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J. Makasiar | October 29, 1971 | G.R. No. L-30573
Putative Principal:
Putative Agent:
3rd Party:

Vicente Domingo
Gregorio Domingo
Oscar de Leon

RULING: YES, the failure to tell Vicente of Gregorios

receipt of the propina constitutes fraud as a cause to
forfeiture of the commission.)

FACTS: Vicente (putative principal) granted Gregorio

(putative agent), a real estate broker, the exclusive
agency to sell his lot with the rate of P2.00 per sq.m
(P176,954 total price) with a commission of 5% if (1)
the property is sold by Vicente or by anyone else during
the 30-day duration of the agency or (2) if the property is
sold by Vicente within three months from the
termination of the agency to a purchaser to whom it was
submitted by Gregorio during the continuance of the
agency with notice to Vicente.
On June 3, 1956, Gregorio authorized the intervenor
Teofilo to look for a buyer, promising him one-half of
the 5% commission. Thereafter, Teofilo introduced
Oscar (third-party) to Gregorio as a prospective buyer.


Oscar submitted a written offer which was much lower

than the price of P2.00/sq. m. Vicente directed Gregorio
to tell Oscar de Leon to raise his offer, but instead of
convincing Oscar to raise his offer, he convinced Vicente
to take the offer by Oscar of P1.20/sq.m (total of
P109,000). Oscar then gave Gregorio as a gift or propina
P1,000.00. This gift was not disclosed by Gregorio to
Vicente and neither did Oscar pay Vicente the additional
amount of P1,000.00 by way of earnest money.
The sale of the lot between Oscar and Vicente through
Gregorio did not push through. Gregorio then found out
Vicente sold the lot to Oscars wife, Amparo Diaz. He
conferred with Oscar, who told him Vicente went to him
to eliminate Gregorio in the transaction and he would
sell his property to him for a lower price of P104,000.
He now claims the 5% commission stipulated in their
contract regarding the sale of the same property by
Vicente to the buyer he found. Vicente argues Gregorio
is not entitled to the 5% because he sold the property not
to Gregorio's buyer, Oscar, but to another buyer, Amparo
The CA ruled in favor of Gregorio stating the sale by
Vicente of his property is a sale to Oscar de Leon since
husband and wife have common or identical interests
and that Gregorio and intervenor Teofilo were the
efficient cause in the consummation of the sale.
ISSUE: Whether the failure on the part of Gregorio to
disclose to Vicente the payment to him by Oscar of the
"propina" constitutes fraud as to cause a forfeiture of his
commission on the sale price


The relevant legal provisions are NCC 1891 and

NCC 1909.The aforecited provisions demand the
utmost good faith, fidelity, honesty, candor and
fairness on the part of the agent, the real estate
broker in this case, to his principal, the vendor. The
law imposes upon the agent the absolute obligation
to make a full disclosure or complete account to his
principal of all his transactions and other material
facts relevant to the agency, so much so that the law
as amended does not countenance any stipulation
exempting the agent from such an obligation and
considers such an exemption as void. The duty of
an agent is likened to that of a trustee. This is not
a technical or arbitrary rule but a rule founded on the
highest and truest principle of morality as well as of
the strictest justice.
An agent who takes a secret profit in the nature of a
bonus, gratuity or personal benefit from the vendee,
without revealing the same to his principal, the
vendor, is guilty of a breach of his loyalty to the
principal and forfeits his right to collect the
commission from his principal, even if the principal
does not suffer any injury by reason of such breach
of fidelity, because the rule is to prevent the
possibility of any wrong, not to remedy or repair an
actual damage. By taking such profit or bonus or gift
or propina from the vendee, the agent thereby
assumes a position wholly inconsistent with that of
being an agent for his principal, who has a right to
treat him, insofar as his commission is concerned,
as if no agency had existed. The fact that the
principal may have been benefited by the valuable
services of the said agent does not exculpate the
agent who has only himself to blame for such a
result by reason of his treachery or perfidy.
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.

CA decision REVERSED,