agency assigned cases 33-36

7/27/2019 Agency Assigned Cases 33-36

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There were 2 other civil cases filed in the same lower court against the same defendants Duñgo andGonzales. The plaintiff in one was a certain Dionisio Lopena, and in the other case, the complainantswere Bernardo Lopena and Maria de la Cruz. All3 cases arose out of one transaction. In view of theidentical 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 AnastacioDuñgo alone.

Before the cases could be tried, a compromise agreement was submitted to the lower court forapproval. It was signed by Lopena and Ramos on one hand, and Gonzales, on the other. It was notsigned by Dungo. However, Gonzales represented that his signature was for both himself and theDugno. Moreover, Duñgo's counsel of record, Atty. Chan, the same lawyer who signed and submittedfor him the answer to the complaint, was present at the preparation of the compromise agreement andthis counsel affixed his signature thereto. This compromise agreement was approved by the lower courton the same day it was submitted.

Subsequently a so-called Tri-Party Agreement 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 abovemotion 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, togetherwith the plaintiffs of the other two cases won as the highes t 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 motionfor 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 agreementwas void ab initio with respect to him because he did not sign the same. Consequently, he argued, allsubsequent proceedings under and by virtue of the compromise agreement, including the foreclosuresale, 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 orderdenying his motion to set aside. The approval of the record on appeal however, was opposed by therespondent spouses who claimed that the judgment was not appealable having been rendered by virtueof the compromise agreement. The opposition was contained in a motion to dismiss the appeal. Thelower court dismissed the appeal

ISSUES/HELD

Was the compromise agreement, the Order of the same date approving the same, and, all theproceedings 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 againsthim because he did not sign the same. Furthermore, as it was void, all the proceedings subsequent to itsexecution, including the Order approving it, were similarly void and could not result to anything adverse

to his interest.

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. 1878 of the Civil Code, a third person cannot bind another to a compromiseagreement unless he, the third person, has obtained a special power of attorney for that purpose fromthe party intended to be bound.

Although the Civil Code expressly requires a special power of attorney in order that one maycompromise an interest of another, it is neither accurate nor correct to conclude that its absencerenders the compromise agreement void. In such a case, the compromise is merely unenforceable. Itmust be governed by the rules and the law on contracts.

ART. 1403. The following contracts are unenforceable, unless they are ratified: Those entered into inthe name of another person by one who has been given no authority or legal representation, or who hasacted beyond his powers;

WON Duñgo had ratified the compromise agreement. YES

The ratification of the compromise agreement was conclusively established by the Tri-PartyAgreement. It is to benoted that the compromise agreement was submitted to and approved by thelower court. Now, the Tri-Party Agreement referred itself to that order.

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 heardto contest its validity

This Court has not overlooked the fact that which indeed Duñgo was not a signatory to thecompromise 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 compromiseagreement extended the date of maturity to June 30, 1960.More than anything the compromiseagreement operated to benefit of Dungo because it afforded him more time and opportunity to fulfill hismonetary obligations under the contract. If only for this reason, this Court believes that the hereinpetitioner should not be heard to repudiate the said agreement.

The compromise agreement stated "that, should the defendants fail to pay the said mortgageindebtedness, judgment of foreclosure shall thereafter be entered against the said defendants:" Beyond



doubt, this was ratified by the Tri-Party Agreement when it covenanted that - If the MAYOR defaults orfails to pay anyone of the installments in the manner stated above, the MAYOR and the DEBTOR herebypermit the CREDITOR to execute the order of sale referred to above (the Judgment of Foreclosure), andthey (PAYOR and DEBTOR) hereby waive any and all objections or oppositions to the propriety of thepublic 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 beenforced against him because it has been novated by the Tri-Party Agreement which brought in a thirdparty, Santos, who assumed the mortgaged obligation of Dungo.

Novation by presumption has never been favored. To be sustained, it need be established that the oldand new contracts are incompatible in all points, or that the will to novate appears by expressagreement 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 oneor 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 theoriginal contract is extended to a third person; it is necessary that the old debtor be released from theobligation, and the third person or new debtor take his place in the new relation. Without such release,there is no novation; the third person who has assumed the obligation of the debtor merely becomes aco-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-PartyAgreement.

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 implythe extinguishment of the liability of the first debtor). The mere fact that the creditor receives aguaranty or accepts payments from a third person who has agreed to assume the obligation, when thereis no agreement that the first debtor shall be released from responsibility, do not 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.



also directed the parties to send their representatives to the place of the survey on the date thereof andto 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 allthe 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 copyof the Compromise Agreement to Mr. Antonio Diokno, President of the corporation, requesting thelatter to intercede with the Board of Directors for the confirmation or approval of the commitmentmade by the plaintiff's lawyers to abide by the decision of the Court based on the reports of theCommissioners

However, the cor poration’s president answered t hrough a letter stating that they do not agree withthe valuation set be the court.

But, TC rendered a judgment

the plaintiff pursuant to the compromise agreement, is hereby ordered to pay the defendants theamount of P15.00 per square meter for the subject properties, and upon full payment, the restrainingorder 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 thedecision of the court dated March 13, 1970 is null and void because it was based on the CompromiseAgreement of January 30, 1969 which was itself null and void for want of a special authority by theplaintiff'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 torenounce the right to appeal from a judgment.



Attorneys have authority to bind their clients in any case by any agreement in relation thereto made inwriting, and in taking appeals, and in all matters of ordinary judicial procedure, but they cannot, withoutspecial 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 petitionersand by the lawyers for private respondent corporation. It is not disputed that the lawyers of respondentcorporation had not submitted to the Court any written authority from their client to enter into acompromise.

This Court has said that the Rules "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 courthas every reason to expect that, if not in writing, the same be duly established by evidence other thanthe self-serving assertion of counsel himself that such authority was verbally given him."

2. The law specifically requires that "juridical persons may compromise only in the form and with therequisites which may be necessary to alienate their property."

Under the corporation law the power to compromise or settle claims in favor of or against thecorporation 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 thebest interests of the corporation.

This power may however be delegated either expressly or impliedly to other corporate officials oragents. 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 suchpower isgiven to him either expressly or by reasonable implication from the circumstances.

It is therefore necessary to ascertain whether from the relevant facts it could be reasonably concludedthat the Board of Directors of the HI Cement Corporation had authorized its lawyers to enter into thesaid compromise agreement.

3. 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 anyother act of the board of directors of HI Cement Corporation has been cited, from which We couldreasonably infer that the administrative manager had been granted expressly or impliedly the power tobind the corporation or the authority to compromise the case. Absent such authority to enter into thecompromise, the signature of Atty. Cardenas on the agreement would be legally ineffectual.



4. Equally inapposite is petitioners' invocation of the principle of estoppel. In the case at bar, exceptthose made by Attys. Ventura, Cardenas and Magpantay, petitioners have not demonstrated any act ordeclaration of the corporation amounting to false representation or concealment of material factscalculated to mislead said petitioners. The acts or conduct for which the corporation may be liable underthe 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.

INSULAR DRUG CO. v. NATIONAL BANK

58 PHIL 684

Quick Facts:

Former salesman had anomalous transactions, committed suicide. The argument that Foerster hadimplied authority to indorse all checks made out in the name of the Insular Drug Co., Inc., has even lessforce. Not only did the bank permit Foerster to indorse checks and then place them to his personalaccount, 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. Asalesman with authority to collect money belonging to his principal does not have the implied authorityto indorse checks received in payment. Any person taking checks made payable to a corporation, whichcan act only by agent does so at his peril, and must same by the consequences if the agent who indorsesthe same is without authority.

Facts:

Foerster acted as a collector for the company. He was instructed to take the checks which came to hishands for the drug company to the Iloilo branch of the Chartered Bank of India, Australia and China anddeposit the amounts to the credit of the drug company.

Instead, Foerster deposited checks, including those of Juan Llorente, Dolores Salcedo, EstanislaoSalcedo, and a fourth party, with the Iloilo branch of the PNB. The checks were in that bank placed in thepersonal 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 subsequentlywithdrawn by U. E.Foerster and Carmen E. de Foerster.

Eventually the Manila office of the drug company investigated the transactions of Foerster. Upon thediscovery of anomalies, Foerster committed suicide.



Argument of Insular Drug: it never received the face value of the132 checks in question covering a totalof P18,285.92The drug company sued PNB for the amount covered by the checks which was improperlyand 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 lightlyinferred. A salesman with authority to collect money belonging to his principal does not have theimplied authority to indorse checks received in payment. Any person taking checks made payable to acorporation, 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 wifeand 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 moneybelonged to the Insular Drug Co. Inc., and not to Foerster of his wife or his clerk. When the bankcredited those checks to the personal account of Foerster and permitted Foerster and his wife to makewithdrawals 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 relieveitself from responsibility by pleading and proving that after the money was withdrawn from the bank itpassed to the drug company which thus suffered no loss, but the bank has not done so. Thus, the bankwill have to stand the loss occasioned by the negligence of its agents.

agency assigned cases 33-36

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