Ching vs. Bantolo

A special power of attorney that constitutes a contract of agency coupled with interest cannot be revoked at the sole will of the principal; however, damages must be satisfactorily proved, and actual damages may not be made contingent on a future event. The SPA in this case was such an agency, but only the P500,000.00 advanced by Ching was recoverable as actual damages; claims to one-half of the properties, reimbursement of expenses, and exemplary damages were denied.

Respondents owned several parcels of land in Tagaytay City covered by OCT Nos. OP-787, OP-788, OP-789, OP-799; OP-793, OP-805, OP-806, OP-807; and OP-790, OP-791, OP-800, OP-801. They executed a Special Power of Attorney in favor of petitioners to obtain a loan using those properties as collateral. The dispute concerns the legal character of that SPA as an agency coupled with interest and the damages recoverable after its revocation. The Civil Code provisions on exemplary damages supply the statutory backdrop for one of the claims.

Respondents Felix M. Bantolo, Antonio O. Adriano, and Eulogio Sta. Cruz, Jr. owned several parcels of land in Tagaytay City, covered by OCT Nos. OP-787, OP-788, OP-789, and OP-799 (Bantolo); OP-793, OP-805, OP-806, and OP-807 (Adriano); and OP-790, OP-791, OP-800, and OP-801 (Sta. Cruz). On April 3, 2000, they executed a Special Power of Attorney in favor of petitioners Albert M. Ching and Romeo J. Bautista, authorizing the latter to borrow money and secure a loan from any bank or financial institution, to mortgage the properties as first mortgage, to receive the loan proceeds, and to account for those proceeds. The SPA referred to an Asian Appraisal Co., Inc. appraisal dated March 24, 1995 for the fair market value of the properties. Without notice to petitioners, respondents executed a Revocation of Power of Attorney effective at the end of business hours on July 17, 2000.

On July 18, 2000, Philippine Veterans Bank approved Ching's loan application in the amount of P25 million for a term of five years, subject to conditions: third-party mortgages were acceptable, but within one year all mortgaged properties had to be in the name of American Boulevard or Albert Ching; submission of new tax declarations free from claimants; submission of DENR certification/clearance that the properties were not subject to forest reserve; and a right of way at least six meters wide usable as an actual access road. On July 31, 2000, Ching informed respondents of the approval. Sometime in the first week of August 2000, petitioners learned of the revocation. Petitioners then sent respondents a letter demanding that they comply with the agreement by annulling the revocation.

On September 8, 2000, petitioners filed before the Regional Trial Court of Quezon City a Complaint for Annulment of Revocation of SPA, Enforcement of SPA and/or interest in the properties covered by the SPA, and Damages. They later amended the Complaint, docketed as Q00-41851, to include an alternative prayer to be declared owners of one-half of the properties. Petitioners alleged that the SPA was irrevocable because it was a contract of agency coupled with interest. According to them, they agreed to defray the costs and expenses of processing the loan because respondents promised them an equal share in the loan proceeds or the subject properties.

In their Answer, respondents contended that petitioners had no cause of action. Respondents alleged that they executed the SPA because petitioners assured them that they could obtain a P50 million loan and that P30 million would be given to respondents within one month. When the one-month period expired, respondents complained to Ching and asked him to advance P500,000.00. Ching acceded on the condition that they hand over the original titles for safekeeping. Respondents then asked Ching to give them P1 million in exchange for the titles; Ching agreed, and they gave him the titles. He never gave them the money. They asked him to return the titles, but he refused. Later, they were informed that the loan was approved in the amount of P25 million and that their share would be P6 million. Because this was not the amount agreed upon, respondents revoked the SPA and demanded the return of the titles.

The records showed that respondents barely knew Ching, that Bautista introduced Ching to Bantolo, and that no evidence other than Ching's self-serving testimony showed an agreement to give petitioners one-half of the properties. The CA found that the receipts presented by petitioners were not shown to have been incurred in relation to the loan application, with the majority incurred abroad and in connection with Ching's business dealings. The CA also found that respondents revoked the SPA because they were not satisfied with the amount of the loan approved, although the revocation was done in bad faith.

• Conditional Judgment: Petitioners contended that the CA's directive that the actual damages of P500,000.00 be deducted from the amount to be loaned was a conditional judgment and therefore null and void.
• One-Half Share: Petitioners claimed that they were entitled to one-half of the subject properties.
• Reimbursement of Expenses: Petitioners claimed that they were entitled to reimbursement of all expenses incurred in procuring the loan.
• Exemplary Damages: Petitioners imputed error to the CA in deleting the award of exemplary damages, contending that respondents revoked the SPA in a malevolent and oppressive manner.

• Nature of Judgment: Respondents argued that the judgment was not conditional because the CA categorically declared them liable to return the P500,000.00 to Ching.
• No Agreement on One-Half Share: Respondents insisted that they never agreed to give petitioners one-half of their respective properties.
• No Reimbursement: Respondents argued that they never agreed to reimburse Ching all expenses incurred in obtaining the loan; Ching admitted in court that he agreed to shoulder all the expenses.
• Exemplary Damages: Respondents argued that petitioners were not entitled to exemplary damages because, when respondents revoked the SPA, they did not act in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

• Conditional Award of Actual Damages: Whether the CA erred in ruling that petitioners' recovery of actual damages in the amount of P500,000.00 be made contingent upon the obtention of a loan through the subject SPA, which respondents refused to honor and revoked in bad faith and illegally.
• One-Half Share in Properties: Whether the CA erred in ruling that petitioners are not entitled to one-half of respondents' properties despite the RTC's finding that the consideration therefor was that petitioners would pay for the loan to be obtained using respondents' properties and the RTC's finding that Ching failed to utilize the loan proceeds for his business plan and to recover his share in the expenses he advanced.
• Reimbursement of Loan Expenses: Whether the CA erred in ruling that the expenses incurred and to be incurred by petitioners in applying for a loan through the SPA should be borne by petitioners despite the alleged agreement to the contrary between petitioners and respondents, the existence of which was found by the RTC.
• Exemplary Damages: Whether the CA erred in ruling that respondents are not liable to pay exemplary damages for revoking the SPA in bad faith on the reasoning that respondents did not act in a wanton, fraudulent, reckless, oppressive, or malevolent manner because they were dissatisfied with the amount of the loan approved.

• Conditional Award of Actual Damages: Yes. The CA erred in making the award conditional; the P500,000.00 advanced by Ching must be paid as actual damages without condition, whether or not a loan is obtained.
• One-Half Share in Properties: No. Petitioners are not entitled to one-half of the properties; no evidence other than Ching's self-serving testimony showed an agreement to convey such share.
• Reimbursement of Loan Expenses: No. Petitioners are not entitled to reimbursement; Ching testified that he agreed to shoulder all expenses and took the risk of not recovering them if the loan was not granted.
• Exemplary Damages: No. Exemplary damages are not recoverable as a matter of right and are awarded only if the guilty party acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner; respondents revoked the SPA due to dissatisfaction with the loan amount, not in such manner.

• Conditional Award of Actual Damages: The SPA executed by respondents in favor of petitioners was a contract of agency coupled with interest because their bilateral contract depended upon the agency; it could not be revoked at the sole will of the principal. The remaining question was the extent of respondents' liability and the damages. Ching had advanced P500,000.00 to respondents in exchange for possession of the titles. Because the loan application with PVB did not push through, respondents were liable to return that amount. The CA's decree that the amount "should be deducted from the amount to be loaned" made the judgment conditional. The return of the P500,000.00 should not depend on the happening of a future event. Whether or not a loan was obtained, respondents were liable to pay the P500,000.00 as actual damages; the dispositive portion was therefore modified to remove the condition.
• One-Half Share in Properties: The CA's denial of a one-half share was affirmed. It was far from human experience for a person to give half of his property to another whom he barely knew. The records showed that respondents did not know Ching; Bautista introduced him to Bantolo. Respondents agreed to give the SPA because they were informed that Ching could help them secure a loan using their properties as collateral. They agreed to share in the loan proceeds, not in the property. Other than Ching's self-serving testimony, no evidence showed that respondents agreed to give one-half of the properties to petitioners.
• Reimbursement of Loan Expenses: Ching testified that he agreed to shoulder all the expenses. He stated that when he asked respondents about the expenses, they told him they had no money to pay him, so he shouldered all the expenses and took the risk of doing so; he also stated that he would not be able to recover all his expenses if the loan was not granted by PVB. For this reason, petitioners were not entitled to reimbursement. Besides, petitioners failed to show that the receipts submitted as evidence were incurred in relation to the loan application; the majority were incurred abroad and in connection with Ching's business dealings.
• Exemplary Damages: Article 2229 of the Civil Code provides that exemplary damages may be imposed by way of example or correction for the public good, in addition to moral, temperate, liquidated, or compensatory damages. They are not recoverable as a matter of right. They are awarded only if the guilty party acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. Although the revocation was done in bad faith, respondents did not act in such a manner; they revoked the SPA because they were not satisfied with the amount of the loan approved. Petitioners were therefore not entitled to exemplary damages.

• Agency Coupled with Interest — A contract of agency coupled with interest is one where the bilateral contract depends upon the agency, such that the agency cannot be revoked at the sole will of the principal. The Court applied this doctrine to the SPA executed by respondents in favor of petitioners, holding that it was an agency coupled with interest and that its revocation was invalid. The Court nevertheless proceeded to determine the extent of liability and damages.
• Damages Require Proof of Factual Basis and Connection — For damages to be awarded, the claimant must satisfactorily prove during trial that the damages have a factual basis and that the defendant's acts have a connection to them. The Court applied this requirement in denying the claims for reimbursement of expenses and one-half of the properties, and in limiting the actual damages to the P500,000.00 advanced by Ching.
• Actual Damages May Not Be Made Contingent on a Future Event — A judgment awarding actual damages should not make the return of a fixed amount depend on the happening of a future event. The Court modified the CA's award because the CA had ordered the P500,000.00 to be deducted from the amount to be loaned, making the judgment conditional; respondents were liable to pay the amount whether or not a loan was obtained.
• Exemplary Damages Not Recoverable as a Matter of Right — Under Civil Code Articles 2229, 2232, and 2233, exemplary damages are imposed by way of example or correction for the public good, are not recoverable as a matter of right, and in contracts and quasi-contracts may be awarded only if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. The Court denied exemplary damages because, although the revocation was in bad faith, respondents did not act in such a manner; they revoked the SPA because they were dissatisfied with the approved loan amount.
• Self-Serving Testimony Insufficient to Prove Agreement to Convey Property — A claim to one-half of real property cannot be established by the claimant's self-serving testimony alone. The Court denied petitioners' claim because no evidence other than Ching's self-serving testimony showed that respondents agreed to give them one-half of the properties.
• Reimbursement Requires Proof That Expenses Were Incurred for the Purpose Claimed — A claim for reimbursement fails where the claimant admitted agreeing to shoulder the expenses and failed to show that the receipts were incurred in relation to the loan application. The Court denied reimbursement because Ching took the risk of shouldering all expenses and the receipts were mostly incurred abroad and in connection with his business dealings.

• "It is essential that for damages to be awarded, a claimant must satisfactorily prove during the trial that they have a factual basis and that the defendant’s acts have a casual connection to them" — The Court opened with this evidentiary requirement, which frames its denial of unproved claims for reimbursement, one-half ownership, and exemplary damages.
• "There is no question that the SPA executed by respondents in favor of petitioners is a contract of agency coupled with interest." — This states the core characterization of the SPA, which made its revocation invalid at respondents' sole will.
• "Obviously, the language employed by the CA made the judgment conditional. The return of the amount of P500,000.00 should not depend on the happening of a future event." — This is the ratio for modifying the CA's award of actual damages to make it unconditional.
• "In this case, we agree with the CA that although the revocation was done in bad faith, respondents did not act in a wanton, fraudulent, reckless, oppressive or malevolent manner." — This is the basis for denying exemplary damages despite the bad-faith revocation.

• Republic of the Philippines vs. Judge Evangelista, 504 Phil. 115, 121 (2005) — Cited for the rule that an agency coupled with interest cannot be revoked at the sole will of the principal; the Court relied on it in characterizing the SPA as an agency coupled with interest.
• Pascua vs. Heirs of Segundo Simeon, 244 Phil. 1, 6 (1988) — Cited in support of the ruling that the return of the P500,000.00 should not depend on the happening of a future event, which justified modifying the CA's conditional award.

• Article 2229, Civil Code — Exemplary or corrective damages are imposed by way of example or correction for the public good, in addition to moral, temperate, liquidated, or compensatory damages. The Court cited this in denying exemplary damages.
• Article 2233, Civil Code — Exemplary damages cannot be recovered as a matter of right; the court decides whether or not they should be adjudicated. The Court applied this in holding that exemplary damages were not recoverable as of right.
• Article 2232, Civil Code — In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. The Court found respondents did not act in such a manner, so no exemplary damages were awarded.
• Rule 45, Rules of Court — The petition was filed as a Petition for Review on Certiorari under Rule 45, the procedural vehicle by which the case reached the Supreme Court.

Antonio T. Carpio (Acting Chief Justice and Chairperson), Arturo D. Brion, Jose Portugal Perez, and Estela M. Perlas-Bernabe.