REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE PRIVATIZATION AND MANAGEMENT

OFFICE (PMO), Petitioner, v. ANTONIO V. BAEZ, LUISITA BAEZ VALERA, NENA BAEZ HOJILLA,
AND EDGARDO B. HOJILLA, JR., Respondents

Petition for Review on Certiorari under Rule 45

Nature: Decision1 of the Court of Appeals dated 23 August 2005 affirmed the Order of the Regional Trial
Court (RTC), Branch 1, Bangued, Abra, dated 16 August 2000, that dismissed the complaint of petitioner
Republic of the Philippines, represented by Privatization and Management Office (PMO), for specific
performance, recovery of possession, and damages against respondents Antonio V. Baez, Luisita Baez
Valera, Nena Baez Hojilla and Edgardo B. Hojilla, Jr.

Facts: In 1976, Antonio V. Baez, Luisita Baez Valera, and Nena Baez Hojilla (collectively,
respondents) offered for sale a parcel of land (subject property), with an area of 20,000 sq m in
Barangay Calaba, Bangued, Abra to Cellophil Resources Corporation (CRC).

Pursuant to the offer to sell on 7 December 1981, respondents executed a Letter Agreement irrevocably
giving CRC the option to purchase the subject property, which CRC accepted. The pertinent portion of the
Letter Agreement (hereinafter referred to as Contract), to wit:

1. The purchase price shall be Twenty Pesos xxx per square meter or a total amount of Four Hundred
Thousand Pesos (P400,000.00).

2. The co-owners shall take all necessary steps to cause the CRC Portion to be brought under the
operation of Republic Act No. 496, as amended, and to cause the issuance in their name of the
corresponding original certificate of title, all of the foregoing to be accomplished within a
reasonable time from date hereof. xxx

xxxx

7. The co-owners hereby confirm their agreement and permission to CRC's entry into, construction of
building[s] and improvements, and occupancy of, any portion of the Property, and xxx waive any right of
action they may have against CRC respecting such entry, construction, or occupancy by the latter of any
Portion of the Property.

8. An absolute deed of sale containing the above provisions and standard warranties on
conveyances of real property shall be executed by the co-owners in favor of CRC or its
assignee/s and the same delivered to the latter together with the original certificate of title upon payment
of the purchase price less the advances made by CRC in accordance with Paragraphs 2 and 3
above; provided, that payment shall be made by CRC only upon presentation by the co-owners to
CRC of certificate/s and/or clearances, with corresponding receipts, issued by the appropriate
government office/s or agency/ies to the effect that capital gains tax, real estate taxes on the
Property and local transfer tax and other taxes, fees or charges due on the transaction and/or on
the Property have been paid.

9. This option shall be effective from [the] date of your acceptance as indicated by your conformity below
and for a period of one (1) month from and after CRC shall have been notified in writing by the co-owners
that an original certificate of title has been issued in their names and that they are ready to execute the xxx
deed of sale.3

Respondents asked for several cash advances which reached the total amount of, more or less, Two
Hundred Seventeen Thousand Pesos (P217,000.00), to be deducted from the purchase price of Four
Hundred Thousand Pesos (P400,000.00).

After paying cash advances to respondents, CRC constructed staff houses and introduced improvements on
the subject property.

As respondents would be staying abroad for a time, they executed a Special Power of Attorney
(SPA) in favor of Edgardo B. Hojilla (Hojilla). The SPA authorized Hojilla to perform the following:

1. To take all steps necessary to cause a portion of the lot covered by Tax Declaration No. 40185
in the name of Urbano Baez which is the subject of our "Offer to Sell" to Cellophil Resources
Corporation containing an area xxx to be brought under the operation of Republic Act No. 496, as
amended, and to cause the issuance in our name of the corresponding original certificate of title.

2. To do all acts and things and to execute all papers and documents of whatever nature or kind required for
the accomplishments of the aforesaid purpose.

However, CRC stopped its operation.

The Development Bank of the Philippines and National Development Company took over CRC's operation
and turned over CRC's equity to Asset Privatization Trust (APT), which is a government agency created by
virtue of Proclamation No. 50, as amended.

Upon the expiration of APT's term on 31 December 2000, the government issued Executive Order
(E.O.) No. 323, which created the Privatization and Management Office (PMO).

CRC, is now represented by the Republic of the Philippines through the PMO.
As alleged by petitioner, respondents declared afterwards the subject property as Urbano Baez property,
rented out to third parties the staff houses petitioner constructed, and ordered its guards to prohibit the
petitioner from entering the compound, which impelled petitioner to file a complaint for specific
performance, recovery of possession, and damages against respondents, including Hojilla, on 10 April 2000

The complaint prayed for respondents to surrender and deliver the title of the subject property, and execute
a deed of absolute sale in favor of petitioner upon full payment. It mentioned three letters sent to
respondents on 29 May 1991, 24 October 1991, and 6 July 1999.

Ruling of the RTC

The failure of either [of the] parties to demand performance of the obligation of the other for an
unreasonable length of time renders the contract ineffective.

On 23 June 2000, Hojilla filed a Motion to Dismiss on the grounds that he was not a real party-in-interest
and that the action was barred by the Statute of Limitations, which Motion the RTC granted in an Order
dated 16 August 2000 based on Article 1144(1) of the Civil Code, which bars actions filed beyond
ten (10) years upon the execution of the written contract.

According to the RTC, the letters petitioner sent to respondents were not demands for respondents to
comply with their obligation to deliver the title as to interrupt the running of the prescriptive period

The RTC resolved that because the written contract was executed on 7 December 1981, then the complaint
that was filed more than eighteen (18) years since the contract was executed was beyond the 10-year
prescriptive period.

Within that 18-year period, there was no act on the part of petitioner, whether judicial or
extrajudicial, to interrupt prescription

There were letters addressed to [respondents] but these were not demands for compliance of [respondents']
obligation and which is not sufficient under the law to interrupt the prescriptive period.

Ruling of the Court of Appeals

The Court of Appeals affirmed the ruling of the RTC in a Decision dated 23 August 2005 on the ground that
the complaint was barred by the Statute of Limitations

Record is bereft of evidence that would attest that written extrajudicial demands were sent to respondents.

While petitioner sent demand letters dated 29 May 1991 and 24 October 1991, these demand letters were
not considered as demand letters because the letters simply called the attention of Hojilla to return the
properties and unlock the gates.

As regards the letter dated 6 July 1999, the Court of Appeals ruled that because the letter was addressed
to Hojilla, who was only an attorney-in-fact authorized to register the property, it was not
binding upon the respondents.

The Court of Appeals opined that because the subject property is a patrimonial property of the State when
APT became the controlling stockholder of CRC, prescription may run against the State. Thus, the
reasonable period within which to register the property is three (3) years.

According to the Court of Appeals, the cause of action of petitioner accrued three (3) years from
the time the Contract was executed on 7 December 1981 or, to say the least, on 15 August 1984
when Hojilla sent the acknowledgment letter dated 15 August 1984, at which time it became
clear that respondents could no longer fulfill their obligation.

PETITIONER:

The petitioner argues that although there is a 10-year limitation within which to file a case
based on a written contract, the period was interrupted due to a written acknowledgment of
respondents' obligation and demand by petitioner. The argument is based on Article 1155 of the
Civil Code, which provides that the running of the prescriptive period is interrupted when
there is a written extrajudicial demand by the creditors, and when there is any written
acknowledgment of the debt by the debtor.

The petitioner referred to the letter sent by Hojilla to the former dated 15 August 1984, and letters given by
petitioner to Hojilla dated 29 May 1991, 24 October 1991, and 6 July 1999. In the letter dated 15 August
1984, respondents affirmed their undertaking that they will claim full payment of the property
upon presentation of a clean title and the execution of the Absolute Deed of Sale, which reads,
"[t]he Baez heirs will only claim for the full payment of the property upon presentation of a
clean title and execution of a Deed of Sale signed by the heirs."10

RESPONDENTS:

Petitioner failed to act either judicially or extrajudicially to effectively interrupt the running of the
prescriptive period. Thus, the complaint must be dismissed for having been extinguished by the Statute of
Limitations
SC RULING : 15 August 1984 letter is an acknowledgment of respondents' commitment under the Contract.

The letter served to update petitioner of the status of the subject property's title, an obligation agreed upon
by the parties in the Contract.

Therefore, the letter dated 15 August 1984 served as a written acknowledgment of debt or obligation of
respondents.

The letters dated 29 May 1991 and 24 October 1991 are deemed
demand letters as contemplated under Article 1155. They are demand letters to enforce
respondents' obligation under the Contract, which is to cede possession to petitioner. The letters interrupted
the running of the prescriptive period which commenced to run anew.
Petitioner's letter dated 6 July
Compared to the letters dated 29 May and 24 October 1991, which demanded Hojilla to surrender
possession of the subject property, this time, in petitioner's letter to Hojilla dated 6 July 1999, petitioner
demanded Hojilla to produce the title of the subject property.

However, despite the fact that the letter was a clear demand of the nature contemplated by law that would
interrupt the prescriptive period,

Court of Appeals found that:

(1) the letter did not effectively interrupt the prescriptive period because the complaint had long
prescribed;

(2) the letter was addressed to the wrong party; and,

finally, (3) the letter did not bear any proof of service or receipt.

SC: DOES NOT AGREE.

Hojilla's SPA - refering to the SPA, which granted the authority of Hojilla.

Contrary to the findings of the lower court, the present case is a case of an
EXPRESS AGENCY, where, Hojilla, the agent, binds himself to represent
another, the principal, who are herein respondents, with the latter's express
consent or authority.
In a contract of agency, the agent acts for and in behalf of the principal on matters within the
scope of the authority conferred upon him, such that, the acts of the agent have the same legal
effect as if they were personally done by the principal.

Because there is an express authority granted upon Hojilla to represent the respondents as
evidenced by the SPA, Hojilla's actions bind the respondents.

As agent, the representations and guarantees of Hojilla are considered representations and
guarantees of the principal.

This is the principle of agency by promissory estoppel . We refer to the evidence on

record. It was Hojilla who administered and/or managed the subject property. 21 Based on Hojilla's letter
dated 15 August 1984 to petitioner, Hojilla made the representation that besides being the attorney-in-fact
of the respondents with limited authority to register the property, he was also their agent with regard to
respondents' other obligations related to the Contract. The pertinent portion of the 15 August 1984 letter of
Hojilla to petitioner reads:

Regarding our loan with the National Electrification Administration (NEA), Hon. Mel Mathay who is helping
the Bafiez heirs has initiated negotiations with NEA for Abreco to purchase our lot in front of the Provincial
Jail to offset our loan with NEA.22

Also, one glaring fact that cannot escape us is Hojilla's representation and guarantee that petitioner's
obligation will only arise upon presentation of a clean title and execution of a Deed of Sale signed by the
respondents' heirs, which reads, "[t]he Baez heirs will only claim for the full payment of the
property upon presentation of a clean title and execution of a Deed of Sale signed by the heirs. "23

If Hojilla knew that he had no authority to execute the Contract and receive the letters on behalf of
respondents, he should have opposed petitioner's demand letters. However, having received the several
demand letters from petitioner, Hojilla continuously represented himself as the duly authorized agent of
respondents, authorized not only to administer and/or manage the subject property, but also authorized to
register the subject property and represent the respondents with regard to the latter's obligations in the
Contract. Hojilla also assured petitioner that petitioner's obligation to pay will arise only upon presentation
of the title.
Clearly, the respondents are estopped by the acts and representations of their agent.

The accrual of the cause of action to demand the titling of the land cannot be earlier than 15 August
1984. So that, the petitioner can sue on the contract until 15 August 1994. Prior to the expiration of the
aforesaid period, the petitioner sent a demand letter to Hojilla dated 29 May 1991. A few months thereafter,
petitioner sent another demand letter to Hojilla dated 24 October 1991. 37

The prescriptive period was interrupted on 29 May 1991.

The consequence is stated in Article 1155 of the Civil Code. It states, "[t]he prescription of actions is
interrupted when they are filed before the court, when there is a written extrajudicial demand by the
creditors, and when there is any written acknowledgment of the debt by the debtor."

Following the law, the new ten-year period for the filing of a case by the petitioner
should be counted from 29 May 1991, ending on 29 May 2001. The complaint at
bar was filed on 10 April 2000, well within the required period.

Notably, before the expiration of the new prescriptive period, the petitioner again sent a new demand
which will expire on 6
letter on 6 July 1999, which again caused the same to run anew,
July 2009. The complaint filed on 10 April 2000 was timely.
The Contract and True Intent of the Parties

Based on the stipulation in the Contract, the parties agreed that payment shall be made only upon
presentation of the title and other documents of the subject property to petitioner. Paragraph 8 of the
Contract reads:

8. An absolute deed of sale containing the above provisions and standard warranties on conveyances of real
property shall be executed by the co-owners in favor of CRC or its assignee/s and the same delivered to the
latter together with the original certificate of title upon payment of the purchase price less the advances
made by CRC in accordance with Paragraphs 2 and 3 above; provided, that payment shall be made by
CRC only upon presentation by the co-owners to CRC of certificate/s and/or clearances, with
corresponding receipts, issued by the appropriate government office/s or agency/ies to the
effect that capital gains tax, real estate taxes on the Property and local transfer tax and other
taxes, fees or charges due on the transaction and/or on the Property have been paid.38 (Emphasis
and underscoring ours)

The true intent of the parties is further enunciated in Hojilla's letter to petitioner dated 15 August 1984,
which stated, "[t]he Baez heirs will only claim for the full payment of the property upon
presentation of a clean title and execution of a Deed of Sale signed by the heirs. "39

To rule in favor of respondents despite their failure to perform their obligations is the height of injustice.
Respondents cannot benefit from their own inaction and failure to comply with their obligations
in the Contract and let the petitioner suffer from respondents' own default.

WINNER: RP

LOSER: BAEZ