G.R. No.
L-24332 January 31, 1978 On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of
RAMON RALLOS, Administrator of the Estate of CONCEPCION
RALLOS, petitioner,  share of the deceased Concepcion Rallos in lot 5983 be d unenforceable, and
vs.
FELIX GO CHAN & SONS REALTY CORPORATION and COURT OF
APPEALS, respondents.
Seno, Mendoza & Associates for petitioner.
Ramon Duterte for private respondent.
 
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.
Concepcion Rallos filed a complaint docketed as Civil Case No. R-4530 of the
Court of First Instance of Cebu, praying (1) that the sale of the undivided
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
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 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 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 fortiori that 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
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 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 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.
G.R. No. L-10918            March 4, 1916
WILLIAM FRESSEL, ET AL., plaintiffs-appellants,  that on the 2d day of September, 1914, the plaintiffs demanded of
vs.
MARIANO UY CHACO SONS & COMPANY, defendant-appellee.
Rohde and Wright for appellants.
Gilbert, Haussermann, Cohn and Fisher for appellee.
TRENT, J.:
This is an appeal from a judgment sustaining the demurrer on the ground
that the complaint does not state a cause of action, followed by an order
dismissing the case after the plaintiffs declined to amend.
The complaint, omitting the caption, etc., reads:
2. That during the latter part of the year 1913, the defendant entered
into a contract with one E. Merritt, whereby the said Merritt
undertook and agreed with the defendant to build for the defendant
a costly edifice in the city of Manila at the corner of Calle Rosario and
Plaza del Padre Moraga. In the contract it was agreed between the
parties thereto, that the defendant at any time, upon certain
contingencies, before the completion of said edifice could take
possession of said edifice in the course of construction and of all the
materials in and about said premises acquired by Merritt for the
construction of said edifice.
3. That during the month of August land past, the plaintiffs delivered
to Merritt at the said edifice in the course of construction certain
materials of the value of P1,381.21, as per detailed list hereto
attached and marked Exhibit A, which price Merritt had agreed to
pay on the 1st day of September, 1914.
4. That on the 28th day of August, 1914, the defendant under and by
virtue of its contract with Merritt took possession of the incomplete
edifice in course of construction together with all the materials on
said premises including the materials delivered by plaintiffs and
mentioned in Exhibit A aforesaid.
5. That neither Merritt nor the defendant has paid for the materials
mentioned in Exhibit A, although payment has been demanded, and
the defendant the return or permission to enter upon said premises
and retake said materials at the time still unused which was refused
by defendant.
6. That in pursuance of the contract between Merritt and the
defendant, Merritt acted as the agent for defendant in the acquisition
of the materials from plaintiffs.
The appellants insist that the above quoted allegations show that Merritt
acted as the agent of the defendant in purchasing the materials in question
and that the defendant, by taking over and using such materials, accepted
and ratified the purchase, thereby obligating itself to pay for the same. Or,
viewed in another light, if the defendant took over the unfinished building
and all the materials on the ground and then completed the structure
according to the plans, specifications, and building permit, it became in fact
the successor or assignee of the first builder, and as successor or assignee, it
was as much bound legally to pay for the materials used as was the original
party. The vendor can enforce his contract against the assignee as readily as
against the assignor. While, on the other hand, the appellee contends that
Merritt, being "by the very terms of the contract" an independent contractor,
is the only person liable for the amount claimed.
It is urged that, as the demurrer admits the truth of all the allegations of fact
set out in the complaint, the allegation in paragraph 6 to the effect that
Merritt "acted as the agent for defendant in the acquisition of the materials
from plaintiffs," must be, at this stage of the proceedings, considered as true.
The rule, as thus broadly stated, has many limitations and restrictions.
A more accurate statement of the rule is that a demurrer admits the
truth of all material and relevant facts which are well pleaded. . . .
.The admission of the truth of material and relevant facts well
pleaded does not extend to render a demurrer an admission of
inferences or conclusions drawn therefrom, even if alleged in the
pleading; nor mere inferences or conclusions from facts not stated;
nor conclusions of law. (Alzua and Arnalot vs. Johnson, 21 Phil. Rep.,
308, 350.)
Upon the question of construction of pleadings, section 106 of the Code of defendant for the value of such supplies? Certainly not. The fact that the
Civil Procedure provides that: P100,000 worth of supplies had been actually used in the building would
place those creditors in no worse position to recover than that of the
In the construction of a pleading, for the purpose of determining its plaintiffs, although the materials which the plaintiffs sold to Merritt had not
effects, its allegations shall be liberally construed, with a view of actually gone into the construction. To hold that either group of creditors can
substantial justice between the parties. recover would have the effect of compelling the defendants to pay, as we
have indicated, just such prices for materials as Merritt and the sellers saw fit
This section is essentially the same as section 452 of the California Code of to fix. In the absence of a statute creating what is known as mechanics' liens,
Civil Procedure. "Substantial justice," as used in the two sections, means the owner of a building is not liable for the value of materials purchased by
substantial justice to be ascertained and determined by fixed rules and an independent contractor either as such owner or as the assignee of the
positive statutes. (Stevens vs. Ross, 1 Cal. 94, 95.) "Where the language of a contractor.
pleading is ambiguous, after giving to it a reasonable intendment, it should
be resolved against the pleader. This is especially true on appeal from a The allegation in paragraph 6 that Merritt was the agent of the defendant
judgment rendered after refusal to amend; where a general and special contradicts all the other allegations and is a mere conclusion drawn from
demurrer to a complaint has been sustained, and the plaintiff had refused to them. Such conclusion is not admitted, as we have said, by the demurrer.
amend, all ambiguities and uncertainties must be construed against him."
(Sutherland on Code Pleading, vol. 1, sec. 85, and cases cited.) The allegations in the complaint not being sufficient to constitute a cause of
action against the defendant, the judgment appealed from is affirmed, with
The allegations in paragraphs 1 to 5, inclusive, above set forth, do not even costs against the appellants. So ordered.
intimate that the relation existing between Merritt and the defendant was
that of principal and agent, but, on the contrary, they demonstrate that
Merritt was an independent contractor and that the materials were
purchased by him as such contractor without the intervention of the
defendant. The fact that "the defendant entered into a contract with one E.
Merritt, where by the said Merritt undertook and agreed with the defendant
to build for the defendant a costly edifice" shows that Merritt was authorized
to do the work according to his own method and without being subject to
the defendant's control, except as to the result of the work. He could
purchase his materials and supplies from whom he pleased and at such
prices as he desired to pay. Again, the allegations that the "plaintiffs
delivered the Merritt . . . . certain materials (the materials in question) of the
value of P1,381.21, . . . . which price Merritt agreed to pay," show that there
were no contractual relations whatever between the sellers and the
defendant. The mere fact that Merritt and the defendant had stipulated in
their building contract that the latter could, "upon certain contingencies,"
take possession of the incompleted building and all materials on the ground,
did not change Merritt from an independent contractor to an agent. Suppose
that, at the time the building was taken over Merritt had actually used in the
construction thus far P100,000 worth of materials and supplies which he had
purchased on a credit, could those creditors maintain an action against the
G.R. No. 6906           September 27, 1911
FLORENTINO RALLOS, ET AL., plaintiff-appellee, 
vs.
TEODORO R. YANGCO, defendant-appellant.
Mariano Escueta, for appellant.
Martin M. Levering, for appellees.
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.
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,
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.

(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
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.
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 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:

(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.)

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.
G.R. No. L-12579            July 27, 1918
GREGORIO JIMENEZ, plaintiff-appellee, 
vs.
PEDRO RABOT, NICOLASA JIMENEZ and her husband EMILIO
RODRIGUEZ, defendants.  hundred and fifty peso were paid at once, with the understanding that a
PEDRO RABOT, appellant.
Antonio Bengson for appellant.
Jose Rivera for appellee.
STREET, J.:
This action was instituted by the plaintiff, Gregorio Jimenez, to recover from
the defendant, Pedro Rabot, a parcel of land situated in the municipality of
Alaminos, in the Province of Pangasinan, and described in the complaint as
follows:
Approximate area of three hectares; bounded on the north and west
with land of Pedro Reynoso, on the south with land of Nicolasa
Jimenez, and on the east with land of Calixta Apostol before, at
present with that of Juan Montemayor and Simon del Barrio. It is
situated in Dinmayat Tancaran, barrio of Alos of this same
municipality of Alaminos, Pangasinan.
From a judgment rendered in favor of the plaintiff, Pedro Rabot has
appealed; but his co-defendants, Nicolasa Jimenez and her husband, who
were cited by the defendant for the purpose of holding her liable upon her
warranty in case of his eviction, have not appealed.
It is admitted that the parcel of land in question, together with two other
parcels in the same locality originally belonged of the heirs in the division of
the estate of his father. It is further appears that while Gregorio was staying
at Vigan, in the Province of Ilocos Sur, during the year 1911, his property in
Alaminos was confided by him to the care of his elder sister Nicolasa
Jimenez. On February 7 of that year he wrote this sister a letter from Vigan in
which he informed her that he was pressed for money and requested her to
sell one of his parcels of land and send him the money in order that he might
pay his debts. This letter contains no description of the land to be sold other
than is indicated in the words "one of my parcels of land" ("uno de mis
terrenos").
Acting upon this letter Nicolasa approached the defendant Pedro Rabot, and
the latter agreed to buy the parcel in question for the sum of P500. Two
deed of conveyance would be executed when the balance should be paid.
Nicolasa admits having received this payment of P250 at the time stated; but
there is no evidence that she sent any of it to her brother.
About one year later Gregorio came down to Alaminos and demanded that
his sister should surrender this piece of land to him, it being then in her
possession. She refused upon some pretext or other to do so; and as a result
Gregorio, in conjunction with others of his brothers and sisters, whose
properties were also in the hands of Nicolasa, instituted an action in the
Court of First Instance for the purpose of recovering their land from her
control. This action was decided favorably to the plaintiffs upon August 12,
1913; and no appeal was taken from the judgment.
Meanwhile, upon May 31, 1912, Nicolasa Jimenez executed and delivered to
Pedro Rabot a deed purporting to convey to him the parcel of land which is
the subject of this controversy. The deed recites that the sale was made in
consideration of the sum of P500, the payment of which is acknowledged.
Pedro Rabot went into possession, and the property was found in his hands
at the time when final judgment was entered in favor of the plaintiffs in the
action above mentioned. It will thus be seen that Pedro Rabot acquired
possession under the deed from Nicolasa during the pendency of the
litigation appear that he was at the time cognizant of that circumstance.
In considering the questions presented by this appeal one or two preliminary
observations may be made. The first is that, as a matter of formality, a power
of attorney to convey real property ought to appear in a public document,
just as any other instrument intended to transmit or convey an interest in
such property ought to appear in a public document. (Art. 1280, Civil Code.)
But inasmuch as it is an established doctrine that a private document is
competent to create, transmit, modify, or extinguish a right in real property
(Thunga Chui vs. Que Bentec, 2 Phil. Rep., 561; Couto Soriano vs. Cortes, 8
Phil. Rep., 459), it follows that a power of attorney to convey such property,
even though in the form of a private document, will operate with effect.
Again, supposing that the letter contained adequate authority for Nicolasa to
sell the property in question, her action in conveying the property in her own
name, without showing the capacity in which she acted, was doubtless
irregular. Nevertheless, such deed would in any event operate to bind her
brother, the plaintiff in its character as a contract (Lyon vs. Pollock, 99 U.S.,
668; 25 L. ed., 265), and supposing that the authority was sufficient, he could
be compelled by a proper judicial proceeding to execute a document to carry
such contract into effect. (Art. 1279, Civil Code.)
The principal question for consideration therefore in the end resolves itself
into this, whether the authority conferred on Nicolasa by the letter of
February 7, 1911, was sufficient to enable her to bind her brother. The only
provisions of law bearing on this point are contained in article 1713 of the
Civil Code and in section 335 of the Code of Civil Procedure. Article 1713 of
the Civil Code requires that the authority to alienate land shall be contained
in an express mandate; while subsection 5 of section 335 of the Code of Civil
Procedure says that the authority of the agent must be in writing and
subscribed by the party to be charged. We are of the opinion that the
authority expressed in the letter is a sufficient compliance with both
requirements.
It has been urged here that in order for the authority to be sufficient under
section 335 of the Code of Civil Procedure the authorization must contain a
particular description of the property which the agent is to be permitted to
sell. There is no such requirement in subsection 5 of section 335; and we do
not believe that it would be legitimate to read such a requirement into it. The
purpose in giving a power of attorney is to substitute the mind and hand of
the agent for the mind and hand of the principal; and if the character and
extent of the power is so far defined as to leave no doubt as to the limits
within which the agent is authorized to act, and he acts within those limits,
the principal cannot question the validity of his act. It is not necessary that
the particular act to be accomplished should be predestinated by the
language of the power. The question to be answered always, after the power
has been exercised, is rather this: Was the act which the agent performed
within the scope of his authority? In the case before us, if the question is
asked whether the act performed by Nicolasa Jimenez was within the scope
of the authority which had been conferred upon her, the answer must be
obviously in the affirmative.
It should not escape observation that the problem with which we are here
concerned relates to the sufficiency of the power of attorney under
subsection 5 of section 335 of the Code of Civil Procedure and not to the
sufficiency of the note or memorandum of the contract, or agreement of sale,
required by the same subsection, in connection with the first paragraph of
the same section. It is well-settled in the jurisprudence of England and the
United States that when the owner, or his agent, comes to make a contract to
sell, or a conveyance to effect a transfer, there must be a description of the
property which is the subject of the sale or conveyance. This is necessary of
course to define the object of the contract. (Brockway vs. Frost, 40 Minn., 155;
Carr vs. Passaic Land etc. Co., 19 N. J. Eq., 424; Lippincott vs. Bridgewater, 55
N. J. Eq., 208; Craig vs. Zelian, 137 Cal., 105; 20 Cyc., 271.)
The general rule here applicable is that the description must be sufficiently
definite to identify the land either from the recitals of the contract or deed or
from external facts referred to in the document, thereby enabling one to
determine the identity of the land and if the description is uncertain on its
face or is shown to be applicable with equal plausibility to more than one
tract, it is insufficient. The principle embodied in these decisions is not, in our
opinion, applicable to the present case, which relates to the sufficiency of the
authorization, not to the sufficiency of the contract or conveyance. It is
unquestionable that the deed which Nicolasa executed contains a proper
description of the property which she purported to convey.
There is ample authority to the effect that a person may by a general power
of attorney an agent to sell "all" the land possessed by the principal, or all
that he possesses in a particular city, county, or state. (Roper vs. McFadden,
48 Cal., 346; Rownd vs. Davidson, 113 La., 1047; Carson vs. Ray, 52 N. C., 609;
78 Am. Dec., 267; 31 Cyc., 1229.) It is also held that where a person authorizes
an agent to sell a farm ("my farm") in a certain county, this is sufficient, if it be
shown that such party has only one farm in that country.
(Marriner vs. Dennison, 78 Cal., 202.) In Linton vs. Moorhead (209 Pa. St., 646),
the power authorized the agent to sell or convey "any or all tracts, lots, or
parcels" of land belonging to the plaintiff. It was held that this was adequate.
In Lyon vs. Pollock (99 U.S., 668), the owner in effect authorized an agent to
sell everything he had in San Antonio Texas. The authority was held sufficient.
In Linan vs. Puno (31 Phil. Rep., 259), the authority granted was to the effect
that the agent might administer "the interests" possessed by the principal in
the municipality of Tarlac and to that end he was authorized to purchase, sell,
collect, and pay, etc. It was held that this was a sufficient power.
In the present case the agent was given the power to sell either of the parcels
of land belonging to the plaintiff. We can see no reason why the performance
of an act within the scope of this authority should not bind the plaintiff to the
same extent as if he had given the agent authority to sell "any or all" and she
had conveyed only one.

From what have been said it is evident that the lower court should have
absolved the defendant Pedro Rabot from the complaint. Judgment will
accordingly be reversed, without any express adjudication of costs this
instance. So ordered.
G.R. No. L-38816             November 3, 1933
INSULAR DRUG CO., INC., plaintiff-appellee,  "Insular Drug Co., Inc., By: (Sgd.) Carmen E. de Foerster, Agent (Sgd.) Carmen
vs.
THE PHILIPPINE NATIONAL BANK, ET AL., defendants.  Carmen E. de Froster"; others "(Sgd.) Carmen E. de Foerster, (Sgd.) Carmen E.
THE PHILIPPINE NATIONAL BANK, appellant.
Camus and Delgado for appellant.
Franco and Reinoso for appellee.
MALCOLM, J.:
This is an appeal taken by Philippine National Bank from a judgment of the
Court of First Instance of Manila requiring bank to pay to the Insular Drug
Co., Inc., the sum of P18,285.92 with legal interest and costs.
The record consists of the testimony of Alfred Von Arend, President and
Manager of the Insular Drug Co., Inc., and of exhibits obtained from the
Philippine National Bank showing transactions of U.E. Foerster with the bank.
The Philippine National Bank was content to submit the case without
presenting evidence in its behalf. The meagre record and the statement of
facts agreed upon by the attorneys for the contending parties disclose the
following facts:
The Insular Drug Co., Inc., is a Philippine corporation with offices in the City of
Manila. U.E. Foerster was formerly a salesman of drug company for the
Islands of Panay and Negros. Foerster also acted as a collector for the
company. He was instructed to take the checks which came to his hands for
the drug company to the Iloilo branch of the Chartered Bank of India,
Australia and China and deposit the amounts to the credit of the drug
company. Instead, Foerster deposited checks, including those of Juan
Llorente, Dolores Salcedo, Estanislao Salcedo, and a fourth party, with the
Iloilo branch of the Philippine National Bank. The checks were in that bank
placed in the personal account of Foerster. Some of the checks were drawn
against the Bank of Philippine National Bank. After the indorsement on the
checks was written "Received payment prior indorsement guaranteed by
Philippine National bank, Iloilo Branch, Angel Padilla, Manager." The
indorsement on the checks took various forms, some being "Insular Drug
Company, Inc., By: (Sgd.) U. Foerster, Agent. (Sgd.) U. Foerster" other being
E. de Foerster"; others "Insular Drug Co., Inc., By: (Sgd.) Carmen E. de Foerster,
de Foerster"; one (Sgd.) U. Foerster. (Sgd.) U. Foerster"; others; "Insular Drug
Co., Inc., Carmen E. de Foerster, By: (Sgd.) V. Bacaldo," etc. In this connection
it should be explained that Carmen E. de Foerster was his stenographer. As a
consequence of the indorsements on checks the amounts therein stated were
subsequently withdrawn by U. E., Foerster and Carmen E. de Foerster.
Eventually the Manila office of the drug company investigated the
transactions of Foerster. Upon the discovery of anomalies, Foerster
committed suicide. But there is no evidence showing that the bank knew that
Foerster was misappropriating the funds of his principal. The Insular Drug
Company claims that it never received the face value of 132 checks here in
the question covering a total of P18,285.92.lawphil.net
There is no Philippine authority which directly fits the proven facts. The case
of Fulton Iron Works Co., vs. China Banking Corporation ([1930], 55 Phil., 208),
mentioned by both parties rest on a different states of facts. However, there
are elementary principles governing the relationship between a bank and its
customers which are controlling.
In first place, the bank argues that the drug company was never defrauded at
all. While the evidence on the extent of the loss suffered by the drug
company is not nearly as clear as it should be, it is a sufficient answer to state
that no such special defense was relied upon by the bank in the trial court.
The drug company saw fit to stand on the proposition that checks drawn in
its favor were improperly and illegally cashed by the bank for Foerster and
placed in his personal account, thus making it possible for Foerster to
defraud the drug company, and the bank did not try to go back of this
proposition.
The next point relied upon by the bank, to the effect that Foerster had
implied authority to indorse all checks made out in the name of the Insular
Drug Co., Inc., has even less force. Not only did the bank permit Foerster to
indorse checks and then place them to his personal account, but it went
farther and permitted Foerster's wife and clerk to indorse the checks. The
right of an agent to indorse commercial paper is a very responsible power
and will not be lightly inferred. A salesman with authority to collect money
belonging to his principal does not have the implied authority to indorse
checks received in payment. Any person taking checks made payable to a
corporation, which can act only by agent does so at his peril, and must same
by the consequences if the agent who indorses the same is without authority.
(Arcade Realty Co. vs. Bank of Commerce [1919], 180 Cal., 318; Standard
Steam Specialty Co., vs. Corn Exchange Bank [1917], 220 N.Y., 278; People vs.
Bank of North America [1879], 75 N.Y., 547; Graham vs. United States Savings
Institution [1870], 46 Mo., 186.) Further speaking to the errors specified by
the bank, it is sufficient to state that no trust fund was involved; that the fact
that bank acted in good faith does not relieve it from responsibility; that no
proof was adduced, admitting that Foerster had right to indorse the checks,
indicative of right of his wife and clerk to do the same , and that the checks
drawn on the Bank of the Philippine Islands can not be differentiated from
those drawn on the Philippine National Bank because of the indorsement by
the latter.

In brief, this is a case where 132 checks made out in the name of the Insular
Drug Co., Inc., were brought to the branch office of the Philippine National
Bank in Iloilo by Foerster, a salesman of the drug company, Foerster's wife,
and Foerster's clerk. The bank could tell by the checks themselves that the
money belonged to the Insular Drug Co., Inc., and not to Foerster or his wife
or his clerk. When the bank credited those checks to the personal account of
Foerster and permitted Foerster and his wife to make withdrawals without
there being made authority from the drug company to do so, the bank made
itself responsible to the drug company for the amounts represented by the
checks. The bank could relieve itself from responsibility by pleading and
proving that after the money was withdrawn from the bank it passed to the
drug company which thus suffered no loss, but the bank has not done so.
Much more could be said about this case, but it suffices to state in conclusion
that bank will have to stand the loss occasioned by the negligence of its
agents.

Overruling the errors assigned, judgment of the trial court will be affirmed,
the costs of this instance to be paid by appellant.
G.R. No. L-30573 October 29, 1971
VICENTE M. DOMINGO, represented by his heirs, ANTONINA
RAYMUNDO VDA. DE DOMINGO, RICARDO, CESAR, AMELIA, VICENTE
JR., SALVADOR, IRENE and JOSELITO, all surnamed
DOMINGO, petitioners-appellants,  Gregorio.
vs.
GREGORIO M. DOMINGO, respondent-appellee, TEOFILO P.
PURISIMA, intervenor-respondent.
Teofilo Leonin for petitioners-appellants.
Osorio, Osorio & Osorio for respondent-appellee.
Teofilo P. Purisima in his own behalf as intervenor-respondent.
 
MAKASIAR, J.:
Petitioner-appellant Vicente M. Domingo, now deceased and represented by
his heirs, Antonina Raymundo vda. de Domingo, Ricardo, Cesar, Amelia,
Vicente Jr., Salvacion, Irene and Joselito, all surnamed Domingo, sought the
reversal of the majority decision dated, March 12, 1969 of the Special Division
of Five of the Court of Appeals affirming the judgment of the trial court,
which sentenced the said Vicente M. Domingo to pay Gregorio M. Domingo
P2,307.50 and the intervenor Teofilo P. Purisima P2,607.50 with interest on
both amounts from the date of the filing of the complaint, to pay Gregorio
Domingo P1,000.00 as moral and exemplary damages and P500.00 as
attorney's fees plus costs.
The following facts were found to be established by the majority of the
Special Division of Five of the Court of Appeals:
In a document Exhibit "A" executed on June 2, 1956, Vicente M. Domingo
granted Gregorio Domingo, a real estate broker, the exclusive agency to sell
his lot No. 883 of Piedad Estate with an area of about 88,477 square meters
at the rate of P2.00 per square meter (or for P176,954.00) with a commission
of 5% on the total price, if the property is sold by Vicente or by anyone else
during the 30-day duration of the agency or if the property is sold by Vicente
within three months from the termination of the agency to apurchaser to
whom it was submitted by Gregorio during the continuance of the agency
with notice to Vicente. The said agency contract was in triplicate, one copy
was given to Vicente, while the original and another copy were retained by
On June 3, 1956, Gregorio authorized the intervenor Teofilo P. Purisima to
look for a buyer, promising him one-half of the 5% commission.
Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio as a
prospective buyer.
Oscar de Leon submitted a written offer which was very much lower than the
price of P2.00 per square meter (Exhibit "B"). Vicente directed Gregorio to tell
Oscar de Leon to raise his offer. After several conferences between Gregorio
and Oscar de Leon, the latter raised his offer to P109,000.00 on June 20, 1956
as evidenced by Exhibit "C", to which Vicente agreed by signing Exhibit "C".
Upon demand of Vicente, Oscar de Leon issued to him a check in the amount
of P1,000.00 as earnest money, after which Vicente advanced to Gregorio the
sum of P300.00. Oscar de Leon confirmed his former offer to pay for the
property at P1.20 per square meter in another letter, Exhibit "D".
Subsequently, Vicente asked for an additional amount of P1,000.00 as earnest
money, which Oscar de Leon promised to deliver to him. Thereafter, Exhibit
"C" was amended to the effect that Oscar de Leon will vacate on or about
September 15, 1956 his house and lot at Denver Street, Quezon City which is
part of the purchase price. It was again amended to the effect that Oscar will
vacate his house and lot on December 1, 1956, because his wife was on the
family way and Vicente could stay in lot No. 883 of Piedad Estate until June 1,
1957, in a document dated June 30, 1956 (the year 1957 therein is a mere
typographical error) and marked Exhibit "D". Pursuant to his promise to
Gregorio, Oscar gave him as a gift or propina the sum of One Thousand
Pesos (P1,000.00) for succeeding in persuading Vicente to sell his lot at P1.20
per square meter or a total in round figure of One Hundred Nine Thousand
Pesos (P109,000.00). This gift of One Thousand Pesos (P1,000.00) was not
disclosed by Gregorio to Vicente. Neither did Oscar pay Vicente the
additional amount of One Thousand Pesos (P1,000.00) by way of earnest
money. In the deed of sale was not executed on August 1, 1956 as stipulated
in Exhibit "C" nor on August 15, 1956 as extended by Vicente, Oscar told
Gregorio that he did not receive his money from his brother in the United
States, for which reason he was giving up the negotiation including the
amount of One Thousand Pesos (P1,000.00) given as earnest money to
Vicente and the One Thousand Pesos (P1,000.00) given to Gregorio
as  propina or gift. When Oscar did not see him after several weeks, Gregorio
sensed something fishy. So, he went to Vicente and read a portion of Exhibit
"A" marked habit "A-1" to the effect that Vicente was still committed to pay
him 5% commission, if the sale is consummated within three months after
the expiration of the 30-day period of the exclusive agency in his favor from
the execution of the agency contract on June 2, 1956 to a purchaser brought
by Gregorio to Vicente during the said 30-day period. Vicente grabbed the
original of Exhibit "A" and tore it to pieces. Gregorio held his peace, not
wanting to antagonize Vicente further, because he had still duplicate of
Exhibit "A". From his meeting with Vicente, Gregorio proceeded to the office
of the Register of Deeds of Quezon City, where he discovered Exhibit "G'
deed of sale executed on September 17, 1956 by Amparo Diaz, wife of Oscar
de Leon, over their house and lot No. 40 Denver Street, Cubao, Quezon City,
in favor Vicente as down payment by Oscar de Leon on the purchase price of
Vicente's lot No. 883 of Piedad Estate. Upon thus learning that Vicente sold
his property to the same buyer, Oscar de Leon and his wife, he demanded in
writting payment of his commission on the sale price of One Hundred Nine
Thousand Pesos (P109,000.00), Exhibit "H". He also conferred with Oscar de
Leon, who told him that Vicente went to him and asked him to eliminate
Gregorio in the transaction and that he would sell his property to him for
One Hundred Four Thousand Pesos (P104,000.0 In Vicente's reply to
Gregorio's letter, Exhibit "H", Vicente stated that Gregorio is not entitled to
the 5% commission because he sold the property not to Gregorio's buyer,
Oscar de Leon, but to another buyer, Amparo Diaz, wife of Oscar de Leon.
The Court of Appeals found from the evidence that Exhibit "A", the exclusive
agency contract, is genuine; that Amparo Diaz, the vendee, being the wife of
Oscar de Leon the sale by Vicente of his property is practically a sale to Oscar
de Leon since husband and wife have common or identical interests; that
Gregorio and intervenor Teofilo Purisima were the efficient cause in the
consummation of the sale in favor of the spouses Oscar de Leon and Amparo
Diaz; that Oscar de Leon paid Gregorio the sum of One Thousand Pesos
(P1,000.00) as "propina" or gift and not as additional earnest money to be
given to the plaintiff, because Exhibit "66", Vicente's letter addressed to Oscar
de Leon with respect to the additional earnest money, does not appear to
have been answered by Oscar de Leon and therefore there is no writing or
document supporting Oscar de Leon's testimony that he paid an additional
earnest money of One Thousand Pesos (P1,000.00) to Gregorio for delivery to
Vicente, unlike the first amount of One Thousand Pesos (P1,000.00) paid by
Oscar de Leon to Vicente as earnest money, evidenced by the letter Exhibit
"4"; and that Vicente did not even mention such additional earnest money in
his two replies Exhibits "I" and "J" to Gregorio's letter of demand of the 5%
commission.
The three issues in this appeal are (1) whether the failure on the part of
Gregorio to disclose to Vicente the payment to him by Oscar de Leon of the
amount of One Thousand Pesos (P1,000.00) as gift or "propina" for having
persuaded Vicente to reduce the purchase price from P2.00 to P1.20 per
square meter, so constitutes fraud as to cause a forfeiture of his commission
on the sale price; (2) whether Vicente or Gregorio should be liable directly to
the intervenor Teofilo Purisima for the latter's share in the expected
commission of Gregorio by reason of the sale; and (3) whether the award of
legal interest, moral and exemplary damages, attorney's fees and costs, was
proper.
Unfortunately, the majority opinion penned by Justice Edilberto Soriano and
concurred in by Justice Juan Enriquez did not touch on these issues which
were extensively discussed by Justice Magno Gatmaitan in his dissenting
opinion. However, Justice Esguerra, in his concurring opinion, affirmed that it
does not constitute breach of trust or fraud on the part of the broker and
regarded same as merely part of the whole process of bringing about the
meeting of the minds of the seller and the purchaser and that the
commitment from the prospect buyer that he would give a reward to
Gregorio if he could effect better terms for him from the seller, independent
of his legitimate commission, is not fraudulent, because the principal can
reject the terms offered by the prospective buyer if he believes that such
terms are onerous disadvantageous to him. On the other hand, Justice
Gatmaitan, with whom Justice Antonio Cafizares corner held the view that
such an act on the part of Gregorio was fraudulent and constituted a breach
of trust, which should deprive him of his right to the commission.
The duties and liabilities of a broker to his employer are essentially those
which an agent owes to his principal. 1
Consequently, the decisive legal provisions are in found Articles 1891 and
1909 of the New Civil Code.
 Art. 1891. Every agent is bound to render an account of his
transactions and to deliver to the principal whatever he may
have received by virtue of the agency, even though it may
not be owing to the principal.
Every stipulation exempting the agent from the obligation to
render an account shall be void.
xxx xxx xxx
Art. 1909. The agent is responsible not only for fraud but also
for negligence, which shall be judged with more less rigor by
the courts, according to whether the agency was or was not
for a compensation.
Article 1891 of the New Civil Code amends Article 17 of the old Spanish Civil
Code which provides that:
Art. 1720. Every agent is bound to give an account of his
transaction and to pay to the principal whatever he may have
received by virtue of the agency, even though what he has
received is not due to the principal.
The modification contained in the first paragraph Article 1891 consists in
changing the phrase "to pay" to "to deliver", which latter term is more
comprehensive than the former.
Paragraph 2 of Article 1891 is a new addition designed to stress the highest
loyalty that is required to an agent — condemning as void any stipulation
exempting the agent from the duty and liability imposed on him in
paragraph one thereof.
Article 1909 of the New Civil Code is essentially a reinstatement of Article
1726 of the old Spanish Civil Code which reads thus:
Art. 1726. The agent is liable not only for fraud, but also for
negligence, which shall be judged with more or less severity
by the courts, according to whether the agency was
gratuitous or for a price or reward.
The aforecited provisions demand the utmost good faith, fidelity, honesty,
candor and fairness on the part of the agent, the real estate broker in this
case, to his principal, the vendor. The law imposes upon the agent the
absolute obligation to make a full disclosure or complete account to his
principal of all his transactions and other material facts relevant to the
agency, so much so that the law as amended does not countenance any
stipulation exempting the agent from such an obligation and considers such
an exemption as void. The duty of an agent is likened to that of a trustee.
This is not a technical or arbitrary rule but a rule founded on the highest and
truest principle of morality as well as of the strictest justice.  2
Hence, an agent who takes a secret profit in the nature of a bonus, gratuity
or personal benefit from the vendee, without revealing the same to his
principal, the vendor, is guilty of a breach of his loyalty to the principal and
forfeits his right to collect the commission from his principal, even if the
principal does not suffer any injury by reason of such breach of fidelity, or
that he obtained better results or that the agency is a gratuitous one, or that
usage or custom allows it; because the rule is to prevent the possibility of any
wrong, not to remedy or repair an actual damage.  3 By taking such profit or
bonus or gift or propina from the vendee, the agent thereby assumes a
position wholly inconsistent with that of being an agent for hisprincipal, who
has a right to treat him, insofar as his commission is concerned, as if no
agency had existed. The fact that the principal may have been benefited by
the valuable services of the said agent does not exculpate the agent who has
only himself to blame for such a result by reason of his treachery or perfidy.
This Court has been consistent in the rigorous application of Article 1720 of
the old Spanish Civil Code. Thus, for failure to deliver sums of money paid to
him as an insurance agent for the account of his employer as required by said
Article 1720, said insurance agent was convicted estafa.  4 An administrator of
an estate was likewise under the same Article 1720 for failure to render an
account of his administration to the heirs unless the heirs consented thereto
or are estopped by having accepted the correctness of his account previously
rendered. 5
Because of his responsibility under the aforecited article 1720, an agent is
likewise liable for estafa for failure to deliver to his principal the total amount
collected by him in behalf of his principal and cannot retain the commission
pertaining to him by subtracting the same from his collections.  6
A lawyer is equally liable unnder said Article 1720 if he fails to deliver to his
client all the money and property received by him for his client despite his
attorney's lien. 7 The duty of a commission agent to render a full account his
operations to his principal was reiterated in Duhart, etc. vs. Macias. 8
The American jurisprudence on this score is well-nigh unanimous.
Where a principal has paid an agent or broker a commission
while ignorant of the fact that the latter has been unfaithful,
the principal may recover back the commission paid, since an
agent or broker who has been unfaithful is not entitled to
any compensation.
xxx xxx xxx
In discussing the right of the principal to recover
commissions retained by an unfaithful agent, the court
in Little vs. Phipps  (1911) 208 Mass. 331, 94 NE 260, 34 LRA
(NS) 1046, said: "It is well settled that the agent is bound to
exercise the utmost good faith in his dealings with his
principal. As Lord Cairns said, this rule "is not a technical or
arbitrary rule. It is a rule founded on the highest and truest
principles, of morality." Parker vs. McKenna (1874) LR
10,Ch(Eng) 96,118 ... If the agent does not conduct himself
with entire fidelity towards his principal, but is guilty of
taking a secret profit or commission in regard the matter in
which he is employed, he loses his right to compensation on
the ground that he has taken a position wholly inconsistent
with that of agent for his employer, and which gives his
employer, upon discovering it, the right to treat him so far as
compensation, at least, is concerned as if no agency had
existed. This may operate to give to the principal the benefit
of valuable services rendered by the agent, but the agent has
only himself to blame for that result."
xxx xxx xxx
The intent with which the agent took a secret profit has been
held immaterial where the agent has in fact entered into a
relationship inconsistent with his agency, since the law
condemns the corrupting tendency of the inconsistent
relationship. Little vs. Phipps  (1911) 94 NE 260. 9
As a general rule, it is a breach of good faith and loyalty to
his principal for an agent, while the agency exists, so to deal
with the subject matter thereof, or with information acquired
during the course of the agency, as to make a profit out of it
for himself in excess of his lawful compensation; and if he
does so he may be held as a trustee and may be compelled
to account to his principal for all profits, advantages, rights, or
privileges acquired by him in such dealings, whether in
performance or in violation of his duties, and be required to
transfer them to his principal upon being reimbursed for his
expenditures for the same, unless the principal has consented
to or ratified the transaction knowing that benefit or profit
would accrue or had accrued, to the agent, or unless with such
knowledge he has allowed the agent so as to change his
condition that he cannot be put in status quo. The application
of this rule is not affected by the fact that the principal did not
suffer any injury by reason of the agent's dealings or that he
in fact obtained better results; nor is it affected by the fact that
there is a usage or custom to the contrary or that the agency
is a gratuitous one. (Emphasis applied.) 10
In the case at bar, defendant-appellee Gregorio Domingo as the broker,
received a gift or  propina  in the amount of One Thousand Pesos (P1,000.00)
from the prospective buyer Oscar de Leon, without the knowledge and
consent of his principal, herein petitioner-appellant Vicente Domingo. His
acceptance of said substantial monetary gift corrupted his duty to serve the
interests only of his principal and undermined his loyalty to his principal, who
gave him partial advance of Three Hundred Pesos (P300.00) on his
commission. As a consequence, instead of exerting his best to persuade his
prospective buyer to purchase the property on the most advantageous terms
desired by his principal, the broker, herein defendant-appellee Gregorio
Domingo, succeeded in persuading his principal to accept the counter-offer
of the prospective buyer to purchase the property at P1.20 per square meter
or One Hundred Nine Thousand Pesos (P109,000.00) in round figure for the
lot of 88,477 square meters, which is very much lower the the price of P2.00
per square meter or One Hundred Seventy-Six Thousand Nine Hundred Fifty-
Four Pesos (P176,954.00) for said lot originally offered by his principal.
The duty embodied in Article 1891 of the New Civil Code will not apply if the
agent or broker acted only as a middleman with the task of merely bringing
together the vendor and vendee, who themselves thereafter will negotiate on
the terms and conditions of the transaction. Neither would the rule apply if
the agent or broker had informed the principal of the gift or bonus or profit
he received from the purchaser and his principal did not object
therto. 11 Herein defendant-appellee Gregorio Domingo was not merely a
middleman of the petitioner-appellant Vicente Domingo and the buyer Oscar
de Leon. He was the broker and agent of said petitioner-appellant only. And
therein petitioner-appellant was not aware of the gift of One Thousand Pesos
(P1,000.00) received by Gregorio Domingo from the prospective buyer; much
less did he consent to his agent's accepting such a gift.
the reasonable amount of One Thousand Pesos (P1,000.00) attorney's fees in
the reasonable amount of One Thousand Pesos (P1,000.00), considering that
this case has been pending for the last fifteen (15) years from its filing on
October 3, 1956.
WHEREFORE, the judgment is hereby rendered, reversing the decision of the
Court of Appeals and directing defendant-appellee Gregorio Domingo: (1) to
pay to the heirs of Vicente Domingo the sum of One Thousand Pesos
(P1,000.00) as moral damages and One Thousand Pesos (P1,000.00) as
attorney's fees; (2) to pay Teofilo Purisima the sum of Six Hundred Fifty Pesos
(P650.00); and (3) to pay the costs.

The fact that the buyer appearing in the deed of sale is Amparo Diaz, the wife
of Oscar de Leon, does not materially alter the situation; because the
transaction, to be valid, must necessarily be with the consent of the husband
Oscar de Leon, who is the administrator of their conjugal assets including
their house and lot at No. 40 Denver Street, Cubao, Quezon City, which were
given as part of and constituted the down payment on, the purchase price of
herein petitioner-appellant's lot No. 883 of Piedad Estate. Hence, both in law
and in fact, it was still Oscar de Leon who was the buyer.

As a necessary consequence of such breach of trust, defendant-appellee

Gregorio Domingo must forfeit his right to the commission and must return
the part of the commission he received from his principal.

Teofilo Purisima, the sub-agent of Gregorio Domingo, can only recover from
Gregorio Domingo his one-half share of whatever amounts Gregorio
Domingo received by virtue of the transaction as his sub-agency contract was
with Gregorio Domingo alone and not with Vicente Domingo, who was not
even aware of such sub-agency. Since Gregorio Domingo received from
Vicente Domingo and Oscar de Leon respectively the amounts of Three
Hundred Pesos (P300.00) and One Thousand Pesos (P1,000.00) or a total of
One Thousand Three Hundred Pesos (P1,300.00), one-half of the same, which
is Six Hundred Fifty Pesos (P650.00), should be paid by Gregorio Domingo to
Teofilo Purisima.

Because Gregorio Domingo's clearly unfounded complaint caused Vicente

Domingo mental anguish and serious anxiety as well as wounded feelings,
petitioner-appellant Vicente Domingo should be awarded moral damages in
G.R. No. L-29640 June 10, 1971
GUILLERMO AUSTRIA, petitioner,  sum of P4,500.00, with legal interest thereon, plus the amount of P450.00 as
vs.
THE COURT OF APPEALS (Second Division), PACIFICO ABAD and MARIA
G. ABAD, respondents.
Antonio Enrile Inton for petitioner.
Jose A. Buendia for respondents.
 
REYES, J.B.L., J.:
Guillermo Austria petitions for the review of the decision rendered by the
Court of Appeal (in CA-G.R. No. 33572-R), on the sole issue of whether in a
contract of agency (consignment of goods for sale) it is necessary that there
be prior conviction for robbery before the loss of the article shall exempt the
consignee from liability for such loss.
In a receipt dated 30 January 1961, Maria G. Abad acknowledged having
received from Guillermo Austria one (1) pendant with diamonds valued at
P4,500.00, to be sold on commission basis or to be returned on demand. On
1 February 1961, however, while walking home to her residence in
Mandaluyong, Rizal, Abad was said to have been accosted by two men, one
of whom hit her on the face, while the other snatched her purse containing
jewelry and cash, and ran away. Among the pieces of jewelry allegedly taken
by the robbers was the consigned pendant. The incident became the subject
of a criminal case filed in the Court of First Instance of Rizal against certain
persons (Criminal Case No. 10649, People vs. Rene Garcia, et al.).
As Abad failed to return the jewelry or pay for its value notwithstanding
demands, Austria brought in the Court of First Instance of Manila an action
against her and her husband for recovery of the pendant or of its value, and
damages. Answering the allegations of the complaint, defendants spouses
set up the defense that the alleged robbery had extinguished their
obligation.
After due hearing, the trial court rendered judgment for the plaintiff, and
ordered defendants spouses, jointly and severally, to pay to the former the
reasonable attorneys' fees, and the costs. It was held that defendants failed
to prove the fact of robbery, or, if indeed it was committed, that defendant
Maria Abad was guilty of negligence when she went home without any
companion, although it was already getting dark and she was carrying a large
amount of cash and valuables on the day in question, and such negligence
did not free her from liability for damages for the loss of the jewelry.
Not satisfied with his decision, the defendants went to the Court of Appeals,
and there secured a reversal of the judgment. The appellate court overruling
the finding of the trial court on the lack of credibility of the two defense
witnesses who testified on the occurrence of the robbery, and holding that
the facts of robbery and defendant Maria Abad's possesion of the pendant
on that unfortunate day have been duly published, declared respondents not
responsible for the loss of the jewelry on account of a fortuitous event, and
relieved them from liability for damages to the owner. Plaintiff thereupon
instituted the present proceeding.
It is now contended by herein petitioner that the Court of Appeals erred in
finding that there was robbery in the case, although nobody has been found
guilty of the supposed crime. It is petitioner's theory that for robbery to fall
under the category of a fortuitous event and relieve the obligor from his
obligation under a contract, pursuant to Article 1174 of the new Civil Code,
there ought to be prior finding on the guilt of the persons responsible
therefor. In short, that the occurrence of the robbery should be proved by a
final judgment of conviction in the criminal case. To adopt a different view,
petitioner argues, would be to encourage persons accountable for goods or
properties received in trust or consignment to connive with others, who
would be willing to be accused in court for the robbery, in order to be
absolved from civil liability for the loss or disappearance of the entrusted
articles.
We find no merit in the contention of petitioner.
It is recognized in this jurisdiction that to constitute a caso fortuito that would
exempt a person from responsibility, it is necessary that (1) the event must be
independent of the human will (or rather, of the debtor's or obligor's); (2) the
occurrence must render it impossible for the debtor to fulfill the obligation in
a normal manner; and that (3) the obligor must be free of participation in or
aggravation of the injury to the creditor. 1 A fortuitous event, therefore, can
be produced by nature, e.g., earthquakes, storms, floods, etc., or by the act of
man, such as war, attack by bandits, robbery,  2etc., provided that the event
has all the characteristics enumerated above.
It is not here disputed that if respondent Maria Abad were indeed the victim
of robbery, and if it were really true that the pendant, which she was obliged
either to sell on commission or to return to petitioner, were taken during the
robbery, then the occurrence of that fortuitous event would have
extinguished her liability. The point at issue in this proceeding is how the fact
of robbery is to be established in order that a person may avail of the
exempting provision of Article 1174 of the new Civil Code, which reads as
follows:
ART. 1174. Except in cases expressly specified by law, or
when it is otherwise declared by stipulation, or when the
nature of the obligation requires the assumption of risk, no
person shall be responsible for those events which could not
be foreseen, or which, though foreseen, were inevitable.
It may be noted the reform that the emphasis of the provision is on the
events, not on the agents or factors responsible for them. To avail of the
exemption granted in the law, it is not necessary that the persons responsible
for the occurrence should be found or punished; it would only be sufficient to
established that the enforceable event, the robbery in this case did take place
without any concurrent fault on the debtor's part, and this can be done by
preponderant evidence. To require in the present action for recovery the
prior conviction of the culprits in the criminal case, in order to establish the
robbery as a fact, would be to demand proof beyond reasonable doubt to
prove a fact in a civil case.
It is undeniable that in order to completely exonerate the debtor for reason
of a fortutious event, such debtor must, in addition to the cams itself, be free
of any concurrent or contributory fault or negligence.  3 This is apparent from
Article 1170 of the Civil Code of the Philippines, providing that:
ART. 1170. Those who in the performance of their
obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof, are
liable for damages.
It is clear that under the circumstances prevailing at present in the City of
Manila and its suburbs, with their high incidence of crimes against persons
and property that renders travel after nightfall a matter to be sedulously
avoided without suitable precaution and protection, the conduct of
respondent Maria G. Abad, in returning alone to her house in the evening,
carrying jewelry of considerable value would be negligent per se and would
not exempt her from responsibility in the case of a robbery. We are not
persuaded, however, that the same rule should obtain ten years previously, in
1961, when the robbery in question did take place, for at that time criminality
had not by far reached the levels attained in the present day.
There is likewise no merit in petitioner's argument that to allow the fact of
robbery to be recognized in the civil case before conviction is secured in the
criminal action, would prejudice the latter case, or would result in
inconsistency should the accused obtain an acquittal or should the criminal
case be dismissed. It must be realized that a court finding that a robbery has
happened would not necessarily mean that those accused in the criminal
action should be found guilty of the crime; nor would a ruling that those
actually accused did not commit the robbery be inconsistent with a finding
that a robbery did take place. The evidence to establish these facts would not
necessarily be the same.
WHEREFORE, finding no error in the decision of the Court of Appeals under
review, the petition in this case is hereby dismissed with costs against the
petitioner.
G.R. No. L-8169 December 29, 1913
ANTONIO M. A. BARRETTO, plaintiff-appellant,  31, 1909; and that, as a second cause of action based upon the facts
vs.
JOSE SANTA MARINA, defendant-appellee.
Hausserman, Cohn and Fisher, for appellant.  P137,000 Philippine currency, and the interest thereon at the legal rate, in
W. A. Kincaid and Thos. L. Hartigan, for appellee.
TORRES, J.:
These cases were appealed by counsel for the plaintiff, through a bill of
exceptions, from the judgment of January 17, 1912, and the order of February
5 of the same year, whereby the Honorable S. del Rosario, judge, sentenced
the defendant to pay to the plaintiff the salary to which he was entitled for
the first eight days of January, 1910, also that for the following month, at the
rate of P3,083.33 per month, without special finding as to costs, and
dismissed the second cause of action contained in the complaint presented
in that case.
On January 5, 1911, for the plaintiff Antonio M.a Barretto filed suit against
Jose Santa Marina, alleging that the defendant, a resident of Spain, was then
the owner and proprietor of the business known as the La Insular Cigar and
Cigarette Factory, established in these Islands, which business consisted in
the purchase of leaf tobacco and other raw material, in the preparation of the
same, and in the sale of cigars and cigarettes in large quantities; that on
January 8, 1910, and for a long time prior thereto, the plaintiff held and had
held the position of agent of the defendant in the Philippine Islands for the
management of the said business in the name and for the account of the said
defendant; that the plaintiff's services were rendered in pursuance of a
contract whereby the defendant obligated himself in writing to hire the said
services for so long a time as the plaintiff should not show discouragement
and to compensate such services at the rate of P37,000 Philippine currency
per annum; that, on the aforesaid 8th day of January, 1910, the defendant,
without reason, justification, or pretext and in violation of the contract before
mentioned, summarily and arbitrarily dispensed with the plaintiff's services
and removed him from the management of the business, since which date
the defendant had refused to pay him the compensation, or any part thereof,
due him and payable in full for services rendered subsequent to December
aforestated, the plaintiff had suffered losses and damages in the sum of
P100,000 Philippine currency. Said counsel therefore prayed that judgment
be rendered against the defendant by sentencing him to pay to the plaintiff
addition to the payment of the costs, together with such other equitable
remedies as the law allows.
By an order of March 14, 1911, the Honorable A. S. Crossfield, judge
overruled the demurrer to the first cause of action, but sustained that to the
second. Counsel for the plaintiff entered an exception to this order in so far
as it sustained the demurrer interposed by the defendant to the second
cause of action.
By his written answer to the complaint, on July 19, 1911, counsel for the
defendant, reserving his exception to the order of the court overruling his
demurrer filed against the first cause of action, denied each and all of the
allegations contained in the complaint, relative to such first cause of action.
As a special defense of the latter, he set forth that the plaintiff had no
contract whatever with the defendant in which any period of time was
stipulated during which the former was to render his services as manager of
the La Insular factory; that the defendant revoked for just cause the power
conferred upon the plaintiff; that subsequent to the revocation of such
power, and on the occasion of the plaintiff's having sold all his rights and
interests in the business of the La Insular factory to the defendant, in
consideration of the sum received by him, the plaintiff renounced all action,
intervention and claim that he might have against the defendant relative to
the business aforementioned, whereby all the questions that might have
arisen between them were settled.
On December 19, 1911, counsel for each of the parties presented to the court
as stipulation of the following purport:
In clause 11 of the will executed by Don Joaquin Santa Marina y
Perez in Madrid before a notary public on August 4, 1901, and duly
legalized in these Islands, there appears the following:
 "The testator provides that the testamentary executor who is
holding office as such shall enjoy a salary, allotment, or
emolument of 4,000 pesos per annum which shall be paid
out of the testator's estate; but that in case of consultation,
the testamentary executors consulted shall not be entitled to
this allotment, nor to any other, on account of such
consultation."
According to the statement of the sums collected by Antonio M.a Barretto as
the judicial administrator of the estate of Joaquin Santa Marina from
November, 1908, to March, 1910, and during twenty-three days of April of
the latter year, the total amount so collected was P5,923.28.
Antonio M.a Barretto ceased to manage the La Insular factory, as the judicial
administrator of the estate of the deceased Joaquin Santa Marina, in October,
1909, and not on November 7, 1908, as erroneously out in the stenographic
notes.
The remuneration paid to Barretto as judicial administrator of the estate of
Santa Marina was independent of that which pertained to him for his services
as manager of the La Insular factory both before and after the date on which
he ceased to administer the said factory as such judicial administrator.
In the stipulation before mentioned there also appears the following: "The
facts above stated are true, but there is a controversy between the attorneys
for the plaintiff and the defendant, as to whether such facts are relevant as
evidence in the said case. They therefore submit this question to the court if
it determines that they are relevant as evidence they should be admitted as
such, with exception by the defendant, but if it determines that they are not
relevant as evidence they should be excluded, with exception by the plaintiff."
After the hearing of the case, with the introduction of evidence by both
parties, the court, on January 17, 1912, rendered the judgment
aforementioned, to which an exception was taken by counsel for the plaintiff,
who by written motion asked that the said judgment be set aside and a new
trial granted, because such judgment was not sufficiently warranted by the
evidence and was contrary to law and because the findings of fact therein
contained were openly and manifestly contrary to the weight of the evidence.
This motion was denied, with exception by the plaintiff. By an order of the
5th of the following month of February, issued in view of a petition presented
by counsel for the plaintiff, the court dismissed the second cause of action
set out in the complaint, to which order said counsel likewise excepted.
Upon presentation of the proper bill of exceptions, the same was approved,
certified, and forwarded to the clerk of this court.
Demand is made in this suit for the payment of the considerable sum of
P137,000, together with the legal interest thereon. Two amounts make up
this sum: One of P37,000, as salary for the year 1910, claimed to be due for
services rendered by the plaintiff as agent and manager of the tobacco
factory known as La Insular; and the other of P100,000, as an indemnity for
losses and damages, on account of the plaintiff's removal without just cause
from his position as agent and manager of said factory, effected arbitrarily
and in violation of the contract of hire of services between the parties, the
plaintiff claiming to be still entitled to hold the position from which he was
dismissed.
The most important fact in this case, which stands out prominently from the
evidence regarded as a whole, is that of the plaintiff Barretto's renunciation
or registration of the position he held as agent and manager of the said
factory, which was freely and voluntarily made by him on the occasion of the
insolvency and disappearance of the Chinaman Uy Yan, who had bought
from the factory products aggregating in value the considerable sum of
P97,000 and, without paying this large debt, disappeared and has not been
seen since.
Antonio M.a Barretto the agent and manager of the said factory, said among
other things the following, in the letter, Exhibit 3, addressed by him to Jose
Santa Marina, on January 2, 1909:
I have to report to you an exceedingly disagreeable matter. This
Chinaman Uy Yan, with whose name I begin this paragraph, has
failed and owes the factory the considerable sum of P97,000. We will
see that I can get from him, although when these Chinamen fail it is
because they have spent everything. I will turned the matter over to
my attorney in order that he may sue the party. I am not attempting
to make light of this matter. I acknowledge that I have been rather
more generous with this fellow than I should have been; but this is
the way of doing business here. . . .
 I have always thought that when the manager of a business trips up
in a matter like this he should tender his resignation, and I still think
so. The position is at your disposal to do as you like.
This letter is authentic and was neither denied nor rejected by the plaintiff,
Barretto.lawphil.net
Although Santa Marina did not immediately reply and tell him what opinion
he may have formed and the decision he had reached in the matter, it is no
less true that the silence and lack of reply on the part of the chief owner of
the factory were sufficient indications that the resignation had been virtually
accepted and that if he did not reply immediately it was because he intended
to act cautiously. As the addressee, the chief owner of the factory, knew of no
one at that time whom he could appoint relieve the writer, who had resigned,
it was to be presumed that he was thereafter looking for some trustworthy
person who might substitute the plaintiff in his position of agent and
manager of the factory, communicated to the plaintiff that he had revoked
the power conferred upon him and had appointed Mr. J. McGavin to
substitute him in his position of manager of the La Insular factory, whereby
the plaintiff's resignation, tendered in his aforesaid letter of January 2, 1909,
Exhibit 3, was expressly accepted.
After the plaintiff had resigned the position he held, and notwithstanding the
lapse of several months before its express acceptance, it cannot be
understood that he has any right to demand an indemnity for losses and
damages particularly since he ostensibly and frankly acknowledged that he
had been negligent in the discharge of his duties and that he had
overstepped his authority in the management of the factory, with respect to
the Chinaman mentioned. The record does not show that Santa Marina, his
principal, required him to resign his position as manager, but that Barretto
himself voluntarily stated by letter to his principal that, for the reasons
therein mentioned, he resigned and placed at the latter's disposal the
position of agent and manager of the La Insular factory; and if the principal,
Santa Marina, deemed it suitable to relieve the agent, for having been
negligent and overstepping his authority in the discharge of his office, and
furthermore because of his having expressly resigned his position, and placed
it at the disposal of the chief owner of the business, it cannot be explained
how such person can be entitled to demand an indemnity for losses and
damages, from his principal, who merely exercised his lawful right of relieving
the plaintiff from the position which he had voluntarily given up.
So, the agent and manager Barretto was not really dismissed or removed by
the defendant Santa Marina. What did occur was that, in view of the
resignation rendered by the plaintiff for the reasons which he himself
conscientiously deemed to warrant his surrender of the position he was
holding in the La Insular factory, the principal owner of the establishment, the
defendant Santa Marina, had to took for and appoint another agent and
manager to relieve and substitute him in the said employment — a lawful act
performed by the principal owner of the factory and one which cannot serve
as a ground upon which to demand from the latter an indemnity for losses
and damages, inasmuch as, in view of the facts that occurred and were
acknowledged and confessed by Barretto in his letters, Exhibits 3 and 6, the
plaintiff could not expect, nor ought to have expected, that the defendant
should have insisted on the unsuccessful agent's continuance in his position,
or that he should not have accepted the resignation tendered by the plaintiff
in his first letter. By the mere fact that the defendant remained silent and
designated another person, Mr. J. McGavin, to, discharge in the plaintiff's
stead the powers and duties of agent and manager of the said factory,
Barretto should have understood that his resignation had been accepted and
that if its acceptance was not communicated to him immediately it was
owing to the circumstance that the principal owner of the factory did not
then have, nor until several months afterwards, any other person whom he
could appoint and place in his stead, for, as soon as the defendant Santa
Marina could appoint the said McGavin, he revoked the power he had
conferred upon the plaintiff and communicated this fact to the latter, by
means of the letter, Exhibit D, which was presented to him by the bearer
thereof, McGavin himself, the new manager and agent appointed.
Omitting consideration for the moment of the first error attributed to the trial
judge by his sustaining the demurrer filed against the second cause of action,
relative to the collection of P100,000 as the amount of the losses and
damages occasioned to the plaintiff, and turning our attention to the second
error imputed to him by his refusal to sentence the defendant, for the first
cause of action, to the payment of P37,000 or of any sum over P3,083.33, we
shall proceed to examine the question whether any period or term for the
duration of the position of agent and manager was fixed in the verbal
contract made between the deceased Joaquin Santa Marina, the defendant's
predecessor in interest, and the plaintiff antonio M.a Barretto — a contract
which, after Joaquin Santa Marina's death was ratified by his brother and heir,
the defendant Jose Santa Marina.
The defendant acknowledged the said verbal contract and also its ratification
by him after his brother's death; but he denied any stipulation therein that
Barretto should hold his office for any specific period of time fixed by and
between the contracting parties, for the deceased Joaquin Santa Marina, in
conferring power upon the plaintiff, did not do so for any specific time nor
did he set any period within which he should hold his office of agent and
manager of the La Insular factory; neither did he fix the date for the
termination of such services, in the instrument of power of attorney executed
by the defendant Santa Marina before a notary on the 25th of September,
1908. (Record, p. 20.)
From the context of the instrument just mentioned it can not be concluded
that any time whatever was fixed during which the plaintiff should hold his
position of agent. The defendant, in executing that instrument, whereby the
agreement made between his brother Joaquin and Barretto was ratified, did
no more than accord to the plaintiff the same confidence that the
defendant's predecessor in interest had in him; and so long as this merely
subjective condition of trust lodged in the agent existed, the time during
which the latter might hold his office could be considered indefinite or
undetermined, but as soon as that indespensable condition of a power of
attorney disappeared and the conduct of the agent deceased to inspire
confidence, the principal had a right to revoke the power he had conferred
upon his agent, especially when the latter, for good reasons, gave up the
office he was holding.
Article 1733 of the civil Code, applicable to the case at bar, according to the
provisions of article 2 of the Code of Commerce, prescribes: "The principal
may, at his will, revoke the power and compel the agent to return the
instrument containing the same in which the authority was given."
Article 279 of the Code of Commerce provides: "The principal may revoke the
commission intrusted to an agent at any stage of the transaction, advising
him thereof, but always being liable for the result of the transactions which
took place before the latter was informed of the revocation."1awphi1.net
From the above legal provisions it is clearly to be inferred that the contract of
agency can subsist only so long as the principal has confidence in his agent,
because, from the moment such confidence disappears and although there
be a fixed period for the excercise of the office of agent, a circumstance that
does not appear in the present case the principal has a perfect right to
revoke the power that he had conferred upon the agent owing to the
confidence he had in him and which for sound reasons had ceased to exist.
The record does not show it to have been duly proved. notwithstanding the
plaintiff's allegation, that a period was fixed for holding his agency or office
of agent and manager of the La Insular factory. It would be improper, for the
purpose of supplying such defect, to apply to the present case the provisions
of article 1128 of the Civil Code. This article relates to obligation for which no
period has been fixed for their fulfillment, but, which, from their nature and
circumstances, allow the inference that there was an intention to grant such
period to the debtor, wherefore the courts are authorized to fix the duration
of the same, and the reason why it is inapplicable is that the rights and
obligations existing between Barretto and Santa Marina are absolutely
different from those to which it refers, for, according to article 1732 of the
Civil Code, agency is terminated:
1. By revocation.
2. By withdrawal of the agent.
3. By death, interdiction, bankruptcy, or insolvency of the principal or
of the agent.
It is not incumbent upon the courts to fix the period during which contracts
for services shall last. Their duration is understood to be implicity fixed, in
default of express stipulation, by the period for the payment of the salary of
the employee. Therefore the doctrine of the tacit renewal of leases of
property, established in article 1566 of the Civil Code, is not applicable to the
case at bar. And even though the annual salary fixed for the services to be
rendered by the plaintiff as agent and manager of the La Insular factory, was
P37,000, yet, in accordance with the custom universally observed throughout
the world, salaries fixed for the year are collected and paid in monthly
installments as they fall due, and so the plaintiff collected and was paid his
remuneration; therefore, on the latter's discontinuance in his office as agent,
he would at most be entitled to the salary for one month and some odd days,
allowed in the judgment of the lower court.
Article 302 of the Code of Commerce reads thus:
 In cases in which no special time is fixed in the contracts of service,
any one of the parties thereto may dissolve it, advising the other
party thereof one month in advance.
The factor or shop clerk shall be entitled, in such case, to the salary
due for one month.
From the mere fact that the principal no longer had confidence in the agent,
he is entitled to withdraw it and to revoke the power he conferred upon the
latter, even before the expiration of the period of the engagement or of the
agreement made between them; but, in the present case, once it has been
shown that, between the deceased Joaquin Santa Marina and the latter's heir,
now the defendant, on the one hand, and the plaintiff Barretto, on the other,
no period whatever was stipulated during which the last-named should hold
the office and manager of the said factory, it is unquestionable that the
defendant, even without good reasons, could lawfully revoke the power
conferred upon the plaintiff and appoint in his place Mr. McGavin, and
thereby contracted no liability whatever other than the obligation to pay the
plaintiff the salary pertaining to one month and some odd days, as held in
the judgment below.
Barretto himself acknowledged in his aforesaid letter, Exhibit 3, that he had
exceeded his authority and acted negligently in selling on credit to the said
Chinaman a large quantity of the products of the factory under the plaintiff's
management, reaching the considerable value of P97,000; whereby he
confessed one of the causes which led to his removal, the revocation of the
power conferred upon him and the appointment of a new agent in his place.
The defendant, Jose Santa Marina, in his letter of December 2, 1909, whereby
he communicated to the plaintiff the revocation of the power he had
conferred upon him and the appointment of another new agent, Mr.
McGavin, stated among other things that the loan contracted by the agent
Barretto, without the approval of the principal, caused a great panic among
the stockholders of the factory and that the defendant hoped to allay it by
the new measure that he expected to adopt. This, then, was still another
reason the induced the principal to withdraw the confidence placed in the
plaintiff and to revoke the power he had conferred upon him. Therefore, even
omitting consideration of the resignation before mentioned, we find duly
warranted the reasons which impelled the defendant to revoke the said
power and relieve the plaintiff from the position of agent and manager of the
La Insular factory.
In accordance with the provisions of article 283 of the Code of Commerce,
the manager of an enterprise or manufacturing or commercial establishment,
authorized to administer it and direct it, with more or less powers, as the
owner may have considered advisable, shall have the legal qualifications of
an agent.
Article 300 of the same code prescribes: "The following shall be special
reasons for which principals may discharge their employees, even though the
time of service of the contract has not elapsed: Fraud or breach of trust in the
business intrusted to them . . . "
By reason of these legal provisions the defendant, in revoking the authority
conferred upon the plaintiff, acted within his unquestionable powers and did
not thereby violate any statute whatever that may have limited them;
consequently, he could not have caused the plaintiff any harm or detriment
to his rights and interests, for not only had Santa Marina a justifiable reason
to proceed as he did, but also no period whatever had been stipulated during
which the plaintiff should be entitled to hold his position; and furthermore,
because, in relieving the latter and appointing another person in his place,
the defendant acted in accordance with the renunciation and resignation
which the plaintiff had tendered. If the plaintiff is entitled to any indemnity in
accordance with law, such was awarded to him in the judgment of the lower
court by granting him the right to collect salary for one month and some odd
days.
As for the other features of the case, the record does not show that the
plaintiff has any good reason or legal ground upon which to claim an
indemnity for losses and damages in the sum of P100,000, for it was not
proved that he suffered to that extent, and the judgment appealed from has
awarded him the month's salary to which he is entitled. Therefore that
judgment and the order of March 14 sustaining the demurrer to the second
cause of action are both in accordance with the law.
For the foregoing reasons, whereby the errors assigned to the said judgment
and order are deemed to have been refuted, both judgment and order are
hereby affirmed, with costs against the appellant.
G.R. No. L-18616             March 31, 1964
VICENTE M. COLEONGCO, plaintiff-appellant,  the control of all the cash" from sales or deposited in banks; that he would have a
vs.
EDUARDO L. CLAPAROLS, defendant-appellee.
San Juan, Africa and Benedicto for plaintiff-appellant.
Alberto Jamir for defendant-appellee.
REYES, J.B.L., J.:
Appeal by plaintiff Vicente Coleongco from a decision of the Court of First Instance of
Negros Occidental (in its Civil Case No. 4170) dismissing plaintiff's action for
damages, and ordering him to pay defendant Eduardo Claparols the amount of
P81,387.27 plus legal interest from the filing of the counterclaim till payment thereof;
P50,000 as moral and compensatory damages suffered by defendant; and costs.
A writ of preliminary attachment for the sum of P100,000 was subsequently issued
against plaintiff's properties in spite of opposition thereto.
Plaintiff Coleongco, not being in conformity with the judgment appealed to this Court
directly, the claims involved being in excess of P200,000.
The antecedent facts as found by the trial court and shown by the records, are as
follows:
Since 1951, defendant-appellee, Eduardo L. Claparols, operated a factory for the
manufacture of nails in Talisay, Occidental Negros, under the style of "Claparols Steel
& Nail Plant". The raw material, nail wire, was imported from foreign sources, specially
from Belgium; and Claparols had a regular dollar allocation therefor, granted by the
Import Control Commission and the Central Bank. The marketing of the nails was
handled by the "ABCD Commercial" of Bacolod, which was owned by a Chinaman
named Kho To.1äwphï1.ñët
Losses compelled Claparols in 1953 to look for someone to finance his imports of nail
wires. At first, Kho To agreed to do the financing, but on April 25, 1953, the Chinaman
introduced his compadre, appellant Vicente Coleongco, to the appellee,
recommending said appellant to be the financier in the stead of Kho To. Claparols
agreed, and on April 25 of that year a contract (Exhibit B) was perfected between
them whereby Coleongco undertook to finance and put up the funds required for the
importation of the nail wire, which Claparols bound himself to convert into nails at his
plant. It was agreed that Coleongco would have the exclusive distribution of the
product, and the "absolute care in the marketing of these nails and the promotion of
sales all over the Philippines", except the Davao Agency; that Coleongco would "share
representative in the management; that all contracts and transactions should be
jointly approved by both parties; that proper books would be kept and annual
accounts rendered; and that profits and losses would be shared "on a 50-50 basis".
The contract was renewed from one year to year until 1958, and Coleongco's share
subsequently increased by 5% of the net profit of the factory (Exhibits D, E, F).
Two days after the execution of the basic agreement, Exhibit "B", on April 27, 1953,
Claparols executed in favor of Coleongco, at the latter's behest a special power of
attorney (Exhibit C) to open and negotiate letters of credit, to sign contracts, bills of
lading, invoices, and papers covering transactions; to represent appellee and the nail
factory; and to accept payments and cash advances from dealers and distributors.
Thereafter, Coleongco also became the assistant manager of the factory, and took
over its business transactions, while Claparols devoted most of his time to the nail
manufacture processes.
Around mid-November of 1956, appellee Claparols was disagreeably surprised by
service of an alias writ of execution to enforce a judgment obtained against him by
the Philippine National Bank, despite the fact that on the preceding September he
had submitted an amortization plan to settle the account. Worried and alarmed,
Claparols immediately left for Manila to confer with the bank authorities. Upon arrival,
he learned to his dismay that the execution had been procured because of derogatory
information against appellee that had reached the bank from his associate, appellant
Coleongco. On July 6, 1956, the latter, without appellee's knowledge, had written to
the bank —
in connection with the verbal offer — for the acquisition by me of the whole
interest of Mr. Eduardo L. Claparols in the Claparols Steel & Nail Plant and
the Claparols Hollow Blocks Factory" (Exhibit 36);
and later, on October 29, 1956, Coleongco had written again the bank another letter
(Exhibit 35), also behind the back of appellee, wherein Coleongco charged Claparols
with taking machines mortgaged to the bank, and added - .
In my humble personal opinion I presume that Mr. Eduardo L. Claparols is
not serious in meeting his obligations with your bank, otherwise he had not
taken these machines and equipments a sign of bad faith since the factory is
making a satisfactory profit of my administration.
Fortunately, Claparols managed to arrange matters with the bank and to have the
execution levy lifted. Incensed at what he regarded as disloyalty of his attorney-in-
fact, he consulted lawyers. The upshot was that appellee revoked the power of
attorney (Exhibit "C"), and informed Coleongco thereof (Exhibits T, T-1), by registered
mail, demanding a full accounting at the same time. Coleongco, as could be expected,
protested these acts of Claparols, but the latter insisted, and on the first of January,
1957 wrote a letter to Coleongco dismissing him as assistant manager of the plant
and asked C. Miller & Company, auditors, to go over the books and records of the
business with a view to adjusting the accounts of the associates. These last steps were
taken in view of the revelation made by his machinery superintendent, Romulo
Agsam, that in the course of the preceding New Year celebrations Coleongco had
drawn Agsam aside and proposed that the latter should pour acid on the machinery
to paralyze the factory. The examination by the auditors, summarized in Exhibits 80
and 87, found that Coleongco owed the Claparols Nail Factory the amount of
P87,387.37, as of June 30, 1957.
In the meantime, Claparols had found in the factory files certain correspondence in
February, 1955 between Coleongco and the nail dealer Kho To whereby the former
proposed to Kho that the latter should cut his monthly advances to Claparols from
P2,000 to P1,000 a month, because —
I think it is time that we do our plan to take advantage of the difficulties of
Eddie with the banks for our benefit. If we can squeeze him more. I am sure
that we can extend our contract with him before it ends next year, and
perhaps on better terms. If we play well our cards we might yet own his
factory (Exhibit 32);
and conformably to Coleongco's proposal, Kho To had written to Claparols that "due
to present business conditions" the latter could only be allowed to draw P1,000 a
month beginning April, 1955 (Exhibit 33).
As the parties could not amicably settle their accounts, Coleongco filed a suit against
Claparols charging breach of contract, asking for accounting, and praying for
P528,762.19 as damages, and attorney's fees, to which Claparols answered, denying
the charge, and counter-claiming for the rescission of the agreement with Coleongco
for P561,387.99 by way of damages. After trial, the court rendered judgment, as stated
at the beginning of this opinion.
In this appeal, it is first contended by the appellant Coleongco that the power of
attorney (Exhibit "C") was made to protect his interest under the financing agreement
(Exhibit "B") and was one coupled with an interest that the appellee Claparols had no
legal power to revoke. This point can not be sustained. The financing agreement itself
already contained clauses for the protection of appellant's interest, and did not call
for the execution of any power of attorney in favor of Coleongco. But granting
appellant's view, it must not be forgotten that a power of attorney can be made
irrevocable by contract only in the sense that the principal may not recall it at his
pleasure; but coupled with interest or not, the authority certainly can be revoked for a
just cause, such as when the attorney-in-fact betrays the interest of the principal, as
happened in this case. It is not open to serious doubt that the irrevocability of the
power of attorney may not be used to shield the perpetration of acts in bad faith,
breach of confidence, or betrayal of trust, by the agent for that would amount to
holding that a power coupled with an interest authorizes the agent to commit frauds
against the principal.
Our new Civil Code, in Article 1172, expressly provides the contrary in prescribing that
responsibility arising from fraud is demandable in all obligations, and that any waiver
of action for future fraud is void. It is also on this principle that the Civil Code, in its
Article 1800, declares that the powers of a partner, appointed as manager, in the
articles of co-partnership are irrevocable without just or lawful cause; and an agent
with power coupled with an interest can not stand on better ground than such a
partner in so far as irrevocability of the power is concerned.
That the appellee Coleongco acted in bad faith towards his principal Claparols is, on
the record, unquestionable. His letters to the Philippine National Bank (Exhibits 35 and
36) attempting to undermine the credit of the principal and to acquire the factory of
the latter, without the principal's knowledge; Coleongco's letter to his cousin, Kho To
(Exhibit 32), instructing the latter to reduce to one-half the usual monthly advances to
Claparols on account of nail sales in order to squeeze said appellee and compel him
to extend the contract entitling Coleongco to share in the profits of the nail factory on
better terms, and ultimately "own his factory", a plan carried out by Kho's letter,
Exhibit 33, reducing the advances to Claparols; Coleongco's attempt to, have Romulo
Agsam pour acid on the machinery; his illegal diversion of the profits of the factory to
his own benefit; and the surreptitious disposition of the Yates band resaw machine in
favor of his cousin's Hong Shing Lumber Yard, made while Claparols was in Baguio in
July and August of 1956, are plain acts of deliberate sabotage by the agent that fully
justified the revocation of the power of attorney (Exhibit "C") by Claparols and his
demand for an accounting from his agent Coleongco.
Appellant attempts to justify his letter to the Philippine National Bank (Exhibits 35 and
36), claiming that Claparols' mal-administration of the business endangered the
security for the advances that he had made under the financing contract (Exhibit "B").
But if that were the case, it is to be expected that Coleongco would have first
protested to Claparols himself, which he never did. Appellant likewise denies the
authorship of the letter to Kho (Exhibit 32) as well as the attempt to induce Agsam to
damage the machinery of the factory. Between the testimony of Agsam and Claparols
and that of Coleongco, the court below whose to believe the former, and we see no
reason to alter the lower court's conclusion on the value of the evidence before it,
considering that Kho's letter to Claparols (Exhibit 33) plainly corroborates and
dovetails with the plan outlined in Coleongco's own letter (Exhibit 32), signed by him,
and that the credibility of Coleongco is affected adversely by his own admission of his
having been previously convicted of estafa (t.s.n., pp. 139, 276), a crime that implies
moral turpitude. Even disregarding Coleongco's letter to his son-in-law (Exhibit 82)
that so fully reveals Coleongco's lack of business scruples, the clear preponderance of
evidence is against appellant.
The same remarks apply to the finding of the trial court that it was appellant
Coleongco, and not Claparols, who disposed of the band resawing equipment, since
said machine was received in July, 1956 and sold in August of that year to the Hong
Shing Lumber Co., managed by appellant's cousin Vicente Kho. The untruth of
Coleongco's charge that Claparols, upon his return from Baguio in September, 1956,
admitted having sold the machine behind his associate's back is further evidenced by
(a) Coleongco's letter, Exhibit "V", dated October 29, 1956, inquiring the whereabouts
of the resaw equipment from Claparols (an inquiry incompatible with Claparols'
previous admission); (b) by the undenied fact that the appellee was in Baguio and
Coleongco was acting for him during the months of July and August when the
machine was received and sold; and (c) the fact that as between the two it is
Coleongco who had a clear interest in selling the sawing machine to his cousin Kho
To's lumber yard. If Claparols wished to sell the machine without Coleongco's
knowledge, he would not have picked the latter's cousin for a buyer.
The action of plaintiff-appellant for damages and lost profits due to the
discontinuance of the financing agreement, Exhibit "B", may not prosper, because the
record shows that the appellant likewise breached his part of the contract. It will be
recalled that paragraph 2 of the contract, Exhibit "B", it was stipulated:
That the Party of the Second Part (Coleongco) has agreed to finance and put
up all the necessary money which may be needed to pay for the importation
of the raw materials needed by such nail factory and allocated by the ICC
from time to time, either in cash of with whatever suitable means which the
Party of the Second Part may be able to make by suitable arrangements with
any well-known banking institution recognized by the Central Bank of the
Philippines.
Instead of putting up all the necessary money  needed to finance the imports of raw
material, Coleongco merely advanced 25% in cash on account of the price and had
the balance covered by surety agreements executed by Claparols and others as
solidary, (joint and several) guarantors (see Exhibits G, H, I). The upshot of this
arrangement was that Claparols was made to shoulder 3/4 of the payment for the
imports, contrary to the financing agreement. Paragraph 11 of the latter expressly
denied Coleongco any power or authority to bind Claparols without previous
consultation and authority. When the balances for the cost of the importations
became due, Coleongco, in some instances, paid it with the dealers' advances to the
nail factory against future sales without the knowledge of Claparols (Exhibits "K" to K-
11, K-13). Under paragraphs 8 and 11 of the financing agreement, Coleongco was to
give preference to the operating expenses before sharing profits, so that until the
operating costs were provided for, Coleongco had no right to apply the factory's
income to pay his own obligations.
Again, the examination of the books by accountant Atienza of C. Miller and Co.,
showed that from 1954 onwards Coleongco (who had the control of the factory's cash
and bank deposits, under Paragraph 11 of Exhibit "B") never liquidated and paid in full
to Claparols his half of the profits, so that by the end of 1956 there was due to
Claparols P38,068.41 on this account (Exhibit 91). For 1957 to 1958 Claparols financed
the imports of nail wire without the help of appellant, and in view of the latter's
infringement of his obligations, his acts of disloyalty previously discussed, and his
diversions of factory funds (he even bought two motor vehicles with them), we find no
justification for his insistence in sharing in the factory's profit for those years, nor for
the restoration of the revoked power of attorney.
The accountant's reports and testimony (specially Exhibits 80 to 87) prove that as of
June 30, 1957, Coleongco owed to Claparols the sum of P83,466.34 that after some
adjustment was reduced to P81,387.37, practically accepted even by appellant's
auditor. The alleged discrepancies between the general ledger and the result thus
arrived at was satisfactorily explained by accountant Atienza in his testimony (t.s.n.,
1173-1178).
No error was, therefore, committed by the trial court in declaring the financing
contract (Exh. B) properly resolved by Claparols or in rendering judgment against
appellant in favor of appellee for the said amount of P81,387.37. The basic rule of
contracts requires parties to act loyally toward each other in the pursuit of the
common end, and appellant clearly violated the rule of good faith prescribed by Art.
1315 of the new Civil Code.
The lower court also allowed Claparols P50,000 for damages, material, moral, and
exemplary, caused by the appellant Coleongco's acts in maliciously undermining
appellee's credit that led the Philippine National Bank to secure a writ of execution
against Claparols. Undeniably, the attempts of Coleongco to discredit and "squeeze"
Claparols out of his own factory and business could not but cause the latter mental
anguish and serious anxiety, as found by the court below, for which he is entitled to
compensation; and the malevolence that lay behind appellee's actions justified also
the imposition of exemplary or deterrent damages (Civ. Code, Art. 2232). While the
award could have been made larger without violating the canons of justice, the
discretion in fixing such damages primarily lay in the trial court, and we feel that the
same should be respected.
IN VIEW OF THE FOREGOING, the decision appealed from is affirmed. Costs against
appellant Vicente Coleongco.