AGENCY SEPT. 26, 2015 1

G.R. No. 159489 February 4, 2008FILIPINAS LIFE ASSURANCE COMPANY (now AYALA LIFE ASSURANCE, INC.),petitioner,vs.CLEMENTE N. PEDROSO, TERESITA O. PEDROSO and JENNIFER N. PALACIO thru her Attorney-in-Fact PONCIANO C. MARQUEZ,respondents.DECISIONQUISUMBING,J.:This petition for review on certiorari seeks the reversal of the Decision1and Resolution,2dated November 29, 2002 and August 5, 2003, respectively, of the Court of Appeals in CA-G.R. CV No. 33568. The appellate court had affirmed the Decision3dated October 10, 1989 of the Regional Trial Court (RTC) of Manila, Branch 3, finding petitioner as defendant and the co-defendants below jointly and severally liable to the plaintiffs, now herein respondents.The antecedent facts are as follows:Respondent Teresita O. Pedroso is a policyholder of a 20-year endowment life insurance issued by petitioner Filipinas Life Assurance Company (Filipinas Life). Pedroso claims Renato Valle was her insurance agent since 1972 and Valle collected her monthly premiums. In the first week of January 1977, Valle told her that the Filipinas Life Escolta Office was holding a promotional investment program for policyholders. It was offering 8% prepaid interest a month for certain amounts deposited on a monthly basis. Enticed, she initially invested and issued a post-dated check dated January 7, 1977 forP10,000.4In return, Valle issued Pedroso his personal check forP800 for the 8%5prepaid interest and a Filipinas Life "Agents Receipt" No. 807838.6Subsequently, she called the Escolta office and talked to Francisco Alcantara, the administrative assistant, who referred her to the branch manager, Angel Apetrior. Pedroso inquired about the promotional investment and Apetrior confirmed that there was such a promotion. She was even told she could "push through with the check" she issued. From the records, the check, with the endorsement of Alcantara at the back, was deposited in the account of Filipinas Life with the Commercial Bank and Trust Company (CBTC), Escolta Branch.Relying on the representations made by the petitioners duly authorized representatives Apetrior and Alcantara, as well as having known agent Valle for quite some time, Pedroso waited for the maturity of her initial investment. A month after, her investment ofP10,000 was returned to her after she made a written request for its refund. The formal written request, dated February 3, 1977, was written on an inter-office memorandum form of Filipinas Life prepared by Alcantara.7To collect the amount, Pedroso personally went to the Escolta branch where Alcantara gave her theP10,000 in cash. After a second investment, she made 7 to 8 more investments in varying amounts, totalingP37,000 but at a lower rate of 5%8prepaid interest a month. Upon maturity of Pedrosos subsequent investments, Valle would take back from Pedroso the corresponding yellow-colored agents receipt he issued to the latter.Pedroso told respondent Jennifer N. Palacio, also a Filipinas Life insurance policyholder, about the investment plan. Palacio made a total investment ofP49,5509but at only 5% prepaid interest. However, when Pedroso tried to withdraw her investment, Valle did not want to return someP17,000 worth of it. Palacio also tried to withdraw hers, but Filipinas Life, despite demands, refused to return her money. With the assistance of their lawyer, they went to Filipinas Life Escolta Office to collect their respective investments, and to inquire why they had not seen Valle for quite some time. But their attempts were futile. Hence, respondents filed an action for the recovery of a sum of money.After trial, the RTC, Branch 3, Manila, held Filipinas Life and its co-defendants Valle, Apetrior and Alcantara jointly and solidarily liable to the respondents.On appeal, the Court of Appeals affirmed the trial courts ruling and subsequently denied the motion for reconsideration.Petitioner now comes before us raising a single issue:WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR AND GRAVELY ABUSED ITS DISCRETION IN AFFIRMING THE DECISION OF THE LOWER COURT HOLDING FLAC [FILIPINAS LIFE] TO BE JOINTLY AND SEVERALLY LIABLE WITH ITS CO-DEFENDANTS ON THE CLAIM OF RESPONDENTSINSTEAD OF HOLDING ITS AGENT, RENATO VALLE, SOLELY LIABLE TO THE RESPONDENTS.10Simply put, did the Court of Appeals err in holding petitioner and its co-defendants jointly and severally liable to the herein respondents?Filipinas Life does not dispute that Valle was its agent, but claims that it was only a life insurance company and was not engaged in the business of collecting investment money. It contends that the investment scheme offered to respondents by Valle, Apetrior and Alcantara was outside the scope of their authority as agents of Filipinas Life such that, it cannot be held liable to the respondents.11On the other hand, respondents contend that Filipinas Life authorized Valle to solicit investments from them. In fact, Filipinas Lifes official documents and facilities were used in consummating the transactions. These transactions, according to respondents, were confirmed by its officers Apetrior and Alcantara. Respondents assert they exercised all the diligence required of them in ascertaining the authority of petitioners agents; and it is Filipinas Life that failed in its duty to ensure that its agents act within the scope of their authority.Considering the issue raised in the light of the submissions of the parties, we find that the petition lacks merit. The Court of Appeals committed no reversible error nor abused gravely its discretion in rendering the assailed decision and resolution.It appears indisputable that respondents Pedroso and Palacio had investedP47,000 andP49,550, respectively. These were received by Valle and remitted to Filipinas Life, using Filipinas Lifes official receipts, whose authenticity were not disputed. Valles authority to solicit and receive investments was also established by the parties. When respondents sought confirmation, Alcantara, holding a supervisory position, and Apetrior, the branch manager, confirmed that Valle had authority. While it is true that a person dealing with an agent is put upon inquiry and must discover at his own peril the agents authority, in this case, respondents did exercise due diligence in removing all doubts and in confirming the validity of the representations made by Valle.Filipinas Life, as the principal, is liable for obligations contracted by its agent Valle. By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter.12The general rule is that the principal is responsible for the acts of its agent done within the scope of its authority, and should bear the damage caused to third persons.13When the agent exceeds his authority, the agent becomes personally liable for the damage.14But even when the agent exceeds his authority, the principal is still solidarily liable together with the agent if the principal allowed the agent to act as though the agent had full powers.15In other words, the acts of an agent beyond the scope of his authority do not bind the principal, unless the principal ratifies them, expressly or impliedly.16Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf by another without authority.17Filipinas Life cannot profess ignorance of Valles acts. Even if Valles representations were beyond his authority as a debit/insurance agent, Filipinas Life thru Alcantara and Apetrior expressly and knowingly ratified Valles acts. It cannot even be denied that Filipinas Life benefited from the investments deposited by Valle in the account of Filipinas Life. In our considered view, Filipinas Life had clothed Valle with apparent authority; hence, it is now estopped to deny said authority. Innocent third persons should not be prejudiced if the principal failed to adopt the needed measures to prevent misrepresentation, much more so if the principal ratified his agents acts beyond the latters authority. The act of the agent is considered that of the principal itself.Qui per alium facit per seipsum facere videtur. "He who does a thing by an agent is considered as doing it himself."18WHEREFORE, the petition isDENIEDfor lack of merit. The Decision and Resolution, dated November 29, 2002 and August 5, 2003, respectively, of the Court of Appeals in CA-G.R. CV No. 33568 areAFFIRMED.Costs against the petitioner.SO ORDERED.

G.R. No. 79688 February 1, 1996PLEASANTVILLE DEVELOPMENT CORPORATION,petitioner,vs.COURT OF APPEALS, WILSON KEE, C.T. TORRES ENTERPRISES, INC. and ELDRED JARDINICO,respondents.D E C I S I O NPANGANIBAN,J.:Is a lot buyer who constructs improvements on the wrong property erroneously delivered by the owner's agent, a builder in good faith? This is the main issue resolved in this petition for review oncertiorarito reverse the Decision1of the Court of Appeals2in CA-G.R. No. 11040, promulgated on August 20, 1987.By resolution dated November 13, 1995, the First Division of this Court resolved to transfer this case (along with several others) to the Third Division. After due deliberation and consultation, the Court assigned the writing of this Decision to the undersignedponente.The FactsThe facts, as found by respondent Court, are as follows:Edith Robillo purchased from petitioner a parcel of land designated as Lot 9, Phase II and located at Taculing Road, Pleasantville Subdivision, Bacolod City. In 1975, respondent Eldred Jardinico bought the rights to the lot from Robillo. At that time, Lot 9 was vacant.Upon completing all payments, Jardinico secured from the Register of Deeds of Bacolod City on December 19, 1978 Transfer Certificate of Title No. 106367 in his name. It was then that he discovered that improvements had been introduced on Lot 9 by respondent Wilson Kee, who had taken possession thereof.It appears that on March 26, 1974, Kee bought on installment Lot 8 of the same subdivision from C.T. Torres Enterprises, Inc. (CTTEI), the exclusive real estate agent of petitioner. Under the Contract to Sell on Installment, Kee could possess the lot even before the completion of all installment payments. On January 20, 1975, Kee paid CTTEI the relocation fee of P50.00 and another P50.00 on January 27, 1975, for the preparation of the lot plan. These amounts were paid prior to Kee's taking actual possession of Lot 8. After the preparation of the lot plan and a copy thereof given to Kee, CTTEI through its employee, Zenaida Octaviano, accompanied Kee's wife, Donabelle Kee, to inspect Lot 8. Unfortunately, the parcel of land pointed by Octaviano was Lot 9. Thereafter, Kee proceeded to construct his residence, a store, an auto repair shop and other improvements on the lot.After discovering that Lot 9 was occupied by Kee, Jardinico confronted him. The parties tried to reach an amicable settlement, but failed.On January 30, 1981, Jardinico's lawyer wrote Kee, demanding that the latter remove all improvements and vacate Lot 9. When Kee refused to vacate Lot 9, Jardinico filed with the Municipal Trial Court in Cities, Branch 3, Bacolod City (MTCC), a complaint for ejectment with damages against Kee.Kee, in turn, filed a third-party complaint against petitioner and CTTEI.The MTCC held that the erroneous delivery of Lot 9 to Kee was attributable to CTTEI. It further ruled that petitioner and CTTEI could not successfully invoke as a defense the failure of Kee to give notice of his intention to begin construction required under paragraph 22 of the Contract to Sell on Installment and his having built a sari-sari store without the prior approval of petitioner required under paragraph 26 of said contract, saying that the purpose of these requirements was merely to regulate the type of improvements to be constructed on the Lot.3However, the MTCC found that petitioner had already rescinded its contract with Kee over Lot 8 for the latter's failure to pay the installments due, and that Kee had not contested the rescission. The rescission was effected in 1979, before the complaint was instituted. The MTCC concluded that Kee no longer had any right over the lot subject of the contract between him and petitioner. Consequently, Kee must pay reasonable rentals for the use of Lot 9, and, furthermore, he cannot claim reimbursement for the improvements he introduced on said lot.The MTCC thus disposed:IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered as follows:1. Defendant Wilson Kee is ordered to vacate the premises of Lot 9, covered by TCT No. 106367 and to remove all structures and improvements he introduced thereon;2. Defendant Wilson Kee is ordered to pay to the plaintiff rentals at the rate of P15.00 a day computed from the time this suit was filed on March 12, 1981 until he actually vacates the premises. This amount shall bear interests (sic) at the rate of 12 per cent (sic) per annum.3. Third-Party Defendant C.T. Torres Enterprises, Inc. and Pleasantville Subdivision are ordered to pay the plaintiff jointly and severally the sum of P3,000.00 as attorney's fees and P700.00 as cost and litigation expenses.4On appeal, the Regional Trial Court, Branch 48, Bacolod City (RTC) ruled that petitioner and CTTEI were not at fault or were not negligent, there being no preponderant evidence to show that they directly participated in the delivery of Lot 9 to Kee5. It found Kee a builder in bad faith. It further ruled that even assumingarguendothat Kee was acting in good faith, he was, nonetheless, guilty of unlawfully usurping the possessory right of Jardinico over Lot 9 from the time he was served with notice to vacate said lot, and thus was liable for rental.The RTC thus disposed:WHEREFORE, the decision appealed from is affirmed with respect to the order against the defendant to vacate the premises of Lot No. 9 covered by Transfer Certificate of Title No. T-106367 of the land records of Bacolod City; the removal of all structures and improvements introduced thereon at his expense and the payment to plaintiff (sic) the sum of Fifteen (P15.00) Pesos a day as reasonable rental to be computed from January 30, 1981, the date of the demand, and not from the date of the filing of the complaint, until he had vacated (sic) the premises, with interest thereon at 12% per annum. This Court further renders judgment against the defendant to pay the plaintiff the sum of Three Thousand (P3,000.00) Pesos as attorney's fees, plus costs of litigation.The third-party complaint against Third-Party Defendants Pleasantville Development Corporation and C.T. Torres Enterprises, Inc. is dismissed. The order against Third-Party Defendants to pay attorney's fees to plaintiff and costs of litigation is reversed.6Following the denial of his motion for reconsideration on October 20, 1986, Kee appealed directly to the Supreme Court, which referred the matter to the Court of Appeals.The appellate court ruled that Kee was a builder in good faith, as he was unaware of the "mix-up" when he began construction of the improvements on Lot 8. It further ruled that the erroneous delivery was due to the negligence of CTTEI, and that such wrong delivery was likewise imputable to its principal, petitioner herein. The appellate court also ruled that the award of rentals was without basis.Thus, the Court of Appeals disposed:WHEREFORE, the petition is GRANTED, the appealed decision is REVERSED, and judgment is rendered as follows:1. Wilson Kee is declared a builder in good faith with respect to the improvements he introduced on Lot 9, and is entitled to the rights granted him under Articles 448, 546 and 548 of the New Civil Code.2. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville Development Corporation are solidarily liable under the following circumstances:A. If Eldred Jardinico decides to appropriate the improvements and, thereafter, remove these structures, the third-party defendants shall answer for all demolition expenses and the value of the improvements thus destroyed or rendered useless;b. If Jardinico prefers that Kee buy the land, the third-party defendants shall answer for the amount representing the value of Lot 9 that Kee should pay to Jardinico.3. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville Development Corporation are ordered to payin solidumthe amount of P3,000.00 to Jardinico as attorney's fees, as well as litigation expenses.4. The award of rentals to Jardinico is dispensed with.Furthermore, the case is REMANDED to the court of origin for the determination of the actual value of the improvements and the property (Lot 9), as well as for further proceedings in conformity with Article 448 of the New Civil Code.7Petitioner then filed the instant petition against Kee, Jardinico and CTTEI.The IssuesThe petition submitted the following grounds to justify a review of the respondent Court's Decision, as follows:1. The Court of Appeals has decided the case in a way probably not in accord with law or the the (sic) applicable decisions of the Supreme Court on third-party complaints, by ordering third-party defendants to pay the demolition expenses and/or price of the land;2. The Court of Appeals has so far departed from the accepted course of judicial proceedings, by granting to private respondent-Kee the rights of a builder in good faith in excess of what the law provides, thus enriching private respondent Kee at the expense of the petitioner;3. In the light of the subsequent events or circumstances which changed the rights of the parties, it becomes imperative to set aside or at least modify the judgment of the Court of Appeals to harmonize with justice and the facts;4. Private respondent-Kee in accordance with the findings of facts of the lower court is clearly a builder in bad faith, having violated several provisions of the contract to sell on installments;5. The decision of the Court of Appeals, holding the principal, Pleasantville Development Corporation (liable) for the acts made by the agent in excess of its authority is clearly in violation of the provision of the law;6. The award of attorney's fees is clearly without basis and is equivalent to putting a premium in (sic) court litigation.From these grounds, the issues could be re-stated as follows:(1) Was Kee a builder in good faith?(2) What is the liability, if any, of petitioner and its agent, C.T. Torres Enterprises, Inc.? and(3) Is the award of attorney's fees proper?The First Issue:Good FaithPetitioner contends that the Court of Appeals erred in reversing the RTC's ruling that Kee was a builder in bad faith.Petitioner fails to persuade this Court to abandon the findings and conclusions of the Court of Appeals that Kee was a builder in good faith. We agree with the following observation of the Court of Appeals:The roots of the controversy can be traced directly to the errors committed by CTTEI, when it pointed the wrong property to Wilson Kee and his wife. It is highly improbable that a purchaser of a lot would knowingly and willingly build his residence on a lot owned by another, deliberately exposing himself and his family to the risk of being ejected from the land and losing all improvements thereon, not to mention the social humiliation that would follow.Under the circumstances, Kee had acted in the manner of a prudent man in ascertaining the identity of his property. Lot 8 is covered by Transfer Certificate of Title No. T-69561, while Lot 9 is identified in Transfer Certificate of Title No. T-106367. Hence, under the Torrens system of land registration, Kee is presumed to have knowledge of the metes and bounds of the property with which he is dealing. . . .xxx xxx xxxBut as Kee is a layman not versed in the technical description of his property, he had to find a way to ascertain that what was described in TCT No. 69561 matched Lot 8. Thus, he went to the subdivision developer's agent and applied and paid for the relocation of the lot, as well as for the production of a lot plan by CTTEI's geodetic engineer. Upon Kee's receipt of the map, his wife went to the subdivision site accompanied by CTTEI's employee, Octaviano, who authoritatively declared that the land she was pointing to was indeed Lot 8. Having full faith and confidence in the reputation of CTTEI, and because of the company's positive identification of the property, Kee saw no reason to suspect that there had been a misdelivery. The steps Kee had taken to protect his interests were reasonable. There was no need for him to have actedex-abundantia cautela, such as being present during the geodetic engineer's relocation survey or hiring an independent geodetic engineer to countercheck for errors, for the final delivery of subdivision lots to their owners is part of the regular course of everyday business of CTTEI. Because of CTTEI's blunder, what Kee had hoped to forestall did in fact transpire. Kee's efforts all went to naught.8Good faith consists in the belief of the builder that the land he is building on is his and his ignorance of any defect or flaw in his title9. And as good faith is presumed, petitioner has the burden of proving bad faith on the part of Kee10.At the time he built improvements on Lot 8, Kee believed that said lot was what he bought from petitioner. He was not aware that the lot delivered to him was not Lot 8. Thus, Kee's good faith. Petitioner failed to prove otherwise.To demonstrate Kee's bad faith, petitioner points to Kee's violation of paragraphs 22 and 26 of the Contract of Sale on Installment.We disagree. Such violations have no bearing whatsoever on whether Kee was a builder in good faith, that is, on his state of mind at the time he built the improvements on Lot 9. These alleged violations may give rise to petitioner's cause of action against Kee under the said contract (contractual breach), but may not be bases to negate the presumption that Kee was a builder in good faith.Petitioner also points out that, as found by the trial court, the Contract of Sale on Installment covering Lot 8 between it and Kee was rescinded long before the present action was instituted. This has no relevance on the liability of petitioner, as such fact does not negate the negligence of its agent in pointing out the wrong lot. to Kee. Such circumstance is relevant only as it gives Jardinico a cause of action for unlawful detainer against Kee.Petitioner next contends that Kee cannot "claim that another lot was erroneously pointed out to him" because the latter agreed to the following provision in the Contract of Sale on installment, to wit:13. The Vendee hereby declares that prior to the execution of his contract he/she has personally examined or inspected the property made subject-matter hereof, as to its location, contours, as well as the natural condition of the lots and from the date hereof whatever consequential change therein made due to erosion, the said Vendee shall bear the expenses of the necessary fillings, when the same is so desired by him/her.11The subject matter of this provision of the contract is the change of the location, contour and condition of the lot due to erosion. It merely provides that the vendee, having examined the property prior to the execution of the contract, agrees to shoulder the expenses resulting from such change.We do not agree with the interpretation of petitioner that Kee contracted away his right to recover damages resulting from petitioner's negligence. Such waiver would be contrary to public policy and cannot be allowed. "Rights may be waived, unless the waiver is contrary to law, public order, public policy, morals, or good customs, or prejudicial to a third person with a right recognized by law."12The Second Issue:Petitioner's LiabilityKee filed a third-party complaint against petitioner and CTTEI, which was dismissed by the RTC after ruling that there was no evidence from which fault or negligence on the part of petitioner and CTTEI can be inferred. The Court of Appeals disagreed and found CTTEI negligent for the erroneous delivery of the lot by Octaviano, its employee.Petitioner does not dispute the fact that CTTEI was its agent. But it contends that the erroneous delivery of Lot 9 to Kee was an act which was clearly outside the scope of its authority, and consequently, CTTEI I alone should be liable. It asserts that "while [CTTEI] was authorized to sell the lot belonging to the herein petitioner, it was never authorized to deliver the wrong lot to Kee"13.Petitioner's contention is without merit.The rule is that the principal is responsible for the acts of the agent, done within the scope of his authority, and should bear the damage caused to third persons14. On the other hand, the agent who exceeds his authority is personally liable for the damage15CTTEI was acting within its authority as the sole real estate representative of petitioner when it made the delivery to Kee. In acting within its scope of authority, it was, however, negligent. It is this negligence that is the basis of petitioner's liability, as principal of CTTEI, per Articles 1909 and 1910 of the Civil Code.Pending resolution of the case before the Court of Appeals, Jardinico and Kee on July 24, 1987 entered into a deed of sale, wherein the former sold Lot 9 to Kee. Jardinico and Kee did not inform the Court of Appeals of such deal.The deed of sale contained the following provision:1. That Civil Case No. 3815 entitled "Jardinico vs. Kee" which is now pending appeal with the Court of Appeals, regardless of the outcome of the decision shall be mutually disregarded and shall not be pursued by the parties herein and shall be considered dismissed and without effect whatso-ever;16Kee asserts though that the "terms and conditions in said deed of sale are strictly for the parties thereto" and that "(t)here is no waiver made by either of the parties in said deed of whatever favorable judgment or award the honorable respondent Court of Appeals may make in their favor against herein petitioner Pleasantville Development Corporation and/or private respondent C.T. Torres Enterprises; Inc."17Obviously, the deed of sale can have no effect on the liability of petitioner. As we have earlier stated, petitioner's liability is grounded on the negligence of its agent. On the other hand, what the deed of sale regulates are the reciprocal rights of Kee and Jardinico; it stressed that they had reached an agreement independent of the outcome of the case.Petitioner further assails the following holding of the Court of Appeals:2. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville Development Corporation are solidarily liable under the following circumstances:a. If Eldred Jardinico decides to appropriate the improvements and, thereafter, remove these structures, the third-party defendants shall answer for all demolition expenses and the value of the improvements thus destroyed or rendered useless;b. If Jardinico prefers that Kee buy the land, the third-party defendants shall answer for the amount representing the value of Lot 9 that Kee should pay to Jardinico.18

Petitioner contends that if the above holding would be carried out, Kee would be unjustly enriched at its expense. In other words, Kee would be able to own the lot, as buyer, without having to pay anything on it, because the aforequoted portion of respondent Court's Decision would require petitioner and CTTEI jointly and solidarily to "answer" or reimburse Kee therefor.We agree with petitioner.Petitioner' s liability lies in the negligence of its agent CTTEI. For such negligence, the petitioner should be held liable for damages. Now, the extent and/or amount of damages to be awarded is a factual issue which should be determined after evidence is adduced. However, there is no showing that such evidence was actually presented in the trial court; hence no damages could flow be awarded.The rights of Kee and Jardinicovis-a-viseach other, as builder in good faith and owner in good faith, respectively, are regulated by law (i.e.,Arts. 448, 546 and 548 of the Civil Code). It was error for the Court of Appeals to make a "slight modification" in the application of such law, on the ground of "equity". At any rate, as it stands now, Kee and Jardinico have amicably settled through their deed of sale their rights and obligations with regards to Lot 9. Thus, we delete items 2 (a) and (b) of the dispositive portion of the Court of Appeals' Decision [as reproduced above] holding petitioner and CTTEI solidarily liable.The Third Issue:Attorney's FeesThe MTCC awarded Jardinico attorney's fees and costs in the amount of P3,000.00 and P700.00, respectively, as prayed for in his complaint. The RTC deleted the award, consistent with its ruling that petitioner was without fault or negligence. The Court of Appeals, however, reinstated the award of attorney's fees after ruling that petitioner was liable for its agent's negligence.

The award of attorney's fees lies within the discretion of the court and depends upon the circumstances of each case19. We shall not interfere with the discretion of the Court of Appeals. Jardinico was compelled to litigate for the protection of his interests and for the recovery of damages sustained as a result of the negligence of petitioner's agent20.In sum, we rule that Kee is a builder in good faith. The disposition of the Court of Appeals that Kee "is entitled to the rights granted him under Articles 448, 546 and 548 of the New Civil Code" is deleted, in view of the deed of sale entered into by Kee and Jardinico, which deed now governs the rights of Jardinico and Kee as to each other. There is also no further need, as ruled by the appellate Court, to remand the case to the court of origin "for determination of the actual value of the improvements and the property (Lot 9), as well as for further proceedings in conformity with Article 448 of the New Civil Code."WHEREFORE , the petition is partially GRANTED. The Decision of the Court of Appeals is hereby MODIFIED as follows:(1) Wilson Kee is declared a builder in good faith;(2) Petitioner Pleasantville Development Corporation and respondent C.T. Torres Enterprises, Inc. are declared solidarily liable for damages due to negligence; however, since the amount and/or extent of such damages was not proven during the trial, the same cannot now be quantified and awarded;(3) Petitioner Pleasantville Development Corporation and respondent C.T. Torres Enterprises, Inc. are ordered to payin solidumthe amount of P3,000.00 to Jardinico as attorney's fees, as well as litigation expenses; and(4) The award of rentals to Jardinico is dispensed with.SO ORDERED.

THIRD DIVISION

[G.R. No. 82978. November 22, 1990.]

THE MANILA REMNANT CO., INC.,Petitioner, v. THE HONORABLE COURT OF APPEALS and OSCAR VENTANILLA, JR. and CARMEN GLORIA DIAZ,Respondents.

Bede S. Talingcos, forPetitioners.

Augusto Gatmaytan forPrivate Respondent.

SYLLABUS

1. CIVIL LAW; AGENCY; FAILURE OF THE PRINCIPAL TO CORRECT AN IRREGULARITY DESPITE KOWLEDGE THEREOF, DEEMED A RATIFICATION OF THE ACT OF THE AGENT. In the case at bar, the Valencia realty firm had clearly overstepped the bounds of its authority as agent and for that matter, even the law when it undertook the double sale of the disputed lots. Such being the case, the principal, Manila Remnant, would have been in the clear pursuant to Article 1897 of the Civil Code which states that" (t)he agent who acts as such is not personally liable to that party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers." However, the unique relationship existing between the principal and the agent at the time of the dual sale must be underscored. Bear in mind that the president then of both firms was Artemio U. Valencia, the individual directly responsible for the sale scam. Hence, despite the fact that the double sale was beyond the power of the agent, Manila Remnant as principal was chargeable with the knowledge or constructive notice of that fact and not having done anything to correct such an irregularity was deemed to have ratified the same. (See Art. 1910, Civil Code.)

2. ID.; ID.; PRINCIPLE OF ESTOPPEL; REASON AND EFFECT THEREOF; CASE AT BAR. More in point, we find that by the principle of estoppel, Manila Remnant is deemed to have allowed its agent to act as though it had plenary powers. Article 1911 of the Civil Code provides: "Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers." The above-quoted article is new. It is intended to protect the rights of innocent persons. In such a situation, both the principal and the agent may be considered as joint feasors whose liability is joint and solidary (Verzosa v. Lim, 45 Phil. 416). Authority by estoppel has arisen in the instant case because by its negligence, the principal, Manila Remnant, has permitted its agent, A.U. Valencia and Co., to exercise powers not granted to it. That the principal might not have had actual knowledge of the agents misdeed is of no moment.

D E C I S I O N

FERNAN,J.:

Like any other couple, Oscar Ventanilla and his wife Carmen, both faculty members of the University of the Philippines and renting a faculty unit, dreamed of someday owning a house and lot. Instead of attaining this dream, they became innocent victims of deceit and found themselves in the midst of an ensuing squabble between a subdivision owner and its real estate agent.

The facts as found by the trial court and adopted by the Appellate Court are as follows:

Petitioner Manila Remnant Co., Inc. is the owner of the parcels of land situated in Quezon City covered by Transfer Certificates of Title Nos. 26400, 26401, 30783 and 31986 and constituting the subdivision known as Capital Homes Subdivision Nos. I and II. On July 25, 1972, Manila Remnant and A.U. Valencia & Co. Inc. entered into a written agreement entitled "Confirmation of Land Development and Sales Contract" to formalize an earlier verbal agreement whereby for a consideration of 17 and 1/2% fee, including sales commission and management fee, A.U. Valencia and Co., Inc. was to develop the aforesaid subdivision with authority to manage the sales thereof, execute contracts to sell to lot buyers and issue official receipts. 1

At that time the President of both A.U. Valencia and Co. Inc. and Manila Remnant Co., Inc. was Artemio U. Valencia.cralawnad

On March 3, 1970, Manila Remnant thru A.U. Valencia and Co. executed two "contracts to sell" covering Lots 1 and 2 of Block 17 in favor of Oscar C. Ventanilla and Carmen Gloria Diaz for the combined contract price of P66,571.00 payable monthly for ten years. 2 As thus agreed in the contracts to sell, the Ventanillas paid the down payments on the two lots even before the formal contract was signed on March 3, 1970.

Ten (10) days after the signing of the contracts with the Ventanillas or on March 13, 1970, Artemio U. Valencia, as President of Manila Remnant, and without the knowledge of the Ventanilla couple, sold Lots 1 and 2 of Block 17 again, this time in favor of Carlos Crisostomo, one of his sales agents without any consideration. 3 Artemio Valencia then transmitted the fictitious Crisostomo contracts to Manila Remnant while he kept in his files the contracts to sell in favor of the Ventanillas. All the amounts paid by the Ventanillas were deposited in Valencias bank account.

Beginning March 13, 1970, upon orders of Artemio Valencia, the monthly payments of the Ventanillas were remitted to Manila Remnant as payments of Crisostomo for which the former issued receipts in favor of Crisostomo. Since Valencia kept the receipts in his files and never transmitted the same to Crisostomo, the latter and the Ventanillas remained ignorant of Valencias scheme. Thus, the Ventanillas continued paying their monthly installments.

Subsequently, the harmonious business relationship between Artemio Valencia and Manila Remnant ended. On May 30, 1973, Manila Remnant, through its General Manager Karl Landahl, wrote Artemio Valencia informing him that Manila Remnant was terminating its existing collection agreement with his firm on account of the considerable amount of discrepancies and irregularities discovered in its collections and remittances by virtue of confirmations received from lot buyers. 4 As a consequence, on June 6, 1973, Artemio Valencia was removed as President by the Board of Directors of Manila Remnant. Therefore, from May of 1973, Valencia stopped transmitting Ventanillas monthly installments which at that time had already amounted to P17,925.40 for Lot 1 and P18,141.95 for Lot 2, (which appeared in Manila Remnants record as credited in the name of Crisostomo). 5

On June 8, 1973, A.U. Valencia and Co. sued Manila Remnant before Branch 19 of the then Court of First Instance of Manila 6 to impugn the abrogation of their agency agreement. On June 10 and July 10, 1973, said court ordered all lot buyers to deposit their monthly amortizations with the court. 7 But on July 17, 1973, A.U. Valencia and Co. wrote the Ventanillas that it was still authorized by the court to collect the monthly amortizations and requested them to continue remitting their amortizations with the assurance that said payments would be deposited later in court. 8 On May 22, 1974, the trial court issued an order prohibiting A.U. Valencia and Co. from collecting the monthly installments. 9 On July 22, 1974 and February 6, 1976 the same court ordered the Valencia firm to furnish the court with a complete list of all lot buyers who had already made down payments to Manila Remnant before December 1972. 10 Valencia complied with the courts order on August 6, 1974 by submitting a list which excluded the name of the Ventanillas. 11

Since A.U. Valencia and Co. failed to forward its collections after May 1973, Manila Remnant caused on August 20, 1976 the publication in the Times Journal of a notice cancelling the contracts to sell of some lot buyers including that of Carlos Crisostomo in whose name the payments of the Ventanillas had been credited. 12

To prevent the effective cancellation of their contracts, Artemio Valencia instigated on September 22, 1976 the filing by Carlos Crisostomo and seventeen (17) other lot vendees of a complaint for specific performance with damages against Manila Remnant before the Court of First Instance of Quezon City. The complaint alleged that Crisostomo had already paid a total of P17,922.40 and P18,136.85 on Lots 1 and 2, respectively. 13

It was not until March 1978 when the Ventanillas, after learning of the termination of the agency agreement between Manila Remnant and A.U. Valencia & Co., decided to stop paying their amortizations to the latter. The Ventanillas, believing that they had already remitted P37,007.00 for Lot 1 and P36,911.00 for Lot 2 or a grand total, inclusive of interest, of P73,122.35 for the two lots, thereby leaving a balance of P13,531.58 for Lot 1 and P13,540.22 for Lot 2, went directly to Manila Remnant and offered to pay the entire outstanding balance of the purchase price. 14 To their shock and utter consternation, they discovered from Gloria Caballes, an accountant of Manila Remnant, that their names did not appear in the records of A.U. Valencia and Co. as lot buyers. Caballes showed the Ventanillas copies of the contracts to sell in favor of Carlos Crisostomo, duly signed by Artemio U. Valencia as President of Manila Remnant. 15 Whereupon, Manila Remnant refused the offer of the Ventanillas to pay for the remainder of the contract price because they did not have the personality to do so. Furthermore, they were shown the published Notice of Cancellation in the January 29, 1978 issue of the Times Journal rescinding the contracts of delinquent buyers including Crisostomo.

Thus, on November 21, 1978, the Ventanillas commenced an action for specific performance, annulment of deeds and damages against Manila Remnant, A.U. Valencia and Co. and Carlos Crisostomo before the Court of First Instance of Quezon City, Branch 17-B. 16 Crisostomo was declared in default for failure to file an answer. On November 17, 1980, the trial court rendered a decision 1) declaring the contracts to sell issued in favor of the Ventanillas valid and subsisting and annulling the contracts to sell in Crisostomos favor; 2) ordering Manila Remnant to execute in favor of the Ventanillas an Absolute Deed of Sale free from all liens and encumbrances; and 3) condemning defendants A.U. Valencia and Co. Inc., Manila Remnant and Carlos Crisostomo jointly and severally to pay the Ventanillas the amount of P100,000.00 as moral damages, P100,000.00 as exemplary damages, and P100,000.00 as attorneys fees. The lower court also added that if, for any legal reason, the transfer of the lots could no longer be effected, the defendants should reimburse jointly and severally to the Ventanillas the total amount of P73,122.35 representing the total amount paid for the two lots plus legal interest thereon from March 1970 plus damages as aforestated. With regard to the cross claim of Manila Remnant against Valencia, the court found that Manila Remnant could have not been dragged into this suit without the fraudulent manipulations of Valencia. Hence, it adjudged A.U. Valencia and Co. to pay the Manila Remnant P5,000.00 as moral damages and exemplary damages and P5,000.00 as attorneys fees. 17

Subsequently, Manila Remnant and A.U. Valencia and Co. elevated the lower courts decision to the Court of Appeals through separate appeals. On October 13, 1987, the Appellate Court affirmed in toto the decision of the lower court. Reconsideration sought by petitioner Manila Remnant was denied, hence the instant petition.

There is no question that the contracts to sell in favor of the Ventanilla spouses are valid and subsisting. The only issue remaining is whether or not petitioner Manila Remnant should be held solidarily liable together with A.U. Valencia and Co. and Carlos Crisostomo for the payment of moral, exemplary damages and attorneys fees in favor of the Ventanillas. 18

While petitioner Manila Remnant has not refuted the legality of the award of damages per se, it believes that it cannot be made jointly and severally liable with its agent A.U. Valencia and Co. since it was not aware of the illegal acts perpetrated nor did it consent or ratify said acts of its agent.

The argument is devoid of merit.

In the case at bar, the Valencia realty firm had clearly overstepped the bounds of its authority as agent and for that matter, even the law when it undertook the double sale of the disputed lots. Such being the case, the principal, Manila Remnant, would have been in the clear pursuant to Article 1897 of the Civil Code which states that" (t)he agent who acts as such is not personally liable to that party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers." However, the unique relationship existing between the principal and the agent at the time of the dual sale must be underscored. Bear in mind that the president then of both firms was Artemio U. Valencia, the individual directly responsible for the sale scam. Hence, despite the fact that the double sale was beyond the power of the agent, Manila Remnant as principal was chargeable with the knowledge or constructive notice of that fact and not having done anything to correct such an irregularity was deemed to have ratified the same. 19

More in point, we find that by the principle of estoppel, Manila Remnant is deemed to have allowed its agent to act as though it had plenary powers. Article 1911 of the Civil Code provides:

"Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers." (Emphasis supplied)

The above-quoted article is new. It is intended to protect the rights of innocent persons. In such a situation, both the principal and the agent may be considered as joint feasors whose liability is joint and solidary. 20

Authority by estoppel has arisen in the instant case because by its negligence, the principal, Manila Remnant, has permitted its agent, A.U. Valencia and Co., to exercise powers not granted to it. That the principal might not have had actual knowledge of the agents misdeed is of no moment. Consider the following circumstances:

Firstly, Manila Remnant literally gave carte blanche to its agent A.U. Valencia and Co. in the sale and disposition of the subdivision lots. As a disclosed principal in the contracts to sell in favor of the Ventanilla couple, there was no doubt that they were in fact contracting with the principal. Section 7 of the Ventanillas contracts to sell states

"7. That all payments whether deposits, down payment and monthly installment agreed to be made by the vendee shall be payable to A.U. Valencia and Co., Inc. It is hereby expressly understood that unauthorized payments made to real estate brokers or agents shall be the sole and exclusive responsibility and at the risk of the vendee and any and all such payments shall not be recognized by the vendors unless the official receipts therefor shall have been duly signed by the vendors duly authorized agent, A.U. Valencia and Co., Inc." (Emphasis supplied)

Indeed, once Manila Remnant had been furnished with the usual copies of the contracts to sell, its only participation then was to accept the collections and pay the commissions to the agent. The latter had complete control of the business arrangement. 21

Secondly, it is evident from the records that Manila Remnant was less than prudent in the conduct of its business as a subdivision owner. For instance, Manila Remnant failed to take immediate steps to avert any damage that might be incurred by the lot buyers as a result of its unilateral abrogation of the agency contract. The publication of the cancelled contracts to sell in the Times Journal came three years after Manila Remnant had revoked its agreement with A.U. Valencia and Co. Moreover, Manila Remnant also failed to check the records of its agent immediately after the revocation of the agency contract despite the fact that such revocation was due to reported anomalies in Valencias collections. Altogether, as pointed out by the counsel for the Ventanillas, Manila Remnant could and should have devised a system whereby it could monitor and require a regular accounting from A.U. Valencia and Co., its agent. Not having done so, Manila Remnant has made itself liable to those who have relied on its agent and the representation that such agent was clothed with sufficient powers to act on behalf of the principal.

Even assuming that Manila Remnant was as much a victim as the other innocent lot buyers, it cannot be gainsaid that it was precisely its negligence and laxity in the day to day operations of the real estate business which made it possible for the agent to deceive unsuspecting vendees like the Ventanillas.

In essence, therefore, the basis for Manila Remnants solidary liability is estoppel which, in turn, is rooted in the principals neglectfulness in failing to properly supervise and control the affairs of its agent and to adopt the needed measures to prevent further misrepresentation. As a consequence, Manila Remnant is considered estopped from pleading the truth that it had no direct hand in the deception employed by its agent. 22

A final word. The Court cannot help but be alarmed over the reported practice of supposedly reputable real estate brokers of manipulating prices by allowing their own agents to "buy" lots in their names in the hope of reselling the same at a higher price to the prejudice of bona fide lot buyers, as precisely what the agent had intended to happen in the present case. This is a serious matter that must be looked into by the appropriate government housing authority.

WHEREFORE, in view of the foregoing, the appealed decision of the Court of Appeals dated October 13, 1987 sustaining the decision of the Quezon City trial court dated November 17, 1980 is AFFIRMED. This judgment is immediately executory. Costs against petitioner.

SO ORDERED.