Siasat vs. Intermediate Appellate Court

A general agent appointed in broad terms to transact with "any entity or organization, private or government" is entitled to the stipulated commission on a perfected and partly executed sale, and the principal cannot defeat that entitlement by revoking the agency after the first delivery and then dealing directly with the buyer. However, where the evidence shows the commission on the first delivery was fully paid and no bad faith attended the revocation, awards for unpaid balance, moral damages, and attorney's fees cannot stand.

Petitioners Primitivo and Marcelino Siasat owned and operated United Flag Industry, a manufacturer of Philippine flags. Respondent Teresita Nacianceno was a private individual who facilitated government procurement transactions. In 1974, the Department of Education and Culture allocated ₱1,000,000.00 for the purchase of national flags for public schools, a procurement that was undertaken without public bidding. The respondent's role was to secure and hand-carry the necessary indorsements from education and budget officials to expedite the approval and release of purchase orders. The legal framework governing the relationship between the parties was the Civil Code provisions on agency and the parol evidence rule under the Revised Rules of Court.

Sometime in 1974, respondent Teresita Nacianceno succeeded in convincing officials of the Department of Education and Culture to purchase, without public bidding, one million pesos worth of national flags for use in public schools throughout the country. She expedited the approval process by hand-carrying indorsements from one office to another, so that by the first week of September 1974, all legal requirements had been complied with except the release of the purchase orders. When the Chief of the Budget Division informed her that purchase orders could not be released unless a formal offer to deliver flags according to required specifications was first submitted for approval, she contacted the owners of United Flag Industry on September 17, 1974. The following day, after the transaction was discussed, petitioner Primitivo Siasat signed a document (Exhibit A) appointing Nacianceno as representative of United Flag Industry to deal with any entity or organization, private or government, in connection with the marketing of their flag products, entitling her to a 30% commission.

On October 16, 1974, the first delivery of 7,933 flags was made. The next day, October 17, 1974, Siasat revoked Nacianceno's authority to represent United Flag Industry. After receiving payment of ₱469,980.00 on October 23, 1974 for the first delivery, Siasat tendered ₱23,900.00, or five percent of the amount received, to the respondent as commission. She protested, insisting on the 30% commission agreed upon, but was prevailed upon to accept the amount upon the petitioners' assurance that they would pay the full commission after delivering the other half of the order. A second delivery of 7,833 flags was made on November 6, 1974.

When Nacianceno later learned that Siasat had already received payment for the second delivery, she confronted the petitioners, who vehemently denied receipt of payment, claimed she had no participation in the second delivery, and asserted that the agency had already been revoked. Nacianceno originally filed a complaint with the Complaints and Investigation Office in Malacañang, but when nothing came of it, she filed an action in the Court of First Instance of Manila to recover the 25% balance on the first delivery and 30% commission on the second delivery. The trial court found in her favor, a finding affirmed in toto by the Intermediate Appellate Court. The petitioners then elevated the matter to the Supreme Court via petition for review.

• Scope of Authority: Petitioner argued that the authorization merely stated that respondent could deal with any entity in connection with the marketing of their products for a 30% commission, and that there was no specific authorization for the sale of 15,666 Philippine flags to the Department of Education and Culture.
• Two Separate Transactions: Petitioner maintained that there were two separate transactions, evidenced by 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 — so that the revocation of agency effected on October 17, 1974 foreclosed respondent's claim to 30% commission on the second transaction.
• Absence of Bad Faith: Petitioner contended that there was no basis for the award of attorney's fees and moral damages because there was no showing of bad faith on their part; rather, it was respondent who showed bad faith in denying having received her commission on the first delivery. Petitioner's counterclaim should therefore have been granted.
• Fraudulent Representation: Petitioner alleged that the contract of agency 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 she would be dealing with entities in the Visayas.

• General Agency: Respondent argued that the broad language of the authorization (Exhibit A) constituted a general agency covering the transaction with the Department of Education and Culture.
• Single Transaction: Respondent contended that the two purchase orders and deliveries were components of a single transaction, as evidenced by the original ₱1,000,000.00 allocation for the purchase of national flags, which was merely released in tranches.
• Earned Commission: Respondent maintained that the revocation of agency came too late to deprive her of the commission on the second delivery, the contract of sale having already been perfected and partly executed.
• Unpaid Balance: Respondent claimed that petitioners paid her only 5% on the first delivery and that she was entitled to the remaining 25% balance, as well as the full 30% commission on the second delivery.
• Forgery of "Fully Paid" Notation: Respondent contested the "Fully Paid" notation on the authorization letter (Exhibit 5-A) as a forgery, supported by expert testimony from the National Bureau of Investigation.

• Nature of Agency: Whether the respondent was a general agent authorized to transact the sale of flags to the Department of Education and Culture, or merely a special agent without authority for that specific transaction.
• Single vs. Separate Transactions: Whether the two purchase orders and two deliveries constituted one continuous transaction or two separate and distinct transactions.
• Effect of Revocation on Commission: Whether the revocation of the agency on October 17, 1974 barred the respondent's claim to commission on the second delivery.
• Full Payment on First Delivery: Whether the commission on the first delivery was fully paid, as evidenced by the "Fully Paid" notation on the authorization letter.
• Moral Damages and Attorney's Fees: Whether the awards of moral damages and attorney's fees were proper.

• Nature of Agency: Yes. The respondent was a general agent, the authorization having employed general words with no restrictions as to manner or place of execution, covering negotiations leading to and execution of a contract of sale with any entity or organization.
• Single vs. Separate Transactions: One transaction. The evidence showed that the ₱1,000,000.00 allocation was a single budget item released in tranches, and the two purchase orders and deliveries were merely components of one procurement process, not separate contracts.
• Effect of Revocation on Commission: No, revocation did not bar the claim. The revocation came too late, the contract of sale having been already perfected and partly executed; a principal cannot deprive an agent of earned commission by revoking the agency and dealing directly with the buyer.
• Full Payment on First Delivery: Yes. The commission on the first delivery was fully paid, as evidenced by the respondent's sworn statement demanding only commission on the second delivery, her lawyer's demand letter referencing only the second delivery, and the "Fully Paid" notation on the authorization letter, the forgery of which was not proven.
• Moral Damages and Attorney's Fees: No. There was no evidence of bad faith in the revocation of the agency, and the respondent did not come to court with completely clean hands; the petitioners had reason to sincerely believe they could legally revoke the agency and did not have to pay commission on the second delivery.

• Nature of Agency: The Court classified agents into three categories — universal, general, and special — citing Padilla's Civil Law The Civil Code Annotated. A general agent is one authorized to do all acts pertaining to a business of a certain kind or at a particular place, with authority either expressly conferred in general terms or made general by the usages, customs, or nature of the business. The authorization document (Exhibit A) used general words — "to represent United Flag Industry to deal with any entity or organization, private or government in connection with the marketing of our products" — with no restrictions as to manner or place. The power granted was so broad that it covered negotiations leading to and execution of a contract of sale with any entity. The Court rejected the petitioners' claim of fraudulent representation, noting that if they truly believed the agency was limited to the Visayas or excluded the Department, they could have so stipulated; their failure to do so after fifteen years in the business was incredible. The parol evidence rule under Section 7, Rule 130 of the Revised Rules of Court precluded evidence of terms other than the contents of the written agreement, and no exception applied.

• Single vs. Separate Transactions: The Court found that the evidence established a single transaction. The indorsement of Assistant Executive Secretary Roberto Reyes to the Budget Commission on September 3, 1974 (Exhibit C) stated that out of the total budget for fiscal year 1975, ₱1,000,000.00 was for the purchase of national flags. The Financial and Work Plan Request for Allotment (Exhibit F) submitted by Secretary Juan Manuel divided the allocation into three quarterly releases. Later correspondence (Exhibits D and E) showed that the first allotment of ₱500,000.00 was released during the second quarter, and Secretary Manuel requested the immediate release of programmed allotments for the third and fourth quarters due to the necessity of furnishing all public schools with flags. These circumstances explained why two purchase orders and deliveries were made on one transaction. The petitioners' evidence did not prove separate contracts: Exhibit 6 was a general indorsement with no reference to the number of flags or amount of funds, and Exhibit 7 was a letter request for "similar authority" written by Acting Secretary Dr. Narciso Albarracin, who may not have known the real nature of the transaction. Had the contracts been separate, the entire government supply procurement process would have been repeated; instead, mere indorsements for release of funds and authorization for the next purchase were issued.

• Effect of Revocation on Commission: Because only one transaction was involved, the revocation of agency on October 17, 1974 could not prevent the respondent from earning her commission on the second delivery. The revocation came too late, the contract of sale having already been perfected and partly executed. Citing Macondray & Co. vs. Sellner (33 Phil. 370, 377), the Court held that where a real estate agent had already earned commissions at the time fixed for termination of negotiations, the principal could not deprive the agent thereof by arbitrarily declining to execute the contract. Citing Infante vs. Cunanan (93 Phil. 691), the Court reiterated that a principal cannot deprive an agent of agreed commission by cancelling the agency and thereafter dealing directly with the buyer. The appellate court's citation of Heimbrod et al. vs. Ledesma (C.A. 49 O.G. 1507) was likewise sustained, invoking the equitable principle of estoppel against allowing one to benefit from another's services at the latter's expense.

• Full Payment on First Delivery: The Court found that the commission on the first delivery was fully paid. When Nacianceno asked the Malacañang Complaints and Investigation Office to help collect her commission, her sworn statement referred exclusively to the 30% commission on the second delivery, emphatically stating that "now" her demand was for the commission on the second release of ₱469,980.00. Her lawyer's demand letter dated November 13, 1984 likewise asked only for the commission due from the second delivery. The omission of any reference to an alleged unpaid balance on the first delivery — an amount only slightly less than what was claimed — was too glaringly remiss to be an oversight. Additionally, the authorization letter (Exhibit 5-A) bore the respondent's signature with the handwritten notation "Fully Paid" above it. The trial court's finding of forgery, based solely on the variance between "Tessie Nacianceno" in thirteen documents and "T. Nacianceno" on the questioned document, was inadequate; a variance in signature style is not conclusive proof of forgery. The Court applied the principle that forgery cannot be presumed but must be proved, and where expert testimony is conflicting — the PC senior document examiner testified against forgery while the NBI junior examiner testified for it — the circumstances favored the petitioners. The notation was a mere acknowledgment, and signing with an initial for the given name and surname in full was not improbable.

• Moral Damages and Attorney's Fees: The Court ruled that the award of ₱25,000.00 as moral damages was without basis. Fraud and bad faith are not to be presumed but must be alleged and proven with sufficient facts. There was no evidence that the revocation of the agency was deliberately effected to avoid payment of commission; the petitioners' use of revocation as a defense in court did not per se constitute bad faith. Citing R & B Surety & Insurance Co., Inc. vs. Intermediate Appellate Court (129 SCRA 736), moral damages cannot be awarded in the absence of a wrongful act or omission or of fraud or bad faith. The award of ₱25,000.00 as attorney's fees, predicated on Article 2208, Paragraph 2 of the Civil Code, was likewise ruled out because the respondent did not come to court with completely clean hands, and the petitioners had reason to sincerely believe they could legally revoke the agency and deal directly with education officials.

• Classification of Agents — An agent may be universal, general, or special. A universal agent is authorized to do all acts which can lawfully be delegated. A general agent is authorized to do all acts pertaining to a business of a certain kind or at a particular place, with authority either expressly conferred in general terms or made general by usages, customs, or the nature of the business. A special agent is authorized to do some particular act or to act upon some particular occasion, usually in accordance with specific instructions or under limitations necessarily implied from the nature of the act. In this case, the broad language of Exhibit A — authorizing respondent "to deal with any entity or organization, private or government in connection with the marketing of our products" — established a general agency covering the flag sale to the Department.

• Earned Commission Not Defeated by Revocation — A principal cannot deprive an agent of commission already earned by revoking the agency and thereafter dealing directly with the buyer. Where the contract of sale has been perfected and partly executed, revocation comes too late to defeat the agent's entitlement. Applied here: the revocation on October 17, 1974, after the first delivery, could not bar the respondent's 30% commission on the second delivery, as the sale was one continuous transaction already perfected.

• Parol Evidence Rule — Under Section 7, Rule 130 of the Revised Rules of Court, when the terms of an agreement have been reduced to writing, it is considered as containing all such terms, and no evidence of terms other than the contents of the writing may be admitted, except in specified cases. Applied here: the petitioners could not introduce extrinsic evidence to limit the agency to the Visayas or exclude the Department, as no exception to the rule applied.

• Forgery Must Be Proved, Not Presumed — Forgery cannot be presumed; it must be proved. Where conflicting expert testimony exists and surrounding circumstances favor authenticity, forgery is not established. A variance in signature style alone is not conclusive proof of forgery. Applied here: the trial court's finding of forgery based solely on the difference between "Tessie Nacianceno" and "T. Nacianceno" was inadequate, and the conflicting expert testimony was resolved in favor of the petitioners.

• Bad Faith Must Be Alleged and Proven — Fraud and bad faith are matters not to be presumed but must be alleged with sufficient facts and proven. Facts justifying the inference of absence of good faith must be alleged and proven to support an award of damages. Applied here: no evidence showed that the revocation was deliberately effected to avoid paying commission; use of revocation as a litigation defense did not per se constitute bad faith.

• "The principal cannot deprive his agent of the commission agreed upon by cancelling the agency and, thereafter, dealing directly with the buyer." — This passage, citing Infante vs. Cunanan, articulates the core doctrine protecting an agent's earned commission against strategic revocation by the principal, and is the controlling rationale for sustaining the respondent's entitlement to commission on the second delivery.

• "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." — This sentence captures the Court's classification of the respondent as a general agent based on the broad, unrestricted language of the authorization, which is central to resolving the scope-of-authority issue.

• "Forgery cannot be presumed. It must be proved." — This formulation states the burden-of-proof standard for forgery that the Court applied to reject the trial court's finding of forgery on the "Fully Paid" notation, a principle frequently invoked in both civil and criminal cases involving questioned documents.

• "Moral damages cannot be awarded in the absence of a wrongful act or omission or of fraud or bad faith." — This passage defines the requisite predicate for moral damages, which the Court found absent in the petitioners' revocation of the agency, leading to the deletion of the ₱25,000.00 award.

• Macondray & Co. vs. Sellner, 33 Phil. 370, 377 — Controlling precedent followed for the proposition that an agent who has already earned commissions at the time of termination cannot be deprived thereof by the principal's arbitrary action in declining to execute the contract of sale.
• Infante vs. Cunanan, 93 Phil. 691 — Followed for the doctrine that a principal cannot deprive an agent of earned commission by cancelling the agency and dealing directly with the buyer.
• Heimbrod et al. vs. Ledesma, C.A. 49 O.G. 1507 — Followed for the equitable principle of estoppel, upholding payment of compensation for services rendered so that one may not benefit from another's efforts at the latter's expense.
• Borromeo vs. Court of Appeals, 131 SCRA 318, 326 — Cited for the principle that where evidence gives rise to two probabilities, one consistent with innocence and another indicative of guilt, that favorable to the accused should be considered; applied by analogy to resolve conflicting expert testimony on forgery.
• Bacolod-Murcia Milling Co., Inc. vs. First Farmers Milling Co., Inc., Etc., 103 SCRA 436 — Cited for the rule that fraud and bad faith must be alleged and proven, not presumed, to support an award of damages.
• R & B Surety & Insurance Co., Inc. vs. Intermediate Appellate Court, 129 SCRA 736 — Cited for the doctrine that moral damages cannot be awarded absent a wrongful act or omission or fraud or bad faith.
• Pirovano et al. vs. De la Rama Steamship Co., 96 Phil. 335 — Cited in connection with Article 2208, Paragraph 2 of the Civil Code as basis for the award of attorney's fees, which the Court ultimately deleted.

• Section 7, Rule 130, Revised Rules of Court — The parol evidence rule, providing that when the terms of an agreement have been reduced to writing, the writing is considered as containing all such terms, and no evidence of terms other than the contents of the writing may be admitted except in specified cases. Applied to bar the petitioners from introducing extrinsic evidence limiting the scope of the agency beyond the broad terms of Exhibit A.
• Article 2208, Paragraph 2, Civil Code — Provides that attorney's fees may be awarded as damages when the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interests. Cited by the lower courts as basis for the attorney's fees award, which the Supreme Court deleted upon finding that the respondent did not come to court with clean hands and the petitioners had reason to believe they acted lawfully.

Relova, De la Fuente, and Patajo, JJ., concurred. Melencio-Herrera, J., was on leave. Plana, J., took no part. Teehankee, J., concurred with the directive that a copy of the decision be furnished the Commission on Audit for appropriate remedial action.