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).

Two days after the execution of the basic agreement, Exhibit "B", on April 27, 1953, Claparols executed in favor of Coleongco, at the latter's behest a special power of attorney (Exhibit C) to open and negotiate letters of credit, to sign contracts, bills of lading, invoices, and papers covering transactions; to represent appellee and the nail factory; and to accept payments and cash advances from dealers and distributors. Thereafter, Coleongco also became the assistant manager of the factory, and took over its business transactions, while Claparols devoted most of his time to the nail manufacture processes. Around mid-November of 1956, appellee Claparols was disagreeably surprised by service of an alias writ of execution to enforce a judgment obtained against him by the Philippine National Bank, despite the fact that on the preceding September he had submitted an amortization plan to settle the account. Worried and alarmed, Claparols immediately left for Manila to confer with the bank authorities. Upon arrival, he learned to his dismay that the execution had been procured because of derogatory information against appellee that had reached the bank from his associate, appellant Coleongco. On July 6, 1956, the latter, without appellee's knowledge, had written to the bank in connection with the verbal offer for the acquisition by me of the whole interest of Mr. Eduardo L. Claparols in the Claparols Steel & Nail Plant and the Claparols Hollow Blocks Factory" (Exhibit 36); and later, on October 29, 1956, Coleongco had written again the bank another letter (Exhibit 35), also behind the back of appellee, wherein Coleongco charged Claparols with taking machines mortgaged to the bank, and added - . In my humble personal opinion I presume that Mr. Eduardo L. Claparols is not serious in meeting his obligations with your bank, otherwise he had not taken these machines and equipments a sign of bad faith since the factory is making a satisfactory profit of my administration. Fortunately, Claparols managed to arrange matters with the bank and to have the execution levy lifted. Incensed at what he regarded as disloyalty of his attorney-in-fact, he consulted lawyers. The upshot was that appellee revoked the power of attorney (Exhibit "C"), and informed Coleongco thereof (Exhibits T, T-1), by registered mail, demanding a full accounting at the same time. Coleongco, as could be expected, protested these acts of Claparols, but the latter insisted, and on the first of January, 1957 wrote a letter to Coleongco dismissing him as assistant manager of the plant and asked C. Miller & Company, auditors, to go over the books and records of the business with a view to adjusting the accounts of the associates. These last steps were taken in view of the revelation made by his machinery superintendent, Romulo Agsam, that in the course of the preceding New Year celebrations Coleongco had drawn Agsam aside and proposed that the latter should pour acid on the machinery to paralyze the factory. The examination by the auditors, summarized in Exhibits 80 and 87, found that Coleongco owed the Claparols Nail Factory the amount of P87,387.37, as of June 30, 1957. In the meantime, Claparols had found in the factory files certain correspondence in February, 1955 between Coleongco and the nail dealer Kho To whereby the former proposed to Kho that the latter should cut his monthly advances to Claparols from P2,000 to P1,000 a month, because

I think it is time that we do our plan to take advantage of the difficulties of Eddie with the banks for our benefit. If we can squeeze him more. I am sure that we can extend our contract with him before it ends next year, and perhaps on better terms. If we play well our cards we might yet own his factory (Exhibit 32); and conformably to Coleongco's proposal, Kho To had written to Claparols that "due to present business conditions" the latter could only be allowed to draw P1,000 a month beginning April, 1955 (Exhibit 33). As the parties could not amicably settle their accounts, Coleongco filed a suit against Claparols charging breach of contract, asking for accounting, and praying for P528,762.19 as damages, and attorney's fees, to which Claparols answered, denying the charge, and counter-claiming for the rescission of the agreement with Coleongco for P561,387.99 by way of damages. After trial, the court rendered judgment, as stated at the beginning of this opinion. In this appeal, it is first contended by the appellant Coleongco that the power of attorney (Exhibit "C") was made to protect his interest under the financing agreement (Exhibit "B") and was one coupled with an interest that the appellee Claparols had no legal power to revoke. This point can not be sustained. The financing agreement itself already contained clauses for the protection of appellant's interest, and did not call for the execution of any power of attorney in favor of Coleongco. But granting appellant's view, it must not be forgotten that a power of attorney can be made irrevocable by contract only in the sense that the principal may not recall it at his pleasure; but coupled with interest or not, the authority certainly can be revoked for a just cause, such as when the attorney-in-fact betrays the interest of the principal, as happened in this case. It is not open to serious doubt that the irrevocability of the power of attorney may not be used to shield the perpetration of acts in bad faith, breach of confidence, or betrayal of trust, by the agent for that would amount to holding that a power coupled with an interest authorizes the agent to commit frauds against the principal. Our new Civil Code, in Article 1172, expressly provides the contrary in prescribing that responsibility arising from fraud is demandable in all obligations, and that any waiver of action for future fraud is void. It is also on this principle that the Civil Code, in its Article 1800, declares that the powers of a partner, appointed as manager, in the articles of copartnership are irrevocable without just or lawful cause; and an agent with power coupled with an interest can not stand on better ground than such a partner in so far as irrevocability of the power is concerned. That the appellee Coleongco acted in bad faith towards his principal Claparols is, on the record, unquestionable. His letters to the Philippine National Bank (Exhibits 35 and 36) attempting to undermine the credit of the principal and to acquire the factory of the latter, without the principal's knowledge; Coleongco's letter to his cousin, Kho To (Exhibit 32), instructing the latter to reduce to one-half the usual monthly advances to Claparols on account of nail sales in order to squeeze said appellee and compel him to extend the contract entitling Coleongco to share in the profits of the nail factory on better terms, and ultimately "own his factory", a plan carried out by Kho's letter, Exhibit 33, reducing the advances to Claparols; Coleongco's attempt to, have Romulo Agsam pour acid on the

machinery; his illegal diversion of the profits of the factory to his own benefit; and the surreptitious disposition of the Yates band resaw machine in favor of his cousin's Hong Shing Lumber Yard, made while Claparols was in Baguio in July and August of 1956, are plain acts of deliberate sabotage by the agent that fully justified the revocation of the power of attorney (Exhibit "C") by Claparols and his demand for an accounting from his agent Coleongco. Appellant attempts to justify his letter to the Philippine National Bank (Exhibits 35 and 36), claiming that Claparols' mal-administration of the business endangered the security for the advances that he had made under the financing contract (Exhibit "B"). But if that were the case, it is to be expected that Coleongco would have first protested to Claparols himself, which he never did. Appellant likewise denies the authorship of the letter to Kho (Exhibit 32) as well as the attempt to induce Agsam to damage the machinery of the factory. Between the testimony of Agsam and Claparols and that of Coleongco, the court below whose to believe the former, and we see no reason to alter the lower court's conclusion on the value of the evidence before it, considering that Kho's letter to Claparols (Exhibit 33) plainly corroborates and dovetails with the plan outlined in Coleongco's own letter (Exhibit 32), signed by him, and that the credibility of Coleongco is affected adversely by his own admission of his having been previously convicted of estafa (t.s.n., pp. 139, 276), a crime that implies moral turpitude. Even disregarding Coleongco's letter to his son-in-law (Exhibit 82) that so fully reveals Coleongco's lack of business scruples, the clear preponderance of evidence is against appellant. The same remarks apply to the finding of the trial court that it was appellant Coleongco, and not Claparols, who disposed of the band resawing equipment, since said machine was received in July, 1956 and sold in August of that year to the Hong Shing Lumber Co., managed by appellant's cousin Vicente Kho. The untruth of Coleongco's charge that Claparols, upon his return from Baguio in September, 1956, admitted having sold the machine behind his associate's back is further evidenced by (a) Coleongco's letter, Exhibit "V", dated October 29, 1956, inquiring the whereabouts of the resaw equipment from Claparols (an inquiry incompatible with Claparols' previous admission); (b) by the undenied fact that the appellee was in Baguio and Coleongco was acting for him during the months of July and August when the machine was received and sold; and (c) the fact that as between the two it is Coleongco who had a clear interest in selling the sawing machine to his cousin Kho To's lumber yard. If Claparols wished to sell the machine without Coleongco's knowledge, he would not have picked the latter's cousin for a buyer. The action of plaintiff-appellant for damages and lost profits due to the discontinuance of the financing agreement, Exhibit "B", may not prosper, because the record shows that the appellant likewise breached his part of the contract. It will be recalled that paragraph 2 of the contract, Exhibit "B", it was stipulated: That the Party of the Second Part (Coleongco) has agreed to finance and put up all the necessary money which may be needed to pay for the importation of the raw materials needed by such nail factory and allocated by the ICC from time to time, either in cash of with whatever suitable means which the Party of the Second Part may be able to make by suitable arrangements with any well-known banking institution recognized by the Central Bank of the Philippines.

Instead of putting up all the necessary money needed to finance the imports of raw material, Coleongco merely advanced 25% in cash on account of the price and had the balance covered by surety agreements executed by Claparols and others as solidary, (joint and several) guarantors (see Exhibits G, H, I). The upshot of this arrangement was that Claparols was made to shoulder 3/4 of the payment for the imports, contrary to the financing agreement. Paragraph 11 of the latter expressly denied Coleongco any power or authority to bind Claparols without previous consultation and authority. When the balances for the cost of the importations became due, Coleongco, in some instances, paid it with the dealers' advances to the nail factory against future sales without the knowledge of Claparols (Exhibits "K" to K-11, K-13). Under paragraphs 8 and 11 of the financing agreement, Coleongco was to give preference to the operating expenses before sharing profits, so that until the operating costs were provided for, Coleongco had no right to apply the factory's income to pay his own obligations. Again, the examination of the books by accountant Atienza of C. Miller and Co., showed that from 1954 onwards Coleongco (who had the control of the factory's cash and bank deposits, under Paragraph 11 of Exhibit "B") never liquidated and paid in full to Claparols his half of the profits, so that by the end of 1956 there was due to Claparols P38,068.41 on this account (Exhibit 91). For 1957 to 1958 Claparols financed the imports of nail wire without the help of appellant, and in view of the latter's infringement of his obligations, his acts of disloyalty previously discussed, and his diversions of factory funds (he even bought two motor vehicles with them), we find no justification for his insistence in sharing in the factory's profit for those years, nor for the restoration of the revoked power of attorney. The accountant's reports and testimony (specially Exhibits 80 to 87) prove that as of June 30, 1957, Coleongco owed to Claparols the sum of P83,466.34 that after some adjustment was reduced to P81,387.37, practically accepted even by appellant's auditor. The alleged discrepancies between the general ledger and the result thus arrived at was satisfactorily explained by accountant Atienza in his testimony (t.s.n., 1173-1178). No error was, therefore, committed by the trial court in declaring the financing contract (Exh. B) properly resolved by Claparols or in rendering judgment against appellant in favor of appellee for the said amount of P81,387.37. The basic rule of contracts requires parties to act loyally toward each other in the pursuit of the common end, and appellant clearly violated the rule of good faith prescribed by Art. 1315 of the new Civil Code. The lower court also allowed Claparols P50,000 for damages, material, moral, and exemplary, caused by the appellant Coleongco's acts in maliciously undermining appellee's credit that led the Philippine National Bank to secure a writ of execution against Claparols. Undeniably, the attempts of Coleongco to discredit and "squeeze" Claparols out of his own factory and business could not but cause the latter mental anguish and serious anxiety, as found by the court below, for which he is entitled to compensation; and the malevolence that lay behind appellee's actions justified also the imposition of exemplary or deterrent damages (Civ. Code, Art. 2232). While the award could have been made larger without violating the canons of justice, the discretion in fixing such damages primarily lay in the trial court, and we feel that the same should be respected. IN VIEW OF THE FOREGOING, the decision appealed from is affirmed. Costs against appellant Vicente Coleongco.

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 of attorney, 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

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 persons furnishing material and labor for the construction of public works", reads in part as follows:

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 against said 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 control but subject to approval under existing laws not only by the Department Head (Sec. 568, Rev. Adm, Code), but also by the Auditor General.

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 of Title 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

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 original authority because, under the old Civil Code, her right to withdraw such authority is recognized. A principal may withdraw the authority given to an agent at will. (Article 1733.) But this 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

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 to alter or vary the terms of the document. This document was merely a withdrawal of the

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,

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 termination of 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

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 plaintiffappellant, 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 the fourth 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 redemption within the legal period, the purchaser's title became absolute.

Moreover, the defendant-appellee, Miguel Velasco, having acquired Federico Valera's right of redemption from Salvador Vallejo, who had acquired it at public auction by virtue of a writ of execution issued upon the judgment obtained by the said Vallejo against the said Valera, the latter lost all right to said usufruct. And even supposing that Eduardo Hernandez had been tricked by Miguel Velasco into selling Federico Valera's right of repurchase to the latter so that Salvador Vallejo might levy an execution on it, and even supposing that said resale was null for lack of consideration, yet, inasmuch as Eduardo Hernandez did not present a third party claim when the right was levied upon for the execution of the judgment obtained by Vallejo against Federico Vallera, nor did he file a complaint to recover said right before the period 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 of redemption has already elapsed. Neither did the trial court err in not ordering Miguel Velasco to render a liquidation of accounts from March 31, 1923, inasmuch as he had acquired the rights of the plaintiff by purchase at the execution sale, and as purchaser, he was entitled to receive the rents from the date of the sale until the date of the repurchase, considering them as part of the redemption price; but not having exercised the right repurchase during the legal period, and the title of the repurchaser having become absolute, the latter did not have to account for said rents. Summarizing, the conclusion is reached that the disagreements between an agent and his principal with respect to the agency, and the filing of a civil action by the former against the latter for the collection of the balance in favor of the agent, resulting from a liquidation of the agency accounts, are facts showing a rupture of relations, and the complaint is equivalent to an express renunciation of the agency, and is more expressive than if the agent had merely said, "I renounce the agency." By virtue of the foregoing, and finding no error in the judgment appealed from, the same is hereby affirmed in all its parts, with costs against the appellant. So ordered.

Case 71 - Buason and Reyes vs Panuyas G.R. No. L-11415 May 25, 1959 MANUEL BUASON and LOLITA M. REYES, plaintiffs-appellants, vs. MARIANO PANUYAS, defendant-appellee. PADILLA, J.: This is an appeal from a judgment of the Court of First Instance of Nueva Ecija dismissing an action brought by the spouses Manuel Buason and Lolita M. Reyes for annulment of a deed of sale in favor of the defendant, cancellation of transfer certificate of title No. 8419 issued in the name of the defendant and his wife, declaration that the sale in their favor is valid, recovery of possession of the parcel of land described in the complaint from the defendant, damages, attorney's fees and costs. (Civil No. 2144.)

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 motion for 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 the same 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

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.