G.R. No.

187769 June 4, 2014

ALVIN PATRIMONIO, Petitioner,

vs.

NAPOLEON GUTIERREZ and OCTAVIO MARASIGAN III, Respondents.

The petitioner and the respondent Napoleon Gutierrez (Gutierrez) entered into a business
venture under the name of Slam Dunk Corporation (Slum Dunk), a production outfit
that produced mini-concerts and shows related to basketball. Petitioner was already then
a decorated professional basketball player while Gutierrez was a well-known sports columnist.

In the course of their business, the petitioner pre-signed several checks to answer for the
expenses of Slam Dunk. Although signed, these checks had no payee’s name, date or
amount. The blank checks were entrusted to Gutierrez with the specific instruction not
to fill them out without previous notification to and approval by the petitioner.
According to petitioner, the arrangement was made so that he could verify the validity of the
payment and make the proper arrangements to fund the account.

In the middle of 1993, without the petitioner’s knowledge and consent, Gutierrez went
to Marasigan (the petitioner’s former teammate), to secure a loan in the amount of
₱200,000.00 on the excuse that the petitioner needed the money for the construction
of his house. In addition to the payment of the principal, Gutierrez assured Marasigan that he
would be paid an interest of 5% per month from March to May 1994.

After much contemplation and taking into account his relationship with the petitioner and
Gutierrez, Marasigan acceded to Gutierrez’ request and gave him ₱200,000.00 sometime in
February 1994. Gutierrez simultaneously delivered to Marasigan one of the blank checks
the petitioner pre-signed with Pilipinas Bank, Greenhills Branch, Check No. 21001764
with the blank portions filled out with the words "Cash" "Two Hundred Thousand
Pesos Only", and the amount of "₱200,000.00". The upper right portion of the check
corresponding to the date was also filled out with the words "May 23, 1994" but the petitioner
contended that the same was not written by Gutierrez.

On May 24, 1994, Marasigan deposited the check but it was dishonored for the reason
"ACCOUNT CLOSED." It was later revealed that petitioner’s account with the bank had been
closed since May 28, 1993.

Marasigan sought recovery from Gutierrez, to no avail. He thereafter sent several

On September 10, 1997, the petitioner filed before the Regional Trial Court (RTC) a Complaint for
Declaration of Nullity of Loan and Recovery of Damages against Gutierrez and co-
respondent Marasigan. He completely denied authorizing the loan or the check’s
negotiation, and asserted that he was not privy to the parties’ loan agreement.

Only Marasigan filed his answer to the complaint. In the RTC’s order dated December 22,
1997,Gutierrez was declared in default.

The Ruling of the RTC

RTC RULING. The RTC ruled on February 3,2003 in favor of Marasigan.4 It found that the
petitioner, in issuing the pre-signed blank checks, had the intention of issuing a negotiable
instrument, albeit with specific instructions to Gutierrez not to negotiate or issue the
check without his approval. While under Section 14 of the Negotiable Instruments Law
Gutierrez had the prima facie authority to complete the checks by filling up the blanks therein, the
RTC ruled that he deliberately violated petitioner’s specific instructions and took
advantage of the trust reposed in him by the latter.

Nonetheless, the RTC declared Marasigan as a holder in due course and accordingly dismissed the
petitioner’s complaint for declaration of nullity of the loan. It ordered the petitioner to pay
Marasigan the face value of the check with a right to claim reimbursement from
Gutierrez.

CA RULING. n September 24, 2008, the CA affirmed the RTC ruling, although premised on
different factual findings. After careful analysis, the CA agreed with the petitioner that
Marasigan is not a holder in due course as he did not receive the check in good faith.

The CA also concluded that the check had been strictly filled out by Gutierrez in
accordance with the petitioner’s authority. It held that the loan may not be nullified since it
is grounded on an obligation arising from law and ruled that the petitioner is still liable to pay
Marasigan the sum of ₱200,000.00.

After the CA denied the subsequent motion for reconsideration that followed, the petitioner filed
the present petition for review on certiorari under Rule 45 of the Revised Rules of Court.

The Petition

The petitioner argues that: (1) there was no loan between him and Marasigan since he never
authorized the borrowing of money nor the check’s negotiation to the latter; (2) under Article 1878
of the Civil Code, a special power of attorney is necessary for an individual to make a loan or
borrow money in behalf of another; (3) the loan transaction was between Gutierrez and
Marasigan, with his check being used only as a security; (4) the check had not been completely
and strictly filled out in accordance with his authority since the condition that the subject check
can only be used provided there is prior approval from him, was not complied with; (5) even if the
check was strictly filled up as instructed by the petitioner, Marasigan is still not entitled to claim
the check’s value as he was not a holder in due course; and (6) by reason of the bad faith in the
dealings between the respondents, he is entitled to claim for damages.

The Issues

Reduced to its basics, the case presents to us the following issues:

1. Whether the contract of loan in the amount of ₱200,000.00 granted by respondent

RULING

We note at the outset that the issues raised in this petition are essentially factual in nature. The
main point of inquiry of whether the contract of loan may be nullified, hinges on the very existence
of the contract of loan – a question that, as presented, is essentially, one of fact. Whether the
petitioner authorized the borrowing; whether Gutierrez completely filled out the subject check
strictly under the petitioner’s authority; and whether Marasigan is a holder in due course are also
questions of fact, that, as a general rule, are beyond the scope of a Rule 45 petition.

The rule that questions of fact are not the proper subject of an appeal by certiorari, as a petition
for review under Rule 45 is limited only to questions of law, is not an absolute rule that admits of
no exceptions. One notable exception is when the findings off act of both the trial court and the
CA are conflicting, making their review necessary.5 In the present case, the tribunals below
arrived at two conflicting factual findings, albeit with the same conclusion, i.e., dismissal of the
complaint for nullity of the loan. Accordingly, we will examine the parties’ evidence presented.

I. Liability Under the Contract of Loan

The petitioner seeks to nullify the contract of loan on the ground that he never
authorized the borrowing of money. He points to Article 1878, paragraph 7 of the Civil
Code, which explicitly requires a written authority when the loan is contracted through
an agent. The petitioner contends that absent such authority in writing, he should not
be held liable for the face value of the check because he was not a party or privy to the
agreement.

Contracts of Agency May be Oral Unless The Law Requires a Specific Form

Article 1868 of the Civil Code defines a contract of agency as a contract whereby 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." Agency may be express,
or implied from the acts of the principal, from his silence or lack of action, or his failure to
repudiate the agency, knowing that another person is acting on his behalf without authority.
As a general rule, a contract of agency may be oral.6 However, it must be written
when the law requires a specific form, for example, in a sale of a piece of land or any
interest therein through an agent.

Article 1878 paragraph 7 of the Civil Code expressly requires a special power of
authority before an agent can loan or borrow money in behalf of the principal, to wit:

Art. 1878. Special powers of attorney are necessary in the following cases:

xxxx

(7) To loan or borrow money, unless the latter act be urgent and indispensable for the
preservation of the things which are under administration. (emphasis supplied)

Article 1878 does not state that the authority be in writing. As long as the mandate is
express, such authority may be either oral or written. We unequivocably declared in Lim Pin v. Liao
Tian, et al.,7 that the requirement under Article 1878 of the Civil Code refers to the nature of
the authorization and not to its form. Be that as it may, the authority must be duly
established by competent and convincing evidence other than the self serving
assertion of the party claiming that such authority was verbally given, thus:

The requirements of a special power of attorney in Article 1878 of the Civil Code and of a special
authority in Rule 138 of the Rules of Court refer to the nature of the authorization and not its
form. The requirements are met if there is a clear mandate from the principal specifically
authorizing the performance of the act. As early as 1906, this Court in Strong v. Gutierrez-Repide
(6 Phil. 680) stated that such a mandate may be either oral or written, the one vital
thing being that it shall be express. And more recently, We stated that, if the special
authority is not written, then it must be duly established by evidence:

x x x 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 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.(Home
Insurance Company vs. United States lines Company, et al., 21 SCRA 863; 866: Vicente vs.
Geraldez, 52 SCRA 210; 225). (emphasis supplied).

The Contract of Loan Entered Into by Gutierrez in Behalf of the Petitioner Should be
Nullified for Being Void; Petitioner is Not Bound by the Contract of Loan.

A review of the records reveals that Gutierrez did not have any authority to borrow
money in behalf of the petitioner.1âwphi1 Records do not show that the petitioner executed
any special power of attorney (SPA) in favor of Gutierrez. In fact, the petitioner’s testimony
confirmed that he never authorized Gutierrez (or anyone for that matter), whether
verbally or in writing, to borrow money in his behalf, nor was he aware of any such
transaction:

ALVIN PATRIMONIO (witness)

ATTY. DE VERA: Did you give Nap Gutierrez any Special Power of Attorney in writing
authorizing him to borrow using your money?

WITNESS: No, sir. (T.S.N., Alvin Patrimonio, Nov. 11, 1999, p. 105)8

xxxx

Marasigan however submits that the petitioner’s acts of pre-signing the blank checks
and releasing them to Gutierrez suffice to establish that the petitioner had authorized
Gutierrez to fill them out and contract the loan in his behalf.

Marasigan’s submission fails to persuade us.

In the absence of any authorization, Gutierrez could not enter into a contract of loan in
behalf of the petitioner. As held in Yasuma v. Heirs of De Villa,9 involving a loan contracted by
de Villa secured by real estate mortgages in the name of East Cordillera Mining Corporation, in the
absence of an SPA conferring authority on de Villa, there is no basis to hold the corporation liable,
to wit:

The power to borrow money is one of those cases where corporate officers as agents of the
corporation need a special power of attorney. In the case at bar, no special power of attorney
conferring authority on de Villa was ever presented. x x x There was no showing that respondent
corporation ever authorized de Villa to obtain the loans on its behalf.

xxxx

Therefore, on the first issue, the loan was personal to de Villa. There was no basis to hold the
corporation liable since there was no authority, express, implied or apparent, given to de Villa to
borrow money from petitioner. Neither was there any subsequent ratification of his act.

xxxx
The liability arising from the loan was the sole indebtedness of de Villa (or of his estate after his
death). (citations omitted; emphasis supplied).

This principle was also reiterated in the case of Gozun v. Mercado,10 where this court held:

Petitioner submits that his following testimony suffices to establish that respondent had authorized
Lilian to obtain a loan from him.

xxxx

Petitioner’s testimony failed to categorically state, however, whether the loan was made on behalf
of respondent or of his wife. While petitioner claims that Lilian was authorized by respondent, the
statement of account marked as Exhibit "A" states that the amount was received by Lilian "in
behalf of Mrs. Annie Mercado.

It bears noting that Lilian signed in the receipt in her name alone, without indicating therein that
she was acting for and in behalf of respondent. She thus bound herself in her personal capacity
and not as an agent of respondent or anyone for that matter.

It is a general rule in the law of agency that, in order to bind the principal by a
mortgage on real property executed by an agent, it must upon its face purport to be
made, signed and sealed in the name of the principal, otherwise, it will bind the agent
only. It is not enough merely that the agent was in fact authorized to make the
mortgage, if he has not acted in the name of the principal. x x x (emphasis supplied).

In the absence of any showing of any agency relations or special authority to act for and
in behalf of the petitioner, the loan agreement Gutierrez entered into with Marasigan
is null and void. Thus, the petitioner is not bound by the parties’ loan agreement.

ENTERING INTO A LOAN CAN NEVER BE PRESUMED. Furthermore, that the petitioner
entrusted the blank pre-signed checks to Gutierrez is not legally sufficient because the
authority to enter into a loan can never be presumed. The contract of agency and the
special fiduciary relationship inherent in this contract must exist as a matter of fact.
The person alleging it has the burden of proof to show, not only the fact of agency, but
also its nature and extent.11 As we held in People v. Yabut:12

Modesto Yambao's receipt of the bad checks from Cecilia Que Yabut or Geminiano Yabut, Jr., in
Caloocan City cannot, contrary to the holding of the respondent Judges, be licitly taken as delivery
of the checks to the complainant Alicia P. Andan at Caloocan City to fix the venue there. He did
not take delivery of the checks as holder, i.e., as "payee" or "indorsee." And there appears to beno
contract of agency between Yambao and Andan so as to bind the latter for the acts of the former.
Alicia P. Andan declared in that sworn testimony before the investigating fiscal that Yambao is but
her "messenger" or "part-time employee." There was no special fiduciary relationship that
permeated their dealings. For a contract of agency to exist, the consent of both parties is
essential, the principal consents that the other party, the agent, shall act on his behalf, and the
agent consents so to act. It must exist as a fact. The law makes no presumption thereof. The
person alleging it has the burden of proof to show, not only the fact of its existence, but also its
nature and extent. This is more imperative when it is considered that the transaction dealt with
involves checks, which are not legal tender, and the creditor may validly refuse the same as
payment of obligation.(at p. 630). (emphasis supplied)

The records show that Marasigan merely relied on the words of Gutierrez without
securing a copy of the SPA in favor of the latter and without verifying from the
petitioner whether he had authorized the borrowing of money or release of the check.
He was thus bound by the risk accompanying his trust on the mere assurances of
Gutierrez.

No Contract of Loan Was Perfected Between Marasigan And Petitioner, as The Latter’s
Consent Was Not Obtained.

In this case, the petitioner denied liability on the ground that the contract lacked the
essential element of consent. We agree with the petitioner. As we explained above, Gutierrez
did not have the petitioner’s written/verbal authority to enter into a contract of loan. While there
may be a meeting of the minds between Gutierrez and Marasigan, such agreement cannot bind
the petitioner whose consent was not obtained and who was not privy to the loan agreement.
Hence, only Gutierrez is bound by the contract of loan.

True, the petitioner had issued several pre-signed checks to Gutierrez, one of which fell into the
hands of Marasigan. This act, however, does not constitute sufficient authority to borrow money in
his behalf and neither should it be construed as petitioner’s grant of consent to the parties’ loan
agreement. Without any evidence to prove Gutierrez’ authority, the petitioner’s signature in the
check cannot be taken, even remotely, as sufficient authorization, much less, consent to the
contract of loan. Without the consent given by one party in a purported contract, such contract
could not have been perfected; there simply was no contract to speak of.15