additionalweek3agency.pdf

7/27/2019 additionalweek3agency.pdf

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G.R. No. L-18377 December 29, 1962

ANASTACIO G. DUGO,petitioner, vs. ADRIANO LOPENA, ROSA RAMOS andHON. ANDRES REYES, Judge of the Court of First Instance of Rizal, respondents.

Gatchalian, Padilla & Sison for petitioner. Santiago F. Alidio for respondents.

REGALA, J.:

On September 10, 1959, herein petitioner Anastacio Dugo and one Rodrigo S.Gonzales purchased 3 parcel of land from the respondents Adriano Lopena andRosa Ramos for the total price of P269,804.00. Of this amount P28.000.00 wasgiven as down payment with the agreement that the balance of P241,804.00 wouldbe paid in 6 monthly installments.

To secure the payment of the balance Anastacio Dugo and Rodrigo S. Gonzales,the vendees, on September 11, 1958, executed over the same 3 parcels of landDeed of Real Estate Mortgage in favor of the respondent Adriano Lopena and RosaRamos. This deed was duly registered with the Office of the Register of Deeds

Rizal, with the condition that failure of the vendees to pay any of the installments ontheir maturity dates shall automatically cause the entire unpaid balance to becomedue and demandable.

The vendees defaulted on the first installment. It resulted then that on November 7,1959, the vendors, herein respondents Adriano Lopena and Rosa Ramos, filed acomplaint for the foreclosure of the aforementioned real estate mortgage with theCourt of First Instance of Rizal the Hon. Judge Andres Reyes, presiding. Thiscomplaint was answered by the herein petitioner and the other vendee, Rodrigo S.Gonzales, on December 7, 1959.

Meanwhile, there were 2 other civil cases filed in the same lower court against thesame defendants Anastacio Dugo and Rodrigo S. Gonzales. The plaintiff in one

was a certain Dionisio Lopena, and in the other case, the complainants wereBernardo Lopena and Maria de la Cruz.

Both complaints involved the same cause of action as that of herein respondentsAdriano Lopena and Rosa Ramos. As a matter of fact a ll th ree cases arose out ofone transaction. In view of the identical nature of the above three cases, they wereconsolidated by the lower court into just one proceeding.

It must be made clear, however, that this present decision refers solely to theinterests and claim of Adriano Lopena against Anastacio Dugo alone.

Before the cases could be tried, a compromise agreement dated January 15, 1960was submitted to the lower court for approval. It was signed by herein respondentsAdriano Lopena and Rosa Ramos on one hand, and Rodrigo S. Gonzales, on the

other. It was not signed by the herein petitioner. However, Rodrigo S. Gonzalesrepresented that his signature was for both himself and the herein petitioner.Moreover, Anastacio Dugo's counsel of record, Atty. Manuel O. Chan, the samelawyer who signed and submitted for him the answer to the complaint, was presentat the preparation of the compromise agreement and this counsel affixed hissignature thereto.

The text of this agreement is hereunder quoted:

COMPROMISE AGREEMENT

COME NOW the parties in the above entitled cases and unto this Hon. Courtrespectfully set forth:

That, the plaintiffs, have agreed to give the defendants up to June 30, 1960 to paythe mortgage indebtedness in each of the said cases;

That, should the defendants fail to pay the said mortgage indebtedness, judgmentsof foreclosure shall thereafter be entered against the said defendants;

That, the defendants hereby waive the period of redemption provided by law afterentry of judgments;

That, in the event of sale of the properties involved in these three cases, thedefendants agree that the said properties shall be sold at one time at public auction,that is, one piece of property cannot be sold without the others.

This compromise agreement was approved by the lower court on the same day itwas submitted, January 15, 1960.

Subsequently, on May 3, 1960, a so-called Tri-Party Agreement was drawn. Thesignatories to it were Anastacio Dugo (herein petitioner) and Rodrigo S. Gonzalesas debtors, Adriano Lopena and Rosa Ramos (herein respondents) as creditors,and, one Emma R. Santos as pay or. The stipulations of the Tri-Party Agreementwere as follows: .

A TRI-PARTY AGREEMENT

KNOW ALL MEN BY THESE PRESENTS:

This contract entered into by and between

(1) MMA R. SANTOS, Filipino, of legal age, single, with residence and postaladdress at ..........., Rizal Avenue, Manila, hereinafter referred to as the PAYOR,


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(2) ANASTACIO C. DUGO Filipino, of legal age, single, with residence and postaladdress at 137 N. Domingo, Quezon City, and RODRIGO S. GONZALES, Filipino,of legal age, married to Magdalena Balatbat, with residence and postal address at73 Maryland, Quezon City, hereinafter referred to as the DEBTOR,

and

(3) DIONISIO LOPENA, married to Teofila Nofuente, LIBRADA LOPENA, married to

Arellano Cawagas, BERNARDO LOPENA, married to Maria de la Cruz, andADRIANO LOPENA, married to Rosa Ramos, all of whom are Filipinos, of legalages, with residence and postal address at Sucat, Muntinlupa, Rizal, hereinafterrepresented by their attorney of record, ANTONIO LOPENA, hereinafter referred toas the CREDITOR,

W I T N E S S E T H:

WHEREAS, the DEBTOR is indebted to the CREDITOR as of this date in theaggregate amount of P503,000.00 for the collection of which, the latter as partyplaintiffs have institute foreclosure proceedings against the former as partydefendant in Civil Cases Nos. 5872, 5873 and 5874 now pending in the Court ofFirst Instance, Pasig, Rizal;

WHEREAS, the PAYOR, hereby submits and binds herself to the force and effect ofthe Order dated January 15, 1960, of the Court of First Instance of Pasig, Rizal,Branch VI, which order is hereby made an integral part of this agreement as ANNEX"A";

WHEREAS, the PAYOR with due knowledge and consent of the DEBTOR, herebyproposes to pay the aforesaid indebtedness in the sum of P503,000.00 to theCREDITOR for and in behalf of the DEBTOR under the following terms andcondition petitions:

(a) To pay the said P503,000.00 in installments in the following schedule of amounts

and time: P50,000.00 on or before May 31, 1960 70,000.00 on or before June 30,1960 70,000.00 on or before July 31, 1960 313,000.00 on or before Aug. 31, 1960.

(b) That the DEBTOR and the PAYOR hereby waive any right to object and obligethemselves not to oppose the motion that the CREDITOR may file during the firstweek of July 1960, or subsequently thereafter, informing the Court of the exactmoney obligation of the DEBTOR which shall be P503,000.00 minus whateverpayments, if any, made before June 30, 1960 by the PAYOR and praying for theissuance of an order to sell the property covered by the mortgage.

(c) That the CREDITOR, once he has the order referred to, should not execute thesame by giving it to the sheriff if the PAYOR is regular and punctual in the paymentof all of the installments stated above. PROVIDED, however, if the PAYOR defaults

or fails to pay anyone of the installments in the manner stated above, the PAYOR

and the DEBTOR hereby permit the CREDITOR to execute the order of salereferred to above, and they (PAYOR and DEBTOR) hereby waive any and allobjection's or oppositions to the propriety of the public auction sale and to theconfirmation of the sale to be made by the court.

(d) That the CREDITOR, at his option, may execute the August installment stated inletter (a) of this paragraph if the PAYOR has paid regularly the May, June, and Julyinstallments, and provided further that one half (!) of the August installment in the

amount of P156,500.00 is paid on the said date of August 31, 1960.

NOW, THEREFORE, for and in consideration of the foregoing stipulations, theDEBTOR and CREDITOR hereby accept, approve and ratify the above-mentionedpropositions of the PAYOR and all the parties herein bind and oblige themselves tocomply to the covenants and stipulations aforestated;

That by mutual agreements of all the parties herein, this TRI-PARTY AGREEMENTmay be submitted to Court to form integral parts of the records of the Civil Casesmentioned above;

IN WITNESS WHEREOF, the parties hereunto affix their signature on this 3rd dayof May, 1960 in the City of Manila, Philippines.

When Anastacio Dugo (herein petitioner) and Rodrigo S. Gonzales failed to paythe balance of their indebtedness on June 30, 1960, herein respondents Lopenaand Ramos filed on July 5, 1960, a Motion for the Sale of Mortgaged Property.Although this last motion was filed ex parte, Anastacio Dugo and Rodrigo S.Gonzales were notified of it by the lower court. Neither of them, however, despitethe notice, filed any opposition thereto. As a result, the lower court granted theabove motion on July 19, 1960, and ordered the sale of the mortgaged property.

On August 25, 1960, the 3 parcels of land above-mentioned were sold by the Sheriffat a public auction where at herein petitioners, together with the plaintiffs of theother two cases won as the highest bidders. The said sheriff's sale was laterconfirmed by the lower court on August 30, 1960. In this connection, it should alsomade of record that before confirming the sale, the lower court gave due notice ofthe motion for the confirmation to the herein petitioner who filed no oppositiontherefore.

On August 31, 1960, Anastacio Dugo filed a motion to set aside all theproceedings on the ground that the compromise agreement dated January 15, 1960was void ab initio with respect to him because he did not sign the same.Consequently, he argued, all subsequent proceedings under and by virtue of thecompromise agreement, including the foreclosure sale of August 25, 1960, werevoid and null as regards him. This motion to set aside, however, was denied by thelower court in its order of December 14, 1960.

Upon denial of the said motion to set aside, Anastacio Dugo filed a Notice ofAppeal from the order o f August 31, 1960 approving the foreclosure sale of August


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25, 1960, as well as the order of December 14, 1960, denying his motion to setaside. The approval of the record on appeal however, was opposed by the hereinrespondent spouses who claimed that the judgment was not appealable havingbeen rendered by virtue of the compromise agreement. The opposition wascontained in a motion to dismiss the appeal. Anastacio Dugo filed a reply to theabove motion. Soon thereafter, the lower court dismissed the appeal.

Two issues were raised to this Court for review, to wit:

(1) Was the compromise agreement of January 15, 1960, the Order of the samedate approving the same, and, all the proceedings subsequent thereto, valid or voidinsofar as the petitioner herein is concerned?

(2) Did the lower court abuse its discretion when it dismissed the appeal of theherein petitioner?

Petitioner Anastacio Dugo insists that the Compromise Agreement was void abinitio and could have no effect whatsoever against him because he did not sign thesame. Furthermore, as it was void, all the proceedings subsequent to its execution,including the Order approving it, were similarly void and could not result to anythingadverse to his interest.

The argument was not well taken. It is true that a compromise is, in itself, a contract.It is as such that the Civil Code speaks of it.

ART. 2028. A compromise is a contract whereby the parties, by making reciprocalconcessions, avoid a litigation or put an end to one already commenced.

Moreover, under Art. 1878 of the Civil Code, a third person cannot bind another to acompromise agreement unless he, the third person, has obtained a special power ofattorney for that purpose from the party intended to be bound.

ART. 1878. Special powers of at torney are necessary in the following cases:

(3) To compromise, to submit questions to arbitration, to renounce the right toappeal from a judgment, to waive objections to the venue of an action or to abandona prescription already acquired;

However, although the Civil Code expressly requires a special power of attorney inorder that one may compromise an interest of another, it is neither accurate norcorrect to conclude that its absence renders the compromise agreement void. In

such a case, the compromise is merely unenforceable. This results from its nature is

a contract. It must be governed by the rules and the law on contracts.

ART. 1403. The fo llowing contracts are unenforceable, unless they are ratified:

(1) Those entered into in the name of another person by one who has been given noauthority or legal representation, or who has acted beyond his powers;

Logically, then, the next inquiry in this case should be whether the herein petitioner,

Anastacio Dugo had or had not ratified the compromise agreement. If he had, thenthe compromise agreement was legally enforced against him; otherwise, he shouldbe sustained in his contention that it never bound him, nor ever could it be made tobind him.

The ratification of the compromise agreement was conclusively established by theTri-Party Agreement of May 1960. It is to be noted that the compromise agreementwas submitted to and approved by the lower court January 15, 1960. Now, the Tri-Party Agreement referred itself to that order when it stipulated thus:

WHEREAS, the MAYOR, hereby submits and binds herself to the force and effect ofthe order dated January 15, 1960, of the Court of First Instance of Pasig, Rizal,Branch which order is hereby made an integral part of this agreement as Annex"A".lawphil.net

Having so consented to making that court order approving the compromiseagreement an integral part of the Tri-Party Agreement, how can the petitioner hereinnow repudiate the compromise agreement and claim he has not authorized it?

When it appears that the client, on becoming aware the compromise and thejudgment thereon, fails to repudiate promptly the action of his attorney, he will notafterwards be heard to contest its validity (Rivero vs. Rivero, 59 Phil. 15).

Besides, this Court has not overlooked the fact that which indeed Anastacio Dugowas not a signatory to the compromise agreement, the principal provision of the said

instrument was for his benefit. Originally, Anastacio Dugo's obligation matured andbecame demandable on October 10, 1959. However, the compromise agreementextended the date of maturity to June 30, 1960. More than anything, therefore, thecompromise agreement operated to benefit the herein petitioner because it affordedhim more time and opportunity to fulfill his monetary obligations under the contract.If only for this reason, this Court believes that the herein petitioner should not beheard to repudiate the said agreement.

Lastly, the compromise agreement stated "that, should the defendants fail to pay thesaid mortgage indebtedness, judgment of foreclosure shall thereafter be enteredagainst the said defendants:" Beyond doubt, this was ratified by the Tri-PartyAgreement when it covenanted that

If the MAYOR defaults or fails to pay anyone of the installments in the manner


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stated above, the MAYOR and the DEBTOR hereby permit the CREDITOR toexecute the order of sale referred to above (the Judgment of Foreclosure), and they(PAYOR and DEBTOR) hereby waive any and all objections or oppositions to thepropriety of the public auction sale and to the confirmation of the sale to be made bythe Court.

Petitioner Dugo finally argued that even assuming that the compromise agreementwas valid, it nevertheless could not be enforced against him because it has beennovated by the Tri-Party Agreement which brought in a third party, namely, EmmaR. Santos, who assumed the mortgaged obligation of the herein petitioner.

This Court cannot accept the argument. Novation by presumption has never beenfavored. To be sustained, it need be established that the old and new contracts areincompatible in all points, or that the will to novate appears by express agreement ofthe parties or in acts of similar import. (Martinez v. Cavives, 25 Phil. 581; Tiy Sincovs. Havana, 45 Phil. 707; Asia Banking Corp. vs. Lacson Co.. 48 Phil. 482; Pascualvs. Lacsamana, 53 O.G. 2467, April 1957).

An obligation to pay a sum of money is not novated, in a new instrument whereinthe old is ratified, by changing only the term of payment and adding otherobligations not incompatible with the old one (Inchausti vs. Yulo, 34 Phil. 978; Pablo

vs. Sapungan, 71 Phil. 145) or wherein the old contract is merely supplemented bythe new one Ramos vs. Gibbon, 67 Phil. 371).

Herein petitioner claims that when a third party Emma R. Santos, came in andassumed the mortgaged obligation, novation resulted thereby inasmuch as a newdebtor was substituted in place of the original one. In this kind of novation, however,it is not enough that the juridical relation of the parties to the original contract isextended to a third person; it is necessary that the old debtor be released from theobligation, and the third person or new debtor take his place in the new relation.Without such release, there is no novation; the third person who has assumed theobligation of the debtor merely becomes a co-debtor or surety. If there is noagreement as to solidarity, the first and the new debtors are considered obligationjointly. (IV Tolentino, Civil Code, p. 360, citing Manresa. There was no such release

of the original debtor in the Tri-Party Agreement.

It is a very common thing in the business affairs for a stranger to a contract toassume its obligations; an while this may have the effect of adding to the number ofpersons liable, it does not necessarily imply the extinguishment of the liability of thefirst debtor (Rios v Jacinto, etc., 49 Phil. 7; Garcia vs. Khu Yek Ching, 65 Phil. 466).The mere fact that the creditor receives a guaranty or accepts payments from a thirdperson who has agreed to assume the obligation, when there is no agreement thatthe first debtor shall be released from responsibility, do not constitute a novation,and the creditor can still enforce the obligation against the original debtor (Straightvs. Haskell, 49 Phil. 614; Pacific Commercial Co. vs. Sotto, 34 Phil. 237; Estate ofMota vs. Serra, 47 Phil. 446).

In view of all the foregoing, We hold that the Tri-Party Agreement was an instrument

intended to render effective the compromise agreement. It merely complemented anratified the same. That a third person was involved in it is inconsequential. Nowherein the new agreement may the release of the herein petitioner be even inferred.

Having held that the compromise agreement was validity and enforceable againstthe herein petitioner, it follows that the lower court committed no abuse of discretionwhen it dismissed the appeal of the herein petitioner.

WHEREFORE, the petition for certiorari and mandamus filed by the herein petitioneris hereby dismissed. The order of the lower court dismissing the appeal is her byaffirmed, with costs.


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G.R. No. L-19265 May 29, 1964

MOISES SAN DIEGO, SR.,petitioner, vs. ADELO NOMBRE and PEDROESCANLAR, respondents.

A. R. Castaeda and M. S. Roxas for petitioner. Amado B. Parreo Law Office forrespondents.

PAREDES, J.:

The case at bar had its origin in Special Proceedings No. 7279 of the CFI of NegrosOccidental wherein respondent Adelo Nombre was the duly constituted judicialadministrator. On May 1, 1960, Nombre, in his capacity was judicial administrator ofthe intestate estate subject of the Sp. Proc. stated above, leased one of theproperties of the estate (a fishpond identified as Lot No. 1617 of the cadastralsurvey of Kabankaban, Negros Occidental), to Pedro Escanlar, the otherrespondent. The terms of the lease was for three (3) years, with a yearly rental ofP3,000.00 to expire on May 1, 1963, the transaction having been done, admittedly,without previous authority or approval of the Court where the proceedings waspending. On January 17, 1961, Nombre was removed as administrator by Order ofthe court and one Sofronio Campillanos was appointed in his stead. The appeal on

the Order of Nombre's removal is supposedly pending with the Court of Appeals.Respondent Escanlar was cited for contempt, allegedly for his refusal to surrenderthe fishpond to the newly appointed administrator. On March 20, 1961, Campillanosfiled a motion asking for authority to execute a lease contract of the same fishpond,in favor of petitioner herein, Moises San Diego, Sr., for 5 years from 1961, at ayearly rental of P5,000.00. Escanlar was not notified of such motion. Nombre, thedeposed administrator, presented a written opposition to the motion of Campillanoson April 11, 1964, pointing out that the fishpond had been leased by him to Escanlarfor 3 years, the period of which was going to expire on May 1, 1963. In asupplemental opposition, he also invited the attention of the Court that to grant themotion of the new administrator would in effect nullify the contract in favor ofEscanlar, a person on whom the Court had no jurisdiction. He also intimated that thevalidity of the lease contract entered into by a judicial administrator, must be

recognized unless so declared void in a separate action. The oppositionnotwithstanding, the Court on April 8, 1961, in effect declared that the contract infavor of Escanlar was null and void, for want of judicial authority and that unless hewould offer the same as or better conditions than the prospective lessee, SanDiego, there was no good reason why the motion for authority to lease the propertyto San Diego should not be granted. Nombre moved to reconsider the Order of April8, stating that Escanlar was willing to increase the rental of P5,000.00, but only afterthe termination of his original contract. The motion for reconsideration was deniedon April 24, 1961, the trial judge stating that the contract in favor of Escanlar wasexecuted in bad faith and was fraudulent because of the imminence of Nombre'sremoval as administrator, one of the causes of which was his indiscriminatepleasant, of the property with inadequate rentals.

From this Order, a petition for Certiorari asking for the annulment of the Orders ofApril 8 and 24, 1961 was presented by Nombre and Escanlar with the Court of

Appeals. A Writ of preliminary injunction was likewise prayed for to restrain the newadministrator Campillanos from possessing the fishpond and from executing a newlease contract covering it; requiring him to return the possession thereof to Escanlar,plus damages and attorney's fees in the amount of P10,000.00 and costs. TheCourt of Appeals issued the injunctive writ and required respondents therein toAnswer. Campillanos insisted on the invalidity of the contract in favor of Escanlar;the lower court alleged that it did not exactly annul or invalidate the lease in hisquestioned orders but suggested merely that Escanlar "may file a separate ordinaryaction in the Court of general jurisdiction."

The Court of Appeals, in dismissing the petition for certiorari, among others said

The controlling issue in this case is the legality of the contract of lease entered intoby the former administrator Nombre, and Pedro Escanlar on May 1, 1960.

Respondents contend that this contract, not having been authorized or approved bythe Court, is null and void and cannot be an obstacle to the execution of another oflease by the new administrator, Campillanos. This contention is without merit. ... . Ithas been held that even in the absence of such special powers, a contract or leasefor more than 6 years is not entirely invalid; it is invalid only in so far as it exceedsthe six-year limit (Enrique v. Watson Company, et al., 6 Phil. 84).1

No such limitation on the power of a judicial administrator to grant a lease ofproperty placed under his custody is provided for in the present law. Under Article1647 of the present Civil Code, it is only when the lease is to be recorded in theRegistry of Property that it cannot be instituted without special authority. Thus,regardless of the period of lease, there is no need of special authority unless thecontract is to be recorded in the Registry of Property. As to whether the contract infavor of Escanlar is to be so recorded is not material to our inquiry. 1wph1.t

On the contrary, Rule 85, Section 3, of the Rules of Court authorizes a judicialadministrator, among other things, to administer the estate of the deceased notdisposed of by will. Commenting on this Section in the light of several SupremeCourt decisions (Jocson de Hilado v. Nava, 69 Phil. 1; Gamboa v. Gamboa, 68 Phil.

304; Ferraris v. Rodas, 65 Phil. 732; Rodriguez v. Borromeo, 43 Phil. 479), Moransays: "Under this provision, the executor or administrator has the power ofadministering the estate of the deceased for purposes of liquidation and distribution.He may, therefore, exercise all acts of administration without special authority of theCourt. For instance, he may lease the property without securing previously anypermission from the court. And where the lease has formally been entered into, thecourt cannot, in the same proceeding, annul the same, to the prejudice of thelessee, over whose person it had no jurisdiction. The proper remedy would be aseparate action by the administrator or the heirs to annul the lease. ... .

On September 13, 1961, petitioner herein Moises San Diego, Sr., who was not aparty in the case, intervened and moved for a reconsideration of the abovejudgment. The original parties (the new administrator and respondent judge) also

filed Motions for reconsideration, but we do not find them in the record. On


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November 18, 1961, the Court of Appeals denied the motions for reconsideration.With the denial of the said motions, only San Diego, appealed therefrom, raisinglegal questions, which center on "Whether a judicial administrator can validly leaseproperty of the estate without prior judicial authority and approval", and "whether theprovisions of the New Civil Code on Agency should apply to judicial administrators."

The Rules of Court provide that

An executor or administrator shall have the right to the possession of the real aswell as the personal estate of the deceased so long as it is necessary for thepayment of the debts and the expenses of administration, and shall administer theestateof the deceased not disposed of by his will. (Sec. 3, Rule 85, old Rules).

Lease has been considered an act of administration (Jocson v. Nava; Gamboa v.Gamboa; Rodriguez v. Borromeo; Ferraris v. Rodas, supra).

The Civil Code, on lease, provides:

If a lease is to be recorded in the Registry of Property, the following persons cannotconstitute the same without proper authority, the husband with respect to the wife'sparaphernal real estate, the father or guardian as to the property of the minor orward, and the manager without special power. (Art. 1647).

The same Code, on Agency, states:

Special powers of attorneys are necessary in the following cases:

(8) To lease any real property to another person for more than one year. (Art. 1878)

Petitioner contends, that No. 8, Art. 1878 is the limitation to the right of a judicialadministrator to lease real property without prior court authority and approval, if itexceeds one year. The lease contract in favor of Escanlar being for 3 years andwithout such court approval and authority is, therefore, null and void. Upon the otherhand, respondents maintain that there is no limitation of such right; and that Article1878 does not apply in the instant case.

We believe that the Court of Appeals was correct in sustaining the validity of thecontract of lease in favor of Escanlar, notwithstanding the lack of prior authority andapproval. The law and prevailing jurisprudence on the matter militates in favor of thisview. While it may be admitted that the duties of a judicial administrator and anagent (petitioner alleges that both act in representative capacity), are in somerespects, identical, the provisions on agency (Art. 1878, C.C.), should not apply to ajudicial administrator. A judicial administrator is appointed by the Court. He is notonly the representative of said Court, but also the heirs and creditors of the estate(Chua Tan v. Del Rosario, 57 Phil. 411). A judicial administrator before entering intohis duties, is required to file a bond. These circumstances are not true in case ofagency. The agent is only answerable to his principal. The protection which the law

gives the principal, in limiting the powers and rights of an agent, stems from the factthat control by the principal can only be thru agreements, whereas the acts of ajudicial administrator are subject to specific provisions of law and orders of theappointing court. The observation of former Chief Justice Moran, as quoted in thedecision of the Court of Appeals, is indeed sound, and We are not prone to alter thesame, at the moment.

We, likewise, seriously doubt petitioner's legal standing to pursue this appeal. And,if We consider the fact that after the expiration of the original period of the leasecontract executed by respondent Nombre in favor of Escanlar, a new contract infavor of said Escanlar, was executed on May 1, 1963, by the new administratorCampillanos. who, incidentally, did not take any active participation in the presentappeal, the right of petitioner to the fishpond becomes a moot and academic issue,which We need not pass upon.

WHEREFORE, the decision appealed from should be, as it is hereby affirmed, in allrespects, with costs against petitioner Moises San Diego, Sr.


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G.R. Nos. L-18223-24 June 29, 1963

COMMERCIAL BANK & TRUST COMPANY OF THE PHILIPPINES, plaintiff-appellee, vs. REPUBLIC ARMORED CAR SERVICE CORPORATION andDAMASO PEREZ, ET AL., defendants-appellants.

Pompeyo Diaz for plaintiff-appellee. Halili, Bolinao, Bolinao & Associates and

Crispin D. Baizas for defendants-appellants.

LABRADOR, J.:

The above-entitled cases are appeals from judgments rendered by the Court of FirstInstance of through Judges Gustavo Victoriano and Conrado M. Vasquez,respectively, of said Court.

In G.R. No. L-8223 plaintiff-appellee filed it complaint alleging that the defendants-appellants were granted by it credit accommodations in the form of an overdraft linefor an amount not exceeding P80,000, with interest (paragraph 2, Complaint); thatdefendants or either of them drew regularly upon the above credit line and as ofFebruary 10, 1960, the total of their drawings and interest due amounted toP79,940.80 (par. 3, id.); that repeated demands were made upon defendants to payfor the drawings but said demands were ignored (par. 4, id.). In their answer to thecomplaint the defendants admit having drawn upon the credit line extended to themas alleged in the complaint; claim they have not ignored the demands for thepayment of the sums demanded and have instituted actions against the formerofficers of defendant corporation who held defrauded the latter; etc. (par. 4,Answer). By way of special affirmative defenses, they allege that the former officersand directors of the defendant corporation had deliberately defrauded andmismanaged the corporations, as a part of their scheme to wrest control of variouscorporations owned by Damaso Perez, from the latter, and as a result of said fraudsor mismanagements the defendants have instituted actions for damages for breachof trust; and that the amounts drawn on the credit line subject of the complaint werereceived and used by the former directors and officers of the defendant corporationsand constitute part of the funds misapplied by them. Upon motion, Judge Victoriano

entered for the plaintiff a judgment on the pleadings, holding that the "specialaffirmative defenses (of the answer) filled to show that any allegation respecting theextent of defendants' drawing although they have admitted having drawn against thecredit line, subject of the action, so that said denial, not being specific denial in thetrue sense, does not controvert the allegation at which it is aimed," etc. The courtalso further held that the alleged mismanagement and fraud of the former directorsand officials of defendant corporation and the action now pending in court regardingthe same are merely internal affairs of the corporation which cannot affect ordiminish the liability of the defendant corporation to the plaintiff. The defendantsappealed from the decision to the Court of Appeals, but this Court certified the caseto Us.

In G.R. No. L-18224 the complaint also alleges that the defendants were given

credit accommodation in the form of an overdraft line in an amount not exceeding

P150,000 and drew regularly upon said credit line amounts which with their interestreach the sum of P133,453.17; that demands were made for the payment of thedrawings but defendants have failed to pay the amounts demanded. Defendants intheir answer admit the opening of the credit line in their favor and that demands forthe indebtedness were made upon them, but allege as special defenses that thedirectors and officers of the defendant corporation deliberately defrauded andmismanaged the said corporation breach of trust in order to deprive Damaso Perezof his control and majority interest in the defendant corporation, as a result of whichfraud, mismanagement and breach of trust the defendants suffered tremendous

losses; that the amounts drawn by defendant corporation upon the credit line werereceived and used by the former directors and officers and same constitute part ofthe funds of the defendant corporation misapplied and mismanaged by said formerofficers and directors of said corporation. Upon the presentation of the answer theplaintiff presented motion sustained, for judgment on the pleadings which the courtsustained, holding:

The defendants having admitted the indebtedness in question, its liability to pay theplaintiff the amount of the said indebtedness is beyond question. The alleged factthat the money borrowed from the plaintiff was misappropriated or misapplied bysome officers of the defendant corporation is no defense against the liability of thedefendants to the plaintiff. It is an internal matter of the defendant corporation inwhich the plaintiff has no concern or participation whatsoever. This is specially so

with respect to the defendant Damaso Perez who appears to have executed theagreement, Annex A, in his own personal capacity and not as an officer of thedefendant Republic Credit Corporation. The allegation that the defendants have aright to claim indemnity or contribution from the erring directors and officers of thedefendant corporation is a matter which may be the subject of a separate action,and in which the plaintiff is not concerned. (p. 37, Record on Appeal)

Against the above judgment the defendants also have prosecuted this appeal. TheCourt of Appeals certified the same to Us in accordance with law.

In G.R. No. L-18223, the defendants-appellants argue that the admission made bythe defendants in their answer that the amount demanded was due, is qualified "inthe sense that whatever amounts were drawn from the overdraft line in question

were part of those corporate funds of Philippine Armored Car, Inc., misused andmisapplied by Ramon Racelis, et al., former directors and executive officers of saidcorporation." (p. 13, Appellee's Brief) In answer to this argument we call attention tothe fact that in the agreement attached to the complaint Exhibit "A", the obligation ofthe defendants-appellants to pay for the amount due under the overdraft line is notin any way qualified; there is no statement that the responsibility of the defendants-appellants for the amount taken on overdraft would cease or be defeated or reducedupon misappropriations on mismanagement of the funds of the corporation by thedirectors and employees thereof. The special defense is, therefore, a sham defense.

Furthermore, under general rules and principles of law the mismanagement of thebusiness of a party by his agents does not relieve said party from the responsibilitythat he had contracted to third persons, especially in the case at bar where the

written agreement contains no limitation to defendants-appellants'


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liability.1wph1.t

The so-called special defense contained in the answer is, therefore, no specialdefense to the liability of the defendants-appellants, nor to the action, and thecourt's action or judgment on the pleadings was properly taken. The argumentcontained in the brief of the defendants-appellants that the defendants contemplateda third-party complaint is of no weight, because a third-party complaint was notavailable to the defendants under the facts of the case. A third-party complaint is,under the Rules, available only if the defendant has a right to demand contribution,indemnity, subrogation or any other relief from the supposed third-party defendantsin respect to the plaintiff's claim. (Sec. 1, Rule 12, Rules of Court). The supposedparties defendants or alleged officers of the defendant corporation had nothing to dowith the overdraft account of defendant corporation with the plaintiff-appellee.Consequently, they cannot be made parties defendants in a third party complaint.Anyway the filing of a third party complaint is no hindrance to the issuance of theorder of the court declaring that the defendants' answer presented no issue ordefense and that, therefore, plaintiff-appellee was entitled to judgment.

In G. R. No. L-18224, our ruling in the first case is also applicable. In this secondcase, it is also alleged that at the time of the agreement for credit in current accountthe defendant corporation was under the management of Ramon Racelis and otherswho defrauded and mismanaged the corporation, in breach of trust, etc., etc. Againwe declare that the written agreement for credit in current account, Annex "A",contains no limitation about the liability of the defendants-appellants, nor an expressagreement that the responsibility of the defendants-appellants should beconditioned upon the lawful management of the business of the defendantcorporation. The same rulings in the first case are applicable in this second case.

WHEREFORE, the judgments appealed from are hereby affirmed, with costsagainst the defendants-appellants.

G.R. Nos. L-18223 and L-18224 September 30, 1963

COMMERCIAL BANK & TRUST COMPANY OF THE PHILIPPINES, plaintiff-appellee, vs. REPUBLIC ARMORED CAR SERVICE CORPORATION andDAMASO PEREZ, ET AL., defendants-appellants.

R E S O L U T I O N

LABRADOR, J.:

Defendant-appellant Damaso Perez has presented a motion for new trial onthe ground of newly discovered evidence. It is claimed that movant was not aware of

the nature of the power of attorney that Ramon Racelis used, purportedly signed by

him, to secure the loans for the Republic Armored Car Service Corporation and theRepublic Credit Corporation. In the motion it is claimed that a photostatic copy of thepower of attorney used by Ramon Racelis was presented at the trial. Thisphotostatic copy or a copy thereof has not been submitted to us, for this reason Wecannot rule upon his claim and contention that Ramon Racelis had no authority tobind the movant as surety for the loans obtained from the appellee CommercialBank & Trust Company. Not having before Us the supposed photostatic copy of thepower of attorney used to secure the loans, there is no reason for Us to rule, inaccordance with his contention, that Racelis exceeded his authority in securing the

loans subject of the present actions.

The motion for reconsideration, however, presents a copy of a power ofattorney purportedly executed by movant on October 22, 1952. It is not expresslymentioned that this is the precise power of attorney that Ramon Racelis Utilized tosecure the loans the collection of which is sought in these cases. But assuming, forthe sake of argument, that the said power of attorney incorporated in the motion forreconsideration was the one used to obtain the loans. We find that the movant'scontention has no merit. In accordance with the document, Racelis was authorizedto negotiate for a loan or various loans .. with other being institution, financingcorporation, insurance companies or investment corporations, in such sum or sums,aforesaid Attorney-in-fact Mr. Ramon Racelis, may deem proper and convenient tomy interests, ... and to execute any and all documents he deems requisite and

necessary in order to obtain such loans, always having in mind best interest; ... Wehold that this general power attorney to secure loans from any banking institute wassufficient authority for Ramon Racelis to obtain the credits subject of the presentsuits.

It will be noted furthermore that Racelis, as agent Damaso Perez, executedthe documents evidencing the loans signing the same "Damaso Perez by RamonRacelis," and in the said contracts Damaso Perez agreed jointly and severally to beresponsible for the loans. As the document as signed makes Perez jointly andseverally responsible, there is no merit in the contention that Perez was only beingheld liable as a guarantor.1awphl.nt

Furthermore, the promissory notes evidencing the loan are attached to the

complaint in G.R. Nos. L-182 and L-18224. If the movant Perez claims that Racelihad no authority to execute the said promissory notes, the authenticity of saiddocuments should have been specifically denied under oath in defendant's answersin the lower court. This was done; consequently Perez could not and may not nowclaim that his agent did not have authority to execute the loan agreements.

Motion for new trial is denied.

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