G.R. No. L-64143. February 28, 1986.
Premier Insurance & Surety Corporation, petitioner, vs. Hon. Intermediate Appellate Court and Mauro M. Castro, respondents.

FACTS

Petitioner Premier Insurance agreed to purchase a parcel of land from Benjamin Sarmiento, represented by his lawyer and attorney-in-fact, respondent Mauro Castro. The sale was conditioned upon verification of the title and location by petitioner’s surveyor. A deed of absolute sale was executed, and petitioner issued partial payment checks, which were later stopped. To facilitate the release of the full purchase price, respondent Castro executed an “Agreement and Statement of Warranties,” warranting Sarmiento’s absolute ownership and holding himself jointly and severally liable with Sarmiento for any breaches of the vendor’s warranties. Relying on this document, petitioner paid the full price. Subsequently, petitioner discovered a prior valid Torrens title over the same property held by the Almendras spouses, rendering Sarmiento’s title void. The trial court declared Sarmiento and Castro jointly and solidarily liable to petitioner.
The Intermediate Appellate Court, in an amended decision, absolved Castro from liability. It found that the warranty agreement did not express the true intent of the parties, was merely a formality to facilitate payment, and was not intended to be enforced against Castro personally. The appellate court gave credence to Castro’s testimony that the document was prepared by petitioner’s lawyer to assure payment to his client, Sarmiento, and that Castro signed it without the intention to assume personal liability beyond his role as an agent.

ISSUE

Whether the Intermediate Appellate Court erred in absolving respondent Castro from joint and several liability under the Agreement and Statement of Warranties.

RULING

The Supreme Court dismissed the petition and affirmed the appellate court’s decision. The Court upheld the factual findings of the Intermediate Appellate Court, which are generally conclusive and binding unless unsupported by substantial evidence. The appellate court correctly determined that the warranty agreement was simulated and did not reflect a true meeting of the minds to impose personal liability on Castro. The evidence showed Castro signed the document in his capacity as Sarmiento’s agent to overcome petitioner’s reluctance to pay, not to assume a personal obligation distinct from his agency. The document’s preparer was petitioner’s own lawyer, and any ambiguity therein must be construed against the party who caused the ambiguity—the petitioner. There was no substantial evidence that Castro intended to bind himself personally beyond facilitating the transaction for his principal. Since the principal, Sarmiento, was already held liable, and the agreement was not intended to create a separate, enforceable personal warranty from the agent, the petitioner’s recourse lies solely against Sarmiento. The loss, under the circumstances, must be borne by the petitioner, which failed to exercise due diligence in verifying the title before full payment.