AGENCY FULLTEXT CASES
authority of the agent unless the power be
A. In GENERAL
G.R. No. L-24332 January 31, 1978
RAMON RALLOS, Administrator of the
Estate of CONCEPCION
RALLOS, petitioner,
vs.
FELIX GO CHAN & SONS REALTY
CORPORATION and COURT OF
APPEALS, respondents.
Agency, its concept, essential elements and
characteristics.—By the relationship of agency,
one party called the principal authorizes another
called the agent to act for and in his behalf in
transactions with third persons. The essential
elements of agency are:(l) there is 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; and (4) the agent acts within the scope
of his authority. Agency is basically personal,
representative, and derivative in nature. The
authority of the agent to act emanates from the
powers granted to him by his principal; his act is
the act of the principal if done within the scope
of the authority. “He who acts through another
acts himself.”
Same: Same; Art. 1930 and Art. 1931 of the Civil
Code providing that death of principal or agent
extinguishing agency is only a general rule;
Rationale for the provision.—Reason of the very
nature of the relationship between principal and
agent, agency is extinguished by the death of
the principal. Manresa explains that the
rationale for the law is found in the juridical basis
of agency which is representation. 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
principal 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
coupled with an interest. This is the prevalent
rule in American jurisprudence where it is well-
settled that a power without an interest
conferred upon an agent is dissolved by the
principal’s death, and any attempted execution
of the power afterwards is not binding on the
heirs or representatives of the deceased.
Same; Same; Art. 1930 and Art. 1931 of the Civil
Code exceptions to general rule provided in Art.
1919 of the Civil Code, that death of principal
revokes ipso jure the agency.—Is the general
rule provided for in Art. 1919 that the death of
the principal or of the agent extinguishes the
agency, subject to any exception, and if so, is
the instant case within that exception? That is
the determinative point in issue in this litigation
x x x Articles 1930 and 1931 of the Civil Code
provide the exceptions to the general rule
aforementioned.
Same; Same; Same; Contention that despite
death of principal the act of attorney-in-fact in
selling his principal’s share of the disputed
property is valid and enforceable since the
buyer acted in good faith is untenable because
of the established knowledge of the attorney-in-
fact of the death of his principal; Requisites of
Art. 1931 that despite death of principal and of
agent is valid not complied with.—Under Art.
1931 of the Civil Code, an act done by the agent
after the death of his principal is valid and
effective only under two conditions, viz: (1) that
the agent acted without knowledge of the death
of the principal, and (2) that the third person who
contracted with the agent himself acted in good
faith. Good faith here means that the third
person was not aware of the death of the
principal at the time he contracted with said
agent. These two requisites must concur: the
absence of one will render the act of the agent
invalid and unenforceable. 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. x x x On the basis of the
established knowledge of Simeon Rallos
concerning the death of his principal,
Concepcion Rallos, Article 1931 of the Civil
 AGENCY FULLTEXT CASES
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.
Same; Same; Same; Same; General rule is that
an act of agent after death of his principal is void
ab initio unless the same falls under exceptions
in Arts. 1930 and 1931 of the Civil Code; Art
1931 being an exception to the general rule is to
be strictly construed.—In sustaining the validity
of the sale to respondent corporation, the Court
of Appeals reasoned out that there is no
provision in the Civil Code which provides that
whatever is done by an agent having knowledge
of the death of his principal is void even with
respect to third persons who may have
contracted with him in good faith and without
knowledge of the death of the principal. We
cannot see the merits of the foregoing argument
as it ignores the existence of the general rule
enunciated in Art. 1919 that the death of the
principal extinguishes the agency. That being
the general rule it follows a fortiori that any act
of an agent after the death of his principal is void
ab initio unless the same falls under the
exceptions provided for in the aforementioned
Articles 1930 and 1931. Article 1931, being an
exception to the general rule, is to be strictly
construed; it is not to be given an interpretation
or application beyond the clear import of its
terms for otherwise the courts will be involved in
a process of legislation outside of their judicial
function.
Same; Same; Revocation by an act of the
principal as a mode of terminating agency
distinguished from revocation by operation of
law such as death of principal.—Revocation by
an act of the principal as a mode of terminating
an agency is to be distinguished from revocation
by operation of law such as death of the
principal which obtains in this case. The
decision stressed that by reason of the very
nature of the relationship between principal and
agent, agency is extinguished ipso jure upon the
death of either principal or agent. Although a
revocation of a power of attorney to be effective
must be communicated to the parties
concerned, yet a revocation by operation of law,
such as by death of the principal is, as a rule,
instantaneously effective inasmuch as “by legal
fiction the agent’s exercise of authority is
regarded as an execution of the principal’s
continuing will.” With death, the principal’s will
ceases or is terminated; the source of authority
is extinguished.
Same; Same; Law does not impose a duty on
the heirs of principal to notify agent of death of
principal; If agent dies, his heirs must notify
principal thereof.—The Civil Code does not
impose a duty on the heirs of the principal to
notify the agent of the death of said principal.
What the Code provides in Article 1932 is that,
if the agent dies, his heirs must notify the
principal thereof, and in the meantime adopt
such measures as the circumstances may
demand in the interest of the latter. Hence, the
fact that no notice of the death of the principal
was registered on the certificate of title of the
property in the Office of the Register of Deeds,
is not fatal to the cause of the estate of the
principal.
Same; Same; No parallel can be drawn between
the case of attorney-in-fact who after death of
his principal sold the latter’s share in the land
pursuant to a special power of attorney which
the principal had executed in his favor and that
of an innocent purchaser for value of registered
land.—Holding that the good faith of a third
person in dealing with an agent affords the
former sufficient protection, respondent court
drew a “parallel” between the instant case and
that of an innocent purchaser for value of a
registered land, stating that if a person
purchases a registered land from one who
acquired it in bad faith—even to the extent of
forging or falsifying the deed of sale in his
favor—the registered owner has no recourse
against such innocent purchaser for value but
only against the forger. To support the
correctness of this “parallelism”, respondent
corporation, in its brief, cites the case of
Blondeau, et al. vs. Nano and Vallejo, 61 Phil.
625. x x x The Blondeau decision, however, is
not on all fours with the case before Us because
here We are confronted with one who admittedly
was an agent of his sister and who sold the
 AGENCY FULLTEXT CASES
property of the latter after her death with full
knowledge of such death. The situation is
expressly covered by a provision of law on
agency the terms of which are clear and
unmistakable leaving no room for an
interpretation contrary to its tenor, in the same
manner that the ruling in Blondeau and the
cases cited therein found a basis in Section 55
of the Land Registration Law.
Same; Same; Conflict of legal opinion in
American jurisprudence does not hold true in
Philippine law; Civil Code of the Philippines
expressly provides for two exceptions to general
rule that death of the principal revokes the
agency; Agent’s act of executing the sale of
property despite notice of death of his principal
is unenforceable against the estate of the
principal.—One last point raised by respondent
corporation in support of the appealed decision
is an 1842 ruling of the Supreme Court of
Pennsylvania in Cassiday v. McKenzie wherein
payments made to an agent after the death of
the principal were held to be “good”, “the parties
being ignorant of the death.” Let us take note
that the Opinion of Justice Rogers was premised
on the statement that the parties were ignorant
of the death of the principal. x x x To avoid any
wrong impression which the Opinion in
Cassiday v. McKenzie may evoke, mention may
be made that the above represents the minority
view in American jurisprudence. x x x 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. Rallos vs. Felix Go Chan & Sons
Realty Corporation, 81 SCRA 251, No. L-24332
January 31, 1978
MUÑOZ PALMA, J.:
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.
The following facts are not disputed.
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
 AGENCY FULLTEXT CASES
as Civil Case No. R-4530 of the Court of First
Instance of Cebu, praying (1) that the sale of the
undivided share of the deceased Concepcion
Rallos in lot 5983 be d unenforceable, and said
share be reconveyed to her estate; (2) that the
Certificate of 'title issued in the name of Felix Go
Chan & Sons Realty Corporation be cancelled
and another title be issued in the names of the
corporation and the "Intestate estate of
Concepcion Rallos" in equal undivided and (3)
that plaintiff be indemnified by way of attorney's
fees and payment of costs of suit. Named party
defendants were Felix Go Chan & Sons Realty
Corporation, Simeon Rallos, and the Register of
Deeds of Cebu, but subsequently, the latter was
dropped from the complaint. The complaint was
amended twice; defendant Corporation's
Answer contained a crossclaim against its co-
defendant, Simon Rallos while the latter filed
third-party complaint against his sister,
Gerundia Rallos While the case was pending in
the trial court, both Simon and his sister
Gerundia died and they were substituted by the
respective administrators of their estates.
After trial the court a quo rendered judgment
with the following dispositive portion:
A. On Plaintiffs Complaint —
(1) Declaring the deed of sale, Exh. "C", null and
void insofar as the one-half pro-indiviso share of
Concepcion Rallos in the property in question,
— Lot 5983 of the Cadastral Survey of Cebu —
is concerned;
(2) Ordering the Register of Deeds of Cebu City
to cancel Transfer Certificate of Title No. 12989
covering Lot 5983 and to issue in lieu thereof
another in the names of FELIX GO CHAN &
SONS REALTY CORPORATION and the
Estate of Concepcion Rallos in the proportion of
one-half (1/2) share each pro-indiviso;
(3) Ordering Felix Go Chan & Sons Realty
Corporation to deliver the possession of an
undivided one-half (1/2) share of Lot 5983 to the
herein plaintiff;
(4) Sentencing the defendant Juan T.
Borromeo, administrator of the Estate of Simeon
Rallos, to pay to plaintiff in concept of
reasonable attorney's fees the sum of
P1,000.00; and
(5) Ordering both defendants to pay the costs
jointly and severally.
B. On GO CHANTS Cross-Claim:
(1) Sentencing the co-defendant Juan T.
Borromeo, administrator of the Estate of Simeon
Rallos, to pay to defendant Felix Co Chan &
Sons Realty Corporation the sum of P5,343.45,
representing the price of one-half (1/2) share of
lot 5983;
(2) Ordering co-defendant Juan T. Borromeo,
administrator of the Estate of Simeon Rallos, to
pay in concept of reasonable attorney's fees to
Felix Go Chan & Sons Realty Corporation the
sum of P500.00.
C. On Third-Party Complaint of defendant Juan
T. Borromeo administrator of Estate of Simeon
Rallos, against Josefina Rallos special
administratrix of the Estate of Gerundia Rallos:
(1) Dismissing the third-party complaint without
prejudice to filing either a complaint against the
regular administrator of the Estate of Gerundia
Rallos or a claim in the Intestate-Estate of
Cerundia Rallos, covering the same subject-
matter of the third-party complaint, at bar. (pp.
98-100, Record on Appeal)
Felix Go Chan & Sons Realty Corporation
appealed in due time to the Court of Appeals
from the foregoing judgment insofar as it set
aside the sale of the one-half (1/2) share of
Concepcion Rallos. The appellate tribunal, as
adverted to earlier, resolved the appeal on
November 20, 1964 in favor of the appellant
corporation sustaining the sale in
question. 1 The appellee administrator, Ramon
Rallos, moved for a reconsider of the decision
but the same was denied in a resolution of
March 4, 1965. 2
 AGENCY FULLTEXT CASES
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?
Before proceedings to the issues, We shall
briefly restate certain principles of law relevant
to the matter tinder consideration.
1. It is a basic axiom in civil law embodied in our
Civil Code that no one may contract in the name
of another without being authorized by the latter,
or unless he has by law a right to represent
him. 3 A contract entered into in the name of
another by one who has no authority or the legal
representation or who has acted beyond his
powers, shall be unenforceable, unless it is
ratified, expressly or impliedly, by the person on
whose behalf it has been executed, before it is
revoked by the other contracting party.4 Article
1403 (1) of the same Code also provides:
ART. 1403. The following contracts are
unenforceable, unless they are justified:
(1) Those entered into in the name of another
person by one who hi - been given no authority
or legal representation or who has acted beyond
his powers; ...
Out of the above given principles, sprung the
creation and acceptance of the relationship of
agency whereby one party, caged the principal
(mandante), authorizes another, called the
agent (mandatario), to act for and in his behalf
in transactions with third persons. The essential
elements of agency are: (1) there is 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
agents acts as a representative and not for
himself, and (4) the agent acts within the scope
of his authority. 5
Agency is basically personal representative,
and derivative in nature. The authority of the
agent to act emanates from the powers granted
to him by his principal; his act is the act of the
principal if done within the scope of the
authority. Qui facit per alium facit se. "He who
acts through another acts himself". 6
2. There are various ways of extinguishing
agency, 7 but her We are concerned only with
one cause — death of the principal Paragraph 3
of Art. 1919 of the Civil Code which was taken
from Art. 1709 of the Spanish Civil Code
provides:
ART. 1919. Agency is extinguished.
xxx xxx xxx
3. By the death, civil interdiction, insanity or
insolvency of the principal or of the agent; ...
(Emphasis supplied)
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.8
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. 9
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
 AGENCY FULLTEXT CASES
interest. 10 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. 11
3. Is the general rule provided for in Article 1919
that the death of the principal or of the agent
extinguishes the agency, subject to any
exception, and if so, is the instant case within
that exception? That is the determinative point
in issue in this litigation. It is the contention of
respondent corporation which was sustained by
respondent court that notwithstanding the death
of the principal Concepcion Rallos the act of the
attorney-in-fact, Simeon Rallos in selling the
former's sham in the property is valid and
enforceable inasmuch as the corporation acted
in good faith in buying the property in question.
Articles 1930 and 1931 of the Civil Code provide
the exceptions to the general rule afore-
mentioned.
ART. 1930. The agency shall remain in full force
and effect even after the death of the principal,
if it has been constituted in the common interest
of the latter and of the agent, or in the interest of
a third person who has accepted the stipulation
in his favor.
ART. 1931. Anything done by the agent, without
knowledge of the death of the principal or of any
other cause which extinguishes the agency, is
valid and shall be fully effective with respect to
third persons who may have contracted with him
in good. faith.
Article 1930 is not involved because admittedly
the special power of attorney executed in favor
of Simeon Rallos was not coupled with an
interest.
Article 1931 is the applicable law. Under this
provision, an act done by the agent after the
death of his principal is valid and effective only
under two conditions, viz: (1) that the agent
acted without knowledge of the death of the
principal and (2) that the third person who
contracted with the agent himself acted in good
faith. Good faith here means that the third
person was not aware of the death of the
principal at the time he contracted with said
agent. These two requisites must concur the
absence of one will render the act of the agent
invalid and unenforceable.
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. 14
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. 15 To the same effect is the case
of Herrera, et al., v. Luy Kim Guan, et al., 1961,
where in the words of Justice Jesus Barrera the
Court stated:
... even granting arguemendo that Luis Herrera
did die in 1936, plaintiffs presented no proof and
there is no indication in the record, that the
agent Luy Kim Guan was aware of the death of
his principal at the time he sold the property. The
death 6f the principal does not render the act of
 AGENCY FULLTEXT CASES
an agent unenforceable, where the latter had no
knowledge of such extinguishment of the
agency. (1 SCRA 406, 412)
4. In sustaining the validity of the sale to
respondent consideration the Court of Appeals
reasoned out that there is no provision in the
Code which provides that whatever is done by
an agent having knowledge of the death of his
principal is void even with respect to third
persons who may have contracted with him in
good faith and without knowledge of the death
of the principal. 16
We cannot see the merits of the foregoing
argument as it ignores the existence of the
general rule enunciated in Article 1919 that the
death of the principal extinguishes the agency.
That being the general rule it follows
a fortiorithat any act of an agent after the death
of his principal is void ab initio unless the same
fags under the exception provided for in the
aforementioned Articles 1930 and 1931. Article
1931, being an exception to the general rule, is
to be strictly construed, it is not to be given an
interpretation or application beyond the clear
import of its terms for otherwise the courts will
be involved in a process of legislation outside of
their judicial function.
5. Another argument advanced by respondent
court is that the vendee acting in good faith
relied on the power of attorney which was duly
registered on the original certificate of title
recorded in the Register of Deeds of the
province of Cebu, that no notice of the death
was aver annotated on said certificate of title by
the heirs of the principal and accordingly they
must suffer the consequences of such
omission. 17
To support such argument reference is made to
a portion in Manresa's Commentaries which We
quote:
If the agency has been granted for the purpose
of contracting with certain persons, the
revocation must be made known to them. But if
the agency is general iii nature, without
reference to particular person with whom the
agent is to contract, it is sufficient that the
principal exercise due diligence to make the
revocation of the agency publicity known.
In case of a general power which does not
specify the persons to whom represents' on
should be made, it is the general opinion that all
acts, executed with third persons who
contracted in good faith, Without knowledge of
the revocation, are valid. In such case, the
principal may exercise his right against the
agent, who, knowing of the revocation,
continued to assume a personality which he no
longer had. (Manresa Vol. 11, pp. 561 and 575;
pp. 15-16, rollo)
The above discourse however, treats of
revocation by an act of the principal as a mode
of terminating an agency which is to be
distinguished from revocation by operation of
law such as death of the principal which obtains
in this case. On page six of this Opinion We
stressed that by reason of the very nature of the
relationship between principal and agent,
agency is extinguished ipso jure upon the death
of either principal or agent. Although a
revocation of a power of attorney to be effective
must be communicated to the parties
concerned, 18 yet a revocation by operation of
law, such as by death of the principal is, as a
rule, instantaneously effective inasmuch as "by
legal fiction the agent's exercise of authority is
regarded as an execution of the
principal's continuing will. 19 With death, the
principal's will ceases or is the of authority is
extinguished.
The Civil Code does not impose a duty on the
heirs to notify the agent of the death of the
principal What the Code provides in Article 1932
is that, if the agent die his heirs must notify the
principal thereof, and in the meantime adopt
such measures as the circumstances may
demand in the interest of the latter. Hence, the
fact that no notice of the death of the principal
was registered on the certificate of title of the
property in the Office of the Register of Deeds,
is not fatal to the cause of the estate of the
principal
 AGENCY FULLTEXT CASES
6. Holding that the good faith of a third person in
said with an agent affords the former sufficient
protection, respondent court drew a "parallel"
between the instant case and that of an innocent
purchaser for value of a land, stating that if a
person purchases a registered land from one
who acquired it in bad faith — even to the extent
of foregoing or falsifying the deed of sale in his
favor — the registered owner has no recourse
against such innocent purchaser for value but
only against the forger. 20
To support the correctness of this respondent
corporation, in its brief, cites the case
of Blondeau, et al., v. Nano and Vallejo, 61 Phil.
625. We quote from the brief:
In the case of Angel Blondeau et al. v. Agustin
Nano et al., 61 Phil. 630, one Vallejo was a co-
owner of lands with Agustin Nano. The latter had
a power of attorney supposedly executed by
Vallejo Nano in his favor. Vallejo delivered to
Nano his land titles. The power was registered
in the Office of the Register of Deeds. When the
lawyer-husband of Angela Blondeau went to
that Office, he found all in order including the
power of attorney. But Vallejo denied having
executed the power The lower court sustained
Vallejo and the plaintiff Blondeau appealed.
Reversing the decision of the court a quo, the
Supreme Court, quoting the ruling in the case
of Eliason v. Wilborn, 261 U.S. 457, held:
But there is a narrower ground on which the
defenses of the defendant- appellee must be
overruled. Agustin Nano had possession of
Jose Vallejo's title papers. Without those title
papers handed over to Nano with the
acquiescence of Vallejo, a fraud could not have
been perpetuated. When Fernando de la
Canters, a member of the Philippine Bar and the
husband of Angela Blondeau, the principal
plaintiff, searched the registration record, he
found them in due form including the power of
attorney of Vallajo in favor of Nano. If this had
not been so and if thereafter the proper notation
of the encumbrance could not have been made,
Angela Blondeau would not have sent
P12,000.00 to the defendant Vallejo.' An
executed transfer of registered lands placed by
the registered owner thereof in the hands of
another operates as a representation to a third
party that the holder of the transfer is authorized
to deal with the land.
As between two innocent persons, one of whom
must suffer the consequence of a breach of
trust, the one who made it possible by his act of
coincidence bear the loss. (pp. 19-21)
The Blondeau decision, however, is not on all
fours with the case before Us because here We
are confronted with one who admittedly was an
agent of his sister and who sold the property of
the latter after her death with full knowledge of
such death. The situation is expressly covered
by a provision of law on agency the terms of
which are clear and unmistakable leaving no
room for an interpretation contrary to its tenor, in
the same manner that the ruling in Blondeau
and the cases cited therein found a basis in
Section 55 of the Land Registration Law which
in part provides:
xxx xxx xxx
The production of the owner's duplicate
certificate whenever any voluntary instrument is
presented for registration shall be conclusive
authority from the registered owner to the
register of deeds to enter a new certificate or to
make a memorandum of registration in
accordance with such instruments, and the new
certificate or memorandum Shall be binding
upon the registered owner and upon all persons
claiming under him in favor of every purchaser
for value and in good faith: Provided however,
That in all cases of registration provided by
fraud, the owner may pursue all his legal and
equitable remedies against the parties to such
fraud without prejudice, however, to the right, of
any innocent holder for value of a certificate of
title. ... (Act No. 496 as amended)
7. One last point raised by respondent
corporation in support of the appealed decision
is an 1842 ruling of the Supreme Court of
Pennsylvania in Cassiday v. McKenzie wherein
payments made to an agent after the death of
the principal were held to be "good", "the parties
 AGENCY FULLTEXT CASES
being ignorant of the death". Let us take note
that the Opinion of Justice Rogers was premised
on the statement that the parties were ignorant
of the death of the principal. We quote from that
decision the following:
... Here the precise point is, whether a payment
to an agent when the Parties are ignorant of the
death is a good payment. in addition to the case
in Campbell before cited, the same judge Lord
Ellenboruogh, has decided in 5 Esp. 117, the
general question that a payment after the death
of principal is not good. Thus, a payment of
sailor's wages to a person having a power of
attorney to receive them, has been held void
when the principal was dead at the time of the
payment. If, by this case, it is meant merely to
decide the general proposition that by operation
of law the death of the principal is a revocation
of the powers of the attorney, no objection can
be taken to it. But if it intended to say that his
principle applies where there was 110 notice of
death, or opportunity of twice I must be
permitted to dissent from it.
... That a payment may be good today, or bad
tomorrow, from the accident circumstance of the
death of the principal, which he did not know,
and which by no possibility could he know? It
would be unjust to the agent and unjust to the
debtor. In the civil law, the acts of the agent,
done bona fide in ignorance of the death of his
principal are held valid and binding upon the
heirs of the latter. The same rule holds in the
Scottish law, and I cannot believe the common
law is so unreasonable... (39 Am. Dec. 76, 80,
81; emphasis supplied)
To avoid any wrong impression which the
Opinion in Cassiday v. McKenzie may evoke,
mention may be made that the above
represents the minority view in American
jurisprudence. Thus in Clayton v. Merrett, the
Court said.—
There are several cases which seem to hold that
although, as a general principle, death revokes
an agency and renders null every act of the
agent thereafter performed, yet that where a
payment has been made in ignorance of the
death, such payment will be good. The leading
case so holding is that of Cassiday v. McKenzie,
4 Watts & S. (Pa) 282, 39 Am. 76, where, in an
elaborate opinion, this view ii broadly
announced. It is referred to, and seems to have
been followed, in the case of Dick v. Page, 17
Mo. 234, 57 AmD 267; but in this latter case it
appeared that the estate of the deceased
principal had received the benefit of the money
paid, and therefore the representative of the
estate might well have been held to be estopped
from suing for it again. . . . These cases, in so
far, at least, as they announce the doctrine
under discussion, are exceptional. The
Pennsylvania Case, supra (Cassiday v.
McKenzie 4 Watts & S. 282, 39 AmD 76), is
believed to stand almost, if not quite, alone in
announcing the principle in its broadest scope.
(52, Misc. 353, 357, cited in 2 C.J. 549)
So also in Travers v. Crane, speaking
of Cassiday v. McKenzie, and pointing out that
the opinion, except so far as it related to the
particular facts, was a mere dictum, Baldwin J.
said:
The opinion, therefore, of the learned Judge
may be regarded more as an extrajudicial
indication of his views on the general subject,
than as the adjudication of the Court upon the
point in question. But accordingly all power
weight to this opinion, as the judgment of a of
great respectability, it stands alone among
common law authorities and is opposed by an
array too formidable to permit us to following it.
(15 Cal. 12,17, cited in 2 C.J. 549)
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
 AGENCY FULLTEXT CASES

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.

So Ordered.
 AGENCY FULLTEXT CASES
G.R. No. 76931 May 29, 1991
ORIENT AIR SERVICES & HOTEL
REPRESENTATIVES, petitioner,
vs.
COURT OF APPEALS and AMERICAN AIR-
LINES INCORPORATED, respondents.
G.R. No. 76933 May 29, 1991
AMERICAN AIRLINES,
INCORPORATED, petitioner,
vs.
COURT OF APPEALS and ORIENT AIR
SERVICES & HOTEL REPRESENTATIVES,
INCORPORATED,respondents
Agency; An agent-principal relationship can only
be effected with the consent of the principal, and
must not, in any way be compelled by law or by
any court.—By affirming this ruling of the trial
court, respondent appellate court, in effect,
compels American Air to extend its personality
to Orient Air. Such would be violative of the
principles and essence of agency, defined by
law as a contract whereby “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.” (emphasis
supplied) In an agent-principal relationship, the
personality of the principal is extended through
the facility of the agent. In so doing, the agent,
by legal fiction, becomes the principal,
authorized to perform all acts which the latter
would have him do. Such a relationship can only
be effected with the consent of the principal,
which must not, in any way, be compelled by law
or by any court. The Agreement itself between
the parties states that “either party may
terminate the Agreement without cause by
giving the other 30 days’ notice by letter,
telegram or cable.” (emphasis supplied) We,
therefore, set aside the portion of the ruling of
the respondent appellate court reinstating
Orient Air as general sales agent of American
Air. Orient-Air Services and Hotel
Representatives vs. Court of Appeals, 197
SCRA 645, G.R. No. 76931, G.R. No. 76933
May 29, 1991
PADILLA, J.:
This case is a consolidation of two (2) petitions
for review on certiorari of a decision1 of the
Court of Appeals in CA-G.R. No. CV-04294,
entitled "American Airlines, Inc. vs. Orient Air
Services and Hotel Representatives, Inc." which
affirmed, with modification, the decision2 of the
Regional Trial Court of Manila, Branch IV, which
dismissed the complaint and granted therein
defendant's counterclaim for agent's overriding
commission and damages.
The antecedent facts are as follows:
On 15 January 1977, American Airlines, Inc.
(hereinafter referred to as American Air), an air
carrier offering passenger and air cargo
transportation in the Philippines, and Orient Air
Services and Hotel Representatives (hereinafter
referred to as Orient Air), entered into a General
Sales Agency Agreement (hereinafter referred
to as the Agreement), whereby the former
authorized the latter to act as its exclusive
general sales agent within the Philippines for the
sale of air passenger transportation. Pertinent
provisions of the agreement are reproduced, to
wit:
WITNESSETH
In consideration of the mutual convenants
herein contained, the parties hereto agree as
follows:
1. Representation of American by Orient Air
Services
Orient Air Services will act on American's behalf
as its exclusive General Sales Agent within the
Philippines, including any United States military
installation therein which are not serviced by an
Air Carrier Representation Office (ACRO), for
the sale of air passenger transportation. The
services to be performed by Orient Air Services
shall include:
 AGENCY FULLTEXT CASES
(a) soliciting and promoting passenger traffic for
the services of American and, if necessary,
employing staff competent and sufficient to do
so;
(b) providing and maintaining a suitable area in
its place of business to be used exclusively for
the transaction of the business of American;
(c) arranging for distribution of American's
timetables, tariffs and promotional material to
sales agents and the general public in the
assigned territory;
(d) servicing and supervising of sales agents
(including such sub-agents as may be
appointed by Orient Air Services with the prior
written consent of American) in the assigned
territory including if required by American the
control of remittances and commissions
retained; and
(e) holding out a passenger reservation facility
to sales agents and the general public in the
assigned territory.
In connection with scheduled or non-scheduled
air passenger transportation within the United
States, neither Orient Air Services nor its sub-
agents will perform services for any other air
carrier similar to those to be performed
hereunder for American without the prior written
consent of American. Subject to periodic
instructions and continued consent from
American, Orient Air Services may sell air
passenger transportation to be performed within
the United States by other scheduled air carriers
provided American does not provide
substantially equivalent schedules between the
points involved.
xxx xxx xxx
4. Remittances
Orient Air Services shall remit in United States
dollars to American the ticket stock or exchange
orders, less commissions to which Orient Air
Services is entitled hereunder, not less
frequently than semi-monthly, on the 15th and
last days of each month for sales made during
the preceding half month.
All monies collected by Orient Air Services for
transportation sold hereunder on American's
ticket stock or on exchange orders, less
applicable commissions to which Orient Air
Services is entitled hereunder, are the property
of American and shall be held in trust by Orient
Air Services until satisfactorily accounted for to
American.
5. Commissions
American will pay Orient Air Services
commission on transportation sold hereunder by
Orient Air Services or its sub-agents as follows:
(a) Sales agency commission
American will pay Orient Air Services a sales
agency commission for all sales of
transportation by Orient Air Services or its sub-
agents over American's services and any
connecting through air transportation, when
made on American's ticket stock, equal to the
following percentages of the tariff fares and
charges:
(i) For transportation solely between points
within the United States and between such
points and Canada: 7% or such other rate(s) as
may be prescribed by the Air Traffic Conference
of America.
(ii) For transportation included in a through ticket
covering transportation between points other
than those described above: 8% or such other
rate(s) as may be prescribed by the International
Air Transport Association.
(b) Overriding commission
In addition to the above commission American
will pay Orient Air Services an overriding
commission of 3% of the tariff fares and charges
for all sales of transportation over American's
service by Orient Air Service or its sub-agents.
xxx xxx xxx
 AGENCY FULLTEXT CASES
10. Default
If Orient Air Services shall at any time default in
observing or performing any of the provisions of
this Agreement or shall become bankrupt or
make any assignment for the benefit of or enter
into any agreement or promise with its creditors
or go into liquidation, or suffer any of its goods
to be taken in execution, or if it ceases to be in
business, this Agreement may, at the option of
American, be terminated forthwith and
American may, without prejudice to any of its
rights under this Agreement, take possession of
any ticket forms, exchange orders, traffic
material or other property or funds belonging to
American.
11. IATA and ATC Rules
The provisions of this Agreement are subject to
any applicable rules or resolutions of the
International Air Transport Association and the
Air Traffic Conference of America, and such
rules or resolutions shall control in the event of
any conflict with the provisions hereof.
xxx xxx xxx
13. Termination
American may terminate the Agreement on two
days' notice in the event Orient Air Services is
unable to transfer to the United States the funds
payable by Orient Air Services to American
under this Agreement. Either party may
terminate the Agreement without cause by
giving the other 30 days' notice by letter,
telegram or cable.
xxx xxx x x x3
On 11 May 1981, alleging that Orient Air had
reneged on its obligations under the Agreement
by failing to promptly remit the net proceeds of
sales for the months of January to March 1981
in the amount of US $254,400.40, American Air
by itself undertook the collection of the proceeds
of tickets sold originally by Orient Air and
terminated forthwith the Agreement in
accordance with Paragraph 13 thereof
(Termination). Four (4) days later, or on 15 May
1981, American Air instituted suit against Orient
Air with the Court of First Instance of Manila,
Branch 24, for Accounting with Preliminary
Attachment or Garnishment, Mandatory
Injunction and Restraining Order4 averring the
aforesaid basis for the termination of the
Agreement as well as therein defendant's
previous record of failures "to promptly settle
past outstanding refunds of which there were
available funds in the possession of the
defendant, . . . to the damage and prejudice of
plaintiff."5
In its Answer6 with counterclaim dated 9 July
1981, defendant Orient Air denied the material
allegations of the complaint with respect to
plaintiff's entitlement to alleged unremitted
amounts, contending that after application
thereof to the commissions due it under the
Agreement, plaintiff in fact still owed Orient Air a
balance in unpaid overriding commissions.
Further, the defendant contended that the
actions taken by American Air in the course of
terminating the Agreement as well as the
termination itself were untenable, Orient Air
claiming that American Air's precipitous conduct
had occasioned prejudice to its business
interests.
Finding that the record and the evidence
substantiated the allegations of the defendant,
the trial court ruled in its favor, rendering a
decision dated 16 July 1984, the dispositive
portion of which reads:
WHEREFORE, all the foregoing premises
considered, judgment is hereby rendered in
favor of defendant and against plaintiff
dismissing the complaint and holding the
termination made by the latter as affecting the
GSA agreement illegal and improper and order
the plaintiff to reinstate defendant as its general
sales agent for passenger tranportation in the
Philippines in accordance with said GSA
agreement; plaintiff is ordered to pay defendant
the balance of the overriding commission on
total flown revenue covering the period from
March 16, 1977 to December 31, 1980 in the
amount of US$84,821.31 plus the additional
amount of US$8,000.00 by way of proper 3%
 AGENCY FULLTEXT CASES
overriding commission per month commencing
from January 1, 1981 until such reinstatement
or said amounts in its Philippine peso equivalent
legally prevailing at the time of payment plus
legal interest to commence from the filing of the
counterclaim up to the time of payment. Further,
plaintiff is directed to pay defendant the amount
of One Million Five Hundred Thousand
(Pl,500,000.00) pesos as and for exemplary
damages; and the amount of Three Hundred
Thousand (P300,000.00) pesos as and by way
of attorney's fees.
Costs against plaintiff.7
On appeal, the Intermediate Appellate Court
(now Court of Appeals) in a decision
promulgated on 27 January 1986, affirmed the
findings of the court a quo on their material
points but with some modifications with respect
to the monetary awards granted. The dispositive
portion of the appellate court's decision is as
follows:
WHEREFORE, with the following modifications
— attorney's fees, but granted insofar as the rate
1) American is ordered to pay Orient the sum
of US$53,491.11 representing the balance of
the latter's overriding commission covering the
period March 16, 1977 to December 31,
1980, or its Philippine peso equivalent in
accordance with the official rate of exchange
legally prevailing on July 10, 1981, the date the
counterclaim was filed;
2) American is ordered to pay Orient the sum of
US$7,440.00 as the latter's overriding
commission per month starting January 1,
1981 until date of termination, May 9, 1981 or its
Philippine peso equivalent in accordance with
the official rate of exchange legally prevailing on
July 10, 1981, the date the counterclaim was
filed
3) American is ordered to pay interest of 12% on
said amounts from July 10, 1981 the date the
answer with counterclaim was filed, until full
payment;
4) American is ordered to pay Orient exemplary
damages of P200,000.00;
5) American is ordered to pay Orient the sum of
P25,000.00 as attorney's fees.
the rest of the appealed decision is affirmed.
Costs against American.8
American Air moved for reconsideration of the
aforementioned decision, assailing the
substance thereof and arguing for its reversal.
The appellate court's decision was also the
subject of a Motion for Partial Reconsideration
by Orient Air which prayed for the restoration of
the trial court's ruling with respect to the
monetary awards. The Court of Appeals, by
resolution promulgated on 17 December 1986,
denied American Air's motion and with respect
to that of Orient Air, ruled thus:
Orient's motion for partial reconsideration is
denied insofar as it prays for affirmance of the
trial court's award of exemplary damages and
of exchange is concerned. The decision of
January 27, 1986 is modified in paragraphs (1)
and (2) of the dispositive part so that the
payment of the sums mentioned therein shall be
at their Philippine peso equivalent in
accordance with the official rate of exchange
legally prevailing on the date of actual payment.9
Both parties appealed the aforesaid resolution
and decision of the respondent court, Orient Air
as petitioner in G.R. No. 76931 and American
Air as petitioner in G.R. No. 76933. By
resolution10 of this Court dated 25 March 1987
both petitions were consolidated, hence, the
case at bar.
The principal issue for resolution by the Court is
the extent of Orient Air's right to the 3%
overriding commission. It is the stand of
American Air that such commission is based
only on sales of its services actually negotiated
or transacted by Orient Air, otherwise referred to
as "ticketed sales." As basis thereof, primary
reliance is placed upon paragraph 5(b) of the
 AGENCY FULLTEXT CASES
Agreement which, in reiteration, is quoted as
follows:
5. Commissions
a) . . .
b) Overriding Commission
In addition to the above commission, American
will pay Orient Air Services an overriding
commission of 3% of the tariff fees and charges
for all sales of transportation over American's
services by Orient Air Services or itssub-
agents. (Emphasis supplied)
Since Orient Air was allowed to carry only the
ticket stocks of American Air, and the former not
having opted to appoint any sub-agents, it is
American Air's contention that Orient Air can
claim entitlement to the disputed overriding
commission based only on ticketed sales. This
is supposed to be the clear meaning of the
underscored portion of the above provision.
Thus, to be entitled to the 3% overriding
commission, the sale must be made by Orient
Air and the sale must be done with the use of
American Air's ticket stocks.
On the other hand, Orient Air contends that the
contractual stipulation of a 3% overriding
commission covers the total revenue of
American Air and not merely that derived from
ticketed sales undertaken by Orient Air. The
latter, in justification of its submission, invokes
its designation as the exclusive General Sales
Agent of American Air, with the corresponding
obligations arising from such agency, such as,
the promotion and solicitation for the services of
its principal. In effect, by virtue of such
exclusivity, "all sales of transportation over
American Air's services are necessarily by
Orient Air."11
It is a well settled legal principle that in the
interpretation of a contract, the entirety thereof
must be taken into consideration to ascertain
the meaning of its provisions.12 The various
stipulations in the contract must be read
together to give effect to all.13 After a careful
examination of the records, the Court finds merit
in the contention of Orient Air that the
Agreement, when interpreted in accordance
with the foregoing principles, entitles it to the 3%
overriding commission based on total revenue,
or as referred to by the parties, "total flown
revenue."
As the designated exclusive General Sales
Agent of American Air, Orient Air was
responsible for the promotion and marketing of
American Air's services for air passenger
transportation, and the solicitation of sales
therefor. In return for such efforts and services,
Orient Air was to be paid commissions of two (2)
kinds: first, a sales agency commission, ranging
from 7-8% of tariff fares and charges from sales
by Orient Air when made on American Air ticket
stock; and second, an overriding commission of
3% of tariff fares and charges for all sales of
passenger transportation over American Air
services. It is immediately observed that the
precondition attached to the first type of
commission does not obtain for the second type
of commissions. The latter type of commissions
would accrue for sales of American Air services
made not on its ticket stock but on the ticket
stock of other air carriers sold by such carriers
or other authorized ticketing facilities or travel
agents. To rule otherwise, i.e., to limit the basis
of such overriding commissions to sales from
American Air ticket stock would erase any
distinction between the two (2) types of
commissions and would lead to the absurd
conclusion that the parties had entered into a
contract with meaningless provisions. Such an
interpretation must at all times be avoided with
every effort exerted to harmonize the entire
Agreement.
An additional point before finally disposing of
this issue. It is clear from the records that
American Air was the party responsible for the
preparation of the Agreement. Consequently,
any ambiguity in this "contract of adhesion" is to
be taken "contra proferentem", i.e., construed
against the party who caused the ambiguity and
could have avoided it by the exercise of a little
more care. Thus, Article 1377 of the Civil Code
provides that the interpretation of obscure words
or stipulations in a contract shall not favor the
 AGENCY FULLTEXT CASES
party who caused the obscurity.14 To put it
differently, when several interpretations of a
provision are otherwise equally proper, that
interpretation or construction is to be adopted
which is most favorable to the party in whose
favor the provision was made and who did not
cause the ambiguity.15 We therefore agree with
the respondent appellate court's declaration
that:
Any ambiguity in a contract, whose terms are
susceptible of different interpretations, must be
read against the party who drafted it.16
We now turn to the propriety of American Air's
termination of the Agreement. The respondent
appellate court, on this issue, ruled thus:
It is not denied that Orient withheld remittances
but such action finds justification from
paragraph 4 of the Agreement, Exh. F, which
provides for remittances to American less
commissions to which Orient is entitled, and
from paragraph 5(d) which specifically allows
Orient to retain the full amount of its
commissions. Since, as stated ante, Orient is
entitled to the 3% override. American's premise,
therefore, for the cancellation of the Agreement
did not exist. . . ."
We agree with the findings of the respondent
appellate court. As earlier established, Orient
Air was entitled to an overriding commission
based on total flown revenue. American Air's
perception that Orient Air was remiss or in
default of its obligations under the Agreement
was, in fact, a situation where the latter acted in
accordance with the Agreement—that of
retaining from the sales proceeds its accrued
commissions before remitting the balance to
American Air. Since the latter was still obligated
to Orient Air by way of such commissions. Orient
Air was clearly justified in retaining and refusing
to remit the sums claimed by American Air. The
latter's termination of the Agreement was,
therefore, without cause and basis, for which it
should be held liable to Orient Air.
On the matter of damages, the respondent
appellate court modified by reduction the trial
court's award of exemplary damages and
attorney's fees. This Court sees no error in such
modification and, thus, affirms the same.
It is believed, however, that respondent
appellate court erred in affirming the rest of the
decision of the trial court.1âwphi1We refer
particularly to the lower court's decision ordering
American Air to "reinstate defendant as its
general sales agent for passenger
transportation in the Philippines in accordance
with said GSA Agreement."
By affirming this ruling of the trial court,
respondent appellate court, in effect, compels
American Air to extend its personality to Orient
Air. Such would be violative of the principles and
essence of agency, defined by law as a contract
whereby "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 .17 (emphasis
supplied) In an agent-principal relationship, the
personality of the principal is extended through
the facility of the agent. In so doing, the agent,
by legal fiction, becomes the principal,
authorized to perform all acts which the latter
would have him do. Such a relationship can only
be effected with the consent of the principal,
which must not, in any way, be compelled by law
or by any court. The Agreement itself between
the parties states that "either party may
terminate the Agreementwithout cause by
giving the other 30 days' notice by letter,
telegram or cable." (emphasis supplied) We,
therefore, set aside the portion of the ruling of
the respondent appellate court reinstating
Orient Air as general sales agent of American
Air.
WHEREFORE, with the foregoing modification,
the Court AFFIRMS the decision and resolution
of the respondent Court of Appeals, dated 27
January 1986 and 17 December 1986,
respectively. Costs against petitioner American
Air.
 AGENCY FULLTEXT CASES
AIR FRANCE, petitioner,
vs.
HONORABLE COURT OF APPEALS, JOSE
G. GANA (Deceased), CLARA A. GANA,
RAMON GANA, MANUEL GANA, MARIA
TERESA GANA, ROBERTO GANA, JAIME
JAVIER GANA, CLOTILDE VDA. DE
AREVALO, and EMILY SAN
JUAN, respondents.
Same; Same; Agency; Notice to travel agent of
rejection of request for extension of validity of
plane tickets, also notice to the principals.—The
GANAS cannot defend by contending lack of
knowledge of those rules since the evidence
bears out that Teresita, who handled travel
arrangements for the GANAS, was duly
informed by travel agent Ella of the advice of
Rillo, the Office Manager of Air France, that the
tickets in question could not be extended
beyond the period of their validity without paying
the fare differentials and additional travel taxes
brought about by the increased fare rate and
travel taxes. The ruling relied on by respondent
Appellate Court, therefore, in KLM vs. Court of
Appeals, 65 SCRA 237 (1975), holding that it
would be unfair to charge respondents therein
with automatic knowledge or notice of
conditions in contracts of adhesion, is
inapplicable. To all legal intents and purposes,
Teresita was the agent of the GANAS and notice
to her of the rejection of the request for
extension of the validity of the tickets was notice
to the GANAS, her principals.
Same; Same; Ratification, not a case of; Fact
that passengers allowed to leave by airport
ticket counter personnel, not implied ratification
of irregular actuations of travel agent.—The
circumstance that AIR FRANCE personnel at
the ticket counter in the airport allowed the
GANAS to leave is not tantamount to an implied
ratification of travel agent Ella's irregular
actuations. It should be recalled that the GANAS
left Manila the day before the expiry date of their
tickets and that "other arrangements" were to be
made with respect to the remaining segments.
Besides, the validating stickers that Ella affixed
on his own merely reflect the status of
reservations on the specified flight and could not
legally serve to extend the validity of a ticket or
revive an expired one. Air France vs. Court of
Appeals, 126 SCRA 448, No. L- 57339
December 29, 1983
MELENCIO-HERRERA, J.:
In this petition for review on certiorari, petitioner
AIR FRANCE assails the Decision of then
respondent Court of Appeals 1 promulgated on
15 December 1980 in CA-G.R. No. 58164-R,
entitled "Jose G. Gana, et al. vs. Sociedad
Nacionale Air France", which reversed the Trial
Court's judgment dismissing the Complaint of
private respondents for damages arising from
breach of contract of carriage, and awarding
instead P90,000.00 as moral damages.
Sometime in February, 1970, the late Jose G.
Gana and his family, numbering nine (the
GANAS), purchased from AIR FRANCE through
Imperial Travels, Incorporated, a duly
authorized travel agent, nine (9) "open-dated"
air passage tickets for the
Manila/Osaka/Tokyo/Manila route. The GANAS
paid a total of US$2,528.85 for their economy
and first class fares. Said tickets were bought at
the then prevailing exchange rate of P3.90 per
US$1.00. The GANAS also paid travel taxes of
P100.00 for each passenger.
On 24 April 1970, AIR FRANCE exchanged or
substituted the aforementioned tickets with
other tickets for the same route. At this time, the
GANAS were booked for the Manila/Osaka
segment on AIR FRANCE Flight 184 for 8 May
1970, and for the Tokyo/Manila return trip on
AIR FRANCE Flight 187 on 22 May 1970. The
aforesaid tickets were valid until 8 May 1971, the
date written under the printed words "Non
valuable apres de (meaning, "not valid after
the").
The GANAS did not depart on 8 May 1970.
Sometime in January, 1971, Jose Gana sought
the assistance of Teresita Manucdoc, a
Secretary of the Sta. Clara Lumber Company
where Jose Gana was the Director and
Treasurer, for the extension of the validity of
 AGENCY FULLTEXT CASES
their tickets, which were due to expire on 8 May
1971. Teresita enlisted the help of Lee Ella
Manager of the Philippine Travel Bureau, who
used to handle travel arrangements for the
personnel of the Sta. Clara Lumber Company.
Ella sent the tickets to Cesar Rillo, Office
Manager of AIR FRANCE. The tickets were
returned to Ella who was informed that
extension was not possible unless the fare
differentials resulting from the increase in fares
triggered by an increase of the exchange rate of
the US dollar to the Philippine peso and the
increased travel tax were first paid. Ella then
returned the tickets to Teresita and informed her
of the impossibility of extension.
In the meantime, the GANAS had scheduled
their departure on 7 May 1971 or one day before
the expiry date. In the morning of the very day
of their scheduled departure on the first leg of
their trip, Teresita requested travel agent Ella to
arrange the revalidation of the tickets. Ella gave
the same negative answer and warned her that
although the tickets could be used by the
GANAS if they left on 7 May 1971, the tickets
would no longer be valid for the rest of their trip
because the tickets would then have expired on
8 May 1971. Teresita replied that it will be up to
the GANAS to make the arrangements. With
that assurance, Ella on his own, attached to the
tickets validating stickers for the Osaka/Tokyo
flight, one a JAL. sticker and the other an SAS
(Scandinavian Airways System) sticker. The
SAS sticker indicates thereon that it was
"Reevaluated by: the Philippine Travel Bureau,
Branch No. 2" (as shown by a circular rubber
stamp) and signed "Ador", and the date is
handwritten in the center of the circle. Then
appear under printed headings the notations:
JL. 108 (Flight), 16 May (Date), 1040 (Time), OK
(status). Apparently, Ella made no more attempt
to contact AIR FRANCE as there was no more
time.
Notwithstanding the warnings, the GANAS
departed from Manila in the afternoon of 7 May
1971 on board AIR FRANCE Flight 184 for
Osaka, Japan. There is no question with respect
to this leg of the trip.
However, for the Osaka/Tokyo flight on 17 May
1971, Japan Airlines refused to honor the tickets
because of their expiration, and the GANAS had
to purchase new tickets. They encountered the
same difficulty with respect to their return trip to
Manila as AIR FRANCE also refused to honor
their tickets. They were able to return only after
pre-payment in Manila, through their relatives,
of the readjusted rates. They finally flew back to
Manila on separate Air France Frights on 19
May 1971 for Jose Gana and 26 May 1971 for
the rest of the family.
On 25 August 1971, the GANAS commenced
before the then Court of First Instance of Manila,
Branch III, Civil Case No. 84111 for damages
arising from breach of contract of carriage.
AIR FRANCE traversed the material allegations
of the Complaint and alleged that the GANAS
brought upon themselves the predicament they
found themselves in and assumed the
consequential risks; that travel agent Ella's
affixing of validating stickers on the tickets
without the knowledge and consent of AIR
FRANCE, violated airline tariff rules and
regulations and was beyond the scope of his
authority as a travel agent; and that AIR
FRANCE was not guilty of any fraudulent
conduct or bad faith.
On 29 May 1975, the Trial Court dismissed the
Complaint based on Partial and Additional
Stipulations of Fact as wen as on the
documentary and testimonial evidence.
The GANAS appealed to respondent Appellate
Court. During the pendency of the appeal, Jose
Gana, the principal plaintiff, died.
On 15 December 1980, respondent Appellate
Court set aside and reversed the Trial Court's
judgment in a Decision, which decreed:
WHEREFORE, the decision appealed from is
set aside. Air France is hereby ordered to pay
appellants moral damages in the total sum of
NINETY THOUSAND PESOS (P90,000.00)
plus costs.
SO ORDERED. 2
 AGENCY FULLTEXT CASES
Reconsideration sought by AIR FRANCE was
denied, hence, petitioner's recourse before this
instance, to which we gave due course.
The crucial issue is whether or not, under the
environmental milieu the GANAS have made
out a case for breach of contract of carriage
entitling them to an award of damages.
We are constrained to reverse respondent
Appellate Court's affirmative ruling thereon.
Pursuant to tariff rules and regulations of the
International Air Transportation Association
(IATA), included in paragraphs 9, 10, and 11 of
the Stipulations of Fact between the parties in
the Trial Court, dated 31 March 1973, an
airplane ticket is valid for one year. "The
passenger must undertake the final portion of
his journey by departing from the last point at
which he has made a voluntary stop before the
expiry of this limit (parag. 3.1.2. ) ... That is the
time allowed a passenger to begin and to
complete his trip (parags. 3.2 and 3.3.). ... A
ticket can no longer be used for travel if its
validity has expired before the passenger
completes his trip (parag. 3.5.1.) ... To complete
the trip, the passenger must purchase a new
ticket for the remaining portion of the journey"
(ibid.) 3
From the foregoing rules, it is clear that AIR
FRANCE cannot be faulted for breach of
contract when it dishonored the tickets of the
GANAS after 8 May 1971 since those tickets
expired on said date; nor when it required the
GANAS to buy new tickets or have their tickets
re-issued for the Tokyo/Manila segment of their
trip. Neither can it be said that, when upon sale
of the new tickets, it imposed additional charges
representing fare differentials, it was motivated
by self-interest or unjust enrichment considering
that an increase of fares took effect, as
authorized by the Civil Aeronautics Board (CAB)
in April, 1971. This procedure is well in accord
with the IATA tariff rules which provide:
6. TARIFF RULES
7. APPLICABLE FARE ON THE DATE OF
DEPARTURE
3.1 General Rule.
All journeys must be charged for at the fare (or
charge) in effect on the date on which
transportation commences from the point of
origin. Any ticket sold prior to a change of fare
or charge (increase or decrease) occurring
between the date of commencement of the
journey, is subject to the above general rule and
must be adjusted accordingly. A new ticket must
be issued and the difference is to be collected
or refunded as the case may be. No adjustment
is necessary if the increase or decrease in fare
(or charge) occurs when the journey is already
commenced. 4
The GANAS cannot defend by contending lack
of knowledge of those rules since the evidence
bears out that Teresita, who handled travel
arrangements for the GANAS, was duly
informed by travel agent Ella of the advice of
Reno, the Office Manager of Air France, that the
tickets in question could not be extended
beyond the period of their validity without paying
the fare differentials and additional travel taxes
brought about by the increased fare rate and
travel taxes.
ATTY. VALTE
Q What did you tell Mrs. Manucdoc, in turn after
being told this by Mr. Rillo?
A I told her, because that is the reason why they
accepted again the tickets when we returned the
tickets spin, that they could not be extended.
They could be extended by paying the additional
fare, additional tax and additional exchange
during that time.
Q You said so to Mrs. Manucdoc?
A Yes, sir." ... 5
The ruling relied on by respondent Appellate
Court, therefore, in KLM. vs. Court of Appeals,
65 SCRA 237 (1975), holding that it would be
unfair to charge respondents therein with
 AGENCY FULLTEXT CASES
automatic knowledge or notice of conditions in
contracts of adhesion, is inapplicable. To all
legal intents and purposes, Teresita was the
agent of the GANAS and notice to her of the
rejection of the request for extension of the
validity of the tickets was notice to the GANAS,
her principals.
The SAS validating sticker for the Osaka/Tokyo
flight affixed by Era showing reservations for
JAL. Flight 108 for 16 May 1971, without
clearing the same with AIR FRANCE allegedly
because of the imminent departure of the
GANAS on the same day so that he could not
get in touch with Air France 6 was certainly in
contravention of IATA rules although as he had
explained, he did so upon Teresita's assurance
that for the onward flight from Osaka and return,
the GANAS would make other arrangements.
Q Referring you to page 33 of the transcript of
the last session, I had this question which reads
as follows: 'But did she say anything to you
when you said that the tickets were about to
expire?' Your answer was: 'I am the one who
asked her. At that time I told her if the tickets
being used ... I was telling her what about their
bookings on the return. What about their travel
on the return? She told me it is up for the Ganas
to make the arrangement.' May I know from you
what did you mean by this testimony of yours?
A That was on the day when they were asking
me on May 7, 1971 when they were checking
the tickets. I told Mrs. Manucdoc that I was going
to get the tickets. I asked her what about the
tickets onward from the return from Tokyo, and
her answer was it is up for the Ganas to make
the arrangement, because I told her that they
could leave on the seventh, but they could take
care of that when they arrived in Osaka.
Q What do you mean?
A The Ganas will make the arrangement from
Osaka, Tokyo and Manila.
Q What arrangement?
A The arrangement for the airline because the
tickets would expire on May 7, and they insisted
on leaving. I asked Mrs. Manucdoc what about
the return onward portion because they would
be travelling to Osaka, and her answer was, it is
up to for the Ganas to make the arrangement.
Q Exactly what were the words of Mrs.
Manucdoc when you told her that? If you can
remember, what were her exact words?
A Her words only, it is up for the Ganas to make
the arrangement.
Q This was in Tagalog or in English?
A I think it was in English. ... 7
The circumstances that AIR FRANCE personnel
at the ticket counter in the airport allowed the
GANAS to leave is not tantamount to an implied
ratification of travel agent Ella's irregular
actuations. It should be recalled that the GANAS
left in Manila the day before the expiry date of
their tickets and that "other arrangements" were
to be made with respect to the remaining
segments. Besides, the validating stickers that
Ella affixed on his own merely reflect the status
of reservations on the specified flight and could
not legally serve to extend the validity of a ticket
or revive an expired one.
The conclusion is inevitable that the GANAS
brought upon themselves the predicament they
were in for having insisted on using tickets that
were due to expire in an effort, perhaps, to beat
the deadline and in the thought that by
commencing the trip the day before the expiry
date, they could complete the trip even
thereafter. It should be recalled that AIR
FRANCE was even unaware of the validating
SAS and JAL. stickers that Ella had affixed
spuriously. Consequently, Japan Air Lines and
AIR FRANCE merely acted within their
contractual rights when they dishonored the
tickets on the remaining segments of the trip and
when AIR FRANCE demanded payment of the
adjusted fare rates and travel taxes for the
Tokyo/Manila flight.
WHEREFORE, the judgment under review is
hereby reversed and set aside, and the
 AGENCY FULLTEXT CASES

Amended Complaint filed by private

respondents hereby dismissed.

No costs.

SO ORDERED.
 AGENCY FULLTEXT CASES
[G.R. No. L-20136. June 23, 1965.]
IN RE: PETITION FOR ISSUANCE OF
SEPARATE CERTIFICATE OF TITLE. JOSE
A. SANTOS Y DIAZ, Petitioner-Appellant, v.
ANATOLIO BUENCONSEJO, ET
AL., Respondents-Appellees.
Segundo C. Mastrili for Petitioner-Appellant.
Manuel M. Calleja, Rafael S. Lucilla and Jose
T. Rubio for Respondents-Appellees.
SYLLABUS
1. AGENCY; POWER OF ATTORNEY
CANNOT VEST PROPERTY RIGHT IN
ATTORNEY’S OWN NAME. — A special power
of attorney authorizing a person to act on behalf
of the children of another cannot vest in the said
attorney any property right in his own name.
2. ID.; CHILDREN WITHOUT AUTHORITY TO
EXECUTE POWER OF ATTORNEY FOR
PARENT. — The children have no authority to
execute a power of attorney for their father who
is still alive.
3. CO-OWNERSHIP; CO OWNER CANNOT
ADJUDICATE A PORTION OF PROPERTY
WITHOUT CONFORMITY OF OTHER CO-
OWNER OR BY JUDICIAL DECREE. — A co-
owner, pro indiviso cannot, without the
conformity of the other co-owner or a judicial
decree of partition, adjudicate to himself in fee
simple a determinate portion of the property
owned in common to the exclusion of the other
co-owners.
DECISION
CONCEPCION, J.:
Petitioner Jose A. Santos y Diaz seeks the
reversal of an order of the Court of First Instance
of Albay, denying his petition, filed in Cadastral
Case No. M-2197, LRC Cad. Rec. No. 1035, for
the cancellation of original certificate of title No.
RO-3848 (25322), issued in the name of
Anatolio Buenconsejo, Lorenzo Bon and
Santiago Bon and covering Lot No. 1917 of the
Cadastral Survey of Tabaco, Albay, and the
issuance, in lieu thereof, of a separate transfer
certificate of title in his name, covering part of
said Lot No. 1917, namely, Lot No. 1917-A of
Subdivision Plan PSD-63379.
The main facts are not disputed. They are set
forth in the order appealed from, from which we
quote:jgc:chanrobles.com.ph
"It appears that the aforementioned Lot No.
1917 covered by Original Certificate of Title No.
RO-3848 (25322) was originally owned in
common by Anatolio Buenconsejo to the extent
of 1/2 undivided portion and Lorenzo Bon and
Santiago Bon to the extent of the other 1/2 (Exh.
B); that Anatolio Buenconsejo’s rights, interests
and participation over the portion above-
mentioned were on January 3, 1961 and by a
Certificate of Sale executed by the Provincial
Sheriff of Albay, transferred and conveyed to
Atty. Tecla San Andres Ziga, awardee in the
corresponding auction sale conducted by said
Sheriff in connection with the execution of the
decision of the Juvenile Delinquency and
Domestic Relations Court in Civil Case No.
25267, entitled `Yolanda Buencosejo, et al, v.
Anatolio Buenconsejo’: that on December 26,
1961 and by a certificate of redemption issued
by the Provincial Sheriff of Albay, the rights,
interest, claim and/or participation which Atty.
Tecla San Andres Ziga may have acquired over
the property in question by reason of the
aforementioned auction sale award, were
transferred and conveyed to the herein
petitioner in his capacity as Attorney-in-fact of
the children of Anatolio Buenconsejo, namely,
Anastacio Buenconsejo, Elena Buenconsejo
and Asucena Buenconsejo (Exh. C)."cralaw
virtua1aw library
It would appear, also, that petitioner Santos had
redeemed the aforementioned share of Anatolio
Buenconsejo, upon the authority of a special
power of attorney executed in his favor by the
children of Anatolio Buenconsejo; that relying
upon this power of attorney and redemption
made by him, Santos now claims to have
acquired the share of Anatolio Buenconsejo in
 AGENCY FULLTEXT CASES

the aforementioned Lot No. 1917; that as the

alleged present owner of said share, Santos
caused a subdivision plan of said Lot No. 1917
to be made, in which the portion he claims as his
share thereof has been marked as Lot No. 1917-
A; and that he wants said subdivision Lot No.
1917-A to be segregated from Lot No. 1917 and
a certificate of title issued in his name
exclusively for said subdivision Lot No. 1917-A.

As correctly held by the lower court, petitioner’s

claim is clearly untenable, for: (1) said special
power of attorney authorized him to act on
behalf of the children of Anatolio Buenconsejo,
and, hence, it could not have possibly vested
him any property right in his own name; (2) the
children of Anatolio Buenconsejo had no
authority to execute said power of attorney,
because their father is still alive and, in fact, he
and his wife opposed the petition of Santos; (3)
in consequence of said power of attorney (if
valid) and redemption, Santos could have
acquired no more than the share pro indiviso of
Anatolio Buenconsejo in Lot No. 1917, so that
petitioner can not — without the conformity of
the other co-owners (Lorenzo and Santiago
Bon), or a judicial decree of partition issued
pursuant to the provisions of Rule 69 of the new
Rules of Court (Rule 71 of the old Rules of
Court) which have not been followed by Santos
— adjudicate to himself in fee simple a
determinate portion of said Lot No. 1917, as his
share therein, to the exclusion of the other co-
owners.

Inasmuch as the appeal is patently devoid of

merit, the order appealed from is hereby
affirmed, with treble costs against petitioner-
appellant Jose A. Santos y Diaz. It is so ordered.
 AGENCY FULLTEXT CASES
G.R. No. L-20726 December 20, 1923
ALBALADEJO Y CIA., S. en C., plaintiff-
appellant,
vs.
The PHILIPPINE REFINING CO., as
successor to The Visayan Refining
Co., defendant-appellant.
1.CONTRACT; NEGLIGENCE IMPUTED TO
DEFENDANT IN PERFORMANCE OF
CONTRACTUAL DUTY.—By contract between
the plaintiff and the Visayan Refining Company
it was agreed that the latter would take, at
current prices, all the copra which the former
should buy in a designated territory; and it was
made the duty of the Visayan Refining Company
to send boats at opportune times to convey the
copra collected by the plaintiff to the point where
it was to be used in the manufacture of coconut
oil. In its first cause of action the plaintiff alleged
that the company mentioned had at various
times negligently failed to send boats to
transport the copra purchased by the plaintiff
and that as a result of this delay the copra
awaiting shipment had unduly diminished in
weight in the process of drying, thereby inflicting
heavy loss upon the plaintiff. The trial judge
having found that transportation had been
supplied with reasonable promptitude, and that
the company mentioned had not been guilty of
the alleged negligence, said finding is affirmed
by this court.
2.ID.; CONTRACT ONE OF PURCHASE, NOT
OF AGENCY.—Under the contract of purchase
above referred to the plaintiff was not the agent
of the Visayan Refining Company as regards
the original purchase of copra by the plaintiff
from the producers. On the contrary those
purchases were made by the plaintiff in its own
behalf. The defendant therefore was not liable
to reimburse the plaintiff for expenses incurred
by the plaintiff in maintaining its purchasing
organization intact over a period during which
the actual buying of copra was suspended.
3.ID.; DETRIMENT INCURRED AT REQUEST
OF ANOTHER; ABSENCE OF INTENTION TO
INCUR CONTRACTUAL LIABILITY.—The
circumstance that the Visayan Refining
Company encouraged the plaintiff to keep its
organization intact during such period of
suspension and suggested that when the
company resumed .buying (which was expected
to occur at some time in the future) the plaintiff
would be compensated for all loss which it had
suffered, "meaning that the profits then to be
made would justify such expenses, does not
render the company liable for such losses upon
its subsequent failure to resume the buying of
copra. The inducements thus held out to the
plaintiff were not intended to lay the basis of any
contractual liability, and the law will not infer the
existence of a contract contrary to the revealed
intention of the parties.
STREET, J.:
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.
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
 AGENCY FULLTEXT CASES
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., the
material parts of which are as follows:
Memorandum of Agreement Re Purchase of
Copra. — This memorandum of agreement,
made and entered into by and between
Albaladejo y Compania, S. en C., of Legaspi,
Province of Albay, Philippine Islands, party of
the first part, and the Visayan Refining
Company, Inc., of Opon, Province of Cebu,
Philippine Islands, party of the second part,
Witnesseth That. — Whereas, the party of the
first part is engaged in the purchase of copra in
the Province of Albay; and Whereas, the party
of the second part is engaged in the business of
the manufacture of coconut oil, or which
purpose it must continually purchase large
quantities of copra; Now, Therefore, in
consideration of the premises and covenants
hereinafter set forth, the said parties have
agreed and do hereby contract and agree as
follows, to wit:
1. The party of the first part agrees and binds
itself to sell to the party of the second part, and
the party of the second part agrees and binds
itself to buy from the party of the first part, for a
period of one (1) year from the date of these
presents, all the copra purchased by the party of
the first part in Province of Albay.
2. The party of the second part agrees to pay
the party of the first part for the said copra the
market price thereof in Cebu at date (of)
purchase, deducting, however, from such price
the cost of transportation by sea to the factory of
the party of second part at Opon, Cebu, the
amount deducted to be ascertained from the
rates established, from time to time, by the
public utility commission, or such entity as shall
succeed to its functions, and also a further
deduction for the shrinkage of the copra from the
time of its delivery to the party of the second part
to its arrival at Opon, Cebu, plus one-half of a
real per picul in the event the copra is delivered
to boats which will unload it on the pier of the
party of the second part at Opon, Cebu, plus one
real per picul in the event that the party of the
first part shall employ its own capital exclusively
in its purchase.
3. During the continuance of this contract the
party of the second part will not appoint any
other agent for the purchase of copra in Legaspi,
nor buy copra from any vendor in Legaspi.
4. The party of the second part will, so far as
practicable, keep the party of the first part
advised of the prevailing prices paid for copra in
the Cebu market.
5. The party of the second part will provide
transportation by sea to Opon, Cebu, for the
copra delivered to it by the party of the first part,
but the party of the first part must deliver such
copra to the party of the second part free on
board the boats of the latter's ships or on the pier
alongside the latter's ships, as the case may be.
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
 AGENCY FULLTEXT CASES
subagencies, in various ports and places of the
Province of Albay and neighboring provinces.
After the Visayan Refining Co. had ceased to
buy copra, as above stated, of which fact the
plaintiff was duly notified, the supplies of copra
already purchased by the plaintiff were
gradually shipped out and accepted by the
Visayan Refining Co., and in the course of the
next eight or ten months the accounts between
the two parties were liquidated. The last account
rendered by the Visayan Refining Co. to the
plaintiff was for the month of April, 1921, and it
showed a balance of P288 in favor of the
defendant. Under date of June 25, 1921, the
plaintiff company addressed a letter from
Legaspi to the Philippine Refining Co. (which
had now succeeded to the rights and liabilities
of the Visayan Refining Co.), expressing its
approval of said account. In this letter no
dissatisfaction was expressed by the plaintiff as
to the state of affairs between the parties; but
about six weeks thereafter the present action
was begun.
Upon reference to paragraph five of the contract
reproduced above it will be seen that the
Visayan Refining Co. obligated itself to provide
transportation by sea to Opon, Cebu, for the
copra which should be delivered to it by the
plaintiff; and the first cause of action set forth in
the complaint is planted upon the alleged
negligent failure of the Visayan Refining Co. to
provide opportune transportation for the copra
collected by the plaintiff and deposited for
shipment at various places. In this connection
we reproduce the following allegations from the
complaint:
6. That, from the month of September, 1918,
until the month of June, 1920, the plaintiff
opportunely advised the Visayan of the stocks
that the former had for shipment, and, from time
to time, requested the Visayan to send vessels
to take up said stocks; but that the Visayan
culpably and negligently allowed a great number
of days to elapse before sending the boats for
the transportation of the copra to Opon, Cebu,
and that due to the fault and negligence of the
Visayan, the stocks of copra prepared for
shipment by the plaintiff had to remain an
unnecessary length of time in warehouses and
could not be delivered to the Visayan, nor could
they be transmitted to this latter because of the
lack of boats, and that for this reason the copra
gathered by the plaintiff and prepared for
delivery to the Visayan suffered the
diminishment of weight herein below specified,
through shrinkage or excessive drying, and, in
consequence thereof, an important
diminishment in its value.
xxx xxx xxx
8. That the diminishment in weight suffered as
shrinkage through excessive drying by all the
lots of copra sold by the plaintiff to the Visayan,
due to the fault and negligence of the Visayan in
the sending of boats to take up said copra,
represents a total of 9,695 piculs and 56 cates,
the just and reasonable value of which, at the
rates fixed by the purchaser as the price in its
liquidation, is a total of two hundred and one
thousand, five hundred and ninety-nine pesos
and fifty-three centavos (P201,599.53),
Philippine currency, in which amount the plaintiff
has been damaged and injured by the negligent
and culpable acts and omissions of the Visayan,
as herein above stated and alleged.
In the course of the appealed decision the trial
judge makes a careful examination of the proof
relative to the movements of the fleet of boats
maintained by the Visayan Refining Co. for the
purpose of collecting copra from the various
ports where it was gathered for said company,
as well as of the movements of other boats
chartered or hired by said company for the same
purpose; and upon consideration of all the facts
revealed in evidence, his Honor found that the
Visayan Refining Co. had used reasonable
promptitude in its efforts to get out the copra
from the places where it had been deposited for
shipment, notwithstanding occasional
irregularities due at times to the condition of the
weather as related to transportation by sea and
at other times to the inability of the Visayan
Refining Co. to dispatch boats to the more
remote ports. This finding of the trial judge, that
no negligence of the kind alleged can properly
 AGENCY FULLTEXT CASES
be imputed to the Visayan Refining Co., is in our
opinion supported by the proof.
Upon the point of the loss of weight of the copra
by shrinkage, the trial judge found that this is a
product which necessarily undergoes
considerable shrinkage in the process of drying,
and intelligent witnesses who are conversant
with the matter testified at the trial that shrinkage
of cobra varies from twenty to thirty per centum
of the original gross weight. It is agreed that the
shrinkage shown in all of the copra which the
plaintiff delivered to the Visayan Refining Co.
amounted to only 8.187 per centum of the
whole, an amount which is notably below the
normal. This showing was undoubtedly due in
part, as the trial judge suggests, to the fact that
in purchasing the copra directly from the
producers the plaintiff's buyers sometimes
estimated the picul at sixty-eight kilos, or
somewhat less, but in no case at the true weight
of 63.25 kilos. The plaintiff was therefore
protected in a great measure from loss by
shrinkage by purchasing upon a different basis
of weight from that upon which he sold,
otherwise the shrinkage shown in the result
must have been much greater than that which
actually appeared. But even considering this
fact, it is quite evident that the demonstrated
shrinkage of 8.187 per centum was extremely
moderate average; and this fact goes to show
that there was no undue delay on the part of the
Visayan Refining Co. in supplying transportation
for the copra collected by the plaintiff.
In the course of his well-reasoned opinion upon
this branch of the case, the trial judge calls
attention to the fact that it is expressly provided
in paragraph two of the contract that the
shrinkage of copra from the time of its delivery
to the party of the second part till its arrival at
Opon should fall upon the plaintiff, from whence
it is to be interfered that the parties intended that
the copra should be paid for according to its
weight upon arrival at Opon regardless of its
weight when first purchased; and such appears
to have been the uniform practice of the parties
in settling their accounts for the copra delivered
over a period of nearly two years.
From what has been said it follows that the first
cause of action set forth in the complaint is not
well founded, and the trial judge committed no
error in absolving the plaintiff therefrom.
It appears that in the first six months of the year
1919, the plaintiff found that its transactions with
the Visayan Refining Co. had not been
productive of reasonable profit, a circumstance
which the plaintiff attributed to loss of weight or
shrinkage in the copra from the time of purchase
to its arrival at Opon; and the matter was taken
up with the officials of said company, with the
result that a bounty amounting to P15,610.41
was paid to the plaintiff by the Visayan Refining
Co. In the ninth paragraph of the complaint the
plaintiff alleges that this payment was made
upon account of shrinkage, for which the
Visayan Refining Co. admitted itself to be liable;
and it is suggested that the making of this
payment operated as a recognition on the part
of the Visayan refining Co. of the justice of the
plaintiff's claim with respect to the shrinkage in
all subsequent transactions. With this
proposition we cannot agree. At most the
payment appears to have been made in
recognition of an existing claim, without
involving any commitment as to liability on the
part of the defendant in the future; and
furthermore it appears to have been in the
nature of a mere gratuity given by the company
in order to encourage the plaintiff and to assure
that the plaintiff's organization would be kept in
an efficient state for future activities. It is certain
that no general liability for plaintiff's losses was
assumed for the future; and the defendant on
more than one occasion thereafter expressly
disclaimed liability for such losses.
As already stated purchases of copra by the
defendant were suspended in the month of July,
1920. At this time the plaintiff had an expensive
organization which had been built up chiefly, we
suppose, with a view to the buying of copra; and
this organization was maintained practically
intact for nearly a year after the suspension of
purchases by the Visayan Refining Co. Indeed
in October, 1920, the plaintiff added an
additional agency at Gubat to the twenty or more
already in existence. As a second cause of
 AGENCY FULLTEXT CASES
action the plaintiff seeks to recover the sum of
P110,000, the alleged amount expended by the
plaintiff in maintaining and extending its
organization as above stated. As a basis for the
defendant's liability in this respect it is alleged
that said organization was maintained and
extended at the express request, or
requirement, of the defendant, in conjunction
with repeated assurances that the defendant
would soon resume activity as a purchaser of
copra.
With reference to this cause of action the trial
judge found that the plaintiff, as claimed, had
incurred expenses at the request of the
defendant and upon its representation that the
plaintiff would be fully compensated therefor in
the future. Instead, however, of allowing the
plaintiff the entire amount claimed, his Honor
gave judgment for only thirty per centum of said
amount, in view of the fact that the plaintiff's
transactions in copra had amounted in the past
only to about thirty per centum of the total
business transacted by it. Estimated upon this
basis, the amount recognized as constituting a
just claim was found to be P49,626.68, and for
this amount judgment was rendered against the
defendant.
The discussion of this branch of the appeal
involves the sole question whether the plaintiff's
expense in maintaining and extending its
organization for the purchase of copra in the
period between July, 1920, to July, 1921, were
incurred at the instance and request of the
defendant, or upon any promise of the
defendant to make the expenditure good. A
careful examination of the evidence, mostly of a
documentary character, is, in our opinion,
convincing that the supposed liability does not
exist.
By recurring to paragraph four of the contract
between the plaintiff and the Visayan Refining
Co. it will be seen that the latter agreed to keep
the plaintiff advised of the prevailing prices paid
for the copra in the Cebu market. In compliance
with this obligation the Visayan Refining Co.
was accustomed to send out "trade letters" from
time to time its various clients in the southern
provinces of whom the plaintiff was one. In these
letters the manager of the company was
accustomed to make comment upon the state of
the market and to give such information as might
be of interest or value to the recipients of the
letters. From the series of letters thus sent to
Albaladejo y Cia. during the latter half of 1920,
we here reproduce the following excerpts:
(Letter of July 2, 1920, from K.B. Day, General
Manager of the Visayan Refining Co., to
Albaladejo y Cia.)
The copra market is still very weak. I have spent
the past two weeks in Manila studying
conditions and find that practically no business
at all is being done. A few of the mills having
provincial agents are accepting small deliveries,
but I do not suppose that 500 piculs of copra are
changing hands a day. Buyers are offering from
P13 to P15, depending on quality, and sellers
are offering to sell at anywhere from P16 to P18,
but no business can be done for the simple
reason that the banks will not lend the mills any
money to buy copra with at this time.
Reports from the United States are to the effect
that the oil market is in a very serious and
depressed condition and that large quantities of
oil cannot be disposed of at any price.
xxx xxx xxx
Under this conditions it is imperative that this mill
buy no more copra than it can possibly help at
the present time. We are not anxious to
compete, nor do we wish to purchase same in
competition with others. We do, however, desire
to keep our agents doing business and trust that
they will continue to hold their parroquianos
(customers), buying only minimum quantities at
present.
The local market has not changed since last
week, and our liquidating price is P14.
(Letter of July 9, 1920, from Visayan Refining
Co. to Albaladejo y Cia.)
 AGENCY FULLTEXT CASES
Notify your subagents to drop out of the market
temporarily. We do not desire to purchase at
present.
(Letter of July 10, 1920, from K. B. Day, General
Manager, to Albaladejo y Cia.)
The market continues to grow weaker.
Conditions are so uncertain that this company
desires to drop out of the copra market until
conditions have a chance to readjust
themselves. We request therefore that our
agents drop out of active competition for copra
temporarily. Stocks that are at present on hand
will, of course, be liquidated, but no new stocks
should be acquired. Agents should do their best
to keep their organizations together temporarily,
for we expect to be in the market again soon
stronger than ever. We expect the cooperation
of agents in making this effective; and if they
give us this cooperation, we will endeavor to see
that they do not lose by the transaction in the
long run. This company has been receiving
copra from its agents for a long time at prices
which have netted it a loss. The company has
been supporting its agents during this period. It
now expects the same support from its agents.
Agents having stocks actually on hand in their
bodegas should telegraph us the quantity
immediately and we will protect same. But
stocks not actually in bodegas cannot be
considered.
(Letter of July 17, 1920, from K.B. Day to
Albaladejo y Cia.)
Conditions have changed very little in the copra
market since last reports. . . . We are in the same
position as last week and are out of the market.
For the benefit of our agents, we wish to explain
in a few words just why we are have been forced
to close down our mill until the arrival of a boat
to load some of our stocks on hand. We have
large stocks of copra. The market for oil is so
uncertain that we do not care to increase these
stocks until such time as we know that the
market has touched the bottom. As soon as this
period of uncertainty is over, we expect to be in
the market again stronger than ever, but it is
only the part of business wisdom to play safe at
such times as these.
Owing to the very small amounts of copra now
in the provinces, we do not think that our agents
will lose anything by our being out of the market.
On the contrary, the producers of copra will have
a chance to allow their nuts to mature on the
trees so that the quality of copra which you will
receive when we again are in the market should
be much better than what you have been
receiving in the past. Due to the high prices and
scarcity of copra a large proportion of the copra
we have received has been made from unripe
coconuts and in order to keep revenue coming
in the producers have kept harvesting these
coconuts without giving them a chance to reach
maturity. This period now should give them the
chance to let their nuts ripen and should give
you a better copra in the future which will shrink
less and be more satisfactory both from your
standpoint and ours. Please do all you can to
assist us at this time. We shall greatly
appreciate your cooperation.lawphi1.net
(Letter of August 7, 1920, from H.U. Umstead,
Assistant General Manager, to Albaladejo y
Cia.)
The copra situation in Manila remains
unchanged and the outlook is still uncertain.
Arrivals continue small.
We are still out of the market and are not yet in
a position to give you buying orders. We trust,
however, that within the next few days weeks we
may be able to reenter the market and resume
our former activity.
xxx xxx xxx
While we are not of the market we have no
objection whatever to our agents selling copra
to other purchasers, if by doing so they are able
to keep themselves in the market and retain
their parroquianos (customers). We do not,
however, wish you to use our money, for this
purpose, nor do we want you to buy copra on
speculation with the idea in mind that we will
take it off of your hands at high prices when we
 AGENCY FULLTEXT CASES
reenter the market. We wish to warn you against
this now so that you will not be working under
any misapprehension.
In this same mail, we are sending you a notice
of change of organization. In your dealings with
us hereafter, will you kindly address all
communications to the Philippine Refining
Corporation, Cebu, which you will understand
will be delivered to us.
(Letter of August 21, 1920, from Philippine
Refining Corporation, by K.B. Day, to Albaladejo
y Cia.)
We are not yet in the market, but, as we have
indicated before, are hopeful of renewing our
activities soon. We shall advise all our agents
seasonably of our return to the market. . . .
We are preparing new form of agreement
between ourselves and our agents and hope to
have them completed in time to refer them to our
agents in the course of the next week or ten
days.
All agents should endeavor to liquidate
outstanding advances at this time because this
is a particularly good time to clean out old
accounts and be on a business basis when we
return to the market. We request that our agents
concentrate their attention on this point during
the coming week.lawphi1.net
(Letter of October 16, 1920, from K.B. Day,
Manager, to Albaladejo y Cia.)
Copra in Manila and coconut oil in the United
States have taken a severe drop during the past
week. The Cebu price seems to have remained
unchanged, but we look for an early drop in the
local market.
We have received orders from our president in
New York to buy no more copra until the
situation becomes more favorable. We had
hoped and expected to be in the market actively
before this time, but this most unexpected
reaction in the market makes the date of our
entry in it more doubtful.
With this in view, we hereby notify our agents
that we can accept no more copra and advance
no more money until we have permission from
our president to do so. We request, therefore,
that you go entirely out of the market, so far as
we are concerned, with the exception of
receiving copra against outstanding accounts.
In case any agent be compelled to take in copra
and desire to send same to us, we will be glad
to sell same for him to the highest bidder in
Cebu. We will make no charge for our services
in this connection, but the copra must be
forwarded to us on consignment only so that we
will not appear as buyers and be required to pay
the internal-revenue tax.
We are extremely sorry to be compelled to make
the present announcement to you, but the
market is such that our president does not deem
it wise for us to purchase copra at present, and,
with this in view, we have no alternative other
than to comply with his orders. We hope that our
agents will realize the spirit in which these
orders are given, and will do all they can to
remain faithful to us until such time as we can
reenter the market, which we hope and believe
will be within a comparatively short time.
(Special Letter of October 16, 1920, from
Philippine Refining Corporation, by K.B. Day, to
Albaladejo y Cia.)
We have received very strict instructions from
New York temporarily to suspend the purchase
of copra, and of course we must comply
therewith. However, should you find yourselves
obliged to buy copra in connection with your
business activities, and cannot dispose of it
advantageously in Cebu, we shall be glad to
receive your copra under the condition that we
shall sell it in the market on your account to the
highest bidder, or, in other words, we offer you
our services free, to sell your copra to the best
possible advantages that the local market may
offer, provided that, in doing so, we be not
obliged to accept your copra as a purchase
when there be no market for this product.
 AGENCY FULLTEXT CASES
Whenever you find yourselves obliged to buy
copra in order to liquidate pending advances,
we can accept it provided that, so long as
present conditions prevail, we be not required to
make further cash advances.
We shall quote no further from letters written by
the management of the Philippine Refining
Corporation to the plaintiff, as we find nothing in
the correspondence which reflects an attitude
different from that reflected in the matter above
quoted. It is only necessary to add that the hope
so frequently expressed in the letters, to the
effect that the Philippine Refining Corporation
would soon enter the market as a buyer of copra
on a more extensive scale than its predecessor,
was not destined to be realized, and the factory
at Opon remained closed.
But it is quite obvious that there is nothing in
these letters on which to hold the defendant
liable for the expenses incurred by the plaintiff in
keeping its organization intact during the period
now under consideration. Nor does the oral
testimony submitted by the plaintiff materially
change the situation in any respect.
Furthermore, the allegation in the complaint that
one agency in particular (Gubat) had been
opened on October 1, 1920, at the special
instance and request of the defendant, is not at
all sustained by the evidence.
We note that in his letter of July 10, 1920, Mr.
Day suggested that if the various purchasing
agents of the Visayan Refining Co. would keep
their organization intact, the company would
endeavor to see that they should not lose by the
transaction in the long run. These words afford
no sufficient basis for the conclusion, which the
trial judge deduced therefrom, that the
defendant is bound to compensate the plaintiff
for the expenses incurred in maintaining its
organization. The correspondence sufficiently
shows on its face that there was no intention on
the part of the company to lay a basis for
contractual liability of any sort; and the plaintiff
must have understood the letters in that light.
The parties could undoubtedly have contracted
about it, but there was clearly no intention to
enter into contractual relation; and the law will
not raise a contract by implication against the
intention of the parties. The inducement held
forth was that, when purchasing should be
resumed, the plaintiff would be compensated by
the profits then to be earned for any expense
that would be incurred in keeping its
organization intact. It is needless to say that
there is no proof showing that the officials of the
defendant acted in bad faith in holding out this
hope.
In the appellant's brief the contention is
advanced that the contract between the plaintiff
and the Visayan Refining Co. created the
relation of principal and agent between the
parties, and the reliance is placed upon article
1729 of the Civil Code which requires the
principal to indemnify the agent for damages
incurred in carrying out the agency. Attentive
perusal of the contract is, however, convincing
to the effect that the relation between the parties
was not that of principal and agent in so far as
relates to the purchase of copra by the plaintiff.
It is true that the Visayan Refining Co. made the
plaintiff one of its instruments for the collection
of copra; but it is clear that in making its
purchases from the producers the plaintiff was
buying upon its own account and that when it
turned over the copra to the Visayan Refining
Co., pursuant to that agreement, a second sale
was effected. In paragraph three of the contract
it is declared that during the continuance of this
contract the Visayan Refining Co. would not
appoint any other agent for the purchase of
copra in Legaspi; and this gives rise indirectly to
the inference that the plaintiff was considered its
buying agent. But the use of this term in one
clause of the contract cannot dominate the real
nature of the agreement as revealed in other
clauses, no less than in the caption of the
agreement itself. In some of the trade letters
also the various instrumentalities used by the
Visayan Refining Co. for 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
 AGENCY FULLTEXT CASES

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.

Johnson, Malcolm, Avanceña, Villamor, Johns

and Romualdez, JJ., concur.
 AGENCY FULLTEXT CASES
G.R. No. L-18727 August 31, 1964
JESUS MA. CUI, Plaintiff-Appellee,
vs. ANTONIO MA. CUI,defendant-appellant,
ROMULO CUI, Intervenor-appellant.
1.SALES; ANNULMENT OF; OLD AGE AND
WEAKNESS OF MIND AS GROUNDS FOR
AVOIDING CONTRACT.—Weakness of mind
alone, not caused by insanity, is not a ground for
avoiding a contract, for it is still necesary to
show that the person at the time of doing the act
“is not capable of understanding with
reasonable clearness the nature and effect of
the transaction in which he is engaging” (Page
on Contracts, Vol. III, p. 2810). Or, as well stated
in the case of Allore vs. Jewell, 24 Law Ed.,
263–264, it is only when there is “great
weakness of mind in a person executing a
conveyance of land, arising from age, sickness,
or any other cause”, can a person ask a court of
equity to interfere in order to set aside the
conveyance. In the case at bar, although at the
time of the sale the vendor was already of
advanced age, yet he was still physically fit and
his mind was keen and clear as shown by the
several letters and documents signed and
executed by him many months after the
execution of the deed of sale in question.
2.ID.; ID.; PROHIBITION AGAINST AGENT OR
ADMINISTRATOR TO BUY PROPERTY OF
PRINCIPAL.— an agent or administrator from
purchasing property in his hands for sale or
management contained in Article 1459 of the old
Civil Code has already been removed. Under
the provisions of article 1491, section 2, of the
new Civil Code, an agent may now buy property
placed in his hands for sale or administration,
provided that the principal gives his consent
thereto. While, the new Code came into effect
only on August 30, 1950, however, since this is
a right that is declared for the first time, the same
may be given retroactive effect if no vested or
acquired right is impaired (Article 2253, new
Civil Code). In the present case, during the
lifetime of the vendor, particularly on the date of
the execution of the sale in question, the
appellants could not claim any vested or
acquired right in the properties sold, as heirs,
the most they had was a mere expectancy.
Therefore, the practical and liberal provision of
the new Civil Code even if the sale had taken
place before its effectivity may be invoked.
3.ID.; ID.; PROPERTIES ACQUIRED DURING
MARRIAGE; PRESUMPTION THAT
PROPERTIES ARE CONJUGAL,
REBUTTABLE,—While properties acquired
during marriage are presumed to be conjugal
properties (Art. 1407, old Civil Code) however,
the presumption is rebuttable. In the case at bar,
there is conclusive and strong evidence,
testimonial as well as documentary, that the lots
in question have always been considered not
only by the vendor, but his children and other
relatives, as his exclusive property, the same
having been donated to him by his uncle and
aunt to the exclusion of his wife; consequently,
the contention that, in disposing of said
property, the vendor has appropriated what
belongs to his co-heirs, has completely no
foundation in the evidence.
MAKALINTAL, J.:chanrobles virtual law library
This is a proving in quo warranto originally filed
in the Court of First Instance of Cebu. The office
in contention is that of Administrator of
the Hospicio de San Jose de Barili. Judgment
was rendered on 27 April 1961 in favor of the
plaintiff, Jesus Ma. Cui, and appealed to us by
the defendant, Antonio Ma. Cui, and by the
intervenor, Romulo
Cui.chanroblesvirtualawlibrarychanrobles
virtual law library
The Hospicio is a charitable institution
established by the spouses Don Pedro Cui and
Do�a Benigna Cui, now deceased, "for the care
and support, free of charge, of indigent invalids,
and incapacitated and helpless persons." It
acquired corporate existence by legislation (Act
No. 3239 of the Philippine Legislature passed
27 November 1925) and endowed with
extensive properties by the said spouses
through a series of donations, principally the
deed of donation executed on 2 January
1926.chanroblesvirtualawlibrarychanrobles
virtual law library
 AGENCY FULLTEXT CASES
Section 2 of Act No. 3239 gave the initial
management to the founders jointly and, in case
of their incapacity or death, to "such persons as
they may nominate or designate, in the order
prescribed to them." Section 2 of the deed of
donation provides as follows:
Que en caso de nuestro fallecimiento o
incapacidad para administrar, nos sustituyan
nuestro legitime sobrino Mariano Cui, si al
tiempo de nuestra muerte o incapacidad se
hallare residiendo en la caudad de Cebu, y
nuestro sobrino politico Dionisio Jakosalem. Si
nuestro dicho sobrino Mariano Cui no estuviese
residiendo entonces en la caudad de Cebu,
designamos en su lugar a nuestro otro sobrino
legitime Mauricio Cui. Ambos sobrinos
administraran conjuntamente el HOSPICIO DE
SAN JOSE DE BARILI. A la muerte o
incapacidad de estos dos administradores, la
administracion del HOSPICIO DE SAN JOSE
DE BARILI pasara a una sola persona que sera
el varon, mayor de edad, que descienda
legitimainente de cualquiera de nuestros
sobrinos legitimos Mariano Cui, Mauricio Cui,
Vicente Cui y Victor Cui, y que posea titulo de
abogado, o medico, o ingeniero civil, o
farmaceutico, o a falta de estos titulos, el que
pague al Estado mayor impuesto o contribution.
En igualdad de circumstancias, sera preferida el
varon de mas edad descendiente de quien tenia
ultimamente la administracion. Cuando
absolutamente faltare persona de estas
cualificaciones, la administracion del
HOSPICIO DE SAN JOSE DE BARILI pasara al
senor Obispo de Cebu o quien sea el mayor
dignatario de la Iglesia Catolica, apostolica,
Romana, que tuviere asiento en la cabecera de
esta Provincia de Cebu, y en su defecto, al
Gobierno Provincial de Cebu.
Don Pedro Cui died in 1926, and his widow
continued to administer the Hospicio until her
death in 1929. Thereupon the administration
passed to Mauricio Cui and Dionisio Jakosalem.
The first died on 8 May 1931 and the second on
1 July 1931. On 2 July 1931 Dr. Teodoro Cui,
only son of Mauricio Cui, became the
administrator. Thereafter, beginning in 1932, a
series of controversies and court litigations
ensued concerning the position of administrator,
to which, in so far as they are pertinent to the
present case, reference will be made later in this
decision.chanroblesvirtualawlibrarychanrobles
virtual law library
Plaintiff Jesus Ma. Cui and defendant Antonio
Ma. Cui are brothers, being the sons of Mariano
Cui, one of the nephews of the spouses Don
Pedro Cui and Do�a Benigna Cui. On 27
February 1960 the then incumbent
administrator, Dr. Teodoro Cui, resigned in favor
of Antonio Ma. Cui pursuant to a "convenio"
entered into between them and embodied in a
notarial document. The next day, 28 February,
Antonio Ma. Cui took his oath of office. Jesus
Ma. Cui, however, had no prior notice of either
the "convenio" or of his brother's assumption of
the
position.chanroblesvirtualawlibrarychanrobles
virtual law library
Dr. Teodoro Cui died on 27 August 1960; on 5
September 1960 the plaintiff wrote a letter to the
defendant demanding that the office be turned
over to him; and on 13 September 1960, the
demand not having been complied with the
plaintiff filed the complaint in this case. Romulo
Cui later on intervened, claiming a right to the
same office, being a grandson of Vicente Cui,
another one of the nephews mentioned by the
founders of the Hospicio in their deed of
donation.chanroblesvirtualawlibrarychanrobles
virtual law library
As between Jesus and Antonio the main issue
turns upon their respective qualifications to the
position of administrator. Jesus is the older of
the two and therefore under equal
circumstances would be preferred pursuant to
section 2 of the deed of donation. However,
before the test of age may be, applied the deed
gives preference to the one, among the
legitimate descendants of the nephews therein
named, "que posea titulo de abogado, o medico,
o ingeniero civil, o farmaceutico, o a falta de
estos titulos el que pague al estado mayor
impuesto o contribucion."chanrobles virtual law
library
 AGENCY FULLTEXT CASES
The specific point in dispute is the mealing of the
term "titulo de abogado." Jesus Ma. Cui holds
the degree of Bachelor of Laws from the
University of Santo Tomas (Class 1926) but is
not a member of the Bar, not having passed the
examinations to qualify him as one. Antonio Ma.
Cui, on the other hand, is a member of the Bar
and although disbarred by this Court on 29
March 1957 (administrative case No. 141), was
reinstated by resolution promulgated on 10
February 1960, about two weeks before he
assumed the position of administrator of
the Hospicio de
Barili.chanroblesvirtualawlibrarychanrobles
virtual law library
The Court a quo, in deciding this point in favor
of the plaintiff, said that the phrase "titulo de
abogado," taken alone, means that of a full-
fledged lawyer, but that has used in the deed of
donation and considering the function or
purpose of the administrator, it should not be
given a strict interpretation but a liberal one,"
and therefore means a law degree or diploma of
Bachelor of Laws. This ruling is assailed as
erroneous both by the defendant and by the
intervenor.chanroblesvirtualawlibrarychanroble
s virtual law library
We are of the opinion, that whether taken alone
or in context the term "titulo de abogado" means
not mere possession of the academic degree of
Bachelor of Laws but membership in the Bar
after due admission thereto, qualifying one for
the practice of law. In Spanish the word "titulo"
is defined as "testimonies o instrumento dado
para ejercer un empleo, dignidad o profesion"
(Diccionario de la Lengua Espa�ola, Real
Academia Espanola, 1947 ed., p. 1224) and the
word "abogado," as follows: "Perito en el
derecho positivo que se dedica a defender en
juicio, por escrito o de palabra, los derechos o
intereses de los litigantes, y tambien a dar
dictmen sobre las cuestiones o puntos legales
que se le consultan (Id., p.5) A Bachelor's
degree alone, conferred by a law school upon
completion of certain academic requirements,
does not entitle its holder to exercise the legal
profession. The English equivalent of "abogado"
is lawyer or attorney-at-law. This term has a
fixed and general signification, and has
reference to that class of persons who are by
license officers of the courts, empowered to
appear, prosecute and defend, and upon whom
peculiar duties, responsibilities and liabilities are
devolved by law as a
consequence.chanroblesvirtualawlibrarychanro
bles virtual law library
In this jurisdiction admission to the Bar and to
the practice of law is under the authority of the
Supreme Court. According to Rule 138 such
admission requires passing the Bar
examinations, taking the lawyer's oath and
receiving a certificate from the Clerk of Court,
this certificate being his license to practice the
profession. The academic degree of Bachelor of
Laws in itself has little to do with admission to
the Bar, except as evidence of compliance with
the requirements that an applicant to the
examinations has "successfully completed all
the prescribed courses, in a law school or
university, officially approved by the Secretary
of Education." For this purpose, however,
possession of the degree itself is not
indispensable: completion of the prescribed
courses may be shown in some other way.
Indeed there are instances, particularly under
the former Code of Civil Procedure, where
persons who had not gone through any formal
legal education in college were allowed to take
the Bar examinations and to qualify as lawyers.
(Section 14 of that code required possession of
"the necessary qualifications of learning
ability.") Yet certainly it would be incorrect to say
that such persons do not possess the "titulo de
abogado" because they lack the academic
degree of Bachelor of Laws from some law
school or
university.chanroblesvirtualawlibrarychanrobles
virtual law library
The founders of the Hospicio de San Jose de
Barili must have established the foregoing test
advisely, and provided in the deed of donation
that if not a lawyer, the administrator should be
a doctor or a civil engineer or a pharmacist, in
that order; or failing all these, should be the one
who pays the highest taxes among those
otherwise qualified. A lawyer, first of all,
 AGENCY FULLTEXT CASES
because under Act No. 3239 the managers or
trustees of the Hospicio shall "make regulations
for the government of said institution (Sec. 3, b);
shall "prescribe the conditions subject to which
invalids and incapacitated and destitute persons
may be admitted to the institute" (Sec. 3, d);
shall see to it that the rules and conditions
promulgated for admission are not in conflict
with the provisions of the Act; and shall
administer properties of considerable value - for
all of which work, it is to be presumed, a working
knowledge of the law and a license to practice
the profession would be a distinct
asset.chanroblesvirtualawlibrarychanrobles
virtual law library
Under this particular criterion we hold that the
plaintiff is not entitled, as against the defendant,
to the office of administrator. But it is argued that
although the latter is a member of the Bar he is
nevertheless disqualified by virtue of paragraph
3 of the deed of donation, which provides that
the administrator may be removed on the
ground, among others, of ineptitude in the
discharge of his office or lack of evident sound
moral character. Reference is made to the fact
that the defendant was disbarred by this Court
on 29 March 1957 for immorality and
unprofessional conduct. It is also a fact,
however, that he was reinstated on 10 February
1960, before he assumed the office of
administrator. His reinstatement is a recognition
of his moral rehabilitation, upon proof no less
than that required for his admission to the Bar in
the first place.
Wherefore, the parties respectfully pray that the
foregoing stipulation of facts be admitted and
approved by this Honorable Court, without
prejudice to the parties adducing other evidence
to prove their case not covered by this
stipulation of facts.
Whether or not the applicant shall be reinstated
rests to a great extent in the sound discretion of
the court. The court action will depend,
generally speaking, on whether or not it decides
that the public interest in the orderly and
impartial administration of justice will be
conserved by the applicant's participation
therein in the capacity of an attorney and
counselor at law. The applicant must, like a
candidate for admission to the bar, satisfy the
court that he is a person of good moral character
- a fit and proper person to practice law. The
court will take into consideration the applicant's
character and standing prior to the disbarment,
the nature and character of the charge for which
he was disbarred, his conduct subsequent to the
disbarment, and the time that has elapsed
between the disbarment and the application for
reinstatement. (5 Am. Jur., Sec. 301, p.
443) chanrobles virtual law library
Evidence of reformation is required before
applicant is entitled to reinstatement,
notwithstanding the attorney has received a
pardon following his conviction, and the
requirements for reinstatement have been held
to be the same as for original admission to the
bar, except that the court may require a greater
degree of proof than in an original admission. (7
C.J.S., Attorney & Client, Sec. 41, p.
815.) chanrobles virtual law library
The decisive questions on an application for
reinstatement are whether applicant is "of good
moral character" in the sense in which that
phrase is used when applied to attorneys-at-law
and is a fit and proper person to be entrusted
with the privileges of the office of an attorney,
and whether his mental qualifications are such
as to enable him to discharge efficiently his duty
to the public, and the moral attributes are to be
regarded as a separate and distinct from his
mental qualifications. (7 C.J.S., Attorney &
Client, Sec. 41, p. 816).
As far as moral character is concerned, the
standard required of one seeking reinstatement
to the office of attorney cannot be less exacting
than that implied in paragraph 3 of the deed of
donation as a requisite for the office which is
disputed in this case. When the defendant was
restored to the roll of lawyers the restrictions and
disabilities resulting from his previous
disbarment were wiped
out.chanroblesvirtualawlibrarychanrobles virtual
law library
 AGENCY FULLTEXT CASES
This action must fail on one other ground: it is
already barred by lapse of time amounting the
prescription or laches. Under Section 16 of Rule
66 (formerly sec. 16, Rule 68, taken from section
216 of Act 190), this kind of action must be filed
within one (1) year after the right of plaintiff to
hold the office
arose.chanroblesvirtualawlibrarychanrobles
virtual law library
Plaintiff Jesus Ma. Cui believed himself entitled
to the office in question as long ago as 1932. On
January 26 of that year he filed a complaint
in quo warranto against Dr. Teodoro Cui, who
assumed the administration of the Hospicio on 2
July 1931. Mariano Cui, the plaintiff's father and
Antonio Ma. Cui came in as intervenors. The
case was dismissed by the Court of First
Instance upon a demurrer by the defendant
there to the complaint and complaint in
intervention. Upon appeal to the Supreme Court
from the order of dismissal, the case was
remanded for further proceedings (Cui v. Cui, 60
Phil. 37, 48). The plaintiff, however, did not
prosecute the case as indicated in the decision
of this Court, but acceded to an arrangement
whereby Teodoro Cui continued as
administrator, Mariano Cui was named "legal
adviser" and plaintiff Jesus Ma. Cui accepted a
position as assistant
administrator.chanroblesvirtualawlibrarychanro
bles virtual law library
Subsequently the plaintiff tried to get the
position by a series of extra-judicial maneuvers.
First he informed the Social Welfare
Commissioner, by letter dated 1 February 1950,
that as of the previous 1 January he had "made
clear" his intention of occupying the office of
administrator of the Hospicio." He followed that
up with another letter dated 4 February,
announcing that he had taken over the
administration as of 1 January 1950. Actually,
however, he took his oath of office before a
notary public only on 4 March 1950, after
receiving a reply of acknowledgment, dated 2
March, from the Social Welfare Commissioner,
who thought that he had already assumed the
position as stated in his communication of 4
February 1950. The rather muddled situation
was referred by the Commissioner to the
Secretary of Justice, who, in an opinion dated 3
April 1950 (op. No. 45, S. 1950), correcting
another opinion previously given, in effect ruled
that the plaintiff, not beings lawyer, was not
entitled to the administration of
the Hospicio.chanroblesvirtualawlibrarychanrob
les virtual law library
Meanwhile, the question again became the
subject of a court controversy. On 4 March
1950, the Hospicio commenced an action
against the Philippine National Bank in the Court
of First Instance of Cebu (Civ. No. R-1216)
because the Bank had frozen
the Hospicio's deposits therein. The Bank then
filed a third-party complaint against herein
plaintiff-appellee, Jesus Ma. Cui, who had, as
stated above, taken oath as administrator. On
19 October 1950, having been deprived of
recognition by the opinion of the Secretary of
Justice he moved to dismiss the third-party
complaint on the ground that he was
relinquishing "temporarily" his claim to the
administration of the Hospicio. The motion was
denied in an order dated 2 October 1953. On 6
February 1954 he was able to take another oath
of office as administrator before President
Magsaysay, and soon afterward filed a second
motion to dismiss in Civil case No. R-1216.
President Magsaysay, be it said, upon learning
that a case was pending in Court, stated in a
telegram to his Executive Secretary that "as far
as (he) was concerned the court may disregard
the oath" thus taken. The motion to dismiss was
granted nevertheless and the other parties in
the case filed their notice of appeal from the
order of dismissal. The plaintiff then filed an ex-
parte motion to be excluded as party in the
appeal and the trial Court again granted the
motion. This was on 24 November 1954.
Appellants thereupon instituted
a mandamus proceeding in the Supreme Court
(G.R. No. L-8540), which was decided on 28
May 1956, to the effect that Jesus Ma. Cui
should be included in the appeal. That appeal,
however, after it reached this Court was dismiss
upon motion of the parties, who agreed that "the
office of administrator and trustee of
the Hospicio ... should be ventilated in quo
 AGENCY FULLTEXT CASES
warranto proceedings to be initiated against the
incumbent by whomsoever is not occupying the
office but believes he has a right to it" (G.R. No.
L-9103). The resolution of dismissal was issued
31 July 1956. At that time the incumbent
administrator was Dr. Teodoro Cui, but no action
in quo warranto was filed against him by plaintiff
Jesus Ma. Cui as indicated in the aforesaid
motion for
dismissal.chanroblesvirtualawlibrarychanrobles
virtual law library
On 10 February 1960, defendant Antonio Ma.
Cui was reinstated by this Court as member of
the Bar, and on the following 27 February Dr.
Teodoro Cui resigned as administrator in his
favor, pursuant to the "convenio" between them
executed on the same date. The next day
Antonio Ma. Cui took his oath of
office.chanroblesvirtualawlibrarychanrobles
virtual law library
The failure of the plaintiff to prosecute his claim
judicially after this Court decided the first case
of Cui v. Cui in 1934 (60 Phil. 3769), remanding
it to the trial court for further proceedings; his
acceptance instead of the position of assistant
administrator, allowing Dr. Teodoro Cui to
continue as administrator and his failure to file
an action in quo warranto against said Dr. Cui
after 31 July 1956, when the appeal in Civil
Case No. R-1216 of the Cebu Court was
dismissed upon motion of the parties precisely
so that the conflicting claims of the parties could
be ventilated in such an action - all these
circumstances militate against the plaintiff's
present claim in view of the rule that an action
in quo warranto must be filed within one year
after the right of the plaintiff to hold the office
arose. The excuse that the plaintiff did not file an
action against Dr. Teodoro Cui after 31 July
1956 because of the latter's illness did not
interrupt the running of the statutory period. And
the fact that this action was filed within one year
of the defendant's assumption of office in
September 1960 does not make the plaintiff's
position any better, for the basis of the action is
his own right to the office and it is from the time
such right arose that the one-year limitation
must be counted, not from the date the
incumbent began to discharge the duties of said
office. Bautista v. Fajardo, 38 Phil. 624; Lim vs.
Yulo, 62 Phil.
161.chanroblesvirtualawlibrarychanrobles
virtual law library
Now for the claim of intervenor and appellant
Romulo Cui. This party is also a lawyer,
grandson of Vicente Cui, one of the nephews of
the founders of the Hospicio mentioned by them
in the deed of donation. He is further, in the line
of succession, than defendant Antonio Ma. Cui,
who is a son of Mariano Cui, another one of the
said nephews. The deed of donation provides:
"a la muerte o incapacidad de estos
administradores (those appointed in the deed
itself) pasara a una sola persona que sera el
varon, mayor de edad, que descienda
legitimamente de cualquiera de nuestros
sobrinos legitimos Mariano Cui, Mauricio Cui,
Vicente Cui, Victor Cui, y que posea titulo de
abogado ... En igualdad de circumstancias, sera
preferido el varon de mas edad descendiente de
quien tenia ultimamente la administration."
Besides being a nearer descendant than
Romulo Cui, Antonio Ma. Cui is older than he
and therefore is preferred when the
circumstances are otherwise equal. The
intervenor contends that the intention of the
founders was to confer the administration by line
and successively to the descendants of the
nephews named in the deed, in the order they
are named. Thus, he argues, since the last
administrator was Dr. Teodoro Cui, who
belonged to the Mauricio Cui line, the next
administrator must come from the line of Vicente
Cui, to whom the intervenor belongs. This
interpretation, however, is not justified by the
terms of the deed of
donation.chanroblesvirtualawlibrarychanrobles
virtual law library
IN VIEW OF THE FOREGOING
CONSIDERATIONS, the judgment appealed
from is reversed and set aside, and the
complaint as well as the complaint in
intervention are dismissed, with costs equally
against plaintiff-appellee and intervenor-
appellant.
 AGENCY FULLTEXT CASES
SUPREME COURT EN BANC
ALLIED FREE WORKERS’ UNION (PLUM),
Petitioner,
-versus-
G.R. Nos. L-22951 and L-22952 January 31,
1967
COMPANIA
JOSE C. TEVES, and COURT
INDUSTRIAL RELATIONS,
Respondents.
x----------------------------------------------------x
COMPANIA MARITIMA and MANAGER JOSE
C. TEVES,
Petitioners,
-versus-
ALLIED FREE WORKERS’ UNION (PLUM)
and COURT OF INDUSTRIAL RELATIONS,
Respondents.
x----------------------------------------------------x
MARITIMA,
MANAGER
G.R. No. L22971 January 31, 1967
DECISION
Industrial Peace Act; No unfair labor practice
where there is no employer-employee
relationship.—The fact that a shipping company
did not answer a union’s proposal for a collective
bargaining agreement does not mean that it is
guilty of an unfair labor practice. Under the law,
the duty to bargain collectively arises only
between the “employer” and its “employees”,
Where neither party is an employer nor an
employee of the other, no such duty would exist.
Where there is no duty to bargain collectively,
the refusal to bargain violates no right.
Independent contractor; Finding that union
operated as a labor contractor under the “cabo”
system.—Where the Court of Industrial
Relations found that the union, in performing
arrastre and stevedoring work for the shipping
company operated as a labor contractor under
the so-called “cabo” system, and the union paid
its own laborers, it is an independent contractor.
This finding cannot be disturbed on appeal. An
OF
independent contractor is not an employee. Nor
can the members of the union be considered
employees of the shipping company since there
was no direct employment relationship between
the company and the laborers. The latter had no
separate, individual contracts with the company.
Same; Employer and employee; Elements in
determining employer-employee relationship.—
Where the union, through its officers, selected
and hired the laborers, paid their wages,
exercised control and supervision over them
and had the power to discipline and dismiss
them, the laborers are employees of the union
and not of the shipping company with which the
union had entered into a contract. There is no
legal impediment for a union to be an employer.
Same; Agency; Where union is not an agent of
shipping company.—A union that entered into a
stevedoring contract with a shipping company
cannot be regarded as an agent of the company
since an agent cannot represent two conflicting
interest.
Same; Unilateral cancellation of employment
contract.—A resolutory condition in a contract
for personal services permitting the cancellation
of the contract by one of the contracting parties
is valid.
Same; Termination of stevedoring contract.—
Where a shipping company terminated its
stevedoring contract with a union because of the
latter’s inefficient service, it cannot be said that
the termination was in bad faith or as a
retaliation for the union’s demand for a collective
 AGENCY FULLTEXT CASES
bargaining contract. Nor can said termination be
considered union interference.
Same; Employer-employee relationship cannot
be imposed.—An employer-employee
relationship cannot be imposed against the will
of a company. It would violate the company’s
exclusive prerogative to determine whether it
should enter into an employment contract or not
(Pampanga Bus Co. vs. Pambusco Employees’
Union, 68 Phil. 541).
Same; Duty to bargain collectively.—The duty to
bargain collectively exists only between the
“employer” and its “employees”. However, the
actual negotiations—which may possibly
culminate in a concrete collective bargaining
contract—are carried on between the
“employer” itself and the official representative
of the “employees” (Secs. 12 [2] and 13, Rep.
Act No. 875)—in most cases, the majority labor
union. In the case at bar, there being no
employer-employee relationship between the
parties disputants, there is neither a “duty to
bargain collectively” to speak of. And there
being no such duty, to hold certification
elections would be pointless. There is no reason
to select a representative to negotiate when
there can be no negotiations in the first place.
Where there is no duty to bargain collectively, it
is not proper to hold certification elections in
connection therewith.
Same; Remedy against “cabo” system.—The
“cabo” system, although not illegal, is
disadvantageous to laborers. However, the
“cabo” system cannot be eliminated by imposing
an employer-employee relationship and forcing
the holding of a certification election which is not
warranted. The end cannot justify the means.
For an action to be sanctioned by the courts, the
purpose must not only be good but the means
undertaken must also be lawful. The remedy
against the “cabo” system need not be sought in
the courts but in the laborers themselves who
should organize into a closely-knit union which
would secure the privileges that the members
desire through the election of officers among
themselves who would not exploit them.
Allied Free Workers’ Union (PLUM) vs.
Compañia Maritima, et al., 19 SCRA 258, No. L-
22971 January 31, 1967
The three cases before this Court are the
respective appeals separately taken by the
parties hereto from an Order[1] of the Court of
Industrial Relations en banc affirming its trial
judge’s decision, rendered on November 4,
1963, in CIR Case 175-MC and CIR Case 426-
ULP. Thus L-22971 is the appeal of
MARITIMA[2] in CIR Case 175-MC; L-22952 is
AFWU’s[3] appeal in the same case; and L-
22951 refers to AFWU’s appeal in CIR Case
426-ULP. Since these cases were jointly tried
and decided in the court a quo and they involve
the same fundamental issue — the presence or
absence of employer-employee relationship —
they are jointly considered herein.
MARITIMA is a local corporation engaged in the
shipping business. Teves is its branch manager
in the port of Iligan City. And AFWU is a duly
registered legitimate labor organization with 225
members. chanroblespublishingcompany
On August 11, 1952, MARITIMA, through
Teves, entered into a CONTRACT[4] with
AFWU, the terms of which We reproduce:
“— ARRASTRE AND STEVEDORING
CONTRACT —
“Know All Men by These Presents:
“This contract made and executed this 11th day
of August, 1952, in the City of Iligan, Philippines,
by and between the COMPANIA MARITIMA,
Iligan Branch, represented by its Branch
Manager in Iligan City, and the ALLIED FREE
WORKERS UNION, a duly authorized labor
union, represented by its President:
“WITNESSETH:
“1. That the Compania Maritima hereby engage
the services of the Allied Free Workers Union to
do and
BENGZON, J.:
 AGENCY FULLTEXT CASES
perform all the work of stevedoring and arrastre
services of all its vessels or boats calling in the
port of Iligan City, beginning August 12, 1952.
“2. That the Compania Maritima shall not be
liable for the payment of the services rendered
by the Allied Free Workers Union, for the
loading, unloading and deliveries of cargoes as
same is payable by the owners and consignees
of cargoes, as it has been the practice in the port
of Iligan City.
“3. That the Allied Free Workers Union shall be
responsible for the damages that may be
caused to the cargoes in the course of their
handling.
“4. That this contract is good and valid for a
period of one (1) month from August 12, 1952,
but same may be renewed by agreement of the
parties; however Compania Maritima reserves
the right to revoke this contract even before the
expiration of the term, if and when the Allied
Free Workers Union fails to render good service.
chanroblespublishingcompany
“IN WITNESS WHEREOF, we hereunto sign
this presents in the City of Iligan, Philippines,
this 11th day of August, 1952.
(Sgd.) SALVADOR. T. LLUCH
President
Allied Free Workers Union Iligan City
“SIGNED IN THE PRESENCE OF:
1. (Sgd.) JOSE CUETO
2. (Sgd.) SERGIO OBACH”
(Sgd.) JOSE C. TEVES
Branch Manager
Compania Maritima
During the first month of the existence of the
CONTRACT, AFWU rendered satisfactory
service. So, MARITIMA, through Teves, verbally
renewed the same. This harmonious relations
between MARITIMA and AFWU lasted up to the
latter part of 1953 when the former complained
to the latter of unsatisfactory and inefficient
service by the laborers doing the arrastre and
stevedoring work. This deteriorating situation
was admitted as a fact by AFWU’s president. To
remedy the situation — since MARITIMA’s
business was being adversely affected — Teves
was forced to hire extra laborers from among
“stand-by” workers not affiliated to any union to
help in the stevedoring and arrastre work. The
wages of these extra laborers were paid by
MARITIMA through separate vouchers and not
by AFWU . Moreover, said wages were not
charged to the consignees or owners of the
cargoes.
On July 23, 1954, AFWU presented to
MARITIMA a written proposal[5] for a collective
bargaining agreement. This demand embodied
certain terms and conditions of employment
different from the provisions of the CONTRACT.
No reply was made by MARITIMA. On August
6, 1954, AFWU instituted proceedings in the
Industrial Court[6] praying that it be certified as
the sole and exclusive bargaining agent in the
bargaining unit composed of all the laborers
doing the arrastre and stevedoring work in
connection with MARITIMA’s vessels in Iligan
City. MARITIMA answered, alleging lack of
employer- employee relationship between the
parties.
On August 24, 1954, MARITIMA informed
AFWU of the termination of the CONTRACT
because of the inefficient service rendered by
the latter which had adversely affected its
business. The termination was to take effect as
of September 1,1954. MARITIMA then
contracted with the Iligan Stevedoring Union for
the arrastre and stevedoring work. The latter
agreed to perform the work subject to the same
terms and conditions of the CONTRACT. The
new agreement was to be carried out on
September 1, 1954.
On August 26, 1954, upon the instance of
AFWU, MARITIMA found itself charged before
 AGENCY FULLTEXT CASES
the Industrial Court[7] of unfair labor practices
under Sec. 4(a), (1), (3), (4) and (6) of Rep. Act
No, 875. MARITIMA answered, again denying
the employer-employee relationship between
the parties.
On September 1, 1954, members of AFWU,
together with those of the Mindanao Workers
Alliance — a sister union — formed a picket line
at the wharf of Iligan City, thus preventing the
Iligan Stevedoring
Union from carrying out the arrastre and
stevedoring work it contracted for.[8] This picket
lasted for nine days.
chanroblespublishingcompany
On September 9, 1954, MARITIMA filed an
action[9] to rescind the CONTRACT, enjoin
AFWU members from doing arrastre and
stevedoring work in connection with its vessels,
and for recovery of damages against AFWU and
its officers. Incidentally, this civil case has been
the subject of three proceedings already which
have reached this Court. The first 10 involved a
preliminary injunction issued therein on
September 9, 1954, by the trial court prohibiting
AFWU from interfering in any manner with the
loading and unloading of cargoes from
MARITIMA’s vessels. This injunction was lifted
that very evening upon the filing of a
counterbond by AFWU. Subsequently, a motion
to dissolve said counterbond was filed by
MARITIMA but the hearing on this incident was
enjoined by Us on March 15, 1955, upon the
institution of the petition for prohibition and
injunction in said L-8876.[11] Meanwhile, AFWU
members- laborers were able to continue the
arrastre and stevedoring work in connection
with MARITIMA’s vessels.
chanroblespublishingcompany
On December 5, 1960, the CFI decision in the
civil case was promulgated. It ordered the
rescission of the CONTRACT and permanently
enjoined AFWU members from performing work
in connection with MARITIMA’s vessels. AFWU
then filed its notice of appeal, appeal bond and
record on appeal.[12] The subsequent incidents
thereto gave rise to the two other proceedings
which have previously reached Us here.
On January 6, 1961, upon motion of MARITIMA,
an order of execution pending appeal and a writ
of injunction against AFWU was issued by the
trial court in the civil case. This enabled
MARITIMA to engage the services of the
Mindanao Arrastre Service to do the arrastre
and stevedoring work on January 8, 1961.
However, AFWU filed a petition for certiorari,
injunction and prohibition[13] here and on
January 18, 1961, was able to secure a writ of
preliminary injunction ordering the maintenance
of the status quo prior to January 6, 1961. Thus,
after January 18, 1961, AFWU laborers were
again back doing the same work as before.
The third incident that reached us[14] involved
an order of the same trial court in the same civil
case, dated January 11, 1961, which amended
some clerical errors in the original decision of
December 5, 1960. Upon motion of MARITIMA,
the trial court, on March 24, 1962, issued an
order for the execution of the decision of
January 11, 1961, since AFWU did not appeal
therefrom, and on March 31, 1962, a writ of
execution ousting the 225 AFWU members-
laborers from their work in connection with the
loading and unloading of cargoes was issued
and a levy on execution upon the properties of
AFWU was effected. Accordingly, on April 1,
1962, MARITIMA was again able to engage the
services of the Mindanao Arrastre Service.
chanroblespublishingcompany
On April 16, 1962, upon the institution of the
petition for certiorari, injunction, prohibition and
mandamus, a preliminary injunction was issued
by Us against the orders of March 24 and 31,
1962. But then, on May 16, 1962, upon motion
of MARITIMA, this preliminary injunction was
lifted by Us insofar as it related to the execution
of the order ousting the AFWU laborers from the
stevedoring and arrastre work in connection
with the MARITIMA vessels.[15] Such then was
the status of things.
On November 4, 1963, after almost 10 years of
hearing the two cases jointly, the Industrial
 AGENCY FULLTEXT CASES
Court finally rendered its decision. The
dispositive part provided:
“IN VIEW OF ALL THE FOREGOING
CIRCUMSTANCES, the complaint of the union
for unfair labor practices against the Compania
Maritima and/or its agent Jose C. Teves and the
Iligan Stevedoring Union and/or Sergio Obach
is hereby dismissed for lacks of substantial
evidence and merit.
chanroblespublishingcompany
“In pursuance of the provisions of Section 12 of
Republic Act 875 and the Rules of this court on
certification election, the Honorable, the
Secretary of Labor or any of his authorized
representative is hereby requested to conduct
certification election among all the workers
and/or stevedores working in the wharf of Iligan
City who are performing stevedoring and
arrastre service aboard Compania Maritima
vessels docking at Iligan City port in order to
determine their representative for collective
bargaining with the employer, whether these
desire to be represented by the petitioner Allied
Free Workers Union or neither [sic]; and upon
termination of the said election, the result
thereof shall forthwith be submitted to this court
for further consideration. The union present
payroll may be utilized in determining the
qualified voters, with the exclusion of all
supervisors.
“SO ORDERED.”
As already indicated, the fundamental issue
involved in these cases before Us consists in
whether there is an employer-employee
relationship between MARITIMA, on the one
hand, and AFWU and/or its members-laborers
who do the actual stevedoring and arrastre
work, on the other hand.
chanroblespublishingcompany
THE UNFAIR LABOR PRACTICE CASE (L-
22951[*] [CIR Case No. 426-ULP])
Petitioner AFWU’s proposition is that the court a
quo erred (1) in concluding that MARITIMA had
not refused to bargain collectively with it, as the
majority union; (2) in not finding that MARITIMA
had committed acts of discrimination,
interferences and coercions upon its members-
laborers, and (3) in concluding that the
CONTRACT may not be interfered with even if
contrary to law or public policy.
It is true that MARITIMA admits that it did not
answer AFWU’s proposal for a collective
bargaining agreement. From this it does not
necessarily follow that it is guilty of unfair labor
practice. Under the law[16] the duty to bargain
collectively arises only between the “employer”
and its “employees”. Where neither party is an
“employer” nor an “employee” of the other, no
such duty would exist. Needless to add, where
there is no duty to bargain collectively the
refusal to bargain violates no right. So, the
question is: Under the CONTRACT, was
MARITIMA the “employer” and AFWU and/or its
members the “employees” with respect to one
another? chanroblespublishingcompany
The court a quo held that under the
CONTRACT, AFWU was an independent
contractor of MARITIMA. This conclusion was
based on the following findings of fact, which We
can no longer disturb, stated in the CIR decision:
“7. The petitioner union operated as a labor
contractor under the so-called ‘cabo’ system;
and as such it has a complete set of officers and
office personnel (Exh. ‘F’ and ‘F-1) and its
organizational structure includes the following:
General President, with the following under him
— one vice-president, legal counsel, general
treasurer, general manager and the board of
directors. Under the general manager is the
secretary, the auditors, and the office staff
composing of the general foreman, general
checker, general timekeeper, and the respective
subordinates like assistant foreman, capataz,
assistant general checker, Field Checker, office
time keeper, and field timekeeper all appointed
by the general manager of the union and are
paid in accordance with the union payroll
exclusively prepared by the union in the office.
(See t.s.n. pp. 32-36, June 9, 1960; pp. 78-80,
February 16, 1961; pp. 26-28, August 9, 1960).
The payrolls where laborers are listed and paid
 AGENCY FULLTEXT CASES
were prepared by the union itself without the
intervention or control of the respondent
company and/or its agent at Iligan City. The
respondent never had any knowledge of the
individual names of laborers and/or workers
listed in the union payroll or in their roster of
membership.
“8. The union engaged the services of their
members in undertaking the work of arrastre
and stevedoring either to haul shippers’ goods
from their warehouses in Iligan City to the
Maritima boat or from the boat to the different
consignees. The charges for such service were
known by the union and collected by them
through their bill collector. This is shown by the
preparation of the union forms known as
‘conduci’ or delivery receipts. These ‘conduci’ or
receipts contain informations as to the number
and/or volume of cargoes handled by the union,
the invoice number, the name of the vessel and
the number of bills of lading covering the
cargoes to be delivered. Those delivery receipts
are different and separate from the bills of lading
and delivery receipts issued by the company to
the consignees or shippers. Cargoes carried
from the warehouses to the boat or from the
boat to the consignees were always
accompanied by the union checker who hand
carry the ‘conduci’. Once goods are delivered to
their
destination the union through its bill collectors
prepare the bills of collection and the charges
thereon are collected by the union bill collectors
who are employees of the union and not of the
respondent. The respondent had no intervention
whatsoever in the collection of those charges as
the same are clearly indicated and described in
the labor contract, Exhibit ‘A’. There were,
however, instances when the respondents were
requested to help the union in the collection of
charges for services rendered by members of
the union when fertilizers and gasoline drums
were loaded aboard the Compania Maritima
boats. This was necessary in order to facilitate
the collection of freight and handling charges
from the government for auditing purposes.
When cargoes are to be loaded. the shipper
usually notifies the petitioner union when to load
their cargoes aboard Compania Maritima boats
calling in the port of Iligan City; and when a boat
docks in said port, the union undertakes to haul
the said shipper’s goods to the boat. In doing
this work, the union employs their own trucks
other vehicles or conveyance from shipper’s
warehouse to the boat or vice-versa. The
respondent has no truck of any kind for the
service of hauling cargoes because such
service is included in the contract executed
between the parties. (See Exh. ‘A’)
“9. The union members who were hired by the
union to perform arrastre and stevedoring work
on respondents’ vessels at Iligan port were
being supervised and controlled by the general
foreman of the petitioner union or by any union
assistant or capataz responsible for the
execution of the labor contract when performing
arrastre and/or stevedoring work aboard
vessels of the Compania Maritima docking at
Iligan City. The foreman assigned their laborers
to perform the required work aboard vessels of
the respondent. For instance, when a boat
arrives, the general foreman requests the cargo
report from the chief mate of the vessel in order
to determine where the cargoes are located in
the hold of the boat and to know the destination
of these cargoes. All the laborers and/or workers
hired for said work are union members and are
only responsible to their immediate chief who
are officers and/or employees of the union. The
respondent firm have their own separate
representatives like checkers who extend aid to
the
union officers and members in checking the
different cargoes unloaded or loaded aboard
vessels of the Compania Maritima. There were
no instances where officers and employees of
the respondent Compania Maritima and/or its
agent had interfered in the giving of instructions
to the laborers performing the arrastre and/or
stevedoring work either aboard vessels or at the
wharf of Ilagan City. As contractor, the union
does not receive instructions as to what to do,
how to do, and works without specific
instructions. They have no fixed hours of work
required by the Maritima.
 AGENCY FULLTEXT CASES
“10. While cargoes were in transit either from the
warehouse to the boat or from the boat to the
different consignees, any losses or damages
caused with the said cargoes were charged to
the account of the union; and the union likewise
imposed the penalty or fine to any employee
who caused or committed the damages to
cargoes in transit. Other disciplinary measure
imposed on laborers performing the said work
were exercised by the general foreman of the
union who has blanket authority from the union
general manager to exercise disciplinary control
over their members who were assigned to
perform the work in a group of laborers assigned
by the union to perform loading or unloading
cargoes when a Compania Maritima boat
docked at Iligan City. The respondents have not
at any time interfered in the imposition of
disciplinary action upon the laborers who are
members of the union. In one instance, under
this situation, the president of the union himself
dismissed one inefficient laborer found to have
been performing inefficient service at the time
(t.s.n. pp. 17-18, February 15, 1961).
xxx
“13. Erring laborers and/or workers who are
affiliates of the union were directly responsible
to the union and never to the respondent.
Respondent cannot, therefore, discipline and/or
dismiss erring workers of the union.” (Italics
supplied)chanroblespublishingcompany
And in absolving MARITIMA of the unfair labor
charge on this point, the court a quo concluded:
“From the foregoing circumstances and
findings, the Court is of the opinion that no
substantial evidence has been presented to
sustain the charge of unfair labor practice acts
as alleged to have been committed by herein
respondent. The Court finds no interference in
the union activities, if any, of the members of the
Allied Free Workers Union as these persons
engaged in the stevedoring and arrastre service
were employed by the Allied Free Workers
Union as independent contractor subject to the
terms and conditions of their then existing labor
contract Exhibit ‘A’. To construe the contract
otherwise would tend to disregard the rights and
privileges of the parties intended by them in their
contract. (Exhibit ‘A’). This Court believes that it
may not interfere in the implementation of the
said labor contract in the absence of abuse by
one party to the prejudice of the other.
“Further, the Court finds that the petitioner,
aside from its labor contract (See Exhibit ‘A’)
with the respondent Compania Maritima also
has other labor contracts with other shipping
firms on the stevedoring and arrastre work; and
that this contract obligated the petitioner as an
independent labor contractor to undertake the
arrastre and stevedoring service on Compania
Maritima boats docking at Iligan City Port. The
petitioner is an independent contractor as
defined in the contract Exhibit ‘A’ and in the
evidence submitted by the parties. ‘An
independent contractor is one who in rendering
services, exercises an independent
employment or occupation and represents the
will of his employer only as to the results of his
work and not as to the means whereby it is
accomplished; one who exercising an
independent employment, contracts to do a
piece of work according to his own methods,
without being subject to the control of his
employer except as to the result of his work; and
who engaged to perform a certain service, for
another, according to his own manner and
methods, free from the control and direction of
his employer in all matters connected with the
performance of the service except as to the
result of the work’ (see 56 C.J.S. pp. 41-43;
Cruz, et al. vs. Manila Hotel. et al. G.R. No. L-
9110, April 30,
1957). These factors were present in the
relation of the parties as described in their
contract Exhibit ‘A’.
xxx
“In Viaña vs. Al Lagadan, et al., G.R. No. L-
8967, May 31, 1956, the Supreme Court states
the rule as follows:
“‘In determining the existence of employer-
employee relationship, the following elements
 AGENCY FULLTEXT CASES
are generally considered, namely: (1) the
selection and engagement of the employees; (2)
the payment of wages; (3) the power of
dismissal; and (4) the power to control the
employee’s conduct — although the latter is the
most important element (35 Am. Jur. 445).
Assuming that the share received by the
deceased could partake of the nature of wages
— on which we need not and do not express our
view — and that the second element, therefore,
exists in the case at bar, the record does not
contain any specific data regarding the third and
fourth elements.’
“The clear implication of the decision of the
Supreme Court is that if the defendant has no
power of ‘control’ — which, according to the
Supreme Court, is the ‘most important element’
— there is no employer-employee relationship.”
(Italics supplied) chanroblespublishingcompany
The conclusion thus reached by the court a quo
is in full accord with the facts and the applicable
jurisprudence. We totally agree with the court a
quo that AFWU was an independent contractor.
And an independent contractor is not an
“employee.”[17]
Neither is there any direct employment
relationship between MARITIMA and the
laborers. The latter have no separate, individual
contracts with MARITIMA. In fact, the court a
quo found that it was AFWU that hired them.
Their only possible connection with MARITIMA
is through AFWU which contracted with the
latter. Hence, they could not possibly be in a
better class than AFWU which dealt with
MARITIMA.[18]
In this connection, it is interesting to note that
the facts as found by the court a quo strongly
indicate that it is AFWU itself who is the
“employer” of those laborers. The facts very
succinctly show that it was AFWU, through its
officers, which (1) selected and hired the
laborers, (2) paid their wages, (3) exercised
control and supervision over them, and (4) had
the power to discipline and dismiss them. These
are the very elements constituting an employer-
employee relationship.[19]
Of course there is no legal impediment for a
union to be an “employer.”[20] Under the
particular facts of this case, however, AFWU
appears to be more of a distinct and completely
autonomous business group or association. Its
organizational structure and operational system
is no different from other commercial entities on
the same line. It even has its own bill collectors
and trucking facilities. And that it really is
engaged in business is shown by the fact that it
had arrastre and stevedoring contracts with
other shipping firms in Iligan City.
Now, in its all-out endeavor to make an
“employer” out of MARITIMA, AFWU, citing an
impressive array of jurisprudence, even goes to
the extent of insisting that it be considered a
mere “agent” of MARITIMA. Suffice it to say on
this point that an agent can not represent two
conflicting interests that are diametrically
opposed. And that the cases sought to be relied
upon did not involve representatives of
opposing interests.
chanroblespublishingcompany
Anent the second point raised: AFWU claims
that the court a quo found that acts of
interferences and discriminations were
committed by MARITIMA against the former’s
members simply for their union affiliation.[21]
However, nowhere in the 32-page decision of
the court a quo can any such finding be found.
On the contrary, said court made the following
finding:
“18. There is no showing that this new union, the
Iligan Stevedoring Union, was organized with
the help of the branch manager Jose C. Teves.
The organizer ,of the union like Messrs. Sergio
Obach, Labayos and Atty. Obach and their
colleagues have never sought the intervention,
help or aid of the respondent Compania
Maritima or its branch manager
Teves in the formation and/or organization of
the said Iligan Stevedoring Union. It appears
that these people have had previous knowledge
and experience in handling stevedoring and in
the arrastre service prior to the employment of
the Allied Free Workers Union in the Iligan port.
 AGENCY FULLTEXT CASES
The charge of union interference and
domination finds no support from the evidence.”
(Italics supplied) chanroblespublishingcompany
More worthy of consideration is the suggestion
that the termination of the CONTRACT was in
bad faith. First of all, contrary to AFWU’s
sweeping statement, the court a quo did not find
that the termination of the CONTRACT was “in
retaliation” to AFWU ‘s demand for collective
bargaining. On the contrary, the court a quo held
that MARITIMA’s authority to terminate the
contract was rightfully exercised:
“21. The evidence does not show substantially
any act of interference in the union membership
or activities of the petitioner union. The
rescission of their contract is not a union
interference contemplated in the law.
xxx
“Further, the Court is satisfied that, there is no
act or acts of discrimination as claimed by herein
petitioner to have been committed by the
respondent firm or its branch manager Teves.
Evidence is clear that Teves, in representation
of the principal, the respondent Compania
Maritima, has also acted in good faith in
implementing the provisions of their existent
contract (Exhibit ‘A’), and when he advised the
union of the rescission of the said contract
effective August 31, 1954, he did so in the
concept that the employer firm may so terminate
their contract pursuant to paragraph 4 of Exhibit
‘A’ which at the time was the law controlling
between them.” (Italics supplied)
We are equally satisfied that the real reason for
the termination of the CONTRACT was AFWU’s
inefficient service. The court a quo drew its
conclusion from the following findings:
chanroblespublishingcompany
“11. During the first month of the existence of the
labor contract Exhibit ‘A’, the petitioner union
rendered satisfactory service. Under this
situation, the Compania Maritima’s
representative at Iligan City was authorized to
renew verbally with the extension of the contract
Exhibit ‘A’ from month to month basis after the
first month of its expiration. This situation of
harmony lasted up to the latter part of 1953
when the Compania Maritima and its branch
manager agent complained to the union of the
unsatisfactory service of the union laborers
hired to load and unload cargoes aboard
Compania Maritima boats. This deteriorating
situation was admitted as a fact by the union
president (See Exh., ‘3’, ‘3-A’ and ‘3 - B’; See
also t.s.n. pp. 65-66, August 9, 1960).
“12. There was a showing that the laborers
employed by the union lagging behind their work
under the contract, so much so of the
respondent company in Iligan City suffered
adversely during the year 1954; and this was
due to the fact that respondents’ vessels were
forced to leave cargoes behind in order not to
disrupt the schedule of departures. The union
laborers were slow in loading and/or unloading
freight from which the respondent Compania
Maritima secured its income and/or profits. At
times, cargoes were left behind because of the
union’s failure to load them before vessel’s
departure. In order to solve this inefficiency of
the complaining union, the branch manager of
the Compania Maritima was forced to hire extra
laborers from among ‘stand-by’ worker not
affiliated to any union for the purpose of helping
in the stevedoring and arrastre work on their
vessels because, at that time, the union was not
performing and/or rendering efficient service in
the loading and unloading of cargoes.”
xxx
“14. Because of the deterioration of the service
rendered to the respondent, the branch
manager of the respondent Compania Maritima
informed the union of its intention to rescind the
contract Exhibit ‘A’ because the company had
been suffering losses for such inefficient
service. (See Exhibit ‘N’). Respondent Teves
reported to the Maritima’s head office on the
financial losses of the company in its operations.
(See Exhibits ‘Y’, ‘Y-1’ to ‘X-5’).
chanroblespublishingcompany
 AGENCY FULLTEXT CASES
“15. On August 24, 1954, branch manager Jose
C. Teves of the Iligan City Maritima Branch,
wrote the petitioner union informing them of the
termination of their contract, Exhibit ‘A’ (See
Exhibit ‘N’). This step was taken after the
company found the union were inefficient in
performing their jobs, and the business that
Maritima boats have to leave on schedule
without loading cargoes already contracted to
be transported.” (Italics supplied)
chanroblespublishingcompany
Perhaps, AFWU might say that this right to
terminate appearing in paragraph 4 of the
CONTRACT is contrary to law, morals, good
customs, public order, or public policy.[22]
However, it has not adduced any argument to
demonstrate such point. Moreover, there is
authority to the effect that the insertion in a
contract for personal services of a resolutory
condition permitting the cancellation of the
contract by one of the contracting parties is
valid.[23] Neither would the termination
constitute “union-busting”. Oceanic Air Products
vs. CIR,[24] cited by AFWU, is not in point. That
case presupposes an employer- employee
relationship between the parties disputants — a
basis absolutely wanting in this case.
AFWU’s third point is again that MARITIMA’s act
of terminating the CONTRACT constituted
union interference. As stated, the court a quo
found as a fact that there is no sufficient
evidence of union interference. And no reason
or argument has been advanced to show that
the fact of said termination alone constituted
union interference.
THE CERTIFICATION ELECTION CASE (L-
22952[*] & L-22971 [CIR Case No. 175-MC])
In the certification election case, the court a quo
directed the holding of a certification election
among the laborers then doing arrastre and
stevedoring work. Both MARITIMA and AFWU
have appealed from that ruling. The latter
maintains that the lower court should have
directly certified it as the majority union, entitled
to represent all the workers in the arrastre and
stevedoring work unit, whereas MARITIMA
contends that said court could not even have
correctly
ordered a certification election considering that
there was an absence of employer-employee
relationship between it and said laborers.
chanroblespublishingcompany
There is no question that certification election
could not have been proper during the existence
of the CONTRACT in view of the court a quo’s
finding that there was no employment
relationship thereunder between the parties. But
after the termination of the CONTRACT on
August 31, 1954, what was the nature of the
relationship between MARITIMA and the
laborers-members of AFWU?
From the finding that after the rescission of the
CONTRACT, MARITIMA continued to avail of
the services of AFWU, the court a quo
concluded that there came about an implied
employer-employee relationship between the
parties. This conclusion cannot be sustained.
First of all, it is contradicted by the established
facts. In its findings of fact, the court a quo
observed that after the rescission, the AFWU
laborers continued working in accordance with
the “cabo” system, which was the prevailing
customs in the place. Said the court:
chanroblespublishingcompany
“20. After the rescission of the contract Exhibit
‘A’ on August 31, 1964, the Allied Free Workers
Union and its members were working or
performing the work of arrastre and stevedoring
service aboard vessels of the Compania
Maritima docking at Iligan City port under the
‘cabo system’ then prevailing in that territory;
and the customs and conditions then prevailing
were observed by the parties without resorting
to the conditions of the former labor contract
Exhibit ‘A’. (Italics supplied)
chanroblespublishingcompany
Under the “Cabo” system, the union was an
independent contractor. This is shown by the
court a quo’s own finding that prior to the
CONTRACT between MARITIMA and AFWU,
 AGENCY FULLTEXT CASES
the former had an oral arrastre and stevedoring
agreement with another union. This agreement
was also based on the “cabo” system. As found
by the court a quo:
chanroblespublishingcompany
“4. That prior to the execution of Exhibit ‘A’, the
arrastre and stevedoring work was performed
by the Iligan Wharf
Laborers Union headed by one Raymundo
Labayos under a verbal agreement similar to the
nature and contents of Exhibit ‘A’; and this work
continued from 1949 to 1952.
“5. Under the oral contract, the Iligan Laborers
Union acting as an independent labor contractor
engaged [in] the services of its members as
laborers to perform the contract work of arrastre
and stevedoring service aboard vessels of the
Compania Maritima calling and docking at Iligan
City; and for the services therein rendered the
union charged shippers and/or consignees in
accordance with the consignment or place, and
the proceeds thereof shall be shared by the
union members in accordance with the union’s
internal rules and regulations. This system of
work is locally known as the ‘cabo system’. The
laborers who are members of the union and
hired for the arrastre and stevedoring work were
paid on union payrolls and the Compania
Maritima has had nothing to do with the
preparation of the same.
“6. Because of unsatisfactory service rendered
by the Iligan Wharf Labor Union headed by
Labayos, the Compania Maritima through its
agent in Iligan City cancelled their oral contract
and entered into a new contract, Exhibit ‘A’ with
the Allied Free Workers Union (PLUM) now
petitioner in this case. The terms and conditions
of the same continued and was similar to the
oral contract entered into with the union headed
by Labayos.
“7. The cancellation of the oral contract with the
Iligan Wharf Labor Union headed by Labayos
was due to the inefficient service rendered by
the said union. The labor contract entered into
by the petitioner herein (Exh. ‘A’) was
negotiated through the intervention of Messrs.
Salvador Lluch, Mariano Ll. Badelles,
Laurentino Ll. Badelles, Nicanor T. Halivas and
Raymundo Labayos. The contract was prepared
by their legal panel and after several
negotiations, respondent Teves reluctantly
signed the said written contract with the union
with the assurance however that the same
arrangement previously had with the former
union regarding the performance and execution
of the arrastre and stevedoring
contract be followed in accordance with the
custom of such kind of work at Iligan City. The
petitioner union, operated as a labor contractor
under the so-called ‘cabo’ system; (Italics
supplied) chanroblespublishingcompany
From the above findings, it is evident that,
insofar as the working agreement was
concerned, there was no real difference
between the CONTRACT and the prior oral
agreement. Both were based on the “cabo”
system. Under both, (1) the union was an
independent contractor which engaged the
services of its members as laborers; (2) the
charges against the consignees and owners of
cargoes were made directly by the union; and
(3) the laborers were paid on union payrolls and
MARITIMA had nothing to do with the
preparation of the same. These are the principal
characteristics of the “cabo” system on which
the parties based their relationship after the
termination of the CONTRACT.
Hence, since the parties observed the “cabo”
system after the rescission of the CONTRACT,
and since the characteristics of said system
show that the contracting union was an
independent contractor, it is reasonable to
assume that AFWU continued being an
independent contractor of MARITIMA. And,
being an independent contractor, it could not
qualify as an “employee”. With more reason
would this be true with respect to the laborers.
chanroblespublishingcompany
Moreover, there is no evidence at all regarding
the characteristics of the working arrangement
between AFWU and MARITIMA after the
 AGENCY FULLTEXT CASES
termination of the CONTRACT. All we have to
go on is the court a quo’s finding that the “cabo”
system was observed — a system that
negatives employment relationship. The four
elements generally regarded as indicating the
employer-employee relationship — or at the
very least, the element of “control” — must be
shown to sustain the conclusion that there came
about such relationship. The lack of such a
showing in the case at bar is a fatal to AFWU’s
contention. chanroblespublishingcompany
Lastly, to uphold the court a quo’s conclusion
would be tantamount to the imposition of an
employer-employee relationship against the will
of MARITIMA. This cannot be done, since it
would violate MARITIMA’s exclusive
prerogative to determine whether it should enter
into an employment contract or not, i.e., whether
it should hire
others or not.[25] In Pampanga Bus Co. vs.
Pambusco Employees’ Union,[26] We said:
“The general right to make a contract in relation
to one’s business is an essential part of the
liberty of the citizens protected by the due
process clause of the Constitution. The right of
a laborer to sell his labor to such person as he
may choose is, in its essence, the same as the
right of an employer to purchase labor from any
person whom it chooses. The employer and the
employee have thus an equality of right
guaranteed by the constitution. ‘If the employer
can compel the employee to work against the
latter’s will, this is servitude. If the employee can
compel the employer to give him work against
the employer’s will, this is oppression.’“ (Italics
supplied) chanroblespublishingcompany
Therefore, even if the AFWU laborers continued
to perform arrastre and stevedoring work after
August 31, 1954, it cannot be correctly
concluded — as did the court a quo — that an
employer-employee relationship — even
impliedly at that — arose when before there
never had been any. Indeed, it would appeal
unreasonable and unjust to force such a
relationship upon MARITIMA when it had clearly
and continuously manifested its intention not to
have any more business relationship
whatsoever with AFWU because of its inefficient
service. It was only to comply with injunctions
and other judicial mandates that MARITIMA
continued to abide by the status quo, extending
in fact and in effect the operation of the
MARITIMA-AFWU contract.
The only remaining question now is whether, in
the particular context of what We have said, the
lower court’s ruling ordering a certification
election can be sustained. As already stated,
the duty to bargain collectively exists only
between the “employer” and its “employees”.
However, the actual negotiations — which may
possibly culminate in a concrete collective
bargaining contract — are carried on between
the “employer” itself and the official
representative of the “employees”[27] — in most
cases, the majority labor union. Since the only
function of a certification election is to
determine, with judicial sanction, who this
official representative or spokesman of the
“employees” will be,[28] the order for
certification election in question cannot be
sustained. There being no employer-employee
relationship between the parties
disputants, there is neither a “duty to bargain
collectively” to speak of. And there being no
such duty, to hold certification elections would
be pointless. There is no reason to select a
representative to negotiate when there can be
no negotiations in the first place. We therefore
hold that where — as in this case — there is no
duty to bargain collectively, it is not proper to
hold certification elections in connection
therewith.
The court a quo’s objective in imposing the
employer-employee relationship may have to do
away with the “cabo” system which, although not
illegal, is in its operation regarded as
disadvantageous to the laborers and
stevedores. The rule however remains that the
end cannot justify the means. For an action to
be sanctioned by the courts, the purpose must
not only be good but the means undertaken
must also be lawful.
chanroblespublishingcompany
 AGENCY FULLTEXT CASES

A true and sincere concern for the welfare of

AFWU members- laborers would call for reforms
within AFWU itself, if the evil of the so-called
“cabo” system is to be eliminated. As We
suggested in Bermiso vs. Hijos de Escano ̃ ,[29]
the remedy against the “cabo” system need not
be sought in the courts but in the laborers
themselves who should organize into a closely-
knit union “which would secure the privileges
that the members desire thru the election of
officers among themselves who would not
exploit them.” chanroblespublishingcompany

WHEREFORE, the appealed decision of the

Court of Industrial Relations is hereby affirmed
insofar as it dismissed the charge of unfair labor
practice in CIR Case 426-ULP, but reversed and
set aside insofar as it ordered the holding of a
certification election in CIR Case No. 175-MC,
and the petition for certification in said case
should be as it is hereby, dismissed. No cost. So
ordered. chanroblespublishingcompany
 AGENCY FULLTEXT CASES
G.R. No. L-7144 May 31, 1955
FAR EASTERN EXPORT & IMPORT
CO., Petitioner, vs. LIM TECK
SUAN, Respondent.
1.PURCHASE AND SALE; WHEN
TRANSACTION NOT AN AGENCY OR
BROKERAGE.—Where the agreement speaks
of the items (merchandise) therein involved as
sold and the sale was even confirmed by the
export company, the agents U. T. Co. and the
export company dealt directly with local
merchants V. and S. without expressly
indicating or revealing their principals, there was
no privity of contract between the buyers S. and
V. and the suppliers F. I. C. and A. J. W. C.,
respectively, no commission or monetary
consideration was paid or agreed to be paid by
the buyers to the export company and the U. T.
Co., proof that there was no agency or
brokerage and that the profit of the latter
undoubtedly the difference between the price
listed to the buyers and the net special price
quoted to the sellers, by the suppliers. Held; that
the transaction entered into is one of purchase
and sale.
2.PRINCIPAL AND AGENT; AGENT OF
FOREIGN COMPANY MAY NOT ACT AS
AGENT OF LOCAL BUYERS.—Where a
foreign company has an agent here selling its
goods and merchandise, that same agent could
not very well act as agent for local buyers,
because the interests of his foreign principal and
those of the buyers would be in direct conflict.
He could not serve two masters at the same
time. (The doctrine in Gonzalo Puyat & Sons,
Inc., vs. Arco Amusement, 72 Phil. 402,
reiterated.)
MONTEMAYOR, J.:
This is a petition for certiorari to review a
decision of the Court of Appeals dated
September 25, 1953, reversing the decision of
the Court of First Instance of Manila, and
sentencing the defendant-petitioner Far Eastern
Export & Import Co. later referred to as export
company, to pay the plaintiff-respondent Lim
Teck Suan later to be referred to as Suan, the
sum of P11,4476.60, with legal interest from the
date of the filing of the complaint and to pay the
costs.chanroblesvirtualawlibrary chanrobles
virtual law library
As to the facts and the issue in the case we are
reproducing the findings of the Court of Appeals,
which findings are binding on this Tribunal in
case of similar appeals:
Sometime in November, 1948, Ignacio
Delizalde, an agent of the Far Eastern Export &
Import Company, went to the store of Lim Teck
Suan situated at 267 San Vicente Street,
Manila, and offered to sell textile, showing
samples thereof, and having arrived at an
agreement with Bernardo Lim, the General
Manager of Lim Teck Suan, Delizalde returned
on November 17 with the buyer's order, Exhibit
A, already prepared which reads: chanrobles
virtual law library
FAR EASTERN EXPORT & IMPORT
COMPANY chanrobles virtual law library
75 Escolta 2nd Floor Brias Roxas Bldg.,
Manilachanrobles virtual law library
Ship to LIM TECK SUAN Date Written 11/17/48
475 Nueva St., Manila Your No.
Our No. 276chanrobles virtual law library
I hereby commission you to procure for me the
following merchandise, subject to the terms and
conditions listed below:chanrobles virtual law
library
====================================
==================chanrobles virtual law
library
Quantity Unit Particulars Amount
10,000 yds Ashtone Acetate & Rayon-No.
13472
Width: 41/42 inches; Weight:
Approximately 8 oz. per yd; Ten (10)
colors, buyers choice, as per attached
samples, equally assorted; at $1.13
per yard F.A.S. New York U. S. $11,500.00
 AGENCY FULLTEXT CASES
Item herein sold are FOB-FAS X C. & F
CIFchanrobles virtual law library
====================================
==================chanrobles virtual law
library
TERMS AND CONDITIONSchanrobles virtual
law library
Acceptancechanrobles virtual law library
This Buyer's Order is subject to confirmation by
the exporter. Shipmentchanrobles virtual law
library
Period of Shipment is to be within December.
Bank Documents should be for a line of 45 days
to allow for presentation and payment against
"ON BOARD" bills of lading. Partial shipments
permitted.chanroblesvirtualawlibrary chanroble
s virtual law library
Paymentchanrobles virtual law library
Payment will be by "Confirmed Irrevocable
Letter of Credit" to be opened in favor of Frenkel
International Corporation, 52 Broadway, New
York, 4, N. Y. for the full amount of the above
cost of merchandise plus (approximately) for
export packing: insurance, freight,
documentation, forwarding, etc. which are for
the buyers accounts, IMMEDIATELY upon
written Confirmation. Our Guarantee In case
shipment is not affected, seller agrees to
reimburse buyer for all banking expenses.
Confirmed Accepted
Signed Nov. 17, 1948
Authorized officialchanrobles virtual law library
Confirmedchanrobles virtual law library
Accepted (Sgd.) Illegible Date Nov. 1948 to be
signed by our representative upon
confirmation.chanroblesvirtualawlibrary chanro
bles virtual law library
In accordance with said Exhibit A, plaintiff
established a letter of credit No. 6390 (Exhibit B)
in favor of Frenkel International Corporation
through the Hongkong and Shanghai Bangking
Corporation, attached to the agreed statement
of facts. On February 11, 1949, the textile
arrived at Manila on board the vessel M. S.
Arnold Maersk, covered by bill of lading No. 125
(Exhibit C), Invoice No. 1684-M (Exhibit D)
issued by Frenkel International Corporation
direct to the plaintiff. The plaintiff complained to
the defendant of the inferior quality of the textile
received by him and had them examined by
Marine Surveyor Del Pan & Company. Said
surveyor took swatches of the textile and had
the same analyzed by the Institute of Science
(Exhibit E-1) and submitted a report or survey
under date of April 9, 1949 (Exhibit E). Upon
instructions of the defendants plaintiff deposited
the goods with the United Warehouse
Corporation (Exhibits H, H-1 to H-6. As per
suggestion of the Far Eastern Export and Import
Company contained in its letter dated June 16,
1949, plaintiff withdrew from the United Bonded
Warehouse, Port Area, Manila, the fifteen cases
of Ashtone Acetate and Rayon Suiting for the
purpose of offering them for sale which netted
P11,907.30. Deducting this amount from the
sum of P23,686.96 which included the amount
paid by plaintiff for said textile and the
warehouse expenses, a difference of
P11,476.66 is left, representing the net direct
loss.chanroblesvirtualawlibrary chanrobles
virtual law library
The defense set up is that the Far Eastern
Export and Import Company only acted as a
broker in this transaction; that after placing the
order the defendants took no further action and
the cargo was taken directly by the buyer Lim
Teck Suan, the shipment having been made to
him and all the documents were also handled by
him directly without any intervention on the part
of the defendants; that upon receipt of Lim Teck
Suan's complaint the defendants passed it to its
principal, Frenkel International Corporation, for
comment, and the latter maintained that the
merchandise was up to standard called
for.chanroblesvirtualawlibrary chanrobles
virtual law library
 AGENCY FULLTEXT CASES
The lower court acquitted the defendants from
the complaint asking for damages in the sum of
P19,500.00 representing the difference in price
between the textile ordered and those received,
plus profits unrealized and the cost of this suit,
and dismissed the counterclaim filed by the
defendants without pronouncement as to costs.
As already stated, the Court of Appeals
reversed the judgment entered by the Court of
First Instance of Manila, basing its decision of
reversal on the case of Jose Velasco, vs.
Universal Trading Co., Inc., 45 Off. Gaz. 4504
where the transaction therein involved was
found by the court to be one of purchase and
sale and not of brokerage or agency. We have
carefully examined the Velasco case and we
agree with the Court of Appeals that the facts in
that case are very similar to those in the present
case. In the case of Velasco, we have the
following statement by the court itself which we
reproduced below:
Prior to November 8, 1945 a salesman or agent
of the Universal Trading Co., Inc. informed Jose
Velasco, Jr. that his company was in a position
to accept and fill in orders for Panamanian
Agewood Bourbon Whisky because there were
several thousand cases of this article ready for
shipment to the company by its principal office
in America. Acting upon this offer and
representative Velasco went to the Universal
Trading Co., Inc., and after a conversation with
the latter's official entered into an agreement
couched in the following terms:chanrobles
virtual law library
"Agreement is hereby made between Messrs.
Jose Velasco, Jr., 340 Echaque, Manila, and the
Universal Trading Company, Manila, for order
as follows and under the following
terms:chanrobles virtual law library
Quantity Merchan
dise and Unit Unit Amount
Price
Description
100 Panamanian Agewood Bourbon
Whisky ..........................Case $17.00 $1,700
_______
Total amount of order ........... $1,700chanrobles
virtual law library
Terms of Agreement:chanrobles virtual law
library
"1. That the Universal Trading Company agrees
to order the above merchandise from their Los
Angeles Office at the price quoted above, C.I.F.
Manila, for December shipment;chanrobles
virtual law library
"2. That Messrs. Jose Velasco, Jr., 340
Echaque, Manila, obligates myself/themselves
to take the above merchandise when advised of
its arrival from the United States and to pay in
cash the full amount of the order in the
Philippine Currency at the office of the Universal
Trading Company;chanrobles virtual law library
"3. This order may be subject to delay because
of uncertain shipping conditions. War risk
insurance, transhipping charges, if any, port
charges, and any storage that may be incurred
due to your not taking delivery of the order upon
being notified by us that the order is ready for
delivery, and government taxes, are all for your
account;chanrobles virtual law library
"4. The terms of this agreement will be either of
the following:
"a. To open up irrevocable letter of credit for the
value of the order with any of the local banks, or
thru bills of lading payable to A. J. Wilson
Company, 1263 South North Avenue, Los
Angeles, California;
"b. To put up a cash deposit equivalent to 50 %
of the order;chanrobles virtual law library
"5. Reasonable substitute, whenever possible,
will be shipped in lieu of items called for, if order
is not available."chanrobles virtual law library
Accordingly, Velasco deposited with the
defendant the sum of $1,700 which is 50% of the
price of the whisky pursuant to agreement
made, instead of 'to open up irrevocable letter of
credit for the value of the order with any of the
local banks, or through bills of lading payable to
A. J. Wilson Company.' On November 6, 1945,
the same date that the contract or agreement,
 AGENCY FULLTEXT CASES
Exhibit A, was signed an invoice under the name
of the Universal Trading Co., Inc. was issued to
Velasco for the 100 cases of Panamanian
Agewood Bourbon Whisky for the price of
$1,700 which invoice manifested that the article
was sold to Jose Velasco, Jr. On January 15,
1946 another invoice was issued containing
besides the list price of $1,700 or P3,400, a
statement of bank charges, customs duties,
internal revenue taxes, etc., giving a total
amount of P5,690.10 which after deducting the
deposit of $1,700, gives a balance of
P3,990.01.chanroblesvirtualawlibrary chanrobl
es virtual law library
On January 25, 1946 the Universal Trading Co.,
Inc. wrote Exhibit 4 to Mr. Velasco advising him
that the S. S. Manoeran had docked and that
they would appreciate it if he would pay the
amount of P3,990.10 direct to them. It turned
out, however, that after the ship arrived, what
the Universal Trading Co., Inc. tried to deliver to
Velasco was not Panamanian Agewood
Bourbon Whisky but Panamanian Agewood
Blended Whisky. Velasco refused to receive the
shipment and in turn filed action against the
defendant for the return of his deposit of $ 1,700
with interest. For its defense, defendant
contends that it merely acted as agent for
Velasco and could not be held responsible for
the substitution of Blended Whisky for Bourbon
Whisky and that furthermore the Blended
Whisky was a reasonable substitute for
Bourbon. After due hearing the Court of First
Instance of Manila held that the transaction was
purchase and sale and ordered the defendant to
refund to the plaintiff his deposit of P1,700 with
legal interest from the date of the filing of the suit
with costs, which decision on appeal was
affirmed by this Court.
We notice the following similarities. In the
present case, the export company acted as
agent for Frenkel International Corporation,
presumably the supplier of the textile sold. In the
Velasco case, the Universal Trading Co., was
acting as agent for A. J. Wilson Company, also
the supplier of the whisky sold. In the present
case, Suan according to the first part of the
agreement is said merely to be commissioning
the Export Company to procure for him the
merchandise in question, just as in the other
case, Velasco was supposed to be ordering the
whisky thru the Universal Trading Co. In the
present case, the price of the merchandise
bought was paid for by Suan by means of an
irrevocable letter of credit opened in favor of the
supplier, Frenkel International Corporation. In
the Velasco case, Velasco was given the choice
of either opening a similar irrevocable letter of
credit in favor of the supplier A. J. Wilson
Company or making a cash deposit. It is true
that in the Velasco case, upon the arrival of the
whisky and because it did not conform to
specifications, Velasco refused to received it;
but in the present case although Suan received
the merchandise he immediately protested its
poor quality and it was deposited in the
warehouse and later withdrawn and sold for the
best price possible, all at the suggestion of the
Export company. The present case is in our
opinion a stronger one than that of Velasco for
holding the transaction as one of purchase and
sale because as may be noticed from the
agreement (Exhibit "A"), the same speaks of the
items (merchandise) therein involved as sold,
and the sale was even confirmed by the Export
company. In both cases, the agents Universal
Trading Co. and the export company dealt
directly with the local merchants Velasco and
Suan without expressly indicating or revealing
their principals. In both cases there was no
privity of contract between the buyers - Suan
and Velasco and the suppliers Frenkel
International Corporation and A. J. Wilson
Company, respectively. In both cases no
commission or monetary consideration was paid
or agreed to be paid by the buyers to the Export
company and the Universal Trading Co., proof
that there was no agency or brokerage, and that
the profit of the latter was undoubtedly the
difference between the price listed to the buyers
and the net or special price quoted to the sellers,
by the suppliers. As already stated, it was held
in the Velasco case that the transaction therein
entered into was one of purchase and sale, and
for the same reasons given there, we agreed
with the Court of Appeals that the transaction
entered into here is one of purchase and
 AGENCY FULLTEXT CASES

sale.chanroblesvirtualawlibrary chanrobles
virtual law library

As was held by this Tribunal in the case of

Gonzalo Puyat & Sons Incorporated vs. Arco
Amusement, 72 Phil., 402, where a foreign
company has an agent here selling its goods
and merchandise, that same agent could not
very well act as agent for local buyers, because
the interests of his foreign principal and those of
the buyer would be in direct conflict. He could
not serve two masters at the same time. In the
present case, the Export company being an
agent of the Frenkel International Corporation
could not, as it claims, have acted as an agent
or broker for Suan.

Finding no reversible error in the decision

appealed from, the same is hereby affirmed,
with costs.
 AGENCY FULLTEXT CASES
G.R. No. L-21601 December 17, 1966
NIELSON & COMPANY, INC., plaintiff-
appellant,
vs.
LEPANTO CONSOLIDATED MINING
COMPANY, defendant-appellee.
Civil Law; Contracts; "Agency" and "lease of
service" compared and distinguished.—In both
agency and lease of services one of the parties
binds himself to render some service to the
other party. Agency, however, is distinguished
from lease of work or services in that the basis
of agency is representation, while in the lease of
work or services the basis is employment. The
lessor of services does not represent his
employer, while the agent represents his
principal. Agency is a preparatory contract, as
agency "does not stop with the agency because
the purpose is to enter into other contracts." The
most characteristic feature of an agency
relationship is the agent's power to bring about
business relations between his principal and
third persons. "The agent is destined to execute
juridical acts (creation, modification or extinction
of relations with .third parties). Lease of services
contemplate only material (non-juridical) acts."
(Reyes & Puno, An Outline of Philippine Civil
Law, Vol. V, p. 277).
Same; Obligations and contracts; Moratorium
law; Republic Act No. 342 not applicable to
debts contracted during the war.—Republic Act
No. 342 does not apply to debts contracted
during the war and did not lift the moratorium in
relation thereto (Uy v. Kalaw Katigbak, L-1830,
Dec. 31, 1949; Sison v. Mirasol, L-4711, Oct. 3,
1952; Compañia Maritima v. Court of Appeals,
L-14949, May 30, 1960). Said Rep. Act No. 342,
however, modified Executive Order No. 32 as to
pre-war debts, making the protection available
only to debtors who had war damage claims
(Sison v. Mirasol, L-4711, Oct. 3, 1952, cited in
Abraham, et al. v. Intestate Estate of Ysmael, et
al., L-16741, Jan. 31, 1962).
Corporation law; Shares of stock; Consideration
for which shares of stock may be issued; A
share of stock coming from stock dividends
declared cannot be issued to one who is not a
stockholder of a corporation.—From the
provision of Section 16 of the Corporation Law,
the consideration for which shares of stock may
be issued are: (1) cash; (2) property; and (3)
undistributed profits. Shares of stock are given
the special name "stock dividends" only if they
are issued in lieu of undistributed profits. If
shares of stocks are issued in exchange of cash
or property then those shares do not fall under
the category of "stock dividends". A corporation
may legally issue shares of stock in
consideration of services rendered to it by a
person not a stockholder, or in payment of its
indebtedness. It is the shares of stock ,that are
originally issued by the corporation and forming
part of the capital that can be exchanged for
cash or services rendered, or property; that is, if
the corporation has original shares of stock
unsold or unsubscribed, either coming from the
original capitalization or f rom the increased
capitalization. Those shares of stock may be
issued to a person who is not a stockholder, or
to a person already a stockholder in exchange
for services rendered or for cash or property. But
a share of stock coming from stock dividends
declared cannot be issued to one who is not a
stockholder of a corporation. Under Section 16
of the Corporation Law stock dividends can not
be issued to a person who is not a stockholder
in payment of services rendered.
Same; "Stock dividend"; "Dividend"; Concept
and nature.—A "stock dividend" is any dividend
payable in shares of stock of the corporation
declaring or authorizing such dividend. It is, as
what the term itself implies, a distribution of the
shares of stock of the corporation among the
stockholders as dividends. A stock dividend of a
corporation is a dividend paid in shares of stock
instead of cash, and is properly payable only out
of surplus profits (Sec. 16, Corporation Law).
So, a stock dividend is actually two things: (1) a
dividend, and (2) the enforced use of the
dividend money to purchase additional shares
of stock at par. (Words and Phrases, p. 270).
When a corporation issues stock dividends, it
shows that the corporation's accumulated profits
have been capitalized instead of distributed to
the stockholders or retained as surplus available
 AGENCY FULLTEXT CASES
f or distribution, in money or kind, should
opportunity offer. Far from being a realization of
profits for the stockholder, it tends rather ,to
postpone said realization, in ,that the fund
represented by the new stock has been
transferred from surplus to assets and no longer
available for actual distribution (Fisher v.
Trinidad, 43 Phil. 973). Thus, it is apparent that
stock dividends are issued only to stockholders.
This is so because only stockholders are
entitled to dividends. They are the only ones
who have a right to a proportional share in that
part of the surplus which is declared as
dividends. A stock dividend really adds nothing
to the interest of the stockholder; the
proportional interest of each stockholder
remains the same (Towne v. Eisner, 62 L. Ed.
372). If a stockholder is deprived of his stock
dividends—and this happens if the shares of
stock forming part of the stock dividends are
issued to a non\stockholder—then the
proportion of the stockholder's interest changes
radically. Stock dividends are civil fruits of the
original investment, and to the owners of the
shares belong the civil fruits (Art. 441, Civil
Code). The term "dividend" both in the technical
sense and its ordinary acceptation, is that part
or portion of the profits of the enterprise which
the corporation, by its governing agents, sets
apart for ratable division among the holders of
the capital stock. It means the fund actually set
aside, and declared by the directors of the
corporation as a dividend, and duly ordered by
the directory, or by the stockholders, at a
corporate meeting, to be divided or distributed
among the stockholders according to their
respective interests (7 Thompson on
Corporations 134135).
ZALDIVAR, J.:
On February 6, 1958, plaintiff brought this action
against defendant before the Court of First
Instance of Manila to recover certain sums of
money representing damages allegedly
suffered by the former in view of the refusal of
the latter to comply with the terms of a
management contract entered into between
them on January 30, 1937, including attorney's
fees and costs.
Defendant in its answer denied the material
allegations of the complaint and set up certain
special defenses, among them, prescription and
laches, as bars against the institution of the
present action.
After trial, during which the parties presented
testimonial and numerous documentary
evidence, the court a quo rendered a decision
dismissing the complaint with costs. The court
stated that it did not find sufficient evidence to
establish defendant's counterclaim and so it
likewise dismissed the same.
The present appeal was taken to this Court
directly by the plaintiff in view of the amount
involved in the case.
The facts of this case, as stated in the decision
appealed from, are hereunder quoted for
purposes of this decision:
It appears that the suit involves an operating
agreement executed before World War II
between the plaintiff and the defendant whereby
the former operated and managed the mining
properties owned by the latter for a
management fee of P2,500.00 a month and a
10% participation in the net profits resulting from
the operation of the mining properties. For
brevity and convenience, hereafter the plaintiff
shall be referred to as NIELSON and the
defendant, LEPANTO.
The antecedents of the case are: The contract
in question (Exhibit `C') was made by the parties
on January 30, 1937 for a period of five (5)
years. In the latter part of 1941, the parties
agreed to renew the contract for another period
of five (5) years, but in the meantime, the Pacific
War broke out in December, 1941.
In January, 1942 operation of the mining
properties was disrupted on account of the war.
In February of 1942, the mill, power plant,
supplies on hand, equipment, concentrates on
hand and mines, were destroyed upon orders of
the United States Army, to prevent their
utilization by the invading Japanese Army. The
Japanese forces thereafter occupied the mining
 AGENCY FULLTEXT CASES
properties, operated the mines during the
continuance of the war, and who were ousted
from the mining properties only in August of
1945.
After the mining properties were liberated from
the Japanese forces, LEPANTO took
possession thereof and embarked in rebuilding
and reconstructing the mines and mill; setting up
new organization; clearing the mill site; repairing
the mines; erecting staff quarters and bodegas
and repairing existing structures; installing new
machinery and equipment; repairing roads and
maintaining the same; salvaging equipment and
storing the same within the bodegas; doing
police work necessary to take care of the
materials and equipment recovered; repairing
and renewing the water system; and
remembering (Exhibits "D" and "E"). The
rehabilitation and reconstruction of the mine and
mill was not completed until 1948 (Exhibit "F").
On June 26, 1948 the mines resumed operation
under the exclusive management of LEPANTO
(Exhibit "F-l").
Shortly after the mines were liberated from the
Japanese invaders in 1945, a disagreement
arose between NIELSON and LEPANTO over
the status of the operating contract in question
which as renewed expired in 1947. Under the
terms thereof, the management contract shall
remain in suspense in case fortuitous event
orforce majeure, such as war or civil commotion,
adversely affects the work of mining and milling.
"In the event of inundations, floodings of mine,
typhoon, earthquake or any other force majeure,
war, insurrection, civil commotion, organized
strike, riot, injury to the machinery or other event
or cause reasonably beyond the control of
NIELSON and which adversely affects the work
of mining and milling; NIELSON shall report
such fact to LEPANTO and without liability or
breach of the terms of this Agreement, the same
shall remain in suspense, wholly or partially
during the terms of such inability." (Clause II of
Exhibit "C").
NIELSON held the view that, on account of the
war, the contract was suspended during the
war; hence the life of the contract should be
considered extended for such time of the period
of suspension. On the other hand, LEPANTO
contended that the contract should expire in
1947 as originally agreed upon because the
period of suspension accorded by virtue of the
war did not operate to extend further the life of
the contract.
No understanding appeared from the record to
have been bad by the parties to resolve the
disagreement. In the meantime, LEPANTO
rebuilt and reconstructed the mines and was
able to bring the property into operation only in
June of 1948, . . . .
Appellant in its brief makes an alternative
assignment of errors depending on whether or
not the management contract basis of the action
has been extended for a period equivalent to the
period of suspension. If the agreement is
suspended our attention should be focused on
the first set of errors claimed to have been
committed by the court a quo; but if the contrary
is true, the discussion will then be switched to
the alternative set that is claimed to have been
committed. We will first take up the question
whether the management agreement has been
extended as a result of the supervening war,
and after this question shall have been
determined in the sense sustained by appellant,
then the discussion of the defense of laches and
prescription will follow as a consequence.
The pertinent portion of the management
contract (Exh. C) which refers to suspension
should any event constitutingforce
majeure happen appears in Clause II thereof
which we quote hereunder:
In the event of inundations, floodings of the
mine, typhoon, earthquake or any other force
majeure, war, insurrection, civil commotion,
organized strike, riot, injury to the machinery or
other event or cause reasonably beyond the
control of NIELSON and which adversely affects
the work of mining and milling; NIELSON shall
report such fact to LEPANTO and without
liability or breach of the terms of this Agreement,
 AGENCY FULLTEXT CASES
the same shall remain in suspense, wholly or
partially during the terms of such inability.
A careful scrutiny of the clause above-quoted
will at once reveal that in order that the
management contract may be deemed
suspended two events must take place which
must be brought in a satisfactory manner to the
attention of defendant within a reasonable time,
to wit: (1) the event constituting the force
majeure must be reasonably beyond the control
of Nielson, and (2) it must adversely affect the
work of mining and milling the company is called
upon to undertake. As long as these two
condition exist the agreement is deem
suspended.
Does the evidence on record show that these
two conditions had existed which may justify the
conclusion that the management agreement
had been suspended in the sense entertained
by appellant? Let us go to the evidence.
It is a matter that this Court can take judicial
notice of that war supervened in our country and
that the mines in the Philippines were either
destroyed or taken over by the occupation
forces with a view to their operation. The
Lepanto mines were no exception for not was
the mine itself destroyed but the mill, power
plant, supplies on hand, equipment and the like
that were being used there were destroyed as
well. Thus, the following is what appears in the
Lepanto Company Mining Report dated March
13, 1946 submitted by its President C. A. DeWitt
to the defendant:1 "In February of 1942, our mill,
power plant, supplies on hand, equipment,
concentrates on hand, and mine, were
destroyed upon orders of the U.S. Army to
prevent their utilization by the enemy." The
report also mentions the report submitted by Mr.
Blessing, an official of Nielson, that "the original
mill was destroyed in 1942" and "the original
power plant and all the installed equipment were
destroyed in 1942." It is then undeniable that
beginning February, 1942 the operation of the
Lepanto mines stopped or became suspended
as a result of the destruction of the mill, power
plant and other important equipment necessary
for such operation in view of a cause which was
clearly beyond the control of Nielson and that as
a consequence such destruction adversely
affected the work of mining and milling which the
latter was called upon to undertake under the
management contract. Consequently, by virtue
of the very terms of said contract the same may
be deemed suspended from February, 1942
and as of that month the contract still had 60
months to go.
On the other hand, the record shows that the
defendant admitted that the occupation forces
operated its mining properties subject of the
management contract,2 and from the very report
submitted by President DeWitt it appears that
the date of the liberation of the mine was August
1, 1945 although at the time there were still
many booby traps.3 Similarly, in a report
submitted by the defendant to its stockholders
dated August 25, 1948, the following appears:
"Your Directors take pleasure in reporting that
June 26, 1948 marked the official return to
operations of this Company of its properties in
Mankayan, Mountain Province, Philippines."4
It is, therefore, clear from the foregoing that the
Lepanto mines were liberated on August 1,
1945, but because of the period of rehabilitation
and reconstruction that had to be made as a
result of the destruction of the mill, power plant
and other necessary equipment for its operation
it cannot be said that the suspension of the
contract ended on that date. Hence, the contract
must still be deemed suspended during the
succeeding years of reconstruction and
rehabilitation, and this period can only be said to
have ended on June 26, 1948 when, as reported
by the defendant, the company officially
resumed the mining operations of the Lepanto.
It should here be stated that this period of
suspension from February, 1942 to June 26,
1948 is the one urged by plaintiff.5
It having been shown that the operation of the
Lepanto mines on the part of Nielson had been
suspended during the period set out above
within the purview of the management contract,
the next question that needs to be determined is
the effect of such suspension. Stated in another
way, the question now to be determined is
 AGENCY FULLTEXT CASES
whether such suspension had the effect of
extending the period of the management
contract for the period of said suspension. To
elucidate this matter, we again need to resort to
the evidence.
For appellant Nielson two witnesses testified,
declaring that the suspension had the effect of
extending the period of the contract, namely,
George T. Scholey and Mark Nestle. Scholey
was a mining engineer since 1929, an
incorporator, general manager and director of
Nielson and Company; and for some time he
was also the vice-president and director of the
Lepanto Company during the pre-war days and,
as such, he was an officer of both appellant and
appellee companies. As vice-president of
Lepanto and general manager of Nielson,
Scholey participated in the negotiation of the
management contract to the extent that he
initialed the same both as witness and as an
officer of both corporations. This witness
testified in this case to the effect that the
standard force majeure clause embodied in the
management contract was taken from similar
mining contracts regarding mining operations
and the understanding regarding the nature and
effect of said clause was that when there is
suspension of the operation that suspension
meant the extension of the contract. Thus, to the
question, "Before the war, what was the
understanding of the people in the particular
trend of business with respect to the force
majeure clause?", Scholey answered: "That
was our understanding that the suspension
meant the extension of time lost."6
Mark Nestle, the other witness, testified along
similar line. He had been connected with
Nielson since 1937 until the time he took the
witness stand and had been a director,
manager, and president of the same company.
When he was propounded the question: "Do you
know what was the custom or usage at that time
in connection with force majeure clause?",
Nestle answered, "In the mining world the force
majeure clause is generally considered. When a
calamity comes up and stops the work like in
war, flood, inundation or fire, etc., the work is
suspended for the duration of the calamity, and
the period of the contract is extended after the
calamity is over to enable the person to do the
big work or recover his money which he has
invested, or accomplish what his obligation is to
a third person ."7
And the above testimonial evidence finds
support in the very minutes of the special
meeting of the Board of Directors of the Lepanto
Company issued on March 10, 1945 which was
then chairmaned by Atty. C. A. DeWitt. We read
the following from said report:
The Chairman also stated that the contract with
Nielson and Company would soon expire if the
obligations were not suspended, in which case
we should have to pay them the retaining fee of
P2,500.00 a month. He believes however, that
there is a provision in the contract suspending
the effects thereof in cases like the present, and
that even if it were not there, the law itself would
suspend the operations of the contract on
account of the war. Anyhow, he stated, we shall
have no difficulty in solving satisfactorily any
problem we may have with Nielson and
Company.8
Thus, we can see from the above that even in
the opinion of Mr. DeWitt himself, who at the
time was the chairman of the Board of Directors
of the Lepanto Company, the management
contract would then expire unless the period
therein rated is suspended but that, however, he
expressed the belief that the period was
extended because of the provision contained
therein suspending the effects thereof should
any of the case of force majeure happen like in
the present case, and that even if such provision
did not exist the law would have the effect of
suspending it on account of the war. In
substance, Atty. DeWitt expressed the opinion
that as a result of the suspension of the mining
operation because of the effects of the war the
period of the contract had been extended.
Contrary to what appellant's evidence reflects
insofar as the interpretation of the force
majeure clause is concerned, however,
appellee gives Us an opposite interpretation
invoking in support thereof not only a letter Atty.
 AGENCY FULLTEXT CASES
DeWitt sent to Nielson on October 20,
1945,9 wherein he expressed for the first time an
opinion contrary to what he reported to the
Board of Directors of Lepanto Company as
stated in the portion of the minutes of its Board
of Directors as quoted above, but also the ruling
laid down by our Supreme Court in some cases
decided sometime ago, to the effect that the war
does not have the effect of extending the term
of a contract that the parties may enter into
regarding a particular transaction, citing in this
connection the cases of Victorias Planters
Association v. Victorias Milling Company, 51
O.G. 4010; Rosario S. Vda. de Lacson, et al. v.
Abelardo G. Diaz, 87 Phil. 150; and Lo Ching y
So Young Chong Co. v. Court of Appeals, et
al., 81 Phil. 601.
To bolster up its theory, appellee also contends
that the evidence regarding the alleged custom
or usage in mining contract that appellant's
witnesses tried to introduce was incompetent
because (a) said custom was not specifically
pleaded; (b) Lepanto made timely and repeated
objections to the introduction of said evidence;
(c) Nielson failed to show the essential elements
of usage which must be shown to exist before
any proof thereof can be given to affect the
contract; and (d) the testimony of its witnesses
cannot prevail over the very terms of the
management contract which, as a rule, is
supposed to contain all the terms and conditions
by which the parties intended to be bound.
It is here necessary to analyze the contradictory
evidence which the parties have presented
regarding the interpretation of the force
majeure clause in the management contract.
At the outset, it should be stated that, as a rule,
in the construction and interpretation of a
document the intention of the parties must be
sought (Rule 130, Section 10, Rules of Court).
This is the basic rule in the interpretation of
contracts because all other rules are but
ancilliary to the ascertainment of the meaning
intended by the parties. And once this intention
has been ascertained it becomes an integral
part of the contract as though it had been
originally expressed therein in unequivocal
terms (Shoreline Oil Corp. v. Guy, App. 189,
So., 348, cited in 17A C.J.S., p. 47). How is this
intention determined?
One pattern is to ascertain the
contemporaneous and subsequent acts of the
contracting parties in relation to the transaction
under consideration (Article 1371, Civil Code).
In this particular case, it is worthy of note what
Atty. C. A. DeWitt has stated in the special
meeting of the Board of Directors of Lepanto in
the portion of the minutes already quoted above
wherein, as already stated, he expressed the
opinion that the life of the contract, if not
extended, would last only until January, 1947
and yet he said that there is a provision in the
contract that the war had the effect of
suspending the agreement and that the effect of
that suspension was that the agreement would
have to continue with the result that Lepanto
would have to pay the monthly retaining fee of
P2,500.00. And this belief that the war
suspended the agreement and that the
suspension meant its extension was so firm that
he went to the extent that even if there was no
provision for suspension in the agreement the
law itself would suspend it.
It is true that Mr. DeWitt later sent a letter to
Nielson dated October 20, 1945 wherein
apparently he changed his mind because there
he stated that the contract was merely
suspended, but not extended, by reason of the
war, contrary to the opinion he expressed in the
meeting of the Board of Directors already
adverted to, but between the two opinions of
Atty. DeWitt We are inclined to give more weight
and validity to the former not only because such
was given by him against his own interest but
also because it was given before the Board of
Directors of Lepanto and in the presence, of
some Nielson officials 10 who, on that occasion
were naturally led to believe that that was the
true meaning of the suspension clause, while
the second opinion was merely self-serving and
was given as a mere afterthought.
Appellee also claims that the issue of true intent
of the parties was not brought out in the
complaint, but anent this matter suffice it to state
 AGENCY FULLTEXT CASES
that in paragraph No. 19 of the complaint
appellant pleaded that the contract was
extended. 11 This is a sufficient allegation
considering that the rules on pleadings must as
a rule be liberally construed.
It is likewise noteworthy that in this issue of the
intention of the parties regarding the meaning
and usage concerning the force
majeure clause, the testimony adduced by
appellant is uncontradicted. If such were not
true, appellee should have at least attempted to
offer contradictory evidence. This it did not do.
Not even Lepanto's President, Mr. V. E.
Lednicky who took the witness stand,
contradicted said evidence.
In holding that the suspension of the agreement
meant the extension of the same for a period
equivalent to the suspension, We do not have
the least intention of overruling the cases cited
by appellee. We simply want to say that the
ruling laid down in said cases does not apply
here because the material facts involved therein
are not the same as those obtaining in the
present. The rule of stare decisis cannot be
invoked where there is no analogy between the
material facts of the decision relied upon and
those of the instant case.
Thus, in Victorias Planters Association vs.
Victorias Milling Company, 51 O.G. 4010, there
was no evidence at all regarding the intention of
the parties to extend the contract equivalent to
the period of suspension caused by the war.
Neither was there evidence that the parties
understood the suspension to mean extension;
nor was there evidence of usage and custom in
the industry that the suspension meant the
extension of the agreement. All these matters,
however, obtain in the instant case.
Again, in the case of Rosario S. Vda. de Lacson
vs. Abelardo G. Diaz, 87 Phil. 150, the issue
referred to the interpretation of a pre-war
contract of lease of sugar cane lands and the
liability of the lessee to pay rent during and
immediately following the Japanese occupation
and where the defendant claimed the right of an
extension of the lease to make up for the time
when no cane was planted. This Court, in
holding that the years which the lessee could not
use the land because of the war could not be
discounted from the period agreed upon, held
that "Nowhere is there any insinuation that the
defendant-lessee was to have possession of
lands for seven years excluding years on which
he could not harvest sugar." Clearly, this ratio
decidendi is not applicable to the case at bar
wherein there is evidence that the parties
understood the "suspension clause by force
majeure" to mean the extension of the period of
agreement.
Lastly, in the case of Lo Ching y So Young
Chong Co. vs. Court of Appeals, et al., 81 Phil.
601, appellant leased a building from appellee
beginning September 13, 1940 for three years,
renewable for two years. The lessee's
possession was interrupted in February, 1942
when he was ousted by the Japanese who
turned the same over to German Otto Schulze,
the latter occupying the same until January,
1945 upon the arrival of the liberation forces.
Appellant contended that the period during
which he did not enjoy the leased premises
because of his dispossession by the Japanese
had to be deducted from the period of the lease,
but this was overruled by this Court, reasoning
that such dispossession was merely a simple
"perturbacion de merohecho y de la cual no
responde el arrendador" under Article 1560 of
the old Civil Code Art. 1664). This ruling is also
not applicable in the instant case because in that
case there was no evidence of the intention of
the parties that any suspension of the lease
by force majeure would be understood to
extend the period of the agreement.
In resume, there is sufficient justification for Us
to conclude that the cases cited by appellee are
inapplicable because the facts therein involved
do not run parallel to those obtaining in the
present case.
We shall now consider appellee's defense of
laches. Appellee is correct in its contention that
the defense of laches applies independently of
prescription. Laches is different from the statute
of limitations. Prescription is concerned with the
 AGENCY FULLTEXT CASES
fact of delay, whereas laches is concerned with
the effect of delay. Prescription is a matter of
time; laches is principally a question of inequity
of permitting a claim to be enforced, this inequity
being founded on some change in the condition
of the property or the relation of the parties.
Prescription is statutory; laches is not. Laches
applies in equity, whereas prescription applies
at law. Prescription is based on fixed time,
laches is not. (30 C.J.S., p. 522; See
also Pomeroy's Equity Jurisprudence, Vol. 2,
5th ed., p. 177).
The question to determine is whether appellant
Nielson is guilty of laches within the meaning
contemplated by the authorities on the matter.
In the leading case of Go Chi Gun, et al. vs. Go
Cho, et al., 96 Phil. 622, this Court enumerated
the essential elements of laches as follows:
(1) conduct on the part of the defendant, or of
one under whom he claims, giving rise to the
situation of which complaint is made and for
which the complaint seeks a remedy; (2) delay
in asserting the complainant's rights, the
complainant having had knowledge or notice of
the defendant's conduct and having been
afforded an opportunity to institute a suit; (3)
lack of knowledge or notice on the part of the
defendant that the complainant would assert the
right on which he bases his suit; and (4) injury
or prejudice to the defendant in the event relief
is accorded to the complainant, or the suit is not
held barred.
Are these requisites present in the case at bar?
The first element is conceded by appellant
Nielson when it claimed that defendant refused
to pay its management fees, its percentage of
profits and refused to allow it to resume the
management operation.
Anent the second element, while it is true that
appellant Nielson knew since 1945 that appellee
Lepanto has refused to permit it to resume
management and that since 1948 appellee has
resumed operation of the mines and it filed its
complaint only on February 6, 1958, there being
apparent delay in filing the present action, We
find the delay justified and as such cannot
constitute laches. It appears that appellant had
not abandoned its right to operate the mines for
even before the termination of the suspension of
the agreement as early as January 20,
194612 and even before March 10, 1945, it
already claimed its right to the extension of the
contract,13 and it pressed its claim for the
balance of its share in the profits from the 1941
operation14 by reason of which negotiations had
taken place for the settlement of the claim15 and
it was only on June 25, 1957 that appellee finally
denied the claim. There is, therefore, only a
period of less than one year that had elapsed
from the date of the final denial of the claim to
the date of the filing of the complaint, which
certainly cannot be considered as unreasonable
delay.
The third element of laches is absent in this
case. It cannot be said that appellee Lepanto did
not know that appellant would assert its rights
on which it based suit. The evidence shows that
Nielson had been claiming for some time its
rights under the contract, as already shown
above.
Neither is the fourth element present, for if there
has been some delay in bringing the case to
court it was mainly due to the attempts at
arbitration and negotiation made by both
parties. If Lepanto's documents were lost, it was
not caused by the delay of the filing of the suit
but because of the war.
Another reason why appellant Nielson cannot
be held guilty of laches is that the delay in the
filing of the complaint in the present case was
the inevitable of the protracted negotiations
between the parties concerning the settlement
of their differences. It appears that Nielson
asked for arbitration16 which was granted. A
committee consisting of Messrs. DeWitt, Farnell
and Blessing was appointed to act on said
differences but Mr. DeWitt always tried to evade
the issue17 until he was taken ill and died. Mr.
Farnell offered to Nielson the sum of
P13,000.58 by way of compromise of all its
claim arising from the management
18
contract but apparently the offer was refused.
 AGENCY FULLTEXT CASES
Negotiations continued with the exchange of
letters between the parties but with no
satisfactory result.19 It can be said that the delay
due to protracted negotiations was caused by
both parties. Lepanto, therefore, cannot be
permitted to take advantage of such delay or to
question the propriety of the action taken by
Nielson. The defense of laches is an equitable
one and equity should be applied with an even
hand. A person will not be permitted to take
advantage of, or to question the validity, or
propriety of, any act or omission of another
which was committed or omitted upon his own
request or was caused by his conduct (R. H.
Stearns Co. vs. United States, 291 U.S. 54, 78
L. Ed. 647, 54 S. Ct., 325; United States vs.
Henry Prentiss & Co., 288 U.S. 73, 77 L. Ed.,
626, 53 S. Ct., 283).
Had the action of Nielson prescribed? The
court a quo held that the action of Nielson is
already barred by the statute of limitations, and
that ruling is now assailed by the appellant in
this appeal. In urging that the court a quo erred
in reaching that conclusion the appellant has
discussed the issue with reference to particular
claims.
The first claim is with regard to the 10% share in
profits of 1941 operations. Inasmuch as
appellee Lepanto alleges that the correct basis
of the computation of the sharing in the net
profits shall be as provided for in Clause V of the
Management Contract, while appellant Nielson
maintains that the basis should be what is
contained in the minutes of the special meeting
of the Board of Directors of Lepanto on August
21, 1940, this question must first be elucidated
before the main issue is discussed.
The facts relative to the matter of profit sharing
follow: In the management contract entered into
between the parties on January 30, 1937, which
was renewed for another five years, it was
stipulated that Nielson would receive a
compensation of P2,500.00 a month plus 10%
of the net profits from the operation of the
properties for the preceding month. In 1940, a
dispute arose regarding the computation of the
10% share of Nielson in the profits. The Board
of Directors of Lepanto, realizing that the
mechanics of the contract was unfair to Nielson,
authorized its President to enter into an
agreement with Nielson modifying the pertinent
provision of the contract effective January 1,
1940 in such a way that Nielson shall receive (1)
10% of the dividends declared and paid, when
and as paid, during the period of the contract
and at the end of each year, (2) 10% of any
depletion reserve that may be set up, and (3)
10% of any amount expended during the year
out of surplus earnings for capital
20
account. Counsel for the appellee admitted
during the trial that the extract of the minutes as
found in Exhibit B is a faithful copy from the
original. 21 Mr. George Scholey testified that the
foregoing modification was agreed upon. 22
Lepanto claims that this new basis of
computation should be rejected (1) because the
contract was clear on the point of the 10% share
and it was so alleged by Nielson in its complaint,
and (2) the minutes of the special meeting held
on August 21, 1940 was not signed.
It appearing that the issue concerning the
sharing of the profits had been raised in
appellant's complaint and evidence on the
matter was introduced 23 the same can be taken
into account even if no amendment of the
pleading to make it conform to the evidence has
been made, for the same is authorized by
Section 4, Rule 17, of the old Rules of Court
(now Section 5, Rule 10, of the new Rules of
Court).
Coming now to the question of prescription
raised by defendant Lepanto, it is contended by
the latter that the period to be considered for the
prescription of the claim regarding participation
in the profits is only four years, because the
modification of the sharing embodied in the
management contract is merely verbal, no
written document to that effect having been
presented. This contention is untenable. The
modification appears in the minutes of the
special meeting of the Board of Directors of
Lepanto held on August 21, 1940, it having been
made upon the authority of its President, and in
said minutes the terms of the modification had
 AGENCY FULLTEXT CASES
been specified. This is sufficient to have the
agreement considered, for the purpose of
applying the statute of limitations, as a written
contract even if the minutes were not signed by
the parties (3 A.L.R., 2d, p. 831). It has been
held that a writing containing the terms of a
contract if adopted by two persons may
constitute a contract in writing even if the same
is not signed by either of the parties (3 A.L.R.,
2d, pp. 812-813). Another authority says that an
unsigned agreement the terms of which are
embodied in a document unconditionally
accepted by both parties is a written contract
(Corbin on Contracts, Vol. 1, p. 85)
The modification, therefore, made in the
management contract relative to the
participation in the profits by appellant, as
contained in the minutes of the special meeting
of the Board of Directors of Lepanto held on
August 21, 1940, should be considered as a
written contract insofar as the application of the
statutes of limitations is concerned. Hence, the
action thereon prescribes within ten (10) years
pursuant to Section 43 of Act 190.
Coming now to the facts, We find that the right
of Nielson to its 10% participation in the 1941
operations accrued on December 21, 1941 and
the right to commence an action thereon began
on January 1, 1942 so that the action must be
brought within ten (10) years from the latter
date. It is true that the complaint was filed only
on February 6, 1958, that is sixteen (16) years,
one (1) month and five (5) days after the right of
action accrued, but the action has not yet
prescribed for various reasons which We will
hereafter discuss.
The first reason is the operation of the
Moratorium Law, for appellant's claim is
undeniably a claim for money. Said claim
accrued on December 31, 1941, and Lepanto is
a war sufferer. Hence the claim was covered by
Executive Order No. 32 of March 10, 1945. It is
well settled that the operation of the Moratorium
Law suspends the running of the statue of
limitations (Pacific Commercial Co. vs. Aquino,
G.R. No. L-10274, February 27, 1957).
This Court has held that the Moratorium Law
had been enforced for eight (8) years, two (2)
months and eight (8) days (Tioseco vs. Day, et
al., L-9944, April 30, 1957; Levy Hermanos, Inc.
vs. Perez, L-14487, April 29, 1960), and
deducting this period from the time that had
elapsed since the accrual of the right of action
to the date of the filing of the complaint, the
extent of which is sixteen (16) years, one (1)
month and five (5) days, we would have less
than eight (8) years to be counted for purposes
of prescription. Hence appellant's action on its
claim of 10% on the 1941 profits had not yet
prescribed.
Another reason that may be taken into account
in support of the no-bar theory of appellant is the
arbitration clause embodied in the management
contract which requires that any disagreement
as to any amount of profits before an action may
be taken to court shall be subject to
arbitration. 24 This agreement to arbitrate is valid
and binding. 25 It cannot be ignored by Lepanto.
Hence Nielson could not bring an action on its
participation in the 1941 operations-profits until
the condition relative to arbitration had been first
complied with. 26 The evidence shows that an
arbitration committee was constituted but it
failed to accomplish its purpose on June 25,
1957. 27 From this date to the filing of the
complaint the required period for prescription
has not yet elapsed.
Nielson claims the following: (1) 10% share in
the dividends declared in 1941, exclusive of
interest, amounting to P17,500.00; (2) 10% in
the depletion reserves for 1941; and (3) 10% in
the profits for years prior to 1948 amounting to
P19,764.70.
With regard to the first claim, the Lepanto's
report for the calendar year of 1954 28 shows
that it declared a 10% cash dividend in
December, 1941, the amount of which is
P175,000.00. The evidence in this connection
(Exhibits L and O) was admitted without
objection by counsel for Lepanto. 29 Nielson
claims 10% share in said amount with interest
thereon at 6% per annum. The document
(Exhibit L) was even recognized by Lepanto's
 AGENCY FULLTEXT CASES
President V. L. Lednicky, 30 and this claim is
predicated on the provision of paragraph V of
the management contract as modified pursuant
to the proposal of Lepanto at the special
meeting of the Board of Directors on August 21,
1940 (Exh. B), whereby it was provided that
Nielson would be entitled to 10% of any
dividends to be declared and paid during the
period of the contract.
With regard to the second claim, Nielson admits
that there is no evidence regarding the amount
set aside by Lepanto for depletion reserve for
1941 31 and so the 10% participation claimed
thereon cannot be assessed.
Anent the third claim relative to the 10%
participation of Nielson on the sum of
P197,647.08, which appears in Lepanto's
annual report for 1948 32 and entered as profit
for prior years in the statement of income and
surplus, which amount consisted "almost in its
entirety of proceeds of copper concentrates
shipped to the United States during 1947," this
claim should to denied because the amount is
not "dividend declared and paid" within the
purview of the management contract.
The fifth assignment of error of appellant refers
to the failure of the lower court to order Lepanto
to pay its management fees for January, 1942,
and for the full period of extension amounting to
P150,000.00, or P2,500.00 a month for sixty
(60) months, — a total of P152,500.00 — with
interest thereon from the date of judicial
demand.
It is true that the claim of management fee for
January, 1942 was not among the causes of
action in the complaint, but inasmuch as the
contract was suspended in February, 1942 and
the management fees asked for included that of
January, 1942, the fact that such claim was not
included in a specific manner in the complaint is
of no moment because an appellate court may
treat the pleading as amended to conform to the
evidence where the facts show that the plaintiff
is entitled to relief other than what is asked for in
the complaint (Alonzo vs. Villamor, 16 Phil. 315).
The evidence shows that the last payment made
by Lepanto for management fee was for
November and December, 1941. 33 If, as We
have declared, the management contract was
suspended beginning February 1942, it follows
that Nielson is entitled to the management fee
for January, 1942.
Let us now come to the management fees
claimed by Nielson for the period of extension.
In this respect, it has been shown that the
management contract was extended from June
27, 1948 to June 26, 1953, or for a period of
sixty (60) months. During this period Nielson
had a right to continue in the management of the
mining properties of Lepanto and Lepanto was
under obligation to let Nielson do it and to pay
the corresponding management fees. Appellant
Nielson insisted in performing its part of the
contract but Lepanto prevented it from doing so.
Hence, by virtue of Article 1186 of the Civil
Code, there was a constructive fulfillment an the
part of Nielson of its obligation to manage said
mining properties in accordance with the
contract and Lepanto had the reciprocal
obligation to pay the corresponding
management fees and other benefits that would
have accrued to Nielson if Lepanto allowed it
(Nielson) to continue in the management of the
mines during the extended period of five (5)
years.
We find that the preponderance of evidence is
to the effect that Nielson had insisted in
managing the mining properties soon after
liberation. In the report 34 of Lepanto, submitted
to its stockholders for the period from 1941 to
March 13, 1946, are stated the activities of
Nielson's officials in relation to Nielson's
insistence in continuing the management. This
report was admitted in evidence without
objection. We find the following in the report:
Mr. Blessing, in May, 1945, accompanied Clark
and Stanford to San Fernando (La Union) to
await the liberation of the mines. (Mr. Blessing
was the Treasurer and Metallurgist of Nielson).
Blessing with Clark and Stanford went to the
property on July 16 and found that while the mill
site had been cleared of the enemy the latter
was still holding the area around the staff
 AGENCY FULLTEXT CASES
houses and putting up a strong defense. As a
result, they returned to San Fernando and later
went back to the mines on July 26. Mr. Blessing
made the report, dated August 6,
recommending a program of operation. Mr.
Nielson himself spent a day in the mine early in
December, 1945 and reiterated the program
which Mr. Blessing had outlined. Two or three
weeks before the date of the report, Mr. Coldren
of the Nielson organization also visited the mine
and told President C. A. DeWitt of Lepanto that
he thought that the mine could be put in
condition for the delivery of the ore within ten
(10) days. And according to Mark Nestle, a
witness of appellant, Nielson had several men
including engineers to do the job in the mines
and to resume the work. These engineers were
in fact sent to the mine site and submitted
reports of what they had done. 35
On the other hand, appellee claims that Nielson
was not ready and able to resume the work in
the mines, relying mainly on the testimony of Dr.
Juan Nabong, former secretary of both Nielson
and Lepanto, given in the separate case of
Nancy Irving Romero vs. Lepanto Consolidated
Mining Company (Civil Case No. 652, CFI,
Baguio), to the effect that as far as he knew
"Nielson and Company had not attempted to
operate the Lepanto Consolidated Mining
Company because Mr. Nielson was not here in
the Philippines after the last war. He came back
later," and that Nielson and Company had no
money nor stocks with which to start the
operation. He was asked by counsel for the
appellee if he had testified that way in Civil Case
No. 652 of the Court of First Instance of Baguio,
and he answered that he did not confirm it fully.
When this witness was asked by the same
counsel whether he confirmed that testimony,
he said that when he testified in that case he
was not fully aware of what happened and that
after he learned more about the officials of the
corporation it was only then that he became
aware that Nielson had really sent his men to the
mines along with Mr. Blessing and that he was
aware of this fact personally. He further said that
Mr. Nielson was here in 1945 and "he was going
out and contacting his people." 36
Lepanto admits, in its own brief, that Nielson had
really insisted in taking over the management
and operation of the mines but that it (Lepanto)
unequivocally refuse to allow it. The following is
what appears in the brief of the appellee:
It was while defendant was in the midst of the
rehabilitation work which was fully described
earlier, still reeling under the terrible devastation
and destruction wrought by war on its mine that
Nielson insisted in taking over the management
and operation of the mine. Nielson thus put
Lepanto in a position where defendant, under
the circumstances, had to refuse, as in fact it
did, Nielson's insistence in taking over the
management and operation because, as was
obvious, it was impossible, as a result of the
destruction of the mine, for the plaintiff to
manage and operate the same and because, as
provided in the agreement, the contract was
suspended by reason of the war. The stand of
Lepanto in disallowing Nielson to assume again
the management of the mine in 1945 was
unequivocal and cannot be
misinterpreted, infra. 37
Based on the foregoing facts and
circumstances, and Our conclusion that the
management contract was extended, We
believe that Nielson is entitled to the
management fees for the period of extension.
Nielson should be awarded on this claim sixty
times its monthly pay of P2,500.00, or a total of
P150,000.00.
In its sixth assignment of error Nielson contends
that the lower court erred in not ordering
Lepanto to pay it (Nielson) the 10% share in the
profits of operation realized during the period of
five (5) years from the resumption of its post-war
operations of the Mankayan mines, in the total
sum of P2,403,053.20 with interest thereon at
the rate of 6% per annum from February 6, 1958
until full payment. 38
The above claim of Nielson refers to four
categories, namely: (1) cash dividends; (2)
stock dividends; (3) depletion reserves; and (4)
amount expended on capital investment.
 AGENCY FULLTEXT CASES

Anent the first category, Lepanto's report for the

calendar year 1954 39 contains a record of the 22 20% June 1953 1,000,00
cash dividends it paid up to the date of said
report, and the post-war dividends paid by it
corresponding to the years included in the TOTAL P14,000,00
period of extension of the management contract
are as follows:
According to the terms of the management
POST-WAR contract as modified, appellant is entitled to 10%
of the P14,000,000.00 cash dividends that had
been distributed, as stated in the above-
8 10% November 1949 P 200,000.00
mentioned report, or the sum of P1,400,000.00.

With regard to the second category, the stock

9 10% July 1950 300,000.00dividends declared by Lepanto during the period
of extension of the contract are: On November
28, 1949, the stock dividend declared was 50%
10 10% October 1950 500,000.00
of the outstanding authorized capital of
P2,000,000.00 of the company, or stock
11 20% December 1950 dividends worth P1,000,000.00; and on August
1,000,000.00
22, 1950, the stock dividends declared was 66-
2/3% of the standing authorized capital of
12 20% March 1951 P3,000,000.00 of the company, or stock
1,000,000.00
dividends worth P2,000,000.00. 40

13 20% June 1951 Appellant's claim that it should be given 10% of

1,000,000.00
the cash value of said stock dividends with
interest thereon at 6% from February 6, 1958
14 20% September 1951 cannot be granted for that would not be in
1,000,000.00
accordance with the management contract
which entitles Nielson to 10% of any dividends
15 40% December 1951 declared paid, when and as paid. Nielson,
2,000,000.00
therefore, is entitled to 10% of the stock
dividends and to the fruits that may have
16 20% March 1952 1,000,000.00
accrued to said stock dividends pursuant to
Article 1164 of the Civil Code. Hence to Nielson
is due shares of stock worth P100,000.00, as
17 20% May 1952 1,000,000.00
per stock dividends declared on November 28,
1949 and all the fruits accruing to said shares
after said date; and also shares of stock worth
18 20% July 1952 1,000,000.00
P200,000.00 as per stock dividends declared on
August 20, 1950 and all fruits accruing thereto
after said date.
19 20% September 1952 1,000,000.00
Anent the third category, the depletion reserve
appearing in the statement of income and
20 20% December 1952 1,000,000.00
surplus submitted by Lepanto corresponding to
the years covered by the period of extension of
the contract, may be itemized as follows:
21 20% March 1953 1,000,000.00
 AGENCY FULLTEXT CASES
In 1948, as per Exh. F, p. 36 and Exh. Q, p. 5,
the depletion reserve set up was P11,602.80.
In 1949, as per Exh. G, p. 49 and Exh. Q, p. 5,
the depletion reserve set up was P33,556.07.
In 1950, as per Exh. H, p. 37, Exh. Q, p. 6 and
Exh. I, p. 37, the depletion reserve set up was
P84,963.30.
In 1951, as per Exh. I, p. 45, Exh. Q, p. 6, and
Exh. J, p. 45, the depletion reserve set up was
P129,089.88.
In 1952, as per Exh. J, p. 45, Exh. Q, p. 6 and
Exh. K p. 41, the depletion reserve was
P147,141.54.
In 1953, as per Exh. K, p. 41, and Exh. Q, p. 6,
the depletion reserve set up as P277,493.25.
Regarding the depletion reserve set up in 1948
it should be noted that the amount given was for
the whole year. Inasmuch as the contract was
extended only for the last half of the year 1948,
said amount of P11,602.80 should be divided by
two, and so Nielson is only entitled to 10% of the
half amounting to P5,801.40.
Likewise, the amount of depletion reserve for
the year 1953 was for the whole year and since
the contract was extended only until the first half
of the year, said amount of P277,493.25 should
be divided by two, and so Nielson is only entitled
to 10% of the half amounting to P138,746.62.
Summing up the entire depletion reserves, from
the middle of 1948 to the middle of 1953, we
would have a total of P539,298.81, of which
Nielson is entitled to 10%, or to the sum of
P53,928.88.
Finally, with regard to the fourth category, there
is no figure in the record representing the value
of the fixed assets as of the beginning of the
period of extension on June 27, 1948. It is
possible, however, to arrive at the amount
needed by adding to the value of the fixed
assets as of December 31, 1947 one-half of the
amount spent for capital account in the year
1948. As of December 31, 1947, the value of the
fixed assets was P1,061,878.88 41 and as of
December 31, 1948, the value of the fixed
assets was P3,270,408.07. 42 Hence, the
increase in the value of the fixed assets for the
year 1948 was P2,208,529.19, one-half of which
is P1,104,264.59, which amount represents the
expenses for capital account for the first half of
the year 1948. If to this amount we add the fixed
assets as of December 31, 1947 amounting to
P1,061,878.88, we would have a total of
P2,166,143.47 which represents the fixed
assets at the beginning of the second half of the
year 1948.
There is also no figure representing the value of
the fixed assets when the contract, as extended,
ended on June 26, 1953; but this may be
computed by getting one-half of the expenses
for capital account made in 1953 and adding the
same to the value of the fixed assets as of
December 31, 1953 is P9,755,840.41 43 which
the value of the fixed assets as of December 31,
1952 is P8,463,741.82, the difference being
P1,292,098.69. One-half of this amount is
P646,049.34 which would represent the
expenses for capital account up to June, 1953.
This amount added to the value of the fixed
assets as of December 31, 1952 would give a
total of P9,109,791.16 which would be the value
of fixed assets at the end of June, 1953.
The increase, therefore, of the value of the fixed
assets of Lepanto from June, 1948 to June,
1953 is P6,943,647.69, which amount
represents the difference between the value of
the fixed assets of Lepanto in the year 1948 and
in the year 1953, as stated above. On this
amount Nielson is entitled to a share of 10% or
to the amount of P694,364.76.
Considering that most of the claims of appellant
have been entertained, as pointed out in this
decision, We believe that appellant is entitled to
be awarded attorney's fees, especially when,
according to the undisputed testimony of Mr.
Mark Nestle, Nielson obliged himself to pay
attorney's fees in connection with the institution
of the present case. In this respect, We believe,
considering the intricate nature of the case, an
award of fifty thousand (P50,000.00) pesos for
attorney's fees would be reasonable.
 AGENCY FULLTEXT CASES

IN VIEW OF THE FOREGOING in cash equivalent to the market value of said

CONSIDERATIONS, We hereby reverse the
decision of the court a quo and enter in lieu
thereof another, ordering the appellee Lepanto
to pay appellant Nielson the different amounts
as specified hereinbelow:
(1) 10% share of cash dividends of December,
1941 in the amount of P17,500.00, with legal
interest thereon from the date of the filing of the
complaint;
(2) management fee for January, 1942 in the
amount of P2,500.00, with legal interest thereon
from the date of the filing of the complaint;
(3) management fees for the sixty-month period
of extension of the management contract,
amounting to P150,000.00, with legal interest
from the date of the filing of the complaint;
shares at the time of default (12 C.J.S., p. 130),
that is, all shares of the stock that should have
been delivered to Nielson before the filing of the
complaint must be paid at their market value as
of the date of the filing of the complaint; and all
shares, if any, that should have been delivered
after the filing of the complaint at the market
value of the shares at the time Lepanto disposed
of all its available shares, for it is only then that
Lepanto placed itself in condition of not being
able to perform its obligation (Article 1160, Civil
Code);
(8) the sum of P50,000.00 as attorney's fees;
and
(9) the costs. It is so ordered.

(4) 10% share in the cash dividends during the

period of extension of the management
contract, amounting to P1,400,000.00, with
legal interest thereon from the date of the filing
of the complaint;

(5) 10% of the depletion reserve set up during

the period of extension, amounting to
P53,928.88, with legal interest thereon from the
date of the filing of the complaint;

(6) 10% of the expenses for capital account

during the period of extension, amounting to
P694,364.76, with legal interest thereon from
the date of the filing of the complaint;

(7) to issue and deliver to Nielson and Co., Inc.

shares of stock of Lepanto Consolidated Mining
Co. at par value equivalent to the total of
Nielson's l0% share in the stock dividends
declared on November 28, 1949 and August 22,
1950, together with all cash and stock
dividends, if any, as may have been declared
and issued subsequent to November 28, 1949
and August 22, 1950, as fruits that accrued to
said shares;

If sufficient shares of stock of Lepanto's are not

available to satisfy this judgment, defendant-
appellee shall pay plaintiff-appellant an amount
 AGENCY FULLTEXT CASES
G.R. No. L-8169 January 29, 1957
THE SHELL COMPANY OF THE
PHILIPPINES, LTD., petitioner,
vs.
FIREMEN'S INSURANCE COMPANY OF
NEWARK, NEW JERSEY COMMERCIAL
CASUALTY INSURANCE CO., SALVADOR
SISON, PORFIRIO DE LA FUENTE and THE
COURT OF APPEALS (First
Division),respondents.
1.PRINCIPAL AND AGENT; WHEN AGENCY
EXISTS AND NOT AN INDEPENDENT
CONTRACTOR.—Where the operator of a
gasoline and service station owed his position to
the company and the latter could remove him or
terminate his services at will; that the service
station belonged to the company and bore its
tradename and the operator sold only the
products of the company; that the equipment
used by the operator belonged to the company
and were just loaned to the operator and the
company took charge of their repair and
maintenance; that an employee of the company
supervised the operator and conducted periodic
inspection of the company’s gasoline and
service station; that the price of the products
sold by the operator was fixed by the company
and not by the operator; and that the receipts
signed by the operator indicated that he was a
mere agent. Held: that the operator is an agent
of the company and not an independent
contractor.
2.CONTRACTS; NATURE OF CONTRACT;
COURTS NOT BOUND UPON THE NAME
GIVEN BY PARTIES.—To determine the nature
of a contract courts do not have or are not bound
to rely upon the name or title given it by the
contracting parties, should there be a
controversy as to what they really had intended
to enter into, but the way the contracting parties
do or perform their respective obligations
stipulated or agreed upon may be shown and
inquired into, and should such performance
conflict with the name or title given the contract
by the parties, the former must prevail over the
latter. Shell Co. of the Phils., Ltd. vs. Firemen’s
Ins. Co. of Newark, N.J., et al., 100 Phil., 757,
No. L-8169 January 29, 1957
PADILLA, J.:
Appeal by certiorari under Rule 46 to review a
judgment of the Court of Appeals which
reversed that of the Court of First Instance of
Manila and sentenced ". . . the defendants-
appellees to pay, jointly and severally, the
plaintiffs-appellants the sum of P1,651.38, with
legal interest from December 6, 1947
(Gutierrez vs. Gutierrez, 56 Phil., 177, 180), and
the costs in both instances."
The Court of Appeals found the following:
Inasmuch as both the Plaintiffs-Appellants and
the Defendant-Appellee, the Shell Company of
the Philippine Islands, Ltd. accept the statement
of facts made by the trial court in its decision and
appearing on pages 23 to 37 of the Record on
Appeal, we quote hereunder such statement:
This is an action for recovery of sum of money,
based on alleged negligence of the defendants.
It is a fact that a Plymounth car owned by
Salvador R. Sison was brought, on September
3, 1947 to the Shell Gasoline and Service
Station, located at the corner of Marques de
Comillas and Isaac Peral Streets, Manila, for
washing, greasing and spraying. The operator
of the station, having agreed to do service upon
payment of P8.00, the car was placed on a
hydraulic lifter under the direction of the
personnel of the station.
What happened to the car is recounted by
Perlito Sison, as follows:
Q. Will you please describe how they proceeded
to do the work?
A. Yes, sir. The first thing that was done, as I
saw, was to drive the car over the lifter. Then by
the aid of the two grease men they raised up my
car up to six feet high, and then washing was
done. After washing, the next step was
greasing. Before greasing was finished, there is
a part near the shelf of the right fender, right
 AGENCY FULLTEXT CASES
front fender, of my car to be greased, but the the
grease men cannot reached that part, so the
next thing to be done was to loosen the lifter just
a few feet lower. Then upon releasing the valve
to make the car lower, a little bit lower . . .
Q. Who released the valve?
A. The greasemen, for the escape of the air. As
the escape of the air is too strong for my ear I
faced backward. I faced toward Isaac Peral
Street, and covered my ear. After the escaped
of the air has been finished, the air coming out
from the valve, I turned to face the car and I saw
the car swaying at that time, and just for a few
second the car fell., (t.s.n. pp. 22-23.)
The case was immediately reported to the
Manila Adjustor Company, the adjustor of the
firemen's Insurance Company and the
Commercial Casualty Insurance Company, as
the car was insured with these insurance
companies. After having been inspected by one
Mr. Baylon, representative of the Manila
Adjustor Company, the damaged car was taken
to the shops of the Philippine Motors,
Incorporated, for repair upon order of the
Firemen's Insurance Company and the
Commercial Casualty Company, with the
consent of Salvador R. Sison. The car was
restored to running condition after repairs
amounting to P1,651.38, and was delivered to
Salvador R. Sison, who, in turn made
assignments of his rights to recover damages in
favor of the Firemen's Insurance Company and
the Commercial Casualty Insurance Company.
On the other hand, the fall of the car from the
hydraulic lifter has been explained by Alfonso M.
Adriano, a greaseman in the Shell Gasoline and
Service Station, as follows:
Q. Were you able to lift the car on the hydraulic
lifter on the occasion, September 3, 1947?
A. Yes, sir.
Q. To what height did you raise more or less?
A. More or less five feet, sir.
Q. After lifting that car that height, what did you
do with the car?
A. I also washed it, sir.
Q. And after washing?
A. I greased it.
Q. On that occasion, have you been able to
finish greasing and washing the car?
A. There is one point which I could not reach.
Q. And what did you do then?
A. I lowered the lifter in order to reach that point.
Q. After lowering it a little, what did you do then?
A. I pushed and pressed the valve in its gradual
pressure.
Q. Were you able to reach the portion which you
were not able to reach while it was lower?
A. No more, sir.
Q. Why?
A. Because when I was lowering the lifter I saw
that the car was swinging and it fell.
THE COURT. Why did the car swing and fall?
WITNESS: 'That is what I do not know, sir'.
(t.s.n., p.67.)
The position of Defendant Porfirio de la Fuente
is stated in his counter-statement of facts which
is hereunder also reproduced:
In the afternoon of September 3, 1947, an
automobile belonging to the plaintiff Salvador
Sison was brought by his son, Perlito Sison, to
the gasoline and service station at the corner of
Marques de Comillas and Isaac Peral Streets,
City of Manila, Philippines, owned by the
defendant The Shell Company of the Philippine
Islands, Limited, but operated by the defendant
Porfirio de la Fuente, for the purpose of having
said car washed and greased for a
 AGENCY FULLTEXT CASES
consideration of P8.00 (t.s.n., pp. 19-20.) Said
car was insured against loss or damage by
Firemen's Insurance Company of Newark, New
Jersey, and Commercial Casualty Insurance
Company jointly for the sum of P10,000
(Exhibits "A', "B", and "D").
The job of washing and greasing was
undertaken by defendant Porfirio de la Fuente
through his two employees, Alfonso M. Adriano,
as greaseman and one surnamed de los Reyes,
a helper and washer (t.s.n., pp. 65-67). To
perform the job the car was carefully and
centrally placed on the platform of the lifter in the
gasoline and service station aforementioned
before raising up said platform to a height of
about 5 feet and then the servicing job was
started. After more than one hour of washing
and greasing, the job was about to be completed
except for an ungreased portion underneath the
vehicle which could not be reached by the
greasemen. So, the lifter was lowered a little by
Alfonso M. Adriano and while doing so, the car
for unknown reason accidentally fell and
suffered damage to the value of P1, 651.38
(t.s.n., pp. 65-67).
The insurance companies after paying the sum
of P1,651.38 for the damage and charging the
balance of P100.00 to Salvador Sison in
accordance with the terms of the insurance
contract, have filed this action together with said
Salvador Sison for the recovery of the total
amount of the damage from the defendants on
the ground of negligence (Record on Appeal,
pp. 1-6).
The defendant Porfirio de la Fuente denied
negligence in the operation of the lifter in his
separate answer and contended further that the
accidental fall of the car was caused by
unforseen event (Record on Appeal, pp. 17-19).
The owner of the car forthwith notified the
insurers who ordered their adjustor, the Manila
Adjustor Company, to investigate the incident
and after such investigation the damaged car,
upon order of the insures and with the consent
of the owner, was brought to the shop of the
Philippine Motors, Inc. The car was restored to
running condition after thereon which amounted
to P1,651.38 and returned to the owner who
assigned his right to collect the aforesaid
amount to the Firemen's Insurance Company
and the Commercial Casualty Insurance
Company.
On 6 December 1947 the insures and the owner
of the car brought an action in the Court of First
Instance of Manila against the Shell Company
of the Philippines, Ltd. and Porfirio de la Fuente
to recover from them, jointly and severally, the
sum of P1,651.38, interest thereon at the legal
rate from the filing of the complaint until fully
paid, the costs. After trial the Court dismissed
the complaint. The plaintiffs appealed. The
Court of Appeals reversed the judgment and
sentenced the defendant to pay the amount
sought to be recovered, legal interest and costs,
as stated at the beginning of this opinion.
In arriving at the conclusion that on 3 September
1947 when the car was brought to the station for
servicing Profirio de la Fuente, the operator of
the gasoline and service station, was an agent
of the Shell Company of the Philippines, Ltd.,
the Court of Appeals found that —
. . . De la Fuente owned his position to the Shell
Company which could remove him terminate his
services at any time from the said Company,
and he undertook to sell the Shell Company's
products exculusively at the said Station. For
this purpose, De la Fuente was placed in
possession of the gasoline and service station
under consideration, and was provided with all
the equipments needed to operate it, by the said
Company, such as the tools and articles listed
on Exhibit 2 which the hydraulic lifter (hoist) and
accessories, from which Sison's automobile fell
on the date in question (Exhibit 1 and 2). These
equipments were delivered to De la Fuente on a
so-called loan basis. The Shell Company took
charge of its care and maintenance and
rendered to the public or its customers at that
station for the proper functioning of the
equipment. Witness Antonio Tiongson, who was
sales superintendent of the Shell Company, and
witness Augusto Sawyer, foreman of the same
Company, supervised the operators and
 AGENCY FULLTEXT CASES
conducted periodic inspection of the Company's
gasoline and service station, the service station
in question inclusive. Explaining his duties and
responsibilities and the reason for the loan,
Tiongson said: "mainly of the supervision of
sales or (of) our dealers and rountinary
inspection of the equipment loaned by the
Company" (t.s.n., 107); "we merely inquire
about how the equipments are, whether they
have complaints, and whether if said
equipments are in proper order . . .", (t.s.n., 110);
station equipments are "loaned for the exclusive
use of the dealer on condition that all supplies to
be sold by said dealer should be exclusively
Shell, so as a concession we loan equipments
for their use . . .," "for the proper functioning of
the equipments, we answer and see to it that the
equipments are in good running order usable
condition . . .," "with respect to the public." (t.s.n.,
111-112). De la Fuente, as operator, was given
special prices by the Company for the gasoline
products sold therein. Exhibit 1 — Shell, which
was a receipt by Antonio Tiongson and signed
by the De la Fuente, acknowledging the delivery
of equipments of the gasoline and service
station in question was subsequently replaced
by Exhibit 2 — Shell, an official from of the
inventory of the equipment which De la Fuente
signed above the words: "Agent's signature"
And the service station in question had been
marked "SHELL", and all advertisements
therein bore the same sign. . . .
. . . De la Fuente was the operator of the station
"by grace" of the Defendant Company which
could and did remove him as it pleased; that all
the equipments needed to operate the station
was owned by the Defendant Company which
took charge of their proper care and
maintenance, despite the fact that they were
loaned to him; that the Defendant company did
not leave the fixing of price for gasoline to De la
Fuente; on the other hand, the Defendant
company had complete control thereof; and that
Tiongson, the sales representative of the
Defendant Company, had supervision over De
la Fuente in the operation of the station, and in
the sale of Defendant Company's products
therein. . . .
Taking into consideration the fact that the
operator owed his position to the company and
the latter could remove him or terminate his
services at will; that the service station belonged
to the company and bore its tradename and the
operator sold only the products of the company;
that the equipment used by the operator
belonged to the company and were just loaned
to the operator and the company took charge of
their repair and maintenance; that an employee
of the company supervised the operator and
conducted periodic inspection of the company's
gasoline and service station; that the price of the
products sold by the operator was fixed by the
company and not by the operator; and that the
receipt signed by the operator indicated that he
was a mere agent, the finding of the Court of
Appeals that the operator was an agent of the
company and not an independent contractor
should not be disturbed.
To determine the nature of a contract courts do
not have or are not bound to rely upon the name
or title given it by the contracting parties, should
there be a controversy as to what they really had
intended to enter into, but the way the
contracting parties do or perform their
respective obligation stipulated or agreed upon
may be shown and inquired into, and should
such performance conflict with the name or title
given the contract by the parties, the former
must prevail over the latter.
It was admitted by the operator of the gasoline
and service station that "the car was carefully
and centrally placed on the platform of the lifter
. . ." and the Court of Appeals found that —
. . . the fall of Appellant Sison's car from the
hydraulic lift and the damage caused therefor,
were the result of the jerking and swaying of the
lift when the valve was released, and that the
jerking was due to some accident and
unforeseen shortcoming of the mechanism
itself, which caused its faulty or defective
operation or functioning,
. . . the servicing job on Appellant Sison's
automobile was accepted by De la Fuente in the
normal and ordinary conduct of his business as
 AGENCY FULLTEXT CASES

operator of his co-appellee's service station, and

that the jerking and swaying of the hydraulic lift
which caused the fall of the subject car were due
to its defective condition, resulting in its faulty
operation. . . .

As the act of the agent or his employees acting

within the scope of his authority is the act of the
principal, the breach of the undertaking by the
agent is one for which the principal is
answerable. Moreover, the company undertook
to "answer and see to it that the equipments are
in good running order and usable condition;"
and the Court of Appeals found that the
Company's mechanic failed to make a thorough
check up of the hydraulic lifter and the check up
made by its mechanic was "merely routine" by
raising "the lifter once or twice and after
observing that the operator was satisfactory, he
(the mechanic) left the place." The latter was
negligent and the company must answer for the
negligent act of its mechanic which was the
cause of the fall of the car from the hydraulic
lifter.

The judgment under review is affirmed, with

costs against the petitioner.
 AGENCY FULLTEXT CASES
G.R. No. L-41182-3 April 16, 1988
DR. CARLOS L. SEVILLA and LINA O.
SEVILLA, petitioners-appellants,
vs.
THE COURT OF APPEALS, TOURIST
WORLD SERVICE, INC., ELISEO S.CANILAO,
and SEGUNDINA NOGUERA, respondents-
appellees.
Civil Law; Partnership; Lina Sevilla’s own
argument that the par-ties had embarked on a
joint venture or otherwise a partnership
rejected.—In rejecting Tourist World Service,
Inc.'s arguments however, we are not, as a
consequence, accepting Lina Seviila’s own, that
is, that the parties had embarked on a joint
venture or otherwise, a partnership. And
apparently, Sevilla herself did not recognize the
existence of such a relation. In her letter of
November 28, 1961, she expressly “concedes
your [Tourist World Service, Inc.'s] right to stop
the operation of your branch office,” in effect,
accepting Tourist World Service, Inc.'s control
over the manner in which the business was run.
A joint venture, including a partnership,
presupposes generally a parity of standing
between the joint co-venturers or partners, in
which each party has an equal proprietary
interest in the capital or property contributed and
where each party exercises equal rights in the
conduct of the business. Furthermore, the
parties did not hold themselves out as partners,
and the building itself was embellished with the
electric sign “Toimst World Service, Inc.," in lieu
of a distinct partnership name.
Same;Agency; The parties had contemplated a
principal-agent relationship rather than a joint
management or a partnership.—It is the Court’s
considered opinion, that when the petitioner,
Lina Sevilla, agreed to (wo)man the private
respondent, Tourist World Service, Inc.'s Ermita
office, she must have done so pursuant to a
contract of agency. It is the essence of this
contract that the agent renders services “in
representation or on behalf of another.” In the
case at bar, Sevilla solicited airline fares, but
she did so for and on behalf of her principal,
Touriat World Servioe, Inc. As compensation,
she received 4% of the proceeds in the concept
of commissions. And as we said, Sevilla herself,
based on her letter of November 28,1961,
presumed her printipaTs authority as owner of
the business undertaking. We are convinced,
considering the circumstances and from the
respondent Court’s recital of facts, that the
parties had contemplated a principalagent
relationship, rather than a joint management or
a partnership.
Same; Same; Same; The agency being one
coupled with an interest cannot be revoked at
wilL—But unlike simple grants of a power of
attorney, the agency that we hereby declare to
be compatible witJb the intent of the parties,
cannot be revoked at will. The reason is that it is
one coupled with an interest, the agency having
been created for the mutual interest of the agent
and the principal. It appears that Lina Sevilla is
a bona fide travel agent herself, and as such,
she had acquired an interest in the business
entrusted to her. Moreover, she had assumed a
personal obligation for the operation thereof,
holding herself solidarily liable for the payment
of rentals. She continued the business, using
her own name, after Tourist World had stopped
further operations. Her interest, obviously, is not
limited to the commissions she earned as a
result of her business transactions. but one that
extendB to the very subject matter of the power
of management delegated to her. It is an agency
that, as we said, cannot be revoked at the
pleasure of the principal. Accordingly, the
revocation complained of should entitle the
petitioner, Lina Sevilla, to damages.
Same; Same; Damages; For unwarranted
revocation of the contract of agency, Tourist
World Service, Inc. should be sentenced to pay
damages.—We rule, therefore, that for its
unwarranted revocation of the contract of
agency, the private respondent, Tourist Worid
Service, Inc., should be sentenced to pay
damages. Under the CivU Code, moral
damages may be awarded for “breaches of
contract where the defendant acted ... in bad
faith.”
 AGENCY FULLTEXT CASES
Same; Same; Same; Same; Respondeni Eliseo
Canilao likewise ordered to respond for the
same damages in a solidary capacity.—The
respondent, Eliseo Canilao, as a joint tortfeasor,
is likewise hereby ordered to respond for the
same damages in a solidary capacity.
SARMIENTO , J.:
The petitioners invoke the provisions on human
relations of the Civil Code in this appeal by
certiorari. The facts are beyond dispute:
xxx xxx xxx
On the strength of a contract (Exhibit A for the
appellant Exhibit 2 for the appellees) entered
into on Oct. 19, 1960 by and between Mrs.
Segundina Noguera, party of the first part; the
Tourist World Service, Inc., represented by Mr.
Eliseo Canilao as party of the second part, and
hereinafter referred to as appellants, the Tourist
World Service, Inc. leased the premises
belonging to the party of the first part at Mabini
St., Manila for the former-s use as a branch
office. In the said contract the party of the third
part held herself solidarily liable with the party of
the part for the prompt payment of the monthly
rental agreed on. When the branch office was
opened, the same was run by the herein
appellant Una 0. Sevilla payable to Tourist
World Service Inc. by any airline for any fare
brought in on the efforts of Mrs. Lina Sevilla, 4%
was to go to Lina Sevilla and 3% was to be
withheld by the Tourist World Service, Inc.
On or about November 24, 1961 (Exhibit 16) the
Tourist World Service, Inc. appears to have
been informed that Lina Sevilla was connected
with a rival firm, the Philippine Travel Bureau,
and, since the branch office was anyhow losing,
the Tourist World Service considered closing
down its office. This was firmed up by two
resolutions of the board of directors of Tourist
World Service, Inc. dated Dec. 2, 1961 (Exhibits
12 and 13), the first abolishing the office of the
manager and vice-president of the Tourist World
Service, Inc., Ermita Branch, and the
second,authorizing the corporate secretary to
receive the properties of the Tourist World
Service then located at the said branch office. It
further appears that on Jan. 3, 1962, the
contract with the appellees for the use of the
Branch Office premises was terminated and
while the effectivity thereof was Jan. 31, 1962,
the appellees no longer used it. As a matter of
fact appellants used it since Nov. 1961.
Because of this, and to comply with the mandate
of the Tourist World Service, the corporate
secretary Gabino Canilao went over to the
branch office, and, finding the premises locked,
and, being unable to contact Lina Sevilla, he
padlocked the premises on June 4, 1962 to
protect the interests of the Tourist World
Service. When neither the appellant Lina Sevilla
nor any of her employees could enter the locked
premises, a complaint wall filed by the herein
appellants against the appellees with a prayer
for the issuance of mandatory preliminary
injunction. Both appellees answered with
counterclaims. For apparent lack of interest of
the parties therein, the trial court ordered the
dismissal of the case without prejudice.
The appellee Segundina Noguera sought
reconsideration of the order dismissing her
counterclaim which the court a quo, in an order
dated June 8, 1963, granted permitting her to
present evidence in support of her
counterclaim.
On June 17,1963, appellant Lina Sevilla refiled
her case against the herein appellees and after
the issues were joined, the reinstated
counterclaim of Segundina Noguera and the
new complaint of appellant Lina Sevilla were
jointly heard following which the court a quo
ordered both cases dismiss for lack of merit, on
the basis of which was elevated the instant
appeal on the following assignment of errors:
I. THE LOWER COURT ERRED EVEN IN
APPRECIATING THE NATURE OF
PLAINTIFF-APPELLANT MRS. LINA O.
SEVILLA'S COMPLAINT.
II. THE LOWER COURT ERRED IN HOLDING
THAT APPELLANT MRS. LINA 0. SEVILA'S
ARRANGEMENT (WITH APPELLEE TOURIST
WORLD SERVICE, INC.) WAS ONE MERELY
 AGENCY FULLTEXT CASES
OF EMPLOYER-EMPLOYEE RELATION AND
IN FAILING TO HOLD THAT THE SAID
ARRANGEMENT WAS ONE OF JOINT
BUSINESS VENTURE.
III. THE LOWER COURT ERRED IN RULING
THAT PLAINTIFF-APPELLANT MRS. LINA O.
SEVILLA IS ESTOPPED FROM DENYING
THAT SHE WAS A MERE EMPLOYEE OF
DEFENDANT-APPELLEE TOURIST WORLD
SERVICE, INC. EVEN AS AGAINST THE
LATTER.
IV. THE LOWER COURT ERRED IN NOT
HOLDING THAT APPELLEES HAD NO RIGHT
TO EVICT APPELLANT MRS. LINA O.
SEVILLA FROM THE A. MABINI OFFICE BY
TAKING THE LAW INTO THEIR OWN
HANDS.
V. THE LOWER COURT ERRED IN NOT
CONSIDERING AT .ALL APPELLEE
NOGUERA'S RESPONSIBILITY FOR
APPELLANT LINA O. SEVILLA'S FORCIBLE
DISPOSSESSION OF THE A. MABINI
PREMISES.
VI. THE LOWER COURT ERRED IN FINDING
THAT APPELLANT APPELLANT MRS. LINA O.
SEVILLA SIGNED MERELY AS GUARANTOR
FOR RENTALS.
On the foregoing facts and in the light of the
errors asigned the issues to be resolved are:
1. Whether the appellee Tourist World Service
unilaterally disco the telephone line at the
branch office on Ermita;
2. Whether or not the padlocking of the office by
the Tourist World Service was actionable or not;
and
3. Whether or not the lessee to the office
premises belonging to the appellee Noguera
was appellees TWS or TWS and the appellant.
In this appeal, appealant Lina Sevilla claims that
a joint bussiness venture was entered into by
and between her and appellee TWS with offices
at the Ermita branch office and that she was not
an employee of the TWS to the end that her
relationship with TWS was one of a joint
business venture appellant made declarations
showing:
1. Appellant Mrs. Lina 0. Sevilla, a prominent
figure and wife of an eminent eye, ear and nose
specialist as well as a imediately columnist had
been in the travel business prior to the
establishment of the joint business venture with
appellee Tourist World Service, Inc. and
appellee Eliseo Canilao, her compadre, she
being the godmother of one of his children, with
her own clientele, coming mostly from her own
social circle (pp. 3-6 tsn. February 16,1965).
2. Appellant Mrs. Sevilla was signatory to a
lease agreement dated 19 October 1960 (Exh.
'A') covering the premises at A. Mabini St., she
expressly warranting and holding [sic] herself
'solidarily' liable with appellee Tourist World
Service, Inc. for the prompt payment of the
monthly rentals thereof to other appellee Mrs.
Noguera (pp. 14-15, tsn. Jan. 18,1964).
3. Appellant Mrs. Sevilla did not receive any
salary from appellee Tourist World Service, Inc.,
which had its own, separate office located at the
Trade & Commerce Building; nor was she an
employee thereof, having no participation in nor
connection with said business at the Trade &
Commerce Building (pp. 16-18 tsn Id.).
4. Appellant Mrs. Sevilla earned commissions
for her own passengers, her own bookings her
own business (and not for any of the business
of appellee Tourist World Service, Inc.) obtained
from the airline companies. She shared the 7%
commissions given by the airline companies
giving appellee Tourist World Service, Lic. 3%
thereof aid retaining 4% for herself (pp. 18
tsn. Id.)
5. Appellant Mrs. Sevilla likewise shared in the
expenses of maintaining the A. Mabini St. office,
paying for the salary of an office secretary, Miss
Obieta, and other sundry expenses, aside from
desicion the office furniture and supplying some
of fice furnishings (pp. 15,18 tsn. April 6,1965),
appellee Tourist World Service, Inc. shouldering
 AGENCY FULLTEXT CASES
the rental and other expenses in consideration
for the 3% split in the co procured by appellant
Mrs. Sevilla (p. 35 tsn Feb. 16,1965).
6. It was the understanding between them that
appellant Mrs. Sevilla would be given the title of
branch manager for appearance's sake only (p.
31 tsn. Id.), appellee Eliseo Canilao admit that it
was just a title for dignity (p. 36 tsn. June 18,
1965- testimony of appellee Eliseo Canilao pp.
38-39 tsn April 61965-testimony of corporate
secretary Gabino Canilao (pp- 2-5, Appellants'
Reply Brief)
Upon the other hand, appellee TWS contend
that the appellant was an employee of the
appellee Tourist World Service, Inc. and as such
was designated manager.1
xxx xxx xxx
The trial court2 held for the private respondent
on the premise that the private respondent,
Tourist World Service, Inc., being the true
lessee, it was within its prerogative to terminate
the lease and padlock the premises. 3 It likewise
found the petitioner, Lina Sevilla, to be a mere
employee of said Tourist World Service, Inc. and
as such, she was bound by the acts of her
employer. 4 The respondent Court of
5
Appeal rendered an affirmance.
The petitioners now claim that the respondent
Court, in sustaining the lower court, erred.
Specifically, they state:
I THE COURT OF APPEALS ERRED ON A
THE COURT OF APPEALS ERRED ON A
QUESTION OF LAW AND GRAVELY ABUSED
ITS DISCRETION IN HOLDING THAT "THE
PADLOCKING OF THE PREMISES BY
TOURIST WORLD SERVICE INC. WITHOUT
THE KNOWLEDGE AND CONSENT OF THE
APPELLANT LINA SEVILLA ... WITHOUT
NOTIFYING MRS. LINA O. SEVILLA OR ANY
OF HER EMPLOYEES AND WITHOUT
INFORMING COUNSEL FOR THE
APPELLANT (SEVILIA), WHO IMMEDIATELY
BEFORE THE PADLOCKING INCIDENT, WAS
IN CONFERENCE WITH THE CORPORATE
SECRETARY OF TOURIST WORLD SERVICE
(ADMITTEDLY THE PERSON WHO
PADLOCKED THE SAID OFFICE), IN THEIR
ATTEMP AMICABLY SETTLE THE
CONTROVERSY BETWEEN THE
APPELLANT (SEVILLA) AND THE TOURIST
WORLD SERVICE ... (DID NOT) ENTITLE THE
LATTER TO THE RELIEF OF DAMAGES"
(ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2)
DECISION AGAINST DUE PROCESS WHICH
ADHERES TO THE RULE OF LAW.
II
THE COURT OF APPEALS ERRED ON A
QUESTION OF LAW AND GRAVELY ABUSED
ITS DISCRETION IN DENYING APPELLANT
SEVILLA RELIEF BECAUSE SHE HAD
"OFFERED TO WITHDRAW HER COMP
PROVIDED THAT ALL CLAIMS AND
COUNTERCLAIMS LODGED BY BOTH
APPELLEES WERE WITHDRAWN." (ANNEX
"A" P. 8)
III
THE COURT OF APPEALS ERRED ON A
QUESTION OF LAW AND GRAVELY ABUSED
ITS DISCRETION IN DENYING-IN FACT NOT
PASSING AND RESOLVING-APPELLANT
SEVILLAS CAUSE OF ACTION FOUNDED ON
ARTICLES 19, 20 AND 21 OF THE CIVIL
CODE ON RELATIONS.
IV
QUESTION OF LAW AND GRAVELY ABUSED
ITS DISCRETION IN DENYING APPEAL
APPELLANT SEVILLA RELIEF YET NOT
RESOLVING HER CLAIM THAT SHE WAS IN
JOINT VENTURE WITH TOURIST WORLD
SERVICE INC. OR AT LEAST ITS AGENT
COUPLED WITH AN INTEREST WHICH
COULD NOT BE TERMINATED OR REVOKED
UNILATERALLY BY TOURIST WORLD
SERVICE INC.6
As a preliminary inquiry, the Court is asked to
declare the true nature of the relation between
Lina Sevilla and Tourist World Service, Inc. The
 AGENCY FULLTEXT CASES
respondent Court of see fit to rule on the
question, the crucial issue, in its opinion being
"whether or not the padlocking of the premises
by the Tourist World Service, Inc. without the
knowledge and consent of the appellant Lina
Sevilla entitled the latter to the relief of damages
prayed for and whether or not the evidence for
the said appellant supports the contention that
the appellee Tourist World Service, Inc.
unilaterally and without the consent of the
appellant disconnected the telephone lines of
the Ermita branch office of the appellee Tourist
World Service, Inc.7 Tourist World Service, Inc.,
insists, on the other hand, that Lina SEVILLA
was a mere employee, being "branch manager"
of its Ermita "branch" office and that inferentially,
she had no say on the lease executed with the
private respondent, Segundina Noguera. The
petitioners contend, however, that relation
between the between parties was one of joint
venture, but concede that "whatever might have
been the true relationship between Sevilla and
Tourist World Service," the Rule of Law
enjoined Tourist World Service and Canilao
from taking the law into their own hands, 8 in
reference to the padlocking now questioned.
The Court finds the resolution of the issue
material, for if, as the private respondent, Tourist
World Service, Inc., maintains, that the relation
between the parties was in the character of
employer and employee, the courts would have
been without jurisdiction to try the case, labor
disputes being the exclusive domain of the
Court of Industrial Relations, later, the Bureau
Of Labor Relations, pursuant to statutes then in
force. 9
In this jurisdiction, there has been no uniform
test to determine the evidence of an employer-
employee relation. In general, we have relied on
the so-called right of control test, "where the
person for whom the services are performed
reserves a right to control not only the end to be
achieved but also the means to be used in
reaching such end." 10Subsequently, however,
we have considered, in addition to the standard
of right-of control, the existing economic
conditions prevailing between the parties, like
the inclusion of the employee in the payrolls, in
determining the existence of an employer-
employee relationship.11
The records will show that the petitioner, Lina
Sevilla, was not subject to control by the private
respondent Tourist World Service, Inc., either as
to the result of the enterprise or as to the means
used in connection therewith. In the first place,
under the contract of lease covering the Tourist
Worlds Ermita office, she had bound herself
in solidum as and for rental payments, an
arrangement that would be like claims of a
master-servant relationship. True the
respondent Court would later minimize her
participation in the lease as one of mere
guaranty, 12 that does not make her an
employee of Tourist World, since in any case, a
true employee cannot be made to part with his
own money in pursuance of his employer's
business, or otherwise, assume any liability
thereof. In that event, the parties must be bound
by some other relation, but certainly not
employment.
In the second place, and as found by the
Appellate Court, '[w]hen the branch office was
opened, the same was run by the herein
appellant Lina O. Sevilla payable to Tourist
World Service, Inc. by any airline for any fare
brought in on the effort of Mrs. Lina
Sevilla. 13 Under these circumstances, it cannot
be said that Sevilla was under the control of
Tourist World Service, Inc. "as to the means
used." Sevilla in pursuing the business,
obviously relied on her own gifts and
capabilities.
It is further admitted that Sevilla was not in the
company's payroll. For her efforts, she retained
4% in commissions from airline bookings, the
remaining 3% going to Tourist World. Unlike an
employee then, who earns a fixed salary
usually, she earned compensation in fluctuating
amounts depending on her booking successes.
The fact that Sevilla had been designated
'branch manager" does not make her, ergo,
Tourist World's employee. As we said,
employment is determined by the right-of-
 AGENCY FULLTEXT CASES
control test and certain economic parameters.
But titles are weak indicators.
In rejecting Tourist World Service, Inc.'s
arguments however, we are not, as a
consequence, accepting Lina Sevilla's own, that
is, that the parties had embarked on a joint
venture or otherwise, a partnership. And
apparently, Sevilla herself did not recognize the
existence of such a relation. In her letter of
November 28, 1961, she expressly 'concedes
your [Tourist World Service, Inc.'s] right to stop
the operation of your branch office 14 in effect,
accepting Tourist World Service, Inc.'s control
over the manner in which the business was run.
A joint venture, including a partnership,
presupposes generally a of standing between
the joint co-venturers or partners, in which each
party has an equal proprietary interest in the
capital or property contributed 15 and where
each party exercises equal rights in the conduct
of the business.16 furthermore, the parties did
not hold themselves out as partners, and the
building itself was embellished with the electric
sign "Tourist World Service, Inc. 17in lieu of a
distinct partnership name.
It is the Court's considered opinion, that when
the petitioner, Lina Sevilla, agreed to (wo)man
the private respondent, Tourist World Service,
Inc.'s Ermita office, she must have done so
pursuant to a contract of agency. It is the
essence of this contract that the agent renders
services "in representation or on behalf of
another.18 In the case at bar, Sevilla solicited
airline fares, but she did so for and on behalf of
her principal, Tourist World Service, Inc. As
compensation, she received 4% of the proceeds
in the concept of commissions. And as we said,
Sevilla herself based on her letter of November
28, 1961, pre-assumed her principal's authority
as owner of the business undertaking. We are
convinced, considering the circumstances and
from the respondent Court's recital of facts, that
the ties had contemplated a principal agent
relationship, rather than a joint managament or
a partnership..
But unlike simple grants of a power of attorney,
the agency that we hereby declare to be
compatible with the intent of the parties, cannot
be revoked at will. The reason is that it is one
coupled with an interest, the agency having
been created for mutual interest, of the agent
and the principal. 19 It appears that Lina Sevilla
is a bona fide travel agent herself, and as such,
she had acquired an interest in the business
entrusted to her. Moreover, she had assumed a
personal obligation for the operation thereof,
holding herself solidarily liable for the payment
of rentals. She continued the business, using
her own name, after Tourist World had stopped
further operations. Her interest, obviously, is not
to the commissions she earned as a result of her
business transactions, but one that extends to
the very subject matter of the power of
management delegated to her. It is an agency
that, as we said, cannot be revoked at the
pleasure of the principal. Accordingly, the
revocation complained of should entitle the
petitioner, Lina Sevilla, to damages.
As we have stated, the respondent Court
avoided this issue, confining itself to the
telephone disconnection and padlocking
incidents. Anent the disconnection issue, it is
the holding of the Court of Appeals that there is
'no evidence showing that the Tourist World
Service, Inc. disconnected the telephone lines
at the branch office. 20 Yet, what cannot be
denied is the fact that Tourist World Service, Inc.
did not take pains to have them reconnected.
Assuming, therefore, that it had no hand in the
disconnection now complained of, it had clearly
condoned it, and as owner of the telephone
lines, it must shoulder responsibility therefor.
The Court of Appeals must likewise be held to
be in error with respect to the padlocking
incident. For the fact that Tourist World Service,
Inc. was the lessee named in the lease con-tract
did not accord it any authority to terminate that
contract without notice to its actual occupant,
and to padlock the premises in such fashion. As
this Court has ruled, the petitioner, Lina Sevilla,
had acquired a personal stake in the business
itself, and necessarily, in the equipment
pertaining thereto. Furthermore, Sevilla was not
a stranger to that contract having been explicitly
named therein as a third party in charge of rental
 AGENCY FULLTEXT CASES
payments (solidarily with Tourist World, Inc.).
She could not be ousted from possession as
summarily as one would eject an interloper.
The Court is satisfied that from the chronicle of
events, there was indeed some malevolent
design to put the petitioner, Lina Sevilla, in a bad
light following disclosures that she had worked
for a rival firm. To be sure, the respondent court
speaks of alleged business losses to justify the
closure '21 but there is no clear showing that
Tourist World Ermita Branch had in fact
sustained such reverses, let alone, the fact that
Sevilla had moonlit for another company. What
the evidence discloses, on the other hand, is
that following such an information (that Sevilla
was working for another company), Tourist
World's board of directors adopted two
resolutions abolishing the office of 'manager"
and authorizing the corporate secretary, the
respondent Eliseo Canilao, to effect the
takeover of its branch office properties. On
January 3, 1962, the private respondents ended
the lease over the branch office premises,
incidentally, without notice to her.
It was only on June 4, 1962, and after office
hours significantly, that the Ermita office was
padlocked, personally by the respondent
Canilao, on the pretext that it was necessary to
Protect the interests of the Tourist World
Service. " 22It is strange indeed that Tourist
World Service, Inc. did not find such a need
when it cancelled the lease five months earlier.
While Tourist World Service, Inc. would not
pretend that it sought to locate Sevilla to inform
her of the closure, but surely, it was aware that
after office hours, she could not have been
anywhere near the premises. Capping these
series of "offensives," it cut the office's
telephone lines, paralyzing completely its
business operations, and in the process,
depriving Sevilla articipation therein.
This conduct on the part of Tourist World
Service, Inc. betrays a sinister effort to punish
Sevillsa it had perceived to be disloyalty on her
part. It is offensive, in any event, to elementary
norms of justice and fair play.
We rule therefore, that for its unwarranted
revocation of the contract of agency, the private
respondent, Tourist World Service, Inc., should
be sentenced to pay damages. Under the Civil
Code, moral damages may be awarded for
"breaches of contract where the defendant
acted ... in bad faith. 23
We likewise condemn Tourist World Service,
Inc. to pay further damages for the moral injury
done to Lina Sevilla from its brazen conduct
subsequent to the cancellation of the power of
attorney granted to her on the authority of Article
21 of the Civil Code, in relation to Article 2219
(10) thereof —
ART. 21. Any person who wilfully causes loss or
injury to another in a manner that is contrary to
morals, good customs or public policy shall
compensate the latter for the damage.24
ART. 2219. Moral damages25 may be recovered
in the following and analogous cases:
xxx xxx xxx
(10) Acts and actions refered into article 21, 26,
27, 28, 29, 30, 32, 34, and 35.
The respondent, Eliseo Canilao, as a joint
tortfeasor is likewise hereby ordered to respond
for the same damages in a solidary capacity.
Insofar, however, as the private respondent,
Segundina Noguera is concerned, no evidence
has been shown that she had connived with
Tourist World Service, Inc. in the disconnection
and padlocking incidents. She cannot therefore
be held liable as a cotortfeasor.
The Court considers the sums of P25,000.00 as
and for moral damages,24 P10,000.00 as
exemplary damages, 25and P5,000.00 as
nominal 26 and/or temperate27 damages, to be
just, fair, and reasonable under the
circumstances.
WHEREFORE, the Decision promulgated on
January 23, 1975 as well as the Resolution
issued on July 31, 1975, by the respondent
Court of Appeals is hereby REVERSED and
 AGENCY FULLTEXT CASES

SET ASIDE. The private respondent, Tourist

World Service, Inc., and Eliseo Canilao, are
ORDERED jointly and severally to indemnify the
petitioner, Lina Sevilla, the sum of 25,00.00 as
and for moral damages, the sum of P10,000.00,
as and for exemplary damages, and the sum of
P5,000.00, as and for nominal and/or temperate
damages.

Costs against said private respondents.

SO ORDERED.
 AGENCY FULLTEXT CASES
[G.R. No. L-34338. November 21, 1984.]
LOURDES VALERIO LIM, Petitioner, v.
PEOPLE OF THE PHILIPPINES, Respondent.
The Solicitor General for public Respondent.
1. CIVIL LAW; OBLIGATIONS AND
CONTRACTS: PERIOD OF OBLIGATION;
MAY NOT BE FIXED BY COURT WHERE
AGREEMENT IN CASE AT BAR CLEARLY
FIXES A PERIOD. — It is clear in the
agreement, Exhibit "A", that the proceeds of the
sale of the tobacco should be turned over to the
complainant as soon as the same was sold, or,
that the obligation was immediately demandable
as soon as the tobacco was disposed of Hence,
Article 1197 of the New Civil Code, which
provides that the courts may fix the duration of
the obligation if it does not fix a period, does not
apply.
2. ID.; ID.; AGENCY; SUBJECT AGREEMENT
IS A CONTRACT OF AGENCY TO SELL NOT
A CONTRACT OF SALE. — The fact that
appellant received the tobacco to be sold at
P1.30 per kilo and the proceeds to be given to
complainant as soon as it was sold, strongly
negates transfer of ownership of the goods to
the petitioner. The agreement (Exhibit "A")
constituted her as an agent with the obligation
to return the tobacco if the same was not sold.
Criminal Law; Contracts; Where a person
obliged himself to pay to another the proceeds
of the latter’s tobacco as soon as they are
disposed of, a period exists for payment of the
obligation and, therefore, Art. 1197, N.C.C. does
not apply.—It is clear in the agreement, Exhibit
“A”, that the proceeds of the sale of the tobacco
should be turned over to he complainant as
soon as the same was sold, or, that the
obligation was immediately demandable as
soon as the tobacco was disposed of. Hence,
Article 1197 of the New Civil Code, which
provides that the courts may fix the duration of
the obligation if it does not fix a period, does not
apply.
Same; Same; Agency; Estafa is present where
contract to sell constituted another as mere
agent.—Aside from the fact that Maria Ayroso
testified that the appellant asked her to be her
agent in selling Ayroso’s tobacco, the appellant
herself admitted that there was an agreement
that upon the sale of the tobacco she would be
given something. The appellant is a
businesswoman, and it is unbelievable that she
would go to the extent of going to Ayroso’s
house and take the tobacco with a jeep which
she had brought if she did not intend to make a
profit out of the transaction. Certainly, if she was
doing a favor to Maria Ayroso and it was Ayroso
who had requested her to sell her tobacco, it
would not have been the appellant who would
have gone to the house of Ayroso, but it would
have been Ayroso who would have gone to the
house of the appellant and deliver the tobacco
to the appellant.”
Same; Same; Same; Sale; There is no contract
of sale, but mere agency to sell, where
agreement was to pay over to tobacco owner
the proceeds thereof as soon as it was sold.—
The fact that appellant received the tobacco to
be sold at P1.30 per kilo and the proceeds to be
given to complainant as soon as it was sold,
strongly negates transfer of ownership of the
goods to the petitioner. The agreement (Exhibit
“A”) constituted her as an agent with the
obligation to return the tobacco if the same was
not sold.
DECISION
RELOVA, J.:
Petitioner Lourdes Valerio Lim was found guilty
of the crime of estafa and was sentenced "to
suffer an imprisonment of four (4) months and
one (1) day as minimum to two (2) years and
four (4) months as maximum, to indemnify the
offended party in the amount of P559.50, with
subsidiary imprisonment in case of insolvency,
and to pay the costs." (p. 14, Rollo)
From this judgment, appeal was taken to the
then Court of Appeals which affirmed the
decision of the lower court but modified the
 AGENCY FULLTEXT CASES
penalty imposed by sentencing her "to suffer an
indeterminate penalty of one (1) month and one
(1) day of arresto mayor as minimum to one (1)
year and one (1) day of prision correccional as
maximum, to indemnify the complainant in the
amount of P550.50 without subsidiary
imprisonment, and to pay the costs of suit." (p.
24, Rollo)
The question involved in this case is whether the
receipt, Exhibit "A", is a contract of agency to
sell or a contract of sale of the subject tobacco
between petitioner and the complainant, Maria
de Guzman Vda. de Ayroso, thereby precluding
criminal liability of petitioner for the crime
charged.
The findings of facts of the appellate court are
as follows:jgc:chanrobles.com.ph
". . . The appellant is a businesswoman. on
January 10, 1966, the appellant went to the
house of Maria Ayroso and proposed to sell
Ayroso’s tobacco. Ayroso agreed to the
proposition of the appellant to sell her tobacco
consisting of 615 kilos at P1.30 a kilo. The
appellant was to receive the overprice for which
she could sell the tobacco. This agreement was
made in the presence of plaintiff’s sister, Salud
G. Bantug. Salvador Bantug drew the
document, Exh. A, dated January 10, 1966,
which reads:chanrobles.com:cralaw:red
‘To Whom It May Concern:chanrob1es virtual
1aw library
This is to certify that I have received from Mrs.
Maria de Guzman Vda. de Ayroso, of Gapan,
Nueva Ecija, six hundred fifteen kilos of leaf
tobacco to be sold at P1.30 per kilo. The
proceed in the amount of Seven Hundred Ninety
Nine Pesos and 50/100 (P799.50) will be given
to her as soon as it was sold.’
This was signed by the appellant and witnessed
by the complainant’s sister, Salud Bantug, and
the latter’s maid, Genoveva Ruiz. The appellant
at that time was bringing a jeep, and the tobacco
was loaded in the jeep and brought by the
appellant. Of the total value of P799.50, the
appellant had paid to Ayroso only P240.00, and
this was paid on three different times. Demands
for the payment of the balance of the value of
the tobacco were made upon the appellant by
Ayroso, and particularly by her sister, Salud
Bantug. Salud Bantug further testified that she
had gone to the house of the appellant several
times, but the appellant often eluded her; and
that the ‘camarin’ of the appellant was empty.
Although the appellant denied that demands for
payment were made upon her, it is a fact that on
October 19, 1966, she wrote a letter to Salud
Bantug which reads as follows:chanrob1es
virtual 1aw library
‘Dear Salud,
‘Hindi ako nakapunta dian noon a 17 nitong
nakaraan, dahil kokonte pa ang nasisingil kong
pera, magintay ka hanggang dito sa linggo ito at
tiak na ako ay magdadala sa iyo. Gosto ko
Salud ay makapagbigay man lang ako ng
marami para hindi masiadong kahiyahiya sa iyo.
Ngayon kung gosto mo ay kahit konte muna ay
bibigyan kita. Pupunta lang kami ni Mina sa
Maynila ngayon. Salud kuug talagang kailangan
mo ay bukas ay dadalhan kita ng pera.
‘Medio mahirap ang maningil sa palengke ng
Cabanatuan dahil nagsisilipat ang mga suki ko
ng puesto. Huwag kang mabahala at tiyak na
babayaran kita.
‘Patnubayan tayo ng mahal na panginoon Dios.
(Exh. B).
Ludy’
"Pursuant to this letter, the appellant sent a
money order for P100.00 on October 24, 1967,
Exh. 4, and another for P50.00 on March 8,
1967; and she paid P90.00 on April 18, 1967 as
evidenced by the receipt Exh. 2, dated April 18,
1967, or a total of P240.00. As no further
amount was paid, the complainant filed a
complaint against the appellant for estafa." (pp.
14, 15, 16, Rollo)
In this petition for review by certiorari, Lourdes
Valerio Lim poses the following questions of
 AGENCY FULLTEXT CASES

law, to wit:chanrob1es virtual 1aw library
1. Whether or not the Honorable Court of
Appeals was legally right in holding that the
foregoing document (Exhibit "A") "fixed a period"
and "the obligation was therefore, immediately
demandable as soon as the tobacco was sold"
(Decision, p. 6) as against the theory of the
petitioner that the obligation does not fix a
period, but from its nature and the
circumstances it can be inferred that a period
was intended in which case the only action that
can be maintained is a petition to ask the court
to fix the duration thereof;
2. Whether or not the Honorable Court of
Appeals was legally right in holding that "Art.
1197 of the New Civil Code does not apply" as
against the alternative theory of the petitioner
that the foregoing receipt (Exhibit "A") gives rise
to an obligation wherein the duration of the
period depends upon the will of the debtor in
which case the only action that can be
maintained is a petition to ask the court to fix the
duration of the period; and
agent in selling Ayroso’s tobacco, the appellant
herself admitted that there was an agreement
that upon the sale of the tobacco she would be
given something. The appellant is a
businesswoman, and it is unbelievable that she
would go to the extent of going to Ayroso’s
house and take the tobacco with a jeep which
she had brought if she did not intend to make a
profit out of the transaction. Certainly, if she was
doing a favor to Maria Ayroso and it was Ayroso
who had requested her to sell her tobacco, it
would not have been the appellant who would
have gone to the house of Ayroso, but it would
have been Ayroso who would have gone to the
house of the appellant and deliver the tobacco
to the appellant." (p. 19, Rollo)
The fact that appellant received the tobacco to
be sold at P1.30 per kilo and the proceeds to be
given to complainant as soon as it was sold,
strongly negates transfer of ownership of the
goods to the petitioner. The agreement (Exhibit
"A") constituted her as an agent with the
obligation to return the tobacco if the same was
not sold.

3. Whether or not the Honorable Court of ACCORDINGLY, the petition for review
Appeals was legally right in holding that the on certiorari is dismissed for lack of merit. With
foregoing receipt is a contract of agency to sell costs.
as against the theory of the petitioner that it is a
contract of sale. (pp. 3-4, Rollo) SO ORDERED.

It is clear in the agreement, Exhibit "A", that the

proceeds of the sale of the tobacco should be
turned over to the complainant as soon as the
same was sold, or, that the obligation was
immediately demandable as soon as the
tobacco was disposed of. Hence, Article 1197 of
the New Civil Code, which provides that the
courts may fix the duration of the obligation if it
does not fix a period, does not apply.

Anent the argument that petitioner was not an

agent because Exhibit "A" does not say that she
would be paid the commission if the goods were
sold, the Court of Appeals correctly resolved the
matter as follows:chanrobles law library : red

". . . Aside from the fact that Maria Ayroso

testified that the appellant asked her to be her
 AGENCY FULLTEXT CASES
G.R. No. L-19265 May 29, 1964
MOISES SAN DIEGO, SR., Petitioner,
vs. ADELO NOMBRE and PEDRO
ESCANLAR, Respondents.
A. R. Casta�eda and M. S. Roxas for petitioner.
Amado B. Parre�o Law Office for respondents.
Executors and administrators; Judicial
administrator may lease property without prior
judicial approval.—A judicial administrator can
validly lease property of the estate without prior
judicial authority and approval.
Same; Non-applicability of provisions of New
Civil Code on agency to judicial
administrators.—The provisions on agency (Art.
1878, C.C.), should not apply to a judicial
administrator. A judicial administrator is
appointed by the Court. He is not only the
representative of said Court, but also the heirs
and creditors of the estate (Chua Tan vs. Del
Rosario, 57 Phil. 411), A judicial administrator
before entering into his duties, is required to file
a bond. These circumstances are not true in
case of agency. The agent is only answerable to
his principal. The protection which the law gives
the principal, in limiting the powers and rights of
an agent, stems from the fact that control by the
principal can only be true agreements, whereas
the acts of a judicial administrator are subject to
specific provisions of law and orders of the
appointing court
PAREDES, J.:chanrobles virtual law library
The case at bar had its origin in Special
Proceedings No. 7279 of the CFI of Negros
Occidental wherein respondent Adelo Nombre
was the duly constituted judicial administrator.
On May 1, 1960, Nombre, in his capacity was
judicial administrator of the intestate estate
subject of the Sp. Proc. stated above, leased
one of the properties of the estate (a fishpond
identified as Lot No. 1617 of the cadastral
survey of Kabankaban, Negros Occidental), to
Pedro Escanlar, the other respondent. The
terms of the lease was for three (3) years, with
a yearly rental of P3,000.00 to expire on May 1,
1963, the transaction having been done,
admittedly, without previous authority or
approval of the Court where the proceedings
was pending. On January 17, 1961, Nombre
was removed as administrator by Order of the
court and one Sofronio Campillanos was
appointed in his stead. The appeal on the Order
of Nombre's removal is supposedly pending with
the Court of Appeals. Respondent Escanlar was
cited for contempt, allegedly for his refusal to
surrender the fishpond to the newly appointed
administrator. On March 20, 1961, Campillanos
filed a motion asking for authority to execute a
lease contract of the same fishpond, in favor of
petitioner herein, Moises San Diego, Sr., for 5
years from 1961, at a yearly rental of P5,000.00.
Escanlar was not notified of such motion.
Nombre, the deposed administrator, presented
a written opposition to the motion of
Campillanos on April 11, 1964, pointing out that
the fishpond had been leased by him to
Escanlar for 3 years, the period of which was
going to expire on May 1, 1963. In a
supplemental opposition, he also invited the
attention of the Court that to grant the motion of
the new administrator would in effect nullify the
contract in favor of Escanlar, a person on whom
the Court had no jurisdiction. He also intimated
that the validity of the lease contract entered into
by a judicial administrator, must be recognized
unless so declared void in a separate action.
The opposition notwithstanding, the Court on
April 8, 1961, in effect declared that the contract
in favor of Escanlar was null and void, for want
of judicial authority and that unless he would
offer the same as or better conditions than the
prospective lessee, San Diego, there was no
good reason why the motion for authority to
lease the property to San Diego should not be
granted. Nombre moved to reconsider the Order
of April 8, stating that Escanlar was willing to
increase the rental of P5,000.00, but only after
the termination of his original contract. The
motion for reconsideration was denied on April
24, 1961, the trial judge stating that the contract
in favor of Escanlar was executed in bad faith
and was fraudulent because of the imminence
of Nombre's removal as administrator, one of
the causes of which was his indiscriminate
pleasant, of the property with inadequate
 AGENCY FULLTEXT CASES
rentals.chanroblesvirtualawlibrarychanrobles
virtual law library
From this Order, a petition for Certiorari asking
for the annulment of the Orders of April 8 and
24, 1961 was presented by Nombre and
Escanlar with the Court of Appeals. A Writ of
preliminary injunction was likewise prayed for to
restrain the new administrator Campillanos from
possessing the fishpond and from executing a
new lease contract covering it; requiring him to
return the possession thereof to Escanlar, plus
damages and attorney's fees in the amount of
P10,000.00 and costs. The Court of Appeals
issued the injunctive writ and required
respondents therein to Answer. Campillanos
insisted on the invalidity of the contract in favor
of Escanlar; the lower court alleged that it did not
exactly annul or invalidate the lease in his
questioned orders but suggested merely that
Escanlar "may file a separate ordinary action in
the Court of general jurisdiction." chanrobles
virtual law library
The Court of Appeals, in dismissing the petition
for certiorari, among others said -
The controlling issue in this case is the legality
of the contract of lease entered into by the
former administrator Nombre, and Pedro
Escanlar on May 1,
1960.chanroblesvirtualawlibrarychanrobles
virtual law library
Respondents contend that this contract, not
having been authorized or approved by the
Court, is null and void and cannot be an obstacle
to the execution of another of lease by the new
administrator, Campillanos. This contention is
without merit. ... . It has been held that even in
the absence of such special powers, a contract
or lease for more than 6 years is not entirely
invalid; it is invalid only in so far as it exceeds
the six-year limit (Enrique v. Watson Company,
et al., 6 Phil. 84). 1 chanrobles virtual law library
No such limitation on the power of a judicial
administrator to grant a lease of property placed
under his custody is provided for in the present
law. Under Article 1647 of the present Civil
Code, it is only when the lease is to be recorded
in the Registry of Property that it cannot be
instituted without special authority. Thus,
regardless of the period of lease, there is no
need of special authority unless the contract is
to be recorded in the Registry of Property. As to
whether the contract in favor of Escanlar is to be
so recorded is not material to our
inquiry.chanroblesvirtualawlibrarychanrobles
virtual law library
On the contrary, Rule 85, Section 3, of the Rules
of Court authorizes a judicial administrator,
among other things, to administer the estate of
the deceased not disposed of by will.
Commenting on this Section in the light of
several Supreme Court decisions (Jocson de
Hilado v. Nava, 69 Phil. 1; Gamboa v. Gamboa,
68 Phil. 304; Ferraris v. Rodas, 65 Phil. 732;
Rodriguez v. Borromeo, 43 Phil. 479), Moran
says: "Under this provision, the executor or
administrator has the power of administering the
estate of the deceased for purposes of
liquidation and distribution. He may, therefore,
exercise all acts of administration without
special authority of the Court. For instance, he
may lease the property without securing
previously any permission from the court. And
where the lease has formally been entered into,
the court cannot, in the same proceeding, annul
the same, to the prejudice of the lessee, over
whose person it had no jurisdiction. The proper
remedy would be a separate action by the
administrator or the heirs to annul the lease. ... .
On September 13, 1961, petitioner herein
Moises San Diego, Sr., who was not a party in
the case, intervened and moved for a
reconsideration of the above judgment. The
original parties (the new administrator and
respondent judge) also filed Motions for
reconsideration, but we do not find them in the
record. On November 18, 1961, the Court of
Appeals denied the motions for reconsideration.
With the denial of the said motions, only San
Diego, appealed therefrom, raising legal
questions, which center on "Whether a judicial
administrator can validly lease property of the
estate without prior judicial authority and
approval", and "whether the provisions of the
 AGENCY FULLTEXT CASES
New Civil Code on Agency should apply to
judicial administrators." chanrobles virtual law
library
The Rules of Court provide that -
An executor or administrator shall have the right
to the possession of the real as well as the
personal estate of the deceased so long as it is
necessary for the payment of the debts and the
expenses of administration, and
shall administer the estate of the deceased not
disposed of by his will. (Sec. 3, Rule 85, old
Rules).
Lease has been considered an act of
administration (Jocson v. Nava; Gamboa v.
Gamboa; Rodriguez v. Borromeo; Ferraris v.
Rodas, supra).chanroblesvirtualawlibrarychanr
obles virtual law library
The Civil Code, on lease, provides:
If a lease is to be recorded in the Registry of
Property, the following persons cannot
constitute the same without proper authority, the
husband with respect to the wife's paraphernal
real estate, the father or guardian as to the
property of the minor or ward, and the manager
without special power. (Art. 1647).
The same Code, on Agency, states:
Special powers of attorneys are necessary in
the following cases:chanrobles virtual law library
(8) To lease any real property to another person
for more than one year. (Art. 1878)
Petitioner contends, that No. 8, Art. 1878 is the
limitation to the right of a judicial administrator to
lease real property without prior court authority
and approval, if it exceeds one year. The lease
contract in favor of Escanlar being for 3 years
and without such court approval and authority is,
therefore, null and void. Upon the other hand,
respondents maintain that there is no limitation
of such right; and that Article 1878 does not
apply in the instant case.
We believe that the Court of Appeals was
correct in sustaining the validity of the contract
of lease in favor of Escanlar, notwithstanding
the lack of prior authority and approval. The law
and prevailing jurisprudence on the matter
militates in favor of this view. While it may be
admitted that the duties of a judicial
administrator and an agent (petitioner alleges
that both act in representative capacity), are in
some respects, identical, the provisions on
agency (Art. 1878, C.C.), should not apply to a
judicial administrator. A judicial administrator is
appointed by the Court. He is not only the
representative of said Court, but also the heirs
and creditors of the estate (Chua Tan v. Del
Rosario, 57 Phil. 411). A judicial administrator
before entering into his duties, is required to file
a bond. These circumstances are not true in
case of agency. The agent is only answerable to
his principal. The protection which the law gives
the principal, in limiting the powers and rights of
an agent, stems from the fact that control by the
principal can only be thru agreements, whereas
the acts of a judicial administrator are subject to
specific provisions of law and orders of the
appointing court. The observation of former
Chief Justice Moran, as quoted in the decision
of the Court of Appeals, is indeed sound, and
We are not prone to alter the same, at the
moment.
We, likewise, seriously doubt petitioner's legal
standing to pursue this appeal. And, if We
consider the fact that after the expiration of the
original period of the lease contract executed by
respondent Nombre in favor of Escanlar, a new
contract in favor of said Escanlar, was executed
on May 1, 1963, by the new administrator
Campillanos. who, incidentally, did not take any
active participation in the present appeal, the
right of petitioner to the fishpond becomes a
moot and academic issue, which We need not
pass upon.
WHEREFORE, the decision appealed from
should be, as it is hereby affirmed, in all
respects, with costs against petitioner Moises
San Diego, Sr.
 AGENCY FULLTEXT CASES
G.R. No. 6906 September 27, 1911
FLORENTINO RALLOS, ET AL., plaintiff-
appellee,
vs.
TEODORO R. YANGCO, defendant-appellant.
1.PRINCIPAL AND AGENT; TERMINATION
OF THE AGENCY; DUTY OF PRINCIPAL TO
GIVE DUE NOTICE.—The defendant having
advertised the fact that C was his agent, having
given special notice to the plaintiffs of the
agency, and having also given them a special
invitation to deal with such agent, it became the
defendant's duty, upon the termination of the
relationship of principal and agent, to give due
and timely notice thereof to the plaintiffs.
2.ID; ID.; ID.; LIABILITY OF PRINCIPAL.—The
general rule is that, when the relationship of
principal and agent is established, and the
principal gives notice of the agency and holds
out the agent as his authorized representative,
upon the termination of the agency it is the duty
of the principal to give due and timely notice
thereof, otherwise, he will be held liable to third
parties acting in good faith and properly relying
upon such agency. Rallos vs. Yangco., 20 Phil.
269, No. 6906 September 27, 1911
MORELAND, J.:
This is an appeal from a judgment of the Court
of First Instance of the Province of Cebu, the
Hon. Adolph Wislizenus presiding, in favor of
the plaintiffs, in the sum of P1,537.08, with
interest at 6 per cent per annum from the month
of July, 1909, with costs.
The defendant in this case on the 27th day of
November, 1907, sent to the plaintiff Florentino
Rallos, among others, the following letter:
CIRCULAR NO. 1.
MANILA, November 27, 1907
MR. FLORENTINO RALLOS, Cebu.
DEAR SIR: I have the honor to inform you that I
have on this date opened in my steamship office
at No. 163 Muelle de la Reina, Binondo, Manila,
P. I., a shipping and commission department for
buying and selling leaf tobacco and other native
products, under the following conditions:
1. When the consignment has been received,
the consignor thereof will be credited with a sum
not to exceed two-thirds of the value of the
goods shipped, which may be made available
by acceptance of a draft or written order of the
consignor on five to ten day's sight, or by his
ordering at his option a bill of goods. In the latter
case he must pay a commission of 2 per cent.
2. No draft or written order will be accepted
without previous notice forwarding the
consignment of goods to guarantee the same.
3. Expenses of freight, hauling and everything
necessary for duly executing the commission
will be charged in the commission.
4. All advances made under sections (1) and (3)
shall bear interest at 10 per cent a year,
counting by the sale of the goods shipped or
remittance of the amount thereof.
5. A commission of 2 ½ per cent will be collected
on the amount realized from the sale of the
goods shipped.
6. A Payment will be made immediately after
collection of the price of the goods shipped.
7. Orders will be taken for the purchase of
general merchandise, ship-stores, cloths, etc.,
upon remittance of the amount with the
commission of 2 per cent on the total value of
the goods bought. Expenses of freight, hauling,
and everything necessary for properly executing
the commission will be charged to the
consignor.
8. The consignor of the good may not fix upon
the consignee a longer period than four months,
counting from the date of receipt, for selling the
same; with the understanding that after such
period the consignee is authorized to make the
sale, so as to prevent the advance and cost of
storage from amounting to more than the actual
value of said goods, as has often happened.
 AGENCY FULLTEXT CASES
9. The shipment to the consignors of the goods
ordered on account of the amount realized from
the sale of the goods consigned and of the
goods bought on remittance of the value
thereof, under sections (1) and (3), will not be
insured against risk by sea and land except on
written order of the interested parties.
10. On all consignments of goods not insured
according to the next preceding section, the
consignors will bear the risk.
11. All the foregoing conditions will take effect
only after this office has acknowledged the
consignor's previous notice.
12. All other conditions and details will be
furnished at the office of the undersigned.
If you care to favor me with your patronage, my
office is at No. 163 Muelle de la Reinna,
Binondo, Manila, P. I., under the name of
"Teodoro R. Yangco." In this connection it gives
me great pleasure to introduce to you Mr.
Florentino Collantes, upon whom I have
conferred public power of attorney before the
notary, Mr. Perfecto Salas Rodriguez, dated
November 16, 1907, to perform in my name and
on my behalf all acts necessary for carrying out
my plans, in the belief that through his
knowledge and long experience in the business,
along with my commercial connections with the
merchants of this city and of the provinces, I
may hope to secure the most advantageous
prices for my patrons. Mr. Collantes will sign by
power of attorney, so I beg that you make due
note of his signature hereto affixed.
Very respectfully,
(Sgd.) T. R. YANGCO.
(Sgd.) F. COLLANTES.
Accepting this invitation, the plaintiffs proceeded
to do a considerable business with the
defendant through the said Collantes, as his
factor, sending to him as agent for the defendant
a good deal of produce to be sold on
commission. Later, and in the month of
February, 1909, the plaintiffs sent to the said
Collantes, as agent for the defendant, 218
bundles of tobacco in the leaf to be sold on
commission, as had been other produce
previously. The said Collantes received said
tobacco and sold it for the sum of P1,744. The
charges for such sale were P206.96. leaving in
the hands of said Collantes the sum of
P1,537.08 belonging to the plaintiffs. This sum
was, apparently, converted to his own use by
said agent.
It appears, however, that prior to the sending of
said tobacco the defendant had severed his
relations with Collantes and that the latter was
no longer acting as his factor. This fact was not
known to the plaintiffs; and it is conceded in the
case that no notice of any kind was given by the
defendant to the plaintiffs of the termination of
the relations between the defendant and his
agent. The defendant refused to pay the said
sum upon demand of the plaintiffs, placing such
refusal upon the ground that at the time the said
tobacco was received and sold by Collantes he
was acting personally and not as agent of the
defendant. This action was brought to recover
said sum.
As is seen, the only question for our decision is
whether or not the plaintiffs, acting in good faith
and without knowledge, having sent produce to
sell on commission to the former agent of the
defendant, can recover of the defendant under
the circumstances above set forth. We are of the
opinion that the defendant is liable. Having
advertised the fact that Collantes was his agent
and having given them a special invitation to
deal with such agent, it was the duty of the
defendant on the termination of the relationship
of principal and agent to give due and timely
notice thereof to the plaintiffs. Failing to do so,
he is responsible to them for whatever goods
may have been in good faith and without
negligence sent to the agent without knowledge,
actual or constructive, of the termination of such
relationship.
For these reasons the judgment appealed from
is confirmed, without special finding as to costs.
 AGENCY FULLTEXT CASES
G.R. No. 2962 February 27, 1907
B. H. MACKE, ET AL., plaintiffs-appellees,
vs.
JOSE CAMPS, defendant-appellant.
Manuel G. Gavieres for appellant.
Gibbs & Gale for appellees.
1.AGENCY; ESTOPPEL.—One who clothes
another with apparent authority as his agent and
holds him out to the public as such, can not be
permitted to deny the authority of such person
to act as his agent to the prejudice of innocent
third parties dealing with such agent in good
faith and in the honest belief that he is what he
appears to be.
2.ID.; PRESUMPTION.—Unless the contrary
appears, the authority of an agent must be
presumed to include all the necessary and usual
means of carrying his agency into effect. Macke
vs. Camps, 7 Phil., 553, No. 2962 February 27,
1907
CARSON, J.:
The plaintiffs in this action, B. H. Macke and W.
H. Chandler, partners doing business under the
firm name of Macke, Chandler & Company,
allege that during the months of February and
March, 1905, they sold to the defendant and
delivered at his place of business, known as the
"Washington Cafe," various bills of goods
amounting to P351.50; that the defendant has
only paid on account of said accounts the sum
of P174; that there is still due them on account
of said goods the sum of P177.50; that before
instituting this action they made demand for the
payment thereof; and that defendant had failed
and refused to pay the said balance or any part
of it up to the time of the filing of the complaint.
B. H. Macke, one of the plaintiffs, testified that
on the order of one Ricardo Flores, who
represented himself to be agent of the
defendant, he shipped the said goods to the
defendants at the Washington Cafe; that Flores
later acknowledged the receipt of said goods
and made various payments thereon amounting
in all to P174; that on demand for payment of
balance of the account Flores informed him that
he did not have the necessary funds on hand,
and that he would have to wait the return of his
principal, the defendant, who was at that time
visiting in the provinces; that Flores
acknowledged the bill for the goods furnished
and the credits being the amount set out in the
complaint; that when the goods were ordered
they were ordered on the credit of the defendant
and that they were shipped by the plaintiffs after
inquiry which satisfied the witness as to the
credit of the defendant and as to the authority of
Flores to act as his agent; that the witness
always believed and still believes that Flores
was the agent of the defendant; and that when
he went to the Washington Cafe for the purpose
of collecting his bill he found Flores, in the
absence of the defendant in the provinces,
apparently in charge of the business and
claiming to be the business manager of the
defendant, said business being that of a hotel
with a bar and restaurant annexed.
A written contract dated May 25, 1904, was
introduced in evidence, from which it appears
that one Galmes, the former owner of the
business now know as the "Washington Cafe,"
subrented the building wherein the business
was conducted, to the defendant for a period of
one year, for the purpose of carrying on that
business, the defendant obligating himself not to
sublet or subrent the building or the business
without the consent of the said Galmes. This
contract was signed by the defendant and the
name of Ricardo Flores appears thereon as a
witness, and attached thereto is an inventory of
the furniture and fittings which also is signed by
the defendant with the word "sublessee"
(subarrendatario) below the name, and at the
foot of this inventory the word "received" (recibo)
followed by the name "Ricardo Flores," with the
words "managing agent" (el manejante
encargado) immediately following his name.
Galmes was called to the stand and identified
the above- described document as the contract
and inventory delivered to him by the defendant,
and further stated that he could not tell whether
Flores was working for himself or for some one
 AGENCY FULLTEXT CASES

else — that it to say, whether Flores was
managing the business as agent or sublessee.
The defendant did not go on the stand nor call
any witnesses, and relies wholly on his
contention that the foregoing facts are not
sufficient to establish the fact that he received
the goods for which payment is demanded.
In the absence of proof of the contrary we think
that this evidence is sufficient to sustain a
finding that Flores was the agent of the
defendant in the management of the bar of the
Washington Cafe with authority to bind the
defendant, his principal, for the payment of the
goods mentioned in the complaint.
The contract introduced in evidence sufficiently
establishes the fact that the defendant was the
owner of business and of the bar, and the title of
"managing agent" attached to the signature of
Flores which appears on that contract, together
with the fact that, at the time the purchases in
question were made, Flores was apparently in
charge of the business, performing the duties
usually entrusted to managing agent, leave little
room for doubt that he was there as authorized
agent of the defendant. One who clothes
another apparent authority as his agent, and
holds him out to the public as such, can not be
permitted to deny the authority of such person
to act as his agent, to the prejudice of innocent
third parties dealing with such person in good
faith and in the following preassumptions or
deductions, which the law expressly directs to
be made from particular facts, are deemed
conclusive:
That Flores, as managing agent of the
Washington Cafe, had authority to buy such
reasonable quantities of supplies as might from
time to time be necessary in carrying on the
business of hotel bar may fairly be presumed
from the nature of the business, especially in
view of the fact that his principal appears to have
left him in charge during more or less prolonged
periods of absence; from an examination of the
items of the account attached to the complaint,
we are of opinion that he was acting within the
scope of his authority in ordering these goods
are binding on his principal, and in the absence
of evidence to the contrary, furnish satisfactory
proof of their delivery as alleged in the
complaint.
The judgment of the trial court is affirmed with
the costs of his instance against the appellant.
After expiration of twenty days judgment will be
rendered in accordance herewith, and ten days
thereafter the case remanded to the lower court
for proper action. So ordered.

(1) "Whenever a party has, by his own

declaration, act, or omission, intentionally and
deliberately led another to believe a particular
thing true, and to act upon such belief, he can
not, in any litigation arising out such declaration,
act, or omission, be permitted to falsify it"
(subsec. 1, sec. 333, Act no. 190); and unless
the contrary appears, the authority of an agent
must be presumed to include all the necessary
and usual means of carrying his agency into
effect. (15 Conn., 347; 90 N. C. 101; 15 La. Ann,
247; 43 Mich., 364; 93 N. Y., 495; 87 Ind., 187.)
 AGENCY FULLTEXT CASES
G.R. No. L-40242 December 15, 1982
DOMINGA CONDE, petitioner,
vs.
THE HONORABLE COURT OF APPEALS,
MANILA PACIENTE CORDERO, together
with his wife, NICETAS ALTERA, RAMON
CONDE, together with his wife, CATALINA T.
CONDE, respondents.
Civil Law; Agency; Implied agency created from
silence or lack of action or failure to repudiate
the agency.—If, as opined by both the Court a
quo and the Appellate Court, petitioner had
done nothing to formalize her repurchase, by
the same token, neither have the vendees-a-
retro done anything to clear their title of the
encumbrance therein regarding petitioner’s right
to repurchase. No new agreement was entered
into by the parties as stipulated in the deed of
pac to de retro, if the vendors a retro failed to
exercise their right of redemption after ten years.
If, as alleged, petitioner exerted no effort to
procure the signature of Pio Altera after he had
recovered from his illness, neither did the
Alteras repudiate the deed that their son-in-law
had signed. Thus, an implied agency must be
held to have been created from their silence or
lack of action, or their failure to repudiate the
agency.
Same; Laches; Respondent’s delay for 24 years
in instituting action for quieting of title and
adverse and uninterrupted possession of the lot
by the petitioner renders respondent guilty of
laches.—Possession of the lot in dispute having
been adversely and uninterruptedly with
petitioner from 1945 when the document of
repurchase was executed, to 1969, when she
instituted this action, or for 24 years, the Alteras
must be deemed to have incurred in laches.
Same; Sale; Purchaser in bad faith; Vendors
who bought property despite being put on notice
of the condition in the title that the property was
subject to repurchase deemed purchasers in
bad faith.—Private respondents Ramon Conde
and Catalina Conde, to whom Pio Altera sold the
disputed property in 1965, assuming that there
was, indeed, such a sale, cannot be said to be
purchasers in good faith. OCT No. 534 in the
name of the Alteras specifically contained the
condition that it was subject to the right of
repurchase within 10 years from 1938. Although
the ten-year period had lapsed in 1965 and
there was no annotation of any repurchase by
petitioner, neither had the title been cleared of
that encumbrance. The purchasers were put on
notice that some other person could have a right
to or interest in the property. It behooved Ramon
Conde and Catalina Conde to have looked into
the right of redemption inscribed on the title, and
particularly the matter of possession, which, as
also admitted by them at the pre-trial, had been
with petitioner since 1945.
Same; Same; Contracts; Interpretation;
Vendors bound by clear terms of memorandum
of repurchase; Where contract is plain and
unequivocal in its terms, vendors are bound
thereby; Duty of every contracting party to learn
and know contents of document before he signs
and delivers it.—Private respondent must be
held bound by the clear terms of the
Memorandum of Repurchase that he had
signed wherein he acknowledged the receipt of
P165.00 and assumed the obligation to maintain
the repurchasers in peaceful possession should
they be “disturbed by other persons”. It was
executed in the Visayan dialect which he
understood. He cannot now be allowed to
dispute the same. “x x x If the contract is plain
and unequivocal in its terms he is ordinarily
bound thereby. It is the duty of every contracting
party to learn and know its contents before he
signs and delivers it.”
Same; Same; Same; Same; Parol evidence
rule; Oral testimony cannot prevail over a written
agreement of the document of repurchase;
Purpose of parol evidence rule.—There is
nothing in the document of repurchase to show
that Paciente Cordero had signed the same
merely to indicate that he had no objection to
petitioner’s right of repurchase. Besides, he
would have had no personality to object. To
uphold his oral testimony on that point, would be
a departure from the parol evidence rule and
would defeat the purpose for which the doctrine
is intended. “x x x The purpose of the rule is to
 AGENCY FULLTEXT CASES
give stability to written agreements, and to
remove the temptation and possibility of perjury,
which would be afforded if parol evidence was
admissible.”
MELENCIO-HERRERA, J.:
An appeal by certiorari from the Decision of
respondent Court of Appeals 1 (CA-G.R. No.
48133- R) affirming the judgment of the Court of
First Instance of Leyte, Branch IX, Tacloban City
(Civil Case No. B-110), which dismissed
petitioner's Complaint for Quieting of Title and
ordered her to vacate the property in dispute
and deliver its possession to private
respondents Ramon Conde and Catalina
Conde.
The established facts, as found by the Court of
Appeals, show that on 7 April 1938. Margarita
Conde, Bernardo Conde and the petitioner
Dominga Conde, as heirs of Santiago Conde,
sold with right of repurchase, within ten (10)
years from said date, a parcel of agricultural
land located in Maghubas Burauen Leyte, (Lot
840), with an approximate area of one (1)
hectare, to Casimira Pasagui, married to Pio
Altera (hereinafter referred to as the Alteras), for
P165.00. The "Pacto de Retro Sale" further
provided:
... (4) if at the end of 10 years the said land is
not repurchased, a new agreement shall be
made between the parties and in no case title
and ownership shall be vested in the hand of the
party of the SECOND PART (the Alteras).
xxx xxx xxx (Exhibit "B")
On 17 April 1941, the Cadastral Court of Leyte
adjudicated Lot No. 840 to the Alteras "subject
to the right of redemption by Dominga Conde,
within ten (10) years counting from April 7, 1983,
after returning the amount of P165.00 and the
amounts paid by the spouses in concept of land
tax ... " (Exhibit "1"). Original Certificate of Title
No. N-534 in the name of the spouses Pio Altera
and Casimira Pasagui, subject to said right of
repurchase, was transcribed in the "Registration
Book" of the Registry of Deeds of Leyte on 14
November 1956 (Exhibit "2").
On 28 November 1945, private respondent
Paciente Cordero, son-in-law of the Alteras,
signed a document in the Visayan dialect, the
English translation of which reads:
MEMORANDUM OF REPURCHASE OVER A
PARCEL OF LAND SOLD WITH
REPURCHASE WHICH DOCUMENT GOT
LOST
WE, PIO ALTERA and PACIENTE CORDERO,
both of legal age, and residents of Burauen
Leyte, Philippines, after having been duly sworn
to in accordance with law free from threats and
intimidation, do hereby depose and say:
1. That I, PIO ALTERA bought with the right of
repurchase two parcels of land from DOMINGA
CONDE, BERNARDO CONDE AND
MARGARITA CONDE, all brother and sisters.
2. That these two parcels of land were all
inherited by the three.
3. That the document of SALE WITH THE
RIGHT OF REPURCHASE got lost in spite of
the diligent efforts to locate the same which was
lost during the war.
4. That these two parcels of land which was the
subject matter of a Deed of Sale with the Right
of Repurchase consists only of one document
which was lost.
5. Because it is about time to repurchase the
land, I have allowed the representative of
Dominga Conde, Bernardo Conde and
Margarita Conde in the name of EUSEBIO
AMARILLE to repurchase the same.
6. Now, this very day November 28, 1945, 1 or
We have received together with Paciente
Cordero who is my son-in-law the amount of
ONE HUNDRED SIXTY-FIVE PESOS (P165.
00) Philippine Currency of legal tender which
was the consideration in that sale with the right
of repurchase with respect to the two parcels of
land.
 AGENCY FULLTEXT CASES
That we further covenant together with Paciente
Cordero who is my son-in-law that from this day
the said Dominga Conde, Bernardo Conde and
Margarita Conde will again take possession of
the aforementioned parcel of land because they
repurchased the same from me. If and when
their possession over the said parcel of land be
disturbed by other persons, I and Paciente
Cordero who is my son-in-law will defend in
behalf of the herein brother and sisters
mentioned above, because the same was
already repurchased by them.
IN WITNESS WHEREOF, I or We have
hereunto affixed our thumbmark or signature to
our respective names below this document or
memorandum this 28th day of November 1945
at Burauen Leyte, Philippines, in the presence
of two witnesses.
PIO ALTERA (Sgd.) PACIENTE CORDERO
WITNESSES:
1. (SGD.) TEODORO C. AGUILLON
To be noted is the fact that neither of the
vendees-a-retro, Pio Altera nor Casimira
Pasagui, was a signatory to the deed. Petitioner
maintains that because Pio Altera was very ill at
the time, Paciente Cordero executed the deed
of resale for and on behalf of his father-in-law.
Petitioner further states that she redeemed the
property with her own money as her co-heirs
were bereft of funds for the purpose.
The pacto de retro document was eventually
found.
On 30 June 1965 Pio Altera sold the disputed lot
to the spouses Ramon Conde and Catalina T.
Conde, who are also private respondents
herein. Their relationship to petitioner does not
appear from the records. Nor has the document
of sale been exhibited.
Contending that she had validly repurchased
the lot in question in 1945, petitioner filed, on 16
January 1969, in the Court of First Instance of
Leyte, Branch IX, Tacloban City, a Complaint
(Civil Case No. B-110), against Paciente
Cordero and his wife Nicetas Altera, Ramon
Conde and his wife Catalina T. Conde, and
Casimira Pasagui Pio Altera having died in
1966), for quieting of title to real property and
declaration of ownership.
Petitioner's evidence is that Paciente Cordero
signed the Memorandum of Repurchase in
representation of his father-in-law Pio Altera,
who was seriously sick on that occasion, and of
his mother-in-law who was in Manila at the time,
and that Cordero received the repurchase price
of P65.00.
Private respondents, for their part, adduced
evidence that Paciente Cordero signed the
document of repurchase merely to show that he
had no objection to the repurchase; and that he
did not receive the amount of P165.00 from
petitioner inasmuch as he had no authority from
his parents-in-law who were the vendees-a-
retro.
After trial, the lower Court rendered its Decision
dismissing the Complaint and the counterclaim
and ordering petitioner "to vacate the property in
dispute and deliver its peaceful possession to
the defendants Ramon Conde and Catalina T.
Conde".
On appeal, the Court of Appeals upheld the
findings of the Court a quo that petitioner had
failed to validly exercise her right of repurchase
in view of the fact that the Memorandum of
Repurchase was signed by Paciente Cordero
and not by Pio Altera, the vendee-a-retro, and
that there is nothing in said document to show
that Cordero was specifically authorized to act
for and on behalf of the vendee a retro, Pio
Altera.
Reconsideration having been denied by the
Appellate Court, the case is before us on
review.
There is no question that neither of the vendees-
a-retro signed the "Memorandum of
Repurchase", and that there was no formal
authorization from the vendees for Paciente
Cordero to act for and on their behalf.
 AGENCY FULLTEXT CASES
Of significance, however, is the fact that from
the execution of the repurchase document in
1945, possession, which heretofore had been
with the Alteras, has been in the hands of
petitioner as stipulated therein. Land taxes have
also been paid for by petitioner yearly from 1947
to 1969 inclusive (Exhibits "D" to "D-15"; and
"E"). If, as opined by both the Court a quo and
the Appellate Court, petitioner had done nothing
to formalize her repurchase, by the same token,
neither have the vendees-a-retro done anything
to clear their title of the encumbrance therein
regarding petitioner's right to repurchase. No
new agreement was entered into by the parties
as stipulated in the deed of pacto de retro, if the
vendors a retro failed to exercise their right of
redemption after ten years. If, as alleged,
petitioner exerted no effort to procure the
signature of Pio Altera after he had recovered
from his illness, neither did the Alteras repudiate
the deed that their son-in-law had signed. Thus,
an implied agency must be held to have been
created from their silence or lack of action, or
their failure to repudiate the agency. 2
Possession of the lot in dispute having been
adversely and uninterruptedly with petitioner
from 1945 when the document of repurchase
was executed, to 1969, when she instituted this
action, or for 24 years, the Alteras must be
deemed to have incurred in laches. 3 That
petitioner merely took advantage of the
abandonment of the land by the Alteras due to
the separation of said spouses, and that
petitioner's possession was in the concept of a
tenant, remain bare assertions without proof.
Private respondents Ramon Conde and
Catalina Conde, to whom Pio Altera sold the
disputed property in 1965, assuming that there
was, indeed, such a sale, cannot be said to be
purchasers in good faith. OCT No. 534 in the
name of the Alteras specifically contained the
condition that it was subject to the right of
repurchase within 10 years from 1938. Although
the ten-year period had lapsed in 1965 and
there was no annotation of any repurchase by
petitioner, neither had the title been cleared of
that encumbrance. The purchasers were put on
notice that some other person could have a right
to or interest in the property. It behooved Ramon
Conde and Catalina Conde to have looked into
the right of redemption inscribed on the title, and
particularly the matter of possession, which, as
also admitted by them at the pre-trial, had been
with petitioner since 1945.
Private respondent must be held bound by the
clear terms of the Memorandum of Repurchase
that he had signed wherein he acknowledged
the receipt of P165.00 and assumed the
obligation to maintain the repurchasers in
peaceful possession should they be "disturbed
by other persons". It was executed in the
Visayan dialect which he understood. He cannot
now be allowed to dispute the same. "... If the
contract is plain and unequivocal in its terms he
is ordinarily bound thereby. It is the duty of every
contracting party to learn and know its contents
before he signs and delivers it." 4
There is nothing in the document of repurchase
to show that Paciente Cordero had signed the
same merely to indicate that he had no objection
to petitioner's right of repurchase. Besides, he
would have had no personality to object. To
uphold his oral testimony on that point, would be
a departure from the parol evidence rule 5 and
would defeat the purpose for which the doctrine
is intended.
... The purpose of the rule is to give stability to
written agreements, and to remove the
temptation and possibility of perjury, which
would be afforded if parol evidence was
admissible. 6
In sum, although the contending parties were
legally wanting in their respective actuations,
the repurchase by petitioner is supported by the
admissions at the pre-trial that petitioner has
been in possession since the year 1945, the
date of the deed of repurchase, and has been
paying land taxes thereon since then. The
imperatives of substantial justice, and the
equitable principle of laches brought about by
private respondents' inaction and neglect for 24
years, loom in petitioner's favor.
 AGENCY FULLTEXT CASES

WHEREFORE, the judgment of respondent

Court of Appeals is hereby REVERSED and
SET ASIDE, and petitioner is hereby declared
the owner of the disputed property. If the original
of OCT No. N-534 of the Province of Leyte is still
extant at the office of the Register of Deeds,
then said official is hereby ordered to cancel the
same and, in lieu thereof, issue a new Transfer
Certificate of Title in the name of petitioner,
Dominga Conde.

No costs.

SO ORDERED.
AGENCY FULLTEXT CASES