AGENCY

NATURE, FORM AND KINDS OF AGENCY

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

(3) To compromise, to submit questions to

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

Art. 1869. Agency may be express, or implied from the acts

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

Art. 1879. A special power to sell excludes the power to

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

DIGEST |1

represented herself to be an agent of defendant Tourist World

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

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

DIGEST |2

negative allegation of respondents Canilao and Tagunicar

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

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

DIGEST |3

Art. 1915. If two or more persons have appointed an

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

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

AGENCY

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

DIGEST |4

to hold petitioner corporation guilty of estoppel in allowing its

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

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

DIGEST |5

incur the expenses of advertisement of the plaintiff's beds,

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

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

DIGEST |6

as revealed in other clauses, no less than in the caption of

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

AGENCY
Mata in Magugpo, Tagum, Davao. On June 5, 1947, the Court
of First Instance of Davao issued an order directing the
Register of Deeds of Davao to issue a new Owner's Duplicate
Certificate of Title No. 3019 in favor of Marcos Mata and
declaring the lost title as null and void. On December 9,
1947, the second sale between Marcos Mata and Fermin
Caram, Jr. was registered with the Register of Deeds. On the
same date, Transfer Certificate of Title No. 140 was issued in
favor of Fermin Caram Jr.
On August 29, 1959, the defendants Marcos Mata
and Codidi Mata filed their answer with counterclaim
admitting the existence of a private absolute deed of sale of
his only property in favor of Claro L. Laureta but alleging that
he signed the same as he was subjected to duress, threat
and intimidation for the plaintiff was the commanding officer
of the 10th division USFIP operating in the unoccupied areas
of Northern Davao with its headquarters at Project No. 7 (Km.
60, Davao Agusan Highways), in the Municipality of Tagum,
Province of Davao; that Laureta's words and requests were
laws; that although the defendant Mata did not like to sell his
property or sign the document without even understanding
the same, he was ordered to accept P650.00 Mindanao
Emergency notes; and that due to his fear of harm or danger
that will happen to him or to his family, if he refused he had
no other alternative but to sign the document.
The defendants Marcos Mata and Codidi Mata also
admit the existence of a record in the Registry of Deeds
regarding a document allegedly signed by him in favor of his
co-defendant Fermin Caram, Jr. but denies that he ever
signed the document for he knew before hand that he had
signed a deed of sale in favor of the plaintiff and that the
plaintiff was in possession of the certificate of title; that if
ever his thumb mark appeared in the document purportedly
alienating the property to Fermin Caram, did his consent was
obtained through fraud and misrepresentation for the
defendant Mata is illiterate and ignorant and did not know
what he was signing; and that he did not receive a
consideration for the said sale.
The defendant Fermin Caram Jr. filed his answer on October
23, 1959 alleging that he has no knowledge or information
about the previous encumbrances, transactions, and
alienations in favor of plaintiff until the filing of the
complaints.
The trial court rendered a decision declaring that the
deed of sale, Exhibit A, executed by Marcos Mata in favor of
Claro L. Laureta stands and prevails over the deed of sale, in
favor of Fermin Caram, Jr.
The defendants appealed from the judgment to the
Court of Appeals which promulgated its decision affirming the
judgment of the trial court.
ISSUE:
Whether there is a valid sale of the property was
made through his representatives, Pedro Irespe and Atty.
Abelardo Aportadera.
HELD:
The contention of the petitioner has no merit. The
facts of record show that Mata, the vendor, and Caram, the
second vendee had never met. During the trial, Marcos Mata
testified that he knows Atty. Aportadera but did not know
Caram. Thus, the sale of the property could have only been
through Caram's representatives, Irespe and Aportadera. The
petitioner, in his answer, admitted that Atty. Aportadera
acted as his notary public and attorney-in-fact at the same
time in the purchase of the property.
The petitioner contends that he cannot be
considered to have acted in bad faith because there is no

DIGEST |7

direct proof showing that Irespe and Aportadera, his alleged

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

AGENCY
cause of the contract. Dolo causante as a ground for the
annulment of contract is specifically described in Article 1338
of the New Civil Code of the Philippines as "insidious words or
machinations of one of the contracting parties" which
induced the other to enter into a contract, and "without
them, he would not have agreed to".
The second deed of sale in favor of Caram is not a voidable
contract. No evidence whatsoever was shown that through
insidious words or machinations, the representatives of
Caram, Irespe and Aportadera had induced Mata to enter into
the contract.
Since the second deed of sale is not a voidable
contract, Article 1391, Civil Code of the Philippines which
provides that the action for annulment shall be brought
within four (4) years from the time of the discovery of fraud
does not apply. Moreover, Laureta has been in continuous
possession of the land since he bought it in June 1945.
A more important reason why Laureta's action could not have
prescribed is that the second contract of sale, having been
registered in bad faith, is null and void. Article 1410 of the
Civil Code of the Philippines provides that any action or
defense for the declaration of the inexistence of a contract
does not prescribe.
In a Memorandum of Authorities submitted to this
Court on March 13, 1978, the petitioner insists that the
action of Laureta against Caram has prescribed because the
second contract of sale is not void under Article 1409 23 of
the Civil Code of the Philippines which enumerates the kinds
of contracts which are considered void. Moreover, Article
1544 of the New Civil Code of the Philippines does not
declare void a second sale of immovable registered in bad
faith.
The fact that the second contract is not considered void
under Article 1409 and that Article 1544 does not declare
void a deed of sale registered in bad faith does not mean that
said contract is not void. Article 1544 specifically provides
who shall be the owner in case of a double sale of an
immovable property. To give full effect to this provision, the
status of the two contracts must be declared valid so that
one vendee may contract must be declared void to cut off all
rights which may arise from said contract. Otherwise, Article
1544 win be meaningless.
The first sale in favor of Laureta prevails over the sale in
favor of Caram.
WHEREFORE, the petition is hereby denied and the
decision of the Court of Appeals sought to be reviewed is
affirmed, without pronouncement as to costs. SO ORDERED.
FIEGE & BROWN v SMITH, BELL & COMPANY, LTD.
43 Phil 113
FACTS:
The defendant, Smith, Bell & Co. Ltd., is a
corporation organized under the laws of the Philippine Islands
with its principal office in the city of Manila. In 1918, the
defendant Cowper was in the employ of the defendant
corporation, which among other things, was engaged in the
sale of machinery and equipment for the use of
manufacturers of coconut oil.
As the result of negotiations with the company, on
May 6, 1918, Cowper wrote a letter.
This letter referred to what is known in the evidence
as the Harden contract. Later, both plaintiffs here became
associated with Cowper in finding purchasers and in the sale
of such machinery for the defendant corporation. Outside of
the above letter, there is no written contract as to what the
plaintiffs should receive or the defendant should pay them
for their services, and there is but little, if any, oral evidence

DIGEST |8

of any contract between Fiege, Brown, and Cowper, as one

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

AGENCY
It is then alleged that outside of P2,000 paid by the
Insular Coconut Oil, Co., on its order of August 22, 1918, no
other payment s have been made on the respective contracts
by any of the other purchaser, which were secured by the
plaintiffs. That until such payments have been made, the
defendant company cannot ascertain the net profits, but that
it has not received any profits whatever from any of the other
orders, and that, as soon as full payment of any order is
made by the purchaser, the company will render an
accounting to plaintiffs, and pay them any amount found
due.
Upon such issues, the case was tried, and a
judgment was rendered for plaintiffs for P6,511.17, without
interest or costs, from which they appealed, claiming that the
court erred in failing to find that the plaintifs were entitled to
commissions on two different contracts; that the court erred
in failing to find that the plaintiffs were entitled to
commissions on two different contracts; that the court erred
in holding that plaintiffs' recovery should be based upon the
defendant company realizing a profit on the respective
contracts; and in rendering judgement without interest or
costs.
ISSUE:
Whether the one half agreed upon by the party
should be one-half of the difference between the cost of the
machinery laid down at Manila and the price specified in the
contracts with the respective purchasers or "one-half of the
net profits."
HELD:
Although the oral evidence pro and con is more or
less conflicting, the trial court found that the letter of May 6,
1918, above quoted, was basis of the contract under which
the services were rendered, and that the plaintiffs were only
entitled to recover one-half of the net profits that the
company made out of its contracts with the purchasers, and
limited the amount of plaintiffs' recovery to the one-half of
the net profits, which the company had actually received and
collected under the contracts ,or P6,511.17.
April 15, 1918, Fiege, Brown and Cowper formed a
partnership known as the Philippine General Commercial
Company to do a general brokerage business. It is admitted
that on May 6, 1918, Cowper wrote the letter above quoted,
and that the different members of the firm and the defendant
company knew that the letter was written and received.
August 15, 1918, the respective members of the firm signed
a writing, which, among, other things, recites:
It is further agreed that whatever commissions may
be due or become due to the members of the
copartnership
on
order
for
machinery
or
merchandise shall be paid by Smith, Bell & Co. pro
rata among the three partners, etc."and that on the
same date the three members of the firm addressed
the following letter to the defendant company:
The
undersigned
hereby
request
that
all
commissions that may accrue on orders for
machinery or merchandise accepted or pending
acceptance in which we, or any of us, may be
interested, be paid as same fall due to the
undersigned individually in pro rata shares of onethird of such commissions . . . . "
The contract with Harden was dated May 16; with Vicente
Sotelo two contracts were dated August 16, and two August
20; one with A. Chicote was August 11; and the other August
19, and the one with the Insular Coconut Oil Co., August 22,
all in the year, 1918. When you consider the dates of the

DIGEST |9

respective contracts, the recital in the agreement between

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

AGENCY
testified, counsel for private prosecution moved for the
postponement of the trial on the ground that their next
witness was sick and unable to come to court. This motion
was granted and the trial was postponed to October 17,
1952, this time to be held at Calamba, Laguna. When this
date came, the private prosecution, through counsel,
presented an urgent motion for continuance of the trial,
which was granted with the conformity of the defense, the
court setting it on November 13, 1952.
On said date, November 13, counsel for private
prosecution, instead of going to trial, again filed a motion for
postponement, this time seeking to transfer the case to the
San Pablo branch alleging as reasons that his witnesses were
all residents of San Pablo City and it would be to their
convenience, as well as of the defendants, who were likewise
residing in the same place, that the trial be continued there.
This motion was objected to not only by the defense but also
by Fiscal David Carreon who argued that he saw no reason
for the transfer in view of the fact that the case had already
been partially tried at the Calamba branch. In the course of
the argument that ensued, counsel for the accused
intervened and joined Fiscal David Carreon in his opposition
to the transfer making the observation in passing that since
the private prosecutor was acting under the direction and
control of the fiscal and the latter had registered his
objection, he found no reason for him to insist on his petition
more so when his appearance in this case was not as a
matter of right but merely by tolerance on the part of the
court.
This observation came as a surprise to the counsel
for private prosecution who then and there asked the court
for a ruling as to whether his appearance in the case was a
matter of right or a matter of tolerance as insinuated,
intimating that if this should be resolved against him he
would bring the matter to the Supreme Court for a definite
ruling. Forthwith, the court ruled that in cases of this nature
which do not involve any civil liability the appearance of a
private prosecutor cannot be considered as a matter of right
and if allowed it would only be upon tolerance of the court
and of the parties. This conclusion notwithstanding, the court
noted that counsel for the private prosecution cannot claim
any prejudice on his part for he could continue appearing as
such by tolerance of the court until after the final termination
of the case. Not satisfied with this ruling, counsel interposed
the present petition for certiorari.
ISSUE:
Whether in the prosecution of a criminal case
commenced either by complaint or by information an
offended party may intervene, personally or by attorney, as a
matter of right as claimed by petitioner, or upon mere
tolerance, as ruled by respondent judge.
HELD:
The law on this point is clear. Section 4, Rule 106,
provides that "all criminal actions either commenced by
complaint or by information shall be prosecuted under the
direction and control of the fiscal"' and, as a corollary, it is
also provided that "unless the offended party has waived the
civil action or expressly reserved the right to institute it after
the termination of the criminal case, . . . he may intervene,
personally or by attorney, in the prosecution of the offense."
(Section 15, Rule 106.) From these provisions we can clearly
infer that while criminal actions as a rule are prosecuted
under the direction and control of the fiscal, however, an
offended party may intervene in the proceeding, personally
or by attorney, specially in cases of offenses which cannot be
prosecuted except at the instance of the offended party.

DIGEST |10

(People vs. Dizon, 44 Phil., 267; Herrero vs. Diaz, 75 Phil.,

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

AGENCY
Art. 1890. If the agent has been empowered to borrow
money, he may himself be the lender at the current rate of
interest. If he has been authorized to lend money at interest,
he cannot borrow it without the consent of the principal. (n)
Art. 1891. Every agent is bound to render an account of his
transactions and to deliver to the principal whatever he may
have received by virtue of the agency, even though it may
not be owing to the principal.
Every stipulation exempting the agent from the
obligation to render an account shall be void. (1720a)
Art. 1892. The agent may appoint a substitute if the
principal has not prohibited him from doing so; but he shall
be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without
designating the person, and the person appointed
was notoriously incompetent or insolvent.
All acts of the substitute appointed against the prohibition of
the principal shall be void. (1721)
Art. 1893. In the cases mentioned in Nos. 1 and 2 of the
preceding article, the principal may furthermore bring an
action against the substitute with respect to the obligations
which the latter has contracted under the substitution.
(1722a)
Art. 1894. The responsibility of two or more agents, even
though they have been appointed simultaneously, is not
solidary, if solidarity has not been expressly stipulated.
(1723)
Art. 1895. If solidarity has been agreed upon, each of the
agents is responsible for the non-fulfillment of agency, and
for the fault or negligence of his fellows agents, except in the
latter case when the fellow agents acted beyond the scope of
their authority. (n)
Art. 1896. The agent owes interest on the sums he has
applied to his own use from the day on which he did so, and
on those which he still owes after the extinguishment of the
agency. (1724a)
Art. 1897. The agent who acts as such is not personally
liable to the party with whom he contracts, unless he
expressly binds himself or exceeds the limits of his authority
without giving such party sufficient notice of his powers.
(1725)
Art. 1898. If the agent contracts in the name of the
principal, exceeding the scope of his authority, and the
principal does not ratify the contract, it shall be void if the
party with whom the agent contracted is aware of the limits
of the powers granted by the principal. In this case, however,
the agent is liable if he undertook to secure the principal's
ratification. (n)
Art. 1899. If a duly authorized agent acts in accordance with
the orders of the principal, the latter cannot set up the
ignorance of the agent as to circumstances whereof he
himself was, or ought to have been, aware. (n)
Art. 1900. So far as third persons are concerned, an act is
deemed to have been performed within the scope of the
agent's authority, if such act is within the terms of the power
of attorney, as written, even if the agent has in fact exceeded
the limits of his authority according to an understanding
between the principal and the agent. (n)
Art. 1901. A third person cannot set up the fact that the
agent has exceeded his powers, if the principal has ratified,
or has signified his willingness to ratify the agent's acts. (n)
Art. 1902. A third person with whom the agent wishes to
contract on behalf of the principal may require the
presentation of the power of attorney, or the instructions as
regards the agency. Private or secret orders and instructions
of the principal do not prejudice third persons who have

DIGEST |11

relied upon the power of attorney or instructions shown

them. (n)
Art. 1903. The commission agent shall be responsible for
the goods received by him in the terms and conditions and as
described in the consignment, unless upon receiving them he
should make a written statement of the damage and
deterioration suffered by the same. (n)
Art. 1904. The commission agent who handles goods of the
same kind and mark, which belong to different owners, shall
distinguish them by countermarks, and designate the
merchandise respectively belonging to each principal. (n)
Art. 1905. The commission agent cannot, without the
express or implied consent of the principal, sell on credit.
Should he do so, the principal may demand from him
payment in cash, but the commission agent shall be entitled
to any interest or benefit, which may result from such sale.
(n)
Art. 1906. Should the commission agent, with authority of
the principal, sell on credit, he shall so inform the principal,
with a statement of the names of the buyers. Should he fail
to do so, the sale shall be deemed to have been made for
cash insofar as the principal is concerned. (n)
Art. 1907. Should the commission agent receive on a sale,
in addition to the ordinary commission, another called a
guarantee commission, he shall bear the risk of collection
and shall pay the principal the proceeds of the sale on the
same terms agreed upon with the purchaser. (n)
Art. 1908. The commission agent who does not collect the
credits of his principal at the time when they become due
and demandable shall be liable for damages, unless he
proves that he exercised due diligence for that purpose. (n)
Art. 1909. The agent is responsible not only for fraud, but
also for negligence, which shall be judged with more or less
rigor by the courts, according to whether the agency was or
was not for a compensation. (1726)
DOMINGO v. DOMINGO
42 SCRA 131
FACTS:
In a document, Vicente M. Domingo granted
Gregorio Domingo, a real estate broker, the exclusive agency
to sell his lot No. 883 of Piedad Estate with an area of about
88,477 square meters at the rate of P2.00 per square meter
(or for P176,954.00) with a commission of 5% on the total
price, if the property is sold by Vicente or by anyone else
during the 30-day duration of the agency or if the property is
sold by Vicente within three months from the termination of
the agency to apurchaser to whom it was submitted by
Gregorio during the continuance of the agency with notice to
Vicente. The said agency contract was in triplicate, one copy
was given to Vicente, while the original and another copy
were retained by Gregorio.
On June 3, 1956, Gregorio authorized the intervenor Teofilo P.
Purisima to look for a buyer, promising him one-half of the
5% commission.
Thereafter, Teofilo Purisima introduced Oscar de
Leon to Gregorio as a prospective buyer.
After several conferences between Gregorio and
Oscar de Leon, the latter raised his offer to P109,000.00 on
June 20, 1956 , to which Vicente agreed by signing. Upon
demand of Vicente, Oscar de Leon issued to him a check in
the amount of P1,000.00 as earnest money, after which
Vicente advanced to Gregorio the sum of P300.00. Oscar de
Leon confirmed his former offer to pay for the property at
P1.20 per square meter in another letter. Subsequently,
Vicente asked for an additional amount of P1,000.00 as
earnest money, which Oscar de Leon promised to deliver to
him. Pursuant to his promise to Gregorio, Oscar gave him as

AGENCY
a gift or propina the sum of One Thousand Pesos (P1,000.00)
for succeeding in persuading Vicente to sell his lot at P1.20
per square meter or a total in round figure of One Hundred
Nine Thousand Pesos (P109,000.00). This gift of One
Thousand Pesos (P1,000.00) was not disclosed by Gregorio to
Vicente. Neither did Oscar pay Vicente the additional amount
of One Thousand Pesos (P1,000.00) by way of earnest money.
In the deed of sale was not executed on August 1, 1956 as
stipulated in Exhibit "C" nor on August 15, 1956 as extended
by Vicente, Oscar told Gregorio that he did not receive his
money from his brother in the United States, for which reason
he was giving up the negotiation including the amount of
One Thousand Pesos (P1,000.00) given as earnest money to
Vicente and the One Thousand Pesos (P1,000.00) given to
Gregorio as propina or gift. When Oscar did not see him after
several weeks, Gregorio sensed something fishy. So, he went
to Vicente and read a portion of Exhibit "A" marked habit "A1" to the effect that Vicente was still committed to pay him
5% commission, if the sale is consummated within three
months after the expiration of the 30-day period of the
exclusive agency in his favor from the execution of the
agency contract on June 2, 1956 to a purchaser brought by
Gregorio to Vicente during the said 30-day period. Vicente
grabbed the original of Exhibit "A" and tore it to pieces.
Gregorio held his peace, not wanting to antagonize Vicente
further, because he had still duplicate of Exhibit "A". From his
meeting with Vicente, Gregorio proceeded to the office of the
Register of Deeds of Quezon City, where he discovered
Exhibit "G' deed of sale executed on September 17, 1956 by
Amparo Diaz, wife of Oscar de Leon, over their house and lot
No. 40 Denver Street, Cubao, Quezon City, in favor Vicente
as down payment by Oscar de Leon on the purchase price of
Vicente's lot No. 883 of Piedad Estate. Upon thus learning
that Vicente sold his property to the same buyer, Oscar de
Leon and his wife, he demanded in writting payment of his
commission on the sale price of One Hundred Nine Thousand
Pesos (P109,000.00), Exhibit "H". He also conferred with
Oscar de Leon, who told him that Vicente went to him and
asked him to eliminate Gregorio in the transaction and that
he would sell his property to him for One Hundred Four
Thousand Pesos (P104,000.0 In Vicente's reply to Gregorio's
letter, Exhibit "H", Vicente stated that Gregorio is not entitled
to the 5% commission because he sold the property not to
Gregorio's buyer, Oscar de Leon, but to another buyer,
Amparo Diaz, wife of Oscar de Leon.
The Court of Appeals found from the evidence that
Exhibit "A", the exclusive agency contract, is genuine; that
Amparo Diaz, the vendee, being the wife of Oscar de Leon
the sale by Vicente of his property is practically a sale to
Oscar de Leon since husband and wife have common or
identical interests; that Gregorio and intervenor Teofilo
Purisima were the efficient cause in the consummation of the
sale in favor of the spouses Oscar de Leon and Amparo Diaz;
that Oscar de Leon paid Gregorio the sum of One Thousand
Pesos (P1,000.00) as "propina" or gift and not as additional
earnest money to be given to the plaintiff, because Exhibit
"66", Vicente's letter addressed to Oscar de Leon with
respect to the additional earnest money, does not appear to
have been answered by Oscar de Leon and therefore there is
no writing or document supporting Oscar de Leon's testimony
that he paid an additional earnest money of One Thousand
Pesos (P1,000.00) to Gregorio for delivery to Vicente, unlike
the first amount of One Thousand Pesos (P1,000.00) paid by
Oscar de Leon to Vicente as earnest money, evidenced by
the letter Exhibit "4"; and that Vicente did not even mention
such additional earnest money in his two replies Exhibits "I"
and "J" to Gregorio's letter of demand of the 5% commission.

DIGEST |12

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

AGENCY
Thousand Three Hundred Pesos (P1,300.00), one-half of the
same, which is Six Hundred Fifty Pesos (P650.00), should be
paid by Gregorio Domingo to Teofilo Purisima.
Because Gregorio Domingo's clearly unfounded
complaint caused Vicente Domingo mental anguish and
serious anxiety as well as wounded feelings, petitionerappellant Vicente Domingo should be awarded moral
damages in the reasonable amount of One Thousand Pesos
(P1,000.00) attorney's fees in the reasonable amount of One
Thousand Pesos (P1,000.00), considering that this case has
been pending for the last fifteen (15) years from its filing on
October 3, 1956.
WHEREFORE, the judgment is hereby rendered, reversing the
decision of the Court of Appeals and directing defendantappellee Gregorio Domingo: (1) to pay to the heirs of Vicente
Domingo the sum of One Thousand Pesos (P1,000.00) as
moral damages and One Thousand Pesos (P1,000.00) as
attorney's fees; (2) to pay Teofilo Purisima the sum of Six
Hundred Fifty Pesos (P650.00); and (3) to pay the costs.
DUHART FRERES Y CIE v MACIAS
54 Phil 613
FACTS:
The change made in the names of the plaintiffs by
the amended complaint filed on October 14, 1927,
substituting for the partnership "Duhart Freres & Cie.," the
names of Pedro Duhart and Eugenio Duhart, who according
to said amended complaint are the sole collective partners,
and the managing partners according to the evidence, does
not constitute a substantial alternation of the party plaintiff,
and does not effect the validity and legal force of the
attachment of the defendants' property, issued in favor of
said "Duhart Freres & Cie.," upon a prior complaint, which
writ still subsist as well in favor of the original plaintiff
"Duhart Freres & Cie.," as for the same entity in the persons
of its own sole collective partners, the plaintiffs Pedro Duhart
and Eugenio Duhart. Whenever it happens, as in the instant
case, that there is no real change of the party plaintiff, the
writ of attachment issued in favor of said plaintiff as an entry,
remains unchanged and in favor of said plaintiff as and there
is no necessity for issuing another in favor of such as may
later appear in the cause as plaintiff, so long as they are to
all intents and purposes the same party plaintiff or its
successors-in-interest. The alternation thus introduced into
the complaint does not amount to a real change in the party
plaintiff. Furthermore, this question has already been decided
by this court against the defendants herein in the certiorari
proceedings instituted by them on January, 1928, G.R. No.
28895.
The appellants contend that as the plaintiffs
subscribed the contract Exhibit A on behalf of the partnership
"Duhart Freres & Cie," they cannot now sue in their town
behalf, and in the instant action must be instituted by the
partnership. It was so done in the beginning, but said
defendant having demurred, and the court sustained their
demurrer, the complaint had to bee amended, naming the
collective partners as plaintiffs in favor of the original
plaintiff, the partnership "Duhart Freres & Cie., It is to be
noted that the present plaintiffs, in executing and signing the
contract Exhibit A, did so, according to its own terms, "as
partners of the firm "Duhart Freres & Cie." doing business in
the aforementioned city." At any rate, the defendant, Ernesto
Macias, who, in Exhibit A contracted with the plaintiffs,
cannot now gainsay their right to bring this suit as partners
of said firm. As to the defendant "E Macias Commission
Impex Co., Ltd.," the parties entered into an agreement in
contract Exhibit A (Clause V) as an agency under said
commercial name, and it appears from paragraph 2 of the

DIGEST |13

fifth special defense of the defendants that said defendant is

an agency created and organized in the Philippines by virtue
of said contract Exhibit A. The defendants come under the
doctrine laid down by this court in Strachan & MacMurray vs.
Emaldi (22 Phil., 295).
ISSUE:
Whether the document Exhibit A was a contract of
agency and in ordering its rescission, and in not declaring
that said document was a partnership contract of joint
account.
HELD:
There is no merit in the assertion that the contract
evidence by instruments Exhibit A, is a joint-account
partnership contract. We are not concerned with an
accidental association confined to definite transaction, being
thus free from any solemnity in its formation (art. 240, Code
of Commerce; Merchantile Law, Carreras, p. 300, 3d edition),
nor did they in the contract agree upon any capital, or that
Ernesto Macias subscribed or would contribute a part of said
capital (art. 239, Code of Commerce). On the contrary, it is
the opening of an "agency," a word and an idea, repeated
and explained throughout the instrument as signifying, a
commercial agency. And notwithstanding the wise sphere of
action granted to said agency, the parties does not render it
any the less an agency, which, however, agreed upon a limit,
until further stipulation, as may be seen in clause VIII of the
contract, namely, "commissions," which are one of the kinds
of a commercial agency, specifically so called in article 244
of the Code of Commerce.
We see no sufficient reason for holding that the
plaintiffs violated the contract, and therefore, we find no
error in the judgment appealed from ordering the dismissal of
the defendants' counterclaim.
It appears of record that the defendant Ernesto
Macias violated clauses VIII, XI, XII, and XIII of the contract,
for it has been established that if he did open a banking
credit for fifty per cent centum of the value of his orders,
which were not paid, neither paid for the credit, nor sent a
monthly statement, nor kept accounts, nor forwarded to the
plaintiffs a balance and semestral inventory. All of which
gives the plaintiffs a right to rescind the contract as agreed
upon in clause XIX thereof.
As to the amount awarded to the plaintiffs, we find no reason
in these proceedings to depart lower court's findings in this
matter.
With regard to the order that defendant Macias render a
detailed account to the plaintiffs of the business of said
agency, as prayed for in the complaint, we deem it justified.
It is simply the consequence of the recession of the contract
of agency, also decreed by the court below. Every agent
must give an account of his operations, a general principle
expressly laid down in article 1720 of the Civil Code. It is no
obstacle to this order to render accounts that a sum of
money has been adjudged to the plaintiffs, or that the
defendants' counterclaim has been dismissed. Both the claim
of said sum of the counterclaim are questioned raised and
submitted by the parties to the court, which, in view of the
evidence, had no decide and did in fact decide, and it has not
been shown that they represent all the transactions between
the parties or all the operations of the agency.
The appeal being without merit, we affirm the
judgment appealed from, with cost against the defendants.
So ordered.
MUNICIPAL COUNCIL OF ILOILO v EVANGELISTA
55 Phil 290
FACTS:

AGENCY
On March 20, 1924, the Court of First Instance of
Iloilo rendered judgment in civil case No. 3514 thereof,
wherein the appellant herein, Tan Ong Sze Vda. de Tan Toco
was the plaintiff, and the municipality of Iloilo the defendant,
and the former sought to recover of the latter the value of a
strip of land belonging to said plaintiff taken by the
defendant to widen a public street; the judgment entitled the
plaintiff to recover P42,966.40, representing the value of said
strip of land, from the defendant (Exhibit A). On appeal to
this court (G. R. No .22617) 1 the judgment was affirmed on
November 28, 1924 (Exhibit B).
After the case was remanded to the court of origin, and
the judgment rendered therein had become final and
executory, Attorney Jose Evangelista, in his own behalf and
as counsel for the administratrix of Jose Ma .Arroyo's
intestate estate, filed a claim in the same case for
professional services rendered by him, which the court,
acting with the consent of the appellant widow, fixed at 15
per cent of the amount of the judgment.
At the hearing on said claim, the claimants appeared,
as did also the Philippine National Bank, which prayed that
the amount of the judgment be turned over to it because the
land taken over had been mortgaged to it. Antero Soriano
also appeared claiming the amount of the judgment as it had
been assigned to him, and by him, in turn, assigned to
Mauricio Cruz & Co., Inc.
After hearing all the adverse claims on the amount of
the judgment the court ordered that the attorney's lien in the
amount of 15 per cent of the judgment, be recorded in favor
of Attorney Jose Evangelista, in his own behalf and as counsel
for the administratrix of the deceased Jose Ma .Arroyo, and
directed the municipality of Iloilo to file an action of
interpleading against the adverse claimants, the Philippine
National Bank, Antero Soriano, Mauricio Cruz & Co., Jose
Evangelista and Jose Arroyo, as was done, the case being
filed in the Court of First Instance of Iloilo as civil case No.
7702.
After due hearing, the court rendered the decision
quoted from at the beginning.
On March 29, 1928, the municipal treasurer of Iloilo,
with the approval of the auditor of the provincial treasurer of
Iloilo and of the Executive Bureau, paid the late Antero
Soriano the amount of P6,000 in part payment of the
judgment mentioned above, assigned to him by Tan Boon
Tiong, acting as attorney-in-fact of the appellant herein, Tan
Ong Sze Vda. de Tan Toco.
On December 18, 1928, the municipal treasurer of
Iloilo deposited with the clerk of the Court of First Instance of
Iloilo the amount of P6,000 on account of the judgment
rendered in said civil case No. 3514. In pursuance of the
resolution of the court below ordering that the attorney's lien
in the amount of 15 per cent of the judgment be recorded in
favor of Attorney Jose Evangelista, in his own behalf and as
counsel for the late Jose Ma. Arroyo, the said clerk of court
delivered on the same date to said Attorney Jose Evangelista
the said amount of P6,000. At the hearing of the instant case,
the codefendants of Attorney Jose Evangelista agreed not to
discuss the payment made to the latter by the clerk of the
Court of First Instance of Iloilo of the amount of P6,000
mentioned above in consideration of said lawyer's waiver of
the remainder of the 15 per cent of said judgment amounting
to P444.69.
With these two payments of P6,000 each making a
total of P12,000, the judgment for P42,966.44 against the
municipality of Iloilo was reduced to P30,966.40, which was
adjudicated by said court to Mauricio Cruz & Co.
This appeal, then, is confined to the claim of Mauricio
Cruz & Co. as alleged assignee of the rights of the late

DIGEST |14

Attorney Antero Soriano by virtue of the said judgment in

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

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

DIGEST |15

merchandise the description of which follows, "the company

agrees with the insured that, if the property above described,
or any party thereof, shall be destroyed or damaged by fire
between September 16, 1918, and September 16, 1919,"
etc., "The company will, out of its capital, stock and funds,
pay or make good all such loss or damage, not exceeding"
the amount of the policy. This policy was later duly assigned
to the plaintiff.
Policy No. 4382, for P15,000, was issued by the same
company to, and in the name of, plaintiff.
Policy No. 326, for P10,000, was issued to, and in the name
of policy No. 326, for P10,000, was issued to, and in the
name of the plaintiff by The Yang-Tsze Insurance Association,
Limited, and recites that the premium of P125 was paid by
the plaintiff to the association, and that, in the event of loss
by fire between certain dates, "the funds and property of the
said association shall be subject and liable to pay, reinstate,
or make good to the said assured, their heirs, executors, or
administrators, such loss or damage as shall be occasioned
by fire to the property above-mentioned and hereby insured,"
not exceeding the amount of the policy.
Policy No. 796111, for P8,000, was issued by The
States Assurance Company, Limited, to the plaintiff for a
premium of P100, which was paid to the Assurance Company
through the defendant, its authorized agent, and recites that
"the company agrees with the insured that in the event of
loss by fire between certain dates, the company will, out of
its capital, stock and funds, pay the amount of such loss or
damage," not exceeding the amount of the policy, and it is
attested by the defendant, through its "Cashier and
Accountant and Manager, Agents, State Assurance Co., Ltd.,"
authorized agents of the Assurance Company.
Policy No. 4143 is attested "on behalf of The China
Fire Insurance Company, Limited," by the cashier and
accountant and manager of the defendant, as agents of The
China Fire Insurance Company, Limited. The same is true as
to policy no. 4382.
Policy No. 326 recites the payment of a premium of
P125 by the plaintiff to The Yang-Tsze Insurance Association,
Limited, and that, in the event of loss, "the funds and
property of the said association shall be subject and liable to
pay, reinstate, or make good to the said assured, their heirs,
executors, or administrators, such loss or damage as shall be
occasioned by fire or lightning to the property" insured, not
exceeding the amount of the policy, and it is attested by the
defendant, through its cashier and accountant and manager,
as agents of the association "under the authority of a Power
of Attorney from The Yang-Tsze Insurance Association,
Limited," "to sign, for and on behalf of the said Association,
etc."
March 25, 1919, and while the policies were in force,
a loss occurred in which the insured property was more or
less damaged by fire and the use of water resulting from the
fire.
The plaintiff made a claim for damages under its policies, but
could not agree as to the amount of loss sustained. It sold
the insured property in its then damaged condition, and
brought this action against Warner, Barnes & Co., in its
capacity as agents, to recover the difference between the
amount of the policies and the amount realized from the sale
of the property, and in the first cause of action, it prayed for
judgment for P23,052.99, and in the second cause of action
P9,857.15.
The numbers and amounts of the policies and the
names of the insurance companies are set forth and alleged
in the complaint.
After trial the court found that there was due the
plaintiff from the three insurance companies p18,493.29 with

AGENCY
interest thereon at the rate of 6 per cent per annum, from
the date of the commencement of the action, and costs
ISSUE:
Whether the resident agent in Manila of the
companies, and was authorized to solicit and do business for
them as such agent; that each company is a foreign
corporation.
HELD:
This is not a case of an undisclosed agent or an
undisclosed principal. It is a case of a disclosed agent and a
disclosed principal.
The policies on their face shows that the defendant
was the agent of the respective companies, and that it was
acting as such agent in dealing with the plaintiff. That in the
issuance and delivery of the policies, the defendant was
doing business in the name of, acting for, and representing,
the respective insurance companies. The different policies
expressly recite that, in the event of a loss, the respective
companies agree to compensate the plaintiff for the amount
of the loss. the defendant company did not insure the
property of the plaintiff, or in any manner agree to pay the
plaintiff the amount of any loss. There is no contract of any
kind. either oral or written, between the plaintiff and Warner,
Barnes & Co. Plaintiff's contracts are with the insurance
companies, and are in writing, and the premiums were paid
to the insurance companies, and are in writing, and the
premiums were paid to the insurance companies and the
policies were issued by, and in the name of, the insurance
companies, and on the face of the policy itself, the plaintiff
knew that the defendant was acting as agent for, and was
representing, the respective insurance companies in the
issuance and deliver of the policies. The defendant company
did not contract or agree to do anything or to pay the plaintiff
any money at any time or on any condition, either as agent
or principal.
There is a very important distinction between the
power and duties of a resident insurance agent of a foreign
company and that of an executor, administrator, or receiver.
An insurance agent as such is not responsible for, and does
not have, any control over the corpus or estate of the
corporate property, as does an executor, administrator, or
receiver. Subject only to the order of the court, such officers
are legal custodians and have actual possession of the
corporate property. It is under their control and within their
jurisdiction.
As stated by counsel for Warner, Barnes & Co., an
attorney of record for an insurance company has greater
power and authority to act for, and bind, the company than
does a soliciting agent of an insurance company. Yet, no
attorney would contend that a personal action would lie
against local attorneys who represent a foreign corporation
to recover on a contract made by the corporation. On the
same principles by which plaintiff seeks to recover from the
defendant, an action could be maintained against the cashier
of any bank on every foreign draft which he signed for, and
on behalf of, the bank.
Every cause of action ex contractu must be founded
upon a contract, oral or written, either express or implied.
Warner, Barnes & Co., as principal or agent, did not make any
contract, either or written, with the plaintiff. The contracts
were made between the respective insurance companies and
the insured, and were made by the insurance companies,
through Warner, Barnes & Co., as their agent.
As in the case of a bank draft, it is not the cashier of
the bank who makes the contract to pay the money
evidenced by the draft, it is the bank, acting through its

DIGEST |16

cashier, that makes the contract. So, in the instant case, it

was the insurance companies, acting through Warner, Barnes
& Co., as their agent, that made the written contracts wit the
insured.
The trial court attached much importance to the fact that in
the further and separate answer, an admission was made
"that defendant was at all times ready and will not to pay, on
behalf of the insurance companies by whom each was
proportionately liable, the actual damage" sustained by the
plaintiff covered by the policies upon the terms and
conditions therein stated.
When analyzed, that is nothing more than a
statement that the companies were ready and willing to
prorate the amount when the losses were legally ascertained.
Again, there is not claim or pretense that Warner, Barnes &
Co. had any authority to act for, and represent the insurance
companies in the pending action, or to appear for them or
make any admission which would bind them. As a local
agent, it could not do that without express authority. That
power could only exercised by an executive officer of the
company, or a person who was duly authorized to act for,
and represent, the company in legal proceedings, and there
is no claim or pretense, either express or implied, that the
defendant has any such authority.
Plaintiff's cause of action, if any, is direct against the
insurance companies that issued the policies and agreed to
pay the losses.
The only defendant in the instant case is "Warner,
Barnes & Co., in its capacity as agents of:" the insurance
companies. Warner, Barnes & Co. did not make any contract
with the plaintiff, and are not liable to the plaintiff on any
contract, either as principal or agent. For such reason,
plaintiff is not entitled to recover its losses from Warner,
Barnes & Co., either as principal or agent. There is no breach
of any contract with the plaintiff by Warners, Barnes & Co.,
either as agent or principal, for the simple reason that
Warner, Barnes & Co., as agent or principal, never made any
contract, oral or written, with the plaintiff. This defense was
promptly raised before the taking of the testimony, and again
renewed on the motion to set aside the judgment.
Plaintiff's own evidence shows that any cause of
action it may have is against the insurance companies which
issued the policies.
The complaint is dismissed, and the judgment of the
lower court is reversed, and one will be entered here in favor
of Warner, Barnes & Co., Ltd., against the plaintiff, for costs
in both this and the lower court. So ordered.
CADWALLADER v SMITH, BELL & COMPANY
7 Phil 461
FACTS:
In this action the plaintiff, as assignee of the Pacific
Export Lumber Company, sues for $3,486, United States
currency, the differences between the amount turned over to
the company on account of a cargo of cedar piles consigned
to the defendants as its agents and afterwards bought by
them, and the amount actually received by them on the
subsequent sale thereof. The defendant were allowed by the
court below a counterclaim of $6,993.80, United States
currency, from which was deducted $2,063.16 for the
plaintiffs claim, leaving a balance in favor of the defendants
of $4,930.64, for the equipment of which, to wit, 9,861.28
pesos, judgment was entered. The defendants have not
appealed. The plaintiff took several exceptions, but on the
argument its counsel stated that its contention was confined
to the allowance by the trial court of the commissions of the
defendant on selling the piling.
In May 1902, the Pacific Export Lumber Company of
Portland shipped upon the steamer Quito five hundred and

AGENCY
eighty-one (581) piles to the defendant, Henry W. Peabody &
Company, at Manila, on the sale of which before storage the
consignees were to receive a commission of one half of
whatever sum was obtained over $15 for each pile and 5 per
cent of the price of the piles sold after storage. After the
arrival of the steamer on August 2, Peabody and Company
wrote the agent of the Pacific Company at Shanghai that for
lack of a demand the piles would have to be sold at
considerably less than $15 apiece; whereupon the company's
agent directed them to make the best possible offer for the
piles, in response to which on August 5 they telegraphed him
an offer of $12 apiece. It was accepted by him on August 6,
in consequence of which the defendant paid the Pacific
Company $6,972.
It afterwards appeared that on July 9 Peabody &
Company had entered into negotiations with the Insular
Purchasing Agent for the sale for the piles at $20 a piece,
resulting of August 4 in the sale to the Government of two
hundred and thirteen (213) piles at $19 each. More of them
were afterwards sold to the Government at the same figure
and the remainder to other parties at carrying prices, the
whole realizing to the defendants $10,41.66, amounting to
$3,445.66 above the amount paid by the defendant to the
plaintiff therefor. Thus it is clear that at the time when the
agents were buying from their principal these piles at $12
apiece on the strength of their representation that no better
price was obtainable, they had already sold a substantial part
of them at $19. In these transactions the defendant, Smith,
Bell & Company, were associated with the defendants, Henry
W. Peabody & Company, who conducted the negotiations,
and are consequently accountable with them.
It is plaint that in concealing from their principal the
negotiations with the Government, resulting in a sale of the
piles at 19 a piece and in misrepresenting the condition of
the market, the agents committed a breach of duty from
which they should benefit. The contract of sale to themselves
thereby induced was founded on their fraud and was subject
to annulment by the aggrieved party. (Civil Code, articles
1265 and 1269.) Upon annulment the parties should be
restored to their original position by mutual restitution.
(Article 1303 and 1306.) Therefore the defendants are not
entitled to retain their commission realized upon the piles
included under the contract so annulled. In respect of the
213 piles, which at the time of the making of this contract on
August 5 they had already sold under the original agency,
their commission should be allowed.
The court below found the net amount due from the
defendants to the plaintiff for the Quito piles, after deducting
the expense of landing the same and $543.10 commission,
was $1,760.88, on which it allowed interest at the rate of 6
per cent from March 1, 1903. This amount should be
increased by the addition thereto of the amount of the
commission disallowed, to wit, $331.17 giving $2,092.05.
Interest computed on this sum to the date of the entry of
judgment below amounts to $359.77, which added to the
principal sum makes $2,241.82, the amount of plaintiff's
claim, which is to be deducted from defendants' counterclaim
of $6,993.80, leaving a balance of $4,541.98, equivalent to
9,083.96 pesos, the amount for which judgment below
should have been entered in favor of the defendants.
Let the judgment of the Court of First Instance be
modified accordingly, without costs to either party.
After expiration of twenty days let judgment be
entered in accordance herewith and ten days thereafter the
record remanded to the court below for proper action. So
ordered.

DIGEST |17

AGENCY
NATIONAL BANK v. BAGAMASPAD
G.R. No. L-3407 June 29, 1951
FACTS:
The plaintiff Philippine National Bank, initiated this
suit in the Court of First Instance of Cotabato for the purpose
of collecting from the defendants Bernardo Bagamaspad and
Bienvenido M. Ferrer who, in the years 1946 and 1947, were
its Agent and Assistant Agent, respectively, in its Cotabato
Agency, the sum of P704,903.18, said to have been
disbursed and released by them as special crop loans,
without authority and in a careless manner to manifestly
insolvent, unqualified or fictitious borrowers, all contrary to
the rules and regulations of the plaintiff Bank.
The theory on which the Bank's claim and complaint
are based is that the two defendants Bagamaspad and Ferrer
acting as Agent and Assistant Agent of the Cotabato Agency,
in granting new crop loans after November 13, 1946, violated
the instructions of the Bank, and that furthermore, in
granting said crop loans, they acted negligently and did not
exercise the care and precaution required of them in order to
prevent the release of crop loans to persons who were
neither qualified borrowers nor entitled to the assistance
being rendered by the Government and the Bank, all contrary
to the rules and regulations issued by the Bank.
In the course of the trial, upon petition of plaintiff's
counsel, the amount of the claim was reduced to
P699,803.57, due to payments made by some of the
borrowers. On March 31, 1949, the trial court rendered
judgment in favor of the plaintiff, ordering both defendants to
pay jointly and severally to it the sum of P699,803.57,
representing the uncollected balance of the special crop
loans improperly released by said defendants, with legal
interest thereon from the date of the filing of the complaint,
plus costs. The two defendants appealed from that decision.
The appeal was first taken to the Court of Appeals but in view
of the amount involved it was certified to this Tribunal by the
said Court of Appeals.
ISSUE:
Whether the appellants, as agents were extremely
lax, negligent and careless in granting new special crop
loans.
HELD:
The lower court as may be seen, severely critcized
and condemned the acts of laxity, negligence and
carelessness of the appellants. But the severity of this
criticism and condemnation would appear to be amply
warranted by the evidence. Out of the numerous acts of
laxity, negligence and carelessness established by the
record, a few cases may be cited.
The evidence shows that in violation of these
instructions and regulations, the defendants released large
loans aggregating P348,768.22 to about 103 borrowers who
were neither landowners or tenants but only public land sales
applicants that is to say, persons who have merely filed
applications to buy public lands.
Appellants in their over-enthusiasm and seemingly
inordinate desire to grant as many loans as possible and in
amounts disproportionate to the needs of the borrowers,
admitted and passed upon more loan applications than they
could properly handle. From July, 1946 to March, 1947 the
total amount of about eight and half (81/2) million pesos was
released in the form of special crop loans to about 5,105
borrowers and this, in a relatively sparsely populated
province like Cotabato.

Also, contrary to the Bank's rules and regulations

regarding the granting of special crops loans, the defendants
allowed intermediaries to intervene in the granting of special
crop loans.
The trial court based the civil liability of the
appellants herein on the provisions of Arts. 1718 and 1719 of
the Civil Code, defining and enumerating the duties and
obligations of an agent and his liability for failure to comply
with such duties, and Art. 259 of the Code of Commerce
which provides that an agent must observe the provisions of
law and regulations with respect to business transactions
entrusted to him otherwise he shall be responsible for the
consequences resulting from their breach or omissions; and
also Art. 1902 of the Civil Code which provides for the liability
of one for his tortious act, that is to say, any act or omission
which causes damage to another by his fault or negligence.
Appellants while agreeing with the meaning and scope of the
legal provisions cited, nevertheless insist that those
provisions are not applicable to them inasmuch as they are
not guilty of any violation of instructions or regulations of the
plaintiff Bank; and that neither are they guilty of negligence
of carelessness as found by the trial court. A careful study
and consideration of the record, however, convinces us and
we agree with the trial court that the defendants-appellants
have not only violated instructions of the plaintiff Bank,
including things which said Bank wanted done or not done,
all of which were fully understood by them, but they
(appellants) also violated standing regulations regarding the
granting of loans; and, what is more, thru their carelessness,
laxity and negligence, they allowed loans to be granted to
persons who were not entitled to receive loans.
In view of all the foregoing, and finding no reversible
error in the decision appealed from, the same is hereby
affirmed with costs against the appellants. So ordered.
GONZALEZ v. E.J. HABERER
G.R. No. L-22604 February 3, 1925
FACTS:
This action is brought to recover the sum of P34,260
alleged to be due the plaintiffs from the defendant upon a
written agreement for the sale of a tract of land situated in
the Province of Nueva Ecija. The plaintiffs also ask for
damages in the sum of P10,000 for the alleged failure of the
defendant to comply with his part of the agreement.
The defendant in his answer admits that of the purchase
price stated in the agreement a balance of P31,000 remains
unpaid, but by way of special defense, cross-complaint and
counter-claim alleges that at the time of entering into the
contract the plaintiffs through false representations lead him
to believe that they were in possession of the land and that
the title to the greater portion thereof was not in dispute;
that on seeking to obtain possession he found that practically
the entire area of the land was occupied by adverse
claimants and the title thereto disputed; that he
consequently has been unable to obtain possession of the
land; and that the plaintiffs have made no efforts to
prosecute the proceedings for the registration of the land. He
therefore asks that the contract be rescinded; that the
plaintiffs be ordered to return to him the P30,000 already
paid by him to them and to pay P25,000 as damages for
breach of the contract.
The court below dismissed the plaintiffs' complaint, declared
the contract rescinded and void and gave the defendant
judgment upon his counterclaim for the sum of P30,000, with
interest from the date upon which the judgment becomes
final. The case is now before this court upon appeal by the
plaintiffs from that judgment.
ISSUE:

DIGEST |18

Whether Gonzalez cannot be charged with the

misrepresentations of Gomez
HELD:
As to the contention that the plaintiff Gonzalez
cannot be charged with the misrepresentations of Gomez, it
is sufficient to say that the latter in negotiating for
the sale of the land acted as the agent and
representative of the other plaintiff, his wife; having
accepted the benefit of the representations of her
agent she cannot, of course, escape liability for them.
(Haskell vs. Starbird, 152 Mass., 117; 23 A.S.R., 809.)
The contention of the appellants that the symbolic
delivery effected by the execution and delivery of the
agreement was a sufficient delivery of the possession of the
land, is also without merit. The possession referred to in the
contract is evidently physical; if it were otherwise it would
not have been necessary to mention it in the contract. (See
Cruzado vs. Bustos and Escaler, 34 Phil., 17.)
The judgment appealed from is in accordance with
the law, is fully sustained by the evidence, and is therefore
affirmed, with the costs against the appellants. So ordered.
COMMERCIAL BANK v REPUBLIC ARMORED CAR
G.R. Nos. L-18223 and L-18224 September 30, 1963

AGENCY
SC holds that this general power attorney to secure
loans from any banking institute was sufficient authority for
Ramon Racelis to obtain the credits subject of the present
suits.
It will be noted furthermore that Racelis, as agent
Damaso Perez, executed the documents evidencing the loans
signing the same "Damaso Perez by Ramon Racelis," and in
the said contracts Damaso Perez agreed jointly and severally
to be responsible for the loans. As the document as signed
makes Perez jointly and severally responsible, there is no
merit in the contention that Perez was only being held liable
as a guarantor.
Furthermore, the promissory notes evidencing the loan
are attached to the complaint in G.R. Nos. L-182 and L18224. If the movant Perez claims that Raceli had no
authority to execute the said promissory notes, the
authenticity of said documents should have been specifically
denied under oath in defendant's answers in the lower court.
This was done; consequently Perez could not and may not
now claim that his agent did not have authority to execute
the loan agreements.
Motion for new trial is denied.
HERMOSA, v EPIFANIO M. LONGARA
G.R. No. L-5267
October 27, 1953

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

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

DIGEST |19

ruling was merely an assumption and the same was not the
actual ruling of the case.
A careful consideration of the condition upon which payment
of the sums advanced was made to depend, "as soon as he
(intestate) receive funds derived from the sale of his property
in Spain," discloses the fact that the condition in question
does not depend exclusively upon the will of the debtor, but
also upon other circumstances beyond his power or control. If
the condition were "if he decides to sell his house." or "if he
likes to pay the sums advanced," or any other condition of
similar import implying that upon him (the debtor) alone
payment would depend, the condition would be protestativa,
dependent exclusively upon his will or discretion. In the form
that the condition was found by the Court of Appeals
however the condition implies that the intestate had already
decided to sell his house, or at least that he had made his
creditors believe that he had done so, and that all that we
needed to make his obligation (to pay his indebtedness)
demandable is that the sale be consummated and the price
thereof remitted to the islands. Note that if the intestate
would prevent or would have prevented the consummation of
the sale voluntarily, the condition would be or would have
been deemed or considered complied with (article 1119, old
Civil Code).The will to sell on the part of the intestate was,
therefore, present in fact, or presumed legally to exist,
although the price and other conditions thereof were still
within his discretion and final approval. But in addition of the
sale to him (the intestate-vendor), there were still other
conditions that had no concur to effect the sale, mainly that
of the presence of a buyer, ready, able and willing to
purchase the property under the conditions demanded by the
intestate. Without such a buyer the sale could not be carried
out or the proceeds thereof sent to the islands. It is evident,
therefore sent to the islands. It is evident, therefore, that the
condition of the obligation was not a purely protestative one,
depending exclusively upon the will of the intestate, but a
mixed one, depending partly upon the will of intestate and
partly upon chance, i.e., the presence of a buyer of the
property for the price and under the conditions desired by
the intestate. The obligation is clearly governed by the
second sentence of article 1115 of the old Civil Code (8
Manresa, 126). The condition is, besides, a suspensive
condition, upon the happening of which the obligation to pay
is made dependent. And upon the happening of the
condition, the debt became immediately due and
demandable.
One other point needs to be considered, and this is
the fact that the sale was not effected in the lifetime of the
debtor (the intestate), but after his death and by his
administrator, the very wife of the claimant. On this last
circumstance we must bear in mind that the Court of Appeals
found no evidence to show that the claim was the product of
a collusion or connivance between the administratrix and the
claimant. That there was really a promise made by the
intestate to pay for the credit advances maybe implied from
the fact that the receipts thereof had been preserved. Had
the advances been made without intention of demanding
their payment later, said receipts would not have been
preserved. Regularity of the advances and the close
relationship between the intestate and the claimant also
support this conclusion.
As to the fact that the suspensive condition took
place after the death of the debtor, and that advances were
made more than ten years before the sale, we supported in
our conclusion that the same is immaterial by Sanchez
Roman, who says, among other things, as to conditional
obligations.
As the obligation retroacts to the date when the
contract was entered into, all amounts advanced from the

AGENCY
time of the agreement became due, upon the happening of
the suspensive condition. As the obligation to pay became
due and demandable only when the house was sold and the
proceeds received in the islands, the action to recover the
same only accrued, within the meaning of the statute of
limitations, on date the money became available here hence
the action to recover the advances has not yet prescribed.
The above considerations dispose of the most important
questions raised on this appeal. It is also contended that the
third group of claims, i.e., credits furnished the intestate's
grandson after his (intestate's) death in 1944, should have
been allowed. We find merit in this contention. Even if
authorization to furnish necessaries to his grandson may
have been given, this authorization could not be made to
extend after his death, for two obvious reasons. First because
the obligation to furnish support is personal and is
extinguished upon the death of the person obliged to give
support(article 150, old Civil Code), and second because
upon the death of a principal (the intestate in this case), his
agent's authority or authorization is deemed terminated
(article 1732, old Civil Code). That part of the decision
allowing this group of claims, amounting to P3,772 should be
reversed.
One last contention of the appellant is that the
claims are barred by the statute of non-claims. It does not
appear from the record that this question was ever raised in
any of the courts below. We are, therefore, without authority
under our rules to consider this issue at this stage of the
proceedings.
The judgment appealed from is hereby affirmed in so far as it
approves the claims of appellee in the amounts of P2,341
and P12,942.12, and reversed as to that of P3,772. Without
costs.

RALLOS v. FELIX GO CHAN

G.R. No. L-24332 January 31, 1978
FACTS:
This is a case of an attorney-in-fact, Simeon Rallos,
who after of his death of his principal, Concepcion Rallos, sold
the latter's undivided share in a parcel of land pursuant to a
power of attorney which the principal had executed in favor.
The administrator of the estate of the went to court to have
the sale declared uneanforceable and to recover the
disposed share. The trial court granted the relief prayed for,
but upon appeal the Court of Appeals uphold the validity of
the sale and the complaint.
Hence, this Petition for Review on certiorari.
Concepcion and Gerundia both surnamed Rallos
were sisters and registered co-owners of a parcel of land
known as Lot No. 5983 of the Cadastral Survey of Cebu
covered by Transfer Certificate of Title No. 11116 of the
Registry of Cebu. On April 21, 1954, the sisters executed a
special power of attorney in favor of their brother, Simeon
Rallos, authorizing him to sell for and in their behalf lot 5983.
On March 3, 1955, Concepcion Rallos died. On September 12,
1955, Simeon Rallos sold the undivided shares of his sisters
Concepcion and Gerundia in lot 5983 to Felix Go Chan & Sons
Realty Corporation for the sum of P10,686.90. The deed of
sale was registered in the Registry of Deeds of Cebu, TCT No.
11118 was cancelled, and a new transfer certificate of Title
No. 12989 was issued in the named of the vendee.
On May 18, 1956 Ramon Rallos as administrator of
the Intestate Estate of Concepcion Rallos filed a complaint
docketed as Civil Case No. R-4530 of the Court of First
Instance of Cebu, praying (1) that the sale of the undivided
share of the deceased Concepcion Rallos in lot 5983 be d

DIGEST |20

unenforceable, and said share be reconveyed to her estate;

(2) that the Certificate of 'title issued in the name of Felix Go
Chan & Sons Realty Corporation be cancelled and another
title be issued in the names of the corporation and the
"Intestate estate of Concepcion Rallos" in equal undivided
and (3) that plaintiff be indemnified by way of attorney's fees
and payment of costs of suit. Named party defendants were
Felix Go Chan & Sons Realty Corporation, Simeon Rallos, and
the Register of Deeds of Cebu, but subsequently, the latter
was dropped from the complaint. The complaint was
amended twice; defendant Corporation's Answer contained a
crossclaim against its co-defendant, Simon Rallos while the
latter filed third-party complaint against his sister, Gerundia
Rallos While the case was pending in the trial court, both
Simon and his sister Gerundia died and they were substituted
by the respective administrators of their estates.
ISSUES:
What is the legal effect of an act performed by an
agent after the death of his principal? Applied more
particularly to the instant case, We have the query. is the
sale of the undivided share of Concepcion Rallos in lot 5983
valid although it was executed by the agent after the death
of his principal? What is the law in this jurisdiction as to the
effect of the death of the principal on the authority of the
agent to act for and in behalf of the latter? Is the fact of
knowledge of the death of the principal a material factor in
determining the legal effect of an act performed after such
death?
HELD:
By reason of the very nature of the relationship
between Principal and agent, agency is extinguished by the
death of the principal or the agent. This is the law in this
jurisdiction.
Manresa commenting on Art. 1709 of the Spanish
Civil Code explains that the rationale for the law is found in
the juridical basis of agency which is representation Them
being an in. integration of the personality of the principal
integration that of the agent it is not possible for the
representation to continue to exist once the death of either is
establish. Pothier agrees with Manresa that by reason of the
nature of agency, death is a necessary cause for its
extinction. Laurent says that the juridical tie between the
principal and the agent is severed ipso jure upon the death of
either without necessity for the heirs of the fact to notify the
agent of the fact of death of the former.
The same rule prevails at common law the death of the
principal effects instantaneous and absolute revocation of
the authority of the agent unless the Power be coupled with
an interest. This is the prevalent rule in American
Jurisprudence where it is well-settled that a power without an
interest confer. red upon an agent is dissolved by the
principal's death, and any attempted execution of the power
afterward is not binding on the heirs or representatives of the
deceased.
In the instant case, it cannot be questioned that the
agent, Simeon Rallos, knew of the death of his principal at
the time he sold the latter's share in Lot No. 5983 to
respondent corporation. The knowledge of the death is
clearly to be inferred from the pleadings filed by Simon Rallos
before the trial court. 12 That Simeon Rallos knew of the
death of his sister Concepcion is also a finding of fact of the
court a quo 13 and of respondent appellate court when the
latter stated that Simon Rallos 'must have known of the
death of his sister, and yet he proceeded with the sale of the
lot in the name of both his sisters Concepcion and Gerundia
Rallos without informing appellant (the realty corporation) of
the death of the former.

AGENCY
On the basis of the established knowledge of Simon
Rallos concerning the death of his principal Concepcion
Rallos, Article 1931 of the Civil Code is inapplicable. The law
expressly requires for its application lack of knowledge on the
part of the agent of the death of his principal; it is not
enough that the third person acted in good faith. Thus in
Buason & Reyes v. Panuyas, the Court applying Article 1738
of the old Civil rode now Art. 1931 of the new Civil Code
sustained the validity , of a sale made after the death of the
principal because it was not shown that the agent knew of
his principal's demise.
Whatever conflict of legal opinion was generated by
Cassiday v. McKenzie in American jurisprudence, no such
conflict exists in our own for the simple reason that our
statute, the Civil Code, expressly provides for two exceptions
to the general rule that death of the principal revokes ipso
jure the agency, to wit: (1) that the agency is coupled with an
interest (Art 1930), and (2) that the act of the agent was
executed without knowledge of the death of the principal and
the third person who contracted with the agent acted also in
good faith (Art. 1931). Exception No. 2 is the doctrine
followed in Cassiday, and again We stress the indispensable
requirement that the agent acted without knowledge or
notice of the death of the principal In the case before Us the
agent Ramon Rallos executed the sale notwithstanding notice
of the death of his principal Accordingly, the agent's act is
unenforceable against the estate of his principal.
IN VIEW OF ALL THE FOREGOING, We set aside the
ecision of respondent appellate court, and We affirm en toto
the judgment rendered by then Hon. Amador E. Gomez of the
Court of First Instance of Cebu, quoted in pages 2 and 3 of
this Opinion, with costs against respondent realty corporation
at all instances.
DE LA PEA v HIDALGO
G.R. No. L-6626
October 6, 1911
FACTS:
This decision concerns the appeals entered under
respective bills of exception by counsel for Jose de la Pea y
de Ramon, the administrator of the estate of the deceased
Jose de la Pea y Gomiz, from the order of the 18th of the
same month, directing that the amount deposited as bond,
by counsel for the intervening attorneys, Chicote & Miranda,
Frederick G. Waite, and C. W. O'Brien, from the said order of
October 18, in so far as it declares that the counterclaim by
the said Hidalgo against de la Pea was presented in his
capacity as administrator of the aforementioned estate and
that the intervener's lien could not avail to prevent the setoff decreed in the said first order appealed from.
After a regular trial in the Court of First Instance of
this city of the case of Jose de la Pea y de Ramon, as
administrator of the estate of his deceased father, Jose de la
Pea y Gomiz, vs. Federico Hidalgo, for the payment of a sum
of money, the record of the proceedings was forwarded to
this court on appeal. By the decision rendered Hidalgo to pay
to Jose de la Pea y de Ramon, as administrator, the sum of
P6,774.50 with legal interest from May 23, 1906, and,
likewise, sentenced the said Jose de la Pea y de Ramon to
pay to Federico Hidalgo, as a counterclaim, the sum of
P9,000, with legal interest thereon from May 21, 1907, the
date of the counterclaim; and affirmed the judgment
appealed from in so far as it was in agreement with the said
decision, and reversed it in so far as it was not in accordance
therewith. That decision became final.
The record of proceedings having been remanded
for execution to the Court of First Instance whence it
originated, the judge, by order of October 14, 1910, decreed
that both amounts for which the defendant Hidalgo and the

DIGEST |21

administrator Pea were mutually liable in concurrent sums,

should off-set each other, and that, consequently, the
plaintiff, Pea y de Ramon, in conformity with the final
decision of this court, was liable for the payment of the
difference between such amounts, or P2,274.93, together
with the interests at 6 per cent from the said date.
At this stage of the proceedings for the execution of
the judgment that had become final, the attorneys for the
said plaintiff, Messrs. Chicote & Miranda, Frederick Garfield
Waite, and C. W. O'Brien represented by C. A. DeWitt, asked
that they be permitted to intervene in the proceedings, as
they held a lien upon the amount awarded in the said
decision of this court, rendered in favor of the plaintiff and
against the defendant, and alleged that the lien which they
held was upon the judgment entered in favor of the plaintiff
in his capacity as administrator, against the defendant; that
the defendant was entitled to the judgment awarded him by
virtue of his counterclaim, yet, in consideration of the fact
that their lien affected the judgment of the lower court, which
was in no wise reversed, the said lien was valid with respect
to any judgment that the plaintiff had obtained against the
defendant, notwithstanding such counterclaim. In spite of the
defendant's opposition, the court, ruling on this incidental
question raised, issued the aforecited order of October 18,
1910.
ISSUE:
Whether the counterclaim by the said Hidalgo
against de la Pea was presented in his capacity as
administrator of the aforementioned estate and that the
intervener's lien could not avail to prevent the set-off
decreed in the said first order appealed from.
HELD:
It is evident, by a simple perusal of the finding of
facts an of the grounds of law of the final decision rendered
in that action, that the same was instituted by Jose de la
Pea y de Ramon, not by himself and in his own
representation, but in his capacity as administrator of the
estate of his deceased father, Jose de la Pea y Gomiz,
demanding payment of certain amounts which, according to
his third mended complaint, the defendant Federico Hidalgo
owed the latter; and it is none the less evident that the
counterclaim presented by the defendant Federico Hidalgo
had for its sole object the collection of a certain sum which
was owing to him by the deceased testator, Jose de la Pea y
Gomiz, and that the plaintiff, Jose de la Pea y de Ramon, per
se and personally, had nothing to do with this debt of the
estate, which concerned him only as such administrator.
If in any place or in any line of said decision mention
was made of the name of the plaintiff Pea y de Ramon
without the title of his office as administrator of the estate, it
probably was because the complaint was filed and the action
was brought by him in his capacity of administrator, and the
counterclaim, also, was directed him as such administrator;
and if in any paragraph the said title of his office was omitted
in designating him, such omission can not serve as a ground
for concluding that the counterclaim allowed and the
sentence imposed in the said decision were against Jose de la
Pea y de Ramon as a private individual and not as the
administrator of the aforementioned estate; and the
sentence contained in the decision referred to can in no wise
be understood to have been made against Jose de la Pea y
de Ramon personally, but in his capacity of administrator of
the estate, which alone was liable for the debt owing to the
defendant; if mention was therein made of the plaintiff by
name, it is because he was the representative of the debtor
estate.

AGENCY
In the aforementioned decision of this court, by which
the complaint and the counterclaim presented by the parties
to the said suit were disposed of, the amount which the
defendant Hidalgo should pay to the administrator of the
estate of the deceased Pea y Gomiz and the sum which the
said administrator, designated by his name of Jose de la Pea
y de Ramon, should, by virtue of the counterclaim, pay to the
defendant, Federico Hidalgo, alone were specified; the
resultant difference, after the set-off should have been made,
was not stated, as it was considered that this merely
arithmetical operation would necessarily be performed in the
course of the execution proceedings by the judge of the
Court of First Instance charged with carrying out the final
decision rendered in the case. This, in fact, he did do in his
order of October 14, by directing that the plaintiff should pay
the said sum, that it, the difference which was found to exist,
after making the set-off between the respective amounts the
litigating parties were sentenced to pay. The failure to state
in the said decision that both debts were set off against each
other up to a concurrent sum, can not avail as a ground for
alleging that the attorneys of the administrator Pea y de
Ramon have acquired a lien on the amount which Hidalgo
should pay to the administrator Pea y de Ramon in
preference to the creditor of the amount that is the subject of
the counterclaim.
If it just be that the estate of the deceased Pea y
Gomiz should collect the amount owing it by Hidalgo, as
determined by final decision, it is equally just that Hidalgo
should have the same right to collect the sum which the said
estate owes him, according to the same decision; therefore,
in order to comply with such decision, determining the two
liabilities directly opposed to each other, it consequently and
logically follows that a set-off of both credits, up to a
concurrent amount, must be affected; and if the lien or the
right to collect professional fees on the part of the attorneys
were superior to the right of the creditor of the estate, the
result would be that the executory decision would not be
complied with; there would then be no set-off and the
defendant would be compelled to pay to the said
administrator his debt to the estate, through the
aforementioned lien of the intervening attorneys, but could
not collect, nor apply to the payment of the credit owing him
by the same estate, the amount of his debt to the latter; this
would be illegal and opposed to the most rudimentary
principles of justice and, furthermore, would be an absurdity
and contrary to common sense
The judgment appealed from having been reversed
with respect to that portion thereof relative to the liability
asked by the administrator of the estate to be laid against
Federico Hidalgo, the sole judgment to be executed is that
contained in the decision rendered in second instance and in
this decision, as has been shown; and the result, in short, has
been in no wise favorable to the plaintiff because, instead of
being able to collect the amount of his credit owing by
Hidalgo to the estate, he still finds himself obliged to pay the
defendant the difference resulting from the set-off to which
the counterclaim, made by the latter for a greater sum, gave
rise; and therefore, the right claimed by the appellant
attorneys to collect their fees out of the amount awarded to
the said administrator, is in all respects unsustainable,
inasmuch as, in consequence of the counterclaim, there was
a set-off against that amount and the plaintiff has nothing to
collect, but, on the contrary, is still liable for the difference
which was found to exist after the reciprocal debts of both
parties had been set off against each other.
The right of attorneys for the administrator Pea y de
Ramon, to collect fees for professional service, under section
37 of the Code of Civil Procedure, is restricted to the personal

DIGEST |22

founds of their client, to amounts awarded to the latter by

final decision, but does not comprise sums of money which,
according to the same decision, must be applied to be made
in such decision by virtue of a prior counterclaim.1awphil.net
We know of no legal provision which grants to the
attorneys for the losing party in a suit, or who has not
obtained a judgment authorizing him to collect money from
the adverse party, the privilege of collecting their
professional fees with preference over, and better right then,
the said adverse party, the legitimate creditor of the said
attorneys' client.
The suit was prosecuted for the collection of amounts
which both parties reciprocally were owing each other, and a
decision was rendered deciding the complaint and the
counterclaim and determining the sums which the litigating
parties must mutually pay; therefore, the final judgment
must be executed, as provided by the trial judge, pursuant to
its terms, and no impediment to such execution can be had
in the improper contention made by the appellant attorneys,
who can invoke no law or just reason which authorizes them
to collect their professional fees out of the bond given by
Hidalgo, once the same was not deposited as security for the
payment of the said fees.
For the foregoing reasons, whereby the errors
attributed by the appellant attorneys to the trial judge have
been duly refuted, it is our opinion and we hold that we
should and hereby do affirm the order of October 14, 1910,
and also the order of the 18th of the same month, with the
exception of the final provision of this last order, of October
18, which we reversed and direct tat return be made to
Federico Hidalgo of the sum of P8,500 retained by the clerk
of the court below as a result of the motion of intervention
herein concerned. No special finding is made as to the costs.
So ordered.

VALERA v. VELASCO
FACTS:
By virtue of the powers of attorney, the defendant
was appointed attorney-in-fact of the said plaintiff with
authority to manage his property in the Philippines,
consisting of the usufruct of a real property located of
Echague Street, City of Manila.
The defendant accepted both powers of attorney,
managed plaintiff's property, reported his operations, and
rendered accounts of his administration; and on March 31,
1923 presented exhibit F to plaintiff, which is the final
account of his administration for said month, wherein it
appears that there is a balance of P3,058.33 in favor of the
plaintiff.
The liquidation of accounts revealed that the plaintiff
owed the defendant P1,100, and as misunderstanding arose
between them, the defendant brought suit against the
plaintiff, civil case No. 23447 of this court. Judgment was
rendered in his favor on March 28, 1923, and after the writ of
execution was issued, the sheriff levied upon the plaintiff's
right of usufruct, sold it at public auction and adjudicated it
to the defendant in payment of all of his claim.
Subsequently, on May 11, 1923, the plaintiff sold his
right of redemption to one Eduardo Hernandez, for the sum
of P200 (Exhibit A). On September 4, 1923, this purchaser
conveyed the same right of redemption, for the sum of P200,
to the plaintiff himself, Federico Valera (Exhibit C).
After the plaintiff had recovered his right of
redemption, one Salvador Vallejo, who had an execution upon
a judgment against the plaintiff rendered in a civil case
against the latter, levied upon said right of redemption,
which was sold by the sheriff at public auction to Salvador

AGENCY
Vallejo for P250 and was definitely adjudicated to him. Later,
he transferred said right of redemption to the defendant
Velasco. This is how the title to the right of usufruct to the
aforementioned property later came to vest the said
defendant.
ISSUE:
Whether one of the ways of terminating an agency is
by the express or tacit renunciation of the agent;
Whether Miguel Velasco was, and at present is, an
authorized representative of the plaintiff Federico Valera
HELD:
The misunderstanding between the plaintiff and the
defendant over the payment of the balance of P1,000 due
the latter, as a result of the liquidation of the accounts
between them arising from the collections by virtue of the
former's usufructuary right, who was the principal, made by
the latter as his agent, and the fact that the said defendant
brought suit against the said principal on March 28, 1928 for
the payment of said balance, more than prove the breach of
the juridical relation between them; for, although the agent
has not expressly told his principal that he renounced the
agency, yet neither dignity nor decorum permits the latter to
continue representing a person who has adopted such an
antagonistic attitude towards him. When the agent filed a
complaint against his principal for recovery of a sum of
money arising from the liquidation of the accounts between
them in connection with the agency, Federico Valera could
not have understood otherwise than that Miguel Velasco
renounced the agency; because his act was more expressive
than words and could not have caused any doubt. (2 C. J.,
543.) In order to terminate their relations by virtue of the
agency the defendant, as agent, rendered his final account
on March 31, 1923 to the plaintiff, as principal.
Briefly, then, the fact that an agent institutes an
action against his principal for the recovery of the balance in
his favor resulting from the liquidation of the accounts
between them arising from the agency, and renders and final
account of his operations, is equivalent to an express
renunciation of the agency, and terminates the juridical
relation between them.
If, as we have found, the defendant-appellee Miguel Velasco,
in adopting a hostile attitude towards his principal, suing him
for the collection of the balance in his favor, resulting from
the liquidation of the agency accounts, ceased ipso facto to
be the agent of the plaintiff-appellant, said agent's purchase
of the aforesaid principal's right of usufruct at public auction
held by virtue of an execution issued upon the judgment
rendered in favor of the former and against the latter, is valid
and legal, and the lower court did not commit the fourth and
fifth assignments of error attributed to it by the plaintiffappellant.
In regard to the third assignment of error, it is
deemed unnecessary to discuss the validity of the sale made
by Federico Valera to Eduardo Hernandez of his right of
redemption in the sale of his usufructuary right made by the
sheriff by virtue of the execution of the judgment in favor of
Miguel Velasco and against the said Federico Valera; and the
same thing is true as to the validity of the resale of the same
right of redemption made by Eduardo Hernandez to Federico
Valera; inasmuch as Miguel Velasco's purchase at public
auction held by virtue of an execution of Federico Valera's
usufructuary right is valid and legal, and as neither the latter
nor Eduardo Hernandez exercised his right of redemption
within the legal period, the purchaser's title became
absolute.

DIGEST |23

Moreover, the defendant-appellee, Miguel Velasco, having

acquired Federico Valera's right of redemption from Salvador
Vallejo, who had acquired it at public auction by virtue of a
writ of execution issued upon the judgment obtained by the
said Vallejo against the said Valera, the latter lost all right to
said usufruct.
And even supposing that Eduardo Hernandez had
been tricked by Miguel Velasco into selling Federico Valera's
right of repurchase to the latter so that Salvador Vallejo
might levy an execution on it, and even supposing that said
resale was null for lack of consideration, yet, inasmuch as
Eduardo Hernandez did not present a third party claim when
the right was levied upon for the execution of the judgment
obtained by Vallejo against Federico Vallera, nor did he file a
complaint to recover said right before the period of
redemption expired, said Eduardo Hernandez, and much less
Federico Valera, cannot now contest the validity of said
resale, for the reason that the one-year period of redemption
has already elapsed.
Neither did the trial court err in not ordering Miguel
Velasco to render a liquidation of accounts from March 31,
1923, inasmuch as he had acquired the rights of the plaintiff
by purchase at the execution sale, and as purchaser, he was
entitled to receive the rents from the date of the sale until
the date of the repurchase, considering them as part of the
redemption price; but not having exercised the right
repurchase during the legal period, and the title of the
repurchaser having become absolute, the latter did not have
to account for said rents.
Summarizing, the conclusion is reached that the
disagreements between an agent and his principal with
respect to the agency, and the filing of a civil action by the
former against the latter for the collection of the balance in
favor of the agent, resulting from a liquidation of the agency
accounts, are facts showing a rupture of relations, and the
complaint is equivalent to an express renunciation of the
agency, and is more expressive than if the agent had merely
said, "I renounce the agency."
By virtue of the foregoing, and finding no error in the
judgment appealed from, the same is hereby affirmed in all
its parts, with costs against the appellant. So ordered.
PASNO v. FORTUNATA RAVINA
G.R. No. L-31581
February 3, 1930
FACTS:
Gabina Labitoria during her lifetime mortgaged three
parcels of land to the Philippine National Bank to secure an
indebtedness of P1,600. It was stipulated in the mortgage,
among other things, that the mortgagee "may remove, sell or
dispose of the mortgaged property or any buildings,
improvements or other property in, on or attached to it and
belonging to the mortgagor in accordance with the provisions
of Act No. 3135 or take other legal action that it may deem
necessary." The mortgagor died, and a petition was
presented in court for the probate of her last will and
testament. During the pendency of these proceedings, a
special administrator was appointed by the lower court who
took possession of the estate of the deceased, including the
three parcels of land mortgaged to the Philippine National
Bank. The estate having failed to comply with the conditions
of the mortgage, the Philippine National Bank, pursuant to
the stipulations contained in the same, asked the sheriff of
Tayabas to proceed with the sale of the parcels of land. When
the attorney for the special administrator received notice of
the proposed action, he filed a motion in court in which an
order was asked requiring the sheriff to vacate the
attachment over the mortgaged properties and to abstain
from selling the same. The lower court granted the petition in

AGENCY
an order of February 14, 1929, and later denied a motion for
reconsideration presented on behalf of the Philippine
National Bank.
The mortgage makes special reference to Act No.
3135. That Act is one to regulate the sale of property under
special powers inserted in or annexed to real-estate
mortgages. It fails to make provision regarding the sale of
mortgaged property which is in custodia legis. Under these
circumstances, it would be logical to suppose that the
general provisions of Philippine law would govern this latter
contingency. It is a familiar rule that statutes in pari materia
are to be read together. The legislative body which enacted
Act No. 3135 must be presumed to have been acquainted
with the provisions of such a well known law as the Code of
Civil Procedure and to have passed Act No. 3135 with
reference thereto.
ISSUE:
Whether the right of sale of the mortgaged property
can survive and can be enforced under special power while
the mortgaged property is in custodia legis
HELD:
The power of sale given in a mortgage is a power coupled
with an interest which survives the death of the grantor. One
case, that of Carter vs. Slocomb ([1898], 122 N. C., 475), has
gone so far as to hold that a sale after the death of the
mortgagor is valid without notice to the heirs of the
mortgagor. However that may be, conceding that the power
of sale is not revoked by the death of the mortgagor,
nevertheless in view of the silence of Act No. 3135 and in
view of what is found in section 708 of the Code of Civil
Procedure, it would be preferable to reach the conclusion that
the mortgagee with a power of sale should be made to
foreclose the mortgage in conformity with the procedure
pointed out in section 708 of the Code of Civil Procedure.
That would safeguard the interests of the estate by putting
the estate on notice while it would not jeopardize any rights
of the mortgagee. The only result is to suspend temporarily
the power to sell so as not to interfere with the orderly
administration of the estate of a decedent. A contrary holding
would be inconsistent with the portion of our law governing
the settlement of estates of deceased persons.
It results that the trial judge committed no error in sustaining
the petition of the administrator of the estate of the
deceased Gabina Labitoria and in denying the motion of the
Philippine National Bank.
Agreeable to the foregoing pronouncements, the
judgment and orders appealed from will be affirmed, with
one-half of the costs of this instance against the oppositors
and appellants Fortunata Ravina and Ponciano Ravina, and
the other half of the costs of this instance against the
Philippine National Bank.

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