TRINIDAD J. FRANCISCO, PLAINTIFF AND APPELLEE, VS. GOVERNMENT SERVICE INSURANCE SYSTEM, DEFENDANT AND APPELLANT.

Appeal by the Government Service Insurance System from the decision
of the Court of First Instance of Rizal (Hon. Angel H. Mojica,
presiding), in its Civil Case No. 2088-P, entitled “Trinidad J.
Francisco, plaintiff, vs. Government Service Insurance System,
defendant”, the dispositive part of which reads as follows:

“Wherefore, judgment is hereby rendered: (a)
Declaring null and void the consolidation in the name of the defendant,
Government Service Insurance System, of the title of the VIC-MAKI
compound; said title shall be restored to the plaintiff; and all
payments made by the plaintiff; after her offer had been accepted by
the defendant, must be credited as amortizations on her loans; and (b)
Ordering the defendant to abide by the terms of the contract created by
plaintiff’s offer and its unconditional acceptance, with costs against
the defendant.”

The plaintiff, Trinidad J. Francisco, likewise appealed separately.
(L-18155), because the trial court did not . award the P535,000.00
damages and attorney’s fees she claimed. Both appeals are, therefore,
jointly treated in this decision.

The following facts are admitted by the parties. On 10 October 1956,
the plaintiff, Trinidad J. Francsico, in consideration of a .loan in
the amount of T400,000,00 out of which the sum of P336,100.00 was
released to her, mortgaged in favor of the defendant, Government
Service Insurance System (hereinafter referred to as the System), a
parcel of land containing an area of 18,232 square meters, with
t;wenty-one (21) bungalows, known as Vic-Mari Compound, located at
Baesa, Quezon City, payable within ten (10) years in monthly
installments: of P3.902.41, and with interest of 7% per annum
compounded monthly..

On 6 January 1959,. the System extrajudicially foreclosed the
mortgage on the ground that up to that date the plaintiff-mortgagor:
was in arrears on her monthly installments in the amount of P52,000.00.
Payments made by the plaintiff at the time of foreclosure, amounted to
P130.000.00. The System itself : was the buyer of the property in the
foreclosure Bale.

On 20 February 1959, the plaintiff’s father, Atty. Vicente J.
Francisco, sent a letter to the general manager of the defendant
corporation, Mr. Rodolfo P. Andal, the material portion of which
recited as follows:

“Yesterday, I was finally able to collect what the Government owed
me and T now propose to pay said amount of P30,000 to the GSIS if it
would agree .that after such payment the foreclosure of my daughter’s
mortgage would be set as’de. I am aware that the amount of  P30,000
which I offer to pay will not cover the total arrearage of P52,000 but
as regards the balance, , I propose this arrangement: for the GSIS to
take over the administration of the mortgaged property and to collect
the monthly installments, amounting to about P5,000, due on the unpaid
purchase price of more than / 31 lots’ and houses therein and the
monthly installments collected phail, be applied to the payment of Miss
Ff aneifeo’s arrearage until the  sams is fully covered. It is
requested, however, that from the amount of the monthly installments,
collected, the .sum of P350.00 be deducted for necessary expenses, such
ag to pay the’ security guard, the street caretaker, the “Meraleo” Bill
for the street lights and sundry items. .

It will be noted that the .collectible income each month from ths
mortgaged property, which as I said consists of installments.amounting
to about P5.000, is more than enough, to cover the monthly amortization
on Miss Francisco!s loan. Indeed, had she not encountered
difficulties, due to unforscen circumstances, in collecting the said
installments, she could have paid.the amortizations as they fell due
and there would have been really no need for the GSIS to resort to
foreclosure.

The proposed administration by the GSIS of the mortgaged property
“will continue even after Miss Francisco’s account shall have been kept
up to date. However, once the arrears shall have been paid, whatever
amount of the monthly installments collected in excess of the
amortization due on the loan will be turned over to Miss Francisco.

I make the foregoing proposal to show Miss Francisco’s sincere
desire to work out any fair arrangement for the settlement of her
obligation. I trust that the GSIS, nnder the broad-minded policies of
your administration, would give it serious consideration.

		Sincerely,
		s/Vieente J. FRANCISCO
		t/VlCENTE Ji FBANCISCO”

On the same date, 20 February 1959, Atty. Francisco received the following telegram:

“VICENTE FRANCISCO
SAMANILLO BLDG. ESCOLTA .

GSIS BOARD APPROVE, YOUR REQUEST RE REDEMPTION OF FORECLOSED PROPERTY OF YOUR DAUGHTER, ANDAL’

On 28 February 1959, Atty. Francisco remitted to the System, through
Andal, a check for P30.000.00, with an accompanying letter, which reads:

“I am sending you herein BPI Check No. B-299484 for
Thirty thousand pesos (F30,O0|>.OO) in accordance with my letter of
February 20th and your reply thereto of the same date, which reads:

‘GSIS
BOARD APPROVED YOUR REQUEST RE REDEMPTION OF FORECLOSED PROPERTY Of
YOUR DAUGHTER’

********

The defendant received the amount of P30,000.00, and issued,
therefor its official receipt No. 1209874, dated 4 March 1959. It did
not, however, take over the administration of the compound. In the
meantime, the plaintiff received the monthly payments of some of  the
occupants thereat; then, on 4 March I960, she remitted, through her
father1, the amount of P44.121.29, representing the total monthly
installments that she received from the occupants for the period from
March to December 1959 and January to February 1960, minus expenses and
real estate taxes. The defendant; also received this amount, and issued
the corresponding official receipt.

Remittances, all accompanied by letters, corresponding to the months
of March, April, May, and June, 1960 and totalling P24,604.81 were
also sent by the plaintiff to the defendant from time to time, all of
which were received and duly receipted for.

Then the System sent three (3) letters, one dated 29 January I960,
which was signed by its assistant general manager, and the other two
letters, dated 19 and 26 February 1960, respectively, which were signed
by Andal, asking the plaintiff for a proposal for the payment of her
indebtedness, since according to. the System the one year period for
redemption had expired.

In reply, Atty. Francisco sent a letter, dated 11 March 1960,
protesting, against the System’s request for proposal of payment and
inviting its attention to the concluded contract generated by his offer
of 20 February 1959:, and its acceptance by telegram of the same date,
the compliance of the terms of the offer already commenced by the
plaintiff”, and the misapplication by the System of the remittances
she had made, and requesting the proper corrections.

By letter, dated 31 May 1960, the defendant countered the preceding
protest that, by all means, the plaintiff should pay attorney’s fees of
P35,644.14, publication expenses, filing fee of P301.00, and surcharge
of P23.64 for the foreclosure work done; that the telegram should be
disregarded in view of its failure to express the contents of the board
resolution due to the error of its minor employees in couching the
correct wording of the telegram, A copy of the excerpts of the
resolution of the Board of Directors (No. 380, February 20, 1959) was
attached to the letter, showing the approval of Francisco’s offer-—

“* * * subject to the condition that Mr. Vicente J.
Francisco shall pay all expenses incurred by the GSIS in the
foreclosure of, the’ mortgage.

Inasmuch as, according to the defendant, the remittances previously
made by Atty. Francisco were allegedly hot sufficient to pay off her
daughter’s  arrears, including attorney’s fees incurred by the
defendant in foreclosing the mortgage, and the one-year period for
redemption has expired, said defendant, on 5 July 1960, consolidated
the title to the compound in its name, and  gave notice thereof to the
plaintiff on 26 July 1960 and to each occupant of the compound,

Hence, the plaintiff instituted the present suit, for specific
performance and damages. The defendant answered, pleading that the
binding acceptance of Francisco’s offer was the resolution of the
Board, and that Andal’s telegram, being erroneous, should be
disregarded. After trial, the court below found that the offer of Atty.
Francisco, dated 20 February 1959, made on behalf of his daughter, had
been unqualifiedly accepted, and was binding, and rendered judgment as
noted at the start of his opinion.

The defendant-appellant corporation assigns, six (6) errors
allegedly committed by the lower court, all of which, however, are
resolvable on the single issue as to whether or not the telegram
generated a contract that is valid and binding upon the parties.

We find no reason for altering the conclusion reached by the court
below that the offer of compromise made by plaintiff in the letter,
Exhibit “A”, had been validly accepted, and was binding on the
defendant. The terms of the offer were clear, and’ over the signature
of defendant’s general manager, Rodolfo Andal, plaintiff was informed
telegraphically that her proposal had been accepted. There, was nothing
in the telegram that hinted at any Anomaly, or gave ground to suspect
its veracity, and the plaintiff, therefore, can not be blamed for
relying upon it. There is no denying that the telegram wast within
Andal’s apparent authority, but the defense is that he did not sign it,
but that it was sent by, the Board Secretary in his name and without
his knowledge.  Assuming this to be true, how was aopellee to know it?
Corporate transactions would speedily come to a standstill were every
person dealing with a corporation held duty-bound’ to disbelieve every
act of its responsible officers, no matter how regular they should
appear on their face. This Court has observed in Ramirez vs.
Orientalist Co., 38 Phil. 634, 654-655, that—

“In passing upon the liability of a corporation in
cases of this kind it is always well to keep in mind the situatio nas
it presents itself to the third party with whom the contract is, made.
Naturally he can have little or no information as to what occurs in
corporate meetings; and he must necessarily  re!y upon the external
manifts-tatioris of corporate consent. The; integrity of commercial
transactions can only be maintained by holding the corporation strictly
to the liability fixed upon it by its agents in accordance with law;
and we/would be sorry to announce a doctrine which would permit the
property of a man in the city of Paris to be whisked out of his. hands
and carried into a remote quarter of ,the earth without recourse
against the corporation whose name and authority had been used in the
manner disclosed in this case. As already observed, it is familiar
doctrine that if a corporation knowingly permits one of its officers,
or any other agent, to do acts within the scope of an apparent
authority, and thus holds him out to the public as possessing power to
do those acts, the corporation will, as against any one who has in good
faith dealt with the corporation through such agent, be estopped from
denying his authority; and where it is said “if the corporation
permits” his-, means the same as “if the thing is permitted by the
directing power of the corporation.”

It has also been decided, that—

“A very large part of the business of the country is
carried on by corporations. It certainly is not the practice of persons
dealing with officers or agents who assume to act for such entities to
insist on being shown the resolution of the board of directors
authorizing the particular officer or agent to transact the particular
business which he assumes to conduct. A person who knows that the
officer or agent of the corporation habitually transacts certain kinds
of business for such corporation under circumstances which necessarily
show knowledge on the part of those charged with the conduct of the
corporate business assumes,- as he has the right to assume, that such
agent or officer is acting within the scope of his authority.” (Curtis
Land & Loan Co.’vs. Interior Land Co., 137 Wis. 341, 118 N. W. 853,
129 Am. St. Eep.. 1068; as cited in 2 Fletcher’s Encyclopedia, Priv.
Corp. 263, Perm. Ed.)

Indeed, it is well-settled that—

“If a private corporation intentionally or
negligently clothes its officers or agents with apparent power to
perform acts for it, the , corporation will be estopped to deny that
such apparent authority is real, as to innocent third persons dealing
in good faith with such officers or agents.” (2 Fletcher’s Cyclopedia,
Priv. Corp. 25&, Perm. Ed.)

Hence, even if it were the board secretary who sent the telegram,
the corporation could not evade the binding effect produced by the
telegram.

The defendant-appellant does not disown the telegram, and even
asserts that it came from its offices, as may be gleaned from the
letter, dated 31 May 1960, to Atty. Francisco, and signed “R. P. Andal,
general manager by Leovigildo Monasterial, legal counsel”, wherein
these phrases occur: “the telegram sent * * * by this office” and “the
telegram we sent you” (emphasis supplied), but it alleges mistake in
couching the correct wording. This alleged mistake cannot be taken
seriously, because while the telegram is dated 20 February 1959, the
defendant informed Atty. Francisco of the alleged mistake only on 31
May I960, and all the while it accepted the various other remittances,
starting on 28 February 1959, sent by the plaintiff to it in compliance
with her performance of her part of the new contract.

The inequity of permitting the System to deny its acceptance becomes
more patent when account is taken of the .fact that in remitting the
payment of P30,000 advanced by her father, plaintiff’s letter to Mr.
Andal quoted verbatim the telegram of acceptance. This was in itself
notice to the corporation of the terms of the allegedly unauthorized
telegram, for as Ballentine says:

“Knowledge of facts acquired or possessed by an officer or agent oi
a corporation in the course of his employment, and in relation to
matters within the scope of his authority, is notice to the
corporation, whether he communicates such knowledge or not.”
(Ballentine, Law on Corporations, section- 112) since a corporation cannot see, or know, anything except through its officers.

Yet, notwithstanding this notice, the defendant System pocketed the
amount, and kept silent about the telegram not being’ in accordance
with the true facts, as it now alleges. This silence, taken together
with the unconditional acceptance of three other subsequent remittances
from plaintiff, constitutes in itself a binding ratification of the
original agreement (Civil Code, Art. 1393).

“Art. 1393, Ratification may be effected expressly
or tacitly. It is understood that there is a tacit ratification if,
with knowledge of the reason which renders the contract voidable and
such reason having ceased, the person who has a right to invoke it
should execute an act which necessarily implies an intention to waive
his right.”

Nowhere else do the circumstances call more insistently for the
application of the equitable maxim that between two innocent parties,
the one who made it’ possible for the wrong to be done should be the
one to bear the resulting loss. .

The defendant’s assertion that the telegram came from it but that it
was incorrectly worded renders unnecessary to resolve the other point
in controversy as to whether the said telegram constitutes an
actionable document.

Since the terms offered by. the plaintiff in the letter of 30
February 1959 (Exhibit ”A”) provided for the setting as’.de of the
foreclosure affected by the defendant System, the acceptance of the
offer left the account of plaintiff in the same condition as if no
foreclosure had taken place. It:follows, as the lower court has
correctly held, that the right of the System to collect attorney’s’
fees equivalent to .10% of the sum due (P35,694.14) and the expenses
and charges of P3;000.00 may no longer be enforced, since by the
express terms of the mortgage contract, these sums were collectible
only “in the event of foreclosure”.

The court a quo also called attention to the unconscion-ability of
the defendant’s charging the attorney’s fees, totalling over
P35,000.00; and this point appears well-taken, considering that the
foreclosure was merely extra-judicial, and the attorney’s work was
limited to requiring the sheriff to effectuate the foreclosure.
However, in view of the parties’ agreement to set the same aside,
with.the consequential elimination of such incidental charges, the
matter of unreasonableness of the counsel fees need not be labored
further. .

Turning now to the plaintiff’s separate appeal (Case G. R. No.
L-18155): Her prayer for an award of actual or compensatory damages for
P83.333.33 is predicated oa her alleged unrealized profits due to her
inability to sell the compound for the price of. P750,000.00 offered
by one Vicente Alunan, which sale was allegedly blocked because the
System consolidated the title to the property in its name. Plaintiff
reckons the. amount of P83,333.38 by placing the actual value of the
property, at P666,666.6′?, a figure arrived at by assuming that the
System’s loan of P400.000.00 constitutes 60% of the actual value of the
security. The court a duo correctly refused to award such actual or
compensatory damages because it ‘could not determine with reasonable
certainty the difference between the offered price and the actual value
of the property, for lack of competent evidence. Without proof we
cannot assume, or take judicial notice, as suggested by, the plaintiff,
that the practice of lending, institutions in the country is to give
out as loan 60% of the actual value, of the collateral. Nor should we
lose sight of the fact that the price offered by Alunan was payable
in installments covering five years, so that it may .not actually
represent true market values.

Nor was there error in the appealed decision indenying moral
damages, not only on account of the plaintiff’s failure to take the
witness stand and testify to her social humiliation, wounded feelings,
anxiety, etc., as the decision holds, but primarily because a breach of
contract like that of defendant, not being malicious or fraudulent,
does not warrant the award of moral damages under Article 2220 of the
Civil Code (Ventanilla vs. Centeno, 110 Phil., 811; Fores vs. Miranda,
105 Phil., 266).

There is no basis for awarding exemplary damages either, because
this species of damages is only allowed in addition to moral,
temperate, liquidated, or compensatory damages, none of which have been
allowed in this ease, for reasons hereinbefore discussed (Art. 2234,
Civil Code; Velayo vs. Shell Co. of P.I., 100 Phil., 186; Singson, et
al vs. Aragon and Lorza, 92 Phil., 514; 49 Off. Gaz.No. .2, 515).

As to attorney’s fees, we agree with the trial court’s stand that in
view of the absence of gross and evident bad faith in defendant’s
refusal to satisfy the plaintiff’s claim, and there being none of the
other grounds enumerated in/ Article 2208 of the Civil Code, such
absence precludes a recovery. The award of attorney’s fees is
essentially discretionary in the trial court, and no.abuse of
discretion has been shown.

Fob the foregoing reasons, the, appealed decision is hereby
affirmed, with costs against, the defendant Government Service
Insurance System in G. R. No. L-18287.

Bengzon, C. J., Padilla, Bautista Angelo, Concepcion, Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.