TUASON vs. OROZCOGR No. 2344 | Feb. 10, 1906 | Mapa |AppealPlaintiff: Gonzalo TuasonDefendant: Dolores OrozcoQuick Summary:Facts: Juan de Vargas executed a power of attorney toEnrique Grupe, authorizing him to dispose of all hisproperty, particularly his house and lot in Malate, Manila,and to mortgage the house to secure the payment of anyamount advanced to his wife, Orozco. Grupe and Orozcoobtained a loan for P3,500 from Tuason. Grupe gave P2,200to Orozco while he retained the P1,300 for himself, which hewill use for his business. Grupe assumed liability for theloan and pledged his 18 shares of stock as special security.Held: A debt thus incurred by the agent is binding directlyupon the principal, provided the agent acted within thescope of his authority. The fact that the agent has alsobound himself to pay the debt does not relieve from liabilitythe principal for whose benefit the debt was incurred. Theindividual liability of the agent constitutes a further securityin favor of the creditor and does not affect or preclude theliability of the principal. The law does not provide that theagent cannot bind himself personally to the fulfillment of anobligation incurred by him in the name and on behalf of hisprincipal. On the contrary, it provides that such act on thepart of an agent would be valid.Facts: Juan de Vargas, Dolores Orozco’shusband, executed a power of attorney toEnrique Grupe. Vargas authorized Grupeto dispose of all his property, particularlyhis house and lot in 24 Calle Nueva,Malate, Manila for the price at which itwas actually sold. Grupe was also authorized to

mortgage the house for the purpose ofsecuring the payment of any amountadvanced to Orozco. Thereafter, Grupe and Orozcoobtained a loan from Gonzalo Tuasonsecured by a mortgage on the said house.In said instrument, Grupe appeared forhimself and in behalf of Juan de Vargas. As evidenced by the instrument1which was duly recorded in the Registry ofProperty, Grupe received P3,500 in cashwhich he promises to pay within 1 year.Of said amount, he delivered 2,200 toOrozco while retaining the 1,300 for hisuse in his business. Grupe also assumed liability forthe whole sum of P3,500, which hepromises to pay in current gold or silvercoin, without discount. Aside from this, hepledged as special security for the debt’spayment his 18 shares of stock in theCompania de los Tranvias de Filipinas. Tuason filed a case for therecovery of the debt, which refers only tothe P2,200 delivered to Orozco. However,she denied having received said amount. CFI: ordered Orozco to payTuason the said amountIssue:WON the debt was incurred by Grupe for hisown benefit as evidenced by his assumption ofpaying the whole loan and his act of pledginghis shares of stock as special security[NO]Ratio: The mortgage agreement wassigned by Grupe as the attorney-in-fact of

Juan de Vargas. A debt thus incurred by the agentis binding directly upon the principal,provided the agent acted within the scopeof his authority. The fact that the agent has alsobound himself to pay the debt does notrelieve from liability the principal forwhose benefit the debt was incurred. Theindividual liability of the agent constitutesa further security in favor of the creditorand does not affect or preclude theliability of the principal. The law does not provide that theagent cannot bind himself personally tothe fulfillment of an obligation incurred byhim in the name and on behalf of hisprincipal. On the contrary, it provides thatsuch act on the part of an agent would bevalid [Article 1725 CC].On whether Orozco received the money Orozco’s assertion that she didnot receive the money is belied by thefollowing: she was one of the parties to theinstrument and she correspondinglysigned it she personally intervened in theexecution of the mortgage she stated in the deed that themortgage had been created with herknowledge and consent she wrote a letter to Tuason’s lawyerspromising to pay the debt on or beforeNovember 5, which she admitted as

valid Thirteen years had elapsed sinceshe signed the mortgage deed. During allthis time she never denied havingreceived the money. On the contrary, shepromised to settle within a short time.Validity of the Mortgage The fact that Orozco received themoney from Grupe and not from Tuasondoes not affect the validity of themortgage in view of the conditionscontained in the power of attorney underwhich the mortgage was created.Nowhere does it appear in this power thatthe money was to be delivered to her bythe creditor himself and not through theagent or any other person. The importantthing was that she should have receivedthe money. The mortgage being valid andhaving been duly recorded in the Registerof Property, directly subjects the propertythus encumbered, whoever its possessormay be, to the fulfillment of the obligationfor the security of which it was created.[Article 1876 CC & Article 105, MortgageLaw]Whether Grupe’s shares of stock that hehas pledged should be accounted for tosatisfy the debt before proceeding toforeclose the mortgage A mortgage directly subjects theproperty encumbered, whoever itspossessor may be, to the fulfillment of theobligation for the security of which it was

created. Moreover, it was incumbent uponOrozco to show that the debt had beenpaid with those shares. Payment is notpresumed but must be proved. It is adefense, which the Orozco may interpose.It was therefore her duty to show this factaffirmatively.

However, she failed to do so.Final Note Said debt having been incurredby Vargas during his marriage, it shouldnot be paid out of property belonging toOrozco exclusively but from thatpertaining to the conjugal partnership.Dispositive: Judgment

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THE MANILA REMNANT CO., INC., petitioner, vs. THE HONORABLE COURT OFAPPEALS and OSCAR VENTANILLA, JR. and CARMEN GLORIA DIAZ, respondents.1990November 223rd DivisionG.R. No. 82978D E C I S I O NFERNAN, J.:Like any other couple, Oscar Ventanilla and his wife Carmen, both faculty membersof the University of the Philippines and renting a faculty unit, dreamed of somedayowning a house and lot. Instead of attaining this dream, they became innocentvictims of deceit and found themselves in the midst of an ensuing squabblebetween a subdivision owner and its real estate agent.The facts as found by the trial court and adopted by the Appellate Court are asfollows:Petitioner Manila Remnant Co., Inc. is the owner of the parcels of land situated inQuezon City covered by Transfer Certificates of Title Nos. 26400, 26401, 30783 and

31986 and constituting the subdivision known as Capital Homes Subdivision Nos. Iand II. On July 25, 1972, Manila Remnant and A.U. Valencia & Co. Inc. entered into awritten agreement entitled "Confirmation of Land Development and Sales Contract"to formalize an earlier verbal agreement whereby for a consideration of 17 and1/2% fee, including sales commission and management fee, A.U. Valencia and Co.,Inc. was to develop the aforesaid subdivision with authority to manage the salesthereof, execute contracts to sell to lot buyers and issue official receipts. 1At that time the President of both A.U. Valencia and Co. Inc. and Manila RemnantCo., Inc. was Artemio U. Valencia.On March 3, 1970, Manila Remnant thru A.U. Valencia and Co. executed two"contracts to sell" covering Lots 1 and 2 of Block 17 in favor of Oscar C. Ventanillaand Carmen Gloria Diaz for the combined contract price of P66,571.00 payablemonthly for ten years. 2 As thus agreed in the contracts to sell, the Ventanillas paid

the down payments on the two lots even before the formal contract was signed onMarch 3, 1970.Ten (10) days after the signing of the contracts with the Ventanillas or on March 13,1970, Artemio U. Valencia, as President of Manila Remnant, and without theknowledge of the Ventanilla couple, sold Lots 1 and 2 of Block 17 again, this time infavor of Carlos Crisostomo, one of his sales agents without any consideration. 3Artemio Valencia then transmitted the fictitious Crisostomo contracts to ManilaRemnant while he kept in his files the contracts to sell in favor of the Ventanillas. Allthe amounts paid by the Ventanillas were deposited in Valencia's bank account.Beginning March 13, 1970, upon orders of Artemio Valencia, the monthly paymentsof the Ventanillas were remitted to Manila Remnant as payments of Crisostomo forwhich the former issued receipts in favor of Crisostomo. Since Valencia kept thereceipts in his files and never transmitted the same to Crisostomo, the latter andthe Ventanillas remained ignorant of Valencia's scheme. Thus, the Ventanillascontinued paying their monthly installments.Subsequently, the harmonious business relationship between Artemio Valencia andManila Remnant ended. On May 30, 1973, Manila Remnant, through its GeneralManager Karl Landahl, wrote Artemio Valencia informing him that Manila Remnant

was terminating its existing collection agreement with his firm on account of theconsiderable amount of discrepancies and irregularities discovered in its collectionsand remittances by virtue of confirmations received from lot buyers. 4 As aconsequence, on June 6, 1973, Artemio Valencia was removed as President by theBoard of Directors of Manila Remnant. Therefore, from May of 1973, Valenciastopped transmitting Ventanilla's monthly installments which at that time hadalready amounted to P17,925.40 for Lot 1 and P18,141.95 for Lot 2, (whichappeared in Manila Remnant's record as credited in the name of Crisostomo). 5On June 8, 1973, A.U. Valencia and Co. sued Manila Remnant before Branch 19 ofthe then Court of First Instance of Manila 6 to impugn the abrogation of theiragency agreement. On June 10 and July 10, 1973, said court ordered all lot buyersto deposit their monthly amortizations with the court. 7 But on July 17, 1973, A.U.Valencia and Co. wrote the Ventanillas that it was still authorized by the court tocollect the monthly amortizations and requested them to continue remitting theiramortizations with the assurance that said payments would be deposited later incourt. 8 On May 22, 1974, the trial court issued an order prohibiting A.U. Valenciaand Co. from collecting the monthly installments. 9 On July 22, 1974 and February

6, 1976 the same court ordered the Valencia firm to furnish the court with acomplete list of all lot buyers who had already made down payments to ManilaRemnant before December 1972. 10 Valencia complied with the court's order onAugust 6, 1974 by submitting a list which excluded the name of the Ventanillas. 11Since A.U. Valencia and Co. failed to forward its collections after May 1973, ManilaRemnant caused on August 20, 1976 the publication in the Times Journal of a noticecancelling the contracts to sell of some lot buyers including that of CarlosCrisostomo in whose name the payments of the Ventanillas had been credited. 12To prevent the effective cancellation of their contracts, Artemio Valencia instigatedon September 22, 1976 the filing by Carlos Crisostomo and seventeen (17) other lotvendees of a complaint for specific performance with damages against ManilaRemnant before the Court of First Instance of Quezon City. The complaint allegedthat Crisostomo had already paid a total of P17,922.40 and P18,136.85 on Lots 1and 2, respectively. 13It was not until March 1978 when the Ventanillas, after learning of the terminationof the agency agreement between Manila Remnant and A.U. Valencia & Co.,decided to stop paying their amortizations to the latter. The Ventanillas, believingthat they had already remitted P37,007.00 for Lot 1 and P36,911.00 for Lot 2 or a

grand total, inclusive of interest, of P73,122.35 for the two lots, thereby leaving abalance of P13,531.58 for Lot 1 and P13,540.22 for Lot 2, went directly to ManilaRemnant and offered to pay the entire outstanding balance of the purchase price.14 To their shock and utter consternation, they discovered from Gloria Caballes, anaccountant of Manila Remnant, that their names did not appear in the records ofA.U. Valencia and Co. as lot buyers. Caballes showed the Ventanillas copies of thecontracts to sell in favor of Carlos Crisostomo, duly signed by Artemio U. Valencia asPresident of Manila Remnant. 15 Whereupon, Manila Remnant refused the offer ofthe Ventanillas to pay for the remainder of the contract price because they did nothave the personality to do so. Furthermore, they were shown the published Noticeof Cancellation in the January 29, 1978 issue of the Times Journal rescinding thecontracts of delinquent buyers including Crisostomo.Thus, on November 21, 1978, the Ventanillas commenced an action for specificperformance, annulment of deeds and damages against Manila Remnant, A.U.Valencia and Co. and Carlos Crisostomo before the Court of First Instance of QuezonCity, Branch 17-B. 16 Crisostomo was declared in default for failure to file ananswer.On November 17, 1980, the trial court rendered a decision 1) declaring the

contracts to sell issued in favor of the Ventanillas valid and subsisting and annullingthe contracts to sell in Crisostomo's favor; 2) ordering Manila Remnant to execute infavor of the Ventanillas an Absolute Deed of Sale free from all liens andencumbrances; and 3) condemning defendants A.U. Valencia and Co. Inc., ManilaRemnant and Carlos Crisostomo jointly and severally to pay the Ventanillas theamount of P100,000.00 as moral damages, P100,000.00 as exemplary damages,and P100,000.00 as attorney's fees. The lower court also added that if, for any legalreason, the transfer of the lots could no longer be effected, the defendants shouldreimburse jointly and severally to the Ventanillas the total amount of P73,122.35representing the total amount paid for the two lots plus legal interest thereon fromMarch 1970 plus damages as aforestated. With regard to the cross claim of ManilaRemnant against Valencia, the court found that Manila Remnant could have notbeen dragged into this suit without the fraudulent manipulations of Valencia. Hence,it adjudged A.U. Valencia and Co. to pay the Manila Remnant P5,000.00 as moraldamages and exemplary damages and P5,000.00 as attorney's fees. 17Subsequently, Manila Remnant and A.U. Valencia and Co. elevated the lower court'sdecision to the Court of Appeals through separate appeals. On October 13, 1987,

the Appellate Court affirmed in toto the decision of the lower court. Reconsiderationsought by petitioner Manila Remnant was denied, hence the instant petition.There is no question that the contracts to sell in favor of the Ventanilla spouses arevalid and subsisting. The only issue remaining is whether or not petitioner ManilaRemnant should be held solidarily liable together with A.U. Valencia and Co. andCarlos Crisostomo for the payment of moral, exemplary damages and attorney'sfees in favor of the Ventanillas. 18While petitioner Manila Remnant has not refuted the legality of the award ofdamages per se, it believes that it cannot be made jointly and severally liable withits agent A.U. Valencia and Co. since it was not aware of the illegal acts perpetratednor did it consent or ratify said acts of its agent.The argument is devoid of merit.In the case at bar, the Valencia realty firm had clearly overstepped the bounds of itsauthority as agent and for that matter, even the law when it undertook thedouble sale of the disputed lots. Such being the case, the principal, ManilaRemnant, would have been in the clear pursuant to Article 1897 of the Civil Codewhich states that "(t)he agent who acts as such is not personally liable to that partywith whom he contracts, unless he expressly binds himself or exceeds the limits ofhis authority without giving such party sufficient notice of his powers."

However, the unique relationship existing between the principal and the agent atthe time of the dual sale must be underscored. Bear in mind that the president thenof both firms was Artemio U. Valencia, the individual directly responsible for the salescam. Hence, despite the fact that the double sale was beyond the power of theagent, Manila Remnant as principal was chargeable with the knowledge orconstructive notice of that fact and not having done anything to correct such anirregularity was deemed to have ratified the same. 19More in point, we find that by the principle of estoppel, Manila Remnant is deemedto have allowed its agent to act as though it had plenary powers.Article 1911 of the Civil Code provides:"Even when the agent has exceeded his authority, the principal is solidarily liablewith the agent if the former allowed the latter to act as though he had full powers."The above-quoted article is new. It is intended to protect the rights of innocentpersons. In such a situation, both the principal and the agent may be considered asjoint feasors whose liability is joint and solidary. 20Authority by estoppel has arisen in the instant case because by its negligence, theprincipal, Manila Remnant, has permitted its agent, A.U. Valencia and Co., toexercise powers not granted to it. That the principal might not have had actualknowledge of the agent's misdeed is of no moment. Consider the followingcircumstances:

Firstly, Manila Remnant literally gave carte blanche to its agent A.U. Valencia andCo. in the sale and disposition of the subdivision lots. As a disclosed principal in thecontracts to sell in favor of the Ventanilla couple, there was no doubt that they werein fact contracting with the principal. Section 7 of the Ventanillas' contracts to sellstates:"7. That all payments whether deposits, down payment and monthly installmentagreed to be made by the vendee shall be payable to A.U. Valencia and Co., Inc. Itis hereby expressly understood that unauthorized payments made to real estatebrokers or agents shall be the sole and exclusive responsibility and at the risk of thevendee and any and all such payments shall not be recognized by the vendorsunless the official receipts therefor shall have been duly signed by the vendors' dulyauthorized agent, A.U. Valencia and Co., Inc."Indeed, once Manila Remnant had been furnished with the usual copies of thecontracts to sell, its only participation then was to accept the collections and paythe commissions to the agent. The latter had complete control of the businessarrangement. 21Secondly, it is evident from the records that Manila Remnant was less than prudentin the conduct of its business as a subdivision owner. For instance, Manila Remnantfailed to take immediate steps to avert any damage that might be incurred by the

lot buyers as a result of its unilateral abrogation of the agency contract. Thepublication of the cancelled contracts to sell in the Times Journal came three yearsafter Manila Remnant had revoked its agreement with A.U. Valencia and Co.Moreover, Manila Remnant also failed to check the records of its agent immediatelyafter the revocation of the agency contract despite the fact that such revocationwas due to reported anomalies in Valencia's collections.Altogether, as pointed out by the counsel for the Ventanillas, Manila Remnant couldand should have devised a system whereby it could monitor and require a regularaccounting from A.U. Valencia and Co., its agent. Not having done so, ManilaRemnant has made itself liable to those who have relied on its agent and therepresentation that such agent was clothed with sufficient powers to act on behalfof the principal.Even assuming that Manila Remnant was as much a victim as the other innocent lotbuyers, it cannot be gainsaid that it was precisely its negligence and laxity in theday to day operations of the real estate business which made it possible for theagent to deceive unsuspecting vendees like the Ventanillas.In essence, therefore, the basis for Manila Remnant's solidary liability is estoppelwhich, in turn, is rooted in the principal's neglectfulness in failing to properlysupervise and control the affairs of its agent and to adopt the needed measures to

prevent further misrepresentation. As a consequence, Manila Remnant isconsidered estopped from pleading the truth that it had no direct hand in thedeception employed by its agent. 22A final word. The Court cannot help but be alarmed over the reported practice ofsupposedly reputable real estate brokers of manipulating prices by allowing theirown agents to "buy" lots in their names in the hope of reselling the same at a higherprice to the prejudice of bona fide lot buyers, as precisely what the agent hadintended to happen in the present case. This is a serious matter that must belooked into by the appropriate government housing authority.WHEREFORE, in view of the foregoing, the appealed decision of the Court of Appealsdated October 13, 1987 sustaining the decision of the Quezon City trial court datedNovember 17, 1980 is AFFIRMED. This judgment is immediately executory. Costsagainst petitioner.

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Infante vs. CunananG.R L- 5180 August 31, 1953Bautista Angelo, J:Facts:Infante was the owner of the land with a house built on it. Cunanan and Mijares were contractedto sell the property from which they would receive commission. Noche agreed to purchase the lot

but Infante informed C & M about her change of mind to sell the lot and had them sign adocument stating that their authority to sell was already cancelled. Subsequently, Infante sold thelot & house to Noche. Defendants herein demanded for their commission. RTC ordered Infante topay commission. CA affirmed.

Issue:Whether or not petitioner was duty bound to pay commission notwithstanding that authority to sellhas been cancelled.

Ruling:A principal may withdraw the authority given to an agent at will. But respondents agreed to cancelthe authority given to them upon assurance by petitioner that should property be sold to Noche,they would be given commission.That petitioner had changed her mind even if respondents had found a buyer who was willing toclose the deal, is a matter that would give rise to a legal consequence if respondents agree to calloff to transaction in deference to the request of the petitioner. Petitioner took advantage of theservices of respondents, but believing that she could evade payment of their commission, shemade use of a ruse by inducing them to sign the deed of cancellation. This act of subversioncannot be sanctioned and cannot serve as basis for petitioner to escape payment of thecommissions agreed upon.

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Barreto v Santa MarinaG.R. No. 8169December 29, 1913PRINCIPAL AND AGENT; REVOCATION OF AGENT'SAUTHORITY. —(Art. 1733, Civil Code; art. 279, Code of Commerce.)2. ID.; ID.; RIGHT OF PRINCIPAL TO DISMISSAGENT. — Even though a period is stipulated during whichthe agent or employee is to hold his position in the serviceof the owner or head of a mercantile establishment, yet thelatter may, for any of the special reasons specified in article300 of the Code of Commerce, dismiss such agent oremployee even before the termination of the period.D E C I S I O NTORRES, J p:Facts:Plaintiff’s side:On January 5, 1911, counsel for the plaintiff Antonio M.aBarretto filed suit against Jose Santa Marina, alleging thatthe defendant for payment of compensation of servicesrendered subsequent to December 31, 1909.On January 8, 1910, and for a long time prior thereto, theplaintiff had held the position of agent of the defendant inthe Philippine Islands for the management of the saidbusiness in the name and for the account of the saiddefendant; that the plaintiff's services were rendered inpursuance of a contract whereby the defendant obligatedhimself in writing to hire the said services for so long a timeas the plaintiff should not show discouragement and tocompensate such services at the rate of P37,000 Philippinecurrency per annum; The defendant, without reason,justification, or pretext and in violation of the contract beforementioned, summarily and arbitrarily dispensed with theplaintiff's services and removed him from the managementof the business, since which date the defendant had

refused to pay him the compensation, or any part thereof,due him and payable in full for services renderedsubsequent to December 31, 1909; and that, as a secondcause of action based upon the facts aforestated, theplaintiff had suffered losses and damages in the sum ofP100,000 Philippine currency. Said counsel thereforeprayed that judgment be rendered against the defendant bysentencing him to pay to the plaintiff P137,000 Philippinecurrency, and the interest thereon at the legal rate, inaddition to the payment of the costs, together with suchother equitable remedies as the law allows.Defendant’s side:Plaintiff had no contract whatever with the defendant inwhich any period of time was stipulated during which theformer was to render his services as manager of the LaInsular factory;That the defendant revoked for just cause the powerconferred upon the plaintiff; that subsequent to therevocation of such power, and on the occasion of theplaintiff's having sold all his rights and interests in thebusiness of the La Insular factory to the defendant, inconsideration of the sum received by him, the plaintiffrenounced all action, intervention and claim that he mighthave against the defendant relative to the businessaforementioned, whereby all the questions that might havearisen between hem were settled.The most important fact in this case, which stands outprominently from the evidence regarded as a whole, is thatof the plaintiff Barretto's renunciation or resignation of theposition he held as agent and manager of the said factory,which was freely and voluntarily made by him on theoccasion of the insolvency and disappearance of theChinaman Uy Yan, who had bought from the factoryproducts aggregating in value the considerable sum ofP97,000 and, without paying this large debt, disappeared

and has not been seen since.Honorable S. del Rosario, judge, sentenced the defendantto pay to the plaintiff the salary to which he was entitled forthe first eight days of January, 1910, also that for thefollowing month, at the rate of P3,083.33 per month, withoutspecial finding as to costs, and dismissed the second causeof action contained in the complaint presented in that case.Demand is made in this suit for the payment of theconsiderable sum of P137,000, together with the legalinterest thereon. Two amounts make up this sum: One ofP37,000, as salary for the year 1910, claimed to be due forservices rendered by the plaintiff as agent and manager ofthe tobacco factory known as La Insular; and the other ofP100,000 as an indemnity for losses and damages, onaccount of the plaintiff's removal without just cause from hisposition as agent and manager of said factory, effectedarbitrarily and in violation of the contract of hire of servicesbetween the parties, the plaintiff claiming to be still entitledto hold the position from which he was dismissed.The record does not show that Santa Marina, his principal,required him to resign his position as manager, but thatBarretto himself voluntarily stated by letter to his principalthat, for the reasons therein mentioned, he resigned andplaced at the latter's disposal the position of agent andmanager of the La Insular factory; and if the principal, SantaMarina, deemed it suitable to relieve the agent, for havingbeen negligent and overstepping his authority in thedischarge of his office, and furthermore because of hishaving expressly resigned his position, and placed it at thedisposal of the chief owner of the business, it cannot beexplained how such person can be entitled to demand anindemnity for losses and damages, from his principal, whomerely exercised his lawful right of relieving the plaintifffrom the position which he had voluntarily given up.So, the agent and manager Barretto was not really

dismissed or removed by the defendant Santa Marina. Whatdid occur was that, in view of the resignation tendered bythe plaintiff for the reasons which he himself conscientiouslydeemed to warrant his surrender of the position he washolding in the La Insular factory, the principal owner of thisestablishment, the defendant Santa Marina, had to look forand appoint another agent and manager to relieve andsubstitute him in the said employment — a lawful actperformed by the principal owner of the factory and onewhich cannot serve as a ground upon which to demandfrom the latter an indemnity for losses and damages,inasmuch as, in view of the facts that occurred and wereacknowledged and confessed by Barretto in is letters,Exhibits 3 and 6, the plaintiff could not expect, nor ought tohave expected, that the defendant should have insisted onthe unsuccessful agent's continuance in his position, or thathe should not have accepted the resignation tendered bythe plaintiff in his first letter.By the mere fact that the defendant remained silent anddesignated another person, Mr. J. McGavin, to discharge inthe plaintiff's stead the powers and duties of agent andmanager of the said factory, Barretto should haveunderstood that his resignation had been accepted and thatif its acceptance was not communicated to him immediatelyit was owing to the circumstance that the principal owner ofthe factory did not then have, nor until several monthsafterwards, any other person whom he could appoint andplace in his stead, for, as soon as the defendant SantaMarina could appoint the said McGavin, he revoked thepower he had conferred upon the plaintiff andcommunicated this fact to the latter, by means of the letter,Exhibit D, which was presented to him by the bearerthereof, McGavin himself, the new manager and agentappointed.Issue and Held:

1) Whether any period or term for the duration of theposition of agent and manager was fixed in theverbal contract made between the deceasedJoaquin Santa MarinaNo. The defendant acknowledged the said verbal contractand also its ratification by him after his brother's death; buthe denied any stipulation therein that Barretto should holdhis office for any specific period of time fixed by andbetween the contacting parties, for the deceased JoaquinSanta Marina, in conferring power upon the plaintiff, did notdo so for any specific time, nor did he set any period withinwhich he should hold his office of agent and manager of theLa Insular factory; neither did he fix the date for thetermination of such services, in the instrument of power ofattorney executed by the defendant Santa Marina before anotary on the 25th of September, 1908.From the context of the instrument just mentioned it cannotbe concluded that any time whatever was fixed duringwhich the plaintiff should hold his position of agent.The defendant, in executing that instrument, whereby theagreement made between his brother Joaquin and Barrettowas ratified, did no more than accord to the plaintiff thesame confidence that the defendant's predecessor ininterest had in him; and so long as this merely subjectivecondition of trust lodged in the agent existed, the timeduring which the latter might hold his office could beconsidered indefinite or undetermined, but as soon as thatindispensable condition of a power of attorneydisappeared and the conduct of the agent ceased toinspire confidence, the principal had a right to revokethe power he had conferred upon his agent, especiallywhen the latter, for good reasons, gave up the office hewas holding.The time during which the agent may hold his positionis indefinite or undetermined, when no period has been

fixed in his commission and so long as the confidencereposed in him by the principal exists; but as soon asthis confidence disappears the principal has a right torevoke the power he conferred upon the agent,especially when the latter has resigned his position forgood reasons.2) Whether or not Santa Marina can validly revokecontract of agency, even before expiration of periodif any was fixed.Yes. The contract of agency can subsist only so long as theprincipal has confidence in his agent, because, from themoment such confidence disappears and although there bea fixed period for the exercise of the office of agent, acircumstance that does not appear in the present case, theprincipal has a perfect right to revoke the power that he hadconferred upon the agent owing to the confidence he had inhim and which for sound reasons had ceased to exist.Therecord does not show it to have been duly proved,notwithstanding the plaintiff's allegation, that a period wasfixed for holding his agency or office of agent and managerof the La Insular factory.Article 1733 of the Civil Code, applicable to the case at bar,according to the provisions of article 2 of the Code ofCommerce, prescribes: "The principal may, at his will,revoke the power and compel the agent to return theinstrument containing the same in which the authoritywas given."Article 279 of the Code of Commerce provides: "Theprincipal may revoke the commission intrusted to anagent at any stage of the transaction, advising himthereof, but always being liable for the result of thetransactions which took place before the latter wasinformed of the revocation."It is not incumbent upon the courts to fix the period duringwhich contracts for services shall last. Their duration is

understood to be implicitly fixed, in default of expressstipulation, by the period for the payment of the salary of theemployee. Even though the annual salary fixed for the yearare collected and paid in monthly installments as they falldue, and so the plaintiff collected and was paid hisremuneration; therefore, on the latter's discontinuance in hisoffice as agent, he would at most be entitled to the salaryfor one month and some odd days, allowed in the judgmentof the lower court.Article 302 of the Code of Commerce reads thus:"In cases in which no special time is fixed in the contracts ofservice, any one of the parties thereto may dissolve it,advising the other party thereof one month in advance."The factor or shop clerk shall be entitled, in such case, tothe salary due for the month."From the mere fact that the principal no longer hadconfidence in the agent, he is entitled to withdraw it andto revoke the power he conferred upon the latter, evenbefore the expiration of the period of the period of theengagement or of the agreement made between them;but, in the present case, once it has been shown that,between the deceased Joaquin Santa Marina and thelatter's heir, now the defendant, on the one hand, and theplaintiff Barretto, on the other, no period whatever wasstipulated during which the last-named should hold theoffice of agent manager of the said factory, it isunquestionable that the defendant, even without goodreasons, could lawfully revoke the power conferredupon the plaintiff and appoint in his place Mr. McGavin,and thereby contracted no liability whatever other thanthe obligation to pay the plaintiff the salary pertainingto one month and some odd days, as held in thejudgment below.Barretto himself acknowledged in his aforesaid letter,Exhibit 3, that he had exceeded his authority and acted

negligently in selling on credit to the said Chinaman a largequantity of the products of the factory under the plaintiff'smanagement, reaching the considerable value of P97,000;whereby he confessed one of the causes which led to hisremoval, the revocation of the power conferred upon himand the appointment of a new agent in his place.The defendant, Jose Santa Marina, in his letter ofDecember 2, 1909, whereby he communicated to theplaintiff the revocation of the power he had conferred uponhim and the appointment of another new agent, Mr.McGavin, stated among other things that the loancontracted by the agent Barretto, without the approval of theprincipal, caused a great panic among the stockholders ofthe factory and that the defendant hoped to allay it by thenew measure that he expected to adopt. This, then, was stillanother reason that induced the principal to withdraw theconfidence placed in the plaintiff and to revoke the powerhe had conferred upon him. Therefore, even omittingconsideration of the resignation before mentioned, we findduly warranted the reasons which impelled the defendant torevoke the said power and relieve the plaintiff from theposition of agent and manager of the La Insular factory.In revoking the authority conferred upon the plaintiff, actedwithin his unquestionable powers and did not therebyviolate any statute whatever that may have limited them;consequently, he could not have caused the plaintiff anyharm or detriment to his right and interests, for not only hadSanta Marina a justifiable reason to proceed as he did, butalso no period whatever had been stipulated during whichthe plaintiff should be entitled to hold his position; andfurthermore, because, in relieving the latter andappointing another person in his place, the defendantacted in accordance with the renunciation andresignation which the plaintiff had tendered. If theplaintiff is entitled to any indemnity in accordance with law,

such was awarded to him in the judgment of the lower courtby granting him the right to collect salary for one month andsome odd days.---------------------------------------------------------------

Coleongco v. Clarapols| G.R. No. L-18616 (1964)|Reyes, J.B.L., J.Facts:Since 1951, Eduardo L. Claparols, operated a factoryfor the manufacture of nails in Talisay, OccidentalNegros, the "Claparols Steel & Nail Plant". The rawmaterial, nail wire, was imported from foreignsources, specially from Belgium; and he had aregular dollar allocation therefor, granted by theImport Control Commission and the Central Bank.The marketing of the nails was handled by the"ABCD Commercial" of Bacolod, which was ownedby a chinaman named Kho To.Losses compelled Claparols in 1953 to look forsomeone to finance his imports of nail wire. 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 inthe stead of Kho To. Claparols agreed, and on April25 of that year a contract (Exhibit B) was perfectedbetween them whereby Coleongco undertook tofinance and put up the funds required for theimportation of the nail wire, which Claparols boundhimself to convert into nails at his plant. It wasagreed that Coleongco would have the exclusivedistribution of the product, and the "absolute care inthe marketing of these nails and the promotion ofsales all over the Philippines", except the DavaoAgency; that Coleongco would "share the control of

all the cash" from sales or deposited in banks; thathe would have a representative in-the management;that all contracts and transactions should be jointlyapproved by both parties; that proper books wouldbe kept and annual accounts rendered; and thatprofits and losses would be shared "on a 50-50basis". The contract was renewed from year to yearuntil 1958, and Coleongco's share subsequentlyincreased by 5% of the net profit of the factory. OnApril 27, 1953, Claparols executed in favor ofColeongco, at the latter's behest, a special power ofattorney (Exhibit C) to open and negotiate letters ofcredit, to sign contracts, bills of lading, invoices, andpapers covering transactions; to represent appelleeand the nail factory; and to accept payments andcash advances from dealers and distributors.Thereafter, Coleongco also became the assistantmanager of the factory, and took over its businesstransactions, while Claparols devoted most of histime to the nail manufacture processes.Around mid-November 1956, Claparols learned fromthe PNB that Coleongco wrote the bank trying todiscredit him, causing the bank to issue an alias writof execution. Behind Claparol's back, Colengcowrote the bank alleging that Claparol was notserious in meeting his financial obligations by sellingthe machines. Claparols was able to settle thematter with the bank but because of this, herevoked the SPA and informed Coleongco of thesame thru registered mail. He also hired anautditing firm C. Miller & Company, auditors, to goover the books and records of the business with aview to adjusting the accounts of the associates.This is after learning the Coleongco asked thesuperintendent Agsam to pour acid on the

machinery to paralyze the factory. Coleongco alsowrote Kho To to cut his monthly advances fromP2000 to P1000 to take advantage of the financialdifficulties of Claparols and so that later, they mayown the factory. This was carried on by Kho To in aletter advising that he can only draw P1000. Theauditors found that Coleongco owed the ClaparolsNail Factory the amount of P81,387.37, as of June30, 1957. Coleongco was also dismissed as theassistant manager.Coleongco denies the allegations and claims thatthe revocation of the SPA was illegal and that he isentitled to the share of the profits as well as moraldamages. Claparols counterclaimed.Issue:Can Claparols validly revoke the Special Power ofAttorney even if it is coupled with interest on thepart of the agent?Held:YES. It is first contended by the appellant Coleongcothat the power of attorney was made to protect hisinterest under the financing agreement and was onecoupled with an interest that the appellee Claparolshad no legal power to revoke. This point cannot besustained. It must not be forgotten that a power ofattorney can be made irrevocable by contract onlyin the sense that the principal may not recall it at hispleasure; but coupled with interest or not, theauthority certainly can be revoked for a just cause,such as when the attorney-in-fact betrays theinterest of the principal, as happened in this case. Itis not open to serious doubt that the irrevocability ofthe power of attorney may not be used to shield theperpetration of acts in bad faith, breach ofconfidence, or betrayal of trust, by the agent, for

that would amount to holding that a power, coupledwith an interest authorizes the agent to commitfrauds against the principal.Our new Civil Code, in Article 1172, expresslyprovides the contrary in prescribing thatresponsibility arising from fraud is demandable in allobligations, and that any waiver of action for futurefraud is void. It is also on this principle that the CivilCode, in its Article 1800, declares that the powers ofa partner, appointed as manager, in the articles ofcopartnership are irrevocable without just or lawfulcause; and an agent with power coupled with aninterest cannot stand on better ground than such apartner in so far as irrevocability of the power isconcerned.The action of plaintiff -appellant for damages andlost profits due to the discontinuance of thefinancing agreement, Exhibit "B", may not prosper,because the record shows that the appellantlikewise breached his part of the contract. It will berecalled that under paragraph 2 of the contract,Exhibit "B", it was stipulated:"That the Party of the Second Part (Coleongeo) hasagreed to finance and put up all the necessarymoney which may be needed to pay for theimportation of the raw material needed by such nailfactory and allocated by the ICC from time to timeeither in cash or with whatever suitable meanswhich the Party of the Second Part may be able tomake by suitable arrangements with any well knownbanking institution recognized by the Central Bankof the Philippines."Instead of putting up all the necessary moneyneeded to finance the imports of raw material,Coleangco merely advanced 25% in cash on account

of the price and had the balance covered by suretyagreements executed by Claparols and others assolidary (joint and several) guarantors. Claparolswas made to shoulder 3/4, of the payment for theimports, contrary to the financing agreement.Paragraph 11 of the latter expressly deniedColeongco any power or authority to bind Claparolswithout previous consultation and authority. Whenthe balances for the cost of the importationsbecame due, Coleongco in some instances, paid itwith the dealers' advances to the nail factoryagainst future sales without the knowledge ofClaparols. Under paragraphs 8 and 11 of thefinancing agreement, Coleongeo was to givepreference to the operating expenses before sharingprofits, so that until the operating costs wereprovided for, Coleongco had no right to apply thefactory's income to pay his own obligations.For 1957 to 1958 Claparols financed the imports ofnail wire without the help of appellant, and in viewof the latter's infringement of his obligations, hisacts of disloyalty previously discussed, and hisdiversions of factory funds (he even bought twomotor vehicles with them), the court finds nojustification for his insistence in sharing in thefactory's profit for these years, nor for therestoration of the revoked power of attorney.The accountant's reports and testimony prove thatas of June 30, 1957, Coleongco owed to Claparolsthe sum of P83,466.34 that after some adjustmentwas reduced to P81,387.37, practically acceptedeven by appellant's auditor.The basic rule of contracts requires parties to actloyally toward each other, in the pursuit of thecommon end, and appellant clearly violated the rule

of good faith prescribed by Art. 1315 of the NewCivil Code.The lower court also allowed Claparols P50,000 fordamages, material, moral and exemplary, caused bythe appellant Coleongco's acts in maliciouslyundermining appellee's credit that led the PhilippineNational Bank to secure a writ of execution againstClaparols. Undeniably, the attempts of Colleongco todiscredit and "squeeze" Claparols out of his ownfactory and business could not but cause the lattermental anguish and serious anxiety, as found by thecourt below, for which he is entitled tocompensation; and the malevolence that lay behindappellee's actions justified also the imposition ofexemplary or deterrent damages (Civ. Code, Art.2232). While the award could have been madelarger without violating the canons of justice, thediscretion in fixing such damages primarily lay in thetrial court, and we feel that the same should berespected.Judgment affirmed

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DY BUNCIO & COMPANY, INC., plaintiff-appelle,vs. ONG GUAN CAN, ET AL., defendants. JUANTONG and PUA GIOK ENG, appellants. - ChachuFACTS· This is a suit over a rice mill and camarinsituated at Dao, Province of Capiz. Plaintiffclaims that the property belongs to its judgmentdebtor, Ong Guan Can, while defendants JuanTong and Pua Giok Eng claim as owner andlessee of the owner by virtue of a deed datedJuly 31, 1931, by Ong Guan Can, Jr.

· After trial the CFI of Capiz held that the deedwas invalid and that the property was subject tothe execution which has been levied on saidproperties by the judgment creditor of theowner. Defendants Juan Tong and Pua Giok bringthis appeal and insist that the deed of the 31stof July, 1931, is valid.· The first recital of the deed is that Ong GuanCan, Jr., as agent of Ong Guan Can, theproprietor of the commercial firm of Ong GuanCan & Sons, sells the rice-mill and camarin forP13,000 and gives as his authority the power ofattorney dated the 23d of May, 1928, a copy ofthis public instrument being attached to thedeed and recorded with the deed in the office ofthe register of deeds of Capiz.· The receipt of the money acknowledged in thedeed was to the agent, and the deed was signedby the agent in his own name and without anywords indicating that he was signing it for theprincipal.ISSUE 1. WON the power of attorney gives theagent the power to alienate the property- NO· The power of attorney is not a general power ofattorney but a limited one and does not give theexpress power to alienate the properties inquestion. (Article 1713 of the Civil Code.)· Appellants claim that this defect is cured byExhibit 1, which purports to be a general powerof attorney given to the same agent in 1920.ISSUE 2. WON this purported 2nd power of attorneycured the defect in the first- NO· Article 1732 of the Civil Code is silent overthe partial termination of an agency. Themaking and accepting of a new power of

attorney, whether it enlarges or decreases thepower of the agent under a prior power ofattorney, must be held to supplant andrevoke the latter when the two areinconsistent. If the new appointment withlimited powers does not revoke the generalpower of attorney, the execution of the secondpower of attorney would be a mere futilegesture.· The title of Ong Guan Can not having beendivested by the so-called deed of July 31, 1931,his properties are subject to attachment andexecution.The judgment appealed from is thereforeaffirmed.

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FEDERICO VALERA, Plaintiff-Appellant , vs.MIGUEL VELASCO, Defendant-Appellee. - ChachuFACTSs· By virtue of the powers of attorney, Exhibits Xand Z, executed by the plaintiff on April 11,1919, and on August 8, 1922, the defendant wasappointed attorney-in-fact of the said plaintiffwith authority to manage his property in thePhilippines, consisting of the usufruct of a realproperty located of Echague Street, City ofManila.· The defendant accepted both powers ofattorney, managed plaintiff's property, reportedhis operations, and rendered accounts of hisadministration; and on March 31, 1923presented exhibit F to plaintiff, which is the finalaccount of his administration for said month,

wherein it appears that there is a balance ofP3,058.33 in favor of the plaintiff.· The liquidation of accounts revealed that theplaintiff owed the defendant P1,100, and asmisunderstanding arose between them, thedefendant brought suit against the plaintiff andudgment was rendered in his favor and after thewrit of execution was issued, the sheriff leviedupon the plaintiff's right of usufruct, sold it atpublic auction and adjudicated it to thedefendant in payment of all of his claim. virtuallaw library· Subsequently, the plaintiff sold his right ofredemption to one Eduardo Hernandez, for thesum of P200. This purchaser conveyed the sameright of redemption, for the sum of P200, to theplaintiff himself, Federico Valera. virtual lawlibrary· After the plaintiff had recovered his right ofredemption, one Salvador Vallejo, who had anexecution upon a judgment against the plaintiffrendered in a civil case against the latter, leviedupon said right of redemption, which was sold bythe sheriff at public auction to Salvador Vallejofor P250 and was definitely adjudicated to him.Later, he transferred said right of redemption tothe defendant Velasco.· This is how the title to the right of usufruct to theaforementioned property later came to vest thesaid defendant.ISSUE 1. WON one of the ways of terminating anagency is by the express or tacit renunciation of theagent and WON the institution of a civil action andthe execution of the judgment obtained by theagent against his principal is but renunciation of the

powers conferred on the agent- YES· 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, orinsolvency of the principal or of the agent.· And article 1736 of the same Code provides that:Art. 1736. An agent may withdraw from the agencyby giving notice to the principal. Should the lattersuffer any damage through the withdrawal, theagent must indemnify him therefore, unless theagent's reason for his withdrawal should be theimpossibility of continuing to act as such withoutserious detriment to himself.· The misunderstanding between the plaintiff andthe defendant over the payment of the balanceof P1,000 due the latter, as a result of theliquidation of the accounts between them arisingfrom the collections by virtue of the former'susufructuary right, who was the principal, madeby the latter as his agent, and the fact that thesaid defendant brought suit against the saidprincipal for the payment of said balance, morethan prove the breach of the juridical relationbetween them; for, although the agent has notexpressly told his principal that he renouncedthe agency, yet neither dignity nor decorumpermits the latter to continue representing aperson who has adopted such an antagonisticattitude towards him.· When the agent filed a complaint againsthis principal for recovery of a sum ofmoney arising from the liquidation of theaccounts between them in connection with

the agency, Federico Valera could not haveunderstood otherwise than that MiguelVelasco renounced the agency; because hisact was more expressive than words and couldnot have caused any doubt. In order toterminate their relations by virtue of the agencythe defendant, as agent, rendered his finalaccount on March 31, 1923 to the plaintiff, asprincipal. law library· Briefly, then, the fact that an agentinstitutes an action against his principal forthe recovery of the balance in his favorresulting from the liquidation of theaccounts between them arising from theagency, and renders and final account ofhis operations, is equivalent to an expressrenunciation of the agency, and terminatesthe juridical relation between them.· If, as we have found, the defendant-appelleeMiguel Velasco, in adopting a hostile attitudetowards his principal, suing him for the collectionof the balance in his favor, resulting from theliquidation of the agency accounts, ceased ipsofacto to be the agent of the plaintiff-appellant,said agent's purchase of the aforesaid principal'sright of usufruct at public auction held by virtueof an execution issued upon the judgmentrendered in favor of the former and against thelatter, is valid and legal, and the lower court didnot commit the fourth and fifth assignments oferror attributed to it by the plaintiff-appellant.chISSUE 2: WON the sale to Hernandez by Valero isvalid- NO· It is deemed unnecessary to discuss thevalidity of the sale made by Federico Valera to

Eduardo Hernandez of his right of redemption inthe sale of his usufructuary right made by thesheriff by virtue of the execution of the judgmentin favor of Miguel Velasco and against the saidFederico Valera; and the same thing is true as tothe validity of the resale of the same right ofredemption made by Eduardo Hernandez toFederico Valera; inasmuch as MiguelVelasco's purchase at public auction heldby virtue of an execution of FedericoValera's usufructuary right is valid andlegal, and as neither the latter nor EduardoHernandez exercised his right ofredemption within the legal period, thepurchaser's title became absolute.· Moreover, the defendant-appellee, MiguelVelasco, having acquired Federico Valera'sright of redemption from Salvador Vallejo,who had acquired it at public auction byvirtue of a writ of execution issued uponthe judgment obtained by the said Vallejoagainst the said Valera, the latter lost allright to said usufruct. law library· And even supposing that Eduardo Hernandezhad been tricked by Miguel Velasco into sellingFederico Valera's right of repurchase to thelatter so that Salvador Vallejo might levy anexecution on it, and even supposing that saidresale was null for lack of consideration, yet,inasmuch as Eduardo Hernandez did not presenta third party claim when the right was leviedupon for the execution of the judgment obtainedby Vallejo against Federico Vallera, nor did hefile a complaint to recover said right before theperiod of redemption expired, said Eduardo

Hernandez, and much less Federico Valera,cannot now contest the validity of said resale,for the reason that the one-year period ofredemption has already elapsed.ISSUE 3: WON Miguel Velasco has to render aliquidation of accounts from March 31, 1923- NO· inasmuch as Velasco had acquired the rights ofthe plaintiff by purchase at the execution sale,and as purchaser, he was entitled to receive therents from the date of the sale until the date ofthe repurchase, considering them as part of theredemption price; but not having exercised theright repurchase during the legal period, and thetitle of the repurchaser having become absolute,the latter did not have to account for said rents.