SALES

07 SEPTEMBER 2017
CASES:

1) G.R. No. L-36359 January 31, 1974

FELIX BUCTON AND NICANORA GABAR BUCTON, petitioners,

vs.
ZOSIMO GABAR, JOSEFINA LLAMOSO GABAR AND THE HONORABLE COURT OF
APPEALS, respondents.

Rizalindo V. Diaz for petitioners.

Alfredo Ber. Pallarca for respondents.

ANTONIO, J.: 1wph1.t

Appeal from the decision of the Court of Appeals in CA-G.R. No. 49091-R, dated January 10, 1973, reversing
the judgment of the trial court and dismissing the complaint filed by herein petitioners, and from said appellate
court's resolution, dated February 5, 1973, denying petitioners' motion for reconsideration.

The facts of the case, as found by the trial court, which have not been disturbed by respondent Court of Appeals,
are as follows:

Plaintiff Nicanora Gabar Bucton (wife of her co-plaintiff Felix Bucton) is the sister of defendant
Zosimo Gabar, husband of his co-defendant Josefina Llamoso Gabar.

This action for specific performance prays, inter-alia, that defendants-spouses be ordered to
execute in favor of plaintiffs a deed of sale of the western half of a parcel of land having an
area of 728 sq. m. covered by TCT No. II (from OCT No. 6337) of the office of the Register of
Deeds of Misamis Oriental.

Plaintiffs' evidence tends to show that sometime in 1946 defendant Josefina Llamoso Gabar
bought the above-mentioned land from the spouses Villarin on installment basis, to wit, P500
down, the balance payable in installments. Josefina entered into a verbal agreement with her
sister-in-law, plaintiff Nicanora Gabar Bucton, that the latter would pay one-half of the price
(P3,000) and would then own one-half of the land. Pursuant to this understanding Nicanora on
January 19, 1946 gave her sister-in-law Josefina the initial amount of P1,000, for which the
latter signed a receipt marked as Exhibit A.

Subsequently, on May 2, 1948 Nicanora gave Josefina P400. She later signed a receipt marked
as Exhibit B.

On July 30, 1951 plaintiffs gave defendants P1,000 in concept of loan, for which defendant
Zosimo Gabar signed a receipt marked as Exhibit E.

Meanwhile, after Josefina had received in January, 1946 the initial amount of P1,000 as above
stated, plaintiffs took possession of the portion of the land indicated to them by defendants and
built a modest nipa house therein. About two years later plaintiffs built behind the nipa house

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another house for rent. And, subsequently, plaintiffs demolished the nipa house and in its place
constructed a house of strong materials, with three apartments in the lower portion for rental
purposes. Plaintiffs occupied the upper portion of this house as their residence, until July, 1969
when they moved to another house, converting and leasing the upper portion as a dormitory.

In January, 1947 the spouses Villarin executed the deed of sale of the land abovementioned in
favor of defendant Josefina Llamoso Gabar, Exhibit I, to whom was issued on June 20, 1947
TCT No. II, cancelling OCT No. 6337. Exhibit D.

Plaintiffs then sought to obtain a separate title for their portion of the land in question.
Defendants repeatedly declined to accommodate plaintiffs. Their excuse: the entire land was
still mortgaged with the Philippine National Bank as guarantee for defendants' loan of P3,500
contracted on June 16, 1947: Exhibit D-1.

Plaintiffs continued enjoying their portion of the land, planting fruit trees and receiving the
rentals of their buildings. In 1953, with the consent of defendants (who were living on their
portion), plaintiffs had the entire land surveyed and subdivided preparatory to obtaining their
separate title to their portion. After the survey and the planting of the concrete monuments
defendants erected a fence from point 2 to point 4 of the plan, Exhibit I, which is the dividing
line between the portion pertaining to defendants, Exhibit I-1, and that pertaining to plaintiffs,
Exhibit I-2.

In the meantime, plaintiffs continued to insist on obtaining their separate title. Defendants
remained unmoved, giving the same excuse. Frustrated, plaintiffs were compelled to employ
Atty. Bonifacio Regalado to intercede; counsel tried but failed. Plaintiffs persevered, this time
employing Atty. Aquilino Pimentel, Jr. to persuade defendants to comply with their obligation
to plaintiffs; this, too, failed. Hence, this case, which has cost plaintiffs P1,500 in attorney's
fees.

Defendants' evidence based only on the testimony of defendant Josefina Llamoso Gabar
denies agreement to sell to plaintiffs one-half of the land in litigation. She declared that the
amounts she had received from plaintiff Nicanora Gabar Bucton first, P1,000, then P400
were loans, not payment of one-half of the price of the land (which was P3,000). This defense
is devoid of merit.

When Josefina received the first amount of P1,000 the receipt she signed, Exhibit A, reads:

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 Received from Mrs. Nicanora Gabar the sum of one thousand (P1,000) pesos, victory currency,
as part payment of the one thousand five hundred (P1,500.00) pesos, which sum is one-half of
the purchase value of Lot No. 337, under Torrens Certificate of Title No. 6337, sold to me by
Mrs. Carmen Roa Villarin.

"(Sgd.) Josefina Ll. Gabar".

On the basis of the facts quoted above the trial court on February 14, 1970, rendered judgment the dispositive
portion of which reads:

WHEREFORE, judgment is hereby rendered for plaintiffs:

1) Ordering defendants within thirty days from receipt hereof to execute a deed of conveyance
in favor of plaintiffs of the portion of the land covered by OCT No. II, indicated as Lot 337-B
in the Subdivision Plan, Exhibit I, and described in the Technical Description, Exhibit 1-2;
should defendants for any reason fail to do so, the deed shall be executed in their behalf by the
Provincial Sheriff of Misamis Oriental or his Deputy;

2) Ordering the Register of Deeds of Cagayan de Oro, upon presentation to him of the above-
mentioned deed of conveyance, to cancel TCT No. II and in its stead to issue Transfer
Certificates of Title, to wit, one to plaintiffs and another to defendants, based on the subdivision
Plan and Technical Description above-mentioned; and ordering defendants to present and
surrender to the Register of Deeds their TCT No. II so that the same may be cancelled; and

3) Ordering defendants to pay unto plaintiffs attorney's fees in the amount of P1,500 and to pay
the costs.

SO ORDERED.

Appeal was interposed by private respondents with the Court of Appeals, which reversed the judgment of the
trial court and ordered petitioners' complaint dismissed, on the following legal disquisition:

Appellees' alleged right of action was based on the receipt (Exh. A) which was executed way
back on January 19, 1946. An action arising from a written contract does not prescribe until
after the lapse of ten (10) years from the date of action accrued. This period of ten (10) years is
expressly provided for in Article 1144 of the Civil Code.

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 From January 19, 1946 to February 15, 1968, when the complaint was filed in this case, twenty-
two (22) years and twenty-six (26) days had elapsed. Therefore, the plaintiffs' action to enforce
the alleged written contract (Exh. A) was not brought within the prescriptive period of ten (10)
years from the time the cause of action accrued.

The land in question is admittedly covered by a torrens title in the name of Josefina Llamoso
Gabar so that the alleged possession of the land by the plaintiffs since 1947 is immaterial
because ownership over registered realty may not be acquired by prescription or adverse
possession (Section 40 of Act 496).

It is not without reluctance that in this case we are constrained to sustain the defense of
prescription, for we think that plaintiffs really paid for a portion of the lot in question pursuant
to their agreement with the defendants that they would then own one-half of the land. But we
cannot apply ethical principles in lieu of express statutory provisions. It is by law provided that:

"ART. 1144. The following actions must be brought within ten years from the
time the right of action accrues:

1. Upon a written contract;

2. Upon an obligation created by law;

3. Upon a judgment."

If eternal vigilance is the price of safety, one cannot sleep on one's right and expect it to be
preserved in its pristine purity.

Petitioners' appeal is predicated on the proposition that owners of the property by purchase from private
respondents, and being in actual, continuous and physical possession thereof since the date of its purchase, their
action to compel the vendors to execute a formal deed of conveyance so that the fact of their ownership may be
inscribed in the corresponding certificate of title, had not yet prescribed when they filed the present action.

We hold that the present appeal is meritorious.

1. There is no question that petitioner Nicanora Gabar Bucton paid P1,500.00 to respondent Josefina Gabar as
purchase price of one-half of the lot now covered by TCT No. II, for respondent Court of Appeals found as a
fact "that plaintiffs really paid for a portion of the lot in question pursuant to their agreement with the defendants
that they would own one-half (1/2) of the land." That sale, although not consigned in a public instrument or
formal writing, is nevertheless valid and binding between petitioners and private respondents, for the time-
honored rule is that even a verbal contract of sale or real estate produces legal effects between the
parties.1 Although at the time said petitioner paid P1,000.00 as part payment of the purchase price on January
19, 1946, private respondents were not yet the owners of the lot, they became such owners on January 24, 1947,
when a deed of sale was executed in their favor by the Villarin spouses. In the premises, Article 1434 of the
Civil Code, which provides that "[w]hen a person who is not the owner of a thing sells or alienates and delivers
it, and later the seller or grantor acquires title thereto, such title passes by operation of law to the buyer or
grantee," is applicable.2 Thus, the payment by petitioner by Nicanora Gabar Bucton of P1,000.00 on January 19,
1946, her second payment of P400.00 on May 2, 1948, and the compensation, up to the amount of P100.00 (out
of the P1,000.00-loan obtained by private respondents from petitioners on July 30, 1951), resulted in the full
payment of the purchase price and the consequential acquisition by petitioners of ownership over one-half of the
lot. Petitioners therefore became owners of the one-half portion of the lot in question by virtue of a sale which,
though not evidenced by a formal deed, was nevertheless proved by both documentary and parole evidence.

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2. The error of respondent Court of Appeals in holding that petitioners' right of action had already prescribed
stems from its belief that the action of petitioners is based on the receipt Exh. "A" which was executed way back
on January 19, 1946, and, therefore, in the view of said appellate court, since petitioners' action was filed on
February 15, 1968, or after the lapse of twenty-two (22) years and twenty-six (26) days from, the date of said
document, the same is already barred according to the provisions of Article 1144 of the New Civil Code. The
aforecited document (Exh. "A"), as well as the other documents of similar import (Exh. "B" and Exh. "E"), are
the receipts issued by private respondents to petitioners, evidencing payments by the latter of the purchase price
of one-half of the lot.

The real and ultimate basis of petitioners' action is their ownership of one-half of the lot coupled with their
possession thereof, which entitles them to a conveyance of the property. In Sapto, et al. v. Fabiana,3 this Court,
speaking thru Mr. Justice J.B.L. Reyes, explained that, under the circumstances no enforcement of the contract
is needed, since the delivery of possession of the land sold had consummated the sale and transferred title to the
purchaser, and that, actually, the action for conveyance is one to quiet title, i.e., to remove the cloud upon the
appellee's ownership by the refusal of the appellants to recognize the sale made by their predecessors. We held
therein that "... it is an established rule of American jurisprudence (made applicable in this jurisdiction by Art.
480 of the New Civil Code) that actions to quiet title to property in the possession of the plaintiff are
imprescriptible (44 Am. Jur. p. 47; Cooper vs. Rhea, 20 L.R.A. 930; Inland Empire Land Co. vs. Grant County,
138 Wash. 439, 245 Pac. 14).

The prevailing rule is that the right of a plaintiff to have his title to land quieted, as against one
who is asserting some adverse claim or lien thereon, is not barred while the plaintiff or his
grantors remain in actual possession of the land, claiming to be owners thereof, the reason for
this rule being that while the owner in fee continues liable to an action, proceeding, or suit upon
the adverse claim, he has a continuing right to the aid of a court of equity to ascertain and
determine the nature of such claim and its effect on his title, or to assert any superior equity in
his favor. He may wait until his possession is disturbed or his title in attacked before taking
steps to vindicate his right. But the rule that the statute of limitations is not available as a defense
to an action to remove a cloud from title can only be invoked by a complainant when he is in
possession. One who claims property which is in the possession of another must, it seems,
invoke remedy within the statutory period. (44 Am. Jur., p. 47)

The doctrine was reiterated recently in Gallar v. Husain, et al.,4 where We ruled that by the delivery of the
possession of the land, the sale was consummated and title was transferred to the appellee, that the action is
actually not for specific performance, since all it seeks is to quiet title, to remove the cloud cast upon appellee's
ownership as a result of appellant's refusal to recognize the sale made by his predecessor, and that as plaintiff-
appellee is in possession of the land, the action is imprescriptible. Considering that the foregoing circumstances
obtain in the present case, We hold that petitioners' action has not prescribed.

WHEREFORE, the decision and resolution of respondent Court of Appeals appealed from are hereby reversed,
and the judgment of the Court of First Instance of Misamis Oriental, Branch IV, in its Civil Case No. 3004, is
revived. Costs against private respondents.

2) G.R. No. L-17527 April 30, 1963

SUN BROTHERS APPLIANCES, INC., plaintiff-appellee,

vs.
DAMASO P. PEREZ, defendant-appellant.

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Dominador A. Alafriz for plaintiff-appellee.
Robert P. Halili & Associates for defendant-appellant.

LABRADOR, J.:

This is an action brought by the plaintiff to recover from defendant the sum of P1,404.00, the price of one
Admiral Air Conditioner, Slim Style, Model 100-23-1 H.P., Serial No. 2978828, delivered to the defendant by
the plaintiff under a conditional sale agreement entered into by and between them on December 6, 1958, in the
City of Manila, plus stipulated interest of 12% from January 6, 1959 until the same is fully paid, together with
P200 as attorney's fees, and costs. Defendant answered that the air-conditioner in question was delivered to him
installed in the office of the defendant located at Gardiner street, Lucena, Quezon on December 14, 1959 but
that said air-conditioner was totally destroyed by fire which occured in the morning of December 28, 1958 at 2
o'clock. Defendant further claimed that the machine was destroyed by force majeure, not by the defendant's fault
and/or negligence and, therefore, he is not liable under the conditional sale, Annex "A", which the parties,
plaintiff and defendant, had executed.

At the trial of the case the parties entered into a stipulation of facts, the most important provision of which are
as follows:

1. That defendant admits that on December 6, 1958, he entered into a Conditional Sale Agreement with the
plaintiff, copy of which contract is attached to the complaint as Annex "A";

2. That pursuant to the terms and conditions provided in the said Conditional Sale Agreement the plaintiff
delivered to the defendant (1) Admiral Air Conditioner Slim Style Model 100-23-1 HP, Serial No. 2978828 with
the contract price of P1,678.00 and that said Air Conditioner was received by the defendant;

3. That defendant made a down payment of P274.00 on December 6, 1958, pursuant to the terms and conditions
of the Conditional Sales Agreement; and Air Conditioner was installed by the plaintiff, thru its representative,
at Lucena, Quezon;

4. That said Air Conditioner was burned on December 27,1958, on or about 2:00 o'clock in the morning,
however, defendant will present evidence to show that the Air Conditioner subject of the complaint herein was
burned where it was installed by the plaintiff;

5. That defendant, after making down payment of P274.00 to the plaintiff, did not pay any of the monthly
installments of P78.00 thereafter, leaving a balance of P1,404.00 in favor of the plaintiff;

6. That after defendant presents evidence to prove that the Air Conditioner was burned where it was installed by
the plaintiff to the satisfaction of this Honorable Court, the parties agree to leave to this Honorable Court the
resolution of the issue whether loss by fire extinguishes the obligation of the defendant to pay to the plaintiff the
subsequent installments of the initial payment;"

The Court of First Instance before which the action was brought rendered judgment condemning the defendant
to pay the plaintiff the amount demanded in the complaint, including interest and attorney's fees. The defendant
has appealed the case directly to us as involving only a question of law.

The conditional sale executed by the plaintiff and defendant contained the following stipulation:

"2. Title to said property shall vest in the Buyer only upon full payment of the entire account as herein provided,
and only upon complete performance of all the other conditions herein specified:

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"3. The Buyer shall keep said property in good condition and properly protected against the elements, at his/its
address above-stated, and undertakes that if said property or any part thereof be lost, damaged, or destroyed for
any causes, he shall suffer such loss, or repair such damage, it being distinctly understood and agreed that said
property remains at Buyer's risk after delivery;"

The Court below declared that as the buyer would be liable in case of loss for any cause, such buyer assumed
liability even in case of loss by fortuitous event; so it rendered judgment declaring defendant liable for the sun
demanded together with interest and attorney's fees.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this
Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by
this stipulation of facts. 1wph1.t

In this Court on appeal defendant-appellant argues that inasmuch as the title to the property sold shall vest in the
buyer only upon full payment of the price, the loss of the vendor; that the phrase "for any cause" used in
paragraph 2 of the agreement may not be interpreted to include a fortuitous event absolutely beyond the control
of the appellant; and that although Article 1174 of the new Civil Code recognizes the exception on fortuitous
event when the parties to a contract expressly so stipulate, the phrase "for any cause" used in the contract did not
indicate any intention of the parties that the loss of the unit due to fortuitous event is to be included within the
responsibility of the vendor.

In answer to the arguments above set forth the appellee argues that the stipulation in the contract of sale whereby
the buyer shall be liable for any loss, damage or destruction for any cause, is not contrary to law, morals or public
policy and is specifically authorized to be stipulated upon between the parties by Article 1174 of the Civil Code;
that the risk of loss was expressly stipulated to be undertaken by the buyer, even if the title to the property sold
remained, also by stipulation, in the vendor; that the terms "any cause" used in the agreement includes a fortuitous
event, and an express stipulation making the vendee responsible in such case is valid.

We believe that the agreement making the buyer responsible for any loss whatsoever, fortuitous or otherwise,
even if the title to the property remains in the vendor, is neither contrary to law, nor to morals or public policy.
We have held such stipulation to be legal in the case of Government vs. Amechazurra, 10 Phil. 637 (Tolentino,
Commentaries on the Civil Code, Vol. IV, p. 120)and declare it to be based on a sound public policy in
conditional sales according to American decisions.

"The weight of authority support the rule that where goods are sold and delivered to the vendor under an
agreement that the title is to remain in the vendor until payment, the loss or destruction of the property while in
the possession of the vendor before payment, without his fault, does not relieve him from the obligation to pay
the price, and he, therefore, suffers the loss. In accord with this rule are the provisions of the Uniform Sales Act
and the Uniform Conditional Sales Act. There are several basis for this rule. First is the absolute and
unconditional nature of the vendee's promise to pay for the goods. The promise is nowise dependent upon the
transfer of the absolute title. Second is the fact that the vendor has fully performed his contract and has nothing
further to do except receive payment, and the vendee received what he bargained for when he obtained the right
of possession and use of the goods and the right to acquire title upon making full payment of the price. A third
basis advanced for the rule is the policy of providing an incentive to care properly for the goods, they being
exclusively under the control and dominion of the vendee." (47 Am. Jur., pp. 81-82).

We, therefore, agree with the trial court that the loss by fire or fortuitous event was expressly agreed in the
contract to be borne by the buyer and this express agreement is not contrary to law but sanctioned by it as well
as by the demands of sound, public policy. The judgment of the court below is affirmed, with costs against
defendant-appellant.

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3) G.R. No. L-9871 January 31, 1958

ATKINS, KROLL and CO., INC., petitioner,

vs.
B. CUA HIAN TEK, respondent.

Ross Selph, Carrascoso and Janda for petitioner.

Ponciano T. Castro for respondent.

BENGZON, J.:

Review of a Court of Appeals' decision. For its failure to deliver one thousand cartons of sardines, which it had
sold to B. Cua Hian Tek, petitioner was sued, and after trial was ordered by the Manila court of first instance to
Pay damages, which on appeal was reduced by the Court of Appeals to P3,240.15 representing unrealized
profits.

There was no such contract of sale, says petitioner, but only an option to buy, which was not enforceable for
lack of consideration because in accordance with Art. 1479 of the New Civil Code "an accepted unilatateral
promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is
supported by a consideration distinct from the price.

Simple are the facts of this case: Dated September 13, 1951, petitioner sent to respondent a letter of the
following tenor:

Sir (s) /Madam:

We are pleased to make you herewith the following firm offer, subject to reply by September 23, 1951:

Quantity and Commodity:

400 Ctns. Luneta brand Sardines in Tomato Sauce 48/15-oz. Ovals at $8.25 Ctn.

300 Ctns. Luntea brand Sardines Natural 48/15 oz. talls at $6.25 Ct.

300 Ctns. Luneta brand Sardines in Tomato Sauce 100/5-oz. talls at $7.48 Ct.

Price(s):

All prices C ad F Manila Cosular Fees of $6.00 to be added.

Shipmet:

Durig September/October from US Ports.

Supplier:

Atkins, Kroll & Co., Sa Frasisco, Cal. U.S.A.

We are looking forward to receive your valued order and remain .

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 Very truly yours,

The Court of first instance and the Court of Appeals1 found that B. Cua Hian Tek accepted the offer
unconditionally and delivered his letter of acceptance Exh. B on September 21, 1951. However, due to
shortage of catch of sardines by the packers in California, Atkins Kroll & Co., failed to deliver the
commodities it had offered for sale. There are other details to which reference shall not be made, as they touch
the question whether the acceptance had been handed on time; and on that issue of Court of Appeals definitely
found for plaintiff.

Ayway, in presenting its case before this Court petitioner does not dispute such timely acceptance. It merely
raises the point that the acceptance only created an option, which, lacking consideration, had no obligatory
force.

The offer Exh. A, petitioner argues, "was a promise to sell a determinate thing for a price certain. Upon its
acceptance by respondent, the offer became an accepted unilateral promise to sell a determinate thing for price
certain. Inasmuch as there was no consideration to support the promise to sell distinct from the price, it follows
that under Art. 1479 aforequoted, the promise is not binding on the petitioner even if it was accepted by
respondent." (p. 12 brief of petitioner.).

The argument, maifestly assumes that only a unilateral promise arose when the offeree accepted. Such
assumption is a mistake, because a bilateral cotract to sell and to buy was created upon acceptance. So much
so that B. Cua Hian Tek could be sued, he had backed out after accepting, by refusing to get the sardines
and/or to pay for their price. Indeed, the word "option" is found neither in the offer nor in the acceptance. On
the copntrary Exh. B accepted "the firm offer for the sale" and adds, "the undersigned buyer has immediately
filed an application for import license . . ." (Emphasis Ours.).

Petitioner, however, insists the offer was a mere offer of option, because the "firm offer" Exh. A. was a
continuing offer to sell until September 23, "an option is nothing more than a continuing offer" for a specified
time. In our opinion implies more than that: it implies the legal obligation to keep open for the time
specified.2 Yet the letter Exh. A did not by itself produce the legal obligation of keeping the offer open up ot
Septmber 23. It could be withdrawn before acceptance, because it is admitted, there was no consideration for
it.

ART. 1324. When the offerer has showed the offeree a certain period to accept, the offer may be withdrawn at
any time before acceptance by communicating such withdrawal, except when the option is founded upon a
consideration, as somnething paid or promissed. (n) (New Civil Code.).

Ordinarily an offer to buy or sell may be withdrawn or countermanded before accepatnce, even though the
offer provides that it will not be withdrawn or countermanded, or allows the offeree a certain time within
which to accept it, unless such provision or agreement is supported by an independent consideration. . . (77
Corpus Juris Secundum p. 636.).

Furthermore, an option is unilateral: a promise to sell3 at the price fixed whenever the offeree should decide to
exercise his option within the specified time. After accepting the promise and before he exercises his option,
the holder of the option is not bound to buy. He is free either to buy or not to later. In this case, however, upon
accepeting herein petitioner's offer a bilateral promise to sell and to buy ensued, and the respondent ipso facto
assumed the obligations of a purchaser. He did not just get the right subsequently to buy or not to buy. It was
not a mere option then; it was bilalteral contract of sale.

Lastly, even supposing that Exh. A granted an option which is not binding for lack of consideration, the
authorities hold that .

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If the option is given without a consideration, it is a mere offer of a contract of sale, which is not binding until
accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale, even
though the option was not supported by a sufficient consideration. . . (77 Corpus Juris Secundum p. 652. See
also 27 Ruling Case Law 339 and cases cited.).

It can be taken for granted, as contended by the defendants, that the option contract was not valid for lack of
consideration. But it was, at least, an offer to sell, which was accepted by letter, and of this acceptance the
offerer had knowledge before said offer was withdrawn. The concurrence of both actsthe offer and the
acceptancecould at all events have generated a contract, if none there was before (atrs. 1254 and 1262 of the
Civil Code). (Zayco vs. Serra, 44 Phil. 331.).

One additional observation should be made before the closing this opinion. The defense in the court of first
instance rested on the proposition or propositions that the offer had not been precedent had not been fulfilled.
This option-without-consideration idea was never mentioned in the answer. A Change of theory in the
appellate courts is not permitted.

In order that a question may be raised on appeal, it is essential that it be within the issues made by the parties
in their pleadings. Consequently, when a party deliberately adopts a certain theory, and the case is tried and
decided upon that theory in the court below, he will not be permitted to change his theory on appeal because,
to permit him to do so, would be unfair to the adverse party. (Rules of Court by Moran1957 Ed. Vol. I p.715
citing Agoncillo vs. Javier, 38 Phil. 424; American Express Company vs. Natividad, 46 Phil. 207; San Agustin
vs. Barrios, 68 Phil. 465, 480; Toribio vs. Dacasa, 55 Phil. 461.) .

We must therefore hold, as the lower courts have held that there was a contract of sale between the parties.
And as no legal excuse has been proven, the seller's failure to comply therewith gave around to an award for
damages, which has been fixed by the Court of Appeals at P3,240.15-amount which petitioner does not dispute
in this final instance.

Consequently, the decision under review should be, and it is hereby affirmed, with cost against petitioner.

5) G.R. No. L-6060 September 30, 1954

FERNANDO A. FROILAN, plaintiff-appellee,

vs.
PAN ORIENTAL SHIPPING CO., defendant-appellant,
REPUBLIC OF THE PHILIPPINES, intervenor-appellee.

Quisumbing, Sycip, Quisumbing and Salazar, for appellant.

Ernesto Zaragoza for appellee.
Hilarion U. Jarencio for the intervenor.

PARAS, C.J.:

The factual antecedents of this case are sufficiently recited in the brief filed by the intervenor-appellee as follows:

1. On February 3, 1951, plaintiff-appellee, Fernando A. Froilan, filed a complaint against the defendant-
appellant, Pan Oriental Shipping Co., alleging that he purchased from the Shipping Commission the vessel FS-
197 for P200,000, paying P50,000 down and agreeing to pay the balance in installments; that to secure the
payment of the balance of the purchase price, he executed a chattel mortgage of said vessel in favor of the
Shipping Commission; that for various reason, among them the non-payment of the installments, the Shipping
Commission took possession of said vessel and considered the contract of sale cancelled; that the Shipping

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Commission chartered and delivered said vessel to the defendant-appellant Pan Oriental Shipping Co. subject to
the approval of the President of the Philippines; that he appealed the action of the Shipping Commission to the
President of the Philippines and, in its meeting on August 25, 1950, the Cabinet restored him to all his rights
under his original contract with the Shipping Commission; that he had repeatedly demanded from the Pan
Oriental Shipping Co. the possession of the vessel in question but the latter refused to do so. He, therefore,
prayed that, upon the approval of the bond accompanying his complaint, a writ of replevin be issued for the
seizure of said vessel with all its equipment and appurtenances, and that after hearing, he be adjudged to have
the rightful possession thereof (Rec. on App. pp. 2-8).

2. On February 3, 1951, the lower court issued the writ of replevin prayed for by Froilan and by virtue thereof
the Pan Oriental Shipping Co. was divested of its possession of said vessel (Rec. on App. p. 47).

3. On March 1, 1951, Pan Oriental Shipping Co. filed its answer denying the right of Froilan to the possession
of the said vessel; it alleged that the action of the Cabinet on August 25, 1950, restoring Froilan to his rights
under his original contract with the Shipping Commission was null and void; that, in any event, Froilan had not
complied with the conditions precedent imposed by the Cabinet for the restoration of his rights to the vessel
under the original contract; that it suffered damages in the amount of P22,764.59 for wrongful replevin in the
month of February, 1951, and the sum of P17,651.84 a month as damages suffered for wrongful replevin from
March 1, 1951; it alleged that it had incurred necessary and useful expenses on the vessel amounting to
P127,057.31 and claimed the right to retain said vessel until its useful and necessary expenses had been
reimbursed (Rec. on App. pp. 8-53).

4. On November 10, 1951, after the leave of the lower court had been obtained, the intervenor-appellee,
Government of the Republic of the Philippines, filed a complaint in intervention alleging that Froilan had failed
to pay to the Shipping Commission (which name was later changed to Shipping Administration) the balance due
on the purchase price of the vessel in question, the interest thereon, and its advances on insurance premium
totalling P162,142.95, excluding the dry-docking expenses incurred on said vessel by the Pan Oriental Shipping
Co.; that intervenor was entitled to the possession of the said vessel either under the terms of the original contract
as supplemented by Froilan's letter dated January 28, 1949, or in order that it may cause the extrajudicial sale
thereof under the Chattel Mortgage Law. It, therefore, prayed that Froilan be ordered to deliver the vessel in
question to its authorized representative, the Board of Liquidators; that Froilan be declared to be without any
rights on said vessel and the amounts he paid thereon forfeited or alternately, that the said vessel be delivered to
the Board of Liquidators in order that the intervenor may have its chattel mortgage extrajudicially foreclosed in
accordance with the provisions of the Chattel Mortgage Law; and that pending the hearing on the merits, the
said vessel be delivered to it (Rec. on App. pp. 54-66).

5. On November 29, 1951, the Pan Oriental Shipping Co. filed an answer to the complaint in intervention alleging
that the Government of the Republic of the Philippines was obligated to deliver the vessel in question to it by
virtue of a contract of bare-boat charter with option to purchase executed on June 16, 1949, by the latter in favor
of the former; it also alleged that it had made necessary and useful expenses on the vessel and claimed the right
of retention of the vessel. It, therefore, prayed that, if the Republic of the Philippines succeeded in obtaining
possession of the said vessel, to comply with its obligations of delivering to it (Pan Oriental Shipping co.) or
causing its delivery by recovering it from Froilan (Rec. on App. pp. 69-81).

6. On November 29, 1951, Froilan tendered to the Board of Liquidators, which was liquidating the affairs of the
Shipping Administration, a check in the amount of P162,576.96 in payment of his obligation to the Shipping
Administration for the said vessel as claimed in the complaint in intervention of the Government of the Republic
of the Philippines. The Board of Liquidators issued an official report therefor stating that it was a 'deposit pending
the issuance of an order of the Court of First Instance of Manila' (Rec. on App. pp. 92-93).

7. On December 7, 1951, the Government of the Republic of the Philippines brought the matter of said payment
and the circumstance surrounding it to the attention of the lower court "in order that they may be taken into

11
account by this Honorable Court in connection with the questions that are not pending before it for
determination" (Rec. on App. pp. 82-86).

8. On February 3, 1952, the lower court held that the payment by Froilan of the amount of P162,576.96 on
November 29, 1951, to the Board of Liquidators constituted a payment and a discharge of Froilan's obligation
to the Government of the Republic of the Philippines and ordered the dismissal of the latter's complaint in
intervention. In the same order, the lower court made it very clear that said order did not pre-judge the question
involved between Froilan and the Oriental Shipping Co. which was also pending determination in said court
(Rec. on App. pp. 92-93). This order dismissing the complaint in intervention, but reserving for future
adjudication the controversy between Froilan and the Pan Oriental Shipping Co. has already become final since
neither the Government of the Republic of the Philippines nor the Pan Oriental Shipping Co. had appealed
therefrom.

9. On May 10, 1952, the Government of the Republic of the Philippines filed a motion to dismiss the
counterclaim of the Pan Oriental Shipping Co. against it on the ground that the purpose of said counterclaim was
to compel the Government of the Republic of the Philippines to deliver the vessel to it (Pan Oriental Shipping
Co.) in the event that the Government of the Republic of the Philippines recovers the vessel in question from
Froilan. In view, however, of the order of the lower court dated February 3, holding that the payment made by
Froilan to the Board of Liquidators constituted full payment of Froilan's obligation to the Shipping
Administration, which order had already become final, the claim of the Pan Oriental Shipping Co. against the
Republic of the Philippines was no longer feasible, said counterclaim was barred by prior judgment and stated
no cause of action. It was also alleged that movant was not subject to the jurisdiction of the court in connection
with the counterclaim. (Rec. on App. pp. 94-97). This motion was opposed by the Pan Oriental Shipping Co. in
its written opposition dated June 4, 1952 (Rec. on app. pp. 19-104).

10. In an order dated July 1, 1952, the lower court dismissed the counterclaim of the Pan Oriental Shipping Co.
as prayed for by the Republic of the Philippines (Rec. on App. pp. 104-106).

11. It if from this order of the lower court dismissing its counterclaim against the Government of the Republic
of the Philippines that Pan Oriental Shipping Co. has perfected the present appeal (Rec. on App. p. 107).

The order of the Court of First Instance of Manila, dismissing the counterclaim of the defendant Pan Oriental
Shipping Co., from which the latter has appealed, reads as follows:

This is a motion to dismiss the counterclaim interposed by the defendant in its answer to the complaint in
intervention.

"The counterclaim states as follows:

"COUNTERCLAIM

"As counterclaim against the intervenor Republic of the Philippines, the defendant alleges:

"1. That the defendant reproduces herein all the pertinent allegations of the foregoing answer to the complaint
in intervention

"2. That, as shown by the allegations of the foregoing answer to the complaint in intervention, the defendant Pan
Oriental Shipping Company is entitled to the possession of the vessel and the intervenor Republic of the
Philippines is bound under the contract of charter with option to purchase it entered into with the defendant to
deliver that possession to the defendant whether it actually has the said possession or it does not have that
possession from the plaintiff Fernando A. Froilan and deliver the same to the defendant;

12
"3. That, notwithstanding demand, the intervenor Republic of the Philippines has not to date complied with its
obligation of delivering or causing the delivery of the vessel to the defendant Pan Oriental Shipping
Company.1wphl.nt

"RELIEF

"WHEREFORE, the defendant respectfully prays that judgment be rendered ordering the intervenor Republic of
the Philippines alternatively to deliver to the defendants the possession of the said vessel, or to comply with its
obligation to the defendant or causing the delivery to the latter of the said vessel by recovering the same from
plaintiff, with costs.

"The defendant prays for such other remedy as the Court may deem just and equitable in the premises."

The ground of the motion to dismiss are (a) That the cause of action is barred by prior judgment; (b) That the
counterclaim states no cause of action; and (c) That this Honorable Court has no jurisdiction over the intervenor
government of the Republic of the Philippines in connection with the counterclaim of the defendant Pan Oriental
Shipping Co.

The intervenor contends that the complaint in intervention having been dismissed and no appeal having been
taken, the dismissal of said complaint is tantamount to a judgment.

The complaint in intervention did not contain any claim whatsoever against the defendant Pan Oriental Shipping
Co.; hence, the counterclaim has no foundation.

The question as to whether the Court has jurisdiction over the intervenor with regard to the counterclaim, the
Court is of the opinion that it has no jurisdiction over said intervenor.

It appearing, therefore, that the grounds of the motion to dismiss are well taken, the counterclaim of the defendant
is dismissed, without pronouncement as to costs.

The defendant's appeal is predicated upon the following assignments of error:

I. The lower court erred in dismissing the counterclaim on the ground of prior judgment.

II. The lower court erred in dismissing the counterclaim on the ground that the counterclaim had no foundation
because made to a complaint in intervention that contained no claim against the defendant.

III. The lower court erred in dismissing the counterclaim on the ground of alleged lack of jurisdiction over the
intervenor Republic of the Philippines.

We agree with appellant's contention that its counterclaim is not barred by prior judgment (order of February 8,
1952, dismissing the complaint in intervention), first, because said counterclaim was filed on November 29,
1951, before the issuance of the order invoked; and, secondly, because in said order of February 8, the court
dismissed the complaint in intervention, "without, of course, precluding the determination of the right of the
defendant in the instant case," and subject to the condition that the "release and cancellation of the chattel
mortgage does not, however, prejudge the question involved between the plaintiff and the defendant which is
still the subject of determination in this case." It is to be noted that the first condition referred to the right of the
defendant, as distinguished from the second condition that expressly specified the controversy between the
plaintiff and the defendant. That the first condition reserved the right of the defendant as against the intervenor,
is clearly to be deduced from the fact that the order of February 8 mentioned the circumstance that "the question

13
of the expenses of drydocking incurred by the defendant has been included in its counterclaim against the
plaintiff," apparently as one of the grounds for granting the motion to dismiss the complaint in intervention.

The defendant's failure to appeal from the order of February 8 cannot, therefore, be held as barring the defendant
from proceeding with its counterclaim, since, as already stated, said order preserved its right as against the
intervenor. Indeed, the maintenance of said right is in consonance with Rule 30, section 2, of the Rules of Court
providing that "if a counterclaim has been pleaded by a defendant prior to the service upon him of the plaintiff's
motion to dismiss, the action shall not be dismissed against the defendant's objection unless the counterclaim
can remain pending for independent adjudication by the court."

The lower court also erred in holding that, as the intervenor had not made any claim against the defendant, the
latter's counterclaim had no foundation. The complaint in intervention sought to recover possession of the vessel
in question from the plaintiff, and this claim is logically adverse to the position assumed by the defendant that it
has a better right to said possession than the plaintiff who alleges in his complaint that he is entitled to recover
the vessel from the defendant. At any rate a counterclaim should be judged by its own allegations, and not by
the averments of the adverse party. It should be recalled that the defendant's theory is that the plaintiff had already
lost his rights under the contract with the Shipping Administration and that, on the other hand, the defendant is
relying on the charter contract executed in its favor by the intervenor which is bound to protect the defendant in
its possession of the vessel. In other words, the counterclaim calls for specific performance on the part of the
intervenor. As to whether this counterclaim is meritorious is another question which is not now before us.

The other ground for dismissing the defendant's counterclaim is that the State is immune from suit. This is
untenable, because by filing its complaint in intervention the Government in effect waived its right of
nonsuability.

The immunity of the state from suits does not deprive it of the right to sue private parties in its own courts. The
state as plaintiff may avail itself of the different forms of actions open to private litigants. In short, by taking the
initiative in an action against a private party, the state surrenders its privileged position and comes down to the
level of the defendant. The latter automatically acquires, within certain limits, the right to set up whatever claims
and other defenses he might have against the state. The United States Supreme Court thus explains:

"No direct suit can be maintained against the United States. But when an action is brought by the United States
to recover money in the hands of a party who has a legal claim against them, it would be a very rigid principle
to deny to him the right of setting up such claim in a court of justice, and turn him around to an application to
Congress." (Sinco, Philippine Political Law, Tenth Ed., pp. 36-37, citing U. S. vs. Ringgold, 8 Pet. 150, 8 L. ed.
899.)

It is however, contended for the intervenor that, if there was at all any waiver, it was in favor of the plaintiff
against whom the complaint in intervention was directed. This contention is untenable. As already stated, the
complaint in intervention was in a sense in derogation of the defendant's claim over the possession of the vessel
in question.

Wherefore, the appealed order is hereby reversed and set aside and the case remanded to the lower court for
further proceedings. So ordered, without costs.

6) G.R. No. L-8169 December 29, 1913

ANTONIO M. A. BARRETTO, plaintiff-appellant,

vs.
JOSE SANTA MARINA, defendant-appellee.

14
Hausserman, Cohn and Fisher, for appellant.
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 31, 1909; and
that, as a second cause of action based upon the facts 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 P137,000 Philippine currency, and the interest thereon at
the legal rate, in 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:

15
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.

16
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

17
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,

18
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.

19
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.

DIGEST:

BUCTON V. GABAR

FACTS: In 1946, Josefina bought a parcel of land fr. the Villarin spouses, payable in installments. Josefina,
then entered into a verbal agreement w/ Nicanora whereby the latter would pay 1/2 of the price
(P3,000.00) & would then own 1/2 of the land.

Nicanora paid P1,000 in 1946 & P400 in 1948. Both were evidenced by receipts issued by Josefina.

After payment of the P1,000, Nicanora took possession of the portion of the land indicated to them by
Josefina & built thereon a nipa house. Subsequently, the nipa house was demolished & replaced by a
house of strong materials, w/ 3 apartments for rental purposes.

In 1947, the Villarin spouses executed a deed of sale in favor of Josefina. Nicanora then sought to
obtain a separate title for their portion of the land but Josefina refused on the ground that the entire land
was still mortgaged w/ the PNB as guarantee for a loan.

Nicanora continued enjoying possession of their portion of the land, planting fruit trees & receiving
rentals fr. the buildings.

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 In 1953, w/ Josefinas consent, Nicanora had the land resurveyed & subdivided preparatory to their
obtaining separate titles thereto. A fence was thereafter erected to demarcate the division. Nicanora
continued to insist on obtaining a separate title but Josefina refused.

Nicanora engaged the services of Atty. Bonifacio Regalado, & then Atty. Aquilino Pimentel, Jr. to
intercede, but to no avail. Hence, case in TC. TC rendered judgment for Nicanora.

On appeal, the CA reversed on the ground that since Nicanoras right of action is allegedly based on
the receipt executed in 1946, the same has prescribed pursuant to Art. 1144 of the CC w/c must be
brought w/in 10 years fr. the time the right of action accrues. When the complaint was filed, 22 years &
26 days had elapsed. Hence this appeal.

ISSUE: Whether or not the action of Nicanora has prescribed. No!

HELD:

The real & ultimate basis of Nicanoras action is their ownership of 1/2 of the lot coupled w/ their
possession thereof, w/c entitles them to a conveyance of the property. In Sapto, et. al. vs. Fabiana, the
Court, through J.B.L. Reyes, explained that under the circumstances, no enforcement of the contract is
needed, since the delivery of the possession of the land sold had consummated the sale & transferred
title to the purchaser, & that, actually, the action for conveyance is one to quiet title, i.e., to remove the
cloud upon Nicanoras ownership by the refusal of the Josefina to recognize the sale made. We held
therein: The prevailing rule is that the right of a plaintiff to have title to land quieted, as against one who
is asserting some adverse claim of lien thereon is not barred while the plaintiff or his grantors remain in
actual possession of the land, claiming to be owners thereof. The reason for this rule being that while the
owner in fee continues being liable to an action, proceeding or suit upon the adverse claim, he has a
continuing right to the aid of a court of equity to ascertain & determine the nature of such claim & its
effect on his title, or to assert any superior equity in his favor. He may wait until his possession is disturbed
or his title is attacked before taking steps to vindicate his right. But the rule that the Statute of Limitations
is not available as a defense to an action to remove a cloud fr. title can only be invoked by a complainant
when he is in possession. One who claims property w/c is in possession of another must, it seems, invoke
his remedy w/in the statutory period.

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