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G.R. No. 76931 May 29, 1991

ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, petitioner, vs. COURT OFAPPEALS 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.

Francisco A. Lava, Jr. and Andresito X. Fornier for Orient Air Service and HotelRepresentatives, Inc.

Sycip, Salazar, Hernandez & Gatmaitan for American Airlines, Inc.

PADILLA, J.:p

This case is a consolidation of two (2) petitions for review on certiorariof a decision 1ofthe 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 decision 2 of the Regional Trial Court of Manila, Branch IV, which dismissed thecomplaint and granted therein defendant's counterclaim for agent's overridingcommission and damages.

The antecedent facts are as follows:

On 15 January 1977, American Airlines, Inc. (hereinafter referred to as American Air), anair carrier offering passenger and air cargo transportation in the Philippines, and OrientAir Services and Hotel Representatives (hereinafter referred to as Orient Air), enteredinto 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 withinthe Philippines for the sale of air passenger transportation. Pertinent provisions of theagreement are reproduced, to wit:

WITNESSETH

In consideration of the mutual convenants herein contained, the parties hereto agree asfollows:

1. Representation of American by Orient Air Services

Orient Air Services will act on American's behalf as its exclusive General Sales Agentwithin the Philippines, including any United States military installation therein which arenot serviced by an Air Carrier Representation Office (ACRO), for the sale of airpassenger transportation. The services to be performed by Orient Air Services shall

include:

(a) soliciting and promoting passenger traffic for the services of American and, ifnecessary, employing staff competent and sufficient to do so;

(b) providing and maintaining a suitable area in its place of business to be usedexclusively for the transaction of the business of American;

(c) arranging for distribution of American's timetables, tariffs and promotional material tosales agents and the general public in the assigned territory;

(d) servicing and supervising of sales agents (including such sub-agents as may beappointed by Orient Air Services with the prior written consent of American) in theassigned territory including if required by American the control of remittances andcommissions retained; and

(e) holding out a passenger reservation facility to sales agents and the general public inthe assigned territory.

In connection with scheduled or non-scheduled air passenger transportation within theUnited States, neither Orient Air Services nor its sub-agents will perform services for anyother air carrier similar to those to be performed hereunder for American without the priorwritten consent of American. Subject to periodic instructions and continued consent from

American, Orient Air Services may sell air passenger transportation to be performedwithin the United States by other scheduled air carriers provided American does notprovide 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 orexchange 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 salesmade during the preceding half month.

All monies collected by Orient Air Services for transportation sold hereunder onAmerican's ticket stock or on exchange orders, less applicable commissions to whichOrient Air Services is entitled hereunder, are the property of American and shall be heldin trust by Orient Air Services until satisfactorily accounted for to American.

5. Commissions

American will pay Orient Air Services commission on transportation sold hereunder byOrient 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 oftransportation by Orient Air Services or its sub-agents over American's services and any


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connecting through air transportation, when made on American's ticket stock, equal tothe following percentages of the tariff fares and charges:

(i) For transportation solely between points within the United States and between suchpoints and Canada: 7% or such other rate(s) as may be prescribed by the Air TrafficConference of America.

(ii) For transportation included in a through ticket covering transportation between pointsother than those described above: 8% or such other rate(s) as may be prescribed by theInternational Air Transport Association.

(b) Overriding commission

In addition to the above commission American will pay Orient Air Services an overridingcommission of 3% of the tariff fares and charges for all sales of transportation overAmerican'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 theprovisions of this Agreement or shall become bankrupt or make any assignment for thebenefit 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, thisAgreement 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 ticketforms, 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 theInternational Air Transport Association and the Air Traffic Conference of America, andsuch 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 AirServices is unable to transfer to the United States the funds payable by Orient AirServices to American under this Agreement. Either party may terminate the Agreementwithout cause by giving the other 30 days' notice by letter, telegram or cable.

xxx xxx xxx 3

On 11 May 1981, alleging that Orient Air had reneged on its obligations under theAgreement by failing to promptly remit the net proceeds of sales for the months ofJanuary to March 1981 in the amount of US $254,400.40, American Air by itselfundertook the collection of the proceeds of tickets sold originally by Orient Air andterminated forthwith the Agreement in accordance with Paragraph 13 thereof(Termination). Four (4) days later, or on 15 May 1981, American Air instituted suit againstOrient Air with the Court of First Instance of Manila, Branch 24, for Accounting withPreliminary Attachment or Garnishment, Mandatory Injunction and Restraining Order 4averring 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 ofwhich there were available funds in the possession of the defendant, . . . to the damageand prejudice of plaintiff." 5

In its Answer 6 with counterclaim dated 9 July 1981, defendant Orient Air denied thematerial allegations of the complaint with respect to plaintiff's entitlement to allegedunremitted amounts, contending that after application thereof to the commissions due itunder the Agreement, plaintiff in fact still owed Orient Air a balance in unpaid overridingcommissions. Further, the defendant contended that the actions taken by American Air inthe 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 toits 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 dispositiveportion of which reads:

WHEREFORE, all the foregoing premises considered, judgment is hereby rendered infavor of defendant and against plaintiff dismissing the complaint and holding thetermination made by the latter as affecting the GSA agreement illegal and improper andorder the plaintiff to reinstate defendant as its general sales agent for passengertranportation in the Philippines in accordance with said GSA agreement; plaintiff isordered to pay defendant the balance of the overriding commission on total flownrevenue covering the period from March 16, 1977 to December 31, 1980 in the amountof 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 suchreinstatement or said amounts in its Philippine peso equivalent legally prevailing at thetime of payment plus legal interest to commence from the filing of the counterclaim up tothe time of payment. Further, plaintiff is directed to pay defendant the amount of OneMillion 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 ofattorney's fees.

Costs against plaintiff. 7

On appeal, the Intermediate Appellate Court (now Court of Appeals) in a decisionpromulgated on 27 January 1986, affirmed the findings of the court a quo on theirmaterial 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


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1) American is ordered to pay Orient the sum of US$53,491.11 representing the balanceof the latter's overriding commission covering the period March 16, 1977 to December31, 1980, or its Philippine peso equivalent in accordance with the official rate ofexchange 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 overridingcommission per month starting January 1, 1981 until date of termination,May 9,1981 orits Philippine peso equivalent in accordance with the official rate of exchange legallyprevailing 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 thedate the answer with counterclaim was filed, until full payment;

4) American is ordered to pay Orientexemplary damagesof 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 thesubstance thereof and arguing for its reversal. The appellate court's decision was alsothe subject of a Motion for Partial Reconsideration by Orient Air which prayed for therestoration of the trial court's ruling with respect to the monetary awards. The Court ofAppeals, by resolution promulgated on 17 December 1986, denied American Air's motionand with respect to that of Orient Air, ruled thus:

Orient's motion for partial reconsideration is denied insofar as it prays for affirmance ofthe trial court's award of exemplary damages and attorney's fees, but granted insofar asthe rate of exchange is concerned. The decision of January 27, 1986 is modified inparagraphs (1) and (2) of the dispositive part so that the payment of the sums mentionedtherein shall be at their Philippine peso equivalent in accordance with the official rate ofexchange 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 resolution

10 of this Court dated 25 March 1987 both petitions wereconsolidated, 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 basedonly on sales of its services actually negotiated or transacted by Orient Air, otherwisereferred to as "ticketed sales." As basis thereof, primary reliance is placed uponparagraph 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 overridingcommission of 3% of the tariff fees and charges for all sales of transportation overAmerican'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 theformer not having opted to appoint any sub-agents, it is American Air's contention thatOrient Air can claim entitlement to the disputed overriding commission based only onticketed sales. This is supposed to be the clear meaning of the underscored portion ofthe above provision. Thus, to be entitled to the 3% overriding commission, the sale mustbe made by Orient Air and the sale must be done with the use of American Air's ticketstocks.

On the other hand, Orient Air contends that the contractual stipulation of a 3% overridingcommission covers the total revenue of American Air and not merely that derived fromticketed sales undertaken by Orient Air. The latter, in justification of its submission,invokes its designation as the exclusiveGeneral Sales Agent of American Air, with thecorresponding obligations arising from such agency, such as, the promotion andsolicitation 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 entiretythereof must be taken into consideration to ascertain the meaning of its provisions. 12The various stipulations in the contract must be read together to give effect to all. 13Aftera careful examination of the records, the Court finds merit in the contention of Orient Airthat the Agreement, when interpreted in accordance with the foregoing principles, entitlesit to the 3% overriding commission based on total revenue, or as referred to by theparties, "total flown revenue."

As the designated exclusive General Sales Agent of American Air, Orient Air wasresponsible for the promotion and marketing of American Air's services for air passengertransportation, 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 agencycommission, ranging from 7-8% of tariff fares and charges from sales by OrientAir whenmade on American Air ticket stock; and second, an overriding commission of 3% of tarifffares and chargesforallsalesof passenger transportation over American Air services. Itis immediately observed that the precondition attached to the first type of commissiondoes not obtain for the second type of commissions. The latter type of commissionswould accrue for sales of American Air services made not on its ticket stock but on theticket stock of other air carriers sold by such carriers or other authorized ticketingfacilities or travel agents. To rule otherwise, i.e., to limit the basis of such overridingcommissions to sales from American Air ticket stock would erase any distinction betweenthe two (2) types of commissions and would lead to the absurd conclusion that theparties had entered into a contract with meaningless provisions. Such an interpretationmust 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


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American Air was the party responsible for the preparation of the Agreement.Consequently, any ambiguity in this "contract of adhesion" is to be taken "contraproferentem", i.e., construed against the party who caused the ambiguity and could haveavoided it by the exercise of a little more care. Thus, Article 1377 of the Civil Codeprovides that the interpretation of obscure words or stipulations in a contract shall notfavor the party who caused the obscurity.

14 To put it differently, when several

interpretations of a provision are otherwise equally proper, that interpretation orconstruction is to be adopted which is most favorable to the party in whose favor theprovision was made and who did not cause the ambiguity. 15We 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. Therespondent appellate court, on this issue, ruled thus:

It is not denied that Orient withheld remittances but such action finds justification fromparagraph 4 of the Agreement, Exh. F, which provides for remittances to American lesscommissions to which Orient is entitled, and from paragraph 5(d) which specificallyallows Orient to retain the full amount of its commissions. Since, as stated ante, Orient isentitled 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 underthe Agreement was, in fact, a situation where the latter acted in accordance with theAgreementthat of retaining from the sales proceeds its accrued commissions beforeremitting the balance to American Air. Since the latter was still obligated to Orient Air byway of such commissions. Orient Air was clearly justified in retaining and refusing toremit 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 trialcourt'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 thedecision of the trial court. We refer particularly to the lower court's decision orderingAmerican Air to "reinstate defendant as its general sales agent for passengertransportation in the Philippines in accordance with said GSA Agreement."

By affirming this ruling of the trial court, respondent appellate court, in effect, compelsAmerican Air to extend its personality to Orient Air. Such would be violative of theprinciples and essence of agency, defined by law as a contract whereby "a person bindshimself to render some service or to do something in representation or on behalf ofanother, WITH THE CONSENT OR AUTHORITY OF THE LATTER . 17 (emphasissupplied) 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 arelationship can only be effected with the consent of the principal, which must not, in anyway, be compelled by law or by any court. The Agreement itself between the partiesstates that "either party may terminate the Agreementwithout causeby giving the other30 days' notice by letter, telegram or cable." (emphasis supplied) We, therefore, setaside the portion of the ruling of the respondent appellate court reinstating Orient Air asgeneral 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 December1986, respectively. Costs against petitioner American Air.

SO ORDERED.


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[G.R. No. 130148. December 15, 1997]

JOSE BORDADOR and LYDIA BORDADOR,petitioners, vs.BRIGIDA D. LUZ,ERNESTO M. LUZ and NARCISO DEGANOS, respondents.

D E C I S I O N

REGALADO, J.:

In this appeal by certiorari, petitioners assail the judgment of the Court of Appealsin CA-G.R. CV No. 49175 affirming the adjudication of the Regional Trial Court ofMalolos, Bulacan which found private respondent Narciso Deganos liable to petitionersfor actual damages, but absolved respondent spouses Brigida D. Luz and Ernesto M.Luz of liability. Petitioners likewise belabor the subsequent resolution of the Court ofAppeals which denied their motion for reconsideration of its challenged decision.

Petitioners were engaged in the business of purchase and sale of jewelry andrespondent Brigida D. Luz, also known as Aida D. Luz, was their regular customer. Onseveral occasions during the period from April 27, 1987 to September 4, 1987,respondent Narciso Deganos, the brother of Brigida D. Luz, received several pieces ofgold and jewelry from petitioners amounting to P382,816.00. [1] These items and theirprices were indicated in seventeen receipts covering the same. Eleven of the receiptsstated that they were received for a certain Evelyn Aquino, a niece of Deganos, and theremaining six indicated that they were received for Brigida D. Luz. [2]

Deganos was supposed to sell the items at a profit and thereafter remit theproceeds and return the unsold items to petitioners. Deganos remitted only the sum ofP

53,207.00. He neither paid the balance of the sales proceeds, nor did he return anyunsold 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 eventuallyfiled a complaint in the barangaycourt 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 withDeganos, signed a compromise agreement with petitioners. In that compromiseagreement, Deganos obligated himself to pay petitioners, on installment basis, thebalance of his account plus interest thereon. However, he failed to comply with hisaforestated undertakings.

On June 25, 1990, petitioners instituted Civil Case No. 412-M-90 in the RegionalTrial Court of Malolos, Bulacan against Deganos and Brigida D. Luz for recovery of asum of money and damages, with an application for preliminary attachment.[4] ErnestoLuz 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 wasdocketed as Criminal Case No. 785-M-94. That criminal case appears to be still pendingin said trial court.

During the trial of the civil case, petitioners claimed that Deganos acted as theagent of Brigida D. Luz when he received the subject items of jewelry and, because hefailed to pay for the same, Brigida, as principal, and her spouse are solidarily liable withhim therefor.

On the other hand, while Deganos admitted that he had an unpaid obligation topetitioners, he claimed that the same was only in the sum of P

382,816.00 and notP725,463.98. He further asserted that it was he alone who was involved in thetransaction with the petitioners; that he neither acted as agent for nor was he authorizedto act as an agent by Brigida D. Luz, notwithstanding the fact that six of the receiptsindicated that the items were received by him for the latter. He further claimed that henever delivered any of the items he received from petitioners to Brigida.

Brigida, on her part, denied that she had anything to do with the transactionsbetween petitioners and Deganos. She claimed that she never authorized Deganos toreceive any item of jewelry in her behalf and, for that matter, neither did she actuallyreceive any of the articles in question.

After trial, the court below found that only Deganos was liable to petitioners forthe 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 Brigidaowed petitioners was the sum of P21,483.00 representing interest on the principalaccount which she had previously paid for.[6]

The trial court also found that it was petitioner Lydia Bordador who indicated inthe 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, butbecause there was no memorandum to this effect, the agreement between the partieswas unenforceable under the Statute of Frauds. [8] Absent the required memorandum orany written document connecting the respondent Luz spouses with the subject receipts,or authorizing Deganos to act on their behalf, the alleged agreement between petitionersand 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 topay P

21,483.00 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 tothe Court of Appeals which affirmed said judgment. [10] The motion for reconsiderationfiled by petitioners was subsequently dismissed, [11] hence the present recourse to thisCourt.

The primary issue in the instant petition is whether or not herein respondentspouses are liable to petitioners for the latters claim for money and damages in the sumof P725,463.98, plus interests and attorneys fees, despite the fact that the evidencedoes not show that they signed any of the subject receipts or authorized Deganos toreceive the items of jewelry on their behalf.

Petitioners argue that the Court of Appeals erred in adopting the findings of the


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court a quothat respondent spouses are not liable to them, as said conclusion of the trialcourt is contradicted by the finding of fact of the appellate court that (Deganos) acted asagent of his sister (Brigida Luz). [12] In support of this contention, petitioners quotedseveral letters sent to them by Brigida D. Luz wherein the latter acknowledged herobligation to petitioners and requested for more time to fulfill the same. They likewiseaver that Brigida testified in the trial court that Deganos took some gold articles frompetitioners and delivered the same to her.

Both the Court of Appeals and the trial court, however, found as a fact that theaforementioned letters concerned the previous obligations of Brigida to petitioners, andhad nothing to do with the money sought to be recovered in the instant case. Suchconcurrent factual findings are entitled to great weight, hence, petitioners cannotplausibly claim in this appellate review that the letters were in the nature ofacknowledgments by Brigida that she was the principal of Deganos in the subjecttransactions.

On the other hand, with regard to the testimony of Brigida admitting delivery ofthe gold to her, there is no showing whatsoever that her statement referred to the itemswhich are the subject matter of this case. It cannot, therefore, be validly said that sheadmitted her liability regarding the same.

Petitioners insist that Deganos was the agent of Brigida D. Luz as the latterclothed 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 ofAppeals recognized in its decision that Deganos was an agent of Brigida.[14]

The evidence does not support the theory of petitioners that Deganos was anagent of Brigida D. Luz and that the latter should consequently be held solidarily liablewith Deganos in his obligation to petitioners. While the quoted statement in the findingsof fact of the assailed appellate decision mentioned that Deganos ostensibly acted as anagent of Brigida, the actual conclusion and ruling of the Court of Appeals categoricallystated that, (Brigida Luz) never authorized her brother (Deganos) to act for and in herbehalf in any transaction with Petitioners x x x. [15] It is clear, therefore, that evenassuming arguendo that Deganos acted as an agent of Brigida, the latter neverauthorized 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 todo something in representation or on behalf of another, with the consent or authority ofthe latter.

The basis for agency is representation. Here, there is no showing that Brigidaconsented to the acts of Deganos or authorized him to act on her behalf, much less withrespect to the particular transactions involved. Petitioners attempt to foist liability onrespondent spouses through the supposed agency relation with Deganos is groundlessand ill-advised.

Besides, it was grossly and inexcusably negligent of petitioners to entrust toDeganos, 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 tohave existed between Deganos and Brigida D. Luz. Evidently, petitioners, who werenegligent in their transactions with Deganos, cannot seek relief from the effects of theirnegligence by conjuring a supposed agency relation between the two respondents whereno evidence supports such claim.

Petitioners next allege that the Court of Appeals erred in ignoring the fact that thedecision of the court below, which it affirmed, is null and void as it contradicted its rulingin CA-G.R. SP No. 39445 holding that there is sufficient evidence/proof against BrigidaD. Luz and Deganos for estafa in the pending criminal case. They further aver that saidappellate court erred in ruling against them in this civil action since the same would resultin an inevitable conflict of decisions should the trial court convict the accused in thecriminal case.

By way of backdrop for this argument of petitioners, herein respondents BrigidaD. Luz and Deganos had filed a demurrer to evidence and a motion for reconsideration inthe aforestated criminal case, both of which were denied by the trial court. They thenfiled a petition for certiorari in the Court of Appeals to set aside the denial of theirdemurrer and motion for reconsideration but, as just stated, their petition therefor wasdismissed.[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 afinding that there is sufficient evidence in the estafa case against Brigida D. Luz andDeganos. Hence, as already stated, petitioners theorize that the decision and resolutionof the Court of Appeals now being impugned in the case at bar would result in a possibleconflict with the prospective decision in the criminal case. Instead of promulgating thepresent decision and resolution under review, so they suggest, the Court of Appealsshould have awaited the decision in the criminal case, so as not to render academic orpreempt the same or, worse, create two conflicting rulings. [18]

Petitioners have apparently lost sight of Article 33 of the Civil Code whichprovides 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 injuredparty. Such civil action shall proceed independently of the criminal prosecution and shallrequire only a preponderance of evidence.

It is worth noting that this civil case was instituted four years before the criminalcase 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 twobranches of the Regional Trial Court concerned to independently proceed with the civiland criminal cases. It will also be observed that a final judgment rendered in a civilaction 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 criminalcase [20] especially because while both cases are based on the same facts, thequantum of proof required for holding the parties liable therein differ. Thus, it isimprovident of petitioners to claim that the decision and resolution of the Court ofAppeals in the present case would be preemptive of the outcome of the cr iminal case.Their fancied fear of possible conflict between the disposition of this civil case and theoutcome of the pending criminal case is illusory.


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Petitioners surprisingly postulate that the Court of Appeals had lost its jurisdictionto issue the denial resolution dated August 18, 1997, as the same was tainted withirregularities and badges of fraud perpetrated by its court officers. [21] They charge thatsaid appellate court, through conspiracy and fraud on the part of its officers, gravelyabused 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 bythe members of the Eleventh Division of said court within one and a half days from theelevation 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 resolutionas the same was made without waiting for the lapse of the ten-day period forrespondents to file their comment and for petitioners to file their reply. It was allegedlyimpossible 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 thenrecuperating from surgery and, that, additionally, hundreds of more important caseswere pending. [22]

These lamentable allegation of irregularities in the Court of Appeals and in theconduct of its officers strikes us as a desperate attempt of petitioners to induce this Courtto give credence to their arguments which, as already found by both the trial andintermediate appellate courts, are devoid of factual and legal substance. The regrettablyirresponsible attempt to tarnish the image of the intermediate appellate tribunal and itsjudicial officers through ad hominemimputations could well be contumacious, but we areinclined 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 affirmingthe trial courts decision. [23] Petitioners moved for reconsideration and the Court ofAppeals ordered respondents to file a comment. Respondents filed the same on August5, 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 petitionersmotion for reconsideration on August 18, 1997.[26]

It is ironic that while some litigants malign the judiciary for being supposedlyslothful in disposing of cases, petitioners are making a show of calling out for justicebecause the Court of Appeals issued a resolution disposing of a case sooner thanexpected of it. They would even deny the exercise of discretion by the appellate court toprioritize 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 dictatewhen and how a tribunal should act upon those cases since they are not even aware ofthe 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 periodof time after the records of the case were elevated to the office of the ponentecannot, byitself, be deemed irregular. There is no showing whatsoever that the resolution wasissued without considering the reply filed by petitioners. In fact, that brief pleading filedby petitioners does not exhibit any esoteric or ponderous argument which could not beanalyzed within an hour. It is a legal presumption, born of wisdom and experience, thatofficial duty has been regularly performed; [27] that the proceedings of a judicial tribunalare regular and valid, and that judicial acts and duties have been and will be duly andproperly performed. [28] The burden of proving irregularity in official conduct is on thepart of petitioners and they have utterly failed to do so. It is thus reprehensible for themto cast aspersions on a court of law on the bases of conjectures or surmises, especiallysince one of the petitioners appears to be a member of the Philippine Bar.

Lastly, petitioners fault the trial courts holding that whatever contract of agencywas established between Brigida D. Luz and Narciso Deganos is unenforceable underthe 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 executorycontracts and not to executed or to partially executed ones. From there, they move on toclaim that the contract involved in this case was an executed contract as the items hadalready been delivered by petitioners to Brigida D. Luz, hence, such delivery resulted inthe execution of the contract and removed the same from the coverage of the Statute ofFrauds.

Petitioners claim is speciously unmeritorious. It should be emphasized thatneither the trial court nor the appellate court categorically stated that there was such acontractual relation between these two respondents. The trial court merely said that ifthere was such an agency existing between them, the same is unenforceable as thecontract would fall under the Statute of Frauds which requires the presentation of a noteor memorandum thereof in order to be enforceable in court. That was merely apreparatory statement of a principle of law. What was finally proven as a matter of fact isthat there was no such contract between Brigida D. Luz and Narciso Deganos, executedor partially executed, and no delivery of any of the items subject of this case was evermade to the former.

WHEREFORE, no error having been committed by the Court of Appeals inaffirming the judgment of the court a quo, its challenged decision and resolution arehereby AFFIRMED and the instant petition is DENIED, with double costs against

petitioners

SO ORDERED.

Puno, Mendoza, andMartinez, JJ., concur.


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G.R. No. 156262

MARIA TUAZON, ALEJANDRO P. TUAZON, MELECIO P.TUAZON, Spouses ANASTACIO and MARY T. BUENAVENTURA, Petitioners,versus HEIRS OF BARTOLOME RAMOS,Respondents. July 14, 2005

x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --- -- -- -- -- x

DECISION

PANGANIBAN,J.:

Stripped of nonessentials, the present case involves the collection of a sum of money.Specifically, this case arose from the failure of petitioners to pay respondentspredecessor-in-interest. This fact was shown by the non-encashment of checks issuedby a third person, but indorsed by herein Petitioner Maria Tuazon in favor of the saidpredecessor. Under these circumstances, to enable respondents to collect on theindebtedness, the check drawer need not be impleaded in the Complaint. Thus, the suitis directed, not against the drawer, but against the debtor who indorsed the checks inpayment 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 DISMISSEDand theappealed decision is AFFIRMED.

On the other hand, the affirmed Decision[3] of Branch 34 of the Regional TrialCourt (RTC) of Gapan, Nueva Ecija, disposed as follows:

WHEREFORE, judgment is hereby rendered in favor of

the plaintiffs and against the defendants, ordering thedefendants spouses Leonilo Tuazon and Maria Tuazon to paythe plaintiffs, as follows:

1. The sum of P1,750,050.00, withinterests from the filing of the secondamended complaint;

2. The sum of P50,000.00, asattorneys fees;

3. The sum of P20,000.00, as moraldamages

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 ofMay 2, 1988 and June 5, 1988, spouses Leonilo and MariaTuazon purchased a total of 8,326 cavans of rice from [thedeceased Bartolome] Ramos [predecessor-in-interest ofrespondents]. That of this [quantity,] x x x only 4,437 cavans[have been paid for so far], leaving unpaid 3,889 cavans valuedat P1,211,919.00. In payment therefor, the spouses Tuazonissued x x x [several] Traders Royal Bank checks.

x x x x x x x x x

[B]ut when these [checks] were encashed, all of the checksbounced due to insufficiency of funds. [Respondents]advanced that before issuing said checks[,] spouses Tuazonalready knew that they had no available fund to support the

checks, and they failed to provide for the payment of thesedespite repeated demands made on them.

[Respondents] averred that because spouses Tuazonanticipated that they would be sued, they conspired with theother [defendants] to defraud them as creditors by executing xx x fictitious sales of their properties. They executed x x xsimulated sale[s] [of three lots] in favor of the x x x spousesBuenaventura x x x[,] as well as their residential lot and thehouse thereon[,] all located at Nueva Ecija, and anothersimulated deed of sale dated July 12, 1988 of a Stake Toyotaregistered with the Land Transportation Office of CabanatuanCity on September 7, 1988. [Co-petitioner] Melecio Tuazon, ason 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 onJanuary 25, 1988 in favor of their other son, [co-petitioner]Alejandro Tuazon x x x. As a result of the said sales, the titlesof these properties issued in the names of spouses Tuazonwere cancelled and new ones were issued in favor of the [co-]defendants spouses Buenaventura, Alejandro Tuazon andMelecio Tuazon. Resultantly, by the said ante-dated andsimulated sales and the corresponding transfers there was nomore property left registered in the names of spouses Tuazonanswerable to creditors, to the damage and prejudice of[respondents].

For their part, defendants denied having

pur chas ed x x x rice from [Bartolome] Ramos. They alleged


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that it was Magdalena Ramos, wife of said deceased, whoowned and traded the merchandise and Maria Tuazon wasmerely her agent. They argued that it was Evangeline Santoswho was the buyer of the rice and issued the checks to MariaTuazon as payments therefor. In good faith[,] the checks werereceived [by petitioner] from Evangeline Santos and turnedover to Ramos without knowing that these were not funded.And it is for this reason that [petitioners] have been insisting onthe inclusion of Evangeline Santos as an indispensable party,and her non-inclusion was a fatal error. Refuting that the saleof several properties were fictitious or simulated, spousesTuazon contended that these were sold because they werethen meeting financial difficulties but the disposals were madefor value and in good faith and done before the filing of theinstant suit. To dispute the contention of plaintiffs that theywere the buyers of the rice, they argued that there was nosales invoice, official receipts or like evidence to prove this.They assert that they were merely agents and should not beheld answerable.[5]

The corresponding civil and criminal cases were filed by respondents againstSpouses Tuazon. Those cases were later consolidated and amended to include

Spouses Anastacio and Mary Buenaventura, with Alejandro Tuazon and Melecio Tuazonas additional defendants. Having passed away before the pretrial, Bartolome Ramoswas 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 primarilyliable to respondents, because she was the one who had purchased the merchandisefrom their predecessor, as evidenced by the fact that the checks had been drawn in hername. The RTC, however, denied petitioners Motion.

Since the trial court acquitted petitioners in all three of the consolidated criminalcases, 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 existenceof an agency between respondents and Spouses Tuazon. The appellate courtdisbelieved petitioners contention that Evangeline Santos should have been impleadedas an indispensable party. Inasmuch as all the checks had been indorsed by MariaTuazon, who thereby became liable to subsequent holders for the amounts stated inthose 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 Appealserred in rendering judgment against the petitionersdespite x x x the failure of the respondents to include in theiraction Evangeline Santos, an indispensable party to thesuit.[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 Rule45 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 onthe parties and this Court.[8] Petitioners have not given us sufficient reasons to deviatefrom 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 orauthority.[9] The following are the elements of agency: (1) the parties consent, expressor implied, to establish the relationship; (2) the object, which is the execution of a juridicalact in relation to a third person; (3) the representation, by which the one who acts as anagent does so, not for oneself, but as a representative; (4) the limitation that the agentacts within the scope of his or her authority.[10] As the basis of agency isrepresentation, 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 samemanner, there must be an intention on the part of the agent to accept the appointmentand 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 thatpetitioners were the rice buyers themselves; they were not mere agents of respondentsin 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 aloneare generally insufficient to establish thefact or extent of their authority.[13] The law makes no presumption of agency; proving itsexistence, nature and extent is incumbent upon the person alleging it.[14] In the presentcase, petitioners raise the fact of agency as an affirmative defense, yet fail to prove itsexistence.

The Court notes that petitioners, on their own behalf, sued EvangelineSantos for collection of the amounts represented by the bounced checks, in a separatecivil case that they sought to be consolidated with the current one. If, as they claim, theywere mere agents of respondents, petitioners should have brought the suit againstSantos for and on behalf of their alleged principal, in accordance with Section 2 of Rule 3of 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


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Bartolome Ramos.

Second Issue:Indispensable Party

Petitioners argue that the lower courts erred in not allowing Evangeline Santos tobe impleaded as an indispensable party. They insist that respondents Complaintagainst them is based on the bouncing checks she issued; hence, they point to her asthe person primarily liable for the obligation.

We hold that respondents cause of action is clearly founded on petitioners failureto pay the purchase price of the rice. The trial court held that Petitioner Maria Tuazonhad indorsed the questioned checks in favor of respondents, in accordance with Sections31 and 63 of the Negotiable Instruments Law.[16] That Santos was the drawer of thechecks is thus immaterial to the respondents cause of action.

As indorser, Petitioner Maria Tuazon warranted that upon due presentment, thechecks were to be accepted or paid, or both, according to their tenor; and that in casethey were dishonored, she would pay the corresponding amount.[17] After an instrumentis dishonored by nonpayment, indorsers cease to be merely secondarily liable; theybecome 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 beforesuing 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 finaldetermination can be had.[19] The instant case was originally one for the collection ofthe 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 andSantos. Hence, a final determination of the rights and interest of the parties may bemade without any need to implead her.

WHEREFORE, the Petition is DENIED and the assailed DecisionAFFIRMED. Costs against petitioners.

SO ORDERED.


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Amon Trading Corp. v. Court of Appeals,

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

D E C I S I O N

CHICO-NAZARIO, J.:

This is an appeal by certiorari from the Decision[1] dated 28 November 2002of the Court of Appeals in CA-G.R. CV No. 60031, reversing the Decision of the RegionalTrial Court of Quezon City, Branch 104, and holding petitioners Amon TradingCorporation and Juliana Marketing to be solidarily liable with Lines & Spaces InteriorsCenter (Lines & Spaces) in refunding private respondent Tri-Realty Development andConstruction Corporation (Tri-Realty) the amount corresponding to the value ofundelivered bags of cement.

The undisputed facts:

Private respondent Tri-Realty is a developer and contractor with projects in

Bulacan and Quezon City. Sometime in February 1992, private respondent had difficultyin purchasing cement needed for its projects. Lines & Spaces, represented by EleanorBahia Sanchez, informed private respondent that it could obtain cement to its satisfactionfrom petitioners, Amon Trading Corporation and its sister company, Juliana Marketing.On the strength of such representation, private respondent proceeded to order fromSanchez Six Thousand Fifty (6,050) bags of cement from petitioner Amon TradingCorporation, and from Juliana Marketing, Six Thousand (6,000) bags at P 98.00/bag.

Private respondent, through Mrs. Sanchez of Lines & Spaces, paid inadvance the amount of P592,900.00 through Solidbank Managers Check No. 0011565payable to Amon Trading Corporation, and the amount of P588,000.00 payable toJuliana Marketing, through Solidbank Managers Check No. 0011566. A certain WengChua signed the check vouchers for Lines & Spaces while Mrs. Sanchez issued receiptsfor the two managers checks. Private respondent likewise paid to Lines & Spaces an

advance fee for the 12,050 cement bags at the rate of P7.00/bag, or a total ofP84,350.00, in consideration of the facilitation of the orders and certainty of delivery ofthe same to the private respondent. Solidbank Managers Check Nos. 0011565 and0011566 were paid by Sanchez to petitioners.

There were deliveries to private respondent from Amon Trading Corporation andJuliana Marketing of 3,850 bags and 3,000 bags, respectively, during the period fromApril to June 1992. However, the balance of 2,200 bags from Amon Trading Corporationand 3,000 bags from Juliana Marketing, or a total of 5,200 bags, was not delivered.Private respondent, thus, sent petitioners written demands but in reply, petitioners statedthat they have already refunded the amount of undelivered bags of cement to Lines andSpaces per written instructions of Eleanor Sanchez.

Left high and dry, with news reaching it that Eleanor Sanchez had already fled

abroad, private respondent filed this case for sum of money against petitioners and Lines

& Spaces.

Petitioners plead in defense lack of right or cause of action, alleging thatprivate respondent had no privity of contract with them as it was Lines & Spaces/Tri-Realty, through Mrs. Sanchez, that ordered or purchased several bags of cement andpaid the price thereof without informing them of any special arrangement nor disclosingto them that Lines & Spaces and respondent corporation are distinct and separateentities. They added that there were purchases or orders made by Lines & Spaces/Tri-Realty which they were about to deliver, but were cancelled by Mrs. Sanchez and theconsideration of the cancelled purchases or orders was later reimbursed to Lines &Spaces. The refund was in the form of a check payable to Lines & Spaces.

Lines & Spaces denied in its Answer that it is represented by Eleanor B.Sanchez and pleads in defense lack of cause of action and in the alternative, it raised thedefense that it was only an intermediary between the private respondent andpetitioners.[2] Soon after, though, counsel for Lines & Spaces moved to withdraw fromthe case for the reason that its client was beyond contact.

On 29 January 1998, the Regional Trial Court of Quezon City, Branch 104,found Lines & Spaces solely liable to private respondent and absolved petitioners of anyliability. The dispositive portion of the trial courts Decision reads:

Wherefore, judgment is hereby renderedordering defendant Lines and Spaces Interiors Center as

follows: to pay plaintiff on the complaint the amount ofP47,950.00 as refund of the fee for the undelivered5,200 bags of cement at the rate of P7.00 per bag; theamount of P509,600.00 for the refund of the price of the5,200 undelivered bags of cement at P98.00 per bag; theamount of P2,000,000.00 for compensatory damages; aswell as the amount of P639,387.50 as attorneys fees;and to pay Amon Trading and Juliana Marketing, Inc. onthe crossclaim the sum of P200,000.00 as attorneysfees.[3]

Private Respondent Tri-Realty partially appealed from the trial courts

decision absolving Amon Trading Corporation and Juliana Marketing of any liability toTri-Realty. In the presently assailed Decision, the Court of Appeals reversed thedecision of the trial court and held petitioners Amon Trading Corporation and JulianaMarketing to be jointly and severally liable with Lines & Spaces for the undelivered bagsof cement. The Court of Appeals disposed-

WHEREFORE, premises considered, the decision of thecourt a quo is hereby REVERSED AND SET ASIDE, andanother one is entered ordering the following:

Defendant-appellee Amon Trading Corporation is heldliable jointly and severally with defendant-appellee Lines andSpaces Interiors Center in the amount of P215,600.00 for therefund of the price of 2,200 undelivered bags of cement.


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Defendant-appellee Juliana Marketing is held liablejointly and severally with defendant-appellee Lines and SpacesInteriors Center in the amount of P294,000.00 for the refund ofthe price of 3,000 undelivered bags of cement.

The defendant-appellee Lines and Spaces InteriorsCenter is held solely in the amount of P47,950.00 as refund ofthe fee for the 5,200 undelivered bags of cement to the plaintiff-appellant Tri-Realty Development and ConstructionCorporation.

The awards of compensatory damages and attorneysfees are DELETED.

The cross claim of defendants-appellees Amon TradingCorporation and Juliana Marketing is DISMISSED for lack ofmerit.

No pronouncement as to costs.[4]

Pained by the ruling, petitioners elevated the case to this Court via thepresent petition for review to challenge the Decision and Resolution of the Court of

Appeals on the following issues:

I. WHETHER OR NOT THERE WAS ACONTRACT OF AGENCY BETWEEN LINES ANDSPACES INTERIOR CENTER ANDRESPONDENT;

II. WHETHER OR NOT PETITIONERS ANDRESPONDENT HAS PRIVITY OF CONTRACT.[5]

At the focus of scrutiny is the issue of whether or not the Court of Appealscommitted reversible error in ruling that petitioners are solidarily liable with Lines &

Spaces. The key to unlocking this issue is to determine whether or not Lines & Spacesis the private respondents agent and whether or not there is privity of contract betweenpetitioners and private respondent.

We shall consider these issues concurrently as they are interrelated.

Petitioners, in their brief, zealously make a case that there was no contractof agency between Lines & Spaces and private respondent.[6] Petitioners stronglyassert that they did not have a hint that Lines & Spaces and Tri-Realty are two differentand distinct entities inasmuch as Eleanor Sanchez whom they have dealt with justrepresented herself to be from Lines & Spaces/Tri-Realty when she placed her order forthe delivery of the bags of cement. Hence, no privity of contract can be said to existbetween petitioners and private respondent.[7]

Private respondent, on the other hand, goes over the top in arguing that

contrary to their claim of innocence, petitioners had knowledge that Lines & Spaces, asrepresented by Eleanor Sanchez, was a separate and distinct entity from Tri-Realty.[8]Then, too, private respondent stirs up support for its contention that contrary topetitioners' claim, there was privity of contract between private respondent andpetitioners.[9]

Primarily, there was no written contract entered into between petitioners andprivate respondent for the delivery of the bags of cement. As gleaned from the records,and as private respondent itself admitted in its Complaint, private respondent agreed withEleanor Sanchez of Lines & Spaces for the latter to source the cement needs of theformer in consideration of P7.00 per bag of cement. It is worthy to note that the paymentin managers checks was made to Eleanor Sanchez of Lines & Spaces and was notdirectly paid to petitioners. While the managers check issued by respondent companywas eventually paid to petitioners for the delivery of the bags of cement, there isobviously nothing from the face of said managers check to hint that private respondentwas the one making the payments. There was likewise no intimation from Sanchez thatthe purchase order placed by her was for private respondents benefit. The meeting ofminds, therefore, was between private respondent and Eleanor Sanchez of Lines &Spaces. This contract is distinct and separate from the contract of sale betweenpetitioners and Eleanor Sanchez who represented herself to be from Lines & Spaces/Tri-Realty, which, per her representation, was a single account or entity.

The records bear out, too, Annex A showing a check voucher payable toAmon Trading Corporation for the 6,050 bags of cement received by a certain Weng

Chua for Mrs. Eleanor Sanchez of Lines & Spaces, and Annex B which is a checkvoucher bearing the name of Juliana Marketing as payee, but was received again by saidWeng Chua. Nowhere from the face of the check vouchers is it shown that petitionersor any of their authorized representatives received the payments from respondentcompany.

Also on record are the receipts issued by Lines & Spaces, signed byEleanor Bahia Sanchez, covering the said managers checks. As Engr. Guido Ganhinhinof respondent Tri-Realty testified, it was Lines & Spaces, not petitioners, which issued tothem a receipt for the two (2) managers checks. Thus-

Q: And what is your proof that Amon andJuliana were paid of the purchases through managers checks?

A: Lines & Spaces who represented AmonTrading and Juliana Marketing issued us receipts for the two(2) managers checks we paid to Amon Trading and JulianaMarketing Corporation.

Q: I am showing to you check no. 074 issuedby Lines & Spaces Interiors Center, what relation has thischeck to that check you mentioned earlier?

A: Official Receipt No. 074 issued by Lines &Spaces Interiors Center was for the P592,900.00 we paid toAmon Trading Corporation for 6,050 bags of cement.

Q: Now there appears a signature in that


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receipt above the printed words authorized signature, whosesignature is that?

A: The signature of Mrs. Eleanor BahiaSanchez, the representative of Lines and Spaces.

Q: Why do you know that that is hersignature?

A: She is quite familiar with me and I saw heraffix her signature upon issuance of the receipt.[10] (Emphasissupplied.)

Without doubt, no vinculumcould be said to exist between petitioners andprivate respondent.

There is likewise nothing meaty about the assertion of private respondentthat inasmuch as the delivery receipts as well as the purchase order were for the accountof Lines & Spaces/Tri-Realty, then petitioners should have been placed on guard that itwas private respondent which is the principal of Sanchez. In China Banking Corp. v.Members of the Board of Trustees, Home Development Mutual Fund[11] and the latercase of Romulo, Mabanta, Buenaventura, Sayoc and De los Angeles v. Home

Development Mutual Fund,[12] the term and/or was held to mean that effect shall begiven to both the conjunctive and and the disjunctive or; or that one word or the othermay be taken accordingly as one or the other will best effectuate the intended purpose.It was accordingly ordinarily held that in using the term "and/or" the word "and" and theword "or" are to be used interchangeably.

By analogy, the words Lines & Spaces/Tri-Realty mean that effect shall begiven to both Lines & Spaces and Tri-Realty or that Lines & Spaces and Tri-Realty maybe used interchangeably. Hence, petitioners were not remiss when they believedEleanor Sanchezs representation that Lines & Spaces/Tri-Realty refers to just oneentity. There was, therefore, no error attributable to petitioners when they refunded thevalue of the undelivered bags of cement to Lines & Spaces only.

There is likewise a dearth of evidence to show that the case at bar is an

open-and-shut case of agency between private respondent and Lines & Spaces. NeitherEleanor Sanchez nor Lines & Spaces was an agent for private respondent, but rather asupplier for the latters cement needs. The Civil Code defines a contract of agency asfollows:

Art. 1868. By the contract of agency a personbinds himself to render some service or to do something inrepresentation or on behalf of another, with the consent orauthority of the latter.

In a bevy of cases such as the avuncular case of Victorias Milling Co., Inc.v. Court of Appeals,[13] the Court decreed from Article 1868 that the basis of agency is

representation.

. . . On the part of the principal, there must be anactual intention to appoint or an intention naturally inferablefrom his words or actions and on the part of the agent, theremust be an intention to accept the appointment and act on it,and in the absence of such intent, there is generally no agency.One factor which most clearly distinguishes agency from otherlegal concepts is control; one person - the agent - agrees to actunder the control or direction of another - the principal. Indeed,the very word "agency" has come to connote control by theprincipal. The control factor, more than any other, has causedthe courts to put contracts between principal and agent in aseparate category.

Here, the intention of private respondent, as the Executive Officer ofrespondent corporation testified on, was merely for Lines & Spaces, through EleanorSanchez, to supply them with the needed bags of cement.

Q: Do you know the defendant Lines &Spaces in this case?

A: Yes, sir.

Q: How come you know this defendant?

A: Lines & Spaces represented by EleanorBahia Sanchez offered to supply us cement when there wasscarcity of cement experienced in our projects.[14] (Emphasissupplied)

We cannot go along the Court of Appeals disquisition that Amon TradingCorporation and Juliana Marketing should have required a special power of attorney formwhen they refunded Eleanor B. Sanchez the cost of the undelivered bags of cement. Allthe quibbling about whether Lines & Spaces acted as agent of private respondent isinane because as illustrated earlier, petitioners took orders from Eleanor Sanchez who,after all, was the one who paid them the managers checks for the purchase of cement.

Sanchez represented herself to be from Lines & Spaces/Tri-Realty, purportedly a singleentity. Inasmuch as they have never directly dealt with private respondent and there isno paper trail on record to guide them that the private respondent, in fact, is thebeneficiary, petitioners had no reason to doubt the request of Eleanor Sanchez later onto refund the value of the undelivered bags of cement to Lines & Spaces. Moreover, thecheck refund was payable to Lines & Spaces, not to Sanchez, so there was indeed nocause to suspect the scheme.

The fact that the deliveries were made at the construction sites of privaterespondent does not by itself raise suspicion that petitioners were delivering for privaterespondent. There was no sufficient showing that petitioners knew that the delivery siteswere that of private respondent and for another thing, the deliveries were made bypetitioners men who have no business nosing around their clients affairs.

Parenthetically, Eleanor Sanchez has absconded to the United States of


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America and the story of what happened to the check refund may be forever locked withher. Lines & Spaces, in its Answer to the Complaint, washed its hands of the apparentruse perpetuated by Sanchez, but argues that if at all, it was merely an intermediarybetween petitioners and private respondent. With no other way out, Lines & Spaces wasa no-show at the trial proceedings so that eventually, its counsel had to withdraw hisappearance because of his clients vanishing act. Left with an empty bag, so to speak,private respondent now puts the blame on petitioners. But this Court finds plausible thestance of petitioners that they had no inkling of the deception that was forthcoming.Indeed, without any contract or any hard evidence to show any privity of contractbetween it and petitioners, private respondents claim against petitioners lacks legalfoothold.

Considering the vagaries of the case, private respondent brought the wrongupon itself. As adeptly surmised by the trial court, between petitioners and privaterespondent, it is the latter who had made possible the wrong that was perpetuated byEleanor Sanchez against it so it must bear its own loss. It is in this sense that we mustapply the equitable maxim that as between two innocent parties, the one who made itpossible for the wrong to be done should be the one to bear the resulting loss.[15] First,private respondent was the one who had reposed too much trust on Eleanor Sanchez forthe latter to source its cement needs. Second, it failed to employ safety nets to steerclear of the rip-off. For such huge sums of money involved in this case, it is surprisingthat a corporation such as private respondent would pay its construction materials inadvance instead of in credit thus opening a window of opportunity for Eleanor Sanchezor Lines & Spaces to pocket the remaining balance of the amount paid corresponding to

the undelivered materials. Private respondent likewise paid in advance the commissionof Eleanor Sanchez for the materials that have yet to be delivered so it really had nomeans of control over her. Finally, there is no paper trail linking private respondent topetitioners thereby leaving the latter clueless that private respondent was their trueclient. Private respondent should have, at the very least, required petitioners to sign thecheck vouchers or to issue receipts for the advance payments so that it could have ahold on petitioners. In this case, it was the representative of Lines & Spaces who signedthe check vouchers. For its failure to establish any of these deterrent measures, privaterespondent incurred the risk of not being able to recoup the value of the materials it hadpaid good money for.

WHEREFORE, the present petition is hereby GRANTED. Accordingly, theDecision and the Resolution dated 28 November 2002 and 10 June 2003, of the Court ofAppeals in CA-G.R CV No. 60031, are hereby REVERSED and SET ASIDE. The

Decision dated 29 January 1998 of the Regional Trial Court of Quezon City, Branch 104,in Civil Case Q-92-14235 is hereby REINSTATED. No costs.

SO ORDERED.


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G.R. No. 144805 June 8, 2006

EDUARDO V. LINTONJUA, JR. and ANTONIO K. LITONJUA,Petitioners,vs. ETERNIT CORPORATION (now ETERTON MULTI-RESOURCES

CORPORATION), ETEROUTREMER, S.A. and FAR EAST BANK & TRUSTCOMPANY, Respondents.

D E C I S I O N

CALLEJO, SR., J.:

On appeal via a Petition for Review on Certiorari is the Decision 1of the Court of Appeals(CA) in CA-G.R. CV No. 51022, which affirmed the Decision of the Regional Trial Court(RTC), Pasig City, Branch 165, in Civil Case No. 54887, as well as the Resolution

2of the

CA denying the motion for reconsideration thereof.

The Eternit Corporation (EC) is a corporation duly organized and registered underPhilippine laws. Since 1950, it had been engaged in the manufacture of roofing materialsand pipe products. Its manufacturing operations were conducted on eight parcels of landwith a total area of 47,233 square meters. The properties, located in Mandaluyong City,Metro Manila, were covered by Transfer Certificates of Title Nos. 451117, 451118,451119, 451120, 451121, 451122, 451124 and 451125 under the name of Far EastBank & Trust Company, as trustee. Ninety (90%) percent of the shares of stocks of ECwere owned by Eteroutremer S.A. Corporation (ESAC), a corporation organized andregistered under the laws of Belgium.

3 Jack Glanville, an Australian citizen, was the

General Manager and President of EC, while Claude Frederick Delsaux was theRegional Director for Asia of ESAC. Both had their offices in Belgium.

In 1986, the management of ESAC grew concerned about the political situation in thePhilippines and wanted to stop its operations in the country. The Committee for Asia ofESAC instructed Michael Adams, a member of ECs Board of Directors, to dispose of theeight parcels of land. Adams engaged the services of realtor/broker Lauro G. Marquez sothat the properties could be offered for sale to prospective buyers. Glanville later showedthe properties to Marquez.

Marquez thereafter offered the parcels of land and the improvements thereon to EduardoB. Litonjua, Jr. of the Litonjua & Company, Inc. In a Letter dated September 12, 1986,Marquez declared that he was authorized to sell the properties for P27,000,000.00 andthat the terms of the sale were subject to negotiation.

4

Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property to EduardoLitonjua, Jr., and his brother Antonio K. Litonjua. The Litonjua siblings offered to buy theproperty for P20,000,000.00 cash. Marquez apprised Glanville of the Litonjua siblingsoffer and relayed the same to Delsaux in Belgium, but the latter did not respond. OnOctober 28, 1986, Glanville telexed Delsaux in Belgium, inquiring on his position/counterproposal to the offer of the Litonjua siblings. It was only on February 12, 1987that Delsaux sent a telex to Glanville stating that, based on the "Belgian/Swiss decision,"the final offer was "US$1,000,000.00 and P2,500,000.00 to cover all existing obligationsprior to final liquidation."

5

Marquez furnished Eduardo Litonjua, Jr. with a copy of the telex sent by Delsaux.Litonjua, Jr. accepted the counterproposal of Delsaux. Marquez conferred with Glanville,and in a Letter dated February 26, 1987, confirmed that the Litonjua siblings hadaccepted the counter-proposal of Delsaux. He also stated that the Litonjua siblings wouldconfirm full payment within 90 days after execution and preparation of all documents ofsale, together with the necessary governmental clearances.6

The Litonjua brothers deposited the amount of US$1,000,000.00 with the Security Bank& Trust Company, Ermita Branch, and drafted an Escrow Agreement to expedite the

sale.7

Sometime later, Marquez and the Litonjua brothers inquired from Glanville when the salewould be implemented. In a telex dated April 22, 1987, Glanville informed Delsaux thathe had met with the buyer, which had given him the impression that "he is prepared topress for a satisfactory conclusion to the sale." 8He also emphasized to Delsaux that thebuyers were concerned because they would incur expenses in bank commitment fees asa consequence of prolonged period of inaction.9

Meanwhile, with the assumption of Corazon C. Aquino as President of the Republic ofthe Philippines, the political situation in the Philippines had improved. Marquez receiveda telephone call from Glanville, advising that the sale would no longer proceed. Glanvillefollowed it up with a Letter dated May 7, 1987, confirming that he had been instructed byhis principal to inform Marquez that "the decision has been taken at a Board Meeting notto sell the properties on which Eternit Corporation is situated." 10

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

May 22, 1987

Mr. L.G. Marquez L.G. Marquez, Inc. 334 Makati Stock Exchange Bldg. 6767 AyalaAvenue Makati, Metro Manila Philippines

Dear Sir:

Re: Land of Eternit Corporation

I would like to confirm officially that our Group has decided not to proceed with the saleof the land which was proposed to you.

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

We regret that we could not make a deal with you this time, but in case the policy wouldchange at a later state, we would consult you again.


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x x x

Yours sincerely,

(Sgd.) C.F. DELSAUX

cc. To: J. GLANVILLE (Eternit Corp.)11

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

The Litonjuas then filed a complaint for specific performance and damages against EC(now the Eterton Multi-Resources Corporation) and the Far East Bank & Trust Company,and ESAC in the RTC of Pasig City. An amended complaint was filed, in whichdefendant EC was substituted by Eterton Multi-Resources Corporation; Benito C. Tan,Ruperto V. Tan, Stock Ha T. Tan and Deogracias G. Eufemio were impleaded asadditional defendants on account of their purchase of ESAC shares of stocks and werethe controlling stockholders of EC.

In their answer to the complaint, EC and ESAC alleged that since Eteroutremer was not

doing business in the Philippines, it cannot be subject to the jurisdiction of Philippinecourts; the Board and stockholders of EC never approved any resolution to sell subjectproperties nor authorized Marquez to sell the same; and the telex dated October 28,1986 of Jack Glanville was his own personal making which did not bind EC.

On July 3, 1995, the trial court rendered judgment in favor of defendants and dismissedthe amended complaint.

12The fallo of the decision reads:

WHEREFORE, the complaint against Eternit Corporation now Eterton Multi-ResourcesCorporation and Eteroutremer, S.A. is dismissed on the ground that there is no valid andbinding sale between the plaintiffs and said defendants.

The complaint as against Far East Bank and Trust Company is likewise dismissed for

lack of cause of action.

The counterclaim of Eternit Corporation now Eterton Multi-Resources Corporation andEteroutremer, S.A. is also dismissed for lack of merit.13

The trial court declared that since the authority of the agents/realtors was not in writing,the sale is void and not merely unenforceable, and as such, could not have been ratifiedby the principal. In any event, such ratification cannot be given any retroactive effect.Plaintiffs could not assume that defendants had agreed to sell the property without aclear authorization from the corporation concerned, that is, through resolutions of theBoard of Directors and stockholders. The trial court also pointed out that the supposedsale involves substantially all the assets of defendant EC which would result in theeventual total cessation of its operation.14

The Litonjuas appealed the decision to the CA, alleging that "(1) the lower court erred inconcluding that the real estate broker in the instant case needed a written authority fromappellee corporation and/or that said broker had no such written authority; and (2) thelower court committed grave error of law in holding that appellee corporation is notlegally bound for specific performance and/or damages in the absence of an enablingresolution of the board of directors."

15 They averred that Marquez acted merely as a

broker or go-between and not as agent of the corporation; hence, it was not necessaryfor him to be empowered as such by any written authority. They further claimed that anagency by estoppel was created when the corporation clothed Marquez with apparentauthority to negotiate for the sale of the properties. However, since it was a bilateralcontract to buy and sell, it was equivalent to a perfected contract of sale, which thecorporation was obliged to consummate.

In reply, EC alleged that Marquez had no written authority from the Board of Directors tobind it; neither were Glanville and Delsaux authorized by its board of directors to offer theproperty for sale. Since the sale involved substantially all of the corporations assets, itwould necessarily need the authority from the stockholders.

On June 16, 2000, the CA rendered judgment affirming the decision of the RTC.16

TheLitonjuas filed a motion for reconsideration, which was also denied by the appellatecourt.

The CA ruled that Marquez, who was a real estate broker, was a special agent within thepurview of Article 1874 of the New Civil Code. Under Section 23 of the CorporationCode, he needed a special authority from ECs board of directors to bind suchcorporation to the sale of its properties. Delsaux, who was merely the representative ofESAC (the majority stockholder of EC) had no authority to bind the latter. The CA pointedout that Delsaux was not even a member of the board of directors of EC. Moreover, theLitonjuas failed to prove that an agency by estoppel had been created between theparties.

In the instant petition for review, petitioners aver that

I

THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PERFECTEDCONTRACT OF SALE.

II

THE APPELLATE COURT COMMITTED GRAVE ERROR OF LAW IN HOLDING THATMARQUEZ NEEDED A WRITTEN AUTHORITY FROM RESPONDENT ETERNITBEFORE THE SALE CAN BE PERFECTED.

III

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT GLANVILLE ANDDELSAUX HAVE THE NECESSARY AUTHORITY TO SELL THE SUBJECT

PROPERTIES, OR AT THE VERY LEAST, WERE KNOWINGLY PERMITTED BY


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RESPONDENT ETERNIT TO DO ACTS WITHIN THE SCOPE OF AN APPARENTAUTHORITY, AND THUS HELD THEM OUT TO THE PUBLIC AS POSSESSINGPOWER TO SELL THE SAID PROPERTIES.17

Petitioners maintain that, based on the facts of the case, there was a perfected contractof sale of the parcels of land and the improvements thereon for "US$1,000,000.00 plusP2,500,000.00 to cover obligations prior to final liquidation." Petitioners insist that theyhad accepted the counter-offer of respondent EC and that before the counter-offer waswithdrawn by respondents, the acceptance was made known to them through real estate

broker Marquez.

Petitioners assert that there was no need for a written authority from the Board ofDirectors of EC for Marquez to validly act as broker/middleman/intermediary. As broker,Marquez was not an ordinary agent because his authority was of a special and limitedcharacter in most respects. His only job as a broker was to look for a buyer and to bringtogether the parties to the transaction. He was not authorized to sell the properties or tomake a binding contract to respondent EC; hence, petitioners argue, Article 1874 of theNew Civil Code does not apply.

In any event, petitioners aver, what is important and decisive was that Marquez was ableto communicate both the offer and counter-offer and their acceptance of respondentECs counter-offer, resulting in a perfected contract of sale.

Petitioners posit that the testimonial and documentary evidence on record amply showsthat Glanville, who was the President and General Manager of respondent EC, andDelsaux, who was the Managing Director for ESAC Asia, had the necessary authority tosell the subject property or, at least, had been allowed by respondent EC to holdthemselves out in the public as having the power to sell the subject properties.Petitioners identified such evidence, thus:

1. The testimony of Marquez that he was chosen by Glanville as the then President andGeneral Manager of Eternit, to sell the properties of said corporation to any interestedparty, which authority, as hereinabove discussed, need not be in writing.

2. The fact that the NEGOTIATIONS for the sale of the subject properties spannedSEVERAL MONTHS, from 1986 to 1987;

3. The COUNTER-OFFER made by Eternit through GLANVILLE to sell its properties tothe Petitioners;

4. The GOOD FAITH of Petitioners in believing Eternits offer to sell the properties asevidenced by the Petitioners ACCEPTANCE of the counter-offer;

5. The fact that Petitioners DEPOSITED the price of [US]$1,000,000.00 with the SecurityBank and that an ESCROW agreement was drafted over the subject properties;

6. Glanvilles telex to Delsaux inquiring "WHEN WE (Respondents) WILL IMPLEMENTACTION TO BUY AND SELL";

7. More importantly, Exhibits "G" and "H" of the Respondents, which evidenced the factthat Petitioners offer was allegedly REJECTED by both Glanville and Delsaux.18

Petitioners insist that it is incongruous for Glanville and Delsaux to make a counter-offerto petitioners offer and thereafter reject such offer unless they were authorized to do soby respondent EC. Petitioners insist that Delsaux confirmed his authority to sell theproperties in his letter to Marquez, to wit:

Dear Sir,

Re: Land of Eternit Corporation

I would like to confirm officially that our Group has decided not to proceed with the saleof the land which was proposed to you.

The Committee for Asia of our Group met recently (meeting every six months) andexamined the position as far as the Philippines are (sic) concerned. Considering the newpolitical situation since the departure of MR. MARCOS and a certain stabilization in thePhilippines, the Committee has decided not to stop our operations in Manila[.] [I]n factproduction started again last week, and (sic) to reorganize the participation in theCorporation.

We regret that we could not make a deal with you this time, but in case the policy wouldchange at a later stage we would consult you again.

In the meantime, I remain

Yours sincerely,

C.F. DELSAUX19

Petitioners further emphasize that they acted in good faith when Glanville and Delsauxwere knowingly permitted by respondent EC to sell the properties within the scope of anapparent authority. Petitioners insist that respondents held themselves to the public as

possessing power to sell the subject properties.

By way of comment, respondents aver that the issues raised by the petitioners arefactual, hence, are proscribed by Rule 45 of the Rules of Court. On the merits of thepetition, respondents EC (now EMC) and ESAC reiterate their submissions in the CA.They maintain that Glanville, Delsaux and Marquez had no authority from thestockholders of respondent EC and its Board of Directors to offer the properties for saleto the petitioners, or to any other person or entity for that matter. They assert that thedecision and resolution of the CA are in accord with law and the evidence on record, andshould be affirmed in toto.

Petitioners aver in their subsequent pleadings that respondent EC, through Glanville andDelsaux, conformed to the written authority of Marquez to sell the properties. The

authority of Glanville and Delsaux to bind respondent EC is evidenced by the fact that


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Glanville and Delsaux negotiated for the sale of 90% of stocks of respondent EC toRuperto Tan on June 1, 1997. Given the significance of their positions and their duties inrespondent EC at the time of the transaction, and the fact that respondent ESAC owns90% of the shares of stock of respondent EC, a formal resolution of the Board ofDirectors would be a mere ceremonial formality. What is important, petitioners maintain,is that Marquez was able to communicate the offer of respondent EC and the petitionersacceptance thereof. There was no time that they acted without the knowledge ofrespondents. In fact, respondent EC never repudiated the acts of Glanville, Marquez andDelsaux.

The petition has no merit.

Anent the first issue, we agree with the contention of responde

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