8/13/2019 Full Text. Case 66-71

1/17

Modes of extinguishment of agency:

Case 66 Coleongco vs Claparols

G.R. No. L-18616 March 31, 1964

VICENTE M. COLEONGCO, plaintiff-appellant, vs. EDUARDO L. CLAPAROLS,

defendant-appellee.

REYES, J.B.L., J.:

Appeal by plaintiff Vicente Coleongco from a decision of the Court of First Instance of

Negros Occidental (in its Civil Case No. 4170) dismissing plaintiff's action for damages,

and ordering him to pay defendant Eduardo Claparols the amount of P81,387.27 plus legal

interest from the filing of the counterclaim till payment thereof; P50,000 as moral and

compensatory damages suffered by defendant; and costs.

A writ of preliminary attachment for the sum of P100,000 was subsequently issued against

plaintiff's properties in spite of opposition thereto.

Plaintiff Coleongco, not being in conformity with the judgment appealed to this Court

directly, the claims involved being in excess of P200,000.

The antecedent facts as found by the trial court and shown by the records, are as follows:

Since 1951, defendant-appellee, Eduardo L. Claparols, operated a factory for the

manufacture of nails in Talisay, Occidental Negros, under the style of "Claparols Steel &

Nail Plant". The raw material, nail wire, was imported from foreign sources, specially from

Belgium; and Claparols had a regular dollar allocation therefor, granted by the Import

Control Commission and the Central Bank. The marketing of the nails was handled by the

"ABCD Commercial" of Bacolod, which was owned by a Chinaman named Kho

To.1wph1.t

Losses compelled Claparols in 1953 to look for someone to finance his imports of nail

wires. At first, Kho To agreed to do the financing, but on April 25, 1953, the Chinaman

introduced his compadre, appellant Vicente Coleongco, to the appellee, recommending

said appellant to be the financier in the stead of Kho To. Claparols agreed, and on April 25

of that year a contract (Exhibit B) was perfected between them whereby Coleongco

undertook to finance and put up the funds required for the importation of the nail wire,

which Claparols bound himself to convert into nails at his plant. It was agreed that

Coleongco would have the exclusive distribution of the product, and the "absolute care in

the marketing of these nails and the promotion of sales all over the Philippines", except the

Davao Agency; that Coleongco would "share the control of all the cash" from sales or

deposited in banks; that he would have a representative in the management; that all

contracts and transactions should be jointly approved by both parties; that proper books

would be kept and annual accounts rendered; and that profits and losses would be shared

"on a 50-50 basis". The contract was renewed from one year to year until 1958, and

Coleongco's share subsequently increased by 5% of the net profit of the factory (Exhibits

D, E, F).

8/13/2019 Full Text. Case 66-71

2/17

Two days after the execution of the basic agreement, Exhibit "B", on April 27, 1953,

Claparols executed in favor of Coleongco, at the latter's behest a special power of attorney

(Exhibit C) to open and negotiate letters of credit, to sign contracts, bills of lading, invoices,

and papers covering transactions; to represent appellee and the nail factory; and to accept

payments and cash advances from dealers and distributors. Thereafter, Coleongco also

became the assistant manager of the factory, and took over its business transactions,

while Claparols devoted most of his time to the nail manufacture processes.

Around mid-November of 1956, appellee Claparols was disagreeably surprised by service

of an alias writ of execution to enforce a judgment obtained against him by the Philippine

National Bank, despite the fact that on the preceding September he had submitted an

amortization plan to settle the account. Worried and alarmed, Claparols immediately left

for Manila to confer with the bank authorities. Upon arrival, he learned to his dismay that

the execution had been procured because of derogatory information against appellee that

had reached the bank from his associate, appellant Coleongco. On July 6, 1956, the latter,

without appellee's knowledge, had written to the bank

in connection with the verbal offer for the acquisition by me of the whole interest of Mr.

Eduardo L. Claparols in the Claparols Steel & Nail Plant and the Claparols Hollow Blocks

Factory" (Exhibit 36);

and later, on October 29, 1956, Coleongco had written again the bank another letter

(Exhibit 35), also behind the back of appellee, wherein Coleongco charged Claparols with

taking machines mortgaged to the bank, and added - .

In my humble personal opinion I presume that Mr. Eduardo L. Claparols is not serious in

meeting his obligations with your bank, otherwise he had not taken these machines and

equipments a sign of bad faith since the factory is making a satisfactory profit of my

administration.

Fortunately, Claparols managed to arrange matters with the bank and to have the

execution levy lifted. Incensed at what he regarded as disloyalty of his attorney-in-fact, he

consulted lawyers. The upshot was that appellee revoked the power of attorney (Exhibit

"C"), and informed Coleongco thereof (Exhibits T, T-1), by registered mail, demanding a

full accounting at the same time. Coleongco, as could be expected, protested these acts of

Claparols, but the latter insisted, and on the first of January, 1957 wrote a letter to

Coleongco dismissing him as assistant manager of the plant and asked C. Miller &Company, auditors, to go over the books and records of the business with a view to

adjusting the accounts of the associates. These last steps were taken in view of the

revelation made by his machinery superintendent, Romulo Agsam, that in the course of

the preceding New Year celebrations Coleongco had drawn Agsam aside and proposed

that the latter should pour acid on the machinery to paralyze the factory. The examination

by the auditors, summarized in Exhibits 80 and 87, found that Coleongco owed the

Claparols Nail Factory the amount of P87,387.37, as of June 30, 1957.

In the meantime, Claparols had found in the factory files certain correspondence in

February, 1955 between Coleongco and the nail dealer Kho To whereby the formerproposed to Kho that the latter should cut his monthly advances to Claparols from P2,000

to P1,000 a month, because

8/13/2019 Full Text. Case 66-71

3/17

I think it is time that we do our plan to take advantage of the difficulties of Eddie with the

banks for our benefit. If we can squeeze him more. I am sure that we can extend our

contract with him before it ends next year, and perhaps on better terms. If we play well our

cards we might yet own his factory (Exhibit 32);

and conformably to Coleongco's proposal, Kho To had written to Claparols that "due to

present business conditions" the latter could only be allowed to draw P1,000 a month

beginning April, 1955 (Exhibit 33).

As the parties could not amicably settle their accounts, Coleongco filed a suit against

Claparols charging breach of contract, asking for accounting, and praying for P528,762.19

as damages, and attorney's fees, to which Claparols answered, denying the charge, and

counter-claiming for the rescission of the agreement with Coleongco for P561,387.99 by

way of damages. After trial, the court rendered judgment, as stated at the beginning of this

opinion.

In this appeal, it is first contended by the appellant Coleongco that the power of attorney

(Exhibit "C") was made to protect his interest under the financing agreement (Exhibit "B")

and was one coupled with an interest that the appellee Claparols had no legal power to

revoke. This point can not be sustained. The financing agreement itself already contained

clauses for the protection of appellant's interest, and did not call for the execution of any

power of attorney in favor of Coleongco. But granting appellant's view, it must not be

forgotten that a power of attorney can be made irrevocable by contract only in the sense

that the principal may not recall it at his pleasure; but coupled with interest or not, the

authority certainly can be revoked for a just cause, such as when the attorney-in-fact

betrays the interest of the principal, as happened in this case. It is not open to serious

doubt that the irrevocability of the power of attorney may not be used to shield the

perpetration of acts in bad faith, breach of confidence, or betrayal of trust, by the agent for

that would amount to holding that a power coupled with an interest authorizes the agent to

commit frauds against the principal.

Our new Civil Code, in Article 1172, expressly provides the contrary in prescribing that

responsibility arising from fraud is demandable in all obligations, and that any waiver of

action for future fraud is void. It is also on this principle that the Civil Code, in its Article

1800, declares that the powers of a partner, appointed as manager, in the articles of co-

partnership are irrevocable without just or lawful cause; and an agent with power coupledwith an interest can not stand on better ground than such a partner in so far as

irrevocability of the power is concerned.

That the appellee Coleongco acted in bad faith towards his principal Claparols is, on the

record, unquestionable. His letters to the Philippine National Bank (Exhibits 35 and 36)

attempting to undermine the credit of the principal and to acquire the factory of the latter,

without the principal's knowledge; Coleongco's letter to his cousin, Kho To (Exhibit 32),

instructing the latter to reduce to one-half the usual monthly advances to Claparols on

account of nail sales in order to squeeze said appellee and compel him to extend the

contract entitling Coleongco to share in the profits of the nail factory on better terms, andultimately "own his factory", a plan carried out by Kho's letter, Exhibit 33, reducing the

advances to Claparols; Coleongco's attempt to, have Romulo Agsam pour acid on the

8/13/2019 Full Text. Case 66-71

4/17

machinery; his illegal diversion of the profits of the factory to his own benefit; and the

surreptitious disposition of the Yates band resaw machine in favor of his cousin's Hong

Shing Lumber Yard, made while Claparols was in Baguio in July and August of 1956, are

plain acts of deliberate sabotage by the agent that fully justified the revocation of the

power of attorney (Exhibit "C") by Claparols and his demand for an accounting from his

agent Coleongco.

Appellant attempts to justify his letter to the Philippine National Bank (Exhibits 35 and 36),

claiming that Claparols' mal-administration of the business endangered the security for the

advances that he had made under the financing contract (Exhibit "B"). But if that were the

case, it is to be expected that Coleongco would have first protested to Claparols himself,

which he never did. Appellant likewise denies the authorship of the letter to Kho (Exhibit

32) as well as the attempt to induce Agsam to damage the machinery of the factory.

Between the testimony of Agsam and Claparols and that of Coleongco, the court below

whose to believe the former, and we see no reason to alter the lower court's conclusion on

the value of the evidence before it, considering that Kho's letter to Claparols (Exhibit 33)

plainly corroborates and dovetails with the plan outlined in Coleongco's own letter (Exhibit

32), signed by him, and that the credibility of Coleongco is affected adversely by his own

admission of his having been previously convicted of estafa (t.s.n., pp. 139, 276), a crime

that implies moral turpitude. Even disregarding Coleongco's letter to his son-in-law (Exhibit

82) that so fully reveals Coleongco's lack of business scruples, the clear preponderance of

evidence is against appellant.

The same remarks apply to the finding of the trial court that it was appellant Coleongco,

and not Claparols, who disposed of the band resawing equipment, since said machine was

received in July, 1956 and sold in August of that year to the Hong Shing Lumber Co.,

managed by appellant's cousin Vicente Kho. The untruth of Coleongco's charge that

Claparols, upon his return from Baguio in September, 1956, admitted having sold the

machine behind his associate's back is further evidenced by (a) Coleongco's letter, Exhibit

"V", dated October 29, 1956, inquiring the whereabouts of the resaw equipment from

Claparols (an inquiry incompatible with Claparols' previous admission); (b) by the

undenied fact that the appellee was in Baguio and Coleongco was acting for him during

the months of July and August when the machine was received and sold; and (c) the fact

that as between the two it is Coleongco who had a clear interest in selling the sawing

machine to his cousin Kho To's lumber yard. If Claparols wished to sell the machine

without Coleongco's knowledge, he would not have picked the latter's cousin for a buyer.

The action of plaintiff-appellant for damages and lost profits due to the discontinuance of

the financing agreement, Exhibit "B", may not prosper, because the record shows that the

appellant likewise breached his part of the contract. It will be recalled that paragraph 2 of

the contract, Exhibit "B", it was stipulated:

That the Party of the Second Part (Coleongco) has agreed to finance and put up all the

necessary money which may be needed to pay for the importation of the raw materials

needed by such nail factory and allocated by the ICC from time to time, either in cash of

with whatever suitable means which the Party of the Second Part may be able to make by

suitable arrangements with any well-known banking institution recognized by the CentralBank of the Philippines.

8/13/2019 Full Text. Case 66-71

5/17

Instead of putting up all the necessary money needed to finance the imports of raw

material, Coleongco merely advanced 25% in cash on account of the price and had the

balance covered by surety agreements executed by Claparols and others as solidary,

(joint and several) guarantors (see Exhibits G, H, I). The upshot of this arrangement was

that Claparols was made to shoulder 3/4 of the payment for the imports, contrary to the

financing agreement. Paragraph 11 of the latter expressly denied Coleongco any power or

authority to bind Claparols without previous consultation and authority. When the balances

for the cost of the importations became due, Coleongco, in some instances, paid it with the

dealers' advances to the nail factory against future sales without the knowledge of

Claparols (Exhibits "K" to K-11, K-13). Under paragraphs 8 and 11 of the financing

agreement, Coleongco was to give preference to the operating expenses before sharing

profits, so that until the operating costs were provided for, Coleongco had no right to apply

the factory's income to pay his own obligations.

Again, the examination of the books by accountant Atienza of C. Miller and Co., showed

that from 1954 onwards Coleongco (who had the control of the factory's cash and bank

deposits, under Paragraph 11 of Exhibit "B") never liquidated and paid in full to Claparols

his half of the profits, so that by the end of 1956 there was due to Claparols P38,068.41 on

this account (Exhibit 91). For 1957 to 1958 Claparols financed the imports of nail wire

without the help of appellant, and in view of the latter's infringement of his obligations, his

acts of disloyalty previously discussed, and his diversions of factory funds (he even bought

two motor vehicles with them), we find no justification for his insistence in sharing in the

factory's profit for those years, nor for the restoration of the revoked power of attorney.

The accountant's reports and testimony (specially Exhibits 80 to 87) prove that as of June

30, 1957, Coleongco owed to Claparols the sum of P83,466.34 that after some adjustment

was reduced to P81,387.37, practically accepted even by appellant's auditor. The alleged

discrepancies between the general ledger and the result thus arrived at was satisfactorily

explained by accountant Atienza in his testimony (t.s.n., 1173-1178).

No error was, therefore, committed by the trial court in declaring the financing contract

(Exh. B) properly resolved by Claparols or in rendering judgment against appellant in favor

of appellee for the said amount of P81,387.37. The basic rule of contracts requires parties

to act loyally toward each other in the pursuit of the common end, and appellant clearly

violated the rule of good faith prescribed by Art. 1315 of the new Civil Code.

The lower court also allowed Claparols P50,000 for damages, material, moral, andexemplary, caused by the appellant Coleongco's acts in maliciously undermining

appellee's credit that led the Philippine National Bank to secure a writ of execution against

Claparols. Undeniably, the attempts of Coleongco to discredit and "squeeze" Claparols out

of his own factory and business could not but cause the latter mental anguish and serious

anxiety, as found by the court below, for which he is entitled to compensation; and the

malevolence that lay behind appellee's actions justified also the imposition of exemplary or

deterrent damages (Civ. Code, Art. 2232). While the award could have been made larger

without violating the canons of justice, the discretion in fixing such damages primarily lay in

the trial court, and we feel that the same should be respected.

IN VIEW OF THE FOREGOING, the decision appealed from is affirmed. Costs against

appellant Vicente Coleongco.

8/13/2019 Full Text. Case 66-71

6/17

Case 67 Dy Buncio vs Ong Guan Can

G.R. No. L-40681 October 2, 1934

DY BUNCIO & COMPANY, INC., plaintiff-appelle, vs. ONG GUAN CAN, ET AL.,

defendants. JUAN TONG and PUA GIOK ENG, appellants.

HULL, J.:

This is a suit over a rice mill and camarin situated at Dao, Province of Capiz. Plaintiff

claims that the property belongs to its judgment debtor, Ong Guan Can, while defendants

Juan Tong and Pua Giok Eng claim as owner and lessee of the owner by virtue of a deed

dated July 31, 1931, by Ong Guan Can, Jr.

After trial the Court of First Instance of Capiz held that the deed was invalid and that the

property was subject to the execution which has been levied on said properties by the

judgment creditor of the owner. Defendants Juan Tong and Pua Giok bring this appeal and

insist that the deed of the 31st of July, 1931, is valid.

The first recital of the deed is that Ong Guan Can, Jr., as agent of Ong Guan Can, the

proprietor of the commercial firm of Ong Guan Can & Sons, sells the rice-mill and camarin

for P13,000 and gives as his authority the power of attorney dated the 23d of May, 1928, a

copy of this public instrument being attached to the deed and recorded with the deed in the

office of the register of deeds of Capiz. The receipt of the money acknowledged in the

deed was to the agent, and the deed was signed by the agent in his own name and

without any words indicating that he was signing it for the principal.

Leaving aside the irregularities of the deed and coming to the power of attorney referred to

in the deed and registered therewith, it is at once seen that it is not a general power of

attorney but a limited one and does not give the express power to alienate the properties

in question. (Article 1713 of the Civil Code.)

Appellants claim that this defect is cured by Exhibit 1, which purports to be a general

power of attorney given to the same agent in 1920. Article 1732 of the Civil Code is silent

over the partial termination of an agency. The making and accepting of a new power of

attorney, whether it enlarges or decreases the power of the agent under a prior power ofattorney, must be held to supplant and revoke the latter when the two are inconsistent. If

the new appointment with limited powers does not revoke the general power of attorney,

the execution of the second power of attorney would be a mere futile gesture.lawphi1.net

The title of Ong Guan Can not having been divested by the so-called deed of July 31,

1931, his properties are subject to attachment and execution.

The judgment appealed from is therefore affirmed. Costs against appellants. So ordered.

Case 68 New Manila Lumber Co., Inc. vs. Republic

G.R. No. L-14248 April 28, 1960

8/13/2019 Full Text. Case 66-71

7/17

NEW MANILA LUMBER COMPANY, INC., plaintiff-appellant, vs.

REPUBLIC OF THE PHILIPPINES, defendant-appellee.

GUTIERREZ DAVID, J.:

Appeal from an order of dismissal of the Court of First Instance of Manila.

On May 8, 1958, the plaintiff lumber company filed in the court below a complaint against

the defendant Republic of the Philippines for the recovery of a sum of money. The

complaint alleges, among other things, that defendant, thru the Director of Schools,

entered into a contract with one Alfonso Mendoza to build two school houses; that plaintiff

furnished the lumber materials in the construction of the said buildings; that prior to the

payment by defendant of any amount due the contractor, the latter executed powers of

attorney in favor of the plaintiff "constituting it as his sole, true and lawful attorney-in-fact

with specific and exclusive authority to collect and receive from the defendant any and all

amounts due or may be due to said contractor from the defendant in connection with the

construction of the aforesaid school buildings, as may be necessary to pay materials

supplied by the plaintiff"; and that originals of the powers of attorney were received by

defendant (thru the Director of Public Schools) who promised to pay plaintiff, but that it,

nevertheless, paid the contractor several amounts on different occasions without first

making payment to plaintiff. The complaint, therefore, prays that defendant be ordered to

pay plaintiff the sum of P18,327.15, the unpaid balance of the cost of lumber supplied and

used in the construction of the school buildings, with interest at the legal rate from the date

same was due, plus attorney's fees and costs.

Served with a copy of the complaint, the defendant Republic of the Philippines, through the

Solicitor General, moved to dismiss the same on the grounds (1) that it does not allege a

sufficient cause of action, (2) that plaintiff has no right to institute the action under Act No.

3688, and (3) that the court is without jurisdiction to entertain the same against the

defendant.

The motion was opposed by plaintiff, but after hearing, the court below holding that

"there is no juridical tie between plaintiff-supplier and defendant-owner sustained the

motion to dismiss on the first ground, and on June 23, 1958 issued an order dismissing

plaintiff's complaint. Its motion for reconsideration having been denied, plaintiff took the

present appeal.

The appeal is without merit.

Briefly stated, plaintiff's complaint seeks to enforce against the Republic of the Philippines

a money claim for the payment of materials it furnished for the construction of two public

school buildings undertaken by contractor Alfonso Mendoza, on the basis of powers of

attorney executed by the latter authorizing said plaintiff to collect and receive from

defendant Republic any amount due or may be due to said contractor as contract price for

the payment of the materials so supplied.

Section one of Public Act No. 3688, entitled "An Act for the protection of personsfurnishing material and labor for the construction of public works", reads in part as follows:

8/13/2019 Full Text. Case 66-71

8/17

SECTION 1. Any person, partnership or corporation entering into a formal contract with the

Government of the Philippine Islands for the construction of any public building, or the

prosecution and completion of any public work, or for repairs upon any public building or

public work, shall be required, before commencing such work, to execute the usual penal

bond, with good and sufficient sureties, with the additional obligation that such contractor

or his or its sub-contractors shall promptly make payments to all persons supplying him or

them with labor and materials in the prosecution of the work provided for in such contract;

and any person, company or corporation who has furnished labor or materials in the

construction or repair of any public building or public work, and payment for which has not

been made, shall have the right to intervene and be made a party to any action instituted

by the Government of the Philippine Islands on the bond of the contractor, and to have

their rights and claims adjudicated in such action and judgment rendered thereon, subject,

however, to the priority of the claim and judgment of the Government of the Philippine

Islands. If the full amount of the liability of the surety on said bond is insufficient to pay the

full amount of said claims and demands, then, after paying the full amount due the

Government, the remainder shall be distributed pro rata among said intervenors. If no suit

should be brought by the Government of the Philippine Islands within six months from the

completion and final settlement of said contract, or if the Government expressly waives its

right to institute action on the penal bond, then the person or persons supplying the

contractor with labor and materials shall, upon application therefor, and furnishing affidavit

to the department under the direction of which said work has been prosecuted, that labor

or materials for the prosecution of such work have been supplied by him or them, and

payment for which has not been made, be furnished with a certified copy of said contract

and bond, upon which he or they shall have a right of action, and shall be, and are hereby,

authorized to bring suit in the name of the Government of the Philippine Islands in the

Court of First Instance in the district in which said contract was to be performed and

executed, and not elsewhere, for his or their use and benefit, against said contractor and

his sureties, and to prosecute the same to final judgment and execution, . . . .

In the case at bar, it is not disputed that defendant Republic has already instituted a suit

against the contractor for the forfeiture of the latter's bond posted to secure the faithful

performance of stipulations in the construction contract with regards to one of the two

school buildings (Civil Case No. 26815, Court of First Instance of Manila). The contractor

has a similar bond with respect to the other school building. Pursuant to Act 3688,

plaintiff's legal remedy is, not to bring suit against the Government, there being no privity

of contract between them, but to intervene in the civil case above-mentioned as an unpaid

supplier of materials to the contractor, or file an action in the name of the Republic againstsaid contractor on the latter's other bond.

Plaintiff argues that an implied contract between it and the defendant Republic arose,

when the latter, thru the Director of Public Schools, on being furnished copies of the

powers of attorney executed by the contractor, promised to make payment to plaintiff for

the materials supplied for the construction of the school buildings. It will be observed,

however, that defendant was not a party to the execution of the powers of attorney.

Besides, the Director of Public Schools had no authority to bind defendant on the payment.

While he was the official who entered into contract with the contractor for the construction

of the school buildings, payment of the contract price was not within his exclusive controlbut subject to approval under existing laws not only by the Department Head (Sec. 568,

Rev. Adm, Code), but also by the Auditor General.

8/13/2019 Full Text. Case 66-71

9/17

At any rate, under the facts alleged in the complaint, the powers of attorney in question

made plaintiff the contractor's agent in the collection of whatever amounts may be due the

contractor from the defendant. And since it is also alleged that, after the execution of the

powers of attorney, the contractor (principal) demanded and collected from defendant the

money the collection of which he entrusted to plaintiff, the agency apparently has already

been revoked. (Articles 1920 and 1924, new Civil Code.)

The point is made by plaintiff that the powers of attorney executed by the contractor in its

favor are irrevocable and are coupled with interest. But even supposing that they are, still

their alleged irrevocability cannot affect defendant who is not a party thereto. They are

obligatory only on the principal who executed the agency.

Plaintiff also cites Article 1729 of the new Civil Code, which provides that

Those who put their labor upon or furnish materials for a piece of work undertaken by the

contractor have an action against the owner up to the amount owing from the latter to the

contractor at the time the claim is made. . . .

This article, however, as expressly provided in its last paragraph, "is subject to the

provisions of special law." The special law governing in the present case, as already seen,

is Act No. 3688.

There is another reason for upholding the order of dismissal complained of. Plaintiff's

action being a claim for sum of money arising from an alleged implied contract between it

and the Republic of the Philippines, the same should have been lodged with the Auditor

General. The state cannot be sued without its consent.

In view of the foregoing, the order of dismissal appealed from is affirmed, with costs

against plaintiff-appellant.

Case 69 Infante vs Cunanan

G.R. No. L-5180 August 31, 1953

CONSEJO INFANTE, petitioner, vs.

JOSE CUNANAN, JUAN MIJARES and THE COURT OF APPEALS, SECOND DIVISION,respondents.

BAUTISTA ANGELO, J.:

This is a petition for review of a decision of the Court of appeals affirming the judgement of

the court of origin which orders the defendant to pay the plaintiffs the sum of P2,500 with

legal interest thereon from February 2,1949 and the costs of action.

Consejo Infante, defendant herein, was the owner of two parcels of land, together with a

house built thereon, situated in the City of Manila and covered by Transfer Certificate ofTitle No. 61786. On or before November 30, 1948, she contracted the services of Jose

Cunanan and Juan Mijares, plaintiff herein, to sell the above-mentioned property for a

8/13/2019 Full Text. Case 66-71

10/17

price of P30,000 subject to the condition that the purchaser would assume the mortgage

existing thereon in the favor of the Rehabilitation Finance Corporation. She agreed to pay

them a commission of 5 per cent on the purchase price plus whatever overprice they may

obtain for the property. Plaintiffs found one Pio S. Noche who was willing to buy the

property under the terms agreed upon with defendant, but when they introduced him to

defendant, the latter informed 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,

defendant dealt directly with Pio S. Noche selling to him the property for P31,000. Upon

learning this transaction, plaintiffs demanded from defendant the payment of their

commission, but she refused and so they brought the present action.

Defendant admitted having contracted the services of the plaintiffs to sell her property as

set forth in the complaint, but stated that she agreed to pay them a commission of P1,200

only on condition that they buy her a property somewhere in Taft Avenue to where she

might transfer after selling her property. Defendant avers that while plaintiffs took steps to

sell her property as agreed upon, they sold the property at Taft Avenue to another party

and because of this failure it was agreed that the authority she had given them be

cancelled.

The lower court found that the preponderance of evidence was in favor of the plaintiffs and

rendered judgement sentensing the defendant to pay the plaintiff the sum of P2,500 with

legal interest thereon from February 2,1949 plus the costs of action. This decision was

affirmed in toto by the Court of Appeals.

There is no dispute that respondents were authorized by petitioner to sell her property for

the sum of P30,000 with the understanding that they will be given a commission of 5

percent plus whatever overprice they may obtain for the property. Petitioner, however,

contends that authority has already been withdrawn on November 30, 1948 when, by the

voluntary act of respondents, they executed a document stating that said authority shall be

considered cancelled and without any effect, so that when petitioner sold the property to

Pio S. Noche on December 20, 1948, she was already free from her commitment with

respondents and, therefore, was not in duty bound to pay them any commission for the

transaction..

If the facts 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 originalauthority 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 fact 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 for 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

8/13/2019 Full Text. Case 66-71

11/17

been cancelled in a written statement. The rule on this matter is that "When the terms of

an agreement have been reduced to writing, it is to be considered as containing all those

terms, and, therefore, there can be, between parties and their successors in interest, no

evidence of the terms of the agreement other than the contents of the writing." (Section 22,

Rule 123, Rules of Court.) The only exceptions to this rule are: "(a)Where a mistake or

imperfection of the writing, or its failure to express the true intent and agreement of the

parties, or the validity of 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 of the cases excepted, for there is nothing therein that has been

put in issue by respondents in their complaint. The terms of 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 of the parties.

But even disregarding the oral evidence adduced by respondents in contravention of the

parole evidence rule, we are, however, of the opinion that there is enough justification for

the conclusion reached by the lower court as well as by the Court of Appeals to the effect

that respondents are entitled to the commission originally agreed upon. It is a fact found by

the Court of Appeals that after petitioner had given the written authority to respondents to

sell her land for the sum of P30,000, respondents found a buyer in the person of 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 of petitioner. But the latter, perhaps by

way of 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 of the

written authority.

That petitioner had changed her mind even if respondents had found a buyer who was

willing to close the deal, is a matter that would not give rise to a legal consequence if

respondents agree to call off the transaction in deference to the request of the petitioner.

But the situation varies if one of the parties takes advantage of the benevolence of the

other and acts in a manner that would promote his own selfish interest. This act is unfair

as would amount to bad faith. 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 of the services rendered by

respondents, but believing that she could evade payment of their commission, she made

use of a ruse by inducing them to sign the deed of cancellation Exhibit 1. This act of

subversion cannot be sanctioned and cannot serve as basis for petitioner to escape

payment of the commission agreed upon.

Wherefore, the decision appealed from is hereby affirmed, with costs against petitioner.

Separate Opinions

LABRADOR, J., 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 of 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 toalter or vary the terms of the document. This document was merely a withdrawal of the

8/13/2019 Full Text. Case 66-71

12/17

authority granted the petitioner to sell the property, not an agreement that they shall not be

paid their commission.

Case 70 Valera vs Velasco

G.R. No. L-28050 March 13, 1928

FEDERICO VALERA, plaintiff-appellant, vs. MIGUEL VELASCO, defendant-appellee.

VILLA-REAL, J.:

This is an appeal taken by Federico Valera from the judgment of the Court of First

Instance of Manila dismissing his complaint against Miguel Velasco, on the ground that he

has not satisfactorily proven his right of action.

In support of his appeal, the appellant assigns the following alleged as committed by the

trial court in its judgment, to wit: (1) The lower court erred in holding that one of the ways

of terminating an agency is by the express or tacit renunciation of the agent; (2) the lower

court erred in holding that the institution of a civil action and the execution of the judgment

obtained by the agent against his principal is but renunciation of the powers conferred on

the agent; (3) the lower erred in holding that, even if the sale by Eduardo Hernandez to the

plaintiff Federico Valera be declared void, such a declaration could not prevail over the

rights of the defendant Miguel Velasco inasmuch as the right redemption was exercised by

neither Eduardo Hernandez nor the plaintiff Federico Valera; (4) the lower court erred in

not finding that the defendant Miguel Velasco was, and at present is, an authorized

representative of the plaintiff Federico Valera; (5) the lower court erred in not annulling the

sale made by the sheriff at public auction to defendant Miguel Velasco, Exhibit K; (6) the

lower court erred in failing to annul the sale executed by Eduardo Hernandez to the

plaintiff Federico Valera, Exhibit C; (7) the lower court erred in not annulling Exhibit L, that

is, the sale at public auction of the right to repurchase the land in question to Salvador

Vallejo; (8) the lower court erred in not declaring Exhibit M null and void, which is the sale

by Salvador Vallejo to defendant Miguel Velasco; (9) the lower court erred in not ordering

the defendant Miguel Velasco to liquidate his accounts as agent of the plaintiff Federico

Valera; (10) the lower court erred in not awarding plaintiff the P5,000 damages prayed for.

The pertinent facts necessary for the solution of the questions raised by the above quoted

assignments of error are contained in the decision appealed from and are as follows:

By virtue of the powers of attorney, Exhibits X and Z, executed by the plaintiff on April 11,

1919, and on August 8, 1922, the defendant was appointed attorney-in-fact of the said

plaintiff with authority to manage his property in the Philippines, consisting of the usufruct

of a real property located of Echague Street, City of Manila.

The defendant accepted both powers of attorney, managed plaintiff's property, reported

his operations, and rendered accounts of his administration; and on March 31, 1923

presented exhibit F to plaintiff, which is the final account of his administration for said

month, wherein it appears that there is a balance of P3,058.33 in favor of the plaintiff.

The liquidation of accounts revealed that the plaintiff owed the defendant P1,100, and as

misunderstanding arose between them, the defendant brought suit against the plaintiff,

8/13/2019 Full Text. Case 66-71

13/17

civil case No. 23447 of this court. Judgment was rendered in his favor on March 28, 1923,

and after the writ of execution was issued, the sheriff levied upon the plaintiff's right of

usufruct, sold it at public auction and adjudicated it to the defendant in payment of all of his

claim.

Subsequently, on May 11, 1923, the plaintiff sold his right of redemption to one Eduardo

Hernandez, for the sum of P200 (Exhibit A). On September 4, 1923, this purchaser

conveyed the same right of redemption, for the sum of P200, to the plaintiff himself,

Federico Valera (Exhibit C).

After the plaintiff had recovered his right of redemption, one Salvador Vallejo, who had an

execution upon a judgment against the plaintiff rendered in a civil case against the latter,

levied upon said right of redemption, which was sold by the sheriff at public auction to

Salvador Vallejo for P250 and was definitely adjudicated to him. Later, he transferred said

right of redemption to the defendant Velasco. This is how the title to the right of usufruct to

the aforementioned property later came to vest the said defendant.

As the first two assignments of error are very closely related to each other, we will

consider them jointly.

Article 1732 of the Civil Code reads as follows:

Art. 1732. Agency is terminated:

1. By revocation;

2. By the withdrawal of the agent;

3. By the death, interdiction, bankruptcy, or insolvency of the principal or of the agent.

And article 1736 of the same Code provides that:

Art. 1736. An agent may withdraw from the agency by giving notice to the principal. Should

the latter suffer any damage through the withdrawal, the agent must indemnify him

therefore, unless the agent's reason for his withdrawal should be the impossibility of

continuing to act as such without serious detriment to himself.

In the case of De la Pea vs. Hidalgo (16 Phil., 450), this court said laid down the following

rule:

1. AGENCY; ADMINISTRATION OF PROPERTY; IMPLIED AGENCY. When the agent

and administrator of property informs his principal by letter that for reasons of health and

medical treatment he is about to depart from the place where he is executing his trust and

wherein the said property is situated, and abandons the property, turns it over to a third

party, renders accounts of its revenues up to the date on which he ceases to hold his

position and transmits to his principal statement which summarizes and embraces all the

balances of his accounts since he began the administration to the date of the terminationof his trust, and, without stating when he may return to take charge of the administration of

the said property, asks his principal to execute a power of attorney in due form in favor of a

8/13/2019 Full Text. Case 66-71

14/17

transmit the same to another person who took charge of the administration of the said

property, it is but reasonable and just to conclude that the said agent had expressly and

definitely renounced his agency and that such agency duly terminated, in accordance with

the provisions of article 1732 of the Civil Code, and, although the agent in his

aforementioned letter did not use the words "renouncing the agency," yet such words,

were undoubtedly so understood and accepted by the principal, because of the lapse of

nearly nine years up to the time of the latter's death, without his having interrogated either

the renouncing agent, disapproving what he had done, or the person who substituted the

latter.

The misunderstanding between the plaintiff and the defendant over the payment of the

balance of P1,000 due the latter, as a result of the liquidation of the accounts between

them arising from the collections by virtue of the former's usufructuary right, who was the

principal, made by the latter as his agent, and the fact that the said defendant brought suit

against the said principal on March 28, 1928 for the payment of said balance, more than

prove the breach of the juridical relation between them; for, although the agent has not

expressly told his principal that he renounced the agency, yet neither dignity nor decorum

permits the latter to continue representing a person who has adopted such an antagonistic

attitude towards him. When the agent filed a complaint against his principal for recovery of

a sum of money arising from the liquidation of the accounts between them in connection

with the agency, Federico Valera could not have understood otherwise than that Miguel

Velasco renounced the agency; because his act was more expressive than words and

could not have caused any doubt. (2 C. J., 543.) In order to terminate their relations by

virtue of the agency the defendant, as agent, rendered his final account on March 31, 1923

to the plaintiff, as principal.

Briefly, then, the fact that an agent institutes an action against his principal for the recovery

of the balance in his favor resulting from the liquidation of the accounts between them

arising from the agency, and renders and final account of his operations, is equivalent to

an express renunciation of the agency, and terminates the juridical relation between them.

If, as we have found, the defendant-appellee Miguel Velasco, in adopting a hostile attitude

towards his principal, suing him for the collection of the balance in his favor, resulting from

the liquidation of the agency accounts, ceased ipso facto to be the agent of the plaintiff-

appellant, said agent's purchase of the aforesaid principal's right of usufruct at public

auction held by virtue of an execution issued upon the judgment rendered in favor of the

former and against the latter, is valid and legal, and the lower court did not commit thefourth and fifth assignments of error attributed to it by the plaintiff-appellant.

In regard to the third assignment of error, it is deemed unnecessary to discuss the validity

of the sale made by Federico Valera to Eduardo Hernandez of his right of redemption in

the sale of his usufructuary right made by the sheriff by virtue of the execution of the

judgment in favor of Miguel Velasco and against the said Federico Valera; and the same

thing is true as to the validity of the resale of the same right of redemption made by

Eduardo Hernandez to Federico Valera; inasmuch as Miguel Velasco's purchase at public

auction held by virtue of an execution of Federico Valera's usufructuary right is valid and

legal, and as neither the latter nor Eduardo Hernandez exercised his right of redemptionwithin the legal period, the purchaser's title became absolute.

8/13/2019 Full Text. Case 66-71

15/17

8/13/2019 Full Text. Case 66-71

16/17

In their lifetime the spouses Buenaventura Dayao and Eugenia Vega acquired by

homestead patent a parcel of land situated at barrio Gabaldon, municipality of Muoz,

province of Nueva Ecija, containing an area of 14.8413 hectares covered by original

certificate of title No. 1187 (Exhibit C). On 29 October 1930 they executed a power of

attorney authorizing Eustaquio Bayuga to engage the services of an attorney to prosecute

their case against Leonardo Gambito for annulment of a contract of sale of the parcel of

land (civil No. 5787 of the same court) and after the termination of the case in their favor to

sell it, and from the proceeds of the sale to deduct whatever expenses he had incurred in

the litigation (Exhibit B). On 14 March 1934 Buenaventura Dayao died leaving his wife

Eugenia Vega and children Pablo, Teodoro, Fortunata and Juliana, all surnamed Dayao.

On 21 march 1939 his four children executed a deed of sale conveying 12.8413 hectares

of the parcel of land to the appellants, the spouses Manuel Buason and Lolita M. Reyes

(Exhibit A). Their mother Eugenia Vega affixed her thumbmark to the deed of sale as

witness (Exhibit A). The appellants took possession of the parcel of land through their

tenants in 1939. On 18 July 1944 Eustaquio Bayuga sold 8 hectares of the same parcel of

land to the spouses Mariano Panuyas (appellee herein) and Sotera B. Cruz (Exhibit D).

Eustaquio Bayuga died on 25 March 1946 and Eugenia Vega in 1954.

The appellants and the appellee claim ownership to the same parcel of land. In their

complaint the appellants prayed that the appellee be ordered to deliver possession of the

part of the parcel of land held by him; that the deed of sale of that part of the parcel of land

held by the appellee executed by Eustaquio Bayuga in his favor and of his wife (Exhibit D)

be declared null and void and that transfer certificate of title No. 8419 issued in their name

be cancelled; that the deed of sale of the parcel of land executed by the children and heirs

of Buenaventura Dayao in their favor (Exhibit A) be declared valid; that the appellee be

ordered to pay them damages and attorney's fees in the sum of P9,600; and that he

ordered to pay the costs of the suit. The appellees affirmative defenses are that he and his

wife were buyers in good faith and for valuable consideration; that appellant's causes of

action are barred by the statute of limitations; that the complaint states no cause of action;

that the claim on which their action is based is unenforceable under the statute of frauds;

and that the appellants are guilty of laches. By way of counterclaim, he prayed that for

bringing a clearly unfounded suit against him which depreciated the value of the land and

injured his good reputation, the appellants be ordered to pay him the sums of P5,000 as

actual damages and P10,000 as moral damages.

After trial on 20 August 1956 the Court rendered judgment holding that the appellants'

action is barred by the statute of limitations and dismissing their complaint. Their motionfor reconsideration filed on 23 August 1956. Hence this appeal upon questions of law.

It appears that the appellants did not register the sale of 12.8413 hectares of the parcel of

land in question executed in their favor by the Dayao children on 21 March 1939 after the

death of their father Buenaventura Dayao. On the other hand, the power of attorney

executed by Buenaventura Dayao on 29 October 1930 authorizing Eustaquio Bayuga to

sell the parcel of land (Exhibit B) was annotated or inscribed on the back of the original

certificate of title No. 1187 (Exhibit C) as Entry No. 16836/H-1187, and the sale executed

by Eustaquio Bayuga in favor of the appellee Mariano Panuyas and his wife Sotera B.

Cruz under the aforesaid power of attorney was annotated or inscribed on the back of thesame original certificate of title (Exhibit C) as Entry No 778/H-1187. It does not appear that

the appellee and his wife had actual knowledge of the previous sale. In the absence of

8/13/2019 Full Text. Case 66-71

17/17

such knowledge, they had a right to rely on the face of the certificate of title of the

registered owners and of the authority conferred by them upon the agent also recorded on

the back of the certificate of title. As this is a case of double sale of land registered under

the Land Registration Act, he who recorded the sale in the Registry of Deeds has a better

right than he who did not.1

As to the appellants' contention that, as the death of the principal on 14 March 1934 ended

the authority of the agent,2 the sale of 8 hectares of the parcel of land by the agent to the

appellee Mariano Panuyas and his wife Sotera B. Cruz was null and void, suffice it to state

that is has not been shown that the agent knew of his principal's demise, and for that

reason article 1738, old Civil code or 1931, new Civil Code, which provides:

Anything done by the agent, without knowledge of the death of the principal or of any other

cause which extinguishes the agency, is valid and shall be fully effective with respect to

third persons who may have contracted with him in good faith is the law applicable to the

point raised by the appellants.

The judgment appealed from is affirmed, with costs against the appellants.