erez as to the person he would be talking to regardingsettlement. Atty. $erez said that his client Han /west ismissing as he alleged in the complaint and that he is therepresentative of Han /west as to the latterQs properties in the$hilippines involved in pending litigation. Asked if he holds aspecial power of attorney, Atty. $erez said that he does nothave one and that he acts on the basis of his retaineragreement as legal counsel but he could secure a specialpower of attorney from the heirs of Han /west if such is

reuired by the defendants for the settlement. Atty. Alladoreplied that a special power of attorney from the heirs wouldbe an admission that Han /west is dead. Atty. $erez insistedthat he is the only general counsel or representative asregards Han /westQs properties in the $hilippines involved inlitigation and could warrant that his acts will not berepudiated especially if the terms of the settlement arereasonable, the same is approved by the court and Dudgmentbased on compromise is issued. Kith the assurances madeby Atty. $erez that his acts will not be repudiated by Han /westor his heirs, Atty. Allado appeared satis+ed and we proceededto discuss the terms of the settlement.

8. Atty. Allado later suggested that the terms of settlement bediscussed with his clients, -s. Anacleto and @ngr.ongar. Attys. $erez, Allado and myself met with -s. Anacletoand @ngr. ongar. -s. Anacleto and @ngr. ongar alsoinuired as to the authority of Atty. $erez. Atty. $erez told -s.Anacleto and @ngr. ongar the same e=planation he gave toAtty. Allado. Apparently satis+ed, the terms of settlementwere discussed. 0o agreement came out of the +rst meeting.Another meeting was held at which Atty. $erez, Atty. Allado,-s. Anacleto and myself were present. Atty. $erez and -s.Anacleto were not able to agree on the terms during thesecond meeting.

9. After another meeting between Atty. $erez and -s.Anacleto, I was informed that the talks bogged down.

3. Atty. $erez called later and asked me to make anotherproposal with Atty. Allado, more particularly on the amount,

terms and manner of payment. /he proposal was eventuallyaccepted and the Compromise Agreement was e=ecuted byAttys. Allado and $erez on behalf of their respective clients.

. I e=ecute this a6davit to attest to the truth of theforegoing.

! Eanuary !8 at -akati City, $hilippines.

B)." C'I$&> C. '>ACIA, E'.

Ke hold that estoppel does not apply. /he a6davit of Atty. 'osacia shows that although petitionerQs former counsel

knew that Atty. $erez had no $A, said counsel nonethelessnegotiated with him because of his representation that he wasthe representative of Han /west as to the latterQs properties inthe $hilippines and that he could secure an $A from the heirsof Han /west. /his is why the negotiations did not fallthrough. $etitioner was thus well within her right in relyingupon this representation of Atty. $erez.

>f importance is paragraph ; of the compromiseagreement which provides that P#t%he signatories to thisAgreement hereby represent and warrant that they are dulyauthorized to e=ecute this Agreement.S y virtue of thisprovision, petitioner had the right to reuire Atty. $erez tosecure the necessary authority from Han /west or the latterQsheirs as well as from @uroceanic. Indeed, petitioner cannot be

faulted for treating this warranty as a condition precedent toher compliance with the compromise agreement since thereuirement of special authority is mandatory#!(% and alawyerQs authority to compromise cannot simply be presumed.#!2% /his is the thrust of the urgent omnibus motion#!1% +led bypetitioner in the trial court in which she asked that the courtreuire Atty. $erez to show an $A in accordance withparagraph ; of their agreement. /hat this was done bypetitioner after the compromise agreement was approved bythe court is of no moment for, as Dust stated, it was the nullityof the Dudgment itself that was put in issue by petitioner.

Indeed, it may be asked, what inDury will result innullifying a contract in which one of the parties is notrepresented and where the only claim of the opposing counselis that the contracting party knew of such fact and belatedlyraised such issue\ @uity, on which the principle of estoppelis based, is simply not on the side of Atty. $erez. /he risk of sustaining the decision of the Court of Appeals is that of reuiring petitioner to pay a debt to a stranger,#!;% and wecannot Dust rely on the guaranty of Atty. $erez that he wouldhold any money he receives in the cases he has +led in trustfor Han /west and<or @uroceanic. In addition, there is nostopping Han /west and<or @uroceanic from suing petitioneragain for the same cause of action if they are unable torecover the money from Atty. $erez. In fact, the law does noteven reuire them to recognize the trust unilaterally createdby Atty. $erez or +rst seek to recover from him.

T&(/. It is nonetheless contended that, under the law,the compromise agreement, once approved by the court,becomes e=ecutory in the absence of a motion to set asidethe Dudgment thereon on the ground of fraud, mistake, etc.and that a party uestioning the Dudgment on compromisemust not only move to set aside the Dudgment but must alsomove to set aside or annul the compromise agreement itself.#!8%

/his contention has no merit. /he principles cited referto the annulment of voidable compromise agreements. uthere, the compromise agreement is void. A void contractdoes not become valid and enforceable merely because it isbased on a Dudgment upon compromise, and, as we haveheld, can be impugned in any proceeding. Ke see no need forpetitioner to wait until a writ of e=ecution is issued against her

before resorting to certiorari or petition for annulment of Dudgment to impugn the validity of the compromiseagreement.

Fourth. It is true that petitioner tried to appeal to theCourt of Appeals from the order of the trial court denying hermotion to vacate the Dudgment based on the compromiseagreement and that petitionerQs notice of appeal was +ledtwelve days late. It was for this reason that the trial courtdenied petitionerQs appeal. $etitioner, therefore, +led apetition for certiorari.

It is within the inherent power of the Court to suspend itsown rules in a particular case in order to do Dustice.#!9% Considering the obvious merit of petitionerQs cause and theunusual circumstances present in this case, the proceduralmiscalculation on the part of petitioner may be

overlooked. For euitable considerations, we have rela=ed theapplication of otherwise stringent rules by giving due courseto appeals +led out of time, #!3%treating petitionsfor certiorari as petitions for review,#!% and remanding casesfor trial even though their previous dismissal had become+nal.#(4% In the case at bar, the fact that, for all intents andpurposes, this case has been litigated up to this Court withonly one party being properly represented and the allegedcounsel for the other admits he has no authority to litigatethis case is a good reason for a liberal application of the rules.

!EREORE, the decision of the Court of Appealsdismissing petitionerQs action for certiorari is hereby'@H@'@) and, conseuently, the decision of the 'egional

/rial Court, ranch 9, -anila, based on the compromiseagreement of the parties, is A00&@) and @/ AI)@ andthe compromise agreement itself is declared without force

and e?ect.

SO ORDERED.

uisum-in, /uena, and 0e 1eon, #r., ##., concur./ellosillo, (Chairman), #., no part. 'elated to one of

parties.


























@C>0) )IHII>0

?G.R. No. 1;111. August 79, 7000@

GLORIA A. ANACLETO, petitioner, vs. ALEANDER VANTEST $)/o EUROCEANIC RAINBOENTERPRISES P!ILIPPINES, INC., respondents.

D E C I S I O N

MENDOA, J.

/his is a petition for review on certiorari of the decisionof the Court of Appeals, dated Eune (4, !9. /he facts arenot disputed. /hey are as follows:

>n February 8, !;, a complaint for reconveyance of title was +led in the name of Ale=ander Han /west and@uroceanic 'ainbow @nterprises $hilippines, Inc. @uroceanic"against petitioner Bloria A. Anacleto and Isaias -.

ongar. /he complaint +led by Atty. @rnesto H. $erez statedthat Ale=ander Han /west Phas been reported missing since

Eune !8, !( but is duly represented herein by undersignedcounsel as his agent and<or general counsel.S

>n -arch 2!, !;, Atty. $erez, in representation of Han /west, entered into a compromise agreement with Anacletoand ongar, then represented by Atty. )iosdado -.Allado. /he te=t of the agreement reads:#!%

C>-$'>-I@ AB'@@-@0/

/his Agreement e=ecuted this 2!st day of -arch, !; at-akati, -etro -anila, by and between:

A@VA0)@' HA0 /K@/, elizean, of legal age with addressat ( -ontclair treet, -erville $ark, $araWaue, -etro -anila,represented herein by Atty. @rnesto H. $erez hereinafterreferred to as Pthe plainti?S".

5and5

B>'IA A. A0AC@/> and IAIA -. >0BA', Filipinos, of legal age with address at c<o 2rd Floor, /ower , Bold oop

/win /owers, X! Bold oop treet, >rtigas Center, $asig, -etro-anila, represented herein by Atty. )iosdado Eose -. Alladohereinafter referred to as Pthe defendantsS".

ITNESSET! T&$t F

K@'@A, the plainti? Han /west and defendant Anacletohave instituted several actions against each other in the past.

K@'@A, the plainti? Han /west instituted the present actionfor reconveyance of real property, annulment of deed of saleand accounting of income of property.

K@'@A, the parties desire to buy peace and wish to avoid aprotracted litigation in this case.

0>K /@'@F>'@, in consideration of the foregoing and thefurther covenants hereinafter set forth, the parties agree asfollows:

!. $lainti? shall be paid the sum of F>&' -II>0 @IB/&0)'@) />&A0) $@> $1,344,444.44" in accordancewith the following schedule:

a. Initial payment 5 FIH@ &0)'@) />&A0) $@>$;44,444.44" shall be paid to the plainti? by defendant>0BA' upon the signing and due e=ecution of thisCompromise Agreement, $rovided, however, that the initialpayment by defendant >0BA' shall be delivered into thecustody and possession of a third party, Atty. Crispulo C.'osacia, who shall act as escrow5trustee of the parties andwho shall only deliver the said initial payment to the plainti? through plainti?Qs counsel upon the +ling in Court of thisCompromise Agreement.

b. /he balance of F>&' -II>0 /'@@ &0)'@) />&A0)$@> $1,244,444.44" shall be paid by defendant A0AC@/>as follows:

econd payment 5 >0@ -II>0 /'@@ &0)'@) />&A0)$@> $!!,244,444.44" within si=ty 84" days after the dateof the +rst payment.

/hird payment 5 >0@ -II>0 $@> $!,444,444.44" withinforty5+ve 1;" days after the date of the second payment.

Fourth payment 5 >0@ -II>0 $@> $!,444,444.44" withinforty5+ve 1;" days after the date of the third payment.

Fifth payment 5 >0@ -II>0 $@> $!,444,444.44" withinforty5+ve 1;" days after the date of the fourth payment.

(. /he initial payment by defendant >0BA' shall be made incash. /he +ve payments on the balance shall be covered bypost5dated checks drawn by defendant A0AC@/> as payableto A//L. @'0@/> H. $@'@Y who shall hold and account forsaid payments in trust for plainti? Han /west.

2. /his Compromise Agreement shall not a?ect nor preDudiceany case or cases between the parties not speci+cally referred

to herein.

1. &pon delivery of the initial payment made by defendant>0BA' and delivered to the escrow5trustee of the parties,the parties shall seek Court approval of this CompromiseAgreement and the cancellation or lifting of the notice of lis

pendens issued by the Court over the property subDect of theaction.

;. /he signatories to this Agreement hereby represent andwarrant that they are duly authorized to e=ecute thisAgreement.

8. /he parties or their assigns hereby waive, renounce andforever uitclaim all their respective claims and counterclaims

subDect of the instant action as well as those that may arisetherefrom, in connection therewith or in relation thereto.

9. /he foregoing covenants are not contrary to law, morals, orpublic policy and the parties bind themselves to complystrictly with their undertakings.

>n April 8, !;, the trial court rendered Dudgmentbased on the compromise agreement. $etitioner later +led amanifestation, submitting a copy of a special power of attorney $A".

>n Eune (, !;, petitioner, represented by new counsel,Atty. -arvin . errera, +led an urgent omnibus motion askingthe court to order Atty. $erez to submit an $A and, in themeantime, to defer petitionerQs compliance with her obligation

under the compromise agreement.

In his comment dated Eune (2, !;, Atty. $erezadmitted he had no $A from Han /west to enter into acompromise agreement. owever, he claimed thatpetitionerQs former counsel, the law +rm of alonga,ernandez and Allado, had been informed of this fact.

In an order dated -arch !9, !8, the trial court deniedpetitionerQs motion on the ground that she was estopped touestion the validity of the compromise agreementconsidering that, during the negotiations which led to thesigning of the compromise agreement, Atty. $erez haddisclosed the fact that he had no $A.

>n -ay !4, !8, petitioner +led a motion to vacate the Dudgment, but her motion was denied by the trial court. er

motion for reconsideration was likewise denied. he then +leda notice of appeal, but it was denied by the trial court on theground that the notice of appeal was +led twelve dayslate. $etitioner +led a petition for certiorari in the Court of Appeals uestioning the denial of her notice of appeal andasking that the order of the trial court denying her motion tovacate the compromise agreement be set aside. As herpetition was dismissed by the appellate court, petitioner +ledthis petition for review on certiorari.

Ke +nd the petition meritorious.

/he basic issue to be resolved here is whether a partywho enters into a compromise agreement with anotherallegedly represented by a lawyer who has no authority to





institute a litigation, much less enter into a compromiseagreement, is estopped from uestioning the validity of suchagreement.

&nder the facts of this case, and for reasons to behereafter discussed, we hold that she is not.

(st. A compromise is a contract whereby parties, bymaking reciprocal concessions, avoid a litigation or put an endto one already commenced.#(% ike any other contract,therefore, it must comply with the reuisites provided in Art.!2!3 of the Civil Code, to wit: !" consent of the contracting

parties7 (" obDect certain which is the subDect matter of thecontract7 and 2" cause of the obligation which is established.#2%

0ow, it is admitted by Atty. $erez that his only authorityto represent Han /west and @uroceanic is the retaineragreement he had with Han /west. /his agreement reads:#1%

!! Euly !4

-'. A@VA0)@' HA0 /K@/-anila

)ear. -r. Han /west:

/hank you for deciding to retain our law +rm as generalcounsel to handle your civil and criminal cases.

/he retainer will amount to $9,;44.44 per month. In order tofacilitate your account, we shall bill this retainer monthly,starting Euly, !4, if agreeable to you.

/he retainer will cover o6ce conferences, drawing of ordinarybusiness documents, contracts, deeds, and the like as well aslegal advise not reuiring substantial time e=pense on ourpart. /he retainer will not cover the trial of any litigatedmatters in court or before any administrative body. /he casesthat we will handle for you shall be subDect of a separateprogressive billings. In such cases we cannot usually

determine in advance the amount of work that will bereuired. owever, any e=traordinary matters will bediscussed with you in advance so that you may have anestimate of the amount that might be involved before makingany commitments.

If the above arrangement is acceptable to you, please sign,date and return the enclosed duplicate copy of this letter forour +le.

Hery truly yours,

-A'/I0@Y Z $@'@Y

AK >FFIC@

by:

igned"

@'0@/> H. $@'@Y

/he above arrangement is acceptable:

igned"!4 Euly !4

It is clear from this agreement that Atty. $erezQs authorityto represent Han /west does not include a special authority toenter into the uestioned compromise agreement as reuiredby 'ule !23, [(2 which provides:

Authorit% of attorne%s to -ind clients. Attorneys haveauthority to bind their clients in any case by any agreement inrelation thereto made in writing, and in taking appeals, and inall matters of ordinary Dudicial procedure. ut they cannot,without special authority, compromise their clientQs litigation,or receive anything in discharge of a clientQs claim but the fullamount in cash.

Indeed, a special power of attorney constituting Atty.$erez as attorney5in5fact is necessary. Art. !393 of the CivilCode provides:

A'/. !393. pecial powers of attorney are necessary in thefollowing cases:

!" /o make such payments as are not usually considered asacts of administration7

(" /o e?ect novations which put an end to obligationsalready in e=istence at the time the agency was constituted7

2" /o compromise, to submit uestions to arbitration, torenounce the right to appeal from a Dudgment, to waiveobDections to the venue of an action or to abandon aprescription already acuired7

. . . .

It is noteworthy that the action for reconveyance +led byAtty. $erez was brought not only in behalf of Han /west butalso of @uroceanic, a Duridical person from which he shouldhave secured the necessary authority to institute this caseand enter into a compromise agreement. /he law speci+cally

reuires that Duridical persons may enter into a compromiseonly in the form and with the reuisites which may benecessary to alienate their property.#;% /he power tocompromise or settle claims in favor of or against thecorporation is vested in the board of directors. #8% ence, in theabsence of any authorization from the board of directors of @uroceanic, Atty. $erez could not +le any suit in its behalf,regardless of the fact that Han /west was the former chairmanof its board.

As Atty. $erez had no authority to litigate or enter into acompromise agreement in behalf of Han /west or @uroceanic,the compromise agreement is void. In ui-an v. /utalid,#9% itwas held that a compromise agreement entered into by aperson not duly authorized to do so by the principal is voidand has no legal e?ect.

/he same is true as regards the Dudgment based on thecompromise agreement. In Alviar v. Court of 8irst nstance of 1a @nion,#3% it was held that a Dudgment based upon acompromise entered by an attorney without a specialauthority from the client is null and void. uch Dudgment maybe impugned and its e=ecution may be enDoined in anyproceeding by the party against whom it is sought to beenforced. /his principle was reiterated in #acinto v."ontesa#% and Cosmic 1um-er Corporation v. Court of

Appeals.#!4%

S'*o)/. /he Court of Appeals held that petitioner isestopped to deny the authority of Atty. $erez to represent Han

/west because petitioner knew from the start of thenegotiations for the compromise agreement that Atty. $erezhad no special power of attorney.

/he appellate court appears to have based its +nding onthe a6davit of Atty. Crispulo C. 'osacia, the lawyer whomediated the compromise agreement between Atty. $erez andpetitionerQs former counsel, Atty. )iosdado -. Allado. /hea6davit states:#!!%

AFFI)AHI/

I, C'I$&> C. '>ACIA, Filipino, of legal age and with o6cesat $enthouse, 0ortheast /ower, the Boldloop towers, >neBoldloop $laza, >rtigas Center, $asig City, after being dulysworn, depose and state that:

!. I was served a subpoena from ranch 9 of the 'egional /rial Court of -anila to appear and testify in the case

entitled: Ale=ander Han /west vs. Bloria Anacleto and Isaiasongar, Civil Case 0o. ;59(3(8 pending before said Court. Inobedience to the subpoena, I appeared before the said Courton )ecember 8, !; and learned that I was subpoenaed toattest regarding the events and discussions prior to thee=ecution of the compromise agreement among the parties insaid case, particularly on the matter of the representation of the plainti? by Atty. @rnesto H. $erez. I have been asked toe=ecute an a6davit in lieu of testimony regarding theaforesaid matter. ence, this a6davit.

(. I am a practicing lawyer and partner at the Hillareal'osacia )iWo amson and $atag aw >6ces with o6ces at the































$enthouse, 0ortheast /ower, the Boldloop /owers, >neBoldloop $laza, >rtigas Center, $asig City.

2. ometime around February or -arch !;, I was reuestedby Atty. @rnesto H. $erez, counsel of Ale=ander Han /west, tocheck with Atty. 'oberto . -endoza, a partner of the alongaernandez and Allado aw >6ces if their clients, BloriaAnacleto and Isaias ongar, would consider amicablesettlement in the case of Ale=ander Han /west vs. BloriaAnacleto and Isaias ongar, Civil Case 0o. ;59(3(8 of the'egional /rial Court of -anila.

1. Atty. -endoza informed me over the telephone that theyare open to settlement and Atty. Allado came up to our o6ceto discuss it. I then set up a meeting between Atty. $erez andAtty. Allado at my o6ce.

;. )uring the initial meeting in my o6ce, Atty. Allado askedAtty. $erez as to the person he would be talking to regardingsettlement. Atty. $erez said that his client Han /west ismissing as he alleged in the complaint and that he is therepresentative of Han /west as to the latterQs properties in the$hilippines involved in pending litigation. Asked if he holds aspecial power of attorney, Atty. $erez said that he does nothave one and that he acts on the basis of his retaineragreement as legal counsel but he could secure a specialpower of attorney from the heirs of Han /west if such is

reuired by the defendants for the settlement. Atty. Alladoreplied that a special power of attorney from the heirs wouldbe an admission that Han /west is dead. Atty. $erez insistedthat he is the only general counsel or representative asregards Han /westQs properties in the $hilippines involved inlitigation and could warrant that his acts will not berepudiated especially if the terms of the settlement arereasonable, the same is approved by the court and Dudgmentbased on compromise is issued. Kith the assurances madeby Atty. $erez that his acts will not be repudiated by Han /westor his heirs, Atty. Allado appeared satis+ed and we proceededto discuss the terms of the settlement.

8. Atty. Allado later suggested that the terms of settlement bediscussed with his clients, -s. Anacleto and @ngr.ongar. Attys. $erez, Allado and myself met with -s. Anacletoand @ngr. ongar. -s. Anacleto and @ngr. ongar alsoinuired as to the authority of Atty. $erez. Atty. $erez told -s.Anacleto and @ngr. ongar the same e=planation he gave toAtty. Allado. Apparently satis+ed, the terms of settlementwere discussed. 0o agreement came out of the +rst meeting.Another meeting was held at which Atty. $erez, Atty. Allado,-s. Anacleto and myself were present. Atty. $erez and -s.Anacleto were not able to agree on the terms during thesecond meeting.

9. After another meeting between Atty. $erez and -s.Anacleto, I was informed that the talks bogged down.

3. Atty. $erez called later and asked me to make anotherproposal with Atty. Allado, more particularly on the amount,

terms and manner of payment. /he proposal was eventuallyaccepted and the Compromise Agreement was e=ecuted byAttys. Allado and $erez on behalf of their respective clients.

. I e=ecute this a6davit to attest to the truth of theforegoing.

! Eanuary !8 at -akati City, $hilippines.

B)." C'I$&> C. '>ACIA, E'.

Ke hold that estoppel does not apply. /he a6davit of Atty. 'osacia shows that although petitionerQs former counsel

knew that Atty. $erez had no $A, said counsel nonethelessnegotiated with him because of his representation that he wasthe representative of Han /west as to the latterQs properties inthe $hilippines and that he could secure an $A from the heirsof Han /west. /his is why the negotiations did not fallthrough. $etitioner was thus well within her right in relyingupon this representation of Atty. $erez.

>f importance is paragraph ; of the compromiseagreement which provides that P#t%he signatories to thisAgreement hereby represent and warrant that they are dulyauthorized to e=ecute this Agreement.S y virtue of thisprovision, petitioner had the right to reuire Atty. $erez tosecure the necessary authority from Han /west or the latterQsheirs as well as from @uroceanic. Indeed, petitioner cannot be

faulted for treating this warranty as a condition precedent toher compliance with the compromise agreement since thereuirement of special authority is mandatory#!(% and alawyerQs authority to compromise cannot simply be presumed.#!2% /his is the thrust of the urgent omnibus motion#!1% +led bypetitioner in the trial court in which she asked that the courtreuire Atty. $erez to show an $A in accordance withparagraph ; of their agreement. /hat this was done bypetitioner after the compromise agreement was approved bythe court is of no moment for, as Dust stated, it was the nullityof the Dudgment itself that was put in issue by petitioner.

Indeed, it may be asked, what inDury will result innullifying a contract in which one of the parties is notrepresented and where the only claim of the opposing counselis that the contracting party knew of such fact and belatedlyraised such issue\ @uity, on which the principle of estoppelis based, is simply not on the side of Atty. $erez. /he risk of sustaining the decision of the Court of Appeals is that of reuiring petitioner to pay a debt to a stranger,#!;% and wecannot Dust rely on the guaranty of Atty. $erez that he wouldhold any money he receives in the cases he has +led in trustfor Han /west and<or @uroceanic. In addition, there is nostopping Han /west and<or @uroceanic from suing petitioneragain for the same cause of action if they are unable torecover the money from Atty. $erez. In fact, the law does noteven reuire them to recognize the trust unilaterally createdby Atty. $erez or +rst seek to recover from him.

T&(/. It is nonetheless contended that, under the law,the compromise agreement, once approved by the court,becomes e=ecutory in the absence of a motion to set asidethe Dudgment thereon on the ground of fraud, mistake, etc.and that a party uestioning the Dudgment on compromisemust not only move to set aside the Dudgment but must alsomove to set aside or annul the compromise agreement itself.#!8%

/his contention has no merit. /he principles cited referto the annulment of voidable compromise agreements. uthere, the compromise agreement is void. A void contractdoes not become valid and enforceable merely because it isbased on a Dudgment upon compromise, and, as we haveheld, can be impugned in any proceeding. Ke see no need forpetitioner to wait until a writ of e=ecution is issued against her

before resorting to certiorari or petition for annulment of Dudgment to impugn the validity of the compromiseagreement.

Fourth. It is true that petitioner tried to appeal to theCourt of Appeals from the order of the trial court denying hermotion to vacate the Dudgment based on the compromiseagreement and that petitionerQs notice of appeal was +ledtwelve days late. It was for this reason that the trial courtdenied petitionerQs appeal. $etitioner, therefore, +led apetition for certiorari.

It is within the inherent power of the Court to suspend itsown rules in a particular case in order to do Dustice.#!9% Considering the obvious merit of petitionerQs cause and theunusual circumstances present in this case, the proceduralmiscalculation on the part of petitioner may be

overlooked. For euitable considerations, we have rela=ed theapplication of otherwise stringent rules by giving due courseto appeals +led out of time, #!3%treating petitionsfor certiorari as petitions for review,#!% and remanding casesfor trial even though their previous dismissal had become+nal.#(4% In the case at bar, the fact that, for all intents andpurposes, this case has been litigated up to this Court withonly one party being properly represented and the allegedcounsel for the other admits he has no authority to litigatethis case is a good reason for a liberal application of the rules.

!EREORE, the decision of the Court of Appealsdismissing petitionerQs action for certiorari is hereby'@H@'@) and, conseuently, the decision of the 'egional

/rial Court, ranch 9, -anila, based on the compromiseagreement of the parties, is A00&@) and @/ AI)@ andthe compromise agreement itself is declared without force

and e?ect.

SO ORDERED.

uisum-in, /uena, and 0e 1eon, #r., ##., concur./ellosillo, (Chairman), #., no part. 'elated to one of

parties.


























G.R. No. 1066= August 17, 700

OODC!ILD !OLDINGS, INC., petitioner, vs.ROAS ELECTRIC AND CONSTRUCTION COMPAN",INC., respondent.

) @ C I I > 0 : CALLEQO, SR., J.

/his is a petition for review on certiorari of the )ecision! of theCourt of Appeals in CA5B.'. CH 0o. ;8!(; reversing the)ecision( of the 'egional /rial Court of -akati, ranch ;9,which ruled in favor of the petitioner.

T&' A)t'*'/')ts

/he respondent 'o=as @lectric and Construction Company,Inc. '@CCI", formerly the 'o=as @lectric and ConstructionCompany, was the

owner of two parcels of land, identi+ed as ot 0o. 1!5A5255!covered by /ransfer Certi+cate of /itle /C/" 0o. 9343; andot 0o. 1!5A5255( covered by /C/ 0o. 93438. A portion of ot 0o. 1!5A5255! which abutted ot 0o. 1!5A5255( was a

dirt road accessing to the umulong ighway, Antipolo, 'izal.

At a special meeting on -ay !9, !!, the respondentGs oardof )irectors approved a resolution authorizing the corporation,through its president, 'oberto . 'o=as, to sell ot 0o. 1!5A5255( covered by /C/ 0o. 93438, with an area of 9,(!2 suaremeters, at a price and under such terms and conditions whichhe deemed most reasonable and advantageous to thecorporation7 and to e=ecute, sign and deliver the pertinentsales documents and receive the proceeds of the sale for andon behalf of the company.2

$etitioner Koodchild oldings, Inc. KI" wanted to buy ot0o. 1!5A5255( covered by /C/ 0o. 93438 on which itplanned to construct its warehouse building, and a portion of

the adDoining lot, ot 0o. 1!5A5255!, so that its 1;5footcontainer van would be able to readily enter or leave theproperty. In a etter to 'o=as dated Eune (!, !!, KI$resident Eonathan L. )y o?ered to buy ot 0o. 1!5A5255(under stated terms and conditions for $!,444 per suaremeter or at the price of $9,(!2,444.1 >ne of the termsincorporated in )yGs o?er was the following provision:

;. /his >?er to $urchase is made on therepresentation and warranty of the >K0@'<@@',that he holds a good and registrable title to theproperty, which shall be conveyed C@A' and F'@@of all liens and encumbrances, and that the area of 9,(!2 suare meters of the subDect property alreadyincludes the area on which the right of way traversesfrom the main lot area" towards the e=it to the

umulong ighway as shown in the location planfurnished by the >wner<eller to the buyer.Furthermore, in the event that the right of way isinsu6cient for the buyerGs purposes e=ample: entryof a 1;5foot container", the seller agrees to selladditional suare meter from his current adDacentproperty to allow the buyer to full access and full useof the property.;

'o=as indicated his acceptance of the o?er on page ( of thedeed. ess than a month later or on Euly !, !!, 'o=as, as$resident of '@CCI, as vendor, and )y, as $resident of KI, asvendee, e=ecuted a contract to sell in which '@CCI bound andobliged itself to sell to )y ot 0o. 1!5A5255( covered by /C/0o. 93438 for $9,(!2,444.8>n eptember ;, !!, a )eed of Absolute ale9 in favor of KI was issued, under which ot 0o.

1!5A5255( covered by /C/ 0o. 93438 was sold for$;,444,444, receipt of which was acknowledged by 'o=asunder the following terms and conditions:

/he Hendor agree sic", as it hereby agrees and bindsitself to give Hendee the bene+cial use of and a rightof way from umulong ighway to the propertyherein conveyed consists of (; suare meters wideto be used as the latterGs egress from and ingress toand an additional (; suare meters in the corner of ot 0o. 1!5A5255!, as turning and<or maneuveringarea for HendeeGs vehicles.

/he Hendor agrees that in the event that the right of way is insu6cient for the HendeeGs use e= entry of a1;5foot container" the Hendor agrees to selladditional suare meters from its current adDacentproperty to allow the Hendee full access and full useof the property.

] /he Hendor hereby undertakes and agrees, at itsaccount, to defend the title of the Hendee to theparcel of land and improvements herein conveyed,against all claims of any and all persons or entities,and that the Hendor hereby warrants the right of theHendee to possess and own the said parcel of landand improvements thereon and will defend theHendee against all present and future claims and<oraction in relation thereto, Dudicial and<oradministrative. In particular, the Hendor shall eDect alle=isting suatters and occupants of the premiseswithin two (" weeks from the signing hereof. In caseof failure on the part of the Hendor to eDect alloccupants and suatters within the two5week periodor breach of any of the stipulations, covenants andterms and conditions herein provided and that of contract to sell dated ! Euly !!, the Hendee shallhave the right to cancel the sale and demandreimbursement for all payments made to the Hendorwith interest thereon at 28N per annum.3

>n eptember !4, !!, the Kimbeco uilderGs, Inc. KI"submitted its uotation for $3,81,444 to KI for theconstruction of the warehouse building on a portion of theproperty with an area of ;,433 suare meters. KI proposedto start the proDect on >ctober !, !! and to turn over thebuilding to KI on February (, !(.!4

In a etter dated eptember !8, !!, $onderosa eatherBoods Company, Inc. con+rmed its lease agreement with KIof a ;,4445suare5meter portion of the warehouse yet to beconstructed at the rental rate of $8; per suare meter.$onderosa emphasized the need for the warehouse to beready for occupancy before April !, !(.!! KI accepted theo?er. owever, KI failed to commence the construction of

the warehouse in >ctober !, !! as planned because of thepresence of suatters in the property and suggested arenegotiation of the contract after the suatters shall havebeen evicted.!( ubseuently, the suatters were evicted fromthe property.

>n -arch 2!, !(, KI and KI e=ecuted a etter5Contractfor the construction of the warehouse building for$!!,341,!84.!2 /he contractor started construction in April!( even before the building o6cials of Antipolo City issueda building permit on -ay (3, !(. After the warehouse was+nished, KI issued on -arch (!, !2 a certi+cate of occupancy by the building o6cial. @arlier, or on -arch !3,!2, KI, as lessor, and $onderosa, as lessee, e=ecuted acontract of lease over a portion of the property for a monthlyrental of $244,444 for a period of three years from -arch !,

!2 up to February (3, !8.!1

In the meantime, KI complained to 'oberto 'o=as that thevehicles of '@CCI were parked on a portion of the propertyover which KI had been granted a right of way. 'o=aspromised to look into the matter. )y and 'o=as discussed theneed of the KI to buy a ;445suare5meter portion of ot 0o.1!5A5255! covered by /C/ 0o. 9343; as provided for in thedeed of absolute sale. owever, 'o=as died soon thereafter.>n April !;, !(, the KI wrote the '@CCI, reiterating itsverbal reuests to purchase a portion of the said lot asprovided for in the deed of absolute sale, and complainedabout the latterGs failure to eDect the suatters within thethree5month period agreed upon in the said deed.

/he KI demanded that the '@CCI sell a portion of ot 0o.1!5A5255! covered by /C/ 0o. 9343; for its bene+cial usewithin 9( hours from notice thereof, otherwise the appropriateaction would be +led against it. '@CCI reDected the demand of KI. KI reiterated its demand in a etter dated -ay (,!(. /here was no response from '@CCI.

>n Eune !9, !(, the KI +led a complaint against the '@CCIwith the 'egional /rial Court of -akati, for speci+cperformance and damages, and alleged, inter alia, thefollowing in its complaint:

;. /he current adDacent property referred to in theaforeuoted paragraph of the )eed of Absolute ale

http://www.lawphil.net/judjuris/juri2004/aug2004/gr_140667_2004.html#fnt1




































pertains to the property covered by /ransferCerti+cate of /itle 0o. 059343; of the 'egistry of )eeds of Antipolo, 'izal, registered in the name of herein defendant 'o=as @lectric.

8. )efendant 'o=as @lectric in patent violation of thee=press and valid terms of the )eed of Absolute aleunDusti+ably refused to deliver to Koodchild oldingsthe stipulated bene+cial use and right of wayconsisting of (; suare meters and ;; suare metersto the preDudice of the plainti?.

9. imilarly, in as much as the (; suare meters and;; suare meters alloted to Koodchild oldings forits bene+cial use is inadeuate as turning and<ormaneuvering area of its 1;5foot container van,Koodchild oldings manifested its intention pursuantto para. ; of the )eed of ale to purchase additionalsuare meters from 'o=as @lectric to allow it fullaccess and use of the purchased property, however,'o=as @lectric refused and failed to merit KoodchildoldingsG reuest contrary to defendant 'o=as@lectricGs obligation under the )eed of Absolute aleAnne= A".

3. -oreover, defendant, likewise, failed to eDect alle=isting suatters and occupants of the premises

within the stipulated time frame and as aconseuence thereof, plainti?Gs planned constructionhas been considerably delayed for seven 9" monthsdue to the suatters who continue to trespass andobstruct the subDect property, thereby Koodchildoldings incurred substantial losses amounting to$2,;84,444.44 occasioned by the increased cost of construction materials and labor.

. >wing further to 'o=as @lectricGs deliberate refusalto comply with its obligation under Anne= A,Koodchild oldings su?ered unrealized income of $244,444.44 a month or $(,!44,444.44 supposedincome from rentals of the subDect property for seven9" months.

!4. >n April !;, !(, Koodchild oldings made a+nal demand to 'o=as @lectric to comply with itsobligations and warranties under the )eed of Absolute ale but notwithstanding such demand,defendant 'o=as @lectric refused and failed andcontinue to refuse and fail to heed plainti?Gs demandfor compliance.

Copy of the demand letter dated April !;, !( ishereto attached as Anne= and made an integralpart hereof.

!!. Finally, on ( -ay !!, Koodchild oldingsmade a letter reuest addressed to 'o=as @lectric toparticularly annotate on /ransfer Certi+cate of /itle0o. 059343; the agreement under Anne= A withrespect to the bene+cial use and right of way,however, 'o=as @lectric unDusti+ably ignored anddisregarded the same.

Copy of the letter reuest dated ( -ay !( ishereto attached as Anne= C and made an integralpart hereof.

!(. y reason of 'o=as @lectricGs continuous refusaland failure to comply with Koodchild oldingsG validdemand for compliance under Anne= A, the latterwas constrained to litigate, thereby incurringdamages as and by way of attorneyGs fees in theamount of $!44,444.44 plus costs of suit and

e=penses of litigation.!;

/he KI prayed that, after due proceedings, Dudgment berendered in its favor, thus:

K@'@F>'@, it is respectfully prayed that Dudgmentbe rendered in favor of Koodchild oldings andordering 'o=as @lectric the following:

a" to deliver to Koodchild oldings the bene+cial useof the stipulated (; suare meters and ;; suaremeters7

b" to sell to Koodchild oldings additional (; and!44 suare meters to allow it full access and use of the purchased property pursuant to para. ; of the)eed of Absolute ale7

c" to cause annotation on /ransfer Certi+cate of /itle0o. 059343; the bene+cial use and right of waygranted to Koodchild oldings under the )eed of Absolute ale7

d" to pay Koodchild oldings the amount of

$;,884,444.44, representing actual damages andunrealized income7

e" to pay attorneyGs fees in the amount of $!44,444.447 and

f" to pay the costs of suit.

>ther reliefs Dust and euitable are prayed for.!8

In its answer to the complaint, the '@CCI alleged that it neverauthorized its former president, 'oberto 'o=as, to grant thebene+cial use of any portion of ot 0o. 1!5A5255!, noragreed to sell any portion thereof or create a lien or burden

thereon. It alleged that, under the 'esolution approved on-ay !9, !!, it merely authorized 'o=as to sell ot 0o. 1!5A5255( covered by /C/ 0o. 93438. As such, the grant of aright of way and the agreement to sell a portion of ot 0o.1!5A5255! covered by /C/ 0o. 9343; in the said deedare ultra vires. /he '@CCI further alleged that the provisiontherein that it would sell a portion of ot 0o. 1!5A5255! tothe KI lacked the essential elements of a binding contract.!9

In its amended answer to the complaint, the '@CCI allegedthat the delay in the construction of its warehouse buildingwas due to the failure of the KIGs contractor to secure abuilding permit thereon.!3

)uring the trial, )y testi+ed that he told 'o=as that thepetitioner was buying a portion of ot 0o. 1!5A5255!consisting of an area of ;44 suare meters, for the price of $!,444 per suare meter.

>n 0ovember !!, !8, the trial court rendered Dudgment infavor of the KI, the decretal portion of which reads:

K@'@F>'@, Dudgment is hereby rendered directingdefendant:!" /o allow plainti? the bene+cial use of the e=istingright of way plus the stipulated (; s. m. and ;; s.m.7(" /o sell to plainti? an additional area of ;44 s. m.priced at $!,444 per s. m. to allow said plainti? fullaccess and use of the purchased property pursuantto $ar. ; of their )eed of Absolute ale7

2" /o cause annotation on /C/ 0o. 059343; thebene+cial use and right of way granted by their )eedof Absolute ale71" /o pay plainti? the amount of $;,;83,444representing actual damages and plainti?Gsunrealized income7;" /o pay plainti? $!44,444 representing attorneyGsfees7 and

/o pay the costs of suit.> >')@'@).!

/he trial court ruled that the '@CCI was estopped fromdisowning the apparent authority of 'o=as under the -ay !9,!! 'esolution of its oard of )irectors. /he court reasonedthat to do so would preDudice the KI which transacted with'o=as in good faith, believing that he had the authority to

bind the KI relating to the easement of right of way, as wellas the right to purchase a portion of ot 0o. 1!5A5255!covered by /C/ 0o. 9343;.

/he '@CCI appealed the decision to the CA, which rendered adecision on 0ovember , ! reversing that of the trial court,and ordering the dismissal of the complaint. /he CA ruledthat, under the resolution of the oard of )irectors of the'@CCI, 'o=as was merely authorized to sell ot 0o. 1!5A5255( covered by /C/ 0o. 93438, but not to grant right of way infavor of the KI over a portion of ot 0o. 1!5A5255!, or togrant an option to the petitioner to buy a portion thereof. /heappellate court also ruled that the grant of a right of way andan option to the respondent were so lopsided in favor of the














respondent because the latter was authorized to += thelocation as well as the price of the portion of its property to besold to the respondent. ence, such provisions contained inthe deed of absolute sale were not binding on the '@CCI. /heappellate court ruled that the delay in the construction of KIGs warehouse was due to its fault.

/he $resent $etition

/he petitioner now comes to this Court asserting that:

I.

/@ C>&'/ >F A$$@A @''@) I0 >)I0B /A/ /@ )@@) >F A>&/@ A@ @V. C" I &/'AHI'@.

II.

/@ C>&'/ >F A$$@A B'AH@L @''@) I0'@H@'I0B /@ '&I0B >F /@ C>&'/ A J&>A>KI0B /@ $AI0/IFF5A$$@@@ /@ @0@FICIA&@ >F /@ @VI/I0B 'IB/ >F KAL $& /@/I$&A/@) (; J&A'@ -@/@' A0) ;; J&A'@-@/@' @CA&@ /@@ A'@ HAI) /I$&A/I>0

AB'@@) L >/ $A'/I@ /> /@ )@@) >FA>&/@ A@ @V. C".

III.

/@'@ I 0> FAC/&A $'>>F >' @HI)@0C@ F>' /@C>&'/ >F A$$@A /> '&@ /A/ /@/I$&A/I>0 >F /@ )@@) >F A>&/@ A@@V. C" K@'@ )IA)HA0/AB@>& /> /@A$$@@@, 0>' KA A$$@@@ )@$'IH@) >F I/$'>$@'/L KI/>&/ )&@ $'>C@.

IH.

I0 FAC/, I/ KA K>>)CI) K> KA )@$'IH@)>F $'>$@'/L KI/>&/ )&@ $'>C@ L /@AAI@) )@CII>0.

H.

/@ )@AL I0 /@ C>0/'&C/I>0 KA )&@ /> /@FAI&'@ >F /@ A$$@A0/ /> @HIC/ /@J&A//@' >0 /@ A0) A AB'@@) I0 /@ )@@)>F A>&/@ A@ @V. C".

HI.

/@ C>&'/ >F A$$@A B'AH@L @''@) I0'@H@'I0B /@ '&I0B >F /@ C>&'/ A J&>

)I'@C/I0B /@ )@F@0)A0/ /> $AL /@ $AI0/IFF /@ A->&0/ >F $;,;83,444.44 '@$'@@0/I0BAC/&A )A-AB@ A0) $AI0/IFFG &0'@AIY@)I0C>-@ A K@ A A//>'0@LG F@@.(4

/he threshold issues for resolution are the following: a"whether the respondent is bound by the provisions in thedeed of absolute sale granting to the petitioner bene+cial useand a right of way over a portion of ot

0o. 1!5A5255! accessing to the umulong ighway andgranting the option to the petitioner to buy a portion thereof,and, if so, whether such agreement is enforceable against therespondent7 b" whether the respondent failed to eDect thesuatters on its property within two weeks from the e=ecution

of the deed of absolute sale7 and, c" whether the respondentis liable to the petitioner for damages.

>n the +rst issue, the petitioner avers that, under its'esolution of -ay !9, !!, the respondent authorized 'o=as,then its president, to grant a right of way over a portion of ot0o. 1!5A5255! in favor of the petitioner, and an option forthe respondent to buy a portion of the said property. /hepetitioner contends that when the respondent sold ot 0o.1!5A5255( covered by /C/ 0o. 93438, it respondent" waswell aware of its obligation to provide the petitioner with ameans of ingress to or egress from the property to theumulong ighway, since the latter had no adeuate outlet tothe public highway. /he petitioner asserts that it agreed to

buy the property covered by /C/ 0o. 9343; because of thegrant by the respondent of a right of way and an option in itsfavor to buy a portion of the property covered by /C/ 0o.9343;. It contends that the respondent never obDected to'o=asG acceptance of its o?er to purchase the property andthe terms and conditions therein7 the respondent evenallowed 'o=as to e=ecute the deed of absolute sale in itsbehalf. /he petitioner asserts that the respondent evenreceived the purchase price of the property without anyobDection to the terms and conditions of the said deed of sale.

/he petitioner claims that it acted in good faith, and contendsthat after having been bene+ted by the said sale, the

respondent is estopped from assailing its terms andconditions. /he petitioner notes that the respondentGs oardof )irectors never approved any resolution reDecting the deedof absolute sale e=ecuted by 'o=as for and in its behalf. Assuch, the respondent is obliged to sell a portion of ot 0o.1!5A5255! covered by /C/ 0o. 9343; with an area of ;44suare meters at the price of $!,444 per suare meter, basedon its evidence and Articles 81 and 8;! of the 0ew CivilCode.

For its part, the respondent posits that 'o=as was not soauthorized under the -ay !9, !! 'esolution of its oard of )irectors to impose a burden or to grant a right of way infavor of the petitioner on ot 0o. 1!5A5255!, much lessconvey a portion thereof to the petitioner. ence, therespondent was not bound by such provisions contained in the

deed of absolute sale. esides, the respondent contends, thepetitioner cannot enforce its right to buy a portion of the saidproperty since there was no agreement in the deed of absolute sale on the price thereof as well as the speci+cportion and area to be purchased by the petitioner.

Ke agree with the respondent.

In &an #uan &tructural and &teel 8a-ricators, nc. v. Court of Appeals,(! we held that:

A corporation is a Duridical person separate anddistinct from its stockholders or members.Accordingly, the property of the corporation is notthe property of its stockholders or members and maynot be sold by the stockholders or members withoute=press authorization from the corporationGs board of directors. ection (2 of $ 83, otherwise known asthe Corporation Code of the $hilippines, provides:

@C. (2. $he /oard of 0irectors or $rustees.^ &nless otherwise provided in this Code,the corporate powers of all corporationsformed under this Code shall be e=ercised,all business conducted and all property of such corporations controlled and held by theboard of directors or trustees to be electedfrom among the holders of stocks, or wherethere is no stock, from among the membersof the corporation, who shall hold o6ce forone !" year and until their successors areelected and uali+ed.

Indubitably, a corporation may act only through itsboard of directors or, when authorized either by itsby5laws or by its board resolution, through its o6cersor agents in the normal course of business. /hegeneral principles of agency govern the relationbetween the corporation and its o6cers or agents,subDect to the articles of incorporation, by5laws, orrelevant provisions of law. ]((

Benerally, the acts of the corporate o6cers within the scopeof their authority are binding on the corporation. owever,under Article !!4 of the 0ew Civil Code, acts done by sucho6cers beyond the scope of their authority cannot bind the

corporation unless it has rati+ed such acts e=pressly or tacitly,or is estopped from denying them:

Art. !!4. /he principal must comply with all theobligations which the agent may have contractedwithin the scope of his authority.

As for any obligation wherein the agent hase=ceeded his power, the principal is not bounde=cept when he rati+es it e=pressly or tacitly.

/hus, contracts entered into by corporate o6cersbeyond the scope of authority are unenforceable











against the corporation unless rati+ed by thecorporation.(2

In /A 8inance Corporation v. Court of Appeals,(1 we also ruledthat persons dealing with an assumed agency, whether theassumed agency be a general or special one, are bound attheir peril, if they would hold the principal liable, to ascertainnot only the fact of agency but also the nature and e=tent of authority, and in case either is controverted, the burden of proof is upon them to establish it.

In this case, the respondent denied authorizing its thenpresident 'oberto . 'o=as to sell a portion of ot 0o. 1!5A5255! covered by /C/ 0o. 9343;, and to create a lien or burdenthereon. /he petitioner was thus burdened to prove that therespondent so authorized 'o=as to sell the same and to createa lien thereon.

Central to the issue at hand is the -ay !9, !! 'esolution of the oard of )irectors of the respondent, which is worded asfollows:

'@>H@), as it is hereby resolved, that thecorporation, thru the $resident, sell to any interestedbuyer, its 9,(!25s.5meter property at the umulongighway, Antipolo, 'izal, covered by /ransfer

Certi+cate of /itle 0o. 0593438, at a price and onterms and conditions which he deems mostreasonable and advantageous to the corporation7

F&'/@' '@>H@), that -r. '>@'/> . '>VA,$resident of the corporation, be, as he is herebyauthorized to e=ecute, sign and deliver the pertinentsales documents and receive the proceeds of sale forand on behalf of the company.(;

@vidently, 'o=as was not speci+cally authorized under thesaid resolution to grant a right of way in favor of the petitioneron a portion of ot 0o. 1!5A5255! or to agree to sell to thepetitioner a portion thereof. /he authority of 'o=as, under theresolution, to sell ot 0o. 1!5A5255( covered by /C/ 0o.93438 did not include the authority to sell a portion of theadDacent lot, ot 0o. 1!5A5255!, or to create or convey realrights thereon. 0either may such authority be implied fromthe authority granted to 'o=as to sell ot 0o. 1!5A5255( tothe petitioner on such terms and conditions which he deemsmost reasonable and advantageous. &nder paragraph !(,Article !393 of the 0ew Civil Code, a special power of attorneyis reuired to convey real rights over immovableproperty.(8 Article !2;3 of the 0ew Civil Code reuires thatcontracts which have for their obDect the creation of real rightsover immovable property must appear in a publicdocument.(9 /he petitioner cannot feign ignorance of the needfor 'o=as to have been speci+cally authorized in writing bythe oard of )irectors to be able to validly grant a right of way and agree to sell a portion of ot 0o. 1!5A5255!. /herule is that if the act of the agent is one which reuiresauthority in writing, those dealing with him are charged with

notice of that fact.(3

$owers of attorney are generally construed strictly and courtswill not infer or presume broad powers from deeds which donot su6ciently include property or subDect under which theagent is to deal.( /he general rule is that the power of attorney must be pursued within legal strictures, and theagent can neither go beyond it7 nor beside it. /he act donemust be legally identical with that authorized to be done. 24 Insum, then, the consent of the respondent to the assailedprovisions in the deed of absolute sale was not obtained7hence, the assailed provisions are not binding on it.

Ke reDect the petitionerGs submission that, in allowing 'o=asto e=ecute the contract to sell and the deed of absolute sale

and failing to reDect or disapprove the same, the respondentthereby gave him apparent authority to grant a right of wayover ot 0o. 1!5A5255! and to grant an option for therespondent to sell a portion thereof to the petitioner. Absentestoppel or rati+cation, apparent authority cannot remedy thelack of the written power reuired under the statement of frauds.2! In addition, the petitionerGs fallacy is its wrongassumption of the unproved premise that the respondent hadfull knowledge of all the terms and conditions contained in thedeed of absolute sale when 'o=as e=ecuted it.

It bears stressing that apparent authority is based on estoppeland can arise from two instances: +rst, the principal mayknowingly permit the agent to so hold himself out as having

such authority, and in this way, the principal becomesestopped to claim that the agent does not have suchauthority7 second, the principal may so clothe the agent withthe indicia of authority as to lead a reasonably prudent personto believe that he actually has such authority.2( /here can beno apparent authority of an agent without acts or conduct onthe part of the principal and such acts or conduct of theprincipal must have been known and relied upon in good faithand as a result of the e=ercise of reasonable prudence by athird person as claimant and such must have produced achange of position to its detriment. /he apparent power of anagent is to be determined by the acts of the principal and not

by the acts of the agent.22

For the principle of apparent authority to apply, the petitionerwas burdened to prove the following: a" the acts of therespondent Dustifying belief in the agency by the petitioner7b" knowledge thereof by the respondent which is sought tobe held7 and, c" reliance thereon by the petitioner consistentwith ordinary care and prudence.21 In this case, there is noevidence on record of speci+c acts made by therespondent2; showing or indicating that it had full knowledgeof any representations made by 'o=as to the petitioner thatthe respondent had authorized him to grant to the respondentan option to buy a portion of ot 0o. 1!5A5255! covered by

/C/ 0o. 9343;, or to create a burden or lien thereon, or thatthe respondent allowed him to do so.

/he petitionerGs contention that by receiving and retaining the$;,444,444 purchase price of ot 0o. 1!5A5255(, therespondent e?ectively and impliedly rati+ed the grant of aright of way on the adDacent lot, ot 0o. 1!5A5255!, and togrant to the petitioner an option to sell a portion thereof, isbarren of merit. It bears stressing that the respondent sold ot0o. 1!5A5255( to the petitioner, and the latter had takenpossession of the property. As such, the respondent had theright to retain the $;,444,444, the purchase price of theproperty it had sold to the petitioner. For an act of theprincipal to be considered as an implied rati+cation of anunauthorized act of an agent, such act must be inconsistentwith any other hypothesis than that he approved andintended to adopt what had been done in hisname.28 'ati+cation is based on waiver ^ the intentionalrelinuishment of a known right. 'ati+cation cannot beinferred from acts that a principal has a right to doindependently of the unauthorized act of the agent. -oreover,if a writing is reuired to grant an authority to do a particularact, rati+cation of that act must also be in writing. 29 ince therespondent had not rati+ed the unauthorized acts of 'o=as,the same are unenforceable.23 ence, by the respondentGsretention of the amount, it cannot thereby be implied that ithad rati+ed the unauthorized acts of its agent, 'oberto 'o=as.

>n the last issue, the petitioner contends that the CA erred indismissing its complaint for damages against the respondenton its +nding that the delay in the construction of itswarehouse was due to its petitionerGs" fault. /he petitionerasserts that the CA should have a6rmed the ruling of the trialcourt that the respondent failed to cause the eviction of thesuatters from the property on or before eptember (, !!7hence, was liable for $;,884,444. /he respondent, for its part,asserts that the delay in the construction of the petitionerGswarehouse was due to its late +ling of an application for abuilding permit, only on -ay (3, !(.

/he petitionerGs contention is meritorious. /he respondentdoes not deny that it failed to cause the eviction of thesuatters on or before eptember (, !!. Indeed, therespondent does not deny the fact that when the petitionerwrote the respondent demanding that the latter cause theeviction of the suatters on April !;, !(, the latter were stillin the premises. It was only after receiving the said letter inApril !( that the respondent caused the eviction of thesuatters, which thus cleared the way for the petitionerGscontractor to commence the construction of its warehouse

and secure the appropriate building permit therefor.

/he petitioner could not be e=pected to +le its application fora building permit before April !( because the suatterswere still occupying the property. ecause of the respondentGsfailure to cause their eviction as agreed upon, the petitionerGscontractor failed to commence the construction of thewarehouse in >ctober !! for the agreed price of $3,81,444. In the meantime, costs of construction materialsspiraled. &nder the construction contract entered intobetween the petitioner and the contractor, the petitioner wasobliged to pay $!!,341,!84,2including the additional workcosting $!,11!,;44, or a net increase of $!,9!(,34.14 /herespondent is liable for the di?erence between the original




















































cost of construction and the increase thereon, conformably toArticle !!94 of the 0ew Civil Code, which reads:

Art. !!94. /hose who in the performance of theirobligations are guilty of fraud, negligence, or delayand those who in any manner contravene the tenorthereof, are liable for damages.

/he petitioner, likewise, lost the amount of $2,44,444 by wayof unearned income from the lease of the property to the$onderosa eather Boods Company. /he respondent is, thus,

liable to the petitioner for the said amount, under Articles((44 and ((4! of the 0ew Civil Code:

Art. ((44. Indemni+cation for damages shallcomprehend not only the value of the loss su?ered,but also that of the pro+ts which the obligee failed toobtain.

Art. ((4!. In contracts and uasi5contracts, thedamages for which the obligor who acted in goodfaith is liable shall be those that are the natural andprobable conseuences of the breach of theobligation, and which the parties have foreseen orcould have reasonably foreseen at the time theobligation was constituted.

In case of fraud, bad faith, malice or wanton attitude,the obligor shall be responsible for all damageswhich may be reasonably attributed to the non5performance of the obligation.

In sum, we a6rm the trial courtGs award of damages andattorneyGs fees to the petitioner.

IN LIG!T O ALL T!E OREGOING, Dudgment is herebyrendered AIRMING the assailed )ecision of the Court of Appeals IT! MODIICATION. /he respondent is ordered topay to the petitioner the amount of $;,8!(,34 by way of actual damages and $!44,444 by way of attorneyGs fees. 0ocosts.

SO ORDERED.

Puno, #., Chairman, Austria"artinez, $ina, and ChicoNazario, ##., concur.

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Types of Agency - Cases