EVELYN CHUA-QUA, petitioner, vs. HON. JACOBO C. CLAVE, and TAY TUNG HIGH SCHOOL, INC., respondents, GR No. 49549 August 30, 1990

 What happened?

Evelyn Chua is a school teacher employed at a private learning institute, (Tay Yung High School). She was the class adviser of sixth grade where Bobby Qua enrolled. During that time, Evelyn is already thirty (30), while Bobby Qua is only sixteen (16) years of age.  In that school, it was its policy of the school to extent remedial instruction to its students, Bobby Qua was imparted to such instruction in school by Evelyn Chua.  In the course thereof, the couple fell in love and subsequently they got married. Of course, after the consent and advise to the marriage was given by Bobby’s mother.

Thereafter, the school represented by its Executive President, without conducting any formal hearing terminated the employment contract of Evelyn Chua on the ground that she is defying all standards of decency, recklessly took advantage of her position as school teacher, lured a Grade VI boy under her advisory, and that she stayed alone with Bobby Qua in the classroom after school hours when everybody had gone home, with one door allegedly locked and the other slightly open.

The school further alleged that to preserve the respect of the community toward the teachers and the school. It argues that as a school teacher who exercises substitute parental authority over her pupils inside the school campus, Evelyn had moral ascendancy over Bobby Qua and, therefore, she must not abuse such authority and respect extended to her. Thus, Evelyn Chua committed immoral and misconduct which warrant her termination.

Issue:    Whether or not Evelyn Chua is legally terminated from her Employment?

Held:     We are of the considered view that the determination of the legality of the dismissal hinges on the issue of whether or not there is substantial evidence to prove that the antecedent facts which culminated in the marriage between petitioner and her student constitute immorality and/or grave misconduct. To constitute immorality, the circumstances of each particular case must be holistically considered and evaluated in the light of prevailing norms of conduct and the applicable law.

With the finding that there is no substantial evidence of the imputed immoral acts, it follows that the alleged violation of the Code of Ethics governing school teachers would have no basis. Private respondent utterly failed to show that petitioner took advantage of her position to court her student. If the two eventually fell in love, despite the disparity in their ages and academic levels, this only lends substance to the truism that the heart has reasons of its own which reason does not know. But, definitely, yielding to this gentle and universal emotion is not to be so casually equated with immorality. The deviation of the circumstances of their marriage from the usual societal pattern cannot be considered as a defiance of contemporary social mores.

It would seem quite obvious that the avowed policy of the school in rearing and educating children is being unnecessarily bannered to justify the dismissal of petitioner. The charge against petitioner not having been substantiated, we declare her dismissal as unwarranted and illegal.

WAKALA: It’s Concept and Permissibility

Wakala is a structure that utilizes the idea of principal and agent theory. The principal provides the capital, and the agent gets hired to provide expertise and labor. Under a wakala, the capital provider receives the profits from the venture, less an agreed-upon fee that goes to pay the agent. Bank deposits can also be structured as a wakala.[1]

The word “Wakala” literally has several meanings including, delegation, authorization, preservation and performing a task on behalf of others. Technically Wakala refers to a type of contract in which one person delegated another person to perform some tasks on behalf of him.[2] Wakala has essential element as a matter of contract, these are the principal (muwakkil), the agent (wakil) and the subject matter (muwakkal bihi). These three elements must be concurred for its validity.[3]

According to Imaam al Shawkhani, “It is permissible for an owner to give authority to someone else to act his behalf in respect of every dealings in as much as there is nothing that could legally prevent such, If an agent sells beyond the amount specified by the owner, the excess money goes to the owner, and if the he acts contrary to the owner’s specification for a better achievement or he like, and the owner is pleased with it, then the transaction becomes valid.”[4]

One of the legal basis from Qur’an often cited on the principle of wakala is the verse found in Surah al Baqara, when Allah said:

وَإِذ قالَ رَبُّكَ لِلمَلائِكَةِ إِنّي جاعِلٌ فِي الأَرضِ خَليفَةً ۖ قالوا أَتَجعَلُ فيها مَن يُفسِدُ فيها وَيَسفِكُ الدِّماءَ وَنَحنُ نُسَبِّحُ بِحَمدِكَ وَنُقَدِّسُ لَكَ ۖ قالَ إِنّي أَعلَمُ ما لا تَعلَم

When your Lord said to the angels, ‘Indeed I am going to set a vicegerent on the earth, ’they said, ‘Will You set in it someone who will cause corruption in it, and shed blood, while we celebrate Your praise and proclaim Your sanctity? He said, ‘Indeed I know what you do not know.’[5]

However, it has to be noted that according to Muslims scholars, the mentioned verse was mainly referring to the authority which Allah has bestowed upon man on earth, such as leadership or political leadership, and as spiritual torch bearer in the Muslim community. A khalifa or viceregent as contemplated from this legislation also in the purview of leading a small unit, such as but not limited to a family, firm, organization, platoons of military armies, or any other institution that requires management and leadership.          

In relation to the discussion on wakala as far as Islamic commercial transactions are concerned, Wakala in modern sense could be linked to the Remittances. According to the basic definition, "a remittance means "send back." In terms of money, a remittance is the sending of money to a recipient who lives abroad. Most families living in slow-growing economies and developing nations rely heavily on these remittances as their main source of income, (anonymous, ccto)".  

Accordingly, the three essential elements of Wakala as mentioned above, Muwakkil is the principal or sender, wakil as the agent, while muwakkil bihe is the subject matter, or the money to be sent. Thus, in remittances, muwakkil is the sender of money from abroad, and wakil is the remittance center, or a bank who facilitates the transferee, while the money is the muwakkil bihe, or the object of the transaction. Thereafter, every successful transaction of remittances was accompanied by a written contract. The receipt issued by the wakil or agent serves as evidence of a perfected contract between the wakil or agent and the muwakkil or principal-sender.          

Based on this transaction, the agent or wakil was entrusted by the muwakkil of his property (money transfer), as such it contemplates the notion of Wakala. Hence, under Islamic commercial transaction, the wakala or remittances is permissible, provided that when the agent do not transgress to the limit as to the authority given to him by the principal, (i.e.) that the agent do not misappropriate the fund entrusted to him to be remitted.

Another Qur’anic legislation that regulates Islamic commercial transaction was found in Surah al Baqara, when Allah said:

يا أَيُّهَا الَّذينَ آمَنوا إِذا تَدايَنتُم بِدَينٍ إِلىٰ أَجَلٍ مُسَمًّى فَاكتُبوهُ ۚ وَليَكتُب بَينَكُم كاتِبٌ بِالعَدلِ ۚ وَلا يَأبَ كاتِبٌ أَن يَكتُبَ كَما عَلَّمَهُ اللَّهُ ۚ فَليَكتُب وَليُملِلِ الَّذي عَلَيهِ الحَقُّ وَليَتَّقِ اللَّهَ رَبَّهُ وَلا يَبخَس مِنهُ شَيئًا ۚ فَإِن كانَ الَّذي عَلَيهِ الحَقُّ سَفيهًا أَو ضَعيفًا أَو لا يَستَطيعُ أَن يُمِلَّ هُوَ فَليُملِل وَلِيُّهُ بِالعَدلِ 

O you who have believed, when you contract a debt for a specified term, write it down. And let a scribe write (it) between you in justice. Let no scribe refuse to write as Allah has taught him. So let him write and let the one who has the obligation dictate. And let him fear Allah, his Lord, and not leave anything out of it. But if the one who has the obligation is of limited understanding or weak or unable to dictate himself, then let his guardian dictate in justice.[6]

 

This verse highlighted the general procedure on how a credit should be regulated, and the fundamental requisites. Thus, an oral agreement is something not recommended under this ruling, instead, a written agreement is preferred. One of the reasons could be that a man in character is scatterbrained, and upon writing, such is to become conclusive evidence. 

To be valid, credit transaction must contain the following: (1), that there is specified credit (2), such must be in writing (3), in a just (4), if one of the parties is illiterate, weak of understating, be represented by his guardian with just (5), and that there should be witnessed by at least two men, or two women and one man. It must be noted that the required witness for this kind of transaction is two men of just, or two women together with one man all of them be of just.[7] 

 

Conclusion 

Wakala, this principle falls within the second division of Islamic aspects called Muammalat. It is referring to the relationship between man and his fellow in relation to the formulation of human society and their community; such relationship is governed by Shari’ah as to the civil aspects of the law.

As defined above, Wakala regulates the business transaction between the principal and his duly authorized representative. When the principal authorized other in his behalf, it is viewed that whatever may be the action taken by the delegate, is the same as it was executed by the principal by himself, and by his owned utterances and act, provided, however, that agent do not step up wholly in the shoe of the principal without his consent.

In other words, although Wakala is permitted, it not absolute. The act of the agent to be valid must be confined to the authorized acts purported to be, otherwise, that act could be challenged. Also, the agent under this principle would not only be limited as to the specific action that he may exercise, but it should be in accordance with the essential requisites mentioned in the Qur’anic regulation. 

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[1] https://ideas.darden.virginia.edu/islamic-finance

[2] Dr. Kheiralla Sirour, The Rules of Wakala Contract (agency) in Sharia law and its application in Islamic Finance A Comparative study, 2015

[3] Ibid

[4] Ash-Shawkhani, Comprehensive Islamic Jurisprudence, Dakwah Corner Bookstore, Malaysia, 1173-1255H, p., 593

[5] Al Qur’an, 2:30

[6] Al Qur’an, 2:282

[7] Ibid, 2015

ROMY AGAG, petitioner vs. ALPHA FINANCING CORPORATION, respondent, GR. No. 154826, July 31, 2003

Doctrine:     The rule that a purchaser or mortgagee of land is not required to look further than what appears on the face of the title does not apply to banks and other financial institutions. These entities are required to exercise more care and prudence in dealing even with registered lands for their business is one affected with public interest. The ascertainment of the status and condition of properties offered to it must be a standard and indispensable part of its operations.

Facts:                     On March 15, 1977, petitioner Romy Agag and Teresita Vda. De Castro executed a document denominated as "Pinagtibay na Pagpapatibay" whereby the latter sold to petitioner, in consideration of the amount of P36,120.00, payable on installment basis, three parcels of land covered by Transfer Certificate of Title. On the same date, petitioner took possession of and occupied said lots after paying a down payment. He was able to pay a total of P37,295.78. Meanwhile, he introduced improvements on the subject lots consisting of fruit trees and a residential house worth more or less P500,000.00. He repeatedly demanded from De Castro the delivery to him of the title of the lots but the latter failed to do so.

On January 30, 1997, petitioner received a letter from respondent Alpha Financing Corporation requesting him to vacate the disputed lots. Respondent claimed that it is the lawful owner of the subject parcels of land occupied by petitioner, having purchased the same in a foreclosure sale after Teresita Vda. De Castro, the original owner thereof failed to pay her loan with a mortgagee bank. Thereafter, the certificates of title in the name of De Castro were cancelled, and a Certificate of Title were issued in the name of respondent. In view of petitioner’s refusal to vacate the premises, respondent filed an ejectment case with the Municipal Trial Court.

The Municipal Trial Court rendered a decision in favor of petitioner. It held that the mortgage and the foreclosure sale from which respondent allegedly derived his rights are inferior to the prior unregistered deed of absolute sale executed by De Castro, the original owner in favor of petitioner. Since De Castro was no longer the owner of the property at the time of the mortgage, respondent acquired no right from her. However, the Court of Appeals reversed the decision of the Regional Trial Court and ordered petitioner to vacate the lots in favor of respondent. It held that the latter had a better right to possess the lots because the best proof of ownership is the indefeasible and incontrovertible title registered in its name.

Issue: Whether or not the respondent has a better right to possess the disputed lots?

Held:  In the case at bar, the resolution of the issue of ownership is indispensable because respondent’s cause of action and petitioner’s defense are both grounded on ownership of the questioned lots. Respondent invokes good faith and the indefeasibility of the transfer certificates of title issued in its name, while petitioner anchors his claim on prior possession as well as on the unregistered sale in his favor of subject lots as embodied in the "Pinagtibay na Pagpapatibay".

The Municipal Trial Court did not err in sustaining the claim of petitioner that the sale of the questioned lots preceded the mortgage and foreclosure sale claimed by respondent. Petitioner had repeatedly challenged respondent to produce documentary evidence which would substantiate the mortgage and foreclosure sale, but the latter failed to produce any. Neither did respondent question the finding of the Municipal Trial Court that the sale occurred prior to the mortgage, nor did it give the name of the mortgagee bank which foreclosed and sold the lots at public auction, assuming that the said bank exists. Finally, respondent failed to show that the properties were indeed mortgaged, and that the mortgage was foreclosed and the lots sold at public action.                   

As a general rule, where there is nothing on the certificate of title to indicate any cloud or vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required to explore further than what the Torrens Title indicates on its face, in quest for any hidden defect or inchoate right that may subsequently defeat his right thereto. This rule, however, applies only to innocent purchasers for value and in good faith. An innocent purchaser for value or any equivalent phrase shall be deemed, under Section 39 of Act 496 (Land Registration Act), to include an innocent lessee, mortgagee or any other encumbrancer for value. It excludes a purchaser or mortgagee who has knowledge of a defect or lack of title in the vendor, or of facts sufficient to induce a reasonably prudent man to inquire into the status of the property.

Respondent, being a financial institution, cannot claim good faith considering that neither it nor the alleged mortgagee bank was in possession of the lots prior and after the foreclosure sale. Had respondent conducted an ocular inspection of the premises, this being the standard practice in the real estate industry, it would have discovered that the land is occupied by petitioner. The failure of respondent to take such precautionary steps is considered negligence on its part and would thereby preclude the defense of good faith.

WHEREFORE, in view of all the foregoing, the instant petition is GRANTED. The decision of the Court of Appeals is REVERSED and SET ASIDE.

 

 

 

AUTOCORP GROUP, petitioner, vs. INTRA STRATA ASSURANCE CORP., respondent, GR No. 16662, June 27, 2008

 

Doctrine:     In the case of Philippine American General Insurance Co., Inc. v. Mutuc, the Court held that an agreement whereby the sureties bound themselves to be liable in case of an extension or renewal of the bond, without the necessity of executing another indemnity agreement for the purpose and without the necessity of being notified of such extension or renewal, is valid; and that there is nothing in it that militates against the law, good customs, good morals, public order or public policy.

Facts:

The petitioner Autocorp Group, secured an ordinary re-export bond, Instrata Bond No. 5770, from private respondent Intra Strata Assurance Corporation (ISAC) in favor of public respondent Bureau of Customs (BOC), in the amount of P327,040.00, to guarantee the re-export of one unit of Hyundai Excel 4-door 1.5 LS and/or to pay the taxes and duties.

The petitioner also obtained another re-export bond, Instrata Bond No. 7154, from ISAC in favor of the BOC, in the amount of P447,671.00, which was eventually increased to P707,609.00 per bond. Thereafter, petitioner executed and signed two Indemnity Agreements with identical stipulations in favor of ISAC, agreeing to act as surety of the subject bonds

The undersigned agree at all times to jointly and severally indemnify the COMPANY and keep it indemnified and hold and save it harmless from and against any and all damages, losses, costs, stamps, taxes, penalties, charges and expenses of whatsoever kind including counsel or attorney's fee.

In sum, ISAC issued the subject bonds to guarantee compliance by the petitioner with their undertaking with the BOC to re-export the imported vehicles within the given period and pay the taxes and/or duties. In turn, petitioners agreed, as surety, to indemnify ISAC for the liability the latter may incur on the said bonds.

Meanwhile, the Autocorp Group failed to re-export the items guaranteed by the bonds and/or liquidate the entries or cancel the bonds, and pay the taxes and duties pertaining to the said items despite repeated demands.

ISAC filed with the RTC on 24 October 1995 an action against petitioners to recover the sum of P1,034,649.00,... plus 25% thereof or P258,662.25 as attorney's fees.

The RTC rendered its Decision ordering petitioner to pay ISAC and/or the BOC the face value of the subject bonds in the total amount of P1,034,649.00, in which, the Court of Appeals affirmed the lower court decision with modification of Attorney’s fee.

 

Issue:           Whether or not the petitioner is jointly liable when amendments were introduced, without his consent and approval?

Held:

The subject bonds, Instrata Bonds No. 5770 and No. 7154, became due and demandable upon the failure of petitioner Autocorp Group to comply with a condition set forth in its undertaking with the BOC, specifically to re-export the imported vehicles within the period of six months... from their date of entry. Since it issued the subject bonds, ISAC then also became liable to the BOC. At this point, the Indemnity Agreements already give ISAC the right to proceed against petitioners via court action or otherwise.

The Indemnity Agreements, therefore, give ISAC the right to recover from petitioner the face value of the subject bonds plus attorney's fees at the time ISAC becomes liable on the said bonds to the BOC, regardless of whether the BOC had actually forfeited the bonds, demanded... payment thereof and/or received such payment. It must be pointed out that the Indemnity Agreements explicitly provide that petitioners shall be liable to indemnify ISAC "whether or not payment has actually been made by the ISAC" and ISAC may proceed against petitioners by... court action or otherwise "even prior to making payment to the [BOC] which may hereafter be done by ISAC.

INDEMNITY, The undersigned Autocorp Group and Rodriguez agree at all times to jointly and severally indemnify the COMPANY [ISAC] and keep it indemnified and hold and save it harmless from and against any and all damages, losses, costs, stamps, taxes, penalties, charges and expenses of whatsoever kind and nature including counsel or attorney’s fee which the COMPANY [ISAC] shall or may at any time sustain or incur in consequence of having become surety upon the bond herein above referred to…

The foregoing provision in the Indemnity Agreements clearly authorized ISAC to consent to the granting of any extension, modification, alteration and/or renewal of the subject bonds.

WHEREFORE, the Decision of the Court of Appeals which affirmed with modification the Decision of the Regional Trial Court is AFFIRMED in toto.