URBAN BANK v. MAGDALENO M. PEÑA, GR No.

145817, 2011-10-19
Facts:
Petitioner-respondent Atty. Magdaleno M. Peña (Peña)[7] is a lawyer by profession and
was formerly a stockholder, director and corporate secretary of Isabel Sugar Company,
Inc. (ISCI)
ISCI owned a parcel of land[9] located in Pasay City (the Pasay property).
In 1984, ISCI leased the Pasay property for a period of 10 years.[11] Without its
consent[12] and in violation... of the lease contract,[13] the lessee subleased the land to
several tenants, who in turn put up 23 establishments, mostly beer houses and night clubs,
inside the compound.
a few months before the lease contract was to... expire, ISCI informed the lessee[15] and
his tenants[16] that the lease would no longer be renewed and that it intended to take over
the Pasay property[17] for the purpose of selling it.
Two weeks before the lease over the Pasay property was to expire, ISCI and Urban Bank
executed a Contract to Sell, whereby the latter would pay ISCI the amount of
PhP241,612,000 in installments for the Pasay property.
Both parties agreed that the final... installment of PhP25,000,000 would be released by the
bank upon ISCI's delivery of full and actual possession of the land, free from any tenants.
In the meantime, the amount of the final installment would be held by the bank in escrow.
the BUYER (Urban Bank) shall withhold the amount of PHP 25,000,000.00 by way of
escrow and shall release this amount to the SELLER only upon its... delivery to the BUYER
of the full and actual possession and control of the Subject Property... within a period of
sixty (60) days from the date of payment by the BUYER of the purchase price of the
subject Property
ISCI then instructed Peña, who was its director and corporate secretary, to take over
possession of the Pasay property[22] against the tenants upon the expiration of the lease.
the day the lease contract was to expire, ISCI and Urban Bank executed a Deed of
Absolute Sale[25] over the Pasay property for the amount agreed upon in the Contract to
Sell, but subject to the above escrow provision.
the lessee duly surrendered possession of the Pasay property to ISCI,[28] but the
unauthorized sub-tenants refused to leave the area.
Pursuant to his authority from ISCI, Peña had the gates of the property... closed to keep
the sub-tenants out.[30] He also posted security guards at the property,[31] services for
which he advanced payments.[32] Despite the closure of the gates and the posting of the
guards, the... sub-tenants would come back in the evening, force open the gates, and
proceed to carry on with their businesses.
Marilyn G. Ong, as representative of ISCI, faxed a letter to Urban Bank - addressed to
respondent... requesting the issuance of a formal authority for Peña.
In response to the letters of Ms. Ong, petitioner-respondent bank,... respondents... advised
Peña[38] that the bank had noted the engagement of his services... by ISCI and stressed
that ISCI remained as the lawyer's principal.
To prevent the sub-tenants from further appropriating the Pasay property,[40] petitioner-
respondent Peña, as director and representative of ISCI, filed a complaint for injunction[41]
(the First Injunction Complaint) with the RTC-Pasay
City.[42] Acting on ISCI's prayer for preliminary relief, the trial court favorably issued a
temporary restraining order (TRO),[43] which was duly implemented.
At the time the First Injunction Complaint was... filed, a new title to the Pasay property had
already been issued in the name of Urban Bank.
when "information reached the judge that the Pasay property had already been transferred
by ISCI to Urban Bank, the trial court recalled the TRO and issued a break-open order for
the property.
On the same day that the TRO was recalled, petitioner-respondent Peña immediately
contacted ISCI's president, Mr. Montilla, who in turn confirmed the sale of the Pasay
property to Urban Bank.[47] Peña told Mr. Montilla that because of the break-open order...
of the RTC-Pasay City, he (Peña) would be recalling the security guards he had posted to
secure the property. Mr. Montilla, however, asked him to suspend the planned withdrawal
of the posted guards, so that ISCI could get in touch with petitioner-respondent bank
regarding the... matter.
Later that same day, Peña received a telephone call from respondent Bejasa. After Peña
informed her of the situation, she allegedly told him that Urban Bank would be retaining his
services in guarding the Pasay property, and that he should continue his efforts in
retaining... possession thereof. He insisted, however, on talking to the Bank's president.
Immediately after talking to respondent Bejasa, Peña got in touch with Urban Bank's
president, respondent Borlongan. Peña explained that the policemen in Pasay City were
sympathetic... to the tenants and were threatening to force their way into the premises.
Respondent Borlongan supposedly assured him that the bank was... going to retain his
services, and that the latter should not give up possession of the subject land.
Nevertheless, petitioner-respondent Peña demanded a written letter of authority from the
bank. Respondent Borlongan acceded and instructed him to see respondent Bejasa for
the... letter.
Peña supposedly demanded 10% of the market value of the... property as compensation
and attorney's fees and reimbursement for all the expenses incurred from the time he took
over land until possession was turned over to Urban Bank.
Respondent Borlongan purportedly agreed on condition that possession would be turned
over to the bank,... free of tenants, not later than four months; otherwise, Peña would lose
the 10% compensation and attorney's fees.
Later that afternoon, Peña received the bank's letter... petitioner-respondent Peña, now in
representation of Urban Bank, filed a separate complaint[56] (the Second Injunction
Complaint) with the RTC-Makati City, to enjoin the tenants from entering the Pasay
property.[57] Acting... on Urban Bank's preliminary prayer, the RTC-Makati City issued a
TRO.
Peña made efforts to settle the issue of possession of the Pasay property with the sub-
tenants. During the negotiations, he was exposed to several civil and criminal cases they
filed in connection with the task he had assumed... for Urban Bank, and he received
several threats against his life.[59] The sub-tenants eventually agreed to stay off the
property for a total consideration of PhP1,500,000.[60] Peña advanced the payment for the
full and final settlement... of their claims against Urban Bank.
On 07 February 1995, within the four-month period allegedly agreed upon in the telephone
conversation, Peña formally informed Urban Bank that it could already take possession of
the Pasay property.[64] There was however no mention of the compensation due... and
owed to him for the services he had rendered.
the bank subsequently took actual possession of the property
Peña thereafter made several attempts to contact respondents Borlongan and Bejasa by
telephone, but the bank officers would not take any of his calls.
when Urban Bank refused to pay for his services in connection with the Pasay property,
Peña filed a complaint[67] for recovery of agent's compensation and expenses, damages
and attorney's fees
In response to the complaint of Atty. Peña, Urban Bank and individual bank officers and
directors argued that it was ISCI, the original owners of the Pasay property, that had
engaged the services of Peña in securing the premises; and, consequently, they could not
be held liable... for the expenses Peña had incurred.
RTC... ruled in favor of Peña, after finding that an agency relationship had indeed been
created between him and Urban Bank
Urban Bank and the individual defendant bank directors and officers filed a common
Notice of Appeal... they questioned the factual finding that an agency relationship existed
between the... bank and Peña.
Urban Bank[78] assigned as errors the trial court's reliance on the purported oral contract
of agency and Peña's claims for compensation during the controverted telephone
conversation with Borlongan, which were... allegedly incredible.
the petitioners in the instant Petition... argued that, even on the assumption that there had
been an agency contract with the... bank, the trial court committed reversible error in
holding them - as bank directors - solidarily liable with the corporation.
adding that the claimed compensation of 10% of the... purchase price of the Pasay
property was not reasonable.
Acting favorably on the appeal, the Court of Appeals[85] annulled the Decision of the
RTC... and ruled that no agency relationship had been created.
Issues:
 Whether or not there was an agency agreement between Urban Bank and Peña

the Petition of Peña (G. R. No. 162562) assailing the CA's decision on the substantive
merits of the case with respect to his claims of compensation based on an agency
agreement; and (b) the
Petitions of Urban Bank (G. R. No. 145817) and the De Leon Group (G R. No. 145822)
questioning the propriety of the grant of execution pending appeal.
Ruling:
Peña is entitled to payment for compensation for services rendered as agent of Urban
Bank, but on the basis of the principles of unjust enrichment and quantum meruit, and not
on the purported oral contract.
In a contract of agency, agents bind themselves to render some service or to do
something in representation or on behalf of the principal, with the consent or authority of
the latter.
Whether or not an agency has been created is determined by the fact that one is
representing and acting for another.[253] The law makes no presumption of agency;
proving its existence, nature and extent is incumbent upon the person alleging it.
Based on the evidence on records and the proceedings below, the Court concludes that
Urban Bank constituted Atty. Peña as its agent to secure possession of the Pasay
property. This conclusion, however, is not determinative of the basis of the amount of
payment that must be... made to him by the bank. The context in which the agency was
created lays the basis for the amount of compensation Atty. Peña is entitled to.
Peña thus first came into the picture as a director of ISCI who was constituted as its agent
to recover the Pasay property against the lessee as well as the sub-tenants who were
occupying the property in violation... of the lease agreement.
He was able to obtain possession of the property from the lessee on the following day, but
the unauthorized sub-tenants refused to vacate the property.
It was only on 7 December 1994, that Urban Bank was informed of the services that Peña
was rendering for ISCI.
It is clear from the above that ISCI was asking Urban Bank for help to comply with ISCI's
own contractual obligation with the bank under the terms of the sale of the Pasay property.
A full-bodied and confident interpretation of the contracts between ISCI and Urban Bank
should have led the latter to inform the unauthorized sub-tenants that under its obligation
as seller to Urban Bank, it was under duty and had continuing authority to recover clean
possession... of the property, despite the transfer of title.
Urban Bank thus chose to cooperate with ISCI without realizing the kind of trouble that it
would reap in the process.
it recognized Peña's role in helping ISCI, but stopped short of granting... him authority to
act on its behalf.
Urban Bank's letter dated 19 December 1994 confirmed in no uncertain terms Peña's
designation as its authorized representative to secure and maintain possession of the
Pasay property against the tenants. Under the terms of the letter, petitioner-respondent
bank confirmed his... engagement (a) "to hold and maintain possession" of the Pasay
property; (b) "to protect the same from former tenants, occupants or any other person who
are threatening to return to the said property and/or interfere with your possession of the
said property for and... in our behalf"; and (c) to represent the bank in any instituted court
action intended to prevent any intruder from entering or staying in the premises.
These three express directives of petitioner-respondent bank's letter admits of no other
construction than that a specific and special authority was given to Peña to act on behalf
of the bank with respect to the latter's claims of ownership over the property against the
tenants.
Having stipulated on the due execution and genuineness of the letter during pretrial,[265]
the bank is bound by the terms thereof and is subject to the necessary consequences of
Peña's reliance thereon.
In any case, the subsequent actions of Urban Bank resulted in the ratification of Peña's
authority as an agent acting on its behalf with respect to the Pasay property.
Even assuming arguendo that it issued no written authority, and that the oral contract was
not substantially established, the bank duly ratified his acts as its agent by its
acquiescence... and acceptance of the benefits, namely, the peaceful turnover of
possession of the property free from sub-tenants.
The agency relationship between an agent and two principals may even be considered...
extinguished if the object or the purpose of the agency is accomplished.
In this case, Peña's services as an agent of both ISCI and Urban Bank were engaged for
one shared purpose or transaction, which was to deliver the property free from
unauthorized... sub-tenants to the new owner - a task that Peña was able to achieve and is
entitled to receive payment for.
That the agency between ISCI and Peña continued, that ISCI is to shoulder the agency fee
and reimbursement for costs of Peña, and that Urban Bank never agreed to pay him a
10% agency fee
First, the initial agency relationship between ISCI and Peña persisted. No proof was ever
offered that the letter of 26 November 1994 of Mr. Montilla of ISCI to Peña, for the latter "to
immediately recover and take possession of the property upon expiration of the contract
of... lease on 29 November 1994" was terminated.
If it is true that... the agency relationship was to be borne by Urban Bank alone, Peña
should have demonstrated that his previous agency relationship with ISCI is incompatible
with his new relationship with Urban Bank, and was thus terminated.
Second, instead, what is on the record is that ISCI confirmed the continuation of this
agency between Peña and itself and committed to pay for the services of Peña
Third, Peña has never shown any written confirmation of his 10% agency fee, whether in a
note, letter, memorandum or board resolution of Urban Bank.
Fourth, while ordinarily, uncontradicted testimony will be accorded its full weight, we
cannot grant full probative value to the testimony of Peña for the following reasons: (a)
Peña is not a credible witness for testifying that he only learned of the sale of the property
of 19
December 1994 when the acts of ISCI, of Urban Bank and his own up to that point all
indicated that he must have known about the sale to Urban Bank; and (b) it is incredible
that Urban Bank will agree to add another PhP24,000,000 to the cost of the property by
agreeing to the... agency fee demanded by Peña.

Peña is entitled to payment for compensation for services rendered as agent of Urban Bank, but
on the basis of the principles of unjust enrichment and quantum meruit, and not on the purported
oral contract.

Even if, however, Peña was constituted as the agent of Urban Bank, it does not necessarily
preclude that a third party would be liable for the payment of the agency fee of Peña. Nor does it
preclude the legal fact that Peña while an agent of Urban Bank, was also an agent of ISCI, and
that his agency from the latter never terminated. This is because the authority given to Peña by
both ISCI and Urban Bank was common — to secure the clean possession of the property so
that it may be turned over to Urban Bank. This is an ordinary legal phenomenon — that an agent
would be an agent for the purpose of pursuing a shared goal so that the common objective of a
transferor and a new transferee would be met.

The Civil Code expressly acknowledged instances when two or more principals have granted a
power of attorney to an agent for a common transaction. 269 The agency relationship between
an agent and two principals may even be considered extinguished if the object or the purpose of
the agency is accomplished. 270 In this case, Peña's services as an agent of both ISCI and
Urban Bank were engaged for one shared purpose or transaction, which was to deliver the
property free from unauthorized sub- tenants to the new owner — a task that Peña was able to
achieve and is entitled to receive payment for.

Agency is presumed to be for compensation. But because in this case we nd no evidence that
Urban Bank agreed to pay Peña a speci c amount or percentage of amount for his services, we
turn to the principle against unjust enrichment and on the basis of quantum meruit.

The corporate o cers and directors of Urban Bank are not solidarily or personally liable with their
properties for the corporate liability of Urban Bank to Atty. Peña.

Considering the absolute nulli cation of the trial court's Decision, the proceedings arising from
the execution pending appeal based on the said Decision is likewise completely vacated.