IV.

EXTINGUISHMENT OF AGENCY

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. L-41420 July 10, 1992 CMS LOGGING, INC., petitioner, vs. THE COURT OF APPEALS and D.R. AGUINALDO CORPORATION, respondents.

NOCON, J.: This is a petition for review on certiorari from the decision dated July 31, 1975 of the Court of Appeals in CA-G.R. No. 47763-R which affirmed in toto the decision of the Court of First Instance of Manila, Branch VII, in Civil Case No. 56355 dismissing the complaint filed by petitioner CMS Logging, Inc. (CMS, for brevity) against private respondent D.R. Aguinaldo Corporation (DRACOR, for brevity) and ordering the former to pay the latter attorney's fees in the amount of P1,000.00 and the costs. The facts of the case are as follows: Petitioner CMS is a forest concessionaire engaged in the logging business, while private respondent DRACOR is engaged in the business of exporting and selling logs and lumber. On August 28, 1957, CMS and DRACOR entered into a contract of agency 1 whereby the former appointed the latter as its exclusive export and sales agent for all logs that the former may produce, for a period of five (5) years. The pertinent portions of the agreement, which was drawn up by DRACOR, 2 are as follows: 1. SISON [CMS] hereby appoints DRACOR as his sole and exclusive export sales agent with full authority, subject to the conditions and limitations hereinafter set forth, to sell and export under a firm sales contract acceptable to SISON, all logs produced by SISON for a period of five (5) years commencing upon the execution of the agreement and upon the terms and conditions hereinafter provided and DRACOR hereby accepts such appointment; xxx xxx xxx 3. It is expressly agreed that DRACOR shall handle exclusively all negotiations of all export sales of SISON with the buyers and arrange the

procurement and schedules of the vessel or vessels for the shipment of SISON's logs in accordance with SISON's written requests, but DRACOR shall not in anyway [sic] be liable or responsible for any delay, default or failure of the vessel or vessels to comply with the schedules agreed upon; xxx xxx xxx 9. It is expressly agreed by the parties hereto that DRACOR shall receive five (5%) per cent commission of the gross sales of logs of SISON based on F.O.B. invoice value which commission shall be deducted from the proceeds of any and/or all moneys received by DRACOR for and in behalf and for the account of SISON; By virtue of the aforesaid agreement, CMS was able to sell through DRACOR a total of 77,264,672 board feet of logs in Japan, from September 20, 1957 to April 4, 1962. About six months prior to the expiration of the agreement, while on a trip to Tokyo, Japan, CMS's president, Atty. Carlos Moran Sison, and general manager and legal counsel, Atty. Teodoro R. Dominguez, discovered that DRACOR had used Shinko Trading Co., Ltd. (Shinko for brevity) as agent, representative or liaison officer in selling CMS's logs in Japan for which Shinko earned a commission of U.S. $1.00 per 1,000 board feet from the buyer of the logs. Under this arrangement, Shinko was able to collect a total of U.S. $77,264.67. 3 CMS claimed that this commission paid to Shinko was in violation of the agreement and that it (CMS) is entitled to this amount as part of the proceeds of the sale of the logs. CMS contended that since DRACOR had been paid the 5% commission under the agreement, it is no longer entitled to the additional commission paid to Shinko as this tantamount to DRACOR receiving double compensation for the services it rendered. After this discovery, CMS sold and shipped logs valued at U.S. $739,321.13 or P2,883,351.90, 4 directly to several firms in Japan without the aid or intervention of DRACOR. CMS sued DRACOR for the commission received by Shinko and for moral and exemplary damages, while DRACOR counterclaimed for its commission, amounting to P144,167.59, from the sales made by CMS of logs to Japanese firms. In its reply, CMS averred as a defense to the counterclaim that DRACOR had retained the sum of P101,167.59 as part of its commission for the sales made by CMS. 5 Thus, as its counterclaim to DRACOR's counterclaim, CMS demanded DRACOR return the amount it unlawfully retained. DRACOR later filed an amended counterclaim, alleging that the balance of its commission on the sales made by CMS was P42,630.82, 6 thus impliedly admitting that it retained the amount alleged by CMS. In dismissing the complaint, the trial court ruled that no evidence was presented to show that Shinko received the commission of U.S. $77,264.67 arising from the sale of CMS's logs in Japan, though the trial court stated that "Shinko was able to collect the total amount of $77,264.67 US Dollars (Exhs. M and M-1)." 7 The counterclaim was likewise dismissed, as it was shown that DRACOR had waived its rights to the balance of its commission in a letter

dated February 2, 1963 to Atty. Carlos Moran Sison, president of CMS. 8 From said decision, only CMS appealed to the Court of Appeals. The Court of Appeals, in a 3 to 2 decision, 9 affirmed the dismissal of the complaint since "[t]he trial court could not have made a categorical finding that Shinko collected commissions from the buyers of Sison's logs in Japan, and could not have held that Sison is entitled to recover from Dracor the amount collected by Shinko as commissions, plaintiffappellant having failed to prove by competent evidence its claims." 10 Moreover, the appellate court held: There is reason to believe that Shinko Trading Co. Ltd., was paid by defendant-appellee out of its own commission of 5%, as indicated in the letter of its president to the president of Sison, dated February 2, 1963 (Exhibit "N"), and in the Agreement between Aguinaldo Development Corporation (ADECOR) and Shinko Trading Co., Ltd. (Exhibit "9"). Daniel R. Aguinaldo stated in his said letter:
. . . , I informed you that if you wanted to pay me for the service, then it would be no more than at the standard rate of 5% commission because in our own case, we pay our Japanese agents 2-1/2%. Accordingly, we would only add a similar amount of 2-1/2% for 11 the service which we would render you in the Philippines.

Aggrieved, CMS appealed to this Court by way of a petition for review on certiorari, alleging (1) that the Court of Appeals erred in not making a complete findings of fact; (2) that the testimony of Atty. Teodoro R. Dominguez, regarding the admission by Shinko's president and director that it collected a commission of U.S. $1.00 per 1,000 board feet of logs from the Japanese buyers, is admissible against DRACOR; (3) that the statement of DRACOR's chief legal counsel in his memorandum dated May 31, 1965, Exhibit "K", is an admission that Shinko was able to collect the commission in question; (4) that the fact that Shinko received the questioned commissions is deemed admitted by DRACOR by its silence under Section 23, Rule 130 of the Rules of Court when it failed to reply to Atty. Carlos Moran Sison's letter dated February 6, 1962; (5) that DRACOR is not entitled to its 5% commission arising from the direct sales made by CMS to buyers in Japan; and (6) that DRACOR is guilty of fraud and bad faith in its dealings with CMS. With regard to CMS's arguments concerning whether or not Shinko received the commission in question, We find the same unmeritorious. To begin with, these arguments question the findings of fact made by the Court of Appeals, which are final and conclusive and can not be reviewed on appeal to the Supreme Court. 12 Moreover, while it is true that the evidence adduced establishes the fact that Shinko is DRACOR's agent or liaison in Japan, 13 there is no evidence which established the fact that Shinko did receive the amount of U.S. $77,264.67 as commission arising from the sale of CMS's logs to various Japanese firms.

The fact that Shinko received the commissions in question was not established by the testimony of Atty. Teodoro R. Dominguez to the effect that Shinko's president and director told him that Shinko received a commission of U.S. $1.00 for every 1,000 board feet of logs sold, since the same is hearsay. Similarly, the letter of Mr. K. Shibata of Toyo Menka Kaisha, Ltd. 14 is also hearsay since Mr. Shibata was not presented to testify on his letter. CMS's other evidence have little or no probative value at all. The statements made in the memorandum of Atty. Simplicio R. Ciocon to DRACOR dated May 31, 1965, 15 the letter dated February 2, 1963 of Daniel R. Aguinaldo, 16 president of DRACOR, and the reply-letter dated January 9, 1964 17 by DRACOR's counsel Atty. V. E. Del Rosario to CMS's demand letter dated September 25, 1963 can not be categorized as admissions that Shinko did receive the commissions in question. The alleged admission made by Atty. Ciocon, to wit Furthermore, as per our records, our shipment of logs to Toyo Menka Kaisha, Ltd., is only for a net volume of 67,747,732 board feet which should enable Shinko to collect a commission of US $67,747.73 only can not be considered as such since the statement was made in the context of questioning CMS's tally of logs delivered to various Japanese firms. Similarly, the statement of Daniel R. Aguinaldo, to wit . . . Knowing as we do that Toyo Menka is a large and reputable company, it is obvious that they paid Shinko for certain services which Shinko must have satisfactorily performed for them in Japan otherwise they would not have paid Shinko and that of Atty. V. E. Del Rosario, . . . It does not seem proper, therefore, for CMS Logging, Inc., as principal, to concern itself with, much less question, the right of Shinko Trading Co., Ltd. with which our client debt directly, to whatever benefits it might have derived form the ultimate consumer/buyer of these logs, Toyo Menka Kaisha, Ltd. There appears to be no justification for your client's contention that these benefits, whether they can be considered as commissions paid by Toyo Menka Kaisha to Shinko Trading, are to be regarded part of the gross sales. can not be considered admissions that Shinko received the questioned commissions since neither statements declared categorically that Shinko did in fact receive the commissions and that these arose from the sale of CMS's logs. As correctly stated by the appellate court:
It is a rule that "a statement is not competent as an admission where it does not, under a reasonable construction, appear to admit or acknowledge the fact which is sought to be

proved by it". An admission or declaration to be competent must have been expressed in definite, certain and unequivocal language (Bank of the Philippine Islands vs. Fidelity & 18 Surety Co., 51 Phil. 57, 64).

CMS's contention that DRACOR had admitted by its silence the allegation that Shinko received the commissions in question when it failed to respond to Atty. Carlos Moran Sison's letter dated February 6, 1963, is not supported by the evidence. DRACOR did in fact reply to the letter of Atty. Sison, through the letter dated March 5, 1963 of F.A. Novenario, 19 which stated: This is to acknowledge receipt of your letter dated February 6, 1963, and addressed to Mr. D. R. Aguinaldo, who is at present out of the country. xxx xxx xxx We have no record or knowledge of any such payment of commission made by Toyo Menka to Shinko. If the payment was made by Toyo Menka to Shinko, as stated in your letter, we knew nothing about it and had nothing to do with it. The finding of fact made by the trial court, i.e., that "Shinko was able to collect the total amount of $77,264.67 US Dollars," can not be given weight since this was based on the summary prepared by CMS itself, Exhibits "M" and "M-1". Moreover, even if it was shown that Shinko did in fact receive the commissions in question, CMS is not entitled thereto since these were apparently paid by the buyers to Shinko for arranging the sale. This is therefore not part of the gross sales of CMS's logs. However, We find merit in CMS's contention that the appellate court erred in holding that DRACOR was entitled to its commission from the sales made by CMS to Japanese firms. The principal may revoke a contract of agency at will, and such revocation may be express, or implied, 20 and may be availed of even if the period fixed in the contract of agency as not yet expired. 21 As the principal has this absolute right to revoke the agency, the agent can not object thereto; neither may he claim damages arising from such revocation, 22 unless it is shown that such was done in order to evade the payment of agent's commission. 23 In the case at bar, CMS appointed DRACOR as its agent for the sale of its logs to Japanese firms. Yet, during the existence of the contract of agency, DRACOR admitted that CMS sold its logs directly to several Japanese firms. This act constituted an implied revocation of the contract of agency under Article 1924 of the Civil Code, which provides: Art. 1924 The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons. In New Manila Lumber Company, Inc. vs. Republic of the Philippines, 24 this Court ruled that the act of a contractor, who, after executing powers of attorney in favor of another empowering the latter to collect whatever amounts may be due to him from the

Government, and thereafter demanded and collected from the government the money the collection of which he entrusted to his attorney-in-fact, constituted revocation of the agency in favor of the attorney-in-fact. Since the contract of agency was revoked by CMS when it sold its logs to Japanese firms without the intervention of DRACOR, the latter is no longer entitled to its commission from the proceeds of such sale and is not entitled to retain whatever moneys it may have received as its commission for said transactions. Neither would DRACOR be entitled to collect damages from CMS, since damages are generally not awarded to the agent for the revocation of the agency, and the case at bar is not one falling under the exception mentioned, which is to evade the payment of the agent's commission. Regarding CMS's contention that the Court of Appeals erred in not finding that DRACOR had committed acts of fraud and bad faith, We find the same unmeritorious. Like the contention involving Shinko and the questioned commissions, the findings of the Court of Appeals on the matter were based on its appreciation of the evidence, and these findings are binding on this Court. In fine, We affirm the ruling of the Court of Appeals that there is no evidence to support CMS's contention that Shinko earned a separate commission of U.S. $1.00 for every 1,000 board feet of logs from the buyer of CMS's logs. However, We reverse the ruling of the Court of Appeals with regard to DRACOR's right to retain the amount of P101,536.77 as part of its commission from the sale of logs by CMS, and hold that DRACOR has no right to its commission. Consequently, DRACOR is hereby ordered to remit to CMS the amount of P101,536.77. WHEREFORE, the decision appealed from is hereby MODIFIED as stated in the preceding paragraph. Costs de officio. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 83122 October 19, 1990 ARTURO P. VALENZUELA and HOSPITALITA N. VALENZUELA, petitioners, vs. THE HONORABLE COURT OF APPEALS, BIENVENIDO M. ARAGON, ROBERT E. PARNELL, CARLOS K. CATOLICO and THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., respondents. Albino B. Achas for petitioners. Angara, Abello, Concepcion, Regala & Cruz for private respondents.

GUTIERREZ, JR., J.: This is a petition for review of the January 29, 1988 decision of the Court of Appeals and the April 27, 1988 resolution denying the petitioners' motion for reconsideration, which decision and resolution reversed the decision dated June 23,1986 of the Court of First Instance of Manila, Branch 34 in Civil Case No. 121126 upholding the petitioners' causes of action and granting all the reliefs prayed for in their complaint against private respondents. The antecedent facts of the case are as follows: Petitioner Arturo P. Valenzuela (Valenzuela for short) is a General Agent of private respondent Philippine American General Insurance Company, Inc. (Philamgen for short) since 1965. As such, he was authorized to solicit and sell in behalf of Philamgen all kinds of non-life insurance, and in consideration of services rendered was entitled to receive the full agent's commission of 32.5% from Philamgen under the scheduled commission rates (Exhibits "A" and "1"). From 1973 to 1975, Valenzuela solicited marine insurance from one of his clients, the Delta Motors, Inc. (Division of Electronics Airconditioning and Refrigeration) in the amount of P4.4 Million from which he was entitled to a commission of 32% (Exhibit "B"). However, Valenzuela did not receive his full commission which amounted to P1.6 Million from the P4.4 Million insurance coverage of the Delta Motors. During the period 1976 to 1978, premium payments amounting to P1,946,886.00 were paid directly to Philamgen and Valenzuela's commission to which he is entitled amounted to P632,737.00. In 1977, Philamgen started to become interested in and expressed its intent to share in the commission due Valenzuela (Exhibits "III" and "III-1") on a fifty-fifty basis (Exhibit "C"). Valenzuela refused (Exhibit "D").

On February 8, 1978 Philamgen and its President, Bienvenido M. Aragon insisted on the sharing of the commission with Valenzuela (Exhibit E). This was followed by another sharing proposal dated June 1, 1978. On June 16,1978, Valenzuela firmly reiterated his objection to the proposals of respondents stating that: "It is with great reluctance that I have to decline upon request to signify my conformity to your alternative proposal regarding the payment of the commission due me. However, I have no choice for to do otherwise would be violative of the Agency Agreement executed between our goodselves." (Exhibit B-1) Because of the refusal of Valenzuela, Philamgen and its officers, namely: Bienvenido Aragon, Carlos Catolico and Robert E. Parnell took drastic action against Valenzuela. They: (a) reversed the commission due him by not crediting in his account the commission earned from the Delta Motors, Inc. insurance (Exhibit "J" and "2"); (b) placed agency transactions on a cash and carry basis; (c) threatened the cancellation of policies issued by his agency (Exhibits "H" to "H-2"); and (d) started to leak out news that Valenzuela has a substantial account with Philamgen. All of these acts resulted in the decline of his business as insurance agent (Exhibits "N", "O", "K" and "K-8"). Then on December 27, 1978, Philamgen terminated the General Agency Agreement of Valenzuela (Exhibit "J", pp. 1-3, Decision Trial Court dated June 23, 1986, Civil Case No. 121126, Annex I, Petition). The petitioners sought relief by filing the complaint against the private respondents in the court a quo (Complaint of January 24, 1979, Annex "F" Petition). After due proceedings, the trial court found: xxx xxx xxx Defendants tried to justify the termination of plaintiff Arturo P. Valenzuela as one of defendant PHILAMGEN's General Agent by making it appear that plaintiff Arturo P. Valenzuela has a substantial account with defendant PHILAMGEN particularly Delta Motors, Inc.'s Account, thereby prejudicing defendant PHILAMGEN's interest (Exhibits 6,"11","11- "12- A"and"13-A"). Defendants also invoked the provisions of the Civil Code of the Philippines (Article 1868) and the provisions of the General Agency Agreement as their basis for terminating plaintiff Arturo P. Valenzuela as one of their General Agents. That defendants' position could have been justified had the termination of plaintiff Arturo P. Valenzuela was (sic) based solely on the provisions of the Civil Code and the conditions of the General Agency Agreement. But the records will show that the principal cause of the termination of the plaintiff as General Agent of defendant PHILAMGEN was his refusal to share his Delta commission. That it should be noted that there were several attempts made by defendant Bienvenido M. Aragon to share with the Delta commission of plaintiff Arturo P. Valenzuela. He had persistently pursued the sharing scheme to the point of terminating plaintiff Arturo P. Valenzuela, and to make matters worse,

defendants made it appear that plaintiff Arturo P. Valenzuela had substantial accounts with defendant PHILAMGEN. Not only that, defendants have also started (a) to treat separately the Delta Commission of plaintiff Arturo P. Valenzuela, (b) to reverse the Delta commission due plaintiff Arturo P. Valenzuela by not crediting or applying said commission earned to the account of plaintiff Arturo P. Valenzuela, (c) placed plaintiff Arturo P. Valenzuela's agency transactions on a "cash and carry basis", (d) sending threats to cancel existing policies issued by plaintiff Arturo P. Valenzuela's agency, (e) to divert plaintiff Arturo P. Valenzuela's insurance business to other agencies, and (f) to spread wild and malicious rumors that plaintiff Arturo P. Valenzuela has substantial account with defendant PHILAMGEN to force plaintiff Arturo P. Valenzuela into agreeing with the sharing of his Delta commission." (pp. 9-10, Decision, Annex 1, Petition). xxx xxx xxx These acts of harrassment done by defendants on plaintiff Arturo P. Valenzuela to force him to agree to the sharing of his Delta commission, which culminated in the termination of plaintiff Arturo P. Valenzuela as one of defendant PHILAMGEN's General Agent, do not justify said termination of the General Agency Agreement entered into by defendant PHILAMGEN and plaintiff Arturo P. Valenzuela. That since defendants are not justified in the termination of plaintiff Arturo P. Valenzuela as one of their General Agents, defendants shall be liable for the resulting damage and loss of business of plaintiff Arturo P. Valenzuela. (Arts. 2199/2200, Civil Code of the Philippines). (Ibid, p. 11) The court accordingly rendered judgment, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against defendants ordering the latter to reinstate plaintiff Arturo P. Valenzuela as its General Agent, and to pay plaintiffs, jointly and severally, the following: 1. The amount of five hundred twenty-one thousand nine hundred sixty four and 16/100 pesos (P521,964.16) representing plaintiff Arturo P. Valenzuela's Delta Commission with interest at the legal rate from the time of the filing of the complaint, which amount shall be adjusted in accordance with Article 1250 of the Civil Code of the Philippines; 2. The amount of seventy-five thousand pesos (P75,000.00) per month as compensatory damages from 1980 until such time that defendant Philamgen shall reinstate plaintiff Arturo P. Valenzuela as one of its general agents;

3. The amount of three hundred fifty thousand pesos (P350,000.00) for each plaintiff as moral damages; 4. The amount of seventy-five thousand pesos (P75,000.00) as and for attorney's fees; 5. Costs of the suit. (Ibid., P. 12) From the aforesaid decision of the trial court, Bienvenido Aragon, Robert E. Parnell, Carlos K. Catolico and PHILAMGEN respondents herein, and defendants-appellants below, interposed an appeal on the following: ASSIGNMENT OF ERRORS I THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF ARTURO P. VALENZUELA HAD NO OUTSTANDING ACCOUNT WITH DEFENDANT PHILAMGEN AT THE TIME OF THE TERMINATION OF THE AGENCY. II THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF ARTURO P. VALENZUELA IS ENTITLED TO THE FULL COMMISSION OF 32.5% ON THE DELTA ACCOUNT. III THE LOWER COURT ERRED IN HOLDING THAT THE TERMINATION OF PLAINTIFF ARTURO P. VALENZUELA WAS NOT JUSTIFIED AND THAT CONSEQUENTLY DEFENDANTS ARE LIABLE FOR ACTUAL AND MORAL DAMAGES, ATTORNEYS FEES AND COSTS. IV ASSUMING ARGUENDO THAT THE AWARD OF DAMAGES AGAINST DEFENDANT PHILAMGEN WAS PROPER, THE LOWER COURT ERRED IN AWARDING DAMAGES EVEN AGAINST THE INDIVIDUAL DEFENDANTS WHO ARE MERE CORPORATE AGENTS ACTING WITHIN THE SCOPE OF THEIR AUTHORITY. V ASSUMING ARGUENDO THAT THE AWARD OF DAMAGES IN FAVOR OF PLAINTIFF ARTURO P. VALENZUELA WAS PROPER, THE LOWER COURT ERRED IN AWARDING DAMAGES IN FAVOR OF HOSPITALITA VALENZUELA, WHO, NOT BEING THE REAL PARTY IN INTEREST IS NOT TO OBTAIN RELIEF.

On January 29, 1988, respondent Court of Appeals promulgated its decision in the appealed case. The dispositive portion of the decision reads: WHEREFORE, the decision appealed from is hereby modified accordingly and judgment is hereby rendered ordering: 1. Plaintiff-appellee Valenzuela to pay defendant-appellant Philamgen the sum of one million nine hundred thirty two thousand five hundred thirty-two pesos and seventeen centavos (P1,902,532.17), with legal interest thereon from the date of finality of this judgment until fully paid. 2. Both plaintiff-appellees to pay jointly and severally defendants-appellants the sum of fifty thousand pesos (P50,000.00) as and by way of attorney's fees. No pronouncement is made as to costs. (p. 44, Rollo) There is in this instance irreconcilable divergence in the findings and conclusions of the Court of Appeals, vis-a-visthose of the trial court particularly on the pivotal issue whether or not Philamgen and/or its officers can be held liable for damages due to the termination of the General Agency Agreement it entered into with the petitioners. In its questioned decision the Court of Appeals observed that: In any event the principal's power to revoke an agency at will is so pervasive, that the Supreme Court has consistently held that termination may be effected even if the principal acts in bad faith, subject only to the principal's liability for damages (Danon v. Antonio A. Brimo & Co., 42 Phil. 133; Reyes v. Mosqueda, 53 O.G. 2158 and Infante V. Cunanan, 93 Phil. 691, cited in Paras, Vol. V, Civil Code of the Philippines Annotated [1986] 696). The lower court, however, thought the termination of Valenzuela as General Agent improper because the record will show the principal cause of the termination of the plaintiff as General Agent of defendant Philamgen was his refusal to share his Delta commission. (Decision, p. 9; p. 13, Rollo, 41) Because of the conflicting conclusions, this Court deemed it necessary in the interest of substantial justice to scrutinize the evidence and records of the cases. While it is an established principle that the factual findings of the Court of Appeals are final and may not be reviewed on appeal to this Court, there are however certain exceptions to the rule which this Court has recognized and accepted, among which, are when the judgment is based on a misapprehension of facts and when the findings of the appellate court, are contrary to those of the trial court (Manlapaz v. Court of Appeals, 147 SCRA 236 [1987]); Guita v. Court of Appeals, 139 SCRA 576 [1986]). Where the findings of the Court of Appeals and the trial court are contrary to each other, this Court may scrutinize the evidence on record (Cruz v. Court of Appeals, 129 SCRA 222 [1984]; Mendoza v. Court of Appeals, 156 SCRA 597 [1987]; Maclan v. Santos, 156 SCRA 542 [1987]). When the conclusion of the Court of Appeals is grounded entirely on speculation, surmises or conjectures, or when the inference made is manifestly mistaken, absurd or impossible, or when there is grave abuse of

discretion, or when the judgment is based on a misapprehension of facts, and when the findings of facts are conflict the exception also applies (Malaysian Airline System Bernad v. Court of Appeals, 156 SCRA 321 [1987]). After a painstaking review of the entire records of the case and the findings of facts of both the court a quo and respondent appellate court, we are constrained to affirm the trial court's findings and rule for the petitioners. We agree with the court a quo that the principal cause of the termination of Valenzuela as General Agent of Philamgen arose from his refusal to share his Delta commission. The records sustain the conclusions of the trial court on the apparent bad faith of the private respondents in terminating the General Agency Agreement of petitioners. It is axiomatic that the findings of fact of a trial judge are entitled to great weight (People v. Atanacio, 128 SCRA 22 [1984]) and should not be disturbed on appeal unless for strong and cogent reasons, because the trial court is in a better position to examine the evidence as well as to observe the demeanor of the witnesses while testifying (Chase v. Buencamino, Sr., 136 SCRA 365 [1985]; People v. Pimentel, 147 SCRA 25 [1987]; and Baliwag Trans., Inc. v. Court of Appeals, 147 SCRA 82 [1987]). In the case at bar, the records show that the findings and conclusions of the trial court are supported by substantial evidence and there appears to be no cogent reason to disturb them (Mendoza v. Court of Appeals. 156 SCRA 597 [1987]). As early as September 30,1977, Philamgen told the petitioners of its desire to share the Delta Commission with them. It stated that should Delta back out from the agreement, the petitioners would be charged interests through a reduced commission after full payment by Delta. On January 23, 1978 Philamgen proposed reducing the petitioners' commissions by 50% thus giving them an agent's commission of 16.25%. On February 8, 1978, Philamgen insisted on the reduction scheme followed on June 1, 1978 by still another insistence on reducing commissions and proposing two alternative schemes for reduction. There were other pressures. Demands to settle accounts, to confer and thresh out differences regarding the petitioners' income and the threat to terminate the agency followed. The petitioners were told that the Delta commissions would not be credited to their account (Exhibit "J"). They were informed that the Valenzuela agency would be placed on a cash and carry basis thus removing the 60-day credit for premiums due. (TSN., March 26, 1979, pp. 54-57). Existing policies were threatened to be cancelled (Exhibits "H" and "14"; TSN., March 26, 1979, pp. 29-30). The Valenzuela business was threatened with diversion to other agencies. (Exhibit "NNN"). Rumors were also spread about alleged accounts of the Valenzuela agency (TSN., January 25, 1980, p. 41). The petitioners consistently opposed the pressures to hand over the agency or half of their commissions and for a treatment of the Delta account distinct from other accounts. The pressures and demands, however, continued until the agency agreement itself was finally terminated. It is also evident from the records that the agency involving petitioner and private respondent is one "coupled with an interest," and, therefore, should not be freely revocable at the unilateral will of the latter.

In the insurance business in the Philippines, the most difficult and frustrating period is the solicitation and persuasion of the prospective clients to buy insurance policies. Normally, agents would encounter much embarrassment, difficulties, and oftentimes frustrations in the solicitation and procurement of the insurance policies. To sell policies, an agent exerts great effort, patience, perseverance, ingenuity, tact, imagination, time and money. In the case of Valenzuela, he was able to build up an Agency from scratch in 1965 to a highly productive enterprise with gross billings of about Two Million Five Hundred Thousand Pesos (P2,500,000.00) premiums per annum. The records sustain the finding that the private respondent started to covet a share of the insurance business that Valenzuela had built up, developed and nurtured to profitability through over thirteen (13) years of patient work and perseverance. When Valenzuela refused to share his commission in the Delta account, the boom suddenly fell on him. The private respondents by the simple expedient of terminating the General Agency Agreement appropriated the entire insurance business of Valenzuela. With the termination of the General Agency Agreement, Valenzuela would no longer be entitled to commission on the renewal of insurance policies of clients sourced from his agency. Worse, despite the termination of the agency, Philamgen continued to hold Valenzuela jointly and severally liable with the insured for unpaid premiums. Under these circumstances, it is clear that Valenzuela had an interest in the continuation of the agency when it was unceremoniously terminated not only because of the commissions he should continue to receive from the insurance business he has solicited and procured but also for the fact that by the very acts of the respondents, he was made liable to Philamgen in the event the insured fail to pay the premiums due. They are estopped by their own positive averments and claims for damages. Therefore, the respondents cannot state that the agency relationship between Valenzuela and Philamgen is not coupled with interest. "There may be cases in which an agent has been induced to assume a responsibility or incur a liability, in reliance upon the continuance of the authority under such circumstances that, if the authority be withdrawn, the agent will be exposed to personal loss or liability" (See MEC 569 p. 406). Furthermore, there is an exception to the principle that an agency is revocable at will and that is when the agency has been given not only for the interest of the principal but for the interest of third persons or for the mutual interest of the principal and the agent. In these cases, it is evident that the agency ceases to be freely revocable by the sole will of the principal (See Padilla, Civil Code Annotated, 56 ed., Vol. IV p. 350). The following citations are apropos: The principal may not defeat the agent's right to indemnification by a termination of the contract of agency (Erskine v. Chevrolet Motors Co. 185 NC 479, 117 SE 706, 32 ALR 196). Where the principal terminates or repudiates the agent's employment in violation of the contract of employment and without cause ... the agent is entitled to receive either the amount of net losses caused and gains prevented by the breach, or the reasonable value of the services rendered. Thus, the agent is entitled to prospective profits which he would have made except for such wrongful termination provided that such profits are not conjectural, or speculative but are capable of determination upon some fairly

reliable basis. And a principal's revocation of the agency agreement made to avoid payment of compensation for a result which he has actually accomplished (Hildendorf v. Hague, 293 NW 2d 272; Newhall v. Journal Printing Co., 105 Minn 44,117 NW 228; Gaylen Machinery Corp. v. PitmanMoore Co. [C.A. 2 NY] 273 F 2d 340) If a principal violates a contractual or quasi-contractual duty which he owes his agent, the agent may as a rule bring an appropriate action for the breach of that duty. The agent may in a proper case maintain an action at law for compensation or damages ... A wrongfully discharged agent has a right of action for damages and in such action the measure and element of damages are controlled generally by the rules governing any other action for the employer's breach of an employment contract. (Riggs v. Lindsay, 11 US 500, 3L Ed 419; Tiffin Glass Co. v. Stoehr, 54 Ohio 157, 43 NE 2798) At any rate, the question of whether or not the agency agreement is coupled with interest is helpful to the petitioners' cause but is not the primary and compelling reason. For the pivotal factor rendering Philamgen and the other private respondents liable in damages is that the termination by them of the General Agency Agreement was tainted with bad faith. Hence, if a principal acts in bad faith and with abuse of right in terminating the agency, then he is liable in damages. This is in accordance with the precepts in Human Relations enshrined in our Civil Code that "every person must in the exercise of his rights and in the performance of his duties act with justice, give every one his due, and observe honesty and good faith: (Art. 19, Civil Code), and every person who, contrary to law, wilfully or negligently causes damages to another, shall indemnify the latter for the same (Art. 20, id). "Any person who wilfully causes loss or injury to another in a manner contrary to morals, good customs and public policy shall compensate the latter for the damages" (Art. 21, id.). As to the issue of whether or not the petitioners are liable to Philamgen for the unpaid and uncollected premiums which the respondent court ordered Valenzuela to pay Philamgen the amount of One Million Nine Hundred Thirty-Two Thousand Five Hundred Thirty-Two and 17/100 Pesos (P1,932,532,17) with legal interest thereon until fully paid (Decision-January 20, 1988, p. 16; Petition, Annex "A"), we rule that the respondent court erred in holding Valenzuela liable. We find no factual and legal basis for the award. Under Section 77 of the Insurance Code, the remedy for the non-payment of premiums is to put an end to and render the insurance policy not binding Sec. 77 ... [N]otwithstanding any agreement to the contrary, no policy or contract of insurance is valid and binding unless and until the premiums thereof have been paid except in the case of a life or industrial life policy whenever the grace period provision applies (P.D. 612, as amended otherwise known as the Insurance Code of 1974) In Philippine Phoenix Surety and Insurance, Inc. v. Woodworks, Inc. (92 SCRA 419 [1979]) we held that the non-payment of premium does not merely suspend but puts an end to an insurance contract since the time of the payment is peculiarly of the essence of the contract. And in Arce v. The Capital Insurance and Surety Co. Inc.(117 SCRA 63, [1982]), we

reiterated the rule that unless premium is paid, an insurance contract does not take effect. Thus: It is to be noted that Delgado (Capital Insurance & Surety Co., Inc. v. Delgado, 9 SCRA 177 [1963] was decided in the light of the Insurance Act before Sec. 72 was amended by the underscored portion. Supra. Prior to the Amendment, an insurance contract was effective even if the premium had not been paid so that an insurer was obligated to pay indemnity in case of loss and correlatively he had also the right to sue for payment of the premium. But the amendment to Sec. 72 has radically changed the legal regime in that unless the premium is paid there is no insurance. " (Arce v. Capitol Insurance and Surety Co., Inc., 117 SCRA 66; Emphasis supplied) In Philippine Phoenix Surety case, we held: Moreover, an insurer cannot treat a contract as valid for the purpose of collecting premiums and invalid for the purpose of indemnity. (Citing Insurance Law and Practice by John Alan Appleman, Vol. 15, p. 331; Emphasis supplied) The foregoing findings are buttressed by Section 776 of the insurance Code (Presidential Decree No. 612, promulgated on December 18, 1974), which now provides that no contract of Insurance by an insurance company is valid and binding unless and until the premium thereof has been paid, notwithstanding any agreement to the contrary (Ibid., 92 SCRA 425) Perforce, since admittedly the premiums have not been paid, the policies issued have lapsed. The insurance coverage did not go into effect or did not continue and the obligation of Philamgen as insurer ceased. Hence, for Philamgen which had no more liability under the lapsed and inexistent policies to demand, much less sue Valenzuela for the unpaid premiums would be the height of injustice and unfair dealing. In this instance, with the lapsing of the policies through the nonpayment of premiums by the insured there were no more insurance contracts to speak of. As this Court held in the Philippine Phoenix Surety case, supra "the non-payment of premiums does not merely suspend but puts an end to an insurance contract since the time of the payment is peculiarly of the essence of the contract." The respondent appellate court also seriously erred in according undue reliance to the report of Banaria and Banaria and Company, auditors, that as of December 31, 1978, Valenzuela owed Philamgen P1,528,698.40. This audit report of Banaria was commissioned by Philamgen after Valenzuela was almost through with the presentation of his evidence. In essence, the Banaria report started with an unconfirmed and unaudited beginning balance of account of P1,758,185.43 as of August 20, 1976. But even with that unaudited and unconfirmed beginning balance of P1,758,185.43, Banaria still came up with the amount of P3,865.49 as Valenzuela's balance as of December 1978 with Philamgen (Exh. "38-A-3"). In fact, as of December 31, 1976, and December 31, 1977, Valenzuela had no unpaid account with Philamgen (Ref: Annexes "D", "D-1", "E", Petitioner's Memorandum). But even disregarding these annexes which are records of Philamgen and

addressed to Valenzuela in due course of business, the facts show that as of July 1977, the beginning balance of Valenzuela's account with Philamgen amounted to P744,159.80. This was confirmed by Philamgen itself not only once but four (4) times on different occasions, as shown by the records. On April 3,1978, Philamgen sent Valenzuela a statement of account with a beginning balance of P744,159-80 as of July 1977. On May 23, 1978, another statement of account with exactly the same beginning balance was sent to Valenzuela. On November 17, 1978, Philamgen sent still another statement of account with P744,159.80 as the beginning balance. And on December 20, 1978, a statement of account with exactly the same figure was sent to Valenzuela. It was only after the filing of the complaint that a radically different statement of accounts surfaced in court. Certainly, Philamgen's own statements made by its own accountants over a long period of time and covering examinations made on four different occasions must prevail over unconfirmed and unaudited statements made to support a position made in the course of defending against a lawsuit. It is not correct to say that Valenzuela should have presented its own records to refute the unconfirmed and unaudited finding of the Banaria auditor. The records of Philamgen itself are the best refutation against figures made as an afterthought in the course of litigation. Moreover, Valenzuela asked for a meeting where the figures would be reconciled. Philamgen refused to meet with him and, instead, terminated the agency agreement. After off-setting the amount of P744,159.80, beginning balance as of July 1977, by way of credits representing the commission due from Delta and other accounts, Valenzuela had overpaid Philamgen the amount of P530,040.37 as of November 30, 1978. Philamgen cannot later be heard to complain that it committed a mistake in its computation. The alleged error may be given credence if committed only once. But as earlier stated, the reconciliation of accounts was arrived at four (4) times on different occasions where Philamgen was duly represented by its account executives. On the basis of these admissions and representations, Philamgen cannot later on assume a different posture and claim that it was mistaken in its representation with respect to the correct beginning balance as of July 1977 amounting to P744,159.80. The Banaria audit report commissioned by Philamgen is unreliable since its results are admittedly based on an unconfirmed and unaudited beginning balance of P1,758,185.43 as of August 20,1976. As so aptly stated by the trial court in its decision: Defendants also conducted an audit of accounts of plaintiff Arturo P. Valenzuela after the controversy has started. In fact, after hearing plaintiffs have already rested their case.

The results of said audit were presented in Court to show plaintiff Arturo P. Valenzuela's accountability to defendant PHILAMGEN. However, the auditor, when presented as witness in this case testified that the beginning balance of their audit report was based on an unaudited amount of P1,758,185.43 (Exhibit 46-A) as of August 20, 1976, which was unverified and merely supplied by the officers of defendant PHILAMGEN. Even defendants very own Exhibit 38- A-3, showed that plaintiff Arturo P. Valenzuela's balance as of 1978 amounted to only P3,865.59, not P826,128.46 as stated in defendant Bienvenido M. Aragon's letter dated December 20,1978 (Exhibit 14) or P1,528,698.40 as reflected in defendant's Exhibit 46 (Audit Report of Banaria dated December 24, 1980). These glaring discrepancy (sic) in the accountability of plaintiff Arturo P. Valenzuela to defendant PHILAMGEN only lends credence to the claim of plaintiff Arturo P. Valenzuela that he has no outstanding account with defendant PHILAMGEN when the latter, thru defendant Bienvenido M. Aragon, terminated the General Agency Agreement entered into by plaintiff (Exhibit A) effective January 31, 1979 (see Exhibits "2" and "2-A"). Plaintiff Arturo P. Valenzuela has shown that as of October 31, 1978, he has overpaid defendant PHILAMGEN in the amount of P53,040.37 (Exhibit "EEE", which computation was based on defendant PHILAMGEN's balance of P744,159.80 furnished on several occasions to plaintiff Arturo P. Valenzuela by defendant PHILAMGEN (Exhibits H-1, VV, VV-1, WW, WW-1 , YY , YY-2 , ZZ and , ZZ2). Prescinding from the foregoing, and considering that the private respondents terminated Valenzuela with evidentmala fide it necessarily follows that the former are liable in damages. Respondent Philamgen has been appropriating for itself all these years the gross billings and income that it unceremoniously took away from the petitioners. The preponderance of the authorities sustain the preposition that a principal can be held liable for damages in cases of unjust termination of agency. In Danon v. Brimo, 42 Phil. 133 [1921]), this Court ruled that where no time for the continuance of the contract is fixed by its terms, either party is at liberty to terminate it at will, subject only to the ordinary requirements of good faith. The right of the principal to terminate his authority is absolute and unrestricted, except only that he may not do so in bad faith. The trial court in its decision awarded to Valenzuela the amount of Seventy Five Thousand Pesos (P75,000,00) per month as compensatory damages from June 1980 until its decision becomes final and executory. This award is justified in the light of the evidence extant on record (Exhibits "N", "N-10", "0", "0-1", "P" and "P-1") showing that the average gross premium collection monthly of Valenzuela over a period of four (4) months from December 1978 to February 1979, amounted to over P300,000.00 from which he is entitled to a commission of P100,000.00 more or less per month. Moreover, his annual sales production amounted to P2,500,000.00 from where he was given 32.5% commissions. Under Article 2200 of the new Civil Code, "indemnification for damages shall comprehend not only the value of the loss suffered, but also that of the profits which the obligee failed to obtain."

The circumstances of the case, however, require that the contractual relationship between the parties shall be terminated upon the satisfaction of the judgment. No more claims arising from or as a result of the agency shall be entertained by the courts after that date. ACCORDINGLY, the petition is GRANTED. The impugned decision of January 29, 1988 and resolution of April 27, 1988 of respondent court are hereby SET ASIDE. The decision of the trial court dated January 23, 1986 in Civil Case No. 121126 is REINSTATED with the MODIFICATIONS that the amount of FIVE HUNDRED TWENTY ONE THOUSAND NINE HUNDRED SIXTY-FOUR AND 16/100 PESOS (P521,964.16) representing the petitioners Delta commission shall earn only legal interests without any adjustments under Article 1250 of the Civil Code and that the contractual relationship between Arturo P. Valenzuela and Philippine American General Insurance Company shall be deemed terminated upon the satisfaction of the judgment as modified. SO ORDERED.

SECOND DIVISION

[G.R. Nos. 148404-05. April 11, 2002]

NELITA M. BACALING, represented by her attorney-in-fact JOSE JUAN TONG, and JOSE JUAN TONG, in his personal capacity, petitioners, vs. FELOMINO MUYA, CRISPIN AMOR, WILFREDO JEREZA, RODOLFO LAZARTE and NEMESIO TONOCANTE, respondents. DECISION
DE LEON, JR., J.:

Before us is a Petition for Review of the consolidated Decision[1] dated January 31, 2001 of the Court of Appeals[2] in CA-G.R. SP No. 54413,[3] and in CA-G.R. SP No. 54414,[4] and of its Resolution[5] dated June 5, 2001 reversing the Decision[6] dated May 22, 1998 and Resolution July 22, 1999 of the Office of the President. The facts of the case are as follows: Petitioner Nelita M. Bacaling and her spouse Ramon Bacaling were the owners of three (3) parcels of land, with a total area of 9.9631 hectares, located in Barangay Cubay, Jaro, Iloilo City, and designated as Lot No. 2103-A (Psd-24069), Lot No. 2103-B-12 (Psd 26685) and Lot No. 2295. These lots were duly covered by Transfer Certificates of Title Nos. T-5801, T-5833 and T-5834, respectively. In 1955 the landholding was subdivided into one hundred ten (110) sublots covered by TCT Nos. T-10664 to T-10773, inclusive of the Registry of Deeds of the City of Iloilo. On May 16, 1955, the landholding was processed and approved as "residential" or "subdivision" by the National Urban Planning Commission (NUPC).[7] On May 24, 1955 the Bureau of Lands approved the corresponding subdivision plan for purposes of developing the said property into a low-cost residential community which the spouses referred to as the Bacaling-Moreno Subdivision.[8] In 1957, a real estate loan of Six Hundred Thousand Pesos (P600,000.00) was granted to the spouses Nelita and Ramon Bacaling by the Government Service Insurance System (GSIS) for the development of the subdivision.[9] To secure the repayment of the loan, the Bacalings executed in favor of the GSIS a real estate mortgage over their parcels of land including the one hundred ten (110) sub-lots.[10] Out of the approved loan of Six Hundred Thousand Pesos (P600,000.00), only Two Hundred Forty Thousand Pesos (P240,000.00) was released to them.[11] The Bacalings failed to pay the amortizations on the loan and consequently the mortgage constituted on the one hundred ten (110) sub-lots was foreclosed by the GSIS.[12] After a court case that reached all the way to this Court,[13] Nelita Bacaling (by then a widow) in 1989 was eventually able to restore to herself ownership of the one hundred ten (110) sub-lots.[14]

According to the findings of the Office of the President, in 1972 and thereafter, respondents Felomino Muya, Crispin Amor, Wilfredo Jereza, Rodolfo Lazarte and Nemesio Tonocante clandestinely entered and occupied the entire one hundred ten (110) sub-lots (formerly known as Lot No. 2103-A, Lot No. 2103-B-12 and Lot No. 2295) and grabbed exclusively for themselves the said 9.9631 hectare landholding.[15] Apparently, respondents took advantage of the problematic peace and order situation at the onset of martial law and the foreclosure of the lots by GSIS.[16] They sowed the lots as if the same were their own, and altered the roads, drainage, boundaries and monuments established thereon.[17] Respondents, on the other hand, claim that in 1964 they were legally instituted by Bacalings administrator/overseer as tenant-tillers of the subject parcels of land on sharing basis with two and a half (2) hectares each for respondents Muya, Amor, Tonocante and Lazarte, and one and a half (1) hectares for respondent Jereza. In 1974, their relationship with the landowner was changed to one of leasehold. They religiously delivered their rental payments to Bacaling as agricultural lessor. In 1980, they secured certificates of land transfer in their names for the one hundred ten (110) sub-lots. They have made various payments to the Land Bank of the Philippines as amortizing owners-cultivators of their respective tillage. In 1977, however, the City Council of Iloilo enacted Zoning Ordinance No. 212 declaring the one hundred ten (110) sub-lots as "residential" and "non-agricultural," which was consistent with the conversion effected in 1955 by the NUPC and the Bureau of Lands. In 1978, Nelita Bacaling was able to register the subject property as the Bacaling-Moreno Subdivision with the National Housing Authority and to obtain therefrom a license to sell the subject one hundred ten (110) sub-lots comprising the said subdivision to consummate the original and abiding design to develop a low-cost residential community. In August 21, 1990, petitioner Jose Juan Tong, together with Vicente Juan and Victoria Siady, bought from Nelita Bacaling the subject one hundred ten (110) sub-lots for One Million Seven Hundred Thousand Pesos (P1,700,000.00).[18] The said sale was effected after Bacaling has repurchased the subject property from the Government Service Insurance System. To secure performance of the contract of absolute sale and facilitate the transfer of title of the lots to Jose Juan Tong, Bacaling appointed him in 1992 as her attorney-in-fact, under an irrevocable special power of attorney with the following mandate1. To file, defend and prosecute any case/cases involving lots nos. 1 to 110 covered by TCT Nos. T-10664 to T-10773 of the Register of Deeds of the City of Iloilo; 2. To assume full control, prosecute, terminate and enter into an amicable settlement and compromise agreement of all cases now pending before the DARAB, Region VI, Iloilo City, which involved portion of Lots 1 to 110, covered by TCT Nos. T-10664 to T-10773 of the Register of Deeds of Iloilo City, which were purchased by Jose Juan Tong, Vicente Juan Tong and Victoria Siady; 3. To hire a lawyer/counsel which he may deem fit and necessary to effect and attain the foregoing acts and deeds; handle and prosecute the aforesaid cases; 4. To negotiate, cause and effect a settlement of occupation and tenants on the aforesaid lots; 5. To cause and effect the transfer of the aforesaid lots in the name of the VENDEES; 6. To execute and deliver document/s or instrument of whatever nature necessary to accomplish the foregoing acts and deeds.[19]

It is significant to note that ten (10) years after the perfection and execution of the sale, or on April 26, 2000, Bacaling filed a complaint to nullify the contract of sale. The suit was, however, dismissed with prejudice and the dismissal has long become final and executory.[20] Following the sale of the one hundred ten (110) sub-lots and using the irrevocable special power of attorney executed in his favor, petitioner Tong (together with Bacaling) filed a petition for cancellation of the certificates of land transfer against respondents and a certain Jaime Ruel with the Department of Agrarian Reform (DAR) Region VI Office in Iloilo City. [21] The DAR, however, dismissed the petition on the ground that there had been no legitimate conversion of the classification of the 110 sub-lots from agricultural to residential prior to October 21, 1972 when Operation Land Transfer under P.D. No. 72 took effect.[22] Bacaling and Tong appealed to the DAR Central Office but their appeal was similarly rejected.[23] The motion for reconsideration failed to overturn the ruling of the Central Office Order.[24] On September 19, 1997, Bacaling and Tong appealed the adverse DAR Orders to the Office of the President which reversed them in toto in a Decision[25]dated May 22, 1998 (OP Decision, for brevity), the dispositive portion of which reads:

WHEREFORE, premises [considered], the assailed order of the Regional Director, DAR Region VI, dated April 3, 1996, as well as the orders of the DAR Secretary dated December 12, 1996 and September 4, 1997, are hereby REVERSED AND SET ASIDE and subject landholdings declared exempt from coverage of the CARL. The Certificates of Land Transfer (CLTs) issued to the appellees are hereby cancelled and the Department of Agrarian Reform directed to implement the voluntary offer made by appellant with respect to the payment of disturbance compensation and relocation of the affected parties. SO ORDERED.[26]
The OP Decision found that the one hundred ten (110) parcels of land had been completely converted from agricultural to residential lots as a result of the declarations of the NUPC and the Bureau of Lands and the factual circumstances, i.e., the GSIS loan with real estate mortgage, the division of the original three (3) parcels of land into one hundred ten (110) sub-lots under individual certificates of title, and the establishment of residential communities adjacent to the subject property, which indubitably proved the intention of Nelita and Ramon Bacaling to develop a residential subdivision thereon. The OP Decision also categorically acknowledged the competence of the NUPC and the Bureau of Lands to classify the one hundred ten (110) sub-lots into residential areas. On July 22, 1999, separate motions for reconsideration thereof were denied.[27] Respondents elevated the OP Decision to the Court of Appeals on a petition for review under Rule 43 of the Rules of Civil Procedure.[28] Before the petition was resolved, or on December 2, 1999, Nelita Bacaling manifested to the appellate court that she was revoking the irrevocable power of attorney in favor of Jose Juan Tong and that she was admitting the status of respondents as her tenants of the one hundred ten (110) sub-lots which allegedly were agricultural in character. The manifestation was however characterized by an obvious streak of ambivalence when her prayer therein urged the Court of Appeals to decide the case, curiously,

on the basis of the clear intent of Private Respondent and in accordance with the perception of this Honorable Court.[29] On January 31, 2001 the Court of Appeals reversed the OP Decision and validated the certificates of land transfers in favor of respondents without however promulgating a ruling on petitioner Tong's supposedly ensuing lack of material interest in the controversy as a result of the manifestation.[30] The dispositive portion of the decision reads:

WHEREFORE, premises considered, petition is GRANTED; and the May 22, 1998 Decision of the Office of the President is hereby REVERSED and SET ASIDE. The April 3, 1996 Order of the Regional Director, DARAB, Region VI, is REINSTATED.[31]
The appellate court refused to recognize the 1955 NUPC and Bureau of Lands classification of the subject lots as residential subdivision. Tong moved for reconsideration of the CA Decision which Bacaling did not oppose despite her manifestation. On June 5, 2001, again without a single reference to Bacaling's alleged repudiation of Tong's actions, the Court of Appeals denied reconsideration of its decision,[32] Hence, this petition for review on certiorari based on the following assignment of errors:
I

SUBJECT LANDHOLDINGS ARE EXEMPT FROM THE COVERAGE OF P.D. 27 AND OPERATION LAND TRANSFER (1972, AS WELL (sic) THE COMPREHENSIVE AGRARIAN REFORM LAW (1988) AS THEY WERE CLASSIFIED AS RESIDENTIAL WAY BACK IN 1955 BY THE THEN NATIONAL PLANNING COMMISSION AND THE SUBDIVSION PLAN WAS APPROVED BY THE BUREAU OF LANDS. AS A CONSEQUENCE, THE CLTs ISSUED TO PRIVATE RESPONENTS IN OCTOBER, 1980 ARE INVALID AS HAVING BEEN ISSUED WITHOUT JURISDICTION.
II

PRIVATE RESPONDENTS ARE NOT BONA FIDE TENANTS OF THE LANDS INVOLVED. PUBLIC REPSONDENTS RULING THAT THE LATTER ARE SUCH IS CONTRARY TO LAW AS IT IGNORED THE FACT THAT THE LANDHOLDINGS ARE RESIDENTIAL AND NO COMPETENT PROOF OF CONSENT OF THE OWNER WAS EVER PRESENTED BY PRIVATE RESPONDENTS.
III

APPROVAL OF THE SECRETARY OF AGRARIAN REFORM IS NOT NECESSARY FOR THE VALID CLASSIFICATION OF THE LANDS INVOLVED INTO RESIDENTIAL BECAUSE THE CARL, AS ALSO THE

RELATED AGRARIAN LAWS, HAVE NO RETROACTIVE APPLICATION.[33]

Long after issues were joined in the instant proceedings, or on October 8, 2001, petitioner Nelita Bacaling resurrected her manifestation with the Court of Appeals and moved to withdraw/dismiss the present petition on the ground that the irrevocable power of attorney in favor of petitioner Jose Juan Tong had been nullified by her and that Tong consequently lacked the authority to appear before this Court.[34] She also manifested that, contrary to the arguments of petitioner Tong, respondents were bona fide tenants of the one hundred ten (110) sub-lots which were allegedly agricultural and not residential pieces of realty.[35]Accordingly, petitioner Tong was left all alone to pursue the instant case. The issues in this case can be summarized as follows: (1) Does petitioner Tong have the requisite interest to litigate this petition for review on certiorari?; (2) Are the respondents agricultural lessees?; and (3) Are the one hundred ten (110) sub-lots admittedly classified for residential use by the National Urban Planning Commission and the Bureau of Lands prior to October 21, 1972[36] covered by the Operation Land Transfer under P.D. No. 72? We hold that petitioner Jose Juan Tong possesses adequate and legitimate interest to file the instant petition. Under our rules of procedure, interest means material interest, that is, an interest in issue and to be affected by the judgment,[37] while a real party in interest is the party who would be benefited or injured by the judgment or the party entitled to the avails of the suit.[38] There should be no doubt that as transferee of the one hundred ten (110) sub-lots through a contract of sale and as the attorney-in-fact of Nelita Bacaling, former owner of the subject lots, under an irrevocable special power of attorney, petitioner Tong stands to be benefited or injured by the judgment in the instant case as well as the orders and decisions in the proceedings a quo. The deed of sale categorically states that petitioner Tong and his co-sellers have fully paid for the subject parcels of land. The said payment has been duly received by Bacaling. Hence, it stands to reason that he has adequate and material interest to pursue the present petition to finality. Respondents put too much weight on the motion to dismiss/withdraw filed by Nelita Bacaling. Under the facts obtaining in this case, the motion should be treated cautiously, and more properly, even skeptically. It is a matter of law that when a party adopts a certain theory in the court below, he will not be permitted to change his theory on appeal, for to permit him to do so would not only be unfair to the other party but it would also be offensive to the basic rules of fair play, justice and due process.[39] Bacaling's motion to dismiss the instant petition comes at the heels of her admission that she had immensely benefited from selling the said one hundred ten (110) sub-lots to petitioner Tong and of the dismissal with prejudice of the civil case which she had earlier filed to nullify the sale.[40] It appears that the motion to dismiss is a crude and belated attempt long after the dismissal of the civil case to divest Tong of his indubitable right of ownership over the one hundred ten (110) sub-lots through the pretext of revoking the irrevocable special power of attorney which Bacaling had executed in his favor hoping that in the process that her act would cause the assailed orders of the DAR to become final and executory. The records also bear out the fact that Bacaling's design to dispossess petitioner Tong of material interest in the subject matter of the instant petition appears to be subtly coordinated with respondents' legal maneuvers when it began as a side pleading (a mere Manifestation) in the

proceedings before the Court of Appeals (CA-G.R. SP No. 54413 and CA-G.R. SP No. 54414) but which was never pursued to its ultimate conclusion until it again surfaced before this Court long after respondents' voluminous comment to the instant petition had been filed. Under these circumstances, we certainly cannot place our trust upon such an unsolicited motion having dubious roots, character and purpose. Substantively, we rule that Bacaling cannot revoke at her whim and pleasure the irrevocable special power of attorney which she had duly executed in favor of petitioner Jose Juan Tong and duly acknowledged before a notary public. The agency, to stress, is one coupled with interest which is explicitly irrevocable since the deed of agency was prepared and signed and/or accepted by petitioner Tong and Bacaling with a view to completing the performance of the contract of sale of the one hundred ten (110) sub-lots. It is for this reason that the mandate of the agency constituted Tong as the real party in interest to remove all clouds on the title of Bacaling and that, after all these cases are resolved, to use the irrevocable special power of attorney to ultimately cause and effect the transfer of the aforesaid lots in the name of the vendees [Tong with two (2) other buyers] and execute and deliver document/s or instrument of whatever nature necessary to accomplish the foregoing acts and deeds.[41] The fiduciary relationship inherent in ordinary contracts of agency is replaced by material consideration which in the type of agency herein established bars the removal or dismissal of petitioner Tong as Bacalings attorney-in-fact on the ground of alleged loss of trust and confidence. While Bacaling alleges fraud in the performance of the contract of agency to justify its revocation, it is significant to note that allegations are not proof, and that proof requires the intervention of the courts where both petitioners Tong and Bacaling are heard. Stated otherwise, Bacaling cannot vest in herself just like in ordinary contracts the unilateral authority of determining the existence and gravity of grounds to justify the rescission of the irrevocable special power of attorney. InSevilla v. Court of Appeals[42] we thus heldBut unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with the intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an interest, the agency having been created for the mutual interest of the agent and the principal xxx [Petitioner's] interest, obviously, is not limited to the commissions she earned as a result of her business transactions, but one that extends to the very subject matter of the power of management delegated to her. It is an agency that, as we said, cannot be revoked at the pleasure of the principal. Accordingly, the revocation complained of should entitle the petitioner x x x to damages. The requirement of a judicial process all the more assumes significance in light of the dismissal with prejudice, hence, res judicata, of Bacaling's complaint to annul the contract of sale which in turn gave rise to the irrevocable special power of attorney. It is clear that prima facie there are more than sufficient reasons to deny the revocation of the said special power of attorney which is coupled with interest. Inasmuch as no judgment has set aside the agency relationship between Bacaling and Tong, we rule that petitioner Tong maintains material interest to prosecute the instant petition with or without the desired cooperation of Bacaling. On the issue of whether the private respondents are agricultural tenants and entitled to the benefits accorded by our agrarian laws, we rule in the negative. The requisites in order to have a valid agricultural leasehold relationship are: (1) The parties are the landowner and the tenant or agricultural lessee; (2) The subject matter of the relationship is agricultural land; (3) There is

consent between the parties to the relationship; (4) the purpose of the relationship is to bring about agricultural production; (5) There is personal cultivation on the part of the tenant or agricultural lessee; and (6) The harvest is shared between the landowner and the tenant or agricultural lessee. We find that the first, third and sixth requisites are lacking in the case at bar. One legal conclusion adduced from the facts in Government Service Insurance System v. Court of Appeals[43] provides that GSIS, not Bacaling, was the owner of the subject properties from 1961 up to 1989 as a result of the foreclosure and confirmation of the sale of the subject properties. Although the confirmation only came in 1975, the ownership is deemed to have been vested to GSIS way back in 1961, the year of the sale of the foreclosed properties. This is due to the fact that the date of confirmation by the trial court of the foreclosure sale retroacts to the date of the actual sale itself.[44] Thus, the respondents cannot validly claim that they are legitimate and recognized tenants of the subject parcels of land for the reason that their agreement to till the land was not with GSIS, the real landowner. There is no showing that GSIS consented to such tenancy relationship nor is there proof that GSIS received a share in the harvest of the tenants. Consequently, the respondents cannot claim security of tenure and other rights accorded by our agrarian laws considering that they have not been validly instituted as agricultural lessees of the subject parcels of land. And from the time Bacaling recovered the subject properties from GSIS up to the time the former changed her legal position in the instant case, Bacaling has consistently disclaimed respondents as her alleged tenants. Bacalings current legal posture cannot also overturn our finding since, as earlier mentioned, the said change of mind of Bacaling has little or no evidentiary weight under the circumstances. The respondents argue that GSIS cannot be considered as the owner of the said properties from 1961 up to 1989 inasmuch as the foreclosure proceedings that started in 1957 only attained finality during its promulgation by this Court in 1989. Respondents contend that GSIS was the owner of the said parcels of land only from 1989. We disagree. The pendency of the GSIS case cannot be construed as a maintenance of status quo with Bacaling as the owner from 1957 up to 1989 for the reason that what was appealed to this Court was only the issue of redemption, and not the validity of the foreclosure proceedings including the public auction sale, the confirmation of the public auction sale and the confirmation and transfer of ownership of the foreclosed parcels of land to GSIS. The ownership of GSIS over the subject parcels of land was not disputed. It was the existence of the right to redeem in a judicial foreclosure that was the subject of the controversy. We ruled that there was no longer any right of redemption in a judicial foreclosure proceeding after the confirmation of the public auction. Only foreclosures of mortgages in favor of banking institutions and those made extrajudicially are subject to legal redemption. Since GSIS is not a banking institution and the procedure of the foreclosure is not extrajudicial in nature, no right of redemption exists after the judicial confirmation of the public auction sale of the said lots. With respect to the third issue, we find that the one hundred ten (110) sub-lots are indeed residential. In Tiongson v. Court of Appeals[45] we held that if the lot in question is not an agricultural land then the rules on agrarian reform do not apply since the "key factor in ascertaining whether there is a landowner-tenant relationship xxx is the nature of the disputed property.[46] We reiterated this rule in Natalia Realty, Inc. v. Department of Agrarian

Reform[47] where we excluded lands not devoted to agricultural activity, i.e., lands previously converted to non-agricultural or residential uses prior to the effectivity of the 1988 agrarian reform law (R.A. No. 6657) by agencies other than the DAR, from the coverage of agrarian reform. The statement of the rule is buttressed by P.D. No. 27 which by its terms applies only to tenant-farmers of private agricultural lands primarily devoted to rice and corn under a system of shared-crop or lease tenancy, whether classified as landed estate or not.[48] In the case at bar, the indubitable conclusion from established facts is that the one hundred ten (110) sub-lots, originally three (3) parcels of land, have been officially classified as residential since 1955. The classification began when the NUPC and the Bureau of Lands approved the subdivision of the original three (3) parcels of land into one hundred ten (110) sublots each covered with transfer certificates of title. To build the subdivision project, Nelita Bacaling then obtained a real estate mortgage loan from the GSIS which she used to fund the project but he was unfortunately unable to complete it due to the immensity of the project cost. Bacaling undertook to complete the sale of the subdivision when in 1978 she obtained the registration thereof with the National Housing Authority as well as a license to sell individually the one hundred ten (110) sub-lots. Earlier, in 1977, the City Council of Iloilo also recognized the residential classification of the same one hundred ten (110) sub-lots when it passed the Land Use Plan and Zoning Ordinance. In 1990, Bacaling sold the same parcels of land to petitioner Tong who obviously wanted to pursue the development of the subdivision project. It is clear that Tong bought the property for residential and not agricultural purposes upon the strong assurance of Bacaling that the one hundred ten (110) sub-lots were legally available for such prospect. To be sure, the subject lots were valuable in the buyers market only for residential use as shown by the example of adjacent lots which had long been utilized for building subdivisions and the implausibility of believing that Tong would buy the lands only to lose them at a bargain to agrarian reform.[49] Clearly, both intention and overt actions show the classification of the one hundred ten (110) sub-lots for residential use. There can be no other conclusion from the facts obtaining in the instant case. Indeed, one cannot imagine Nelita Bacaling borrowing the substantial amount of Six Hundred Thousand Pesos (P600,000.00) from the GSIS and spending Two Hundred Fifty Thousand Pesos (P250,000.00) for the purpose of developing and subdividing the original three (3) parcels of land into one hundred ten (110) homelots, with individual transfer certificates of title ready and available for sale, if her purported desire were to keep the landholding for agricultural purposes. It also makes no sense that petitioner Tong would invest so much money, time and effort in these sub-lots for planting and cultivating agricultural crops when all the mechanisms are already in place for building a residential community. One cannot likewise deny the consistent official government action which decreed the said one hundred ten (110) sublots as most appropriate for human settlements considering that for several times beginning in 1955 and in accordance with relevant laws and regulations, the said landholding was categorically reserved as a residential subdivision. It is also grave error to gloss over the NUPC action since its declarations have long been recognized in similar cases as the present one as clear and convincing evidence of residential classification. In Magno-Adamos v. Bagasao[50] we found the endorsements of the NUPC approving albeit tentatively a subdivision plan to be a very strong evidence of conversion of the disputed parcels of land into a residential subdivision which would contradict the alleged tenancy relationship. We found nothing objectionable in the trial court's ruling in Santos v. de

Guzman[51] ejecting an alleged tenant from the landholding "because the same was included in a homesite subdivision duly approved by the National Planning Commission."[52] In Republic v. Castellvi[53] we gave great weight to the certification of the NUPC that the subject parcels of land were classified as residential areas and ordered their appraisal as residential and not agricultural lands -

The lower court found, and declared, that the lands of Castellvi and Toledo-Gozun are residential lands. The finding of the lower court is in consonance with the unanimous opinion of the three commissioners who, in their report to the court, declared that the lands are residential lands. The Republic assails the finding that the lands are residential, contending that the plans of the appellees to convert the lands into subdivision for residential purposes were only on paper, there being no overt acts on the part of the appellees which indicated that the subdivision project had been commenced xxx. We find evidence showing that the lands in question had ceased to be devoted to the production of agricultural crops, that they had become adaptable for residential purposes, and that the appellees had actually taken steps to convert their lands into residential subdivisions xxx. The evidence shows that Castellvi broached the idea of subdividing her land into residential lots as early as July 11, 1956 in her letter to the Chief of Staff of the Armed Forces of the Philippines xxx. As a matter of fact, the layout of the subdivision plan was tentatively approved by the National Planning Commission on September 7, 1956 xxx. The land of Castellvi had not been devoted to agriculture since 1947 when it was leased to the Philippine Army. In 1957 said land was classified as residential, and taxes based on its classification as residential had been paid since then xxx. The location of the Castellvi land justifies its suitability for a residential subdivision.
The NUPC was created under EO 98, s. of 1946[54] to "prepare general plans, zoning ordinances, and subdivision regulations, to guide and accomplish a coordinated, adjusted, harmonious reconstruction and future development of urban areas which will in accordance with present and future needs, best promote health, safety, morals, order, convenience, prosperity, and general welfare, as well as efficiency and economy in the process of development; including among other things adequate provisions for traffic, the promotion of safety from fire and other dangers, adequate provision for light and air, the promotion of healthful and convenient distribution of populations xxx."[55] Under the express terms of its mandate, the NUPC was therefore duty-bound to act only upon realty projects which would be used for human settlements and not for agricultural purposes. It is in this light that we must take stock of the 1955 NUPC conversion of the one hundred ten (110) sub-lots from agricultural to residential classification. To bolster the exclusive role of the NUPC over developmental projects for residential and industrial purposes, the term subdivision (which NUPC was mandated to review and if properly executed to approve) was defined in EO 98 as the division of a tract or parcel of land into two (2) or more lots, sites or other divisions for the purpose, whether immediate or future, of sale or building development, and includes resubdivision, and when appropriate to the context, relates to the process of subdividing or to the land or area subdivided.[56] The Subdivision Regulations[57] (which the NUPC adopted pursuant to EO 98) decreed as mandatory the NUPC

approval of all subdivisions of land in the Philippines intended for residential, commercial and industrial purposes, before lots comprising the subdivision could be legally sold or building development therein could validly commence -

Any owner of land wishing to subdivide land shall submit to the Director of Planning [who was the head of NUPC] a plat of the subdivision which shall conform to the requirements set forth in these Regulations. No subdivider shall proceed with the sale of lots of a subdivision and no plat of a subdivision shall be filed with the Director of Lands for approval or recorded in the Office of the Register of Deeds until such plat shall have been approved by the Director of Planning. Applications for plat approval submitted to the District or City Engineer of a town or city in the Philippines shall be forwarded to the Director of Planning together with the District or City Engineer's recommendations (underscoring supplied).
We are convinced that the 1955 approval by the NUPC of the subdivision of the subject three (3) parcels of land owned by Nelita Bacaling and her spouse into one hundred ten (110) sub-lots caused the conversion, if not outright classification, of the entire landholding into a residential community for sale to interested buyers. This is an official classification of the sublots as residential units and constitutes the only objective and effectual means of obtaining in 1955 the classification and reservation of private land for non-agricultural use, i.e. residential, industrial or commercial, since neither P.D. No. 27 nor R.A. No. 6657[58] (together with the specified formal mechanisms stipulated therein for converting a piece of agricultural land into a residential lot) were then binding and effective. The assignment or conversion of the one hundred ten (110) sub-lots for residential purposes was not abrogated by P.D. No. 27 under which respondents invalidly secured their certificates of land transfer since the decree was only prospectively effective[59] and its coverage was limited only to agricultural lands which clearly do not include the residential sub-lots in question.[60] By virtue of the official classification made by NUPC and the other circumstances convincingly proved herein, the only fair and legally acceptable decision in the instant case would be to declare, as we now indeed rule, that the one hundred ten (110) sub-lots are truly residential in character as well as in purpose and are thus excluded from the coverage of P.D. No. 27. Verily, the Certificates of Land Transfer (CLT) issued in respondents' names are not valid and do not change our ruling. The respondents cannot rely on said CLTS as proof of security of tenure. It is well settled that the certificates of land transfer are not absolute evidence of ownership of the subject lots[61] and consequently do not bar the finding that their issuance is void from inception since they cover residential lands contrary to the mandate of P.D. No. 27. It follows from the fact of nullity of the certificates of land transfer in respondents' names that the respondents are not entitled to occupy and possess the one hundred ten (110) sub-lots or portions thereof without the consent of the owner, herein petitioner Tong. While not raised as issues in the instant petition, we nevertheless rule now (conformably with Gayos v. Gayos[62] that it is a cherished rule of procedure that a court should always strive to settle the entire controversy in a single proceeding leaving no root or branch to bear the seeds of future litigation) that respondents cannot claim disturbance compensation for the reason that the

sub-lots are not and have never been available for agrarian reform. In the same vein, respondents also have no right to be reimbursed by petitioner Jose Juan Tong for the value of or expenses for improvements which they might have introduced on the one hundred ten (110) sublots since they did not allege nor prove the existence of such improvements and their right to compensation thereto, if any.[63] WHEREFORE, the Petition for Review is GRANTED. It is further ordered and adjudged that: 1. The certificates of land transfer over the one hundred ten (110) sub-lots located in Barangay Cubay, Jaro, Iloilo City, in the name of respondents and/or their successors in interest are hereby DECLARED VOID AB INITIO. The said one hundred ten (110) sub-lots, covered by TCT Nos. T-10664 to T-10773 of the Registry of Deeds of the City of Iloilo, are declared outside the coverage and operation of P.D. No. 27 and other land reform laws. 2. The consolidated Decision of the Court of Appeals in CA-G.R. SP No. 54413 (Felomino Muya and Crispin Amor v. Nelita Bacaling, represented by her attorney-in-fact, Jose Juan Tong, and the Executive Secretary, Office of the President) and in CA-G.R. SP No. 54414, (Wilfredo Jereza, Rodolfo Lazarte and Nemesio Tonocante v. Hon. Executive Secretary, Office of the President and Nelita Bacaling) and its Resolution dated June 5, 2001 denying petitioners Motion for Reconsideration are REVERSED AND SET ASIDE. 3. The Decision dated May 22, 1998 and the Resolution dated July 22, 1999 of the Office of the President in OP Case No. 98-K-8180 are REINSTATED with the modification in that the respondents are not entitled to disturbance compensation; and 4. Respondents Felomino Muya, Crispin Amor, Wilfredo Jereza, Rodolfo Lazarte and Nemesio Tonocante together with their assigns and successors in interest are ordered to vacate and surrender peacefully the possession of the one hundred ten (110) sub-lots, covered by TCT Nos. T-10664 to T-10773-Iloilo City, to petitioner Jose Juan Tong within thirty (30) days from notice of this Decision. No pronouncement as to costs. SO ORDERED.

EN BANC G.R. No. L-5486 August 17, 1910 JOSE DE LA PEA Y DE RAMON, Plaintiff-Appellant , vs. FEDERICO HIDALGO, DefendantAppellant. TORRES, J.:
c hanro bles vi rt ual law li bra ry

On May 23, 1906, Jose dela Pea y de Ramon, and Vicenta de Ramon, in her own behalf and as the legal guardian of her son Roberto de la Pea, filed in the Court of First Instance of Manila a written complaint against of Federico Hidalgo, Antonio Hidalgo, and Francisco Hidalgo, and, after the said complaint, already amended, had been answered by the defendants Antonio and Francisco Hidalgo, and the other defendant, Federico Hidalgo, had moved for the dismissal of this complaint, the plaintiff, Jose de la Pea y de Ramon, as the judicial administrator of the estate of the deceased Jose de la Pea y Gomiz, with the consent of the court filed a second amended complaint prosecuting his action solely against Federico Hidalgo, who answered the same in writing on the 21st of may and at the same time filed a counterclaim, which was also answered by the defendant.
chan roble svirt ualawlib rary chan roble s vi rtual law lib rary

On October 22, 1907, the case was brought up for hearing and oral testimony was adduced by both parties, the exhibits introduced being attached to the record. In view of such testimony and of documentary evidence, the court, on March 24, 1908, rendered judgment in favor of the plaintiff-administrator for the sum of P13,606.19 and legal interest from the date of the filing of the complaint on May 24, 1906, and the costs of the trial.
chanroble svi rtualawl ib rary chan roble s virtual law l ibra ry

Both the plaintiff and the defendant filed notice of appeal from this judgment and also asked for the annulment of the same and for a new trial, on the ground that the evidence did not justify the said judgment and that the latter was contrary to law. The defendant, on April 1, 1908, presented a written motion for new hearing, alleging the discovery of new evidence favorable to him and which would necessarily influence the decision such evidence or to introduce it at the trial of the case, notwithstanding the fact that he had used all due diligence. His petition was accompanied by affidavits from Attorney Eduardo Gutierrez Repilde and Federico Hidalgo, and was granted by order of the court of the 4th of April.
chanroblesv irt ualawli bra ry c hanro bles vi rt ual law libra ry

At this stage of the proceedings and on August 10, 1908, the plaintiff Pea y De Ramon filed a third amended complaint, with the permission of the court, alleging, among other things, as a first cause of action, that during the period of time from November 12, 1887, to January 7, 1904, when Federico Hidalgo had possession of and administered the following properties, to wit; one house and lot at No. 48 Calle San Luis; another house and lot at No. 6 Calle Cortada; another house and lot at 56 Calle San Luis, and a fenced lot on the same street, all of the district of Ermita, and another house and lot at No. 81 Calle Looban de Paco, belonging to his principal, Jose de la Pea y Gomiz, according to the power of attorney executed in his favor and exhibited with the complaint under letter A, the defendant, as such agent, collected the rents and income from the said properties, amounting to P50,244, which sum, collected in partial amounts and on different dates, he should have deposited, in accordance with the verbal agreement between the deceased and himself, the defendant, in the general treasury of the Spanish Government at an interest of 5 per cent per annum, which interest on accrual was likewise to be deposited in order that it also might bear interest; that the defendant did not remit or pay to Jose de la Pea y Gomiz, during the latter's lifetime, nor to nay representative of the said De la Pea y Gomiz, the sum aforestated nor any part thereof, with the sole exception of P1,289.03, nor has he deposited

the unpaid balance of the said sum in the treasury, according to agreement, wherefore he has become liable to his principal and to the defendant-administrator for the said sum, together with its interest, which amounts to P72,548.24 and that, whereas the defendant has not paid over all nor any part of the last mentioned sum, he is liable for the same, as well as for the interest thereon at 6 per cent per annum from the time of the filing of the complaint, and for the costs of the suit.
chanroble svi rtualawl ib rary chan roble s virtual law l ibra ry

In the said amended complaint, the plaintiff alleged as a second cause of action: That on December 9, 1887, Gonzalo Tuason deposited in the general treasury of the Spanish Government, to the credit of Pea y Gomiz, the sum of 6,360 pesos, at 5 per cent interest per annum, and on December 20, 1888, the defendant, as the agent of Pea y Gomiz, withdrew the said amount with its interest, that is, 6,751.60 pesos, and disposed of the same for his own use and benefit, without having paid all or any part of the said sum to Pea y Gomiz, or to the plaintiff after the latter's death, notwithstanding the demands made upon him: wherefore the defendant now owes the said sum of 6,751.60 pesos, with interest at the rate of 5 per cent per annum, compounded annually, from the 20th of December, 1888, to the time of the filing of this complaint, and from the latter date at 6 per cent, in accordance with law.
chanroble svi rtualaw lib rary c hanrob les vi rtua l law lib rary

The complaint recites as a third cause of action: that, on or about November 25, 1887, defendant's principal, Pea y Gomiz, on his voyage to Spain, remitted from Singapore, one of the ports to call, to Father Ramon Caviedas, a Franciscan friar residing in this city, the sum of 6,000 pesos with the request to deliver the same, which he did, to defendant, who, on receiving this money, appropriated it to himself and converted it to his own use and benefit, since he only remitted to Pea y Gomiz in Sapin, by draft, 737.24 pesos, on December 20, 1888; and, later, on December 21, 1889, he likewise remitted by another draft 860 pesos, without having returned or paid the balance of the said sum, notwithstanding the demands made upon him so to do: wherefore the defendant owes to the plaintiff, for the third cause of action, the sum of P4,402.76, with interest at the rate of 5 per cent per annum, compounded yearly, to the time of the filing of the complaint and with interest at 6 per cent from that date, as provided by law.
chan rob lesvi rtualaw lib rary chan roble s virtual law lib rary

As a fourth cause of action the plaintiff alleges that, on or about January 23, 1904, on his arrival from Spain and without having any knowledge or information of the true condition of affairs relative to the property of the deceased Pea y Gomiz and its administration, he delivered and paid to the defendant at his request the sum of P2,000, derived from the property of the deceased, which sum the defendant has not returned notwithstanding the demands made upon him so to do.
chan roblesv irtualawl ibra ry c han robles v irt ual law li bra ry

Wherefore the plaintiff petitions the court to render judgment sentencing the defendant to pay, as first cause of action, the sum of P72,548.24, with interest thereon at the rate of 6 per cent per annum from May 24, 1906, the date of the filing of the complaint, and the costs; as a second cause of action, the sum of P15,774.19, with interest at the rate of 6 per cent per annum from the said date of the filing of the complaint, and costs; as a third cause of action, P9,811.13, with interest from the aforesaid date, and costs; and, finally, as a fourth cause of action, he prays that the defendant be sentenced to refund the sum of P2,000, with interest thereon at the rate of 6 per cent per annum from the 23d of January, 1904, and to pay the costs of trial.
chanrob lesvi rtua lawlib rary chan rob les vi rtual law lib rary

The defendant, Federico Hidalgo, in his answer to the third amended complaint, sets forth: That he admits the second, third, and fourth allegations contained in the first, second, third, and fourth causes of action, and denies generally and specifically each one and all of the

allegations contained in the complaint, with the exception of those expressly admitted in his answer; that, as a special defense against the first cause of action, he, the defendant, alleges that on November 18, 1887, by virtue of the powers conferred upon him by Pea y Gomiz, he took charge of the administration of the latter's property and administered the same until December 31, 1893, when for reasons of health he ceased to discharge the duties of said position; that during the years 1889, 1890, 1891, and 1892, the defendant continually by letter requested Pea y Gomiz, his principal, to appoint a person to substitute him in the administration of the latter's property, inasmuch as the defendant, for reasons of health, was unable to continue in his trust; that, on March 22, 1894, the defendant Federico Hidalgo, because of serious illness, was absolutely obliged to leave these Islands and embarked on the steamer Isla de Luzon for Sapin, on which date the defendant notified his principal that, for the reason aforestated, he had renounced his powers and turned over the administration of his property to Antonio Hidalgo, to whom he should transmit a power of attorney for the fulfillment, in due form, of the trust that the defendant had been discharging since January 1, 1894, or else execute a power of attorney in favor of such other person as he might deem proper;
chan roble s vi rtual law lib rary

That prior to the said date of March 22, the defendant came, rendered accounts to his principal, and on the date when he embarked for Spain rendered the accounts pertaining to the years 1892 and 1893, which were those that yet remained to be forwarded, and transmitted to him a general statement of accounts embracing the period from November 18, 1887, to December 31, 1893, with a balance of 6,774.50 pesos in favor of Pea y Gomiz, which remained in the control of the acting administrator, Antonio Hidalgo; that from the 22nd of March, 1894, when the defendant left these Islands, to the date of his answer to the said complaint, he has not again intervened nor taken any part directly or indirectly in the administration of the property of Pea y Gomiz, the latter's administrator by express authorization having been Antonio Hidalgo, from January 1, 1894, to October, 1902, who, on this latter date, delegated his powers to Francisco Hidalgo, who in turn administered the said property until January 7, 1904; that the defendant, notwithstanding his having rendered, in 1894, all his accounts to Jose Pea y Gomiz, again rendered to the plaintiff in 1904 those pertaining to the period from 1887 to December 31, 1893, which accounts the plaintiff approved without any protest whatever and received to his entire satisfaction the balance due and the vouchers and documents and documents relating to the property of the deceased Pea y Gomiz and issued to the defendant the proper acquaintance therefor.
c hanroblesv irt ual awlibra ry c hanro bles vi rt ual law li bra ry

As a special defense to the second cause of action, the defendant alleged that, on December 9, 1886, Jose de la Pea y Gomiz himself deposited in the caja general de depositos (General Deposit Bank) the sum of 6,000 pesos, at 6 per cent interest for the term of one year, in two deposit receipts of 3,000 pesos each, which two deposit receipts, with the interest accrued thereon, amounted to 6,360 pesos, ad were collected by Gonzalo Tuason, through indorsement by Pea y Gomiz, on December 9, 1887, and on this same date Tuason, in the name of Pea y Gomiz, again deposited the said sum of 6,360 pesos in the General Deposit Bank, at the same rate of interest, for the term of one year and in two deposit receipts of 3,180 pesos each, registered under Nos. 1336 and 1337; that, on December 20, 1888, father Ramon Caviedas, a Franciscan friar, delivered to the defendant, Federico Hidalgo, by order of De la Pea y Gomiz, the said two deposit receipts with the request to collect the interest due thereon viz., 741.60 pesos an to remit it by draft on London, drawn in favor of De la Pea y Gomiz, to deposit again the 6,000 pesos in the said General Deposit Bank, for one year, in a single deposit, and in the latter's name, and to deliver to him, the said Father Caviedas, the corresponding deposit receipt and the draft on London for their transmittal to Pea y Gomiz: all of which was performed by the defendant who acquired the said draft in favor of De la Pea y Gomiz from the Chartered Bank of

India, Australia and China, on December 20, 1888, and delivered the draft, together with the receipt from the General Deposit Bank, to Father Caviedas, and on the same date, by letter, notified Pea y Gomiz of the transactions executed; that on December 20, 1889, the said Father Hidalgo, by order of Pea y Gomiz, the aforesaid deposit receipt from the General Deposit Bank, with the request to remit, in favor of his constituent, the interest thereon, amounting to 360 pesos, besides 500 pesos of the capital, that is 860 pesos in all, and to again deposit the rest, 5,500 pesos, in the General Deposit Bank for another year in Pea y Gomiz's own name, and to deliver to Father Caviedas the deposit receipt and the draft on London, for their transmittal to his constituent; all of which the defendant did; he again deposited the rest of the capital, 5,500 pesos, in the General Deposit Bank, in the name of Pea y Gomiz, for one year at 5 per cent interest, under registry number 3,320, and obtained from the house of J. M. Tuason and Co. a draft on London for 860 pesos in favor of Pea y Gomiz, on December 21, 1889, and thereupon delivered the said receipt and draft to Father Caviedas, of which acts, when performed, the defendant advised Pea y Gomiz by letter of December 24, 1889' and that, on December 20, 1890, the said Father Ramon Caviedas delivered to the defendant, by order of Pea y Gomiz, the said deposit receipt for 5,500 pesos with the request that he withdraw from the General Deposit Bank the capital and accrued interest, which amounted all together to 5,775 pesos, and that he deliver this amount to Father Caviedas, which he did, in order that it might be remitted to Pea y Gomiz.
chanro blesvi rtua lawlib rary cha nrob les vi rtua l law lib rary

The defendant denied each of the allegations contained in the third cause of action, and avers that they are all false and calumnious.
chan roblesv irt ualawli bra ry chanrobles vi rt ual law li bra ry

He likewise makes a general and specific denial of all the allegations of the fourth cause of action.
chanro blesvi rtua lawlib rary cha nrob les vi rtua l law lib rary

As a counterclaim the defendant alleges that Jose Pea y Gomiz owed and had not paid the defendant, up to the date of his death, the sum of 4,000 pesos with interest at 6 per cent per annum, and 3,600 pesos, and on the plaintiff's being presented with the receipt subscribed by his father, Pea y Gomiz, on the said date of January 15th, and evidencing his debt, plaintiff freely and voluntarily offered to exchange for the said receipt another document executed by him, and transcribed in the complaint. Defendant further alleges that, up to the date of his counterclaim, the plaintiff has not paid him the said sum, with the exception of 2,000 pesos. Wherefore the defendant prays the court to render judgment absolving him from the complaint with the costs against the plaintiff, and to adjudge that the latter shall pay to the defendant the sum 9,000 pesos, which he still owes defendant, with legal interest thereon from the date of the counterclaim, to wit, May 21, 1907, and to grant such other and further relief as may be just and equitable.
chan roble svirtualawl ibra ry chan roble s virtual law l ibra ry

On the 25th of September, 1908, and subsequent dates, the new trial was held; oral testimony was adduced by both parties, and the documentary evidence was attached to the record of the proceedings, which show that the defendant objected and took exception to the introduction of certain oral and documentary evidence produced by the plaintiff. On February 26, 1909, the court in deciding the case found that the defendant, Federico Hidalgo, as administrator of the estate of the deceased Pea y Gomiz, actually owed by the plaintiff, on the date of the filing of the complaint, the sum of P37,084.93; that the plaintiff was not entitled to recover any sum whatever from the defendant for the alleged second, third, and fourth causes of action; that the plaintiff actually owed the defendant, on the filing of the complaint, the sum of P10,155, which the defendant was entitled to deduct from the sum owing by him to the plaintiff. Judgment was therefore entered against the

defendant, Federico Hidalgo, for the payment of P26,629.93, with interest thereon at the rate of 6 per cent per annum from May 23, 1906, and the costs of the trial.
chanrob lesvi rtua lawlib rary chan rob les vi rtual law lib rary

Both parties filed written exceptions to this judgment and asked, separately, for its annulment and that a new trial be ordered, on the grounds that the findings of fact contained in the judgment were not supported nor justified by the evidence produced, and because the said judgment was contrary to law, the defendant stating in writing that his exception and motion for a new trial referred exclusively to that part of the judgment that was condemnatory to him. By order of the 10th of April, 1909, the motions made by both parties were denied, to which they excepted and announced their intention to file their respective bills of exceptions.
chanrob lesvi rtua lawlib rary cha nrob les vi rtual law lib rary

By written motions of the 24th of March, 1909, the plaintiff prayed for the execution of the said judgment, and the defendant being informed thereof solicited a suspension of the issuance of the corresponding writ of execution until his motion for a new trial should be decided or his bill of exceptions for the appeal be approved, binding himself to give such bond as the court might fix. The court, therefore, by order of the 25th of the same month, granted the suspension asked for, conditioned upon the defendants giving a bond, fixed at P34,000 by another order of the same date, to guarantee compliance with the judgment rendered should it be affirmed, or with any other decision that might be rendered in the case by the Supreme Court. This bond was furnished by the defendant on the 26th of the same month.
cha nrob lesvi rtua lawlib rary cha nrob les vi rtual law lib rary

On April 16 and May 4, 1909, the defendant and the plaintiff filed their respective bills of exceptions, which were certified to and approved by order of May 8th and forwarded to the clerk of this court.
c hanro blesvi rt ualawlib ra ry cha nrob les vi rtua l law lib ra ry

Before proceeding to examine the disputed facts to make such legal findings as follows from a consideration of the same and of the questions of law to which such facts give rise, and for the purpose of avoiding confusion and obtaining the greatest clearness and an easy comprehension of this decision, it is indispensable to premise: First, that as before related, the original and first complaint filed by the plaintiff was drawn against Federico Hidalgo, Antonio Hidalgo, and Francisco Hidalgo, the three persons who had successively administered the property of Jose de la Pea y Gomiz, now deceased; but afterwards the action was directed solely against Federico Hidalgo, to the exclusion of the other defendants, Antonio and Francisco Hidalgo, in the second and third amended complaints, the latter of the date of August 10, 1908, after the issuance by the court of the order of April 4th of the same year, granting the new trial solicited by the defendant on his being notified of the ruling of the 24th of the previous month of March; second, that the administration of the property mentioned, from the time its owner left these Islands and returned to Spain, lasted from November 18, 1887, to January 7, 1904; and third that, the administration of the said Federico, Antonio, and Francisco Hidalgo, having lasted so long, it is necessary to divide it into three periods in order to fix the time during which they respectively administered De la Pea's property: During the first period, from November 18, 1887, to December 31, 1893, the property of the absent Jose de la Pea y Gomiz was administered by his agent, Federico Hidalgo, under power of attorney; during the second period, from January 1, 1894, to September, 1902, Antonio Hidalgo administered the said property, and during the third period, from October, 1902, to January 7, 1904, Francisco Hidalgo was its administrator.
c hanro blesvi rt ualawlib ra ry cha nrob les vi rtua l law lib rary

Before Jose de la Pea y Gomiz embarked for Spain, on November 12, 1887, he executed before a notary a power of attorney in favor of Federico Hidalgo, Antonio L. Rocha,

Francisco Roxas and Isidro Llado, so that, as his agents, they might represent him and administer, in the order in which they were appointed, various properties he owned and possessed in Manila. The first agent, Federico Hidalgo, took charge of the administration of the said property on the 18th of November, 1887.
chan roble svirtualawl ibra ry chan robles v irt ual law l ibra ry

After Federico Hidalgo had occupied the position of agent and administrator of De la Pea's property for several years, the former wrote to the latter requesting him to designate a person who might substitute him in his said position in the event of his being obliged to absent himself from these Islands, as one of those appointed in the said power of attorney had died and the others did not wish to take charge of the administration of their principal's property. The defendant, Hidalgo, stated that his constituent, Pea y Gomiz, did not even answer his letters, to approve or object to the former's accounts, and did not appoint or designate another person who might substitute the defendant in his administration of his constituent's property. These statements were neither denied nor proven to be the record show any evidence tending to disapprove them, while it does show, attached to the record and exhibited by the defendant himself, several letters written by Hidalgo and addressed to Pea y Gomiz, which prove the said statements, and also a letter from the priest Pedro Gomiz, a relative of the deceased Jose de la Pea y Gomiz, addressed to Federico Hidalgo, telling the latter that the writer had seen among the papers of the deceased several letters from the agent, Federico Hidalgo, in which the latter requested the designation of a substitute, because he had to leave this country for Spain, and also asked for the approval or disapproval of the accounts of his administration which had been transmitted to his constituent, Pea y Gomiz.
chanroblesv irt ualawli bra ry c hanro bles vi rtua l law lib ra ry

For reasons of health and by order of his physician, Federico Hidalgo was obliged, on March 22, 1894, to embark for Spain, and, on preparing for his departure, he rendered the accounts of his administration corresponding to the last quarters, up to December 31, 1893, not as yet transmitted, and forwarded them to his constituent with a general statement of all the partial balances, which amounted to the sum total of 6,774.50 pesos, by letter of the date of March 22, 1894, addressed to his principal, Pea y Gomiz. In this letter the defendant informed the latter of the writer's intended departure from this country and of his having provisionally turned over the administration of the said property to his cousin, Antonio Hidalgo, upon whom the writer had conferred a general power of attorney, but asking, in case that this was not sufficient, that Pea send to Antonio Hidalgo a new power of attorney.
c han roblesv irt ualawli bra ry c hanro bles vi rt ual law li bra ry

This notifications is of the greatest importance in the decision of this case. The plaintiff avers that he found no such letter among his father's papers after the latter's death, for which reason he did not have it in his possession, but on the introduction of a copy thereof by the defendant at the trial, it was admitted without objection by the plaintiff (p. 81 of the record); wherefore, in spite of the denial of the plaintiff and of his averment of his not having found that said original among his father's papers, justice demands that it be concluded that this letter of the 22d of March, 1894, was sent to, and was received by Jose de la Pea y Gomiz, during his lifetime, for its transmittal, with inclosure of the last partial accounts of Federico Hidalgo's administration and of the general resume of balances, being affirmed by the defendant, the fact of the plaintiff's having found among his deceased father's paper's the said resume which he exhibited at the trial, shows conclusively that it was received by the deceased, as well as the letter of transmittal of the 22nd of March, 1894, one of the several letters written by Hidalgo, which the said priest, Father Gomiz, affirms that he saw among the papers of the deceased Pea, the dates of which ran from 1890 to 1894; and it is also shown by the record that the defendant Hidalgo positively asserted that the said letter of March was the only one that he wrote to Pea during the

year 1894; From all of which it is deduced that the constituent, Pea y Gomiz, was informed of the departure of his agent from these Islands for reasons of health and because of the physician's advice, of the latter's having turned over the administration of the property to Antonio Hidalgo, and of his agent's the defendant's petition that he send a new power of attorney to the substitute.
cha nro blesvi rtua lawlib rary cha nrob les vi rtua l law lib rary

The existence, amount the papers of the deceased, of the aforementioned statement of all accounts rendered, which comprise the whole period of the administration of the property of the constituent by the defendant, Federico Hidalgo, from November 18, 1887, to December 31, 1893 - a statement transmitted with the last partial accounts which were a continuation of those already previously received - and the said letter of March 22, 1894, fully prove that Jose de la Pea y Gomiz also received the said letter, informed himself of its contents, and had full knowledge that Antonio Hidalgo commenced to administer his property from January of that year. They likewise prove that he did no see fit to execute a new power of attorney in the letter's favor, nor to appoint or designate a new agent to take charge of the administration of his property that had been abandoned by the defendant, Federico Hidalgo.
chan roblesv irtualawli bra rycha nrob les vi rtua l law lib rary

From the procedure followed by the agent, Federico Hidalgo, it is logically inferred that he had definitely renounced his agency was duly terminated, according to the provisions of article 1732 of the Civil Code, because, although in the said letter of March 22, 1894, the word "renounce" was not employed in connection with the agency or power of attorney executed in his favor, yet when the agent informs his principal that for reasons of health and by medical advice he is about to depart from the place where he is exercising his trust and where the property subject to his administration is situated, abandons the property, turns it over a third party, without stating when he may return to take charge of the administration, renders accounts of its revenues up to a certain date, December 31, 1893, and transmits to his principal a general statement which summarizes and embraces all the balances of his accounts since he began to exercise his agency to the date when he ceased to hold his trust, and asks that a power of attorney in due form in due form be executed and transmitted to another person who substituted him and took charge of the administration of the principal's property, it is then reasonable and just to conclude that the said agent expressly and definitely renounced his agency, and it may not be alleged that the designation of Antonio Hidalgo to take charge of the said administration was that of a mere proceed lasted for more than fifteen years, for such an allegation would be in conflict with the nature of the agency.
cha nrob lesvi rtua lawlib rary chan roble s vi rtual law lib rary

This renouncement was confirmed by the subsequent procedure, as well as of the agent as of the principal, until the latter died, on August 2, 1902, since the principal Pea did not disapprove the designation of Antonio Hidalgo, nor did he appoint another, nor send a new power of attorney to the same, as he was requested to by the previous administrator who abandoned his charge; and the trial record certainly contains no proof that the defendant, since he left these Islands in March, 1894, until January, 1904, when he returned to this city, took any part whatever, directly or even indirectly, in the said administration of the principal's property, while Antonio Hidalgo was the only person who was in charge of the aforementioned administration of De la Pea y Gomiz's property and the one who was to represent the latter in his business affairs, with his tacit consent. From all of which it is perfectly concluded (unless here be proof to the contrary, and none appears in the record), that Antonio Hidalgo acted in the matter of the administration of the property of Jose de la Pea y Gomiz by virtue of an implied agency derived from the latter, in accordance with the provisions of article 1710 of the Civil Code.
c han roblesv irt ualawli bra ry c hanro bles vi rtua l l aw libra ry

The proof of the tacit consent of the principal, Jose de la Pea y Gomiz, the owner of the property administered - a consent embracing the essential element of a legitimate agency, article 1710 before cited - consists in that Pea, knowing that on account of the departure of Federico Hidalgo from the Philippines for reasons of health, Antonio Hidalgo took charge of the administration of his property, for which Federico Hidalgo, his agent, who was giving up his trust, requested him to send a new power of attorney in favor of the said Antonio Hidalgo, nevertheless he, Jose de la Pea y Gomiz, saw fit not to execute nor transmit any power of attorney whatever to the new administrator of his property and remained silent for nearly nine years; and, in that the said principal, being able to prohibit the party designated, Antonio Hidalgo, from continuing in the exercise of his position as administrator, and being able to appoint another agent, did neither the one nor the other. Wherefore, in permitting Antonio Hidalgo to administer his property in this city during such a number of years, it is inferred, from the procedure and silence of the owner thereof, that he consented to have Antonio Hidalgo administer his property, and in fact created in his favor an implied agency, as the true and legitimate administrator.
chan rob lesvi rtualaw lib rary chan roble s virtual law lib rary

Antonio Hidalgo administered the aforementioned property of De la Pea y Gomiz, not in the character of business manager, but as agent by virtue of an implied agency vested in him by its owner who was not unaware of the fact, who knew perfectly well that the said Antonio Hidalgo took charge of the administration of that property on account of the obligatory absence of his previous agent for whom it was an impossibility to continue in the discharge of his duties.
chan roble svirtualawl ibra ry c han robles v irt ual law l ibra ry

It is improper to compare the case where the owner of the property is ignorant of the officious management of the third party, with the case where he had perfect knowledge of the management and administration of the same, which administration and management, far from being opposed by him was indeed consented to by him for nearly nine years, as was done by Pea y Gomiz. The administration and management, by virtue of an implied agency, is essentially distinguished from that management of another's business, in this respect, that while the former originated from a contract, the latter is derived only from a qausi-contract.
cha nrob lesvi rtua lawlib rary chan roble s virtual law lib rary

The implied agency is founded on the lack of contradiction or opposition, which constitutes simultaneous agreement on the part of the presumed principal to the execution of the contract, while in the management of another's business there is no simultaneous consent, either express or implied, but a fiction or presumption of consent because of the benefit received.
chan roble svirtualawl ibra ry chan roble s virtual law l ibra ry

The distinction between an agency and a business management has been established by the jurisprudence of the supreme court (of Spain) in its noteworthy decision of the 7th of July, 1881, setting up the following doctrine: That laws 28 and 32, title 12 Partida 3, refer to the expenses incurred in things not one's own and without power of attorney from those to whom they belong, and therefore the said laws are not applicable to this suit where the petition of the plaintiff is founded on the verbal request made to him by the defendant or the latter's employees to do some hauling, and where, consequently, questions that arise from a contract that produces reciprocal rights and duties can not be governed by the said laws. It being absolutely necessary for Federico Hidalgo to leave this city and abandon the administration of the property of his principal, Pea y Gomiz, for reasons of health, he made delivery of the property and of his administration to Antonio Hidalgo and gave notice of

what he had done to his constituent, Pea, in order that the latter might send a new power of attorney to Antonio Hidalgo, the person charged with the administration of the property. Pea y Gomiz did not send the power of attorney requested, did not oppose or prohibit Antonio Hidalgo's containing to administer his property, and consented to his doing so for nearly nine years. Consequently the second administrator must be considered as a legitimate agent of the said principal, as a result of the tacit agreement on the latter's part, and the previous agent, who necessarily abandoned and ceased to hold his position, as completely free and clear from the consequences and results of the second administration, continued by a third party and accepted by his principal; for it is a fact, undenied nor even doubted, that the said first administrator had to abandon this country and the administration of Pea's property for reasons of health, which made it possible for him to continue in the discharge of his duties without serious detriment to himself, his conduct being in accordance with the provisions of article 1736 of the Civil Code.
chan roble svirtualawl ibra ry chan robles v irt ual law l ibra ry

In the power of attorney executed by Pea y Gomiz in this city on November 12, 1887, in favor of, among others, Federico Hidalgo, no authority was conferred upon the latter by his principal to substitute the power or agency in favor of another person; wherefore the agent could not, by virtue of the said power of attorney, appoint any person to substitute or relieve him in the administration of the principal's property, for the lack of a clause of substitution in the said instrument authorizing him so to do.
c han roblesv irt ualawli bra ry c hanro bles vi rtu al law li bra ry

The designation of Antonio Hidalgo was not made as a result of substitution of the power of attorney executed by Pea in favor of the defendant, but in order that the principal's property should not be abandoned, inasmuch as, for the purposes of the discharge of the duties of administrator of the same, the agent, who was about to absent himself from this city, requested his principal to send to the party, provisionally designated by the former, a new power of attorney, for the reason that the general power of attorney which Federico Hidalgo had left, executed in favor of his cousin Antonio Hidalgo, was so executed in his own name and for his own affairs, and not in the name of Pea y Gomiz, as the latter had not authorized him to take such action.
chan roble svi rtualawl ib rary chan roble s virtual law l ibra ry

If the owner of the property provisionally administered at the time by Antonio Hidalgo, saw fit to keep silent, even after having received the aforesaid letter of March 22, 1894, and during the lapse of nearly ten years, without counter commanding or disapproving the designation of the person who took charge of the administration of his property, knowing perfectly well that his previous agent was obliged, by sickness and medical advice to leave this city where such property was situated, he is not entitled afterwards to hold amenable the agent who had to abandon this country for good and valid reasons, inasmuch as the latter immediately reported to his principal the action taken by himself and informed him of the person who had taken charge of the administration of his property, which otherwise would have been left abandoned. From the time of that notification the agent who, for legitimate cause, ceased to exercise his trust, was free and clear from the results and consequences of the management of the person who substituted him with the consent, even only a tacit one, of the principal, inasmuch as the said owner of the property could have objected to could have prohibited the continuance in the administration thereof, of the party designated by his agent, and could have opportunely appointed another agent or mandatory of his own confidence to look after his property and if he did not do so, he is obliged to abide by the consequences of his negligence and abandonment and has no right to claim damages against his previous agent, who complied with his duty and did all that he could and ought to have done, in accordance with the law.
chanrob lesvi rtua lawlib rary chan rob les vi rtual law lib rary

The defendant Federico Hidalgo, having ceased in his administration of the property belonging to Pea y Gomiz, on account of physical impossibility, which cessation he duly reported to his principal and also informed him of the person who relieved him as such administrator, and for whom he had requested a new power of attorney, is only liable for the results and consequences of his administration during the period when the said property was in his charge, and therefore his liability can not extend beyond the period of his management, as his agency terminated by the tacit or implied approval of his principal, judging from the latter's silence in neither objecting to nor in anywise prohibiting Antonio Hidalgo's continuing to administer his property, notwithstanding the lapse of the many years since he learned by letter of the action taken by his previous agent, Federico Hidalgo.
chanroble svi rtualaw lib rary chan roble s virtual law l ibra ry

Moreover, this latter, in announcing the termination of his agency, transmitted the last partial accounts that he had not rendered, up to December 31, 1893, together with a general statement of all the resulting balances covering the period of his administration, and Jose de la Pea y Gomiz remained silent and offered no objection whatever to the said accounts and did not manifest his disapproval of the same nor of the general statement, which he must have received in April or may, 1894, to the time he died, in August, 1902; and when his son, the plaintiff, came to this city in company with the defendant, Federico Hidalgo, they traveled together from Spain and arrived in Manila during one of the early days of January, 1904, the former, for the purpose of taking charge of the estate left by his father, and after the plaintiff had examined the accounts kept by Federico Hidalgo, his deceased father's first agent, he approved them and therefore issued in favor of the defendant the document, Exhibit 5, found on page 936 of the second record of trial, dated January 15, 1904, in which Jose de la Pea y de Ramon acknowledged having received from his deceased father's old agent the accounts, balances, and vouchers to his entire satisfaction, and gave an acquittance in full settlement of the administration that had been commended to the defendant Hidalgo.
chanrob lesvi rtua lawlib rary cha nrob les vi rtual law lib rary

This document, written in the handwriting of the plaintiff, Pea y de Ramon, appears to be executed in a form considered to be sufficient by its author, and, notwithstanding the allegations of the said plaintiff, the record contains no proof of any kind of Federico Hidalgo's having obtained it by coercion, intimidation, deceit, or fraud; neither is its shown to have been duly impugned as false, criminally or civilly, for the statements therein made by the plaintiff are too explicit and definite to allow, without proof of some vice or defect leading to nullification, of its being considered as void and without value or legal effect.
chan roble svirtualawl ibra ry law libra ry

c han robles v irt ual

With respect to the responsibility contracted by the defendant, as regards the payment of the balance shown by the accounts rendered by him, it is not enough that the agent should have satisfactorily rendered the accounts pertaining to his trust, but it is also indispensable that it be proved that he had paid to his principal, or to the owner of the property administered, the balance resulting from his accounts. This balance, which was allowed in the judgment appealed from, notwithstanding the allegations of the plaintiff, which were not deemed as established, amounts to P6,774.50, according to the proofs adduced at the trial. It was the imperative duty of the administrator, Federico Hidalgo, to transmit this sum to his principal, Jose de la Pea y Gomiz, as the final balance of the accounts of his administration, struck on December 31, 1893, and by his failure so to do and delivery of the said sum to his successor, Antonio Hidalgo, he acted improperly, and must pay the same to the plaintiff.
chanrob lesvi rtua lawlib rary chan roble s virtual law lib rary

Antonio Hidalgo took charge of the administration of Pea y Gomiz's property from January, 1894, to September, 1902, that is, during the second period of administration of the several properties that belonged to the deceased Pea.
ch anroble svirtualawl ibra ry chan roble s virtual law l ibra ry

Although the plaintiff, in his original complaint, had included the said Antonio Hidalgo as one of the responsible defendants, yet he afterwards excluded him, as well from the second as from the third amended complaint, and consequently the liability that might attach to Antonio Hidalgo was not discussed, nor was it considered in the judgment of the lower court; neither can it be in the decision, for the reason that the said Antonio Hidalgo is not a party to this suit. However, the said liability of Antonio Hidalgo is imputed to Federico Hidalgo, and so it is that, in the complain t, the claim is made solely against Federico Hidalgo, in order that the latter might be adjudged to pay the amounts which constitute the balance owing from him who might be responsible, Antonio Hidalgo, during the period of this latter's administration.
cha nrob lesvi rtua lawlib rary chan roble s vi rtual law lib rary

Federico Hidalgo, in our opinion, could not and can not be responsible for the administration of the property that belonged to the deceased Pea y Gomiz, which was administered by Antonio Hidalgo during eight years and some months, that is, during the second period, because of the sole fact of his having turned over to the latter the administration of the said property on his departure from this city of Spain. Neither law nor reason obliged Federico Hidalgo to remain in this country at the cost of his health and perhaps of his life, even though he were the administrator of certain property belonged to Pea y Gomiz, since the care of the property and interests of another does not require sacrifice on the part of the agent of his own life and interests. Federico Hidalgo was obliged to deliver the said property belonging to Pea y Gomiz to Antonio Hidalgo for good and valid reasons, and reasons, and in proceeding in the manner aforesaid he complied with the duty required of him by law and justice and acted as a diligent agent. If the principal, Jose de la Pea Gomiz, the owner of the property mentioned, although informed opportunely of what had occurred saw fit to keep silent, not to object to the arrangements made, not to send the power of attorney requested by Federico Hidalgo in favor of Antonio Hidalgo, and took no action nor made any inquiry whatever to ascertain how his property was being administered by the second agent, although to the time of his death more than eight years had elapsed, the previous agent, who ceased in the discharge of his duties, can in nowise be held liable for the consequences of such abandonment, nor for the results of the administration of property by Antonio Hidalgo, for the reason that, since his departure from this country, he has not had the least intervention nor even indirect participation in the aforementioned administration of the said Antonio Hidalgo who, under the law, was the agent or administrator by virtue of an implied agency, which is equivalent in its results to an express agency, executed by the owner of the property. Consequently, Federico Hidalgo is not required to render accounts of the administration corresponding to the second period mentioned, nor to pay the balance that such accounts may show to be owing.
chanrob lesvi rtua lawlib rary chan rob les vi rtual law lib rary

At the first trial of this cause, Federico Hidalgo, testified under oath that his principal, Jose Pea y Gomiz, did not agree to the appointment of Antonio Hidalgo, chosen by the witness, not to such appointee's taking charge of the administration of his property. Aside from the fact that the trial record does not show honor on what date Pea expressed such disagreement it is certain that, in view of the theory of defense maintained by the defendant Hidalgo could have said, by means of a no, that his principal did not agree to the appointment of the said Antonio Hidalgo, and the intercalation of the word no in the statement quoted is more inexplicable in that the attorney for the adverse party moved that the said answer be stricken from the record, as he objected to its appearing therein.
chanrob lesvi rtua lawlib rary cha nrob les vi rtual law lib rary

Were it true that the principal Jose de la Pea by Gomiz, had neither agreed to the designation of Antonio Hidalgo, nor to the latter's administering his property, he would immediately have appointed another agent and administrator, since he knew that Federico Hidalgo had left the place where his property was situated and that it would be abandoned,

had he not wished that Antonio Hidalgo should continue to administer it. If the latter continued in the administration of the property for so long a time, nearly nine years, it was because the said Pea agreed and gave his consent to the acts performed by his outgoing agent, and for this reason the answer given by Federico Hidalgo mistakenly, or not, that his principal, Pea, did not agree to the appointment of Antonio Hidalgo, is immaterial and does not affect the terms of this decision.
chan roblesv irt ualawli bra ry c hanro bles vi rt ual law li bra ry

If the defendant is not responsible for the results of the administration of said property administered by Antonio Hidalgo during the second period before referred to, neither is he responsible for that performed during the third period by Francisco Hidalgo, inasmuch as the latter was not even chosen by the defendant who, on October 1, 1902, when Francisco Hidalgo took charge of Peas' property that had been turned over to him by Antonio Hidalgo, was in Spain and had no knowledge of nor intervention in such delivery; wherefore the defendant can in no manner be obliged to pay to the plaintiff any sum that may be found owing by Francisco Hidalgo.
chanroblesv irt ualawli bra ry c hanro bles vi rtua l law li bra ry

The trial judge - taking into consideration that, by the evidence adduced at the hearing, it was proved that Francisco Hidalgo rendered accounts to the plaintiff of the administration of the property in question during the said third period, that is, for one year, three months, and someday, and that he delivered to the plaintiff the balance of 1,280.03 pesos, for which the latter issued to the said third administrator the document Exhibit 2, written in his own handwriting under date of January 7, 1904, and the signature which, affixed by himself, he admitted in his testimony was authentic, on its being exhibited to him - found that the plaintiff, Pea y de Ramon, was not entitled to recover any sum whatever for the rents pertaining to the administration of his property by the said Francisco Hidalgo.
chanrob lesvi rtua lawlib rary chan rob les vi rtual law lib rary

All the reasons hereinbefore given relate to the first cause of action, whereby claim is made against Federico Hidalgo for the payment of the sum of P72,548.24 and interest at the rate of 6 per cent per centum, and they have decided some of the errors assigned by the appellants in their briefs to the judgment appealed from.
cha nrob lesvi rtua lawlib rary chan rob les vi rtual law lib rary

Two amounts are have claimed which have one and the same origin, yet are based on two causes of action, the second and the third alleged by the plaintiff; and although the latter, afterwards convinced by the truth and of the impropriety of his claim, had to waive the said third cause of action during the second hearing of this cause (pp. 57 and 42 of the record of the evidence), the trial judge, on the grounds that the said second and third causes of action refer to the same certificates of deposit of the treasury of the Spanish Government, found, in the judgment appealed from, that the plaintiff was not entitled to recover anything for the aforesaid second and third causes of action - a finding that is proper and just, although qualified as erroneous by the plaintiff in his brief.
chanro blesv irt ualawlib ra ry cha nro bles vi rtua l law lib ra ry

It appears, from the evidence taken in this cause, that Jose de la Pea y Gomiz, according to the certificates issued by the chief of the division his lifetime, after having in 1882 withdrawn from the General Deposit Bank of the Spanish Government a deposit of 17,000 pesos and its interest deposit any sum therein until December 9, 1886, when he deposited two amounts of 3,000 pesos each, that is, 6,000 pesos in all, the two deposit receipts for the same being afterwards endorsed in favor of Gonzalo Tuason. The latter, on December 9, 1887, withdrew the deposit and took out the said two amounts, together with the interest due thereon, and on the same date redeposited them in the sum of 6,360 pesos at 5 per cent per annum in the name of Jose de la Pea y Gomiz. On the 20th of December of the following year, 1888, the defendant Hidalgo received from his principal, Pea y Gomiz, through Father Ramon Caviedas, the two said letters of credit, in order that he might

withdraw from the General Deposit Bank the two amounts deposited, together with the interest due thereon, amounting to 741 pesos, and with this interest purchase a draft on London in favor of its owner and then redeposit the original capital of 6,000 pesos. This, the defendant Hidalgo did and then delivered the draft and the deposit receipt to Father Caviedas, of all of which transactions he informed his principal by letter of the same date, transcribed on page 947 of the second trial record.
chan roble svirtualawl ibra ry chan roble s virtual law l ibra ry

In the following year, 1889, Father Ramon Caviedas again delivered to the defendant Hidalgo the aforementioned deposit receipt with the request to withdraw from the General Deposit bank the sum deposited and to purchase a draft of 860 pesos on London in favor of their owner, Jose de la Pea y Gomiz, and, after deducting the cost of the said draft from the capital and interest withdrawn from deposit, amounting to 6,360 pesos, to redeposit the remainder, 5,500 pesos, in the bank mentioned, in accordance with the instructions from Pea y Gomiz: All of which was done by the defendant Hidalgo, who delivered to Father Caviedas the receipt for the new deposit of 5,500 pesos as accredited by the reply-letter, transcribed on page 169 of the record, and by the letter addressed by Hidalgo to Pea, of the date of December 20 of that year and shown as an original exhibit by the plaintiff himself on page 29 of the record of the evidence.
c hanro blesvi rt ualawlib ra ry cha nro bles vi rtua l law lib ra ry

Lastly, in December, 1890, Father Caviedas, aforementioned, delivered to the defendant Hidalgo the said deposit receipt for 5,500 pesos in order that he might withdraw this amount from deposit and deliver it with the interest thereon to the former for the purpose of remitting it by draft to Jose de la Pea; this Hidalgo did, according to a reply-letter from Father Caviedas, the original of which appears on page 979 of the file of exhibits and is copied on page 171 of the trial record, and is apparently confirmed by the latter in his sworn testimony.
chan roble svi rtualawl ib rary chan roble s virtual law l ibra ry

So that the two amounts of 3,000 pesos each, expressed in two deposit receipts received from De la Pea y Gomiz by Father Ramon Caviedas and afterwards delivered to Francisco Hidalgo for the successive operations of remittance and redeposit in the bank before mentioned, are the same and only ones that were on deposit in the said bank in the name of their owner, Pea y Gomiz. The defendant Hidalgo made two remittances by drafts of London, one in 1888 for 741.60 pesos, through a draft purchased from the Chartered Bank, and another in 1889 for 860 pesos, through a draft purchased from the house of Tuason & Co., and both in favor of Pea y Gomiz, who received through Father Ramon Caviedas the remainder, 5,500 pesos, of the sums deposited. For these reasons, the trial judge was of the opinion that the certificates of deposit sent by Pea y Gomiz to Father Ramon Caviedas and those received from the latter by the defendant Hidalgo were identicals, as were likewise the total amounts expressed by the said receipts or certificates of deposit, from the sum of which were deducted the amounts remitted to Pea y Gomiz and the remainder deposited after each anual operation until, finally, the sum of 5,500 pesos was remitted to its owner, Pea y Gomiz, according to his instructions, through the said Father Caviedas. The lower court, in concluding its judgment, found that the plaintiff was entitled to recover any sum whatever for the said second and third causes of action, notwithstanding that, as hereinbefore stated, the said plaintiff withdrew the third cause of action. This finding of the court, with respect to the collection of the amounts of the aforementioned deposit receipts, is perfectly legal and in accordance with justice, inasmuch as it is a sustained by abundant and conclusive documentary evidence, which proves in an incontrovertible manner the unrighteousness of the claim made by the plaintiff in twice seeking payment, by means of the said second and third causes of action, of the said sum which, after various operations of deposit and remittance during three years, was finally returned with its interest to the possession of its owner, Pea y Gomiz.
chan roblesv irtualawli bra ry c hanrobles vi rt ual law li bra ry

From the trial had in this case, it also appears conclusively proved that Jose de la Pea y Gomiz owed, during his lifetime, to Federico Hidalgo, 7,600 pesos, 4,000 pesos of which were to bear interest at the rate of 6 per cent per annum, and the remainder without any interest, and that, notwithstanding the lapse of the period of three years, from November, 1887, within which he bound himself to repay the amount borrowed, and in spite of his creditor's demand of payment, made by registered letter, the original copy of which is on page 38 of the file of exhibits and a transcription thereof on page 930 of the first and second record of the evidence, the debt was not paid up to the time of the debtor's death. For such reasons, the trial court, in the judgment appealed from, found that there was a preponderance of evidence to prove that this loan had been made and that the plaintiff actually owed the defendant the sum loaned, as well as the interest thereon, after deducting therefrom the 2,000 pesos which the defendant received from the plaintiff on account of the credit, and that the former was entitled to recover.
cha nro blesvi rtua lawlib rary cha nrob les vi rtua l law lib rary

It appears from the pleadings and evidence at the trial that in January, 1904, on the arrival in this city of Federico de la Pea de Ramon, and on the occasion of the latter's proceeding to examine the accounts previously rendered, up to December 31, 1893, by the defendant Hidalgo to the plaintiff's father, then deceased, Hidalgo made demand upon the plaintiff, Pea y de Ramon, for the payment of the said debt of his father, although the creditor Hidalgo acceded to the requests of the plaintiff to grant the latter an extension of time until he should be able to sell one of the properties of the estate. It was at that time, according to the defendant, that the plaintiff Pea took up the instrument of indebtedness, executed by his deceased father during his lifetime, and delivered to the defendant in exchange therefor the document of the date of January 15, 1904, found on page 924 of the second record of evidence, whereby the plaintiff, Jose de la Pea, bound himself to pay his father's debt of 11,000 pesos, owing to the defendant Hidalgo, out of the proceeds of the sale of some of the properties specified in the said document, which was written and signed by the plaintiff in his own handwriting.
chanroble svirtualawl ibra ry chan robles v irt ual law l ibra ry

The plaintiff not only executed the said document acknowledging his father's debt and binding himself to settle it, but also, several days after the sale of a lot belonging to the estate, paid to the creditor on account the sum of 2,000 pesos, according to the receipt issued by the latter and exhibited on page 108 of the first record of evidence.
cha nrob lesvi rtua lawlib rary chan rob les vi rtual law lib rary

The said document, expressive of the obligation contracted by the plaintiff Pea y de Ramon that he would pay to the defendant the debt of plaintiff's deceased father, amounting to 11,000 pesos, out of the proceeds from some of the properties of the estate, has not been denied nor impugned as false; and not withstanding the averment made by the plaintiff that when he signed he lacked information and knowledge of the true condition of the affairs concerning Hidalgo's connection with the property that be absolutely no proof whatever is shown in the trial record of the creditor's having obtained the said document through deceit or fraud - circumstances in a certain manner incompatible with the explicit statements contained therein. For these reasons, the trial court, weighing the whole of the evidence furnished by the record, found that the loan of the said 7,600 pesos was truly and positively made, and that the plaintiff must pay the same to the defendant, with the interest thereon, and that he was not entitled to recover the 2,000 pesos, as an undue payment made by him to the defendant creditor. For the foregoing reason the others errors assigned by the plaintiff to the judgment appealed from are dismissed.
cha nrob lesvi rtua lawlib rary chan rob les vi rtual law lib rary

With respect to the obligation to pay the interest due on the amounts concerned in this decision, it must be borne in mind that, as provided by article 1755 of the Civil Code, interest shall only be owed when it has been expressly stipulated, and that should the

debtor, who is obliged to pay a certain sum of money, be in default and fail to fulfill the agreement made with his creditor, he must pay, as indemnity for losses and damages, the interest agreed upon, and should there be no express stipulation, the legal interest (art. 1108 of the Civil Code); but, in order that the debtor may be considered to be in default and obliged to pay the indemnity, it is required, as a general rule, that his creditor shall demand of such debtor the fulfillment of his obligation, judicially or extrajudicially, except in such cases as are limitedly specified in article 1100 of the Civil Code.
cha nrob lesvi rtua lawlib rary cha nrob les vi rtual law lib rary

It was not expressly stipulated that either the balance of the last account rendered by the defendant Federico Hidalgo in 1893, or the sum which the plaintiff bound himself to pay to the defendant, in the instrument of the 15th of January, 1904, should bear interest; nor is there proof that a judicial or extrajudicial demand was made, on the part of the respective creditors concerned, until the date of complaint, on the part of the plaintiff, and that of the counterclaim, on the part of the defendant. Therefore no legal interest is owing for the time prior to the respectives dates of the complaint and counterclaim.
chanroblesv irt ualawli bra ry c hanro bles vi rt ual law li bra ry

By virtue, then, of the reasons herein before set forth, it is proper, in our opinion, to adjudge, as we do hereby adjudge, that the defendant, Federico Hidalgo, shall pay to the plaintiff, Jose de la Pea y de Ramon, as administrator of the estate of the deceased Jose de la Pea y Gomiz, the sum of P6,774.50, and the legal interest thereon at the rate of 6 per cent per annum from 23rd of May, 1906, the date of the filing of the original complaint in this case; that we should and hereby do declare that the said defendant Federico Hidalgo, is not bound to gibe nor render accounts of the administration of the property of the said deceased Jose de la Pea y Gomiz administered, respectively, by Antonio Hidalgo, from January, 1894, to September 30, 1902, and by Francisco Hidalgo, from October 1, 1902, to January 7, 1904, and therefore the defendant, Federico Hidalgo, not being responsible for the results of the administration of the said property administered by the said Antonio and Francisco Hidalgo, we do absolve the said defendant from the complaint filed by the plaintiff, in so far as it concerns the accounts pertaining to the aforesaid two periods of administration and relates to the payment of the balances resulting from such accounts; and that we should and hereby do absolve the defendant Hidalgo from the complaint with respect to the demand for the payment of the sums of P15,774.19 and P2,000, with their respective interests, on account of the second and the fourth cause of action, respectively, and because the plaintiff renounced and withdrew his complaint, with respect to the third cause of action; and that we should and do likewise adjudge, that the plaintiff, Jose de la Pea y de Ramon, shall pay to Federico Hidalgo, by reason of the counterclaim, the sum of P9,000 with legal interest thereon at the rate of 6 per cent per annum from 21st of may, 1907, the date of the counterclaim.
chanroblesv irt ualawli bra ry c hanro bles vi rt ual law li bra ry

The judgment appealed from, together with that part thereof relative to the statement it contains concerning the equivalence between the Philippine peso and the Mexican peso, is affirmed in so far as it is in agreement with the findings of this decision, and the said judgment is reversed in so far as it is not in accordance herewith. No special finding is made as to costs assessed in either instance, and to the plaintiff is reserved any right that he may be entitled to enforce against Antonio Hidalgo.
chanro bles virtua lawlib rary chan rob les vi rtual law lib rary

Arellano, C.J., Johnson, Moreland and Trent, JJ., concur.

EN BANC G.R. No. L-21813 July 30, 1966

AMPARO G. PEREZ, ET AL., plaintiffs and appellees, vs. PHILIPPINE NATIONAL BANK, Binalbagan Branch, ET AL., defendants and appellants. Tomas Besa and A. Galang for defendants and appellants. Jose U. Carbonell and Celso B. Zamora for plaintiffs and appellees. REYES, J.B.L., J.: Appeal from a decision, in Civil Case No. 100 of the Court of First Instance of Negros Occidental, annulling the extra-judicial foreclosure sale of Lot No. 286-E of the Kabankalan Cadastre, standing in the name of Vicente Perez, in favor of the Philippine National Bank, as well as the cancellation of the mortgagor's Original Certificate of Title No. 29530 and the issuance of a new Certificate T-32066 in the Bank's name; and ordering the said Bank to pay the heirs of Vicente Perez P3,000 damages and P2,000 attorney's fees, and costs. The antecedents of the case were as follows: On August 29, 1939, Vicente Perez mortgaged Lot No. 286-E of the Kabankalan Cadastre, with Transfer certificate of Title No. 29530, to the appellant Philippine National Bank, Bacolod Branch, in order to secure payment of a loan of P2,500, plus interest, payable in yearly installments. On October 7, 1942, Vicente Perez, mortgagor, died intestate, survived by his widow and children (appellees herein). At that time, there was an outstanding balance of P1,917.00, and corresponding interest, on the mortgage indebtedness. On October 18, 1956, the widow of Perez instituted Special Proceedings No. 512 of the Court of First Instance of Occidental Negros for the settlement of the estate of Vicente Perez. The widow was appointed Administratrix and notice to creditors was duly published. The Bank did not file a claim. The project of partition was submitted on July 18, 1956; it was approved and the properties distributed accordingly. Special Proceedings No. 512 was then closed. It appears also that, as early as March of 1947, the widow of the late Vicente Perez inquired by letter from the Bank the status of her husband's account; and she was informed that there was an outstanding balance thereon of P2,758.84 earning a daily interest of P0.4488. She was furnished a copy of the mortgage and, on April 2, 1947, a copy of the Tax Declaration (Rec. App. pp. 45-48). On January 2, 1963, the Bank, pursuant to authority granted it in the mortgage deed, caused the mortgaged properties to be extrajudicially foreclosed. The Provincial Sheriff accordingly sold Lot No. 286-E at auction, and it was purchased by the Bank. In the ordinary course after the lapse of the year of redemption, Certificate of Title No. T-29530 in the name of Vicente Perez was cancelled, and Certificate T-32066, dated May 11, 1962, was issued in the name of the Bank. The widow and heirs were not notified.
1wph1.t

Three months later, on August 15, 1962, the widow and heirs of Vicente Perez instituted this case against the Bank in the court below, seeking to annul the extra-judicial foreclosure sale and the transfer of the Certificate of Title as well as to recover damages, claiming that the Bank had acted illegally and in bad faith. The Bank answered, denying the charges. After trial, the court a quo, on December 15, 1962, rendered judgment holding that, according to the doctrine of this Supreme Court in Pasno vs. Ravina 54 Phil. 382, the Bank should have foreclosed its mortgage in court; that the power to sell contained in the deed of mortgage had terminated upon the death of the mortgagor, Vicente Perez. Wherefore, the trial court declared null and void the extra-judicial foreclosure sale to the Bank, as well as the cancellation of the Certificate of Title of Vicente Perez and issuance in it's stead of a new certificate in the name of the Bank, and ordered the latter to pay the plaintiffs P3,000 damages and P2,000 attorney's fees and cost. The Bank appealed to this Supreme Court. The main issue in this appeal is the application of section 7, Rule 87, of the original Rules of Court adopted in 1941 (now Section 7, Rule 68, of the 1964 Revised Rules), and which was, in turn, a reproduction of section 708 of the Code of Civil Procedure (Act 190). The text is as follows: SEC. 7. Mortgage debt due from estate. A creditor holding a claim against the deceased secured by mortgage or other, collateral security, may abandon the security and prosecute his claim in the manner provided in this rule, and share in the general distribution of the assets of the estate; or he may foreclose his mortgage or realize upon his security, by action in court, making the executor or administrator a party defendant, and if there is a judgment for a deficiency, after the sale of the mortgaged premises, or the property pledged, in the foreclosure or other proceeding to realize upon the security, he may claim his deficiency judgment in the manner provided in the preceding section; or he may rely upon his mortgage other security alone, and foreclose the same at any time within the period of the statute of limitations, and in that event he shall not be admitted as a creditor and shall receive no share in the distribution of the other assets of the estate, but nothing herein contained shall prohibit the executor or administrator from redeeming the property mortgaged or pledged, by paying the debt for which it is held as security, under the direction of the court, if the court shall adjudge it to be for the best interest of the estate that such redemption shall be made. The lower court held that the Rule inhibits any extrajudicial foreclosure of the mortgage constituted by a deceased debtor-mortgagor, following the majority opinion of five justices in Pasno vs. Ravina, 54 Phil. 382 said the Court in that case (382): 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

mortgage 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 the settlement of estates of deceased persons. A vigorous and able dissenting opinion, subscribed by Justices Street, Villamor and Ostrand, held that an extrajudicial foreclosure was authorized (cas. cit. pp. 383-385). The dissent argues: The opinion of the Court refers to section 708 of the Code of Civil Procedure as determining the proposition that, after the death of the mortgagor, foreclosure can be effected only by an ordinary action in court; but if this section be attentively examined, it will be seen that the bringing of an action to foreclose is necessary only when the mortgagee wishes to obtain a judgment over for the deficiency remaining unpaid after foreclosure is effected. In fact this section gives to the mortgagee three distinct alternatives, which are first, to waive his security and prove his credit as an ordinary debt against the estate of the deceased; secondly to foreclose the mortgage by ordinary action in court and recover any deficiency against the estate in administration; and, thirdly, to foreclose without action at any time within the period allowed by the statute of limitations. The third mode of procedure is indicated in that part of section 708 which is expressed in these words: "Or he may rely upon his mortgage or other security alone, and foreclose the same at any time, within the period of the statute of limitations, and in that event he shall not be admitted as a creditor, and shall receive no share in the distribution of the other assets of the estate." The alternative here contemplated is, evidently, foreclosure under power of sale contained in the mortgage. It must be so, since there are no other modes of foreclosure known to the law than by ordinary action and foreclosure under power, and the procedure by action is covered in that part of section 708 which immediately precedes the words which we have quoted above. It will be noted that the result of adopting the last mode of foreclosure is that the creditor waives his right to recover any deficiency from the estate. In addition to what is said above, we submit that the policy of the court in requiring foreclosure by action in case of the death of a mortgagor, where a power of sale is inserted in the mortgage, will prove highly prejudicial to the estates of deceased mortgagors. Nowadays nearly every mortgage executed in this country contains a stipulation for the payment of attorney's fees and expenses of foreclosure, usually in an amount not less than 20 or 25 per cent of the mortgage debt. This means, in practical effect, that the creditor can recover, for attorney's fee and expenses,

whatever the Court will allow a reasonable, within the stipulated limit. On the other hand, if an extra-judicial foreclosure is effected under the power of sale, the expenses of foreclosure are limited to the cost of advertising and other actual expenses of the sale, not including the attorney's fee. Again, if foreclosure is effected extrajudicially, under the power, in conformity with the provisions of Act No. 3135, the mortgagor or his representative has a full year, from the date of the sale, within which to redeem the property, this being the same period of time that is allowed to judgment debtors for redeeming after sale under execution. On the other hand, the provisions of the Code of Civil Procedure relative to the foreclosure of mortgages by action allows no fixed period for redemption after sale; and although, in the closing words of section 708 of the Code of Civil Procedure the court is authorized to permit the administrator to redeem mortgaged property, this evidently refers to redemption to be effected before the foreclosure becomes final. When account is further taken of the fact that a creditor who elects to foreclose by extrajudicial sale waives all right to recover against the estate of the deceased debtor for any deficiency remaining unpaid after the sale, it will be readily seen that the decision in this case will impose a burden upon the estates of deceased persons who have mortgaged real property for the security debts, without any compensatory advantage. The ruling in Pasno vs. Ravina not having been reiterated in any other case, We have carefully reexamined the same after mature deliberation have reached the conclusion that the dissenting opinion is more in conformity with reason and law. Of the three alternative courses that section 7, Rule 87 (now Rule 86), offers the mortgage creditor, to wit, (1) to waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim; (2) to foreclose the mortgage judicially and prove any deficiency as an ordinary claim; and (3) to rely on the mortgage exclusively, foreclosing the same at any time before it is barred by prescription, without right to file a claim for any deficiency, the majority opinion in Pasno vs. Ravina, in requiring a judicial foreclosure, virtually wipes out the third alternative conceded by the Rules to the mortgage creditor, and which would precisely include extra-judicial foreclosures by contrast with the second alternative. This result we do not consider warranted by the text of the Rules; and, in addition, the recognition of creditor's right to foreclose extra-judicially presents undoubted advantages for the estate of the mortgagor, as pointed out by the dissenting opinion in Pasno vs. Ravina, supra. In the light of these considerations, we have decided to overrule the majority decision in said case, and uphold the right of the mortgage creditor to foreclose extra-judicially in accordance with section 7, Rule 86, of the Revised Rules (old Rule 87). The argument that foreclosure by the Bank under its power of sale is barred upon death of the debtor, because agency is extinguished by the death of the principal, under Article 1732 of the Civil Code of 1889 and Article 1919 of the Civil Code of the Philippines, neglects to take into account that the power to foreclose is not an ordinary agency that contemplates exclusively the representation of the principal by the agent but is primarily an authority conferred upon the mortgagee for the latter's own protection. It is, in fact, an ancillary stipulation supported by the same causa or consideration for the mortgage and forms an

essential and inseparable part of that bilateral agreement. As can be seen in the preceding quotations from Pasno vs. Ravina, 54 Phil. 382, both the majority and the dissenting opinions conceded that the power to foreclose extrajudicially survived the death of the mortgagor, even under the law prior to the Civil Code of the Philippines now in force. Nevertheless, while upholding the validity of the appellant Bank's foreclosure, We can not close our eyes to the fact that the Bank was apprised since 1947 of the death of its debtor, Vicente Perez, yet it failed and neglected to give notice of the foreclosure to the latter's widow and heirs as expressly found by the court a quo. Such failure, in effect, prevented them from blocking the foreclosure through seasonable payment, as well as impeded their effectuating a seasonable redemption. In view of these circumstances, it is our view that both justice and equity would be served by permitting herein appellees to redeem the foreclosed property within a reasonable time, by paying the capital and interest of the indebtedness up to the time of redemption, plus foreclosure and useful expenses, less any rents and profits obtained by the Bank from and after the same entered into its possession. Wherefore, the judgment appealed from is hereby modified, as follows: (1) Declaring valid and effective the extra-judicial foreclosure of the mortgage over Lot 286-E of the Kabankalan Cadastre; (2) Upholding and confirming the cancellation of Transfer Certificate of Title No. 29350 of the Registry of Deeds of Occidental Negros in the name of the late Vicente Perez, as well as its replacement by Certificate of Title T-32066 of the same Registry in the name of appellant Philippine National Bank; (3) Declaring the appellees herein, widow and other heirs of Vicente Perez entitled to redeem the property in question by paying or tendering to the Bank the capital of the debt of Vicente Perez, with the stipulated interest to the date of foreclosure, plus interest thereafter at 12% per annum; and reimbursing the Bank the value of any useful expenditures on the said property but deducting from the amounts thus payable the value of any rents and profits derived by the appellee National Bank from the property in question. Such payment to be made within sixty (60) days after the balance is determined by the court of origin. Neither party to recover damages or costs. Let the records be returned to the court of origin for further proceedings in conformity with this decision. So ordered. Concepcion, C.J., Barrera, Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur