FIRST DIVISION

[G.R. No. L-67889. October 10, 1985.]

PRIMITIVO SIASAT and MARCELINO SIASAT , petitioners, vs.

Payawal, Jimenez & Associates for petitioners.

DECISION

GUTIERREZ, JR. , J : p

This is a petition for review of the decision of the Intermediate Appellate Court affirming in
toto the judgment of the Court of First Instance of Manila, Branch XXI, which ordered the
petitioner to pay respondent the thirty percent (30%) commission on 15,666 pieces of
Philippine flags worth P936,960.00, moral damages, attorney's fees and the costs of the
suit.
Sometime in 1974, respondent Teresita Nacianceno succeeded in convincing officials of
the then Department of Education and Culture, hereinafter called Department, to purchase
without public bidding, one million pesos worth of national flags for the use of public
schools throughout the country. The respondent was able to expedite the approval of the
purchase by handcarrying the different indorsements from one office to another, so that
by the first week of September, 1974, all the legal requirements had been complied with,
except the release of the purchase orders. When Nacianceno was informed by the Chief of
the Budget Division of the Department that the purchase orders could not be released
unless a formal offer to deliver the flags in accordance with the required specifications
was first submitted for approval, she contacted the owners of the United Flag Industry on
September 17, 1974. The next day, after the transaction was discussed, the following
document (Exhibit A) was drawn up: LibLex

"Mrs. Tessie Nacianceno,

"This is to formalize our agreement for you to represent United Flag Industry to
deal with any entity or organization, private or government in connection with the
marketing of our products - flags and all its accessories.
"For your service, you will be entitled to a commission of thirty (30%) percent.

Signed
Mr. Primitivo Siasat
Owner and Gen. Manager"

On October 16, 1974, the first delivery of 7,933 flags was made by the United Flag
Industry. The next day, on October 17, 1974, the respondent's authority to represent the
United Flag Industry was revoked by petitioner Primitivo Siasat.
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 According to the findings of the courts below, Siasat, after receiving the payment of
P469,980.00 on October 23, 1974 for the first delivery, tendered the amount of
P23,900.00 or five percent (5%) of the amount received, to the respondent as payment of
her commission. The latter allegedly protested. She refused to accept the said amount
insisting on the 30% commission agreed upon. The respondent was prevailed upon to
accept the same, however, because of the assurance of the petitioners that they would pay
the commission in full after they delivered the other half of the order. The respondent
states that she later on learned that petitioner Siasat had already received payment for the
second delivery of 7,833 flags. When she confronted the petitioners, they vehemently
denied receipt of the payment, at the same time claiming that the respondent had no
participation whatsoever with regard to the second delivery of flags and that the agency
had already been revoked.
The respondent originally filed a complaint with the Complaints and Investigation Office in
Malacañang but when nothing came of the complaint, she filed an action in the Court of
First Instance of Manila to recover the following commissions: 25% as balance on the first
delivery and 30% on the second delivery. LLpr

The trial court decided in favor of the respondent. The dispositive portion of the decision
reads as follows:
"WHEREFORE, judgment is hereby rendered sentencing Primitivo Siasat to pay to
the plaintiff the sum of P281,988.00, minus the sum P23,900.00, with legal
interest from the date of this decision, and ordering the defendants to pay jointly
and solidarily the sum of P25,000.00 as moral damages, and P25,000.00 as
attorney's fees, also with legal interest from the date of this decision, and the
costs."

The decision was affirmed in toto by the Intermediate Appellate Court. After their motion
for reconsideration was denied, the petitioners went to this Court on a petition for review
on August 6, 1984.
In assailing the appellate court's decision, the petition tenders the following arguments:
first, the authorization making the respondent the petitioner's representative merely states
that she could deal with any entity in connection with the marketing of their products for a
commission of 30%. There was no specific authorization for the sale of 15,666 Philippine
flags to the Department; second, there were two transactions involved evidenced by the
separate purchase orders and separate delivery receipts, Exhibit 6-C for the purchase and
delivery on October 16, 1974, and Exhibits 7 to 7-C, for the purchase and delivery on
November 6, 1974. The revocation of agency effected by the parties with mutual consent
on October 17, 1974, therefore, forecloses the respondent's claim of 30% commission on
the second transaction; and last, there was no basis for the granting of attorney's fees and
moral damages because there was no showing of bad faith on the part of the petitioner. It
was respondent who showed bad faith in denying having received her commission on the
first delivery. The petitioner's counterclaim, therefore, should have been granted.
This petition was initially dismissed for lack of merit in a minute resolution. On a motion
for reconsideration, however, this Court gave due course to the petition on November 14,
1984. prLL

After a careful review of the records, we are constrained to sustain with some
modifications the decision of the appellate court.
We find petitioners' argument regarding respondent's incapacity to represent them in the
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 transaction with the Department untenable. There are several kinds of agents. To quote a
commentator on the matter:
"An agent may be (1) universal; (2) general, or (3) special. A universal agent is one
authorized to do all acts for his principal which can lawfully be delegated to an
agent. So far as such a condition is possible, such an agent may be said to have
universal authority. (Mec. Sec. 58).

"A general agent is one authorized to do all acts pertaining to a business of a

"An agent, therefore, who is empowered to transact all the business of his
principal of a particular kind or in a particular place, would, for this reason, be
ordinarily deemed a general agent. (Mec. Sec. 60).

"A special agent is one authorized to do some particular act or to act upon some
particular occasion. He acts usually in accordance with specific instructions or
under limitations necessarily implied from the nature of the act to be done." (Mec.
Sec. 61) (Padilla, Civil Law, The Civil Code Annotated, Vol. VI, 1969 Edition, p.
204).

One does not have to undertake a close scrutiny of the document embodying the
agreement between the petitioners and the respondent to deduce that the latter was
instituted as a general agent. Indeed, it can easily be seen by the way general words were
employed in the agreement that no restrictions were intended as to the manner the agency
was to be carried out or in the place where it was to be executed. The power granted to the
respondent was so broad that it practically covers the negotiations leading to, and the
execution of, a contract of sale of petitioners' merchandise with any entity or organization.
There is no merit in petitioners' allegations that the contract of agency between the parties
was entered into under fraudulent representation because respondent "would not disclose
the agency with which she was supposed to transact and made the petitioner believe that
she would be dealing with the Visayas", and that "the petitioner had known of the
transactions and/or project for the said purchase of the Philippine flags by the Department
of Education and Culture and precisely it was the one being followed up also by petitioner."
If the circumstances were as claimed by the petitioners, they would have exerted efforts to
protect their interests by limiting the respondent's authority. There was nothing to prevent
the petitioners from stating in the contract of agency that the respondent could represent
them only in the Visayas. Or to state that the Department of Education and Culture and the
Department of National Defense, which alone would need a million pesos worth of flags,
are outside the scope of the agency. As the trial court opined, it is incredible that they
could be so careless after being in the business for fifteen years. LLphil

A cardinal rule of evidence embodied in Section 7 Rule 130 of our Revised Rules of Court
states that "when the terms of an agreement have been reduced to writing, it is to be
considered as containing all such terms, and, therefore, there can be between the parties
and their successors-in-interest, no evidence of the terms of the agreement other than the
contents of the writing", except in cases specifically mentioned in the same rule.
Petitioners have failed to show that their agreement falls under any of these exceptions.
The respondent was given ample authority to transact with the Department in behalf of the
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 petitioners. Equally without merit is the petitioners' proposition that the transaction
involved two separate contracts because there were two purchase orders and two
deliveries. The petitioners' evidence is overcome by other pieces of evidence proving that
there was only one transaction.
The indorsement of then Assistant Executive Secretary Roberto Reyes to the Budget
Commission on September 3, 1974 (Exhibit "C") attests to the fact that out of the total
budget of the Department for the fiscal year 1975, "P1,000,000.00 is for the purchase of
national flags." This is also reflected in the Financial and Work Plan Request for Allotment
(Exhibit "F") submitted by Secretary Juan Manuel for fiscal year 1975 which however,
divided the allocation and release of the funds into three, corresponding to the second,
third, and fourth quarters of the said year. Later correspondence between the Department
and the Budget Commission (Exhibits "D" and "E") show that the first allotment of
P500,000.00 was released during the second quarter. However, due to the necessity of
furnishing all of the public schools in the country with the Philippine flag, Secretary Manuel
requested for the immediate release of the programmed allotments intended for the third
and fourth quarters. These circumstances explain why two purchase orders and two
deliveries had to be made on one transaction.

The petitioners' evidence does not necessarily prove that there were two separate
transactions. Exhibit "6" is a general indorsement made by Secretary Manuel for the
purchase of the national flags for public schools. It contains no reference to the number of
flags to be ordered or the amount of funds to be released. Exhibit "7" is a letter request for
a "similar authority" to purchase flags from the United Flag Industry. This was, however,
written by Dr. Narciso Albarracin who was appointed Acting Secretary of the Department
after Secretary Manuel's tenure, and who may not have known the real nature of the
transaction.
If the contracts were separate and distinct from one another, the whole or at least a
substantial part of the government's supply procurement process would have been
repeated. In this case, what were issued were mere indorsements for the release of funds
and authorization for the next purchase.
Since only one transaction was involved, we deny the petitioners' contention that
respondent Nacianceno is not entitled to the stipulated commission on the second
delivery because of the revocation of the agency effected after the first delivery. The
revocation of agency could not prevent the respondent from earning her commission
because as the trial court opined, it came too late, the contract of sale having been already
perfected and partly executed. LLphil

In Macondray & Co. v. Sellner (33 Phil. 370, 377), a case analogous to this one in principle,
this Court held:
"We do not mean to question the general doctrine as to the power of a principal to
revoke the authority of his agent at will, in the absence of a contract fixing the
duration of the agency (subject, however, to some well defined exceptions). Our
ruling is that at the time fixed by the manager of the plaintiff company for the
termination of the negotiations, the defendant real estate agent had already
earned the commissions agreed upon, and could not be deprived thereof by the
arbitrary action of the plaintiff company in declining to execute the contract of
sale for some reason personal to itself.".
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 The principal cannot deprive his agent of the commission agreed upon by cancelling
the agency and, thereafter, dealing directly with the buyer. (Infante v. Cunanan, 93 Phil.
691).
The appellate court's citation of its previous ruling in Heimbrod et al. v. Ledesma (C.A. 49
O.G. 1507) is correct:
"The appellee is entitled to recovery. No citation is necessary to show that the
general law of contracts the equitable principle of estoppel, and the expense of
another, uphold payment of compensation for services rendered."

There is merit, however, in the petitioners' contention that the agent's commission on the
first delivery was fully paid. The evidence does not sustain the respondent's claim that the
petitioners paid her only 5% and that their right to collect another 25% commission on the
first delivery must be upheld.
When respondent Nacianceno asked the Malacañang Complaints and Investigation Office
to help her collect her commission, her statement under oath referred exclusively to the
30% commission on the second delivery. The statement was emphatic that "now" her
demand was for the 30% commission on the second release of P469,980.00. The demand
letter of the respondent's lawyer dated November 13, 1984 asked petitioner Siasat only
for the 30% commission due from the second delivery. The fact that the respondent
demanded only the commission on the second delivery without reference to the alleged
unpaid balance — which was only slightly less than the amount claimed — can only mean
that the commission on the first delivery was already fully paid. Considering the sizeable
sum involved, such an omission is too glaringly remiss to be regarded as an oversight.
Moreover, the respondent's authorization letter (Exhibit "5") bears her signature with the
handwritten words "Fully Paid", inscribed above it.
The respondent contested her signature as a forgery. Handwriting experts from two
government agencies testified on the matter. The reason given by the trial court in ruling
for the respondent is too flimsy to warrant a finding of forgery. LLpr

The court stated that in thirteen documents presented as exhibits, the private respondent
signed her name as "Tessie Nacianceno" while in this particular instance, she signed as "T.
Nacianceno."
The stated basis is inadequate to sustain the respondent's allegation of forgery. A variance
in the manner the respondent signed her name can not be considered as conclusive proof
that the questioned signature is a forgery. The mere fact that the respondent signed
thirteen documents using her full name does not rule out the possibility of her having
signed the notation. "Fully Paid", with her initial for the given name and the surname written
in full. What she was signing was a mere acknowledgment.
This leaves the expert testimony as the sole basis for the verdict of forgery.
In support of their allegation of full payment as evidenced by the signed authorization
letter (Exhibit "5-A"), the petitioners presented as witness Mr. Francisco Cruz, Jr. a senior
document examiner of the Philippine Constabulary Crime Laboratory. In rebuttal, the
respondent presented Mr. Arcadio Ramos, a junior document examiner of the National
Bureau of Investigation.
While the experts testified in a civil case, the principles developed in criminal cases
involving forgery are applicable. Forgery cannot be presumed. It must be proved.
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 In Borromeo v. Court of Appeals (131 SCRA 318, 326) we held that:
xxx xxx xxx
". . . Where the evidence, as here, gives rise to two probabilities, one consistent
with the defendant's innocence and another indicative of his guilt, that which is
favorable to the accused should be considered. The constitutional presumption of
innocence continues until overthrown by proof of guilt beyond reasonable doubt,
which requires moral certainty which convinces and satisfies the reason and
conscience of those who are to act upon it. (People v. Clores, et al., 125 SCRA 67;
People v. Bautista, 81 Phil. 78).

We ruled in another case that where the supposed expert's testimony would constitute the
sole ground for conviction and there is equally convincing expert testimony to the contrary,
the constitutional presumption of innocence must prevail. (Lorenzo Ga. Cesar v. Hon.
Sandiganbayan and People of the Philippines, 134 SCRA 105) In the present case, the
circumstances earlier mentioned taken with the testimony of the PC senior document
examiner lead us to rule against forgery.
We also rule against the respondent's allegation that the petitioners acted in bad faith
when they revoked the agency given to the respondent.
Fraud and bad faith are matters not to be presumed but matters to be alleged with
sufficient facts. To support a judgment for damages, facts which justify the inference of a
lack or absence of good faith must be alleged and proven. (Bacolod-Murcia Milling Co.,
Inc. vs. First Farmers Milling Co., Inc., Etc., 103 SCRA 436). llcd

There is no evidence on record from which to conclude that the revocation of the agency
was deliberately effected by the petitioners to avoid payment of the respondent's
commission. What appears before us is only the petitioner's use in court of such a factual
allegation as a defense against the respondent's claim. This alone does not per se make
the petitioners guilty of bad faith for that defense should have been fully litigated.
Moral damages cannot be awarded in the absence of a wrongful act or omission or of
fraud or bad faith. (R & B Surety & Insurance Co., Inc. vs. Intermediate Appellate Court, 129
SCRA 736).
We therefore, rule that the award of P25,000.00 as moral damages is without basis.
The additional award of P25,000.00 damages by way of attorney's fees, was given by the
courts below on the basis of Article 2208, Paragraph 2, of the Civil Code, which provides:
"When the defendant's act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interests;" attorney's fees may be awarded as
damages. (Pirovano, et al. v. De la Rama Steamship Co., 96 Phil. 335).
The underlying circumstances of this case lead us to rule out any award of attorney's fees.
For one thing, the respondent did not come to court with completely clean hands. For
another, the petitioners apparently believed they could legally revoke the agency in the
manner they did and deal directly with education officials handling the purchase of
Philippine flags. They had reason to sincerely believe they did not have to pay a
commission for the second delivery of flags.
We cannot close this case without commenting adversely on the inexplicably strange
procurement policies of the Department of Education and Culture in its purchase of
Philippine flags. There is no reason why a shocking 30% of the taxpayers' money should go
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 to an agent or facilitator who had no flags to sell and whose only work was to secure and
handcarry the indorsements of education and budget officials. There are only a few
manufacturers of flags in our country with the petitioners claiming to have supplied flags
for our public schools on earlier occasions. If public bidding was deemed unnecessary, the
Department should have negotiated directly with flag manufacturers. Considering the sad
plight of underpaid and overworked classroom teachers whose pitiful salaries and
allowances cannot sometimes be paid on time, a P300,000.00 fee for a P1,000,000.00
purchase of flags is not only clearly unnecessary but a scandalous waste of public funds
as well. cdphil

WHEREFORE, the decision of the respondent court is hereby MODIFIED. The petitioners are
ordered to pay the respondent the amount of ONE HUNDRED FORTY THOUSAND NINE
HUNDRED AND NINETY FOUR PESOS (P140,994.00) as her commission on the second
delivery of flags with legal interest from the date of the trial court's decision. No
pronouncement as to costs.

SO ORDERED.
Relova, De la Fuente and Patajo, JJ., concur.
Melencio-Herrera, J., is on leave.
Plana, J., took no part.

Separate Opinions
TEEHANKEE , J., concurring:

Let copy hereof be furnished the Commission on Audit for appropriate remedial action, as
it may take.

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