Doles vs. Angeles

A contract of sale predicated on a debt is void for lack of consideration where both the seller and the buyer acted merely as agents for their respective principals, such that neither agent was privy to the underlying loan contract. The sale likewise fails where the alternative consideration—an assumption of mortgage—cannot be sustained because the record is bereft of evidence that the seller held any ownership interest in the property conveyed.

Respondent Ma. Aura Tina Angeles was engaged in the business of lending money using funds supplied by her capitalist, Arsenio Pua. Petitioner Jocelyn B. Doles referred friends who needed loans to respondent, receiving a commission on the transactions. The property subject of the disputed Deed of Absolute Sale was covered by Transfer Certificate of Title No. 382532, which on its face showed the registered owner as Household Development Corporation, with an entry indicating a special power of attorney in favor of petitioner covering the share of Teodorico Doles. The property was mortgaged to the National Home Mortgage Finance Corporation (NHMFC).

On April 1, 1997, Ma. Aura Tina Angeles filed a complaint for Specific Performance with Damages against Jocelyn B. Doles before the RTC, Branch 21, Manila, docketed as Civil Case No. 97-82716. Angeles alleged that Doles was indebted to her in the amount of ₱405,430.00, representing the principal and interest of a personal loan, and that on October 5, 1996, by virtue of a Deed of Absolute Sale, Doles ceded to Angeles a 42-square-meter parcel of land with improvements located at Camella Townhomes Sorrente in Bacoor, Cavite, covered by TCT No. 382532, in order to satisfy that loan. Angeles further alleged that the property was mortgaged to NHMFC to secure Doles's loan of ₱337,050.00, and that as a condition for the sale, Angeles agreed to assume the unpaid balance of the mortgage and pay the monthly amortization of ₱4,748.11 for the remainder of a 25-year period beginning September 3, 1994. Angeles claimed that upon verification with NHMFC, she discovered Doles had incurred arrearages of ₱26,744.09, inclusive of penalties and interest, and that despite repeated demands, Doles refused to cooperate in executing the documents required by NHMFC to effect the transfer of title. Angeles also alleged that Doles collected the ₱3,000.00 rental for January 1997 and refused to remit it.

Doles, while admitting some allegations, denied that she borrowed money from Angeles. She averred that from June to September 1995, she referred friends—Zenaida Romulo, Theresa Moratin, Julia Inocencio, Virginia Jacob, and Elizabeth Tomelden—to Angeles, whom she knew to be in the business of lending money through her capitalist Arsenio Pua. According to Doles, her friends borrowed money from Angeles and issued personal checks in payment, but the checks bounced for insufficiency of funds. Doles stated that despite her efforts to assist Angeles in collecting from the borrowers, they could no longer be located, and Angeles became furious and threatened to file a criminal case against her. Doles claimed she was forced to issue eight checks amounting to ₱350,000.00 to answer for the bounced checks of the borrowers she had referred, and that she had informed Angeles the checks were not sufficiently funded before Angeles deposited them. Doles further alleged that Angeles then threatened to initiate a criminal case for violation of Batas Pambansa Blg. 22, and that she was forced to execute the Absolute Deed of Sale over her property to avoid criminal prosecution. She contended that the deed had no valid consideration, that she did not appear before a notary public, and that the Community Tax Certificate number on the deed was not hers.

The RTC dismissed the complaint, holding that the sale was void for lack of cause or consideration, noting that Angeles's own admission that the borrowers were Doles's friends and that the checks were issued by those borrowers negated the cause of the contract of sale. The RTC also observed that the property was not solely owned by Doles, as the TCT showed only a special power of attorney in her favor covering the share of Teodorico Doles. The CA reversed, concluding that Doles was the real borrower who "re-lent" the money to her friends, citing four circumstances: the friends never presented themselves to Angeles; the money passed through the parties' bank accounts; Doles admitted she was "re-lending" the money for profit; and the documentary evidence showed the friends considered Doles their creditor. The CA held that the alleged intimidation did not vitiate consent, as a threat to enforce a just or legal claim through competent authority does not vitiate consent under Article 1335 of the Civil Code. On motion for reconsideration, Doles argued that Angeles had admitted in open court that she acted only as agent of Arsenio Pua and thus had no legal capacity to sue, and that Doles's father, who co-owned the property, was not impleaded. The CA denied the motion.

• Agency Relationship: Petitioner maintained that she was merely the agent or representative of the alleged debtors—her friends whom she referred to respondent—and therefore was not a party to the loan contract. Since the Deed of Absolute Sale was predicated on that pre-existing debt, it was void for lack of consideration.
• Respondent's Lack of Legal Capacity: Petitioner argued that respondent categorically admitted in open court that she acted only as agent or representative of Arsenio Pua, the principal financier, and thus had no legal capacity to sue petitioner directly.
• Co-owner Not Impleaded: Petitioner contended that her father, who co-owned the subject property, was not impleaded as a defendant and was not indebted to respondent, so she could not be compelled to sign documents to effect the transfer of ownership over the entire property.
• Intimidation: Petitioner alleged that she was forced by respondent to execute the Absolute Deed of Sale to avoid criminal prosecution, and that the deed had no valid consideration.
• Title Anomalies: Petitioner pointed out that the Community Tax Certificate number on the deed was not hers, and that she did not appear before a notary public.

• Petitioner as Real Borrower: Respondent argued that petitioner was the real borrower who "re-lent" the money borrowed from respondent to other individuals for profit, citing that the supposed friends never presented themselves to respondent, the money passed through the parties' bank accounts, petitioner admitted re-lending, and documentary evidence showed the friends considered petitioner their creditor.
• Valid Consideration: Respondent maintained that the Deed of Absolute Sale was supported by valid consideration—the sum of ₱405,430.00 representing the debt petitioner owed respondent.
• Assumption of Mortgage: Respondent averred that the parties had agreed that respondent would assume the balance of the mortgage loan with NHMFC as a condition for the conveyance, which constituted a separate and valid consideration.
• No Vitiated Consent: Respondent argued that any alleged threat or intimidation did not vitiate consent, as a threat to enforce a just or legal claim through competent authority does not vitiate consent under Article 1335 of the Civil Code.

• Debtor Status: Whether the petitioner can be considered as a debtor of the respondent.
• Agent's Authority to Collect: Whether an agent who was not authorized by the principal to collect debt on his behalf could directly collect payment from the debtor.
• Validity of Consideration: Whether the contract of sale was executed for a valid cause or consideration.

• Debtor Status: No. Petitioner was not a debtor of respondent because both parties acted as agents for their respective principals—petitioner for her friends (the actual borrowers) and respondent for Arsenio Pua (the financier)—and thus neither was privy to the loan contract. Both are estopped to deny their agency.
• Agent's Authority to Collect: N/A. The Court did not separately resolve this issue as a distinct question; it was subsumed within the agency analysis establishing that neither party was privy to the loan.
• Validity of Consideration: No. The Deed of Absolute Sale was void for lack of consideration because the purported cause—the debt—was a loan between the parties' principals, not between petitioner and respondent. The alternative consideration—assumption of mortgage—also failed because the TCT was registered in the name of Household Development Corporation, not petitioner, and the TCT had been cancelled.

• Debtor Status: The Court re-examined the factual findings, invoking recognized exceptions to the rule against reviewing factual findings: when the judgment is based on a misapprehension of facts, when the findings of the courts a quo are conflicting, and when the CA manifestly overlooked relevant facts. The CA had relied on four circumstances to conclude that petitioner was the real borrower: (1) the friends never presented themselves to respondent; (2) the money passed through the parties' bank accounts; (3) petitioner admitted "re-lending" the money; and (4) documentary evidence showed the friends considered petitioner their creditor. The Court found each insufficient. On the first point, the CA was incorrect in treating the friends' non-appearance as negating agency; it is sufficient that petitioner disclosed to respondent that she was acting on behalf of her principals, and the law contemplates impersonal dealings where the principal need not personally know or meet the third person. On the second point, the use of the agents' bank accounts is a normal commercial convenience and does not negate agency. On the third point, the manner in which the parties designate the relationship is not controlling; if an act is in its essential nature one of agency, the person is an agent notwithstanding the label used. Critically, the friends issued checks in payment of the loan in the name of Pua, not petitioner—if petitioner were truly re-lending, the checks would have been drawn in her name. Most decisively, respondent herself admitted during cross-examination that the money came from Arsenio Pua and that she was "only representing him." Respondent is estopped to deny that she acted as agent of Pua, her disclosed principal, just as petitioner is estopped to deny that she acted as agent for her friends. Under Article 1868 of the Civil Code, the basis of agency is representation, and agency may be implied from the words and conduct of the parties. Since both parties were agents, neither was privy to the loan contract between their principals, and the sale predicated on that loan was void for lack of consideration.

• Validity of Consideration: The Court examined whether the sale might have been backed by a separate and distinct consideration: respondent's agreement to assume the balance of the mortgage loan with NHMFC. While an assumption of mortgage debt may constitute valid consideration for a sale, the Court found that TCT No. 382532 on its face showed the registered owner as Household Development Corporation—neither petitioner nor her father Teodorico Doles. Although there was an entry showing a special power of attorney in favor of petitioner covering the share of Teodorico Doles, the Court could not infer from this bare notation that petitioner or her father held any direct interest in the property sufficient to validly mortgage or convey it. Moreover, the TCT itself had been "cancelled." Given these anomalies, the Court could not entertain the possibility that respondent agreed to assume the mortgage balance, especially since the record contained no factual finding that petitioner was endowed with any ownership rights to validly mortgage and convey the property. As the complainant who initiated the case, respondent bore the burden of proving the basis of her complaint; having failed to discharge that burden, the sale was declared void for lack of cause. The Court found it unnecessary to address whether duress or intimidation vitiated consent, given the sale's nullity. Additionally, even assuming the mortgage validly existed, the 25-year mortgage period began September 3, 1994, and respondent filed her complaint in 1997—since the 25 years had not lapsed, the prayer to compel execution of transfer documents was premature.

• Agency by Estoppel — One who professes to act as agent for another may be estopped to deny her agency both as against the asserted principal and third persons interested in the transaction. Applied here: both petitioner and respondent disclosed to each other that they were representing someone else—petitioner for her friends (the borrowers) and respondent for Arsenio Pua (the financier)—and both were therefore estopped to deny their agency and the consequent lack of privity with the underlying loan contract.
• Agency by Representation (Article 1868, Civil Code) — The basis of agency is representation. Agency may be implied from the words and conduct of the parties and the circumstances of the case. It is not necessary that the principal personally encounter the third person with whom the agent interacts; the very purpose of agency is to extend the personality of the principal through the facility of the agent.
• Nomenclature Not Controlling in Agency — The manner in which the parties designate the relationship is not controlling. If an act done by one person in behalf of another is in its essential nature one of agency, the former is the agent of the latter notwithstanding he or she is not so called. The question is determined by the fact that one represents and is acting for another.
• Contracts Without Cause Are Void (Articles 1352, 1458, 1471, Civil Code) — Contracts without a cause or consideration produce no effect whatsoever. A contract of sale is null and void where it is without cause or consideration. Applied here: the Deed of Absolute Sale was predicated on a debt between the parties' principals, not between petitioner and respondent, and the alternative consideration (assumption of mortgage) failed for lack of evidence of petitioner's ownership.
• Assumption of Mortgage as Valid Consideration — An assumption of a mortgage debt may constitute a valid consideration for a sale. However, this doctrine could not be applied because the record was bereft of any factual finding that petitioner held ownership rights sufficient to validly mortgage and convey the property.

• "If an act done by one person in behalf of another is in its essential nature one of agency, the former is the agent of the latter notwithstanding he or she is not so called." — This passage articulates the principle that the substance of the relationship, not its label, determines whether agency exists—a key ratio in establishing that both parties were agents and thus not privy to the loan.
• "For an agency to arise, it is not necessary that the principal personally encounter the third person with whom the agent interacts. The law in fact contemplates, and to a great degree, impersonal dealings where the principal need not personally know or meet the third person with whom her agent transacts: precisely, the purpose of agency is to extend the personality of the principal through the facility of the agent." — This passage defines the scope of agency and refutes the CA's reasoning that the borrowers' failure to personally appear before respondent negated the agency relationship.
• "In view of the two agency relationships, petitioner and respondent are not privy to the contract of loan between their principals. Since the sale is predicated on that loan, then the sale is void for lack of consideration." — This is the decisive ratio decidendi connecting the agency findings to the nullity of the sale.

• Cia vs. Phil. Refining Co., 45 Phil. 556 (1923) — Cited for the principle that if an act done by one person in behalf of another is in its essential nature one of agency, the former is the agent notwithstanding the label used, and that agency exists whether the parties understood the exact nature of the relation or not. Followed as controlling authority on the nature of agency.
• Rivera vs. Roman, G.R. No. 142402, September 20, 2005 — Cited for the exceptions to the rule against reviewing factual findings of lower courts, including when the judgment is based on a misapprehension of facts, when findings of the courts a quo are conflicting, and when the CA manifestly overlooked relevant facts. Followed to justify the Court's re-examination of the evidence.
• Bravo-Guerrero vs. Bravo, G.R. No. 152658, July 29, 2005 — Cited for the doctrine that an assumption of mortgage debt may constitute valid consideration for a sale. Distinguished in application because the record lacked evidence of petitioner's ownership.
• Amon Trading Co. vs. Court of Appeals, G.R. No. 158585, December 13, 2005 — Cited for the principle that the basis of agency under Article 1868 is representation. Followed.
• Zulueta vs. Wong, G.R. No. 153514, June 8, 2005 — Cited for the principle that a contract of sale is null and void and produces no effect where it is without cause or consideration. Followed.

• Article 1868, Civil Code — Defines agency as a relationship whereby a person binds himself to render some service or to do something in representation or on behalf of another, with the latter's consent or by his authority. Applied to establish that both petitioner and respondent acted as agents for their respective principals.
• Articles 1869–1872, Civil Code — Provide that agency may be express or implied from the words and conduct of the parties and the circumstances of the case. Applied to find that the agency relationships arose from the parties' conduct and admissions.
• Article 1352, Civil Code — Provides that contracts without cause or consideration produce no effect whatsoever. Applied to declare the Deed of Absolute Sale void.
• Articles 1458 and 1471, Civil Code — Define the contract of sale and provide that a sale is null and void where there is no cause or consideration. Applied to the Deed of Absolute Sale.
• Article 1335, Civil Code — Provides that a threat to enforce one's claim through competent authority, if the claim is just or legal, does not vitiate consent. Cited by the CA but rendered moot by the Court's finding of nullity.
• Articles 1892–1893, Civil Code — Address the appointment of sub-agents and the use of the agent's facilities. Applied to explain that the use of the parties' bank accounts for loan disbursements and payments was consistent with agency.
• Article 2085(3), Civil Code — Requires that the mortgagor be the absolute owner of the property mortgaged. Applied to question the validity of the mortgage given that the TCT was in the name of Household Development Corporation.

Chief Justice Artemio V. Panganiban (Chairperson), Associate Justice Consuelo Ynares-Santiago, Associate Justice Romeo J. Callejo, Sr., and Associate Justice Minita V. Chico-Nazario concurred.