G.R. No.
76931 May 29, 1991
ORIENT AIR SERVICES & HOTEL
REPRESENTATIVES, petitioner,
vs.
COURT OF APPEALS and AMERICAN AIR-LINES
INCORPORATED, respondents.
G.R. No. 76933 May 29, 1991
AMERICAN AIRLINES, INCORPORATED, petitioner,
vs.
COURT OF APPEALS and ORIENT AIR SERVICES &
HOTEL REPRESENTATIVES,
INCORPORATED,respondents.
PADILLA, J.:
This case is a consolidation of two (2) petitions for review
on certiorari of a decision1 of the Court of Appeals in CA-
G.R. No. CV-04294, entitled "American Airlines, Inc. vs.
Orient Air Services and Hotel Representatives, Inc." which
affirmed, with modification, the decision2 of the Regional
Trial Court of Manila, Branch IV, which dismissed the
complaint and granted therein defendant's counterclaim
for agent's overriding commission and damages.
The antecedent facts are as follows:
On 15 January 1977, American Airlines, Inc. (hereinafter
referred to as American Air), an air carrier offering
passenger and air cargo transportation in the Philippines,
and Orient Air Services and Hotel Representatives
(hereinafter referred to as Orient Air), entered into a
General Sales Agency Agreement (hereinafter referred to
as the Agreement), whereby the former authorized the
latter to act as its exclusive general sales agent within the
Philippines for the sale of air passenger transportation.
Pertinent provisions of the agreement are reproduced, to
wit:
WITNESSETH
In consideration of the mutual convenants herein
contained, the parties hereto agree as follows:
1. Representation of American by Orient Air
Services
Orient Air Services will act on American's behalf
as its exclusive General Sales Agent within the
Philippines, including any United States military
installation therein which are not serviced by an
Air Carrier Representation Office (ACRO), for the
sale of air passenger transportation. The services
to be performed by Orient Air Services shall
include:
(a) soliciting and promoting passenger
traffic for the services of American and, if
necessary, employing staff competent and
sufficient to do so;
(b) providing and maintaining a suitable
area in its place of business to be used
exclusively for the transaction of the
business of American;
(c) arranging for distribution of
American's timetables, tariffs and
promotional material to sales agents and
the general public in the assigned
territory;
(d) servicing and supervising of sales
agents (including such sub-agents as may
be appointed by Orient Air Services with
the prior written consent of American) in
the assigned territory including if required
by American the control of remittances
and commissions retained; and
(e) holding out a passenger reservation
facility to sales agents and the general
public in the assigned territory.
In connection with scheduled or non-scheduled
air passenger transportation within the United
States, neither Orient Air Services nor its sub-
agents will perform services for any other air
carrier similar to those to be performed
hereunder for American without the prior written
consent of American. Subject to periodic
instructions and continued consent from
American, Orient Air Services may sell air
passenger transportation to be performed within
the United States by other scheduled air carriers
provided American does not provide substantially
equivalent schedules between the points involved.
xxx xxx xxx
4. Remittances
Orient Air Services shall remit in United States
dollars to American the ticket stock or exchange
orders, less commissions to which Orient Air
Services is entitled hereunder, not less frequently
than semi-monthly, on the 15th and last days of
each month for sales made during the preceding
half month.
All monies collected by Orient Air Services for
transportation sold hereunder on American's
ticket stock or on exchange orders, less applicable
commissions to which Orient Air Services is
entitled hereunder, are the property of American
and shall be held in trust by Orient Air Services
until satisfactorily accounted for to American.
5. Commissions
American will pay Orient Air Services commission
on transportation sold hereunder by Orient Air
Services or its sub-agents as follows:
(a) Sales agency commission
American will pay Orient Air Services a sales
agency commission for all sales of transportation
by Orient Air Services or its sub-agents over
American's services and any connecting through
air transportation, when made on American's
ticket stock, equal to the following percentages of
the tariff fares and charges:
(i) For transportation solely between
points within the United States and
between such points and Canada: 7% or
such other rate(s) as may be prescribed by
the Air Traffic Conference of America.
(ii) For transportation included in a
through ticket covering transportation
between points other than those described
above: 8% or such other rate(s) as may be
prescribed by the International Air
Transport Association.
(b) Overriding commission
In addition to the above commission American
will pay Orient Air Services an overriding
commission of 3% of the tariff fares and charges
for all sales of transportation over American's
service by Orient Air Service or its sub-agents.
xxx xxx xxx
10. Default
If Orient Air Services shall at any time default in
observing or performing any of the provisions of
this Agreement or shall become bankrupt or make
any assignment for the benefit of or enter into any
agreement or promise with its creditors or go into
liquidation, or suffer any of its goods to be taken
in execution, or if it ceases to be in business, this
Agreement may, at the option of American, be
terminated forthwith and American may, without
prejudice to any of its rights under this
Agreement, take possession of any ticket forms,
exchange orders, traffic material or other property
or funds belonging to American.
11. IATA and ATC Rules
The provisions of this Agreement are subject to
any applicable rules or resolutions of the
International Air Transport Association and the
Air Traffic Conference of America, and such rules
or resolutions shall control in the event of any
conflict with the provisions hereof.
xxx xxx xxx
13. Termination
American may terminate the Agreement on two
days' notice in the event Orient Air Services is
unable to transfer to the United States the funds
payable by Orient Air Services to American under
this Agreement. Either party may terminate the
Agreement without cause by giving the other 30
days' notice by letter, telegram or cable.
xxx xxx x x x3
On 11 May 1981, alleging that Orient Air had reneged on
its obligations under the Agreement by failing to promptly
remit the net proceeds of sales for the months of January
to March 1981 in the amount of US $254,400.40,
American Air by itself undertook the collection of the
proceeds of tickets sold originally by Orient Air and
terminated forthwith the Agreement in accordance with
Paragraph 13 thereof (Termination). Four (4) days later,
or on 15 May 1981, American Air instituted suit against
Orient Air with the Court of First Instance of Manila,
Branch 24, for Accounting with Preliminary Attachment
or Garnishment, Mandatory Injunction and Restraining
Order4 averring the aforesaid basis for the termination of
the Agreement as well as therein defendant's previous
record of failures "to promptly settle past outstanding
refunds of which there were available funds in the
possession of the defendant, . . . to the damage and
prejudice of plaintiff."5
In its Answer6 with counterclaim dated 9 July 1981,
defendant Orient Air denied the material allegations of
the complaint with respect to plaintiff's entitlement to
alleged unremitted amounts, contending that after
application thereof to the commissions due it under the
Agreement, plaintiff in fact still owed Orient Air a balance
in unpaid overriding commissions. Further, the defendant
contended that the actions taken by American Air in the
course of terminating the Agreement as well as the
termination itself were untenable, Orient Air claiming that
American Air's precipitous conduct had occasioned
prejudice to its business interests.
Finding that the record and the evidence substantiated
the allegations of the defendant, the trial court ruled in its
favor, rendering a decision dated 16 July 1984, the
dispositive portion of which reads:
WHEREFORE, all the foregoing premises
considered, judgment is hereby rendered in favor
of defendant and against plaintiff dismissing the
complaint and holding the termination made by
the latter as affecting the GSA agreement illegal
and improper and order the plaintiff to reinstate
defendant as its general sales agent for passenger
tranportation in the Philippines in accordance
with said GSA agreement; plaintiff is ordered to
pay defendant the balance of the overriding
 commission on total flown revenue covering the
period from March 16, 1977 to December 31,
1980 in the amount of US$84,821.31 plus the
additional amount of US$8,000.00 by way of
proper 3% overriding commission per month
commencing from January 1, 1981 until such
reinstatement or said amounts in its Philippine
peso equivalent legally prevailing at the time of
payment plus legal interest to commence from the
filing of the counterclaim up to the time of
payment. Further, plaintiff is directed to pay
defendant the amount of One Million Five
Hundred Thousand (Pl,500,000.00) pesos as and
for exemplary damages; and the amount of Three
Hundred Thousand (P300,000.00) pesos as and by
way of attorney's fees.
Costs against plaintiff.7
On appeal, the Intermediate Appellate Court (now Court
of Appeals) in a decision promulgated on 27 January
1986, affirmed the findings of the court a quo on their
material points but with some modifications with respect
to the monetary awards granted. The dispositive portion
of the appellate court's decision is as follows:
WHEREFORE, with the following modifications —
1) American is ordered to pay Orient the sum
of US$53,491.11 representing the balance of the
latter's overriding commission covering the
period March 16, 1977 to December 31, 1980, or
its Philippine peso equivalent in accordance with
the official rate of exchange legally prevailing on
July 10, 1981, the date the counterclaim was filed;
2) American is ordered to pay Orient the sum of
US$7,440.00 as the latter's overriding commission
per month starting January 1, 1981 until date of
termination, May 9, 1981 or its Philippine peso
equivalent in accordance with the official rate of
exchange legally prevailing on July 10, 1981, the
date the counterclaim was filed
3) American is ordered to pay interest of 12% on
said amounts from July 10, 1981 the date the
answer with counterclaim was filed, until full
payment;
4) American is ordered to pay Orient exemplary
damages of P200,000.00;
5) American is ordered to pay Orient the sum of
P25,000.00 as attorney's fees.
the rest of the appealed decision is affirmed.
Costs against American.8
American Air moved for reconsideration of the
aforementioned decision, assailing the substance thereof
and arguing for its reversal. The appellate court's decision
was also the subject of a Motion for Partial
Reconsideration by Orient Air which prayed for the
restoration of the trial court's ruling with respect to the
monetary awards. The Court of Appeals, by resolution
promulgated on 17 December 1986, denied American
Air's motion and with respect to that of Orient Air, ruled
thus:
Orient's motion for partial reconsideration is
denied insofar as it prays for affirmance of the
trial court's award of exemplary damages and
attorney's fees, but granted insofar as the rate of
exchange is concerned. The decision of January 27,
1986 is modified in paragraphs (1) and (2) of the
dispositive part so that the payment of the sums
mentioned therein shall be at their Philippine peso
equivalent in accordance with the official rate of
exchange legally prevailing on the date of actual
payment.9
Both parties appealed the aforesaid resolution and
decision of the respondent court, Orient Air as petitioner
in G.R. No. 76931 and American Air as petitioner in G.R.
No. 76933. By resolution10 of this Court dated 25 March
1987 both petitions were consolidated, hence, the case at
bar.
The principal issue for resolution by the Court is the
extent of Orient Air's right to the 3% overriding
commission. It is the stand of American Air that such
commission is based only on sales of its services actually
negotiated or transacted by Orient Air, otherwise referred
to as "ticketed sales." As basis thereof, primary reliance is
placed upon paragraph 5(b) of the Agreement which, in
reiteration, is quoted as follows:
5. Commissions
a) . . .
b) Overriding Commission
In addition to the above commission, American
will pay Orient Air Services an overriding
commission of 3% of the tariff fees and charges
for all sales of transportation over American's
services by Orient Air Services or itssub-
agents. (Emphasis supplied)
Since Orient Air was allowed to carry only the ticket
stocks of American Air, and the former not having opted
to appoint any sub-agents, it is American Air's contention
that Orient Air can claim entitlement to the disputed
overriding commission based only on ticketed sales. This
is supposed to be the clear meaning of the underscored
portion of the above provision. Thus, to be entitled to the
3% overriding commission, the sale must be made by
Orient Air and the sale must be done with the use of
American Air's ticket stocks.
On the other hand, Orient Air contends that the
contractual stipulation of a 3% overriding commission
covers the total revenue of American Air and not merely
that derived from ticketed sales undertaken by Orient Air.
The latter, in justification of its submission, invokes its
designation as the exclusive General Sales Agent of
American Air, with the corresponding obligations arising
from such agency, such as, the promotion and solicitation
for the services of its principal. In effect, by virtue of such
exclusivity, "all sales of transportation over American
Air's services are necessarily by Orient Air."11
It is a well settled legal principle that in the interpretation
of a contract, the entirety thereof must be taken into
consideration to ascertain the meaning of its
provisions.12 The various stipulations in the contract must
be read together to give effect to all.13 After a careful
examination of the records, the Court finds merit in the
contention of Orient Air that the Agreement, when
interpreted in accordance with the foregoing principles,
entitles it to the 3% overriding commission based on total
revenue, or as referred to by the parties, "total flown
revenue."
As the designated exclusive General Sales Agent of
American Air, Orient Air was responsible for the
promotion and marketing of American Air's services for
air passenger transportation, and the solicitation of sales
therefor. In return for such efforts and services, Orient Air
was to be paid commissions of two (2) kinds: first, a sales
agency commission, ranging from 7-8% of tariff fares and
charges from sales by Orient Air when made on American
Air ticket stock; and second, an overriding commission of
3% of tariff fares and charges for all sales of passenger
transportation over American Air services. It is
immediately observed that the precondition attached to
the first type of commission does not obtain for the
second type of commissions. The latter type of
commissions would accrue for sales of American Air
services made not on its ticket stock but on the ticket
stock of other air carriers sold by such carriers or other
authorized ticketing facilities or travel agents. To rule
otherwise, i.e., to limit the basis of such overriding
commissions to sales from American Air ticket stock
would erase any distinction between the two (2) types of
commissions and would lead to the absurd conclusion
that the parties had entered into a contract with
meaningless provisions. Such an interpretation must at all
times be avoided with every effort exerted to harmonize
the entire Agreement.
An additional point before finally disposing of this issue. It
is clear from the records that American Air was the party
responsible for the preparation of the Agreement.
Consequently, any ambiguity in this "contract of
adhesion" is to be taken "contra proferentem", i.e.,
construed against the party who caused the ambiguity
and could have avoided it by the exercise of a little more
care. Thus, Article 1377 of the Civil Code provides that the
interpretation of obscure words or stipulations in a
contract shall not favor the party who caused the
obscurity.14 To put it differently, when several
interpretations of a provision are otherwise equally
proper, that interpretation or construction is to be
adopted which is most favorable to the party in whose
favor the provision was made and who did not cause the
ambiguity.15 We therefore agree with the respondent
appellate court's declaration that:
Any ambiguity in a contract, whose terms are
susceptible of different interpretations, must be
read against the party who drafted it.16
We now turn to the propriety of American Air's
termination of the Agreement. The respondent appellate
court, on this issue, ruled thus:
It is not denied that Orient withheld remittances
but such action finds justification from paragraph
4 of the Agreement, Exh. F, which provides for
remittances to American less commissions to
which Orient is entitled, and from paragraph 5(d)
which specifically allows Orient to retain the full
amount of its commissions. Since, as stated ante,
Orient is entitled to the 3% override. American's
premise, therefore, for the cancellation of the
Agreement did not exist. . . ."
We agree with the findings of the respondent appellate
court. As earlier established, Orient Air was entitled to an
overriding commission based on total flown revenue.
American Air's perception that Orient Air was remiss or in
default of its obligations under the Agreement was, in fact,
a situation where the latter acted in accordance with the
Agreement—that of retaining from the sales proceeds its
accrued commissions before remitting the balance to
American Air. Since the latter was still obligated to Orient
Air by way of such commissions. Orient Air was clearly
justified in retaining and refusing to remit the sums
claimed by American Air. The latter's termination of the
Agreement was, therefore, without cause and basis, for
which it should be held liable to Orient Air.
On the matter of damages, the respondent appellate court
modified by reduction the trial court's award of
exemplary damages and attorney's fees. This Court sees
no error in such modification and, thus, affirms the same.
It is believed, however, that respondent appellate court
erred in affirming the rest of the decision of the trial
court.1âwphi1We refer particularly to the lower court's
decision ordering American Air to "reinstate defendant as
its general sales agent for passenger transportation in the
Philippines in accordance with said GSA Agreement."
By affirming this ruling of the trial court, respondent
appellate court, in effect, compels American Air to extend
its personality to Orient Air. Such would be violative of
the principles and essence of agency, defined by law as a
contract whereby "a person binds himself to render some
service or to do something in representation or on behalf
of another, WITH THE CONSENT OR AUTHORITY OF THE
LATTER .17 (emphasis supplied) In an agent-principal
relationship, the personality of the principal is extended
through the facility of the agent. In so doing, the agent, by
legal fiction, becomes the principal, authorized to perform
all acts which the latter would have him do. Such a
relationship can only be effected with the consent of the
principal, which must not, in any way, be compelled by
law or by any court. The Agreement itself between the
parties states that "either party may terminate the
Agreementwithout cause by giving the other 30 days'
notice by letter, telegram or cable." (emphasis supplied)
We, therefore, set aside the portion of the ruling of the
respondent appellate court reinstating Orient Air as
general sales agent of American Air.
WHEREFORE, with the foregoing modification, the Court
AFFIRMS the decision and resolution of the respondent
Court of Appeals, dated 27 January 1986 and 17
December 1986, respectively. Costs against petitioner
American Air.
SO ORDERED.
[G.R. No. 130148. December 15, 1997]
JOSE BORDADOR and LYDIA BORDADOR, petitioners,
vs. BRIGIDA D. LUZ, ERNESTO M. LUZ and
NARCISO DEGANOS, respondents.
DECISION
REGALADO, J.:
In this appeal by certiorari, petitioners assail the
judgment of the Court of Appeals in CA-G.R. CV No. 49175
affirming the adjudication of the Regional Trial Court of
Malolos, Bulacan which found private respondent Narciso
Deganos liable to petitioners for actual damages, but
absolved respondent spouses Brigida D. Luz and Ernesto
M. Luz of liability. Petitioners likewise belabor the
subsequent resolution of the Court of Appeals which
denied their motion for reconsideration of its challenged
decision.
Petitioners were engaged in the business of purchase
and sale of jewelry and respondent Brigida D. Luz, also
known as Aida D. Luz, was their regular customer. On
several occasions during the period from April 27, 1987 to
September 4, 1987, respondent Narciso Deganos, the
brother of Brigida D. Luz, received several pieces of gold
and jewelry from petitioners amounting
to P382,816.00. [1] These items and their prices were
indicated in seventeen receipts covering the same. Eleven
of the receipts stated that they were received for a certain
Evelyn Aquino, a niece of Deganos, and the remaining six
indicated that they were received for Brigida D. Luz. [2]
Deganos was supposed to sell the items at a profit
and thereafter remit the proceeds and return the unsold
items to petitioners. Deganos remitted only the sum
of P53,207.00. He neither paid the balance of the sales
proceeds, nor did he return any unsold item to
petitioners. By January 1990, the total of his unpaid
account to petitioners, including interest, reached the sum
of P725,463.98. [3] Petitioners eventually filed a complaint
in the barangay court against Deganos to recover said
amount.
In the barangay proceedings, Brigida D. Luz, who was
not impleaded in the case, appeared as a witness for
Deganos and ultimately, she and her husband, together
with Deganos, signed a compromise agreement with
petitioners. In that compromise agreement, Deganos
obligated himself to pay petitioners, on installment basis,
the balance of his account plus interest thereon. However,
he failed to comply with his aforestated undertakings.
On June 25, 1990, petitioners instituted Civil Case No.
412-M-90 in the Regional Trial Court of Malolos, Bulacan
against Deganos and Brigida D. Luz for recovery of a sum
of money and damages, with an application for
preliminary attachment.[4] Ernesto Luz was impleaded
therein as the spouse of Brigida.
Four years later, or on March 29, 1994, Deganos and
Brigida D. Luz were charged with estafa[5] in the Regional
Trial Court of Malolos, Bulacan, which was docketed as
Criminal Case No. 785-M-94. That criminal case appears
to be still pending in said trial court.
During the trial of the civil case, petitioners claimed
that Deganos acted as the agent of Brigida D. Luz when he
received the subject items of jewelry and, because he
failed to pay for the same, Brigida, as principal, and her
spouse are solidarily liable with him therefor.
On the other hand, while Deganos admitted that he
had an unpaid obligation to petitioners, he claimed that
the same was only in the sum of P382,816.00 and
not P725,463.98. He further asserted that it was he alone
who was involved in the transaction with the petitioners;
that he neither acted as agent for nor was he authorized
to act as an agent by Brigida D. Luz, notwithstanding the
fact that six of the receipts indicated that the items were
received by him for the latter. He further claimed that he
never delivered any of the items he received from
petitioners to Brigida.
 Brigida, on her part, denied that she had anything to
do with the transactions between petitioners and
Deganos. She claimed that she never authorized Deganos
to receive any item of jewelry in her behalf and, for that
matter, neither did she actually receive any of the articles
in question.
After trial, the court below found that only Deganos
was liable to petitioners for the amount and damages
claimed. It held that while Brigida D. Luz did have
transactions with petitioners in the past, the items
involved were already paid for and all that Brigida owed
petitioners was the sum of P21,483.00 representing
interest on the principal account which she had
previously paid for.[6]
The trial court also found that it was petitioner Lydia
Bordador who indicated in the receipts that the items
were received by Deganos for Evelyn Aquino and Brigida
D. Luz. [7] Said court was persuaded that Brigida D. Luz
was behind Deganos, but because there was no
memorandum to this effect, the agreement between the
parties was unenforceable under the Statute of
Frauds. [8] Absent the required memorandum or any
written document connecting the respondent Luz spouses
with the subject receipts, or authorizing Deganos to act on
their behalf, the alleged agreement between petitioners
and Brigida D. Luz was unenforceable.
Deganos was ordered to pay petitioners the amount
of P725,463.98, plus legal interest thereon from June 25,
1990, and attorneys fees. Brigida D. Luz was ordered to
pay P21,483.00 representing the interest on her own
personal loan. She and her co-defendant spouse were
absolved from any other or further liability. [9]
As stated at the outset, petitioners appealed the
judgment of the court a quo to the Court of Appeals which
affirmed said judgment. [10] The motion for
reconsideration filed by petitioners was subsequently
dismissed, [11] hence the present recourse to this Court.
The primary issue in the instant petition is whether
or not herein respondent spouses are liable to petitioners
for the latters claim for money and damages in the sum
of P725,463.98, plus interests and attorneys fees, despite
the fact that the evidence does not show that they signed
any of the subject receipts or authorized Deganos to
receive the items of jewelry on their behalf.
Petitioners argue that the Court of Appeals erred in
adopting the findings of the court a quo that respondent
spouses are not liable to them, as said conclusion of the
trial court is contradicted by the finding of fact of the
appellate court that (Deganos) acted as agent of his sister
(Brigida Luz). [12] In support of this contention, petitioners
quoted several letters sent to them by Brigida D. Luz
wherein the latter acknowledged her obligation to
petitioners and requested for more time to fulfill the
same. They likewise aver that Brigida testified in the trial
court that Deganos took some gold articles from
petitioners and delivered the same to her.
Both the Court of Appeals and the trial court,
however, found as a fact that the aforementioned letters
concerned the previous obligations of Brigida to
petitioners, and had nothing to do with the money sought
to be recovered in the instant case. Such concurrent
factual findings are entitled to great weight, hence,
petitioners cannot plausibly claim in this appellate review
that the letters were in the nature of acknowledgments by
Brigida that she was the principal of Deganos in the
subject transactions.
On the other hand, with regard to the testimony of
Brigida admitting delivery of the gold to her, there is no
showing whatsoever that her statement referred to the
items which are the subject matter of this case. It cannot,
therefore, be validly said that she admitted her liability
regarding the same.
Petitioners insist that Deganos was the agent of
Brigida D. Luz as the latter clothed him with apparent
authority as her agent and held him out to the public as
such, hence Brigida can not be permitted to deny said
authority to innocent third parties who dealt with
Deganos under such belief. [13] Petitioners further
represent that the Court of Appeals recognized in its
decision that Deganos was an agent of Brigida.[14]
The evidence does not support the theory of
petitioners that Deganos was an agent of Brigida D. Luz
and that the latter should consequently be held solidarily
liable with Deganos in his obligation to petitioners. While
the quoted statement in the findings of fact of the assailed
appellate decision mentioned that Deganos ostensibly
acted as an agent of Brigida, the actual conclusion and
ruling of the Court of Appeals categorically stated that,
(Brigida Luz) never authorized her brother (Deganos) to
act for and in her behalf in any transaction with
Petitioners xx x. [15] It is clear, therefore, that even
assuming arguendo that Deganos acted as an agent of
Brigida, the latter never authorized him to act on her
behalf with regard to the transactions subject of this case.
The Civil Code provides:
Art. 1868. By the contract of agency a person binds
himself to render some service or to do something in
representation or on behalf of another, with the consent
or authority of the latter.
The basis for agency is representation. Here, there is
no showing that Brigida consented to the acts of Deganos
or authorized him to act on her behalf, much less with
respect to the particular transactions involved. Petitioners
attempt to foist liability on respondent spouses through
the supposed agency relation with Deganos is groundless
and ill-advised.
Besides, it was grossly and inexcusably negligent of
petitioners to entrust to Deganos, not once or twice but on
at least six occasions as evidenced by six receipts, several
pieces of jewelry of substantial value without requiring a
written authorization from his alleged principal. A person
dealing with an agent is put upon inquiry and must
discover upon his peril the authority of the agent. [16]
The records show that neither an express nor an
implied agency was proven to have existed between
Deganos and Brigida D. Luz. Evidently, petitioners, who
were negligent in their transactions with Deganos, cannot
seek relief from the effects of their negligence by
conjuring a supposed agency relation between the two
respondents where no evidence supports such claim.
Petitioners next allege that the Court of Appeals
erred in ignoring the fact that the decision of the court
below, which it affirmed, is null and void as it
contradicted its ruling in CA-G.R. SP No. 39445 holding
that there is sufficient evidence/proof against Brigida D.
Luz and Deganos for estafa in the pending criminal
case. They further aver that said appellate court erred in
ruling against them in this civil action since the same
would result in an inevitable conflict of decisions should
the trial court convict the accused in the criminal case.
By way of backdrop for this argument of petitioners,
herein respondents Brigida D. Luz and Deganos had filed a
demurrer to evidence and a motion for reconsideration in
the aforestated criminal case, both of which were denied
by the trial court. They then filed a petition
for certiorari in the Court of Appeals to set aside the
denial of their demurrer and motion for reconsideration
but, as just stated, their petition therefor was
dismissed.[17]
Petitioners now claim that the aforesaid dismissal by
the Court of Appeals of the petition in CA-G.R. SP No.
39445 with respect to the criminal case is equivalent to a
finding that there is sufficient evidence in the estafa case
against Brigida D. Luz and Deganos. Hence, as already
stated, petitioners theorize that the decision and
resolution of the Court of Appeals now being impugned in
the case at bar would result in a possible conflict with the
prospective decision in the criminal case. Instead of
promulgating the present decision and resolution under
review, so they suggest, the Court of Appeals should have
awaited the decision in the criminal case, so as not to
render academic or preempt the same or, worse, create
two conflicting rulings. [18]
Petitioners have apparently lost sight of Article 33 of
the Civil Code which provides that in cases involving
alleged fraudulent acts, a civil action for damages, entirely
separate and distinct from the criminal action, may be
brought by the injured party. Such civil action shall
proceed independently of the criminal prosecution and
shall require only a preponderance of evidence.
It is worth noting that this civil case was instituted
four years before the criminal case for estafa was filed,
and that although there was a move to consolidate both
cases, the same was denied by the trial
court. Consequently, it was the duty of the two branches
of the Regional Trial Court concerned to independently
proceed with the civil and criminal cases. It will also be
observed that a final judgment rendered in a civil action
absolving the defendant from civil liability is no bar to a
criminal action. [19]
It is clear, therefore, that this civil case may proceed
independently of the criminal case [20] especially because
while both cases are based on the same facts, the quantum
of proof required for holding the parties liable therein
differ. Thus, it is improvident of petitioners to claim that
the decision and resolution of the Court of Appeals in the
present case would be preemptive of the outcome of the
criminal case. Their fancied fear of possible conflict
between the disposition of this civil case and the outcome
of the pending criminal case is illusory.
Petitioners surprisingly postulate that the Court of
Appeals had lost its jurisdiction to issue the denial
resolution dated August 18, 1997, as the same was tainted
with irregularities and badges of fraud perpetrated by its
court officers. [21] They charge that said appellate court,
through conspiracy and fraud on the part of its officers,
gravely abused its discretion in issuing that resolution
denying their motion for reconsideration. They claim that
said resolution was drafted by the ponente, then signed
and issued by the members of the Eleventh Division of
said court within one and a half days from the elevation
thereof by the division clerk of court to the office of
the ponente.
It is the thesis of petitioners that there was undue
haste in issuing the resolution as the same was made
without waiting for the lapse of the ten-day period for
respondents to file their comment and for petitioners to
file their reply. It was allegedly impossible for the Court of
Appeals to resolve the issue in just one and a half days,
especially because its ponente, the late Justice Maximiano
C. Asuncion, was then recuperating from surgery and,
that, additionally, hundreds of more important cases were
pending. [22]
These lamentable allegation of irregularities in the
Court of Appeals and in the conduct of its officers strikes
us as a desperate attempt of petitioners to induce this
Court to give credence to their arguments which, as
already found by both the trial and intermediate appellate
courts, are devoid of factual and legal substance. The
regrettably irresponsible attempt to tarnish the image of
the intermediate appellate tribunal and its judicial officers
through ad hominem imputations could well be
contumacious, but we are inclined to let that pass with a
strict admonition that petitioners refrain from indulging
in such conduct in litigations.
On July 9, 1997, the Court of Appeals rendered
judgment in this case affirming the trial courts
decision. [23] Petitioners moved for reconsideration and
the Court of Appeals ordered respondents to file a
comment. Respondents filed the same on August 5,
1997 [24] and petitioners filed their reply to said comment
on August 15, 1997. [25] The Eleventh Division of said
court issued the questioned resolution denying
petitioners motion for reconsideration on August 18,
1997.[26]
It is ironic that while some litigants malign the
judiciary for being supposedly slothful in disposing of
cases, petitioners are making a show of calling out for
justice because the Court of Appeals issued a resolution
disposing of a case sooner than expected of it. They would
even deny the exercise of discretion by the appellate court
to prioritize its action on cases in line with the procedure
it has adopted in disposing thereof and in declogging its
dockets. It is definitely not for the parties to determine
and dictate when and how a tribunal should act upon
those cases since they are not even aware of the status of
the dockets and the internal rules and policies for acting
thereon.
The fact that a resolution was issued by said court
within a relatively short period of time after the records
of the case were elevated to the office of
the ponente cannot, by itself, be deemed irregular. There
is no showing whatsoever that the resolution was issued
without considering the reply filed by petitioners. In fact,
that brief pleading filed by petitioners does not exhibit
any esoteric or ponderous argument which could not be
analyzed within an hour. It is a legal presumption, born of
wisdom and experience, that official duty has been
regularly performed; [27] that the proceedings of a judicial
tribunal are regular and valid, and that judicial acts and
duties have been and will be duly and properly
performed. [28] The burden of proving irregularity in
official conduct is on the part of petitioners and they have
utterly failed to do so. It is thus reprehensible for them to
cast aspersions on a court of law on the bases of
conjectures or surmises, especially since one of the
petitioners appears to be a member of the Philippine Bar.
Lastly, petitioners fault the trial courts holding that
whatever contract of agency was established between
Brigida D. Luz and Narciso Deganos is unenforceable
under the Statute of Frauds as that aspect of this case
allegedly is not covered thereby. [29] They proceed on the
premise that the Statute of Frauds applies only to
executory contracts and not to executed or to partially
executed ones. From there, they move on to claim that the
contract involved in this case was an executed contract as
the items had already been delivered by petitioners to
Brigida D. Luz, hence, such delivery resulted in the
execution of the contract and removed the same from the
coverage of the Statute of Frauds.
Petitioners claim is speciously unmeritorious. It
should be emphasized that neither the trial court nor the
appellate court categorically stated that there was such a
contractual relation between these two respondents. The
trial court merely said that if there was such an agency
existing between them, the same is unenforceable as the
contract would fall under the Statute of Frauds which
requires the presentation of a note or memorandum
thereof in order to be enforceable in court. That was
merely a preparatory statement of a principle of
law. What was finally proven as a matter of fact is that
there was no such contract between Brigida D. Luz and
Narciso Deganos, executed or partially executed, and no
delivery of any of the items subject of this case was ever
made to the former.
WHEREFORE, no error having been committed by
the Court of Appeals in affirming the judgment of the
court a quo, its challenged decision and resolution are
hereby AFFIRMED and the instant petition is
DENIED, with double costs against petitioners
SO ORDERED.
G.R. No. 152613 & No. 152628 June 23, 2006
APEX MINING CO., INC., petitioner,
vs.
SOUTHEAST MINDANAO GOLD MINING CORP.,
DECISION
CHICO-NAZARIO, J.:
On 27 February 1931, Governor General Dwight F. Davis
issued Proclamation No. 369, establishing the Agusan-
Davao-Surigao Forest Reserve consisting of
approximately 1,927,400 hectares.1
The disputed area, a rich tract of mineral land, is inside
the forest reserve located at Monkayo, Davao del Norte,
and Cateel, Davao Oriental, consisting of 4,941.6759
hectares.2 This mineral land is encompassed by Mt.
Diwata, which is situated in the municipalities of Monkayo
and Cateel. It later became known as the "Diwalwal Gold
Rush Area." It has since the early 1980’s been stormed by
conflicts brought about by the numerous mining
claimants scrambling for gold that lies beneath its bosom.
On 21 November 1983, Camilo Banad and his group, who
claimed to have first discovered traces of gold in Mount
Diwata, filed a Declaration of Location (DOL) for six
mining claims in the area.
Camilo Banad and some other natives pooled their skills
and resources and organized the Balite Communal Portal
Mining Cooperative (Balite).3
On 12 December 1983, Apex Mining Corporation (Apex)
entered into operating agreements with Banad and his
group.
From November 1983 to February 1984, several
individual applications for mining locations over mineral
land covering certain parts of the Diwalwal gold rush area
were filed with the Bureau of Mines and Geo-Sciences
(BMG).
On 2 February 1984, Marcopper Mining Corporation
(MMC) filed 16 DOLs or mining claims for areas adjacent
to the area covered by the DOL of Banad and his group.
After realizing that the area encompassed by its mining
claims is a forest reserve within the coverage of
Proclamation No. 369 issued by Governor General Davis,
MMC abandoned the same and instead applied for a
prospecting permit with the Bureau of Forest
Development (BFD).
On 1 July 1985, BFD issued a Prospecting Permit to MMC
covering an area of 4,941.6759 hectares traversing the
municipalities of Monkayo and Cateel, an area within the
forest reserve under Proclamation No. 369. The permit
embraced the areas claimed by Apex and the other
individual mining claimants.
On 11 November 1985, MMC filed Exploration Permit
Application No. 84-40 with the BMG. On 10 March 1986,
the BMG issued to MCC Exploration Permit No. 133 (EP
133).
Discovering the existence of several mining claims and the
proliferation of small-scale miners in the area covered by
EP 133, MMC thus filed on 11 April 1986 before the BMG a
Petition for the Cancellation of the Mining Claims of Apex
and Small Scale Mining Permit Nos. (x-1)-04 and (x-1)-05
which was docketed as MAC No. 1061. MMC alleged that
the areas covered by its EP 133 and the mining claims of
Apex were within an established and existing forest
reservation (Agusan-Davao-Surigao Forest Reserve)
under Proclamation No. 369 and that pursuant to
Presidential Decree No. 463,4 acquisition of mining rights
within a forest reserve is through the application for a
permit to prospect with the BFD and not through
registration of a DOL with the BMG.
On 23 September 1986, Apex filed a motion to dismiss
MMC’s petition alleging that its mining claims are not
within any established or proclaimed forest reserve, and
as such, the acquisition of mining rights thereto must be
undertaken via registration of DOL with the BMG and not
through the filing of application for permit to prospect
with the BFD.
On 9 December 1986, BMG dismissed MMC’s petition on
the ground that the area covered by the Apex mining
claims and MMC’s permit to explore was not a forest
reservation. It further declared null and void MMC’s EP
133 and sustained the validity of Apex mining claims over
the disputed area.
MMC appealed the adverse order of BMG to the
Department of Environment and Natural Resources
(DENR).
On 15 April 1987, after due hearing, the DENR reversed
the 9 December 1996 order of BMG and declared MMC’s
EP 133 valid and subsisting.
Apex filed a Motion for Reconsideration with the DENR
which was subsequently denied. Apex then filed an appeal
before the Office of the President. On 27 July 1989, the
Office of the President, through Assistant Executive
Secretary for Legal Affairs, Cancio C. Garcia,5 dismissed
Apex’s appeal and affirmed the DENR ruling.
Apex filed a Petition for Certiorari before this Court. The
Petition was docketed as G.R. No. 92605 entitled, "Apex
Mining Co., Inc. v. Garcia."6 On 16 July 1991, this Court
rendered a Decision against Apex holding that the
disputed area is a forest reserve; hence, the proper
procedure in acquiring mining rights therein is by initially
applying for a permit to prospect with the BFD and not
through a registration of DOL with the BMG.
On 27 December 1991, then DENR Secretary Fulgencio
Factoran, Jr. issued Department Administrative Order No.
66 (DAO No. 66) declaring 729 hectares of the areas
covered by the Agusan-Davao-Surigao Forest Reserve as
non-forest lands and open to small-scale mining purposes.
As DAO No. 66 declared a portion of the contested area
open to small scale miners, several mining entities filed
applications for Mineral Production Sharing Agreement
(MPSA).
On 25 August 1993, Monkayo Integrated Small Scale
Miners Association (MISSMA) filed an MPSA application
which was denied by the BMG on the grounds that the
area applied for is within the area covered by MMC EP
133 and that the MISSMA was not qualified to apply for an
MPSA under DAO No. 82,7 Series of 1990.
On 5 January 1994, Rosendo Villaflor and his group filed
before the BMG a Petition for Cancellation of EP 133 and
for the admission of their MPSA Application. The Petition
was docketed as RED Mines Case No. 8-8-94. Davao
United Miners Cooperative (DUMC) and Balite intervened
and likewise sought the cancellation of EP 133.
On 16 February 1994, MMC assigned EP 133 to Southeast
Mindanao Gold Mining Corporation (SEM), a domestic
corporation which is alleged to be a 100% -owned
subsidiary of MMC.
On 14 June 1994, Balite filed with the BMG an MPSA
application within the contested area that was later on
rejected.
On 23 June 1994, SEM filed an MPSA application for the
entire 4,941.6759 hectares under EP 133, which was also
denied by reason of the pendency of RED Mines Case No.
8-8-94. On 1 September 1995, SEM filed another MPSA
application.
On 20 October 1995, BMG accepted and registered SEM’s
MPSA application and the Deed of Assignment over EP
133 executed in its favor by MMC. SEM’s application was
designated MPSA Application No. 128 (MPSAA 128). After
publication of SEM’s application, the following filed before
the BMG their adverse claims or oppositions:
To address the matter, the DENR constituted a Panel of
Arbitrators (PA) to resolve the following:
(a) The adverse claims on MPSAA No. 128; and
(b) The Petition to Cancel EP 133 filed by Rosendo
Villaflor docketed as RED Case No. 8-8-94.9
On 13 June 1997, the PA rendered a resolution in RED
Mines Case No. 8-8-94. As to the Petition for Cancellation
of EP 133 issued to MMC, the PA relied on the ruling in
Apex Mining Co., Inc. v. Garcia,10 and opined that EP 133
was valid and subsisting. It also declared that the BMG
Director, under Section 99 of the Consolidated Mines
Administrative Order implementing Presidential Decree
No. 463, was authorized to issue exploration permits and
to renew the same without limit.
With respect to the adverse claims on SEM’s MPSAA No.
128, the PA ruled that adverse claimants’ petitions were
not filed in accordance with the existing rules and
regulations governing adverse claims because the adverse
claimants failed to submit the sketch plan containing the
technical description of their respective claims, which was
a mandatory requirement for an adverse claim that would
allow the PA to determine if indeed there is an
overlapping of the area occupied by them and the area
applied for by SEM. It added that the adverse claimants
were not claim owners but mere occupants conducting
illegal mining activities at the contested area since only
MMC or its assignee SEM had valid mining claims over the
area as enunciated in Apex Mining Co., Inc. v.
Garcia.11 Also, it maintained that the adverse claimants
were not qualified as small-scale miners under DENR
Department Administrative Order No. 34 (DAO No.
34),12 or the Implementing Rules and Regulation of
Republic Act No. 7076 (otherwise known as the "People’s
Small-Scale Mining Act of 1991"), as they were not duly
licensed by the DENR to engage in the extraction or
removal of minerals from the ground, and that they were
large-scale miners. The decretal portion of the PA
resolution pronounces:
VIEWED IN THE LIGHT OF THE FOREGOING, the validity
of Expoloration Permit No. 133 is hereby reiterated and
all the adverse claims against MPSAA No. 128 are
DISMISSED.13
Undaunted by the PA ruling, the adverse claimants
appealed to the Mines Adjudication Board (MAB). In a
Decision dated 6 January 1998, the MAB considered
erroneous the dismissal by the PA of the adverse claims
filed against MMC and SEM over a mere technicality of
failure to submit a sketch plan. It argued that the rules of
procedure are not meant to defeat substantial justice as
the former are merely secondary in importance to the
latter. Dealing with the question on EP 133’s validity, the
MAB opined that said issue was not crucial and was
irrelevant in adjudicating the appealed case because EP
133 has long expired due to its non-renewal and that the
holder of the same, MMC, was no longer a claimant of the
Agusan-Davao-Surigao Forest Reserve having
relinquished its right to SEM. After it brushed aside the
issue of the validity of EP 133 for being irrelevant, the
MAB proceeded to treat SEM’s MPSA application over the
disputed area as an entirely new and distinct application.
It approved the MPSA application, excluding the area
segregated by DAO No. 66, which declared 729 hectares
within the Diwalwal area as non-forest lands open for
small-scale mining. The MAB resolved:
WHEREFORE, PREMISES CONSIDERED, the decision of
the Panel of Arbitrators dated 13 June 1997 is hereby
VACATED and a new one entered in the records of the
case as follows:
1. SEM’s MPSA application is hereby given due
course subject to the full and strict compliance of
the provisions of the Mining Act and its
Implementing Rules and Regulations;
2. The area covered by DAO 66, series of 1991,
actually occupied and actively mined by the small-
scale miners on or before August 1, 1987 as
determined by the Provincial Mining Regulatory
Board (PMRB), is hereby excluded from the area
applied for by SEM;
3. A moratorium on all mining and mining-related
activities, is hereby imposed until such time that
all necessary procedures, licenses, permits, and
other requisites as provided for by RA 7076, the
Mining Act and its Implementing Rules and
Regulations and all other pertinent laws, rules and
regulations are complied with, and the
appropriate environmental protection measures
and safeguards have been effectively put in place;
4. Consistent with the spirit of RA 7076, the Board
encourages SEM and all small-scale miners to
continue to negotiate in good faith and arrive at an
agreement beneficial to all. In the event of SEM’s
 strict and full compliance with all the
requirements of the Mining Act and its
Implementing Rules and Regulations, and the
concurrence of the small-scale miners actually
occupying and actively mining the area, SEM may
apply for the inclusion of portions of the areas
segregated under paragraph 2 hereof, to its MPSA
application. In this light, subject to the preceding
paragraph, the contract between JB [JB
Management Mining Corporation] and SEM is
hereby recognized.14
Dissatisfied, the Villaflor group and Balite appealed the
decision to this Court. SEM, aggrieved by the exclusion of
729 hectares from its MPSA application, likewise
appealed. Apex filed a Motion for Leave to Admit Petition
for Intervention predicated on its right to stake its claim
over the Diwalwal gold rush which was granted by the
Court. These cases, however, were remanded to the Court
of Appeals for proper disposition pursuant to Rule 43 of
the 1997 Rules of Civil Procedure. The Court of Appeals
consolidated the remanded cases as CA-G.R. SP No. 61215
and No. 61216.
In the assailed Decision15 dated 13 March 2002, the Court
of Appeals affirmed in toto the decision of the PA and
declared null and void the MAB decision.
The Court of Appeals, banking on the premise that the
SEM is the agent of MMC by virtue of its assignment of EP
133 in favor of SEM and the purported fact that SEM is a
100% subsidiary of MMC, ruled that the transfer of EP
133 was valid. It argued that since SEM is an agent of
MMC, the assignment of EP 133 did not violate the
condition therein prohibiting its transfer except to MMC’s
duly designated agent. Thus, despite the non-renewal of
EP 133 on 6 July 1994, the Court of Appeals deemed it
relevant to declare EP 133 as valid since MMC’s mining
rights were validly transferred to SEM prior to its
expiration.
The Court of Appeals also ruled that MMC’s right to
explore under EP 133 is a property right which the 1987
Constitution protects and which cannot be divested
without the holder’s consent. It stressed that MMC’s
failure to proceed with the extraction and utilization of
minerals did not diminish its vested right to explore
because its failure was not attributable to it.
Reading Proclamation No. 369, Section 11 of
Commonwealth Act 137, and Sections 6, 7, and 8 of
Presidential Decree No. 463, the Court of Appeals
concluded that the issuance of DAO No. 66 was done by
the DENR Secretary beyond his power for it is the
President who has the sole power to withdraw from the
forest reserve established under Proclamation No. 369 as
non-forest land for mining purposes. Accordingly, the
segregation of 729 hectares of mining areas from the
coverage of EP 133 by the MAB was unfounded.
The Court of Appeals also faulted the DENR Secretary in
implementing DAO No. 66 when he awarded the 729
hectares segregated from the coverage area of EP 133 to
other corporations who were not qualified as small-scale
miners under Republic Act No. 7076.
As to the petitions of Villaflor and company, the Court of
Appeals argued that their failure to submit the sketch plan
to the PA, which is a jurisdictional requirement, was fatal
to their appeal. It likewise stated the Villaflor and
company’s mining claims, which were based on their
alleged rights under DAO No. 66, cannot stand as DAO No.
66 was null and void. The dispositive portion of the
Decision decreed:
WHEREFORE, premises considered, the Petition of
Southeast Mindanao Gold Mining Corporation is
GRANTED while the Petition of Rosendo Villaflor, et al., is
DENIED for lack of merit. The Decision of the Panel of
Arbitrators dated 13 June 1997 is AFFIRMED in toto and
the assailed MAB Decision is hereby SET ASIDE and
declared as NULL and VOID.16
Hence, the instant Petitions for Review on Certiorari
under Rule 45 of the Rules of Court filed by Apex, Balite
and MAB.
During the pendency of these Petitions, President Gloria
Macapagal-Arroyo issued Proclamation No. 297 dated 25
November 2002. This proclamation excluded an area of
8,100 hectares located in Monkayo, Compostela Valley,
and proclaimed the same as mineral reservation and as
environmentally critical area. Subsequently, DENR
Administrative Order No. 2002-18 was issued declaring
an emergency situation in the Diwalwal gold rush area
and ordering the stoppage of all mining operations
therein. Thereafter, Executive Order No. 217 dated 17
June 2003 was issued by the President creating the
National Task Force Diwalwal which is tasked to address
the situation in the Diwalwal Gold Rush Area.
In G.R. No. 152613 and No. 152628, Apex raises the
following issues:
I
WHETHER OR NOT SOUTHEAST MINDANAO GOLD
MINING’S [SEM] E.P. 133 IS NULL AND VOID DUE TO THE
FAILURE OF MARCOPPER TO COMPLY WITH THE TERMS
AND CONDITIONS PRESCRIBED IN EP 133.
II
WHETHER OR NOT APEX HAS A SUPERIOR AND
PREFERENTIAL RIGHT TO STAKE IT’S CLAIM OVER THE
ENTIRE 4,941 HECTARES AGAINST SEM AND THE OTHER
CLAIMANTS PURSUANT TO THE TIME-HONORED
PRINCIPLE IN MINING LAW THAT "PRIORITY IN TIME IS
PRIORITY IN RIGHT."17
In G.R. No. 152619-20, Balite anchors its petition on the
following grounds:
I On the first issue, Apex takes exception to the Court of
WHETHER OR NOT THE MPSA OF SEM WHICH WAS
FILED NINE (9) DAYS LATE (JUNE 23, 1994) FROM THE
FILING OF THE MPSA OF BALITE WHICH WAS FILED ON
JUNE 14, 1994 HAS A PREFERENTIAL RIGHT OVER THAT
OF BALITE.
II
WHETHER OR NOT THE DISMISSAL BY THE PANEL OF
ARBITRATORS OF THE ADVERSE CLAIM OF BALITE ON
THE GROUND THAT BALITE FAILED TO SUBMIT THE
REQUIRED SKETCH PLAN DESPITE THE FACT THAT
BALITE, HAD IN FACT SUBMITTED ON TIME WAS A
VALID DISMISSAL OF BALITE’S ADVERSE CLAIM.
III
WHETHER OR NOT THE ACTUAL OCCUPATION AND
SMALL-MINING OPERATIONS OF BALITE PURSUANT TO
DAO 66 IN THE 729 HECTARES WHICH WAS PART OF
THE 4,941.6759 HECTARES COVERED BY ITS MPSA
WHICH WAS REJECTED BY THE BUREAU OF MINES AND
GEOSCIENCES WAS ILLEGAL.18
In G.R. No. 152870-71, the MAB submits two issues, to
wit:
I Presidential Decree No. 463 and Republic Act No. 7942
WHETHER OR NOT EP NO. 133 IS STILL VALID AND
SUBSISTING.
II
WHETHER OR NOT THE SUBSEQUENT ACTS OF THE
GOVERNMENT SUCH AS THE ISSUANCE OF DAO NO. 66,
PROCLAMATION NO. 297, AND EXECUTIVE ORDER 217
CAN OUTWEIGH EP NO. 133 AS WELL AS OTHER
ADVERSE CLAIMS OVER THE DIWALWAL GOLD RUSH
AREA.19
The common issues raised by petitioners may be
summarized as follows:
I. Whether or not the Court of Appeals erred in
upholding the validity and continuous existence of
EP 133 as well as its transfer to SEM;
II. Whether or not the Court of Appeals erred in
declaring that the DENR Secretary has no
authority to issue DAO No. 66; and
III. Whether or not the subsequent acts of the
executive department such as the issuance of
Proclamation No. 297, and DAO No. 2002-18 can
outweigh Apex and Balite’s claims over the
Diwalwal Gold Rush Area.
Appeals’ ruling upholding the validity of MMC’s EP 133
and its subsequent transfer to SEM asserting that MMC
failed to comply with the terms and conditions in its
exploration permit, thus, MMC and its successor-in-
interest SEM lost their rights in the Diwalwal Gold Rush
Area. Apex pointed out that MMC violated four conditions
in its permit. First, MMC failed to comply with the
mandatory work program, to complete exploration work,
and to declare a mining feasibility. Second, it reneged on
its duty to submit an Environmental Compliance
Certificate. Third, it failed to comply with the reportorial
requirements. Fourth, it violated the terms of EP 133
when it assigned said permit to SEM despite the explicit
proscription against its transfer.
Apex likewise emphasizes that MMC failed to file its MPSA
application required under DAO No. 8220 which caused its
exploration permit to lapse because DAO No. 82 mandates
holders of exploration permits to file a Letter of Intent
and a MPSA application not later than 17 July 1991. It said
that because EP 133 expired prior to its assignment to
SEM, SEM’s MPSA application should have been evaluated
on its own merit.
As regards the Court of Appeals recognition of SEM’s
vested right over the disputed area, Apex bewails the
same to be lacking in statutory bases. According to Apex,
impose upon the claimant the obligation of actually
undertaking exploration work within the reserved lands
in order to acquire priority right over the area. MMC, Apex
claims, failed to conduct the necessary exploration work,
thus, MMC and its successor-in-interest SEM lost any right
over the area.
In its Memorandum, Balite maintains that EP 133 of MMC,
predecessor-in-interest of SEM, is an expired and void
permit which cannot be made the basis of SEM’s MPSA
application.
Similarly, the MAB underscores that SEM did not acquire
any right from MMC by virtue of the transfer of EP 133
because the transfer directly violates the express
condition of the exploration permit stating that "it shall be
for the exclusive use and benefit of the permittee or his
duly authorized agents." It added that while MMC is the
permittee, SEM cannot be considered as MMC’s duly
designated agent as there is no proof on record
authorizing SEM to represent MMC in its business
dealings or undertakings, and neither did SEM pursue its
interest in the permit as an agent of MMC. According to
the MAB, the assignment by MMC of EP 133 in favor of
SEM did not make the latter the duly authorized agent of
MMC since the concept of an agent under EP 133 is not
equivalent to the concept of assignee. It finds fault in the
assignment of EP 133 which lacked the approval of the
DENR Secretary in contravention of Section 25 of
Republic Act No. 794221 requiring his approval for a valid
assignment or transfer of exploration permit to be valid.
SEM, on the other hand, counters that the errors raised by
petitioners Apex, Balite and the MAB relate to factual and
evidentiary matters which this Court cannot inquire into
in an appeal by certiorari.
The established rule is that in the exercise of the Supreme
Court’s power of review, the Court not being a trier of
facts, does not normally embark on a re-examination of
the evidence presented by the contending parties during
the trial of the case considering that the findings of facts
of the Court of Appeals are conclusive and binding on the
Court.22 This rule, however, admits of exceptions as
recognized by jurisprudence, to wit:
(1) [w]hen the findings are grounded entirely on
speculation, surmises or conjectures; (2) when the
inference made is manifestly mistaken, absurd or
impossible; (3) when there is grave abuse of discretion;
(4) when the judgment is based on misapprehension of
facts; (5) when the findings of facts are conflicting; (6)
when in making its findings the Court of Appeals went
beyond the issues of the case, or its findings are contrary
to the admissions of both the appellant and the appellee;
(7) when the findings are contrary to the trial court; (8)
when the findings are conclusions without citation of
specific evidence on which they are based; (9) when the
facts set forth in the petition as well as in the petitioner’s
main and reply briefs are not disputed by the respondent;
(10) when the findings of fact are premised on the
supposed absence of evidence and contradicted by the
evidence on record; and (11) when the Court of Appeals
manifestly overlooked certain relevant facts not disputed
by the parties, which, if properly considered, would justify
a different conclusion.23
Also, in the case of Manila Electric Company v.
Benamira,24 the Court in a Petition for Review on
Certiorari, deemed it proper to look deeper into the
factual circumstances of the case since the Court of
Appeal’s findings are at odds to those of the National
Labor Relations Commission (NLRC). Just like in the
foregoing case, it is this Court’s considered view that a re-
evaluation of the attendant facts surrounding the present
case is appropriate considering that the findings of the
MAB are in conflict with that of the Court of Appeals.
I in favor of the MMC, the Director of the BMG acted within
At the threshold, it is an undisputed fact that MMC
assigned to SEM all its rights under EP 133 pursuant to a
Deed of Assignment dated 16 February 1994.25
EP 133 is subject to the following terms and conditions26 :
1. That the permittee shall abide by the work
program submitted with the application or
statements made later in support thereof, and
which shall be considered as conditions and
essential parts of this permit;
2. That permittee shall maintain a complete record
of all activities and accounting of all expenditures
incurred therein subject to periodic inspection
and verification at reasonable intervals by the
Bureau of Mines at the expense of the applicant;
3. That the permittee shall submit to the Director
of Mines within 15 days after the end of each
calendar quarter a report under oath of a full and
complete statement of the work done in the area
covered by the permit;
4. That the term of this permit shall be for two (2)
years to be effective from this date, renewable for
the same period at the discretion of the Director of
Mines and upon request of the applicant;
5. That the Director of Mines may at any time
cancel this permit for violation of its provision or
in case of trouble or breach of peace arising in the
area subject hereof by reason of conflicting
interests without any responsibility on the part of
the government as to expenditures for exploration
that might have been incurred, or as to other
damages that might have been suffered by the
permittee; and
6. That this permit shall be for the exclusive use
and benefit of the permittee or his duly authorized
agents and shall be used for mineral exploration
purposes only and for no other purpose.
Under Section 9027 of Presidential Decree No. 463, the
applicable statute during the issuance of EP 133, the
DENR Secretary, through Director of BMG, is charged with
carrying out the said law. Also, under Commonwealth Act
No. 136, also known as "An Act Creating The Bureau of
Mines," which was approved on 7 November 1936, the
Director of Mines has the direct charge of the
administration of the mineral lands and minerals, and of
the survey, classification, lease or any other form of
concession or disposition thereof under the Mining
Act.28 This power of administration includes the power to
prescribe terms and conditions in granting exploration
permits to qualified entities. Thus, in the grant of EP 133
his power in laying down the terms and conditions
attendant thereto.
Condition number 6 categorically states that the permit
shall be for the exclusive use and benefit of MMC or its
duly authorized agents. While it may be true that SEM, the
assignee of EP 133, is a 100% subsidiary corporation of
MMC, records are bereft of any evidence showing that the
former is the duly authorized agent of the latter. For a
contract of agency to exist, it is essential that the principal
consents that the other party, the agent, shall act on its
behalf, and the agent consents so as to act.29 In the case of
Yu Eng Cho v. Pan American World Airways, Inc.,30this
Court had the occasion to set forth the elements of agency,
viz:
(1) consent, express or implied, of the parties to
establish the relationship;
(2) the object is the execution of a juridical act in
relation to a third person;
(3) the agent acts as a representative and not for
himself;
(4) the agent acts within the scope of his
authority.
The existence of the elements of agency is a factual matter
that needs to be established or proven by evidence. The
burden of proving that agency is extant in a certain case
rests in the party who sets forth such allegation. This is
based on the principle that he who alleges a fact has the
burden of proving it.31 It must likewise be emphasized
that the evidence to prove this fact must be clear, positive
and convincing.32
In the instant Petitions, it is incumbent upon either MMC
or SEM to prove that a contract of agency actually exists
between them so as to allow SEM to use and benefit from
EP 133 as the agent of MMC. SEM did not claim nor submit
proof that it is the designated agent of MMC to represent
the latter in its business dealings or undertakings. SEM
cannot, therefore, be considered as an agent of MMC
which can use EP 133 and benefit from it. Since SEM is not
an authorized agent of MMC, it goes without saying that
the assignment or transfer of the permit in favor of SEM is
null and void as it directly contravenes the terms and
conditions of the grant of EP 133.
Furthermore, the concept of agency is distinct from
assignment. In agency, the agent acts not on his own
behalf but on behalf of his principal.33 While in
assignment, there is total transfer or relinquishment of
right by the assignor to the assignee.34 The assignee takes
the place of the assignor and is no longer bound to the
latter. The deed of assignment clearly stipulates:
1. That for ONE PESO (P1.00) and other valuable
consideration received by the ASSIGNOR from the
ASSIGNEE, the ASSIGNOR hereby ASSIGNS, TRANSFERS
and CONVEYS unto the ASSIGNEE whatever rights or
interest the ASSIGNOR may have in the area situated in
Monkayo, Davao del Norte and Cateel, Davao Oriental,
identified as Exploration Permit No. 133 and Application
for a Permit to Prospect in Bunawan, Agusan del Sur
respectively.35
Bearing in mind the just articulated distinctions and the
language of the Deed of Assignment, it is readily obvious
that the assignment by MMC of EP 133 in favor of SEM did
not make the latter the former’s agent. Such assignment
involved actual transfer of all rights and obligations MMC
have under the permit in favor of SEM, thus, making SEM
the permittee. It is not a mere grant of authority to SEM,
as an agent of MMC, to use the permit. It is a total
abdication of MMC’s rights over the permit. Hence, the
assignment in question did not make SEM the authorized
agent of MMC to make use and benefit from EP 133.
The condition stipulating that the permit is for the
exclusive use of the permittee or its duly authorized agent
is not without any reason. Exploration permits are strictly
granted to entities or individuals possessing the resources
and capability to undertake mining operations. Without
such a condition, non-qualified entities or individuals
could circumvent the strict requirements under the law
by the simple expediency acquiring the permit from the
original permittee.
We cannot lend recognition to the Court of Appeals’
theory that SEM, being a 100% subsidiary of MMC, is
automatically an agent of MMC.
A corporation is an artificial being created by operation of
law, having the right of succession and the powers,
attributes, and properties expressly authorized by law or
incident to its existence.36 It is an artificial being invested
by law with a personality separate and distinct from those
of the persons composing it as well as from that of any
other legal entity to which it may be related.37 Resultantly,
absent any clear proof to the contrary, SEM is a separate
and distinct entity from MMC.
The Court of Appeals pathetically invokes the doctrine of
piercing the corporate veil to legitimize the prohibited
transfer or assignment of EP 133. It stresses that SEM is
just a business conduit of MMC, hence, the distinct legal
personalities of the two entities should not be recognized.
True, the corporate mask may be removed when the
corporation is just an alter ego or a mere conduit of a
person or of another corporation.38 For reasons of public
policy and in the interest of justice, the corporate veil will
justifiably be impaled only when it becomes a shield for
fraud, illegality or inequity committed against a third
person.39 However, this Court has made a caveat in the
application of the doctrine of piercing the corporate veil.
Courts should be mindful of the milieu where it is to be
applied. Only in cases where the corporate fiction was
misused to such an extent that injustice, fraud or crime
was committed against another, in disregard of its rights
may the veil be pierced and removed. Thus, a subsidiary
corporation may be made to answer for the liabilities
and/or illegalities done by the parent corporation if the
former was organized for the purpose of evading
obligations that the latter may have entered into. In other
words, this doctrine is in place in order to expose and
hold liable a corporation which commits illegal acts and
use the corporate fiction to avoid liability from the said
acts. The doctrine of piercing the corporate veil cannot
therefore be used as a vehicle to commit prohibited acts
because these acts are the ones which the doctrine seeks
to prevent.
To our mind, the application of the foregoing doctrine is
unwarranted. The assignment of the permit in favor of
SEM is utilized to circumvent the condition of non-
transferability of the exploration permit. To allow SEM to
avail itself of this doctrine and to approve the validity of
the assignment is tantamount to sanctioning illegal act
which is what the doctrine precisely seeks to forestall.
Quite apart from the above, a cursory consideration of the
mining law pertinent to the case, will, indeed,
demonstrate the infraction committed by MMC in its
assignment of EP 133 to SEM.
Presidential Decree No. 463, enacted on 17 May 1974,
otherwise known as the Mineral Resources Development
Decree, which governed the old system of exploration,
development, and utilization of mineral resources
through "license, concession or lease" prescribed:
SEC. 97. Assignment of Mining Rights. – A mining lease
contract or any interest therein shall not be transferred,
assigned, or subleased without the prior approval of the
Secretary: Provided, That such transfer, assignment or
sublease may be made only to a qualified person
possessing the resources and capability to continue the
mining operations of the lessee and that the assignor has
complied with all the obligations of the lease: Provided,
further, That such transfer or assignment shall be duly
registered with the office of the mining recorder
concerned. (Emphasis supplied.)
The same provision is reflected in Republic Act No. 7942,
otherwise known as the Philippine Mining Act of 1995,
which is the new law governing the exploration,
development and utilization of the natural resources,
which provides:
SEC. 25. Transfer or Assignment. - An exploration permit
may be transferred or assigned to a qualified person
subject to the approval of the Secretary upon the
recommendation of the Director.
The records are bereft of any indication that the
assignment bears the imprimatur of the Secretary of the
DENR. Presidential Decree No. 463, which is the
governing law when the assignment was executed,
explicitly requires that the transfer or assignment of
mining rights, including the right to explore a mining area,
must be with the prior approval of the Secretary of DENR.
Quite conspicuously, SEM did not dispute the allegation
that the Deed of Assignment was made without the prior
approval of the Secretary of DENR. Absent the prior
approval of the Secretary of DENR, the assignment of EP
133, was, therefore, without legal effect for violating the
mandatory provision of Presidential Decree No. 463.
An added significant omission proved fatal to MMC/SEM’s
cause. While it is true that the case of Apex Mining Co., Inc.
v. Garcia40 settled the issue of which between Apex and
MMC validly acquired mining rights over the disputed
area, such rights, though, had been extinguished by
subsequent events. Records indicate that on 6 July 1993,
EP 133 was extended for 12 months or until 6 July
1994.41 MMC never renewed its permit prior and after its
expiration. Thus, EP 133 expired by non-renewal.
With the expiration of EP 133 on 6 July 1994, MMC lost
any right to the Diwalwal Gold Rush Area. SEM, on the
other hand, has not acquired any right to the said area
because the transfer of EP 133 in its favor is invalid.
Hence, both MMC and SEM have not acquired any vested
right over the 4,941.6759 hectares which used to be
covered by EP 133.
II
The Court of Appeals theorizes that DAO No. 66 was
issued beyond the power of the DENR Secretary since the
power to withdraw lands from forest reserves and to
declare the same as an area open for mining operation
resides in the President.
Under Proclamation No. 369 dated 27 February 1931, the
power to convert forest reserves as non-forest reserves is
vested with the DENR Secretary. Proclamation No. 369
partly states:
From this reserve shall be considered automatically
excluded all areas which had already been certified and
which in the future may be proclaimed as classified and
certified lands and approved by the Secretary of
Agriculture and Natural Resources.42
However, a subsequent law, Commonwealth Act No. 137,
otherwise known as "The Mining Act" which was
approved on 7 November 1936 provides:
Sec. 14. Lands within reservations for purposes other than
mining, which, after such reservation is made, are found
to be more valuable for their mineral contents than for the
purpose for which the reservation was made, may be
withdrawn from such reservations by the President with
the concurrence of the National Assembly, and thereupon
such lands shall revert to the public domain and be
subject to disposition under the provisions of this Act.
Unlike Proclamation No. 369, Commonwealth Act No. 137
vests solely in the President, with the concurrence of the
National Assembly, the power to withdraw forest reserves
found to be more valuable for their mineral contents than
for the purpose for which the reservation was made and
convert the same into non-forest reserves. A similar
provision can also be found in Presidential Decree No. 463
dated 17 May 1974, with the modifications that (1) the
declaration by the President no longer requires the
concurrence of the National Assembly and (2) the DENR
Secretary merely exercises the power to recommend to
the President which forest reservations are to be
withdrawn from the coverage thereof. Section 8 of
Presidential Decree No. 463 reads:
SEC. 8. Exploration and Exploitation of Reserved Lands. –
When lands within reservations, which have been
established for purposes other than mining, are found to
be more valuable for their mineral contents, they may,
upon recommendation of the Secretary be withdrawn
from such reservation by the President and established as
a mineral reservation.
Against the backdrop of the applicable statutes which
govern the issuance of DAO No. 66, this Court is
constrained to rule that said administrative order was
issued not in accordance with the laws. Inescapably, DAO
No. 66, declaring 729 hectares of the areas covered by the
Agusan-Davao-Surigao Forest Reserve as non-forest land
open to small-scale mining operations, is null and void as,
verily, the DENR Secretary has no power to convert forest
reserves into non-forest reserves.
III
It is the contention of Apex that its right over the
Diwalwal gold rush area is superior to that of MMC or that
of SEM because it was the first one to occupy and take
possession of the area and the first to record its mining
claims over the area.
For its part, Balite argues that with the issuance of DAO
No. 66, its occupation in the contested area, particularly in
the 729 hectares small-scale mining area, has entitled it to
file its MPSA. Balite claims that its MPSA application
should have been given preference over that of SEM
because it was filed ahead.
The MAB, on the other hand, insists that the issue on who
has superior right over the disputed area has become
moot and academic by the supervening events. By virtue
of Proclamation No. 297 dated 25 November 2002, the
disputed area was declared a mineral reservation.
Proclamation No. 297 excluded an area of 8,100 hectares
located in Monkayo, Compostela Valley, and proclaimed
the same as mineral reservation and as environmentally
critical area, viz:
WHEREAS, by virtue of Proclamation No. 369, series of
1931, certain tracts of public land situated in the then
provinces of Davao, Agusan and Surigao, with an area of
approximately 1,927,400 hectares, were withdrawn from
settlement and disposition, excluding, however, those
portions which had been certified and/or shall be
classified and certified as non-forest lands;
WHEREAS, gold deposits have been found within the area
covered by Proclamation No. 369, in the Municipality of
Monkayo, Compostela Valley Province, and unregulated
small to medium-scale mining operations have, since
1983, been undertaken therein, causing in the process
serious environmental, health, and peace and order
problems in the area;
WHEREAS, it is in the national interest to prevent the
further degradation of the environment and to resolve the
health and peace and order problems spawned by the
unregulated mining operations in the said area;
WHEREAS, these problems may be effectively addressed
by rationalizing mining operations in the area through the
establishment of a mineral reservation;
WHEREAS, after giving due notice, the Director of Mines
and Geoxciences conducted public hearings on September
6, 9 and 11, 2002 to allow the concerned sectors and
communities to air their views regarding the
establishment of a mineral reservation in the place in
question;
WHEREAS, pursuant to the Philippine Mining Act of 1995
(RA 7942), the President may, upon the recommendation
of the Director of Mines and Geosciences, through the
Secretary of Environment and Natural Resources, and
when the national interest so requires, establish mineral
reservations where mining operations shall be
undertaken by the Department directly or thru a
contractor;
WHEREAS, as a measure to attain and maintain a rational
and orderly balance between socio-economic growth and
environmental protection, the President may, pursuant to
Presidential Decree No. 1586, as amended, proclaim and
declare certain areas in the country as environmentally
critical;
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO,
President of the Philippines, upon recommendation of the
Secretary of the Department of Environment and Natural
Resources (DENR), and by virtue of the powers vested in
me by law, do hereby exclude certain parcel of land
located in Monkayo, Compostela Valley, and proclaim the
same as mineral reservation and as environmentally
critical area, with metes and bound as defined by the
following geographical coordinates;
xxxx
with an area of Eight Thousand One Hundred (8,100)
hectares, more or less. Mining operations in the area may
be undertaken either by the DENR directly, subject to
payment of just compensation that may be due to
legitimate and existing claimants, or thru a qualified
contractor, subject to existing rights, if any.
The DENR shall formulate and issue the appropriate
guidelines, including the establishment of an
environmental and social fund, to implement the intent
and provisions of this Proclamation.
Upon the effectivity of the 1987 Constitution, the State
assumed a more dynamic role in the exploration,
development and utilization of the natural resources of
the country.43 With this policy, the State may pursue full
control and supervision of the exploration, development
and utilization of the country’s natural mineral resources.
The options open to the State are through direct
undertaking or by entering into co-production, joint
venture, or production-sharing agreements, or by
entering into agreement with foreign-owned corporations
for large-scale exploration, development and
utilization.44 Thus, Article XII, Section 2, of the 1987
Constitution, specifically states:
SEC. 2. All lands of the public domain, waters, minerals,
coal, petroleum, and other mineral oils, all forces of
potential energy, fisheries, forests or timber, wildlife, flora
and fauna, and other natural resources are owned by the
State. With the exception of agricultural lands, all other
natural resources shall not be alienated. The exploration,
development, and utilization of natural resources shall be
under the full control and supervision of the State. The
State may directly undertake such activities, or it may
enter into co-production, joint venture, or production-
sharing agreements with Filipino citizens, or corporations
or associations at least sixty per centum of whose capital
is owned by such citizens. Such agreements may be for a
period not exceeding twenty-five years, renewable for not
more than twenty-five years, and under such terms and
conditions as may be provided by law. x x x
xxxx
The President may enter into agreements with foreign-
owned corporations involving either technical or financial
assistance for large-scale exploration, development, and
utilization of minerals, petroleum, and other mineral oils
according to the general terms and conditions provided
by law, based on real contributions to the economic
growth and general welfare of the country. x x x
(Underscoring supplied.)
Recognizing the importance of the country’s natural
resources, not only for national economic development,
but also for its security and national defense, Section 5 of
Republic Act No. 7942 empowers the President, when the
national interest so requires, to establish mineral
reservations where mining operations shall be
undertaken directly by the State or through a contractor.
To implement the intent and provisions of Proclamation
No. 297, the DENR Secretary issued DAO No. 2002-18
dated 12 August 2002 declaring an emergency situation in
the Diwalwal Gold Rush Area and ordering the stoppage
of all mining operations therein.
The issue on who has priority right over the disputed area
is deemed overtaken by the above subsequent
developments particularly with the issuance of
Proclamation 297 and DAO No. 2002-18, both being
constitutionally-sanctioned acts of the Executive Branch.
Mining operations in the Diwalwal Mineral Reservation
are now, therefore, within the full control of the State
through the executive branch. Pursuant to Section 5 of
Republic Act No. 7942, the State can either directly
undertake the exploration, development and utilization of
the area or it can enter into agreements with qualified
entities, viz:
SEC 5. Mineral Reservations. – When the national interest
so requires, such as when there is a need to preserve
strategic raw materials for industries critical to national
development, or certain minerals for scientific, cultural or
ecological value, the President may establish mineral
reservations upon the recommendation of the Director
through the Secretary. Mining operations in existing
mineral reservations and such other reservations as may
thereafter be established, shall be undertaken by the
Department or through a contractor x x x .
It is now up to the Executive Department whether to take
the first option, i.e., to undertake directly the mining
operations of the Diwalwal Gold Rush Area. As already
ruled, the State may not be precluded from considering a
direct takeover of the mines, if it is the only plausible
remedy in sight to the gnawing complexities generated by
the gold rush. The State need be guided only by the
demands of public interest in settling on this option, as
well as its material and logistic feasibility.45 The State can
also opt to award mining operations in the mineral
reservation to private entities including petitioners Apex
and Balite, if it wishes. The exercise of this prerogative lies
with the Executive Department over which courts will not
interfere.
WHEREFORE, premises considered, the Petitions of Apex,
Balite and the MAB are PARTIALLY GRANTED, thus:
1. We hereby REVERSE and SET ASIDE the
Decision of the Court of Appeals, dated 13 March
2002, and hereby declare that EP 133 of MMC has
EXPIRED on 7 July 1994 and that its subsequent
transfer to SEM on 16 February 1994 is VOID.
2. We AFFIRM the finding of the Court of Appeals
in the same Decision declaring DAO No. 66 illegal
for having been issued in excess of the DENR
Secretary’s authority.
Consequently, the State, should it so desire, may now
award mining operations in the disputed area to any
qualified entity it may determine. No costs.
SO ORDERED.
G.R. No. L-7089 August 31, 1954
DOMINGO DE LA CRUZ, plaintiff-appellant,
vs.
NORTHERN THEATRICAL ENTERPRISES INC., ET
AL., defendants-appellees.
Conrado Rubio for appellant.
Ruiz, Ruiz, Ruiz, Ruiz, and Benjamin Guerrero for appellees.
MONTEMAYOR, J.:
The facts in this case based on an agreed statement of
facts are simple. In the year 1941 the Northern Theatrical
Enterprises Inc., a domestic corporation operated a movie
house in Laoag, Ilocos Norte, and among the persons
employed by it was the plaintiff DOMINGO DE LA CRUZ,
hired as a special guard whose duties were to guard the
main entrance of the cine, to maintain peace and order
and to report the commission of disorders within the
premises. As such guard he carried a revolver. In the
afternoon of July 4, 1941, one Benjamin Martin wanted to
crash the gate or entrance of the movie house. Infuriated
by the refusal of plaintiff De la Cruz to let him in without
first providing himself with a ticket, Martin attacked him
with a bolo. De la Cruz defendant himself as best he could
until he was cornered, at which moment to save himself
he shot the gate crasher, resulting in the latter's death.
For the killing, De la Cruz was charged with homicide in
Criminal Case No. 8449 of the Court of First Instance of
Ilocos Norte. After a re-investigation conducted by the
Provincial Fiscal the latter filed a motion to dismiss the
complaint, which was granted by the court in January
1943. On July 8, 1947, De la Cruz was again accused of the
same crime of homicide, in Criminal Case No. 431 of the
same Court. After trial, he was finally acquitted of the
charge on January 31, 1948. In both criminal cases De la
Cruz employed a lawyer to defend him. He demanded
from his former employer reimbursement of his expenses
but was refused, after which he filed the present action
against the movie corporation and the three members of
its board of directors, to recover not only the amounts he
had paid his lawyers but also moral damages said to have
been suffered, due to his worry, his neglect of his interests
and his family as well in the supervision of the cultivation
of his land, a total of P15,000. On the basis of the
complaint and the answer filed by defendants wherein
they asked for the dismissal of the complaint, as well as
the agreed statement of facts, the Court of First Instance
of Ilocos Norte after rejecting the theory of the plaintiff
that he was an agent of the defendants and that as such
agent he was entitled to reimbursement of the expenses
incurred by him in connection with the agency (Arts.
1709-1729 of the old Civil Code), found that plaintiff had
no cause of action and dismissed the complaint without
costs. De la Cruz appealed directly to this Tribunal for the
reason that only questions of law are involved in the
appeal.
We agree with the trial court that the relationship
between the movie corporation and the plaintiff was not
that of principal and agent because the principle of
representation was in no way involved. Plaintiff was not
employed to represent the defendant corporation in its
dealings with third parties. He was a mere employee hired
to perform a certain specific duty or task, that of acting as
special guard and staying at the main entrance of the
movie house to stop gate crashers and to maintain peace
and order within the premises. The question posed by this
appeal is whether an employee or servant who in line of
duty and while in the performance of the task assigned to
him, performs an act which eventually results in his
incurring in expenses, caused not directly by his master or
employer or his fellow servants or by reason of his
performance of his duty, but rather by a third party or
stranger not in the employ of his employer, may recover
said damages against his employer.
The learned trial court in the last paragraph of its decision
dismissing the complaint said that "after studying many
laws or provisions of law to find out what law is
applicable to the facts submitted and admitted by the
parties, has found none and it has no other alternative
than to dismiss the complaint." The trial court is right. We
confess that we are not aware of any law or judicial
authority that is directly applicable to the present case,
and realizing the importance and far-reaching effect of a
ruling on the subject-matter we have searched, though
vainly, for judicial authorities and enlightenment. All the
laws and principles of law we have found, as regards
master and servants, or employer and employee, refer to
cases of physical injuries, light or serious, resulting in loss
of a member of the body or of any one of the senses, or
permanent physical disability or even death, suffered in
line of duty and in the course of the performance of the
duties assigned to the servant or employee, and these
cases are mainly governed by the Employer's Liability Act
and the Workmen's Compensation Act. But a case
involving damages caused to an employee by a stranger or
outsider while said employee was in the performance of
his duties, presents a novel question which under present
legislation we are neither able nor prepared to decide in
favor of the employee.
In a case like the present or a similar case of say a driver
employed by a transportation company, who while in the
course of employment runs over and inflicts physical
injuries on or causes the death of a pedestrian; and such
driver is later charged criminally in court, one can
imagine that it would be to the interest of the employer to
give legal help to and defend its employee in order to In view of the foregoing, the judgment of the lower court
show that the latter was not guilty of any crime either is affirmed. No costs.
deliberately or through negligence, because should the
employee be finally held criminally liable and he is found MARIA TUAZON, ALEJANDRO G.R. No. 156262
to be insolvent, the employer would be subsidiarily liable. P. TUAZON, MELECIO P.
That is why, we repeat, it is to the interest of the employer TUAZON, Spouses ANASTACIO and Present:
to render legal assistance to its employee. But we are not MARY T. BUENAVENTURA,
prepared to say and to hold that the giving of said legal Petitioners, Panganiban, J.,
assistance to its employees is a legal obligation. While it Chairman,
might yet and possibly be regarded as a normal Sandoval-Gutierrez,
obligation, it does not at present count with the sanction Corona,
of man-made laws. - versus - Carpio Morales, and
Garcia, JJ
If the employer is not legally obliged to give, legal Promulgated:
assistance to its employee and provide him with a lawyer, HEIRS OF BARTOLOME RAMOS,
naturally said employee may not recover the amount he Respondents. July 14, 2005
may have paid a lawyer hired by him. x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --- -- -- --

Viewed from another angle it may be said that the damage
suffered by the plaintiff by reason of the expenses
incurred by him in remunerating his lawyer, is not caused
by his act of shooting to death the gate crasher but rather
by the filing of the charge of homicide which made it
necessary for him to defend himself with the aid of
counsel. Had no criminal charge been filed against him,
there would have been no expenses incurred or damage
suffered. So the damage suffered by plaintiff was caused
rather by the improper filing of the criminal charge,
possibly at the instance of the heirs of the deceased gate
crasher and by the State through the Fiscal. We say
improper filing, judging by the results of the court
proceedings, namely, acquittal. In other words, the
plaintiff was innocent and blameless. If despite his
innocence and despite the absence of any criminal
responsibility on his part he was accused of homicide,
then the responsibility for the improper accusation may
be laid at the door of the heirs of the deceased and the
State, and so theoretically, they are the parties that may
be held responsible civilly for damages and if this is so, we
fail to see now this responsibility can be transferred to the
employer who in no way intervened, much less initiated
the criminal proceedings and whose only connection or
relation to the whole affairs was that he employed
plaintiff to perform a special duty or task, which task or
duty was performed lawfully and without negligence.
S tripped of nonessentials, the present case involves the
collection of a sum of money. Specifically, this case
arose from the failure of petitioners to pay respondents
predecessor-in-interest. This fact was shown by the non-
encashment of checks issued by a third person, but
indorsed by herein Petitioner Maria Tuazon in favor of the
said predecessor. Under these circumstances, to enable
respondents to collect on the indebtedness, the check
drawer need not be impleaded in the Complaint. Thus, the
suit is directed, not against the drawer, but against the
debtor who indorsed the checks in payment of the
obligation.
The Case
Before us is a Petition for Review[1] under Rule 45 of the
Rules of Court, challenging the July 31, 2002 Decision[2] of
the Court of Appeals (CA) in CA-GR CV No. 46535. The
decretal portion of the assailed Decision reads:
WHEREFORE, the appeal
is DISMISSED and the appealed decision
is AFFIRMED.
On the other hand, the affirmed Decision[3] of Branch 34 of
the Regional Trial Court (RTC) of Gapan, Nueva Ecija,
disposed as follows:

Still another point of view is that the damages incurred WHEREFORE, judgment is hereby
here consisting of the payment of the lawyer's fee did not rendered in favor of the plaintiffs and
flow directly from the performance of his duties but only against the defendants, ordering the
indirectly because there was an efficient, intervening defendants spouses Leonilo Tuazon and
cause, namely, the filing of the criminal charges. In other Maria Tuazon to pay the plaintiffs, as
words, the shooting to death of the deceased by the follows:
plaintiff was not the proximate cause of the damages
suffered but may be regarded as only a remote cause, 1. The sum
because from the shooting to the damages suffered there of P1,750,050.00, with
was not that natural and continuous sequence required to interests from the filing of
fix civil responsibility. the second amended
complaint;

2. The sum of P50,000.00,
as attorneys fees;
3. The sum of P20,000.00,
as moral damages
4. And to pay the costs of
suit.
x x x x x x x x x[4]
The Facts
The facts are narrated by the CA as follows:
[Respondents] alleged that
between the period of May 2, 1988 and
June 5, 1988, spouses Leonilo and Maria
Tuazon purchased a total of 8,326 cavans
of rice from [the deceased Bartolome]
Ramos [predecessor-in-interest of
respondents]. That of this [quantity,] x x x
only 4,437 cavans [have been paid for so
far], leaving unpaid 3,889 cavans valued
at P1,211,919.00. In payment therefor, the
spouses Tuazon issued x x x [several]
Traders Royal Bank checks.
xxxxxxxxx
[B]ut when these [checks] were encashed,
all of the checks bounced due to
insufficiency of funds. [Respondents]
advanced that before issuing said checks[,]
spouses Tuazon already knew that they
had no available fund to support the
checks, and they failed to provide for the
payment of these despite repeated
demands made on them.
[Respondents] averred that because
spouses Tuazon anticipated that they
would be sued, they conspired with the
other [defendants] to defraud them as
creditors by executing x x x fictitious sales
of their properties. They executed x x x
simulated sale[s] [of three lots] in favor of
the x x x spouses Buenaventura x x x[,] as
well as their residential lot and the house
thereon[,] all located at Nueva Ecija, and
another simulated deed of sale dated July
12, 1988 of a Stake Toyota registered with
the Land Transportation Office of
Cabanatuan City on September 7, 1988.
[Co-petitioner] Melecio Tuazon, a son of
spouses Tuazon, registered a fictitious
Deed of Sale on July 19, 1988 x x x over a
residential lot located at Nueva Ecija.
Another simulated sale of a Toyota Willys
was executed on January 25, 1988 in favor
of their other son, [co-petitioner]
Alejandro Tuazon x x x. As a result of the
said sales, the titles of these properties
issued in the names of spouses Tuazon
were cancelled and new ones were issued
in favor of the [co-]defendants spouses
Buenaventura, Alejandro Tuazon and
Melecio Tuazon. Resultantly, by the said
ante-dated and simulated sales and the
corresponding transfers there was no
more property left registered in the names
of spouses Tuazon answerable to
creditors, to the damage and prejudice of
[respondents].
For their part, defendants denied
having purchased x x x rice from
[Bartolome] Ramos. They alleged that it
was Magdalena Ramos, wife of said
deceased, who owned and traded the
merchandise and Maria Tuazon was
merely her agent. They argued that it was
Evangeline Santos who was the buyer of
the rice and issued the checks to Maria
Tuazon as payments therefor. In good
faith[,] the checks were received [by
petitioner] from Evangeline Santos and
turned over to Ramos without knowing
that these were not funded. And it is for
this reason that [petitioners] have been
insisting on the inclusion of Evangeline
Santos as an indispensable party, and her
non-inclusion was a fatal error. Refuting
that the sale of several properties were
fictitious or simulated, spouses Tuazon
contended that these were sold because
they were then meeting financial
difficulties but the disposals were made
for value and in good faith and done before
the filing of the instant suit. To dispute the
contention of plaintiffs that they were the
buyers of the rice, they argued that there
was no sales invoice, official receipts or
like evidence to prove this. They assert
that they were merely agents and should
not be held answerable.[5]
The corresponding civil and criminal cases were filed by
respondents against Spouses Tuazon. Those cases were
later consolidated and amended to include Spouses
Anastacio and Mary Buenaventura, with Alejandro
Tuazon and Melecio Tuazon as additional defendants.
Having passed away before the pretrial, Bartolome Ramos
was substituted by his heirs, herein respondents.

Contending that Evangeline Santos was an indispensable
party in the case, petitioners moved to file a third-party
complaint against her. Allegedly, she was primarily liable
to respondents, because she was the one who had
purchased the merchandise from their predecessor, as
evidenced by the fact that the checks had been drawn in
her name. The RTC, however, denied petitioners Motion.
Since the trial court acquitted petitioners in all three of
the consolidated criminal cases, they appealed only its
decision finding them civilly liable to respondents.
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that petitioners had failed
to prove the existence of an agency between respondents
and Spouses Tuazon. The appellate court disbelieved
petitioners contention that Evangeline Santos should have
been impleaded as an indispensable party. Inasmuch as
all the checks had been indorsed by Maria Tuazon, who
thereby became liable to subsequent holders for the
amounts stated in those checks, there was no need to
implead Santos.
Hence, this Petition.[6]
Issues
Petitioners raise the following issues for our
consideration:
1. Whether or not the Honorable Court of
Appeals erred in ruling that petitioners are
not agents of the respondents.
2. Whether or not the Honorable Court
of Appeals erred in rendering judgment
against the petitioners despite x x x
the failure of the respondents to include in
their action Evangeline Santos, an
indispensable party to the suit.[7]
The Courts Ruling
The Petition is unmeritorious.
First Issue:
Agency
Well-entrenched is the rule that the Supreme Courts role
in a petition under Rule 45 is limited to reviewing errors
of law allegedly committed by the Court of Appeals.
Factual findings of the trial court, especially when
affirmed by the CA, are conclusive on the parties and this
Court.[8] Petitioners have not given us sufficient reasons to
deviate from this rule.
In a contract of agency, one binds oneself to
render some service or to do something in representation
or on behalf of another, with the latters consent or
authority.[9] The following are the elements of agency: (1)
the parties consent, express or implied, to establish the
relationship; (2) the object, which is the execution of a
juridical act in relation to a third person; (3)
the representation, by which the one who acts as an agent
does so, not for oneself, but as a representative; (4)
the limitation that the agent acts within the scope of his or
her authority.[10] As the basis of agency is representation,
there must be, on the part of the principal, an actual
intention to appoint, an intention naturally inferable from
the principals words or actions. In the same manner, there
must be an intention on the part of the agent to accept the
appointment and act upon it. Absent such mutual intent,
there is generally no agency.[11]
This Court finds no reversible error in the findings
of the courts a quo that petitioners were the rice buyers
themselves; they were not mere agents of respondents in
their rice dealership. The question of whether a contract
is one of sale or of agency depends on the intention of the
parties.[12]
The declarations of agents alone are generally
insufficient to establish the fact or extent of their
authority.[13] The law makes no presumption of agency;
proving its existence, nature and extent is incumbent
upon the person alleging it.[14] In the present case,
petitioners raise the fact of agency as an affirmative
defense, yet fail to prove its existence.
The Court notes that petitioners, on their own
behalf, sued Evangeline Santos for collection of the
amounts represented by the bounced checks, in a
separate civil case that they sought to be consolidated
with the current one. If, as they claim, they were mere
agents of respondents, petitioners should have brought
the suit against Santos for and on behalf of their alleged
principal, in accordance with Section 2 of Rule 3 of the
Rules on Civil Procedure.[15] Their filing a suit against
her in their own names negates their claim that they acted
as mere agents in selling the rice obtained from
Bartolome Ramos.
Second Issue:
Indispensable Party
Petitioners argue that the lower courts erred in not
allowing Evangeline Santos to be impleaded as an
indispensable party. They insist that respondents
Complaint against them is based on the bouncing checks
she issued; hence, they point to her as the person
primarily liable for the obligation.
We hold that respondents cause of action is clearly
founded on petitioners failure to pay the purchase price of
the rice. The trial court held that Petitioner Maria Tuazon
had indorsed the questioned checks in favor of
respondents, in accordance with Sections 31 and 63 of the
Negotiable Instruments Law.[16] That Santos was the
drawer of the checks is thus immaterial to the
respondents cause of action.
As indorser, Petitioner Maria Tuazon warranted that upon
due presentment, the checks were to be accepted or paid,
or both, according to their tenor; and that in case they
were dishonored, she would pay the corresponding
amount.[17] After an instrument is dishonored by
nonpayment, indorsers cease to be merely secondarily
liable; they become principal debtors whose liability
becomes identical to that of the original obligor. The
holder of a negotiable instrument need not even proceed
against the maker before suing the indorser.[18] Clearly,
Evangeline Santos -- as the drawer of the checks -- is not
an indispensable party in an action against Maria Tuazon,
the indorser of the checks.
Indispensable parties are defined as parties in interest
without whom no final determination can be had.[19] The
instant case was originally one for the collection of the
purchase price of the rice bought by Maria Tuazon from
respondents predecessor. In this case, it is clear that there
is no privity of contract between respondents and Santos.
Hence, a final determination of the rights and interest of
the parties may be made without any need to implead her.
WHEREFORE, the Petition is DENIED and the
assailed Decision AFFIRMED. Costs against petitioners.
SO ORDERED.
[G.R. No. 117356. June 19, 2000]
VICTORIAS MILLING CO., INC., petitioner,
vs. COURT OF APPEALS and CONSOLIDATED
SUGAR CORPORATION, respondents.
DECISION
QUISUMBING, J.:
Before us is a petition for review
on certiorari under Rule 45 of the Rules of Court
assailing the decision of the Court of Appeals
dated February 24, 1994, in CA-G.R. CV No. 31717,
as well as the respondent court's resolution of
September 30, 1994 modifying said decision. Both
decision and resolution amended the judgment
dated February 13, 1991, of the Regional Trial
Court of Makati City, Branch 147, in Civil Case No.
90-118.
The facts of this case as found by both the trial and
appellate courts are as follows:
St. Therese Merchandising (hereafter STM)
regularly bought sugar from petitioner Victorias
Milling Co., Inc., (VMC). In the course of their
dealings, petitioner issued several Shipping
List/Delivery Receipts (SLDRs) to STM as proof of
purchases. Among these was SLDR No. 1214M,
which gave rise to the instant case. Dated October
16, 1989, SLDR No. 1214M covers 25,000 bags of
sugar. Each bag contained 50 kilograms and
priced at P638.00 per bag as "per sales order VMC
Marketing No. 042 dated October 16, 1989."[1] The
transaction it covered was a "direct sale."[2] The
SLDR also contains an additional note which
reads: "subject for (sic) availability of a (sic) stock
at NAWACO (warehouse)."[3]
On October 25, 1989, STM sold to private
respondent Consolidated Sugar Corporation (CSC)
its rights in SLDR No. 1214M for P 14,750,000.00.
CSC issued one check dated October 25, 1989 and
three checks postdated November 13, 1989 in
payment. That same day, CSC wrote petitioner
that it had been authorized by STM to withdraw
the sugar covered by SLDR No. 1214M. Enclosed
in the letter were a copy of SLDR No. 1214M and a
letter of authority from STM authorizing CSC "to
withdraw for and in our behalf the refined sugar
covered by Shipping List/Delivery Receipt-
Refined Sugar (SDR) No. 1214 dated October 16,
1989 in the total quantity of 25,000 bags."[4]
On October 27, 1989, STM issued 16 checks in the
total amount of P31,900,000.00 with petitioner as
payee. The latter, in turn, issued Official Receipt
No. 33743 dated October 27, 1989 acknowledging
receipt of the said checks in payment of 50,000
bags. Aside from SLDR No. 1214M, said checks
also covered SLDR No. 1213.
Private respondent CSC surrendered SLDR No.
1214M to the petitioner's NAWACO warehouse
and was allowed to withdraw sugar. However,
after 2,000 bags had been released, petitioner
refused to allow further withdrawals of sugar
against SLDR No. 1214M. CSC then sent petitioner
a letter dated January 23, 1990 informing it that
SLDR No. 1214M had been "sold and endorsed" to
it but that it had been refused further withdrawals
of sugar from petitioner's warehouse despite the
fact that only 2,000 bags had been
withdrawn.[5] CSC thus inquired when it would be
allowed to withdraw the remaining 23,000 bags.
On January 31, 1990, petitioner replied that it
could not allow any further withdrawals of sugar
against SLDR No. 1214M because STM had already
dwithdrawn all the sugar covered by the cleared
checks.[6]
On March 2, 1990, CSC sent petitioner a letter
demanding the release of the balance of 23,000
bags.
Seven days later, petitioner reiterated that all the
sugar corresponding to the amount of STM's
cleared checks had been fully withdrawn and
hence, there would be no more deliveries of the
commodity to STM's account. Petitioner also
noted that CSC had represented itself to be STM's
agent as it had withdrawn the 2,000 bags against
SLDR No. 1214M "for and in behalf" of STM.
On April 27, 1990, CSC filed a complaint for
specific performance, docketed as Civil Case No.
90-1118. Defendants were Teresita Ng Sy (doing
business under the name of St. Therese
Merchandising) and herein petitioner. Since the
former could not be served with summons, the
case proceeded only against the latter. During the
trial, it was discovered that Teresita Ng Go who
testified for CSC was the same Teresita Ng Sy who
could not be reached through summons.[7] CSC,
however, did not bother to pursue its case against
her, but instead used her as its witness.
CSC's complaint alleged that STM had fully paid
petitioner for the sugar covered by SLDR No.
1214M. Therefore, the latter had no justification
for refusing delivery of the sugar. CSC prayed that
petitioner be ordered to deliver the 23,000 bags
covered by SLDR No. 1214M and sought the award
of P1,104,000.00 in unrealized profits,
P3,000,000.00 as exemplary damages,
P2,200,000.00 as attorney's fees and litigation
expenses.
Petitioner's primary defense a quo was that it was
an unpaid seller for the 23,000 bags.[8] Since STM
had already drawn in full all the sugar
corresponding to the amount of its cleared checks,
it could no longer authorize further delivery of
sugar to CSC. Petitioner also contended that it had
no privity of contract with CSC.
Petitioner explained that the SLDRs, which it had
issued, were not documents of title, but mere
delivery receipts issued pursuant to a series of
transactions entered into between it and STM. The
SLDRs prescribed delivery of the sugar to the
party specified therein and did not authorize the
transfer of said party's rights and interests.
Petitioner also alleged that CSC did not pay for the
SLDR and was actually STM's co-conspirator to
defraud it through a misrepresentation that CSC
was an innocent purchaser for value and in good
faith. Petitioner then prayed that CSC be ordered
to pay it the following sums: P10,000,000.00 as
moral damages; P10,000,000.00 as exemplary
damages; and P1,500,000.00 as attorney's fees.
Petitioner also prayed that cross-defendant STM
be ordered to pay it P10,000,000.00 in exemplary
damages, and P1,500,000.00 as attorney's fees.
Since no settlement was reached at pre-trial, the
trial court heard the case on the merits.
As earlier stated, the trial court rendered its
judgment favoring private respondent CSC, as
follows:
"WHEREFORE, in view of the foregoing,
the Court hereby renders judgment in
favor of the plaintiff and against defendant
Victorias Milling Company:
"1) Ordering defendant Victorias Milling
Company to deliver to the plaintiff 23,000
bags of refined sugar due under SLDR No.
1214;
"2) Ordering defendant Victorias Milling
Company to pay the amount of
P920,000.00 as unrealized profits, the
amount of P800,000.00 as exemplary
damages and the amount of
P1,357,000.00, which is 10% of the
acquisition value of the undelivered bags
of refined sugar in the amount of
P13,570,000.00, as attorney's fees, plus
the costs.
"SO ORDERED."[9]
It made the following observations:
"[T]he testimony of plaintiff's witness
Teresita Ng Go, that she had fully paid the
purchase price of P15,950,000.00 of the
25,000 bags of sugar bought by her
covered by SLDR No. 1214 as well as the
purchase price of P15,950,000.00 for the
25,000 bags of sugar bought by her
covered by SLDR No. 1213 on the same
date, October 16, 1989 (date of the two
SLDRs) is duly supported by Exhibits C to
C-15 inclusive which are post-dated
checks dated October 27, 1989 issued by
St. Therese Merchandising in favor of
Victorias Milling Company at the time it
purchased the 50,000 bags of sugar
covered by SLDR No. 1213 and 1214. Said
checks appear to have been honored and
duly credited to the account of Victorias
 Milling Company because on October 27,
1989 Victorias Milling Company issued
official receipt no. 34734 in favor of St.
Therese Merchandising for the amount of
P31,900,000.00 (Exhibits B and B-1). The
testimony of Teresita Ng Go is further
supported by Exhibit F, which is a
computer printout of defendant Victorias
Milling Company showing the quantity and
value of the purchases made by St. Therese
Merchandising, the SLDR no. issued to
cover the purchase, the official reciept no.
and the status of payment. It is clear in
Exhibit 'F' that with respect to the sugar
covered by SLDR No. 1214 the same has
been fully paid as indicated by the word
'cleared' appearing under the column of
'status of payment.'
"On the other hand, the claim of defendant
Victorias Milling Company that the
purchase price of the 25,000 bags of sugar
purchased by St. Therese Merchandising
covered by SLDR No. 1214 has not been
fully paid is supported only by the
testimony of Arnulfo Caintic, witness for
defendant Victorias Milling Company. The
Court notes that the testimony of Arnulfo
Caintic is merely a sweeping barren
assertion that the purchase price has not
been fully paid and is not corroborated by
any positive evidence. There is an
insinuation by Arnulfo Caintic in his
testimony that the postdated checks
issued by the buyer in payment of the
purchased price were dishonored.
However, said witness failed to present in
Court any dishonored check or any
replacement check. Said witness likewise
failed to present any bank record showing
that the checks issued by the buyer,
Teresita Ng Go, in payment of the purchase
price of the sugar covered by SLDR No.
1214 were dishonored."[10]
Petitioner appealed the trial courts decision to the
Court of Appeals.
On appeal, petitioner averred that the dealings
between it and STM were part of a series of
transactions involving only one account or one
general contract of sale. Pursuant to this contract,
STM or any of its authorized agents could
withdraw bags of sugar only against cleared
checks of STM. SLDR No. 21214M was only one of
22 SLDRs issued to STM andsince the latter had
already withdrawn its full quota of sugar under
the said SLDR, CSC was already precluded from
seeking delivery of the 23,000 bags of sugar.
Private respondent CSC countered that the sugar
purchases involving SLDR No. 1214M were
separate and independent transactions and that
the details of the series of purchases were
contained in a single statement with a
consolidated summary of cleared check payments
and sugar stock withdrawals because this a more
convenient system than issuing separate
statements for each purchase.
The appellate court considered the following
issues: (a) Whether or not the transaction
between petitioner and STM involving SLDR No.
1214M was a separate, independent, and single
transaction; (b) Whether or not CSC had the
capacity to sue on its own on SLDR No. 1214M;
and (c) Whether or not CSC as buyer from STM of
the rights to 25,000 bags of sugar covered by
SLDR No. 1214M could compel petitioner to
deliver 23,000 bags allegedly unwithdrawn.
On February 24, 1994, the Court of Appeals
rendered its decision modifying the trial court's
judgment, to wit:
"WHEREFORE, the Court
hereby MODIFIES the assailed judgment
and orders defendant-appellant to:
"1) Deliver to plaintiff-appellee 12,586
bags of sugar covered by SLDR No. 1214M;
" 2) Pay to plaintiff-appellee P792,918.00
which is 10% of the value of the
undelivered bags of refined sugar, as
attorneys fees;
"3) Pay the costs of suit.
"SO ORDERED."[11]
Both parties then seasonably filed separate
motions for reconsideration.
In its resolution dated September 30, 1994, the
appellate court modified its decision to read:
"WHEREFORE, the Court hereby modifies
the assailed judgment and orders
defendant-appellant to:
"(1) Deliver to plaintiff-appellee 23,000
bags of refined sugar under SLDR No.
1214M;
"(2) Pay costs of suit.
"SO ORDERED."[12]
The appellate court explained the rationale for the
modification as follows:
"There is merit in plaintiff-appellee's
position.
"Exhibit F' We relied upon in fixing the
number of bags of sugar which remained
undelivered as 12,586 cannot be made the
basis for such a finding. The rule is explicit
that courts should consider the evidence
only for the purpose for which it was
offered. (People v. Abalos, et al, 1 CA Rep
783). The rationale for this is to afford the
party against whom the evidence is
presented to object thereto if he deems it
necessary. Plaintiff-appellee is, therefore,
correct in its argument that Exhibit F'
which was offered to prove that checks in
the total amount of P15,950,000.00 had
been cleared. (Formal Offer of Evidence for
Plaintiff, Records p. 58) cannot be used to
prove the proposition that 12,586 bags of
sugar remained undelivered.
"Testimonial evidence (Testimonies of
Teresita Ng [TSN, 10 October 1990, p. 33]
and Marianito L. Santos [TSN, 17 October
1990, pp. 16, 18, and 36]) presented by
plaintiff-appellee was to the effect that it
had withdrawn only 2,000 bags of sugar
from SLDR after which it was not allowed
to withdraw anymore. Documentary
evidence (Exhibit I, Id., p. 78, Exhibit K, Id.,
p. 80) show that plaintiff-appellee had sent
demand letters to defendant-appellant
asking the latter to allow it to withdraw
the remaining 23,000 bags of sugar from
SLDR 1214M. Defendant-appellant, on the
other hand, alleged that sugar delivery to
the STM corresponded only to the value of
cleared checks; and that all sugar
corresponded to cleared checks had been
withdrawn. Defendant-appellant did not
rebut plaintiff-appellee's assertions. It did
not present evidence to show how many
bags of sugar had been withdrawn against
SLDR No. 1214M, precisely because of its
theory that all sales in question were a
series of one single transaction and
withdrawal of sugar depended on the
clearing of checks paid therefor.
"After a second look at the evidence, We
see no reason to overturn the findings of
the trial court on this point."[13]
Hence, the instant petition, positing the following
errors as grounds for review:
"1. The Court of Appeals erred in not
holding that STM's and private
respondent's specially informing
petitioner that respondent was authorized
by buyer STM to withdraw sugar against
SLDR No. 1214M "for and in our (STM)
behalf," (emphasis in the original) private
respondent's withdrawing 2,000 bags of
sugar for STM, and STM's empowering
other persons as its agents to withdraw
sugar against the same SLDR No. 1214M,
rendered respondent like the other
persons, an agent of STM as held in Rallos
v. Felix Go Chan & Realty Corp., 81 SCRA
252, and precluded it from subsequently
claiming and proving being an assignee of
SLDR No. 1214M and from suing by itself
for its enforcement because it was
conclusively presumed to be an agent (Sec.
2, Rule 131, Rules of Court) and estopped
from doing so. (Art. 1431, Civil Code).
" 2. The Court of Appeals erred in
manifestly and arbitrarily ignoring and
disregarding certain relevant and
undisputed facts which, had they been
considered, would have shown that
petitioner was not liable, except for 69
bags of sugar, and which would justify
review of its conclusion of facts by this
Honorable Court.
" 3. The Court of Appeals misapplied the
law on compensation under Arts. 1279,
1285 and 1626 of the Civil Code when it
ruled that compensation applied only to
credits from one SLDR or contract and not
to those from two or more distinct
contracts between the same parties; and
erred in denying petitioner's right to setoff
all its credits arising prior to notice of
assignment from other sales or SLDRs
against private respondent's claim as
assignee under SLDR No. 1214M, so as to
extinguish or reduce its liability to 69 bags,
because the law on compensation applies
precisely to two or more distinct contracts
between the same parties (emphasis in the
original).
"4. The Court of Appeals erred in
concluding that the settlement or
liquidation of accounts in Exh. F between
petitioner and STM, respondent's
admission of its balance, and STM's
acquiescence thereto by silence for almost
one year did not render Exh. `F' an account
stated and its balance binding.
 "5. The Court of Appeals erred in not
holding that the conditions of the assigned
SLDR No. 1214, namely, (a) its subject
matter being generic, and (b) the sale of
sugar being subject to its availability at the
Nawaco warehouse, made the sale
conditional and prevented STM or private
respondent from acquiring title to the
sugar; and the non-availability of sugar
freed petitioner from further obligation.
"6. The Court of Appeals erred in not
holding that the "clean hands" doctrine
precluded respondent from seeking
judicial reliefs (sic) from petitioner, its
only remedy being against its assignor."[14]
Simply stated, the issues now to be resolved are:
(1)....Whether or not the Court of Appeals
erred in not ruling that CSC was an agent
of STM and hence, estopped to sue upon
SLDR No. 1214M as an assignee.
(2)....Whether or not the Court of Appeals
erred in applying the law on compensation
to the transaction under SLDR No. 1214M
so as to preclude petitioner from offsetting
its credits on the other SLDRs.
(3)....Whether or not the Court of Appeals
erred in not ruling that the sale of sugar
under SLDR No. 1214M was a conditional
sale or a contract to sell and hence freed
petitioner from further obligations.
(4)....Whether or not the Court of Appeals
committed an error of law in not applying
the "clean hands doctrine" to preclude CSC
from seeking judicial relief.
The issues will be discussed in seriatim.
Anent the first issue, we find from the records that
petitioner raised this issue for the first time on
appeal. It is settled that an issue which was not
raised during the trial in the court below could not
be raised for the first time on appeal as to do so
would be offensive to the basic rules of fair play,
justice, and due process.[15] Nonetheless, the Court
of Appeals opted to address this issue, hence, now
a matter for our consideration.
Petitioner heavily relies upon STM's letter of
authority allowing CSC to withdraw sugar against
SLDR No. 1214M to show that the latter was STM's
agent. The pertinent portion of said letter reads:
"This is to authorize Consolidated Sugar
Corporation or its representative to
withdraw for and in our behalf (stress
supplied) the refined sugar covered by
Shipping List/Delivery Receipt = Refined
Sugar (SDR) No. 1214 dated October 16,
1989 in the total quantity of 25, 000
bags."[16]
The Civil Code defines a contract of agency as
follows:
"Art. 1868. By the contract of agency a
person binds himself to render some
service or to do something in
representation or on behalf of another,
with the consent or authority of the latter."
It is clear from Article 1868 that the basis of
agency is representation.[17] On the part of the
principal, there must be an actual intention to
appoint[18] or an intention naturally inferable from
his words or actions;[19] and on the part of the
agent, there must be an intention to accept the
appointment and act on it,[20] and in the absence of
such intent, there is generally no agency.[21] One
factor which most clearly distinguishes agency
from other legal concepts is control; one person -
the agent - agrees to act under the control or
direction of another - the principal. Indeed, the
very word "agency" has come to connote control
by the principal.[22] The control factor, more than
any other, has caused the courts to put contracts
between principal and agent in a separate
category.[23] The Court of Appeals, in finding that
CSC, was not an agent of STM, opined:
"This Court has ruled that where the
relation of agency is dependent upon the
acts of the parties, the law makes no
presumption of agency, and it is always a
fact to be proved, with the burden of proof
resting upon the persons alleging the
agency, to show not only the fact of its
existence, but also its nature and
extent (Antonio vs. Enriquez [CA], 51 O.G.
3536]. Here, defendant-appellant failed to
sufficiently establish the existence of an
agency relation between plaintiff-appellee
and STM. The fact alone that it (STM) had
authorized withdrawal of sugar by
plaintiff-appellee "for and in our (STM's)
behalf" should not be eyed as pointing to
the existence of an agency relation ...It
should be viewed in the context of all the
circumstances obtaining. Although it
would seem STM represented plaintiff-
appellee as being its agent by the use of
the phrase "for and in our (STM's) behalf"
the matter was cleared when on 23
 January 1990, plaintiff-appellee informed apply Article 1279 of the Civil Code to the present
defendant-appellant that SLDFR No. case.
1214M had been "sold and endorsed" to it
by STM (Exhibit I, Records, p. 78). Further, Regarding the third issue, petitioner contends that
plaintiff-appellee has shown that the 25, the sale of sugar under SLDR No. 1214M is a
000 bags of sugar covered by the SLDR No. conditional sale or a contract to sell, with title to
1214M were sold and transferred by STM the sugar still remaining with the vendor.
to it ...A conclusion that there was a valid Noteworthy, SLDR No. 1214M contains the
sale and transfer to plaintiff-appellee may, following terms and conditions:
therefore, be made thus capacitating
"It is understood and agreed that by
plaintiff-appellee to sue in its own name,
payment by buyer/trader of refined sugar
without need of joining its imputed
and/or receipt of this document by the
principal STM as co-plaintiff."[24]
buyer/trader personally or through a
In the instant case, it appears plain to us that representative, title to refined sugar is
private respondent CSC was a buyer of the SLDFR transferred to buyer/trader and delivery to
form, and not an agent of STM. Private respondent him/it is deemed effected and
CSC was not subject to STM's control. The completed (stress supplied) and
question of whether a contract is one of sale or buyer/trader assumes full responsibility
agency depends on the intention of the parties as therefore"[29]
gathered from the whole scope and effect of the
The aforequoted terms and conditions clearly
language employed.[25]That the authorization
show that petitioner transferred title to the sugar
given to CSC contained the phrase "for and in our
to the buyer or his assignee upon payment of the
(STM's) behalf" did not establish an agency.
purchase price. Said terms clearly establish a
Ultimately, what is decisive is the intention of the
contract of sale, not a contract to sell. Petitioner is
parties.[26] That no agency was meant to be
now estopped from alleging the contrary. The
established by the CSC and STM is clearly shown
contract is the law between the contracting
by CSC's communication to petitioner that SLDR
parties.[30] And where the terms and conditions so
No. 1214M had been "sold and endorsed" to
stipulated are not contrary to law, morals, good
it.[27]The use of the words "sold and endorsed"
customs, public policy or public order, the
means that STM and CSC intended a contract of
contract is valid and must be upheld.[31] Having
sale, and not an agency. Hence, on this score, no
transferred title to the sugar in question,
error was committed by the respondent appellate
petitioner is now obliged to deliver it to the
court when it held that CSC was not STM's agent
purchaser or its assignee.
and could independently sue petitioner.
As to the fourth issue, petitioner submits that STM
On the second issue, proceeding from the theory
and private respondent CSC have entered into a
that the transactions entered into between
conspiracy to defraud it of its sugar. This
petitioner and STM are but serial parts of one
conspiracy is allegedly evidenced by: (a) the fact
account, petitioner insists that its debt has been
that STM's selling price to CSC was below its
offset by its claim for STM's unpaid purchases,
purchasing price; (b) CSC's refusal to pursue its
pursuant to Article 1279 of the Civil
case against Teresita Ng Go; and (c) the authority
Code.[28] However, the trial court found, and the
given by the latter to other persons to withdraw
Court of Appeals concurred, that the purchase of
sugar against SLDR No. 1214M after she had sold
sugar covered by SLDR No. 1214M was a separate
her rights under said SLDR to CSC. Petitioner
and independent transaction; it was not a serial
prays that the doctrine of "clean hands" should be
part of a single transaction or of one account
applied to preclude CSC from seeking judicial
contrary to petitioner's insistence. Evidence on
relief. However, despite careful scrutiny, we find
record shows, without being rebutted, that
here the records bare of convincing evidence
petitioner had been paid for the sugar purchased
whatsoever to support the petitioner's allegations
under SLDR No. 1214M. Petitioner clearly had the
of fraud. We are now constrained to deem this
obligation to deliver said commodity to STM or its
matter purely speculative, bereft of concrete
assignee. Since said sugar had been fully paid for,
proof.
petitioner and CSC, as assignee of STM, were not
mutually creditors and debtors of each other. No WHEREFORE, the instant petition is DENIED for
reversible error could thereby be imputed to lack of merit. Costs against petitioner.
respondent appellate court when, it refused to
SO ORDERED.
Jocelyn B. Doles, G.R. No. 149353
- versus -
Angeles,
Respondent. June 26, 2006
This refers to the Petition for Review
on Certiorari under Rule 45 of the Rules of
Court questioning the Decision [ 1 ] dated April
30, 2001 of the Court of Appeals (CA) i n C.A. -
G.R. CV No. 66985, which reversed the Decision
dated July 29, 1998 of the Regional Trial Court
(RTC), Branch 21, City of Manila; and the C A
Resolution [ 2 ] dated August 6, 2001 which
denied petitioners Motion for Reconsideration.
The antecedents of the case follow:
On April 1, 1997, Ma. Aura Tina Angeles
(respondent) filed wi th the RTC a complai nt for
Specific Performanc e with Damages against
Jocelyn B. Doles (petitioner), docketed as Civil
Case No. 97-82716. Respondent alleged that
petitioner was i ndebted to the former in the
concept of a personal loan amounting
to P405,430.00 representing the pri ncipal
amount and interest; that on October 5, 1996,
by virtue of a Deed of Absolute
Sale, [ 3 ] petitioner, as seller, ceded to
respondent, as buyer, a parcel of land, as well
as the improvements thereon, with an area of
42 square meters, covered by Transfer
Certificate of Title No. 382532, [ 4 ] and located at
a subdivision project known as Camella
Townhomes Sorrente in Bacoor, Cavite, in order
to satisfy her personal loan with respondent;
that this property was mortgaged to National
Home Mortgage Finance Corporation (NHMFC)
to secure petitioners loan i n the sum
of P337,050.00 with that enti ty; that as a
condition for the foregoing sale, respondent
shall assume the undue balance of the mortgage
and pay the monthly amortization of P4,748.11
for the remainder of the 25 years which began
on September 3, 1994; that the property was at
that time being occupied by a tenant paying a
monthly rent of P3,000.00; that upon
verification with the NHMFC, respondent
learned that petitioner ha d incurred arrearages
amounting to P26,744.09, inclusive of penalties
and interest; that upon informing the peti tioner
of her arrears, petitioner denied that she
incurred them and refused to pay the same; that
despite repeated demand, petitioner refused to
cooperate wi th res pondent to execute the
necessary documents and other form alities
required by the NHMFC to effect the transfer of
the title over the property; that petitioner
collected rent over the property for the month
of January 1997 and refused to r emit the
proceeds to respondent; and that respondent
suffered damages as a res ult and was forced to
litigate.
Petitioner, then defendant, whi le
admitting some allegations in the Complaint,
denied that she borrowed money from
respondent, and averred that from June to
September 1995, she referred her friends to
respondent whom s he knew to be engaged in
the business of lendi ng money i n exchange for
personal checks through her capitalist Arsenio
Pua. She alleged that her friends, namely,
Zenaida Romulo, There sa Moratin, Julia
Inocencio, Virginia Jacob, and Eli zabeth
Tomelden, borrowed money from respondent
and issued personal checks in payment of the
loan; that the checks bounced for insufficiency
of funds; that despite her efforts to assist
respondent to coll ec t from the borrowers, she
could no longer locate them; that, because of
this, respondent became furious and threatened
petitioner that if the accounts were not s ettled,
a criminal case will be filed against her; that
she was forced to issue eight checks amounting
to P350,000 to answer for the bounced checks
of the borrowers she referred; that prior to the
issuance of the checks she informed respondent
that they were not s ufficiently funded but the
latter nonetheless deposited the checks and for
which reas on they were subsequently
dishonored; that res pondent then threatened to
initiate a criminal case against her for violation
of Batas Pambansa Blg. 22; that she was forced
by respondent to execute an Absolute Deed of
Sale over her property in Bacoor, Cavite , to
avoid criminal prosecution; that the said deed
had no valid consideration; that she di d not
appear before a notary public; that the
Community Tax Certi ficate number on the deed
was not hers and for which respondent may be
prosecuted for falsification and perjury; and
that she suffered damages and lost rental as a
result.
The RTC identified the issues as follows: first,
whether the Deed of Absolute Sale is valid;
second; if valid, whether petitioner is obliged to
sign and execute the necessary documen ts to
effect the transfer of her rights over the
property to the respondent; and third, whether
petitioner is liable for damages.
 HAS NO CONSIDERATION OR
INSUFFICIENCY OF EVIDENCE. [ 6 ]
On July 29, 1998, the RTC rendered a decision
the dispositive portion of which states :
On April 30, 2001, the CA promulgated its
Decision, the dispositive portion of which
WHEREFORE, premises considered,
reads:
the Court hereby orders the
dismissal of the complaint for
WHEREFORE, IN VIEW OF
insufficiency of evidence. With
THE FOREGOING, this appeal is
costs against plai ntiff.
hereby GRANTED. The Decision of
the lower court dated July 29,
SO ORDERED.
1998 is REVERSED and SET
ASIDE. A new one is entered
The RTC held that the sale was void for lack of
ordering defendant -appellee to
cause or consideration: [ 5 ]
execute all necessary documents to
effect transfer of subject property
Plaintiff Angeles admission
to plai ntiff -appellant wi th the
that the borrowers are the friends
arrearages of the formers loan with
of defendant Doles and further
the NHMFC, at the latters
admission that the checks issued
expense. No costs.
by these borrowers in payment of
the loan obli gation negates [sic]
SO ORDERED.
the cause or consideration of the
contract of sale executed by and
between plaintiff and
The CA concluded that petitioner was the
defendant. Moreover, the property
borrower and, in turn, would re -lend the
is not solely owned by defendant
amount borrowed from the respondent to her
as appearing in Entry No. 9055 of
friends. Hence, the Deed of Absolute Sale was
Transfer Certificate of Title No.
supported by a valid consideration, which is the
382532 (Annex A, Complaint),
sum of money petitioner owed respondent
thus:
amounting to P405,430.00, representing both
principal and interes t.
Entry No. 9055. Special
Power of Attorney in favor of
The CA took into account the following
Jocelyn Doles covering the share of
circumstances in their entirety: the supposed
Teodorico Doles on the parcel of
friends of peti tioner never pres ented
land described in this certificate of
themselves to respondent and that all
title by virtue of the special power
transactions were made by and between
of attorney to mortgage, executed
petitioner and respondent; [ 7 ] that the money
before the notary p ublic, etc.
borrowed was deposited with the bank account
of the petitioner, while payments made for the
The rule under the Civil Code is
loan were deposi ted by the latter to
that contracts without a cause or
respondents bank account; [ 8 ] that peti tioner
consideration produce no effect
herself admitted i n open court that she was re-
whatsoever. (Art. 1352, Civil
lending the money loaned from respondent to
Code).
other individuals for profit; [ 9 ] and that the
documentary evidence shows that the actual
borrowers, the friends of petitioner, consider
Respondent appealed to the CA. In her appeal
her as their creditor and not the respondent. [ 1 0 ]
brief, respondent interposed her sole
assignment of error :
Furthermore, the CA held that the alleged threa t
or intimidation by respondent did not vitiate
THE TRIAL COURT ERRED IN
consent, since the same is considered just or
DISMISSING THE CASE AT BAR ON
legal if made to enforce ones claim through
THE GROUND OF [sic] THE DEED
competent authori ty under Article 1335 [ 1 1 ] of
OF SALE BETWEEN THE PARTIES
the Civil Code; [ 1 2 ] that with respect to the
arrearages of peti tioner on her monthly
amortization with the NHMFC in the sum
of P26,744.09, the same shall be deemed part of
the balance of petiti oners loan with the NHMFC
which respondent agreed to assume; and that
the amount of P3,000.00 representing the rental
for January 1997 supposedly collected by
petitioner, as well as the claim for damages and
attorneys fees, is denied for insufficiency of
evidence. [ 1 3 ]
On May 29, 2001, petitioner filed her M oti on for
Reconsideration wi th the CA, arguing that
respondent categorically admitted in open court
that she acted only as agent or representative
of Arsenio Pua, the principal financier and,
hence, she had no legal capacity to sue
petitioner; and that the CA failed to consider
the fact that petitioners father, who co - owned
the subject property, was not impleaded as a
defendant nor was he indebted to the
respondent and, hence, she cannot be made to
sign the documents to effect the transfer of
ownership over the entire property.
On August 6, 2001, the CA issued its Resolution
denyi ng the motion on the ground that the
foregoing matters had already been passed
upon.
On August 13, 2001, petitioner received a copy
of the CA Resolution. On August 28, 2001,
petitioner filed the present Petition and raised
the following issues:
I.
WHETHER OR NOT THE
PETITIONER CAN BE CONSIDERED
AS A DEBTOR OF THE
RESPONDENT.
II.
WHETHER OR NOT AN AGENT WHO
WAS NOT AUTHORIZED BY THE
PRINCIPAL TO COLLECT DEBT IN
HIS BEHALF COU LD DIRECTLY
COLLECT PAYMENT FROM THE
DEBTOR.
III.
WHETHER OR NOT T HE CONTRACT
OF S ALE WAS EXECUTED FOR A
CAUSE. [ 1 4 ]
Although, as a r ule, i t is not the business of this
Court to review the findings of fact made by the
lower courts, juris prudence has recognized
several exceptions, at least three of which are
present in the instant case, namely: when the
judgment is based on a misapprehen si on of
facts; when the findings of facts of the courts a
quo are conflicting; and when the CA mani festly
overlooked certai n relevant facts not disputed
by the parties, whic h, if properly consi dered,
could justify a different conclusion. [15] To arrive
at a proper judgment, therefore, the Court finds
it necessary to re -examine the evidence
presented by the contending parties during the
trial of the case.
The Petition is meritorious.
The principal issue is whether the Deed of
Absolute Sale is supported by a valid
consideration.
1. Petitioner argues that since she is merely the
agent or representative of the alleged debtors,
then she is not a p arty to the loan; and that the
Deed of Sale executed between her and the
respondent i n their own names, which was
predicated on that pre -existing debt, is void for
lack of consideration.
Indeed, the Deed of Absolute Sale purports to
be supported by a con sideration in the form of a
price certain in money [ 1 6 ] and that this sum
indisputably pertains to the debt i n issue. This
Court has consistentl y held that a contract of
sale is null and void and produces no effect
whatsoever where the same is without cause or
consideration. [ 1 7 ] The question that has to be
resolved for the moment is whether this debt
can be considered as a valid caus e or
consideration for the sale.
To restate, the CA cited four instances in
the record to support its holding that petitioner
re-lends the amount borrowed from respondent
to her friends: first, the friends of peti tioner
never presented themselves to respondent and
that all transactions were made by and between
petitioner and respondent; [ 1 8 ] second; the
money passed through the bank accounts of
petitioner and respondent; [ 1 9 ] third, peti ti oner
herself admitted that she was re -lending the
money loaned to other individuals for
profit; [ 2 0 ] and fourth, the documentary evidence
shows that the actual borrowers, the friends of
petitioner, consider her as their creditor and
not the respondent. [ 2 1 ]
 On the first, third, and fou rth points, the
CA cites the testimony of the petitioner, then
defendant, during her cross -examination: [ 2 2 ]
Respondent is estopped to deny th at she herself
acted as agent of a certain Arsenio Pua, her
disclosed principal. She is also estopped to
deny that petitioner acted as agent for the
alleged debtors, the friends whom she
(petitioner) referred.
This Court has affirmed that, under
Article 1868 of the Civil Code, the basis of
agenc y is representation. [ 2 5 ] The questi on of
whether an agenc y has been created is
ordinarily a question which may be established
in the same way as any other fact, either by
direct or circumstantial evidence. The question
is ultimately one of intention. [ 2 6 ] Agency may
even be implied from the words and conduct of
the parties and the circumstances of the
particular case. [ 2 7 ] T hough the fa ct or extent of
authority of the agents may not, as a general
rule, be established from the declarations of the
agents alone, if one professes to act as agent for
another, she may be estopped to deny her
agenc y both as agai nst the asserted pri ncipal
and the third persons interested i n the
transaction in which he or she is engaged. [ 2 8 ]
In this case, petiti oner knew that the
financier of responde nt is Pua; and respondent
knew that the borrowers are friends of
petitioner.
The CA is incorrect when it considered
the fact that the supposed friends of
[petitioner], the actual borrowers, did not
present themselves to [respondent] as evi dence
that nega tes the agenc y relationshipit is
sufficient that petitioner disclosed to
respondent that the former was acti ng in behalf
of her principals, her friends whom she referred
to respondent. For an agency to arise, it is not
necessary that the principal pers onal ly
encounter the third person wi th whom the
agent interac ts. The law in fact contemplates,
and to a great degree, impersonal dealings
where the pri ncipal need not personally know
or meet the third person with whom her agent
transacts: precisely, the purpos e of agency is to
extend the personali ty of the pri ncipal through
the facility of the agent. [ 2 9 ]
In the case at bar, both peti tioner and
respondent have undeniably disclosed to each
other that they are representi ng someone else,
and so both of them are estopped to deny the
same. It is evident from the record that
petitioner merely refers actual borrowers and
then collects and dis burses the amou nts of the
loan upon which she received a commission;
and that respondent transacts on behalf of her
principal financier, a certain Arsenio Pua. If
their respective principals do not actually and
personally know each other, such ignorance
does not affect t heir juridical standi ng as
agents, especially since the very purpose of
agenc y is to extend the personality of the
principal through the facility of the agent.
With respect to the admission of
petitioner that she is re -lending the money
loaned from respo ndent to other indi viduals for
profit, it must be stressed that the manner in
which the parties designate the relat ionship is
not controlling . If an act done by one pers on in
behalf of another is in its essential nature one
of agency, the former is the age nt of the latter
notwithstanding he or she is not so
called. [ 3 0 ] The questi on is to be determined by
the fact that one represents and is acting for
another, and if relations exist which will
constitute an agency, it will be an agency
whether the parties understood the exact nature
of the relation o r not. [ 3 1 ]
That both parties acted as mere agents is
shown by the undisputed fact that the friends of
petitioner issued checks in payment of the loan
in the name of Pua. If it is true that petitioner
was re-lendi ng, then the checks should ha ve
been drawn in her name and not directly paid to
Pua.
With respect to the second point,
particularly, the finding of the CA that the
disbursements and payments for the loan were
made through the bank accounts of peti tioner
and respondent,
suffice it to say that in the normal course of
commercial dealings and for reasons of
convenience and practical utility it can be
reasonably expected that the facilities of the
agent, such as a bank account, m ay be
employed, and that a sub -agent be appointed,
such as the bank its elf, to carry out the task,
especially where there is no stipulation to the
contrary. [ 3 2 ]
In view of the two agency relationships,
petitioner and respondent are not privy to the
contract of loan between their principals. Since
the sale is predicated on that loan, then the sale
is void for lack of consideration.
 2. A further scrutiny of the record
shows, however, that th e sale might have been Moreover, even ass uming the mortgage
backed up by anot her consideration that is validly e xists, the Court notes respondents
separate and distinc t from the debt: respondent allegation that the mortgage with the NHMFC
averred in her complaint and tes tified that the was for 25 years which began September 3,
parties had agreed that as a condition for the 1994. Respondent filed her Complaint for
conveyance of the property the respondent Specific Performanc e in 1997. Since the 25
shall assume the balance of the mortgage loan years had not lapsed, the prayer of respondent
which petitioner allegedly owed to the to compel petitioner to execute nec essary
NHMFC. [ 3 3 ] This Court in the recent past has documents to effect the transfer of title is
declared that an a ssumption of a mortgage debt premature.
may constitute a valid consideration for a
sale. [ 3 4 ] WHEREFORE, the petition is granted. The
Decision and Resolution of the Court of Appeals
Although the record shows that are REVERSED and SET ASIDE. The complaint
petitioner admitted at the t ime of trial that she of respondent in Civil Case N o. 97- 82716
owned the property described in the is DISMISSED.
TCT, [ 3 5 ] the Court must stress that the Transfer
Certificate of Title No. 382532 [ 3 6 ] on its face SO ORDERED.
shows that the owner of the property which
admittedly forms the subject matter of the Deed
of Absolute Sale refers neither to the p etitioner
nor to her father, Teodorico Doles, the alleged
co-owner. Rather, it states that the property is
registered in the name of Hous ehold
Development Corporation. Although there is an
entry to the effect that the petitioner had been
granted a special power of attorney covering
the shares of Teodorico Doles on the parcel of
land described i n this certificate, [ 3 7 ] it c annot
be inferred from th i s bare notation, nor from
any other evidence on the record, that the
petitioner or her father held any direct interest
on the property in question so as to validly
constitute a mortgage thereon [ 3 8 ] and, with
more reason, to effect the delivery of the object
of the sale at the consummation stage. [ 3 9 ] What
is worse, there is a notation that the TCT itself
has been cancelled. [ 4 0 ]

In view of these anomalies, the Court

cannot entertai n the
possibility that respondent agreed to as sume
the balance of the mortgage loan which
petitioner allegedly owed to the NHMFC,
especially since the record is bereft of any
factual findi ng that petitioner was, in the first
place, endowed with any ownership ri ghts to
validly mortgage and convey the property. As
the complainant who initiated the case,
respondent bears the burden of proving the
basis of her complaint. Havi ng failed to
discharge such burden, the Court has no c hoice
but to declare the s ale void for lac k of
cause. And since the sale is void, the Court finds
it unnecessary to dwell on the issue of whether
duress or intimidation had been foisted upon
petitioner upon the execution of the sale.