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support to our view that the bank was not satisfied with the
authority to mortgage alone.
PNB v. STA. MARIA
29 SCRA 303
QUICK FACTS: [6 brothers and sisters executed PA in favor of
Maximo Sta. Maria; power to mortgage does not include power to
loan]
Disinclination of courts to enlarge an authority granted beyond the
powers expressly given and those incidentally flowing therefrom as
being usual or reasonably necessary and proper for the
performance of such express powers. The authority granted by
defendants-appellants (except Valeriana) unto their brother,
Maximo, was merely to mortgage the property jointly owned by
them, not to contract for any loans in their names and behalf.
Maximo alone, with Valeriana who authorized him to borrow
money, must answer for them; other defendants-appellants' only
liability is that the real estate authorized by them to be mortgaged
would be subject to foreclosure and sale to respond for the
obligations contracted by Maximo. But they cannot be held
personally liable.
4.
The outcome might be different if there had been an express
ratification of the loans by defendants-appellants or if it had
been shown that they had been benefited by the crop loans so
as to put them in estoppel.
5.
Valeriana's liability for the loans secured by Maximo is not
joint and several or solidary as adjudged by the trial court, but
only joint, pursuant to the provisions of Article 1207 of the
Civil Code that "the concurrence ... of two or more debtors in
one and the same obligation does not imply that ... each one of
the (debtors) is bound to render entire compliance with the
prestation.
Facts:

The said sugar crop loans were obtained by defendant Maximo
Sta. Maria from plaintiff bank under a special power of
attorney, executed in his favor by his six brothers and sisters,
defendants-appellants herein, to mortgage a 16-odd hectare
parcel of land, jointly owned by all of them

In addition, Valeriana Sta. Maria alone also executed in favor of
her brother, Maximo, a special power of attorney to borrow
money and mortgage any real estate owned by her

Maximo Sta. Maria applied for two separate crop loans, for the
1952-1953 and 1953-1954 crop years, with plaintiff bank, one
in the amount of P15,000.00, of which only the sum of
P13,216.11 was actually extended by plaintiff, and the other in
the amount of P23,000.00, of which only the sum of
P12,427.57 was actually extended by plaintiff.

As security for the two loans, Maximo Sta. Maria executed in
his own name in favor of plaintiff bank two chattel mortgages
on the standing crops, guaranteed by surety bonds for the full
authorized amounts of the loans executed by the Associated
Insurance & Surety Co., Inc. as surety with Maximo Sta. Maria
as principal.
Facts:

That on Dec. 29, 1921, for value, the defendant Gabriela
Andrea de Coster y Roxas, having the consent and permission
of her husband, and he acting as her agent, said defendants
made to the plaintiff a certain promissory note for P292,000,
payable one year after date, with interest of 9 per cent per
annum, payable monthly.

that to secure the payment thereof, the defendants Jean M.
Poizat and J. M. Poizat and Co. executed a chattel mortgage to
the plaintiff on the steamers Roger Poizat and Gabrielle Poizat,
with the machinery and materials belonging to the Poizat
Vegetable Oil Mills and certain merchandise; that at the same
time and for the same purpose, the defendant Gabriela Andrea
de Coster y Roxas, having the consent and permission of her
husband, and he acting as her agent, they acknowledged and
delivered to this plaintiff a mortgage on certain real property
lying and being situated in the City of Manila.

that the real property was subject to a prior mortgage in favor
of La Orden de Dominicos or PP. Predicadores de la Provincia
del Santisimo Rosario, hence it is made a party defendant

That the promissory not in question is long past due and
owing, thus the plaintiff brought action against the defendants.

the court rendered judgment against the defendants Gabriela
Andrea de Coster y Roxas, Jean M. Poizat and J. M. Poizat and
Co. jointly and severally for P292,000, with interest at the rate
of 9 per cent per annum from the 31st of August, 1923,
P10,000 as attorney's fees, and P2,500 for and in account of
insurance upon the steamer Gabrielle Poizat, with interest on
that amount from February 9, 1924, at the rate of 9 per cent
per annum, and costs;

Wherefore, plaintiff prays for an order of the court to direct
the sheriff of the City of Manila to take immediate possession
of the property described in the chattel mortgage and sell the
same according to the Chattel Mortgage Law; that the property
described in the real mortgage or so much thereof as may be
required to pay the amount due the plaintiff be sold according
to law; that out of such sales plaintiff shall be paid the amount
due and owing it; and that such defendants be adjudged to pay
any remaining deficiency.

May 3, 1924, on motion by the plaintiff, for failure to appear or
answer, the defendants Gabriela Andrea de Coster y Roxas and
Jean M. Poizat and J.M. Poizat & Co. were declared in default.

The court rendered decision in favor of the plaintiffs

On Aug. 26, 1924, Gabriela Andrea de Coster y Roxas, claimed
that she had been residing in Paris, France from 1908 until
April 30, 1924 and that sheonly found out about the case from
the newspapers.

She claims that she was never given any summons by the
sheriff and that her husband exceeded his authority under the
powers given to him under his power of attorney.

She prayed that the judgement be annulled and set aside and
the case be reopend and that she be permitted to file an
answer, and that the case be tried on its merits, and that a final
judgement be rendered, absolving her from all liability.
Held: a special power of attorney to mortgage real estate is limited
to such authority to mortgage and does not bind the grantor
personally to other obligations contracted by the grantee, in the
absence of any ratification or other similar act that would estop the
grantor from questioning or disowning such other obligations
contracted by the grantee.
Ratio:
1. Plaintiff bank has not made out a cause of action against
defendants-appellants (except Valeriana), so as to hold them
liable for the unpaid balances of the loans obtained by Maximo
under the chattel mortgages executed by him in his own name
alone.

This is but in accord with the disinclination of courts to
enlarge an authority granted beyond the powers
expressly given and those which incidentally flow or
derive therefrom as being usual or reasonably necessary
and proper for the performance of such express powers.
2. The authority granted by defendants-appellants (except
Valeriana) unto their brother, Maximo, was merely to
mortgage the property jointly owned by them. They did not
grant Maximo any authority to contract for any loans in their
names and behalf. Maximo alone, with Valeriana who
authorized him to borrow money, must answer for said loans
and the other defendants-appellants' only liability is that the
real estate authorized by them to be mortgaged would be
subject to foreclosure and sale to respond for the obligations
contracted by Maximo. But they cannot be held personally
liable for the payment of such obligations, as erroneously held
by the trial court.
3.
The fact that Maximo presented to the plaintiff bank
Valeriana's additional special power of attorney expressly
authorizing him to borrow money, Exh. E-1, aside from the
authority to mortgage executed by Valeriana together with the
other defendants-appellants also in Maximo's favor, lends
BPI v. DE COSTER
47 PHIL 594
ISSUES:
1. WON proper summons were made
2. WON Jean M. Poizat, husband of the defendant exceeded his
authority as an agent of his wife
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3.
WON the case should be remanded
HELD/RATIO:
1. No, In the ordinary course of business the wife is absent from
the residence of husband on a pleasure trip or for business
reasons or to visit friends or relatives that, in the nature of
such things, the residence of the wife would continue and
remain to be that of the husband. That is not this case. For
sixteen years the residence of the husband was in the City of
Manila, and the residence of the wife was in the City of Paris.
2.









3.
Yes, The following the specific powers of attorney that the wife
gave her husband
Paragraph 5 of the power of attorney authorizes the husband
for in the name of his wife to "loan or borrow any sums of
money or fungible things, etc." This should be construed to
mean that the husband had power only to loan his wife's
money and to borrow money for or on account of his wife as
her agent and attorney in fact. That does not carry with it or
imply that he had the legal right to make his wife liable as a
surety for the preexisting debt of a third person.
Paragraph 6 authorizes him to "enter into any kind of
contracts whether civil or mercantile, giving due form thereof
either by private documents or public deeds, etc."
Paragraph 7 authorizes him to "draw, endorse, accept, issue
and negotiate any drafts, bills of exchange, letters of credit,
letters of payment, bills, vales, promissory notes, etc."
The foregoing are the clauses in the power of attorney upon
which the bank relies for the authority of the husband to
execute promissory notes for and on behalf of his wife and as
her agent.
It will be noted that there is no provision in either of them
which authorizes or empowers him to sign anything or to do
anything which would make his wife liable as a surety for a
pre-existing debt.
It is fundamental rule of construction that where in an
instrument powers and duties are specified and defined,
that all of such powers and duties are limited and confined
to those which are specified and defined, and that all other
powers and duties are excluded.
It is very apparent from the face of the instrument that the
whole purpose and intent of the power of attorney was to
empower and authorize the husband to look after and protect
the interests of the wife and for her and in her name to
transact any and all of her business. But nowhere does it
provide or authorize him to make her liable as a surety for the
payment of the pre-existing debt of a third person.
Hence, it follows that the husband was not authorized or
empowered to sign the note in question for and on behalf of
the wife as her act and deed, and that as to her the note is void
for want of power of her husband to execute it.
The same thing is true as to the real mortgage to the bank.
It was given to secure the note in question and was not
given for any other purpose. The real property described
in the mortgage to the bank was and is the property of the
wife. The note being void as to her, it follows that as to her
the real mortgage to the bank is also void for want of
power to execute it.
Yes, the case is remanded to the lower court, with leave for the
wife to file an answer to plaintiff's cause of action, and to have
the case tried on its merits and for any further proceedings not
inconsistent with this opinion.
HODGES v. SALAS
63 PHIL 567
FACTS:

On September 2, 1923, the defendants executed a power of
attorney in favor of their brother-in-law Felix S. Yulo to enable
him to obtain a loan and secure it with a mortgage on the real
property described in transfer certificate of title No. 3335. The
power of attorney was registered in the registry of deeds of
the Province of Occidental Negros and the pertinent clauses
thereof read as follows:

Acting under said power of attorney, Felix S. Yulo obtained a
loan of P28,000 from the plaintiff, binding his principals jointly
and severally, to pay it within ten (10) years, together with

interest thereon at 12 per cent per annum payable annually in
advance, to which effect he signed a promissory note for said
amount and executed a deed of mortgage of the real property
described in transfer certificate of title No. 3335 and the
improvements thereon consisting in concrete buildings. It was
stated in the deed that in case the defendants failed to pay the
stipulated interest and the taxes on the real property
mortgaged and if the plaintiff were compelled to bring an
action to recover his credit, said defendants would be obliged
to pay 10 per cent more on the unpaid capital, as fees for the
plaintiff's attorneys. The mortgage so constituted was
registered in the registry of deeds of the Province of Occidental
Negros and noted on the back of the transfer certificate of title.
The defendants failed to pay at maturity the interest stipulated
which should have been paid one year in advance. All the sums
paid by them on account of accrued interest up to March 27,
1934, on which the complaint was filed.
ISSUES/HELD:
FIRST ISSUE: WON THE CASE IS ONLY A PERSONAL ACTION
(BECAUSE ONLY ORAL EVIDENCE WAS OFFERED)- NO

Section 284 of the Code of Civil Procedure requires the
contents of a writing to be proven by the writing itself, except
in cases therein specified. Section 313, No. 6, provides that
official or public documents must be proven by presenting the
original or a copy certified by the legal keeper thereof.

According to this, the plaintiff was obliged to present the
original or a certified copy of the mortgage deed showing the
registration thereof, as well as the owner's transfer certificate
of title. Both would have been the best evidence to prove the
registration of the mortgage and the notation thereof on the
back of the title.

Had the defendants objected to the oral evidence offered, there
is no doubt that it would have been rejected as incompetent.
But it is universally accepted that when secondary or
incompetent evidence is presented and accepted without any
objection on the part of the other party, the latter is bound
thereby and the court is obliged to grant it, the probatory
value it deserves.
SECOND ISSUE: WON THE LOAN AND MORTGAGE WERE USURIOUS
AND ILLEGAL- NO

We have examined Exhibits 8 to 17 of the defendants, which
are the evidence offered to establish the fact that compound
interest had been charged, and we have, without any difficulty,
arrived at the conclusion that the plaintiff has really charged
said unauthorized and unstipulated interest.

If there is any doubt on this fact, it is dispelled by Exhibit 10, in
the handwriting of the plaintiff himself, wherein it appears
that the sum of P33.60 was charged by him on account of
interest on unpaid interest.

But the fact of charging illegal interest that may be charged,
does not make the loan or the mortgage usurious because the
transactions took place subsequent to the execution of said
contracts and the latter do not appear to be void ab initio Said
interest should be applied first to the payment of the
stipulated and unpaid interest and, later, to that of the capital.

Section 5 of Act No. 2655, as amended by section 3 of Act No.
3291, expressly permit a creditor to charge in advance interest
corresponding to not more than one year, whatever the
duration of the loan. What is prohibited is the charging in
advance of interest for more than one year. Section 6
reiterates said rule in exempting a creditor found guilty of
usury from the obligation to return the interest and
commissions collected by him in advance, provided said
interest and commissions are not for a period of more than
one year and the rate of interest does not exceed the maximum
limit fixed by law.
THIRD ISSUE: WON THE ACTION FOR THE USURY IS BARRED BY
STATUTE OF LIMITATIONS- YES, BUT HE FAILED TO ALLEGE IT

It is true that according to the evidence more than two years
have already elapsed from the time the defendants paid and
the plaintiff received the usurious interest to the registration
of the cross-complaint, but the plaintiff cannot successfully
invoke the defense of prescription because he failed to allege it
in his reply to the cross-complaint.
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
In order that prescription may constitute a valid defense and it
may be considered on appeal, it must be specifically pleaded in
the answer and proven with the same degree of certainty with
which an essential allegation in a civil action is established.
Otherwise it will not be taken into consideration, much less if
it is alleged for the first time on appeal.

FOURTH ISSUE: WON ATTORNEY’S FEES SHOULD BE PAID- YES

The plaintiff violated the Usury Law in charging compound
interest notwithstanding the fact that it has not been so
stipulated and that adding these sums to the stipulated
interest the average exceeds the maximum rate of interest that
may be charged for the loan which has been the subject matter
of the transaction. This violation falls under the precept of
section 6 of the Usury Law and the plaintiff is obliged to pay
the fees of the attorney for the defendants.
FIFTH ISSUE (AGENCY RELEVANT): WON DEFENDANTS RATIFIED
ALL THE OBLIGATIONS CONTRACTED BY THEIR ATTY-IN-FACT
AND WHAT IS THE LATTER’S SCOPE OF AUTHORITY-NO; ONLY
LIMITED

The terms of the power of atty are limited; the agent was
thereby authorized only to borrow any amount of money
which he deemed necessary. There is nothing, however, to
indicate that the defendants had likewise authorized him to
convert the money obtained by him to his personal use.

With respect to a power of attorney of special character, it
cannot be interpreted as also authorizing the agent to dispose
of the money as he pleased, particularly when it does not
appear that such was the intention of the principals, and in
applying part of the funds to pay his personal obligations, he
exceeded his authority (art. 1714, Civil Code; Bank of the
Philippine Islands vs. De Coster, 47 Phil., 594 and 49 Phil.,
574).

In the case like the present one, it should be understood that
the agent was obliged to turn over the money to the principals
or, at least, place it at their disposal.

The plaintiff contends that the agent's act of employing part of
the loan to pay his personal debts was ratified by the
defendants in their letter to him dated August 21, 1927
(Exhibit E). This court has carefully read the contents of said
document and has found nothing implying ratification or
approval of the agent's act. In it the defendants confined
themselves to stating that they would notify their agent of the
maturity of the obligation contracted by him. They said
nothing about whether or not their agent was authorized to
use the funds obtained by him in the payment of his personal
obligations.

Of the loan of P28,000, the agent applied the sum of
P10,188.29 to the payment of his personal debt to the plaintiff.
The balance of P17,811.71 constitutes the capital which the
defendants are obliged to pay by virtue of the power conferred
upon their agent and the mortgage deed.
STRONG v. GUTIERREZ RUPIDE
6 PHIL 680
Facts:

Mrs. Strong owned 800 shares of the capital stock of Philippine
Sugar Estates Development Co., Limited, an anonymous society
formed to hold the Dominican friar lands. Repide bought them
through a broker who dealt with Mrs. Strong's agent, Jones,
who was in possession of the script and who had made the sale
without Mrs. Strong's knowledge. Repide was a director, was
the managing agent and was the majority stockholder of the
society.

Plaintiffs brought this case to recover the 800 shares.
Issues:
1. (Relevant) WON her agent had the power to sell or deliver the
stocks. NO
2. WON its sale, through her agent, was procured by fraud on the
part of Repide. NO
Ratio:
1. Based on OCC 1712, an agency stated in general terms only
includes acts of administration. In order to compromise,
alienate, mortgage, or to execute any, other act of strict
ownership an express mandate is required. The express

2.
mandate required by law to enable an appointee of an agency
couched in general terms to sell must be one that expressly
mentions a sale or that includes a sale as a necessary
ingredient of the act mentioned. The right to sell shall be
express. Here, there was no proof of an effective power given
Jones to dispose of this stock.
European civil law and American common law established that
acts of agents, beyond the limitation of their power are null
and that third persons dealt with them at their peril and are
bound to inquire as to the extent of the power of the agent
with whom they contract and that where neither the actual
power not the appearance of it, for which the principal is
responsible, exists, a third party is not protected without such
inquiry. Here, Repide relied unquestioningly upon Jones'
assumption of authority and took the risk.
The case also discussed that in a certain Dalloz' annotation,
after laying down the admitted proposition of the acts of an
agent beyond his limited powers are null, states 3
qualifications whereby the principal is held bound:
1) where his acts have contributed to deceive a third person
in good faith;
2) where the limitations upon the power created by him
could not have been known by a third person, and
3) where he has placed in the hands of the agent an
instrument signed by him in blank.
The defendant violated no duty in not communicating to the
plaintiff his purpose in buying her shares and has been guilty
of no fraud. Managers are not given the duty to the members in
respect to their individual stock, which is fully recognized as a
separate property, whose character and transmission is
provided for in laws peculiar to it.
KATIGBAK v. TAI HUNG CO.
52 PHIL 622
FACTS:

Nov 9, 1921 - Po Tecsi executed a general power of attorney in
favor of his brother Po Ejap, empowering and authorizing him
to perform on his behalf and as his lawful agent the following:
“to buy, sell, or barter, assign or admit in acquittance an
instrument, or in any other manner to acquire or convey all
sorts of property, real and personal, usinesses and industries,
credits, rights, and actions belonging to me, for whatever prices
and under the conditions which he may stipulate, paying and
receiving payment in cash or in installments, and to execute
the proper instruments with the formalities provided by the
law.”

On Dec 15, 1921, Po Tecsi acknowledged in an instrument an
indebtedness to Po Ejap in the amount of P68,000 for the
properties Po Ejap had sold to him.

Mar 31, 1923 – Po Ejap executed a second mortgage on his
own land in favor of Limjenco. This land, which is the subject
of the case, was at that time, mortgaged to PNB to secure the
payment of the sum of P60,000 with 7% interest. He thereafter
sold the land with all its improvements to Po Tecsi.

Nov 22, 1923 – Acting on behalf of Po Tecsi and with the
special power granted to him, he sold the subject land with all
its improvements to Katigbak. The only mortgage mentioned
in the instrument was the one executed with PNB. He sold the
land without recording his power of attorney or the sale in the
title. At the time of the sale, Po Tecsi was in possession of the
land.

Oct 22, 1924 – Po Tecsi leased a part of the land to Uy Chia for
a period of 5 years.

Po Tecsi sent letters complaining of Po Ejap’s pressuring him
to pay the rent and also to call the attention of Po Ejap for
leasing the land without consulting him.

In 1925, the second mortgage was cancelled.

Po Tecsi died, and his son Po Sun Suy sent a liquidation of
accounts over the propert to Po Ejap. Po Sun Suy was
appointed administrator of Po Tecsi’s estate, and he included
the land as one of hid dad’s properties.

In 1927, Po Ejap assigned all his rights and actions in the credit
of P68,000 against Po Tecsi to Po Sun Boo (Po Ejap’s son) who
bought the land from Katigbak. This purchase was made
known by Po Sun Boo to Po Sun Suy to deal with him regarding
the payment of the rent.
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

As there were rent in arrears from the time Po Tecsi was still
alive, an action for recovery of rent was filed in court agains
Tai Hing Co. (which I assume is Po Tecsi’s company?).
Po Sun Suy filed an intervention praying that the court
declare that Katigbak was not the owner of the property
and was not, therefore, entitled to rent.
ISSUE/HELD: Was the land validly acquired by Katigbak? Yes.

Appellant: Po Ejap was not authorized under the power of
attorney to sell the particular land because it was acquired by
Po Tecsi after the execution of the power of attorney.

Court: The power is general and authorizes Po Ejap to sell any
kind of realty belonging to Po Tecsi. This includes not only the
properties that Po Tecsi already owned at the time of the
execution of the power, but also such as he might afterwards
have during the time it was in force.


Appellant: The power was not registered in the registry of
deeds, and the authority granted to sell is therefore ineffective.
Court: While it is true that a power of authority not recorded
in the registry of deeds is ineffective in order that an agent or
attorney-in-fact may validly perform acts in the name of his
principal, and that any act performed by the agent by virtue of
said power with respect to the land is ineffective against a
third person who, in good faith, may have acquired a right
thereto, it does, however, bind the principal to acknowledge
the acts performed by his attorney-in-fact regarding said
property.
o
The record contains many indications that Po Tecsi was
not unaware of the sale. Letters, remittance of rent were
a tacit acknowledgment that he occupied that land in
question no longer as an owner but only as lessee.
Appellants tried to explain that this was in payment of
the P68,000 debt, but nothing in the letter said so.

Po Sun Suy, when Po Tecsi died, also acknowledged that he
was occupying as a lessee when he sent a letter to Po Ejap
explaining why he could not pay rent.

Extra: lease of Uy Chua valid because it was recorded, and it
does not appear that he had any knowledge of the sale.
CHUA v. IAC
229 SCRA 99
o Sometime in 1950, private respondent Herminigilda HERRERA
executed a Contract of Lease in favor of SY TIAN ON, whereby
the former leased to the latter a parcel of land located
somewhere at Cebu City for a term of 10 years, renewable for
another 5 years
o The contract of lease contains a stipulation giving the lessee an
option to buy the leased property and that the lessor guarantees
to leave the possession of said property to the lessee for a period
of 10 years or as long as the lessee faithfully fulfills the terms and
conditions of their contract
o Eventually, the lessee (TIAN ON) erected a residential house on
the leased premises. Within 4 years from the execution of the
said contract of lease, the lessee (TIAN ON), executed a Deed of
Absolute Sale of the building in favor of CHUA BOK, the
predecessor-in-interest of the petitioners herein, whereby the
TIAN sold to CHUA the aforesaid residential house for and in
consideration of the sum of P8,000
o In said Deed of Absolute Sale, TIAN also assigned all his rights
and privileges as a lessee of the lot on which the said building is
constructed together with its corresponding obligations as
contained in the Contract of Lease executed in 1950 between him
and the lot owner, HERRERA, to CHUA
o Moreover, the same Deed of Absolute Sale contained a stipulation
that the sale was made with the knowledge and express consent
of the lot-owner and lessor (HERRERA) who was represented by
her attorney-in-fact (a certain DE REYNES) where she also
honored the annulment of the lease made by TIAN in favor of
CHUA
o Thereafter, CHUA and his family (herein petitioners) resided in
the said residential building and they faithfully and religiously
paid the rentals thereof
o When the Original Contract of Lease expired in 1960, CHUA and
defendant HERRERA, through her alleged attorney-in-fact
executed a new Contract of Lease
o After the expiration of the renewed Contract of Lease, the
petitioners who are the successors-in-interest of CHUA BOK
(who had died) continued possession of the premises up to
April 1978, with adjusted rental rate of P1,000; later readjusted
to P2,000
o But on July 1977, HERRERA through her attorney-in-fact (LUZ
TORMIS, who was authorized with a special power of attorney)
sold the lots in question to private respondents SPOUSES GO.
Vendees (GO) were able to have aforesaid sale registered with
the Register of Deeds of the City of Cebu and the titles of the two
parcels of land were transferred in their names
o Thereafter, herein petitioners (heirs of CHUA BOK) filed the
instant case seeking the annulment of the said sale between
HERRERA and the SPS. GO, alleging that the conveyance was in
violation of the petitioners' right of option to buy the leased
premises as provided in the Contract of Lease and that the SPS.
GO acted in bad faith in purchasing the said lots knowing fully
well that the CHUAs have the option to buy those lots
o After due trial, TC rendered judgment DISMISSING the CHUAS’
complaint and ordered instead that they vacate the premises in
question and remove the improvements thereon. But while TC
recognized the validity of the subject property’s conveyance to
the SPS. GO, it nevertheless awarded moral damages in favor of
the CHUAs and attorney’s fees in favor of the SPS. GO (against
HERRERA)
o Both the CHUAs and HERRERA appealed from the TC decision to
the CA. The appellate court affirmed with modification the TC
decision. The award of moral damages in favor of the CHUAs was
deleted – hence, this petition…
*Note that in this appeal before the SC, the CHUAs already gave up
their demand to annul the sale made between HERRERA and the SPS.
GO. The CHUAs here only raise concern of the order for their
ejectment from the premises in question and the demolition of the
improvements introduced thereon.
ISSUE/HELD: WON the CHUAs are entitled to continue possession
of the disputed property and exercise the option to buy the leased
premises in accordance with the Lease Contract between them and
HERRERA – NO, simply because the Lease Contract is VOID!
RATIO: [only relevant point with respect to AGENCY]
o In support of their right to possess the premises in question, the
CHUAs rely on the Contract of Lease entered into by and
between CHUA BOK and a certain DE REYNES, as attorney-in-fact
of landowner HERRERA
o HOWEVER, the petitioners (CHUAs) lose sight of the fact that said
Contract of Lease is VOID. As the CA correctly ruled, DE REYNES
was not armed with a special power of attorney to enter into a
lease contract for a period of more than one year when the alleged
lease contract with and between CHUA BOK was constituted
o The lease contract in question involves the lease of real
property for a period of more than one year. The contract
was entered into by the agent of the lessor and not the lessor
herself. In such a case, the law requires that the agent be
armed with a special power of attorney to lease the premises
(Art 1878, CC)
ON (IMPLIED) NEW LEASE… [not too relevant]
o It is true that HERRERA allowed the CHUAs to occupy the leased
premises after the expiration of the renewed lease contract and
under Art 1670, CC, a tacit renewal of the lease (tacita
reconduccion) is deemed to have taken place  HOWEVER, a
tacit renewal is limited only to the terms of the contract which
are germane to the lessee's right of continued enjoyment of the
property and does not extend to alien matters, like the option to
buy the leased premises (Art 1670, CC)
OTHER MATTERS RESPECTING THE LAW ON PROPERTY
o The CHUAs also question the jurisdiction of the trial court in
ordering their ejectment from the leased premises and the
removal of the improvements introduced thereon by them 
they claim that the action therein was for the annulment of the
sale of the property and not an appropriate case for an ejectment
o Suffice it to say that the right of possession of the CHUAs of the
leased premises was squarely put in issue by the SPS. GO in their
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counterclaim, where they specifically asked that the CHUAs
should vacate their premises as soon as feasible or as the
Honorable Court may direct  in effect, the counterclaim was an
accion publiciana for the recovery of the possession of the leased
premises!
o Surely, the CFI had jurisdiction over actions which involve the
possession of real property or any interest therein, except
forcible entry and detainer actions. So, there’s no point
questioning their jurisdiction in this case
o It does not matter that the accion publiciana only came in the
form of a counterclaim because the same is considered a
complaint anyway, only that, it is the original defendant who
becomes the plaintiff. It stands on the same footing and is to be
tested by the same rules as if it were an independent action.
Hence, the same rules on jurisdiction in an independent action
apply to a counterclaim
o Finally, the CHUAs claim that the CA erred in eliminating the
award of moral damages given to them by the TC  It must be
borne in mind that the elimination of said award is only a logical
consequence of the finding that the CHUAs had no right of option
to purchase the leased premises that can be enforced against
HERRERA. There being no such ground, the prayer for moral
damages consequently cannot stand





DUNGO v. LOPENA
6 SCRA 1007
FACTS:

Anastacio Dungo and Rodrigo Gonzales purchased 3 parcels of
land from Adriano Lopena and Rosa Ramos for the total price
of P269,804.00. P28.000.00 was given as down payment with
the agreement that the balance of P241,804.00 would be paid
in 6 monthly installments.

To secure the payment of the balance, the Dungo and Gonzales
executed over the same parcels of land Deed of Real Estate
Mortgage in favor of Lopena and Ramos. 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 on their maturity dates shall automatically cause
the entire unpaid balance to become due and demandable.

Dungo and Gonzales defaulted on the 1st installment.

Lopena and Ramos filed a complaint for the foreclosure of the
real estate mortgage with the CFI of Rizal

There were 2 other civil cases filed in the same lower court
against the same defendants Duñgo and Gonzales. The plaintiff
in one was a certain Dionisio Lopena, and in the other case, the
complainants were Bernardo Lopena and Maria de la Cruz. All
3 cases arose out of one transaction. In view of the identical
nature of the cases, they were consolidated by the lower court
into just one proceeding.

This present decision refers solely to the interests and claim of
Adriano Lopena against Anastacio Duñgo alone.

Before the cases could be tried, a compromise agreement1 was
submitted to the lower court for approval. It was signed by
Lopena and Ramos on one hand, and Gonzales, on the other. It
was not signed by Dungo. However, Gonzales represented that
his signature was for both himself and the Dugno. Moreover,
Duñgo's counsel of record, Atty. Chan, the same lawyer who
signed and submitted for him the answer to the complaint, was
present at the preparation of the compromise agreement and
this counsel affixed his signature thereto.This compromise
agreement was approved by the lower court on the same day it
was submitted
ISSUES/HELD
Was the compromise agreement, the Order of the same date
approving the same, and, all the proceedings subsequent
thereto, valid or void insofar as Dungo is concerned? YES

Duñgo - the Compromise Agreement was void ab initio and
could have no effect whatsoever against him because he did
not sign the same. 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
anything adverse to his interest.chanroblesvirtualawlibrary
chanrobles virtual law library

It is true that a compromise is, in itself, a contract.

ART. 2028. A compromise is a contract whereby the parties, by
making reciprocal concessions, avoid a litigation or put an end
to one already commenced.

Moreover, under Art. 18783 of the Civil Code, a third person
cannot bind another to a compromise agreement unless he, the
third person, has obtained a special power of attorney for that
purpose from the party intended to be bound.

Although the Civil Code expressly requires a special power of
attorney in order that one may compromise an interest of
another, it is neither accurate nor correct to conclude that its
absence renders the compromise agreement void. In such a
case, the compromise is merely unenforceable. It must be
governed by the rules and the law on contracts.

ART. 1403. The following contracts are unenforceable, unless
they are ratified:
Those entered into in the name of another person by one
who has been given no authority or legal representation,
or who has acted beyond his powers;
WHEREAS, the PAYOR, hereby submits and binds herself to the
force and effect of the 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, hereby proposes to pay the aforesaid indebtedness in the
sum of P503,000.00 to the CREDITOR for and in behalf of the
DEBTOR.
3 ART. 1878. Special powers of attorney are necessary in the
following cases:
(3) To compromise, to submit questions to arbitration, to renounce
the right to appeal from a judgment, to waive objections to the
venue of an action or to abandon a prescription already acquired;
2
That, the plaintiffs, have agreed to give the defendants up to June
30, 1960 to pay the mortgage indebtedness in each of the said cases;
That, should the defendants fail to pay the said mortgage
indebtedness, judgments of foreclosure shall thereafter be entered
against the said defendants;
That, the defendants hereby waive the period of redemption
provided by law after entry of judgments;
That, in the event of sale of the properties involved in these three
cases, the defendants 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.
1
Subsequently a so-called Tri-Party Agreement2 was drawn.
The signatories to it were Duñgo and Gonzales as debtors,
Lopena and Ramos as creditors, and, one Emma R. Santos as
payor.
When Duñgo and Gonzales failed to pay the balance, Lopena
and Ramos filed a Motion for the Sale of Mortgaged Property.
Although this last motion was filed ex parte, Duñgo and
Gonzales were notified of it by the lower court. Neither of
them filed any opposition thereto. The lower court granted the
above motion and ordered the sale of the mortgaged property.
The 3 parcels of land were sold by the Sheriff at a public
auction where at herein petitioners, together with the
plaintiffs of the other two cases won as the highest bidders.
The said sheriff's sale was later confirmed by the lower court.
Before confirming the sale, the lower court gave due notice of
the motion for the confirmation to the herein petitioner who
filed no opposition therefore.
Duñgo filed a motion to set aside all the proceedings on the
ground that the compromise agreement was 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
the compromise agreement, including the foreclosure sale,
were void and null as regards him. This motion to set aside
was denied by the lower court
Duñgo filed a Notice of Appeal from the order approving the
foreclosure sale, as well as the order denying his motion to set
aside. The approval of the record on appeal however, was
opposed by the respondent spouses who claimed that the
judgment was not appealable having been rendered by virtue
of the compromise agreement. The opposition was contained
in a motion to dismiss the appeal. The lower court dismissed
the appeal
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A&P Compiled Digests No. 2
WON Duñgo had ratified the compromise agreement. YES

The ratification of the compromise agreement was
conclusively established by the Tri-Party Agreement. It is to be
noted that the compromise agreement was submitted to and
approved by the lower court. Now, the Tri-Party Agreement
referred itself to that order4.

Rivero v. Rivero - When it appears that the client, on becoming
aware the compromise and the judgment thereon, fails to
repudiate promptly the action of his attorney, he will not
afterwards be heard to contest its validity

This Court has not overlooked the fact that which indeed
Duñgo was not a signatory to the compromise agreement, the
principal provision of the said instrument was for his benefit.
Originally, Duñgo's obligation matured and became
demandable on October 10, 1959. However, the compromise
agreement extended the date of maturity to June 30, 1960.
More than anything the compromise agreement operated to
benefit of Dungo because it afforded him 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 be heard to repudiate the said
agreement.

The compromise agreement stated "that, should the
defendants fail to pay the said mortgage indebtedness,
judgment of foreclosure shall thereafter be entered against the
said defendants:" Beyond doubt, this was ratified by the TriParty Agreement when it covenanted that - If the MAYOR
defaults or fails to pay anyone of the installments in the
manner stated above, the MAYOR and the DEBTOR hereby
permit the CREDITOR to execute 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 the propriety of the public auction sale and to the
confirmation of the sale to be made by the Court.






Duñgo - even assuming that the compromise agreement was
valid, it nevertheless could not be enforced against him
because it has been novated by the Tri-Party Agreement which
brought in a third party, Santos, who assumed the mortgaged
obligation of Dungo.
Novation by presumption has never been favored. To be
sustained, it need be established that the old and new
contracts are incompatible in all points, or that the will to
novate appears by express agreement of the parties or in acts
of similar import.
An obligation to pay a sum of money is not novated, in a new
instrument wherein the old is ratified, by changing only the
term of payment and adding other obligations not
incompatible with the old one or wherein the old contract is
merely supplemented by the new one
Dungo claims that when a third party, Santos, came in and
assumed the mortgaged obligation, novation resulted thereby
inasmuch as a new debtor 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 is
extended to a third person; it is necessary that the old debtor
be released from the obligation, 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 the
obligation of the debtor merely becomes a co-debtor or surety.
If there is no agreement as to solidarity, the first and the new
debtors are considered obligation jointly. 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 to assume its obligations; while this may have the
effect of adding to the number of persons liable, it does not
necessarily imply the extinguishment of the liability of the first
debtor). The mere fact that the creditor receives a guaranty or
accepts payments from a third person who has agreed to
assume the obligation, when there is no agreement that the
first debtor shall be released from responsibility, do not
WHEREAS, the MAYOR, hereby submits and binds herself to the
force and effect of the 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".
4

constitute a novation, and the creditor can still enforce the
obligation against the original debtor .
The Tri-Party Agreement was an instrument intended to
render effective the compromise agreement. It merely
complemented and ratified the same. That a third person was
involved in it is inconsequential. Nowhere in the new
agreement may the release of Dungo be even inferred.
VICENTE v. GERALDEZ
52 SCRA 210
Quickie:
Hi-cement Corporation acquired Placer Lease Contract (which is
essentially mining claims). Vicente, et. al were claiming some parts
of the mining claims as theirs. So they were suing each other, etc.
and then the Corporation’s lawyers finally agreed to settle with
Vicente, et. al, through a compromise agreement. However, the
Corporation’s VP refused to sign such compromise agreement.
SC ruled that: It having been found by the trial court that "the
counsel for the plaintiff entered into the compromise agreement
without the written authority of his client and the latter did not
ratify, on the contrary it repudiated and disowned the same ...", 12
We therefore declare that the orders of the court a quo subject of
these two petitions, have not been issued in excess of its
jurisdictional authority or in grave abuse of its discretion.
Rationale:
1. Special powers of attorney are necessary to compromise
and to renounce the right to appeal from a judgment.
Attorneys cannot compromise their client’s litigation. It is
not disputed that the lawyers of Hi Cement had not
submitted to the Court any written authority from their
client to enter into a compromise.
2.
Juridical persons may compromise only in the form and
with the requisites which may be necessary to alienate their
property. As a general rule an officer or agent of the
corporation has no power to compromise or settle a claim
by or against the corporation, except to the extent that such
power is given to him either expressly or by reasonable
implication from the circumstances.
3.
To ratify the unauthorized contract of an agent and make it
binding on the corporation, it must be shown that the
governing body or officer authorized to ratify had full and
complete knowledge of all the material facts connected with
the transaction to which it relates. Ratification must be by
the officer or governing body having authority to make such
contract, and must be with full knowledge.
Nature:
There are two original actions of certiorari with prayer for
preliminary injunction wherein petitioners seek to annul the
orders dated April 24, May 18, and July 18, 1970 of respondent
Judge of the Court of First Instance of Bulacan in Civil Case No. SM201 (Hi Cement Corporation vs. Juan Bernabe, Ignacio Vicente and
Moises Angeles).
Facts:

On September 9, 1967 herein private respondent Hi Cement
Corporation filed with the Court of First Instance of Bulacan a
complaint for injunction and damages against herein
petitioners Juan Bernabe, Ignacio Vicente and Moises Angeles.

In said complaint the plaintiff alleged that:
o
Under a deed of sale and transfer, It had acquire the
Placer Lease Contract No. V-90, from the Banahaw Shale
Mining Association. The deed was duly registered with
the Office of the Mining Recorder of Bulacan, and duly
approved by the DENR Secretary.
o
The said Placer Lease Contract No. V-90 was for a period
of twenty-five years commencing from August 1, 1960
and covered two mining claims (Red Star VIII & IX)
with a combined area of about fifty-one hectares
o
However, within the boundaries of the Red Star VIII are 3
parcels of land which are veing claimed by defendants
Juan Bernabe (about two hectares), Ignacio Vicente
(about two hectares) and Moises Angeles (about onefourth hectare)
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A&P Compiled Digests No. 2
The plaintiff had requested the defendants to allow its
workers to enter the area in question for exploration
and development purposes as well as for the
extraction of minerals therefrom, promising to pay
the defendants reasonable amounts as damages, but
the defendants refused to allow entry of the
plaintiff's representatives
o
that the defendants were threatening the plaintiff's
workers with bodily harm if they entered the premises,
for which reason the plaintiff had suffered irreparable
damages due to its failure to work on and develop its
claims and to extract minerals therefrom, resulting in its
inability to comply with its contractual commitments
Trial Court: issued a restraining order and required the defendants
to file an answer
o
Defendants’ (herein petitioners) answer:











They are rightful owners of certain portions of the land
covered by the supposed mining claims of the plaintiff
It was the plaintiff and its workers who had committed acts of
force and violence when they entered into and intruded upon
the defendants' lands; and that the complaint failed to state a
cause of action.
The court then suggested the relocation of the boundaries
of the plaintiff's claims in relation to the properties of the
defendants, and to this end named as Commissioner, a
Surveyor from the Office of the District Engineer of Bulacan to
relocate the boundaries of the plaintiff's mining claims, to
show in a survey plan the location of the areas thereof in
conflict with the portions whose ownership is claimed by the
defendants and to submit his report thereof to the court on or
before October 31, 1967. The court also directed the parties to
send their representatives to the place of the survey on the
date thereof and to furnish the surveyor with copies of their
titles.
The report found that Angeles’ and Vicente’s properties
were totally covered by Corporation’s claim. Bernabe’s
property was only partially covered.
In an Order issued on December 14, 1967, the court approved
the report "with the conformity of all the parties in this case.”
On January 30, 1969 the counsels of the parties executed and
submitted to the court for its approval the following
Compromise Agreement
On the same date, the foregoing Compromise Agreement
was approved by the trial court, which enjoined the
parties to comply with the terms and conditions thereof.
On October 21, 1969, Atty. Francisco Ventura, one of the three
lawyers for plaintiff HI Cement Corporation, filed with the
trial court a manifestation stating that on September 1,
1969 he sent a copy of the Compromise Agreement to Mr.
Antonio Diokno, President of the corporation, requesting
the latter to intercede with the Board of Directors for the
confirmation or approval of the commitment made by the
plaintiff's lawyers to abide by the decision of the Court
based on the reports of the Commissioners
However, the corporation’s president answered through a
letter stating that they do not agree with the valuation set be
the court.
But, TC rendered a judgment  the plaintiff pursuant to
the compromise agreement, is hereby ordered to pay the
defendants the amount of P15.00 per square meter for the
subject properties, and upon full payment, the restraining
order earlier issued by this Court shall be deemed lifted.
On April 22, 1970 the plaintiff filed with the court a motion
for new trial on the ground that the decision of the court
dated March 13, 1970 is null and void because it was based on
the Compromise Agreement of January 30, 1969 which was
itself null and void for want of a special authority by the
plaintiff's lawyers to enter into the said agreement.
ISSUE: Whether the compromise agreement entered into by the
corporation’s lawyer is valid.
Held/Ratio: No.
1.
Special powers of attorney are necessary, among other cases,
in the following: to compromise and to renounce the right to
2.
3.
4.
appeal from a judgment. Attorneys have authority to bind
their clients in any case by any agreement in relation
thereto made in writing, and in taking appeals, and in all
matters of ordinary judicial procedure, but they cannot,
without special authority, compromise their clients'
litigation, or receive anything in discharge of their clients'
claims but the full amount in cash.

The Compromise Agreement dated January 30, 1969 was
signed only by the lawyers for petitioners and by the
lawyers for private respondent corporation. It is not
disputed that the lawyers of respondent corporation had
not submitted to the Court any written authority from
their client to enter into a compromise.

This Court has said that the Rules 3 "require, for attorneys
to compromise the litigation of their clients, a special
authority. And while the same does not state that the
special authority be in writing the court has every reason
to expect that, if not in writing, the same be duly
established by evidence other than the self-serving
assertion of counsel himself that such authority was
verbally given him."
The law specifically requires that "juridical persons may
compromise only in the form and with the requisites which
may be necessary to alienate their property."

Under the corporation law the power to compromise or
settle claims in favor of or against the corporation is
ordinarily and primarily committed to the Board of
Directors. The right of the Directors "to compromise a
disputed claim against the corporation rests upon their
right to manage the affairs of the corporation according
to their honest and informed judgment and discretion as
to what is for the best interests of the corporation." 6 This
power may however be delegated either expressly or
impliedly to other corporate officials or agents. Thus
it has been stated, that as a general rule an officer or
agent of the corporation has no power to
compromise or settle a claim by or against the
corporation, except to the extent that such power is
given to him either expressly or by reasonable
implication from the circumstances. 7 It is therefore
necessary to ascertain whether from the relevant facts it
could be reasonably concluded that the Board of
Directors of the HI Cement Corporation had authorized
its lawyers to enter into the said compromise agreement.
Whatever authority the officers or agents of a corporation may
have is derived from the board of directors, or other governing
body, unless conferred by the charter of the corporation. A
corporation officer's power as an agent of the corporation
must therefore be sought from the statute, the charter, the
by-laws, or in a delegation of authority to such officer,
from the acts of board of directors, formally expressed or
implied from a habit or custom of doing business. In the
case at bar no provision of the charter and by-laws of the
corporation or any resolution or any other act of the board of
directors of HI Cement Corporation has been cited, from which
We could reasonably infer that the administrative manager
had been granted expressly or impliedly the power to bind the
corporation or the authority to compromise the case. Absent
such authority to enter into the compromise, the signature of
Atty. Cardenas on the agreement would be legally ineffectual.
Equally inapposite is petitioners' invocation of the principle of
estoppel. In the case at bar, except those made by Attys.
Ventura, Cardenas and Magpantay, petitioners have not
demonstrated any act or declaration of the corporation
amounting to false representation or concealment of material
facts calculated to mislead said petitioners. The acts or
conduct for which the corporation may be liable under the
doctrine of estoppel must be those of the corporation, its
governing body or authorized officers, and not those of the
purported agent who is himself responsible for the
misrepresentation.
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A&P Compiled Digests No. 2
INSULAR DRUG CO. v. NATIONAL BANK
58 PHIL 684
Quick Facts: Former salesman had anomalous transactions,
committed suicide
The argument that Foerster had implied authority to indorse all
checks made out in the name of the Insular Drug Co., Inc., has even
less force. Not only did the bank permit Foerster to indorse checks
and then place them to his personal account, but it went farther and
permitted Foerster's wife and clerk to indorse the checks. The right
of an agent to indorse commercial paper is a very responsible
power and will not be lightly inferred. A salesman with authority to
collect money belonging to his principal does not have the implied
authority to indorse checks received in payment. Any person taking
checks made payable to a corporation, which can act only by agent
does so at his peril, and must same by the consequences if the agent
who indorses the same is without authority.
Facts:

Foerster acted as a collector for the company. He was
instructed to take the checks which came to his hands for the
drug company to the Iloilo branch of the Chartered Bank of
India, Australia and China and deposit the amounts to the
credit of the drug company.

Instead, Foerster deposited checks, including those of Juan
Llorente, Dolores Salcedo, Estanislao Salcedo, and a fourth
party, with the Iloilo branch of the PNB. The checks were in
that bank placed in the personal account of Foerster.

After the indorsements on the checks was written "Received
payment prior indorsement guaranteed by the Philippine
National Bank, Iloilo Branch, Angel Padilla, Manager."

As a consequence of the indorsements on the checks the
amounts therein stated were subsequently withdrawn by U. E.
Foerster and Carmen E. de Foerster.

Eventually the Manila office of the drug company investigated
the transactions of Foerster. Upon the discovery of anomalies,
Foerster committed suicide.
Argument of Insular Drug: it never received the face value of the
132 checks in question covering a total of P18,285.92
The drug company sued PNB for the amount covered by the checks
which was improperly and illegally cashed by Foerster.
Issue: WON Foerster had implied authority to indorse all checks
made out in the name of the Insular Drug Co., Inc.
Held: NO.

Right of agent to indorse a very responsible power and not
lightly inferred
The right of an agent to indorse commercial paper is a very
responsible power and will not be lightly inferred. A salesman
with authority to collect money belonging to his principal does
not have the implied authority to indorse checks received in
payment. Any person taking checks made payable to a
corporation, which can act only by agents does so at his peril,
and must abide by the consequences if the agent who indorses
the same is without authority. In the present case, PNB not
only permitted Foerster to indorse the checks and place them
in his personal account but also permitted Foerster's wife and
clerk to indorse the checks.

Good faith does not excuse responsibility

Bank made itself responsible for amounts represented by
checks
PNB could tell by the checks brought to PNB Iloilo by Foerster,
his wife and his clerk, that the money belonged to the Insular
Drug Co. Inc., and not to Foerster of his wife or his clerk. When
the bank credited those checks to the personal account of
Foerster and permitted Foerster and his wife to make
withdrawals without there being any authority from the drug
company to do so, the bank made itself responsible to the drug
company for the amounts represented by the checks. The bank
could relieve itself from responsibility by pleading and proving
that after the money was withdrawn from the bank it passed
to the drug company which thus suffered no loss, but the bank
has not done so. Thus, the bank will have to stand the loss
occasioned by the negligence of its agents.
8