G.R. No.

76931 May 29, 1991

ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, petitioner,
vs.
COURT OF APPEALS and AMERICAN AIR-LINES INCORPORATED, respondents.
G.R. No. 76933 May 29, 1991
AMERICAN AIRLINES, INCORPORATED, petitioner,
vs.
COURT OF APPEALS and ORIENT AIR SERVICES & HOTEL REPRESENTATIVES,
INCORPORATED, respondents.
Francisco A. Lava, Jr. and Andresito X. Fornier for Orient Air Service and Hotel Representatives, Inc. Sycip,
Sala:ar, Hernande: & Gatmaitan for American Airlines, Inc.
PADILLA,
This case is a consolidation oI two (2) petitions Ior review on certiorari oI a decision
1
oI the Court oI Appeals
in CA-G.R. No. CV-04294, entitled "American Airlines, Inc. vs. Orient Air Services and Hotel Representatives,
Inc." which aIIirmed, with modiIication, the decision
2
oI the Regional Trial Court oI Manila, Branch IV, which
dismissed the complaint and granted therein deIendant's counterclaim Ior agent's overriding commission and
damages.
The antecedent Iacts are as Iollows:
On 15 January 1977, American Airlines, Inc. (hereinaIter reIerred to as American Air), an air carrier oIIering
passenger and air cargo transportation in the Philippines, and Orient Air Services and Hotel Representatives
(hereinaIter reIerred to as Orient Air), entered into a General Sales Agency Agreement (hereinaIter reIerred to
as the Agreement), whereby the Iormer authorized the latter to act as its exclusive general sales agent within the
Philippines Ior the sale oI air passenger transportation. Pertinent provisions oI the agreement are reproduced, to
wit:
WITNESSETH
In consideration oI the mutual convenants herein contained, the parties hereto agree as Iollows:
1. Representation of American by Orient Air Services
Orient Air Services will act on American's behalI as its exclusive General Sales Agent within the Philippines,
including any United States military installation therein which are not serviced by an Air Carrier Representation
OIIice (ACRO), Ior the sale oI air passenger transportation. The services to be perIormed by Orient Air
Services shall include:
(a) soliciting and promoting passenger traIIic Ior the services oI American and, iI necessary, employing staII
competent and suIIicient to do so;
(b) providing and maintaining a suitable area in its place oI business to be used exclusively Ior the transaction
oI the business oI American;
(c) arranging Ior distribution oI American's timetables, tariIIs and promotional material to sales agents and the
general public in the assigned territory;
(d) servicing and supervising oI sales agents (including such sub-agents as may be appointed by Orient Air
Services with the prior written consent oI American) in the assigned territory including iI required by American
the control oI remittances and commissions retained; and (e) holding out a passenger reservation Iacility to sales
agents and the general public in the assigned territory.
In connection with scheduled or non-scheduled air passenger transportation within the United States, neither
Orient Air Services nor its sub-agents will perIorm services Ior any other air carrier similar to those to be
perIormed hereunder Ior American without the prior written consent oI American. Subject to periodic
instructions and continued consent Irom American, Orient Air Services may sell air passenger transportation to
be perIormed within the United States by other scheduled air carriers provided American does not provide
substantially equivalent schedules between the points involved.
xxx xxx xxx 4. Remittances
Orient Air Services shall remit in United States dollars to American the ticket stock or exchange orders, less
commissions to which Orient Air Services is entitled hereunder, not less Irequently than semi-monthly, on the
15th and last days oI each month Ior sales made during the preceding halI month.
All monies collected by Orient Air Services Ior transportation sold hereunder on American's ticket stock or on
exchange orders, less applicable commissions to which Orient Air Services is entitled hereunder, are the
property oI American and shall be held in trust by Orient Air Services until satisIactorily accounted Ior to
American.
5. Commissions
American will pay Orient Air Services commission on transportation sold hereunder by Orient Air Services or
its sub-agents as Iollows:
(a) Sales agency commission
American will pay Orient Air Services a sales agency commission Ior all sales oI transportation by Orient Air
Services or its sub-agents over American's services and any connecting through air transportation, when made
on American's ticket stock, equal to the Iollowing percentages oI the tariII Iares and charges:
(i) For transportation solely between points within the United States and between such points and Canada: 7
or such other rate(s) as may be prescribed by the Air TraIIic ConIerence oI America.
(ii) For transportation included in a through ticket covering transportation between points other than those
described above: 8 or such other rate(s) as may be prescribed by the International Air Transport Association.
(b) Overriding commission
In addition to the above commission American will pay Orient Air Services an overriding commission oI 3 oI
the tariII Iares and charges Ior all sales oI transportation over American's service by Orient Air Service or its
sub-agents.
xxx xxx xxx 10. efault
II Orient Air Services shall at any time deIault in observing or perIorming any oI the provisions oI this
Agreement or shall become bankrupt or make any assignment Ior the beneIit oI or enter into any agreement or
promise with its creditors or go into liquidation, or suIIer any oI its goods to be taken in execution, or iI it
ceases to be in business, this Agreement may, at the option oI American, be terminated Iorthwith and American
may, without prejudice to any oI its rights under this Agreement, take possession oI any ticket Iorms, exchange
orders, traIIic material or other property or Iunds belonging to American.
11. IATA and ATC Rules
The provisions oI this Agreement are subject to any applicable rules or resolutions oI the International Air
Transport Association and the Air TraIIic ConIerence oI America, and such rules or resolutions shall control in
the event oI any conIlict with the provisions hereoI.
xxx xxx xxx 13. Termination
American may terminate the Agreement on two days' notice in the event Orient Air Services is unable to
transIer to the United States the Iunds payable by Orient Air Services to American under this Agreement. Either
party may terminate the Agreement without cause by giving the other 30 days' notice by letter, telegram or
cable.
xxx xxx xxx
3

On 11 May 1981, alleging that Orient Air had reneged on its obligations under the Agreement by Iailing to
promptly remit the net proceeds oI sales Ior the months oI January to March 1981 in the amount oI US
$254,400.40, American Air by itselI undertook the collection oI the proceeds oI tickets sold originally by Orient
Air and terminated Iorthwith the Agreement in accordance with Paragraph 13 thereoI (Termination). Four (4)
days later, or on 15 May 1981, American Air instituted suit against Orient Air with the Court oI First
Instance oI Manila, Branch 24, Ior Accounting with Preliminary Attachment or Garnishment, Mandatory
Injunction and Restraining Order
4
averring the aIoresaid basis Ior the termination oI the Agreement as well as
therein deIendant's previous record oI Iailures "to promptly settle past outstanding reIunds oI which there were
available Iunds in the possession oI the deIendant, . . . to the damage and prejudice oI plaintiII."
5

In its Answer
6
with counterclaim dated 9 July 1981, deIendant Orient Air denied the material allegations oI the
complaint with respect to plaintiII's entitlement to alleged unremitted amounts, contending that aIter application
thereoI to the commissions due it under the Agreement, plaintiII in Iact still owed Orient Air a balance in
unpaid overriding commissions. Further, the deIendant contended that the actions taken by American Air in the
course oI terminating the Agreement as well as the termination itselI were untenable, Orient Air claiming that
American Air's precipitous conduct had occasioned prejudice to its business interests.
Finding that the record and the evidence substantiated the allegations oI the deIendant, the trial court ruled in its
Iavor, rendering a decision dated 16 July 1984, the dispositive portion oI which reads:
WHEREFORE, all the Ioregoing premises considered, judgment is hereby rendered in Iavor oI deIendant and
against plaintiII dismissing the complaint and holding the termination made by the latter as aIIecting the GSA
agreement illegal and improper and order the plaintiII to reinstate deIendant as its general sales agent Ior
passenger tranportation in the Philippines in accordance with said GSA agreement; plaintiII is ordered to pay
deIendant the balance oI the overriding commission on total Ilown revenue covering the period Irom March 16,
1977 to December 31, 1980 in the amount oI US$84,821.31 plus the additional amount oI US$8,000.00 by way
oI proper 3 overriding commission per month commencing Irom January 1, 1981 until such reinstatement or
said amounts in its Philippine peso equivalent legally prevailing at the time oI payment plus legal interest to
commence Irom the Iiling oI the counterclaim up to the time oI payment. Further, plaintiII is directed to pay
deIendant the amount oI One Million Five Hundred Thousand (Pl,500,000.00) pesos as and Ior exemplary
damages; and the amount oI Three Hundred Thousand (P300,000.00) pesos as and by way oI attorney's Iees.
Costs against plaintiII.
7

On appeal, the Intermediate Appellate Court (now Court oI Appeals) in a decision promulgated on 27 January
1986, aIIirmed the Iindings oI the court a quo on their material points but with some modiIications with respect
to the monetary awards granted. The dispositive portion oI the appellate court's decision is as Iollows:
WHEREFORE, with the Iollowing modiIications
1) American is ordered to pay Orient the sum oI US$53 , 491 11 representing the balance oI the latter's
overriding commission covering the period March 16, 1977 to December 31, 1980, or its Philippine peso
equivalent in accordance with the official rate of exchange legally prevailing on July 10 , 1981 , the date the
counterclaim was filed ;
2) American is ordered to pay Orient the sum oI US$7,440.00 as the latter's overriding commission per month
starting January 1, 1981 until date of termination , May 9 , 1981 or its Philippine peso equivalent in accordance
with the official rate of exchange legally prevailing on July 10 , 1981 , the date the counterclaim was filed
3) American is ordered to pay interest of 12 on said amounts Irom July 10, 1981 the date the answer with
counterclaim was Iiled, until Iull payment;
4) American is ordered to pay Orient exemplary damages of P200 , 000 00 ;
5) American is ordered to pay Orient the sum oI P25,000.00 as attorneys fees
the rest oI the appealed decision is aIIirmed.
Costs against American.


American Air moved Ior reconsideration oI the aIorementioned decision, assailing the substance thereoI and
arguing Ior its reversal. The appellate court's decision was also the subject oI a Motion Ior Partial
Reconsideration by Orient Air which prayed Ior the restoration oI the trial court's ruling with respect to the
monetary awards. The Court oI Appeals, by resolution promulgated on 17 December 1986, denied American
Air's motion and with respect to that oI Orient Air, ruled thus:
Orient's motion Ior partial reconsideration is denied insoIar as it prays Ior aIIirmance oI the trial court's award
oI exemplary damages and attorney's Iees, but granted insoIar as the rate oI exchange is concerned. The
decision oI January 27, 1986 is modiIied in paragraphs (1) and (2) oI the dispositive part so that the payment oI
the sums mentioned therein shall be at their Philippine peso equivalent in accordance with the official rate of
exchange legally prevailing on the date of actual payment .
9

Both parties appealed the aIoresaid resolution and decision oI the respondent court, Orient Air as petitioner in
G.R. No. 76931 and American Air as petitioner in G.R. No. 76933. By resolution
10
oI this Court dated 25
March 1987 both petitions were consolidated, hence, the case at bar.
The principal issue Ior resolution by the Court is the extent oI Orient Air's right to the 3 overriding
commission. It is the stand oI American Air that such commission is based only on sales oI its services actually
negotiated or transacted by Orient Air, otherwise reIerred to as "ticketed sales." As basis thereoI, primary
reliance is placed upon paragraph 5(b) oI the Agreement which, in reiteration, is quoted as Iollows:
5. Commissions a) . . .
b) Overriding Commission
In addition to the above commission, American will pay Orient Air Services an overriding commission oI 3 oI
the tariII Iees and charges Ior all sales of transportation over Americans services by Orient Air Services or its
sub-agents (Emphasis supplied)
Since Orient Air was allowed to carry only the ticket stocks oI American Air, and the Iormer not having opted
to appoint any sub-agents, it is American Air's contention that Orient Air can claim entitlement to the disputed
overriding commission based only on ticketed sales . This is supposed to be the clear meaning oI the
underscored portion oI the above provision. Thus, to be entitled to the 3 overriding commission, the sale must
be made by Orient Air and the sale must be done with the use oI American Air's ticket stocks.
On the other hand, Orient Air contends that the contractual stipulation oI a 3 overriding commission covers
the total revenue oI American Air and not merely that derived Irom ticketed sales undertaken by Orient Air. The
latter, in justiIication oI its submission, invokes its designation as the exclusive General Sales Agent oI
American Air, with the corresponding obligations arising Irom such agency, such as, the promotion and
solicitation Ior the services oI its principal. In eIIect, by virtue oI such exclusivity, "all sales oI transportation
over American Air's services are necessarily by Orient Air."
11

It is a well settled legal principle that in the interpretation oI a contract, the entirety thereoI must be taken into
consideration to ascertain the meaning oI its provisions.
12
The various stipulations in the contract must be read
together to give eIIect to all.
13
AIter a careIul examination oI the records, the Court Iinds merit in the
contention oI Orient Air that the Agreement, when interpreted in accordance with the Ioregoing principles,
entitles it to the 3 overriding commission based on total revenue, or as reIerred to by the parties, "total Ilown
revenue."
As the designated exclusive General Sales Agent oI American Air, Orient Air was responsible Ior the
promotion and marketing oI American Air's services Ior air passenger transportation, and the solicitation oI
sales thereIor. In return Ior such eIIorts and services, Orient Air was to be paid commissions oI two (2) kinds:
Iirst, a sales agency commission, ranging Irom 7-8 oI tariII Iares and charges Irom sales by Orient Air when
made on American Air ticket stock ; and second, an overriding commission oI 3 oI tariII Iares and charges Ior
all sales oI passenger transportation over American Air services. It is immediately observed that the
precondition attached to the Iirst type oI commission does not obtain Ior the second type oI commissions. The
latter type oI commissions would accrue Ior sales oI American Air services made not on its ticket stock but on
the ticket stock oI other air carriers sold by such carriers or other authorized ticketing Iacilities or travel agents.
To rule otherwise, i e ., to limit the basis oI such overriding commissions to sales Irom American Air ticket
stock would erase any distinction between the two (2) types oI commissions and would lead to the absurd
conclusion that the parties had entered into a contract with meaningless provisions. Such an interpretation must
at all times be avoided with every eIIort exerted to harmonize the entire Agreement.
An additional point beIore Iinally disposing oI this issue. It is clear Irom the records that American Air was the
party responsible Ior the preparation oI the Agreement. Consequently, any ambiguity in this "contract oI
adhesion" is to be taken " contra proferentem ", i e ., construed against the party who caused the ambiguity and
could have avoided it by the exercise oI a little more care. Thus, Article 1377 oI the Civil Code provides that
the interpretation oI obscure words or stipulations in a contract shall not Iavor the party who caused the
obscurity.
14
To put it diIIerently, when several interpretations oI a provision are otherwise equally proper, that
interpretation or construction is to be adopted which is most Iavorable to the party in whose Iavor the provision
was made and who did not cause the ambiguity.
15
We thereIore agree with the respondent appellate court's
declaration that:
Any ambiguity in a contract, whose terms are susceptible oI diIIerent interpretations, must be read against the
party who draIted it.
16

We now turn to the propriety oI American Air's termination oI the Agreement. The respondent appellate court,
on this issue, ruled thus:
It is not denied that Orient withheld remittances but such action Iinds justiIication Irom paragraph 4 oI the
Agreement, Exh. F, which provides Ior remittances to American less commissions to which Orient is entitled,
and Irom paragraph 5(d) which speciIically allows Orient to retain the Iull amount oI its commissions. Since, as
stated ante, Orient is entitled to the 3 override. American's premise, thereIore, Ior the cancellation oI the
Agreement did not exist. . . ."
We agree with the Iindings oI the respondent appellate court. As earlier established, Orient Air was entitled to
an overriding commission based on total Ilown revenue. American Air's perception that Orient Air was remiss
or in deIault oI its obligations under the Agreement was, in Iact, a situation where the latter acted in accordance
with the Agreementthat oI retaining Irom the sales proceeds its accrued commissions beIore remitting the
balance to American Air. Since the latter was still obligated to Orient Air by way oI such commissions. Orient
Air was clearly justiIied in retaining and reIusing to remit the sums claimed by American Air. The latter's
termination oI the Agreement was, thereIore, without cause and basis, Ior which it should be held liable to
Orient Air.
On the matter oI damages, the respondent appellate court modiIied by reduction the trial court's award oI
exemplary damages and attorney's Iees. This Court sees no error in such modiIication and, thus, aIIirms the
same.
It is believed, however, that respondent appellate court erred in aIIirming the rest oI the decision oI the trial
court. We reIer particularly to the lower court's decision ordering American Air to "reinstate deIendant as its
general sales agent Ior passenger transportation in the Philippines in accordance with said GSA Agreement."
By aIIirming this ruling oI the trial court, respondent appellate court, in eIIect, compels American Air to extend
its personality to Orient Air. Such would be violative oI the principles and essence oI agency, deIined by law as
a contract whereby "a person binds himselI to render some service or to do something in representation or on
behalI oI another, WITH THE CONSENT OR AUTHORITY OF THE LATTER .
17
(emphasis supplied) In an
agent-principal relationship, the personality oI the principal is extended through the Iacility oI the agent. In so
doing, the agent, by legal Iiction, becomes the principal, authorized to perIorm all acts which the latter would
have him do. Such a relationship can only be eIIected with the consent oI the principal, which must not, in any
way, be compelled by law or by any court. The Agreement itselI between the parties states that "either party
may terminate the Agreement without cause by giving the other 30 days' notice by letter, telegram or cable."
(emphasis supplied) We, thereIore, set aside the portion oI the ruling oI the respondent appellate court
reinstating Orient Air as general sales agent oI American Air.
WHEREFORE, with the Ioregoing modiIication, the Court AFFIRMS the decision and resolution oI the
respondent Court oI Appeals, dated 27 January 1986 and 17 December 1986, respectively. Costs against
petitioner American Air.
SO ORDERED.
Melencio-Herrera, and Regalado, JJ., concur. Paras, J., took no part. Son is a partner in one of the counsel.
Sarmiento, J., is on leave.
(
Footnotes
1 Penned by Justice SeraIin B. Camilon and concurred in by Justices Jose C. Campos, Jr. and Desiderio P.
Jurado.
2 Penned by Judge Herminio C. Mariano.
3 Rollo , pp. 110-118.
4 Rollo , p. 102.
5 Ibid ., p. 104.
6 Ibid ., p. 121.
7 Rollo , p. 162.
8 Rollo , pp. 173-174.
9 Ibid ., p. 210.
10 Rollo , p. 212.
11 Rollo , p. 291.
12 NAESS Shipping Philippines, Inc. vs. NLRC, G.R. No. 73441, 4 September 1987, 153 SCRA 657.
13 North Negros Sugar Co. vs. Compania General de Tabacos, No. L-9277, 29 March 1957; Article 1374, Civil
Code oI the Philippines.
14 Equitable Banking Corporation vs. Intermediate Appellate Court, G.R. No. 74451, 25 May 1988, 161 SCRA
518.
15 Government oI the Philippine Islands vs. Derham Brothers and the International Banking Corporation, 36
Phil. 960.


G.R. No. L-24332 1anuary 31, 197
RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS, petitioner,
vs.
FELIX GO CHAN & SONS REALTY CORPORATION and COURT OF APPEALS, respondents.
Seno, Mendo:a & Associates for petitioner. Ramon uterte for private respondent.
MUOZ PALMA,
This is a case oI an attorney-in-Iact, Simeon Rallos, who aIter oI 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 oI the estate oI the went to court to have the sale declared
uneanIorceable 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 Ior Review on certiorari.
The Iollowing Iacts are not disputed. Concepcion and Gerundia both surnamed Rallos were sisters and
registered co-owners oI a parcel oI land known as Lot No. 5983 oI the Cadastral Survey oI Cebu covered by
TransIer CertiIicate oI Title No. 11116 oI the Registry oI Cebu. On April 21, 1954, the sisters executed a
special power oI attorney in Iavor oI their brother, Simeon Rallos, authorizing him to sell Ior and in their behalI
lot 5983. On March 3, 1955, Concepcion Rallos died. On September 12, 1955, Simeon Rallos sold the
undivided shares oI his sisters Concepcion and Gerundia in lot 5983 to Felix Go Chan & Sons Realty
Corporation Ior the sum oI P10,686.90. The deed oI sale was registered in the Registry oI Deeds oI Cebu, TCT
No. 11118 was cancelled, and a new transIer certiIicate oI Title No. 12989 was issued in the named oI the
vendee.
On May 18, 1956 Ramon Rallos as administrator oI the Intestate Estate oI Concepcion Rallos Iiled a complaint
docketed as Civil Case No. R-4530 oI the Court oI First Instance oI Cebu, praying (1) that the sale oI the
undivided share oI the deceased Concepcion Rallos in lot 5983 be d unenIorceable, and said share be
reconveyed to her estate; (2) that the CertiIicate oI 'title issued in the name oI Felix Go Chan & Sons Realty
Corporation be cancelled and another title be issued in the names oI the corporation and the "Intestate estate oI
Concepcion Rallos" in equal undivided and (3) that plaintiII be indemniIied by way oI attorney's Iees and
payment oI costs oI suit. Named party deIendants were Felix Go Chan & Sons Realty Corporation, Simeon
Rallos, and the Register oI Deeds oI Cebu, but subsequently, the latter was dropped Irom the complaint. The
complaint was amended twice; deIendant Corporation's Answer contained a crossclaim against its co-deIendant,
Simon Rallos while the latter Iiled 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 oI their estates.
AIter trial the court a quo rendered judgment with the Iollowing dispositive portion:
A. On PlaintiIIs Complaint
(1) Declaring the deed oI sale, Exh. "C", null and void insoIar as the one-halI pro-indiviso share oI Concepcion
Rallos in the property in question, Lot 5983 oI the Cadastral Survey oI Cebu is concerned;
(2) Ordering the Register oI Deeds oI Cebu City to cancel TransIer CertiIicate oI Title No. 12989 covering Lot
5983 and to issue in lieu thereoI another in the names oI FELIX GO CHAN & SONS REALTY
CORPORATION and the Estate oI Concepcion Rallos in the proportion oI one-halI (1/2) share each pro-
indiviso;
(3) Ordering Felix Go Chan & Sons Realty Corporation to deliver the possession oI an undivided one-halI (1/2)
share oI Lot 5983 to the herein plaintiII;
(4) Sentencing the deIendant Juan T. Borromeo, administrator oI the Estate oI Simeon Rallos, to pay to plaintiII
in concept oI reasonable attorney's Iees the sum oI P1,000.00; and (5) Ordering both deIendants to pay the costs
jointly and severally.
B. On GO CHANTS Cross-Claim:
(1) Sentencing the co-deIendant Juan T. Borromeo, administrator oI the Estate oI Simeon Rallos, to pay to
deIendant Felix Co Chan & Sons Realty Corporation the sum oI P5,343.45, representing the price oI one-halI
(1/2) share oI lot 5983;
(2) Ordering co-deIendant Juan T. Borromeo, administrator oI the Estate oI Simeon Rallos, to pay in concept oI
reasonable attorney's Iees to Felix Go Chan & Sons Realty Corporation the sum oI P500.00.
C. On Third-Party Complaint oI deIendant Juan T. Borromeo administrator oI Estate oI Simeon Rallos, against
JoseIina Rallos special administratrix oI the Estate oI Gerundia Rallos:
(1) Dismissing the third-party complaint without prejudice to Iiling either a complaint against the regular
administrator oI the Estate oI Gerundia Rallos or a claim in the Intestate-Estate oI Cerundia Rallos, covering the
same subject-matter oI 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 oI Appeals Irom the Ioregoing
judgment insoIar as it set aside the sale oI the one-halI (1/2) share oI Concepcion Rallos. The appellate tribunal,
as adverted to earlier, resolved the appeal on November 20, 1964 in Iavor oI the appellant corporation
sustaining the sale in question.
1
The appellee administrator, Ramon Rallos, moved Ior a reconsider oI the
decision but the same was denied in a resolution oI March 4, 1965.
2

What is the legal eIIect oI an act perIormed by an agent aIter the death oI his principal? Applied more
particularly to the instant case, We have the query. is the sale oI the undivided share oI Concepcion Rallos in lot
5983 valid although it was executed by the agent aIter the death oI his principal? What is the law in this
jurisdiction as to the eIIect oI the death oI the principal on the authority oI the agent to act Ior and in behalI oI
the latter? Is the Iact oI knowledge oI the death oI the principal a material Iactor in determining the legal eIIect
oI an act perIormed aIter such death?
BeIore proceedings to the issues, We shall brieIly restate certain principles oI 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 oI 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 oI another by one who has no authority or the legal representation or who has acted beyond his
powers, shall be unenIorceable, unless it is ratiIied, expressly or impliedly, by the person on whose behalI it has
been executed, beIore it is revoked by the other contracting party.
4
Article 1403 (1) oI the same Code also
provides:
ART. 1403. The Iollowing contracts are unenIorceable, unless they are justiIied:
(1) Those entered into in the name oI another person by one who hi - been given no authority or legal
representation or who has acted beyond his powers; ..
Out oI the above given principles, sprung the creation and acceptance oI the relationship of agency whereby one
party, caged the principal ( mandante ), authorizes another, called the agent ( mandatario ), to act Ior and in his
behalI in transactions with third persons. The essential elements oI agency are: (1) there is consent, express or
implied oI the parties to establish the relationship; (2) the object is the execution oI a juridical act in relation to a
third person; (3) the agents acts as a representative and not Ior himselI, and (4) the agent acts within the scope
oI his authority.
5

Agency is basically personal representative , and derivative in nature. The authority oI the agent to act
emanates Irom the powers granted to him by his principal; his act is the act oI the principal iI done within the
scope oI the authority. Qui facit per alium facit se . "He who acts through another acts himselI".
6

2. There are various ways oI extinguishing agency,
7
but her We are concerned only with one cause death oI
the principal Paragraph 3 oI Art. 1919 oI the Civil Code which was taken Irom Art. 1709 oI the Spanish Civil
Code provides:
ART. 1919. Agency is extinguished .
xxx xxx xxx 3. By the death , civil interdiction, insanity or insolvency oI the principal or oI the agent; ...
(Emphasis supplied)
By reason oI the very nature oI the relationship between Principal and agent, agency is extinguished by the
death oI the principal or the agent. This is the law in this jurisdiction.


Manresa commenting on Art. 1709 oI the Spanish Civil Code explains that the rationale Ior the law is Iound in
the furidical basis oI agency which is representation Them being an in. integration oI the personality oI the
principal integration that oI the agent it is not possible Ior the representation to continue to exist once the death
oI either is establish. Pothier agrees with Manresa that by reason oI the nature oI agency, death is a necessary
cause Ior its extinction. Laurent says that the juridical tie between the principal and the agent is severed ipso
jure upon the death oI either without necessity Ior the heirs oI the Iact to notiIy the agent oI the Iact oI death oI
the Iormer.
9

The same rule prevails at common law the death oI the principal eIIects instantaneous and absolute
revocation oI the authority oI 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 conIer. red upon an agent is
dissolved by the principal's death, and any attempted execution oI the power aIterward is not binding on the
heirs or representatives oI the deceased.
11

3. Is the general rule provided Ior in Article 1919 that the death oI the principal or oI the agent extinguishes the
agency, subject to any exception, and iI so, is the instant case within that exception? That is the determinative
point in issue in this litigation. It is the contention oI respondent corporation which was sustained by respondent
court that notwithstanding the death oI the principal Concepcion Rallos the act oI the attorney-in-Iact, Simeon
Rallos in selling the Iormer's sham in the property is valid and enIorceable inasmuch as the corporation acted in
good Iaith in buying the property in question.
Articles 1930 and 1931 oI the Civil Code provide the exceptions to the general rule aIore-mentioned.
ART. 1930. The agency shall remain in Iull Iorce and eIIect even aIter the death oI the principal, iI it has been
constituted in the common interest oI the latter and oI the agent, or in the interest oI a third person who has
accepted the stipulation in his Iavor.
ART. 1931. Anything done by the agent, without knowledge oI the death oI the principal or oI any other cause
which extinguishes the agency, is valid and shall be Iully eIIective with respect to third persons who may have
contracted with him in good. Iaith.
Article 1930 is not involved because admittedly the special power oI attorney executed in Iavor oI Simeon
Rallos was not coupled with an interest.
Article 1931 is the applicable law. Under this provision, an act done by the agent aIter the death oI his principal
is valid and eIIective 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
Iaith here means that the third person was not aware oI the death oI the principal at the time he contracted with
said agent. These two requisites must concur the absence oI one will render the act oI the agent invalid and
unenIorceable.
In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew oI the death oI his principal at
the time he sold the latter's share in Lot No. 5983 to respondent corporation. The knowledge oI the death is
clearly to be inIerred Irom the pleadings Iiled by Simon Rallos beIore the trial court.
12
That Simeon Rallos
knew oI the death oI his sister Concepcion is also a Iinding oI Iact oI the court a quo
13
and oI respondent
appellate court when the latter stated that Simon Rallos 'must have known oI the death oI his sister, and yet he
proceeded with the sale oI the lot in the name oI both his sisters Concepcion and Gerundia Rallos without
inIorming appellant (the realty corporation) oI the death oI the Iormer.
14

On the basis oI the established knowledge oI Simon Rallos concerning the death oI his principal Concepcion
Rallos, Article 1931 of the Civil Code is inapplicable. The law expressly requires Ior its application lack oI
knowledge on the part oI the agent oI the death oI his principal; it is not enough that the third person acted in
good Iaith. Thus in Buason & Reyes v. Panuyas, the Court applying Article 1738 oI the old Civil rode now Art.
1931 oI the new Civil Code sustained the validity , oI a sale made aIter the death oI the principal because it was
not shown that the agent knew of his principals demise .
15
To the same eIIect is the case oI Herrera, et al., v.
Luy Kim Guan, et al. , 1961, where in the words oI Justice Jesus Barrera the Court stated:
... even granting arguemendo that Luis Herrera did die in 1936, plaintiIIs presented no prooI and there is no
indication in the record, that the agent Luy Kim Guan was aware oI the death oI his principal at the time he sold
the property. The death 6I the principal does not render the act oI an agent unenIorceable, where the latter had
no knowledge oI such extinguishment oI the agency. (1 SCRA 406, 412) 4. In sustaining the validity oI the sale
to respondent consideration the Court oI Appeals reasoned out that there is no provision in the Code which
provides that whatever is done by an agent having knowledge oI the death oI his principal is void even with
respect to third persons who may have contracted with him in good Iaith and without knowledge oI the death oI
the principal.
16

We cannot see the merits oI the Ioregoing argument as it ignores the existence oI the general rule enunciated in
Article 1919 that the death oI the principal extinguishes the agency. That being the general rule it Iollows a
fortiori that any act oI an agent aIter the death oI his principal is void ab initio unless the same Iags under the
exception provided Ior in the aIorementioned 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 oI its terms Ior otherwise the courts will be involved in a process oI legislation outside oI their judicial
Iunction.
5. Another argument advanced by respondent court is that the vendee acting in good Iaith relied on the power oI
attorney which was duly registered on the original certiIicate oI title recorded in the Register oI Deeds oI the
province oI Cebu, that no notice oI the death was aver annotated on said certiIicate oI title by the heirs oI the
principal and accordingly they must suIIer the consequences oI such omission.
17

To support such argument reIerence is made to a portion in Manresas Commentaries which We quote:
II the agency has been granted Ior the purpose oI contracting with certain persons, the revocation must be made
known to them. But iI the agency is general iii nature, without reIerence to particular person with whom the
agent is to contract, it is suIIicient that the principal exercise due diligence to make the revocation oI the agency
publicity known.
In case oI a general power which does not speciIy 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 Iaith, Without knowledge oI
the revocation, are valid. In such case, the principal may exercise his right against the agent, who, knowing oI
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 oI revocation by an act oI the principal as a mode oI terminating an agency
which is to be distinguished Irom revocation by operation of law such as death oI the principal which obtains in
this case. On page six oI this Opinion We stressed that by reason oI the very nature oI the relationship between
principal and agent, agency is extinguished ipso fure upon the death oI either principal or agent. Although a
revocation oI a power oI attorney to be eIIective must be communicated to the parties concerned,
1
yet a
revocation by operation oI law, such as by death oI the principal is, as a rule, instantaneously eIIective
inasmuch as "by legal Iiction the agent's exercise oI authority is regarded as an execution oI the principal's
continuing will.
19
With death, the principal's will ceases or is the oI authority is extinguished.
The Civil Code does not impose a duty on the heirs to notiIy the agent oI the death oI the principal What the
Code provides in Article 1932 is that, iI 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 oI the latter. Hence, the Iact
that no notice oI the death oI the principal was registered on the certiIicate oI title oI the property in the OIIice
oI the Register oI Deeds, is not Iatal to the cause oI the estate oI the principal 6. Holding that the good Iaith oI a
third person in said with an agent aIIords the Iormer suIIicient protection, respondent court drew a "parallel"
between the instant case and that oI an innocent purchaser Ior value oI a land, stating that iI a person purchases
a registered land Irom one who acquired it in bad Iaith even to the extent oI Ioregoing or IalsiIying the deed
oI sale in his Iavor the registered owner has no recourse against such innocent purchaser Ior value but only
against the Iorger.
20

To support the correctness oI this respondent corporation, in its brieI, cites the case oI Blondeau, et al., v. Nano
and Jallefo , 61 Phil. 625. We quote Irom the brieI:
In the case oI Angel Blondeau et al. v. Agustin Nano et al., 61 Phil. 630, one Vallejo was a co-owner oI lands
with Agustin Nano. The latter had a power oI attorney supposedly executed by Vallejo Nano in his Iavor.
Vallejo delivered to Nano his land titles. The power was registered in the OIIice oI the Register oI Deeds. When
the lawyer-husband oI Angela Blondeau went to that OIIice, he Iound all in order including the power oI
attorney. But Vallejo denied having executed the power The lower court sustained Vallejo and the plaintiII
Blondeau appealed. Reversing the decision oI the court a quo, the Supreme Court, quoting the ruling in the case
oI Eliason v. Wilborn, 261 U.S. 457, held:
But there is a narrower ground on which the deIenses oI the deIendant- appellee must be overruled. Agustin
Nano had possession oI Jose Vallejo's title papers. Without those title papers handed over to Nano with the
acquiescence oI Vallejo, a Iraud could not have been perpetuated. When Fernando de la Canters, a member oI
the Philippine Bar and the husband oI Angela Blondeau, the principal plaintiII, searched the registration record,
he Iound them in due Iorm including the power oI attorney oI Vallajo in Iavor oI Nano. II this had not been so
and iI thereaIter the proper notation oI the encumbrance could not have been made, Angela Blondeau would not
have sent P12,000.00 to the deIendant Vallejo.' An executed transIer oI registered lands placed by the registered
owner thereoI in the hands oI another operates as a representation to a third party that the holder oI the transIer
is authorized to deal with the land.
As between two innocent persons, one oI whom must suIIer the consequence oI a breach oI trust, the one who
made it possible by his act oI coincidence bear the loss. (pp. 19-21)
The Blondeau decision, however, is not on all Iours with the case beIore Us because here We are conIronted
with one who admittedly was an agent oI his sister and who sold the property oI the latter aIter her death with
Iull knowledge oI such death. The situation is expressly covered by a provision oI law on agency the terms oI
which are clear and unmistakable leaving no room Ior an interpretation contrary to its tenor, in the same manner
that the ruling in Blondeau and the cases cited therein Iound a basis in Section 55 oI the Land Registration Law
which in part provides:
xxx xxx xxx
The production oI the owner's duplicate certiIicate whenever any voluntary instrument is presented Ior
registration shall be conclusive authority Irom the registered owner to the register oI deeds to enter a new
certiIicate or to make a memorandum oI registration in accordance with such instruments, and the new
certiIicate or memorandum Shall be binding upon the registered owner and upon all persons claiming under him
in Iavor oI every purchaser Ior value and in good Iaith: Provided however , That in all cases oI registration
provided by Iraud, the owner may pursue all his legal and equitable remedies against the parties to such Iraud
without prejudice, however, to the right, oI any innocent holder Ior value oI a certiIicate oI title. ... (Act No. 496
as amended) 7. One last point raised by respondent corporation in support oI the appealed decision is an 1842
ruling oI the Supreme Court oI Pennsylvania in Cassiday v. McKen:ie wherein payments made to an agent aIter
the death oI the principal were held to be "good", "the parties being ignorant oI the death". Let us take note that
the Opinion oI Justice Rogers was premised on the statement that the parties were ignorant of the death of the
principal. We quote Irom that decision the Iollowing:
... Here the precise point is, whether a payment to an agent when the Parties are ignorant oI the death is a good
payment. in addition to the case in Campbell beIore cited, the same judge Lord Ellenboruogh, has decided in 5
Esp. 117, the general question that a payment aIter the death oI principal is not good. Thus, a payment oI
sailor's wages to a person having a power oI attorney to receive them, has been held void when the principal
was dead at the time oI the payment. II, by this case, it is meant merely to decide the general proposition that by
operation oI law the death oI the principal is a revocation oI the powers oI the attorney, no objection can be
taken to it. But iI it intended to say that his principle applies where there was 110 notice oI death, or opportunity
oI twice I must be permitted to dissent Irom it.
... That a payment may be good today, or bad tomorrow, Irom the accident circumstance oI the death oI 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 oI the agent, done bona fide in ignorance of the death of his
principal are held valid and binding upon the heirs oI 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. McKen:ie 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 oI the agent thereaIter perIormed, yet that where a payment has been made in ignorance
oI the death, such payment will be good. The leading case so holding is that oI Cassiday v. McKen:ie , 4 Watts
& S. (Pa) 282, 39 Am. 76, where, in an elaborate opinion, this view ii broadly announced. It is reIerred to, and
seems to have been Iollowed, in the case oI ick v. Page, 17 Mo. 234, 57 AmD 267; but in this latter case it
appeared that the estate oI the deceased principal had received the beneIit oI the money paid, and thereIore the
representative oI the estate might well have been held to be estopped Irom suing Ior it again. . . . These cases, in
so Iar, 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, iI 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 oI Cassiday v. McKen:ie , and pointing out that the opinion, except so Iar
as it related to the particular Iacts, was a mere dictum , Baldwin J. said:
The opinion, thereIore, oI the learned Judge may be regarded more as an extrajudicial indication oI his views on
the general subject, than as the adjudication oI the Court upon the point in question. But accordingly all power
weight to this opinion, as the judgment oI a oI great respectability, it stands alone among common law
authorities and is opposed by an array too Iormidable to permit us to Iollowing it. (15 Cal. 12,17, cited in 2 C.J.
549)
Whatever conIlict oI legal opinion was generated by Cassiday v. McKen:ie in American jurisprudence, no such
conIlict exists in our own Ior the simple reason that our statute, the Civil Code, expressly provides Ior two
exceptions to the general rule that death oI 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 oI the agent was executed without knowledge oI the
death oI the principal and the third person who contracted with the agent acted also in good Iaith (Art. 1931).
Exception No. 2 is the doctrine Iollowed in Cassiday, and again We stress the indispensable requirement that
the agent acted without knowledge or notice oI the death oI the principal In the case beIore Us the agent Ramon
Rallos executed the sale notwithstanding notice oI the death oI his principal Accordingly, the agent's act is
unenIorceable against the estate oI his principal.
IN VIEW OF ALL THE FOREGOING, We set aside the ecision oI respondent appellate court, and We aIIirm
en toto the judgment rendered by then Hon. Amador E. Gomez oI the Court oI First Instance oI Cebu, quoted in
pages 2 and 3 oI this Opinion, with costs against respondent realty corporation at all instances.
So Ordered.
Teehankee (Chairman), Makasiar, Fernande: and Guerrero, JJ., concur.
(
Footnotes
1 p. 40, rollo 2 p, 42, Ibid.
3 Art. 1317, Civil Code oI the Philippines 4 Ibid
5 Art. 1868, Civil Code. By the contract oI the agency oI a person blinds himselI to render some service or to do
something in representation or on behalI oI another, with the consent oI the authority oI the latter.
Art. 1881, Civil Code. The Agent must act within the scope oI his authority. He may do acts as may be
conductive to the accomplishment oI the purpose oI the agency.
11 Manresa 422-423; 4 Sanchez Roman 478, 2nd Ed.; 26 Scaevola, 243, 262; Tolentino, Comments, Civil Code
oI the Philippines, p.340, vol. 5, 1959 Ed.
See also Columbia University Club v. Higgins, D.CN.Y., 23 I. Supp. 572, 574; Valentine Oil Co. v. Young 109
P. 2d 180, 185.
6 74 C.J.S. 4; Valentine Oil Co. v. Powers, 59 N.W. 2d 160, 163, 157 Neb. 87; Purnell v. City oI Florence, 175
So. 417, 27 Ala. App. 516; Stroman Motor Co. v. Brown, 243 P. 133, 126 Ok. 36 7 See Art. 1919 oI the Civil
Code 8 Hermosa v. Longara, 1953, 93 Phil. 977, 983; Del Rosario, et al. v. Abad, et al., 1958, 104 Phil. 648,
652 9 11 Manresa 572-573; Tolentino, supra, 369-370 10 2 Kent Comm. 641, cited in Williston on Contracts,
3rd Ed., Vol. 2, p. 288 11 See Notes on Acts oI agent aIter principal's death, 39 Am. Dec. 81,83, citing Ewell's
Evans on Agency, 116; Dunlap's Paley on Agency, 186; Story on Agency, see. 488; Harper v. Little. 11 Am.
Dec. 25; Staples v. Bradbury, 23 Id. 494; Gale v. Tappan 37 Id. 194; Hunt v. Rousmanier, 2 Mason, 244, S.C. 8
Wheat, 174; Boones Executor v. Clarke 3 Cranch C.C. 389; Hank oI 'Washington v. Person, 2 'Rash. C.C. 6.85;
Scruggs v. Driver's Executor, 31 Ala. 274; McGriII v. Porter, 5 Fla. 373; Lincoln v. Emerson, 108 Mass 87;
'Wilson v. Edmonds, 24 N.H 517; Easton v. Ellis, 1 Handy (Ohio), 70; McDonald v. Black's Administrators, 20
Ohio, 185; Michigan Ins. Co. v. Leavenworth, 30 Vt. 11; Huston v. Cantril, 11 Leigh, 136; Campanari v.
'Woodburn, 15 Com B 400
See also ',Williston on Contracts, 3rd Ed., Vol. 2, p. 289 12 see p. 15, 30-31 64 68-69, Record on Appeal 13 pp.
71-72, Ibid.
14 p. 7 oI the Decision at page 14, rollo 15 105 Phil. 79:i, 798 16 p. 6 oI Decision, at page 13, rollo 17 pp. 6-7
oI Decision at pp, 13-14, Ibid.
18 See Articles 1921 & 1922 oI the Civil Code 19 2 C.J.S. 1 174 citing American Jurisprudence in diIIerent
States Irom Alabama to Washington; emphasis supplied.
20 p. 8, decision at Page 15, rollo



EDUARDO V. LINTON1UA, 1R. G.R. No. 14405
and ANTONIO K. LITON1UA,
Petitioners,
Present:

PANGANIBAN, C.J., Chairperson,
- versus - YNARES-SANTIAGO,*
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.
ETERNIT CORPORATION
(now ETERTON MULTI-
RESOURCES CORPORATION),
ETEROUTREMER, S.A. and Promulgated:
FAR EAST BANK & TRUST
COMPANY, June 8, 2006
Respondents.



x-----------------------------------------------------------------------------------------x

D E C I S I O N



CALLE1O, SR.,


On appeal via a Petition Ior Review on Certiorari is the Decision1|1| oI the Court oI
Appeals (CA) in CA-G.R. CV No. 51022, which aIIirmed the Decision oI the Regional Trial
Court (RTC), Pasig City, Branch 165, in Civil Case No. 54887, as well as the Resolution2|2| oI
the CA denying the motion Ior reconsideration thereoI.



The Eternit Corporation (EC) is a corporation duly organized and registered under
Philippine laws. Since 1950, it had been engaged in the manuIacture oI rooIing materials and
pipe products. Its manuIacturing operations were conducted on eight parcels oI land with a total
area oI 47,233 square meters. The properties, located in Mandaluyong City, Metro Manila, were
covered by TransIer CertiIicates oI Title Nos. 451117, 451118, 451119, 451120, 451121,
451122, 451124 and 451125 under the name oI Far East Bank & Trust Company, as trustee.
Ninety (90) percent oI the shares oI stocks oI EC were owned by Eteroutremer S.A.
Corporation (ESAC), a corporation organized and registered under the laws oI Belgium.3|3|
Jack Glanville, an Australian citizen, was the General Manager and President oI EC, while
Claude Frederick Delsaux was the Regional Director Ior Asia oI ESAC. Both had their oIIices
in Belgium.

In 1986, the management oI ESAC grew concerned about the political situation in the
Philippines and wanted to stop its operations in the country. The Committee Ior Asia oI ESAC
instructed Michael Adams, a member oI EC`s Board oI Directors, to dispose oI the eight parcels
oI land. Adams engaged the services oI realtor/broker Lauro G. Marquez so that the properties
could be oIIered Ior sale to prospective buyers. Glanville later showed the properties to
Marquez.

Marquez thereaIter oIIered the parcels oI land and the improvements thereon to Eduardo
B. Litonjua, Jr. oI the Litonjua & Company, Inc. In a Letter dated September 12, 1986,
Marquez declared that he was authorized to sell the properties Ior P27,000,000.00 and that the
terms oI the sale were subject to negotiation.4|4|




Eduardo Litonjua, Jr. responded to the oIIer. Marquez showed the property to Eduardo
Litonjua, Jr., and his brother Antonio K. Litonjua. The Litonjua siblings oIIered to buy the
property Ior P20,000,000.00 cash. Marquez apprised Glanville oI the Litonjua siblings` oIIer
and relayed the same to Delsaux in Belgium, but the latter did not respond. On October 28,
1986, Glanville telexed Delsaux in Belgium, inquiring on his position/ counterproposal to the
oIIer oI the Litonjua siblings. It was only on February 12, 1987 that Delsaux sent a telex to
Glanville stating that, based on the 'Belgian/Swiss decision, the Iinal oIIer was
'US$1,000,000.00 and P2,500,000.00 to cover all existing obligations prior to Iinal
liquidation.5|5|

Marquez Iurnished Eduardo Litonjua, Jr. with a copy oI the telex sent by Delsaux.
Litonjua, Jr. accepted the counterproposal oI Delsaux. Marquez conIerred with Glanville, and in
a Letter dated February 26, 1987, conIirmed that the Litonjua siblings had accepted the counter-
proposal oI Delsaux. He also stated that the Litonjua siblings would conIirm Iull payment
within 90 days aIter execution and preparation oI all documents oI sale, together with the
necessary governmental clearances.6|6|

The Litonjua brothers deposited the amount oI US$1,000,000.00 with the Security Bank
& Trust Company, Ermita Branch, and draIted an Escrow Agreement to expedite the sale.7|7|

Sometime later, Marquez and the Litonjua brothers inquired Irom Glanville when the sale
would be implemented. In a telex dated April 22, 1987, Glanville inIormed Delsaux that he had
met with the buyer, which had given him the impression that 'he is prepared to press Ior a




satisIactory conclusion to the sale.8|8| He also emphasized to Delsaux that the buyers were
concerned because they would incur expenses in bank commitment Iees as a consequence oI
prolonged period oI inaction.9|9|

Meanwhile, with the assumption oI Corazon C. Aquino as President oI the Republic oI
the Philippines, the political situation in the Philippines had improved. Marquez received a
telephone call Irom Glanville, advising that the sale would no longer proceed. Glanville
Iollowed it up with a Letter dated May 7, 1987, conIirming that he had been instructed by his
principal to inIorm Marquez that 'the decision has been taken at a Board Meeting not to sell the
properties on which Eternit Corporation is situated.10|10|

Delsaux himselI later sent a letter dated May 22, 1987, conIirming that the ESAC
Regional OIIice had decided not to proceed with the sale oI the subject land, to wit:

May 22, 1987
Mr. L.G. Marquez
L.G. Marquez, Inc.

334 Makati Stock Exchange Bldg.
6767 Ayala Avenue
Makati, Metro Manila
Philippines





Dear Sir:

Re: Land oI Eternit Corporation

I would like to conIirm oIIicially that our Group has decided not to proceed with the sale
oI the land which was proposed to you.

The Committee Ior Asia oI our Group met recently (meeting every six months) and
examined the position as Iar as the Philippines are (sic) concerned. Considering the( new
political situation since the departure of MR. MARCOS and a certain stabilization in the
Philippines, the Committee has decided not to stop our operations in Manila. In fact,
production has started again last week, and (sic) to recognize the participation in the
Corporation.

We regret that we could not make a deal with you this time, but in case the policy would
change at a later state, we would consult you again.

xxx

Yours sincerely,
(Sgd.)
C.F. DELSAUX

cc. To: J. GLANVILLE (Eternit Corp.)11|11|

When apprised oI this development, the Litonjuas, through counsel, wrote EC,
demanding payment Ior damages they had suIIered on account oI the aborted sale. EC,
however, rejected their demand.

The Litonjuas then Iiled a complaint Ior speciIic perIormance and damages against EC
(now the Eterton Multi-Resources Corporation) and the Far East Bank & Trust Company, and
ESAC in the RTC oI Pasig City. An amended complaint was Iiled, in which deIendant EC was
substituted by Eterton Multi-Resources Corporation; Benito C. Tan, Ruperto V. Tan, Stock Ha


T. Tan and Deogracias G. EuIemio were impleaded as additional deIendants on account oI their
purchase oI ESAC shares oI stocks and were the controlling stockholders oI EC.

In their answer to the complaint, EC and ESAC alleged that since Eteroutremer was not
doing business in the Philippines, it cannot be subject to the jurisdiction oI Philippine courts;
the Board and stockholders oI EC never approved any resolution to sell subject properties nor
authorized Marquez to sell the same; and the telex dated October 28, 1986 oI Jack Glanville
was his own personal making which did not bind EC.

On July 3, 1995, the trial court rendered judgment in Iavor oI deIendants and dismissed
the amended complaint.12|12| The fallo oI the decision reads:

WHEREFORE, the complaint against Eternit Corporation now Eterton Multi-Resources
Corporation and Eteroutremer, S.A. is dismissed on the ground that there is no valid and binding
sale between the plaintiIIs and said deIendants.

The complaint as against Far East Bank and Trust Company is likewise dismissed Ior
lack oI cause oI action.

The counterclaim oI Eternit Corporation now Eterton Multi-Resources Corporation and
Eteroutremer, S.A. is also dismissed Ior lack oI merit.13|13|

The trial court declared that since the authority oI the agents/realtors was not in writing,
the sale is void and not merely unenIorceable, and as such, could not have been ratiIied by the
principal. In any event, such ratiIication cannot be given any retroactive eIIect. PlaintiIIs could
not assume that deIendants had agreed to sell the property without a clear authorization Irom the
corporation concerned, that is, through resolutions oI the Board oI Directors and stockholders.



The trial court also pointed out that the supposed sale involves substantially all the assets oI
deIendant EC which would result in the eventual total cessation oI its operation.14|14|

The Litonjuas appealed the decision to the CA, alleging that '(1) the lower court erred in
concluding that the real estate broker in the instant case needed a written authority Irom
appellee corporation and/or that said broker had no such written authority; and (2) the lower
court committed grave error oI law in holding that appellee corporation is not legally bound Ior
speciIic perIormance and/or damages in the absence oI an enabling resolution oI the board oI
directors.15|15| They averred that Marquez acted merely as a broker or go-between and not as
agent oI the corporation; hence, it was not necessary Ior him to be empowered as such by any
written authority. They Iurther claimed that an agency by estoppel was created when the
corporation clothed Marquez with apparent authority to negotiate Ior the sale oI the properties.
However, since it was a bilateral contract to buy and sell, it was equivalent to a perIected
contract oI sale, which the corporation was obliged to consummate.

In reply, EC alleged that Marquez had no written authority Irom the Board oI Directors to
bind it; neither were Glanville and Delsaux authorized by its board oI directors to oIIer the
property Ior sale. Since the sale involved substantially all oI the corporation`s assets, it would
necessarily need the authority Irom the stockholders.

On June 16, 2000, the CA rendered judgment aIIirming the decision oI the RTC. 16|16|
The Litonjuas Iiled a motion Ior reconsideration, which was also denied by the appellate court.





The CA ruled that Marquez, who was a real estate broker, was a special agent within the
purview oI Article 1874 oI the New Civil Code. Under Section 23 oI the Corporation Code, he
needed a special authority Irom EC`s board oI directors to bind such corporation to the sale oI
its properties. Delsaux, who was merely the representative oI ESAC (the majority stockholder
oI EC) had no authority to bind the latter. The CA pointed out that Delsaux was not even a
member oI the board oI directors oI EC. Moreover, the Litonjuas Iailed to prove that an agency
by estoppel had been created between the parties.

In the instant petition Ior review, petitioners aver that

I

THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PERFECTED
CONTRACT OF SALE.

II

THE APPELLATE COURT COMMITTED GRAVE ERROR OF LAW IN HOLDING THAT
MARQUEZ NEEDED A WRITTEN AUTHORITY FROM RESPONDENT ETERNIT
BEFORE THE SALE CAN BE PERFECTED.


III

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT GLANVILLE AND
DELSAUX HAVE THE NECESSARY AUTHORITY TO SELL THE SUBJECT
PROPERTIES, OR AT THE VERY LEAST, WERE KNOWINGLY PERMITTED BY
RESPONDENT ETERNIT TO DO ACTS WITHIN THE SCOPE OF AN APPARENT
AUTHORITY, AND THUS HELD THEM OUT TO THE PUBLIC AS POSSESSING POWER
TO SELL THE SAID PROPERTIES.17|17|

Petitioners maintain that, based on the Iacts oI the case, there was a perIected contract oI
sale oI the parcels oI land and the improvements thereon Ior 'US$1,000,000.00 plus
P2,500,000.00 to cover obligations prior to Iinal liquidation. Petitioners insist that they had


accepted the counter-oIIer oI respondent EC and that beIore the counter-oIIer was withdrawn by
respondents, the acceptance was made known to them through real estate broker Marquez.

Petitioners assert that there was no need Ior a written authority Irom the Board oI
Directors oI EC Ior Marquez to validly act as broker/middleman/intermediary. As broker,
Marquez was not an ordinary agent because his authority was oI a special and limited character
in most respects. His only job as a broker was to look Ior a buyer and to bring together the
parties to the transaction. He was not authorized to sell the properties or to make a binding
contract to respondent EC; hence, petitioners argue, Article 1874 oI the New Civil Code does
not apply.

In any event, petitioners aver, what is important and decisive was that Marquez was able
to communicate both the oIIer and counter-oIIer and their acceptance oI respondent EC`s
counter-oIIer, resulting in a perIected contract oI sale.

Petitioners posit that the testimonial and documentary evidence on record amply shows
that Glanville, who was the President and General Manager oI respondent EC, and Delsaux,
who was the Managing Director Ior ESAC Asia, had the necessary authority to sell the subject
property or, at least, had been allowed by respondent EC to hold themselves out in the public as
having the power to sell the subject properties. Petitioners identiIied such evidence, thus:

1. The testimony of Marquez that he was chosen by Glanville as the then President
and General Manager oI Eternit, to sell the properties oI said corporation to any interested party,
which authority, as hereinabove discussed, need not be in writing.
2. The Iact that the NEGOTIATIONS Ior the sale oI the subject properties spanned
SEVERAL MONTHS, Irom 1986 to 1987;

3. The COUNTER-OFFER made by Eternit through GLANVILLE to sell its
properties to the Petitioners;

4. The GOOD FAITH oI Petitioners in believing Eternit`s oIIer to sell the
properties as evidenced by the Petitioners` ACCEPTANCE oI the counter-oIIer;

5. The Iact that Petitioners DEPOSITED the price oI |US|$1,000,000.00 with the
Security Bank and that an ESCROW agreement was draIted over the subject properties;

6. Glanville`s telex to Delsaux inquiring 'WHEN WE (Respondents) WILL
IMPLEMENT ACTION TO BUY AND SELL;

7. More importantly, Exhibits 'G and 'H oI the Respondents, which evidenced
the Iact that Petitioners` oIIer was allegedly RE1ECTED by both Glanville and Delsaux.18|18|

Petitioners insist that it is incongruous Ior Glanville and Delsaux to make a counter-oIIer
to petitioners` oIIer and thereaIter reject such oIIer unless they were authorized to do so by
respondent EC. Petitioners insist that Delsaux conIirmed his authority to sell the properties in
his letter to Marquez, to wit:

Dear Sir,

Re: Land oI Eternit Corporation


I would like to conIirm oIIicially that our Group has decided not to proceed with the sale
oI the land which was proposed to you.

The Committee Ior Asia oI our Group met recently (meeting every six months) and
examined the position as Iar as the Philippines are (sic) concerned. Considering the new political
situation since the departure oI MR. MARCOS and a certain stabilization in the Philippines, the
Committee has decided not to stop our operations in Manila|.| |I|n Iact production started again
last week, and (sic) to reorganize the participation in the Corporation.

We regret that we could not make a deal with you this time, but in case the policy
would change at a later stage we would consult you again.


In the meantime, I remain

Yours sincerely,

C.F. DELSAUX19|19|

Petitioners Iurther emphasize that they acted in good Iaith when Glanville and Delsaux
were knowingly permitted by respondent EC to sell the properties within the scope oI an
apparent authority. Petitioners insist that respondents held themselves to the public as
possessing power to sell the subject properties.

By way oI comment, respondents aver that the issues raised by the petitioners are Iactual,
hence, are proscribed by Rule 45 oI the Rules oI Court. On the merits oI the petition,
respondents EC (now EMC) and ESAC reiterate their submissions in the CA. They maintain
that Glanville, Delsaux and Marquez had no authority Irom the stockholders oI respondent EC
and its Board oI Directors to oIIer the properties Ior sale to the petitioners, or to any other
person or entity Ior that matter. They assert that the decision and resolution oI the CA are in
accord with law and the evidence on record, and should be aIIirmed in toto.

Petitioners aver in their subsequent pleadings that respondent EC, through Glanville and
Delsaux, conIormed to the written authority oI Marquez to sell the properties. The authority oI
Glanville and Delsaux to bind respondent EC is evidenced by the Iact that Glanville and
Delsaux negotiated Ior the sale oI 90 oI stocks oI respondent EC to Ruperto Tan on June 1,
1997. Given the signiIicance oI their positions and their duties in respondent EC at the time oI
the transaction, and the Iact that respondent ESAC owns 90 oI the shares oI stock oI
respondent EC, a Iormal
resolution oI the Board oI Directors would be a mere ceremonial Iormality. What is important,


petitioners maintain, is that Marquez was able to communicate the oIIer oI respondent EC and
the petitioners` acceptance thereoI. There was no time that they acted without the knowledge oI
respondents. In Iact, respondent EC never repudiated the acts oI Glanville, Marquez and
Delsaux.

The petition has no merit.

Anent the Iirst issue, we agree with the contention oI respondents that the issues raised by
petitioner in this case are Iactual. Whether or not Marquez, Glanville, and Delsaux were
authorized by respondent EC to act as its agents relative to the sale oI the properties oI
respondent EC, and iI so, the boundaries oI their authority as agents, is a question oI Iact. In the
absence oI express written terms creating the relationship oI an agency, the existence oI an
agency is a Iact question.20|20| Whether an agency by estoppel was created or whether a
person acted within the bounds oI his apparent authority, and whether the principal is estopped
to deny the apparent authority oI its agent are, likewise, questions oI Iact to be resolved on the
basis oI the evidence on record.21|21| The Iindings oI the trial court on such issues, as
aIIirmed by the CA, are conclusive on the Court, absent evidence that the trial and appellate
courts ignored, misconstrued, or misapplied Iacts and circumstances oI substance which, iI
considered, would warrant a modiIication or reversal oI the outcome oI the case.22|22|

It must be stressed that issues oI Iacts may not be raised in the Court under Rule 45 oI the
Rules oI Court because the Court is not a trier oI Iacts. It is not to re-examine and assess the
evidence on record, whether testimonial and documentary. There are, however, recognized
exceptions where the Court may delve into and resolve Iactual issues, namely:





(1) When the conclusion is a Iinding grounded entirely on speculations, surmises, or
conjectures; (2) when the inIerence made is maniIestly mistaken, absurd, or impossible; (3) when
there is grave abuse oI discretion; (4) when the judgment is based on a misapprehension oI Iacts;
(5) when the Iindings oI Iact are conIlicting; (6) when the Court oI Appeals, in making its
Iindings, went beyond the issues oI the case and the same is contrary to the admissions oI both
appellant and appellee; (7) when the Iindings oI the Court oI Appeals are contrary to those
oI the trial court; (8) when the Iindings oI Iact are conclusions without citation oI speciIic
evidence on which they are based; (9) when the Court oI Appeals maniIestly overlooked certain
relevant Iacts not disputed by the parties, which, iI properly considered, would justiIy a diIIerent
conclusion; and (10) when the Iindings oI Iact oI the Court oI Appeals are premised on the
absence oI evidence and are contradicted by the evidence on record.23|23|

We have reviewed the records thoroughly and Iind that the petitioners Iailed to establish
that the instant case Ialls under any oI the Ioregoing exceptions. Indeed, the assailed decision oI
the Court oI Appeals is supported by the evidence on record and the law.

It was the duty oI the petitioners to prove that respondent EC had decided to sell its
properties and that it had empowered Adams, Glanville and Delsaux or Marquez to oIIer the
properties Ior sale to prospective buyers and to accept any counter-oIIer. Petitioners likewise
Iailed to prove that their counter-oIIer had been accepted by respondent EC, through Glanville
and Delsaux. It must be stressed that when speciIic perIormance is sought oI a contract made
with an agent, the agency must be established by clear, certain and speciIic prooI.24|24|

Section 23 oI Batas Pambansa Bilang 68, otherwise known as the Corporation Code oI
the Philippines, provides:

SEC. 23. The Board of irectors or Trustees. Unless otherwise provided in this Code,
the corporate powers oI all corporations Iormed under this Code shall be exercised, all business
conducted and all property oI such corporations controlled and held by the board oI directors or
trustees to be elected Irom among the holders oI stocks, or where there is no stock, Irom among



the members oI the corporation, who shall hold oIIice Ior one (1) year and until their successors
are elected and qualiIied.

Indeed, a corporation is a juridical person separate and distinct Irom its members or
stockholders and is not aIIected by the personal rights,
obligations and transactions oI the latter.25|25| It may act only through its board oI directors or,
when authorized either by its by-laws or by its board resolution, through its oIIicers or agents in
the normal course oI business. The general principles oI agency govern the relation between
the corporation and its oIIicers or agents, subject to the articles oI incorporation, by-laws, or
relevant provisions oI law.26|26|

Under Section 36 oI the Corporation Code, a corporation may sell or convey its real
properties, subject to the limitations prescribed by law and the Constitution, as Iollows:

SEC. 36. Corporate powers and capacity. Every corporation incorporated under this
Code has the power and capacity:

x x x x

7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and
otherwise deal with such real and personal property, including securities and bonds oI other
corporations, as the transaction oI a lawIul business oI the corporation may reasonably and
necessarily require, subject to the limitations prescribed by the law and the Constitution.


The property oI a corporation, however, is not the property oI the stockholders or
members, and as such, may not be sold without express authority Irom the board oI
directors.27|27| Physical acts, like the oIIering oI the properties oI the corporation Ior sale, or
the acceptance oI a counter-oIIer oI prospective buyers oI such properties and the execution oI
the deed oI sale covering such property, can be perIormed by the corporation only by oIIicers or
agents duly authorized Ior the purpose by corporate by-laws or by speciIic acts oI the board oI
directors.28|28| Absent such valid delegation/authorization, the rule is that the declarations oI
an individual director relating to the aIIairs oI the corporation, but not in the course oI, or





connected with, the perIormance oI authorized duties oI such director, are not binding on the
corporation.29|29|

While a corporation may appoint agents to negotiate Ior the sale oI its real properties, the
Iinal say will have to be with the board oI directors through its oIIicers and agents as authorized
by a board resolution or by its by-laws.30|30| An unauthorized act oI an oIIicer oI the
corporation is not binding on it unless the latter ratiIies the same expressly or impliedly by its
board oI directors. Any sale oI real property oI a corporation by a person purporting to be an
agent thereoI but without written authority Irom the corporation is null and void. The
declarations oI the agent alone are generally insuIIicient to establish the Iact or extent oI his/her
authority.31|31|

By the contract oI agency, a person binds himselI to render some service or to do
something in representation on behalI oI another, with the consent or authority oI the
latter.32|32| Consent oI both principal and agent is necessary to create an agency. The
principal must intend that the agent shall act Ior him; the agent must intend to accept the
authority and act on it, and the intention oI the parties must Iind expression either in words or
conduct between them.33|33|

An agency may be expressed or implied Irom the act oI the principal, Irom his silence or
lack oI action, or his Iailure to repudiate the agency knowing that another person is acting on his
behalI without authority. Acceptance by the agent may be expressed, or implied Irom his acts
which carry out the agency, or Irom his silence or inaction according to the






circumstances.34|34| Agency may be oral unless the law requires a speciIic Iorm.35|35|
However, to create or convey real rights over immovable property, a special power oI attorney
is necessary.36|36| Thus, when a sale of a piece of land or any portion thereof is through an
agent, the authority of the latter shall be in writing, otherwise, the sale shall be void.37|37|

In this case, the petitioners as plaintiIIs below, Iailed to adduce in evidence any
resolution oI the Board oI Directors oI respondent EC empowering Marquez, Glanville or
Delsaux as its agents, to sell, let alone oIIer Ior sale, Ior and in its behalI, the eight parcels oI
land owned by respondent EC including the improvements thereon. The bare Iact that Delsaux
may have been authorized to sell to Ruperto Tan the shares oI stock oI respondent ESAC, on
June 1, 1997, cannot be used as basis Ior petitioners` claim that he had likewise been authorized
by respondent EC to sell the parcels oI land.

Moreover, the evidence oI petitioners shows that Adams and Glanville acted on the
authority oI Delsaux, who, in turn, acted on the authority oI respondent ESAC, through its
Committee Ior Asia,38|38| the Board oI Directors oI respondent ESAC,39|39| and the
Belgian/Swiss component oI the management oI respondent ESAC.40|40| As such, Adams and
Glanville engaged the services oI Marquez to oIIer to sell the properties to prospective buyers.
Thus, on September 12, 1986, Marquez wrote the petitioner that he was authorized to oIIer Ior
sale the property Ior P27,000,000.00 and the other terms oI the sale subject to negotiations.
When petitioners oIIered to purchase the property Ior P20,000,000.00, through Marquez, the
latter relayed petitioners` oIIer to Glanville; Glanville had to send a telex to Delsaux to inquire
the position oI respondent ESAC to petitioners` oIIer. However, as admitted by petitioners in








their Memorandum, Delsaux was unable to reply immediately to the telex oI Glanville because
Delsaux had to wait Ior conIirmation Irom respondent ESAC.41|41| When Delsaux Iinally
responded to Glanville on February 12, 1987, he made it clear that, based on the 'Belgian/Swiss
decision the Iinal oIIer oI respondent ESAC was US$1,000,000.00 plus P2,500,000.00 to
cover all existing obligations prior to Iinal liquidation.42|42| The oIIer oI Delsaux emanated
only Irom the 'Belgian/Swiss decision, and not the entire management or Board oI Directors
oI respondent ESAC. While it is true that petitioners accepted the counter-oIIer oI respondent
ESAC, respondent EC was not a party to the transaction between them; hence, EC was not
bound by such acceptance.

While Glanville was the President and General Manager oI respondent EC, and Adams
and Delsaux were members oI its Board oI Directors, the three acted Ior and in behalI oI
respondent ESAC, and not as duly authori:ed agents of respondent EC; a board resolution
evincing the grant oI such authority is needed to bind EC to any agreement regarding the sale oI
the subject properties. Such board resolution is not a mere Iormality but is a condition sine qua
non to bind respondent EC. Admittedly, respondent ESAC owned 90 oI the shares oI stocks
oI respondent EC; however, the mere Iact that a corporation owns a majority oI the shares oI
stocks oI another, or even all oI such shares oI stocks, taken alone, will not justiIy their being
treated as one corporation.43|43|

It bears stressing that in an agent-principal relationship, the personality oI the principal is
extended through the Iacility oI the agent. In so doing, the agent, by legal Iiction, becomes the
principal, authorized to perIorm all acts which the latter would have him do. Such a




relationship can only be eIIected with the consent oI the principal, which must not, in any way,
be compelled by law or by any court.44|44|

The petitioners cannot Ieign ignorance oI the absence oI any regular and valid authority
oI respondent EC empowering Adams, Glanville or Delsaux to oIIer the properties Ior sale and
to sell the said properties to the petitioners. A person dealing with a known agent is not
authorized, under any circumstances, blindly to trust the agents; statements as to the extent oI
his powers; such person must not act negligently but must use reasonable diligence and
prudence to ascertain whether the agent acts within the scope oI his authority.45|45| The
settled rule is that, persons dealing with an assumed agent are bound at their peril, and iI they
would hold the principal liable, to ascertain not only the Iact oI agency but also the nature and
extent oI authority, and in case either is controverted, the burden oI prooI is upon them to prove
it.46|46| In this case, the petitioners Iailed to discharge their burden; hence, petitioners are not
entitled to damages Irom respondent EC.

It appears that Marquez acted not only as real estate broker Ior the petitioners but also as
their agent. As gleaned Irom the letter oI Marquez to Glanville, on February 26, 1987, he
conIirmed, Ior and in behalI oI the petitioners, that the latter had accepted such oIIer to sell the
land and the improvements thereon. However, we agree with the ruling oI the appellate court
that Marquez had no authority to bind respondent EC to sell the subject properties. A real estate
broker is one who negotiates the sale oI real properties. His business, generally speaking, is
only to Iind a purchaser who is willing to buy the land upon terms Iixed by the owner. He has
no authority to bind the principal by signing a contract oI sale. Indeed, an authority to Iind a
purchaser oI real property does not include an authority to sell.47|47|






Equally barren oI merit is petitioners` contention that respondent EC is estopped to deny
the existence oI a principal-agency relationship between it and Glanville or Delsaux. For an
agency by estoppel to exist, the Iollowing must be established: (1) the principal maniIested a
representation oI the agent`s authority or knowlingly allowed the agent to assume such
authority; (2) the third person, in good Iaith, relied upon such representation; (3) relying upon
such representation, such third person has changed his position to his detriment.48|48| An
agency by estoppel, which is similar to the doctrine oI apparent authority, requires prooI oI
reliance upon the representations, and that, in turn, needs prooI that the representations predated
the action taken in reliance.49|49| Such prooI is lacking in this case. In their communications to
the petitioners, Glanville and Delsaux positively and unequivocally declared that they were
acting Ior and in behalI oI respondent ESAC.

Neither may respondent EC be deemed to have ratiIied the transactions between the
petitioners and respondent ESAC, through Glanville, Delsaux and Marquez. The transactions
and the various communications inter se were never submitted to the Board oI Directors oI
respondent EC Ior ratiIication.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED Ior lack oI merit.
Costs against the petitioners.

SO ORDERED.



1ocelyn B. Doles, G.R. No. 149353
Petitioner,
Present

PANGANIBAN, C..



Chairperson)
- versus - YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLE1O, SR., and
CHICO-NAZARIO, 11.

Ma. Aura Tina
Angeles, Promulgated
Respondent. 1une 26, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x



D E C I S I O N



AUSTRIA-MARTINEZ, .

This reIers to the Petition Ior Review on Certiorari under Rule 45 oI the Rules oI Court
questioning the Decision50|1| dated April 30, 2001 oI the Court oI Appeals (CA) in C.A.-G.R.
CV No. 66985, which reversed the Decision dated July 29, 1998 oI the Regional Trial Court


(RTC), Branch 21, City oI Manila; and the CA Resolution51|2| dated August 6, 2001 which
denied petitioner`s Motion Ior Reconsideration.

The antecedents oI the case Iollow:

On April 1, 1997, Ma. Aura Tina Angeles (respondent) Iiled with the RTC a complaint
Ior SpeciIic PerIormance with Damages against Jocelyn B. Doles (petitioner), docketed as Civil
Case No. 97-82716. Respondent alleged that petitioner was indebted to the Iormer in the
concept oI a personal loan amounting to P405,430.00 representing the principal amount and
interest; that on October 5, 1996, by virtue oI a 'Deed oI Absolute Sale,52|3| petitioner, as
seller, ceded to respondent, as buyer, a parcel oI land, as well as the improvements thereon, with
an area oI 42 square meters, covered by TransIer CertiIicate oI Title No. 382532,53|4| and
located at a subdivision project known as Camella Townhomes Sorrente in Bacoor, Cavite, in
order to satisIy her personal loan with respondent; that this property was mortgaged to National
Home Mortgage Finance Corporation (NHMFC) to secure petitioner`s loan in the sum oI
P337,050.00 with that entity; that as a condition Ior the Ioregoing sale, respondent shall assume
the undue balance oI the mortgage and pay the monthly amortization oI P4,748.11 Ior the
remainder oI the 25 years which began on September 3, 1994; that the property was at that time
being occupied by a tenant paying a monthly rent oI P3,000.00; that upon veriIication with the
NHMFC, respondent learned that petitioner had incurred arrearages amounting to P26,744.09,
inclusive oI penalties and interest; that upon inIorming the petitioner oI her arrears, petitioner
denied that she incurred them and reIused to pay the same; that despite repeated demand,
petitioner reIused to cooperate with respondent to execute the necessary documents and other
Iormalities required by the NHMFC to eIIect the transIer oI the title over the property; that
petitioner collected rent over the property Ior the month oI January 1997 and reIused to remit




the proceeds to respondent; and that respondent suIIered damages as a result and was Iorced to
litigate.

Petitioner, then deIendant, while admitting some allegations in the Complaint, denied that
she borrowed money Irom respondent, and averred that Irom June to September 1995, she
reIerred her Iriends to respondent whom she knew to be engaged in the business oI lending
money in exchange Ior personal checks through her capitalist Arsenio Pua. She alleged that her
Iriends, namely, Zenaida Romulo, Theresa Moratin, Julia Inocencio, Virginia Jacob, and
Elizabeth Tomelden, borrowed money Irom respondent and issued personal checks in payment
oI the loan; that the checks bounced Ior insuIIiciency oI Iunds; that despite her eIIorts to assist
respondent to collect Irom the borrowers, she could no longer locate them; that, because oI this,
respondent became Iurious and threatened petitioner that iI the accounts were not settled, a
criminal case will be Iiled against her; that she was Iorced to issue eight checks amounting to
P350,000 to answer Ior the bounced checks oI the borrowers she reIerred; that prior to the
issuance oI the checks she inIormed respondent that they were not suIIiciently Iunded but the
latter nonetheless deposited the checks and Ior which reason they were subsequently
dishonored; that respondent then threatened to initiate a criminal case against her Ior violation
oI Batas Pambansa Blg. 22; that she was Iorced by respondent to execute an 'Absolute Deed oI
Sale over her property in Bacoor, Cavite, to avoid criminal prosecution; that the said deed had
no valid consideration; that she did not appear beIore a notary public; that the Community Tax
CertiIicate number on the deed was not hers and Ior which respondent may be prosecuted Ior
IalsiIication and perjury; and that she suIIered damages and lost rental as a result.

The RTC identiIied the issues as Iollows: Iirst, whether the Deed oI Absolute Sale is
valid; second; iI valid, whether petitioner is obliged to sign and execute the necessary
documents to eIIect the transIer oI her rights over the property to the respondent; and third,
whether petitioner is liable Ior damages.

On July 29, 1998, the RTC rendered a decision the dispositive portion oI which states:

WHEREFORE, premises considered, the Court hereby orders the dismissal oI the complaint Ior
insuIIiciency oI evidence. With costs against plaintiII.

SO ORDERED.

The RTC held that the sale was void Ior lack oI cause or consideration:54|5|

PlaintiII Angeles` admission that the borrowers are the Iriends oI deIendant Doles and Iurther admission that the
checks issued by these borrowers in payment oI the loan obligation negates |sic| the cause or consideration oI
the contract oI sale executed by and between plaintiII and deIendant. Moreover, the property is not solely
owned by deIendant as appearing in Entry No. 9055 oI TransIer CertiIicate oI Title No. 382532 (Annex A,
Complaint), thus:

'Entry No. 9055. Special Power oI Attorney in Iavor oI Jocelyn Doles covering the share oI Teodorico Doles
on the parcel oI land described in this certiIicate oI title by virtue oI the special power oI attorney to mortgage,
executed beIore the notary public, etc.

The rule under the Civil Code is that contracts without a cause or consideration produce no eIIect
whatsoever. (Art. 1352, Civil Code).


Respondent appealed to the CA. In her appeal brieI, respondent interposed her sole
assignment oI error:



THE TRIAL COURT ERRED IN DISMISSING THE CASE AT BAR ON THE GROUND OF |sic| THE
DEED OF SALE BETWEEN THE PARTIES HAS NO CONSIDERATION OR INSUFFICIENCY OF
EVIDENCE.55|6|


On April 30, 2001, the CA promulgated its Decision, the dispositive portion oI which reads:

WHEREFORE, IN VIEW OF THE FOREGOING, this appeal is hereby GRANTED. The Decision oI the
lower court dated July 29, 1998 is REVERSED and SET ASIDE. A new one is entered ordering deIendant-
appellee to execute all necessary documents to eIIect transIer oI subject property to plaintiII-appellant with the
arrearages oI the Iormer`s loan with the NHMFC, at the latter`s expense. No costs.

SO ORDERED.


The CA concluded that petitioner was the borrower and, in turn, would 're-lend the
amount borrowed Irom the respondent to her Iriends. Hence, the Deed oI Absolute Sale was
supported by a valid consideration, which is the sum oI money petitioner owed respondent
amounting to P405,430.00, representing both principal and interest.

The CA took into account the Iollowing circumstances in their entirety: the supposed
Iriends oI petitioner never presented themselves to respondent and that all transactions were
made by and between petitioner and respondent;56|7| that the money borrowed was deposited
with the bank account oI the petitioner, while payments made Ior the loan were deposited by the
latter to respondent`s bank account;57|8| that petitioner herselI admitted in open court that she
was 're-lending the money loaned Irom respondent to other individuals Ior proIit;58|9| and





that the documentary evidence shows that the actual borrowers, the Iriends oI petitioner,
consider her as their creditor and not the respondent.59|10|

Furthermore, the CA held that the alleged threat or intimidation by respondent did not
vitiate consent, since the same is considered just or legal iI made to enIorce one`s claim through
competent authority under Article 133560|11| oI the Civil Code;61|12| that with respect to the
arrearages oI petitioner on her monthly amortization with the NHMFC in the sum oI
P26,744.09, the same shall be deemed part oI the balance oI petitioner`s loan with the NHMFC
which respondent agreed to assume; and that the amount oI P3,000.00 representing the rental
Ior January 1997 supposedly collected by petitioner, as well as the claim Ior damages and
attorney`s Iees, is denied Ior insuIIiciency oI evidence.62|13|
On May 29, 2001, petitioner Iiled her Motion Ior Reconsideration with the CA, arguing
that respondent categorically admitted in open court that she acted only as agent or
representative oI Arsenio Pua, the principal Iinancier and, hence, she had no legal capacity to
sue petitioner; and that the CA Iailed to consider the Iact that petitioner`s Iather, who co-owned
the subject property, was not impleaded as a deIendant nor was he indebted to the respondent
and, hence, she cannot be made to sign the documents to eIIect the transIer oI ownership over
the entire property.

On August 6, 2001, the CA issued its Resolution denying the motion on the ground that
the Ioregoing matters had already been passed upon.






On August 13, 2001, petitioner received a copy oI the CA Resolution. On August 28,
2001, petitioner Iiled the present Petition and raised the Iollowing issues:

I.

WHETHER OR NOT THE PETITIONER CAN BE CONSIDERED AS A DEBTOR OF THE
RESPONDENT.

II.

WHETHER OR NOT AN AGENT WHO WAS NOT AUTHORIZED BY THE PRINCIPAL
TO COLLECT DEBT IN HIS BEHALF COULD DIRECTLY COLLECT PAYMENT FROM
THE DEBTOR.

III.

WHETHER OR NOT THE CONTRACT OF SALE WAS EXECUTED FOR A CAUSE.63|14|


Although, as a rule, it is not the business oI this Court to review the Iindings oI Iact made
by the lower courts, jurisprudence has recognized several exceptions, at least three oI which are
present in the instant case, namely: when the judgment is based on a misapprehension oI Iacts;
when the Iindings oI Iacts oI the courts a quo are conIlicting; and when the CA maniIestly
overlooked certain relevant Iacts not disputed by the parties, which, iI properly considered,
could justiIy a diIIerent conclusion.64|15| To arrive at a proper judgment, thereIore, the Court
Iinds it necessary to re-examine the evidence presented by the contending parties during the
trial oI the case.

The Petition is meritorious.




The principal issue is whether the Deed oI Absolute Sale is supported by a valid
consideration.

1. Petitioner argues that since she is merely the agent or representative oI the alleged
debtors, then she is not a party to the loan; and that the Deed oI Sale executed between her and
the respondent in their own names, which was predicated on that pre-existing debt, is void Ior
lack oI consideration.

Indeed, the Deed oI Absolute Sale purports to be supported by a consideration in the Iorm
oI a price certain in money65|16| and that this sum indisputably pertains to the debt in issue.
This Court has consistently held that a contract oI sale is null and void and produces no eIIect
whatsoever where the same is without cause or consideration.66|17| The question that has to
be resolved Ior the moment is whether this debt can be considered as a valid cause or
consideration Ior the sale.

To restate, the CA cited Iour instances in the record to support its holding that petitioner
're-lends the amount borrowed Irom respondent to her Iriends: Iirst, the Iriends oI petitioner
never presented themselves to respondent and that all transactions were made by and between
petitioner and respondent;67|18| second; the money passed through the bank accounts oI
petitioner and respondent;68|19| third, petitioner herselI admitted that she was 're-lending the
money loaned to other individuals Ior proIit;69|20| and Iourth, the documentary evidence






shows that the actual borrowers, the Iriends oI petitioner, consider her as their creditor and not
the respondent.70|21|

On the Iirst, third, and Iourth points, the CA cites the testimony oI the petitioner, then
deIendant, during her cross-examination:71|22|

Atty. Diza:

q. You also mentioned that you were not the one indebted to the plaintiII?

witness:

a. Yes, sir.

Atty. Diza:

q. And you mentioned the persons|,| namely, Elizabeth Tomelden, Teresa Moraquin, Maria
Luisa Inocencio, Zenaida Romulo, they are your Iriends?

witness:

a. Inocencio and Moraquin are my Iriends while |as to| Jacob and Tomelden|,| they were
just reIerred.

Atty. Diza:

q. And you have transact|ed| with the plaintiII?

witness:

a. Yes, sir.

Atty. Diza:

q. What is that transaction?




witness:

a. To reIer those persons to Aura and to reIer again to Arsenio Pua, sir.

Atty. Diza:

q. Did the plaintiII personally see the transactions with your Iriends?

witness:

a. No, sir.

Atty. Diza:

q. Your Iriends and the plaintiII did not meet personally?

witness:

a. Yes, sir.

Atty. Diza:

q. You are intermediaries?
witness:

a. We are both intermediaries. As evidenced by the checks oI the debtors they were
deposited to the name oI Arsenio Pua because the money came Irom Arsenio Pua.

x x x x

Atty. Diza:

q. Did the plaintiII knew |sic| that you will lend the money to your Iriends speciIically the
one you mentioned |a| while ago?

witness:

a. Yes, she knows the money will go to those persons.

Atty. Diza:

q. You are re-lending the money?

witness:

a. Yes, sir.

Atty. Diza:

q. What proIit do you have, do you have commission?

witness:

a. Yes, sir.

Atty. Diza:

q. How much?

witness:

a. Two percent to Tomelden, one percent to Jacob and then Inocencio and my Iriends none,
sir.


Based on the Ioregoing, the CA concluded that petitioner is the real borrower, while the
respondent, the real lender.

But as correctly noted by the RTC, respondent, then plaintiII, made the Iollowing
admission during her cross examination:72|23|

Atty. Villacorta:

q. Who is this Arsenio Pua?

witness:

a. Principal Iinancier, sir.

Atty. Villacorta:

q. So the money came Irom Arsenio Pua?



witness:

a. Yes, because I am only representing him, sir.


Other portions oI the testimony oI respondent must likewise be considered:73|24|

Atty. Villacorta:

q. So it is not actually your money but the money oI Arsenio Pua?

witness:

a. Yes, sir.

Court:

q. It is not your money?

witness:

a. Yes, Your Honor.

Atty. Villacorta:

q. Is it not a Iact Ms. Witness that the deIendant borrowed Irom you to accommodate somebody,
are you aware oI that?

witness:

a. I am aware oI that.

Atty. Villacorta:



q. More or less she |accommodated| several Iriends oI the deIendant?

witness:

a. Yes, sir, I am aware oI that.

x x x x

Atty. Villacorta:

q. And these Iriends oI the deIendant borrowed money Irom you with the assurance oI the
deIendant?

witness:

a. They go direct to Jocelyn because I don`t know them.

x x x x

Atty. Villacorta:

q. And is it not also a Iact Madam witness that everytime that the deIendant borrowed money Irom
you her Iriends who |are| in need oI money issued check|s| to you? There were checks issued to
you?

witness:

a. Yes, there were checks issued.

Atty. Villacorta:

q. By the Iriends oI the deIendant, am I correct?

witness:

a. Yes, sir.

Atty. Villacorta:

q. And because oI your assistance, the Iriends oI the deIendant who are in need oI money
were able to obtain loan to |sic| Arsenio Pua through your assistance?

witness:

a. Yes, sir.

Atty. Villacorta:
q. So that occasion lasted Ior more than a year?
witness:

a. Yes, sir.

Atty. Villacorta:

q. And some oI the checks that were issued by the Iriends oI the deIendant bounced, am I correct?

witness:

a. Yes, sir.

Atty. Villacorta:

q. And because oI that Arsenio Pua got mad with you?

witness:

a. Yes, sir.


Respondent is estopped to deny that she herselI acted as agent oI a certain Arsenio Pua,
her disclosed principal. She is also estopped to deny that petitioner acted as agent Ior the
alleged debtors, the Iriends whom she (petitioner) reIerred.

This Court has aIIirmed that, under Article 1868 oI the Civil Code, the basis oI agency is
representation.74|25| The question oI whether an agency has been created is ordinarily a
question which may be established in the same way as any other Iact, either by direct or
circumstantial evidence. The question is ultimately one oI intention.75|26| Agency may even



be implied Irom the words and conduct oI the parties and the circumstances oI the particular
case.76|27| Though the Iact or extent oI authority oI the agents may not, as a general rule, be
established Irom the declarations oI the agents alone, iI one proIesses to act as agent Ior
another, she may be estopped to deny her agency both as against the asserted principal and the
third persons interested in the transaction in which he or she is engaged.77|28|

In this case, petitioner knew that the Iinancier oI respondent is Pua; and respondent knew
that the borrowers are Iriends oI petitioner.

The CA is incorrect when it considered the Iact that the 'supposed Iriends oI |petitioner|,
the actual borrowers, did not present themselves to |respondent| as evidence that negates the
agency relationshipit is suIIicient that petitioner disclosed to respondent that the Iormer was
acting in behalI oI her principals, her Iriends whom she reIerred to respondent. For an agency
to arise, it is not necessary that the principal personally encounter the third person with whom
the agent interacts. The law in Iact contemplates, and to a great degree, impersonal dealings
where the principal need not personally know or meet the third person with whom her agent
transacts: precisely, the purpose oI agency is to extend the personality oI the principal through
the Iacility oI the agent.78|29|

In the case at bar, both petitioner and respondent have undeniably disclosed to each other
that they are representing someone else, and so both oI them are estopped to deny the same. It
is evident Irom the record that petitioner merely reIers actual borrowers and then collects and
disburses the amounts oI the loan upon which she received a commission; and that respondent
transacts on behalI oI her 'principal Iinancier, a certain Arsenio Pua. II their respective




principals do not actually and personally know each other, such ignorance does not aIIect their
juridical standing as agents, especially since the very purpose oI agency is to extend the
personality oI the principal through the Iacility oI the agent.

With respect to the admission oI petitioner that she is 're-lending the money loaned
Irom respondent to other individuals Ior proIit, it must be stressed that the manner in which the
parties designate the relationship is not controlling. II an act done by one person in behalI oI
another is in its essential nature one oI agency, the Iormer is the agent oI the latter
notwithstanding he or she is not so called.79|30| The question is to be determined by the Iact
that one represents and is acting Ior another, and iI relations exist which will constitute an
agency, it will be an agency whether the parties understood the exact nature of the relation or
not.80|31|

That both parties acted as mere agents is shown by the undisputed Iact that the Iriends oI
petitioner issued checks in payment oI the loan in the name oI Pua. II it is true that petitioner
was 're-lending, then the checks should have been drawn in her name and not directly paid to
Pua.

With respect to the second point, particularly, the Iinding oI the CA that the
disbursements and payments Ior the loan were made through the bank accounts oI petitioner
and respondent,
suIIice it to say that in the normal course oI commercial dealings and Ior reasons oI
convenience and practical utility it can be reasonably expected that the Iacilities oI the agent,



such as a bank account, may be employed, and that a sub-agent be appointed, such as the bank
itselI, to carry out the task, especially where there is no stipulation to the contrary.81|32|

In view oI the two agency relationships, petitioner and respondent are not privy to the
contract oI loan between their principals. Since the sale is predicated on that loan, then the sale
is void Ior lack oI consideration.

2. A Iurther scrutiny oI the record shows, however, that the sale might have been
backed up by another consideration that is separate and distinct Irom the debt: respondent
averred in her complaint and testiIied that the parties had agreed that as a condition Ior the
conveyance oI the property the respondent shall assume the balance oI the mortgage loan which
petitioner allegedly owed to the NHMFC.82|33| This Court in the recent past has declared that
an assumption oI a mortgage debt may constitute a valid consideration Ior a sale.83|34|

Although the record shows that petitioner admitted at the time oI trial that she owned the
property described in the TCT,84|35| the Court must stress that the TransIer CertiIicate oI Title
No. 38253285|36| on its Iace shows that the owner oI the property which admittedly Iorms the
subject matter oI the Deed oI Absolute Sale refers neither to the petitioner nor to her father,
Teodorico oles, the alleged co-owner. Rather, it states that the property is registered in the
name oI 'Household Development Corporation. Although there is an entry to the eIIect that
the petitioner had been granted a special power oI attorney 'covering the shares oI Teodorico
Doles on the parcel oI land described in this certiIicate,86|37| it cannot be inIerred Irom this
bare notation, nor Irom any other evidence on the record, that the petitioner or her Iather held







any direct interest on the property in question so as to validly constitute a mortgage
thereon87|38| and, with more reason, to eIIect the delivery oI the object oI the sale at the
consummation stage.88|39| What is worse, there is a notation that the TCT itselI has been
'cancelled.89|40|

In view oI these anomalies, the Court cannot entertain the
possibility that respondent agreed to assume the balance oI the mortgage loan which petitioner
allegedly owed to the NHMFC, especially since the record is bereIt oI any Iactual Iinding that
petitioner was, in the Iirst place, endowed with any ownership rights to validly mortgage and
convey the property. As the complainant who initiated the case, respondent bears the burden oI
proving the basis oI her complaint. Having Iailed to discharge such burden, the Court has no
choice but to declare the sale void Ior lack oI cause. And since the sale is void, the Court Iinds
it unnecessary to dwell on the issue oI whether duress or intimidation had been Ioisted upon
petitioner upon the execution oI the sale.

Moreover, even assuming the mortgage validly exists, the Court notes respondent`s
allegation that the mortgage with the NHMFC was Ior 25 years which began September 3,
1994. Respondent Iiled her Complaint Ior SpeciIic PerIormance in 1997. Since the 25 years
had not lapsed, the prayer oI respondent to compel petitioner to execute necessary documents to
eIIect the transIer oI title is premature.





WHEREFORE, the petition is granted. The Decision and Resolution oI the Court oI
Appeals are REVERSED and SET ASIDE. The complaint oI respondent in Civil Case No.
97-82716 is DISMISSED.

SO ORDERED.



G.R. No. L-57339 December 29, 193
AIR FRANCE, petitioner,
vs.
HONORABLE COURT OF APPEALS, 1OSE G. GANA (Deceased), CLARA A. GANA, RAMON
GANA, MANUEL GANA, MARIA TERESA GANA, ROBERTO GANA, 1AIME 1AVIER GANA,
CLOTILDE VDA. DE AREVALO, and EMILY SAN 1UAN, respondents.
Benfamin S. Jalte for petitioner. Napoleon Garcia for private respondents.
MELENCIO-HERRERA,
In this petition Ior review on certiorari , petitioner AIR FRANCE assails the Decision oI then respondent Court
oI Appeals
1
promulgated on 15 December 1980 in CA-G.R. No. 58164-R, entitled " Jose G. Gana, et al. vs.
Sociedad Nacionale Air France ", which reversed the Trial Court's judgment dismissing the Complaint oI
private respondents Ior damages arising Irom breach oI contract oI carriage, and awarding instead P90,000.00
as moral damages.
Sometime in February, 1970, the late Jose G. Gana and his Iamily, numbering nine (the GANAS), purchased
Irom AIR FRANCE through Imperial Travels, Incorporated, a duly authorized travel agent, nine (9) "open-
dated" air passage tickets Ior the Manila/Osaka/Tokyo/Manila route. The GANAS paid a total oI US$2,528.85
Ior their economy and Iirst class Iares. Said tickets were bought at the then prevailing exchange rate oI P3.90
per US$1.00. The GANAS also paid travel taxes oI P100.00 Ior each passenger.
On 24 April 1970, AIR FRANCE exchanged or substituted the aIorementioned tickets with other tickets Ior the
same route. At this time, the GANAS were booked Ior the Manila/Osaka segment on AIR FRANCE Flight 184
Ior 8 May 1970, and Ior the Tokyo/Manila return trip on AIR FRANCE Flight 187 on 22 May 1970. The
aIoresaid tickets were valid until 8 May 1971, the date written under the printed words "Non valuable apres de
(meaning, "not valid aIter the").
The GANAS did not depart on 8 May 1970.
Sometime in January, 1971, Jose Gana sought the assistance oI Teresita Manucdoc, a Secretary oI the Sta. Clara
Lumber Company where Jose Gana was the Director and Treasurer, Ior the extension oI the validity oI their
tickets, which were due to expire on 8 May 1971. Teresita enlisted the help oI Lee Ella Manager oI the
Philippine Travel Bureau, who used to handle travel arrangements Ior the personnel oI the Sta. Clara Lumber
Company. Ella sent the tickets to Cesar Rillo, OIIice Manager oI AIR FRANCE. The tickets were returned to
Ella who was inIormed that extension was not possible unless the Iare diIIerentials resulting Irom the increase
in Iares triggered by an increase oI the exchange rate oI the US dollar to the Philippine peso and the increased
travel tax were Iirst paid. Ella then returned the tickets to Teresita and inIormed her oI the impossibility oI
extension.
In the meantime, the GANAS had scheduled their departure on 7 May 1971 or one day beIore the expiry date.
In the morning oI the very day oI their scheduled departure on the Iirst leg oI their trip, Teresita requested travel
agent Ella to arrange the revalidation oI the tickets. Ella gave the same negative answer and warned her that
although the tickets could be used by the GANAS iI they leIt on 7 May 1971, the tickets would no longer be
valid Ior the rest oI their trip because the tickets would then have expired on 8 May 1971. Teresita replied that it
will be up to the GANAS to make the arrangements. With that assurance, Ella on his own, attached to the
tickets validating stickers Ior the Osaka/Tokyo Ilight, one a JAL. sticker and the other an SAS (Scandinavian
Airways System) sticker. The SAS sticker indicates thereon that it was "Reevaluated by: the Philippine Travel
Bureau, Branch No. 2" (as shown by a circular rubber stamp) and signed "Ador", and the date is handwritten in
the center oI the circle. Then appear under printed headings the notations: JL. 108 (Flight), 16 May (Date), 1040
(Time), OK (status). Apparently, Ella made no more attempt to contact AIR FRANCE as there was no more
time.
Notwithstanding the warnings, the GANAS departed Irom Manila in the aIternoon oI 7 May 1971 on board AIR
FRANCE Flight 184 Ior Osaka, Japan. There is no question with respect to this leg oI the trip.
However, Ior the Osaka/Tokyo Ilight on 17 May 1971, Japan Airlines reIused to honor the tickets because oI
their expiration, and the GANAS had to purchase new tickets. They encountered the same diIIiculty with
respect to their return trip to Manila as AIR FRANCE also reIused to honor their tickets. They were able to
return only aIter pre-payment in Manila, through their relatives, oI the readjusted rates. They Iinally Ilew back
to Manila on separate Air France Frights on 19 May 1971 Ior Jose Gana and 26 May 1971 Ior the rest oI the
Iamily.
On 25 August 1971, the GANAS commenced beIore the then Court oI First Instance oI Manila, Branch III,
Civil Case No. 84111 Ior damages arising Irom breach oI contract oI carriage.
AIR FRANCE traversed the material allegations oI the Complaint and alleged that the GANAS brought upon
themselves the predicament they Iound themselves in and assumed the consequential risks; that travel agent
Ella's aIIixing oI validating stickers on the tickets without the knowledge and consent oI AIR FRANCE,
violated airline tariII rules and regulations and was beyond the scope oI his authority as a travel agent; and that
AIR FRANCE was not guilty oI any Iraudulent conduct or bad Iaith.
On 29 May 1975, the Trial Court dismissed the Complaint based on Partial and Additional Stipulations oI Fact
as wen as on the documentary and testimonial evidence.
The GANAS appealed to respondent Appellate Court. During the pendency oI the appeal, Jose Gana, the
principal plaintiII, died.
On 15 December 1980, respondent Appellate Court set aside and reversed the Trial Court's judgment in a
Decision, which decreed:
WHEREFORE, the decision appealed Irom is set aside. Air France is hereby ordered to pay appellants moral
damages in the total sum oI NINETY THOUSAND PESOS (P90,000.00) plus costs.
SO ORDERED.
2

Reconsideration sought by AIR FRANCE was denied, hence, petitioner's recourse beIore this instance, to which
we gave due course.
The crucial issue is whether or not, under the environmental milieu the GANAS have made out a case Ior
breach oI contract oI carriage entitling them to an award oI damages.
We are constrained to reverse respondent Appellate Court's aIIirmative ruling thereon.
Pursuant to tariII rules and regulations oI the International Air Transportation Association (IATA), included in
paragraphs 9, 10, and 11 oI the Stipulations oI Fact between the parties in the Trial Court, dated 31 March 1973,
an airplane ticket is valid Ior one year. "The passenger must undertake the Iinal portion oI his journey by
departing Irom the last point at which he has made a voluntary stop beIore the expiry oI this limit (parag. 3.1.2.
) ... That is the time allowed a passenger to begin and to complete his trip (parags. 3.2 and 3.3.). ... A ticket can
no longer be used Ior travel iI its validity has expired beIore the passenger completes his trip (parag. 3.5.1.) ...
To complete the trip, the passenger must purchase a new ticket Ior the remaining portion oI the journey" ( ibid .)
3

From the Ioregoing rules, it is clear that AIR FRANCE cannot be Iaulted Ior breach oI contract when it
dishonored the tickets oI the GANAS aIter 8 May 1971 since those tickets expired on said date; nor when it
required the GANAS to buy new tickets or have their tickets re-issued Ior the Tokyo/Manila segment oI their
trip. Neither can it be said that, when upon sale oI the new tickets, it imposed additional charges representing
Iare diIIerentials, it was motivated by selI-interest or unjust enrichment considering that an increase oI Iares
took eIIect, as authorized by the Civil Aeronautics Board (CAB) in April, 1971. This procedure is well in
accord with the IATA tariII rules which provide:
6. TARIFF RULES
7. APPLICABLE FARE ON THE DATE OF DEPARTURE
3.1 General Rule.
All journeys must be charged Ior at the Iare (or charge) in eIIect on the date on which transportation
commences Irom the point oI origin. Any ticket sold prior to a change oI Iare or charge (increase or decrease)
occurring between the date oI commencement oI the journey, is subject to the above general rule and must be
adjusted accordingly. A new ticket must be issued and the diIIerence is to be collected or reIunded as the case
may be. No adjustment is necessary iI the increase or decrease in Iare (or charge) occurs when the journey is
already commenced.
4

The GANAS cannot deIend by contending lack oI knowledge oI those rules since the evidence bears out that
Teresita, who handled travel arrangements Ior the GANAS, was duly inIormed by travel agent Ella oI the
advice oI Reno, the OIIice Manager oI Air France, that the tickets in question could not be extended beyond the
period oI their validity without paying the Iare diIIerentials and additional travel taxes brought about by the
increased Iare rate and travel taxes.
ATTY. VALTE
Q What did you tell Mrs. Manucdoc, in turn aIter being told this by Mr. Rillo?
A I told her, because that is the reason why they accepted again the tickets when we returned the tickets spin,
that they could not be extended. They could be extended by paying the additional Iare, additional tax and
additional exchange during that time.
Q You said so to Mrs. Manucdoc?
A Yes, sir." ...
5

The ruling relied on by respondent Appellate Court, thereIore, in KLM. vs. Court of Appeals , 65 SCRA 237
(1975), holding that it would be unIair to charge respondents therein with automatic knowledge or notice oI
conditions in contracts oI adhesion, is inapplicable. To all legal intents and purposes, Teresita was the agent oI
the GANAS and notice to her oI the rejection oI the request Ior extension oI the validity oI the tickets was
notice to the GANAS, her principals.
The SAS validating sticker Ior the Osaka/Tokyo Ilight aIIixed by Era showing reservations Ior JAL. Flight 108
Ior 16 May 1971, without clearing the same with AIR FRANCE allegedly because oI the imminent departure oI
the GANAS on the same day so that he could not get in touch with Air France
6
was certainly in contravention
oI IATA rules although as he had explained, he did so upon Teresita's assurance that Ior the onward Ilight Irom
Osaka and return, the GANAS would make other arrangements.
Q ReIerring you to page 33 oI the transcript oI the last session, I had this question which reads as Iollows: 'But
did she say anything to you when you said that the tickets were about to expire?' Your answer was: 'I am the
one who asked her. At that time I told her iI the tickets being used ... I was telling her what about their bookings
on the return. What about their travel on the return? She told me it is up Ior the Ganas to make the arrangement.'
May I know Irom you what did you mean by this testimony oI yours?
A That was on the day when they were asking me on May 7, 1971 when they were checking the tickets. I told
Mrs. Manucdoc that I was going to get the tickets. I asked her what about the tickets onward Irom the return
Irom Tokyo, and her answer was it is up Ior the Ganas to make the arrangement, because I told her that they
could leave on the seventh, but they could take care oI that when they arrived in Osaka.
Q What do you mean?
A The Ganas will make the arrangement Irom Osaka, Tokyo and Manila.
Q What arrangement?
A The arrangement Ior the airline because the tickets would expire on May 7, and they insisted on leaving. I
asked Mrs. Manucdoc what about the return onward portion because they would be travelling to Osaka, and her
answer was, it is up to Ior the Ganas to make the arrangement.
Q Exactly what were the words oI Mrs. Manucdoc when you told her that? II you can remember, what were her
exact words?
A Her words only, it is up Ior the Ganas to make the arrangement.
Q This was in Tagalog or in English?
A I think it was in English. ...
7

The circumstances that AIR FRANCE personnel at the ticket counter in the airport allowed the GANAS to
leave is not tantamount to an implied ratiIication oI travel agent Ella's irregular actuations. It should be recalled
that the GANAS leIt in Manila the day beIore the expiry date oI their tickets and that "other arrangements" were
to be made with respect to the remaining segments. Besides, the validating stickers that Ella aIIixed on his own
merely reIlect the status oI reservations on the speciIied Ilight and could not legally serve to extend the validity
oI a ticket or revive an expired one.
The conclusion is inevitable that the GANAS brought upon themselves the predicament they were in Ior having
insisted on using tickets that were due to expire in an eIIort, perhaps, to beat the deadline and in the thought that
by commencing the trip the day beIore the expiry date, they could complete the trip even thereaIter. It should be
recalled that AIR FRANCE was even unaware oI the validating SAS and JAL. stickers that Ella had aIIixed
spuriously. Consequently, Japan Air Lines and AIR FRANCE merely acted within their contractual rights when
they dishonored the tickets on the remaining segments oI the trip and when AIR FRANCE demanded payment
oI the adjusted Iare rates and travel taxes Ior the Tokyo/Manila Ilight.
WHEREFORE, the judgment under review is hereby reversed and set aside, and the Amended Complaint Iiled
by private respondents hereby dismissed.
No costs.
SO ORDERED.
Teehankee (Chairman), Plana, Relova and Gutierre:, Jr., JJ., concur.
(
Footnotes
1 Seventh Division composed oI J. Guillermo P. Villasor, ponente concurred in by JJ. Venicio Escolin and
OnoIre A. Villaluz.
2 p. 62, Rollo.
3 3.1.2 The time allowed a passenger to complete his journey calculated Irom the date oI comencement oI the
journey, but exclusive oI that date. The passenger must undertake the Iinal portion oI his journey by departing
Irom the last point at which he has made a voluntary stop beIore the expiry oI this limit, regardless oI whether
this last segment is covered by a single or several Ilight coupons.
xxx xxx xxx 3.2 Time allowed a passenger to begin his trip .
As a rule, ONE YEAR. It may be modiIied by periods during which Iares or reductions granted 3.3 Time
allowed a passenger to complete his trip .
In principle, ONE YEAR. It may be modiIied by periods during which Iares or reductions granted are
applicable.
xxx xxx xxx 3.5 Extensions of validity
3.5.1 A ticket can no longer be used Ior travel iI its validity has expired beIore the passenger completes his trip.
It can only be reIunded in Accordance with normal reIund regulations. To complete the trip, the passenger must
purchase a new ticket Ior the remaining portion oI the journey.
4 p. 195, Folder oI Exhibits.
5 T.s.n., Disposition oI Lee Ella May 15, 1972, p. 7.
6 T.s.n., Ibid. , p. 20.
7 T.s.n. , Ibid ., pp. 28-29.



G.R. No. L-49219 December 11, 1946
PABLO D. PALMA, petitioner,
vs.
EDUARDO REYES CRISTOBAL, respondent.
Jicente J. Francisco and Guillermo B. Guevara for petitioner. Antonio Gon:ales for respondent.
PERFECTO,
A parcel oI a land located in Quesada Street, Tondo, Manila, covered by transIer certiIicate oI title No. 31073 oI
the Register oI Deeds oI Manila, issued in Iavor oI petitioner Pablo D. Palma, is the subject oI contention
between the parties.
Petitioner sought, at Iirst, to eject respondent Eduardo Cristobal Reyes Irom the land in question in a complaint
Iiled with the Municipal Court oI Manila. As respondent raised the question oI ownership, the complaint was
dismissed, and petitioner Iiled with the Court oI First Instance oI Manila the complaint which initiated this case,
petitioner praying that he be declared the owner oI the land and that respondent be ordered to restore its
possession and to remove his house thereIrom.
The complaint was dismissed and petitioner brought the case to the Court oI Appeals, where he again Iailed, the
appealed judgment having been aIIirmed by a decision penned by Mr. Justice Padilla, concurred in by Mr.
Justice Jose G. Generoso and Mr. Justice Pedro Tuason.
The case is now beIore us on appeal by certiorari
In 1909, aIter registration proceedings under the provisions oI Act No. 496, original certiIicate oI title No. 1627
was issued in the names oI petitioner and his wiIe Luisa Cristobal. In 1923, said certiIicate was cancelled and
substituted by certiIicate oI title No. 20968 by virtue oI a decree issued by the Court oI First Instance oI Manila
in connection with Manila cadastre. It was later substituted by certiIicate oI title No. 26704, also in the name oI
petitioner and his wiIe. AIter the latter's death in 1922,a new certiIicate oI title was issued in 1923 only in the
name oI the name oI the petitioner, substituted in 1928 by certiIicate oI title No. 31073.
The Court oI Appeals, upon the evidence, concluded with the Court oI First Instance oI Manila that the parcel
oI land in question is a community property held by petitioner in trust Ior the real owners (the respondent being
an heir oI one oI them), the registration having been made in accordance with an understanding between the co-
owners, by reason oI the conIidence they had in petitioner and his wiIe. This conIidence, close relationship, and
the Iact that the co-owners were receiving their shares in the rentals, were the reasons why no step had been
taken to partition the property.
The Court oI Appeals explains that it was only aIter the death oI Luisa Cristobal and petitioner had taken a
second wiIe that trouble on religious matters arose between petitioner and respondent, and it gives credence to
the testimony oI Apolonia Reyes and respondent to the eIIect that Luisa, beIore her death, called her husband,
the petitioner, and enjoined him to give her co-owners their shares in the parcel oI land; but respondent told her
then not to worry about it, Ior it was more important to them to have her cured oI the malady that aIIected her.
Petitioner answered his wiIe that she should not worry because he would take care oI the matter by giving the
co-owners their respective shares.
Petitioner assigns as Iirst error oI the Court oI Appeals the Iact that it considered the oral testimony adduced in
behalI oI respondent suIIicient to rebut the legal presumption that petitioner is the owner oI the land in
controversy.
In Severino vs. Severino (43 Phil., 343), this court declared that "the relations oI an agent to his principal are
Iiduciary and it is an elementary and very old rule that in regard to property Iorming the subject-matter oI the
agency, he is estopped Irom acquiring or asserting a title adverse to that oI the principal. His position is
analogous to that oI a trustee and he cannot consistently, with the principles oI good Iaith, be allowed to create
in himselI an interest in opposition to that oI his principal or cestui que trust ." AIIirming the said doctrine in
Barretto vs. Tuason (50 Phil., 888), the Supreme Court declared that the registration oI the property in the name
oI the trustees in possession thereoI, must be deemed to have been eIIected Ior the beneIit oI the cestui que trust
. In Palet vs. Tefedor (55 Phil., 790), it was declared that whether or not there is bad Iaith or Iraud in obtaining a
decree with respect to a registered property, the same does not belong to the person in whose Iavor it was
issued, and the real owners be entitled to recover the ownership oI the property so long as the same has not been
transIerred to a third person who has acquired it in good Iaith and Ior a valuable consideration. This right to
recover is sanctioned by section 55 oI Act No. 496, as amended by Act No. 3322.
There is no showing why the conclusions oI Iacts oI the Court oI Appeals should be disturbed, and upon said
Iacts petitioner's Iirst assignment oI errors appears to be untenable in the light oI law and oI the decision oI this
court.
Petitioner alleged that the Court oI Appeals erred in not holding the respondent estopped Irom claiming that
petitioner is not the absolute owner oI the property in question because, aIter Luisa Cristobal, petitioner's wiIe,
died in 1922, instead oI moving Ior the partition oI the property, considering specially that petitioner had
promised such a partition at the deathbed oI the deceased, respondent appeared as attorney Ior petitioner and
prayed that a new certiIicate oI title be issued in the name oI said petitioner as the sole owner oI the property.
Petitioner insisted with energy that respondent himselI was a party to the Iraud upon the court, as guilty as
petitioner himselI, and that estops him Irom asserting that he is the co-owner oI the land involved herein.
There is no merit in petitioner's contention. The Iact that respondent has been a party to the deception which
resulted in petitioner's securing in his name the title to a property not belonging to him, is not valid reason Ior
changing the legal relationship between the latter and its true owners to such an extent as to let them lose their
ownership to a person trying to usurp it.
Whether petitioner and respondent are or are not jointly responsible Ior any Iraud upon a court oI justice, cannot
aIIect the substantial rights oI the real owners oI the title oI a real property.
Respondent is not barred because his appearance as attorney Ior petitioner was not a misrepresentation which
would induce petitioner to believe that respondent recognized the Iormer as the sole owner oI the property in
controversy. The misrepresentation could deceive the court and outsiders, because they were not aware oI the
understanding between the co-owners that the property be registered in the name oI petitioner. The Court oI
Appeals Iound, and the Iinding is not now in issue, that petitioner was a party to the understanding and assumed
the role oI an instrument to make it eIIective. Respondent's appearance, as attorney Ior petitioner in 1923, was a
consequence oI the understanding, and petitioner could not legitimately assume that it had the eIIect oI breaking
or reversing said understanding.
Lastly, it is contended by petitioner that, even conceding that the controverted property was owned in common
by several co-owners, yet the Court oI Appeals erred in not holding that, as against respondent, petitioner had
acquired absolute ownership oI the same through prescription.
Upon the premise that the registration in 1909 in the name oI petitioner and his wiIe, Luisa Cristobal, was in
accordance with an agreement among the co-owners, petitioner advances the theory that when he, upon the
death oI his wiIe in 1922, caused the trust property to be registered in his sole name in 1923, and subsequently
partitioned between himselI and his daughter, IldeIonsa Cristobal Ditangco, as heirs oI the decedent, "he openly
breached the agreement oI 1909 as well as the promise made to his dying wiIe oI giving the co-owners their
respective shares," concluding that "that breach was an assumption oI ownership, and could be the basis oI title
by prescription."
This theory holds no water because, according to the pronouncement oI the Court oI Appeals, upon the
evidence, petitioner held the property and secured its registration in his name in a Iiduciary capacity, and it is
elementary that a trustee cannot acquire by prescription the ownership oI the property entrusted to him. The
position oI a trustee is oI representative nature. His position is the position oI a cestui que trust . It is logical that
all beneIits derived by the possession and acts oI the agent, as such agent, should accrue to the beneIit oI his
principal.
Petitioner's pretension oI building his right to claim ownership by prescription upon his own breach oI a trust
cannot be countenanced by any court, being subversive oI generally accepted ethical principles.
The decision oI the Court oI Appeals is aIIirmed. No costs.
Moran, Beng:on, C.J., Paras, Feria, Pablo, Hilado and Briones, JJ., concur.


G.R. No. L-1556 November , 1919
W. G. PHILPOTTS, petitioner,
vs.
PHILIPPINE MANUFACTURING COMPANY and F. N. BERRY, respondents.
Lawrence and Ross for petitioner. Crossfield and OBrien for defendants.
STREET,
The petitioner, W. G. Philpotts, a stockholder in the Philippine ManuIacturing Company, one oI the respondents
herein, seeks by this proceeding to obtain a writ oI mandamus to compel the respondents to permit the plaintiII,
in person or by some authorized agent or attorney, to inspect and examine the records oI the business transacted
by said company since January 1, 1918. The petition is Iiled originally in this court under the authority oI
section 515 oI the Code oI Civil Procedure, which gives to this tribunal concurrent jurisdiction with the Court oI
First Instance in cases, among others, where any corporation or person unlawIully excludes the plaintiII Irom
the use and enjoyment oI some right to which he is entitled. The respondents interposed a demurrer, and the
controversy is now beIore us Ior the determination oI the questions thus presented.
The Iirst point made has reIerence to a supposed deIect oI parties, and it is said that the action can not be
maintained jointly against the corporation and its secretary without the addition oI the allegation that the latter is
the custodian oI the business records oI the respondent company.
By the plain language oI sections 515 and 222 oI our Code oI Civil Procedure, the right oI action in such a
proceeding as this is given against the corporation; and the respondent corporation in this case was the only
absolutely necessary party. In the Ohio case oI Cincinnati Volksblatt Co. vs. HoIImister (61 Ohio St., 432; 48 L.
R. A., 735), only the corporation was named as deIendant, while the complaint, in language almost identical
with that in the case at bar, alleged a demand upon and reIusal by the corporation.
Nevertheless the propriety oI naming the secretary oI the corporation as a codeIendant cannot be questioned,
since such oIIicial is customarily charged with the custody oI all documents, correspondence, and records oI a
corporation, and he is presumably the person against whom the personal orders oI the court would be made
eIIective in case the relieI sought should be granted. Certainly there is nothing in the complaint to indicate that
the secretary is an improper person to be joined. The petitioner might have named the president oI the
corporation as a respondent also; and this oIIicial might be brought in later, even aIter judgment rendered, iI
necessary to the eIIectuation oI the order oI the court.
Section 222 oI our Code oI Civil Procedure is taken Irom the CaliIornia Code, and a decision oI the CaliIornia
Supreme Court Barber vs. MulIord (117 Cal., 356) is quite clear upon the point that both the corporation
and its oIIicers may be joined as deIendants.
The real controversy which has brought these litigants into court is upon the question argued in connection with
the second ground oI demurrer, namely, whether the right which the law concedes to a stockholder to inspect
the records can be exercised by a proper agent or attorney oI the stockholder as well as by the stockholder in
person. There is no pretense that the respondent corporation or any oI its oIIicials has reIused to allow the
petitioner himselI to examine anything relating to the aIIairs oI the company, and the petition prays Ior a
peremptory order commanding the respondents to place the records oI all business transactions oI the company,
during a speciIied period, at the disposal oI the plaintiII or his duly authorized agent or attorney, it being evident
that the petitioner desires to exercise said right through an agent or attorney. In the argument in support oI the
demurrer it is conceded by counsel Ior the respondents that there is a right oI examination in the stockholder
granted under section 51 oI the Corporation Law, but it is insisted that this right must be exercised in person.
The pertinent provision oI our law is Iound in the second paragraph oI section 51 oI Act No. 1459, which reads
as Iollows: "The record oI all business transactions oI the corporation and the minutes oI any meeting shall be
open to the inspection oI any director, member or stockholder oI the corporation at reasonable hours."
This provision is to be read oI course in connecting with the related provisions oI sections 51 and 52, deIining
the duty oI the corporation in respect to the keeping oI its records.
Now it is our opinion, and we accordingly hold, that the right oI inspection given to a stockholder in the
provision above quoted can be exercised either by himselI or by any proper representative or attorney in Iact,
and either with or without the attendance oI the stockholder. This is in conIormity with the general rule that
what a man may do in person he may do through another; and we Iind nothing in the statute that would justiIy
us in qualiIying the right in the manner suggested by the respondents.
This conclusion is supported by the undoubted weight oI authority in the United States, where it is generally
held that the provisions oI law conceding the right oI inspection to stockholders oI corporations are to be
liberally construed and that said right may be exercised through any other properly authorized person. As was
said in Foster vs. White (86 Ala., 467), "The right may be regarded as personal, in the sense that only a
stockholder may enjoy it; but the inspection and examination may be made by another. Otherwise it would be
unavailing in many instances." An observation to the same eIIect is contained in Martin vs. Bienville Oil Works
Co. (28 La., 204), where it is said: "The possession oI the right in question would be Iutile iI the possessor oI it,
through lack oI knowledge necessary to exercise it, were debarred the right oI procuring in his behalI the
services oI one who could exercise it." In Deadreck vs. Wilson (8 Baxt. |Tenn.|, 108), the court said: "That
stockholders have the right to inspect the books oI the corporation, taking minutes Irom the same, at all
reasonable times, and may be aided in this by experts and counsel, so as to make the inspection valuable to
them, is a principle too well settled to need discussion." Authorities on this point could be accumulated in great
abundance, but as they may be Iound cited in any legal encyclopedia or treaties devoted to the subject oI
corporations, it is unnecessary here to reIer to other cases announcing the same rule.
In order that the rule above stated may not be taken in too sweeping a sense, we deem it advisable to say that
there are some things which a corporation may undoubtedly keep secret, notwithstanding the right oI inspection
given by law to the stockholder; as Ior instance, where a corporation, engaged in the business oI manuIacture,
has acquired a Iormula or process, not generally known, which has proved oI utility to it in the manuIacture oI
its products. It is not our intention to declare that the authorities oI the corporation, and more particularly the
Board oI Directors, might not adopt measures Ior the protection oI such process Iorm publicity. There is,
however, nothing in the petition which would indicate that the petitioner in this case is seeking to discover
anything which the corporation is entitled to keep secret; and iI anything oI the sort is involved in the case it
may be brought out at a more advanced stage oI the proceedings.
The demurrer is overruled; and it is ordered that the writ oI mandamus shall issue as prayed, unless within 5
days Irom notiIication hereoI the respondents answer to the merits. So ordered.
Arellano, C.J., Torres, Johnson, Araullo, Malcolm and Avancea, JJ., concur.


G.R. No. L-1091 March 4, 1916
WILLIAM FRESSEL, ET AL., plaintiffs-appellants,
vs.
MARIANO UY CHACO SONS & COMPANY, defendant-appellee.
Rohde and Wright for appellants. Gilbert, Haussermann, Cohn and Fisher for appellee.
TRENT,
This is an appeal Irom a judgment sustaining the demurrer on the ground that the complaint does not state a
cause oI action, Iollowed by an order dismissing the case aIter the plaintiIIs declined to amend.
The complaint, omitting the caption, etc., reads:
2. That during the latter part oI the year 1913, the deIendant entered into a contract with one E. Merritt, whereby
the said Merritt undertook and agreed with the deIendant to build Ior the deIendant a costly ediIice in the city oI
Manila at the corner oI Calle Rosario and Plaza del Padre Moraga. In the contract it was agreed between the
parties thereto, that the deIendant at any time, upon certain contingencies, beIore the completion oI said ediIice
could take possession oI said ediIice in the course oI construction and oI all the materials in and about said
premises acquired by Merritt Ior the construction oI said ediIice.
3. That during the month oI August land past, the plaintiIIs delivered to Merritt at the said ediIice in the course
oI construction certain materials oI the value oI P1,381.21, as per detailed list hereto attached and marked
Exhibit A, which price Merritt had agreed to pay on the 1st day oI September, 1914.
4. That on the 28th day oI August, 1914, the deIendant under and by virtue oI its contract with Merritt took
possession oI the incomplete ediIice in course oI construction together with all the materials on said premises
including the materials delivered by plaintiIIs and mentioned in Exhibit A aIoresaid.
5. That neither Merritt nor the deIendant has paid Ior the materials mentioned in Exhibit A, although payment
has been demanded, and that on the 2d day oI September, 1914, the plaintiIIs demanded oI the deIendant the
return or permission to enter upon said premises and retake said materials at the time still unused which was
reIused by deIendant.
6. That in pursuance oI the contract between Merritt and the deIendant, Merritt acted as the agent Ior deIendant
in the acquisition oI the materials Irom plaintiIIs.
The appellants insist that the above quoted allegations show that Merritt acted as the agent oI the deIendant in
purchasing the materials in question and that the deIendant, by taking over and using such materials, accepted
and ratiIied the purchase, thereby obligating itselI to pay Ior the same. Or, viewed in another light, iI the
deIendant took over the unIinished building and all the materials on the ground and then completed the structure
according to the plans, speciIications, and building permit, it became in Iact the successor or assignee oI the
Iirst builder, and as successor or assignee, it was as much bound legally to pay Ior the materials used as was the
original party. The vendor can enIorce 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 oI the contract" an independent
contractor, is the only person liable Ior the amount claimed.
It is urged that, as the demurrer admits the truth oI all the allegations oI Iact set out in the complaint, the
allegation in paragraph 6 to the eIIect that Merritt "acted as the agent Ior deIendant in the acquisition oI the
materials Irom plaintiIIs," must be, at this stage oI the proceedings, considered as true. The rule, as thus broadly
stated, has many limitations and restrictions.
A more accurate statement oI the rule is that a demurrer admits the truth oI all material and relevant Iacts which
are well pleaded. . . . .The admission oI the truth oI material and relevant Iacts well pleaded does not extend to
render a demurrer an admission oI inIerences or conclusions drawn thereIrom, even iI alleged in the pleading;
nor mere inIerences or conclusions Irom Iacts not stated; nor conclusions oI law. (Alzua and Arnalot vs.
Johnson, 21 Phil. Rep., 308, 350.)
Upon the question oI construction oI pleadings, section 106 oI the Code oI Civil Procedure provides that:
In the construction oI a pleading, Ior the purpose oI determining its eIIects, its allegations shall be liberally
construed, with a view oI substantial justice between the parties.
This section is essentially the same as section 452 oI the CaliIornia Code oI Civil Procedure. "Substantial
justice," as used in the two sections, means substantial justice to be ascertained and determined by Iixed rules
and positive statutes. (Stevens vs. Ross, 1 Cal. 94, 95.) "Where the language oI a pleading is ambiguous, aIter
giving to it a reasonable intendment, it should be resolved against the pleader. This is especially true on appeal
Irom a judgment rendered aIter reIusal to amend; where a general and special demurrer to a complaint has been
sustained, and the plaintiII had reIused to amend, all ambiguities and uncertainties must be construed against
him." (Sutherland on Code Pleading, vol. 1, sec. 85, and cases cited.)
The allegations in paragraphs 1 to 5, inclusive, above set Iorth, do not even intimate that the relation existing
between Merritt and the deIendant was that oI 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 oI the deIendant. The Iact that "the deIendant entered into a contract with one E. Merritt, where
by the said Merritt undertook and agreed with the deIendant to build Ior the deIendant a costly ediIice" shows
that Merritt was authorized to do the work according to his own method and without being subject to the
deIendant's control, except as to the result oI the work. He could purchase his materials and supplies Irom
whom he pleased and at such prices as he desired to pay. Again, the allegations that the "plaintiIIs delivered the
Merritt . . . . certain materials (the materials in question) oI the value oI P1,381.21, . . . . which price Merritt
agreed to pay," show that there were no contractual relations whatever between the sellers and the deIendant.
The mere Iact that Merritt and the deIendant had stipulated in their building contract that the latter could, "upon
certain contingencies," take possession oI the incompleted building and all materials on the ground, did not
change Merritt Irom an independent contractor to an agent. Suppose that, at the time the building was taken
over Merritt had actually used in the construction thus Iar P100,000 worth oI materials and supplies which he
had purchased on a credit, could those creditors maintain an action against the deIendant Ior the value oI such
supplies? Certainly not. The Iact that the P100,000 worth oI supplies had been actually used in the building
would place those creditors in no worse position to recover than that oI the plaintiIIs, although the materials
which the plaintiIIs sold to Merritt had not actually gone into the construction. To hold that either group oI
creditors can recover would have the eIIect oI compelling the deIendants to pay, as we have indicated, just such
prices Ior materials as Merritt and the sellers saw Iit to Iix. In the absence oI a statute creating what is known as
mechanics' liens, the owner oI a building is not liable Ior the value oI materials purchased by an independent
contractor either as such owner or as the assignee oI the contractor.
The allegation in paragraph 6 that Merritt was the agent oI the deIendant contradicts all the other allegations and
is a mere conclusion drawn Irom them. Such conclusion is not admitted, as we have said, by the demurrer.
The allegations in the complaint not being suIIicient to constitute a cause oI action against the deIendant, the
judgment appealed Irom is aIIirmed, with costs against the appellants. So ordered.
Arellano, C.J., Torres, Johnson and Araullo, JJ., concur. Moreland, J., concurs in the result. Carson, J.,
dissents.


G.R. No. L-169 1anuary 29, 1957
THE SHELL COMPANY OF THE PHILIPPINES, LTD., petitioner,
vs.
FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW 1ERSEY COMMERCIAL CASUALTY
INSURANCE CO., SALVADOR SISON, PORFIRIO DE LA FUENTE and THE COURT OF APPEALS
(First Division), respondents.
Ross, Selph, Carrascoso & Janda for petitioner. J. A. Wolfson and Manuel Y. Macias for respondents.
PADILLA,
Appeal by certiorari under Rule 46 to review a judgment oI the Court oI Appeals which reversed that oI the
Court oI First Instance oI Manila and sentenced ". . . the deIendants-appellees to pay, jointly and severally, the
plaintiIIs-appellants the sum oI P1,651.38, with legal interest Irom December 6, 1947 (Gutierrez vs. Gutierrez,
56 Phil., 177, 180), and the costs in both instances."
The Court oI Appeals Iound the Iollowing:
Inasmuch as both the PlaintiIIs-Appellants and the DeIendant-Appellee, the Shell Company oI the Philippine
Islands, Ltd. accept the statement oI Iacts made by the trial court in its decision and appearing on pages 23 to 37
oI the Record on Appeal, we quote hereunder such statement:
This is an action Ior recovery oI sum oI money, based on alleged negligence oI the deIendants.
It is a Iact that a Plymounth car owned by Salvador R. Sison was brought, on September 3, 1947 to the Shell
Gasoline and Service Station, located at the corner oI Marques de Comillas and Isaac Peral Streets, Manila, Ior
washing, greasing and spraying. The operator oI the station, having agreed to do service upon payment oI
P8.00, the car was placed on a hydraulic liIter under the direction oI the personnel oI the station.
What happened to the car is recounted by Perlito Sison, as Iollows:
Q. Will you please describe how they proceeded to do the work?
A. Yes, sir. The Iirst thing that was done, as I saw, was to drive the car over the liIter. Then by the aid oI the
two grease men they raised up my car up to six Ieet high, and then washing was done. AIter washing, the next
step was greasing. BeIore greasing was Iinished, there is a part near the shelI oI the right Iender, right Iront
Iender, oI my car to be greased, but the the grease men cannot reached that part, so the next thing to be done
was to loosen the liIter just a Iew Ieet lower. Then upon releasing the valve to make the car lower, a little bit
lower . .
Q. Who released the valve?
A. The greasemen, Ior the escape oI the air. As the escape oI the air is too strong Ior my ear I Iaced backward. I
Iaced toward Isaac Peral Street, and covered my ear. AIter the escaped oI the air has been Iinished, the air
coming out Irom the valve, I turned to Iace the car and I saw the car swaying at that time, and just Ior a Iew
second the car Iell., (t.s.n. pp. 22-23.)
The case was immediately reported to the Manila Adjustor Company, the adjustor oI the Iiremen's Insurance
Company and the Commercial Casualty Insurance Company, as the car was insured with these insurance
companies. AIter having been inspected by one Mr. Baylon, representative oI the Manila Adjustor Company,
the damaged car was taken to the shops oI the Philippine Motors, Incorporated, Ior repair upon order oI the
Firemen's Insurance Company and the Commercial Casualty Company, with the consent oI Salvador R. Sison.
The car was restored to running condition aIter repairs amounting to P1,651.38, and was delivered to Salvador
R. Sison, who, in turn made assignments oI his rights to recover damages in Iavor oI the Firemen's Insurance
Company and the Commercial Casualty Insurance Company.
On the other hand, the Iall oI the car Irom the hydraulic liIter has been explained by AlIonso M. Adriano, a
greaseman in the Shell Gasoline and Service Station, as Iollows:
Q. Were you able to liIt the car on the hydraulic liIter on the occasion, September 3, 1947?
A. Yes, sir.
Q. To what height did you raise more or less?
A. More or less Iive Ieet, sir.
Q. AIter liIting that car that height, what did you do with the car?
A. I also washed it, sir.
Q. And aIter washing?
A. I greased it.
Q. On that occasion, have you been able to Iinish greasing and washing the car?
A. There is one point which I could not reach.
Q. And what did you do then?
A. I lowered the liIter in order to reach that point.
Q. AIter lowering it a little, what did you do then?
A. I pushed and pressed the valve in its gradual pressure.
Q. Were you able to reach the portion which you were not able to reach while it was lower?
A. No more, sir.
Q. Why?
A. Because when I was lowering the liIter I saw that the car was swinging and it Iell.
THE COURT. Why did the car swing and Iall?
WITNESS: 'That is what I do not know, sir'. (t.s.n., p.67.)
The position oI DeIendant PorIirio de la Fuente is stated in his counter-statement oI Iacts which is hereunder
also reproduced:
In the aIternoon oI September 3, 1947, an automobile belonging to the plaintiII Salvador Sison was brought by
his son, Perlito Sison, to the gasoline and service station at the corner oI Marques de Comillas and Isaac Peral
Streets, City oI Manila, Philippines, owned by the deIendant The Shell Company oI the Philippine Islands,
Limited, but operated by the deIendant PorIirio de la Fuente, Ior the purpose oI having said car washed and
greased Ior a consideration oI P8.00 (t.s.n., pp. 19-20.) Said car was insured against loss or damage by
Firemen's Insurance Company oI Newark, New Jersey, and Commercial Casualty Insurance Company jointly
Ior the sum oI P10,000 (Exhibits "A', "B", and "D").
The job oI washing and greasing was undertaken by deIendant PorIirio de la Fuente through his two employees,
AlIonso M. Adriano, as greaseman and one surnamed de los Reyes, a helper and washer (t.s.n., pp. 65-67). To
perIorm the job the car was careIully and centrally placed on the platIorm oI the liIter in the gasoline and
service station aIorementioned beIore raising up said platIorm to a height oI about 5 Ieet and then the servicing
job was started. AIter more than one hour oI washing and greasing, the job was about to be completed except
Ior an ungreased portion underneath the vehicle which could not be reached by the greasemen. So, the liIter was
lowered a little by AlIonso M. Adriano and while doing so, the car Ior unknown reason accidentally Iell and
suIIered damage to the value oI P1, 651.38 (t.s.n., pp. 65-67).
The insurance companies aIter paying the sum oI P1,651.38 Ior the damage and charging the balance oI
P100.00 to Salvador Sison in accordance with the terms oI the insurance contract, have Iiled this action together
with said Salvador Sison Ior the recovery oI the total amount oI the damage Irom the deIendants on the ground
oI negligence (Record on Appeal, pp. 1-6).
The deIendant PorIirio de la Fuente denied negligence in the operation oI the liIter in his separate answer and
contended Iurther that the accidental Iall oI the car was caused by unIorseen event (Record on Appeal, pp. 17-
19).
The owner oI the car Iorthwith notiIied the insurers who ordered their adjustor, the Manila Adjustor Company,
to investigate the incident and aIter such investigation the damaged car, upon order oI the insures and with the
consent oI the owner, was brought to the shop oI the Philippine Motors, Inc. The car was restored to running
condition aIter thereon which amounted to P1,651.38 and returned to the owner who assigned his right to
collect the aIoresaid amount to the Firemen's Insurance Company and the Commercial Casualty Insurance
Company.
On 6 December 1947 the insures and the owner oI the car brought an action in the Court oI First Instance oI
Manila against the Shell Company oI the Philippines, Ltd. and PorIirio de la Fuente to recover Irom them,
jointly and severally, the sum oI P1,651.38, interest thereon at the legal rate Irom the Iiling oI the complaint
until Iully paid, the costs. AIter trial the Court dismissed the complaint. The plaintiIIs appealed. The Court oI
Appeals reversed the judgment and sentenced the deIendant to pay the amount sought to be recovered, legal
interest and costs, as stated at the beginning oI this opinion.
In arriving at the conclusion that on 3 September 1947 when the car was brought to the station Ior servicing
ProIirio de la Fuente, the operator oI the gasoline and service station, was an agent oI the Shell Company oI the
Philippines, Ltd., the Court oI Appeals Iound that
. . . De la Fuente owned his position to the Shell Company which could remove him terminate his services at
any time Irom the said Company, and he undertook to sell the Shell Company's products exculusively at the
said Station. For this purpose, De la Fuente was placed in possession oI the gasoline and service station under
consideration, and was provided with all the equipments needed to operate it, by the said Company, such as the
tools and articles listed on Exhibit 2 which the hydraulic liIter (hoist) and accessories, Irom which Sison's
automobile Iell on the date in question (Exhibit 1 and 2). These equipments were delivered to De la Fuente on a
so-called loan basis. The Shell Company took charge oI its care and maintenance and rendered to the public or
its customers at that station Ior the proper Iunctioning oI the equipment. Witness Antonio Tiongson, who was
sales superintendent oI the Shell Company, and witness Augusto Sawyer, Ioreman oI the same Company,
supervised the operators and conducted periodic inspection oI the Company's gasoline and service station, the
service station in question inclusive. Explaining his duties and responsibilities and the reason Ior the loan,
Tiongson said: "mainly oI the supervision oI sales or (oI) our dealers and rountinary inspection oI the
equipment loaned by the Company" (t.s.n., 107); "we merely inquire about how the equipments are, whether
they have complaints, and whether iI said equipments are in proper order . . .", (t.s.n., 110); station equipments
are "loaned Ior the exclusive use oI the dealer on condition that all supplies to be sold by said dealer should be
exclusively Shell, so as a concession we loan equipments Ior their use . . .," "Ior the proper Iunctioning oI the
equipments, we answer and see to it that the equipments are in good running order usable condition . . .," "with
respect to the public." (t.s.n., 111-112). De la Fuente, as operator, was given special prices by the Company Ior
the gasoline products sold therein. Exhibit 1 Shell, which was a receipt by Antonio Tiongson and signed by
the De la Fuente, acknowledging the delivery oI equipments oI the gasoline and service station in question was
subsequently replaced by Exhibit 2 Shell, an oIIicial Irom oI the inventory oI the equipment which De la
Fuente signed above the words: "Agent's signature" And the service station in question had been marked
"SHELL", and all advertisements therein bore the same sign. . .
. . . De la Fuente was the operator oI the station "by grace" oI the DeIendant Company which could and did
remove him as it pleased; that all the equipments needed to operate the station was owned by the DeIendant
Company which took charge oI their proper care and maintenance, despite the Iact that they were loaned to him;
that the DeIendant company did not leave the Iixing oI price Ior gasoline to De la Fuente; on the other hand, the
DeIendant company had complete control thereoI; and that Tiongson, the sales representative oI the DeIendant
Company, had supervision over De la Fuente in the operation oI the station, and in the sale oI DeIendant
Company's products therein. . .
Taking into consideration the Iact that the operator owed his position to the company and the latter could
remove him or terminate his services at will; that the service station belonged to the company and bore its
tradename and the operator sold only the products oI the company; that the equipment used by the operator
belonged to the company and were just loaned to the operator and the company took charge oI their repair and
maintenance; that an employee oI the company supervised the operator and conducted periodic inspection oI the
company's gasoline and service station; that the price oI the products sold by the operator was Iixed by the
company and not by the operator; and that the receipt signed by the operator indicated that he was a mere agent,
the Iinding oI the Court oI Appeals that the operator was an agent oI the company and not an independent
contractor should not be disturbed.
To determine the nature oI a contract courts do not have or are not bound to rely upon the name or title given it
by the contracting parties, should there be a controversy as to what they really had intended to enter into, but the
way the contracting parties do or perIorm their respective obligation stipulated or agreed upon may be shown
and inquired into, and should such perIormance conIlict with the name or title given the contract by the parties,
the Iormer must prevail over the latter.
It was admitted by the operator oI the gasoline and service station that "the car was careIully and centrally
placed on the platIorm oI the liIter . . ." and the Court oI Appeals Iound that
. . . the Iall oI Appellant Sison's car Irom the hydraulic liIt and the damage caused thereIor, were the result oI
the jerking and swaying oI the liIt when the valve was released, and that the jerking was due to some accident
and unIoreseen shortcoming oI the mechanism itselI, which caused its Iaulty or deIective operation or
Iunctioning,
. . . the servicing job on Appellant Sison's automobile was accepted by De la Fuente in the normal and ordinary
conduct oI his business as operator oI his co-appellee's service station, and that the jerking and swaying oI the
hydraulic liIt which caused the Iall oI the subject car were due to its deIective condition, resulting in its Iaulty
operation. . .
As the act oI the agent or his employees acting within the scope oI his authority is the act oI the principal, the
breach oI the undertaking by the agent is one Ior which the principal is answerable. Moreover, the company
undertook to "answer and see to it that the equipments are in good running order and usable condition;" and the
Court oI Appeals Iound that the Company's mechanic Iailed to make a thorough check up oI the hydraulic liIter
and the check up made by its mechanic was "merely routine" by raising "the liIter once or twice and aIter
observing that the operator was satisIactory, he (the mechanic) leIt the place." The latter was negligent and the
company must answer Ior the negligent act oI its mechanic which was the cause oI the Iall oI the car Irom the
hydraulic liIter.
The judgment under review is aIIirmed, with costs against the petitioner.
Paras, C.J., Beng:on, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Endencia
and Felix, JJ., concur.



G.R. No. 117356. 1une 19, 2000
VICTORIAS MILLING CO., INC., petitioner, vs.
COURT OF APPEALS and CONSOLIDATED SUGAR CORPORATION, respondents.
D E C I S I O N
QUISUMBING, .
BeIore us is a petition Ior review on certiorari under Rule 45 oI the Rules oI Court assailing the decision oI the
Court oI Appeals dated February 24, 1994, in CA-G.R. CV No. 31717, as well as the respondent court's
resolution oI September 30, 1994 modiIying said decision. Both decision and resolution amended the judgment
dated February 13, 1991, oI the Regional Trial Court oI Makati City, Branch 147, in Civil Case No. 90-118.
The Iacts oI this case as Iound by both the trial and appellate courts are as Iollows:
St. Therese Merchandising (hereaIter STM) regularly bought sugar Irom petitioner Victorias Milling Co., Inc.,
(VMC). In the course oI their dealings, petitioner issued several Shipping List/Delivery Receipts (SLDRs) to
STM as prooI oI purchases. Among these was SLDR No. 1214M, which gave rise to the instant case. Dated
October 16, 1989, SLDR No. 1214M covers 25,000 bags oI sugar. Each bag contained 50 kilograms and priced
at P638.00 per bag as "per sales order VMC Marketing No. 042 dated October 16, 1989." |1| The transaction it
covered was a "direct sale." |2| The SLDR also contains an additional note which reads: "subject Ior (sic)
availability oI a (sic) stock at NAWACO (warehouse)." |3|
On October 25, 1989, STM sold to private respondent Consolidated Sugar Corporation (CSC) its rights in
SLDR No. 1214M Ior P 14,750,000.00. CSC issued one check dated October 25, 1989 and three checks
postdated November 13, 1989 in payment. That same day, CSC wrote petitioner that it had been authorized by
STM to withdraw the sugar covered by SLDR No. 1214M. Enclosed in the letter were a copy oI SLDR No.
1214M and a letter oI authority Irom STM authorizing CSC "to withdraw Ior and in our behalI the reIined sugar
covered by Shipping List/Delivery Receipt-ReIined Sugar (SDR) No. 1214 dated October 16, 1989 in the total
quantity oI 25,000 bags." |4|
On October 27, 1989, STM issued 16 checks in the total amount oI P31,900,000.00 with petitioner as payee.
The latter, in turn, issued OIIicial Receipt No. 33743 dated October 27, 1989 acknowledging receipt oI the said
checks in payment oI 50,000 bags. Aside Irom SLDR No. 1214M, said checks also covered SLDR No. 1213.
Private respondent CSC surrendered SLDR No. 1214M to the petitioner's NAWACO warehouse and was
allowed to withdraw sugar. However, aIter 2,000 bags had been released, petitioner reIused to allow Iurther
withdrawals oI sugar against SLDR No. 1214M. CSC then sent petitioner a letter dated January 23, 1990
inIorming it that SLDR No. 1214M had been "sold and endorsed" to it but that it had been reIused Iurther
withdrawals oI sugar Irom petitioner's warehouse despite the Iact that only 2,000 bags had been withdrawn. |5|
CSC thus inquired when it would be allowed to withdraw the remaining 23,000 bags.
On January 31, 1990, petitioner replied that it could not allow any Iurther withdrawals oI sugar against SLDR
No. 1214M because STM had already dwithdrawn all the sugar covered by the cleared checks. |6|
On March 2, 1990, CSC sent petitioner a letter demanding the release oI the balance oI 23,000 bags.
Seven days later, petitioner reiterated that all the sugar corresponding to the amount oI STM's cleared checks
had been Iully withdrawn and hence, there would be no more deliveries oI the commodity to STM's account.
Petitioner also noted that CSC had represented itselI to be STM's agent as it had withdrawn the 2,000 bags
against SLDR No. 1214M "Ior and in behalI" oI STM.
On April 27, 1990, CSC Iiled a complaint Ior speciIic perIormance, docketed as Civil Case No. 90-1118.
DeIendants were Teresita Ng Sy (doing business under the name oI St. Therese Merchandising) and herein
petitioner. Since the Iormer could not be served with summons, the case proceeded only against the latter.
During the trial, it was discovered that Teresita Ng Go who testiIied Ior CSC was the same Teresita Ng Sy who
could not be reached through summons. |7| CSC, however, did not bother to pursue its case against her, but
instead used her as its witness.
CSC's complaint alleged that STM had Iully paid petitioner Ior the sugar covered by SLDR No. 1214M.
ThereIore, the latter had no justiIication Ior reIusing delivery oI the sugar. CSC prayed that petitioner be
ordered to deliver the 23,000 bags covered by SLDR No. 1214M and sought the award oI P1,104,000.00 in
unrealized proIits, P3,000,000.00 as exemplary damages, P2,200,000.00 as attorney's Iees and litigation
expenses.
Petitioner's primary deIense a quo was that it was an unpaid seller Ior the 23,000 bags. |8| Since STM had
already drawn in Iull all the sugar corresponding to the amount oI its cleared checks, it could no longer
authorize Iurther delivery oI sugar to CSC. Petitioner also contended that it had no privity oI contract with CSC.
Petitioner explained that the SLDRs, which it had issued, were not documents oI title, but mere delivery receipts
issued pursuant to a series oI transactions entered into between it and STM. The SLDRs prescribed delivery oI
the sugar to the party speciIied therein and did not authorize the transIer oI said party's rights and interests.
Petitioner also alleged that CSC did not pay Ior the SLDR and was actually STM's co-conspirator to deIraud it
through a misrepresentation that CSC was an innocent purchaser Ior value and in good Iaith. Petitioner then
prayed that CSC be ordered to pay it the Iollowing sums: P10,000,000.00 as moral damages; P10,000,000.00 as
exemplary damages; and P1,500,000.00 as attorney's Iees. Petitioner also prayed that cross-deIendant STM be
ordered to pay it P10,000,000.00 in exemplary damages, and P1,500,000.00 as attorney's Iees.
Since no settlement was reached at pre-trial, the trial court heard the case on the merits.
As earlier stated, the trial court rendered its judgment Iavoring private respondent CSC, as Iollows:
"WHEREFORE, in view oI the Ioregoing, the Court hereby renders judgment in Iavor oI the plaintiII and
against deIendant Victorias Milling Company:
"1) Ordering deIendant Victorias Milling Company to deliver to the plaintiII 23,000 bags oI reIined sugar due
under SLDR No. 1214;
"2) Ordering deIendant Victorias Milling Company to pay the amount oI P920,000.00 as unrealized proIits, the
amount oI P800,000.00 as exemplary damages and the amount oI P1,357,000.00, which is 10 oI the
acquisition value oI the undelivered bags oI reIined sugar in the amount oI P13,570,000.00, as attorney's Iees,
plus the costs.
"SO ORDERED." |9|
It made the Iollowing observations:
"|T|he testimony oI plaintiII's witness Teresita Ng Go, that she had Iully paid the purchase price oI
P15,950,000.00 oI the 25,000 bags oI sugar bought by her covered by SLDR No. 1214 as well as the purchase
price oI P15,950,000.00 Ior the 25,000 bags oI sugar bought by her covered by SLDR No. 1213 on the same
date, October 16, 1989 (date oI the two SLDRs) is duly supported by Exhibits C to C-15 inclusive which are
post-dated checks dated October 27, 1989 issued by St. Therese Merchandising in Iavor oI Victorias Milling
Company at the time it purchased the 50,000 bags oI sugar covered by SLDR No. 1213 and 1214. Said checks
appear to have been honored and duly credited to the account oI Victorias Milling Company because on
October 27, 1989 Victorias Milling Company issued oIIicial receipt no. 34734 in Iavor oI St. Therese
Merchandising Ior the amount oI P31,900,000.00 (Exhibits B and B-1). The testimony oI Teresita Ng Go is
Iurther supported by Exhibit F, which is a computer printout oI deIendant Victorias Milling Company showing
the quantity and value oI the purchases made by St. Therese Merchandising, the SLDR no. issued to cover the
purchase, the oIIicial reciept no. and the status oI payment. It is clear in Exhibit 'F' that with respect to the sugar
covered by SLDR No. 1214 the same has been Iully paid as indicated by the word 'cleared' appearing under the
column oI 'status oI payment.'
"On the other hand, the claim oI deIendant Victorias Milling Company that the purchase price oI the 25,000
bags oI sugar purchased by St. Therese Merchandising covered by SLDR No. 1214 has not been Iully paid is
supported only by the testimony oI ArnulIo Caintic, witness Ior deIendant Victorias Milling Company. The
Court notes that the testimony oI ArnulIo Caintic is merely a sweeping barren assertion that the purchase price
has not been Iully paid and is not corroborated by any positive evidence. There is an insinuation by ArnulIo
Caintic in his testimony that the postdated checks issued by the buyer in payment oI the purchased price were
dishonored. However, said witness Iailed to present in Court any dishonored check or any replacement check.
Said witness likewise Iailed to present any bank record showing that the checks issued by the buyer, Teresita
Ng Go, in payment oI the purchase price oI the sugar covered by SLDR No. 1214 were dishonored." |10|
Petitioner appealed the trial court`s decision to the Court oI Appeals.
On appeal, petitioner averred that the dealings between it and STM were part oI a series oI transactions
involving only one account or one general contract oI sale. Pursuant to this contract, STM or any oI its
authorized agents could withdraw bags oI sugar only against cleared checks oI STM. SLDR No. 21214M was
only one oI 22 SLDRs issued to STM and since the latter had already withdrawn its Iull quota oI sugar under
the said SLDR, CSC was already precluded Irom seeking delivery oI the 23,000 bags oI sugar.
Private respondent CSC countered that the sugar purchases involving SLDR No. 1214M were separate and
independent transactions and that the details oI the series oI purchases were contained in a single statement with
a consolidated summary oI cleared check payments and sugar stock withdrawals because this a more convenient
system than issuing separate statements Ior each purchase.
The appellate court considered the Iollowing issues: (a) Whether or not the transaction between petitioner and
STM involving SLDR No. 1214M was a separate, independent, and single transaction; (b) Whether or not CSC
had the capacity to sue on its own on SLDR No. 1214M; and (c) Whether or not CSC as buyer Irom STM oI the
rights to 25,000 bags oI sugar covered by SLDR No. 1214M could compel petitioner to deliver 23,000 bags
allegedly unwithdrawn.
On February 24, 1994, the Court oI Appeals rendered its decision modiIying the trial court's judgment, to wit:
"WHEREFORE, the Court hereby MOIFIES the assailed judgment and orders deIendant-appellant to:
"1) Deliver to plaintiII-appellee 12,586 bags oI sugar covered by SLDR No. 1214M;
" 2) Pay to plaintiII-appellee P792,918.00 which is 10 oI the value oI the undelivered bags oI reIined sugar, as
attorneys Iees;
"3) Pay the costs oI suit.
"SO ORDERED." |11|
Both parties then seasonably Iiled separate motions Ior reconsideration.
In its resolution dated September 30, 1994, the appellate court modiIied its decision to read:
"WHEREFORE, the Court hereby modiIies the assailed judgment and orders deIendant-appellant to:
"(1) Deliver to plaintiII-appellee 23,000 bags oI reIined sugar under SLDR No. 1214M;
"(2) Pay costs oI suit.
"SO ORDERED." |12|
The appellate court explained the rationale Ior the modiIication as Iollows:
"There is merit in plaintiII-appellee's position.
"Exhibit F' We relied upon in Iixing the number oI bags oI sugar which remained undelivered as 12,586 cannot
be made the basis Ior such a Iinding. The rule is explicit that courts should consider the evidence only Ior the
purpose Ior which it was oIIered. (People v. Abalos, et al, 1 CA Rep 783). The rationale Ior this is to aIIord the
party against whom the evidence is presented to object thereto iI he deems it necessary. PlaintiII-appellee is,
thereIore, correct in its argument that Exhibit F' which was oIIered to prove that checks in the total amount oI
P15,950,000.00 had been cleared. (Formal Offer of Evidence for Plaintiff, Records p. 58) cannot be used to
prove the proposition that 12,586 bags oI sugar remained undelivered.
"Testimonial evidence (Testimonies of Teresita Ng [TSN, 10 October 1990, p. 33] and Marianito L. Santos
[TSN, 17 October 1990, pp. 16, 18, and 36]) presented by plaintiII-appellee was to the eIIect that it had
withdrawn only 2,000 bags oI sugar Irom SLDR aIter which it was not allowed to withdraw anymore.
Documentary evidence ( Exhibit I, Id., p. 78, Exhibit K, Id., p. 80) show that plaintiII-appellee had sent demand
letters to deIendant-appellant asking the latter to allow it to withdraw the remaining 23,000 bags oI sugar Irom
SLDR 1214M. DeIendant-appellant, on the other hand, alleged that sugar delivery to the STM corresponded
only to the value oI cleared checks; and that all sugar corresponded to cleared checks had been withdrawn.
DeIendant-appellant did not rebut plaintiII-appellee's assertions. It did not present evidence to show how many
bags oI sugar had been withdrawn against SLDR No. 1214M, precisely because oI its theory that all sales in
question were a series oI one single transaction and withdrawal oI sugar depended on the clearing oI checks
paid thereIor.
"AIter a second look at the evidence, We see no reason to overturn the Iindings oI the trial court on this point."
|13|
Hence, the instant petition, positing the Iollowing errors as grounds Ior review:
"1. The Court oI Appeals erred in not holding that STM's and private respondent's specially inIorming petitioner
that respondent was authorized by buyer STM to withdraw sugar against SLDR No. 1214M " Ior and in our
(STM) behalI ," (emphasis in the original) private respondent's withdrawing 2,000 bags oI sugar Ior STM, and
STM's empowering other persons as its agents to withdraw sugar against the same SLDR No. 1214M, rendered
respondent like the other persons, an agent oI STM as held in Rallos v. Felix Go Chan & Realty Corp., 81
SCRA 252, and precluded it Irom subsequently claiming and proving being an assignee oI SLDR No. 1214M
and Irom suing by itselI Ior its enIorcement because it was conclusively presumed to be an agent (Sec. 2, Rule
131, Rules oI Court) and estopped Irom doing so. (Art. 1431, Civil Code).
" 2. The Court oI Appeals erred in maniIestly and arbitrarily ignoring and disregarding certain relevant and
undisputed Iacts which, had they been considered, would have shown that petitioner was not liable, except Ior
69 bags oI sugar, and which would justiIy review oI its conclusion oI Iacts by this Honorable Court.
" 3. The Court oI Appeals misapplied the law on compensation under Arts. 1279, 1285 and 1626 oI the Civil
Code when it ruled that compensation applied only to credits Irom one SLDR or contract and not to those Irom
two or more distinct contracts between the same parties; and erred in denying petitioner's right to setoII all its
credits arising prior to notice oI assignment Irom other sales or SLDRs against private respondent's claim as
assignee under SLDR No. 1214M, so as to extinguish or reduce its liability to 69 bags, because the law on
compensation applies precisely to two or more distinct contracts between the same parties (emphasis in the
original).
"4. The Court oI Appeals erred in concluding that the settlement or liquidation oI accounts in Exh. F` between
petitioner and STM, respondent's admission oI its balance, and STM's acquiescence thereto by silence Ior
almost one year did not render Exh. `F' an account stated and its balance binding.
"5. The Court oI Appeals erred in not holding that the conditions oI the assigned SLDR No. 1214, namely, (a)
its subject matter being generic, and (b) the sale oI sugar being subject to its availability at the Nawaco
warehouse, made the sale conditional and prevented STM or private respondent Irom acquiring title to the
sugar; and the non-availability oI sugar Ireed petitioner Irom Iurther obligation.
"6. The Court oI Appeals erred in not holding that the "clean hands" doctrine precluded respondent Irom
seeking judicial relieIs (sic) Irom petitioner, its only remedy being against its assignor." |14|
Simply stated, the issues now to be resolved are:
(1)....Whether or not the Court oI Appeals erred in not ruling that CSC was an agent oI STM and hence,
estopped to sue upon SLDR No. 1214M as an assignee.
(2)....Whether or not the Court oI Appeals erred in applying the law on compensation to the transaction under
SLDR No. 1214M so as to preclude petitioner Irom oIIsetting its credits on the other SLDRs.
(3)....Whether or not the Court oI Appeals erred in not ruling that the sale oI sugar under SLDR No. 1214M was
a conditional sale or a contract to sell and hence Ireed petitioner Irom Iurther obligations.
(4)....Whether or not the Court oI Appeals committed an error oI law in not applying the "clean hands doctrine"
to preclude CSC Irom seeking judicial relieI.
The issues will be discussed in seriatim
Anent the first issue , we Iind Irom the records that petitioner raised this issue Ior the Iirst time on appeal. It is
settled that an issue which was not raised during the trial in the court below could not be raised Ior the Iirst time
on appeal as to do so would be oIIensive to the basic rules oI Iair play, justice, and due process. |15|
Nonetheless, the Court oI Appeals opted to address this issue, hence, now a matter Ior our consideration.
Petitioner heavily relies upon STM's letter oI authority allowing CSC to withdraw sugar against SLDR No.
1214M to show that the latter was STM's agent. The pertinent portion oI said letter reads:
"This is to authorize Consolidated Sugar Corporation or its representative to withdraw Ior and in our behalI
(stress supplied) the reIined sugar covered by Shipping List/Delivery Receipt ReIined Sugar (SDR) No. 1214
dated October 16, 1989 in the total quantity oI 25, 000 bags." |16|
The Civil Code deIines a contract oI agency as Iollows:
" Art. 1868 . By the contract oI agency a person binds himselI to render some service or to do something in
representation or on behalI oI another, with the consent or authority oI the latter."
It is clear Irom Article 1868 that the basis oI agency is representation. |17| On the part oI the principal, there
must be an actual intention to appoint |18| or an intention naturally inIerable Irom his words or actions; |19|
and on the part oI the agent, there must be an intention to accept the appointment and act on it, |20| and in the
absence oI such intent, there is generally no agency. |21| One Iactor which most clearly distinguishes agency
Irom other legal concepts is control; one person - the agent - agrees to act under the control or direction oI
another - the principal. Indeed, the very word "agency" has come to connote control by the principal. |22| The
control Iactor, more than any other, has caused the courts to put contracts between principal and agent in a
separate category. |23| The Court oI Appeals, in Iinding that CSC, was not an agent oI STM, opined:
"This Court has ruled that where the relation oI agency is dependent upon the acts oI the parties, the law makes
no presumption oI agency, and it is always a Iact to be proved, with the burden oI prooI resting upon the
persons alleging the agency, to show not only the Iact oI its existence, but also its nature and extent (Antonio vs.
Enrique: |CA| , 51 O.G. 3536|. Here, deIendant-appellant Iailed to suIIiciently establish the existence oI an
agency relation between plaintiII-appellee and STM. The Iact alone that it (STM) had authorized withdrawal oI
sugar by plaintiII-appellee "Ior and in our (STM's) behalI" should not be eyed as pointing to the existence oI an
agency relation ...It should be viewed in the context oI all the circumstances obtaining. Although it would seem
STM represented plaintiII-appellee as being its agent by the use oI the phrase "Ior and in our (STM's) behalI"
the matter was cleared when on 23 January 1990, plaintiII-appellee inIormed deIendant-appellant that SLDFR
No. 1214M had been "sold and endorsed" to it by STM (Exhibit I, Records, p. 78). Further, plaintiII-appellee
has shown that the 25, 000 bags oI sugar covered by the SLDR No. 1214M were sold and transIerred by STM
to it .. A conclusion that there was a valid sale and transIer to plaintiII-appellee may, thereIore, be made thus
capacitating plaintiII-appellee to sue in its own name, without need oI joining its imputed principal STM as co-
plaintiII." |24|
In the instant case, it appears plain to us that private respondent CSC was a buyer oI the SLDFR Iorm, and not
an agent oI STM. Private respondent CSC was not subject to STM's control. The question oI whether a contract
is one oI sale or agency depends on the intention oI the parties as gathered Irom the whole scope and eIIect oI
the language employed. |25| That the authorization given to CSC contained the phrase "Ior and in our (STM's)
behalI" did not establish an agency. Ultimately, what is decisive is the intention oI the parties. |26| That no
agency was meant to be established by the CSC and STM is clearly shown by CSC's communication to
petitioner that SLDR No. 1214M had been "sold and endorsed" to it. |27| The use oI the words "sold and
endorsed" means that STM and CSC intended a contract oI sale, and not an agency. Hence, on this score, no
error was committed by the respondent appellate court when it held that CSC was not STM's agent and could
independently sue petitioner.
On the second issue, proceeding Irom the theory that the transactions entered into between petitioner and STM
are but serial parts oI one account, petitioner insists that its debt has been oIIset by its claim Ior STM's unpaid
purchases, pursuant to Article 1279 oI the Civil Code. |28| However, the trial court Iound, and the Court oI
Appeals concurred, that the purchase oI sugar covered by SLDR No. 1214M was a separate and independent
transaction; it was not a serial part oI a single transaction or oI one account contrary to petitioner's insistence.
Evidence on record shows, without being rebutted, that petitioner had been paid Ior the sugar purchased under
SLDR No. 1214M. Petitioner clearly had the obligation to deliver said commodity to STM or its assignee. Since
said sugar had been Iully paid Ior, petitioner and CSC, as assignee oI STM, were not mutually creditors and
debtors oI each other. No reversible error could thereby be imputed to respondent appellate court when, it
reIused to apply Article 1279 oI the Civil Code to the present case.
Regarding the third issue, petitioner contends that the sale oI sugar under SLDR No. 1214M is a conditional
sale or a contract to sell, with title to the sugar still remaining with the vendor. Noteworthy, SLDR No. 1214M
contains the Iollowing terms and conditions:
"It is understood and agreed that by payment by buyer/trader oI reIined sugar and/or receipt oI this document by
the buyer/trader personally or through a representative, title to refined sugar is transferred to buyer/trader and
delivery to him/it is deemed effected and completed (stress supplied) and buyer/trader assumes Iull
responsibility thereIore." |29|
The aIorequoted terms and conditions clearly show that petitioner transIerred title to the sugar to the buyer or
his assignee upon payment oI the purchase price. Said terms clearly establish a contract oI sale, not a contract to
sell. Petitioner is now estopped Irom alleging the contrary. The contract is the law between the contracting
parties. |30| And where the terms and conditions so stipulated are not contrary to law, morals, good customs,
public policy or public order, the contract is valid and must be upheld |31| Having transIerred title to the sugar
in question, petitioner is now obliged to deliver it to the purchaser or its assignee.
As to the fourth issue, petitioner submits that STM and private respondent CSC have entered into a conspiracy
to deIraud it oI its sugar. This conspiracy is allegedly evidenced by: (a) the Iact that STM's selling price to CSC
was below its purchasing price; (b) CSC's reIusal to pursue its case against Teresita Ng Go; and (c) the authority
given by the latter to other persons to withdraw sugar against SLDR No. 1214M aIter she had sold her rights
under said SLDR to CSC. Petitioner prays that the doctrine oI "clean hands" should be applied to preclude CSC
Irom seeking judicial relieI. However, despite careIul scrutiny, we Iind here the records bare oI convincing
evidence whatsoever to support the petitioner's allegations oI Iraud. We are now constrained to deem this matter
purely speculative, bereIt oI concrete prooI.
WHEREFORE, the instant petition is DENIED Ior lack oI merit. Costs against petitioner.
SO ORDERED.
Bellosillo, (Chairman), Mendo:a, Buena, and e Leon, Jr., JJ., concur.
|1| Records, p. 60.
|2| Ibid
|3| Ibid
|4| Supra Note 1, at 9.
|5| Id . at 11.
|6| Id . at 12.
|7| TSN, October 10, 1990, p. 16.
|8| Supra Note 1, at 170.
|9| CA Rollo , p. 134.
|10| Id . at 131-132.
|11| Rollo , p. 89.
|12| Id . at 95.
|13| Id . at 93-94.
|14| Id . at 24.
|15| Spouses Felipe and Irma Buag v. Court oI Appeals, 303 SCRA 591, 596 (1999); Roman Catholic
Archbishop oI Manila v . Court oI Appeals, 336 Phil. 138, 149 (1997) citing Gevero v . Intermediate Appellate
Court, 189 SCRA 201, 208 (1990)
|16| Records, p. 68.
|17| Bordador v. Luz, 283 SCRA 374, 382 (1997)
|18| Connell v . McLoughlin, 28 Or. 230; 42 P. 218.
|19| Halladay v . Underwood, 90 Ill. App. 130.
|20| Internal Trust Co. v . Bridges, 57 F. 753.
|21| Security Co. v . Graybeal, 85 Iowa 543, 52 N.W. 497.
|22| ROSCOE T. STEFFEN, AGENCY- PARTNERSHIP IN A NUTSHELL (1977) 30-31.
|23| Supra , at 33.
|24| Supra Note 11, at 87-88.
|25| Bessing v . Prince, 52 Cal. App. 190, 198 P. 422; Greenlease Lied Motors v . Sadler, 216 Iowa 302, 249
N.W. 383; Salisbury v . Brooks, 81 W. Va. 233, 94 S.E. 117.
|26| State v . Parker, 112 Conn., 39, 151 A. 325; Rucks-Brandt Const. Co. v . Price, 165 Okl. 178, 23 P2d 690,
cert den 291 US 679, 78 L. Ed 1067, 54 S. Ct. 526.
|27| Supra Note 5.
|28| "Art. 1279. In order that compensation may be proper, it is necessary:
(1)....That each one oI the obligors be bound principally and that he be at the same time a principal creditor oI
the other:
(2)....That both debts consist in a sum oI money, or oI the things due are consumable, they be oI the same kind,
and also oI the same quality iI the latter has been stated;
(3)....That the two debts be due;
(4)....That they be liquidated and demandable;
(5)....That over neither oI them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor."
|29| Supra Note 1.
|30| CIVIL CODE, art. 1308; Rizal Commercial Banking Corp. v . Court oI Appeals, 178 SCRA 739, 744
(1989); Escano v . Court oI Appeals, 100 SCRA 197, 202 (1980)
|31| CIVIL CODE, art. 1306; Legarda Koh v . Ongsiaco, 36 Phil. 185, 193 (1917); Icaza, et al. v . Ortega , 5
Phil. 166, 169 (1905)



G.R. No. L-21601 December 2, 196
NIELSON & COMPANY, INC., plaintiff-appellant,
vs.
LEPANTO CONSOLIDATED MINING COMPANY, defendant-appellee.
R E S O L U T I O N
ZALDIVAR,
Lepanto seeks the reconsideration oI the decision rendered on December 17, 1966. The motion Ior
reconsideration is based on two sets oI grounds the Iirst set consisting oI Iour principal grounds, and the
second set consisting oI Iive alternative grounds, as Iollows:
Principal Grounds.
1. The court erred in overlooking and Iailing to apply the proper law applicable to the agency or management
contract in question, namely, Article 1733 oI the Old Civil Code (Article 1920 oI the new), by virtue oI which
said agency was eIIectively revoked and terminated in 1945 when, as stated in paragraph 20 oI the complaint,
"deIendant voluntarily ... prevented plaintiII Irom resuming management and operation oI said mining
properties."
2. The court erred in holding that paragraph II oI the management contract (Exhibit C) suspended the period oI
said contract.
3. The court erred in reversing the ruling oI the trial judge, based on well-settled jurisprudence oI this Supreme
Court, that the management agreement was only suspended but not extended on account oI the war.
4. The court erred in reversing the Iinding oI the trial judge that Nielson's action had prescribed, but considering
only the Iirst claim and ignoring the prescriptibility oI the other claims.
Alternative Grounds.
5. The court erred in holding that the period oI suspension oI the contract on account oI the war lasted Irom
February 1942 to June 26, 1948.
6. Assuming arguendo that Nielson is entitled to any relieI, the court erred in awarding as damages (a) 10 oI
the cash dividends declared and paid in December, 1941; (b) the management Iee oI P2,500.00 Ior the month oI
January, 1942; and (c) the Iull contract price Ior the extended period oI sixty months, since these damages were
neither demanded nor proved and, in any case, not allowable under the general law oI damages.
7. Assuming arguendo that appellant is entitled to any relieI, the court erred in ordering appellee to issue and
deliver to appellant shares oI stock together with Iruits thereoI.
8. The court erred in awarding to appellant an undetermined amount oI shares oI stock and/or cash, which
award cannot be ascertained and executed without Iurther litigation.
9. The court erred in rendering judgment Ior attorney's Iees.
We are going to dwell on these grounds in the order they are presented.
1. In its Iirst principal ground Lepanto claims that its own counsel and this Court had overlooked the real nature
oI the management contract entered into by and between Lepanto and Nielson, and the law that is applicable on
said contract. Lepanto now asserts Ior the Iirst time and this is done in a motion Ior reconsideration - that the
management contract in question is a contract oI agency such that it has the right to revoke and terminate the
said contract, as it did terminate the same, under the law oI agency, and particularly pursuant to Article 1733 oI
the Old Civil Code (Article 1920 oI the New Civil Code).
We have taken note that Lepanto is advancing a new theory. We have careIully examined the pleadings Iiled by
Lepanto in the lower court, its memorandum and its brieI on appeal, and never did it assert the theory that it has
the right to terminate the management contract because that contract is one oI agency which it could terminate
at will. While it is true that in its ninth and tenth special aIIirmative deIenses, in its answer in the court below,
Lepanto pleaded that it had the right to terminate the management contract in question, that plea oI its right to
terminate was not based upon the ground that the relation between Lepanto and Nielson was that oI principal
and agent but upon the ground that Nielson had allegedly not complied with certain terms oI the management
contract. II Lepanto had thought oI considering the management contract as one oI agency it could have
amended its answer by stating exactly its position. It could have asserted its theory oI agency in its
memorandum Ior the lower court and in its brieI on appeal. This, Lepanto did not do. It is the rule, and the
settled doctrine oI this Court, that a party cannot change his theory on appeal that is, that a party cannot raise
in the appellate court any question oI law or oI Iact that was not raised in the court below or which was not
within the issue made by the parties in their pleadings (Section 19, Rule 49 oI the old Rules oI Court, and also
Section 18 oI the new Rules oI Court; Hautea vs. Magallon, L-20345, November 28, 1964; Northern Motors,
Inc. vs. Prince Line, L-13884, February 29, 1960; American Express Co. vs. Natividad, 46 Phil. 207; Agoncillo
vs. Javier, 38 Phil. 424 and Molina vs. Somes, 24 Phil 49).
At any rate, even iI we allow Lepanto to assert its new theory at this very late stage oI the proceedings, this
Court cannot sustain the same.
Lepanto contends that the management contract in question (Exhibit C) is one oI agency because: (1) Nielson
was to manage and operate the mining properties and mill on behalI, and Ior the account, oI Lepanto; and (2)
Nielson was authorized to represent Lepanto in entering, on Lepanto's behalI, into contracts Ior the hiring oI
laborers, purchase oI supplies, and the sale and marketing oI the ores mined. All these, Lepanto claims, show
that Nielson was, by the terms oI the contract, destined to execute juridical acts not on its own behalI but on
behalI oI Lepanto under the control oI the Board oI Directors oI Lepanto "at all times". Hence Lepanto claims
that the contract is one oI agency. Lepanto then maintains that an agency is revocable at the will oI the principal
(Article 1733 oI the Old Civil Code), regardless oI any term or period stipulated in the contract, and it was in
pursuance oI that right that Lepanto terminated the contract in 1945 when it took over and assumed exclusive
management oI the work previously entrusted to Nielson under the contract. Lepanto Iinally maintains that
Nielson as an agent is not entitled to damages since the law gives to the principal the right to terminate the
agency at will.
Because oI Lepanto's new theory We consider it necessary to determine the nature oI the management contract
whether it is a contract oI agency or a contract oI lease oI services. Incidentally, we have noted that the lower
court, in the decision appealed Irom, considered the management contract as a contract oI lease oI services.
Article 1709 oI the Old Civil Code, deIining contract oI agency, provides:
By the contract oI agency, one person binds himselI to render some service or do something Ior the account or
at the request oI another.
Article 1544, deIining contract oI lease oI service, provides:
In a lease oI work or services, one oI the parties binds himselI to make or construct something or to render a
service to the other Ior a price certain.
In both agency and lease oI services one oI the parties binds himselI to render some service to the other party.
Agency, however, is distinguished Irom lease oI work or services in that the basis oI agency is representation,
while in the lease oI work or services the basis is employment. The lessor oI services does not represent his
employer, while the agent represents his principal. Manresa, in his "Commentarios al Codigo Civil Espaol"
(1931, Tomo IX, pp. 372-373), points out that the element oI representation distinguishes agency Irom lease oI
services, as Iollows:
Nuestro art. 1.709 como el art. 1.984 del Codigo de Napoleon y cuantos textos legales citamos en las
concordancias , expresan claramente esta idea de la representacion, "hacer alguna cosa por cuenta o encargo de
otra" dice nuestro Codigo; "poder de hacer alguna cosa para el mandante o en su nombre" dice el Codigo de
Napoleon, y en tales palabras aparece vivo y luminoso el concepto y la teoria de la representacion, tan Iecunda
en ensenanzas, que a su sola luz es como se explican las diIerencias que separan el mandato del arrendamiento
de servicios, de los contratos inominados, del consejo y de la gestion de negocios.
En eIecto, en el arrendamiento de servicios al obligarse para su ejecucion, se trabaja, en verdad, para el dueno
que remunera la labor, pero ni se le representa ni se obra en su nombre...
On the basis oI the interpretation oI Article 1709 oI the old Civil Code, Article 1868 oI the new Civil Code has
deIined the contract oI agency in more explicit terms, as Iollows:
By the contract oI agency a person binds himselI to render some service or to do something in representation or
on behalf of another, with the consent or authority oI the latter.
There is another obvious distinction between agency and lease oI services. Agency is a preparatory contract, as
agency "does not stop with the agency because the purpose is to enter into other contracts." The most
characteristic Ieature oI an agency relationship is the agent's power to bring about business relations between his
principal and third persons. "The agent is destined to execute juridical acts (creation, modiIication or extinction
oI relations with third parties). Lease oI services contemplate only material (non-juridical) acts." (Reyes and
Puno, "An Outline oI Philippine Civil Law," Vol. V, p. 277).
In the light oI the interpretations we have mentioned in the Ioregoing paragraphs let us now determine the
nature oI the management contract in question. Under the contract, Nielson had agreed, Ior a period oI Iive
years, with the right to renew Ior a like period, to explore, develop and operate the mining claims oI Lepanto,
and to mine, or mine and mill, such pay ore as may be Iound therein and to market the metallic products
recovered thereIrom which may prove to be marketable, as well as to render Ior Lepanto other services
speciIied in the contract. We gather Irom the contract that the work undertaken by Nielson was to take complete
charge subject at all times to the general control oI the Board oI Directors oI Lepanto, oI the exploration and
development oI the mining claims, oI the hiring oI a suIIicient and competent staII and oI suIIicient and capable
laborers, oI the prospecting and development oI the mine, oI the erection and operation oI the mill, and oI the
beneIication and marketing oI the minerals Iound on the mining properties; and in carrying out said obligation
Nielson should proceed diligently and in accordance with the best mining practice. In connection with its work
Nielson was to submit reports, maps, plans and recommendations with respect to the operation and development
oI the mining properties, make recommendations and plans on the erection or enlargement oI any existing mill,
dispatch mining engineers and technicians to the mining properties as Irom time to time may reasonably be
required to investigate and make recommendations without cost or expense to Lepanto. Nielson was also to "act
as purchasing agent oI supplies, equipment and other necessary purchases by Lepanto, provided, however, that
no purchase shall be made without the prior approval oI Lepanto; and provided Iurther, that no commission
shall be claimed or retained by Nielson on such purchase"; and "to submit all requisition Ior supplies, all
constricts and arrangement with engineers, and staII and all matters requiring the expenditures oI money,
present or Iuture, Ior prior approval by Lepanto; and also to make contracts subject to the prior approve oI
Lepanto Ior the sale and marketing oI the minerals mined Irom said properties, when said products are in a
suitable condition Ior marketing."
1

It thus appears that the principal and paramount undertaking oI Nielson under the management contract was the
operation and development oI the mine and the operation oI the mill. All the other undertakings mentioned in
the contract are necessary or incidental to the principal undertaking these other undertakings being
dependent upon the work on the development oI the mine and the operation oI the mill. In the perIormance oI
this principal undertaking Nielson was not in any way executing juridical acts Ior Lepanto, destined to create,
modiIy or extinguish business relations between Lepanto and third persons. In other words, in perIorming its
principal undertaking Nielson was not acting as an agent oI Lepanto, in the sense that the term agent is
interpreted under the law oI agency, but as one who was perIorming material acts Ior an employer, Ior a
compensation.
It is true that the management contract provides that Nielson would also act as purchasing agent oI supplies and
enter into contracts regarding the sale oI mineral, but the contract also provides that Nielson could not make any
purchase, or sell the minerals, without the prior approval oI Lepanto. It is clear, thereIore, that even in these
cases Nielson could not execute juridical acts which would bind Lepanto without Iirst securing the approval oI
Lepanto. Nielson, then, was to act only as an intermediary, not as an agent.
Lepanto contends that the management contract in question being one oI agency it had the right to terminate the
contract at will pursuant to the provision oI Article 1733 oI the old Civil Code. We Iind, however, a proviso in
the management contract which militates against this stand oI Lepanto. Paragraph XI oI the contract provides:
Both parties to this agreement Iully recognize that the terms oI this Agreement are made possible only because
oI the Iaith or conIidence that the OIIicials oI each company have in the other; thereIore, in order to assure that
such conIidence and Iaith shall abide and continue, NIELSON agrees that LEPANTO may cancel this
Agreement at any time upon ninety (90) days written notice, in the event that NIELSON Ior any reason
whatsoever, except acts oI God, strike and other causes beyond its control, shall cease to prosecute the operation
and development oI the properties herein described, in good Iaith and in accordance with approved mining
practice.
It is thus seen, Irom the above-quoted provision oI paragraph XI oI the management contract, that Lepanto
could not terminate the agreement at will. Lepanto could terminate or cancel the agreement by giving notice oI
termination ninety days in advance only in the event that Nielson should prosecute in bad Iaith and not in
accordance with approved mining practice the operation and development oI the mining properties oI Lepanto.
Lepanto could not terminate the agreement iI Nielson should cease to prosecute the operation and development
oI the mining properties by reason oI acts oI God, strike and other causes beyond the control oI Nielson.
The phrase "Both parties to this agreement Iully recognize that the terms oI this agreement are made possible
only because oI the Iaith and conIidence oI the oIIicials oI each company have in the other" in paragraph XI oI
the management contract does not qualiIy the relation between Lepanto and Nielson as that oI principal and
agent based on trust and conIidence, such that the contractual relation may be terminated by the principal at any
time that the principal loses trust and conIidence in the agent. Rather, that phrase simply implies the
circumstance that brought about the execution oI the management contract. Thus, in the annual report Ior 1936
2
, submitted by Mr. C. A. Dewit, President oI Lepanto, to its stockholders, under date oI March 15, 1937, we
read the Iollowing:
To the stockholders xxx xxx xxx
The incorporation oI our Company was eIIected as a result oI negotiations with Messrs. Nielson & Co., Inc.,
and an oIIer by these gentlemen to Messrs. C. I. Cookes and V. L. Lednicky, dated August 11, 1936, reading as
Iollows:
Messrs. Cookes and Lednicky,
Present
Re: Mankayan Copper Mines
GENTLEMEN:
AIter an examination oI your property by our engineers, we have decided to oIIer as we hereby oIIer to
underwrite the entire issue oI stock oI a corporation to be Iormed Ior the purpose oI taking over said properties,
said corporation to have an authorized capital oI P1,750,000.00, oI which P700,000.00 will be issued in escrow
to the claim-owners in exchange Ior their claims, and the balance oI P1,050,000.00 we will sell to the public at
par or take ourselves.
The arrangement will be under the Iollowing conditions:
1. The subscriptions Ior cash shall be payable 50 at time oI subscription and the balance subject to the call oI
the Board oI Directors oI the proposed corporation.
2. We shall have an underwriting and brokerage commission oI 10 oI the P1,050,000.00 to be sold Ior cash to
the public, said commission to be payable Irom the Iirst payment oI 50 on each subscription.
3. We will bear the cost oI preparing and mailing any prospectus that may be required, but no such prospectus
will be sent out until the text thereoI has been Iirst approved by the Board oI Directors oI the proposed
corporation.
4. That aIter the organization oI the corporation, all operating contract be entered into between ourselves and
said corporation, under the terms which the property will be developed and mined and a mill erected, under our
supervision, our compensation to be P2,000.00 per month until the property is put on a proIitable basis and
P2,500.00 per month plus 10 oI the net proIits Ior a period oI Iive years thereaIter.
5. That we shall have the option to renew said operating contract Ior an additional period oI Iive years, on the
same basis as the original contract, upon the expiration thereoI.
It is understood that the development and mining operations on said property, and the erection oI the mill
thereon, and the expenditures thereIor shall be subject to the general control oI the Board oI Directors oI the
proposed corporation, and, in case you accept this proposition, that a detailed operating contract will be entered
into, covering the relationships between the parties.
Yours very truly, (Sgd.) L. R. Nielson
Pursuant to the provisions oI paragraph 2 oI this oIIer, Messrs. Nielson & Co., took subscriptions Ior One
Million FiIty Thousand Pesos (P1,050,000.00) in shares oI our Company and their underwriting and brokerage
commission has been paid. More than IiIty per cent oI these subscriptions have been paid to the Company in
cash. The claim owners have transIerred their claims to the Corporation, but the P700,000.00 in stock which
they are to receive thereIor, is as yet held in escrow.
Immediately upon the Iormation oI the Corporation Messrs. Nielson & Co., assumed the Management oI the
property under the control oI the Board oI Directors. A modiIication in the Management Contract was made
with the consent oI all the then stockholders, in virtue oI which the compensation oI Messrs. Nielson & Co.,
was increased to P2,500.00 per month when mill construction began. The Iormal Management Contract was not
entered into until January 30, 1937.
xxx xxx xxx
Manila, March 15, 1937 (Sgd.) C. A. DeWitt President
We can gather Irom the Ioregoing statements in the annual report Ior 1936, and Irom the provision oI paragraph
XI oI the Management contract, that the employment by Lepanto oI Nielson to operate and manage its mines
was principally in consideration oI the know-how and technical services that Nielson oIIered Lepanto. The
contract thus entered into pursuant to the oIIer made by Nielson and accepted by Lepanto was a "detailed
operating contract". It was not a contract oI agency. Nowhere in the record is it shown that Lepanto considered
Nielson as its agent and that Lepanto terminated the management contract because it had lost its trust and
conIidence in Nielson.
The contention oI Lepanto that it had terminated the management contract in 1945, Iollowing the liberation oI
the mines Irom Japanese control, because the relation between it and Nielson was one oI agency and as such it
could terminate the agency at will, is, thereIore, untenable. On the other hand, it can be said that, in asserting
that it had terminated or cancelled the management contract in 1945, Lepanto had thereby violated the express
terms oI the management contract. The management contract was renewed to last until January 31, 1947, so that
the contract had yet almost two years to go upon the liberation oI the mines in 1945. There is no showing
that Nielson had ceased to prosecute the operation and development oI the mines in good Iaith and in
accordance with approved mining practice which would warrant the termination oI the contract upon ninety
days written notice. In Iact there was no such written notice oI termination. It is an admitted Iact that Nielson
ceased to operate and develop the mines because oI the war a cause beyond the control oI Nielson. Indeed, iI
the management contract in question was intended to create a relationship oI principal and agent between
Lepanto and Nielson, paragraph XI oI the contract should not have been inserted because, as provided in Article
1733 oI the old Civil Code, agency is essentially revocable at the will oI the principal that means, with or
without cause. But precisely said paragraph XI was inserted in the management contract to provide Ior the cause
Ior its revocation. The provision oI paragraph XI must be given eIIect.
In the construction oI an instrument where there are several provisions or particulars, such a construction is, iI
possible, to be adopted as will give eIIect to all,
3
and iI some stipulation oI any contract should admit oI several
meanings, it shall be understood as bearing that import which is most adequate to render it eIIectual.
4

It is Our considered view that by express stipulation oI the parties, the management contract in question is not
revocable at the will oI Lepanto. We rule that this management contract is not a contract oI agency as deIined in
Article 1709 oI the old Civil Code, but a contract oI lease oI services as deIined in Article 1544 oI the same
Code. This contract can not be unilaterally revoked by Lepanto.
The Iirst ground oI the motion Ior reconsideration should, thereIore, be brushed aside.
2. In the second, third and IiIth grounds oI its motion Ior reconsideration, Lepanto maintains that this Court
erred, in holding that paragraph 11 oI the management contract suspended the period oI said contract, in holding
that the agreement was not only suspended but was extended on account oI the war, and in holding that the
period oI suspension on account oI the war lasted Irom February, 1942 to June 26, 1948. We are going to
discuss these three grounds together because they are interrelated.
In our decision we have dwelt lengthily on the points that the management contract was suspended because oI
the war, and that the period oI the contract was extended Ior a period equivalent to the time when Nielson was
unable to perIorm the work oI mining and milling because oI the adverse eIIects oI the war on the work oI
mining and milling.
It is the contention oI Lepanto that the happening oI those events, and the eIIects oI those events, simply
suspended the perIormance oI the obligations by either party in the contract, but did not suspend the period oI
the contract, much less extended the period oI the contract.
We have conscientiously considered the arguments oI Lepanto in support oI these three grounds, but We are not
persuaded to reconsider the rulings that We made in Our decision.
We want to say a little more on these points, however. Paragraph II oI the management contract provides as
Iollows:
In the event oI inundation, Ilooding oI the mine, typhoon, earthquake or any other Iorce majeure, war,
insurrection, civil commotion, organized strike, riot, Iire, injury to the machinery or other event or cause
reasonably beyond the control oI NIELSON and which adversely aIIects the work oI mining and milling;
NIELSON shall report such Iact to LEPANTO and without liability or breach oI the terms oI this Agreement,
the same shall remain in suspense, wholly or partially during the terms oI such inability. (Emphasis supplied)
A reading oI the above-quoted paragraph II cannot but convey the idea that upon the happening oI any oI the
events enumerated therein, which adversely aIIects the work oI mining and milling, the agreement is deemed
suspended Ior as long as Nielson is unable to perIorm its work oI mining and milling because oI the adverse
eIIects oI the happening oI the event on the work oI mining and milling. During the period when the adverse
eIIects on the work oI mining and milling exist, neither party in the contract would be held liable Ior non-
compliance oI its obligation under the contract. In other words, the operation oI the contract is suspended Ior as
long as the adverse eIIects oI the happening oI any oI those events had impeded or obstructed the work oI
mining and milling. An analysis oI the phraseology oI the above-quoted paragraph II oI the management
contract readily supports the conclusion that it is the agreement, or the contract, that is suspended. The phrase
"the same" can reIer to no other than the term "Agreement" which immediately precedes it. The "Agreement"
may be wholly or partially suspended, and this situation will depend on whether the event wholly or partially
aIIected adversely the work oI mining and milling. In the instant case, the war had adversely aIIected and
wholly at that the work oI mining and milling. We have clearly stated in Our decision the circumstances
brought about by the war which caused the whole or total suspension oI the agreement or oI the management
contract.
LEPANTO itselI admits that the management contract was suspended. We quote Irom the brieI oI LEPANTO:
Probably, what Nielson meant was, it was prevented by Lepanto to assume again the management oI the mine
in 1945, at the precise time when deIendant was at the Ieverish phase oI rehabilitation and although the contract
had already been suspended. (Lepanto's BrieI, p. 9).
... it was impossible, as a result oI the destruction oI the mine, Ior the plaintiII to manage and operate the same
and because, as provided in the agreement, the contract was suspended by reason oI the war (Lepanto's BrieI,
pp. 9-10).
Clause II, by its terms, is clear that the contract is suspended in case Iortuitous event or Iorce majeure, such as
war, adversely aIIects the work oI mining and milling. (Lepanto's BrieI, p. 49).
Lepanto is correct when it said that the obligations under the contract were suspended upon the happening oI
any oI the events enumerated in paragraph II oI the management contract. Indeed, those obligations were
suspended because the contract itselI was suspended. When we talk oI a contract that has been suspended we
certainly mean that the contract temporarily ceased to be operative, and the contract becomes operative again
upon the happening oI a condition or when a situation obtains which warrants the termination oI the
suspension oI the contract.
In Our decision We pointed out that the agreement in the management contract would be suspended when two
conditions concur, namely: (1) the happening oI the event constituting a force mafeure that was reasonably
beyond the control oI Nielson, and (2) that the event constituting the Iorce majeure adversely aIIected the work
oI mining and milling. The suspension, thereIore, would last not only while the event constituting the Iorce
majeure continued to occur but also Ior as long as the adverse eIIects oI the Iorce majeure on the work oI
mining and milling had not been eliminated. Under the management contract the happening alone oI the event
constituting the Iorce majeure which did not aIIect adversely the work oI mining and milling would not suspend
the period oI the contract. It is only when the two conditions concur that the period oI the agreement is
suspended.
It is not denied that because oI the war, in February 1942, the mine, the original mill, the original power plant,
the supplies and equipment, and all installations at the Mankayan mines oI Lepanto, were destroyed upon order
oI the United States Army, to prevent their utilization by the enemy. It is not denied that Ior the duration oI the
war Nielson could not undertake the work oI mining and milling. When the mines were liberated Irom the
enemy in August, 1945, the condition oI the mines, the mill, the power plant and other installations, was not the
same as in February 1942 when they were ordered destroyed by the US army. Certainly, upon the liberation oI
the mines Irom the enemy, the work oI mining and milling could not be undertaken by Nielson under the same
Iavorable circumstances that obtained beIore February 1942. The work oI mining and milling, as undertaken by
Nielson in January, 1942, could not be resumed by Nielson soon aIter liberation because oI the adverse eIIects
oI the war, and this situation continued until June oI 1948. Hence, the suspension oI the management contract
did not end upon the liberation oI the mines in August, 1945. The mines and the mill and the installations, laid
waste by the ravages oI war, had to be reconstructed and rehabilitated, and it can be said that it was only on
June 26, 1948 that the adverse eIIects oI the war on the work oI mining and milling had ended, because it was
on that date that the operation oI the mines and the mill was resumed. The period oI suspension should,
thereIore, be reckoned Irom February 1942 until June 26, 1948, because it was during this period that the war
and the adverse eIIects oI the war on the work oI mining and milling had lasted. The mines and the installations
had to be rehabilitated because oI the adverse eIIects oI the war. The work oI rehabilitation started soon aIter
the liberation oI the mines in August, 1945 and lasted until June 26, 1948 when, as stated in Lepanto's annual
report to its stockholders Ior the year 1948, "June 28, 1948 marked the oIIicial return to operation oI this
company at its properties at Mankayan, Mountain Province, Philippines" (Exh. F-1).
Lepanto would argue that iI the management contract was suspended at all the suspension should cease in
August oI 1945, contending that the eIIects oI the war should cease upon the liberation oI the mines Irom the
enemy. This contention cannot be sustained, because the period oI rehabilitation was still a period when the
physical eIIects oI the war the destruction oI the mines and oI all the mining installations adversely
aIIected, and made impossible, the work oI mining and milling. Hence, the period oI the reconstruction and
rehabilitation oI the mines and the installations must be counted as part oI the period oI suspension oI the
contract.
Lepanto claims that it would not be unIair to end the period oI suspension upon the liberation oI the mines
because soon aIter the liberation oI the mines Nielson insisted to resume the management work, and that
Nielson was under obligation to reconstruct the mill in the same way that it was under obligation to construct
the mill in 1937. This contention is untenable. It is true that Nielson insisted to resume its management work
aIter liberation, but this was only Ior the purpose oI restoring the mines, the mill, and other installations to their
operating and producing condition as oI February 1942 when they were ordered destroyed. It is not shown by
any evidence in the record, that Nielson had agreed, or would have agreed, that the period oI suspension oI the
contract would end upon the liberation oI the mines. This is so because, as Iound by this Court, the intention oI
the parties in the management contract, and as understood by them, the management contract was suspended Ior
as long as the adverse eIIects oI the Iorce majeure on the work oI mining and milling had not been removed,
and the contract would be extended Ior as long as it was suspended. Under the management contract Nielson
had the obligation to erect and operate the mill, but not to erect or reconstruct the mill in case oI its destruction
by force mafeure
It is the considered view oI this court that it would not be Iair to Nielson to consider the suspension oI the
contract as terminated upon the liberation oI the mines because then Nielson would be placed in a situation
whereby it would have to suIIer the adverse eIIects oI the war on the work oI mining and milling. The evidence
shows that as oI January 1942 the operation oI the mines under the management oI Nielson was already under
beneIicial conditions, so much so that dividends were already declared by Lepanto Ior the years 1939, 1940 and
1941. To make the management contract immediately operative aIter the liberation oI the mines Irom the
Japanese, at the time when the mines and all its installations were laid waste as a result oI the war, would be to
place Nielson in a situation whereby it would lose all the beneIits oI what it had accomplished in placing the
Lepanto mines in proIitable operation beIore the outbreak oI the war in December, 1941. The record shows that
Nielson started its management operation way back in 1936, even beIore the management contract was entered
into. As early as August 1936 Nielson negotiated with Messrs. C. I. Cookes and V. L. Lednicky Ior the
operation oI the Mankayan mines and it was the result oI those negotiations that Lepanto was incorporated; that
it was Nielson that helped to capitalize Lepanto, and that aIter the Iormation oI the corporation (Lepanto)
Nielson immediately assumed the management oI the mining properties oI Lepanto. It was not until January 30,
1937 when the management contract in question was entered into between Lepanto and Nielson (Exhibit A).
A contract Ior the management and operation oI mines calls Ior a speculative and risky venture on the part oI
the manager-operator. The manager-operator invests its technical know-how, undertakes back-breaking eIIorts
and tremendous spade-work, so to say, in the Iirst years oI its management and operation oI the mines, in the
expectation that the investment and the eIIorts employed might be rewarded later with success. This expected
success may never come. This had happened in the very case oI the Mankayan mines where, as recounted by
Mr. Lednicky oI Lepanto, various persons and entities oI diIIerent nationalities, including Lednicky himselI,
invested all their money and Iailed. The manager-operator may not strike suIIicient ore in the Iirst, second,
third, or Iourth year oI the management contract, or he may not strike ore even until the end oI the IiIth year.
Unless the manager-operator strikes suIIicient quantity oI ore he cannot expect proIits or reward Ior his
investment and eIIorts. In the case oI Nielson, its corps oI competent engineers, geologists, and technicians
begun working on the Mankayan mines oI Lepanto since the latter part oI 1936, and continued their work
without success and proIit through 1937, 1938, and the earlier part oI 1939. It was only in December oI 1939
when the eIIorts oI Nielson started to be rewarded when Lepanto realized proIits and the Iirst dividends were
declared. From that time on Nielson could expect proIit to come to it as in Iact Lepanto declared dividends
Ior 1940 and 1941 iI the development and operation oI the mines and the mill would continue unhampered.
The operation, and the expected proIits, however, would still be subject to hazards due to the occurrence oI
Iortuitous events, Iires, earthquakes, strikes, war, etc., constituting Iorce majeure, which would result in the
destruction oI the mines and the mill. One oI these diverse causes, or one aIter the other, may consume the
whole period oI the contract, and iI it should happen that way the manager-operator would reap no proIit to
compensate Ior the Iirst years oI spade-work and investment oI eIIorts and know-how. Hence, in Iairness to the
manager-operator, so that he may not be deprived oI the beneIits oI the work he had accomplished, the Iorce
majeure clause is incorporated as a standard clause in contracts Ior the management and operation oI mines.
The nature oI the contract Ior the management and operation oI mines justiIies the interpretation oI the Iorce
majeure clause, that a period equal to the period oI suspension due to Iorce majeure should be added to the
original term oI the contract by way oI an extension. We, thereIore, reiterate the ruling in Our decision that the
management contract in the instant case was suspended Irom February, 1942 to June 26, 1948, and that Irom the
latter date the contract had yet Iive years to go.
3. In the Iourth ground oI its motion Ior reconsideration, Lepanto maintains that this Court erred in reversing the
Iinding oI the trial court that Nielson's action has prescribed, by considering only the Iirst claim and ignoring
the prescriptibility oI the other claims.
This ground oI the motion Ior reconsideration has no merit.
In Our decision We stated that the claims oI Nielson are based on a written document, and, as such, the cause oI
action prescribes in ten years.
5
Inasmuch as there are diIIerent claims which accrued on diIIerent dates the
prescriptive periods Ior all the claims are not the same. The claims oI Nielson that have been awarded by this
Court are itemized in the dispositive part oI the decision.
The first item oI the awards in Our decision reIers to Nielson's compensation in the sum oI P17,500.00, which is
equivalent to 10 oI the cash dividends declared by Lepanto in December, 1941. As we have stated in Our
decision, this claim accrued on December 31, 1941, and the right to commence an action thereon started on
January 1, 1942. We declared that the action on this claim did not prescribe although the complaint was Iiled on
February 6, 1958 or aIter a lapse oI 16 years, 1 month and 5 days because oI the operation oI the
moratorium law.
We declared that under the applicable decisions oI this Court
6
the moratorium period oI 8 years, 2 months and 8
days should be deducted Irom the period that had elapsed since the accrual oI the cause oI action to the date oI
the Iiling oI the complaint, so that there is a period oI less than 8 years to be reckoned Ior the purpose oI
prescription.
This claim oI Nielson is covered by Executive Order No. 32, issued on March 10, 1945, which provides as
Iollows:
EnIorcement oI payments oI all debts and other monetary obligations payable in the Philippines, except debts
and other monetary obligations entered into in any area aIter declaration by Presidential Proclamation that such
area has been Ireed Irom enemy occupation and control, is temporarily suspended pending action by the
Commonwealth Government. (41 O.G. 56-57; Emphasis supplied)
Executive Order No. 32 covered all debts and monetary obligation contracted beIore the war (or beIore
December 8, 1941) and those contracted subsequent to December 8, 1941 and during the Japanese occupation.
Republic Act No. 342, approved on July 26, 1948, liIted the moratorium provided Ior in Executive Order No.
32 on pre-war (or pre-December 8, 1941) debts oI debtors who had not Iiled war damage claims with the United
States War Damage Commission. In other words, aIter the eIIectivity oI Republic Act No. 342, the debt
moratorium was limited: (1) to debts and other monetary obligations which were contracted aIter December 8,
1941 and during the Japanese occupation, and (2) to those pre-war (or pre-December 8, 1941) debts and other
monetary obligations where the debtors Iiled war damage claims. That was the situation up to May 18, 1953
when this Court declared Republic Act No. 342 unconstitutional.
7
It has been held by this Court, however, that
Irom March 10, 1945 when Executive Order No. 32 was issued, to May 18, 1953 when Republic Act No. 342
was declared unconstitutional or a period oI 8 years, 2 months and 8 days the debt moratorium was in
Iorce, and had the eIIect oI suspending the period oI prescription.


Lepanto is wrong when in its motion Ior reconsideration it claims that the moratorium provided Ior in Executive
Order No. 32 was continued by Republic Act No. 342 "only with respect to debtors oI pre-war obligations or
those incurred prior to December 8, 1941," and that "the moratorium was lifted and terminated with respect to
obligations incurred aIter December 8, 1941."
9

This Court has held that Republic Act No. 342 does not apply to debts contracted during the war and did not liIt
the moratorium in relations thereto.
10
In the case oI Abraham, et al. vs. Intestate Estate oI Juan C. Ysmael, et
al., L-16741, Jan. 31, 1962, this Court said:
Respondents, however, contend that Republic Act No. 342, which took eIIect on July 26, 1948, liIted the
moratorium on debts contracted during the Japanese occupation. The court has already held that Republic Act
No. 342 did not liIt the moratorium on debts contracted during the war (Uy vs. Kalaw Katigbak, G.R. No. L-
1830, Dec. 31, 1949) but modiIied Executive Order No. 32 as to pre-war debts, making the protection available
only to debtors who had war damage claims (Sison v. Mirasol, G.R. No. L-4711, Oct. 3, 1952).
We thereIore reiterate the ruling in Our decision that the claim involved in the Iirst item awarded to Nielson had
not prescribed.
What we have stated herein regarding the non-prescription oI the cause oI action oI the claim involved in the
Iirst item in the award also holds true with respect to the second item in the award, which reIers to Nielson's
claim Ior management Iee oI P2,500.00 Ior January, 1942. Lepanto admits that this second item, like the Iirst, is
a monetary obligation. The right oI action oI Nielson regarding this claim accrued on January 31, 1942.
As regards items 3, 4, 5, 6 and 7 in the awards in the decision, the moratorium law is not applicable. That is the
reason why in Our decision We did not discuss the question oI prescription regarding these items. The claims oI
Nielson involved in these items are based on the management contract, and Nielson's cause oI action regarding
these claims prescribes in ten years. Corollary to Our ruling that the management contract was suspended Irom
February, 1942 until June 26, 1948, and that the contract was extended Ior Iive years Irom June 26, 1948, the
right oI action oI Nielson to claim Ior what is due to it during that period oI extension accrued during the period
Irom June 26, 1948 till the end oI the Iive-year extension period or until June 26, 1953. And so, even iI We
reckon June 26, 1948 as the starting date oI the ten-year period in connection with the prescriptibility oI the
claims involved in items 3, 4, 5, 6 and 7 oI the awards in the decision, it is obvious that when the complaint was
Iiled on February 6, 1958 the ten-year prescriptive period had not yet lapsed.
In Our decision We have also ruled that the right oI action oI Nielson against Lepanto had not prescribed
because oI the arbitration clause in the Management contract. We are satisIied that there is evidence that
Nielson had asked Ior arbitration, and an arbitration committee had been constituted. The arbitration committee,
however, Iailed to bring about any settlement oI the diIIerences between Nielson and Lepanto. On June 25,
1957 counsel Ior Lepanto deIinitely advised Nielson that they were not entertaining any claim oI Nielson. The
complaint in this case was Iiled on February 6, 1958.
4. In the sixth ground oI its motion Ior reconsideration, Lepanto maintains that this Court "erred in awarding as
damages (a) 10 oI the cash dividends declared and paid in December, 1941; (b) the management Iee oI
P2,500.00 Ior the month oI January 1942; and (c) the Iull contract price Ior the extended period oI 60 months,
since the damages were never demanded nor proved and, in any case, not allowable under the general law on
damages."
We have stated in Our decision that the original agreement in the management contract regarding the
compensation oI Nielson was modiIied, such that instead oI receiving a monthly compensation oI P2,500.00
plus 10 oI the net proIits Irom the operation oI the properties Ior the preceding month,
11
Nielson would
receive a compensation oI P2,500.00 a month, plus (1) 10 oI the dividends declared and paid, when and as
paid, during the period oI the contract, and at the end oI each year, (2) 10 oI any depletion reserve that may be
set up, and (3) 10 oI any amount expended during the year out oI surplus earnings Ior capital account.
It is shown that in December, 1941, cash dividends amounting to P175,000.00 was declared by Lepanto.
12
Nielson, thereIore, should receive the equivalent oI 10 oI this amount, or the sum oI P17,500.00. We have
Iound that this amount was not paid to Nielson.
In its motion Ior reconsideration, Lepanto inserted a photographic copy oI page 127 oI its cash disbursement
book, allegedly Ior 1941, in an eIIort to show that this amount oI P17,500.00 had been paid to Nielson. It
appears, however, in this photographic copy oI page 127 oI the cash disbursement book that the sum oI
P17,500.00 was entered on October 29 as "surplus a/c Nielson & Co. Inc." The entry does not make any
reIerence to dividends or participation oI Nielson in the proIits. On the other hand, in the photographic copy oI
page 89 oI the 1941 cash disbursement book, also attached to the motion Ior reconsideration, there is an entry
Ior P17,500.00 on April 23, 1941 which states "Accts. Pay. Particip. Nielson & Co. Inc." This entry Ior April
23, 1941 may really be the participation oI Nielson in the proIits based on dividends declared in April 1941 as
shown in Exhibit L. But in the same Exhibit L it is not stated that any dividend was declared in October 1941.
On the contrary it is stated in Exhibit L that dividends were declared in December 1941. We cannot entertain
this piece oI evidence Ior several reasons: (1) because this evidence was not presented during the trial in the
court below; (2) there is no showing that this piece oI evidence is newly discovered and that Lepanto was not in
possession oI said evidence when this case was being tried in the court below; and (3) according to Exhibit L
cash dividends oI P175,000.00 were declared in December, 1941, and so the sum oI P17,500.00 which appears
to have been paid to Nielson in October 1941 could not be payment oI the equivalent oI 10 oI the cash
dividends that were later declared in December, 1941.
As regards the management Iee oI Nielson corresponding to January, 1942, in the sum oI P2,500.00, We have
also Iound that Nielson is entitled to be paid this amount, and that this amount was not paid by Lepanto to
Nielson. Whereas, Lepanto was able to prove that it had paid the management Iees oI Nielson Ior November
and December, 1941,
13
it was not able to present any evidence to show that the management Iee oI P2,500.00
Ior January, 1942 had been paid.
It having been declared in Our decision, as well as in this resolution, that the management contract had been
extended Ior 5 years, or sixty months, Irom June 27, 1948 to June 26, 1953, and that the cause oI action oI
Nielson to claim Ior its compensation during that period oI extension had not prescribed, it Iollows that Nielson
should be awarded the management Iees during the whole period oI extension, plus the 10 oI the value oI the
dividends declared during the said period oI extension, the 10 oI the depletion reserve that was set up, and the
10 oI any amount expended out oI surplus earnings Ior capital account.
5. In the seventh ground oI its motion Ior reconsideration, Lepanto maintains that this Court erred in ordering
Lepanto to issue and deliver to Nielson shares oI stock together with Iruits thereoI.
In Our decision, We declared that pursuant to the modiIied agreement regarding the compensation oI Nielson
which provides, among others, that Nielson would receive 10 oI any dividends declared and paid, when and
as paid, Nielson should be paid 10 oI the stock dividends declared by Lepanto during the period oI extension
oI the contract.
It is not denied that on November 28, 1949, Lepanto declared stock dividends worth P1,000,000.00; and on
August 22, 1950, it declared stock dividends worth P2,000,000.00). In other words, during the period oI
extension Lepanto had declared stock dividends worth P3,000,000.00. We held in Our decision that Nielson is
entitled to receive l0 oI the stock dividends declared, or shares oI stock worth P300,000.00 at the par value oI
P0.10 per share. We ordered Lepanto to issue and deliver to Nielson those shares oI stocks as well as all the
Iruits or dividends that accrued to said shares.
In its motion Ior reconsideration, Lepanto contends that the payment to Nielson oI stock dividends as
compensation Ior its services under the management contract is a violation oI the Corporation Law, and that it
was not, and it could not be, the intention oI Lepanto and Nielson as contracting parties that the services
oI Nielson should be paid in shares oI stock taken out oI stock dividends declared by Lepanto. We have
assiduously considered the arguments adduced by Lepanto in support oI its contention, as well as the answer oI
Nielson in this connection, and We have arrived at the conclusion that there is merit in the contention oI
Lepanto.
Section 16 oI the Corporation Law, in part, provides as Iollows:
No corporation organized under this Act shall create or issue bills, notes or other evidence oI debt, Ior
circulation as money, and no corporation shall issue stock or bonds except in exchange Ior actual cash paid to
the corporation or Ior: (1) property actually received by it at a Iair valuation equal to the par or issued value oI
the stock or bonds so issued; and in case oI disagreement as to their value, the same shall be presumed to be the
assessed value or the value appearing in invoices or other commercial documents, as the case may be; and the
burden or prooI that the real present value oI the property is greater than the assessed value or value appearing
in invoices or other commercial documents, as the case may be, shall be upon the corporation, or Ior (2) profits
earned by it but not distributed among its stockholders or members; Provided, however , That no stock or bond
dividend shall be issued without the approval oI stockholders representing not less than two-thirds oI all stock
then outstanding and entitled to vote at a general meeting oI the corporation or at a special meeting duly called
Ior the purpose.
xxx xxx xxx
No corporation shall make or declare any dividend except from the surplus profits arising from its business , or
divide or distribute its capital stock or property other than actual proIits among its members or stockholders
until aIter the payment oI its debts and the termination oI its existence by limitation or lawIul dissolution:
Provided , That banking, savings and loan, and trust corporations may receive deposits and issue certiIicates oI
deposit, checks, draIts, and bills oI exchange, and the like in the transaction oI the ordinary business oI banking,
savings and loan, and trust corporations. (As amended by Act No. 2792, and Act No. 3518; Emphasis supplied.)
From the above-quoted provision oI Section 16 oI the Corporation Law, the consideration Ior which shares oI
stock may be issued are: (1) cash; (2) property; and (3) undistributed proIits. Shares oI stock are given the
special name "stock dividends" only iI they are issued in lieu oI undistributed proIits. II shares oI stocks are
issued in exchange oI cash or property then those shares do not Iall under the category oI "stock dividends". A
corporation may legally issue shares oI stock in consideration oI services rendered to it by a person not a
stockholder, or in payment oI its indebtedness. A share oI stock issued to pay Ior services rendered is equivalent
to a stock issued in exchange oI property, because services is equivalent to property.
14
Likewise a share oI stock
issued in payment oI indebtedness is equivalent to issuing a stock in exchange Ior cash. But a share oI stock
thus issued should be part oI the original capital stock oI the corporation upon its organization, or part oI the
stocks issued when the increase oI the capitalization oI a corporation is properly authorized. In other words, it is
the shares oI stock that are originally issued by the corporation and Iorming part oI the capital that can be
exchanged Ior cash or services rendered, or property; that is, iI the corporation has original shares oI stock
unsold or unsubscribed, either coming Irom the original capitalization or Irom the increased capitalization.
Those shares oI stock may be issued to a person who is not a stockholder, or to a person already a stockholder
in exchange Ior services rendered or Ior cash or property. But a share oI stock coming Irom stock dividends
declared cannot be issued to one who is not a stockholder oI a corporation.
A "stock dividend" is any dividend payable in shares oI stock oI the corporation declaring or authorizing such
dividend. It is, what the term itselI implies, a distribution oI the shares oI stock oI the corporation among the
stockholders as dividends. A stock dividend oI a corporation is a dividend paid in shares oI stock instead oI
cash, and is properly payable only out oI surplus proIits.
15
So, a stock dividend is actually two things: (1) a
dividend, and (2) the enIorced use oI the dividend money to purchase additional shares oI stock at par.
16
When
a corporation issues stock dividends, it shows that the corporation's accumulated proIits have been capitalized
instead oI distributed to the stockholders or retained as surplus available Ior distribution, in money or kind,
should opportunity oIIer. Far Irom being a realization oI proIits Ior the stockholder, it tends rather to postpone
said realization, in that the Iund represented by the new stock has been transIerred Irom surplus to assets and no
longer available Ior actual distribution.
17
Thus, it is apparent that stock dividends are issued only to
stockholders. This is so because only stockholders are entitled to dividends. They are the only ones who have a
right to a proportional share in that part oI the surplus which is declared as dividends. A stock dividend really
adds nothing to the interest oI the stockholder; the proportional interest oI each stockholder remains the same.
1
II a stockholder is deprived oI his stock dividends - and this happens iI the shares oI stock Iorming part oI the
stock dividends are issued to a non-stockholder then the proportion oI the stockholder's interest changes
radically. Stock dividends are civil Iruits oI the original investment, and to the owners oI the shares belong the
civil Iruits.
19

The term "dividend" both in the technical sense and its ordinary acceptation, is that part or portion oI the proIits
oI the enterprise which the corporation, by its governing agents, sets apart Ior ratable division among the
holders oI the capital stock. It means the Iund actually set aside, and declared by the directors oI the corporation
as dividends and duly ordered by the director, or by the stockholders at a corporate meeting, to be divided or
distributed among the stockholders according to their respective interests.
20

It is Our considered view, thereIore, that under Section 16 oI the Corporation Law stock dividends can not be
issued to a person who is not a stockholder in payment oI services rendered. And so, in the case at bar Nielson
can not be paid in shares oI stock which Iorm part oI the stock dividends oI Lepanto Ior services it rendered
under the management contract. We sustain the contention oI Lepanto that the understanding between Lepanto
and Nielson was simply to make the cash value oI the stock dividends declared as the basis Ior determining the
amount oI compensation that should be paid to Nielson, in the proportion oI 10 oI the cash value oI the stock
dividends declared. And this conclusion oI Ours Iinds support in the record.
We had adverted to in Our decision that in 1940 there was some dispute between Lepanto and Nielson
regarding the application and interpretation oI certain provisions oI the original contract particularly with regard
to the 10 participation oI Nielson in the net proIits, so that some adjustments had to be made. In the minutes
oI the meeting oI the Board oI Directors oI Lepanto on August 21, 1940, We read the Iollowing:
The Chairman stated that he believed that it would be better to tie the computation of the 10 participation of
Nielson & Company, Inc. to the dividend, because Nielson will then be able to definitely compute its net
participation by the amount of the dividends declared . In addition to the dividend, we have been setting up a
depletion reserve and it does not seem Iair to burden the 10 participation oI Nielson with the depletion
reserve, as the depletion reserve should not be considered as an operating expense. AIter a prolonged
discussion, upon motion duly made and seconded, it was
RESOLVED, That the President, be, and he hereby is, authorized to enter into an agreement with Nielson &
Company, Inc., modiIying Paragraph V oI management contract oI January 30, 1937, eIIective January 1, 1940,
in such a way that Nielson & Company, Inc. shall receive 10 oI any dividends declared and paid, when and as
paid during the period oI the contract and at the end oI each year, 10 oI any depletion reserve that may be set
up and 10 oI any amount expended during the year out oI surplus earnings Ior capital account. (Emphasis
supplied.)
From the sentence, "The Chairman stated that he believed that it would be better to tie the computation oI the
10 participation oI Nielson & Company, Inc., to the dividend, because Nielson will then be able to deIinitely
compute its net participation by the amount oI the dividends declared" the idea is conveyed that the intention oI
Lepanto, as expressed by its Chairman C. A. DeWitt, was to make the value oI the dividends declared
whether the dividends were in cash or in stock as the basis Ior determining the amount oI compensation that
should be paid to Nielson, in the proportion oI 10 oI the cash value oI the dividends so declared. It does not
mean, however, that the compensation oI Nielson would be taken Irom the amount actually declared as cash
dividend to be distributed to the stockholder, nor Irom the shares oI stocks to be issued to the stockholders as
stock dividends, but Irom the other assets or Iunds oI the corporation which are not burdened by the dividends
thus declared. In other words, iI, Ior example, cash dividends oI P300,000.00 are declared, Nielson would be
entitled to a compensation oI P30,000.00, but this P30,000.00 should not be taken Irom the P300,000.00 to be
distributed as cash dividends to the stockholders but Irom some other Iunds or assets oI the corporation which
are not included in the amount to answer Ior the cash dividends thus declared. This is so because iI the
P30,000.00 would be taken out Irom the P300,000.00 declared as cash dividends, then the stockholders would
not be getting P300,000.00 as dividends but only P270,000.00. There would be a dilution oI the dividend that
corresponds to each share oI stock held by the stockholders. Similarly, iI there were stock dividends worth one
million pesos that were declared, which means an issuance oI ten million shares at the par value oI ten centavos
per share, it does not mean that Nielson would be given 100,000 shares. It only means that Nielson should be
given the equivalent oI 10 oI the aggregate cash value oI those shares issued as stock dividends. That this was
the understanding oI Nielson itselI is borne out by the Iact that in its appeal brieI Nielson urged that it should be
paid "P300,000.00 being 10 oI the P3,000,000.00 stock dividends declared on November 28, 1949 and
August 20, 1950...."
21

We, thereIore, reconsider that part oI Our decision which declares that Nielson is entitled to shares oI stock
worth P300,000.00 based on the stock dividends declared on November 28, 1949 and on August 20, 1950,
together with all the Iruits accruing thereto. Instead, We declare that Nielson is entitled to payment by Lepanto
oI P300,000.00 in cash, which is equivalent to 10 oI the money value oI the stock dividends worth
P3,000,000.00 which were declared on November 28, 1949 and on August 20, 1950, with interest thereon at the
rate oI 6 Irom February 6, 1958.
6. In the eighth ground oI its motion Ior reconsideration Lepanto maintains that this Court erred in awarding to
Nielson an undetermined amount oI shares oI stock and/or cash, which award can not be ascertained and
executed without Iurther litigation.
In view oI Our ruling in this resolution that Nielson is not entitled to receive shares oI stock as stock dividends
in payment oI its compensation under the management contract, We do not consider it necessary to discuss this
ground oI the motion Ior reconsideration. The awards in the present case are all reduced to speciIic sums oI
money.
7. In the ninth ground oI its motion Ior reconsideration Lepanto maintains that this Court erred in rendering
judgment or attorney's Iees.
The matter oI the award oI attorney's Iees is within the sound discretion oI this Court. In Our decision We have
stated the reason why the award oI P50,000.00 Ior attorney's Iees is considered by this Court as reasonable.
Accordingly, We resolve to modiIy the decision that We rendered on December 17, 1966, in the sense that
instead oI awarding Nielson shares oI stock worth P300,000.00 at the par value oI ten centavos (P0.10) per
share based on the stock dividends declared by Lepanto on November 28, 1949 and August 20, 1950, together
with their Iruits, Nielson should be awarded the sum oI P300,000.00 which is an amount equivalent to 10 oI
the cash value oI the stock dividends thus declared, as part oI the compensation due Nielson under the
management contract. The dispositive portion oI the decision should, thereIore, be amended, to read as Iollows:
IN VIEW OF THE FOREGOING CONSIDERATIONS, We hereby reverse the decision oI the court a quo and
enter in lieu thereoI another, ordering the appellee Lepanto to pay the appellant Nielson the diIIerent amounts as
speciIied hereinbelow:
(1) Seventeen thousand Iive hundred pesos (P17,500.00), equivalent to 10 oI the cash dividends oI December,
1941, with legal interest thereon Irom the date oI the Iiling oI the complaint;
(2) Two thousand Iive hundred pesos (P2,500.00) as management Iee Ior January 1942, with legal interest
thereon Irom the date oI the Iiling oI the complaint;
(3) One hundred IiIty thousand pesos (P150,000.00), representing management Iees Ior the sixty-month period
oI extension oI the management contract, with legal interest thereon Irom the date oI the Iiling oI the complaint;
(4) One million Iour hundred thousand pesos (P1,400,000.00), equivalent to 10 oI the cash dividends declared
during the period oI extension oI the management contract, with legal interest thereon Irom the date oI the Iiling
oI the complaint;
(5) Three hundred thousand pesos (P300,000.00), equivalent to 10 oI the cash value oI the stock dividends
declared on November 28, 1949 and August 20, 1950, with legal interest thereon Irom the date oI the Iiling oI
the complaint;
(6) FiIty three thousand nine hundred twenty eight pesos and eighty eight centavos (P53,928.88), equivalent to
10 oI the depletion reserve set up during the period oI extension, with legal interest thereon Irom the date oI
the Iiling oI the complaint;
(7) Six hundred ninety Iour thousand three hundred sixty Iour pesos and seventy six centavos (P694,364.76),
equivalent to 10 oI the expenses Ior capital account during the period oI extension, with legal interest thereon
Irom the date oI the Iiling oI the complaint;
(8) FiIty thousand pesos (P50,000.00) as attorney's Iees; and (9) The costs.
It is so ordered.
Concepcion, C.J., Reyes, J.B.L., i:on, Makalintal, Sanche: and Castro, JJ., concur. Fernando, Capistrano,
Teehankee and Barredo, JJ., took no part.
(
Footnotes
1 Annex A to complaint, pp. 43-46, R.A.; Also Exhibit C.
2 Exhibit A.
3 Sec. 9, Rule 130 oI the Rules oI Court.
4 Article 1373 oI the (new) Civil Code.
5 Section 43, par. 1, Act 190.
6 Tiosejo vs. Day, et al., L-9944, April 30, 1937; Levi Hermanos, Inc. vs. Perez, L-14487, April 29, 1960.
7 Rutter vs. Esteban, 93 Phil. 68.
8 Tiosejo vs. Day, supra; Levi Hermanos, Inc. vs. Perez, supra
9 Motion Ior reconsideration, p. 60.
10 Uy v. Kalaw Katigbak, G.R. No. L-1830, Dec. 31, 1949; Sison v. Mirasol, L-4711, Oct. 31, 1962; Compania
Maritima v. Court oI Appeals, L-14949, May 30, 1960.
11 Par. V oI Management Contract, Exhibit C.
12 Page 3, Exhibit L, Report Ior 1954.
13 Exhibit 1.
14 Sec. 5187, 11 Fletcher, Cyclopedia oI the Law on Private Corporations, p. 422.
15 Sec. 16, Corporation Law
16 Words and Phrases, p. 270.
17 Fisher vs. Trinidad, 43 Phil. 973.
18 Towns vs. Eisner, 62 L. Ed. 372.
19 Art. 441, Civil Code oI the Philippines.
20 7 Thompson on Corporations 134-135.
21 p. 115, Nielson's Appeal BrieI.


G.R. No. L-7144 May 31, 1955
FAR EASTERN EXPORT & IMPORT CO., petitioner,
vs.
LIM TECK SUAN, respondent.
Juan Nabong and Crisolito Pascual for petitioner. Jose P. Laurel, Marciano Almario and Jose T. Lofom for
respondent.
MONTEMAYOR,
This is a petition Ior certiorari to review a decision oI the Court oI Appeals dated September 25, 1953,
reversing the decision oI the Court oI First Instance oI Manila, and sentencing the deIendant-petitioner Far
Eastern Export & Import Co. later reIerred to as export company, to pay the plaintiII-respondent Lim Teck Suan
later to be reIerred to as Suan, the sum oI P11,4476.60, with legal interest Irom the date oI the Iiling oI the
complaint and to pay the costs.
As to the Iacts and the issue in the case we are reproducing the Iindings oI the Court oI Appeals, which Iindings
are binding on this Tribunal in case oI similar appeals:
Sometime in November, 1948, Ignacio Delizalde, an agent oI the Far Eastern Export & Import Company, went
to the store oI Lim Teck Suan situated at 267 San Vicente Street, Manila, and oIIered to sell textile, showing
samples thereoI, and having arrived at an agreement with Bernardo Lim, the General Manager oI Lim Teck
Suan, Delizalde returned on November 17 with the buyer's order, Exhibit A, already prepared which reads:
FAR EASTERN EXPORT & IMPORT COMPANY
75 Escolta 2nd Floor Brias Roxas Bldg., Manila
Ship to LIM TECK SUAN Date Written 11/17/48 475 Nueva St., Manila Your No.
Our No. 276
I hereby commission you to procure Ior me the Iollowing merchandise, subject to the terms and conditions
listed below:

Quantity Unit Particulars Amount 10,000 yds Ashtone Acetate & Rayon-No. 13472
Width: 41/42 inches; Weight:
Approximately 8 oz. per yd; Ten (10) colors, buyers choice, as per attached samples, equally assorted; at $1.13
per yard F.A.S. New York U. S. $11,500.00
Item herein sold are FOB-FAS X C. & F
CIF

TERMS AND CONDITIONS
Acceptance
This Buyer's Order is subject to conIirmation by the exporter. Shipment
Period oI Shipment is to be within December. Bank Documents should be Ior a line oI 45 days to allow Ior
presentation and payment against "ON BOARD" bills oI lading. Partial shipments permitted.
Payment
Payment will be by "ConIirmed Irrevocable Letter oI Credit" to be opened in Iavor oI Frenkel International
Corporation, 52 Broadway, New York, 4, N. Y. Ior the Iull amount oI the above cost oI merchandise plus
(approximately) Ior export packing: insurance, Ireight, documentation, Iorwarding, etc. which are Ior the buyers
accounts, IMMEDIATELY upon written ConIirmation. Our Guarantee In case shipment is not aIIected, seller
agrees to reimburse buyer Ior all banking expenses. ConIirmed Accepted
Signed Nov. 17, 1948
Authorized oIIicial
ConIirmed
Accepted (Sgd.) Illegible Date Nov. 1948 to be signed by our representative upon conIirmation.
In accordance with said Exhibit A, plaintiII established a letter oI credit No. 6390 (Exhibit B) in Iavor oI
Frenkel International Corporation through the Hongkong and Shanghai Bangking Corporation, attached to the
agreed statement oI Iacts. On February 11, 1949, the textile arrived at Manila on board the vessel M. S. Arnold
Maersk, covered by bill oI lading No. 125 (Exhibit C), Invoice No. 1684-M (Exhibit D) issued by Frenkel
International Corporation direct to the plaintiII. The plaintiII complained to the deIendant oI the inIerior quality
oI the textile received by him and had them examined by Marine Surveyor Del Pan & Company. Said surveyor
took swatches oI the textile and had the same analyzed by the Institute oI Science (Exhibit E-1) and submitted a
report or survey under date oI April 9, 1949 (Exhibit E). Upon instructions oI the deIendants plaintiII deposited
the goods with the United Warehouse Corporation (Exhibits H, H-1 to H-6. As per suggestion oI the Far Eastern
Export and Import Company contained in its letter dated June 16, 1949, plaintiII withdrew Irom the United
Bonded Warehouse, Port Area, Manila, the IiIteen cases oI Ashtone Acetate and Rayon Suiting Ior the purpose
oI oIIering them Ior sale which netted P11,907.30. Deducting this amount Irom the sum oI P23,686.96 which
included the amount paid by plaintiII Ior said textile and the warehouse expenses, a diIIerence oI P11,476.66 is
leIt, representing the net direct loss.
The deIense set up is that the Far Eastern Export and Import Company only acted as a broker in this transaction;
that aIter placing the order the deIendants took no Iurther action and the cargo was taken directly by the buyer
Lim Teck Suan, the shipment having been made to him and all the documents were also handled by him directly
without any intervention on the part oI the deIendants; that upon receipt oI Lim Teck Suan's complaint the
deIendants passed it to its principal, Frenkel International Corporation, Ior comment, and the latter maintained
that the merchandise was up to standard called Ior.
The lower court acquitted the deIendants Irom the complaint asking Ior damages in the sum oI P19,500.00
representing the diIIerence in price between the textile ordered and those received, plus proIits unrealized and
the cost oI this suit, and dismissed the counterclaim Iiled by the deIendants without pronouncement as to costs.
As already stated, the Court oI Appeals reversed the judgment entered by the Court oI First Instance oI Manila,
basing its decision oI reversal on the case oI Jose Velasco, vs . Universal Trading Co., Inc., 45 OII. Gaz. 4504
where the transaction therein involved was Iound by the court to be one oI purchase and sale and not oI
brokerage or agency. We have careIully examined the Velasco case and we agree with the Court oI Appeals that
the Iacts in that case are very similar to those in the present case. In the case oI Velasco, we have the Iollowing
statement by the court itselI which we reproduced below:
Prior to November 8, 1945 a salesman or agent oI the Universal Trading Co., Inc. inIormed Jose Velasco, Jr.
that his company was in a position to accept and Iill in orders Ior Panamanian Agewood Bourbon Whisky
because there were several thousand cases oI this article ready Ior shipment to the company by its principal
oIIice in America. Acting upon this oIIer and representative Velasco went to the Universal Trading Co., Inc.,
and aIter a conversation with the latter's oIIicial entered into an agreement couched in the Iollowing terms:
"Agreement is hereby made between Messrs. Jose Velasco, Jr., 340 Echaque, Manila, and the Universal Trading
Company, Manila, Ior order as Iollows and under the Iollowing terms:
Quantity Merchan dise and Unit Unit Amount
Price
Description 100 Panamanian Agewood Bourbon
Whisky ..........................Case $17.00 $1,700

Total amount oI order ........... $1,700
Terms oI Agreement:
"1. That the Universal Trading Company agrees to order the above merchandise Irom their Los Angeles OIIice
at the price quoted above, C.I.F. Manila, Ior December shipment;
"2. That Messrs. Jose Velasco, Jr., 340 Echaque, Manila, obligates myselI/themselves to take the above
merchandise when advised oI its arrival Irom the United States and to pay in cash the Iull amount oI the order in
the Philippine Currency at the oIIice oI the Universal Trading Company;
"3. This order may be subject to delay because oI uncertain shipping conditions. War risk insurance,
transhipping charges, iI any, port charges, and any storage that may be incurred due to your not taking delivery
oI the order upon being notiIied by us that the order is ready Ior delivery, and government taxes, are all Ior your
account;
"4. The terms oI this agreement will be either oI the Iollowing:
"a. To open up irrevocable letter oI credit Ior the value oI the order with any oI the local banks, or thru bills oI
lading payable to A. J. Wilson Company, 1263 South North Avenue, Los Angeles, CaliIornia;
"b. To put up a cash deposit equivalent to 50 oI the order;
"5. Reasonable substitute, whenever possible, will be shipped in lieu oI items called Ior, iI order is not
available."
Accordingly, Velasco deposited with the deIendant the sum oI $1,700 which is 50 oI the price oI the whisky
pursuant to agreement made, instead oI 'to open up irrevocable letter oI credit Ior the value oI the order with any
oI the local banks, or through bills oI lading payable to A. J. Wilson Company.' On November 6, 1945, the
same date that the contract or agreement, Exhibit A, was signed an invoice under the name oI the Universal
Trading Co., Inc. was issued to Velasco Ior the 100 cases oI Panamanian Agewood Bourbon Whisky Ior the
price oI $1,700 which invoice maniIested that the article was sold to Jose Velasco, Jr. On January 15, 1946
another invoice was issued containing besides the list price oI $1,700 or P3,400, a statement oI bank charges,
customs duties, internal revenue taxes, etc., giving a total amount oI P5,690.10 which aIter deducting the
deposit oI $1,700, gives a balance oI P3,990.01.
On January 25, 1946 the Universal Trading Co., Inc. wrote Exhibit 4 to Mr. Velasco advising him that the S. S.
Manoeran had docked and that they would appreciate it iI he would pay the amount oI P3,990.10 direct to them.
It turned out, however, that aIter the ship arrived, what the Universal Trading Co., Inc. tried to deliver to
Velasco was not Panamanian Agewood Bourbon Whisky but Panamanian Agewood Blended Whisky. Velasco
reIused to receive the shipment and in turn Iiled action against the deIendant Ior the return oI his deposit oI $
1,700 with interest. For its deIense, deIendant contends that it merely acted as agent Ior Velasco and could not
be held responsible Ior the substitution oI Blended Whisky Ior Bourbon Whisky and that Iurthermore the
Blended Whisky was a reasonable substitute Ior Bourbon. AIter due hearing the Court oI First Instance oI
Manila held that the transaction was purchase and sale and ordered the deIendant to reIund to the plaintiII his
deposit oI P1,700 with legal interest Irom the date oI the Iiling oI the suit with costs, which decision on appeal
was aIIirmed by this Court.
We notice the Iollowing similarities. In the present case, the export company acted as agent Ior Frenkel
International Corporation, presumably the supplier oI the textile sold. In the Velasco case, the Universal
Trading Co., was acting as agent Ior A. J. Wilson Company, also the supplier oI the whisky sold. In the present
case, Suan according to the Iirst part oI the agreement is said merely to be commissioning the Export Company
to procure Ior him the merchandise in question, just as in the other case, Velasco was supposed to be ordering
the whisky thru the Universal Trading Co. In the present case, the price oI the merchandise bought was paid Ior
by Suan by means oI an irrevocable letter oI credit opened in Iavor oI the supplier, Frenkel International
Corporation. In the Velasco case, Velasco was given the choice oI either opening a similar irrevocable letter oI
credit in Iavor oI the supplier A. J. Wilson Company or making a cash deposit. It is true that in the Velasco
case, upon the arrival oI the whisky and because it did not conIorm to speciIications, Velasco reIused to
received it; but in the present case although Suan received the merchandise he immediately protested its poor
quality and it was deposited in the warehouse and later withdrawn and sold Ior the best price possible, all at the
suggestion oI the Export company. The present case is in our opinion a stronger one than that oI Velasco Ior
holding the transaction as one oI purchase and sale because as may be noticed Irom the agreement (Exhibit
"A"), the same speaks oI the items (merchandise) therein involved as sold, and the sale was even conIirmed by
the Export company. In both cases, the agents Universal Trading Co. and the export company dealt directly with
the local merchants Velasco and Suan without expressly indicating or revealing their principals. In both cases
there was no privity oI contract between the buyers Suan and Velasco and the suppliers Frenkel International
Corporation and A. J. Wilson Company, respectively. In both cases no commission or monetary consideration
was paid or agreed to be paid by the buyers to the Export company and the Universal Trading Co., prooI that
there was no agency or brokerage, and that the proIit oI the latter was undoubtedly the diIIerence between the
price listed to the buyers and the net or special price quoted to the sellers, by the suppliers. As already stated, it
was held in the Velasco case that the transaction therein entered into was one oI purchase and sale, and Ior the
same reasons given there, we agreed with the Court oI Appeals that the transaction entered into here is one oI
purchase and sale.
As was held by this Tribunal in the case oI Gonzalo Puyat & Sons Incorporated vs . Arco Amusement, 72 Phil.,
402, where a Ioreign company has an agent here selling its goods and merchandise, that same agent could not
very well act as agent Ior local buyers, because the interests oI his Ioreign principal and those oI the buyer
would be in direct conIlict. He could not serve two masters at the same time. In the present case, the Export
company being an agent oI the Frenkel International Corporation could not, as it claims, have acted as an agent
or broker Ior Suan.
Finding no reversible error in the decision appealed Irom, the same is hereby aIIirmed, with costs.
Pablo, Beng:on, Reyes, A., Bautista Angelo, Labrador, Concepcion, and Reyes, J. B. L., JJ., concur.


G.R. No. L-3433 November 21, 194
LOURDES VALERIO LIM, petitioner,
vs.
PEOPLE OF THE PHILIPPINES, respondent.
RELOVA,
Petitioner Lourdes Valerio Lim was Iound guilty oI the crime oI estaIa and was sentenced "to suIIer an
imprisonment oI Iour (4) months and one (1) day as minimum to two (2) years and Iour (4) months as
maximum, to indemniIy the oIIended party in the amount oI P559.50, with subsidize imprisonment in case oI
insolvency, and to pay the costs." (p. 14, Rollo)
From this judgment, appeal was taken to the then Court oI Appeals which aIIirmed the decision oI the lower
court but modiIied the penalty imposed by sentencing her "to suIIer an indeterminate penalty oI one (1) month
and one (1) day oI arresto mayor as minimum to one (1) year and one (1) day oI prision correccional as
maximum, to indemniIy the complainant in the amount oI P550.50 without subsidiary imprisonment, and to pay
the costs oI suit." (p. 24, Rollo)
The question involved in this case is whether the receipt, Exhibit "A", is a contract oI agency to sell or a
contract oI sale oI the subject tobacco between petitioner and the complainant, Maria de Guzman Vda. de
Ayroso, thereby precluding criminal liability oI petitioner Ior the crime charged.
The Iindings oI Iacts oI the appellate court are as Iollows:
... The appellant is a businesswoman. On January 10, 1966, the appellant went to the house oI Maria Ayroso
and proposed to sell Ayroso's tobacco. Ayroso agreed to the proposition oI the appellant to sell her tobacco
consisting oI 615 kilos at P1.30 a kilo. The appellant was to receive the overprice Ior which she could sell the
tobacco. This agreement was made in the presence oI plaintiII's sister, Salud G. Bantug. Salvador Bantug drew
the document, Exh. A, dated January 10, 1966, which reads:
To Whom It May Concern:
This is to certiIy that I have received Irom Mrs. Maria de Guzman Vda. de Ayroso. oI Gapan, Nueva Ecija, six
hundred IiIteen kilos oI leaI tobacco to be sold at Pl.30 per kilo. The proceed in the amount oI Seven Hundred
Ninety Nine Pesos and 50/100 (P 799.50) will be given to her as soon as it was sold.
This was signed by the appellant and witnessed by the complainant's sister, Salud Bantug, and the latter's maid,
Genoveva Ruiz. The appellant at that time was bringing a jeep, and the tobacco was loaded in the jeep and
brought by the appellant. OI the total value oI P799.50, the appellant had paid to Ayroso only P240.00, and this
was paid on three diIIerent times. Demands Ior the payment oI the balance oI the value oI the tobacco were
made upon the appellant by Ayroso, and particularly by her sister, Salud Bantug. Salud Bantug Iurther testiIied
that she had gone to the house oI the appellant several times, but the appellant oIten eluded her; and that the
"camarin" the appellant was empty. Although the appellant denied that demands Ior payment were made upon
her, it is a Iact that on October 19, 1966, she wrote a letter to Salud Bantug which reads as Iollows:
Dear Salud,
Hindi ako nakapunta dian noon a 17 nitong nakaraan, dahil kokonte pa ang nasisingil kong pera, magintay ka
hanggang dito sa linggo ito at tiak na ako ay magdadala sa iyo. Gosto ko Salud ay makapagbigay man lang ako
ng marami para hindi masiadong kahiyahiya sa iyo. Ngayon kung gosto mo ay kahit konte muna ay bibigyan
kita. Pupunta lang kami ni Mina sa Maynila ngayon. Salud kung talagang kailangan mo ay bukas ay dadalhan
kita ng pera.
Medio mahirap ang maningil sa palengke ng Cabanatuan dahil nagsisilipat ang mga suki ko ng puesto. Huwag
kang mabahala at tiyak na babayaran kita.
Patnubayan tayo ng mahal na panginoon Dios. (Exh. B).
Ludy
Pursuant to this letter, the appellant sent a money order Ior P100.00 on October 24, 1967, Exh. 4, and another
Ior P50.00 on March 8, 1967; and she paid P90.00 on April 18, 1967 as evidenced by the receipt Exh. 2, dated
April 18, 1967, or a total oI P240.00. As no Iurther amount was paid, the complainant Iiled a complaint against
the appellant Ior estaIa. (pp. 14, 15, 16, Rollo)
In this petition Ior review by certiorari, Lourdes Valerio Lim poses the Iollowing questions oI law, to wit:
1. Whether or not the Honorable Court oI Appeals was legally right in holding that the Ioregoing document
(Exhibit "A") "Iixed a period" and "the obligation was thereIore, immediately demandable as soon as the
tobacco was sold" (Decision, p. 6) as against the theory oI the petitioner that the obligation does not Iix a
period, but Irom its nature and the circumstances it can be inIerred that a period was intended in which case the
only action that can be maintained is a petition to ask the court to Iix the duration thereoI;
2. Whether or not the Honorable Court oI Appeals was legally right in holding that "Art. 1197 oI the New Civil
Code does not apply" as against the alternative theory oI the petitioner that the Iore. going receipt (Exhibit "A")
gives rise to an obligation wherein the duration oI the period depends upon the will oI the debtor in which case
the only action that can be maintained is a petition to ask the court to Iix the duration oI the period; and 3.
Whether or not the honorable Court oI Appeals was legally right in holding that the Ioregoing receipt is a
contract oI agency to sell as against the theory oI the petitioner that it is a contract oI sale. (pp. 3-4, Rollo)
It is clear in the agreement, Exhibit "A", that the proceeds oI the sale oI the tobacco should be turned over to the
complainant as soon as the same was sold, or, that the obligation was immediately demandable as soon as the
tobacco was disposed oI. Hence, Article 1197 oI the New Civil Code, which provides that the courts may Iix the
duration oI the obligation iI it does not Iix a period, does not apply.
Anent the argument that petitioner was not an agent because Exhibit "A" does not say that she would be paid
the commission iI the goods were sold, the Court oI Appeals correctly resolved the matter as Iollows:
... Aside Irom the Iact that Maria Ayroso testiIied that the appellant asked her to be her agent in selling Ayroso's
tobacco, the appellant herselI admitted that there was an agreement that upon the sale oI the tobacco she would
be given something. The appellant is a businesswoman, and it is unbelievable that she would go to the extent oI
going to Ayroso's house and take the tobacco with a jeep which she had brought iI she did not intend to make a
proIit out oI the transaction. Certainly, iI she was doing a Iavor to Maria Ayroso and it was Ayroso who had
requested her to sell her tobacco, it would not have been the appellant who would have gone to the house oI
Ayroso, but it would have been Ayroso who would have gone to the house oI the appellant and deliver the
tobacco to the appellant. (p. 19, Rollo)
The Iact that appellant received the tobacco to be sold at P1.30 per kilo and the proceeds to be given to
complainant as soon as it was sold, strongly negates transIer oI ownership oI the goods to the petitioner. The
agreement (Exhibit "A') constituted her as an agent with the obligation to return the tobacco iI the same was not
sold.
ACCORDINGLY, the petition Ior review on certiorari is dismissed Ior lack oI merit. With costs.
SO ORDERED.
Teehankee (Chairman), Melencio-Herrera, Plana, Gutierre:, Jr. and e la Fuente, JJ., concur.


G.R. No. L-11491 August 23, 191
ANDRES QUIROGA, plaintiff-appellant,
vs.
PARSONS HARDWARE CO., defendant-appellee.
Alfredo Chicote, Jose Arnai: and Pascual B. A:an:a for appellant. Crossfield & OBrien for appellee.
AVANCEA,
On January 24, 1911, in this city oI manila, a contract in the Iollowing tenor was entered into by and between
the plaintiII, as party oI the Iirst part, and J. Parsons (to whose rights and obligations the present deIendant later
subrogated itselI), as party oI the second part:
CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J. PARSONS, BOTH
MERCHANTS ESTABLISHED IN MANILA, FOR THE EXCLUSIVE SALE OF "QUIROGA" BEDS IN
THE VISAYAN ISLANDS.
ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan Islands to J. Parsons
under the Iollowing conditions:
(A) Mr. Quiroga shall Iurnish beds oI his manuIacture to Mr. Parsons Ior the latter's establishment in Iloilo, and
shall invoice them at the same price he has Iixed Ior sales, in Manila, and, in the invoices, shall make and
allowance oI a discount oI 25 per cent oI the invoiced prices, as commission on the sale; and Mr. Parsons shall
order the beds by the dozen, whether oI the same or oI diIIerent styles.
(B) Mr. Parsons binds himselI to pay Mr. Quiroga Ior the beds received, within a period oI sixty days Irom the
date oI their shipment.
(C) The expenses Ior transportation and shipment shall be borne by M. Quiroga, and the Ireight, insurance, and
cost oI unloading Irom the vessel at the point where the beds are received, shall be paid by Mr. Parsons.
(D) II, beIore an invoice Ialls due, Mr. Quiroga should request its payment, said payment when made shall be
considered as a prompt payment, and as such a deduction oI 2 per cent shall be made Irom the amount oI the
invoice.
The same discount shall be made on the amount oI any invoice which Mr. Parsons may deem convenient to pay
in cash.
(E) Mr. Quiroga binds himselI to give notice at least IiIteen days beIore hand oI any alteration in price which he
may plan to make in respect to his beds, and agrees that iI on the date when such alteration takes eIIect he
should have any order pending to be served to Mr. Parsons, such order shall enjoy the advantage oI the
alteration iI the price thereby be lowered, but shall not be aIIected by said alteration iI the price thereby be
increased, Ior, in this latter case, Mr. Quiroga assumed the obligation to invoice the beds at the price at which
the order was given.
(F) Mr. Parsons binds himselI not to sell any other kind except the "Quiroga" beds.
ART. 2. In compensation Ior the expenses oI advertisement which, Ior the beneIit oI both contracting parties,
Mr. Parsons may Iind himselI obliged to make, Mr. Quiroga assumes the obligation to oIIer and give the
preIerence to Mr. Parsons in case anyone should apply Ior the exclusive agency Ior any island not comprised
with the Visayan group.
ART. 3. Mr. Parsons may sell, or establish branches oI his agency Ior the sale oI "Quiroga" beds in all the
towns oI the Archipelago where there are no exclusive agents, and shall immediately report such action to Mr.
Quiroga Ior his approval.
ART. 4. This contract is made Ior an unlimited period, and may be terminated by either oI the contracting
parties on a previous notice oI ninety days to the other party.
OI the three causes oI action alleged by the plaintiII in his complaint, only two oI them constitute the subject
matter oI this appeal and both substantially amount to the averment that the deIendant violated the Iollowing
obligations: not to sell the beds at higher prices than those oI the invoices; to have an open establishment in
Iloilo; itselI to conduct the agency; to keep the beds on public exhibition, and to pay Ior the advertisement
expenses Ior the same; and to order the beds by the dozen and in no other manner. As may be seen, with the
exception oI the obligation on the part oI the deIendant to order the beds by the dozen and in no other manner,
none oI the obligations imputed to the deIendant in the two causes oI action are expressly set Iorth in the
contract. But the plaintiII alleged that the deIendant was his agent Ior the sale oI his beds in Iloilo, and that said
obligations are implied in a contract oI commercial agency. The whole question, thereIore, reduced itselI to a
determination as to whether the deIendant, by reason oI the contract hereinbeIore transcribed, was a purchaser
or an agent oI the plaintiII Ior the sale oI his beds.
In order to classiIy a contract, due regard must be given to its essential clauses. In the contract in question, what
was essential, as constituting its cause and subject matter, is that the plaintiII was to Iurnish the deIendant with
the beds which the latter might order, at the price stipulated, and that the deIendant was to pay the price in the
manner stipulated. The price agreed upon was the one determined by the plaintiII Ior the sale oI these beds in
Manila, with a discount oI Irom 20 to 25 per cent, according to their class. Payment was to be made at the end
oI sixty days, or beIore, at the plaintiII's request, or in cash, iI the deIendant so preIerred, and in these last two
cases an additional discount was to be allowed Ior prompt payment. These are precisely the essential Ieatures oI
a contract oI purchase and sale. There was the obligation on the part oI the plaintiII to supply the beds, and, on
the part oI the deIendant, to pay their price. These Ieatures exclude the legal conception oI an agency or order to
sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the
principal the price he obtains Irom the sale oI the thing to a third person, and iI he does not succeed in selling it,
he returns it. By virtue oI the contract between the plaintiII and the deIendant, the latter, on receiving the beds,
was necessarily obliged to pay their price within the term Iixed, without any other consideration and regardless
as to whether he had or had not sold the beds.
It would be enough to hold, as we do, that the contract by and between the deIendant and the plaintiII is one oI
purchase and sale, in order to show that it was not one made on the basis oI a commission on sales, as the
plaintiII claims it was, Ior these contracts are incompatible with each other. But, besides, examining the clauses
oI this contract, none oI them is Iound that substantially supports the plaintiII's contention. Not a single one oI
these clauses necessarily conveys the idea oI an agency. The words commission on sales used in clause (A) oI
article 1 mean nothing else, as stated in the contract itselI, than a mere discount on the invoice price. The word
agency , also used in articles 2 and 3, only expresses that the deIendant was the only one that could sell the
plaintiII's beds in the Visayan Islands. With regard to the remaining clauses, the least that can be said is that
they are not incompatible with the contract oI purchase and sale.
The plaintiII calls attention to the testimony oI Ernesto Vidal, a Iormer vice-president oI the deIendant
corporation and who established and managed the latter's business in Iloilo. It appears that this witness, prior to
the time oI his testimony, had serious trouble with the deIendant, had maintained a civil suit against it, and had
even accused one oI its partners, Guillermo Parsons, oI IalsiIication. He testiIied that it was he who draIted the
contract Exhibit A, and, when questioned as to what was his purpose in contracting with the plaintiII, replied
that it was to be an agent for his beds and to collect a commission on sales . However, according to the
deIendant's evidence, it was Mariano Lopez Santos, a director oI the corporation, who prepared Exhibit A. But,
even supposing that Ernesto Vidal has stated the truth, his statement as to what was his idea in contracting with
the plaintiII is oI no importance, inasmuch as the agreements contained in Exhibit A which he claims to have
draIted, constitute, as we have said, a contract oI purchase and sale, and not one oI commercial agency. This
only means that Ernesto Vidal was mistaken in his classiIication oI the contract. But it must be understood that
a contract is what the law deIines it to be, and not what it is called by the contracting parties.
The plaintiII also endeavored to prove that the deIendant had returned beds that it could not sell; that, without
previous notice, it Iorwarded to the deIendant the beds that it wanted; and that the deIendant received its
commission Ior the beds sold by the plaintiII directly to persons in Iloilo. But all this, at the most only shows
that, on the part oI both oI them, there was mutual tolerance in the perIormance oI the contract in disregard oI
its terms; and it gives no right to have the contract considered, not as the parties stipulated it, but as they
perIormed it. Only the acts oI the contracting parties, subsequent to, and in connection with, the execution oI the
contract, must be considered Ior the purpose oI interpreting the contract, when such interpretation is necessary,
but not when, as in the instant case, its essential agreements are clearly set Iorth and plainly show that the
contract belongs to a certain kind and not to another. Furthermore, the return made was oI certain brass beds,
and was not eIIected in exchange Ior the price paid Ior them, but was Ior other beds oI another kind; and Ior the
letter Exhibit L-1, requested the plaintiII's prior consent with respect to said beds, which shows that it was not
considered that the deIendant had a right, by virtue oI the contract, to make this return. As regards the shipment
oI beds without previous notice, it is insinuated in the record that these brass beds were precisely the ones so
shipped, and that, Ior this very reason, the plaintiII agreed to their return. And with respect to the so-called
commissions, we have said that they merely constituted a discount on the invoice price, and the reason Ior
applying this beneIit to the beds sold directly by the plaintiII to persons in Iloilo was because, as the deIendant
obligated itselI in the contract to incur the expenses oI advertisement oI the plaintiII's beds, such sales were to
be considered as a result oI that advertisement.
In respect to the deIendant's obligation to order by the dozen, the only one expressly imposed by the contract,
the eIIect oI its breach would only entitle the plaintiII to disregard the orders which the deIendant might place
under other conditions; but iI the plaintiII consents to Iill them, he waives his right and cannot complain Ior
having acted thus at his own Iree will.
For the Ioregoing reasons, we are oI opinion that the contract by and between the plaintiII and the deIendant
was one oI purchase and sale, and that the obligations the breach oI which is alleged as a cause oI action are not
imposed upon the deIendant, either by agreement or by law.
The judgment appealed Irom is aIIirmed, with costs against the appellant. So ordered.
Arellano, C.J., Torres, Johnson, Street and Malcolm, JJ., concur.


G.R. No. L-20726 December 20, 1923
ALBALADE1O Y CIA., S. en C., plaintiff-appellant,
vs.
The PHILIPPINE REFINING CO., as successor to The Visayan Refining Co., defendant-appellant.
Eduardo Gutierre: Repide and Felix Socias for plaintiff. Manly, Goddard and Lockwood for defendant-
appellant. Fisher, eWitt, Perkins and Brady of counsel.
STREET,
This action was instituted in the Court oI First Instance oI the Province oI Albay by Albaladejo y Cia., S. en C.,
to recover a sum oI money Irom the Philippine ReIining Co., as successor to the Visayan ReIining Co., two
causes oI action being stated in the complaint. Upon hearing the cause the trial judge absolved the deIendant
Irom the Iirst cause oI action but gave judgment Ior the plaintiII to recover the sum oI P49,626.68, with costs,
upon the second cause oI action. From this judgment the plaintiII appealed with respect to the action taken upon
the Iirst cause oI action, and the deIendant appealed with respect to the action taken upon the second cause oI
action. It results that, by the appeal oI the two parties, the decision oI the lower court is here under review as
regards the action taken upon both grounds oI action set Iorth in the complaint.
It appears that Albaladejo y Cia. is a limited partnership, organized in conIormity with the laws oI these Islands,
and having its principal place oI business at Legaspi, in the Province oI Albay; and during the transactions
which gave origin to this litigation said Iirm was engaged in the buying and selling oI the products oI the
country, especially copra, and in the conduct oI a general mercantile business in Legaspi and in other places
where it maintained agencies, or sub-agencies, Ior the prosecution oI its commercial enterprises.
The Visayan ReIining Co. is a corporation organized under the laws oI the Philippine Islands; and prior to July
9, 1920, it was engaged in operating its extensive plant at Opon, Cebu, Ior the manuIacture oI coconut oil.
On August 28, 1918, the plaintiII made a contract with the Visayan ReIining Co., the material parts oI which
are as Iollows:
Memorandum of Agreement Re Purchase of Copra . This memorandum oI agreement, made and entered into
by and between Albaladejo y Compania, S. en C., oI Legaspi, Province oI Albay, Philippine Islands, party oI
the Iirst part, and the Visayan ReIining Company, Inc., oI Opon, Province oI Cebu, Philippine Islands, party oI
the second part,
Witnesseth That . Whereas, the party oI the Iirst part is engaged in the purchase oI copra in the Province oI
Albay; and Whereas, the party oI the second part is engaged in the business oI the manuIacture oI coconut oil,
or which purpose it must continually purchase large quantities oI copra; Now, ThereIore, in consideration oI the
premises and covenants hereinaIter set Iorth, the said parties have agreed and do hereby contract and agree as
Iollows, to wit:
1. The party oI the Iirst part agrees and binds itselI to sell to the party oI the second part, and the party oI the
second part agrees and binds itselI to buy Irom the party oI the Iirst part, Ior a period oI one (1) year Irom the
date oI these presents, all the copra purchased by the party oI the Iirst part in Province oI Albay.
2. The party oI the second part agrees to pay the party oI the Iirst part Ior the said copra the market price thereoI
in Cebu at date (oI) purchase, deducting, however, Irom such price the cost oI transportation by sea to the
Iactory oI the party oI second part at Opon, Cebu, the amount deducted to be ascertained Irom the rates
established, Irom time to time, by the public utility commission, or such entity as shall succeed to its Iunctions,
and also a Iurther deduction Ior the shrinkage oI the copra Irom the time oI its delivery to the party oI the
second part to its arrival at Opon, Cebu, plus one-halI oI a real per picul in the event the copra is delivered to
boats which will unload it on the pier oI the party oI the second part at Opon, Cebu, plus one real per picul in
the event that the party oI the Iirst part shall employ its own capital exclusively in its purchase.
3. During the continuance oI this contract the party oI the second part will not appoint any other agent Ior the
purchase oI copra in Legaspi, nor buy copra Irom any vendor in Legaspi.
4. The party oI the second part will, so Iar as practicable, keep the party oI the Iirst part advised oI the
prevailing prices paid Ior copra in the Cebu market.
5. The party oI the second part will provide transportation by sea to Opon, Cebu, Ior the copra delivered to it by
the party oI the Iirst part, but the party oI the Iirst part must deliver such copra to the party oI the second part
Iree on board the boats oI the latter's ships or on the pier alongside the latter's ships, as the case may be.
Pursuant to this agreement the plaintiII, during the year therein contemplated, bought copra extensively Ior the
Visayan ReIining Co. At the end oI said year both parties Iound themselves satisIied with the existing
arrangement, and they thereIore continued by tacit consent to govern their Iuture relations by the same
agreement. In this situation aIIairs remained until July 9, 1920, when the Visayan ReIining Co. closed down its
Iactory at Opon and withdrew Irom the copra market.
When the contract above reIerred to was originally made, Albaladejo y Cia. apparently had only one
commercial establishment, i.e., that at Legaspi; but the large requirements oI the Visayan ReIining Co. Ior copra
appeared so Iar to justiIy the extension oI the plaintiII's business that during the course oI the next two or three
years it established some twenty agencies, or subagencies, in various ports and places oI the Province oI Albay
and neighboring provinces.
AIter the Visayan ReIining Co. had ceased to buy copra, as above stated, oI which Iact the plaintiII was duly
notiIied, the supplies oI copra already purchased by the plaintiII were gradually shipped out and accepted by the
Visayan ReIining Co., and in the course oI the next eight or ten months the accounts between the two parties
were liquidated. The last account rendered by the Visayan ReIining Co. to the plaintiII was Ior the month oI
April, 1921, and it showed a balance oI P288 in Iavor oI the deIendant. Under date oI June 25, 1921, the
plaintiII company addressed a letter Irom Legaspi to the Philippine ReIining Co. (which had now succeeded to
the rights and liabilities oI the Visayan ReIining Co.), expressing its approval oI said account. In this letter no
dissatisIaction was expressed by the plaintiII as to the state oI aIIairs between the parties; but about six weeks
thereaIter the present action was begun.
Upon reIerence to paragraph Iive oI the contract reproduced above it will be seen that the Visayan ReIining Co.
obligated itselI to provide transportation by sea to Opon, Cebu, Ior the copra which should be delivered to it by
the plaintiII; and the Iirst cause oI action set Iorth in the complaint is planted upon the alleged negligent Iailure
oI the Visayan ReIining Co. to provide opportune transportation Ior the copra collected by the plaintiII and
deposited Ior shipment at various places. In this connection we reproduce the Iollowing allegations Irom the
complaint:
6. That, Irom the month oI September, 1918, until the month oI June, 1920, the plaintiII opportunely advised the
Visayan oI the stocks that the Iormer had Ior shipment, and, Irom time to time, requested the Visayan to send
vessels to take up said stocks; but that the Visayan culpably and negligently allowed a great number oI days to
elapse beIore sending the boats Ior the transportation oI the copra to Opon, Cebu, and that due to the Iault and
negligence oI the Visayan, the stocks oI copra prepared Ior shipment by the plaintiII had to remain an
unnecessary length oI time in warehouses and could not be delivered to the Visayan, nor could they be
transmitted to this latter because oI the lack oI boats, and that Ior this reason the copra gathered by the plaintiII
and prepared Ior delivery to the Visayan suIIered the diminishment oI weight herein below speciIied, through
shrinkage or excessive drying, and, in consequence thereoI, an important diminishment in its value.
xxx xxx xxx 8. That the diminishment in weight suIIered as shrinkage through excessive drying by all the lots
oI copra sold by the plaintiII to the Visayan, due to the Iault and negligence oI the Visayan in the sending oI
boats to take up said copra, represents a total oI 9,695 piculs and 56 cates, the just and reasonable value oI
which, at the rates Iixed by the purchaser as the price in its liquidation, is a total oI two hundred and one
thousand, Iive hundred and ninety-nine pesos and IiIty-three centavos (P201,599.53), Philippine currency, in
which amount the plaintiII has been damaged and injured by the negligent and culpable acts and omissions oI
the Visayan, as herein above stated and alleged.
In the course oI the appealed decision the trial judge makes a careIul examination oI the prooI relative to the
movements oI the Ileet oI boats maintained by the Visayan ReIining Co. Ior the purpose oI collecting copra
Irom the various ports where it was gathered Ior said company, as well as oI the movements oI other boats
chartered or hired by said company Ior the same purpose; and upon consideration oI all the Iacts revealed in
evidence, his Honor Iound that the Visayan ReIining Co. had used reasonable promptitude in its eIIorts to get
out the copra Irom the places where it had been deposited Ior shipment, notwithstanding occasional
irregularities due at times to the condition oI the weather as related to transportation by sea and at other times to
the inability oI the Visayan ReIining Co. to dispatch boats to the more remote ports. This Iinding oI the trial
judge, that no negligence oI the kind alleged can properly be imputed to the Visayan ReIining Co., is in our
opinion supported by the prooI.
Upon the point oI the loss oI weight oI the copra by shrinkage, the trial judge Iound that this is a product which
necessarily undergoes considerable shrinkage in the process oI drying, and intelligent witnesses who are
conversant with the matter testiIied at the trial that shrinkage oI cobra varies Irom twenty to thirty per centum oI
the original gross weight. It is agreed that the shrinkage shown in all oI the copra which the plaintiII delivered
to the Visayan ReIining Co. amounted to only 8.187 per centum oI the whole, an amount which is notably
below the normal. This showing was undoubtedly due in part, as the trial judge suggests, to the Iact that in
purchasing the copra directly Irom the producers the plaintiII's buyers sometimes estimated the picul at sixty-
eight kilos, or somewhat less, but in no case at the true weight oI 63.25 kilos. The plaintiII was thereIore
protected in a great measure Irom loss by shrinkage by purchasing upon a diIIerent basis oI weight Irom that
upon which he sold, otherwise the shrinkage shown in the result must have been much greater than that which
actually appeared. But even considering this Iact, it is quite evident that the demonstrated shrinkage oI 8.187 per
centum was extremely moderate average; and this Iact goes to show that there was no undue delay on the part oI
the Visayan ReIining Co. in supplying transportation Ior the copra collected by the plaintiII.
In the course oI his well-reasoned opinion upon this branch oI the case, the trial judge calls attention to the Iact
that it is expressly provided in paragraph two oI the contract that the shrinkage oI copra Irom the time oI its
delivery to the party oI the second part till its arrival at Opon should Iall upon the plaintiII, Irom whence it is to
be interIered that the parties intended that the copra should be paid Ior according to its weight upon arrival at
Opon regardless oI its weight when Iirst purchased; and such appears to have been the uniIorm practice oI the
parties in settling their accounts Ior the copra delivered over a period oI nearly two years.
From what has been said it Iollows that the Iirst cause oI action set Iorth in the complaint is not well Iounded,
and the trial judge committed no error in absolving the plaintiII thereIrom.
It appears that in the Iirst six months oI the year 1919, the plaintiII Iound that its transactions with the Visayan
ReIining Co. had not been productive oI reasonable proIit, a circumstance which the plaintiII attributed to loss
oI weight or shrinkage in the copra Irom the time oI purchase to its arrival at Opon; and the matter was taken up
with the oIIicials oI said company, with the result that a bounty amounting to P15,610.41 was paid to the
plaintiII by the Visayan ReIining Co. In the ninth paragraph oI the complaint the plaintiII alleges that this
payment was made upon account oI shrinkage, Ior which the Visayan ReIining Co. admitted itselI to be liable;
and it is suggested that the making oI this payment operated as a recognition on the part oI the Visayan reIining
Co. oI the justice oI the plaintiII's claim with respect to the shrinkage in all subsequent transactions. With this
proposition we cannot agree. At most the payment appears to have been made in recognition oI an existing
claim, without involving any commitment as to liability on the part oI the deIendant in the Iuture; and
Iurthermore it appears to have been in the nature oI a mere gratuity given by the company in order to encourage
the plaintiII and to assure that the plaintiII's organization would be kept in an eIIicient state Ior Iuture activities.
It is certain that no general liability Ior plaintiII's losses was assumed Ior the Iuture; and the deIendant on more
than one occasion thereaIter expressly disclaimed liability Ior such losses.
As already stated purchases oI copra by the deIendant were suspended in the month oI July, 1920. At this time
the plaintiII had an expensive organization which had been built up chieIly, we suppose, with a view to the
buying oI copra; and this organization was maintained practically intact Ior nearly a year aIter the suspension oI
purchases by the Visayan ReIining Co. Indeed in October, 1920, the plaintiII added an additional agency at
Gubat to the twenty or more already in existence. As a second cause oI action the plaintiII seeks to recover the
sum oI P110,000, the alleged amount expended by the plaintiII in maintaining and extending its organization as
above stated. As a basis Ior the deIendant's liability in this respect it is alleged that said organization was
maintained and extended at the express request, or requirement, oI the deIendant, in conjunction with repeated
assurances that the deIendant would soon resume activity as a purchaser oI copra.
With reIerence to this cause oI action the trial judge Iound that the plaintiII, as claimed, had incurred expenses
at the request oI the deIendant and upon its representation that the plaintiII would be Iully compensated thereIor
in the Iuture. Instead, however, oI allowing the plaintiII the entire amount claimed, his Honor gave judgment Ior
only thirty per centum oI said amount, in view oI the Iact that the plaintiII's transactions in copra had amounted
in the past only to about thirty per centum oI the total business transacted by it. Estimated upon this basis, the
amount recognized as constituting a just claim was Iound to be P49,626.68, and Ior this amount judgment was
rendered against the deIendant.
The discussion oI this branch oI the appeal involves the sole question whether the plaintiII's expense in
maintaining and extending its organization Ior the purchase oI copra in the period between July, 1920, to July,
1921, were incurred at the instance and request oI the deIendant, or upon any promise oI the deIendant to make
the expenditure good. A careIul examination oI the evidence, mostly oI a documentary character, is, in our
opinion, convincing that the supposed liability does not exist.
By recurring to paragraph Iour oI the contract between the plaintiII and the Visayan ReIining Co. it will be seen
that the latter agreed to keep the plaintiII advised oI the prevailing prices paid Ior the copra in the Cebu market.
In compliance with this obligation the Visayan ReIining Co. was accustomed to send out "trade letters" Irom
time to time its various clients in the southern provinces oI whom the plaintiII was one. In these letters the
manager oI the company was accustomed to make comment upon the state oI the market and to give such
inIormation as might be oI interest or value to the recipients oI the letters. From the series oI letters thus sent to
Albaladejo y Cia. during the latter halI oI 1920, we here reproduce the Iollowing excerpts:
(Letter of July 2, 1920, from K.B. ay, General Manager of the Jisayan Refining Co., to Albaladefo y Cia.)
The copra market is still very weak. I have spent the past two weeks in Manila studying conditions and Iind that
practically no business at all is being done. A Iew oI the mills having provincial agents are accepting small
deliveries, but I do not suppose that 500 piculs oI copra are changing hands a day. Buyers are oIIering Irom P13
to P15, depending on quality, and sellers are oIIering to sell at anywhere Irom P16 to P18, but no business can
be done Ior the simple reason that the banks will not lend the mills any money to buy copra with at this time.
Reports Irom the United States are to the eIIect that the oil market is in a very serious and depressed condition
and that large quantities oI oil cannot be disposed oI at any price.
xxx xxx xxx
Under this conditions it is imperative that this mill buy no more copra than it can possibly help at the present
time. We are not anxious to compete, nor do we wish to purchase same in competition with others. We do,
however, desire to keep our agents doing business and trust that they will continue to hold their parroquianos
(customers), buying only minimum quantities at present.
The local market has not changed since last week, and our liquidating price is P14.
(Letter of July 9, 1920, from Jisayan Refining Co. to Albaladefo y Cia.)
NotiIy your subagents to drop out oI the market temporarily. We do not desire to purchase at present.
(Letter of July 10, 1920, from K. B. ay, General Manager, to Albaladefo y Cia.)
The market continues to grow weaker. Conditions are so uncertain that this company desires to drop out oI the
copra market until conditions have a chance to readjust themselves. We request thereIore that our agents drop
out oI active competition Ior copra temporarily. Stocks that are at present on hand will, oI course, be liquidated,
but no new stocks should be acquired. Agents should do their best to keep their organizations together
temporarily, Ior we expect to be in the market again soon stronger than ever. We expect the cooperation oI
agents in making this eIIective; and iI they give us this cooperation, we will endeavor to see that they do not
lose by the transaction in the long run. This company has been receiving copra Irom its agents Ior a long time at
prices which have netted it a loss. The company has been supporting its agents during this period. It now
expects the same support Irom its agents. Agents having stocks actually on hand in their bodegas should
telegraph us the quantity immediately and we will protect same. But stocks not actually in bodegas cannot be
considered.
(Letter of July 17, 1920, from K.B. ay to Albaladefo y Cia.)
Conditions have changed very little in the copra market since last reports. . . . We are in the same position as
last week and are out oI the market.
For the beneIit oI our agents, we wish to explain in a Iew words just why we are have been Iorced to close down
our mill until the arrival oI a boat to load some oI our stocks on hand. We have large stocks oI copra. The
market Ior oil is so uncertain that we do not care to increase these stocks until such time as we know that the
market has touched the bottom. As soon as this period oI uncertainty is over, we expect to be in the market
again stronger than ever, but it is only the part oI business wisdom to play saIe at such times as these.
Owing to the very small amounts oI copra now in the provinces, we do not think that our agents will lose
anything by our being out oI the market. On the contrary, the producers oI copra will have a chance to allow
their nuts to mature on the trees so that the quality oI copra which you will receive when we again are in the
market should be much better than what you have been receiving in the past. Due to the high prices and scarcity
oI copra a large proportion oI the copra we have received has been made Irom unripe coconuts and in order to
keep revenue coming in the producers have kept harvesting these coconuts without giving them a chance to
reach maturity. This period now should give them the chance to let their nuts ripen and should give you a better
copra in the Iuture which will shrink less and be more satisIactory both Irom your standpoint and ours. Please
do all you can to assist us at this time. We shall greatly appreciate your cooperation.
(Letter of August 7, 1920, from H.U. Umstead, Assistant General Manager, to Albaladefo y Cia.)
The copra situation in Manila remains unchanged and the outlook is still uncertain. Arrivals continue small.
We are still out oI the market and are not yet in a position to give you buying orders. We trust, however, that
within the next Iew days weeks we may be able to reenter the market and resume our Iormer activity.
xxx xxx xxx
While we are not oI the market we have no objection whatever to our agents selling copra to other purchasers, iI
by doing so they are able to keep themselves in the market and retain their parroquianos (customers). We do
not, however, wish you to use our money, Ior this purpose, nor do we want you to buy copra on speculation
with the idea in mind that we will take it oII oI your hands at high prices when we reenter the market. We wish
to warn you against this now so that you will not be working under any misapprehension.
In this same mail, we are sending you a notice oI change oI organization. In your dealings with us hereaIter,
will you kindly address all communications to the Philippine ReIining Corporation, Cebu, which you will
understand will be delivered to us.
(Letter of August 21, 1920, from Philippine Refining Corporation, by K.B. ay, to Albaladefo y Cia.)
We are not yet in the market, but, as we have indicated beIore, are hopeIul oI renewing our activities soon. We
shall advise all our agents seasonably oI our return to the market. . . .
We are preparing new Iorm oI agreement between ourselves and our agents and hope to have them completed in
time to reIer them to our agents in the course oI the next week or ten days.
All agents should endeavor to liquidate outstanding advances at this time because this is a particularly good
time to clean out old accounts and be on a business basis when we return to the market. We request that our
agents concentrate their attention on this point during the coming week.
(Letter of October 16, 1920, from K.B. ay, Manager, to Albaladefo y Cia.)
Copra in Manila and coconut oil in the United States have taken a severe drop during the past week. The Cebu
price seems to have remained unchanged, but we look Ior an early drop in the local market.
We have received orders Irom our president in New York to buy no more copra until the situation becomes
more Iavorable. We had hoped and expected to be in the market actively beIore this time, but this most
unexpected reaction in the market makes the date oI our entry in it more doubtIul.
With this in view, we hereby notiIy our agents that we can accept no more copra and advance no more money
until we have permission Irom our president to do so. We request, thereIore, that you go entirely out oI the
market, so Iar as we are concerned, with the exception oI receiving copra against outstanding accounts.
In case any agent be compelled to take in copra and desire to send same to us, we will be glad to sell same Ior
him to the highest bidder in Cebu. We will make no charge Ior our services in this connection, but the copra
must be Iorwarded to us on consignment only so that we will not appear as buyers and be required to pay the
internal-revenue tax.
We are extremely sorry to be compelled to make the present announcement to you, but the market is such that
our president does not deem it wise Ior us to purchase copra at present, and, with this in view, we have no
alternative other than to comply with his orders. We hope that our agents will realize the spirit in which these
orders are given, and will do all they can to remain IaithIul to us until such time as we can reenter the market,
which we hope and believe will be within a comparatively short time.
(Special Letter of October 16, 1920, from Philippine Refining Corporation, by K.B. ay, to Albaladefo y Cia.)
We have received very strict instructions Irom New York temporarily to suspend the purchase oI copra, and oI
course we must comply therewith. However, should you Iind yourselves obliged to buy copra in connection
with your business activities, and cannot dispose oI it advantageously in Cebu, we shall be glad to receive your
copra under the condition that we shall sell it in the market on your account to the highest bidder, or, in other
words, we oIIer you our services Iree, to sell your copra to the best possible advantages that the local market
may oIIer, provided that, in doing so, we be not obliged to accept your copra as a purchase when there be no
market Ior this product.
Whenever you Iind yourselves obliged to buy copra in order to liquidate pending advances, we can accept it
provided that, so long as present conditions prevail, we be not required to make Iurther cash advances.
We shall quote no Iurther Irom letters written by the management oI the Philippine ReIining Corporation to the
plaintiII, as we Iind nothing in the correspondence which reIlects an attitude diIIerent Irom that reIlected in the
matter above quoted. It is only necessary to add that the hope so Irequently expressed in the letters, to the eIIect
that the Philippine ReIining Corporation would soon enter the market as a buyer oI copra on a more extensive
scale than its predecessor, was not destined to be realized, and the Iactory at Opon remained closed.
But it is quite obvious that there is nothing in these letters on which to hold the deIendant liable Ior the expenses
incurred by the plaintiII in keeping its organization intact during the period now under consideration. Nor does
the oral testimony submitted by the plaintiII materially change the situation in any respect. Furthermore, the
allegation in the complaint that one agency in particular (Gubat) had been opened on October 1, 1920, at the
special instance and request oI the deIendant, is not at all sustained by the evidence.
We note that in his letter oI July 10, 1920, Mr. Day suggested that iI the various purchasing agents oI the
Visayan ReIining Co. would keep their organization intact, the company would endeavor to see that they should
not lose by the transaction in the long run. These words aIIord no suIIicient basis Ior the conclusion, which the
trial judge deduced thereIrom, that the deIendant is bound to compensate the plaintiII Ior the expenses incurred
in maintaining its organization. The correspondence suIIiciently shows on its Iace that there was no intention on
the part oI the company to lay a basis Ior contractual liability oI any sort; and the plaintiII must have understood
the letters in that light. The parties could undoubtedly have contracted about it, but there was clearly no
intention to enter into contractual relation; and the law will not raise a contract by implication against the
intention oI the parties. The inducement held Iorth was that, when purchasing should be resumed, the plaintiII
would be compensated by the proIits then to be earned Ior any expense that would be incurred in keeping its
organization intact. It is needless to say that there is no prooI showing that the oIIicials oI the deIendant acted in
bad Iaith in holding out this hope.
In the appellant's brieI the contention is advanced that the contract between the plaintiII and the Visayan
ReIining Co. created the relation oI principal and agent between the parties, and the reliance is placed upon
article 1729 oI the Civil Code which requires the principal to indemniIy the agent Ior damages incurred in
carrying out the agency. Attentive perusal oI the contract is, however, convincing to the eIIect that the relation
between the parties was not that oI principal and agent in so Iar as relates to the purchase oI copra by the
plaintiII. It is true that the Visayan ReIining Co. made the plaintiII one oI its instruments Ior the collection oI
copra; but it is clear that in making its purchases Irom the producers the plaintiII was buying upon its own
account and that when it turned over the copra to the Visayan ReIining Co., pursuant to that agreement, a
second sale was eIIected. In paragraph three oI the contract it is declared that during the continuance oI this
contract the Visayan ReIining Co. would not appoint any other agent Ior the purchase oI copra in Legaspi; and
this gives rise indirectly to the inIerence that the plaintiII was considered its buying agent. But the use oI this
term in one clause oI the contract cannot dominate the real nature oI the agreement as revealed in other clauses,
no less than in the caption oI the agreement itselI. In some oI the trade letters also the various instrumentalities
used by the Visayan ReIining Co. Ior the collection oI copra are spoken oI as agents. But this designation was
evidently used Ior convenience; and it is very clear that in its activities as a buyer the plaintiII was acting upon
its own account and not as agents, in the legal sense, oI the Visayan ReIining Co. The title to all oI the copra
purchased by the plaintiII undoubtedly remained in it until it was delivered by way oI subsequent sale to said
company.
For the reasons stated we are oI the opinion that no liability on the part oI the deIendant is shown upon the
plaintiII's second cause oI action, and the judgment oI the trial court on this part oI the case is erroneous.
The appealed judgment will thereIore be aIIirmed in so Iar as it absolves the deIendant Irom the Iirst cause oI
action and will be reversed in so Iar as it gives judgment against the deIendant upon the second cause oI action;
and the deIendant will be completely absolved Irom the complaint. So ordered, without express Iindings as to
costs oI either instance.
Johnson, Malcolm, Avancea, Jillamor, Johns and Romualde:, JJ., concur.



G.R. No. L-709 August 31, 1954
DOMINGO DE LA CRUZ, plaintiff-appellant,
vs.
NORTHERN THEATRICAL ENTERPRISES INC., ET AL., defendants-appellees.
Conrado Rubio for appellant. Rui:, Rui:, Rui:, Rui:, and Benfamin Guerrero for appellees.
MONTEMAYOR,
The Iacts in this case based on an agreed statement oI Iacts are simple. In the year 1941 the Northern Theatrical
Enterprises Inc., a domestic corporation operated a movie house in Laoag, Ilocos Norte, and among the persons
employed by it was the plaintiII DOMINGO DE LA CRUZ, hired as a special guard whose duties were to guard
the main entrance oI the cine, to maintain peace and order and to report the commission oI disorders within the
premises. As such guard he carried a revolver. In the aIternoon oI July 4, 1941, one Benjamin Martin wanted to
crash the gate or entrance oI the movie house. InIuriated by the reIusal oI plaintiII De la Cruz to let him in
without Iirst providing himselI with a ticket, Martin attacked him with a bolo. De la Cruz deIendant himselI as
best he could until he was cornered, at which moment to save himselI he shot the gate crasher, resulting in the
latter's death.
For the killing, De la Cruz was charged with homicide in Criminal Case No. 8449 oI the Court oI First Instance
oI Ilocos Norte. AIter a re-investigation conducted by the Provincial Fiscal the latter Iiled a motion to dismiss
the complaint, which was granted by the court in January 1943. On July 8, 1947, De la Cruz was again accused
oI the same crime oI homicide, in Criminal Case No. 431 oI the same Court. AIter trial, he was Iinally acquitted
oI the charge on January 31, 1948. In both criminal cases De la Cruz employed a lawyer to deIend him. He
demanded Irom his Iormer employer reimbursement oI his expenses but was reIused, aIter which he Iiled the
present action against the movie corporation and the three members oI its board oI directors, to recover not only
the amounts he had paid his lawyers but also moral damages said to have been suIIered, due to his worry, his
neglect oI his interests and his Iamily as well in the supervision oI the cultivation oI his land, a total oI P15,000.
On the basis oI the complaint and the answer Iiled by deIendants wherein they asked Ior the dismissal oI the
complaint, as well as the agreed statement oI Iacts, the Court oI First Instance oI Ilocos Norte aIter rejecting the
theory oI the plaintiII that he was an agent oI the deIendants and that as such agent he was entitled to
reimbursement oI the expenses incurred by him in connection with the agency (Arts. 1709-1729 oI the old Civil
Code), Iound that plaintiII had no cause oI action and dismissed the complaint without costs. De la Cruz
appealed directly to this Tribunal Ior the reason that only questions oI law are involved in the appeal.
We agree with the trial court that the relationship between the movie corporation and the plaintiII was not that
oI principal and agent because the principle oI representation was in no way involved. PlaintiII was not
employed to represent the deIendant corporation in its dealings with third parties. He was a mere employee
hired to perIorm a certain speciIic duty or task, that oI acting as special guard and staying at the main entrance
oI the movie house to stop gate crashers and to maintain peace and order within the premises. The question
posed by this appeal is whether an employee or servant who in line oI duty and while in the perIormance oI the
task assigned to him, perIorms an act which eventually results in his incurring in expenses, caused not directly
by his master or employer or his Iellow servants or by reason oI his perIormance oI his duty, but rather by a
third party or stranger not in the employ oI his employer, may recover said damages against his employer.
The learned trial court in the last paragraph oI its decision dismissing the complaint said that "aIter studying
many laws or provisions oI law to Iind out what law is applicable to the Iacts submitted and admitted by the
parties, has Iound none and it has no other alternative than to dismiss the complaint." The trial court is right. We
conIess that we are not aware oI any law or judicial authority that is directly applicable to the present case, and
realizing the importance and Iar-reaching eIIect oI a ruling on the subject-matter we have searched, though
vainly, Ior judicial authorities and enlightenment. All the laws and principles oI law we have Iound, as regards
master and servants, or employer and employee, reIer to cases oI physical injuries, light or serious, resulting in
loss oI a member oI the body or oI any one oI the senses, or permanent physical disability or even death,
suIIered in line oI duty and in the course oI the perIormance oI the duties assigned to the servant or employee,
and these cases are mainly governed by the Employer's Liability Act and the Workmen's Compensation Act.
But a case involving damages caused to an employee by a stranger or outsider while said employee was in the
perIormance oI his duties, presents a novel question which under present legislation we are neither able nor
prepared to decide in Iavor oI the employee.
In a case like the present or a similar case oI say a driver employed by a transportation company, who while in
the course oI employment runs over and inIlicts physical injuries on or causes the death oI a pedestrian; and
such driver is later charged criminally in court, one can imagine that it would be to the interest oI the employer
to give legal help to and deIend its employee in order to show that the latter was not guilty oI any crime either
deliberately or through negligence, because should the employee be Iinally held criminally liable and he is
Iound to be insolvent, the employer would be subsidiarily liable. That is why, we repeat, it is to the interest oI
the employer to render legal assistance to its employee. But we are not prepared to say and to hold that the
giving oI said legal assistance to its employees is a legal obligation. While it might yet and possibly be regarded
as a normal obligation, it does not at present count with the sanction oI man-made laws.
II the employer is not legally obliged to give, legal assistance to its employee and provide him with a lawyer,
naturally said employee may not recover the amount he may have paid a lawyer hired by him.
Viewed Irom another angle it may be said that the damage suIIered by the plaintiII by reason oI the expenses
incurred by him in remunerating his lawyer, is not caused by his act oI shooting to death the gate crasher but
rather by the Iiling oI the charge oI homicide which made it necessary Ior him to deIend himselI with the aid oI
counsel. Had no criminal charge been Iiled against him, there would have been no expenses incurred or damage
suIIered. So the damage suIIered by plaintiII was caused rather by the improper Iiling oI the criminal charge,
possibly at the instance oI the heirs oI the deceased gate crasher and by the State through the Fiscal. We say
improper Iiling, judging by the results oI the court proceedings, namely, acquittal. In other words, the plaintiII
was innocent and blameless. II despite his innocence and despite the absence oI any criminal responsibility on
his part he was accused oI homicide, then the responsibility Ior the improper accusation may be laid at the door
oI the heirs oI the deceased and the State, and so theoretically, they are the parties that may be held responsible
civilly Ior damages and iI this is so, we Iail to see now this responsibility can be transIerred to the employer
who in no way intervened, much less initiated the criminal proceedings and whose only connection or relation
to the whole aIIairs was that he employed plaintiII to perIorm a special duty or task, which task or duty was
perIormed lawIully and without negligence.
Still another point oI view is that the damages incurred here consisting oI the payment oI the lawyer's Iee did
not Ilow directly Irom the perIormance oI his duties but only indirectly because there was an eIIicient,
intervening cause, namely, the Iiling oI the criminal charges. In other words, the shooting to death oI the
deceased by the plaintiII was not the proximate cause oI the damages suIIered but may be regarded as only a
remote cause, because Irom the shooting to the damages suIIered there was not that natural and continuous
sequence required to Iix civil responsibility.
In view oI the Ioregoing, the judgment oI the lower court is aIIirmed. No costs.
Beng:on, Padilla, Reyes, A., Bautista Angelo, Labrador, Concepcion, and Reyes, J.B.L., JJ., concur.



G.R. No. L-30573 October 29, 1971
VICENTE M. DOMINGO, represented by his heirs, ANTONINA RAYMUNDO VDA. DE DOMINGO,
RICARDO, CESAR, AMELIA, VICENTE 1R., SALVADOR, IRENE and 1OSELITO, all surnamed
DOMINGO, petitioners-appellants,
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,
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 oI the majority decision dated, March 12, 1969 oI the Special Division oI Five oI the Court oI
Appeals aIIirming the judgment oI the trial court, which sentenced the said Vicente M. Domingo to pay
Gregorio M. Domingo P2,307.50 and the intervenor TeoIilo P. Purisima P2,607.50 with interest on both
amounts Irom the date oI the Iiling oI the complaint, to pay Gregorio Domingo P1,000.00 as moral and
exemplary damages and P500.00 as attorney's Iees plus costs.
The Iollowing Iacts were Iound to be established by the majority oI the Special Division oI Five oI the Court oI
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 oI Piedad Estate with an area oI about 88,477 square
meters at the rate oI P2.00 per square meter (or Ior P176,954.00) with a commission oI 5 on the total price, iI
the property is sold by Vicente or by anyone else during the 30-day duration oI the agency or iI the property is
sold by Vicente within three months Irom the termination oI the agency to apurchaser to whom it was submitted
by Gregorio during the continuance oI the agency with notice to Vicente. The said agency contract was in
triplicate, one copy was given to Vicente, while the original and another copy were retained by Gregorio.
On June 3, 1956, Gregorio authorized the intervenor TeoIilo P. Purisima to look Ior a buyer, promising him
one-halI oI the 5 commission.
ThereaIter, TeoIilo Purisima introduced Oscar de Leon to Gregorio as a prospective buyer.
Oscar de Leon submitted a written oIIer which was very much lower than the price oI P2.00 per square meter
(Exhibit "B"). Vicente directed Gregorio to tell Oscar de Leon to raise his oIIer. AIter several conIerences
between Gregorio and Oscar de Leon, the latter raised his oIIer to P109,000.00 on June 20, 1956 as evidenced
by Exhibit "C", to which Vicente agreed by signing Exhibit "C". Upon demand oI Vicente, Oscar de Leon
issued to him a check in the amount oI P1,000.00 as earnest money, aIter which Vicente advanced to Gregorio
the sum oI P300.00. Oscar de Leon conIirmed his Iormer oIIer to pay Ior the property at P1.20 per square meter
in another letter, Exhibit "D". Subsequently, Vicente asked Ior an additional amount oI P1,000.00 as earnest
money, which Oscar de Leon promised to deliver to him. ThereaIter, Exhibit "C" was amended to the eIIect that
Oscar de Leon will vacate on or about September 15, 1956 his house and lot at Denver Street, Quezon City
which is part oI the purchase price. It was again amended to the eIIect that Oscar will vacate his house and lot
on December 1, 1956, because his wiIe was on the Iamily way and Vicente could stay in lot No. 883 oI 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 giIt or propina the sum
oI One Thousand Pesos (P1,000.00) Ior succeeding in persuading Vicente to sell his lot at P1.20 per square
meter or a total in round Iigure oI One Hundred Nine Thousand Pesos (P109,000.00). This giIt oI One
Thousand Pesos (P1,000.00) was not disclosed by Gregorio to Vicente. Neither did Oscar pay Vicente the
additional amount oI One Thousand Pesos (P1,000.00) by way oI earnest money. In the deed oI 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 Irom his brother in the United States, Ior which reason he was
giving up the negotiation including the amount oI 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 giIt. When Oscar did not see
him aIter several weeks, Gregorio sensed something Iishy. So, he went to Vicente and read a portion oI Exhibit
"A" marked habit "A-1" to the eIIect that Vicente was still committed to pay him 5 commission, iI the sale is
consummated within three months aIter the expiration oI the 30-day period oI the exclusive agency in his Iavor
Irom the execution oI 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 oI Exhibit "A" and tore it to pieces. Gregorio held his
peace, not wanting to antagonize Vicente Iurther, because he had still duplicate oI Exhibit "A". From his
meeting with Vicente, Gregorio proceeded to the oIIice oI the Register oI Deeds oI Quezon City, where he
discovered Exhibit "G' deed oI sale executed on September 17, 1956 by Amparo Diaz, wiIe oI Oscar de Leon,
over their house and lot No. 40 Denver Street, Cubao, Quezon City, in Iavor Vicente as down payment by Oscar
de Leon on the purchase price oI Vicente's lot No. 883 oI Piedad Estate. Upon thus learning that Vicente sold
his property to the same buyer, Oscar de Leon and his wiIe, he demanded in writting payment oI his
commission on the sale price oI One Hundred Nine Thousand Pesos (P109,000.00), Exhibit "H". He also
conIerred 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 Ior 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, wiIe oI Oscar de Leon.
The Court oI Appeals Iound Irom the evidence that Exhibit "A", the exclusive agency contract, is genuine; that
Amparo Diaz, the vendee, being the wiIe oI Oscar de Leon the sale by Vicente oI his property is practically a
sale to Oscar de Leon since husband and wiIe have common or identical interests; that Gregorio and intervenor
TeoIilo Purisima were the eIIicient cause in the consummation oI the sale in Iavor oI the spouses Oscar de Leon
and Amparo Diaz; that Oscar de Leon paid Gregorio the sum oI One Thousand Pesos (P1,000.00) as "propina"
or giIt and not as additional earnest money to be given to the plaintiII, 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 thereIore there is no writing or document supporting Oscar de Leon's testimony
that he paid an additional earnest money oI One Thousand Pesos (P1,000.00) to Gregorio Ior delivery to
Vicente, unlike the Iirst amount oI 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 oI demand oI the 5 commission.
The three issues in this appeal are (1) whether the Iailure on the part oI Gregorio to disclose to Vicente the
payment to him by Oscar de Leon oI the amount oI One Thousand Pesos (P1,000.00) as giIt or "propina" Ior
having persuaded Vicente to reduce the purchase price Irom P2.00 to P1.20 per square meter, so constitutes
Iraud as to cause a IorIeiture oI his commission on the sale price; (2) whether Vicente or Gregorio should be
liable directly to the intervenor TeoIilo Purisima Ior the latter's share in the expected commission oI Gregorio
by reason oI the sale; and (3) whether the award oI legal interest, moral and exemplary damages, attorney's Iees
and costs, was proper.
UnIortunately, 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, aIIirmed that it does not constitute
breach oI trust or Iraud on the part oI the broker and regarded same as merely part oI the whole process oI
bringing about the meeting oI the minds oI the seller and the purchaser and that the commitment Irom the
prospect buyer that he would give a reward to Gregorio iI he could eIIect better terms Ior him Irom the seller,
independent oI his legitimate commission, is not Iraudulent, because the principal can reject the terms oIIered
by the prospective buyer iI he believes that such terms are onerous disadvantageous to him. On the other hand,
Justice Gatmaitan, with whom Justice Antonio CaIizares corner held the view that such an act on the part oI
Gregorio was Iraudulent and constituted a breach oI trust, which should deprive him oI his right to the
commission.
The duties and liabilities oI a broker to his employer are essentially those which an agent owes to his principal.
1

Consequently, the decisive legal provisions are in Iound Articles 1891 and 1909 oI the New Civil Code.
Art. 1891. Every agent is bound to render an account oI his transactions and to deliver to the principal whatever
he may have received by virtue oI the agency, even though it may not be owing to the principal.
Every stipulation exempting the agent Irom the obligation to render an account shall be void.
xxx xxx xxx
Art. 1909. The agent is responsible not only Ior Iraud but also Ior negligence, which shall be judged with more
less rigor by the courts, according to whether the agency was or was not Ior a compensation.
Article 1891 oI the New Civil Code amends Article 17 oI the old Spanish Civil Code which provides that:
Art. 1720. Every agent is bound to give an account oI his transaction and to pay to the principal whatever he
may have received by virtue oI the agency, even though what he has received is not due to the principal.
The modiIication contained in the Iirst paragraph Article 1891 consists in changing the phrase "to pay" to "to
deliver", which latter term is more comprehensive than the Iormer.
Paragraph 2 oI 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 Irom the duty and liability imposed on him in
paragraph one thereoI.
Article 1909 oI the New Civil Code is essentially a reinstatement oI Article 1726 oI the old Spanish Civil Code
which reads thus:
Art. 1726. The agent is liable not only Ior Iraud, but also Ior negligence, which shall be judged with more or
less severity by the courts, according to whether the agency was gratuitous or Ior a price or reward.
The aIorecited provisions demand the utmost good Iaith, Iidelity, honesty, candor and Iairness on the part oI 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 Iull disclosure or complete account to his principal oI all his transactions and
other material Iacts relevant to the agency, so much so that the law as amended does not countenance any
stipulation exempting the agent Irom such an obligation and considers such an exemption as void. The duty oI
an agent is likened to that oI a trustee. This is not a technical or arbitrary rule but a rule Iounded on the highest
and truest principle oI morality as well as oI the strictest justice.
2

Hence, an agent who takes a secret proIit in the nature oI a bonus, gratuity or personal beneIit Irom the vendee,
without revealing the same to his principal, the vendor, is guilty oI a breach oI his loyalty to the principal and
IorIeits his right to collect the commission Irom his principal, even iI the principal does not suIIer any injury by
reason oI such breach oI Iidelity, 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 oI any wrong, not to remedy or repair an
actual damage.
3
By taking such proIit or bonus or giIt or propina Irom the vendee, the agent thereby assumes a
position wholly inconsistent with that oI being an agent Ior hisprincipal, who has a right to treat him, insoIar as
his commission is concerned, as iI no agency had existed. The Iact that the principal may have been beneIited
by the valuable services oI the said agent does not exculpate the agent who has only himselI to blame Ior such a
result by reason oI his treachery or perIidy.
This Court has been consistent in the rigorous application oI Article 1720 oI the old Spanish Civil Code. Thus,
Ior Iailure to deliver sums oI money paid to him as an insurance agent Ior the account oI his employer as
required by said Article 1720, said insurance agent was convicted estaIa.
4
An administrator oI an estate was
likewise under the same Article 1720 Ior Iailure to render an account oI his administration to the heirs unless
the heirs consented thereto or are estopped by having accepted the correctness oI his account previously
rendered.
5

Because oI his responsibility under the aIorecited article 1720, an agent is likewise liable Ior estaIa Ior Iailure to
deliver to his principal the total amount collected by him in behalI oI his principal and cannot retain the
commission pertaining to him by subtracting the same Irom his collections.
6

A lawyer is equally liable unnder said Article 1720 iI he Iails to deliver to his client all the money and property
received by him Ior his client despite his attorney's lien.
7
The duty oI a commission agent to render a Iull
account his operations to his principal was reiterated in uhart, etc. vs. Macias


The American jurisprudence on this score is well-nigh unanimous.
Where a principal has paid an agent or broker a commission while ignorant oI the Iact that the latter has been
unIaithIul, the principal may recover back the commission paid, since an agent or broker who has been
unIaithIul is not entitled to any compensation.
xxx xxx xxx
In discussing the right oI the principal to recover commissions retained by an unIaithIul 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 Iaith in his dealings with his principal. As Lord Cairns said, this rule "is not a
technical or arbitrary rule. It is a rule Iounded on the highest and truest principles, oI morality." Parker vs.
McKenna (1874) LR 10,Ch(Eng) 96,118 ... II the agent does not conduct himselI with entire Iidelity towards his
principal, but is guilty oI taking a secret proIit 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 oI agent
Ior his employer, and which gives his employer, upon discovering it, the right to treat him so Iar as
compensation, at least, is concerned as iI no agency had existed. This may operate to give to the principal the
beneIit oI valuable services rendered by the agent, but the agent has only himselI to blame Ior that result."
xxx xxx xxx
The intent with which the agent took a secret proIit has been held immaterial where the agent has in Iact entered
into a relationship inconsistent with his agency, since the law condemns the corrupting tendency oI the
inconsistent relationship. Little vs. Phipps (1911) 94 NE 260.
9

As a general rule, it is a breach oI good Iaith and loyalty to his principal Ior an agent, while the agency exists, so
to deal with the subject matter thereoI, or with inIormation acquired during the course oI the agency, as to make
a proIit out oI it Ior himselI in excess oI his lawIul compensation; and iI 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 infury by reason of the
agents 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, deIendant-appellee Gregorio Domingo as the broker, received a giIt or propina in the amount
oI One Thousand Pesos (P1,000.00) Irom the prospective buyer Oscar de Leon, without the knowledge and
consent oI his principal, herein petitioner-appellant Vicente Domingo. His acceptance oI said substantial
monetary giIt corrupted his duty to serve the interests only oI his principal and undermined his loyalty to his
principal, who gave him partial advance oI Three Hundred Pesos (P300.00) on his commission. As a
consequence, instead oI exerting his best to persuade his prospective buyer to purchase the property on the most
advantageous terms desired by his principal, the broker, herein deIendant-appellee Gregorio Domingo,
succeeded in persuading his principal to accept the counter-oIIer oI the prospective buyer to purchase the
property at P1.20 per square meter or One Hundred Nine Thousand Pesos (P109,000.00) in round Iigure Ior the
lot oI 88,477 square meters, which is very much lower the the price oI P2.00 per square meter or One Hundred
Seventy-Six Thousand Nine Hundred FiIty-Four Pesos (P176,954.00) Ior said lot originally oIIered by his
principal.
The duty embodied in Article 1891 oI the New Civil Code will not apply iI the agent or broker acted only as a
middleman with the task oI merely bringing together the vendor and vendee, who themselves thereaIter will
negotiate on the terms and conditions oI the transaction. Neither would the rule apply iI the agent or broker had
inIormed the principal oI the giIt or bonus or proIit he received Irom the purchaser and his principal did not
object therto.
11
Herein deIendant-appellee Gregorio Domingo was not merely a middleman oI the petitioner-
appellant Vicente Domingo and the buyer Oscar de Leon. He was the broker and agent oI said petitioner-
appellant only. And therein petitioner-appellant was not aware oI the giIt oI One Thousand Pesos (P1,000.00)
received by Gregorio Domingo Irom the prospective buyer; much less did he consent to his agent's accepting
such a giIt.
The Iact that the buyer appearing in the deed oI sale is Amparo Diaz, the wiIe oI Oscar de Leon, does not
materially alter the situation; because the transaction, to be valid, must necessarily be with the consent oI the
husband Oscar de Leon, who is the administrator oI their conjugal assets including their house and lot at No. 40
Denver Street, Cubao, Quezon City, which were given as part oI and constituted the down payment on, the
purchase price oI herein petitioner-appellant's lot No. 883 oI Piedad Estate. Hence, both in law and in Iact, it
was still Oscar de Leon who was the buyer.
As a necessary consequence oI such breach oI trust, deIendant-appellee Gregorio Domingo must IorIeit his right
to the commission and must return the part oI the commission he received Irom his principal.
TeoIilo Purisima, the sub-agent oI Gregorio Domingo, can only recover Irom Gregorio Domingo his one-halI
share oI whatever amounts Gregorio Domingo received by virtue oI the transaction as his sub-agency contract
was with Gregorio Domingo alone and not with Vicente Domingo, who was not even aware oI such sub-
agency. Since Gregorio Domingo received Irom Vicente Domingo and Oscar de Leon respectively the amounts
oI Three Hundred Pesos (P300.00) and One Thousand Pesos (P1,000.00) or a total oI One Thousand Three
Hundred Pesos (P1,300.00), one-halI oI the same, which is Six Hundred FiIty Pesos (P650.00), should be paid
by Gregorio Domingo to TeoIilo Purisima.
Because Gregorio Domingo's clearly unIounded complaint caused Vicente Domingo mental anguish and
serious anxiety as well as wounded Ieelings, petitioner-appellant Vicente Domingo should be awarded moral
damages in the reasonable amount oI One Thousand Pesos (P1,000.00) attorney's Iees in the reasonable amount
oI One Thousand Pesos (P1,000.00), considering that this case has been pending Ior the last IiIteen (15) years
Irom its Iiling on October 3, 1956.
WHEREFORE, the judgment is hereby rendered, reversing the decision oI the Court oI Appeals and directing
deIendant-appellee Gregorio Domingo: (1) to pay to the heirs oI Vicente Domingo the sum oI One Thousand
Pesos (P1,000.00) as moral damages and One Thousand Pesos (P1,000.00) as attorney's Iees; (2) to pay TeoIilo
Purisima the sum oI Six Hundred FiIty Pesos (P650.00); and (3) to pay the costs.
Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo and Jillamor,
JJ., concur.
|#| Footnotes
1 12 Am. Jur. 2d 835; 134 ALR 1346; 1 ALR 2d 987; Brown vs. Coates, 67 ALR 2d 943; Haymes vs. Rogers
17 ALR 2d 896; Moore vs. Turner, 32 ALR 2d 713.
2 See also Manresa, Vol. 2, p. 461, 4th ed.
3 12 Am. Jur. 2d Sec. 171, 811-12.
4 U.S. vs. Kiene 7 Phil. 736.
5 Ojinaga vs. Estate oI Perez, 9 Phil. 185 6 U.S. vs. Reyes, 36 Phil. 791.
7 In Re: Bamberger 49 Phil. 962.
8 54 Phil. 513.
9 134 ALR Ann. pp. 1346, 1347-1348; see also 1 ALR 2d, 987.
10 3 CJS 53-54; see also 12 Am. Jur. 2d 835-841, 908-912.
11 12 Am. Jur. 2d, 835-841, 908-912; Raymond vs. Davis, Jan. 3, 1936, 199 NE 321, 102 ALR 1112-1115,
1116-1121.


G.R. No. L-26 August 22, 1952
GREGORIO ARANETA, INC., plaintiff-appellant,
vs.
PAZ TUASON DE PATERNO and 1OSE VIDAL, defendants-appellants.
Araneta and Araneta for appellant. Ramire: and Ortigas for defendants-appellants. Perkins, Ponce Enrile and
Contreras And La O and Feria for appellee.
TUASON,
This is a three-cornered contest between the purchasers, the seller, and the mortgagee oI certain portions
(approximately 40,703 square meters) oI a big block oI residential land in the district oI Santa Mesa, Manila.
The plaintiII, which is the purchaser, and the mortgagee elevated this appeal. Though not an appellant, the seller
and mortgagor has made assignments oI error in her brieI, some to strengthen the judgment and others Ior the
purpose oI new trial.
The case is extremely complicated and multiple issues were raised.
The salient Iacts in so Iar as they are not controverted are these. Paz Tuason de Paterno is the registered owner
oI the aIoresaid land, which was subdivided into city lots. Most oI these lots were occupied by lessees who had
contracts oI lease which were to expire on December 31,1952, and carried a stipulation to the eIIect that in the
event the owner and lessor should decide to sell the property the lessees were to be given priority over other
buyers iI they should desire to buy their leaseholds, all things being equal. Smaller lots were occupied by
tenants without Iormal contract.
In 1940 and 1941 Paz Tuason obtained Irom Jose Vidal several loans totalling P90,098 and constituted a Iirst
mortgage on the aIoresaid property to secure the debt. In January and April, 1943, she obtained additional loans
oI P30,000 and P20,000 upon the same security. On each oI the last-mentioned occasions the previous contract
oI mortgage was renewed and the amounts received were consolidated. In the Iirst novated contract the time oI
payment was Iixed at two years and in the second and last at Iour years. New conditions not relevant here were
also incorporated into the new contracts.
There was, besides, a separate written agreement entitled "Penalidad del Documento de Novacion de Esta
Fecha" which, unlike the principal contracts, was not registered. The tenor oI this separate agreement, all
copies, oI which were alleged to have been destroyed or lost, was in dispute and became the subject oI
conIlicting evidence. The lower court did not make categorical Iindings on this point, however, and it will be
our task to do so at the appropriate place in this decision.
In 1943 Paz Tuason decided to sell the entire property Ior the net amount oI P400,000 and entered into
negotiations with Gregorio Araneta, Inc. Ior this purpose. The result oI the negotiations was the execution on
October 19, 1943, oI a contract called "Promesa de Compra y Venta" and identiIied as Exhibit "1." This
contract provided that subject to the preIerred right oI the lessees and that oI Jose Vidal as mortgagee, Paz
Tuason would sell to Gregorio Araneta, Inc. and the latter would buy Ior the said amount oI P400,000 the entire
estate under these terms.
El precio sera pagado como sigue: un 40 por ciento juntamente con la carta de aceptacion del arrendatario, un
20 por ciento delprecio al otorgarse la escritura de compromiso de venta, y el remanente 40 por ciento al
otorgarse la escritura de venta deIinitiva, la cual sera otorgada despues de que se habiese canceladola hipoteca a
Iavor de Jose Vidal que pesa sobre dichos lotes. Lacomision del 5 por ciento que corresponde a Jose Araneta
serapagada al otorgarse la escritura de compromiso de venta.
Paz Tuason se obliga a entregar mediante un propio las cartasque dirigira a este eIecto a los arrendatarios, de
conIormidad con el Iormulario adjunto, que se marca como Apendice A.
Expirado el plazo arriba mencionado, Paz Tuason otorgara las escrituras correspondientes de venta a los
arrendatarios que hayan decidido comprar sus respectivos lotes.
9. Los alquieres correspondientes a este ao se prorratearan entre la vendedora y el comprador, correspondiendo
al comprador los alquileres correspondientes a Noviembre y Diciembre de este ao y asimismo sera por cuenta
del comprador el amillaramiento correspondiente a dichos meses.
10. Paz Tuason, reconoce haver recibido en este acto de Gregorio Araneta, Inc., la suma de Ciento Noventa Mil
Pesos (P190,000)como adelanto del precio de venta que Gregorio Araneta, Inc., tuviere que pagar a Paz Tuason.
La cantidad que Paz Tuason recibe en este acto sera aplicadapor ella a saldar su deuda con Jose Vidal, los
amillaramientos, sobre el utilizado por Paz Tuason para otros Iines.
11. Una vez determinados los lotes que Paz Tuason podra vendera Gregorio Araneta, Inc., Paz Tuason otorgara
una escritura deventa deIinitiva sobre dichos lotes a Iavor de Gregorio Araneta, Inc.
Gregorio Araneta, Inc., pagara el precio de venta como sigue: 90 por ciento del mismo al otorgarse la escritura
de venta deIinitiva descontandose de la cantidad que entonces se tenga que pagar de adelanto de P190,000 que
se entrega en virtud de esta escritura. El 10 por ciento remanente se pagara a Paz Tuazon, una vez se haya
cancelado la hipoteca que pesa actualmente sobre el terreno.
No obstante la dispuesto en el parraIo 8, cualquier arrendatario que decida comprar el lote que occupa con
contrato de arrendamiento podra optar por pedir el otorgamiento inmediato a su Iavor el acto de la escritura de
venta deIinitiva pagando en el acto el 50 por ciento del precio (ademas del 40 por ciento que debio incluir en su
carta de aceptacion) y el remanente de 10 por ciento inmediatemente despues de cancelarse la hipoteca que pesa
sobre el terreno.
12. Si la mencionada cantidad de P190,000 excediere del 90 por ciento de la cantidad que Gregorio Araneta,
Inc., tuviere que vender a dicho comprador, el saldo sera pagado inmediatamente por Paz Tuazon, tomandolo de
las cantidades que reciba de los arrendatarios como precio de venta.
In Iurtherance oI this promise to buy and sell, letters were sent the lessees giving them until August 31, 1943, an
option to buy the lots they occupied at the price and terms stated in said letters. Most oI the tenants who held
contracts oI lease took advantage oI the opportunity thus extended and aIter making the stipulated payments
were giving their deeds oI conveyance. These sales, as Iar as the record would show, have been respected by the
seller.
With the elimination oI the lots sold or be sold to the tenants there remained unencumbered, except Ior the
mortgage to Jose Vidal, Lots 1, 8-16 and 18 which have an aggregate area oI 14,810.20 square meters; and on
December 2, 1943, Paz Tuason and Gregorio Araneta, Inc. executed with regard to these lots an absolute deed
oI sale, the terms oI which, except in two respects, were similar to those oI the sale to the lessees. This deed,
copy oI which is attached to the plaintiII's complaint as Exhibit A, provided, among other things, as Iollows:
The aIoresaid lots are being sold by he Vendor to the Vendee separately at the prices mentioned in paragraph
(6) oI the aIoresaid contract entitled "Promesa de Compra y Venta," making a total sum oI One Hundred Thirty-
Nine Thousand Eighty-three pesos and Thirty-two centavos (P139,083.32), ninety (90) per cent oI which
amount, i.e., the sum oI One Hundred Twenty-Iive Thousand One Hundred Seventy-Iour Pesos and Ninety-nine
centavos (P125,174.99), the Vendor acknowledges to have received by virtue oI the advance oI One Hundred
Ninety Thousand (P190,000) Pesos made by the Vendee to the Vendor upon the execution oI the aIoresaid
contract entitled "Promesa de Compra y Venta". The balance oI Sixty-Four Thousand Eight Hundred Twenty-
Iive Pesos and One centavo (P64,825.01) between the sum oI P125,174.99, has been returned by the Vendor to
the Vendee, which amount the Vendee acknowledges to have received by these presents;
The aIoresaid sum oI P190,000 was delivered by the Vendee to the Vendor by virtue oI Iour checks issued by
the Vendee against the Bank oI the Philippine Islands, as Iollows:
No. C-286445 in Iavor oI Paz Tuason de Paterno P13,476.62
No. C-286444 in Iavor oI the City Treasurer,
Manila 3,373.38
No. C-286443 in Iavor oI Jose Vidal 30,000.00
No. C-286442 in Iavor oI Jose Vidal 143,150.00
Total P190,000.00
The return oI the sum oI P64,825.01 was made by the Vendor to the Vendee in a liquidation which reads as
Iollows:
Hemos recibido de Da. Paz Tuason de Paterno la cantidad de Sesenta y Cuatro mil Ochocientos
Veinticinco Pesos y un centimo (P64,825.01) enconcepto de devolucion que nos hace del excesode lo pagadoa
ella de P190,000.00
Menos el 90 de P139,083.32, importe de los lotes que vamos a comprar 125,174.99
Exceso 64,825.01
Cheque BIF No. D-442988 de Simplicio del Rosario 21,984.20
Cheque PNB No. 177863-K de L.E. Dumas 21,688.60
Cheque PNB No. 267682-K de AlIonso Sycip 20,000.00
Cheque PNB No. 83940 de JoseIina de Pabalan 4,847.96
Billetes recibidos de AlIonso Sycip 42.96
P68,563.21
Menos las comisiones de 5 recibidas de
JoseIina de Pabalan P538.60
L.E. Dumas 1,084.43
Angela S. Tuason 1,621.94 3,244.97
P65,318.24
Menos cheque BIF No. C-288642 a Iavor de Da.
Paz Tuason de Paterno que le entregamos como exceso 493.23
P64,825.01
Manila, Noviembre 2, 1943
GREGORIO ARANETA, INCORPORATED
Por;
(Fdo.) "JOSE ARANETA
Presidente
Recibido cheque No. C-288642 BIF-P493.23
Por:
(Fdo.) "M.J. GONZALEZ
In view oI the Ioregoing liquidation, the vendor acknowledges Iully and unconditionally, having received the
sum oI P125,174.99 oI the present legal currency and hereby expressly declares that she will not hold the
Vendee responsible Ior any loss that she might suIIer due to the Iact that two oI the checks paid to her by the
Vendee were issued in Iavor oI Jose Vidal and the latter has, up to the present time, not yet collected the same.
The ten (10) per cent balance oI the purchase price not yet paid in the total sum oI P13,908.33 will be paid by
the Vendee to the Vendor when the existing mortgage over the property sold by the Vendor to the Vendee is
duly cancelled in the oIIice oI the Register oI Deeds, or sooner at the option oI the Vendee.
This Deed oI Sale is executed by the Vendor Iree Irom all liens and encumbrances, with the only exception oI
the existing lease contracts on parcels Nos. 1, 10, 11, and 16, which lease contracts will expire on December 31,
1953, with the understanding, however, that this sale is being executed Iree Irom any option or right on the part
oI the lessees to purchase the lots respectively leased by them.
It is thereIore clearly understood that the Vendor will pay the existing mortgage on her property in Iavor oI Jose
Vidal.
The liquidation oI the amounts respectively due between the Vendor and the Vendee in connection with the
rents and real estate taxes as stipulated in paragraph (9) oI the contract entitled "Promesa de Compara y Venta"
will be adjusted between the parties in a separate document.
Should any oI the aIoresaid lessees oI lots Nos. 2, 3, 4, 5, 6, 7, 9 and 17 Iail to carry out their respective
obligations under the option to purchase exercised by them so that the rights oI the lessee to purchase the
respective property leased by him is cancelled, the Vendor shall be bound to sell the same to the herein Vendee,
Gregorio Araneta, Incorporated, in conIormity with the terms and conditions provided in the aIoresaid contract
oI "Promesa de Compra y Venta";
The documentary stamps to be aIIixed to this deed will be Ior the account oI the Vendor while the expenses Ior
the registration oI this document will be Ior the account oI the Vendee.
The remaining area oI the property oI the Vendor subject to TransIer CertiIicates oI Title Nos. 60471 and
60472, are lots Nos. 2, 3, 4, 5, 6, 7, 9, and 17, all oI the Consolidation oI lots Nos. 20 and 117 oI plan II-4755,
G.L.R.O. Record No. 7680.
BeIore the execution oI the above deed, that is, on October 20, 1943, the day immediately Iollowing the signing
oI the agreement to buy and sell, Paz Tuason had oIIered to Vidal the check Ior P143,150 mentioned in Exhibit
A, in Iull settlement oI her mortgage obligation, but the mortgagee had reIused to receive that check or to cancel
the mortgage, contending that by the separate agreement beIore mentioned payment oI the mortgage was not to
be eIIected totally or partially beIore the end oI Iour years Irom April, 1943.
Because oI this reIusal oI Vidal's Paz Tuason, through Atty. AlIonso Ponce Enrile, commenced an action
against the mortgagee in October or the early paret oI November 1943. the record oI that case was destroyed
and no copy oI the complaint was presented in evidence. Attached to the complaint or deposited with the clerk
oI court by Attorney Ponce Enrile simultaneously with the docketing oI the suit were the check Ior P143,150
previously turned down by Vidal, another certiIied check Ior P12,932.61, also drawn by Gregorio Araneta, Inc.,
in Iavor oI Vidal, and one ordinary check Ior P30,000 issued by Paz Tuazon. These three checks were supposed
to cover the whole indebtedness to Vidal including the principal and interest up to that time and the penalty
provided in the separate agreement.
But the action against Vidal never came on Ior trial and the record and the checks were destroyed during the
war operations in January or February, 1945; and neither was the case reconstituted aIterward. This Iailure oI
the suit Ior the cancellation oI Vidal's mortgage, coupled with the destruction oI the checks tendered to the
mortgagee, the nulliIication oI the bank deposit on which those checks had been drawn, and the tremendous rise
oI real estate value Iollowing the termination oI the war, gave occasion to the breaking oII the schemes outlined
in Exhibits 1 and A; Paz Tuason aIter liberation repudiated them Ior the reasons to be hereaIter set Iorth. The
instant action was the oIIshoot, begun by Gregorio Araneta, Inc. to compel Paz Tuason to deliver to the plaintiII
a clear title to the lots described in Exhibit A Iree Irom all liens and encumbrances, and a deed oI cancellation oI
the mortgage to Vidal. Vidal came into the case in virtue oI a summon issued by order oI the court, and Iiled a
cross-claim against Paz Tuazon to Ioreclose his mortgage.
It should be stated that the outset that all the parties are in agreement that Vidal's loans are still outstanding. Paz
Tuason's counsel concede that the tender oI payment to Vidal was legally deIective and did not operate to
discharge the mortgage, while the plaintiII is apparently uninterested in this Ieature oI the case considering the
matter one largely between the mortgagor and the mortgagee, although to a certain degree this notion is
incorrect. At any rate, the points oI discord between Paz Tuason and Vidal concern only the accrual oI interest
on the loans, Vidal's claim to attorney's Iees, and the application oI the debt moratorium law which the debtor
now invokes. These matters will be taken up in the discussion oI the controversy between Paz Tuason and Jose
Vidal.
The principal bone oI contention between Gregorio Araneta, Inc., and Paz Tuason was the validity oI the deed
oI sale oI Exhibit A on which the suit was predicated. The lower court's judgment was that this contract was
invalid and was so declared, "sin per juicio de que la demandada Paz Tuason de Paterno pague a la entidad
demandante todas las cantidades que habia estado recibiendo de lareIerida entidad demandante, en concepto de
pago de losterrenos, en moneda corriente, segun el cambio que debiaregir al tiempo de otorgarse la escritura
segun la escalade "Ballentine", descontando, sin embargo, de dichas cantidades cualesquiera que la demandante
haya estadorecibiendo como alquileres de los terrenos supuestamentevendidos a ella." The court based its
opinion that Exhibit 1. His Honor, Judge Sotero Rodas, agreedwith the deIendant that under paragraph 8 oI
Exhibit 1 there was to be no absolute sale to Gregorio Araneta, Inc., unless Vidal's mortgage was cancelled.
In our opinion the trial court was in error in its interpretation oI Exhibit 1. The contemplated execution oI an
absolute deed oI sale was not contingent on the cancellation oI Vidal's mortgage. What Exhibit 1 did provide
(eleventh paragraph) was that such deed oI absolute sale should be executed "una vez determinado los lotes que
Paz Tuason podra vender a Gregorio Araneta, Inc." The lots which could be sold to Gregorio Araneta, Inc. were
deIinitely known by October 31, 1943, which was the expiry oI the tenants' option to buy, and the lots included
in the absolute oI which the occupants' option to buy lapsed unconditionally. Such deed as Exhibit A was then
in a condition to be made.
Vidal's mortgage was not an obstacle to the sale. An amount had been set aside to take care oI it, and the parties,
it would appear, were conIident that the suit against the mortgagee would succeed. The only doubt in their
minds was in the amount to which Vidal was entitled. The Iailure oI the court to try and decide that the case was
not Ioreseen either.
This reIutes, were think, the charge that there was undue rush on the part oI the plaintiII to push across the sale.
The Iact that simultaneously with Exhibit A similar deeds were given the lessees who had elected to buy their
leaseholds, which comprise an area about twice as big as the lots described in Exhibit A, and the Iurther Iact
that the sale to the lessees have never been questioned and the proceeds thereoI have been received by the
deIendant, should add to dispel any suspicion oI bad Iaith on the part oI the plaintiII. II anyone was in a hurry it
could have been the deIendant. The clear preponderance oI the evidence that Paz Tuason was pressed Ior cash
and that the payment oI the mortgage was only an incident, or a necessary means to eIIectuate the sale.
Otherwise she could have settled her mortgage obligation merely by selling a portion oI her estate, say, some oI
the lots leased to tenants who, except two who were in concentration camps, were only too anxious to buy and
own the lots on which their houses were built.
Whatever the terms oI Exhibit 1, the plaintiII and the deIendant were at perIect liberty to make a new agreement
diIIerent Irom or even contrary to the provisions oI that document. The validity oI the subsequent sale must oI
necessity depend on what it said and not on the provisions oI the promise to buy and sell.
It is as possible prooI or Iraud that the discrepancies between the two documents bear some attention. It was
alleged that Attorneys Salvador Araneta and J. Antonio Araneta who the deIendant said had been her attorneys
and had drawn Exhibit A, and not inIormed or had misinIormed her about its contents; that being English, she
had not read the deed oI sale; that iI she had not trusted the said attorneys she would not have been so Ioolish as
to aIIix her signature to a contract so one-sided.
The evidence does not support the deIendant. Except in two particulars, Exhibit A was a substantial compliance
with Exhibit 1 in Iurtherance oI which Exhibit A was made. One departure was the proviso that 10 per cent oI
the purchase price should be paid only aIter Vidal's mortgage should have been cancelled. This provisional
deduction was not onerous or unusual. It was not onerous or unusual that the vendee should withhold a
relatively small portion oI the purchase price beIore all the impediments to the Iinal consummation oI the sale
had been removed. The tenants who had bought their lots had been granted the privilege to deduct as much as
40 per cent oI the stipulated price pending discharge oI the mortgage, although his percentage was later reduced
to 10 as in the case oI Gregorio Araneta, Inc. It has also been that the validity oI the sales to the tenants has not
been contested; that these sales embraced in the aggregate 24,245.40 square meters Ior P260,916.68 as
compared to 14,811.20 square meters sold to Gregorio Araneta, Inc. Ior P139,083.32; that the seller has already
received Irom the tenant purchasers 90 per cent oI the purchase money.
There is good reason to believe that had Gregorio Araneta, Inc. not insisted on charging to the deIendant the
loss oI the checks deposited with the court, the sale in question would have gone the smooth way oI the sales to
the tenants. Thus Dindo Gonzales, deIendant's son, declared:
P. Despues de haberse presentado esta demanda, recuerda usted haber tenido conversacion con Salvador
Araneta acerca de este asunto?
R. Si Seor.
P. Usted Iue quien se acerco al seor Salvador Araneta?
R. Si, seor.
P. Quiero usted decir al Honorable Juzgado que era lo que usted dijo al seor Salvador Araneta?
R. No creo que es propio que yo diga, por tratarse de mi madre.
P. En otras palabras, usted quiere decir que no quiere usted que se vuelva decir o repetir ante este Honorable
Juzgado lo que usted dijo al seor Salvador Araneta, pues, se trata de su madre?
R. No, seor.
P. Puede usted decirnos que quiso usted decir cuando que no quisiera decir?
R. Voy a decir lo que Salvador Araneta, yo me acerque a Don Salvador Araneta, y yo le dije que es una
verguenza de que nosotros, en la Iamilia tengamos que ir a la Corte por este, y tambien dije que mi madre de
por si quiere vender el terreno a ellos, porque mi madre quiere pagar al seor Vidal, y que es una verguenza,
siendo entre parientes, tener que venir por este; era lo que yo dije al seor Salvador Araneta.
xxx xxx xxx
P. No recuerda usted tambien dijo al seor Salvador Araneta que usted no comulgaba con ella (su madre) en
este asunto?
R. Si, Seor; porque yo creia que mi madre solamente queria anular esta venta, pero cuando me dijo el seor La
O y sus abogados que, encima de quitar la propiedad, todavia tendria ella que pagar al seor Jidal, este no
veso claro
xxx xxx xxx
P. Ahora bien; de tal suerte que, tal como nosotros desperendemos de su testimonio, tanto, usted como, su
madre, esteban muy conIormes en la venta, es asi?
R. Si, seor.
The other stipulation embodied in Exhibit A which had no counterpart in Exhibit 1 was that by which Gregorio
Araneta Inc. would hold Paz Tuason liable Ior the lost checks and which, as stated, appeared to be at the root oI
the whole trouble between the plaintiII and the deIendant.
The stipulation reads:
In view oI the Ioregoing liquidation, the Vendor acknowledges Iully and unconditionally, having received the
sum oI P125,174.99 oI the present legal currency and hereby expressly declares that she will not hold the
Vendee responsible Ior any loss that she might suIIer due to the Iact that two oI the checks paid to her by the
Vendee were used in Iavor oI Jose Vidal and the latter has, up to the present time, not yet collected the same.
It was argued that no person in his or her right senses would knowingly have agreed to a covenant so iniquitous
and unreasonable.
In the light oI all the circumstances, it is diIIicult to believe that the deIendant was deceived into signing Exhibit
A, in spite oI the provision oI which she and her son complaint. Intelligent and well educated who had been
managing her aIIairs, she had an able attorney who was assisting her in the suit against Vidal, a case which was
instituted precisely to carry into eIIect Exhibit A or Exhibit 1, and a son who is leading citizen and a business-
man and knew the English language very well iI she did not. Dindo Gonzalez took active part in, iI he was not
the initiator oI the negotiations that led to the execution oI Exhibit 1, oI which he was an attesting witness
besides. II the deIendant signed Exhibit A without being apprised oI its import, it can hardly be conceived that
she did not have her attorney or her son read it to her aIterward. The transaction involved the alienation oI
property then already worth a Iortune and now assessed by the deIendant at several times higher. Doubts in
deIendant's veracity are enhanced by the Iact that she denied or at least pretended in her answer to be ignorant
oI the existence oI Exhibit A, and that only aIter she was conIronted with the signed copy oI the document on
the witness did she spring up the deIense oI Iraud. It would look as iI she gambled on the chance that no signed
copy oI the deed had been saved Irom the war. She could not have Iorgotten having signed so important a
document even iI she had not understood some oI its provisions.
From the unreasonableness and inequity oI the aIorequoted Exhibit A it is not to be presumed that the deIendant
did not understand it. It was highly possible that she did not attach much importance to it, convinced that Vidal
could be Iorced to accept the checks and not Ioreseeing the Iate that lay in store Ior the case against the
mortgagee.
Technical objections are made against the deed oI sale.
First oI these is that Jose Araneta, since deceased, was deIendant's agent and at the same time the president oI
Gregorio Araneta, Inc.
The trial court Iound that Jose Araneta was not Paz Tuason's agent or broker. This Iinding is contrary to the
clear weight oI the evidence, although the point would be irrelevant, iI the court were right in its holding that
Exhibit A was void on another ground, i.e., it was inconsistent with Exhibit 1.
Without taking into account deIendant's Exhibit 7 and 8, which the court rejected and which, in our opinion,
should have been admitted, Exhibit 1 is decisive oI the deIendant's assertion. In paragraph 8 oI Exhibit 1 Jose
Araneta was reIerred to as deIendant's agent or broker "who acts in this transaction" and who as such was to
receive a commission oI 5 per cent, although the commission was to be charged to the purchasers, while in
paragraph 13 the deIendant promised, in consideration oI Jose Araneta's services rendered to her, to assign to
him all her right, title and interest to and in certain lots not embraced in the sales to Gregorio Araneta, Inc. or
the tenants.
However, the trial court hypothetically admitting the existence oI the relation oI principal and agent between
Paz Tuason and Jose Araneta, pointed out that not Jose Araneta but Gregorio Araneta, Inc. was the purchaser,
and cited the well-known distinction between the corporation and its stockholders. In other words, the court
opined that the sale to Gregorio Araneta, Inc. was not a sale to Jose Araneta the agent or broker.
The deIendant would have the court ignore this distinction and apply to this case the other well-known principle
which is thus stated in 18 C.J.S. 380: "The courts, at law and in equity, will disregard the Iiction oI corporate
entity apart Irom the members oI the corporation when it is attempted to be used as a means oI accomplishing a
Iraud or an illegal act.".
It will at once be noted that this principle does not Iit in with the Iacts oI the case at bar. Gregorio Araneta, Inc.
had long been organized and engaged in real estate business. The corporate entity was not used to circumvent
the law or perpetrate deception. There is no denying that Gregorio Araneta, Inc. entered into the contract Ior
itselI and Ior its beneIit as a corporation. The contract and the roles oI the parties who participated therein were
exactly as they purported to be and were Iully revealed to the seller. There is no pretense, nor is there reason to
suppose, that iI Paz Tuason had known Jose Araneta to Gregorio Araneta, Inc's president, which she knew, she
would not have gone ahead with the deal. From her point oI view and Irom the point oI view oI public interest,
it would have made no diIIerence, except Ior the brokerage Iee, whether Gregorio Araneta, Inc. or Jose Araneta
was the purchaser. Under these circumstances the result oI the suggested disregard oI a technicality would be,
not to stop the commission oI deceit by the purchaser but to pave the way Ior the evasion oI a legitimate and
binding commitment buy the seller. The principle invoked by the deIendant is resorted to by the courts as a
measure or protection against deceit and not to open the door to deceit. "The courts," it has been said, "will not
ignore the corporate entity in order to Iurther the perpetration oI a Iraud." (18 C.J.S. 381.)
The corporate theory aside, and granting Ior the nonce that Jose Araneta and Gregorio Araneta, Inc. were
identical and that the acts oI one where the acts oI the other, the relation between the deIendant and Jose
Araneta did not Iall within the purview oI article 1459 oI the Spanish Civil Code.
1

Agency is deIined in article 1709 in broad term, and we have not come across any commentary or decision
dealing directly with the precise meaning oI agency as employed in article 1459. But in the opinion oI
Manresa(10 Manresa 4th ed. 100), agent in the sense there used is one who accepts another's representation to
perIorm in his name certain acts oI more or less transcendency, while Scaevola (Vol. 23, p. 403) says that the
agent's in capacity to buy his principal's property rests in the Iact that the agent and the principal Iorm one
juridicial person. In this connection Scaevola observes that the Iear that greed might get the better oI the
sentiments oI loyalty and disinterestedness which should animate an administrator or agent, is the reason
underlying various classes oI incapacity enumerated in article 1459. And as American courts commenting on
similar prohibition at common law put it, the law does not trust human nature to resist the temptations likely to
arise oI antogonism between the interest oI the seller and the buyer.
So the ban oI paragraph 2 oI article 1459 connotes the idea oI trust and conIidence; and so where the
relationship does not involve considerations oI good Iaith and integrity the prohibition should not and does not
apply. To come under the prohibition, the agent must be in a Iiduciary with his principal.
Tested by this standard, Jose Araneta was not an agent within the meaning oI article 1459. By Exhibits 7 and 8
he was to be nothing more than a go-between or middleman between the deIendant and the purchaser, bringing
them together to make the contract themselves. There was no conIidence to be betrayed. Jose Araneta was not
authorize to make a binding contract Ior the deIendant. He was not to sell and he did not sell the deIendant's
property. He was to look Ior a buyer and the owner herselI was to make, and did make, the sale. He was not to
Iix the price oI the sale because the price had been already Iixed in his commission. He was not to make the
terms oI payment because these, too, were clearly speciIied in his commission. In Iine, Jose Araneta was leIt no
power or discretion whatsoever, which he could abuse to his advantage and to the owner's prejudice.
DeIendant's other ground Ior repudiating Exhibit A is that the law Iirm oI Araneta & Araneta who handled the
preparation oI that deed and represented by Gregorio Araneta, Inc. were her attorneys also. On this point the
trial court's opinion is likewise against the deIendant.
Since attorney Ponce Enrile was the deIendant's lawyer in the suit against Vidal, it was not likely that she
employed Atty. Salvador Araneta and J. Antonio Araneta as her attorneys in her dealings with Gregorio
Araneta, Inc., knowing, as she did, their identity with the buyer. II she had needed legal counsels, in this
transaction it seems certain that she would have availed herselI oI the services oI Mr. Ponce Enrile who was
allegedly representing her in another case to pave the way Ior the sale.
The Iact that Attys. Salvador and Araneta and J. Antonio Araneta drew Exhibits 1 and A, undertook to write the
letters to the tenants and the deeds oI sale to the latter, and charged the deIendant the corresponding Iees Ior all
this work, did not themselves prove that they were the seller's attorneys. These letters and documents were
wrapped up with the contemplated sale in which Gregorio Araneta, Inc. was interested, and could very well
have been written by Attorneys Araneta and Araneta in Iurtherance oI Gregorio Araneta's own interest. In
collecting the Iees Irom the deIendant they did what any other buyer could have appropriately done since all
such expenses normally were to be deIrayed by the seller.
Granting that Attorney Araneta and Araneta were attorneys Ior the deIendant, yet they were not Iorbidden to
buy the property in question. Attorneys are only prohibited Irom buying their client's property which is the
subject oI litigation. (Art. 1459, No. 5, Spanish Civil Code.) The questioned sale was eIIected beIore the subject
thereoI became involved in the present action. There was already at the time oI the sale a litigation over this
property between the deIendant and Vidal, but Attys. Salvador Araneta and J. Antonio Araneta were not her
attorneys in that case.
From the pronouncement that Exhibit A is valid, however, it does not Iollow that the deIendant should be held
liable Ior the loss oI the certiIied checks attached to the complaint against Vidal or deposited with the court, or
oI the Iunds against which they had been issued. The matter oI who should bear this loss does not depend upon
the validity oI the sale but on the extent and scope oI the clause hereinbeIore quoted as applied to the Iacts oI
the present case.
The law and the evidence on this branch oI the case revealed these Iacts, oI some oI which passing mention has
already been made.
The aIoresaid checks, one Ior P143,150 and one Ior P12,932.61, were issued by Gregorio Araneta, Inc. and
payable to Vidal, and were drawn against the Bank oI the Philippines with which Gregorio Araneta, Inc. had a
deposit in the certiIication stated that they were to be "void iI not presented Ior payment date oI acceptance"
oIIice (Bank) within 90 days Irom date oI acceptance."
Under banking laws and practice, by the clariIication" the Iunds represented by the check were transIerred Irom
the credit oI the maker to that oI the payee or holder, and, Ior all intents and purposes, the latter became the
depositor oI the drawee bank, with rights and duties oI one such relation." But the transIer oI the corresponding
Iunds Irom the credit oI the depositor to that oI that oI the payee had to be co-extensive with the liIe oI the
checks, which in the case was 90 days. II the checks were not presented Ior payment within that period they
became invalid and the Iunds were automatically restored to the credit oI the drawer though not as a current
deposit but as special deposit. This is the consensus oI the evidence Ior both parties which does not materially
diIIer on this proposition.
The checks were never collected and the account against which they were drawn was not used or claimed by
Gregorio Araneta, Inc.; and since that account "was opened during the Japanese occupation and in Japanese
currency," the checks "became obsolete as the account subject thereto is considered null and void in accordance
with Executive Order No. 49 oI the President oI the Philippines", according to the Bank.
Whether the Bank oI the Philippines could lawIully limit the negotiability oI certiIied checks to a period less
than the period provided by the Statute oI Limitations does not seem material. The limitation imposed by the
Bank as to time would adversely aIIect the payee, Jose Vidal, who is not trying to recover on the instruments
but on the contrary rejected them Irom the outset, insisting that the payment was premature. As Iar as Vidal was
concerned, it was oI no importance whether the certiIication was or was not restricted. On the other hand,
neither the plaintiII nor the deIendant now insists that Vidal should present, or should have presented, the
checks Ior collection. They in Iact agree that the oIIer oI those checks to Vidal did not, Ior technical reason,
work to wipe out the mortgage.
But as to Gregorio Araneta and Paz Tuason, the conditions speciIied in the certiIication and the prevailing
regulations oI the Bank were the law oI the case. Not only this, but they were aware oI and abided by those
regulations and practice, as instanced by the Iact that the parties presented testimony to prove those regulations
and practice. And that Gregorio Araneta, Inc. knew that Vidal had not cashed the checks within 90 days is not,
and could not successIully be denied.
In these circumstances, the stipulation in Exhibit A that the deIendant or seller "shall not hold the vendee
responsible Ior any loss oI these checks" was unconscionable, void and unenIorceable in so Iar as the said
stipulation would stretch the deIendant's liability Ior this checks beyond 90 days. It was not in accord with law,
equity or good conscience to hold a party responsible Ior something he or she had no access to and could not
make use oI but which was under the absolute control and disposition oI the other party. To make Paz Tuason
responsible Ior those checks aIter they expired and when they were absolutely useless would be like holding an
obligor to answer Ior the loss or destruction oI something which the obligee kept in its saIe with no power given
the obligor to protect it or interIere with the obligee's possession.
To the extent that the contract Exhibit A would hold the vendor responsible Ior those checks aIter they had
lapsed, the said contract was without consideration. The checks having become obsolete, the beneIit in
exchange Ior which the deIendant had consented to be responsible Ior them had vanished. The sole motivation
on her part Ior the stipulation was the Iact that by the checks the mortgage might or was to be released. AIter 90
days the deIendant stood to gain absolutely nothing by them, which had become veritable scraps oI paper, while
the ownership oI the deposit had reverted to the plaintiII which alone could withdraw and make use oI it.
What the plaintiII could and should have done iI the disputed stipulation was to be kept alive was to keep the
Iunds accessible Ior the purpose oI paying the mortgage, by writing new checks either to Vidal or to the
deIendant, as was done with the check Ior P30,000, or placing the deposit at the deIendant's disposal. The check
Ior P30,000 intended Ior the penalty previously had been issued in the name oI Vidal and certiIied, too, but by
mutual agreement it was changed to an ordinary check payable to Paz Tuason. Although that check was also
deposited with the court and lost, its loss undoubtedly was imputable to the deIendant's account, and she did not
seem to disown her liability Ior it.
Let it be remembered that the idea oI certiIying the lost checks was all the plaintiII's. The plaintiII would not
trust the deIendant and studiously so arranged matters that she could not by any possibility put a Iinger on the
money. For all the practical intents and purposes the plaintiII dealt directly with the mortgagee and excluded the
deIendant Irom meddling in the manner oI payment to Vidal. And let it also be kept in mind that Gregorio
Araneta, Inc. was not a mere accommodator in writing these checks. It was as much interested in the
cancellation oI the mortgage as Paz Tuason.
Coming down to Vidal's cross-claim Judge Rodas rendered no judgment other than declaring that the mortgage
remained intact and subsisting. The amount to be paid Vidal was not named and the question whether interest
and attorney's Iees were due was not passed upon. The motion Ior reconsideration oI the decision by Vidal's
attorney's praying that Paz Tuason be sentenced to pay the creditor P244,917.90 plus interest at the rate oI 1
percent monthly Irom September 10, 1948 and that the mortgaged property be ordered sold in case oI deIault
within 90 days, and another motion by the deIendant seeking speciIication oI the amount she had to pay the
mortgagee were summarily denied by Judge Potenciano Pecson, to whom the motions were submitted, Judge
Rodas by that time having been appointed to the Court oI Appeals.
All the Iacts and evidence on this subject are on the record, however, and we may just as well determine Irom
these Iacts and evidence the amount to which the mortgagee is entitled, instead oI remanding the case Ior new
trial, iI only to avoid Iurther delay iI the disposition oI this case.
It is obvious that Vidal had a right to judgment Ior his credit and to Ioreclose the mortgage iI the credit was not
paid.
There is no dispute as to the amount oI the principal and there is agreement that the loans made in 1943, in
Japanese war notes, should be computed under the Ballantyne conversion table. As has been said, where the
parties do not see eye-to-eye was in regard to the mortgagee's claim to attorney's Iees and interest Irom October,
1943, which was reached a considerable amount. It was contended that, having oIIered to pay Vidal her debt in
that month, the deIendant was relieved thereaIter Irom paying such interest.
It is to be recalled that Paz Tuason deposited with the court three checks which were intended to cover the
principal and interest up to October, 1943, plus the penalty provided in the instrument "Penalidad del
Documento de Novacion de Esta Fecha." The mortgagor maintains that although these checks may not have
constituted a valid payment Ior the purpose oI discharging the debt, yet they did Ior the purpose oI stopping the
running oI interest. The deIendant draws attention to the Iollowing citations:
An oIIer in writing to pay a particular sum oI money or to deliver a written instrument or speciIic personal
property is, iI rejected, equivalent to the actual production and tender oI the money, instrument or property.
(Sec. 24, Rule 123.)
It is not accord with either the letter or the spirit oI the law to impose upon the person aIIecting a redemption oI
property, in addition to 12 per cent interest per annum up to the time oI the oIIer to redeem, a Iurther payment
oI 6 per cent per annum Irom the date oI the oIIicer to redeem. (Fabros vs. Villa Agustin, 18 Phil., 336.)
A tender by the debtor oI the amount oI this debt, iI made in the proper manner, will suspend the running oI
interest on the debt Ior the time oI such tender. (30 Am. Jur., 42.)
In the case oI Fabrosa vs. Jilla Agustin, supra , a parcel oI land had been sold on execution to one Tabliga.
Within the period oI redemption Fabros, to whom the land had been mortgaged by the execution debtor, had
oIIered to redeem the land Irom the execution creditor and purchaser at public auction. The trial court ruled that
the redemptioner was not obliged to pay the stipulated interest oI 12 per cent aIter he oIIered to redeem the
property; nevertheless he was sentenced to pay 6 per cent interest Irom the date oI the oIIer.
This court on appeal held that "there is no reason Ior this other (6 per cent) interest, which appears to be a
penalty Ior delinquency while there was no delinquency." The court cited an earlier decision, Martine: vs.
Campbell , 10 Phil., 626, where this doctrine was laid down: "When the right oI redemption is exercised within
the term Iixed by section 465 oI the Code oI Civil Procedure, and an oIIer is made oI the amount due Ior the
repurchase oI the property to which said right reIers, it is neither reasonable nor just that the repurchaser should
pay interest on the redemption money aIter the time when he oIIered to repurchase and tendered the money
thereIor."
In the light oI these decisions and law, the next query is; Did the mortgagor have the right under the contract to
pay the mortgage on October 20, 1943? The answer to this question requires an inquiry into the provision oI the
"Penalidad del Documento de Novacion de Esta Fecha."
Vidal introduced oral evidence to the eIIect that he reserved unto himselI in that agreement the right "to accept
or reIuse the total payment oI the loan outstanding . . ., iI at the time oI such oIIer oI payment he considered it
advantageous to his interest." This was gist oI Vidal's testimony and that oI Lucio M. Tiangco, one oI Vidal's
Iormer attorneys who, as notary public, had authenticated the document. Vidal's above testimony was ordered
stricken out as hearsay, Ior Vidal was blind and, according to him, only had his other lawyer read the document
to him.
We are oI the opinion that the court erred in excluding Vidal's statement. There is no reason to suspect that
Vidal's attorney did not correctly read the paper to him. The reading was a contemporaneous incident oI the
writing and the circumstances under which the document was read precluded every possibility oI design,
premeditation, or Iabrication.
Nevertheless, Vidal's testimony, like the testimony oI Lucio M. Tiangco's, was based on recollection which,
with the lapse oI time, was Ior Irom inIallible. By contrast, the testimony oI Attorneys Ponce Enrile, Salvador
Araneta, and J. Antonio Araneta does not suIIer Irom such weakness and is entitled to Iull Iaith and credit. The
document was the subject oI a close and concerted study on their part with the object oI Iinding the rights and
obligations oI the mortgagee and the mortgagor in the premises and mapping out the course to be pursued. And
the results oI their study and deliberation were translated into concrete action and embodied in a letter which
has been preserved. In line with the results oI their study, action was instituted in court to compel acceptance by
Vidal oI the checks consigned with the complaint, and beIore the suit was commenced, and with the document
beIore him, Atty. Ponce Enrile, in behalI oI his client, wrote Vidal demanding that he accept the payment and
execute a deed oI cancellation oI the mortgage. In his letter Atty. Ponce Enrile reminded Vidal that the recital in
the "Penalidad del Documento de Novacion de Esta Fecha" was "to the eIIect that should the debtor wish to pay
the debt beIore the expiration oI the period the reinstated (two years) such debtor would have to pay, in addition
to interest due, the penalty oI P30,000 this is in addition to the penalty clause oI 10 per cent oI the total
amount due inserted in the document oI mortgage oI January 20, 1943."
Atty. Ponce Enrile's concept oI the agreement, Iormed aIter mature and careIul reading oI it, jibes with the only
possible reason Ior the insertion oI the penalty provision. There was no reason Ior the penalty unless it was Ior
deIendant's paying her debt beIore the end oI the agreed period. It was to Vidal's interest that the mortgage be
not settled in the near Iuture, Iirst, because his money was earning good interest and was guaranteed by a solid
security, and second, which was more important, he, in all probability, shared the common belieI that Japanese
war notes were headed Ior a crash and that Iour years thence, judging by the trends oI the war, the hostilities
would be over.
To say, as Vidal says, that the debtor could not pay the mortgage within Iour years and, at the same time, that
there would be penalty iI she paid aIter that period, would be a contradiction. Moreover, adequate remedy was
provided Ior Iailure to pay or aIter the expiration oI the mortgage: increased rate or interest, Ioreclosure oI the
mortgage, and attorney's Iees.
It is thereIore to be concluded that the deIendant's oIIer to pay Vidal in October, 1943, was in accordance with
the parties' contract and terminated the debtor's obligation to pay interest. The technical deIects oI the
consignation had to do with the discharge oI the mortgage, which is conceded on all sides to be still in Iorce
because oI the deIects. But the matter oI the suspension oI the running oI interest on the loan stands oI a
diIIerent Iooting and is governed by diIIerent principles. These principles regard reality rather than technicality,
substance rather than Iorm. Good Iaith oI the oIIer or and ability to make good the oIIer should in simple justice
excuse the debtor Irom paying interest aIter the oIIer was rejected. A debtor can not be considered delinquent
who oIIered checks backed by suIIicient deposit or ready to pay cash iI the creditor chose that means oI
payment. Technical deIects oI the oIIer cannot be adduced to destroy its eIIects when the objection to accept the
payment was based on entirely diIIerent grounds. II the creditor had told the debtor that he wanted cash or an
ordinary check, which Vidal now seems to think Paz Tuason should have tendered, certainly Vidal's wishes
would have been IulIilled, gladly.
The plain truth was that the mortgagee bent all his eIIorts to put oII the payment, and thanks to the deIects
which he now, with obvious inconsistency, points out, the mortgage has not perished with the checks.
Falling within the reasons Ior the stoppage oI interest are attorney's Iees. In Iact there is less merit in the claim
Ior attorney's Iees than in the claim Ior interest; Ior the creditor it was who by his reIusal brought upon himselI
this litigation, reIusal which, as just shown, resulted greatly to his beneIit.
Vidal, however, is entitled to the penalty, a point which the debtor seems to a grant. The suspension oI the
running oI the interest is premised on the thesis that the debt was considered paid as oI the date the oIIer to pay
the principal was made. It is precisely the mortgagor's contention that he was to pay said penalty iI and when
she paid the mortgage beIore the expiration oI the Iour-year period provided in the mortgage contract. This
penalty was designed to take the place oI the interest which the creditor would be entitled to collect iI the
duration oI the mortgage had not been cut short and Irom which interest the debtor has been relieved. "In
obligations with a penalty clause the penalty shall substitute indemnity Ior damages and the payment oI interest.
. ." (Art. 1152, Civil Code oI Spain.).
To summarize, the Iollowing are our Iindings and decision:
The contract oI sale Exhibit A was valid and enIorceable, but the loss oI the checks Ior P143,150 and
P12,932.61 and invalidation oI the corresponding deposit is to be borne by the buyer. Gregorio Araneta, Inc. the
value oI these checks as well as the several payments made by Paz Tuason to Gregorio Araneta, Inc. shall be
deducted Irom the sum oI P190,000 which the buyer advanced to the seller on the execution oI Exhibit 1.
The buyer shall be entitled to the rents on the land which was the subject oI the sale, rents which may have been
collected by Paz Tuason aIter the date oI the sale.
Paz Tuason shall pay Jose Vidal the amount oI the mortgage and the stipulated interest up to October 20,1943,
plus the penalty oI P30,000, provided that the loans obtained during the Japanese occupation shall be reduced
according to the Ballantyne scale oI payment, and provided that the date basis oI the computation as to the
penalty is the date oI the Iiling oI the suit against Vidal.
Paz Tuason shall pay the amount that shall have been Iound due under the contracts oI mortgage within 90 days
Irom the time the court's judgment upon the liquidation shall have become Iinal, otherwise the property
mortgaged shall be ordered sold provided by law.
Vidal's mortgage is superior to the purchaser's right under Exhibit A, which is hereby declared subject to said
mortgage. Should Gregorio Araneta, Inc. be Iorced to pay the mortgage, it will be subrogated to the right oI the
mortgagee.
This case will be remanded to the court oI origin with instruction to hold a rehearing Ior the purpose oI
liquidation as herein provided. The court also shall hear and decide all other controversies relative to the
liquidation which may have been overlooked at this decision, in a manner not inconsistent with the above
Iindings and judgment.
The mortgagor is not entitled to suspension oI payment under the debt moratorium law or orders. Among other
reasons: the bulk oI the debt was a pre-war obligation and the moratorium as to such obligations has been
abrogated unless the debtor has suIIered war damages and has Iiled claim Ior them; there is no allegation or
prooI that she has. In the second place, the debtor herselI caused her creditor to be brought into the case which
resulted in the Iiling oI the cross-claim to Ioreclose the mortgage. In the third place, prompt settlement oI the
mortgage is necessary to the settlement oI the dispute and liquidation between Gregorio Araneta, Inc. and Paz
Tuason. II Ior no other reason, Paz Tuason would do well to Iorego the beneIits oI the moratorium law.
There shall be no special judgments as to costs oI either instance.
Paras, C.J., Pablo, Beng:on, Padilla, Bautista Angelo and Labrador, JJ., concur.
R E S O L U T I O N
ecember 22, 1952
TUASON,
The motion Ior reconsideration oI the plaintiII, Gregorio Araneta, Inc., and the deIendant, Paz Tuason de
Paterno, are in large part devoted to the question, extensively discussed in the decision, oI the validity oI the
contract oI sale Exhibit A. The arguments are not new and at least were given due consideration in the
deliberation and study oI the case. We Iind no reason Ior disturbing our decision on this phase oI the case.
The plaintiII-appellant's alternative proposition to wit: "Should this Honorable Court declare that the
purchase price was not paid and that plaintiII has to bear the loss due to the invalidation oI the occupation
currency, its loss should be limited to: (a) the purchase price oI P139,083.32 less P47,825.70 which plaintiII
paid and the deIendant actually collected during the occupation, or the sum oI P92,233.32, or at most, (b) the
purchase price oI the lot in the sum oI P139,083.32," as well as the alleged over-payment by the deIendant-
appellee, may be taken up in the liquidation under the reservation in the judgment that "the court (below) shall
hold a rehearing Ior the purpose oI liquidation as herein provided" and "shall also hear and decide all other
controversies relative to the liquidation which may have been overlooked in this decision, in the manner not
inconsistent with the above Iindings and judgment."
These payments and disbursement are matters oI accounting which, not having been put directly in issue or
given due attention at the trial and in the appealed decision, can better be treshed out in the proposed rehearing
where each party will have an opportunity to put Iorward his views and reasons, with supporting evidence iI
necessary, on how the various items in question should be regarded and credited, in the light oI our decision.
As to Jose Vidal's motion: There is nothing to add to or detract Irom what has been said in the decision relative
to the interest on the loans and attorney's Iees. There are no substantial Ieatures oI the case that have not been
weighed careIully in arriving at our conclusions. It is our considered opinion that the decision is in accord with
law, reason and equity.
The vehement protest that this court should not modiIy the conclusion oI the lower court on interest and
attorney's Iees is actually and entirely contrary to the cross-claimant's own suggestion in his brieI. From page 20
oI his brieI, we copy these passages:
We submit that this Honorable Court is in a position now to render judgment in the Ioreclosure oI mortgage suit
as no Iurther issue oI Iact need be acted upon by the trial court. DeIendant Paz Tuason has admitted the amount
oI capital due. That is a Iact. She only requests that interest be granted up to October 20,1943, and that the
moratorium law be applied. Whether this is possible or not is a legal question, which can be decided by this
court . Unnecessary loss oI time and expenses to the parties herein will be avoided by this Honorable Court by
rendering judgment in the Ioreclosure oI mortgage suit as Iollows:
xxx xxx xxx
In reality, the judgment did not adjudicate the Ioreclosure oI the mortgage nor did it Iix the amount due on the
mortgage. The pronouncement that the mortgage was in Iull Iorce and eIIect was a conclusion which the
mortgagor did not and does not now question. There was thereIore virtually no decision that could be executed.
Vidal himselI moved in the Court oI First Instance Ior amendment oI the decision alleging, correctly, that "the
court Iailed to act on the cross-claim oI Jose Vidal dated April 22, 1947, where he demanded Ioreclosure oI the
mortgage . . . ." That motion like Paz Tuason's motion to complete the judgment, was summarily denied.
In strict accordance with the procedure, the case should have been remanded to the court oI origin Ior Iurther
proceedings in the Iorm stated by Paz Tuason's counsel. Both the mortgagor and the mortgagee agree on this.
We did not Iollow the above course believing it best, in the interest oI the parties themselves and Iollowing
Vidal's attorney's own suggestion, to decide the controversies between Vidal and Paz Tuason upon the records
and the brieIs already submitted.
The three motions Ior reconsideration are denied.
Paras, C.J., Pablo, Beng:on, Padilla, Montemayor, Jugo, Bautista Angelo and Labrador, JJ., concur.
R E S O L U T I O N
January 26, 1953
TUASON,
In the second motion Ior reconsideration by deIendant-appellee it is urged that the sale be resolved Ior Iailure oI
plaintiII-appellant to pay the entire purchase price oI the property sold.
Rescission oI the contract, it is true, was alternative prayer in the cross-complaint, but the trial court declared
the sale void in accordance with the main contention oI the deIendant, and passed no judgment on the matter oI
rescission. For this reason, and because rescission was not pressed on appeal, we deemed unnecessary, iI not
uncalled Ior, any pronouncement touching this point.
In the second place, the nonpayment oI a portion, albeit big portion, oI the price was not, in our opinion, such
Iailure as would justiIy recission under Articles 1124 and 1505 et seq. oI the Civil Code oI Spain, which was
still in Iorce when this case was tried. "The general rule is that recission will not be permitted Ior a slight or
casual breach oI the contract, but only Ior such breaches as are so substantial and Iundamental as to deIeat the
object oI the parties." (Song Fo & Co. vs. Hawaiian-Philippine Co., 47 Phil., 821, 827.)
In the present case, the vendee did not Iail or reIuse to pay by plan or design, granting there was Iailure or
reIusal to pay. As a matter oI Iact, the portion oI the purchase price which is said not to have been satisIied until
now was actually received by checks by the vendor and deposited by her with the court in the suit against Vidal,
in accordance with the understanding iI not express agreement between vendor and vendee. The question oI
who should bear the loss oI this amount, the checks having been destroyed and the Iunds against which they
were drawn having become oI no value, was one oI the most bitterly debated issues, and in adjudging the
vendee to be the party to shoulder the said loss and ordering the said vendee to pay the amount to the vendor,
this Court's judgment was not, and was not intended to be, in the nature oI an extension oI time oI payment. In
contemplation oI the Civil Code there was no deIault, except possibly in connection with the alleged
overcharges by the vendee arising Irom honest mistakes oI accounting, mistakes which, by our decision, are to
be corrected in a new trial thereby ordered.
The second motion Ior reconsideration is, thereIore, denied.
Paras, C.J., Pablo, Beng:on, Padilla, Montemayor, Reyes, Jugo, Bautista Angelo and Labrador, JJ., concur.
(
Footnotes
1 Art. 1459. The Iollowing persons cannot take by purchase, even at a public or judicial auction, either in
person or through the mediation oI another:
xxx xxx xxx 2 An agent, any property oI which the management or sale may have been intrusted to him;



G.R. No. L-16716 May 31, 1922
ALFONSO ROCHA, plaintiff-appellant,
vs.
PRATS & COMPANY, defendant-appellee.
Eduardo Gutierre: Repide and Felix Socias for appellant. Claro M. Recto, and J. M. Casal for appellee.
OSTRAND,
This action was brought to recover the sum oI P15,000 as broker's commission on the sale oI a building and lot
situated on Calle David, Manila. The trial court rendered judgment in Iavor oI the deIendant company absolving
it Irom the complaint. From this judgment the plaintiII appealed.
It appears Irom the evidence that some time in the month oI May, 1919, Antonio A. Brimo, the manager oI the
deIendant company, verbally authorized one Joaquin Mencarini to negotiate the sale oI the property above-
mentioned, Mencarini to receive as his compensation the excess oI the purchase price over and above P150,000.
Subsequently, the plaintiII Rocha agreed to help Mencarini in Iinding a purchaser and received Irom Brimo an
authorization similar to that oI Mencarini.
Both Mencarini and Rocha Irom time to time submitted propositions Irom various prospective purchasers, none
oI which were acceptable to the deIendant. Finally, on July 30, 1919, Rocha obtained an oIIer Irom Vicente
Madrigal to buy the property Ior P165,000 oI which the sum oI P65,000 was to be paid in cash and the balance
within a year Irom the date oI the sale. BeIore closing the sale Brimo, at Rocha's request, gave the latter the
Iollowing power in writing:
We hereby authorize you to close in our name during this day the sale oI our real estates on Pinpin, Martinez,
and David Streets, containing a total area oI 1,529 square meters, Ior the price oI one hundred sixty-Iive
thousand pesos (P165,000) under the Iollowing conditions:
Sixty-Iive thousand pesos should be paid to us at the time oI signing the deed.
The remaining one hundred thousand pesos should be paid to us within the period oI one year Irom date with
interest at 6 per cent per annum until paid. Provided that the purchaser shall give banking security Ior the
payment oI these one hundred thousand pesos (P100,000).
We reserve the right to vacate within six months the premises we are actually occupying Ior which we will pay
a monthly rent oI one thousand pesos (P1,000), and in the event that they are vacated beIore the six months
stipulated, we will pay only Ior the months during which we shall have occupied the premises.
(Sgd.) PRATS and CO.
Good until July 31, 1919.
Rocha testiIies that when the document quoted was handed to him he protested against the clause
"Entendiendose que el comprador pondra garantia bancaria para responder de estos cien mil pesos (provided
that the purchaser shall give banking security Ior the payment oI these one hundred thousand pesos)" and Brimo
then told him that iI the sale was made to Madrigal he could strike out this clause. Brimo denies that he
authorized Rocha to waive this condition.
The Iollowing day, July 31, Rocha endeavored to close the transaction with Madrigal who oIIered to secure the
deIerred payment on the purchase price with a mortgage on the property, but Brimo then insisting to agree to
this, the sale Iailed. A Iew days later Brimo, through another agent, sold the property to one Concepcion Leyba
Ior P175,000.
Mencarini at Iirst claimed compensation Ior his services in connection with the negotiations Ior the sale to
Madrigal, but now appears to have relinquished his claim in Iavor oI Rocha.
The decision oI the case hinges on questions oI Iact upon which we do not Ieel justiIied in disturbing the
Iindings oI the trial court. There is no doubt that iI Exhibit B, the authorization above quoted, correctly states
the terms oI the proposed sale, the plaintiII cannot recover; he never quite succeeded in bringing the minds oI
the buyer and seller to an agreement. In the case oI Danon vs. Antonio A. Brimo and Co. (42 Phil., 133), which,
in some respects, bears close resemblance to the present case, this court quoted, with approval, the rule laid
down in Sibbald vs. Bethlehem Iron Co. (83 N.Y., 378), that "In all cases, under all and varying Iorms oI
expression, the Iundamental and correct doctrine is, that the duty assumed by the broker is to bring the minds oI
the buyer and seller to an agreement Ior a sale, and the price and terms on which it is to be made, and until that
is done his right to commission does not accrue."
It may be conceded that iI it were clearly established that the deIendant waived the condition that the deIerred
payments oI the purchase price were to be secured by bank credits, the plaintiII would be entitled to a recovery,
but we do not think the oral evidence presented by the plaintiII is suIIicient to vary the terms oI the written
instrument Exhibit B. We agree with the trail court that had there been a clear understanding as to the waiver,
ordinary prudence should have led the plaintiII to have that understanding appear in writing.
The judgment appealed Irom is thereIore aIIirmed, without costs. So ordered.
Araullo, C.J., Malcolm, Avancea, Jillamor and Romualde:, JJ., concur.


G.R. No. L-669. May 25, 1956.(
VICENTA REYES, ET AL., !etitioners, vs. GUARDALINO C. MOSQUEDA and THE COURT OF
APPEALS, Respondents.

D E C I S I O N
MONTEMAYOR,
On February 18, 1949, Guardalino C. Mosqueda sold to Jose Marquez Lim his parcel oI land in the City oI
Iloilo, containing 9,460 square meters, covered by TransIer CertiIicate oI Title No. T-2794 issued by the
Register oI Deeds oI the province oI Iloilo, Ior the sum oI P65,605. Claiming that Mosqueda had previously
contracted her services to sell the same land with a commission oI 5 per cent on the sales price, and that thru her
eIIorts she could bring together Mosqueda and Lim who Iinally agreed upon and consummated the sale oI the
land, and because Mosqueda reIused to pay her commission oI 5 per cent she commenced this action in the
Court oI First Instance oI Iloilo to recover Irom Mosqueda the sum oI P3,280.25 representing 5 per cent oI the
sales price with interest Irom the date oI the Iiling oI the complaint. AIter hearing, the trial court rendered
judgment in her Iavor ordering efendant Mosqueda to pay to her P3,280.25 with interest oI 6 per cent Irom
March 7, 1949, with costs. On appeal to the Court oI Appeals, said Tribunal reversed the appealed decision and
dismissed the complaint without costs. Plaintiff Reyes is now petitioning Ior the revision oI said decision oI the
Court oI Appeals.
The Court oI Appeals thru Justice Dionisio de Leon states the position taken and the evidence presented by both
parties in support oI their respective claims as Iollows
'Plaintiff Vicente Reyes alleges that on February 16, 1949, she was contracted by efendant Guardalino
Mosqueda to sell the land oI the latter, with an area oI 9,460 square meters, situated in Iloilo City, and covered
by transIer certiIicate oI title No. 2794, Ior the sum oI P7.50 per square meter, at a commission oI 5 per cent on
the total purchase price (Exhibits A and D). She oIIered the sale oI the land to Jose Marquez Lim who, aIter an
ocular inspection oI the premises, said that the price oI P7.50 per square meter was high as the land was covered
with water, but he was willing to buy the land Ior a lower price. Reyes went back to Mosqueda and inIormed
him about what her buyer had told her about the land. Mosqueda reduced the price to P7.30 per square meter.
On this occasion, Reyes told Mosqueda that inasmuch as the purchase price has already been settled, she was
now Iree to disclose, as she did that her buyer was Jose Marquez Lim who would see Mosqueda personally
about the consummation oI the sale.
'Appellant Mosqueda said that on February 16, 1949, he went to see Jose Marquez Lim, Manager oI the
Philippine-American Insurance Co. in Iloilo City, about a loan oIIering his land covered by transIer certiIicate
oI title 2794 as security, as he was in urgent need oI money to pay his debt with a bank which was due on
February 18, 1949. Lim inIormed Mosqueda that only the Manila oIIice oI the Company could grant loans.
Lim, however, oIIered to buy Mosqueda`s land as it adjoined his own land. Mosqueda replied that he was
willing to sell his land to him at P8 per square meter. Lim asked Ior time to think it over as Mosqueda`s price
was high. Anxious to buy the land, Lim requested Vicente Reyes, who, together with her husband, were
employees in his oIIice, to approach Mosqueda on his behalI and exact Irom him the last price he could oIIer
Ior his land. Reyes went to see Dr. Mosqueda and told him that she had a buyer Ior his land without divulging
the identity oI her said buyer, resulting in the execution oI Exhibits A and D. Also on that same day, Vicenta
Reyes inIormed Lim that the price on Mosqueda was now P7.50 per square meter. Lim still considered this as
high, so that he again sent Vicenta Reyes to ask Ior a lower price Irom Mosqueda. Mosqueda reduced it to
P7.30. Reyes told Lim about Mosqueda`s last quotation. Apparently, Lim was still not agreeable to the price oI
P7.30 per square meter, so that he told Vicenta Reyes to desist Irom Iurther contracting Mosqueda on his behalI
as he, himselI, would deal directly with Mosqueda as he had initially done earlier on the same day. Lim oIIered
to pay P500 to Reyes Ior her eIIorts, but the latter demanded P1,000, aIter which she leIt Lim`s oIIice evidently
in an angry mood. Reyes went back to Mosqueda and told him that her buyer was not willing to buy his land at
P7.30 per square meter, and that she would not sell any more the land because oI the disagreement between her
and her buyer, whom she disclosed Ior the Iirst time to be Jose Marquez Lim. Mosqueda wanted to withdraw
the authority which he had given Vicenta Reyes, but the latter pleaded that she be given until the aIternoon oI
the Iollowing days, February 17, within which to Iind another buyer. The Iollowing day, due to the Iailure oI
Reyes to Iind another buyer Ior his land, Mosqueda inIormed Reyes that he was deIinitely canceling her
authority to Iind a buyer Ior his land. The Iollowing day, February 18, Lim went personally to the clinic oI Dr.
Mosqueda, resulting in the execution oI the deed oI sale (Exhibit 1 or F).
Then said Court makes the Iollowing Iindings or observations:
'We have gone careIully over the evidence oI record, and we have arrived at the conclusion that the same Iairly
preponderates in Iavor oI the Appellant. Jose Marquez Lim and Alejandro Santiago companion oI the Appellant
when the latter went to see Lim about a loan, corroborated the claim oI the Appellant that Lim had oIIered to
buy the Appellant`s land. Vicenta Reyes did not testiIy how she came to learn that Mosqueda was looking Ior a
buyer oI his land. Perhaps, when she was requested by him to intercede in his behalI with respect to the sale oI
Mosqueda`s land, Vicenta Reyes grabbed this opportunity to make spare money as a sideline. It must also be
noted that while Reyes said Lim was willing to buy the land Ior a price less than P7.50 per square meter, she did
not testiIy that Lim was willing to buy the property Ior P7.30, or that Lim authorized her to close the deal with
Mosqueda at any price lower than P7.50 per square meter.
'There is no dispute that the Appellee was contracted by the Appellant to Iind a buyer Ior his land, with a
commission oI 5 per cent. Mosqueda reduced his original price oI P8 to P7.80 per square meter through the
intervention oI Vicenta Reyes. The question, however, is whether it was also through the eIIorts oI the Appellee
that the sale (Exhibit 1 or F) was Iinally eIIected at the price oI P65,605, or less than P7 per square meter, on
February 18, 1949.
'Vicente Reyes was hired as a broker, not as commercial agent cralaw . At the time the contract oI sale (Exhibit 1 or
F) was signed by the parties on February 18, 1949, the authority oI Reyes as a broker Ior Mosqueda has already
been withdrawn by the latter cralaw At the time the authority oI the Appellee was withdrawn, there was still no
meeting oI the minds between Mosqueda and Lim with respect to the price and terms oI the sale. Again, the
land was sold at price and terms arrived at by the contracting parties without the Appellee`s intervention and
Lim bought the property independently oI the eIIorts oI Reyes. Vicenta Reyes was told by Lim to leave him
alone in the transaction. We have every reason to believe Lim`s testimony as this action Ior recovery oI a sum
oI money is not directed against him, and he has nothing to lose or gain by telling the truth.
Accepting, as we have to, the Iindings oI the Court oI Appeals, we Iind its judgment oI reversal to be supported
by the Iacts and the law. II as Iound by the Court oI Appeals Plaintiff Reyes was engaged only as a broker, then
in order to earn her commission, it was not suIIicient Ior her to Iind a prospective buyer but to Iind one who will
actually buy the property on the terms and conditions imposed by the owner. In the case oI Danon vs. Brimo &
Co., 42 Phil., 133, we said:chanroblesvirt uallawlibra ry
'The broker must be the eIIicient agent or the procuring cause oI the sale. The means employed by him and his
eIIorts must result in the sale. He must Iind the purchaser, and the sale must proceed Irom his eIIorts acting as a
broker. (Cases cited.)
Besides, according to the Iindings oI the Court oI Appeals, the actual sale was perIected and consummated
without the intervention oI Plaintiff Reyes, and what is more, beIore that, her authority to sell the property had
been withdrawn, at a time when there was still no meeting oI the minds oI buyer and seller.
We realize that there are times when the owner oI a property Ior sale may not legally cancel or revoke the
authority given by him to a broker when the negotiations through the broker`s eIIorts have reached such a stage
that it would be unIair to deny the commission earned, especially when the property owner acts in bad Iaith and
cancels the authority only to evade the payment oI said commission. Such was our holding in the same case oI
Danon vs. Brimo & Co., supra:chanroblesvirtuallawlibrary
'c ralaw the right oI the principal to terminate his authority is absolute and unrestricted, except only that he may not do
it in bad Iaith, and as a mere device to escape the payment oI the broker`s commissions. Thus, iI in the midst oI
negotiations instituted by the broker, and which were plainly and evidently approaching success, the seller
should revoke the authority oI the broker, with the view oI concluding the bargain without his aid, and avoiding
the payment oI commission about to be earned, it might be well said that the due perIormance oI his obligation
by the broker was purposely prevented by the principal. But iI the latter acts in good Iaith, not seeking to escape
the payment oI commissions, but moved Iairly by a view oI his own interest, he has the absolute right beIore a
bargain is made while negotiations remain unsuccessIul, beIore commissions are earned, to revoke the broker`s
authority, and the latter cannot thereaIter claim compensation Ior a sale made by the principal even though it be
to a customer with whom the broker unsuccessIully negotiated, and even though, to some extent, the seller
might justly be said to have availed himselI oI the Iruits oI the broker`s labor. (Danon vs. Brimo, 42 Phil., 133,
141-142, citing Sibbald vs. Bethlehem Iron Co., 83 N.Y. 378, 38 Am. Rep. 441, 444-446.)
In the present case, there is nothing to show that bad Iaith was involved in the cancellation oI the authority oI
Plaintiff Reyes beIore the consummation oI the sale. Not only this, but the actuations oI Plaintiff Reyes are not
entirely above suspicion. As observed by the Court oI Appeals she did not explain how she came to know that
efendant Mosqueda was interested in selling his land and was looking Ior a buyer thereoI. It is highly possible
that aIter Reyes was commissioned by her employer Lim to approached Mosqueda with a view to reducing the
price oI P8 per square meter, it was then and only then that Reyes came to know about the desire oI Mosqueda
to sell his land to cover his obligations with the bank inasmuch as he Iailed to secure a loan Irom the Insurance
Company, and as said by the Court oI Appeals
'cralaw Perhaps, when she was requested by Lim to intercede in his behalI with respect to the sale oI Mosqueda`s
land, Vicenta Reyes grabbed this opportunity to make spare money as a sideline.
In view oI the Ioregoing, the decision oI the Court oI Appeals appealed Irom is hereby aIIirmed, with costs in
both instances.
Paras, C, Bengzon, Reyes, A., 1ugo, Bautista Angelo, Labrador, Concepcion, Reyes, 1.B.L., and
Endencia, , concur.



G.R. No. L-510 August 31, 1953
CONSE1O INFANTE, petitioner,
vs.
1OSE CUNANAN, 1UAN MI1ARES and THE COURT OF APPEALS, SECOND DIVISION,
respondents.
Yuseco, Abdon & Yuseco for petitioner. Jose E. Erfe and Maria Luisa Gome: for respondents.
BAUTISTA ANGELO,
This is a petition Ior review oI a decision oI the Court oI appeals aIIirming the judgement oI the court oI origin
which orders the deIendant to pay the plaintiIIs the sum oI P2,500 with legal interest thereon Irom February
2,1949 and the costs oI action.
Consejo InIante, deIendant herein, was the owner oI two parcels oI land, together with a house built thereon,
situated in the City oI Manila and covered by TransIer CertiIicate oI Title No. 61786. On or beIore November
30, 1948, she contracted the services oI Jose Cunanan and Juan Mijares, plaintiII herein, to sell the above-
mentioned property Ior a price oI P30,000 subject to the condition that the purchaser would assume the
mortgage existing thereon in the Iavor oI the Rehabilitation Finance Corporation. She agreed to pay them a
commission oI 5 per cent on the purchase price plus whatever overprice they may obtain Ior the property.
PlaintiIIs Iound one Pio S. Noche who was willing to buy the property under the terms agreed upon with
deIendant, but when they introduced him to deIendant, the latter inIormed them that she was no longer
interested in selling the property and succeeded in making them sign a document stating therein that the written
authority she had given them was already can-celled. However, on December 20, 1948, deIendant dealt directly
with Pio S. Noche selling to him the property Ior P31,000. Upon learning this transaction, plaintiIIs demanded
Irom deIendant the payment oI their commission, but she reIused and so they brought the present action.
DeIendant admitted having contracted the services oI the plaintiIIs to sell her property as set Iorth in the
complaint, but stated that she agreed to pay them a commission oI P1,200 only on condition that they buy her a
property somewhere in TaIt Avenue to where she might transIer aIter selling her property. DeIendant avers that
while plaintiIIs took steps to sell her property as agreed upon, they sold the property at TaIt Avenue to another
party and because oI this Iailure it was agreed that the authority she had given them be cancelled.
The lower court Iound that the preponderance oI evidence was in Iavor oI the plaintiIIs and rendered judgement
sentensing the deIendant to pay the plaintiII the sum oI P2,500 with legal interest thereon Irom February 2,1949
plus the costs oI action. This decision was aIIirmed in toto by the Court oI Appeals.
There is no dispute that respondents were authorized by petitioner to sell her property Ior the sum oI P30,000
with the understanding that they will be given a commission oI 5 percent plus whatever overprice they may
obtain Ior the property. Petitioner, however, contends that authority has already been withdrawn on November
30, 1948 when, by the voluntary act oI respondents, they executed a document stating that said authority shall
be considered cancelled and without any eIIect, so that when petitioner sold the property to Pio S. Noche on
December 20, 1948, she was already Iree Irom her commitment with respondents and, thereIore, was not in
duty bound to pay them any commission Ior the transaction.
II the Iacts were as claimed by petitioner, there is in-deed no doubt that she would have no obligation to pay
respondents the commission which was promised them under the original authority because, under the old Civil
Code, her right to withdraw such authority is recognized. A principal may withdraw the authority given to an
agent at will. (Article 1733.) But this Iact is disputed. Thus, respondents claim that while they agreed to cancel
the written authority given to them, they did so merely upon the verbal assurance given by petitioner that,
should the property be sold to their own buyer , Pio S. Noche, they would be given the commission agreed
upon. True, this verbal assurance does not appear in the written cancellation, Exhibit 1, and, on the other hand,
it is disputed by petitioner, but respondents were allowed to present oral evidence to prove it, and this is now
assigned as error in this petition Ior review.
The plea that oral evidence should not have been allowed to prove the alleged verbal assurance is well taken it
appearing that the written authority given to respondents has been cancelled in a written statement. The rule on
this matter is that "When the terms oI an agreement have been reduced to writing, it is to be considered as
containing all those terms, and, thereIore, there can be, between parties and their successors in interest, no
evidence oI the terms oI the agreement other than the contents oI the writing." (Section 22, Rule 123, Rules oI
Court.) The only exceptions to this rule are: "(a)Where a mistake or imperIection oI the writing, or its Iailure to
express the true intent and agreement oI the parties, or the validity oI the agreement is put in issue by the
pleadings"; and "(b) Where there is an intrinsic ambiguity in the writing." ( Ibid.) There is no doubt that the
point raised does not come under any oI the cases excepted, Ior there is nothing therein that has been put in
issue by respondents in their complaint. The terms oI the document, Exhibit 1, seem to be clear and they do not
contain any reservation which may in any way run counter to the clear intention oI the parties.
But even disregarding the oral evidence adduced by respondents in contravention oI the parole evidence rule,
we are, however, oI the opinion that there is enough justiIication Ior the conclusion reached by the lower court
as well as by the Court oI Appeals to the eIIect that respondents are entitled to the commission originally agreed
upon. It is a Iact Iound by the Court oI Appeals that aIter petitioner had given the written authority to
respondents to sell her land Ior the sum oI P30,000, respondents Iound a buyer in the person oI one Pio S.
Noche who was willing to buy the property under the terms agreed upon, and this matter was immediately
brought to the knowledge oI petitioner. But the latter, perhaps by way oI strategem, advised respondents that
she was no longer interested in the deal and was able to prevail upon them to sign a document agreeing to the
cancellation oI the written authority.
That petitioner had changed her mind even iI respondents had Iound a buyer who was willing to close the deal,
is a matter that would not give rise to a legal consequence iI respondents agree to call oII the transaction in
deIerence to the request oI the petitioner. But the situation varies iI one oI the parties takes advantage oI the
benevolence oI the other and acts in a manner that would promote his own selIish interest. This act is unIair as
would amount to bad Iaith. This act cannot be sanctioned without ac-cording to the party prejudiced the reward
which is due him. This is the situation in which respondents were placed by petitioner. Petitioner took
advantage oI the services rendered by respondents, but believing that she could evade payment oI their
commission, she made use oI a ruse by inducing them to sign the deed oI cancellation Exhibit 1. This act oI
subversion cannot be sanctioned and cannot serve as basis Ior petitioner to escape payment oI the commission
agreed upon.
WhereIore, the decision appealed Irom is hereby aIIirmed, with costs against petitioner.
Paras, C.J., Pablo, Beng:on, Padilla, Tuason, Monte-mayor, Reyes, and Jugo, JJ., concur.
Separate Opinions
LABRADOR, ,concurring and dissenting:
I concur in the result. I can not agree, however, to the ruling made in the majority decision that the petitioners
can not introduce evidence oI the circumstances under which the document was signed, i.e. upon promise by
respondent that should the property be sold to petitioner's buyer they would nevertheless be entitled to the
commission agreed upon. Such evidence is not excluded by the parole evidence rule, because it does not tend to
alter or vary the terms oI the document. This document was merely a withdrawal oI the authority granted the
petitioner to sell the property, not an agreement that they shall not be paid their commission.
(
Separate Opinions
LABRADOR, ,concurring and dissenting:
I concur in the result. I can not agree, however, to the ruling made in the majority decision that the petitioners
can not introduce evidence oI the circumstances under which the document was signed, i.e. upon promise by
respondent that should the property be sold to petitioner's buyer they would nevertheless be entitled to the
commission agreed upon. Such evidence is not excluded by the parole evidence rule, because it does not tend to
alter or vary the terms oI the document. This document was merely a withdrawal oI the authority granted the
petitioner to sell the property, not an agreement that they shall not be paid their commission.


November 20, 1917

G.R. No. 15823
1ULIO DANON, plaintiII-appellee,
vs.
ANTONIO A. BRIMO & CO., deIendant-appellant.

J. Ilistre, for appellants.
Acting Attorney-General Harvey, for appellee.

1ohnson,

The inIormation in this case charging the appellants with the crime oI assassination is in substance as Iollows:
That on or about the night oI December 3, 1909, in the municipality oI Talisay, Occidental Negros, Philippine
Islands, the said Jose Locson, Isidoro Penetrante, and Daniel Labasa, did maliciously, illegally, and criminally,
and with the premeditated intention oI causing the death oI Dominga Treyes, take her Irom the home where she
lived, place her in a quiles, and when on the road going Irom Bacolod to Talisay, taking advantage oI their
superiority and the darkness oI the night, with alevosia did, by means oI a pointed instrument, inIlict a wound in
the leIt armpit oI the said Dominga Treyes, causing her death.

The appellant, Jose Locson, was convicted in the court below oI the crime oI homicide, and sentenced to
seventeen years and Iour months oI reclusion temporal, together with the accessory penalties prescribed by law.
The appellant, Isidoro Penetrante, was Iound guilty as an accomplice in the commission oI this crime, and
sentenced to ten years oI prision mayor, together with the accessory penalties prescribed by law. The deIendant,
Daniel Labasa, who was charged in the inIormation jointly with the appellants, was acquitted aIter the
prosecution closed the presentation oI its testimony in chieI, on motion oI the deIense, and the complaint as to
his was dismissed on the ground that the prosecution had Iailed to oIIer any evidence which tended to connect
him with the commission oI the crime charged in the inIormation.

As early as the years 1904, when Dominga Treyes, deceased, was yet a minor and living with relatives in
Talisay, the appellant, Locson, had illicit relations with her, and about the time lived openly and publicly with
her Ior a period oI some six months. ThereaIter, though not living together, they continued to have carnal
relations with each other, and in the year 1907 the woman gave birth to a child oI which the appellant, Locson,
admits he is the Iather. In August, 1909, the woman swore out a complaint beIore the justice oI the peace oI
Talisay, charging Locson with seduction her aIter the birth oI her child. Later, some time in the month oI
November, 1909, an inIormation charging the accused with the same oIIense was Iiled in the Court oI First
Instance, and this charge was pending in that court at the time oI her death.

On the night oI December 3, 1909, the woman and her child were at Bacolod visiting at the house oI a relative,
having gone there apparently in connection with the proceedings in the Court oI First Instance upon her
complaint against the appellant Jose Locson. About 10 o'clock on that night, gathering up her personal eIIects
and taking with her the child, she leIt the house in company with the appellant Penetrante, who had called there
Ior her, saying when she leIt that she was going to return to her home in Talisay. Not Iar Irom the house they
were joined by Locson and Labasa, who were waiting there with a conveyance, a kind oI quiles drawn by a
carabao. Soon thereaIter the conveyance started on the main road toward Talisay, the occupants being Dominga
Treyes, deceased, and her child, Locson, Penetrante and Labasa. The distance Irom Bacolod to Talisay is some
8 kilometers, and on the night in question the road appears to have been in Iair condition. The weight oI the
evidence indicates, however, that the party consumed several hours in making the trip. A stop was made at a
bridge just beIore entering Talisay, the duration oI which, according to Penetrante, was some thirty minutes. No
explanation oI the purpose oI this stop appears in evidence. Several witnesses testiIied that they saw the
conveyance arriving in Talisay at an early hour, approximately 3 o'clock on the morning oI December 4, and
recognized among the occupants the appellants Locson and Penetrante, and the woman Dominga Treyes and her
child. The public road Irom Bacolod to Talisay continues directly through the town oI Talisay, and is there
known as Calle TaIt; this street is crossed at right angles by Calle Filipina. From the evidence it appears that the
conveyance stopped at or near the corner oI Calle TaIt and Calle Filipina, about 50 meters Irom the house oI
Macaria Treyes on Calle Filipina.

Julian Agriam testiIied that he saw the conveyance stop at this corner, and that Jose Locson then drew the
woman Irom the quiles, and putting his arm around her waist, supported her toward the house oI her aunt,
Macaria Treyes, Iollowed by Penetrante carrying the child. He Iurther testiIied that he heard Dominga say: "O,
Jose, the punishment you have given me will bring me to my grave, but you will aIterwards pay Ior it yourselI."
This witness Iurther testiIied that aIter the two men leIt the woman and the child at the house oI Macaria
Treyes, they hurried back to the vehicle and drove away, and that soon thereaIter he heard the woman Macaria
Treyes calling Ior help, saying that Dominga was lead.

Another witness, Jose Agasan, testiIied that he saw Jose Locson and Dominga Treyes come Irom the rig,
walking slowly, Jose having his arm around the back oI Dominga, and that with then came a man carrying a
child xIIHgI.

Leon Cortes, who lives across the street Irom Macaria Treyes, testiIied to practically the same Iacts.

Macaria Treyes, an aunt oI Dominga Treyes on the Iather's side, testiIied that about 3 o'clock on the morning oI
December 4 the door oI her house was pushed open, and that Jose Locson leIt her niece, Dominga Treyes, at the
door where the child was placed by another man. That Dominga supported herselI against the door Ior a short
interval, and the Iell to the Iloor, crying "aunt Caye, Jose killed me," and there and then died, oI a single wound,
a stab under the leIt armpit made by a pointed instrument.

In addition to the testimony oI these witnesses, other evidence was oIIered by the prosecution tending to
corroborate the main Iacts hereinbeIore stated, which it is not necessary at this time to review.

The deIense did not deny the existence at one time oI illicit relations between the appellant Locson and the
deceased, nor that the criminal proceedings above mentioned were pending at the time oI the woman's death,
nor that the trip was taken in the vehicle on the night oI the 3rd oI December, 1909, substantially as above set
out, except that the witnesses called by the deIense undertook to show that the party arrived in Talisay
considerably earlier in the night than the time indicated by the witnesses who claimed to have seen the arrival,
the three deIendants testiIying that Dominga Treyes was unhurt when they leIt her in Talisay. The theory oI
counsel Ior the deIense in the court below and on this appeal is that the evidence points to one Demetrio, called
by the witnesses "Dimit," an uncle oI the deceased woman, as the man who killed her, his motive, as they would
make it appear, being the Ieeling oI animosity and enmity which he had Ior the deIendant and appellant Locson,
who had seduced his niece, and his rage when he learned that, while criminal proceedings were pending against
Locson, based on a complaint Iiled by her, she had accompanied him in his vehicle Irom Bacolod to Talisay.

Without undertaking to review the evidence at length, it is suIIicient Ior us to say that we are all agreed with the
court below that the evidence introduced by the deIense Iails to support this theory oI the death oI the deceased;
and accepting the Iindings oI the trial court as to the credibility oI the various witnesses who testiIied beIore
him, we must conclude that the Iacts touching the death oI Dominga Treyes are substantially those hereinbeIore
set out.

There is no evidence whatever in the record which cats any light upon the circumstances surrounding the
striking oI the Iatal blow, and we are agreed with the trial judge that there is nothing in the record to sustain the
allegations oI premeditation and treachery as set out in the inIormation. There seems to be no doubt that the
woman started on the journey Irom Bacolod oI her own Iree will and accord, believing that her Iormer lover
was going to take her to her home in Talisay. Just why she should consent to accompany him notwithstanding
the Iact that she had Iiled a complaint against him in the Court oI First Instance, is not apparent. He himselI
testiIied that the trip was undertaken by him with the hope oI eIIecting a compromise oI the criminal
proceedings which had been instituted against him, and that it was his intention to take her to Silay and have her
enter into a settlement oI the case beIore his uncle, Vicente Gamboa, a notary public. All three oI the accused
testiIied that this was the object oI the trip. The evidence discloses that there was some discussion oI this matter
between Locson and the woman on the journey Irom Bacolod to Talisay, and that Locson tried to persuade her
to go to Silay, but that she reIused to do so. He was insistent and she was unyielding in her reIusal. The
seduction case was set Ior trial, and a hearing was to be had in Iew days. Locson was interested in eIIecting
some sort oI compromise, and since all the witnesses Ior the deIense agree on this point, we see no reason to
doubt that this was the object oI the trip, and that he was thwarted in his plans. Nothing in the record indicates
that there was a prearranged plan to take the liIe oI the unIortunate woman, and it would seen probably at least
that the Iatal blow was inIlicted during an outburst oI passion in a moment oI disappointed rage and anger
because oI the woman's reIusal to go to Silay, there to make a settlement oI the criminal proceedings. But
however this may have been, there can be no reasonable doubt that the Iatal blow was struck by Locson, and
while it is possible that a conspiracy had been entered into by the party who took her in the vehicle to take her
liIe iI she reIused to agree to compromise the criminal proceedings, we agree with trial court that the evidence
does not sustain a Iinding to that eIIect. In our opinion, it tends rather to indicate that the blow was struck by
Locson without deliberate premeditation, and that his companions in the vehicle had no part in the commission
oI the crime. There is nothing in the record which indicates that Penetrante was a co-principal or an accomplice.
He seems to have accompanied Locson as a sort oI cochero or servant in attendance, and there is no evidence on
which to base a Iinding that he in any wise aided his master in striking the Iatal blow EelUjWI.

The trial court Iound him guilty as an accomplice, but we do not think that the mere Iact that he was present in
the vehicle when the Iatal blow was struck, and that aIter it was struck he continued to accompany the party to
the home oI the wounded woman to which she aided by her assailant, is suIIicient to show that there was any
such cooperation on his part in the striking oI the blow as would be necessary to make him an accessory to the
crime under the decisions oI this court.

Discussing Iacts very similar to those proven in this case, we have heretoIore held that:

The mere presence oI the deIendant at the time and place oI the commission oI the crime is not itselI suIIicient
to show such an commission oI the crime is not oI itselI suIIicient to show an act oI simultaneous cooperation
as to make such a deIendant an accessory to the crime. (U.S. vs. Guevara, 2 Phil. Rep., 528.)

Where one oI two persons jointly engaged in a quarrel with others stabs and kills one oI his opponents, his
companion could not be held as principal or accomplice where it does not appear that there was some concerted
action leading up to the striking oI the Iatal blow, or that said companion had any reason to believe that a deadly
attack was to be made on the deceased. (U. S. vs. Manayao, 4 Phil. Rep., 293; U. S. vs. Cabonce, 11 Phil. Rep.,
169; U. S. vs. Flores, 6 Phil. Rep., 383; U. S. vs. Maquiraya, 14 Phil. Rep., 243; U. S. vs. Romulo, 15 Phil.
Rep., 408.)

For the reasons hereinbeIore stated, the judgment oI the lower court is aIIirmed in so Iar as it relates to the
conviction and imposition oI sentence on the deIendant and appellant Jose Locson, with his proportionate share
oI the costs in this instance against him; but it is reversed, in so Iar as an accessory in the commission oI the
crime charged in the inIormation and sentences him thereIor. The deIendant Isidoro Penetrante is hereby
acquitted oI the crime with which he is charged in the inIormation, and will be set at liberty Iorthwith, with his
share oI the costs in both instances de oIicio. So ordered wlJLqI.

Torres, Mapa, Johnson, Moreland and Trent, JJ., concur. .


lebruary 2 1916

C8 no L9184
MACCNDkA CC INC plalnLlffappellee
vs
GLCkGL S SLLLNLk defendanLappellanL

uk wlllloms fot oppelloot
noossetmooo cobo ooJ llsbet fot oppellee

Carson

1hls acLlon was broughL Lo recover Lhe sum of 17 173 by way of damages alleged Lo have been suffered by Lhe plalnLlff
as a resulL of Lhe sale of a parcel of land whlch lL ls alleged was made by Lhe defendanL for and on behalf of Lhe plalnLlff
afLer auLhorlLy Lo make Lhe sale had been revoked !udgmenL was rendered ln favor of Lhe plalnLlff for Lhe sum of
3433 LogeLher wlLh lnLeresL aL 6 per cenL per annum from Lhe daLe of Lhe lnsLlLuLlon of Lhls acLlon lrom Lhls
[udgmenL defendanL appealed and broughL Lhe case have on hls duly cerLlfled blll of excepLlons

Larly ln 1912 Lhe defendanL a real esLaLe broker sold Lhe parcel of land descrlbed ln Lhe complalnL Lo Lhe plalnLlff
company for 17173 1he formal deed of sale was noL execuLed and accepLed unLll !uly 29 1912 Lhe agreemenL Lo
purchase belng condlLloned on Lhe dellvery of a 1orrens LlLle whlch was noL secured unLll early ln LhaL monLh ln Lhe
meanLlme Lhe land was flooded by hlgh Lldes and Lhe plalnLlff company became hlghly dlssaLlsfled wlLh lLs purchase
When Lhe flnal Lransfer was made Lhe plalnLlff company lnformed defendanL LhaL Lhe land was wholly unsulLed for use
as a coalyard for whlch lL had been purchased and requesLed hlm Lo flnd anoLher purchaser AL LhaL Llme lL was
expressly undersLood and agreed LhaL Lhe plalnLlff company was wllllng Lo dlspose of Lhe land for 17173 and LhaL
defendanL was Lo have as hls commlsslon for securlng a purchaser anyLhlng over LhaL amounL whlch he could geL

A shorL Llme LhereafLer defendanL reporLed Lo plalnLlff LhaL he had a purchaser for Lhe land ln Lhe person of AnLonlo M
8arreLLo who was wllllng Lo pay 273 per square meLer or a LoLal of 1889230 lalnLlff Lhereupon execuLed a formal
deed of conveyance whlch LogeLher wlLh Lhe cerLlflcaLe of LlLle (1orrens) was dellvered Lo defendanL wlLh Lhe
undersLandlng LhaL he was Lo conclude Lhe sale dellver Lhe LlLledeed and cerLlflcaLe Lo 8arreLLo and recelved from hlm
Lhe purchase prlce 1he deed was daLed AugusL 21 1912 1hereafLer defendanL advlsed 8arreLLo LhaL plalnLlff had
execuLed Lhe LlLledeed and LhaL he was ready Lo close Lhe deal 8arreLLo agreed Lo accepL Lhe land lf upon examlnaLlon
Lhe LlLle and Lhe deed should prove saLlsfacLory and defendanL lefL Lhe deed of conveyance wlLh hlm wlLh Lhe
undersLandlng LhaL lf Lhe LlLle and Lhe deed of conveyance were as represenLed 8arreLLo would glve hlm hls check for
Lhe amounL of Lhe purchase prlce uefendanL reLalned possesslon of Lhe 1orrens cerLlflcaLe of LlLle A few days
afLerwards 8arreLLo was compelled Lo go Lo 1ayabas on buslness and was deLalned by a Lyphoon whlch delayed hls
reLurn unLll Lhe 31sL of AugusL

uurlng 8arreLLos absence Lhe plalnLlff company advlsed defendanL LhaL he musL consummaLe Lhe sale and collecL Lhe
purchase money wlLhouL delay upon 8arreLLos reLurn Lo Manlla Cn Lhe arrlval of 8arreLLo on SaLurday AugusL 31sL
defendanL called upon hlm and lnformed hlm LhaL Lhe plalnLlff company deslred Lo close up Lhe LransacLlon aL once and
8arreLLo who was somewhaL lndlsposed from hls Lrlp promlsed Lo examlne Lhe papers as soon as he could geL Lo Lhem
and assured Lhe defendanL LhaL he would send hls check for Lhe purchased prlce ln a day or Lwo lf he found Lhe
documenLs ln proper shape 1hese assurance were reporLed Lo ?oung Lhe plalnLlff companys general manager and
represenLaLlve LhroughouL Lhe LransacLlon on Monday mornlng SepLember 2d ?oung Lhen formally noLlfled defendanL
LhaL unless Lhe purchase prlce was pald before flve oclock of LhaL same afLernoon Lhe deal would be off uefendanLs
agaln called upon 8arreLLo who lnformed hlm LhaL lf he would Lurn over Lhe 1orrens cerLlflcaLe of LlLle he would leL hlm
have a check for Lhe purchase prlce uefendanL senL Lhe cerLlflcaLe as requesLed buL dld noL recelve Lhe check unLll
LhlrLyslx hours afLerwards on Wednesday mornlng Cn recelpL of 8arreLLos check he lmmedlaLely Lendered plalnLlff
company a check for Lhe agreed selllng prlce 17173 lalnLlffs manager refused Lo accepL Lhe check and soon
LhereafLer flled Lhls acLlon clalmlng LhaL Lhe sale had been cancelled upon Lhe fallure of defendanL Lo Lurn over Lhe
purchase prlce on Lhe afLernoon of Monday SepLember 2nd

1he followlng ls a copy of plalnLlff companys leLLer Lo defendanL advlslng hlm LhaL Lhe sale would be cancelled unless
Lhe purchase prlce was pald aL flve oclock of Lhe day on whlch lL was wrlLLen

SL1 2 1912

Mr CLC C SLLLnL8 Manlla

uLA8 Sl8 ln accordance wlLh our conversaLlon Loday Lhls ls Lo noLlfy you LhaL we conslder Lhe sale of our loL ln nagLa[an
Lo AnLonlo M 8arreLLo as cancelled ln vlew of Lhe nonpaymenL of Lhe purchase prlce before flve oclock Lhls afLernoon

lease conflrm

?ours very Lruly

MACCnu8A? CC lnC

(Sgd) CA8LCS ?CunC

Ceneral Manager

As Lo Lhe facLs [usL narraLed Lhere ls pracLlcally no dlspuLe Lhe only maLLers of facLs as Lo whlch Lhere ls any real
conLenLlon ln Lhe record belng llmlLed Lo quesLlon as Lo Lhe value of Lhe land and as Lo Lhe orlglnal lnsLrucLlons Lo
defendanL ln regard Lo Lhe dellvery of Lhe LlLle deeds

lalnLlffs manager LesLlfled LhaL as he had no confldence ln 8arreLLo he expressly lnsLrucLed defendanL noL Lo dellver
Lhe LlLle deeds unLll 8arreLLo Lurned over Lhe purchase prlce uefendanL swore LhaL he had recelved no such lnsLrucLlon
upon Lhls confllcL of LesLlmony we do noL deem lL necessary Lo make an express flndlng because as we vlew Lhe
LransacLlon lL could ln no evenL affecL our dlsposlLlon of Lhls appeal

We are of oplnlon LhaL Lhe dlspuLed evldence clearly dlscloses LhaL on AugusL 21sL Lhe plalnLlff company Lhrough Lhe
defendanL real esLaLe broker agreed Lo sell Lhe land Lo 8arreLLo for 1889230 and LhaL 8arreLLo agreed Lo buy Lhe
land aL LhaL prlce on Lhe usual condlLlon precedenL LhaL before Lurnlng over Lhe purchase prlce Lhe LlLle deeds and deed
of Lransfer from Lhe company should be found Lo be ln due and legal form 1haL for Lhe purpose of consummaLlng Lhe
sale Lhe plalnLlff company Lurned over Lo Lhe defendanL a deed of Lransfer Lo 8arreLLo LogeLher wlLh a 1orrens LlLle
cerLlflcaLe Lo Lhe land execuLed as of Lhe day when Lhe agreemenL Lo sell was enLered lnLo 1haL Lhe defendanL wlLh full
auLhorlLy from plalnLlff company agreed Lo dellver Lhe deed and cerLlflcaLe Lo 8arreLLo on paymenL of Lhe purchase
prlce 1haL from Lhe very naLure of Lhe LransacLlon lL was undersLood LhaL Lhe purchaser should have a reasonable Llme
ln whlch Lo examlne Lhe deed of Lransfer and Lhe oLher documenLs of LlLle and LhaL defendanL exerclslng an auLhorlLy
lmplledly lf noL expressly conferred upon hlm gave Lhe purchaser a reasonable Llme ln whlch Lo saLlsfy hlmself as Lo Lhe
legallLy and correcLness of Lhe documenLs of LlLle 1haL Lhe company Lhrough lLs manager ?oung acqulesced ln and
raLlfled whaL had been done by defendanL ln Lhls regard when wlLh full knowledge of all Lhe facLs ?oung advlsed Lhe
defendanL durlng 8arreLLos absence ln 1ayabas LhaL Lhe deal musL be closed up wlLhouL delay on 8arreLLos reLurn Lo
Manlla

no reason appears nor had any reason been asslgned for Lhe demand by Lhe plalnLlff company for Lhe dellvery of Lhe
purchase prlce aL Lhe hour speclfled under LhreaL ln Lhe evenL of fallure Lo make paymenL aL LhaL hour lL would decllne
Lo carry ouL Lhe agreemenL oLher Lhan LhaL Lhe manager of Lhe plalnLlff company had been annoyed by Lhe delays
whlch occurred durlng Lhe earller sLage of Lhe negoLlaLlons and had changed hls mlnd as Lo Lhe deslrablllLy of maklng
Lhe sale aL Lhe prlce agreed upon elLher because he belleved LhaL he could geL a beLLer prlce elsewhere or LhaL Lhe land
was worLh more Lo hls company Lhan Lhe prlce he had agreed Lo Lake for lL lL ls very evldenL LhaL plalnLlff companys
manager hoped LhaL by seLLlng a llmlL of a few hours upon Lhe Llme wlLhln whlch he would recelve Lhe money hls
company would be relleved of Lhe obllgaLlon Lo carry ouL lLs conLracL

upon Lhe quesLlon of Lhe value of Lhe land we Lhlnk LhaL Lhe evldence clearly dlscloses LhaL aL Lhe daLe of Lhe sale lLs
acLual and lLs Lrue markeL value was noL more Lhan Lhe amounL pald for lL by 8arreLLo LhaL ls Lo say 1889230 1he
evldence dlscloses LhaL lL had been ln Lhe hands of an experL real esLaLe agenL for many monLhs prlor Lo Lhe sale wlLh
every lnducemenL Lo hlm Lo secure Lhe hlghesL cash prlce whlch could be goLLen for lL 1haL he acLually sold lL Lo Lhe
plalnLlff company a few monLhs prlor Lo Lhe sale Lo 8arreLLo for 17173 1haL Lhe plalnLlff company was hlghly
dlssaLlsfled wlLh lLs purchase and readlly agreed Lo resell aL LhaL prlce 1haL Lhe defendanL ln hls company was hlghly
dlssaLlsfled wlLh lLs purchase and readlly agreed Lo resell aL LhaL prlce 1haL Lhe defendanL ln hls capaclLy as a real
esLaLe agenL wlLh a personal and dlrecL lnLeresL ln securlng Lhe hlghesL posslble prlce for Lhe land sold lL Lo 8arreLLo for
1889230

1he only evldence ln Lhe record Lendlng Lo prove LhaL Lhe land had a hlgher markeL value Lhan Lhe prlce acLually pald for
lL under such clrcumsLances ls Lhe LesLlmony of a rlval real esLaLe broker who had never been on Lhe land buL clalmed
LhaL he was famlllar wlLh lLs general locaLlon from maps and descrlpLlon and asserLed LhaL ln hls oplnlon lL was worLh
conslderably more Lhan Lhe prlce acLually pald for lL and LhaL he LhoughL he could have sold Lhe land for 3 a meLer or
approxlmaLely 20610 Cf course an experL oplnlon of Lhls klnd however slncere and honesL Lhe wlLness may have
been ln formlng lL ls wholly lnsufflclenL Lo malnLaln a flndlng LhaL Lhe land was worLh any more Lhan lL acLually broughL
when sold under Lhe condlLlons above seL forLh

lL may be LhaL Lhe land has a speculaLlve value much hlgher Lhan Lhe acLual markeL value aL Lhe Llme of Lhe sale so LhaL
lf held for an opporLune Lurn ln Lhe markeL or unLll a buyer of some speclal need for lL happened Lo presenL hlmself a
prlce approxlmaLlng LhaL lndlcaLed by Lhls wlLness mlghL be secured for lL 8uL Lhe quesLlon of facL ruled upon ls Lhe
acLual markeL value of Lhe land aL Lhe Llme of lLs sale Lo 8arreLLo and noL any speculaLlve value whlch mlghL be asslgned
Lo lL ln anLlclpaLlon of unknown lndeflnlLe and uncerLaln conLlngencles

Among oLher deflnlLlons of markeL value Lo be found ln Words and hrases vol 3 p 4383 and supporLed by
clLaLlon of auLhorlLy are Lhe followlng

1he markeL value of properLy ls Lhe prlce whlch Lhe properLy wlll brlng ln a falr markeL afLer falr and reasonable efforLs
have been made Lo flnd a purchaser who wlll glve Lhe hlghesL prlce for lL

xxx xxx xxx

1he markeL value of land ls Lhe prlce LhaL would ln all probablllLy resulL form falr negoLlaLlons where Lhe seller ls wllllng
Lo sell and Lhe buyer deslres Lo buy

upon Lhe foregolng sLaLemenL of Lhe facLs dlsclosed by Lhe record we are of oplnlon LhaL Lhe [udgmenL enLered ln Lhe
courL below should be reversed and Lhe complalnL dlsmlssed wlLhouL cosLs ln Lhls lnsLance

1 Lven were we Lo admlL whlch we do noL LhaL Lhe plalnLlff company had Lhe rlghL Lo LermlnaLe Lhe negoLlaLlons aL Lhe
Llme lndlcaLed by lLs manager and Lo dlrecL lLs real esLaLe noL make Lhe sale of 8arreLLo afLer Lhe hour lndlcaLed
neverLheless we would be compelled Lo hold upon Lhe evldence before us LhaL Lhe plalnLlff company has no cause of
acLlon for moneLary damages agalnsL Lhe defendanL real esLaLe agenL

1he measure of Lhe damages whlch Lhe plalnLlff would be enLlLled Lo recover from Lhe real esLaLe agenL for Lhe
unauLhorlzed sale of lLs properLy would be Lhe acLual markeL value of Lhe properLy LlLle Lo whlch had been losL as a
resulL of Lhe sale We are noL now conslderlng any quesLlon as Lo Lhe rlghL of Lhe owner under such clrcumsLances Lo
recover Lhe properLy from Lhe purchaser or damages for lLs deLenLlon or llke buL merely hls rlghL Lo recover moneLary
damages from hls agenL should he elecL as Lhe plalnLlff company dld ln Lhls case Lo raLlfy Lhe sale and recoup from Lhe
agenL any loss resulLlng from hls alleged unauLhorlzed consummaLlon of Lhe sale

1he markeL value of Lhe land ln quesLlon was 1889230 Cf Lhls Lhe plalnLlff company has recelved 17173 leavlng a
balance of 171730 unpald 8uL whaLever may be Lhe vlew whlch should Laken as Lo Lhe rlghL of Lhe plalnLlff company
Lo LermlnaLe Lhe negoLlaLlons for Lhe sale of Lhe properLy Lo 8arreLLo aL Lhe Llme flxed by lL ln lLs leLLer Lo Lhe defendanL
real esLaLe agenL Lhere can be no quesLlon as Lo Lhe llablllLy of Lhe plalnLlff company Lo Lhe real esLaLe agenL ln Lhe
evenL LhaL lL dld so LermlnaLe Lhe negoLlaLlons for Lhe amounL of Lhe commlsslon whlch lL agreed Lo pay hlm should he
flnd a purchaser for Lhe land aL Lhe prlce agreed upon ln hls agency conLracL 1he commlsslon agreed upon was all over
17173 whlch Lhe defendanL could secure from Lhe properLy and lL ls clear LhaL allowlng Lhe defendanL Lhls
commlsslon and offseLLlng lL agalnsL Lhe unpald balance of Lhe markeL value of Lhe land Lhe plalnLlff company ls noL
enLlLled Lo a money [udgmenL agalnsL defendanL

We do noL mean Lo quesLlon Lhe general docLrlne as Lo Lhe power of a prlnclpal Lo revoke Lhe auLhorlLy of hls agenL aL
wlll ln Lhe absence of a conLracL flxlng Lhe duraLlon of Lhe agency (sub[ecL however Lo some well deflned excepLlons)
Cur rullng ls LhaL aL Lhe Llme flxed by Lhe manager of Lhe plalnLlff company for Lhe LermlnaLlon of Lhe negoLlaLlons Lhe
defendanL real esLaLe agenL had already earned Lhe commlsslons agreed upon and could noL be deprlved Lhereof by Lhe
arblLrary acLlon of Lhe plalnLlff company ln decllnlng Lo execuLe Lhe conLracL of sale for some reason personal Lo lLself

1he quesLlon as Lo whaL consLlLuLes a sale so as Lo enLlLle a real esLaLe broker Lo hls commlsslons ls exLenslvely
annoLaLed ln Lhe case of Lunney vs Pealey (nebraska) 36313 reporLed ln 44 Law 8ep Ann 393 noLe and Lhe long llne
of auLhorlLles Lhere clLed supporL Lhe followlng rule

1he buslness of a real esLaLe broker or agenL generally ls only Lo flnd a purchaser and Lhe seLLled rule as sLaLed by Lhe
courLs ls LhaL ln Lhe absence of an express conLracL beLween Lhe broker and hls prlnclpal Lhe lmpllcaLlon generally ls
LhaL Lhe broker becomes enLlLled Lo Lhe usual commlsslons whenever he brlngs Lo hls prlnclpal a parLy who ls able and
wllllng Lo Lake Lhe properLy and enLer lnLo a valld conLracL upon Lhe Lerms Lhen named by Lhe prlnclpal alLhough Lhe
parLlculars may be arranged and Lhe maLLer negoLlaLed and compleLed beLween Lhe prlnclpal and Lhe purchaser dlrecLly
ln!83C

ln Lhe case of WaLson vs 8rooks (17 led 8ep 340 8 Sawy 316) lL was held LhaL a sale of real properLy enLlLllng a
broker Lo hls commlsslons was an agreemenL by Lhe vendor for a cerLaln valuable conslderaLlon Lhen or LhereafLer Lo be
pald and was compleLe wlLhouL conveyance alLhough Lhe legal LlLle remalned ln Lhe vendor

1he rlghLs of a real esLaLe broker Lo be proLecLed agalnsL Lhe arblLrary revocaLlon of hls agency wlLhouL remuneraLlon
for servlces rendered ln flndlng a sulLable purchaser prlor Lo Lhe revocaLlon are clearly and forcefully sLaLed ln Lhe
followlng clLaLlon form Lhe oplnlon ln Lhe case of 8lumenLhal vs Coodall (89 Cal 231)

1he acL of Lhe agenL ln flndlng a purchaser requlred Llme and labor for lLs compleLlon and wlLhln Lhree days of Lhe
execuLlon of Lhe conLracL and prlor Lo lLs revocaLlon he had placed Lhe maLLer ln Lhe poslLlon LhaL success was
pracLlcally cerLaln and lmmedlaLe and lL would be Lhe helghL of ln[usLlce Lo permlL Lhe prlnclpal Lhen Lo wlLhdraw Lhe
auLhorlLy and LermlnaLe Lhe agency as agalnsL an express provlslon of Lhe conLracL and perchance reap Lhe beneflL of
Lhe agenLs labors wlLhouL belng llable Lo hlm for hls commlsslons 1hls would be Lo make Lhe conLracL an
unconsclonable one and would offer a premlum for fraud by enabllng one of Lhe parLles Lo Lake advanLage of hls own
wrong and secure Lhe labor of Lhe oLher wlLhouL remuneraLlon

2 We are of oplnlon LhaL under all Lhe clrcumsLances surroundlng Lhe negoLlaLlons as dlsclosed by Lhe pracLlcally
undlspuLed evldence of record Lhe plalnLlff company could noL lawfully LermlnaLe Lhe negoLlaLlons aL Lhe Llme lL
aLLempLed Lo do so and LhereafLer decllne Lo convey Lhe land Lo 8arreLLo who had accepLed an offer of sale made Lo
hlm by Lhe plalnLlffs duly auLhorlzed agenL sub[ecL only Lo an examlnaLlon of Lhe documenLs of LlLle and sLood ready Lo
pay Lhe purchase prlce upon Lhe dellvery of Lhe duly execuLed deed of conveyance and oLher necessary documenLs of
LlLle We are noL now conslderlng Lhe rlghL or Lhe power of Lhe plalnLlff company Lo LermlnaLe or revoke Lhe agency of
Lhe defendanL aL LhaL Llme 1he revocaLlon of Lhe agenLs auLhorlLy aL LhaL Llme could ln no wlse relleve Lhe plalnLlff
company of lLs obllgaLlon Lo sell Lhe land Lo 8arreLLo for Lhe prlce and on Lhe Lerms agreed upon before Lhe agency was
revoked

lf we are correcL ln our concluslons ln Lhls regard lL follows of course LhaL no maLLer haL was Lhe acLual value of Lhe
land Lhe plalnLlff company suffered no damage by Lhe dellvery of Lhe LlLle deeds Lo 8arreLLo and Lhe consummaLlon of
Lhe sale by Lhe defendanL upon Lhe Lerms and aL Lhe prlce agreed upon prlor Lo Lhe revocaLlon of hls agency vp64

WlLhouL conslderlng any of Lhe dlspuLed quesLlons of facL lL clearly appears LhaL before Lhe manager of Lhe plalnLlff
company wroLe Lhe leLLer daLed SepLember 2 1912 whlch ls seL forLh ln Lhe foregolng sLaLemenL of facLs and before
Lhe conversaLlon was had Lo whlch LhaL leLLer refers Lhe defendanL real esLaLe agenL had offered Lo sell Lhe land Lo
8arreLLo for 1889230 and LhaL he dld so wlLh Lhe knowledge and consenL and under Lhe auLhorlLy of Lhe plalnLlff
company lL furLher clearly appears LhaL Lhls offer had been duly accepLed by 8arreLLo who sLood ready and wllllng Lo
pay over Lhe agreed purchase prlce upon Lhe producLlon and dellvery of Lhe necessary documenLs of LlLle should Lhese
documenLs be found upon examlnaLlon Lo be execuLed ln due and legal form 1he only quesLlon Lhen whlch we need
conslder ls wheLher Lhe plalnLlff company could lawfully cancel or resclnd Lhls agreemenL for Lhe sale and purchase of
Lhe land on Lhe sole ground LhaL Lhe purchase prlce was noL pald aL Lhe hour deslgnaLed ln Lhe leLLer Lo Lhe defendanL

1he only reasons asslgned for Lhe sudden and arblLrary demand for Lhe paymenL of Lhe purchase prlce whlch was made
wlLh Lhe manlfesL hope LhaL lL would defeaL Lhe agenLs deal wlLh 8arreLLo are LhaL Lhe plalnLlff companys manager had
become saLlsfled LhaL Lhe land was worLh more Lhan he had agreed Lo accepL for lL and LhaL he was plqued and
annoyed aL Lhe delays whlch marked Lhe earller sLages of Lhe negoLlaLlons

1lme does noL appear Lo have been of Lhe essence of Lhe conLracL 1he agreemenL Lo sell was made wlLhouL any express
sLlpulaLlon as Lo Lhe Llme wlLhln whlch Lhe purchase prlce was Lo be pald excepL LhaL Lhe purchaser reserved Lhe rlghL Lo
examlne Lhe documenLs of LlLle before maklng paymenL of Lhe purchase prlce Lhough lL was undersLood LhaL Lhe sale
was for cash upon Lhe dellvery of Lhe documenLs of LlLle execuLed ln due form under Lhe agreemenL wlLh Lhe agenL of
Lhe plalnLlff company Lhe purchaser had a perfecL rlghL Lo examlne Lhe documenLs of LlLle and ln Lhe absence of an
express agreemenL flxlng Lhe Llme Lo be allowed Lherefore he was clearly enLlLled Lo such Llme as mlghL be reasonably
necessary for LhaL purpose CA1ezev

1he plalnLlff company Lhrough lLs agenL had glven 8arreLLo an opporLunlLy Lo examlne Lhe documenLs of LlLle wlLh Lhe
express undersLandlng LhaL lf Lhey were saLlsfacLory he would hand Lhe agenL hls check for Lhe purchase prlce and lL ls
very clear LhaL Lhe plalnLlff company could noL arblLrarlly and for lLs own convenlence deprlve 8arreLLo of Lhls
opporLunlLy Lo make such examlnaLlon of Lhe documenLs as mlghL be reasonably necessary

Cf course we are noL Lo be undersLood as denylng Lhe rlghL of Lhe vendor Lo couple hls agreemenL Lo sell wlLh a
sLlpulaLlon LhaL Lhe purchase prlce musL be pald aL a speclflc day hour and mlnuLe nor LhaL Lhe obllgaLlon Lo pay over
Lhe purchase prlce forLhwlLh may noL be lnferred from all Lhe clrcumsLances surroundlng Lhe LransacLlon ln a parLlcular
case 1lme may be and ofLen ls of Lhe very essence of Lhe conLracL 8uL ln a conLracL for Lhe sale of real esLaLe where no
agreemenL Lo Lhe conLrary appears lL may falrly be assumed LhaL lL was Lhe lnLenLlon of Lhe parLles Lo allow a
reasonable Llme for Lhe examlnaLlon of Lhe documenLs of LlLle and ln any case ln whlch Llme has been expressly allowed
for LhaL purpose Lhe vendor cannoL arblLrarlly demand Lhe paymenL of Lhe purchase prlce before Lhe explraLlon of Lhe
Llme reasonably necessary Lherefor C3C[Zr

1he docLrlne supporLed by clLaLlon of auLhorlLy ls seL forLh as follows on page 163 Maupln on MarkeLable 1lLle Lo 8eal
LsLaLe

1he conLracL of sale usually speclfles a Llme ln whlch Lhe purchaser may examlne Lhe LlLle before compleLlng Lhe
purchase lf no Llme be speclfled he wlll be enLlLled Lo a reasonable Llme for LhaL purpose buL cannoL keep Lhe conLracL
open lndeflnlLely so as Lo avall hlmself of a rlse ln Lhe value of Lhe properLy or escape loss ln case of depreclaLlon Pe
cannoL be requlred Lo pay Lhe purchase money before he has examlned Lhe absLracL unless he has expressly sLlpulaLed
so Lo do lL has been held LhaL lf Lhe conLracL provlde LhaL Lhe purchaser shall be furnlshed an absLracL of LlLle and shall
have a speclfled Llme ln whlch Lo examlne Lhe LlLle and pay Lhe purchase money Lhe purchaser musL deLermlne ln LhaL
Llme wheLher he wlll Lake Lhe LlLle and LhaL he cannoL Lender Lhe purchase money afLer LhaL Llme even Lhough no
absLracL of Lhe LlLle was furnlshed

1he purchaser ls enLlLled Lo a reasonable Llme wlLhln whlch Lo deLermlne by lnvesLlgaLlon Lhe valldlLy of apparenL llens
dlsclosed by Lhe record AfLer Lhe purchaser has examlned Lhe absLracL or lnvesLlgaLed Lhe LlLle ln Lhe Llme allowed for
LhaL purpose lL ls hls duLy Lo polnL ouL or make known hls ob[ecLlons Lo Lhe LlLle lf any so as Lo glve Lhe vendor an
opporLunlLy Lo remove Lhem

ln Lhe case of PoyL vs 1uxbury (70 lll 331 332) Lhe rule ls sLaLed as follows

Where Lhe purchase of land ls made upon condlLlon Lhe LlLle ls found good Lhe purchaser ls only enLlLled Lo a
reasonable Llme ln whlch Lo deLermlne wheLher he wlll Lake Lhe LlLle Lhe vendor has or re[ecL lL Pe cannoL keep Lhe
conLracL open lndeflnlLely so as Lo avall of a rlse ln Lhe value of Lhe properLy or relleve hlmself ln case of a depreclaLlon
!1npCZ

ln Lhe case of LasLon vs MonLgomery (90 Cal 307) Lhe rule ls seL forLh as follows

A conLracL for Lhe sale of land whlch provldes LlLle Lo prove good or no sale wlLhouL speclfylng Lhe Llme wlLhln whlch
Lhe examlnaLlon ls Lo be made lmplles a reasonable Llme

ln 39 Cyc 1332 Lhe general rule supporLed by numerous clLaLlons ls seL forLh as follows

lf Lhe conLracL of sale does noL speclfy Lhe Llme of performance a reasonable Llme wlll be lmplled ln oLher words a
reasonable Llme for performance wlll be allowed and performance wlLhln a reasonable Llme wlll be requlred WhaL ls a
reasonable Llme necessarlly depends upon Lhe facLs and clrcumsLances of Lhe parLlcular case 1he rule permlLLlng and
requlrlng performance wlLhln a reasonable Llme applles boLh Lo Lhe Llme for maklng and execuLlng Lhe conveyance by
Lhe vendor and Lo Lhe Llme for maklng or Lenderlng paymenL by Lhe purchaser and where some precedenL acL or
demand ls necessary Lhe rule applles Lo Lhe Llme of performance afLer such acL ls done or afLer such demand has been
made lL also applles Lo Lhe Llme wlLhln whlch any condlLlons precedenL ls Lo be performed or wlLhln whlch a
conLlngency upon whlch Lhe LransacLlon depends ls Lo happen and Lo Lhe performance of varlous acLs by Lhe parLles
such as Lhe furnlshlng of an absLracL of LlLle or maklng a survey or any acL whlch ls Lo precede or may affecL Lhe Llme of
conveyance or paymenL or whlch one of Lhe parLles may do aL hls opLlon whlch may affecL Lhe rlghLs of Lhe parLles
under Lhe conLracL lf Lhe purchaser ls enLlLled Lo an examlnaLlon of Lhe LlLle a reasonable Llme Lherefor wlll be lmplled

under all Lhe clrcumsLances surroundlng Lhe LransacLlon ln Lhe case aL bar as Lhey appear from Lhe evldence of record
we have no heslLaLlon ln holdlng LhaL Lhe plalnLlff companys leLLer of SepLember 2 1912 demandlng paymenL before
flve oclock of Lhe afLernoon of LhaL day under penalLy of Lhe cancellaLlon of lLs agreemenL Lo sell was an arblLrary
unreasonable aLLempL Lo deny Lo Lhe purchaser Lhe reasonable opporLunlLy Lo lnspecL Lhe documenLs of LlLle Lo whlch
he was enLlLled by vlrLue of Lhe express agreemenL of Lhe plalnLlff companys agenL before any aLLempL was made Lo
revoke hls agency lL follows LhaL 8arreLLos rlghL Lo enforce Lhe agreemenL Lo sell was ln no wlse affecLed by Lhe
aLLempL of Lhe plalnLlff company Lo cancel Lhe agreemenL and LhaL Lhe plalnLlff company suffered no damage by Lhe
consummaLlon of Lhe agreemenL by Lhe accepLance of Lhe sLlpulaLed purchase prlce by Lhe defendanL real esLaLe agenL

erhaps we should lndlcaLe LhaL ln arrlvlng aL Lhese concluslons we have noL found lL necessary Lo pass upon Lhe
dlspuLed quesLlon of facL as Lo wheLher or noL Lhe plalnLlff companys manager lnsLrucLed Lhe defendanL noL Lo dellver
Lhe LlLledeed unLll he had recelved Lhe purchase prlce Cn Lhls polnL Lhere ls a dlrecL confllcL of evldence 8uL as we
undersLand Lhe LransacLlon lL was clearly undersLood LhaL Lhe purchaser would have a reasonable opporLunlLy Lo
lnspecL and examlne Lhe documenLs of LlLle before paylng over a large sum of money ln exchange Lherefor wheLher Lhe
agenL dld or dld noL have Lhe auLhorlLy Lo make acLual dellvery of Lhe LlLle deed for LhaL purpose

1wenLy days hereafLer leL [udgmenL be enLered reverslng Lhe [udgmenL enLered ln Lhe courL below wlLhouL cosLs ln Lhls
lnsLance and dlrecLlng Lhe dlsmlssal of Lhe complalnL wlLh Lhe cosLs ln flrsL lnsLance agalnsL Lhe plalnLlff company and
Len days LhereafLer leL Lhe record be reLurned Lo Lhe courL whereln lL orlglnaLed So ordered

Arellano C! 1orres Moreland 1renL and Araullo !! concur


SECOND DIVISION
|G.R. No. 150678. February 18, 2005|
BIENVENIDO R. MEDRANO and IBAAN RURAL BANK, petitioners, vs. COURT OF APPEALS, PACITA
G. BORBON, JOSEFINA E. ANTONIO and ESTELA A. FLOR, respondents.
D E C I S I O N
CALLEJO, SR., J.:
This is a petition Ior review oI the Decision[1] oI the Court oI Appeals (CA) aIIirming in toto the Decision[2] oI
the Regional Trial Court (RTC) oI Makati City, Branch 135, in Civil Case No. 15664 which awarded to the
respondents their 5 broker`s commission.
The Iacts are as Iollows:
Bienvenido R. Medrano was the Vice-Chairman oI Ibaan Rural Bank, a bank owned by the Medrano Iamily. In
1986, Mr. Medrano asked Mrs. Estela Flor, a cousin-in-law, to look Ior a buyer oI a Ioreclosed asset oI the
bank,[3] a 17-hectare mango plantation priced at P2,200,000.00, located in Ibaan, Batangas.[4]
Mr. Dominador Lee, a businessman Irom Makati City, was a client oI respondent Mrs. Pacita G. Borbon, a
licensed real estate broker. The two met through a previous transaction where Lee responded to an ad in a
newspaper put up by Borbon Ior an 8-hectare property in Lubo, Batangas, planted with atis trees. Lee
expressed that he preIerred a land with mango trees instead. Borbon promised to get back to him as soon as she
would be able to Iind a property according to his speciIications.
Borbon relayed to her business associates and Iriends that she had a ready buyer Ior a mango orchard. Flor then
advised her that her cousin-in-law owned a mango plantation which was up Ior sale. She told Flor to conIer
with Medrano and to give them a written authority to negotiate the sale oI the property.[5] Thus, on September
3, 1986, Medrano issued the Letter oI Authority, as Iollows:
Mrs. Pacita G. Borbon & Miss JoseIina E. Antonio
Campos Rueda Building
Tindalo, Makati, M.M.
Mrs. Estela A. Flor & Miss Maria Yumi S. Karasig
23 Mabini Street
Quezon City, M.M.
Dear Mesdames:
This letter will serve as your authority* to negotiate with any prospective buyer Ior the sale oI a certain real
estate property more speciIically a mango plantation which is described more particularly therein below:
Location : Barrio Tulay-na-Patpat, Ibaan,
Batangas
Lot Area : 17 hectares (more or less) per
attached Appendix 'A
Improvements : 720 all Iruit-bearing mango trees
(carabao variety) and other trees
Price : P 2,200,000.00
For your labor and eIIort in Iinding a purchaser thereoI, I hereby bind myselI to pay you a commission oI 5 oI
the total purchase price to be agreed upon by the buyer and seller.
Very truly yours,
(Sgd.)
B.R. Medrano
Owner
* Subject to price sale.[6]
The respondents arranged Ior an ocular inspection oI the property together with Lee which never materialized
the Iirst time was due to inclement weather; the next time, no car was available Ior the tripping to Batangas.[7]
Lee then called up Borbon and told her that he was on his way to Lipa City to inspect another property, and
might as well also take a look at the property Borbon was oIIering. Since Lee was in a hurry, the respondents
could no longer accompany him at the time. Thus, he asked Ior the exact address oI the property and the
directions on how to reach the lot in Ibaan Irom Lipa City. Thereupon, Lee was instructed to get in touch with
Medrano`s daughter and also an oIIicer oI the bank, Mrs. Teresa Ganzon, regarding the property.[8]
Two days aIter the visit, respondent JoseIina Antonio called Lee to inquire about the result oI his ocular
inspection. Lee told her that the mango trees 'looked sick so he was bringing an agriculturist to the property.
Three weeks thereaIter, Antonio called Lee again to make a Iollow-up oI the latter`s visit to Ibaan. Lee
inIormed her that he already purchased the property and had made a down payment oI P1,000,000.00. The
remaining balance oI P1,200,000.00 was to be paid upon the approval oI the incorporation papers oI the
corporation he was organizing by the Securities and Exchange Commission. According to Antonio, Lee asked
her iI they had already received their commission. She answered 'no, and Lee expressed surprise over this.[9]
A Deed oI Sale was eventually executed on November 6, 1986 between the bank, represented by its
President/General Manager Teresa M. Ganzon (as Vendor) and KGB Farms, Inc., represented by Dominador
Lee (as Vendee), Ior the purchase price oI P1,200,000.00.[10] Since the sale oI the property was consummated,
the respondents asked Irom the petitioners their commission, or 5 oI the purchase price. The petitioners
reIused to pay and oIIered a measly sum oI P5,000.00 each.[11] Hence, the respondents were constrained to Iile
an action against herein petitioners.
The petitioners alleged that Medrano issued the letter oI authority in Iavor oI all the respondents, upon the
representation oI Flor that she had a prospective buyer. Flor was the only person known to Medrano, and he
had never met Borbon and Antonio. Medrano had asked that the name oI their prospective buyer be
immediately registered so as to avoid conIusion later on, but Flor Iailed to do so. Furthermore, the other
oIIicers oI the bank had never met nor dealt with the respondents in connection with the sale oI the property.
Ganzon also asked Lee iI he had an agent and the latter replied that he had none. The petitioners also denied
that the purchase price oI the property was P2,200,000.00 and alleged that the property only cost
P1,200,000.00. The petitioners Iurther contended that the letter oI authority signed by Medrano was not binding
or enIorceable against the bank because the latter had a personality separate and distinct Irom that oI Medrano.
Medrano, on the other hand, denied liability, considering that he was not the registered owner oI the property,
but the bank. The petitioners, likewise, Iiled a counterclaim as they were constrained to hire the services oI
counsel and suIIered damages.[12]
AIter the case was submitted Ior decision, Medrano died, but no substitution oI party was made at this time.[13]
The trial court resolved the case based on the Iollowing common issues:
1. Whether or not the letter oI authority is binding and enIorceable against the deIendant Bank only or both
deIendants; and
2. Whether or not the plaintiIIs are entitled to any commission Ior the sale oI the subject property.[14]
On September 21, 1994, the trial court rendered a Decision in Iavor oI the respondents. The petitioners were
ordered to pay, jointly and severally, the 5 broker`s commission to herein respondents. The trial court Iound
that the letter oI authority was valid and binding as against Medrano and the Ibaan Rural bank. Medrano signed
the said letter Ior and in behalI oI the bank, and as owner oI the property, promising to pay the respondents a
5 commission Ior their eIIorts in looking Ior a purchaser oI the property. He is, thereIore, estopped Irom
denying liability on the basis oI the letter oI authority he issued in Iavor oI the respondents. The trial court
Iurther stated that the sale oI the property could not have been possible without the representation and
intervention oI the respondents. As such, they are entitled to the broker`s commission oI 5 oI the selling price
oI P1,200,000.00 as evidenced by the deed oI sale.[15] The fallo oI the decision reads as Iollows:
WHEREFORE, premises considered, judgment is hereby rendered in Iavor oI the plaintiIIs and against the
deIendants, Ior the latter, jointly and severally:
1. To pay plaintiIIs the sum oI P60,000.00 representing their Iive percent (5) commission oI the purchase
price oI the property sold based on Exh. 'D or '9 plus legal interest Irom date oI Iiling oI the herein
complaint until Iully paid;
2. To pay plaintiIIs the sum oI P20,000.00 as and Ior attorney`s Iees;
3. To pay the plaintiIIs the sum oI P10,000.00 as litigation expenses;
4. To pay the costs oI the proceedings.[16]
Unable to agree with the RTC decision, petitioner Ibaan Rural Bank Iiled its notice oI appeal.[17]
On October 10, 1994, the heirs oI Bienvenido Medrano Iiled a Motion Ior Reconsideration[18] praying that the
late Bienvenido Medrano be substituted by his heirs. They Iurther prayed that the trial court`s decision as Iar as
Medrano was concerned be set aside and dismissed considering his demise. The trial court denied the motion
Ior reconsideration.[19] Hence, the heirs oI Medrano also Iiled their notice oI appeal.[20]
On appeal, the petitioners reiterated their stance that the letter oI authority was not binding and enIorceable, as
the same was signed by Medrano, who was not actually the owner oI the property. They reIused to give the
respondents any commission, since the latter did not perIorm any act to consummate the sale. The petitioners
pointed out that the respondents (1) did not veriIy the real owner oI the property; (2) never saw the property in
question; (3) never got in touch with the registered owner oI the property; and (4) neither did they perIorm any
act oI assisting their buyer in having the property inspected and veriIied.[21] The petitioners Iurther raised the
trial court`s error in not dismissing the case against Bienvenido Medrano considering his death.
On May 3, 2001, the CA promulgated the assailed decision aIIirming the Iinding oI the trial court that the letter
oI authority was valid and binding. Applying the principle oI agency, the appellate court ruled that Bienvenido
Medrano constituted the respondents as his agents, granting them authority to represent and act on behalI oI the
Iormer in the sale oI the 17-hectare mango plantation. The CA also ruled that the trial court did not err in
Iinding that the respondents were the procuring cause oI the sale. SuIIice it to state that were it not Ior the
respondents, Lee would not have known that there was a mango orchard oIIered Ior sale.
The CA Iurther ruled that an action Ior a sum oI money continues even aIter the death oI the deIendant, and
shall remain as a money claim against the estate oI the deceased.
Undaunted by the CA`s unIavorable decision, the petitioners Iiled the instant petition, raising eight (8)
assignments oI errors, to wit:
I. THE COURT OF APPEALS ERRED WHEN IT FOUND THE PRIVATE RESPONDENTS TO BE
THE PROCURING CAUSE OF THE SALE;
II. THE COURT OF APPEALS ERRED IN GIVING CREDENCE TO THE LETTER-AUTHORITY
OF PETITIONER MR. MEDRANO;
III. THE COURT OF APPEALS MADE A MISTAKE WHEN IT CORRECTLY RECOGNIZED THE
EXTENT OF THE PRIVATE RESPONDENTS` OBLIGATION AND AUTHORITY CONTAINED
IN MEDRANO`S LETTER-AUTHORITY AND YET ERRONEOUSLY GRANTED THE
PRIVATE-RESPONDENTS` DEMAND, NOTWITHSTANDING THE NON-PERFORMANCE OF
THEIR OBLIGATION THEREUNDER;
IV. THE COURT OF APPEALS ERRED IN PRESUMING BAD FAITH UPON THE PETITIONERS;
V. THE COURT OF APPEALS ERRED IN PLACING THE BURDEN OF PROOF UPON THE
DEFENDANTS-PETITIONERS;
VI. THE COURT OF APPEALS FAILED TO SUBSTANTIATE ITS CONCLUSION WITH
EVIDENCE AND INSTEAD RELIED ON INFERENCE;
VII. THE COURT OF APPEALS FAILED TO SUBSTANTIATE ITS CONCLUSION WITH
EVIDENCE AND MERELY RELIED ON SPECULATION AND SURMISE;
VIII. THE COURT OF APPEALS MISAPPRECIATED THE FACTS PRESENTED BEFORE IT, AND
CONSEQUENTLY FAILED TO CONSIDER REASONABLY THE TWO (2) BASIC
ARGUMENTS OF THE PETITIONERS.[22]
The petition is denied.
The records disclose that respondent Pacita Borbon is a licensed real estate broker[23] and respondents JoseIina
Antonio and Estela A. Flor are her associates.[24] A broker is generally deIined as one who is engaged, Ior
others, on a commission, negotiating contracts relative to property with the custody oI which he has no concern;
the negotiator between other parties, never acting in his own name but in the name oI those who employed him;
he is strictly a middleman and Ior some purposes the agent oI both parties. A broker is one whose occupation is
to bring parties together, in matters oI trade, commerce or navigation.[25] For the respondents` participation in
Iinding a buyer Ior the petitioners` property, the petitioners reIuse to pay them commission, asserting that they
are not the eIIicient procuring cause oI the sale, and that the letter oI authority signed by petitioner Medrano is
not binding against the petitioners.
'Procuring cause is meant to be the proximate cause.[26] The term 'procuring cause, in describing a broker`s
activity, reIers to a cause originating a series oI events which, without break in their continuity, result in
accomplishment oI prime objective oI the employment oI the broker producing a purchaser ready, willing and
able to buy real estate on the owner`s terms.[27] A broker will be regarded as the 'procuring cause oI a sale, so
as to be entitled to commission, iI his eIIorts are the Ioundation on which the negotiations resulting in a sale are
begun.[28] The broker must be the eIIicient agent or the procuring cause oI the sale. The means employed by
him and his eIIorts must result in the sale. He must Iind the purchaser, and the sale must proceed Irom his
eIIorts acting as broker.[29]
Indeed, the evidence on record shows that the respondents were instrumental in the sale oI the property to Lee.
Without their intervention, no sale could have been consummated. They were the ones who set the sale oI the
subject land in motion.[30] Upon being inIormed by Flor that Medrano was selling his mango orchard, Borbon
lost no time in inIorming Lee that they had Iound a property according to his speciIications. An ocular
inspection oI the property together with Lee was immediately planned; unIortunately, it never pushed through
Ior reasons beyond the respondents` control. Since Lee was in a hurry to see the property, he asked the
respondents the exact address and the directions on how to reach Ibaan, Batangas. The respondents thereupon
instructed him to look Ior Teresa Ganzon, an oIIicer oI the Ibaan Rural Bank and the person to talk to regarding
the property. While the letter-authority issued in Iavor oI the respondents was non-exclusive, no evidence was
adduced to show that there were other persons, aside Irom the respondents, who inIormed Lee about the
property Ior sale. Ganzon testiIied that no advertisement was made announcing the sale oI the lot, nor did she
give any authority to other brokers/agents to sell the subject property.[31] The Iact that it was Lee who
personally called Borbon and asked Ior directions prove that it was only through the respondents that Lee
learned about the property Ior sale.[32] SigniIicantly, too, Ms. Teresa Ganzon testiIied that there were no other
persons other than the respondents who inquired Irom her about the sale oI the property to Lee.[33] It can thus
be readily inIerred that the respondents were the only ones who knew about the property Ior sale and were
responsible in leading a buyer to its consummation. All these circumstances lead us to the inescapable
conclusion that the respondents were the procuring cause oI the sale. When there is a close, proximate and
causal connection between the broker`s eIIorts and the principal`s sale oI his property, the broker is entitled to a
commission.[34]
The petitioners insist that the respondents are not entitled to any commission since they did not actually perIorm
any acts oI 'negotiation as required in the letter-authority. They reIuse to pay the commission since according
to them, the respondents` participation in the transaction was not apparent, iI not nil. The respondents did not
even look at the property themselves; did not introduce the buyer to the seller; did not hold any conIerences
with the buyer, nor take part in concluding the sale. For the non-compliance oI this obligation 'to negotiate,
the petitioners argue, the respondents are not entitled to any commission.
We Iind the argument specious. The letter oI authority must be read as a whole and not in its truncated parts.
Certainly, it was not the intention oI Medrano to expect the respondents to do just that (to negotiate) when he
issued the letter oI authority. The clear intention is to reward the respondents Ior procuring a buyer Ior the
property. BeIore negotiating a sale, a broker must Iirst and Ioremost bring in a prospective buyer. It has been
held that a broker earns his pay merely by bringing the buyer and the seller together, even iI no sale is
eventually made.[35] The essential Ieature oI a broker`s conventional employment is merely to procure a
purchaser Ior a property ready, able, and willing to buy at the price and on the terms mutually agreed upon by
the owner and the purchaser. And it is not a prerequisite to the right to compensation that the broker conduct
the negotiations between the parties aIter they have been brought into contact with each other through his
eIIorts.[36] The case oI Macondray v. Sellner[37] is quite instructive:
The business oI a real estate broker or agent, generally, is only to Iind a purchaser, and the settled rule as stated
by the courts is that, in the absence oI an express contract between the broker and his principal, the implication
generally is that the broker becomes entitled to the usual commissions whenever he brings to his principal a
party who is able and willing to take the property and enter into a valid contract upon the terms then named by
the principal, although the particulars may be arranged and the matter negotiated and completed between the
principal and the purchaser directly.
Notably, there are cases where the right oI the brokers to recover commissions were upheld where they actually
took no part in the negotiations, never saw the customer, and even some in which they did nothing except
advertise the property, as long as it can be shown that they were the eIIicient cause oI the sale.[38]
In the case at bar, the role oI the respondents in the transaction is undisputed. Whether or not they participated
in the negotiations oI the sale is oI no moment. Armed with an authority to procure a purchaser and with a
license to act as broker, we see no reason why the respondents can not recover compensation Ior their eIIorts
when, in Iact, they are the procuring cause oI the sale.[39]
Anent the validity oI the letter-authority signed by Medrano, we Iind no reversible error with the Iindings oI the
appellate and trial courts that the petitioners are liable thereunder. Such Iactual Iindings deserve this Court`s
respect in the absence oI any cogent reason to reverse the same. Medrano`s obligation to pay the respondents
commission Ior their labor and eIIort in Iinding a purchaser or a buyer Ior the described parcel oI land is
unquestionable. In the absence oI Iraud, irregularity or illegality in its execution, such letter-authority serves as
a contract, and is considered as the law between the parties. As such, Medrano can not renege on the promise to
pay commission on the Ilimsy excuse that he is not the registered owner oI the property. The evidence shows
that he comported himselI to be the owner oI the property. His testimony is quite telling:
Q Mr. Medrano, do you know any oI the plaintiIIs in this case, Pacita Borbon, JoseIina Antonio, and Stella
(sic) F. Flor?
WITNESS
A I know only Stella (sic) F. Flor. The rest, I do not know them. I have never met them, up to now.
Q How about the co-deIendant Ibaan Rural Bank?
A I know co-deIendant Ibaan Rural Bank, having been the Iounder and at one time or another, I have served
several capacities Irom President to Chairman oI the Board.
Q Are you Iamiliar with a certain parcel oI land located at Barrio Tulay na Patpat, Ibaan, Batangas, with an
area oI 17 hectares?
A Yes, Sir. I used to own that property but later on mortgaged it to Ibaan Rural Bank.
Q And what, iI any, |did| the bank do to your property aIter you have mortgaged the same to it?
A AIter many demands Ior payment or redemption oI my mortgage, which I Iailed to do so, the Ibaan Rural
Bank sold it.
Q AIter it was Ioreclosed?
A Yes, Sir.
Q Do you recall having made any transaction with plaintiII Stella (sic) F. Flor regarding the property?
A Yes, Sir. Since she is the Iirst cousin oI my wiIe, I remember |that| she came to my oIIice once and
requested Ior a letter oI authority which I issued |in| September 1986, I think, and I gave her the letter oI
authority.[40]
As to the liability oI the bank, we quote with Iavor the disquisition oI the respondent court, to wit:
Further, the appellants cannot use the Ilimsy excuse (only to evade liability) that '(w)hat Mr. Medrano
represented to the plaintiIIs-appellees, without the knowledge or consent oI the deIendant Bank, did not bind the
Bank. Res inter alios acta alteri nocere non debet. (page 8 oI the Appellant`s BrieI; page 35 oI the Rollo).
While it may be true that technically the Ibaan Rural Bank did not authorize Bienvenido R. Medrano to sell the
land under litigation or that the latter was no longer an oIIicer oI the said bank, still, these circumstances do not
convince this Court Iully well to absolve the bank. Note that, as Iormer President oI the said bank, it is
improbable that he (Bienvenido R. Medrano) was completely oblivious oI the developments therein. By reason
oI his past association with the oIIicers oI the said bank (who are, in Iact, his relatives), it is unbelievable that
Bienvenido R. Medrano could simply have issued the said letter oI authority without the knowledge oI the said
oIIicers. Granting por aguendo that Bienvenido R. Medrano did not act on behalI oI the bank, however, We
doubt that he had no Iinancial and/or material interest in the said sale a Iact that could not possibly have
eluded Our attention.[41]
From all the Ioregoing, there can be no other conclusion than the respondents are indeed the procuring cause oI
the sale. II not Ior the respondents, Lee would not have known about the mango plantation being sold by the
petitioners. The sale was consummated. The bank had proIited Irom such transaction. It would certainly be
iniquitous iI the respondents would not be rewarded their commission pursuant to the letter oI authority.
WHEREFORE, the petition is DENIED due course. The Decision oI the Court oI Appeals is AFFIRMED.
SO ORDERED.
Puno, (Chairman), Tinga, and Chico-Nazario, JJ., concur.
Austria-Martinez, J., no part.



[1] Penned by Associate Justice Jose L. Sabio, Jr., with Associate Justices Ma. Alicia Austria-Martinez (now an
Associate Justice oI the Supreme Court) and Hilarion L. Aquino (retired), concurring.
[2] Penned by Judge Omar U. Amin.
[3] Records, p. 8.
[4] TSN, 4 January 1989, p. 6.
[5] TSN, 4 December 1987, pp. 7-8.
[6] Exhibit 'B, Records, p. 153.
[7] TSN, 4 December 1987, pp. 9-10; TSN, 15 March 1989, p. 9.
[8] TSN, 15 March 1989, p. 10
[9] TSN, 11 May 1989, pp. 8-9.
[10] Exhibit 'D, Records, p. 178.
[11] TSN, 15 March 1989, p. 14.
[12] Records, pp. 8-10.
[13] Id. at 320.
[14] Id.
[15] Id. at 229.
[16] Id. at 321.
[17] Id. at 322.
[18] Id. at 325-327.
[19] Id. at 370-371.
[20] Id. at 372.
[21] Rollo, p. 39.
[22] Rollo, pp. 16-17.
[23] Exhibit 'A, Records, p. 168.
[24] TSN, 4 December 1987, p. 6.
[25] Tan v. Gullas, 393 SCRA 334 (2002).
[26] Black`s Law Dictionary, FiIth Edition.
[27] Clark v. Ellsworth, 66 Ariz. 119, 184 P.2d 821 (1947).
[28] See Mohamed v. Robbins, 23 Ariz. App. 195, 531 P.2d 928, 930 (1975).
[29] Danon v. Brimo, 48 Phil. 133 (1921).
[30] Tan v. Gullas, supra.
[31] TSN, 11 September 1990, p. 5.
[32] TSN, 4 December 1987, p. 11.
[33] TSN, 11 September 1990, p. 5.
[34] Manotok Brothers, Inc. v. Court oI Appeals, 221 SCRA 224 (1993).
[35] Tan v. Gullas, supra.
[36] Wickersham v. T. D. Harris, 313 F.2d 468 (1963).
[37] 33 Phil. 370 (1916).
[38] Libby v. Ivers & Pond Piano Co., 317 Mass. 478, 58 N.E.2d 834 (1945); Gleason v. Nelson, 162 Mass. 245,
38 N.E. 497 (1894); Clark v. Ellsworth, supra.
[39] Wickersham v. Harris, supra.
[40] TSN, 6 November 1990, pp. 5-6.
[41] Rollo, p. 41.


G.R. No. 94753 April 7, 1993
MANOTOK BROTHERS, INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, THE HONORABLE 1UDGE OF THE REGIONAL
TRIAL COURT OF MANILA (Branch VI), and SALVADOR SALIGUMBA, respondents.
Antonio C. Ravelo for petitioner. Remigio M. Trinidas for private respondent.
CAMPOS, 1R.,
Petitioner Manotok Brothers, Inc., by way oI he instant Petition docketed as G.R. No. 94753 sought relieI Irom
this Court's Resolution dated May 3, 1989, which reads:
G.R. No. 78898 (Manotok Brothers, Inc. vs. Salvador Saligumba and Court oI Appeals). Considering the
maniIestation oI compliance by counsel Ior petitioner dated April 14, 1989 with the resolution oI March 13,
1989 which required the petitioner to locate private respondent and to inIorm this Court oI the present address
oI said private respondent, the Court Resolved to DISMISS this case, as the issues cannot be joined as private
respondent's and counsel's addresses cannot be Iurnished by the petitioner to this court.
1

In addition, petitioner prayed Ior the issuance oI a preliminary injunction to prevent irreparable injury to itselI
pending resolution by this Court oI its cause. Petitioner likewise urged this Court to hold in contempt private
respondent Ior allegedly adopting sinister ploy to deprive petitioner oI its constitutional right to due process.
Acting on said Petition, this Court in a Resolution
2
dated October 1, 1990 set aside the entry oI judgment made
on May 3, 1989 in case G.R.
No. 78898; admitted the amended petition; and issued a temporary restraining order to restrain the execution oI
the judgment appealed Irom.
The amended petition
3
admitted by this Court sought relieI Irom this Court's Resolution abovequoted. In the
alternative, petitioner begged leave oI court to re-Iile its Petition Ior Certiorari
4
(G.R. No. 78898) grounded on
the allegation that petitioner was deprived oI its opportunity to be heard.
The Iacts as Iound by the appellate court, revealed that petitioner herein (then deIendant-appellant) is the owner
oI a certain parcel oI land and building which were Iormerly leased by the City oI Manila and used by the Claro
M. Recto High School, at M.F. Jhocson Street, Sampaloc Manila.
By means oI a letter
5
dated July 5, 1966, petitioner authorized herein private respondent Salvador Saligumba to
negotiate with the City oI Manila the sale oI the aIorementioned property Ior not less than P425,000.00. In the
same writing, petitioner agreed to pay private respondent a Iive percent (5) commission in the event the sale is
Iinally consummated and paid.
Petitioner, on March 4, 1967, executed another letter
6
extending the authority oI private respondent Ior 120
days. ThereaIter, another extension was granted to him Ior 120 more days, as evidenced by another letter
7
dated
June 26, 1967.
Finally, through another letter

dated November 16, 1967, the corporation with RuIino Manotok, its President,
as signatory, authorized private respondent to Iinalize and consummate the sale oI the property to the City oI
Manila Ior not less than P410,000.00. With this letter came another extension oI 180 days.
The Municipal Board oI the City oI Manila eventually, on April 26, 1968, passed Ordinance No. 6603,
appropriating the sum oI P410,816.00 Ior the purchase oI the property which private respondent was authorized
to sell. Said ordinance however, was signed by the City Mayor only on May 17, 1968, one hundred eighty three
(183) days aIter the last letter oI authorization.
On January 14, 1969, the parties signed the deed oI sale oI the subject property. The initial payment oI
P200,000.00 having been made, the purchase price was Iully satisIied with a second payment on April 8, 1969
by a check in the amount oI P210,816.00.
Notwithstanding the realization oI the sale, private respondent never received any commission, which should
have amounted to P20,554.50. This was due to the reIusal oI petitioner to pay private respondent said amount as
the Iormer does not recognize the latter's role as agent in the transaction.
Consequently, on June 29, 1969, private respondent Iiled a complaint against petitioner, alleging that he had
successIully negotiated the sale oI the property. He claimed that it was because oI his eIIorts that the Municipal
Board oI Manila passed Ordinance No. 6603 which appropriated the sum Ior the payment oI the property
subject oI the sale.
Petitioner claimed otherwise. It denied the claim oI private respondent on the Iollowing grounds: (1) private
respondent would be entitled to a commission only iI the sale was consummated and the price paid within the
period given in the respective letters oI authority; and (2) private respondent was not the person responsible Ior
the negotiation and consummation oI the sale, instead it was Filomeno E. Huelgas, the PTA president Ior 1967-
1968 oI the Claro M. Recto High School. As a counterclaim, petitioner (then deIendant-appellant) demanded
the sum oI P4,000.00 as attorney's Iees and Ior moral damages.
ThereaIter, trial ensued. Private respondent, then plaintiII, testiIied as to the eIIorts undertaken by him to ensure
the consummation oI the sale. He recounted that it Iirst began at a meeting with RuIino Manotok at the oIIice oI
Fructuoso Ancheta, principal oI C.M. Recto High School. Atty. Dominador Bisbal, then president oI the PTA,
was also present. The meeting was set precisely to ask private respondent to negotiate the sale oI the school lot
and building to the City oI Manila. Private respondent then went to Councilor Mariano Magsalin, the author oI
the Ordinance which appropriated the money Ior the purchase oI said property, to present the project. He also
went to the Assessor's OIIice Ior appraisal oI the value oI the property. While these transpired and his letters oI
authority expired, RuIino Manotok always renewed the Iormer's authorization until the last was given, which
was to remain in Iorce until May 14, 1968. AIter securing the report oI the appraisal committee, he went to the
City Mayor's OIIice, which indorsed the matter to the Superintendent oI City Schools oI Manila. The latter
oIIice approved the report and so private respondent went back to the City Mayor's OIIice, which thereaIter
indorsed the same to the Municipal Board Ior appropriation. Subsequently, on April 26, 1968, Ordinance No.
6603 was passed by the Municipal Board Ior the appropriation oI the sum corresponding to the purchase price.
Petitioner received the Iull payment oI the purchase price, but private respondent did not receive a single
centavo as commission.
Fructuoso Ancheta and Atty. Dominador Bisbal both testiIied acknowledging the authority oI private
respondent regarding the transaction.
Petitioner presented as its witnesses Filomeno Huelgas and the petitioner's President, RuIino Manotok.
Huelgas testiIied to the eIIect that aIter being inducted as PTA president in August, 1967 he Iollowed up the
sale Irom the start with Councilor Magsalin until aIter it was approved by the Mayor on May 17, 1968. He also
said that he came to know RuIino Manotok only in August, 1968, at which meeting the latter told him that he
would be given a "gratiIication" in the amount oI P20,000.00 iI the sale was expedited.
RuIino Manotok conIirmed that he knew Huelgas and that there was an agreement between the two oI them
regarding the "gratiIication".
On rebuttal, Atty. Bisbal said that Huelgas was present in the PTA meetings Irom 1965 to 1967 but he never
oIIered to help in the acquisition oI said property. Moreover, he testiIied that Huelgas was aware oI the Iact that
it was private respondent who was negotiating the sale oI the subject property.
ThereaIter, the then Court oI First Instance (now, Regional Trial Court) rendered judgment sentencing petitioner
and/or RuIino Manotok to pay unto private respondent the sum oI P20,540.00 by way oI his commission Iees
with legal interest thereon Irom the date oI the Iiling oI the complaint until payment. The lower court also
ordered petitioner to pay private respondent the amount oI P4,000.00 as and Ior attorney's Iees.
9

Petitioner appealed said decision, but to no avail. Respondent Court oI Appeals aIIirmed the said ruling oI the
trial court.
10

Its Motion Ior Reconsideration having been denied by respondent appellate court in a Resolution dated June 22,
1987, petitioner seasonably elevated its case on Petition Ior Review on Certiorari on August 10, 1987 beIore
this Court, docketed as G.R. No. 78898.
Acting on said Petition, this Court issued a Minute Resolution
11
dated August 31, 1987 ordering private
respondent to comment on said Petition.
It appearing that the abovementioned Resolution was returned unserved with the postmaster's notation
"unclaimed", this Court in another Resolution
12
dated March 13, 1989, required petitioner to locate private
respondent and to inIorm this Court oI the present address oI private respondent within ten (10) days Irom
notice. As petitioner was unsuccessIul in its eIIorts to locate private respondent, it opted to maniIest that private
respondent's last address was the same as that address to which this Court's Resolution was Iorwarded.
Subsequently, this Court issued a Resolution dated May 3, 1989 dismissing petitioner's case on the ground that
the issues raised in the case at bar cannot be joined. Thus, the above-entitled case became Iinal and executory
by the entry oI judgment on May 3, 1989.
ThereaIter, on January 9, 1990 private respondent Iiled a Motion to Execute the said judgment beIore the court
oI origin. Upon discovery oI said development, petitioner veriIied with the court oI origin the circumstances by
which private respondent obtained knowledge oI the resolution oI this Court. Sensing a Iraudulent scheme
employed by private respondent, petitioner then instituted this instant Petition Ior RelieI, on August 30, 1990.
On September 13, 1990, said petition was amended to include, in the alternative, its petition to re-Iile its
Petition Ior Certiorari (G.R. No. 78898).
The sole issue to be addressed in this petition is whether or not private respondent is entitled to the Iive percent
(5) agent's commission.
It is petitioner's contention that as a broker, private respondent's job is to bring together the parties to a
transaction. Accordingly, iI the broker does not succeed in bringing the minds oI the purchaser and the vendor
to an agreement with respect to the sale, he is not entitled to a commission.
Private respondent, on the other hand, oppose petitioner's position maintaining that it was because oI his eIIorts
that a purchase actually materialized between the parties.
We rule in Iavor oI private respondent.
At Iirst sight, it would seem that private respondent is not entitled to any commission as he was not successIul
in consummating the sale between the parties, Ior the sole reason that when the Deed oI Sale was Iinally
executed, his extended authority had already expired. By this alone, one might be misled to believe that this
case squarely Ialls within the ambit oI the established principle that a broker or agent is not entitled to any
commission until he has successIully done the job given to him.
13

Going deeper however into the case would reveal that it is within the coverage oI the exception rather than oI
the general rule, the exception being that enunciated in the case oI Prats vs. Court of Appeals .
14
In the said
case, this Court ruled in Iavor oI claimant-agent, despite the expiration oI his authority, when a sale was Iinally
consummated.
In its decision in the abovecited case, this Court said, that while it was respondent court's (reIerring to the Court
oI Appeals) Iactual Iindings that petitioner Prats (claimant-agent) was not the eIIicient procuring cause in
bringing about the sale (prescinding Irom the Iact oI expiration oI his exclusive authority), still petitioner was
awarded compensation Ior his services. And We quote:
In equity, however, the Court notes that petitioner had diligently taken steps to bring back together respondent
Doronila and the SSS,
xxx xxx xxx
The court has noted on the other hand that Doronila Iinally sold the property to the Social Security System at
P3.25 per square meter which was the very same price counter-oIIered by the Social Security System and
accepted by him in July, 1967 when he alone was dealing exclusively with the said buyer long beIore Prats
came into the picture but that on the other hand Prats efforts somehow were instrumental in bringing them
together again and Iinally consummating the transaction at the same price oI P3.25 per square meter, although
such finali:ation was after the expiration of Prats extended exclusive authority
xxx xxx xxx
Under the circumstances, the Court grants in equity the sum oI One Hundred Thousand Pesos (P100,000.00) by
way oI compensation Ior his eIIorts and assistance in the transaction, which however was finali:ed and
consummated after the expiration of his exclusive authority . . . .
15
(Emphasis supplied.)
From the Ioregoing, it Iollows then that private respondent herein, with more reason, should be paid his
commission. While in Prats vs. Court of Appeals , the agent was not even the eIIicient procuring cause in
bringing about the sale, unlike in the case at bar, it was still held therein that the agent was entitled to
compensation. In the case at bar, private respondent is the eIIicient procuring cause Ior without his eIIorts, the
municipality would not have anything to pass and the Mayor would not have anything to approve.
In an earlier case,
16
this Court ruled that when there is a close, proximate and causal connection between the
agent's eIIorts and labor and the principal's sale oI his property, the agent is entitled to a commission.
We agree with respondent Court that the City oI Manila ultimately became the purchaser oI petitioner's property
mainly through the eIIorts oI private respondent. Without discounting the Iact that when Municipal Ordinance
No. 6603 was signed by the City Mayor on May 17, 1968, private respondent's authority had already expired, it
is to be noted that the ordinance was approved on April 26, 1968 when private respondent's authorization was
still in Iorce. Moreover, the approval by the City Mayor came only three days aIter the expiration oI private
respondent's authority. It is also worth emphasizing that Irom the records, the only party given a written
authority by petitioner to negotiate the sale Irom July 5, 1966 to May 14, 1968 was private respondent.
Contrary to what petitioner advances, the case oI anon vs. Brimo,
17
on which it heavily anchors its
justiIication Ior the denial oI private respondent's claim, does not apply squarely to the instant petition.
Claimant-agent in said case Iully comprehended the possibility that he may not realize the agent's commission
as he was inIormed that another agent was also negotiating the sale and thus, compensation will pertain to the
one who Iinds a purchaser and eventually eIIects the sale. Such is not the case herein. On the contrary, private
respondent pursued with his goal oI seeing that the parties reach an agreement, on the belieI that he alone was
transacting the business with the City Government as this was what petitioner made it to appear.
While it may be true that Filomeno Huelgas Iollowed-up the matter with Councilor Magsalin, the author oI
Municipal Ordinance No. 6603 and Mayor Villegas, his intervention regarding the purchase came only aIter the
ordinance had already been passed when the buyer has already agreed to the purchase and to the price Ior
which said property is to be paid. Without the eIIorts oI private respondent then, Mayor Villegas would have
nothing to approve in the Iirst place. It was actually private respondent's labor that had set in motion the
intervention oI the third party that produced the sale, hence he should be amply compensated.
WHEREFORE, in the light oI the Ioregoing and Iinding no reversible error committed by respondent Court, the
decision oI the Court oI Appeals is hereby AFFIRMED. The temporary restraining order issued by this Court in
its Resolution dated October 1, 1990 is hereby liIted.
SO ORDERED.
Narvasa, C.J., Padilla, Regalado and Nocon, JJ., concur.
|#| Footnotes
1 Rollo oI G.R. No. 94753, p. 12.
2 Ibid., p. 77.
3 Ibid., p. 47.
4 Rollo oI G.R. No. 78898, p. 12.
5 Supra, note 1 at p. 156.
6 Ibid ., p. 160.
7 Ibid ., p. 161.
8 Ibid ., p. 162.
9 Decision rendered by then Court oI First Instance, Branch VI, Manila in Civil Case No. 76997, Rollo, pp. 13-
18.
10 Penned by Associate Justice Vicente V. Mendoza and concurred in by Associate Justices Manuel C. Herrera
and Jorge S. Imperial. Rollo, pp. 19-28.
11 Supra, note 4 at p. 67.
12 Ibid., p. 69.
13 Ramos vs. Court oI Appeals, 63 SCRA 331 (1975).
14 81 SCRA 360 (1978).
15 Ibid., pp. 383-385.
16 Reyes vs. Manaoat, et al., 8 C.A. Rep. 2d 368 (1965).
17 42 Phil. 133 (1921).



G.R. No. 76969 1une 9, 1997
INLAND REALTY INVESTMENT SERVICE, INC. and ROMAN M. DE LOS REYES, petitioners,
vs.
HON. COURT OF APPEALS, GREGORIO ARANETA, INC. and 1. ARMANDO EDUQUE,
respondents.
HERMOSISIMA, 1R.,
Herein petitioners Inland Realty Investment Service, Inc. (hereaIter, "Inland Realty") and Roman M. de los
Reyes seek the reversal oI the Decision
1
oI the Intermediate Appellate Court (now Court oI Appeals)
2
which
aIIirmed the trial court's dismissal
3
oI petitioners' claim Ior unpaid agent's commission Ior brokering the sales
transaction involving 9,800 shares oI stock in Architects' Bldg., Inc. (hereaIter, "Architects"') between private
respondent Gregorio Araneta, Inc. (hereaIter, "Araneta, Inc.") as seller and StanIord Microsystems, Inc.
(hereaIter, "StanIord") as buyer.
Petitioners come to us with a two-Iold agenda: (1) to obtain Irom us a declaration that the trial court and the
respondent appellate court gravely erred when appreciating the Iacts oI the case by disregarding Exhibits "L," a
Letter dated October 28, 1976 signed by Gregorio Araneta II, renewing petitioners' authority to act as sales
agent Ior a period oI thirty (30) days Irom same date, and Exhibit "M," a Letter dated November 16, 1976
signed by petitioner de los Reyes, naming Iour (4) other prospective buyers, respectively; and (2) to obtain Irom
us a categorical ruling that a broker is automatically entitled to the stipulated commission merely upon securing
Ior, and introducing to, the seller the particular buyer who ultimately purchases Irom the Iormer the object oI
the sale, regardless oI the expiration oI the broker's contract oI agency and authority to sell.
BeIore we proceed to address petitioners' objectives, there is a need to unIold the Iacts oI the case. For that
purpose, we quote hereunder the Iindings oI Iact oI the Court oI Appeals with which petitioners agree, except as
to the respondent appellate court's non-inclusion oI the aIorementioned Exhibits "L" and "M":
From the evidence, the Iollowing Iacts appear undisputed: On September 16, 1975, deIendant corporation thru
its co-deIendant Assistant General Manager J. Armando Eduque, granted to plaintiIIs a 30-day authority to sell
its . . . 9,800 shares oI stock in Architects' Bldg., Inc. as Iollows:
September 16, 1975
TO WHOM IT MAY CONCERN:
This is to authorize Mr. R.M. de los Reyes, representing Inland Realty, to sell on a Iirst come Iirst served basis
the total holdings oI Gregorio Araneta, Inc. in Architects' |Bldg.|, Inc. equivalent to 98 or 9,800 shares oI
stock at the price oI P1,500.00 per share Ior a period oI 30 days.
(SGD.) J. ARMANDO EDUQUE
Asst. General Manager'
PlaintiII Inland Realty Investment Service, Inc. (Inland Realty Ior short) is a corporation engaged |in|, among
others . . . the real estate business |and| brokerages, duly licensed by the Bureau oI Domestic Trade . . . |Inland
Realty| planned their sales campaign, sending proposal letters to prospective buyers. One such prospective
buyer to whom a proposal letter was sent to was StanIord Microsystems, Inc. . . . |that| counter-proposed to buy
9,800 shares oIIered at P1,000.00 per share or Ior a total oI P9,800,000.00, P4,900,000.00 payable in Iive years
at 12 per annum interest until Iully paid.
Upon plaintiIIs' receipt oI the said counter-proposal, it immediately | sic | wrote deIendant a letter to register
StanIord Microsystems, Inc. as one oI its prospective buyers . . . DeIendant Araneta, Inc., thru its Assistant
General Manager J. Armando Eduque, replied that the price oIIered by StanIord was too low and suggested that
plaintiIIs see iI the price and terms oI payment can be improved upon by StanIord . . . Other prospective buyers
were submitted to deIendants among whom were Atty. Maximo F. Belmonte and Mr. Joselito Hernandez. The
authority to sell given to plaintiIIs by deIendants was extended several times: the Iirst being on October 2, 1975,
Ior 30 days Irom said date (Exh. "J"), the second on October 28, 1975 Ior 30 days Irom said date (Exh. "L") and
on December 2, 1975 Ior 30 days Irom said date (Exh. "K").
PlaintiII Roman de los Reyes, manager oI Inland Realty's brokerage division, who by contract with Inland
Realty would be entitled to 1/2 oI the claim asserted herein, testiIied that when his company was initially
granted the authority to sell, he asked Ior an exclusive authority and Ior a longer period but Armando Eduque
would not give, but according to this witness, the liIe oI the authority could always be extended Ior the purpose
oI negotiation that would be continuing.
On July 8, 1977, plaintiIIs Iinally sold the 9,800 shares oI stock
|in| Architects' |Bldg.|, Inc. to StanIord Microsystems, Inc. Ior P13,500,000.00 . .
On September 6, 1977, plaintiIIs demanded Iormally |Irom| deIendants, through a letter oI demand, Ior
payment oI their 5 broker|'s| commission at P13,500,000.00 or a total amount oI P675,000.00 . . . which was
declined by |deIendants| on the ground that the claim has no Iactual or legal basis.
4

Ascribing merit to private respondents' deIense that, aIter their authority to sell expired thirty (30) days Irom
December 2, 1975, or on January 1, 1976, petitioners abandoned the sales transaction and were no longer privy
to the consummation and documentation thereoI, the trial court dismissed petitioners' complaint Ior collection
oI unpaid broker's commission.
Petitioners appealed, but the Court oI Appeals was unswayed in the Iace oI evidence oI the expiration oI
petitioners' agency contract and authority to sell on January 1, 1976 and the consummation oI the sale to
StanIord on July 8, 1977 or more than one (1) year and Iive (5) months aIter petitioners' agency contract and
authority to sell expired. Respondent appellate court dismissed petitioners' appeal in this wise:
. . . The resolution would seem to hinge on the question oI whether plaintiII was instrumental in the Iinal
consummation oI the sale to StanIord which was the same name oI the company submitted to deIendants as a
prospective buyer although their price was considered by deIendant to be too low and deIendants wrote to
plaintiII iI the price may be improved upon by StanIord . . . This was on October 13, 1975. AIter that, there was
an extension Ior 30 days Irom October 28, 1975 oI the authority (Exh. "L") and another on December 2, 1975
Ior another 30 days Irom the said date . . . . There is nothing in the record or in the testimonial evidence that the
authority extended 30 days Irom the last date oI extension was ever reserved nor extended, nor has there been
any communication made to deIendants that the plaintiII was actually negotiating with StanIord a better price
than what was previously oIIered by it . . .
In Iact there was no longer any agency aIter the last extension. Certainly, the length oI time which had
transpired Irom the date oI last extension oI authority to the Iinal consummation oI the sale with StanIord oI
about one (1) year and Iive (5) months without any communication at all Irom plaintiIIs to deIendants with
respect to the suggestion or deIendants that StanIord's oIIer was too low and suggested iI plaintiIIs may make it
better. We have a case oI proposal and counter-proposal which would not constitute a deIinite closing oI the
transaction just because it was plaintiII who solely suggested to deIendants the name oI StanIord as buyer . . .
5

Unable to accept the dismissal oI its claim Ior unpaid broker's commission, petitioners Iiled the instant petition
Ior review asking us (1) to pass upon the Iactual issue oI the alleged extension oI their agency contract and
authority to sell and (2) to rule in Iavor oI a broker's automatic entitlement to the stipulated commission merely
upon securing Ior, and introducing to, the seller, the particular buyer who ultimately purchases Irom the Iormer
the object oI the sale, regardless oI the expiration oI the broker's contract oI agency and authority to sell.
We Iind Ior private respondents.
I
Petitioners take exception to the Iinding oI the respondent Court oI Appeals that their contract oI agency and
authority to sell expired thirty (30) days Irom its last renewal on December 2, 1975. They insist that, in the
Letter dated October 28, 1976, Gregorio Araneta III, in behalI oI Araneta, Inc., renewed petitioner Inland
Realty's authority to act as agent to sell the Iormer's 9,800 shares in Architects' Ior another thirty (30) days Irom
same date. This Letter dated October 28, 1976, petitioners claim, was marked as Exhibit "L" during the trial
proceedings beIore the trial court.
This claim is a blatant lie. In the Iirst place, petitioners have conspicuously Iailed to attach a certiIied copy oI
this Letter dated October 28, 1976. They have, in Iact, not attached even a machine copy thereoI. All they gave
this court is their word that said Letter dated October 28, 1976 does exist, and on that basis, they expect us to
accordingly rule in their Iavor.
Such naivety, this court will not tolerate. We will not treat lightly petitioners' attempt to mislead this court by
claiming that the Letter dated October 28, 1976 was marked as Exhibit "L" by the trial court, when the truth is
that the trial court marked as Exhibit "L", and the respondent Court oI Appeals considered as Exhibit "L,"
private respondent Araneta, Inc.'s Letter dated October 28, 1975 , not 1976 . Needless to say, this blatant
attempt to mislead this court, is contemptuous conduct that we sternly condemn.
II
The Letter dated November 16, 1976, claimed by petitioners to have been marked as Exhibit "M", has no
probative value, considering that its very existence remains under a heavy cloud oI doubt and that
hypothetically assuming its existence, its alleged content, namely, a listing oI Iour (4) other prospective buyers,
does not at all prove that the agency contract and authority to sell in Iavor oI petitioners was renewed or revived
aIter it expired on January 1, 1976. As in the case oI the Letter dated October 28, 1976, petitioners have
miserably Iailed to attach any copy oI the Letter dated November 16, 1976. A copy thereoI would not help
petitioners' Iailing cause, anyway, especially considering that said letter was signed by petitioner De los Reyes
and would thereIore take on the nature oI a selI-serving document that has no evidentiary value insoIar as
petitioners are concerned.
III
Finally, petitioners asseverate that, regardless oI whether or not their agency contract and authority to sell had
expired, they are automatically entitled to their broker's commission merely upon securing Ior and introducing
to private respondent Araneta, Inc. the buyer in the person oI StanIord which ultimately acquired ownership
over Araneta, Inc.'s 9,800 shares in Architects'.
Petitioners' asseverations are devoid oI merit.
It is understandable, though, why petitioners have resorted to a campaign Ior an automatic and blanket
entitlement to brokerage commission upon doing nothing but submitting to private respondent Araneta, Inc., the
name oI StanIord as prospective buyer oI the latter's shares in Architects'. OI course petitioners would advocate
as such because precisely petitioners did nothing but submit StanIord's name as prospective buyer. Petitioners
did not succeed in outrightly selling said shares under the predetermined terms and conditions set out by
Araneta, Inc., e.g., that the price per share is P1,500.00. They admit that they could not dissuade StanIord Irom
haggling Ior the price oI P1,000.00 per share with the balance oI 50 oI the total purchase price payable in Iive
(5) years at 12 interest per annum . From September 16, 1975 to January 1, 1976, when petitioners' authority
to sell was subsisting, iI at all, petitioners had nothing to show that they actively served their principal's
interests, pursued to sell the shares in accordance with their principal's terms and conditions, and perIormed
substantial acts that proximately and causatively led to the consummation oI the sale to StanIord oI Araneta,
Inc.'s 9,800 shares in Architects'.
The Court oI Appeals cannot be Iaulted Ior emphasizing the lapse oI more than one (1) year and Iive (5) months
between the expiration oI petitioners' authority to sell and the consummation oI the sale to StanIord, to be a
signiIicant index oI petitioners' non-participation in the really critical events leading to the consummation oI
said sale, i e ., the negotiations to convince StanIord to sell at Araneta, Inc.'s asking price, the Iinalization oI the
terms and conditions oI the sale, the draIting oI the deed oI sale, the processing oI pertinent documents, and the
delivery oI the shares oI stock to StanIord. Certainly, when the lapse oI the period oI more than one (1) year and
Iive (5) months between the expiration oI petitioners' authority to sell and the consummation oI the sale, is
viewed in the context oI the utter lack oI evidence oI petitioners' involvement in the negotiations between
Araneta, Inc. and StanIord during that period and in the subsequent processing oI the documents pertinent to
said sale, it becomes undeniable that the respondent Court oI Appeals did not at all err in aIIirming the trial
court's dismissal oI petitioners' claim Ior unpaid brokerage commission.
Petitioners were not the eIIicient procuring cause
6
in bringing about the sale in question an July 8, 1977 and
are, thereIore, not entitled to the stipulated broker's commission oI "5 on the total price."
WHEREFORE, the instant petition is HEREBY DISMISSED.
Costs against petitioners.
SO ORDERED.
Bellosillo, Jitug and Kapunan, JJ., concur. Padilla, J., is on leave.
(
Footnotes
1 In AC-G.R. CV No. 00221, promulgated on May 29, 1986, and penned by Associate Justices Floreliana
Castro-Bartolome with Associate Justices Jorge R. Coquia and Bienvenido C. Ejercito, concurring; Rollo , pp.
61-65.
2 Third Civil Cases Division.
3 Decision rendered on January 5, 1981 by the Court oI First Instance (now Regional Trial Court) oI Manila,
Branch VII.
4 Decision oI the Court oI Appeals dated May 29, 1986, pp. 2-3; Rollo , pp. 62-63.
5 Decision oI the Court oI Appeals dated May 29, 1986, pp. 3-5; Rollo , pp. 63-65.
6 Prats v. Court oI Appeals, 81 SCRA 360, 381 |1978|.