Agency Digest

AGENCY

NATURE, FORM AND KINDS OF AGENCY Art. 1868. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. (1709a)

(3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired; (4) To waive any obligation gratuitously; (5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration; (6) To make gifts, except customary ones for charity or those made to employees in the business managed by the agent; (7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration; (8) To lease any real property to another person for more than one year; (9) To bind the principal to render some service without compensation; (10) To bind the principal in a contract of partnership; (11) To obligate the principal as a guarantor or surety; (12) To create or convey real rights over immovable property; (13) To accept or repudiate an inheritance; (14) To ratify or recognize obligations contracted before the agency; (15) Any other act of strict dominion. (n)

Art. 1869. Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority. Agency may be oral, unless the law requires a specific form. (1710a) Art. 1870. Acceptance by the agent may also be express, or implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances. (n) Art. 1871. Between persons who are present, the acceptance of the agency may also be implied if the principal delivers his power of attorney to the agent and the latter receives it without any objection. (n) Art. 1872. Between persons who are absent, the acceptance of the agency cannot be implied from the silence of the agent, except: (1) When the principal transmits his power of attorney to the agent, who receives it without any objection; (2) When the principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he is habitually engaged as an agent, and he did not reply to the letter or telegram. Art. 1873. If a person specially informs another or states by public advertisement that he has given a power of attorney to a third person, the latter thereby becomes a duly authorized agent, in the former case with respect to the person who received the special information, and in the latter case with regard to any person. The power shall continue to be in full force until the notice is rescinded in the same manner in which it was given. Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. Art. 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary. (n) Art. 1876. An agency is either general or special. The former comprises all the business of the principal. The latter, one or more specific transactions. (1712) Art. 1877. An agency couched in general terms comprises only acts of administration, even if the principal should state that he withholds no power or that the agent may execute such acts as he may consider appropriate, or even though the agency should authorize a general and unlimited management. (n) Art. 1878. Special powers of attorney are necessary in the following cases: (1) To make such payments as are not usually considered as acts of administration; (2) To effect novations which put an end to obligations already in existence at the time the agency was constituted;

Art. 1879. A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell. (n) Art. 1880. A special power to compromise does not authorize submission to arbitration. (1713a) Art. 1881. The agent must act within the scope of his authority. He may do such acts as may be conducive to the accomplishment of the purpose of the agency. (1714a) Art. 1882. The limits of the agent's authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him. (1715) Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal. In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. The provisions of this article shall be understood to be without prejudice to the actions between the principal and agent. SPOUSES YU ENG CHO & FRANCISCO TAO YU v. PAN AMERICAN WORLD AIRWAYS, INC. (GR 123560, March 27, 2000) FACTS: Plaintiff Yu Eng Cho is the owner of Young Hardware Co. and Achilles Marketing. In connection with [this] business, he travels from time to time to Malaysia, Taipei and Hongkong. On July 10, 1976, plaintiffs bought plane tickets (Exhs. A & B) from defendant Claudia Tagunicar who represented herself to be an agent of defendant Tourist World

DIGEST |1

Services, Inc. (TWSI). The destination[s] are Hongkong, Tokyo, San Francisco, U.S.A., for the amount of P25,000.00 per computation of said defendant Claudia Tagunicar (Exhs. C & C-1). The purpose of this trip is to go to Fairfield, New Jersey, U.S.A. to buy to two (2) lines of infrared heating system processing textured plastic article A few days before the scheduled flight of plaintiffs, their son, Adrian Yu, called the Pan Am office to verify the status of the flight. According to said Adrian Yu, personnel of defendant Pan Am told him over the phone that plaintiffs' booking[s] are confirmed. On July 23, 1978, plaintiffs left for Hongkong and stayed there for five (5) days. They left Hongkong for Tokyo on July 28, 1978. Upon their arrival in Tokyo, they called up Pan-Am office for reconfirmation of their flight to San Francisco. Said office, however, informed them that their names are not in the manifest. Since plaintiffs were supposed to leave on the 29th of July, 1978, and could not remain in Japan for more than 72 hours, they were constrained to agree to accept airline tickets for Taipei instead, per advise of JAL officials. This is the only option left to them because Northwest Airlines was then on strike, hence, there was no chance for the plaintiffs to obtain airline seats to the United States within 72 hours. Plaintiffs paid for these tickets. Upon reaching Taipei, there were no flight[s] available for plaintiffs, thus, they were forced to return back to Manila on August 3, 1978, instead of proceeding to the United States. [Japan] Air Lines (JAL) refunded the plaintiffs the difference of the price for Tokyo-Taipei [and] Tokyo-San Francisco (Exhs. I & J) in the total amount of P2,602.00. In view of their failure to reach Fairfield, New Jersey, Radiant Heat Enterprises, Inc. cancelled Yu Eng Cho's option to buy the two lines of infra-red heating system (Exh. K). The agreement was for him to inspect the equipment and make final arrangement[s] with the said company not later than August 7, 1978. From this business transaction, plaintiff Yu Eng Cho expected to realize a profit of P300,000.00 to P400,000.00. Defendant Tagunicar claims that on July 13, 1978, a few days before the scheduled flight, plaintiff Yu Eng Cho personally went to her office, pressing her about their flight. She called up defendant Julieta Canilao, and the latter told her "o sige Claudia, confirm na." She even noted this in her index card (Exh. L), that it was Julieta who confirmed the booking (Exh. L-1). It was then that she allegedly attached the confirmation stickers (Exhs. 2, 2-B TWSI) to the tickets. These stickers came from TWSI. Defendant Tagunicar alleges that it was only in the first week of August, 1978 that she learned from Adrian Yu, son of plaintiffs, that the latter were not able to take the flight from Tokyo to San Francisco, U.S.A. After a few days, said Adrian Yu came over with a gentleman and a lady, who turned out to be a lawyer and his secretary. Defendant Tagunicar claims that plaintiffs were asking for her help so that they could file an action against Pan-Am. Because of plaintiffs' promise she will not be involved, she agreed to sign the affidavit prepared by the lawyer. A complaint for damages was filed by petitioners against private respondents Pan American World Airways, Inc. (Pan Am), Tourist World Services, Inc. (TWSI), Julieta Canilao (Canilao), and Claudia Tagunicar (Tagunicar) for expenses allegedly incurred such as costs of tickets and hotel accommodations when petitioners were compelled to stay in Hongkong and then in Tokyo by reason of the nonconfirmation of their booking with Pan-Am. In a Decision dated November 14, 1991, the Regional Trial Court of Manila, Branch 3, held the defendants jointly and severally liable, except defendant Julieta Canilao

AGENCY

Only respondents Pan Am and Tagunicar appealed to the Court of Appeals. On 11 August 1995, the appellate court rendered judgment modifying the amount of damages awarded, holding private respondent Tagunicar solely liable therefor, and absolving respondents Pan Am and TWSI from any and all liability. ISSUE: Whether here is no agency relationship among PANAM, TWSI and Tagunicar are contrary to the judicial admissions of PAN-AM, TWSI and Tagunicar and likewise contrary to the findings of fact of the trial court. HELD: By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. 7 The elements of agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself; (4) the agent acts within the scope of his authority. 8 It is a settled rule that persons dealing with an assumed agent are bound at their peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to establish it. In the case at bar, petitioners rely on the affidavit of respondent Tagunicar where she stated that she is an authorized agent of TWSI. This affidavit, however, has weak probative value in light of respondent Tagunicar's testimony in court to the contrary. Affidavits, being taken ex parte, are almost always incomplete and often inaccurate, sometimes from partial suggestion, or for want of suggestion and inquiries. Their infirmity as a species of evidence is a matter of judicial experience and are thus considered inferior to the testimony given in court. 10 Further, affidavits are not complete reproductions of what the declarant has in mind because they are generally prepared by the administering officer and the affiant simply signs them after the same have been read to her. 11 Respondent Tagunicar testified that her affidavit was prepared and typewritten by the secretary of petitioners' lawyer, Atty. Acebedo, who both came with Adrian Yu, son of petitioners, when the latter went to see her at her office. This was confirmed by Adrian Yu who testified that Atty. Acebedo brought his notarial seal and notarized the affidavit of the same day. 12 The circumstances under which said affidavit was prepared put in doubt petitioners' claim that it was executed voluntarily by respondent Tagunicar. It appears that the affidavit was prepared and was based on the answers which respondent Tagunicar gave to the questions propounded to her by Atty. Acebedo. 13 They never told her that the affidavit would be used in a case to be filed against her. 14 They even assured her that she would not be included as defendant if she agreed to execute the affidavit. 15 Respondent Tagunicar was prevailed upon by petitioners' son and their lawyer to sign the affidavit despite her objection to the statement therein that she was an agent of TWSI. They assured her that "it is immaterial" 16 and that "if we file a suit against you we cannot get anything from you." 17 This purported admission of respondent Tagunicar cannot be used by petitioners to prove their agency relationship. At any rate, even if such affidavit is to be given any probative value, the existence of the agency relationship cannot be established on its sole basis. The declarations of the agent alone are generally insufficient to establish the fact or extent of his authority. 18 In addition, as between the negative allegation of respondents Canilao and Tagunicar

DIGEST |2

that neither is an agent nor principal of the other, and the affirmative allegation of petitioners that an agency relationship exists, it is the latter who have the burden of evidence to prove their allegation, 19 failing in which, their claim must necessarily fail. We stress that respondent Tagunicar categorically denied in open court that she is a duly authorized agent of TWSI, and declared that she is an independent travel agent. 20 We have consistently ruled that in case of conflict between statements in the affidavit and testimonial declarations, the latter command greater weight. 21 As further proofs of agency, petitioners call our attention to TWSI's Exhibits "7", "7-A", and "8" which show that Tagunicar and TWSI received sales commissions from Pan Am. Exhibit "7" 22 is the Ticket Sales Report submitted by TWSI to Pan Am reflecting the commissions received by TWSI as an agent of Pan Am. Exhibit "7-A" 23 is a listing of the routes taken by passengers who were audited to TWSI's sales report. Exhibit "8" 24 is a receipt issued by TWSI covering the payment made by Tagunicar for the tickets she bought from TWSI. These documents cannot justify the decision that Tagunicar was paid a commission either by TWSI or Pan Am. On the contrary, Tagunicar testified that when she pays TWSI, she already deducts in advance her commission and merely gives the net amount to TWSI. 25 From all sides of the legal prism, the transaction is simply a contract of sale wherein Tagunicar buys airline tickets from TWSI and then sells it at a premium to her clients. WHEREFORE, the decision appealed from is hereby AFFIRMED. Cost against petitioners. SO ORDERED. CONSTANTE AMOR DE CASTRO v. CA (GR 115838, July 8 2002) FACTS: Appellants5 were co-owners of four (4) lots located at EDSA corner New York and Denver Streets in Cubao, Quezon City. In a letter dated January 24, 1984 (Exhibit "A-1, p. 144, Records), appellee6 was authorized by appellants to act as real estate broker in the sale of these properties for the amount of P23,000,000.00, five percent (5%) of which will be given to the agent as commission. It was appellee who first found Times Transit Corporation, represented by its president Mr. Rondaris, as prospective buyer which desired to buy two (2) lots only, specifically lots 14 and 15. Eventually, sometime in May of 1985, the sale of lots 14 and 15 was consummated. Appellee received from appellants P48,893.76 as commission. It was then that the rift between the contending parties soon emerged. Appellee apparently felt short changed because according to him, his total commission should be P352,500.00 which is five percent (5%) of the agreed price of P7,050,000.00 paid by Times Transit Corporation to appellants for the two (2) lots, and that it was he who introduced the buyer to appellants and unceasingly facilitated the negotiation which ultimately led to the consummation of the sale. Hence, he sued below to collect the balance of P303,606.24 after having received P48,893.76 in advance. On the other hand, appellants completely traverse appellee's claims and essentially argue that appellee is selfishly asking for more than what he truly deserved as commission to the prejudice of other agents who were more instrumental in the consummation of the sale. Although appellants readily concede that it was appellee who first introduced Times Transit Corp. to them, appellee was not designated by them as their exclusive real estate agent but that in fact there were more or less eighteen (18) others whose collective efforts in the long run dwarfed those of appellee's, considering that the first negotiation for the sale where appellee took active participation failed and it was

AGENCY

these other agents who successfully brokered in the second negotiation. But despite this and out of appellants' "pure liberality, beneficence and magnanimity", appellee nevertheless was given the largest cut in the commission (P48,893.76), although on the principle of quantum meruit he would have certainly been entitled to less. So appellee should not have been heard to complain of getting only a pittance when he actually got the lion's share of the commission and worse, he should not have been allowed to get the entire commission. Furthermore, the purchase price for the two lots was only P3.6 million as appearing in the deed of sale and not P7.05 million as alleged by appellee. Thus, even assuming that appellee is entitled to the entire commission, he would only be getting 5% of the P3.6 million, or P180,000.00." Private respondent Francisco Artigo ("Artigo" for brevity) sued petitioners Constante A. De Castro ("Constante" for brevity) and Corazon A. De Castro ("Corazon" for brevity) to collect the unpaid balance of his broker's commission from the De Castros. The Trial Court finds defendants Constante and Corazon Amor de Castro jointly and solidarily liable to plaintiff. The Court of Appeals affirmed in toto the decision of the RTC. Hence, this petition. ISSUE: Whether the complaint merits dismissal for failure to implead other co-owners as indispensable parties HELD: The De Castros argue that Artigo's complaint should have been dismissed for failure to implead all the co-owners of the two lots. The De Castros claim that Artigo always knew that the two lots were co-owned by Constante and Corazon with their other siblings Jose and Carmela whom Constante merely represented. The De Castros contend that failure to implead such indispensable parties is fatal to the complaint since Artigo, as agent of all the four co-owners, would be paid with funds co-owned by the four co-owners. The De Castros' contentions are devoid of legal basis. An indispensable party is one whose interest will be affected by the court's action in the litigation, and without whom no final determination of the case can be had.7 The joinder of indispensable parties is mandatory and courts cannot proceed without their presence.8 Whenever it appears to the court in the course of a proceeding that an indispensable party has not been joined, it is the duty of the court to stop the trial and order the inclusion of such party.9 However, the rule on mandatory joinder of indispensable parties is not applicable to the instant case. There is no dispute that Constante appointed Artigo in a handwritten note dated January 24, 1984 to sell the properties of the De Castros for P23 million at a 5 percent commission. The authority was on a first come, first serve basis. Constante signed the note as owner and as representative of the other co-owners. Under this note, a contract of agency was clearly constituted between Constante and Artigo. Whether Constante appointed Artigo as agent, in Constante's individual or representative capacity, or both, the De Castros cannot seek the dismissal of the case for failure to implead the other co-owners as indispensable parties. The De Castros admit that the other co-owners are solidarily liable under the contract of agency,10 citing Article 1915 of the Civil Code, which reads: Art. 1915. If two or more persons have appointed an agent for a common transaction or undertaking, they

DIGEST |3

shall be solidarily liable to the agent for all the consequences of the agency. The solidary liability of the four co-owners, however, militates against the De Castros' theory that the other co-owners should be impleaded as indispensable parties. When the law expressly provides for solidarity of the obligation, as in the liability of co-principals in a contract of agency, each obligor may be compelled to pay the entire obligation.12 The agent may recover the whole compensation from any one of the co-principals, as in this case. Indeed, Article 1216 of the Civil Code provides that a creditor may sue any of the solidary debtors. This article reads: Art. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected. Thus, the Court has ruled in Operators Incorporated vs. American Biscuit Co., Inc. that "x x x solidarity does not make a solidary obligor an indispensable party in a suit filed by the creditor. Article 1216 of the Civil Code says that the creditor `may proceed against anyone of the solidary debtors or some or all of them simultaneously'." (Emphasis supplied)

BA FINANCE CORPORATION v. CA GR 94566, July 1992 FACTS: On December 17, 1980, Renato Gaytano, doing business under the name Gebbs International, applied for and was granted a loan with respondent Traders Royal Bank in the amount of P60,000.00. As security for the payment of said loan, the Gaytano spouses executed a deed of suretyship whereby they agreed to pay jointly and severally to respondent bank the amount of the loan including interests, penalty and other bank charges. In a letter dated December 5, 1980 addressed to respondent bank, Philip Wong as credit administrator of BA Finance Corporation for and in behalf of the latter, undertook to guarantee the loan of the Gaytano spouses. Partial payments were made on the loan leaving an unpaid balance in the amount of P85,807.25. Since the Gaytano spouses refused to pay their obligation, respondent bank filed with the trial court complaint for sum of money against the Gaytano spouses and petitioner corporation as alternative defendant. The Gaytano spouses did not present evidence for their defense. Petitioner corporation, on the other hand, raised the defense of lack of authority of its credit administrator to bind the corporation. On December 12, 1988, the trial court rendered a decision in favor of plaintiff and against defendants/Gaytano spouses, ordering the latter to jointly and severally pay the plaintiff. Not satisfied with the decision, respondent bank appealed with the Court of Appeals. On March 13, 1990, respondent appellate court rendered judgment modifying the decision of the trial court. Hence, this petition. ISSUE: Whether the letter of guaranty is ultra vires and thus invalid and/or unenforceable.

HELD:

AGENCY

It is a settled rule that persons dealing with an assumed agent, whether the assumed agency be a general or special one are bound at their peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to establish it (Harry Keeler v. Rodriguez, 4 Phil. 19). Hence, the burden is on respondent bank to satisfactorily prove that the credit administrator with whom they transacted acted within the authority given to him by his principal, petitioner corporation. The only evidence presented by respondent bank was the testimony of Philip Wong, credit administrator, who testified that he had authority to issue guarantees as can be deduced from the wording of the memorandum given to him by petitioner corporation on his lending authority. The said memorandum which allegedly authorized Wong not only to approve and grant loans but also to enter into contracts of guaranty in behalf of the corporation. Although Wong was clearly authorized to approve loans even up to P350,000.00 without any security requirement, which is far above the amount subject of the guaranty in the amount of P60,000.00, nothing in the said memorandum expressly vests on the credit administrator power to issue guarantees. We cannot agree with respondent's contention that the phrase "contingent commitment" set forth in the memorandum means guarantees. It has been held that a power of attorney or authority of an agent should not be inferred from the use of vague or general words. Guaranty is not presumed, it must be expressed and cannot be extended beyond its specified limits (Director v. Sing Juco, 53 Phil. 205). In one case, where it appears that a wife gave her husband power of attorney to loan money, this Court ruled that such fact did not authorize him to make her liable as a surety for the payment of the debt of a third person (Bank of Philippine Islands v. Coster, 47 Phil. 594). The sole allegation of the credit administrator in the absence of any other proof that he is authorized to bind petitioner in a contract of guaranty with third persons should not be given weight. The representation of one who acts as agent cannot by itself serve as proof of his authority to act as agent or of the extent of his authority as agent (Velasco v. La Urbana, 58 Phil. 681). Wong's testimony that he had entered into similar transactions of guaranty in the past for and in behalf of the petitioner, lacks credence due to his failure to show documents or records of the alleged past transactions. The actuation of Wong in claiming and testifying that he has the authority is understandable. He would naturally take steps to save himself from personal liability for damages to respondent bank considering that he had exceeded his authority. The rule is clear that an agent who exceeds his authority is personally liable for damages (National Power Corporation v. National Merchandising Corporation, Nos. L33819 and L-33897, October 23, 1982, 117 SCRA 789). Anent the conclusion of respondent appellate court that petitioner is estopped from alleging lack of authority due to its failure to cancel or disallow the guaranty, We find that the said conclusion has no basis in fact. Respondent bank had not shown any evidence aside from the testimony of the credit administrator that the disputed transaction of guaranty was in fact entered into the official records or files of petitioner corporation, which will show notice or knowledge on the latter's part and its consequent ratification of the said transaction. In the absence of clear proof, it would be unfair to hold petitioner corporation guilty of estoppel in allowing its credit administrator to act as though the latter had power to guarantee.

DIGEST |4

ACCORDINGLY, the petition is GRANTED and the assailed decision of the respondent appellate court dated March 13, 1990 is hereby REVERSED and SET ASIDE and another one is rendered dismissing the complaint for sum of money against BA Finance Corporation. SO ORDERED. QUIROGA v PARSONS HARDWARE CO 38 Phil FACTS: On January 24, 1911, in this city of manila, a contract was entered into by and between the plaintiff, as party of the first part, and J. Parsons (to whose rights and obligations the present defendant later subrogated itself), as party of the second part. Of the three causes of action alleged by the plaintiff in his complaint, only two of them constitute the subject matter of this appeal and both substantially amount to the averment that the defendant violated the following obligations: not to sell the beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the dozen and in no other manner. As may be seen, with the exception of the obligation on the part of the defendant to order the beds by the dozen and in no other manner, none of the obligations imputed to the defendant in the two causes of action are expressly set forth in the contract. But the plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said obligations are implied in a contract of commercial agency. ISSUE: whether the defendant, by reason of the contract hereinbefore transcribed, was a purchaser or an agent of the plaintiff for the sale of his beds.. HELD: In order to classify a contract, due regard must be given to its essential clauses. In the contract in question, what was essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in the manner stipulated. The price agreed upon was the one determined by the plaintiff for the sale of these beds in Manila, with a discount of from 20 to 25 per cent, according to their class. Payment was to be made at the end of sixty days, or before, at the plaintiff's request, or in cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed for prompt payment. These are precisely the essential features of a contract of purchase and sale. There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within the term fixed, without any other consideration and regardless as to whether he had or had not sold the beds. It would be enough to hold, as we do, that the contract by and between the defendant and the plaintiff is one of purchase and sale, in order to show that it was not one made on the basis of a commission on sales, as the plaintiff claims it was, for these contracts are incompatible with each other. But, besides, examining the clauses of this

AGENCY

contract, none of them is found that substantially supports the plaintiff's contention. Not a single one of these clauses necessarily conveys the idea of an agency. The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the defendant was the only one that could sell the plaintiff's beds in the Visayan Islands. With regard to the remaining clauses, the least that can be said is that they are not incompatible with the contract of purchase and sale. The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-president of the defendant corporation and who established and managed the latter's business in Iloilo. It appears that this witness, prior to the time of his testimony, had serious trouble with the defendant, had maintained a civil suit against it, and had even accused one of its partners, Guillermo Parsons, of falsification. He testified that it was he who drafted the contract Exhibit A, and, when questioned as to what was his purpose in contracting with the plaintiff, replied that it was to be an agent for his beds and to collect a commission on sales. However, according to the defendant's evidence, it was Mariano Lopez Santos, a director of the corporation, who prepared Exhibit A. But, even supposing that Ernesto Vidal has stated the truth, his statement as to what was his idea in contracting with the plaintiff is of no importance, inasmuch as the agreements contained in Exhibit A which he claims to have drafted, constitute, as we have said, a contract of purchase and sale, and not one of commercial agency. This only means that Ernesto Vidal was mistaken in his classification of the contract. But it must be understood that a contract is what the law defines it to be, and not what it is called by the contracting parties. The plaintiff also endeavored to prove that the defendant had returned beds that it could not sell; that, without previous notice, it forwarded to the defendant the beds that it wanted; and that the defendant received its commission for the beds sold by the plaintiff directly to persons in Iloilo. But all this, at the most only shows that, on the part of both of them, there was mutual tolerance in the performance of the contract in disregard of its terms; and it gives no right to have the contract considered, not as the parties stipulated it, but as they performed it. Only the acts of the contracting parties, subsequent to, and in connection with, the execution of the contract, must be considered for the purpose of interpreting the contract, when such interpretation is necessary, but not when, as in the instant case, its essential agreements are clearly set forth and plainly show that the contract belongs to a certain kind and not to another. Furthermore, the return made was of certain brass beds, and was not effected in exchange for the price paid for them, but was for other beds of another kind; and for the letter Exhibit L-1, requested the plaintiff's prior consent with respect to said beds, which shows that it was not considered that the defendant had a right, by virtue of the contract, to make this return. As regards the shipment of beds without previous notice, it is insinuated in the record that these brass beds were precisely the ones so shipped, and that, for this very reason, the plaintiff agreed to their return. And with respect to the so-called commissions, we have said that they merely constituted a discount on the invoice price, and the reason for applying this benefit to the beds sold directly by the plaintiff to persons in Iloilo was because, as the defendant obligated itself in the contract to incur the expenses of advertisement of the plaintiff's beds, such sales were to be considered as a result of that advertisement.

DIGEST |5

In respect to the defendant's obligation to order by the dozen, the only one expressly imposed by the contract, the effect of its breach would only entitle the plaintiff to disregard the orders which the defendant might place under other conditions; but if the plaintiff consents to fill them, he waives his right and cannot complain for having acted thus at his own free will. For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and the defendant was one of purchase and sale, and that the obligations the breach of which is alleged as a cause of action are not imposed upon the defendant, either by agreement or by law. The judgment appealed from is affirmed, with costs against the appellant. So ordered. ALBALADEJO v PHILIPPINE REFINING CO 45 Phil 556 FACTS: It appears that Albaladejo y Cia. is a limited partnership, organized in conformity with the laws of these Islands, and having its principal place of business at Legaspi, in the Province of Albay; and during the transactions which gave origin to this litigation said firm was engaged in the buying and selling of the products of the country, especially copra, and in the conduct of a general mercantile business in Legaspi and in other places where it maintained agencies, or sub-agencies, for the prosecution of its commercial enterprises. The Visayan Refining Co. is a corporation organized under the laws of the Philippine Islands; and prior to July 9, 1920, it was engaged in operating its extensive plant at Opon, Cebu, for the manufacture of coconut oil. On August 28, 1918, the plaintiff made a contract with the Visayan Refining Co. Pursuant to this agreement the plaintiff, during the year therein contemplated, bought copra extensively for the Visayan Refining Co. At the end of said year both parties found themselves satisfied with the existing arrangement, and they therefore continued by tacit consent to govern their future relations by the same agreement. In this situation affairs remained until July 9, 1920, when the Visayan Refining Co. closed down its factory at Opon and withdrew from the copra market. When the contract above referred to was originally made, Albaladejo y Cia. apparently had only one commercial establishment, i.e., that at Legaspi; but the large requirements of the Visayan Refining Co. for copra appeared so far to justify the extension of the plaintiff's business that during the course of the next two or three years it established some twenty agencies, or subagencies, in various ports and places of the Province of Albay and neighboring provinces. After the Visayan Refining Co. had ceased to buy copra, as above stated, of which fact the plaintiff was duly notified, the supplies of copra already purchased by the plaintiff were gradually shipped out and accepted by the Visayan Refining Co., and in the course of the next eight or ten months the accounts between the two parties were liquidated. The last account rendered by the Visayan Refining Co. to the plaintiff was for the month of April, 1921, and it showed a balance of P288 in favor of the defendant. Under date of June 25, 1921, the plaintiff company addressed a letter from Legaspi to the Philippine Refining Co. (which had now succeeded to the rights and liabilities of the Visayan Refining Co.), expressing its approval of said account. In this letter no dissatisfaction was expressed by the plaintiff as to the state of affairs between the parties; but about six weeks thereafter the present action was begun.

AGENCY

This action was instituted in the Court of First Instance of the Province of Albay by Albaladejo y Cia., S. en C., to recover a sum of money from the Philippine Refining Co., as successor to the Visayan Refining Co., two causes of action being stated in the complaint. Upon hearing the cause the trial judge absolved the defendant from the first cause of action but gave judgment for the plaintiff to recover the sum of P49,626.68, with costs, upon the second cause of action. From this judgment the plaintiff appealed with respect to the action taken upon the first cause of action, and the defendant appealed with respect to the action taken upon the second cause of action. It results that, by the appeal of the two parties, the decision of the lower court is here under review as regards the action taken upon both grounds of action set forth in the complaint. ISSUE: Whether he defendant liable for the expenses incurred by the plaintiff in keeping its organization intact during the period now under consideration. HELD: We note that in his letter of July 10, 1920, Mr. Day suggested that if the various purchasing agents of the Visayan Refining Co. would keep their organization intact, the company would endeavor to see that they should not lose by the transaction in the long run. These words afford no sufficient basis for the conclusion, which the trial judge deduced therefrom, that the defendant is bound to compensate the plaintiff for the expenses incurred in maintaining its organization. The correspondence sufficiently shows on its face that there was no intention on the part of the company to lay a basis for contractual liability of any sort; and the plaintiff must have understood the letters in that light. The parties could undoubtedly have contracted about it, but there was clearly no intention to enter into contractual relation; and the law will not raise a contract by implication against the intention of the parties. The inducement held forth was that, when purchasing should be resumed, the plaintiff would be compensated by the profits then to be earned for any expense that would be incurred in keeping its organization intact. It is needless to say that there is no proof showing that the officials of the defendant acted in bad faith in holding out this hope. In the appellant's brief the contention is advanced that the contract between the plaintiff and the Visayan Refining Co. created the relation of principal and agent between the parties, and the reliance is placed upon article 1729 of the Civil Code which requires the principal to indemnify the agent for damages incurred in carrying out the agency. Attentive perusal of the contract is, however, convincing to the effect that the relation between the parties was not that of principal and agent in so far as relates to the purchase of copra by the plaintiff. It is true that the Visayan Refining Co. made the plaintiff one of its instruments for the collection of copra; but it is clear that in making its purchases from the producers the plaintiff was buying upon its own account and that when it turned over the copra to the Visayan Refining Co., pursuant to that agreement, a second sale was effected. In paragraph three of the contract it is declared that during the continuance of this contract the Visayan Refining Co. would not appoint any other agent for the purchase of copra in Legaspi; and this gives rise indirectly to the inference that the plaintiff was considered its buying agent. But the use of this term in one clause of the contract cannot dominate the real nature of the agreement as revealed in other clauses, no less than in the caption of the agreement itself. In some of the trade letters also the various instrumentalities used by the Visayan Refining Co. for

DIGEST |6

the collection of copra are spoken of as agents. But this designation was evidently used for convenience; and it is very clear that in its activities as a buyer the plaintiff was acting upon its own account and not as agents, in the legal sense, of the Visayan Refining Co. The title to all of the copra purchased by the plaintiff undoubtedly remained in it until it was delivered by way of subsequent sale to said company. For the reasons stated we are of the opinion that no liability on the part of the defendant is shown upon the plaintiff's second cause of action, and the judgment of the trial court on this part of the case is erroneous. The appealed judgment will therefore be affirmed in so far as it absolves the defendant from the first cause of action and will be reversed in so far as it gives judgment against the defendant upon the second cause of action; and the defendant will be completely absolved from the complaint. So ordered, without express findings as to costs of either instance. CARAM v. LAURETA 103 SCRA 7 FACTS: This is a petition for certiorari to review the decision of the Court of Appeals promulgated on January 29, 1968 in CA-G. R. NO. 35721-R entitled "Claro L. Laureta, plaintiffappellee versus Marcos Mata, Codidi Mata and Fermin Caram, Jr., defendants- appellants; Tampino (Mansaca), et al. Intervenors-appellants," affirming the decision of the Court of First Instance of Davao in Civil Case No. 3083. On June 25, 1959, Claro L. Laureta filed in the Court of First Instance of Davao an action for nullity, recovery of ownership and/or reconveyance with damages and attorney's fees against Marcos Mata, Codidi Mata, Fermin Z. Caram, Jr. and the Register of Deeds of Davao City. On June 10, 1945, Marcos Mata conveyed a large tract of agricultural land covered by Original Certificate of Title No. 3019 in favor of Claro Laureta, plaintiff, the respondent herein. The deed of absolute sale in favor of the plaintiff was not registered because it was not acknowledged before a notary public or any other authorized officer. At the time the sale was executed, there was no authorized officer before whom the sale could be acknowledged inasmuch as the civil government in Tagum, Davao was not as yet organized. However, the defendant Marcos Mata delivered to Laureta the peaceful and lawful possession of the premises of the land together with the pertinent papers thereof such as the Owner's Duplicate Original Certificate of Title No. 3019, sketch plan, tax declaration, tax receipts and other papers related thereto. Since June 10, 1945, the plaintiff Laureta had been and is stin in continuous, adverse and notorious occupation of said land, without being molested, disturbed or stopped by any of the defendants or their representatives. In fact, Laureta had been paying realty taxes due thereon and had introduced improvements worth not less than P20,000.00 at the time of the filing of the complaint. On May 5, 1947, the same land covered by Original Certificate of Title No. 3019 was sold by Marcos Mata to defendant Fermin Z. Caram, Jr., petitioner herein. The deed of sale in favor of Caram was acknowledged before Atty. Abelardo Aportadera. On May 22, 1947, Marcos Mata, through Attys. Abelardo Aportadera and Gumercindo Arcilla, filed with the Court of First Instance of Davao a petition for the issuance of a new Owner's Duplicate of Original Certificate of Title No. 3019, alleging as ground therefor the loss of said title in the evacuation place of defendant Marcos Mata in Magugpo, Tagum, Davao. On June 5, 1947, the Court of First Instance of Davao issued an order directing the Register of Deeds of Davao to issue a new Owner's Duplicate

AGENCY

Certificate of Title No. 3019 in favor of Marcos Mata and declaring the lost title as null and void. On December 9, 1947, the second sale between Marcos Mata and Fermin Caram, Jr. was registered with the Register of Deeds. On the same date, Transfer Certificate of Title No. 140 was issued in favor of Fermin Caram Jr. On August 29, 1959, the defendants Marcos Mata and Codidi Mata filed their answer with counterclaim admitting the existence of a private absolute deed of sale of his only property in favor of Claro L. Laureta but alleging that he signed the same as he was subjected to duress, threat and intimidation for the plaintiff was the commanding officer of the 10th division USFIP operating in the unoccupied areas of Northern Davao with its headquarters at Project No. 7 (Km. 60, Davao Agusan Highways), in the Municipality of Tagum, Province of Davao; that Laureta's words and requests were laws; that although the defendant Mata did not like to sell his property or sign the document without even understanding the same, he was ordered to accept P650.00 Mindanao Emergency notes; and that due to his fear of harm or danger that will happen to him or to his family, if he refused he had no other alternative but to sign the document. The defendants Marcos Mata and Codidi Mata also admit the existence of a record in the Registry of Deeds regarding a document allegedly signed by him in favor of his co-defendant Fermin Caram, Jr. but denies that he ever signed the document for he knew before hand that he had signed a deed of sale in favor of the plaintiff and that the plaintiff was in possession of the certificate of title; that if ever his thumb mark appeared in the document purportedly alienating the property to Fermin Caram, did his consent was obtained through fraud and misrepresentation for the defendant Mata is illiterate and ignorant and did not know what he was signing; and that he did not receive a consideration for the said sale. The defendant Fermin Caram Jr. filed his answer on October 23, 1959 alleging that he has no knowledge or information about the previous encumbrances, transactions, and alienations in favor of plaintiff until the filing of the complaints. The trial court rendered a decision declaring that the deed of sale, Exhibit A, executed by Marcos Mata in favor of Claro L. Laureta stands and prevails over the deed of sale, in favor of Fermin Caram, Jr. The defendants appealed from the judgment to the Court of Appeals which promulgated its decision affirming the judgment of the trial court. ISSUE: Whether there is a valid sale of the property was made through his representatives, Pedro Irespe and Atty. Abelardo Aportadera. HELD: The contention of the petitioner has no merit. The facts of record show that Mata, the vendor, and Caram, the second vendee had never met. During the trial, Marcos Mata testified that he knows Atty. Aportadera but did not know Caram. Thus, the sale of the property could have only been through Caram's representatives, Irespe and Aportadera. The petitioner, in his answer, admitted that Atty. Aportadera acted as his notary public and attorney-in-fact at the same time in the purchase of the property. The petitioner contends that he cannot be considered to have acted in bad faith because there is no direct proof showing that Irespe and Aportadera, his alleged agents, had knowledge of the first sale to Laureta. This contention is also without merit.

DIGEST |7

Even if Irespe and Aportadera did not have actual knowledge of the first sale, still their actions have not satisfied the requirement of good faith. Bad faith is not based solely on the fact that a vendee had knowledge of the defect or lack of title of his vendor. In the instant case, Irespe and Aportadera had knowledge of circumstances which ought to have put them an inquiry. Both of them knew that Mata's certificate of title together with other papers pertaining to the land was taken by soldiers under the command of Col. Claro L. Laureta. 16 Added to this is the fact that at the time of the second sale Laureta was already in possession of the land. Irespe and Aportadera should have investigated the nature of Laureta's possession. If they failed to exercise the ordinary care expected of a buyer of real estate they must suffer the consequences. The rule of caveat emptor requires the purchaser to be aware of the supposed title of the vendor and one who buys without checking the vendor's title takes all the risks and losses consequent to such failure. The principle that a person dealing with the owner of the registered land is not bound to go behind the certificate and inquire into transactions the existence of which is not there intimated should not apply in this case. It was of common knowledge that at the time the soldiers of Laureta took the documents from Mata, the civil government of Tagum was not yet established and that there were no officials to ratify contracts of sale and make them registerable. Obviously, Aportadera and Irespe knew that even if Mata previously had sold t he Disputed such sale could not have been registered. There is no doubt then that Irespe and Aportadera, acting as agents of Caram, purchased the property of Mata in bad faith. Applying the principle of agency, Caram as principal, should also be deemed to have acted in bad faith. Since Caram was a registrant in bad faith, the situation is as if there was no registration at all. The question to be determined now is, who was first in possession in good faith? A possessor in good faith is one who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it. Laureta was first in possession of the property. He is also a possessor in good faith. It is true that Mata had alleged that the deed of sale in favor of Laureta was procured by force. 21 Such defect, however, was cured when, after the lapse of four years from the time the intimidation ceased, Marcos Mata lost both his rights to file an action for annulment or to set up nullity of the contract as a defense in an action to enforce the same. Anent the fourth error assigned, the petitioner contends that the second deed of sale, Exhibit "F", is a voidable contract. Being a voidable contract, the action for annulment of the same on the ground of fraud must be brought within four (4) years from the discovery of the fraud. In the case at bar, Laureta is deemed to have discovered that the land in question has been sold to Caram to his prejudice on December 9, 1947, when the Deed of Sale, Exhibit "F" was recorded and entered in the Original Certificate of Title by the Register of Deeds and a new Certificate of Title No. 140 was issued in the name of Caram. Therefore, when the present case was filed on June 29, 1959, plaintiff's cause of action had long prescribed. The petitioner's conclusion that the second deed of sale, "Exhibit F", is a voidable contract is not correct. I n order that fraud can be a ground for the annulment of a contract, it must be employed prior to or simultaneous to the, consent or creation of the contract. The fraud or dolo causante must be that which determines or is the essential cause of the contract. Dolo causante as a ground for the annulment of contract is specifically described in Article 1338 of the New Civil Code of the Philippines as "insidious words or

AGENCY

machinations of one of the contracting parties" which induced the other to enter into a contract, and "without them, he would not have agreed to". The second deed of sale in favor of Caram is not a voidable contract. No evidence whatsoever was shown that through insidious words or machinations, the representatives of Caram, Irespe and Aportadera had induced Mata to enter into the contract. Since the second deed of sale is not a voidable contract, Article 1391, Civil Code of the Philippines which provides that the action for annulment shall be brought within four (4) years from the time of the discovery of fraud does not apply. Moreover, Laureta has been in continuous possession of the land since he bought it in June 1945. A more important reason why Laureta's action could not have prescribed is that the second contract of sale, having been registered in bad faith, is null and void. Article 1410 of the Civil Code of the Philippines provides that any action or defense for the declaration of the inexistence of a contract does not prescribe. In a Memorandum of Authorities submitted to this Court on March 13, 1978, the petitioner insists that the action of Laureta against Caram has prescribed because the second contract of sale is not void under Article 1409 23 of the Civil Code of the Philippines which enumerates the kinds of contracts which are considered void. Moreover, Article 1544 of the New Civil Code of the Philippines does not declare void a second sale of immovable registered in bad faith. The fact that the second contract is not considered void under Article 1409 and that Article 1544 does not declare void a deed of sale registered in bad faith does not mean that said contract is not void. Article 1544 specifically provides who shall be the owner in case of a double sale of an immovable property. To give full effect to this provision, the status of the two contracts must be declared valid so that one vendee may contract must be declared void to cut off all rights which may arise from said contract. Otherwise, Article 1544 win be meaningless. The first sale in favor of Laureta prevails over the sale in favor of Caram. WHEREFORE, the petition is hereby denied and the decision of the Court of Appeals sought to be reviewed is affirmed, without pronouncement as to costs. SO ORDERED. FIEGE & BROWN v SMITH, BELL & COMPANY, LTD. 43 Phil 113 FACTS: The defendant, Smith, Bell & Co. Ltd., is a corporation organized under the laws of the Philippine Islands with its principal office in the city of Manila. In 1918, the defendant Cowper was in the employ of the defendant corporation, which among other things, was engaged in the sale of machinery and equipment for the use of manufacturers of coconut oil. As the result of negotiations with the company, on May 6, 1918, Cowper wrote a letter. This letter referred to what is known in the evidence as the Harden contract. Later, both plaintiffs here became associated with Cowper in finding purchasers and in the sale of such machinery for the defendant corporation. Outside of the above letter, there is no written contract as to what the plaintiffs should receive or the defendant should pay them for their services, and there is but little, if any, oral evidence of any contract between Fiege, Brown, and Cowper, as one party, and the defendant corporation, as the other. As a result of their services, a number of purchasers were found for the machinery with whom the defendant

DIGEST |8

corporation entered into written contracts for its sale and delivery, and undertook in good faith to carry out the terms and provisions of the different contracts with the respective purchasers. The plaintiffs Fiege and Brown now claim that the signing of the respective purchasers made and constituted a complete sale of the machinery, and that their compensation should be based upon the gross amount of the contracts, which should be construed as completed sales. In other words, which when the contracts were signed, their services were complete and their commissions were earned. Claiming that the defendant company has breached its contract, and refused to account or settle with the plaintiffs for their services, they commenced this action, to recover from the defendant corporation, and because Cowper refused to join the plaintifs, he was made a defendant in the action. Among other things, the complaint alleges that, under the terms and conditions of the contract, the plaintiffs and their associate Cowper were to seek buyers for the machinery which were acceptable to the defendant company, and that the prices were to be fixed by the plaintiffs, as brokers, but which should, in no case, be less than P10,000 for each expeller, and that the date of delivery should not be specific but only approximate. That the plaintiffs secured order for machinery and equipment and which were delivered to, and accepted by , the defendant company, as follows: (Here follows a list of the contracts, dates, with whom made, and amounts aggregating to P313,000.) It is then alleged that, for the purpose of carrying out the respective contracts, the defendant imported all of the specified machinery, but that it has failed and refused and still refuses to make any settlement with the plaintiffs or to render any accounting of the cost of the machinery, or to make any payment, either in full or on account, of the services rendered. That the plaintiffs have no way to determine the amount of the compensation which they should receive, and that it can only ascertained by means of an accounting, which the defendant company should make. That they are entitled to recover approximately P35,000, and they pray that the defendant company be required within a reasonable time to furnish the plaintiffs a full and complete accounting, and to pay them the amount found to be due for the service rendered, upon which they should have interest from the time the machinery was imported, and for such other and further relief as may be just and equitable. For answer, the defendant admits that at the times alleged the plaintiffs were associated, as partners, under the firm name of the Philippine General Commercial Company; that it is a corporation as alleged; and that in the year, 1918, it engaged the plaintiffs to act as brokers for the sale of machinery and equipmetn, and they delivered purchasers' contracts to the defendant company, which it accepted, amounting to P313,000 as alleged in paragraph 6 of the complaint. The defendant J.C. Cowper was formerly a partner of the plaintiffs, and withdrew from the partnership won August 8, 1918, and that he had an interest in the amount which the plaintiffs should recover, but refused to join with them, and denies all other material allegations of the complaint, and, as a further and separate defense, alleges that the plaintiffs and defendant Cowper secured orders for machinery and equipment, for which the company, "agreed to pay plaintiffs and the defendant J.C. Cowper, in equal shares, one-half of the net profits derived by said defendant, Smith, Bell & Co., Ltd., from said orders." It is then alleged that outside of P2,000 paid by the Insular Coconut Oil, Co., on its order of August 22, 1918, no other payment s have been made on the respective contracts by any of the other purchaser, which were secured by the

AGENCY

plaintiffs. That until such payments have been made, the defendant company cannot ascertain the net profits, but that it has not received any profits whatever from any of the other orders, and that, as soon as full payment of any order is made by the purchaser, the company will render an accounting to plaintiffs, and pay them any amount found due. Upon such issues, the case was tried, and a judgment was rendered for plaintiffs for P6,511.17, without interest or costs, from which they appealed, claiming that the court erred in failing to find that the plaintifs were entitled to commissions on two different contracts; that the court erred in failing to find that the plaintiffs were entitled to commissions on two different contracts; that the court erred in holding that plaintiffs' recovery should be based upon the defendant company realizing a profit on the respective contracts; and in rendering judgement without interest or costs. ISSUE: Whether the one half agreed upon by the party should be one-half of the difference between the cost of the machinery laid down at Manila and the price specified in the contracts with the respective purchasers or "one-half of the net profits." HELD: Although the oral evidence pro and con is more or less conflicting, the trial court found that the letter of May 6, 1918, above quoted, was basis of the contract under which the services were rendered, and that the plaintiffs were only entitled to recover one-half of the net profits that the company made out of its contracts with the purchasers, and limited the amount of plaintiffs' recovery to the one-half of the net profits, which the company had actually received and collected under the contracts ,or P6,511.17. April 15, 1918, Fiege, Brown and Cowper formed a partnership known as the Philippine General Commercial Company to do a general brokerage business. It is admitted that on May 6, 1918, Cowper wrote the letter above quoted, and that the different members of the firm and the defendant company knew that the letter was written and received. August 15, 1918, the respective members of the firm signed a writing, which, among, other things, recites: It is further agreed that whatever commissions may be due or become due to the members of the copartnership on order for machinery or merchandise shall be paid by Smith, Bell & Co. pro rata among the three partners, etc."and that on the same date the three members of the firm addressed the following letter to the defendant company: The undersigned hereby request that all commissions that may accrue on orders for machinery or merchandise accepted or pending acceptance in which we, or any of us, may be interested, be paid as same fall due to the undersigned individually in pro rata shares of onethird of such commissions . . . . " The contract with Harden was dated May 16; with Vicente Sotelo two contracts were dated August 16, and two August 20; one with A. Chicote was August 11; and the other August 19, and the one with the Insular Coconut Oil Co., August 22, all in the year, 1918. When you consider the dates of the respective contracts, the recital in the agreement between the members of the firm, and the letter to the firm of August 15, become important. The firm agreement recites "that whatever commissions may be due or become due," and the letter recites " that all commission that may accrue on orders

DIGEST |9

for machinery or merchandise accepted or pending acceptance." The expellers were not to be sold for less than P10,000. As we construe the contract, the plaintiffs and Cowper during his partnership, as one party, and the defendant company, as the other party, were to divide equally the profits of each contract, and until such time as the company made a profit on a given contract, plaintiffs' commission was not earned as to that contract. There was no profit through the mere signing of the contract by the purchaser and its acceptance by the company. There would not be any profit until the purchaser paid all the money and complied with his contract. Until such time as the company realized a profit on the contracts, there was nothing to share or divide. The authorities cited by the attorneys for the appellants are good law, but, under the facts in this case, they are not in point. Plaintiffs commission was to paid out of, and is limited to, net profits, and except as to the amount found by the trial court, there is no evidence of net profit on any of the contracts. No tender was made before October 15, 1919, the date of filing the complaint, and none is alleged in the answer. September 8, 1920, through its attorneys, the defendant wrote a letter to plaintiffs' attorneys, in which they say they are willing to pay as commissions on contracts for the sale of a machinery the sum of P6,511.17, "in full settlement of all claims which they have upon our clients on that behalf as of this date," and we "hereby tender you the sum of P6,511.17 in full settlement of all claims due by our clients as of this date." As applied to the existing facts, it might be questioned as to whether this was a good tender of the P6,511.17. But, assuming that it was valid for that amount, it was made nearly one year after the action was commenced and more than one year after the defendant had collected the money upon the contracts, and it does not include interest on the money collected or the accrued costs. The evidence shows, and the company in effect admits, that from and out of moneys which it had previously collected on the contracts, the plaintiffs were entitled to have and received P6,511.17. Under the contract between the plaintiffs and the company, this money should have been paid to the plaintiffs when it was collected. The lower court found that the plaintiffs were not entitled to interest and costs. That was error. In so far as it found that the plaintiffs were entitled to judgment for P6,511.17, the judgment of the lower court is affirmed. In all other respects, it is reversed, and a judgement will be entered here in favor of the plaintiffs for P6,511.17, with interest from the 15th of October,1919, at the rate of six per cent per annum, together with costs in favor of the plaintiffs in both this and the lower court. This judgment to be without prejudice to plaintiffs' right to recover any other profits which may have accrued or which may hereafter accrue upon any of the remaining contracts. So ordered. LIM TEK GOAN v AZORES 76 Phil 363 FACTS: The accused was arraigned on August 7, 1952 and the case set for hearing on September 19, 1952. On the latter date, after the first witness for the prosecution has testified, counsel for private prosecution moved for the postponement of the trial on the ground that their next witness was sick and unable to come to court. This motion was granted and the trial was postponed to October 17, 1952, this time to be held at Calamba, Laguna. When this

AGENCY

date came, the private prosecution, through counsel, presented an urgent motion for continuance of the trial, which was granted with the conformity of the defense, the court setting it on November 13, 1952. On said date, November 13, counsel for private prosecution, instead of going to trial, again filed a motion for postponement, this time seeking to transfer the case to the San Pablo branch alleging as reasons that his witnesses were all residents of San Pablo City and it would be to their convenience, as well as of the defendants, who were likewise residing in the same place, that the trial be continued there. This motion was objected to not only by the defense but also by Fiscal David Carreon who argued that he saw no reason for the transfer in view of the fact that the case had already been partially tried at the Calamba branch. In the course of the argument that ensued, counsel for the accused intervened and joined Fiscal David Carreon in his opposition to the transfer making the observation in passing that since the private prosecutor was acting under the direction and control of the fiscal and the latter had registered his objection, he found no reason for him to insist on his petition more so when his appearance in this case was not as a matter of right but merely by tolerance on the part of the court. This observation came as a surprise to the counsel for private prosecution who then and there asked the court for a ruling as to whether his appearance in the case was a matter of right or a matter of tolerance as insinuated, intimating that if this should be resolved against him he would bring the matter to the Supreme Court for a definite ruling. Forthwith, the court ruled that in cases of this nature which do not involve any civil liability the appearance of a private prosecutor cannot be considered as a matter of right and if allowed it would only be upon tolerance of the court and of the parties. This conclusion notwithstanding, the court noted that counsel for the private prosecution cannot claim any prejudice on his part for he could continue appearing as such by tolerance of the court until after the final termination of the case. Not satisfied with this ruling, counsel interposed the present petition for certiorari. ISSUE: Whether in the prosecution of a criminal case commenced either by complaint or by information an offended party may intervene, personally or by attorney, as a matter of right as claimed by petitioner, or upon mere tolerance, as ruled by respondent judge. HELD: The law on this point is clear. Section 4, Rule 106, provides that "all criminal actions either commenced by complaint or by information shall be prosecuted under the direction and control of the fiscal"' and, as a corollary, it is also provided that "unless the offended party has waived the civil action or expressly reserved the right to institute it after the termination of the criminal case, . . . he may intervene, personally or by attorney, in the prosecution of the offense." (Section 15, Rule 106.) From these provisions we can clearly infer that while criminal actions as a rule are prosecuted under the direction and control of the fiscal, however, an offended party may intervene in the proceeding, personally or by attorney, specially in cases of offenses which cannot be prosecuted except at the instance of the offended party. (People vs. Dizon, 44 Phil., 267; Herrero vs. Diaz, 75 Phil., 489.) The only exception to this rule is when the offended party waives his right to civil action or expressly reserves his right to institute it after the termination of the case, in which case he loses his right to intervene upon the theory that he is deemed to have lost his interest in its prosecution.(People vs.

DIGEST |10

Velez, 77 Phil., 1026, 44 Off. Gaz., [6], 1811; People vs. Capistrano, 90 Phil., 823.) And in any event, whether an offended party intervenes in the prosecution of a criminal action, his intervention must always be subject to the direction and control of the prosecuting official (Idem.). Considering the foregoing observations, it is apparent that the ruling of respondent judge that in cases like the one under consideration which do not involve any civil liability an offended party can only appear upon tolerance on the part of the court is not well taken it being contrary to the law and precedents obtaining in this jurisdiction. In this respect, the law makes no distinction between cases that are public in nature and those that can only be prosecuted at the instance of the offended party. In either case the law gives to the offended party the right to intervene, personally or by counsel, and he is deprived of such right only when he waives the civil action or reserves his right to institute one. Such is not the situation in the present case. The case at bar involves a public crime and the private prosecution has asserted its right to intervene in the proceedings. The respondent judge, therefore, erred in considering the appearance of counsel merely as a matter of tolerance. We believe, however, that the incident at bar is not of such a character as to give rise to a petition for certiorari for it does not involve grave abuse of discretion. While the ruling of the judge is erroneous, he has however caused no prejudice to counsel since he has expressly manifested in his order that he could continue representing the interest of his client. The action of the judge may at most be considered an error of judgment which can be remedied by appeal. We find therefore no reason for granting the relief now urged by counsel in his petition for certiorari. Wherefore, the petition is denied, without pronouncement as to costs. OBLIGATIONS OF AGENT Art. 1884. The agent is bound by his acceptance to carry out the agency, and is liable for the damages which, through his non-performance, the principal may suffer. He must also finish the business already begun on the death of the principal, should delay entail any danger. (1718) Art. 1885. In case a person declines an agency, he is bound to observe the diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner until the latter should appoint an agent or take charge of the goods. (n) Art. 1886. Should there be a stipulation that the agent shall advance the necessary funds, he shall be bound to do so except when the principal is insolvent. (n) Art. 1887. In the execution of the agency, the agent shall act in accordance with the instructions of the principal. In default thereof, he shall do all that a good father of a family would do, as required by the nature of the business. Art. 1888. An agent shall not carry out an agency if its execution would manifestly result in loss or damage to the principal. (n) Art. 1889. The agent shall be liable for damages if, there being a conflict between his interests and those of the principal, he should prefer his own. (n) Art. 1890. If the agent has been empowered to borrow money, he may himself be the lender at the current rate of interest. If he has been authorized to lend money at interest, he cannot borrow it without the consent of the principal. (n) Art. 1891. Every agent is bound to render an account of his transactions and to deliver to the principal whatever he may

AGENCY

have received by virtue of the agency, even though it may not be owing to the principal. Every stipulation exempting the agent from the obligation to render an account shall be void. (1720a) Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be responsible for the acts of the substitute: (1) When he was not given the power to appoint one; (2) When he was given such power, but without designating the person, and the person appointed was notoriously incompetent or insolvent. All acts of the substitute appointed against the prohibition of the principal shall be void. (1721) Art. 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the principal may furthermore bring an action against the substitute with respect to the obligations which the latter has contracted under the substitution. (1722a) Art. 1894. The responsibility of two or more agents, even though they have been appointed simultaneously, is not solidary, if solidarity has not been expressly stipulated. (1723) Art. 1895. If solidarity has been agreed upon, each of the agents is responsible for the non-fulfillment of agency, and for the fault or negligence of his fellows agents, except in the latter case when the fellow agents acted beyond the scope of their authority. (n) Art. 1896. The agent owes interest on the sums he has applied to his own use from the day on which he did so, and on those which he still owes after the extinguishment of the agency. (1724a) Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers. (1725) Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of his authority, and the principal does not ratify the contract, it shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal. In this case, however, the agent is liable if he undertook to secure the principal's ratification. (n) Art. 1899. If a duly authorized agent acts in accordance with the orders of the principal, the latter cannot set up the ignorance of the agent as to circumstances whereof he himself was, or ought to have been, aware. (n) Art. 1900. So far as third persons are concerned, an act is deemed to have been performed within the scope of the agent's authority, if such act is within the terms of the power of attorney, as written, even if the agent has in fact exceeded the limits of his authority according to an understanding between the principal and the agent. (n) Art. 1901. A third person cannot set up the fact that the agent has exceeded his powers, if the principal has ratified, or has signified his willingness to ratify the agent's acts. (n) Art. 1902. A third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power of attorney, or the instructions as regards the agency. Private or secret orders and instructions of the principal do not prejudice third persons who have relied upon the power of attorney or instructions shown them. (n) Art. 1903. The commission agent shall be responsible for the goods received by him in the terms and conditions and as described in the consignment, unless upon receiving them he

DIGEST |11

should make a written statement of the damage and deterioration suffered by the same. (n) Art. 1904. The commission agent who handles goods of the same kind and mark, which belong to different owners, shall distinguish them by countermarks, and designate the merchandise respectively belonging to each principal. (n) Art. 1905. The commission agent cannot, without the express or implied consent of the principal, sell on credit. Should he do so, the principal may demand from him payment in cash, but the commission agent shall be entitled to any interest or benefit, which may result from such sale. (n) Art. 1906. Should the commission agent, with authority of the principal, sell on credit, he shall so inform the principal, with a statement of the names of the buyers. Should he fail to do so, the sale shall be deemed to have been made for cash insofar as the principal is concerned. (n) Art. 1907. Should the commission agent receive on a sale, in addition to the ordinary commission, another called a guarantee commission, he shall bear the risk of collection and shall pay the principal the proceeds of the sale on the same terms agreed upon with the purchaser. (n) Art. 1908. The commission agent who does not collect the credits of his principal at the time when they become due and demandable shall be liable for damages, unless he proves that he exercised due diligence for that purpose. (n) Art. 1909. The agent is responsible not only for fraud, but also for negligence, which shall be judged with more or less rigor by the courts, according to whether the agency was or was not for a compensation. (1726) DOMINGO v. DOMINGO 42 SCRA 131 FACTS: In a document, Vicente M. Domingo granted Gregorio Domingo, a real estate broker, the exclusive agency to sell his lot No. 883 of Piedad Estate with an area of about 88,477 square meters at the rate of P2.00 per square meter (or for P176,954.00) with a commission of 5% on the total price, if the property is sold by Vicente or by anyone else during the 30-day duration of the agency or if the property is sold by Vicente within three months from the termination of the agency to apurchaser to whom it was submitted by Gregorio during the continuance of the agency with notice to Vicente. The said agency contract was in triplicate, one copy was given to Vicente, while the original and another copy were retained by Gregorio. On June 3, 1956, Gregorio authorized the intervenor Teofilo P. Purisima to look for a buyer, promising him one-half of the 5% commission. Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio as a prospective buyer. After several conferences between Gregorio and Oscar de Leon, the latter raised his offer to P109,000.00 on June 20, 1956 , to which Vicente agreed by signing. Upon demand of Vicente, Oscar de Leon issued to him a check in the amount of P1,000.00 as earnest money, after which Vicente advanced to Gregorio the sum of P300.00. Oscar de Leon confirmed his former offer to pay for the property at P1.20 per square meter in another letter. Subsequently, Vicente asked for an additional amount of P1,000.00 as earnest money, which Oscar de Leon promised to deliver to him. Pursuant to his promise to Gregorio, Oscar gave him as a gift or propina the sum of One Thousand Pesos (P1,000.00) for succeeding in persuading Vicente to sell his lot at P1.20 per square meter or a total in round figure of One Hundred Nine Thousand Pesos (P109,000.00). This gift of One Thousand Pesos (P1,000.00) was not disclosed by Gregorio to Vicente. Neither did Oscar pay Vicente the additional amount

AGENCY

of One Thousand Pesos (P1,000.00) by way of earnest money. In the deed of sale was not executed on August 1, 1956 as stipulated in Exhibit "C" nor on August 15, 1956 as extended by Vicente, Oscar told Gregorio that he did not receive his money from his brother in the United States, for which reason he was giving up the negotiation including the amount of One Thousand Pesos (P1,000.00) given as earnest money to Vicente and the One Thousand Pesos (P1,000.00) given to Gregorio as propina or gift. When Oscar did not see him after several weeks, Gregorio sensed something fishy. So, he went to Vicente and read a portion of Exhibit "A" marked habit "A-1" to the effect that Vicente was still committed to pay him 5% commission, if the sale is consummated within three months after the expiration of the 30-day period of the exclusive agency in his favor from the execution of the agency contract on June 2, 1956 to a purchaser brought by Gregorio to Vicente during the said 30day period. Vicente grabbed the original of Exhibit "A" and tore it to pieces. Gregorio held his peace, not wanting to antagonize Vicente further, because he had still duplicate of Exhibit "A". From his meeting with Vicente, Gregorio proceeded to the office of the Register of Deeds of Quezon City, where he discovered Exhibit "G' deed of sale executed on September 17, 1956 by Amparo Diaz, wife of Oscar de Leon, over their house and lot No. 40 Denver Street, Cubao, Quezon City, in favor Vicente as down payment by Oscar de Leon on the purchase price of Vicente's lot No. 883 of Piedad Estate. Upon thus learning that Vicente sold his property to the same buyer, Oscar de Leon and his wife, he demanded in writting payment of his commission on the sale price of One Hundred Nine Thousand Pesos (P109,000.00), Exhibit "H". He also conferred with Oscar de Leon, who told him that Vicente went to him and asked him to eliminate Gregorio in the transaction and that he would sell his property to him for One Hundred Four Thousand Pesos (P104,000.0 In Vicente's reply to Gregorio's letter, Exhibit "H", Vicente stated that Gregorio is not entitled to the 5% commission because he sold the property not to Gregorio's buyer, Oscar de Leon, but to another buyer, Amparo Diaz, wife of Oscar de Leon. The Court of Appeals found from the evidence that Exhibit "A", the exclusive agency contract, is genuine; that Amparo Diaz, the vendee, being the wife of Oscar de Leon the sale by Vicente of his property is practically a sale to Oscar de Leon since husband and wife have common or identical interests; that Gregorio and intervenor Teofilo Purisima were the efficient cause in the consummation of the sale in favor of the spouses Oscar de Leon and Amparo Diaz; that Oscar de Leon paid Gregorio the sum of One Thousand Pesos (P1,000.00) as "propina" or gift and not as additional earnest money to be given to the plaintiff, because Exhibit "66", Vicente's letter addressed to Oscar de Leon with respect to the additional earnest money, does not appear to have been answered by Oscar de Leon and therefore there is no writing or document supporting Oscar de Leon's testimony that he paid an additional earnest money of One Thousand Pesos (P1,000.00) to Gregorio for delivery to Vicente, unlike the first amount of One Thousand Pesos (P1,000.00) paid by Oscar de Leon to Vicente as earnest money, evidenced by the letter Exhibit "4"; and that Vicente did not even mention such additional earnest money in his two replies Exhibits "I" and "J" to Gregorio's letter of demand of the 5% commission. ISSUE: (1) whether the failure on the part of Gregorio to disclose to Vicente the payment to him by Oscar de Leon of the amount of One Thousand Pesos (P1,000.00) as gift or "propina" for having persuaded Vicente to reduce the purchase price from P2.00 to P1.20 per square meter, so constitutes fraud as to cause a forfeiture of his commission on the sale price.

DIGEST |12

AGENCY

HELD: In the case at bar, defendant-appellee Gregorio Domingo as the broker, received a gift or propina in the amount of One Thousand Pesos (P1,000.00) from the prospective buyer Oscar de Leon, without the knowledge and consent of his principal, herein petitioner-appellant Vicente Domingo. His acceptance of said substantial monetary gift corrupted his duty to serve the interests only of his principal and undermined his loyalty to his principal, who gave him partial advance of Three Hundred Pesos (P300.00) on his commission. As a consequence, instead of exerting his best to persuade his prospective buyer to purchase the property on the most advantageous terms desired by his principal, the broker, herein defendant-appellee Gregorio Domingo, succeeded in persuading his principal to accept the counteroffer of the prospective buyer to purchase the property at P1.20 per square meter or One Hundred Nine Thousand Pesos (P109,000.00) in round figure for the lot of 88,477 square meters, which is very much lower the the price of P2.00 per square meter or One Hundred Seventy-Six Thousand Nine Hundred Fifty-Four Pesos (P176,954.00) for said lot originally offered by his principal. The duty embodied in Article 1891 of the New Civil Code will not apply if the agent or broker acted only as a middleman with the task of merely bringing together the vendor and vendee, who themselves thereafter will negotiate on the terms and conditions of the transaction. Neither would the rule apply if the agent or broker had informed the principal of the gift or bonus or profit he received from the purchaser and his principal did not object therto. 11 Herein defendantappellee Gregorio Domingo was not merely a middleman of the petitioner-appellant Vicente Domingo and the buyer Oscar de Leon. He was the broker and agent of said petitioner-appellant only. And therein petitioner-appellant was not aware of the gift of One Thousand Pesos (P1,000.00) received by Gregorio Domingo from the prospective buyer; much less did he consent to his agent's accepting such a gift. The fact that the buyer appearing in the deed of sale is Amparo Diaz, the wife of Oscar de Leon, does not materially alter the situation; because the transaction, to be valid, must necessarily be with the consent of the husband Oscar de Leon, who is the administrator of their conjugal assets including their house and lot at No. 40 Denver Street, Cubao, Quezon City, which were given as part of and constituted the down payment on, the purchase price of herein petitioner-appellant's lot No. 883 of Piedad Estate. Hence, both in law and in fact, it was still Oscar de Leon who was the buyer. As a necessary consequence of such breach of trust, defendant-appellee Gregorio Domingo must forfeit his right to the commission and must return the part of the commission he received from his principal. Teofilo Purisima, the sub-agent of Gregorio Domingo, can only recover from Gregorio Domingo his one-half share of whatever amounts Gregorio Domingo received by virtue of the transaction as his sub-agency contract was with Gregorio Domingo alone and not with Vicente Domingo, who was not even aware of such sub-agency. Since Gregorio Domingo received from Vicente Domingo and Oscar de Leon respectively the amounts of Three Hundred Pesos (P300.00) and One Thousand Pesos (P1,000.00) or a total of One Thousand Three Hundred Pesos (P1,300.00), one-half of the same, which is Six Hundred Fifty Pesos (P650.00), should be paid by Gregorio Domingo to Teofilo Purisima. Because Gregorio Domingo's clearly unfounded complaint caused Vicente Domingo mental anguish and serious anxiety as well as wounded feelings, petitionerappellant Vicente Domingo should be awarded moral

damages in the reasonable amount of One Thousand Pesos (P1,000.00) attorney's fees in the reasonable amount of One Thousand Pesos (P1,000.00), considering that this case has been pending for the last fifteen (15) years from its filing on October 3, 1956. WHEREFORE, the judgment is hereby rendered, reversing the decision of the Court of Appeals and directing defendantappellee Gregorio Domingo: (1) to pay to the heirs of Vicente Domingo the sum of One Thousand Pesos (P1,000.00) as moral damages and One Thousand Pesos (P1,000.00) as attorney's fees; (2) to pay Teofilo Purisima the sum of Six Hundred Fifty Pesos (P650.00); and (3) to pay the costs. DUHART FRERES Y CIE v MACIAS 54 Phil 613 FACTS: The change made in the names of the plaintiffs by the amended complaint filed on October 14, 1927, substituting for the partnership "Duhart Freres & Cie.," the names of Pedro Duhart and Eugenio Duhart, who according to said amended complaint are the sole collective partners, and the managing partners according to the evidence, does not constitute a substantial alternation of the party plaintiff, and does not effect the validity and legal force of the attachment of the defendants' property, issued in favor of said "Duhart Freres & Cie.," upon a prior complaint, which writ still subsist as well in favor of the original plaintiff "Duhart Freres & Cie.," as for the same entity in the persons of its own sole collective partners, the plaintiffs Pedro Duhart and Eugenio Duhart. Whenever it happens, as in the instant case, that there is no real change of the party plaintiff, the writ of attachment issued in favor of said plaintiff as an entry, remains unchanged and in favor of said plaintiff as and there is no necessity for issuing another in favor of such as may later appear in the cause as plaintiff, so long as they are to all intents and purposes the same party plaintiff or its successors-in-interest. The alternation thus introduced into the complaint does not amount to a real change in the party plaintiff. Furthermore, this question has already been decided by this court against the defendants herein in the certiorari proceedings instituted by them on January, 1928, G.R. No. 28895. The appellants contend that as the plaintiffs subscribed the contract Exhibit A on behalf of the partnership "Duhart Freres & Cie," they cannot now sue in their town behalf, and in the instant action must be instituted by the partnership. It was so done in the beginning, but said defendant having demurred, and the court sustained their demurrer, the complaint had to bee amended, naming the collective partners as plaintiffs in favor of the original plaintiff, the partnership "Duhart Freres & Cie., It is to be noted that the present plaintiffs, in executing and signing the contract Exhibit A, did so, according to its own terms, "as partners of the firm "Duhart Freres & Cie." doing business in the aforementioned city." At any rate, the defendant, Ernesto Macias, who, in Exhibit A contracted with the plaintiffs, cannot now gainsay their right to bring this suit as partners of said firm. As to the defendant "E Macias Commission Impex Co., Ltd.," the parties entered into an agreement in contract Exhibit A (Clause V) as an agency under said commercial name, and it appears from paragraph 2 of the fifth special defense of the defendants that said defendant is an agency created and organized in the Philippines by virtue of said contract Exhibit A. The defendants come under the doctrine laid down by this court in Strachan & MacMurray vs. Emaldi (22 Phil., 295). ISSUE:

DIGEST |13

Whether the document Exhibit A was a contract of agency and in ordering its rescission, and in not declaring that said document was a partnership contract of joint account. HELD: There is no merit in the assertion that the contract evidence by instruments Exhibit A, is a joint-account partnership contract. We are not concerned with an accidental association confined to definite transaction, being thus free from any solemnity in its formation (art. 240, Code of Commerce; Merchantile Law, Carreras, p. 300, 3d edition), nor did they in the contract agree upon any capital, or that Ernesto Macias subscribed or would contribute a part of said capital (art. 239, Code of Commerce). On the contrary, it is the opening of an "agency," a word and an idea, repeated and explained throughout the instrument as signifying, a commercial agency. And notwithstanding the wise sphere of action granted to said agency, the parties does not render it any the less an agency, which, however, agreed upon a limit, until further stipulation, as may be seen in clause VIII of the contract, namely, "commissions," which are one of the kinds of a commercial agency, specifically so called in article 244 of the Code of Commerce. We see no sufficient reason for holding that the plaintiffs violated the contract, and therefore, we find no error in the judgment appealed from ordering the dismissal of the defendants' counterclaim. It appears of record that the defendant Ernesto Macias violated clauses VIII, XI, XII, and XIII of the contract, for it has been established that if he did open a banking credit for fifty per cent centum of the value of his orders, which were not paid, neither paid for the credit, nor sent a monthly statement, nor kept accounts, nor forwarded to the plaintiffs a balance and semestral inventory. All of which gives the plaintiffs a right to rescind the contract as agreed upon in clause XIX thereof. As to the amount awarded to the plaintiffs, we find no reason in these proceedings to depart lower court's findings in this matter. With regard to the order that defendant Macias render a detailed account to the plaintiffs of the business of said agency, as prayed for in the complaint, we deem it justified. It is simply the consequence of the recession of the contract of agency, also decreed by the court below. Every agent must give an account of his operations, a general principle expressly laid down in article 1720 of the Civil Code. It is no obstacle to this order to render accounts that a sum of money has been adjudged to the plaintiffs, or that the defendants' counterclaim has been dismissed. Both the claim of said sum of the counterclaim are questioned raised and submitted by the parties to the court, which, in view of the evidence, had no decide and did in fact decide, and it has not been shown that they represent all the transactions between the parties or all the operations of the agency. The appeal being without merit, we affirm the judgment appealed from, with cost against the defendants. So ordered. MUNICIPAL COUNCIL OF ILOILO v EVANGELISTA 55 Phil 290 FACTS: On March 20, 1924, the Court of First Instance of Iloilo rendered judgment in civil case No. 3514 thereof, wherein the appellant herein, Tan Ong Sze Vda. de Tan Toco was the plaintiff, and the municipality of Iloilo the defendant, and the former sought to recover of the latter the value of a strip of land belonging to said plaintiff taken by the defendant to widen a public street; the judgment entitled the plaintiff to recover P42,966.40, representing the value of said

AGENCY

strip of land, from the defendant (Exhibit A). On appeal to this court (G. R. No .22617) 1 the judgment was affirmed on November 28, 1924 (Exhibit B). After the case was remanded to the court of origin, and the judgment rendered therein had become final and executory, Attorney Jose Evangelista, in his own behalf and as counsel for the administratrix of Jose Ma .Arroyo's intestate estate, filed a claim in the same case for professional services rendered by him, which the court, acting with the consent of the appellant widow, fixed at 15 per cent of the amount of the judgment. At the hearing on said claim, the claimants appeared, as did also the Philippine National Bank, which prayed that the amount of the judgment be turned over to it because the land taken over had been mortgaged to it. Antero Soriano also appeared claiming the amount of the judgment as it had been assigned to him, and by him, in turn, assigned to Mauricio Cruz & Co., Inc. After hearing all the adverse claims on the amount of the judgment the court ordered that the attorney's lien in the amount of 15 per cent of the judgment, be recorded in favor of Attorney Jose Evangelista, in his own behalf and as counsel for the administratrix of the deceased Jose Ma .Arroyo, and directed the municipality of Iloilo to file an action of interpleading against the adverse claimants, the Philippine National Bank, Antero Soriano, Mauricio Cruz & Co., Jose Evangelista and Jose Arroyo, as was done, the case being filed in the Court of First Instance of Iloilo as civil case No. 7702. After due hearing, the court rendered the decision quoted from at the beginning. On March 29, 1928, the municipal treasurer of Iloilo, with the approval of the auditor of the provincial treasurer of Iloilo and of the Executive Bureau, paid the late Antero Soriano the amount of P6,000 in part payment of the judgment mentioned above, assigned to him by Tan Boon Tiong, acting as attorney-in-fact of the appellant herein, Tan Ong Sze Vda. de Tan Toco. On December 18, 1928, the municipal treasurer of Iloilo deposited with the clerk of the Court of First Instance of Iloilo the amount of P6,000 on account of the judgment rendered in said civil case No. 3514. In pursuance of the resolution of the court below ordering that the attorney's lien in the amount of 15 per cent of the judgment be recorded in favor of Attorney Jose Evangelista, in his own behalf and as counsel for the late Jose Ma. Arroyo, the said clerk of court delivered on the same date to said Attorney Jose Evangelista the said amount of P6,000. At the hearing of the instant case, the codefendants of Attorney Jose Evangelista agreed not to discuss the payment made to the latter by the clerk of the Court of First Instance of Iloilo of the amount of P6,000 mentioned above in consideration of said lawyer's waiver of the remainder of the 15 per cent of said judgment amounting to P444.69. With these two payments of P6,000 each making a total of P12,000, the judgment for P42,966.44 against the municipality of Iloilo was reduced to P30,966.40, which was adjudicated by said court to Mauricio Cruz & Co. This appeal, then, is confined to the claim of Mauricio Cruz & Co. as alleged assignee of the rights of the late Attorney Antero Soriano by virtue of the said judgment in payment of professional services rendered by him to the said widow and her coheirs. ISSUE: Whether the assignment made by Tan Boon Tiong as attorney-in-fact of the appellant Tan Ong Sze Viuda de Tan Toco, to Attorney Antero Soriano, of all the credits, rights and

DIGEST |14

interests belonging to said appellant Tan Ong Sze Viuda de Tan Toco entitled Viuda de Tan Toco vs. The Municipal Council of Iloilo, adjudicating to said widow the amount of P42,966.40, plus the costs of court, against said municipal council of Iloilo, in consideration of the professional services rendered by said attorney to said widow of Tan Toco and her coheirs. HELD: A glance at these receipts shows that those amounts were received by Attorney Antero Soriano for the firm of Soriano & Arroyo, which is borne out by the stamp on said receipts reading, "Befete Soriano & Arroyo," and the manner in which said attorney receipted for them, "Soriano & Arroyo, by A. Soriano." Therefore, the appellant's contention that the amounts of P200 and P500 evidence by said receipts should be considered as payments made to Attorney Antero Soriano for professional services rendered by him personally to the interests of the widow of Tan Toco, is untenable. Besides, if at the time of the assignments to the late Antero Soriano his professional services to the appellant widow of Tan Toco had already been paid for, no reason can be given why it was necessary to write him money in payment of professional services on March 14, 1928 (Exhibit 5-G Tan Toco) and December 15, of the same year (Exhibit 5H Tan Toco) after the deed of assignment, (Exhibit 2-Cruz) dated September 27, 1927, had been executed. In view of the fact that the amounts involved in the cases prosecuted by Attorney Antero Soriano as counsel for Tan Toco's widow, some of which cases have been appealed to this court, run into the hundreds of thousands of pesos, and considering that said attorney had won several of those cases for his clients, the sum of P10,000 to date paid to him for professional services is wholly inadequate, and shows, even if indirectly, that the assignments of the appellant's rights and interests made to the late Antero Soriano and determined in the judgment aforementioned, was made in consideration of the professional services rendered by the latter to the aforesaid widow and her coheirs. The defendant-appellant also contends that the deed of assignment Exhibit 2-Cruz was drawn up in contravention of the prohibition contained in article 1459, It does not appear that the Attorney Antero Soriano was counsel for the herein appellant in civil case No. 3514 of the Court of First Instance of Iloilo, which she instituted against the municipality of Iloilo, Iloilo, for the recovery of the value of a strip of land expropriated by said municipality for the widening of a certain public street. The only lawyers who appear to have represented her in that case were Arroyo and Evangelista, who filed a claim for their professional fees .When the appellant's credit, right, and interests in that case were assigned by her attorney-in-fact Tan Boon Tiong, to Attorney Antero Soriano in payment of professional services rendered by the latter to the appellant and her coheirs in connection with other cases, that particular case had been decided, and the only thing left to do was to collect the judgment. There was no relation of attorney and client, then, between Antero Soriano and the appellant, in the case where that judgment was rendered; and therefore the assignment of her credit, right and interests to said lawyer did not violate the prohibition cited above. As to whether Tan Boon Tiong as attorney-in-fact of the appellant, was empowered by his principal to make as assignment of credits, rights and interests, in payment of debts for professional services rendered by lawyers, in paragraph VI of the power of attorney, Exhibit 5-Cruz, Tan Boon Tiong is authorized to employ and contract for the services of lawyers upon such conditions as he may deem

AGENCY

convenient, to take charge of any actions necessary or expedient for the interests of his principal, and to defend suits brought against her. This power necessarily implies the authority to pay for the professional services thus engaged. In the present case, the assignment made by Tan Boon Tiong, as Attorney-in-fact for the appellant, in favor of Attorney Antero Soriano for professional services rendered in other cases in the interests of the appellant and her coheirs, was that credit which she had against the municipality of Iloilo, and such assignment was equivalent to the payment of the amount of said credit to Antero Soriano for professional services. With regard to the failure of the other attorney-in-fact of the appellant, Tan Montano, authorized by Exhibit 1 � Tan Toco, to consent to the deed of assignment, the latter being also authorized to pay, in the name and behalf of the principal, all her debts and the liens and encumbrances her property, the very fact that different letters of attorney were given to each of these two representatives shows that it was not the principal's intention that they should act jointly in order to make their acts valid. Furthermore, the appellant was aware of that assignment and she not only did not repudiate it, but she continued employing Attorney Antero Soriano to represent her in court. For the foregoing considerations, the court is of opinion and so holds: (1) That an agent of attorney-in -fact empowered to pay the debts of the principal, and to employ lawyers to defend the latter's interests, is impliedly empowered to pay the lawyer's fees for services rendered in the interests of said principal, and may satisfy them by an assignment of a judgment rendered in favor of said principal; (2) that when a person appoints two attorneys-in-fact independently, the consent of the one will not be required to validate the acts of the other unless that appears positively to have been the principal's attention; and (3) that the assignment of the amount of a judgment made by a person to his attorney, who has not taken any part in the case wherein said judgment was rendered, made in payment of professional services in other cases, does not contravene the prohibition of article 1459, case 5, of the Civil Code. By virtue whereof, and finding no error in the judgment appealed from, the same is affirmed in its entirety, with costs against the appellant. So ordered. E. MACIAS & CO v WARNER, BARNES & CO. 43 Phil 155 FACTS: The plaintiff is a corporation duly registered and domiciled in Manila. The defendant is a corporation duly licensed to do business in the Philippine Islands, and is the resident agent of insurance companies "The China Fire Insurance Company, Limited, of Hongkong," "The Yang-Tsze Insurance Association Limited, of Shanghai," and "The State Assurance Company, Limited, of Liverpool. The plaintiff is an importer of textures and commercial articles for wholesale. In the ordinary course of business, it applied for, and obtained, the following policies against loss by fire: Policy No. 4143, of P12,000, recites that Mrs. Rosario Vizcarra, having paid to the China Fire Insurance Company, Limited, P102 for insuring against or damage by fire certain merchandise the description of which follows, "the company agrees with the insured that, if the property above described, or any party thereof, shall be destroyed or damaged by fire between September 16, 1918, and September 16, 1919," etc., "The company will, out of its capital, stock and funds, pay or make good all such loss or damage, not exceeding" the amount of the policy. This policy was later duly assigned to the plaintiff. Policy No. 4382, for P15,000, was issued by the same company to, and in the name of, plaintiff.

DIGEST |15

Policy No. 326, for P10,000, was issued to, and in the name of policy No. 326, for P10,000, was issued to, and in the name of the plaintiff by The Yang-Tsze Insurance Association, Limited, and recites that the premium of P125 was paid by the plaintiff to the association, and that, in the event of loss by fire between certain dates, "the funds and property of the said association shall be subject and liable to pay, reinstate, or make good to the said assured, their heirs, executors, or administrators, such loss or damage as shall be occasioned by fire to the property above-mentioned and hereby insured," not exceeding the amount of the policy. Policy No. 796111, for P8,000, was issued by The States Assurance Company, Limited, to the plaintiff for a premium of P100, which was paid to the Assurance Company through the defendant, its authorized agent, and recites that "the company agrees with the insured that in the event of loss by fire between certain dates, the company will, out of its capital, stock and funds, pay the amount of such loss or damage," not exceeding the amount of the policy, and it is attested by the defendant, through its "Cashier and Accountant and Manager, Agents, State Assurance Co., Ltd.," authorized agents of the Assurance Company. Policy No. 4143 is attested "on behalf of The China Fire Insurance Company, Limited," by the cashier and accountant and manager of the defendant, as agents of The China Fire Insurance Company, Limited. The same is true as to policy no. 4382. Policy No. 326 recites the payment of a premium of P125 by the plaintiff to The Yang-Tsze Insurance Association, Limited, and that, in the event of loss, "the funds and property of the said association shall be subject and liable to pay, reinstate, or make good to the said assured, their heirs, executors, or administrators, such loss or damage as shall be occasioned by fire or lightning to the property" insured, not exceeding the amount of the policy, and it is attested by the defendant, through its cashier and accountant and manager, as agents of the association "under the authority of a Power of Attorney from The Yang-Tsze Insurance Association, Limited," "to sign, for and on behalf of the said Association, etc." March 25, 1919, and while the policies were in force, a loss occurred in which the insured property was more or less damaged by fire and the use of water resulting from the fire. The plaintiff made a claim for damages under its policies, but could not agree as to the amount of loss sustained. It sold the insured property in its then damaged condition, and brought this action against Warner, Barnes & Co., in its capacity as agents, to recover the difference between the amount of the policies and the amount realized from the sale of the property, and in the first cause of action, it prayed for judgment for P23,052.99, and in the second cause of action P9,857.15. The numbers and amounts of the policies and the names of the insurance companies are set forth and alleged in the complaint. After trial the court found that there was due the plaintiff from the three insurance companies p18,493.29 with interest thereon at the rate of 6 per cent per annum, from the date of the commencement of the action, and costs ISSUE: Whether the resident agent in Manila of the companies, and was authorized to solicit and do business for them as such agent; that each company is a foreign corporation. HELD:

AGENCY

This is not a case of an undisclosed agent or an undisclosed principal. It is a case of a disclosed agent and a disclosed principal. The policies on their face shows that the defendant was the agent of the respective companies, and that it was acting as such agent in dealing with the plaintiff. That in the issuance and delivery of the policies, the defendant was doing business in the name of, acting for, and representing, the respective insurance companies. The different policies expressly recite that, in the event of a loss, the respective companies agree to compensate the plaintiff for the amount of the loss. the defendant company did not insure the property of the plaintiff, or in any manner agree to pay the plaintiff the amount of any loss. There is no contract of any kind. either oral or written, between the plaintiff and Warner, Barnes & Co. Plaintiff's contracts are with the insurance companies, and are in writing, and the premiums were paid to the insurance companies, and are in writing, and the premiums were paid to the insurance companies and the policies were issued by, and in the name of, the insurance companies, and on the face of the policy itself, the plaintiff knew that the defendant was acting as agent for, and was representing, the respective insurance companies in the issuance and deliver of the policies. The defendant company did not contract or agree to do anything or to pay the plaintiff any money at any time or on any condition, either as agent or principal. There is a very important distinction between the power and duties of a resident insurance agent of a foreign company and that of an executor, administrator, or receiver. An insurance agent as such is not responsible for, and does not have, any control over the corpus or estate of the corporate property, as does an executor, administrator, or receiver. Subject only to the order of the court, such officers are legal custodians and have actual possession of the corporate property. It is under their control and within their jurisdiction. As stated by counsel for Warner, Barnes & Co., an attorney of record for an insurance company has greater power and authority to act for, and bind, the company than does a soliciting agent of an insurance company. Yet, no attorney would contend that a personal action would lie against local attorneys who represent a foreign corporation to recover on a contract made by the corporation. On the same principles by which plaintiff seeks to recover from the defendant, an action could be maintained against the cashier of any bank on every foreign draft which he signed for, and on behalf of, the bank. Every cause of action ex contractu must be founded upon a contract, oral or written, either express or implied. Warner, Barnes & Co., as principal or agent, did not make any contract, either or written, with the plaintiff. The contracts were made between the respective insurance companies and the insured, and were made by the insurance companies, through Warner, Barnes & Co., as their agent. As in the case of a bank draft, it is not the cashier of the bank who makes the contract to pay the money evidenced by the draft, it is the bank, acting through its cashier, that makes the contract. So, in the instant case, it was the insurance companies, acting through Warner, Barnes & Co., as their agent, that made the written contracts wit the insured. The trial court attached much importance to the fact that in the further and separate answer, an admission was made "that defendant was at all times ready and will not to pay, on behalf of the insurance companies by whom each was proportionately liable, the actual damage" sustained by the plaintiff covered by the policies upon the terms and conditions therein stated.

DIGEST |16

When analyzed, that is nothing more than a statement that the companies were ready and willing to prorate the amount when the losses were legally ascertained. Again, there is not claim or pretense that Warner, Barnes & Co. had any authority to act for, and represent the insurance companies in the pending action, or to appear for them or make any admission which would bind them. As a local agent, it could not do that without express authority. That power could only exercised by an executive officer of the company, or a person who was duly authorized to act for, and represent, the company in legal proceedings, and there is no claim or pretense, either express or implied, that the defendant has any such authority. Plaintiff's cause of action, if any, is direct against the insurance companies that issued the policies and agreed to pay the losses. The only defendant in the instant case is "Warner, Barnes & Co., in its capacity as agents of:" the insurance companies. Warner, Barnes & Co. did not make any contract with the plaintiff, and are not liable to the plaintiff on any contract, either as principal or agent. For such reason, plaintiff is not entitled to recover its losses from Warner, Barnes & Co., either as principal or agent. There is no breach of any contract with the plaintiff by Warners, Barnes & Co., either as agent or principal, for the simple reason that Warner, Barnes & Co., as agent or principal, never made any contract, oral or written, with the plaintiff. This defense was promptly raised before the taking of the testimony, and again renewed on the motion to set aside the judgment. Plaintiff's own evidence shows that any cause of action it may have is against the insurance companies which issued the policies. The complaint is dismissed, and the judgment of the lower court is reversed, and one will be entered here in favor of Warner, Barnes & Co., Ltd., against the plaintiff, for costs in both this and the lower court. So ordered. CADWALLADER v SMITH, BELL & COMPANY 7 Phil 461 FACTS: In this action the plaintiff, as assignee of the Pacific Export Lumber Company, sues for $3,486, United States currency, the differences between the amount turned over to the company on account of a cargo of cedar piles consigned to the defendants as its agents and afterwards bought by them, and the amount actually received by them on the subsequent sale thereof. The defendant were allowed by the court below a counterclaim of $6,993.80, United States currency, from which was deducted $2,063.16 for the plaintiffs claim, leaving a balance in favor of the defendants of $4,930.64, for the equipment of which, to wit, 9,861.28 pesos, judgment was entered. The defendants have not appealed. The plaintiff took several exceptions, but on the argument its counsel stated that its contention was confined to the allowance by the trial court of the commissions of the defendant on selling the piling. In May 1902, the Pacific Export Lumber Company of Portland shipped upon the steamer Quito five hundred and eighty-one (581) piles to the defendant, Henry W. Peabody & Company, at Manila, on the sale of which before storage the consignees were to receive a commission of one half of whatever sum was obtained over $15 for each pile and 5 per cent of the price of the piles sold after storage. After the arrival of the steamer on August 2, Peabody and Company wrote the agent of the Pacific Company at Shanghai that for lack of a demand the piles would have to be sold at considerably less than $15 apiece; whereupon the company's agent directed them to make the best possible offer for the piles, in response to which on August 5 they telegraphed him

AGENCY

an offer of $12 apiece. It was accepted by him on August 6, in consequence of which the defendant paid the Pacific Company $6,972. It afterwards appeared that on July 9 Peabody & Company had entered into negotiations with the Insular Purchasing Agent for the sale for the piles at $20 a piece, resulting of August 4 in the sale to the Government of two hundred and thirteen (213) piles at $19 each. More of them were afterwards sold to the Government at the same figure and the remainder to other parties at carrying prices, the whole realizing to the defendants $10,41.66, amounting to $3,445.66 above the amount paid by the defendant to the plaintiff therefor. Thus it is clear that at the time when the agents were buying from their principal these piles at $12 apiece on the strength of their representation that no better price was obtainable, they had already sold a substantial part of them at $19. In these transactions the defendant, Smith, Bell & Company, were associated with the defendants, Henry W. Peabody & Company, who conducted the negotiations, and are consequently accountable with them. It is plaint that in concealing from their principal the negotiations with the Government, resulting in a sale of the piles at 19 a piece and in misrepresenting the condition of the market, the agents committed a breach of duty from which they should benefit. The contract of sale to themselves thereby induced was founded on their fraud and was subject to annulment by the aggrieved party. (Civil Code, articles 1265 and 1269.) Upon annulment the parties should be restored to their original position by mutual restitution. (Article 1303 and 1306.) Therefore the defendants are not entitled to retain their commission realized upon the piles included under the contract so annulled. In respect of the 213 piles, which at the time of the making of this contract on August 5 they had already sold under the original agency, their commission should be allowed. The court below found the net amount due from the defendants to the plaintiff for the Quito piles, after deducting the expense of landing the same and $543.10 commission, was $1,760.88, on which it allowed interest at the rate of 6 per cent from March 1, 1903. This amount should be increased by the addition thereto of the amount of the commission disallowed, to wit, $331.17 giving $2,092.05. Interest computed on this sum to the date of the entry of judgment below amounts to $359.77, which added to the principal sum makes $2,241.82, the amount of plaintiff's claim, which is to be deducted from defendants' counterclaim of $6,993.80, leaving a balance of $4,541.98, equivalent to 9,083.96 pesos, the amount for which judgment below should have been entered in favor of the defendants. Let the judgment of the Court of First Instance be modified accordingly, without costs to either party. After expiration of twenty days let judgment be entered in accordance herewith and ten days thereafter the record remanded to the court below for proper action. So ordered.

NATIONAL BANK v. BAGAMASPAD G.R. No. L-3407 June 29, 1951 FACTS: The plaintiff Philippine National Bank, initiated this suit in the Court of First Instance of Cotabato for the purpose of collecting from the defendants Bernardo Bagamaspad and Bienvenido M. Ferrer who, in the years 1946 and 1947, were its Agent and Assistant Agent, respectively, in its Cotabato Agency, the sum of P704,903.18, said to have been disbursed and released by them as special crop loans,

DIGEST |17

without authority and in a careless manner to manifestly insolvent, unqualified or fictitious borrowers, all contrary to the rules and regulations of the plaintiff Bank. The theory on which the Bank's claim and complaint are based is that the two defendants Bagamaspad and Ferrer acting as Agent and Assistant Agent of the Cotabato Agency, in granting new crop loans after November 13, 1946, violated the instructions of the Bank, and that furthermore, in granting said crop loans, they acted negligently and did not exercise the care and precaution required of them in order to prevent the release of crop loans to persons who were neither qualified borrowers nor entitled to the assistance being rendered by the Government and the Bank, all contrary to the rules and regulations issued by the Bank. In the course of the trial, upon petition of plaintiff's counsel, the amount of the claim was reduced to P699,803.57, due to payments made by some of the borrowers. On March 31, 1949, the trial court rendered judgment in favor of the plaintiff, ordering both defendants to pay jointly and severally to it the sum of P699,803.57, representing the uncollected balance of the special crop loans improperly released by said defendants, with legal interest thereon from the date of the filing of the complaint, plus costs. The two defendants appealed from that decision. The appeal was first taken to the Court of Appeals but in view of the amount involved it was certified to this Tribunal by the said Court of Appeals. ISSUE: Whether the appellants, as agents were extremely lax, negligent and careless in granting new special crop loans. HELD: The lower court as may be seen, severely critcized and condemned the acts of laxity, negligence and carelessness of the appellants. But the severity of this criticism and condemnation would appear to be amply warranted by the evidence. Out of the numerous acts of laxity, negligence and carelessness established by the record, a few cases may be cited. The evidence shows that in violation of these instructions and regulations, the defendants released large loans aggregating P348,768.22 to about 103 borrowers who were neither landowners or tenants but only public land sales applicants that is to say, persons who have merely filed applications to buy public lands. Appellants in their over-enthusiasm and seemingly inordinate desire to grant as many loans as possible and in amounts disproportionate to the needs of the borrowers, admitted and passed upon more loan applications than they could properly handle. From July, 1946 to March, 1947 the total amount of about eight and half (81/2) million pesos was released in the form of special crop loans to about 5,105 borrowers and this, in a relatively sparsely populated province like Cotabato. Also, contrary to the Bank's rules and regulations regarding the granting of special crops loans, the defendants allowed intermediaries to intervene in the granting of special crop loans. The trial court based the civil liability of the appellants herein on the provisions of Arts. 1718 and 1719 of the Civil Code, defining and enumerating the duties and obligations of an agent and his liability for failure to comply with such duties, and Art. 259 of the Code of Commerce which provides that an agent must observe the provisions of law and regulations with respect to business transactions entrusted to him otherwise he shall be responsible for the consequences resulting from their breach or omissions; and

AGENCY

also Art. 1902 of the Civil Code which provides for the liability of one for his tortious act, that is to say, any act or omission which causes damage to another by his fault or negligence. Appellants while agreeing with the meaning and scope of the legal provisions cited, nevertheless insist that those provisions are not applicable to them inasmuch as they are not guilty of any violation of instructions or regulations of the plaintiff Bank; and that neither are they guilty of negligence of carelessness as found by the trial court. A careful study and consideration of the record, however, convinces us and we agree with the trial court that the defendants-appellants have not only violated instructions of the plaintiff Bank, including things which said Bank wanted done or not done, all of which were fully understood by them, but they (appellants) also violated standing regulations regarding the granting of loans; and, what is more, thru their carelessness, laxity and negligence, they allowed loans to be granted to persons who were not entitled to receive loans. In view of all the foregoing, and finding no reversible error in the decision appealed from, the same is hereby affirmed with costs against the appellants. So ordered. GONZALEZ v. E.J. HABERER G.R. No. L-22604 February 3, 1925 FACTS: This action is brought to recover the sum of P34,260 alleged to be due the plaintiffs from the defendant upon a written agreement for the sale of a tract of land situated in the Province of Nueva Ecija. The plaintiffs also ask for damages in the sum of P10,000 for the alleged failure of the defendant to comply with his part of the agreement. The defendant in his answer admits that of the purchase price stated in the agreement a balance of P31,000 remains unpaid, but by way of special defense, cross-complaint and counter-claim alleges that at the time of entering into the contract the plaintiffs through false representations lead him to believe that they were in possession of the land and that the title to the greater portion thereof was not in dispute; that on seeking to obtain possession he found that practically the entire area of the land was occupied by adverse claimants and the title thereto disputed; that he consequently has been unable to obtain possession of the land; and that the plaintiffs have made no efforts to prosecute the proceedings for the registration of the land. He therefore asks that the contract be rescinded; that the plaintiffs be ordered to return to him the P30,000 already paid by him to them and to pay P25,000 as damages for breach of the contract. The court below dismissed the plaintiffs' complaint, declared the contract rescinded and void and gave the defendant judgment upon his counterclaim for the sum of P30,000, with interest from the date upon which the judgment becomes final. The case is now before this court upon appeal by the plaintiffs from that judgment. ISSUE: Whether Gonzalez cannot be charged with the misrepresentations of Gomez HELD: As to the contention that the plaintiff Gonzalez cannot be charged with the misrepresentations of Gomez, it is sufficient to say that the latter in negotiating for the sale of the land acted as the agent and representative of the other plaintiff, his wife; having accepted the benefit of the representations of her agent she cannot, of course, escape liability for them. (Haskell vs. Starbird, 152 Mass., 117; 23 A.S.R., 809.) The contention of the appellants that the symbolic delivery effected by the execution and delivery of the

DIGEST |18

AGENCY

agreement was a sufficient delivery of the possession of the land, is also without merit. The possession referred to in the contract is evidently physical; if it were otherwise it would not have been necessary to mention it in the contract. (See Cruzado vs. Bustos and Escaler, 34 Phil., 17.) The judgment appealed from is in accordance with the law, is fully sustained by the evidence, and is therefore affirmed, with the costs against the appellants. So ordered.

18224. If the movant Perez claims that Raceli had no authority to execute the said promissory notes, the authenticity of said documents should have been specifically denied under oath in defendant's answers in the lower court. This was done; consequently Perez could not and may not now claim that his agent did not have authority to execute the loan agreements. Motion for new trial is denied.

COMMERCIAL BANK v REPUBLIC ARMORED CAR G.R. Nos. L-18223 and L-18224 September 30, 1963

HERMOSA, v EPIFANIO M. LONGARA G.R. No. L-5267 October 27, 1953

FACTS: Defendant-appellant Damaso Perez has presented a motion for new trial on the ground of newly discovered evidence. It is claimed that movant was not aware of the nature of the power of attorney that Ramon Racelis used, purportedly signed by him, to secure the loans for the Republic Armored Car Service Corporation and the Republic Credit Corporation. In the motion it is claimed that a photostatic copy of the power of attorney used by Ramon Racelis was presented at the trial. This photostatic copy or a copy thereof has not been submitted to us, for this reason We cannot rule upon his claim and contention that Ramon Racelis had no authority to bind the movant as surety for the loans obtained from the appellee Commercial Bank & Trust Company. Not having before Us the supposed photostatic copy of the power of attorney used to secure the loans, there is no reason for Us to rule, in accordance with his contention, that Racelis exceeded his authority in securing the loans subject of the present actions. The motion for reconsideration, however, presents a copy of a power of attorney purportedly executed by movant on October 22, 1952. It is not expressly mentioned that this is the precise power of attorney that Ramon Racelis Utilized to secure the loans the collection of which is sought in these cases. But assuming, for the sake of argument, that the said power of attorney incorporated in the motion for reconsideration was the one used to obtain the loans. We find that the movant's contention has no merit. In accordance with the document, Racelis was authorized to negotiate for a loan or various loans .. with other being institution, financing corporation, insurance companies or investment corporations, in such sum or sums, aforesaid Attorney-in-fact Mr. Ramon Racelis, may deem proper and convenient to my interests, ... and to execute any and all documents he deems requisite and necessary in order to obtain such loans, always having in mind best interest; ... ISSUE: Whether the general power of attorney is sufficient for Atty. Racelis to obtain a loan HELD: SC holds that this general power attorney to secure loans from any banking institute was sufficient authority for Ramon Racelis to obtain the credits subject of the present suits. It will be noted furthermore that Racelis, as agent Damaso Perez, executed the documents evidencing the loans signing the same "Damaso Perez by Ramon Racelis," and in the said contracts Damaso Perez agreed jointly and severally to be responsible for the loans. As the document as signed makes Perez jointly and severally responsible, there is no merit in the contention that Perez was only being held liable as a guarantor. Furthermore, the promissory notes evidencing the loan are attached to the complaint in G.R. Nos. L-182 and L-

FACTS: This is an appeal by way of certiorari against a decision of the Court of Appeals, fourth division, approving certain claims presented by Epifanio M. Longara against the testate estate of Fernando Hermosa, Sr. The claims are of three kinds, namely, P2,341.41 representing credit advances made to the intestate from 1932 to 1944, P12,924.12 made to his son Francisco Hermosa, and P3,772 made to his grandson, Fernando Hermosa, Jr. from 1945 to 1947, after the death of the intestate, which occurred in December, 1944. The claimant presented evidence and the Court of Appeals found, in accordance therewith, that the intestate had asked for the said credit advances for himself and for the members of his family "on condition that their payment should be made by Fernando Hermosa, Sr. as soon as he receive funds derived from the sale of his property in Spain." Claimant had testified without opposition that the credit advances were to be "payable as soon as Fernando Hermosa, Sr.'s property in Spain was sold and he receive money derived from the sale." The Court of Appeals held that payment of the advances did not become due until the administratrix received the sum of P20,000 from the buyer of the property. Upon authorization of the probate court in October, 1947, and the same was paid for subsequently. The Claim was filed on October 2, 1948. ISSUE: Whether the obligation contracted by the intestate was subject to a condition exclusively dependent upon the will of the debtor (a condicion potestativa) and therefore null and void Whether the sale was not effected in the lifetime of the debtor (the intestate), but after his death and by his administrator, the very wife of the claimant HELD: In accordance with article 1115 of the old Civil Code. The case of Osmeña vs. Rama, (14 Phil. 99) is cited to support appellants contention. In this case, this court seems to have filed that a promise to pay an indebtedness "if a house of strong materials is sold" is an obligation the performance of which depended on the will of the debtor. We have examined this case and we find that the supposed ruling was merely an assumption and the same was not the actual ruling of the case. A careful consideration of the condition upon which payment of the sums advanced was made to depend, "as soon as he (intestate) receive funds derived from the sale of his property in Spain," discloses the fact that the condition in question does not depend exclusively upon the will of the debtor, but also upon other circumstances beyond his power or control. If the condition were "if he decides to sell his house." or "if he likes to pay the sums advanced," or any other condition of similar import implying that upon him (the debtor) alone payment would depend, the condition would be protestativa, dependent exclusively upon his will or discretion. In the form that the condition was found by the Court of Appeals however the condition implies that the intestate had already

DIGEST |19

decided to sell his house, or at least that he had made his creditors believe that he had done so, and that all that we needed to make his obligation (to pay his indebtedness) demandable is that the sale be consummated and the price thereof remitted to the islands. Note that if the intestate would prevent or would have prevented the consummation of the sale voluntarily, the condition would be or would have been deemed or considered complied with (article 1119, old Civil Code).The will to sell on the part of the intestate was, therefore, present in fact, or presumed legally to exist, although the price and other conditions thereof were still within his discretion and final approval. But in addition of the sale to him (the intestate-vendor), there were still other conditions that had no concur to effect the sale, mainly that of the presence of a buyer, ready, able and willing to purchase the property under the conditions demanded by the intestate. Without such a buyer the sale could not be carried out or the proceeds thereof sent to the islands. It is evident, therefore sent to the islands. It is evident, therefore, that the condition of the obligation was not a purely protestative one, depending exclusively upon the will of the intestate, but a mixed one, depending partly upon the will of intestate and partly upon chance, i.e., the presence of a buyer of the property for the price and under the conditions desired by the intestate. The obligation is clearly governed by the second sentence of article 1115 of the old Civil Code (8 Manresa, 126). The condition is, besides, a suspensive condition, upon the happening of which the obligation to pay is made dependent. And upon the happening of the condition, the debt became immediately due and demandable. One other point needs to be considered, and this is the fact that the sale was not effected in the lifetime of the debtor (the intestate), but after his death and by his administrator, the very wife of the claimant. On this last circumstance we must bear in mind that the Court of Appeals found no evidence to show that the claim was the product of a collusion or connivance between the administratrix and the claimant. That there was really a promise made by the intestate to pay for the credit advances maybe implied from the fact that the receipts thereof had been preserved. Had the advances been made without intention of demanding their payment later, said receipts would not have been preserved. Regularity of the advances and the close relationship between the intestate and the claimant also support this conclusion. As to the fact that the suspensive condition took place after the death of the debtor, and that advances were made more than ten years before the sale, we supported in our conclusion that the same is immaterial by Sanchez Roman, who says, among other things, as to conditional obligations. As the obligation retroacts to the date when the contract was entered into, all amounts advanced from the time of the agreement became due, upon the happening of the suspensive condition. As the obligation to pay became due and demandable only when the house was sold and the proceeds received in the islands, the action to recover the same only accrued, within the meaning of the statute of limitations, on date the money became available here hence the action to recover the advances has not yet prescribed. The above considerations dispose of the most important questions raised on this appeal. It is also contended that the third group of claims, i.e., credits furnished the intestate's grandson after his (intestate's) death in 1944, should have been allowed. We find merit in this contention. Even if authorization to furnish necessaries to his grandson may have been given, this authorization could not be made to extend after his death, for two obvious reasons. First because

AGENCY

the obligation to furnish support is personal and is extinguished upon the death of the person obliged to give support(article 150, old Civil Code), and second because upon the death of a principal (the intestate in this case), his agent's authority or authorization is deemed terminated (article 1732, old Civil Code). That part of the decision allowing this group of claims, amounting to P3,772 should be reversed. One last contention of the appellant is that the claims are barred by the statute of non-claims. It does not appear from the record that this question was ever raised in any of the courts below. We are, therefore, without authority under our rules to consider this issue at this stage of the proceedings. The judgment appealed from is hereby affirmed in so far as it approves the claims of appellee in the amounts of P2,341 and P12,942.12, and reversed as to that of P3,772. Without costs.

RALLOS v. FELIX GO CHAN G.R. No. L-24332 January 31, 1978 FACTS: This is a case of an attorney-in-fact, Simeon Rallos, who after of his death of his principal, Concepcion Rallos, sold the latter's undivided share in a parcel of land pursuant to a power of attorney which the principal had executed in favor. The administrator of the estate of the went to court to have the sale declared uneanforceable and to recover the disposed share. The trial court granted the relief prayed for, but upon appeal the Court of Appeals uphold the validity of the sale and the complaint. Hence, this Petition for Review on certiorari. Concepcion and Gerundia both surnamed Rallos were sisters and registered co-owners of a parcel of land known as Lot No. 5983 of the Cadastral Survey of Cebu covered by Transfer Certificate of Title No. 11116 of the Registry of Cebu. On April 21, 1954, the sisters executed a special power of attorney in favor of their brother, Simeon Rallos, authorizing him to sell for and in their behalf lot 5983. On March 3, 1955, Concepcion Rallos died. On September 12, 1955, Simeon Rallos sold the undivided shares of his sisters Concepcion and Gerundia in lot 5983 to Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. The deed of sale was registered in the Registry of Deeds of Cebu, TCT No. 11118 was cancelled, and a new transfer certificate of Title No. 12989 was issued in the named of the vendee. On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos filed a complaint docketed as Civil Case No. R-4530 of the Court of First Instance of Cebu, praying (1) that the sale of the undivided share of the deceased Concepcion Rallos in lot 5983 be d unenforceable, and said share be reconveyed to her estate; (2) that the Certificate of 'title issued in the name of Felix Go Chan & Sons Realty Corporation be cancelled and another title be issued in the names of the corporation and the "Intestate estate of Concepcion Rallos" in equal undivided and (3) that plaintiff be indemnified by way of attorney's fees and payment of costs of suit. Named party defendants were Felix Go Chan & Sons Realty Corporation, Simeon Rallos, and the Register of Deeds of Cebu, but subsequently, the latter was dropped from the complaint. The complaint was amended twice; defendant Corporation's Answer contained a crossclaim against its co-defendant, Simon Rallos while the latter filed third-party complaint against his sister, Gerundia Rallos While the case was pending in the trial court, both Simon and his sister Gerundia died and they were substituted by the respective administrators of their estates.

DIGEST |20

AGENCY

ISSUES: What is the legal effect of an act performed by an agent after the death of his principal? Applied more particularly to the instant case, We have the query. is the sale of the undivided share of Concepcion Rallos in lot 5983 valid although it was executed by the agent after the death of his principal? What is the law in this jurisdiction as to the effect of the death of the principal on the authority of the agent to act for and in behalf of the latter? Is the fact of knowledge of the death of the principal a material factor in determining the legal effect of an act performed after such death? HELD: By reason of the very nature of the relationship between Principal and agent, agency is extinguished by the death of the principal or the agent. This is the law in this jurisdiction. Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for the law is found in the juridical basis of agency which is representation Them being an in. integration of the personality of the principal integration that of the agent it is not possible for the representation to continue to exist once the death of either is establish. Pothier agrees with Manresa that by reason of the nature of agency, death is a necessary cause for its extinction. Laurent says that the juridical tie between the principal and the agent is severed ipso jure upon the death of either without necessity for the heirs of the fact to notify the agent of the fact of death of the former. The same rule prevails at common law the death of the principal effects instantaneous and absolute revocation of the authority of the agent unless the Power be coupled with an interest. This is the prevalent rule in American Jurisprudence where it is well-settled that a power without an interest confer. red upon an agent is dissolved by the principal's death, and any attempted execution of the power afterward is not binding on the heirs or representatives of the deceased. In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death of his principal at the time he sold the latter's share in Lot No. 5983 to respondent corporation. The knowledge of the death is clearly to be inferred from the pleadings filed by Simon Rallos before the trial court. 12 That Simeon Rallos knew of the death of his sister Concepcion is also a finding of fact of the court a quo 13 and of respondent appellate court when the latter stated that Simon Rallos 'must have known of the death of his sister, and yet he proceeded with the sale of the lot in the name of both his sisters Concepcion and Gerundia Rallos without informing appellant (the realty corporation) of the death of the former. On the basis of the established knowledge of Simon Rallos concerning the death of his principal Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law expressly requires for its application lack of knowledge on the part of the agent of the death of his principal; it is not enough that the third person acted in good faith. Thus in Buason & Reyes v. Panuyas, the Court applying Article 1738 of the old Civil rode now Art. 1931 of the new Civil Code sustained the validity , of a sale made after the death of the principal because it was not shown that the agent knew of his principal's demise. Whatever conflict of legal opinion was generated by Cassiday v. McKenzie in American jurisprudence, no such conflict exists in our own for the simple reason that our statute, the Civil Code, expressly provides for two exceptions to the general rule that death of the principal revokes ipso

jure the agency, to wit: (1) that the agency is coupled with an interest (Art 1930), and (2) that the act of the agent was executed without knowledge of the death of the principal and the third person who contracted with the agent acted also in good faith (Art. 1931). Exception No. 2 is the doctrine followed in Cassiday, and again We stress the indispensable requirement that the agent acted without knowledge or notice of the death of the principal In the case before Us the agent Ramon Rallos executed the sale notwithstanding notice of the death of his principal Accordingly, the agent's act is unenforceable against the estate of his principal. IN VIEW OF ALL THE FOREGOING, We set aside the ecision of respondent appellate court, and We affirm en toto the judgment rendered by then Hon. Amador E. Gomez of the Court of First Instance of Cebu, quoted in pages 2 and 3 of this Opinion, with costs against respondent realty corporation at all instances. DE LA PEÑA v HIDALGO G.R. No. L-6626 October 6, 1911 FACTS: This decision concerns the appeals entered under respective bills of exception by counsel for Jose de la Peña y de Ramon, the administrator of the estate of the deceased Jose de la Peña y Gomiz, from the order of the 18th of the same month, directing that the amount deposited as bond, by counsel for the intervening attorneys, Chicote & Miranda, Frederick G. Waite, and C. W. O'Brien, from the said order of October 18, in so far as it declares that the counterclaim by the said Hidalgo against de la Peña was presented in his capacity as administrator of the aforementioned estate and that the intervener's lien could not avail to prevent the setoff decreed in the said first order appealed from. After a regular trial in the Court of First Instance of this city of the case of Jose de la Peña y de Ramon, as administrator of the estate of his deceased father, Jose de la Peña y Gomiz, vs. Federico Hidalgo, for the payment of a sum of money, the record of the proceedings was forwarded to this court on appeal. By the decision rendered Hidalgo to pay to Jose de la Peña y de Ramon, as administrator, the sum of P6,774.50 with legal interest from May 23, 1906, and, likewise, sentenced the said Jose de la Peña y de Ramon to pay to Federico Hidalgo, as a counterclaim, the sum of P9,000, with legal interest thereon from May 21, 1907, the date of the counterclaim; and affirmed the judgment appealed from in so far as it was in agreement with the said decision, and reversed it in so far as it was not in accordance therewith. That decision became final. The record of proceedings having been remanded for execution to the Court of First Instance whence it originated, the judge, by order of October 14, 1910, decreed that both amounts for which the defendant Hidalgo and the administrator Peña were mutually liable in concurrent sums, should off-set each other, and that, consequently, the plaintiff, Peña y de Ramon, in conformity with the final decision of this court, was liable for the payment of the difference between such amounts, or P2,274.93, together with the interests at 6 per cent from the said date. At this stage of the proceedings for the execution of the judgment that had become final, the attorneys for the said plaintiff, Messrs. Chicote & Miranda, Frederick Garfield Waite, and C. W. O'Brien represented by C. A. DeWitt, asked that they be permitted to intervene in the proceedings, as they held a lien upon the amount awarded in the said decision of this court, rendered in favor of the plaintiff and against the defendant, and alleged that the lien which they held was upon the judgment entered in favor of the plaintiff in his capacity as administrator, against the defendant; that

DIGEST |21

the defendant was entitled to the judgment awarded him by virtue of his counterclaim, yet, in consideration of the fact that their lien affected the judgment of the lower court, which was in no wise reversed, the said lien was valid with respect to any judgment that the plaintiff had obtained against the defendant, notwithstanding such counterclaim. In spite of the defendant's opposition, the court, ruling on this incidental question raised, issued the aforecited order of October 18, 1910. ISSUE: Whether the counterclaim by the said Hidalgo against de la Peña was presented in his capacity as administrator of the aforementioned estate and that the intervener's lien could not avail to prevent the set-off decreed in the said first order appealed from. HELD: It is evident, by a simple perusal of the finding of facts an of the grounds of law of the final decision rendered in that action, that the same was instituted by Jose de la Peña y de Ramon, not by himself and in his own representation, but in his capacity as administrator of the estate of his deceased father, Jose de la Peña y Gomiz, demanding payment of certain amounts which, according to his third mended complaint, the defendant Federico Hidalgo owed the latter; and it is none the less evident that the counterclaim presented by the defendant Federico Hidalgo had for its sole object the collection of a certain sum which was owing to him by the deceased testator, Jose de la Peña y Gomiz, and that the plaintiff, Jose de la Peña y de Ramon, per se and personally, had nothing to do with this debt of the estate, which concerned him only as such administrator. If in any place or in any line of said decision mention was made of the name of the plaintiff Peña y de Ramon without the title of his office as administrator of the estate, it probably was because the complaint was filed and the action was brought by him in his capacity of administrator, and the counterclaim, also, was directed him as such administrator; and if in any paragraph the said title of his office was omitted in designating him, such omission can not serve as a ground for concluding that the counterclaim allowed and the sentence imposed in the said decision were against Jose de la Peña y de Ramon as a private individual and not as the administrator of the aforementioned estate; and the sentence contained in the decision referred to can in no wise be understood to have been made against Jose de la Peña y de Ramon personally, but in his capacity of administrator of the estate, which alone was liable for the debt owing to the defendant; if mention was therein made of the plaintiff by name, it is because he was the representative of the debtor estate. In the aforementioned decision of this court, by which the complaint and the counterclaim presented by the parties to the said suit were disposed of, the amount which the defendant Hidalgo should pay to the administrator of the estate of the deceased Peña y Gomiz and the sum which the said administrator, designated by his name of Jose de la Peña y de Ramon, should, by virtue of the counterclaim, pay to the defendant, Federico Hidalgo, alone were specified; the resultant difference, after the set-off should have been made, was not stated, as it was considered that this merely arithmetical operation would necessarily be performed in the course of the execution proceedings by the judge of the Court of First Instance charged with carrying out the final decision rendered in the case. This, in fact, he did do in his order of October 14, by directing that the plaintiff should pay the said sum, that it, the difference which was found to exist, after making the set-off between the respective amounts the

AGENCY

litigating parties were sentenced to pay. The failure to state in the said decision that both debts were set off against each other up to a concurrent sum, can not avail as a ground for alleging that the attorneys of the administrator Peña y de Ramon have acquired a lien on the amount which Hidalgo should pay to the administrator Peña y de Ramon in preference to the creditor of the amount that is the subject of the counterclaim. If it just be that the estate of the deceased Peña y Gomiz should collect the amount owing it by Hidalgo, as determined by final decision, it is equally just that Hidalgo should have the same right to collect the sum which the said estate owes him, according to the same decision; therefore, in order to comply with such decision, determining the two liabilities directly opposed to each other, it consequently and logically follows that a set-off of both credits, up to a concurrent amount, must be affected; and if the lien or the right to collect professional fees on the part of the attorneys were superior to the right of the creditor of the estate, the result would be that the executory decision would not be complied with; there would then be no set-off and the defendant would be compelled to pay to the said administrator his debt to the estate, through the aforementioned lien of the intervening attorneys, but could not collect, nor apply to the payment of the credit owing him by the same estate, the amount of his debt to the latter; this would be illegal and opposed to the most rudimentary principles of justice and, furthermore, would be an absurdity and contrary to common sense The judgment appealed from having been reversed with respect to that portion thereof relative to the liability asked by the administrator of the estate to be laid against Federico Hidalgo, the sole judgment to be executed is that contained in the decision rendered in second instance and in this decision, as has been shown; and the result, in short, has been in no wise favorable to the plaintiff because, instead of being able to collect the amount of his credit owing by Hidalgo to the estate, he still finds himself obliged to pay the defendant the difference resulting from the set-off to which the counterclaim, made by the latter for a greater sum, gave rise; and therefore, the right claimed by the appellant attorneys to collect their fees out of the amount awarded to the said administrator, is in all respects unsustainable, inasmuch as, in consequence of the counterclaim, there was a set-off against that amount and the plaintiff has nothing to collect, but, on the contrary, is still liable for the difference which was found to exist after the reciprocal debts of both parties had been set off against each other. The right of attorneys for the administrator Peña y de Ramon, to collect fees for professional service, under section 37 of the Code of Civil Procedure, is restricted to the personal founds of their client, to amounts awarded to the latter by final decision, but does not comprise sums of money which, according to the same decision, must be applied to be made in such decision by virtue of a prior counterclaim.1awphil.net We know of no legal provision which grants to the attorneys for the losing party in a suit, or who has not obtained a judgment authorizing him to collect money from the adverse party, the privilege of collecting their professional fees with preference over, and better right then, the said adverse party, the legitimate creditor of the said attorneys' client. The suit was prosecuted for the collection of amounts which both parties reciprocally were owing each other, and a decision was rendered deciding the complaint and the counterclaim and determining the sums which the litigating parties must mutually pay; therefore, the final judgment must be executed, as provided by the trial judge, pursuant to its terms, and no impediment to such execution can be had

DIGEST |22

in the improper contention made by the appellant attorneys, who can invoke no law or just reason which authorizes them to collect their professional fees out of the bond given by Hidalgo, once the same was not deposited as security for the payment of the said fees. For the foregoing reasons, whereby the errors attributed by the appellant attorneys to the trial judge have been duly refuted, it is our opinion and we hold that we should and hereby do affirm the order of October 14, 1910, and also the order of the 18th of the same month, with the exception of the final provision of this last order, of October 18, which we reversed and direct tat return be made to Federico Hidalgo of the sum of P8,500 retained by the clerk of the court below as a result of the motion of intervention herein concerned. No special finding is made as to the costs. So ordered.

VALERA v. VELASCO FACTS: By virtue of the powers of attorney, the defendant was appointed attorney-in-fact of the said plaintiff with authority to manage his property in the Philippines, consisting of the usufruct of a real property located of Echague Street, City of Manila. The defendant accepted both powers of attorney, managed plaintiff's property, reported his operations, and rendered accounts of his administration; and on March 31, 1923 presented exhibit F to plaintiff, which is the final account of his administration for said month, wherein it appears that there is a balance of P3,058.33 in favor of the plaintiff. The liquidation of accounts revealed that the plaintiff owed the defendant P1,100, and as misunderstanding arose between them, the defendant brought suit against the plaintiff, civil case No. 23447 of this court. Judgment was rendered in his favor on March 28, 1923, and after the writ of execution was issued, the sheriff levied upon the plaintiff's right of usufruct, sold it at public auction and adjudicated it to the defendant in payment of all of his claim. Subsequently, on May 11, 1923, the plaintiff sold his right of redemption to one Eduardo Hernandez, for the sum of P200 (Exhibit A). On September 4, 1923, this purchaser conveyed the same right of redemption, for the sum of P200, to the plaintiff himself, Federico Valera (Exhibit C). After the plaintiff had recovered his right of redemption, one Salvador Vallejo, who had an execution upon a judgment against the plaintiff rendered in a civil case against the latter, levied upon said right of redemption, which was sold by the sheriff at public auction to Salvador Vallejo for P250 and was definitely adjudicated to him. Later, he transferred said right of redemption to the defendant Velasco. This is how the title to the right of usufruct to the aforementioned property later came to vest the said defendant. ISSUE: Whether one of the ways of terminating an agency is by the express or tacit renunciation of the agent; Whether Miguel Velasco was, and at present is, an authorized representative of the plaintiff Federico Valera HELD: The misunderstanding between the plaintiff and the defendant over the payment of the balance of P1,000 due the latter, as a result of the liquidation of the accounts between them arising from the collections by virtue of the former's usufructuary right, who was the principal, made by

AGENCY

the latter as his agent, and the fact that the said defendant brought suit against the said principal on March 28, 1928 for the payment of said balance, more than prove the breach of the juridical relation between them; for, although the agent has not expressly told his principal that he renounced the agency, yet neither dignity nor decorum permits the latter to continue representing a person who has adopted such an antagonistic attitude towards him. When the agent filed a complaint against his principal for recovery of a sum of money arising from the liquidation of the accounts between them in connection with the agency, Federico Valera could not have understood otherwise than that Miguel Velasco renounced the agency; because his act was more expressive than words and could not have caused any doubt. (2 C. J., 543.) In order to terminate their relations by virtue of the agency the defendant, as agent, rendered his final account on March 31, 1923 to the plaintiff, as principal. Briefly, then, the fact that an agent institutes an action against his principal for the recovery of the balance in his favor resulting from the liquidation of the accounts between them arising from the agency, and renders and final account of his operations, is equivalent to an express renunciation of the agency, and terminates the juridical relation between them. If, as we have found, the defendant-appellee Miguel Velasco, in adopting a hostile attitude towards his principal, suing him for the collection of the balance in his favor, resulting from the liquidation of the agency accounts, ceased ipso facto to be the agent of the plaintiff-appellant, said agent's purchase of the aforesaid principal's right of usufruct at public auction held by virtue of an execution issued upon the judgment rendered in favor of the former and against the latter, is valid and legal, and the lower court did not commit the fourth and fifth assignments of error attributed to it by the plaintiffappellant. In regard to the third assignment of error, it is deemed unnecessary to discuss the validity of the sale made by Federico Valera to Eduardo Hernandez of his right of redemption in the sale of his usufructuary right made by the sheriff by virtue of the execution of the judgment in favor of Miguel Velasco and against the said Federico Valera; and the same thing is true as to the validity of the resale of the same right of redemption made by Eduardo Hernandez to Federico Valera; inasmuch as Miguel Velasco's purchase at public auction held by virtue of an execution of Federico Valera's usufructuary right is valid and legal, and as neither the latter nor Eduardo Hernandez exercised his right of redemption within the legal period, the purchaser's title became absolute. Moreover, the defendant-appellee, Miguel Velasco, having acquired Federico Valera's right of redemption from Salvador Vallejo, who had acquired it at public auction by virtue of a writ of execution issued upon the judgment obtained by the said Vallejo against the said Valera, the latter lost all right to said usufruct. And even supposing that Eduardo Hernandez had been tricked by Miguel Velasco into selling Federico Valera's right of repurchase to the latter so that Salvador Vallejo might levy an execution on it, and even supposing that said resale was null for lack of consideration, yet, inasmuch as Eduardo Hernandez did not present a third party claim when the right was levied upon for the execution of the judgment obtained by Vallejo against Federico Vallera, nor did he file a complaint to recover said right before the period of redemption expired, said Eduardo Hernandez, and much less Federico Valera, cannot now contest the validity of said resale, for the reason that the one-year period of redemption has already elapsed.

DIGEST |23

Neither did the trial court err in not ordering Miguel Velasco to render a liquidation of accounts from March 31, 1923, inasmuch as he had acquired the rights of the plaintiff by purchase at the execution sale, and as purchaser, he was entitled to receive the rents from the date of the sale until the date of the repurchase, considering them as part of the redemption price; but not having exercised the right repurchase during the legal period, and the title of the repurchaser having become absolute, the latter did not have to account for said rents. Summarizing, the conclusion is reached that the disagreements between an agent and his principal with respect to the agency, and the filing of a civil action by the former against the latter for the collection of the balance in favor of the agent, resulting from a liquidation of the agency accounts, are facts showing a rupture of relations, and the complaint is equivalent to an express renunciation of the agency, and is more expressive than if the agent had merely said, "I renounce the agency." By virtue of the foregoing, and finding no error in the judgment appealed from, the same is hereby affirmed in all its parts, with costs against the appellant. So ordered. PASNO v. FORTUNATA RAVINA G.R. No. L-31581 February 3, 1930 FACTS: Gabina Labitoria during her lifetime mortgaged three parcels of land to the Philippine National Bank to secure an indebtedness of P1,600. It was stipulated in the mortgage, among other things, that the mortgagee "may remove, sell or dispose of the mortgaged property or any buildings, improvements or other property in, on or attached to it and belonging to the mortgagor in accordance with the provisions of Act No. 3135 or take other legal action that it may deem necessary." The mortgagor died, and a petition was presented in court for the probate of her last will and testament. During the pendency of these proceedings, a special administrator was appointed by the lower court who took possession of the estate of the deceased, including the three parcels of land mortgaged to the Philippine National Bank. The estate having failed to comply with the conditions of the mortgage, the Philippine National Bank, pursuant to the stipulations contained in the same, asked the sheriff of Tayabas to proceed with the sale of the parcels of land. When the attorney for the special administrator received notice of the proposed action, he filed a motion in court in which an order was asked requiring the sheriff to vacate the attachment over the mortgaged properties and to abstain from selling the same. The lower court granted the petition in an order of February 14, 1929, and later denied a motion for reconsideration presented on behalf of the Philippine National Bank. The mortgage makes special reference to Act No. 3135. That Act is one to regulate the sale of property under special powers inserted in or annexed to real-estate mortgages. It fails to make provision regarding the sale of mortgaged property which is in custodia legis. Under these circumstances, it would be logical to suppose that the general provisions of Philippine law would govern this latter contingency. It is a familiar rule that statutes in pari materia are to be read together. The legislative body which enacted Act No. 3135 must be presumed to have been acquainted with the provisions of such a well known law as the Code of Civil Procedure and to have passed Act No. 3135 with reference thereto.

AGENCY

Whether the right of sale of the mortgaged property can survive and can be enforced under special power while the mortgaged property is in custodia legis HELD: The power of sale given in a mortgage is a power coupled with an interest which survives the death of the grantor. One case, that of Carter vs. Slocomb ([1898], 122 N. C., 475), has gone so far as to hold that a sale after the death of the mortgagor is valid without notice to the heirs of the mortgagor. However that may be, conceding that the power of sale is not revoked by the death of the mortgagor, nevertheless in view of the silence of Act No. 3135 and in view of what is found in section 708 of the Code of Civil Procedure, it would be preferable to reach the conclusion that the mortgagee with a power of sale should be made to foreclose the mortgage in conformity with the procedure pointed out in section 708 of the Code of Civil Procedure. That would safeguard the interests of the estate by putting the estate on notice while it would not jeopardize any rights of the mortgagee. The only result is to suspend temporarily the power to sell so as not to interfere with the orderly administration of the estate of a decedent. A contrary holding would be inconsistent with the portion of our law governing the settlement of estates of deceased persons. It results that the trial judge committed no error in sustaining the petition of the administrator of the estate of the deceased Gabina Labitoria and in denying the motion of the Philippine National Bank. Agreeable to the foregoing pronouncements, the judgment and orders appealed from will be affirmed, with one-half of the costs of this instance against the oppositors and appellants Fortunata Ravina and Ponciano Ravina, and the other half of the costs of this instance against the Philippine National Bank.

ISSUE:

DIGEST |24