Agency Part D: Obligations of the Agents (Art. 1884 1888) 1 JAMES D. BARTON, plaintiff-appellee, vs.

s. LEYTE ASPHALT & MINERAL OIL CO., defendantappellant. SYLLABUS 1. PRINCIPAL AND AGENT; AUTHORITY OF SELLING AGENT; SALES TO SUBAGENT. An agent who is clothed with authority to sell a given commodity cannot bind the principle by selling to himself, either directly or indirectly. It results that the principal is not obligated to fill orders taken by the agent from his own subagent, unless the principal ratifies such sale with full knowledge of the facts. Court of First Instance of the City of Manila by James D. Barton, to recover of the Leyte Asphalt & Mineral Oil Co., Ltd., as damages for breach of contract, the sum of $318,563.30. The trial judge entered a judgment absolving the defendant corporation from four of the six causes of action set forth in the complain and giving judgment for the plaintiff to recover of said defendant, upon the first and fourth causes of action, the sum of $202,500, United States currency, equivalent to P405,000, Philippine currency, with legal interest from June 2, 1921, and with costs. From this judgment the defendant company appealed. The plaintiff is a citizen of the United States, resident in the City of Manila, while the defendant is a corporation organized under the laws of the Philippine Islands with its principal office in the City of Cebu, Province of Cebu, Philippine Islands. Said company appears to be the owner of a valuable deposit of bituminous limestone and other asphalt products, located on the Island of Leyte and known as the Lucio mine. On April 21,1920, one William Anderson, as president and general manager of the defendant company, addressed a letter Exhibit B, to the plaintiff Barton, authorizing the latter to sell the products of the Lucio mine in the Commonwealth of Australia and New Zealand upon a scale of prices indicated in said letter. In the third cause of action stated in the complaint the plaintiff alleges that during the life of the agency indicated in Exhibit B, he rendered services to the defendant company in the way of advertising and demonstrating the products of the defendant and expended large sums of money in visiting various parts of the world for the purpose of carrying on said advertising and demonstrations, in shipping to various parts of the world samples of the products of the defendant, and in otherwise carrying on advertising work. For these services and expenditures the plaintiff sought, in said third cause of action, to recover the sum of $16,563.80, United States currency. The court, however, absolved the defendant from all liability on this cause of action and the plaintiff did not appeal, with the result that we are not now concerned with this phase of the case. Besides, the authority contained in said Exhibit B was admitted superseded by the authority expressed in a later letter, Exhibit A, dated October 1, 1920. This document bears the approval of the board of directors of the defendant company and was formally accepted by the plaintiff. As it supplies the principle basis of the action, it will be quoted in its entirety. "(Exhibit A) "Cebu, Cebu, P. I., "October 1, 1920. "JAMES D. BARTON, Esq., "Cebu Hotel City. "DEAR SIR: You are hereby given the sole and exclusive sales agency for our bituminous limestone and other asphalt, Ltd., until May first, 1922, in the following territory: AustraliaSaigonJava New ZealandIndiaChina TasmaniaSumatraHongkong "Siam and the Straits Settlements, also in the United States of America until May 1, 1921. "As regards bituminous limestone mined from the Lucio property . No orders for less than one thousand (1,000) tons will be accepted except under special agreement with us. All orders for said products are to be billed to you as follows: Per ton In 1,000 ton lotsP15 In 2,000 ton lots14 In 5,000 ton lots12 In 10,000 ton lots10 with the understanding, however, that, should the sales in the above territory equal or exceed ten thousand (10,000) tons in the year ending October 1, 1921, then in that event the price of all shipments made during the above period shall be ten pesos (P10) per ton, and any sum charged to any of your customers or buyers in the aforesaid territory in excess of ten pesos (P10) per ton, shall be rebated to you. Said rebate to be due and payable when the gross sales have equaled or exceeded ten thousand (10,000) tons in the twelve months period as hereinbefore described. Rebates on lesser sales to apply as per above price list. "You are to have full authority to sell said product of the sum Lucio mine for any sum you see fit in excess of the prices quoted above and such excess in price shall be your extra and additional profit and commission. Should we make any collections in excess of the prices quoted, we agree to remit same to you within ten (10) days of the date of such collections or payments. "All contracts taken with municipal governments will be subject to inspection before shipping, by any authorized representative of such governments at whatever price may be contracted for by you and we agree to accept such contracts subject to draft attached to bill of lading in full payment of such shipment. "It is understood that the purchasers of the products of the Lucio mine are to pay freight from the mine carriers to destination and are to be responsible for all freight, insurance and other charges, providing said shipment has been accepted by their inspectors. "All contracts taken with responsible firms are to be under the same conditions as with municipal governments.

Agency Part D: Obligations of the Agents (Art. 1884 1888) 2 "All contracts will be subject to delays caused by the acts of God, over which the parties hereto have no control. "It is understood and agreed that we agree to load all ships, steamers, boats or other carriers promptly and without delay and load not less than 1,000 tons each twenty-four hours after March 1, 1921, unless we so notify you specifically prior to that date what we are prepared to load at that rate, and it is also stipulated that we shall not be required to ship orders of 5,000 tons except on 30 days notice and 10,000 tons except on 60 days notice. "If your sales in the United States reach five thousand tons on or before May 1, 1921, you are to have sole rights for this territory also for one year additional and should your sales in the second year reach or exceed ten thousand tons you are to have the option to renew the agreement for this territory on the same terms for an additional two years. "Should your sales equal or exceed ten thousand (10,000) tons in the year ending October 1, 1921, or twenty thousand (20,000) tons by May 1, 1922, then this contract is to be continued automatically for an additional three years ending April 30, 1925, under the same terms and conditions as above stipulated. "The products of the other mines can be sold by you in the aforesaid territories under the same terms and conditions as the products of the Lucio mine; scale of prices to be mutually agreed upon between us. "LEYTE ASPHALT & MINERAL OIL CO.,LTD. "By (Sgd.) WM. ANDERSON "President (Sgd. "W.C.A. PALMER "Secretary "Approved by Board of Directors, "October 1, 1920. (Sgd.) "WM. ANDERSON "President "Accepted. (Sgd.) "JAMES D. BARTON "Witness D. G. McVean Upon careful perusal of the fourth paragraph from the end of this letter it is apparent that some negative word has been inadvertently omitted before "prepared" so that the full expression should be "unless we should notify you specifically prior to that we are unprepared to load at that rate," or "not prepared to load at that rate." Very soon after the aforesaid contract became effective, the plaintiff requested the defendant company to give him a similar selling agency for Japan. To this request the defendant company, through its president, Wm. Anderson, replied, under date of November 27,1920, as follows: On February 5, 1921, Ludvigsen & McCurdy, of San Francisco, addressed a letter to the plaintiff, then in San Francisco, advising him that he might enter an order for six thousand tons of bituminous limestone to be loaded at Leyte not later than May 5, 1921, upon terms stated in the letter Exhibit G. Upon this letter the plaintiff immediately indorsed his acceptance. The plaintiff them returned to Manila; and on March 2, 1929, Anderson wrote to him from Cebu, to the effect that the company was behind with construction and was not then able to handle big contracts. (Exhibit FF.) On March 12, Anderson was in Manila and the two had an interview in the Manila Hotel, in the course of which the plaintiff informed Anderson of the San Francisco order. Anderson thereupon said that, owing to lack of capita, adequate facilities had not been provide by the company for filling large orders and suggested that the plaintiff had better hold up in the matter of taking orders. The plaintiff expressed surprise at this and told Anderson that he had not only the San Francisco order (which he says he exhibited to Anderson) but other orders for large quantities of bituminuos limestone to be shipped to Australia and Shanghai. In another interview on the same day Anderson definitely informed the plaintiff that the contracts which he claimed to have procured would not be filled. Three days later the plaintiff addressed a letter (Exhibit Y) to the defendant company in Cebu, in which he notified the company to prepared to ship five thousand tons of bituminuos limestone to John Chapman Co., San Francisco, loading to commence on May 1, and to proceed at the rate of one thousand tons per day of each twenty-four hours, weather permitting. On March 5, 1921, Frank B. Smith, of Sydney, had cabled the plaintiff an order for five thousand tons of bituminuos limestone; and in his letter of March 15 to the defendant, the plaintiff advised the defendant company to be prepared to ship another five thousand tons of bituminuos limestone, on or about may 6, 1921, in addition to the intended consignment for San Francisco. the name Henry E. White was indicated as the name of the person through whom this contract had "In your request for Japanese agency, will say, that we are willing to give you, the same commission on all sales made by you in Japan, on the same basis as your Australian sales, but we do not feel like giving you a regular agency for Japan until you can make some large sized sales there, because some other people have given us assurances that they can handle our Japanese sales, therefore we have decided to leave this agency open for a time." Meanwhile the plaintiff had embarked for San Francisco and upon arriving at that port he entered into an agreement with Ludvigsen & McCurdy, of that city, whereby said firm was constituted a subagent and given the sole selling rights for the bituminous limestone products of the defendant company for the period of one year from November 11,1920, on terms stated in the letter Exhibit K. The territory assigned to Ludvigsen & McCurdy included San Francisco and all territory in California north of said city. Upon an earlier voyage during the same year to Australia, the plaintiff had already made an agreement with Frank B. Smith, of Sydney, whereby the latter was to act as the plaintiff's sales agent for bituminous limestone mined at the defendant's quarry in Leyte, until February 12, 1921. Later the same agreement was extended for the period of one year from January 1, 1921. (Exhibit Q.)

Agency Part D: Obligations of the Agents (Art. 1884 1888) 3 been made and it was stated that the consignee would be named later, no destination for the shipment being given. The plaintiff explains that the name white, as used in this letter, was based on an inference which he had erroneously drawn from the cable sent by Frank B. Smith, and his intention was to have the second shipment consigned to Australia in response to Smith's order. It will be noted in connection with this letter of the plaintiff, of March 15, 1921, that no mention was made of the names of the person, or firm, for whom the shipments were really intended. The obvious explanation that occurs in connection with this is that the plaintiff did not then care to reveal the fact that the two orders had originated from his own subagents in San Francisco and Sydney. To the plaintiff's letter of March 15, the assistant manager of the defendant company replied on March 25, 1921, acknowledging the receipt of an order for five thousand tons of bituminous limestone to be consigned to John Chapman Co., of San Francisco, and the further amount of five thousand tons of the same material to be consigned to Henry E. White; and it was stated that "no orders can be entertained unless cash has been actually deposited with either the International Banking Corporation or the Chartered bank of India, Australia and China, Cebu." (Exhibit Z.) To this letter the plaintiff in turn replied from Manila, under date of March 29,1921, questioning the right of the defendant to insist upon a cash deposit in Cebu prior to the filling of the orders. In conclusion the plaintiff gave orders for shipment to Australia of five thousand tons, or more, about May 22, 1921, and ten thousand tons, or more, about June 1, 1921. In conclusion the plaintiff said "I have arranged for deposits to be made on these additional shipments if you will signify your ability to fulfill these orders on the dates mentioned." No name was mentioned as the purchaser, or purchasers, of these intended Australian consignments. Soon after writing the letter last above-mentioned, the plaintiff embarked for China and Japan. With his activities in China we are not here concerned, but we note that in Tokyo, Japan, he came in contact with one H. Hiwatari, who appears to have been a suitable person for handling bituminous limestone for construction work in Japan. In the letter Exhibit X, Hiwatari speaks of himself as if he had been appointed exclusive sales agent for the plaintiff in Japan, but no document expressly appointing him such is in evidence. While the plaintiff was Tokyo he procured the letter Exhibit W, addressed to himself, to be signed by Hiwatari. This letter, edited by the plaintiff himself, contains an order for one thousand tons of bituminous limestone from the quarries of the defendant company, to be delivered as soon after July 1, 1921, as possible. In this letter Hiwatari states, "on receipt of the cable from you, notifying me of date you will be ready to ship, and also tonnage rate, i will agree to transfer through the Bank of Taiwan, of Tokyo, to the Asia Banking Corporation, of Manila, P. I., the entire payment of $16,000 gold, to be subject to your order on delivery of documents covering bill of lading of shipment, the customs report of weight, and prepaid export tax receipt. I will arrange in advance a confirmed or irrevocable letter of credit for the above amount so that payment can be ordered by cable, in reply to your cable advising shipping date." In a later letter, Exhibit X, of May 16,1921, Hiwatari informs the plaintiff that he had shown the contract, signed by himself, to the submanager of the Taiwan Bank who had given it as his opinion that he would be able to issue, upon request of Hiwatari, a credit note for the contracted amount, but he added that the submanager was not personally able to place his approval on the contract as that was a matter beyond his authority. Accordingly Hiwatari advised that he was intending to make further arrangements when the manager of the bank should return from Formosa. In the letter of May 5, 1921, containing Hiwatari's order for one thousand tons of bituminous limestone, it was stated that if the material should prove satisfactory after being thoroughly tested by the Paving Department of the City of Tokyo, he would contract with the plaintiff for a minimum quantity of ten thousand additional tons, to be used within a year from September 1, 1921, and that in this event the contract was to be automatically extended for an additional four years. The contents of the letter of May 5 seems to have been conveyed, though imperfectly, by the plaintiff to his attorney, Mr. Frank B. Ingersoll, of Manila; and on May 17,1921, Ingersoll addressed a note to the defendant company in Cebu in which he stated that he had been requested by the plaintiff to notify the defendant that the plaintiff had accepted an order from Hiwatari , of Tokyo, approved by the Bank of Taiwan, for a minimum for a period of five years, the first shipment of one thousand tons to be made as early after July 1 as possible. It will be noted that this communication did not truly reflect the contents of Hiwatari's letter, which called unconditionally for only one thousand tons, the taking of the remainder being contingent upon future eventualities. It will be noted that the only written communications between the plaintiff and the defendant company in which the former gave notice of having any orders for the sale of bituminous limestone are the four letters Exhibits Y, AA, BB, and II. In the first of these letters, dated March 15,1921, the plaintiff advises the defendant company to be prepared to ship five thousand tons of bituminous limestone, to be consigned to John Chapman Co., of San Francisco to be loaded by May 5, and a further consignment of five thousand tons, through a contract with Henry E. White, consignees to be named later. In the letter Exhibit BB dated May 17, 1921, the plaintiff of an order from Hiwatari, of Tokyo, approved by the Bank of Taiwan, for a minimum of ten thousand tons annually for a period of five years, first shipment of a thousand tons to be as early after July 1 as possible. In the letter Exhibit II the plaintiff gives notice of an "additional" (?) order from H.E. White, Sydney, for two lots of bituminous limestone of five thousand tons each, one for shipment not later than June 30, 1921, and the other by July 20,1921. In the same letter the plaintiff reports for the first time an order for five thousand tons from F.B. Smith, to be shipped to Brisbane, Australia, by June 30, and a similar amount within thirty days later. After the suit was brought, the plaintiff filed an amendment to his complaint in which he set out, in tabulated form, the orders which he claims to have received and upon which his letters of notification to the defendant company were based. In this amended answer the name of Ludvigsen & McCurdy appears for the first time; and the name of Frank B. Smith, of Sydney, is used for the first time as the source of the intended consignments of May 1, May 22, and June 1. We note, furthermore, that the letters, Exhibits G, L, M, and W, containing the orders from Ludvigsen & McCurdy, Frank B, Smith and H. Hiwatari were at no time submitted for inspection to any officer of

Agency Part D: Obligations of the Agents (Art. 1884 1888) 4 the defendant company, except possibly the Exhibit G, which the plaintiff claims to have shown to Anderson in Manila on March 12, 1921. The different items comprising the award which the trial judge gave in favor of the plaintiff are all based upon the orders given by Ludvigsen & McCurdy (Exhibit G), by Frank B. Smith (Exhibits L and M), and by Hiwatari in Exhibit W; and the appeal does not involve an order which came from Shanghai, China. We therefore now address ourselves to the question whether or not the orders contained in Exhibits G, L, M, and W, in connection with the subsequent notification thereof given by the plaintiff to the defendant, are sufficient to support the judgment rendered by the trial court. The transaction indicated in the orders from Ludvigsen & McCurdy and from Frank B. Smith must, in our opinion, be at once excluded from consideration as emanating from persons who had been constituted mere agents of the plaintiff. The San Francisco order and the Australian orders are the same in legal effect as if they were orders signed by the plaintiff and drawn upon himself; and it cannot be pretended that those orders represent sales to bona fide purchasers found by the plaintiff. The original contract by which the plaintiff was appointed sales agent for a limited period of time in Australia and the United States contemplated that he should find reliable and solvent buyers who should be prepared to obligate themselves to take the quantity of bituminous limestone contracted for upon terms consistent with the contract. These conditions were not met by the taking of these orders from the plaintiff's own subagents, which was as if the plaintiff had bought for himself the commodity which he was authorized to sell to others. Article 267 of the Code of Commerce declares that no agent shall purchase for himself or for another that which he has been ordered to sell. The law has placed its ban upon a broker's purchasing from his principal unless the latter with full knowledge of all the facts and circumstances acquiesces in such course; and even then the broker's action must be characterized by the utmost good faith. A sale made by a broker to himself without the consent of the principal is ineffectual whether the broker has been guilty of fraudulent conduct or not. (4 R. C. L., 276-277.) We think, therefore, that the position of the defendant company is indubitably sound in so far as it rests upon the contention that the plaintiff has not in fact found any bona fide purchasers ready and able to take the commodity contracted for upon terms compatible with the contract which is the basis of the action. It will be observed that the contract set out at the beginning of this opinion contains provisions under which the period of the contract might be extended. That privilege was probably considered a highly important incident of the contract; and it will be seen that the sale of five thousand tons which the plaintiff reported for shipment to San Francisco was precisely adjusted to the purpose of the extension of the contract for the United States for the period of an additional year; and the sales reported for shipment to Australia were likewise adjusted to the requirements for the extension of the contract in that territory. Given the circumstances surrounding these contracts as they were reported to the defendant company and the concealment by the plaintiff of the names of the authors of the orders, who after all were merely the plaintiff's subagents, the officers of the defendant company might justly have entertained the suspicion that the real and only person behind those contracts was the plaintiff himself. Such at least turns out to have been the case. Much energy has been expended in the briefs upon this appeal over the contention whether the defendant was justified in laying down the condition mentioned in the letter of March 26, 1921, to the effect that no order would be entertained unless cash should be deposited with either the International Banking Corporation or the Chartered Bank of India, Australia and China, in Cebu. In this connection the plaintiff points to the stipulation of the contract which provides that contracts with responsible parties are to be accepted "subject to draft attached to bill of lading in full payment of such shipment." What passed between the parties upon this point appears to have the character of mere diplomatic parrying, as the plaintiff had no contract from any responsible purchaser other than his own subagents and the defendant company could not probably have filled the contracts even if they had been backed by the Bank of England. Upon inspection of the plaintiff's letters (Exhibits Y and AA), there will be found ample assurance that deposits for the amount of each shipment would be made with a bank in Manila provided the defendant would indicate its ability to fill the orders; but these assurances rested upon no other basis than the financial responsibility of the plaintiff himself, and this circumstance doubtless did not escape the discernment of the defendant's officers. With respect to the order from H. Hiwatari, we observe that while he intimates that he had been promised the exclusive agency under the plaintiff for Japan, nevertheless it does not affirmatively appear that he had been in fact appointed to be such at the time he signed the order Exhibit W at the request of the plaintiff. It may be assumed, therefore, that he was at that time a stranger to the contract of agency. It clearly appears, however, that he did not expect to purchase the thousand tons of bituminous limestone referred to in his order without banking assistance; and although the submanager of the Bank of Taiwan had said something encouraging in respect to the matter, nevertheless that official had refrained from giving his approval to the order Exhibit W. It is therefore not shown affirmatively that this order proceeds from a responsible source. The first assignment of error in the appellant's brief is directed to the action of the trial judge in refusing to admit Exhibits 2, 7, 8, 9 and 10, offered by the defendant, and in admitting Exhibit E, offered by the plaintiff. The Exhibit 2 is a letter dated June 25, 1921, or more than three weeks after the action was instituted, in which the defendant's assistant general manager undertakes to reply to the plaintiff's letter of March 29 preceding. It was evidently intended as an argumentative presentation of the plaintiff's point of view in the litigation then pending, and its probative value is so slight, even if admissible at all, that there was no error on the part of the trial court in excluding it. Exhibits 7, 8, 9 and 10 comprise correspondence which passed between the parties by mail or telegraph during the first part of the year 1921. The subject-matter of this correspondence relates to efforts that were being made by Anderson to dispose of the controlling interest in the defendant corporation, and Exhibit 9 in particular contains an offer from the plaintiff, representing certain associates, to buy out Anderson's interest for a fixed sum. While these exhibits perhaps shed some light upon the relations of the parties during the time this controversy was brewing, the

Agency Part D: Obligations of the Agents (Art. 1884 1888) 5 bearing of the matter upon the litigation before us is too remote to exert any definitive influence on the case. The trial court was not in error in our opinion in excluding these documents. Exhibit E is a letter from Anderson to the plaintiff, dated April 21, 1920, in which information is given concerning the property of the defendant company. It is stated in this letter that the output of the Lucio mine (quarry) during the coming year would probably be at the rate of about five tons for twenty-four hours, with the equipment then on hand, but that with the installation of a model cable-way which was under contemplation, the company would be able to handle two thousand tons in twenty-four hours. We see no legitimate reason for rejecting this document, although of slight probative value; and the error imputed to the court in admitting the same was not committed. Exhibit 14, which was offered in evidence by the defendant, consists of a carbon copy of a letter dated June 13, 1921, written by the plaintiff to his attorney, Frank B. Ingersoll, Esq., of Manila, and in which plaintiff states, among other things, that his profits from the San Francisco contract would have been at the rate of eighty-five cents (gold) per ton. The authenticity of this document is admitted, and when it was offered in evidence by the attorney for the defendant the counsel for the plaintiff announced that he had no objection to the introduction of this carbon copy in evidence if counsel for the defendant would explain where this copy was secured. Upon this the attorney for the defendant informed the court that he received the letter from the former attorneys of the defendant without explanation of the manner in which the document had come into their possession. Upon this the attorney for the plaintiff made this announcement: "We hereby give notice at this time that unless such an explanation is made, explaining fully how this carbon copy came into the possession of the defendant company, or any one representing it, we propose to object to its admission on the ground that it is a confidential communication between client and lawyer." No further information was then given by the attorney for the defendant as to the manner in which the letter had come to his hands and the trial judge thereupon excluded the document, on the ground that it was a privileged communication between client and attorney. We are of the opinion that this ruling was erroneous; for even supposing that the letter was within the privilege which protects communications between attorney and client, this privilege was lost when the letter came to the hands of the adverse party. And it makes no difference how the adversary acquired possession. The law protects the client from the effect of disclosures made by him to his attorney in the confidence of the legal relation, but when such a document, containing admissions of the client, comes to the hand of a third party, and reaches the adversary, it is admissible in evidence. In this connection Mr. Wigmore says: "The law provides subjective freedom for the client by assuring him of exemption from its processes of disclosure against himself or the attorney or their agents of communication. This much, but not a whit more, is necessary for the maintenance of the privilege. Since the means of preserving secrecy of communication are entirely in the client's hands, and since the privilege is derogation from the general testimonial duty and should be strictly construed, it would be improper to extend its prohibition to third persons who obtain knowledge of the communications. One who overhears the communications, Although the precedents are somewhat confusing, the better doctrine is to the effect that when papers are offered in evidence a court will take no notice of how they were obtained, whether legally or illegally, properly or improperly; nor will it from a collateral issue to try that question. (10 R. C. L., 931; 1 Greenl. Evid., sec. 254a; State vs. Mathers, 15 L. R. A., 268; Gross vs. State, 33 L. R. A., [N. S.], 477, note.) Our conclusion upon the entire record is that the judgment appealed from must be reversed; and the defendant will be absolved from the complaint. It is so ordered, without special pronouncement as to costs of either instance. Araullo, C.J., Johnson, Avancea, Ostrand, Johns, and Romualdez, JJ., concur. Separate Opinions MALCOLM, J., dissenting: An intensive scrutiny of every phase of this case leads me to the conclusion that the trial judge was correct in his findings of fact and in his decision. Without encumbering the case with a long and tedious dissent, I shall endeavor to explain my point of view as briefly and clearly as possible. A decision must be reached on the record as it is and not on a record as we would like to have it. The plaintiff and the defendant deliberately entered into a contract, the basis of this action. The plaintiff, proceeding pursuant to this contract, spent considerable effort and used considerable money to advance the interests of the defendant and to secure orders for its products. These orders were submitted to the president of the defendant company personally and alter formally by writing. Prior to the institution of the suit, the only objection of the defendant was that the money should be deposited with either the International Banking Corporation or the Chartered Bank of India, Australia and China at Cebu, a stipulation not found in the contract. A reasonable deduction, therefore, is that the plaintiff presented orders under circumstances which were a substantial compliance with the terms of the contract with the defendant, and which insured to the defendant payment for its deliveries according to the price agreed upon, and that as the defendant has breached its contract, it must respond in damages. The current running through the majority opinion is that the orders emanated from subagents of the plaintiff, and that no bona fide purchasers were ready and able to take the commodity contracted for upon terms compatible with the contract. The answer is, in the first place, that the contract nowhere prohibits the plaintiff to secure subagents. The answer is, in the second place, that the orders were so phrased as to make the persons making them personally responsible. The Ludvigsen & McCurdy order from San Francisco begins: "You can enter our order for 6,000 tons of bituminous limestone as per sample submitted, at $10 gold per ton, f. o. b., island of Leyte, subject to the following terms and conditions: . . ." (Exhibit G). The Smith order from Australia contains the following: "It is therefore with great pleasure I confirm the booking of the whether with or without the client's knowledge, is not within the protection of the privilege. The same rule ought to apply to one who surreptitiously reads or obtains possession of a document in original or copy." (5 Wigmore on Evidence, 2d ed., sec. 2326.)

Agency Part D: Obligations of the Agents (Art. 1884 1888) 6 following orders, to be shipped at least within a week of respective dates: . . ." (Exhibit L). The Japan order starts with the following sentence: "You can enter my order for 1,000 tons of 1,000 kilos each of bituminous limestone from the quarries of the Leyte Asphalt and Mineral Oil Co. . . ." (Exhibit W.) But the main point of the plaintiff which the majority decision misses entirely centers on the proposition that the orders were communicated by the plaintiff to the defendant, and that the only objection the defendant had related to the manner of payment. To emphasize this thought again, let me quote the reply of the defendant to the plaintiff when the defendant acknowledged receipt of the orders placed by the plaintiff. The letter reads: "In reply to same have to advise you that no orders can be entertained unless cash has been actually deposited with either the International Banking Corporation or the Chartered Bank of India, Australia and China, Cebu." (Exhibit Y.) Prior to the filing of suit, the defendant company never at any time raised any question as to whether the customers secured by plaintiff were "responsible firms" within the meaning of the contract, and never secured any information whatsoever as to their financial standing. Consequently, defendant is now estopped by its conduct from raising new objections for rejection of the orders. (Mechem on Agency, section 2441.) The majority decision incidentally takes up for consideration assignments of error 1 and 2 having to do with either the admission or the rejection by the trial court of certain exhibits. Having in mind that the Court reverses the court a quo on the facts, what is said relative to these two assignments is absolutely unnecessary for a judgment, and even as obiter dicta, contains unfortunate expressions. Exhibit 14, for example, is a letter addressed by the plaintiff to his lawyer and probably merely shown to the counsel of the defendant during negotiations to seek a compromise. Whether that exhibit be considered improperly rejected or not would not change the result one iota. The rule now announced by the Court that it makes no difference how the adversary acquired possession of the document, and that a court will take no notice of how it was obtained, is destructive of the attorney's privilege and constitutes an obstacle to attempts at friendly compromise. In the case of Uy Chico vs. Union Life Assurance Society ([1915], 29 Phil., 163), it was held that communications made by a client to his attorney for the purpose of being communicated to others are not privileged if they have been so communicated. But here, there is no intimation that Exhibit 14 was sent by the client to the lawyer for the purpose of being communicated to others. The Supreme Court of Georgia in the case of Southern Railway Co. vs. White ([1899], 108 Ga., 201), held that statements in a letter to a party's attorney handed by the latter to the opponent's attorney, are confidential communications and must be excluded. Briefly, the decision of the majority appears to me to be defective in the following particulars: (1) It sets aside without good reason the fair findings of fact as made by the trial court and substitutes therefor other findings not warranted by the proof; (2) it fails to stress plaintiff's main argument, and (3) it lays down uncalled for rules which undermine the inviolability of a client's communications to his attorney. Accordingly, I dissent and vote for an affirmance of the judgment. --------------------------------------------------------------------------------------------------------------------------------------FIRST DIVISION [G.R. No. L-4014. February 18, 1908.] GENARO HEREDIA, plaintiff-appellant, vs. RAMON SALINAS, defendant-appellee. Genaro Heredia, on his own behalf. Ramon Salinas, on his own behalf. SYLLABUS 1.BILL OF EXCEPTIONS. The recording of the intent of to present a bill of exceptions thirty days after motion for a new trial has been denied is not authorized by law nor by any rule established in any case decide by this court. 2.ACTION FOR LOSSES AND DAMAGES ARISING FROM ABANDONMENT OF THE APPEAL. Articles 1101, 1718, and 1902 of the Civil Code refer to losses and damages. The existence of the losses and damages caused must be established in the suit upon the validity of the action prosecuted to secure the indemnity. There is not proof of losses and damages when the action is based upon the unsubstantiated and arbitrary supposition of the injustice of the judgment which became final by the fault and negligence of the attorney. No proof of the injustice of such decision having been offered, the action instituted for losses and damages is without foundation. The denial of remuneration for losses and damages on such ground does not constitute a violation of the aforesaid articles of the Civil Code. DECISION ARELLANO, C.J p: From the allegations and proofs in this case, it appears: 1.That this was an action between Justo Trinidad as plaintiff, on the one part, and Genaro Heredia on the other, as defendant; it was decided against the latter by a judgment dated the 19th of April, 1906. 2.That on the 23d of April, letters of notification were addressed to the parties, and on the 28th of said month the defendant excepted thereto and moved for a new trial. 3.That on the 5th of May following, the motion for a new trial was heard and denied, to which exception was at once taken. 4.That on the 5th of June of the same year, the defendant gave notice of his intention to file a bill of exceptions, which was presented on the 13th of the same month. 5.That the admission and approval, of the bill of exceptions was objected to by the plaintiff, but the court overruled his objection and the bill was admitted and approved. 6.That upon said bill having been submitted to this Supreme Court, and upon the question being again raised, the court held that the bill of exceptions should not have been admitted and the appeal was thus abandoned. 7.That by reason of such abandonment, the appellant in that case, believing himself prejudiced, filed the complaint which is now before us on appeal. 8.That the object of the present complaint is to claim damages from Attorney Ramon Salinas, now the defendant, who advised him in the former case, on the ground "that the latter as lawyer for the plaintiff in the above-mentioned case, did not perform his duties, as he should have done, with all due diligence, and that through his fault or negligence the said plaintiff was subjected to losses. Said losses are alleged to be as follow: (a) the sum of P611.39 which he paid to Justo Trinidad as

Agency Part D: Obligations of the Agents (Art. 1884 1888) 7 principal, interest, and costs under the judgment entered in the above-cited case; (b) the sum of 1,500, for which Genaro Heredia had contracted to sell the four parcels of land which reverted to Justo Trinidad; (c) the sum of P88, paid to the clerk of the Supreme Court and to the printing establishment "La Enriqueta" by reason of the appeal to which the complaint refer"(VI, complaint). 9.That in his answer the defendant positively denied this statement in the complaint, and alleged that he had presented the bill of exceptions within the ten days following the date when the court was notified of his intention to submit the said bill of exceptions. 10.That in his turn, by way of counterclaim, he demands from the plaintiff the sum of P800 amount as professional fees earned in defending him, of which P500 are for fees in connection with the so often mooted bill of exceptions in the previous suit between Justo Trinidad and Genaro Heredia, and the P300 remaining accruing in the suit brought between Heredia on the one part and Felisa Nepomuceno and Marciana Canon on the other. 11.That at the trial the plaintiff, who had not previously answered the counterclaim, offered his own testimony in support of his complaint; and in his examination in reference to the counterclaim he said that he did not accept the amounts stated in the same because he had a contract, to wit, P75 for the proceedings in the lower court; and in case of an appeal to the Supreme Court, although the defendant had asked him P100, he only offered to pay him a further sum of P75; to this, however, the defendant did not reply, and when questioned as to how he would construe such silence, he said that as the difference was only P25, he thought no more of the matter, since this was the amount agreed upon between them in another suit brought against the respondent by Felisa Nepomuceno and Marciana Canon. Upon cross-examination by the defendant, his testimony was as follows: "Q.Is it not true that you called at my office and there intrusted to me the two cases pending against you here in the Court of First Instance? A.Yes, sir. "Q.Is it not true that I asked you P100 for each case, but that at your request I agreed to reduce it to P75 owing to the partnership which existed between us at that time, and that I sent you a bill for P150 which was paid by you? A.Our agreement was for P75 for the Court of First Instance and P100 for the Supreme Court, but I asked you to reduce the amount to P75 in your bill for the Supreme Court. You sent me a bill for P150 that is, P75 for each case and I paid it. 12.That the court in its decision of the 6th of March, 1907, "found that the plaintiff is not entitled to recover anything under his complaint nor the defendant for his counterclaim and that neither parties should recover costs." 13.And that by a new amendatory judgment of the 21st of the same month and year, entered on motion of the defendant, the court modified its former decision in the sense that the defendant was declared to be entitled to the sum of P150, by reason of his counterclaim. The plaintiff appealed form the first judgment and the defendant from the second; the following bill of errors was presented by the former: "The Court of First Instance erred, he states, (1) in considering that Attorney Ramon Salinas, now the defendant herein, had exercised due diligence and ordinary care in presenting the bill of exceptions; (2) in rendering judgment acquitting the defendant on the ground that both the defendant lawyer and his client were simply unfortunate, inasmuch as he considered that the bill of exceptions had been presented within the time specified by the law." Under the conclusions of the judgment appealed from if because the bill of exceptions was presented on the 13th of June, 1906 eight days after the date of the notice of its presentation which was given on the 5th of said month, the court considered that "it could hardly be said that the nonadmission of such bill of exceptions was a result that ought to have been foreseen by an attorney of reasonable knowledge and capabilities exercising ordinary care," such a conclusion is notoriously erroneous, inasmuch as the adverse judgment having been excepted to and motion for a new trial having been made on the 28th of April, and denied on the 5th of May, according to the facts stated above, from the latter date to the 5th of June, a period of thirty days, no action was taken by the defendant, and there is no law authorizing that notice of the intention to present a bill of exceptions may be served thirty days after a motion for a new trial has been denied. It is likewise erroneous to find a similarity between the case at issue and those of Garcia vs. Hipolito (2 Phil. Rep., 732) and Paez vs. Berenguer (6 Phil. Rep., 521), because in the first of these cases, upon the adverse judgment having been notified on the 21st of May, on the 23d it had been excepted to and a new trial moved for, which up to the 23d of July, had not been denied by the court, and the bill of exceptions was then presented on the 28th of said month of July, for which reason it was admitted, inasmuch as the lapse of time from the 23d of May to the 23d of July had transpired while the matter was in the hands of the court; it would have been very arbitrary and devoid of all reason and justice to attribute the delay to negligence of lawyer, and to permit the action of the court to redound to the prejudice of the party when, under the law, it could not have been considered as a period of unjustifiable inaction on the part of the appellant, as in the present case, wherein thirty days transpired, from the 5th of May to the 5th of June, during which absolutely no action had been taken by appellant's attorney. And in the second case, wherein the same lapse of time occurred between the motion for new trial and the denial thereof, this court held it to be a sound application of the law, that such lapse could not result to the prejudice of the appellant with respect to the filing of his bill of exceptions inasmuch as the law prescribes that mention shall be made of the motion of its denial, and of the exception thereto, in order that this Supreme Court may consider itself invested with the power to review the evidence in case of a strict appeal, and not in the mere cassation or decision of errors of law. Therefore, if the filing of a bill of exceptions eight days after notice of the intention to present was given is in accordance with the law, it is not permissible to give such notice thirty days after the motion for a new trial was denied, a procedure which is not authorized by law nor by any rule established in any case decided by this court. Such behaviour, however, can not be the subject of an action for indemnity for losses and damages under article 1101 of the Civil Code, cited by the appellant in the first alleged error of law stated in his brief of the judgment appealed from, which article has been incorrectly quoted by

Agency Part D: Obligations of the Agents (Art. 1884 1888) 8 causing it to read, "those who if fulfilling their obligations are guilty of error, negligence, or delay, . . . shall be subject to indemnify for the losses and damages caused thereby . . . when it should read, "those who . . .are guilty of fraud, negligence, or delay." In a similar case, wherein by reason of a solicitor having interposed out of time an appeal in cassation to the audiencia of Madrid, it was held that his right had expired, a complaint was filed by the appellant against the said solicitor, setting forth the facts, and asking that he be sentenced to pay him an indemnity for losses and damages, amounting to the value of the property in litigation stated in said appeal, and a further indemnity for the costs which the plaintiff had been ordered to pay. The complaint was denied in its major part and the plaintiff appealed in cassation to the supreme court, alleging that articles 1101, 1718, and 1902 of the Civil Code had been violated by the Audencia de Madrid, but the supreme court established the following doctrine: "Articles 1101, 1718, and 1902 of the Civil Code which, in the two appeals interposed by the plaintiff, are cited as having been violated, refer, for the purpose of payment of an indemnity, to losses and damages caused to those who occasioned them through their own fault; from this fact the logical and necessary consequence is that their existence must be substantiated; and, inasmuch as in this suit the claim has not been proven, because the appellant bases his appeal on the unsubstantiated and arbitrary supposition of the injustice of the decision which became final through the fault and negligence of the solicitor, the sentencing court, which denied the indemnity for losses and damages, has not committed a violation of the said articles of the code, because established losses are not involved herein." (Decision of the 9th of January, 1897.) We consider that the above doctrine established is sufficient for the decision of this suit wherein established losses are not involved, and which has also been based on the unsubstantiated supposition of the injustice of the judgment in the former suit which became final owing to the expiration of the period allowed for appeal. With regard to the lawyer's appeal, the lower court having decided the question of the cross complaint upon preponderance of evidence, and no assignment of errors having been filed against its findings as prescribed nor any allegation that a real mistake of law was committed, this court finds the judgment to be in accordance with the law. For the reasons above set forth the judgments appealed from, of the 6th and of the 21st of March, 1906, are hereby affirmed without special ruling as to costs. So ordered. Torres, Mapa, Johnson, Carson, Willard and Tracey, JJ., concur. --------------------------------------------------------------------------------------------------------------------------------------SYLLABUS 1.CIVIL LAW; SPECIAL CONTRACTS; CHATTEL MORTGAGE; RULE WHEN MORTGAGEE ASSIGNS HIS MORTGAGE LIEN; CASE AT BAR. B.A. Finance Corporation was deemed subrogated to the rights and obligations of Supercars, Inc. when the latter assigned the promissory note, together with the chattel mortgage constituted on the motor vehicle in question, in favor of the former. Consequently, B.A. Finance Corporation is bound by the terms and conditions of the chattel mortgage executed between the Cuadys and Supercars, Inc. 2.ID.; ID.; ID.; ID.; OBLIGATIONS OF AN ASSIGNEE. Under the deed of chattel mortgage, B.A. Finance Corporation was constituted attorney-in-fact with full power and authority to file, follow-up, prosecute, compromise or settle insurance claims; to sign, execute and deliver the corresponding papers, receipts and documents to the Insurance Company as may be necessary to prove the claim, and to collect from the latter the proceeds of insurance to the extent of its interests, in the event that the mortgaged car suffers any loss or damage. In granting B.A. Finance Corporation the aforementioned powers and prerogatives, the Cuady spouses created in the former's favor an agency. Under Article 1884 of the Civil Code of the Philippines, B.A. Finance Corporation is bound by its acceptance to carry out the agency, and is liable for damages which, through its non-performance, the Cuadys, the principal in the case at bar, may suffer. 3.ID.; ID.; ID.; MORTGAGOR, NOT BOUND TO SUFFER FROM THE ACTS OF MORTGAGEE; CASE AT BAR . Unquestionably, the Cuadys suffered pecuniary loss in the form of salvage value of the motor vehicle in question, not to mention the amount equivalent to the unpaid balance on the promissory note, when B.A. Finance Corporation steadfastly refused and refrained from proceeding against the insurer for the payment of a clearly valid insurance claim, and continued to ignore the yearning of the Cuadys to enforce the total loss provision in the insurance policy, despite the undeniable fact that Rea Auto Center, the auto repair shop chosen by the insurer itself to repair the aforementioned motor vehicle, misrepaired and rendered it completely useless and unserviceable. Accordingly, there is no reason to depart from the ruling set down by the respondent appellate court. In this connection, the Court of Appeals said: ". . . Under the established facts and circumstances, it is unjust, unfair inequitable to require the chattel mortgagors, appellees herein, to still pay the unpaid balance of their mortgage debt on the said car, the non-payment of which account was due to the stubborn refusal and failure of appellant mortgagee to avail of the insurance money which became due and demandable after the insured motor vehicle was badly damaged in a vehicular accident covered by the insurance risk. . . .." 4.REMEDIAL LAW; EVIDENCE; CONCLUSION OF FACTS BY COURT OF APPEALS. B.A. Finance Corporation would have this Court review and reverse the factual findings of the respondent appellate SECOND DIVISION [G.R. No. 82040. August 27, 1991.] BA FINANCE CORPORATION, petitioner, vs. HON. COURT OF APPEALS, Hon. Presiding Judge of Regional Trial Court of Manila, Branch 43, MANUEL CUADY and LILIA CUADY, respondents. Valera, Urmeneta & Associates for petitioner. Pompeyo L. Bautista for private respondents.

Agency Part D: Obligations of the Agents (Art. 1884 1888) 9 court. This, of course, the Court cannot and will not generally do. It is axiomatic that the judgment of the Court of Appeals is conclusive as to the facts and may not ordinarily be reviewed by the Supreme Court. The doctrine is, to be sure, subject to certain specific exceptions none of which, however, obtains in the instant case (Luzon Brokerage Corporation v. Court of Appeals, 176 SCRA 483 [1989]). 5.ID.; CIVIL PROCEDURE; APPEAL; ISSUES NOT RAISED IN THE TRIAL COURT; CANNOT BE RAISED FOR THE FIRST TIME ON APPEAL. As ruled by this Court in a long line of cases, issues not raised and/or ventilated in the trial court, let alone in the Court of Appeals, cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice and due process (Galicia v. Polo, 179 SCRA 375 [1989]; Ramos vs. IAC, 175 SCRA 70 (1989) and other cases. DECISION PARAS, J p: This is a petition for review on certiorari which seeks to reverse and set aside (1) the decision of the Court of Appeals dated July 21, 1987 in CA-G.R. No. CV-06522 entitled "B.A. Finance Corporation, Plaintiff-Appellant, vs. Manuel Cuady and Lilia Cuady, Defendants-Appellees," affirming the decision of the Regional Trial Court of Manila, Branch 43, which dismissed the complaint in Civil Case No. 82-10478, and (2) the resolution dated February 9, 1988 denying petitioner's motion for reconsideration. Cdpr As gathered from the records, the facts are as follows: On July 15, 1977, private respondents Manuel Cuady and Lilia Cuady obtained from Supercars, Inc. a credit of P39,574.80, which amount covered the cost of one unit of Ford Escort 1300, four-door sedan. Said obligation was evidenced by a promissory note executed by private respondents in favor of Supercars, Inc., obligating themselves to pay the latter or order the sum of P39,574.80, inclusive of interest at 14% per annum, payable on monthly installments of P1,098.00 starting August 16, 1977, and on the 16th day of the next 35 months from September 16, 1977 until full payment thereof. There was also stipulated a penalty of P10.00 for every month of late installment payment. To secure the faithful and prompt compliance of the obligation under the said promissory note, the Cuady spouses constituted a chattel mortgage on the aforementioned motor vehicle. On July 25, 1977, Supercars, Inc. assigned the promissory note, together with the chattel mortgage, to B.A. Finance Corporation. The Cuadys paid a total of P36,730.15 to the B.A. Finance Corporation, thus leaving an unpaid balance of P2,344.65 as of July 18, 1980. In addition thereto, the Cuadys' owe B.A. Finance Corporation P460.00 representing penalties or surcharges for tardy monthly installments (Rollo, pp. 27-29). Parenthetically, the B.A. Finance Corporation, as the assignee of the mortgage lien, obtained the renewal of the insurance coverage over the aforementioned motor vehicle for the year 1980 with Zenith Insurance Corporation, when the Cuadys failed to renew said insurance coverage themselves. Under the terms and conditions of the said insurance coverage, any loss under the policy shall be payable to the B.A. Finance Corporation (Memorandum For Private Respondents, pp. 3-4). On April 18, 1980, the aforementioned motor vehicle figured in an accident and was badly damaged. The unfortunate happening was reported to the B.A. Finance Corporation and to the insurer, Zenith Insurance Corporation. The Cuadys asked the B.A. Finance Corporation to consider the same as a total loss, and to claim from the insurer the face value of the car insurance policy and apply the same to the payment of their remaining account and give them the surplus thereof, if any. But instead of heeding the request of the Cuadys, B.A. Finance Corporation prevailed upon the former to just have the car repaired. Hence, this present recourse. On July 11, 1990, this Court gave due course to the petition and required the parties to submit their respective memoranda. The parties having complied with the submission of their memoranda, the case was submitted for decision. Not long thereafter, however, the car bogged down. The Cuadys wrote B.A. Finance Corporation requesting the latter to pursue their prior instruction of enforcing the total loss provision in the insurance coverage. When B.A. Finance Corporation did not respond favorably to their request, the Cuadys stopped paying their monthly installments on the promissory note (Ibid., pp. 45). On June 29, 1982, in view of the failure of the Cuadys to pay the remaining installments on the note, B.A. Finance Corporation sued them in the Regional Trial Court of Manila, Branch 43, for the recovery of the said remaining installments (Memorandum for the Petitioner, p. 1). After the termination of the pre-trial conference, the case was set for trial on the merits on April 25, 1984. B.A. Finance Corporation's evidence was presented on even date and the presentation of Cuady's evidence was set on August 15, 1984. On August 7, 1984, Atty. Noel Ebarle, counsel for the petitioner, filed a motion for postponement, the reason being that the 'handling' counsel, Atty. Ferdinand Macibay was temporarily assigned in Cebu City and would not be back until after August 15, 1984. Said motion was, however, denied by the trial court on August 10, 1984. On August 15, 1984, the date of hearing, the trial court allowed private respondents to adduce evidence ex parte in the form of an affidavit to be sworn to before any authorized officer. B.A. Finance Corporation filed a motion for reconsideration of the order of the trial court denying its motion for postponement. Said motion was granted in an order dated September 26, 1984, thus: "The Court grants plaintiff's motion for reconsideration dated August 22, 1984, in the sense that plaintiff is allowed to adduce evidence in the form of counteraffidavits of its witnesses, to be sworn to before any person authorized to administer oaths, within ten days from notice hereof." (Ibid., pp. 1-2). LibLex B.A. Finance Corporation, however, never complied with the above-mentioned order, paving the way for the trial court to render its decision on January 18, 1985, the dispositive portion of which reads as follows: "IN VIEW WHEREOF, the Court DISMISSES the complaint without costs. SO ORDERED." (Rollo, p. 143). On appeal, the respondent appellate court * affirmed the decision of the trial court. The decretal portion of the said decision reads as follows: "WHEREFORE, after consultation among the undersigned members of this Division, in compliance with the provision of Section 13, Article VIII of the Constitution; and finding no reversible error in the judgment appealed from, the same is hereby AFFIRMED, without any pronouncement as to costs." (Ibid. p. 33) B.A. Finance Corporation moved for the reconsideration of the above decision, but the motion was denied by the respondent appellate court in a resolution dated February 9, 1988 (Ibid., p. 38).

Agency Part D: Obligations of the Agents (Art. 1884 1888) 10 The real issue to be resolved in the case at bar is whether or not B.A. Finance Corporation has waived its right to collect the unpaid balance of the Cuady spouses on the promissory note for failure of the former to enforce the total loss provision in the insurance coverage of the motor vehicle subject of the chattel mortgage. It is the contention of B.A. Finance Corporation that even if it failed to enforce the total loss provision in the insurance policy of the motor vehicle subject of the chattel mortgage, said failure does not operate to extinguish the unpaid balance on the promissory note, considering that the circumstances obtaining in the case at bar do not fall under Article 1231 of the Civil Code relative to the modes of extinguishment of obligations (Memorandum for the Petitioner, p. 11). On the other hand, the Cuadys insist that owing to its failure to enforce the total loss provision in the insurance policy, B.A. Finance Corporation lost not only its opportunity to collect the insurance proceeds on the mortgaged motor vehicle in its capacity as the assignee of the said insurance proceeds pursuant to the memorandum in the insurance policy which states that the "LOSS: IF ANY, under this policy shall be payable to BA FINANCE CORP., as their respective rights and interest may appear." (Rollo, p. 91) but also the remaining balance on the promissory note (Memorandum for the Respondents, pp. 16-17). The petition is devoid of merit. B.A. Finance Corporation was deemed subrogated to the rights and obligations of Supercars, Inc. when the latter assigned the promissory note, together with the chattel mortgage constituted on the motor vehicle in question, in favor of the former. Consequently, B.A. Finance Corporation is bound by the terms and conditions of the chattel mortgage executed between the Cuadys and Supercars, Inc. Under the deed of chattel mortgage, B.A. Finance Corporation was constituted attorney-in-fact with full power and authority to file, follow-up, prosecute, compromise or settle insurance claims; to sign, execute and deliver the corresponding papers, receipts and documents to the Insurance Company as may be necessary to prove the claim, and to collect from the latter the proceeds of insurance to the extent of its interests, in the event that the mortgaged car suffers any loss or damage (Rollo, p. 89). In granting B.A. Finance Corporation the aforementioned powers and prerogatives, the Cuady spouses created in the former's favor an agency. Thus, under Article 1884 of the Civil Code of the Philippines, B.A. Finance Corporation is bound by its acceptance to carry out the agency, and is liable for damages which, through its non-performance, the Cuadys, the principal in the case at bar, may suffer. LLjur Unquestionably, the Cuadys suffered pecuniary loss in the form of salvage value of the motor vehicle in question, not to mention the amount equivalent to the unpaid balance on the promissory note, when B.A. Finance Corporation steadfastly refused and refrained from proceeding against the insurer for the payment of a clearly valid insurance claim, and continued to ignore the yearning of the Cuadys to enforce the total loss provision in the insurance policy, despite the undeniable fact that Rea Auto Center, the auto repair shop chosen by the insurer itself to repair the aforementioned motor vehicle, misrepaired and rendered it completely useless and unserviceable (Ibid., p. 31). Accordingly, there is no reason to depart from the ruling set down by the respondent appellate court. In this connection, the Court of Appeals said: ". . . Under the established facts and circumstances, it is unjust, unfair inequitable to require the chattel mortgagors, appellees herein, to still pay the unpaid balance of their mortgage debt on the said car, the non-payment of which account was due to the stubborn refusal and failure of appellant mortgagee to avail of the insurance money which became due and demandable after the insured motor vehicle was badly damaged in a vehicular accident covered by the insurance risk. . . ." (Ibid.) On the allegation that the respondent court's findings that B.A. Finance Corporation failed to claim for the damage to the car was not supported by evidence, the records show that instead of acting on the instruction of the Cuadys to enforce the total loss provision in the insurance policy, the petitioner insisted on just having the motor vehicle repaired, to which private respondents reluctantly acceded. As heretofore mentioned, the repair shop chosen was not able to restore the aforementioned motor vehicle to its condition prior to the accident. Thus, the said vehicle bogged down shortly thereafter. The subsequent request of the Cuadys for the B.A. Finance Corporation to file a claim for total loss with the insurer fell on deaf ears, prompting the Cuadys to stop paying the remaining balance on the promissory note (Memorandum for the Respondents, pp. 4-5). Moreover, B.A. Finance Corporation would have this Court review and reverse the factual findings of the respondent appellate court. This, of course, the Court cannot and will not generally do. It is axiomatic that the judgment of the Court of Appeals is conclusive as to the facts and may not ordinarily be reviewed by the Supreme Court. The doctrine is, to be sure, subject to certain specific exceptions none of which, however, obtains in the instant case (Luzon Brokerage Corporation v. Court of Appeals, 176 SCRA 483 [1989]). Finally, B.A. Finance Corporation contends that respondent trial court committed grave abuses of discretion in two instances: First, when it denied the petitioner's motion for reconsideration praying that the counsel be allowed to cross-examine the affiant, and; second, when it seriously considered the evidence adduced ex-parte by the Cuadys, and heavily relied thereon, when in truth and in fact, the same was not formally admitted as part of the evidence for the private respondents (Memorandum for the Petitioner, p. 10). This Court does not have to unduly dwell on this issue which was only raised by B.A. Finance Corporation for the first time on appeal. A review of the records of the case shows that B.A. Finance Corporation failed to directly raise or ventilate in the trial court nor in the respondent appellate court the validity of the evidence adduced ex-parte by private respondents. It was only when the petitioner filed the instant petition with this Court that it later raised the aforementioned issue. As ruled by this Court in a long line of cases, issues not raised and/or ventilated in the trial court, let alone in the Court of Appeals, cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice and due process (Galicia v. Polo, 179 SCRA 375 [1989]; Ramos v. Intermediate Appellate Court, 175 SCRA 70 [1989]; Dulos Realty & Development Corporation v. Court of Appeals, 157 SCRA 425 [1988]; Dihiansan, et al. v. Court of Appeals, et al., 153 SCRA 712 [1987]; De la Santa v. Court of Appeals, et al., 140 SCRA 44 [1985]). PREMISES CONSIDERED, the instant petition is DENIED, and the decision appealed from is AFFIRMED. LLphil SO ORDERED. Melencio-Herrera, Padilla and Regalado, JJ ., concur. Sarmiento, J., is on leave. ---------------------------------------------------------------------------------------------------------------------------------------

Agency Part D: Obligations of the Agents (Art. 1884 1888) 11 EN BANC[G.R. No. L-20567. July 30, 1965.] PHILIPPINE NATIONAL BANK, petitioner, vs. MANILA SURETY & FIDELITY CO., INC., and THE COURT OF APPEALS (Second Division), respondents. Besa, Galang and Medina for petitioner. De Santos & Delfino for respondents. SYLLABUS 1.AGENCY; DUTY OF AGENT TO ACT WITH THE CASE OF A GOOD FATHER OF A FAMILY. An agent is required to act with the care of a good father of a family and becomes liable for the damages which the principal may suffer through his non-performance. 2.ID.; ID.; BANK LIABLE FOR NEGLECT IN COLLECTING SUMS DUE ITS DEBTOR. A bank is answerable for negligence in failing to collect the sums due its debtor from the latter's own debtor, contrary to said bank's duty as holder of an exclusive and irrevocable power of attorney to make such collections. 3.SURETYSHIP; SURETY RELEASED WHEN ASSIGNED FUNDS PERMITTED BY CREDITOR TO BE EXHAUSTED WITHOUT NOTIFYING FORMER. By allowing the assigned funds to be exhausted without notifying the surety, the creditor deprives the surety of any possibility of recoursing against that security, and therefore the surety is released. DECISION REYES, J.B.L., J p: The Philippine National Bank petitions for the review and reversal of the decision rendered by the Court of Appeals (Second Division), in its case CA-G.R. No. 24232-R, dismissing the Bank's complaint against respondent Manila Surety & Fidelity Co., Inc., and modifying the judgment of the Court of First Instance of Manila in its Civil Case No. 11263. The material facts of the case, as found by the appellate Court, are as follows: The Philippine National Bank had opened a letter of credit and advanced thereon $120,000.00 to Edgington Oil Refinery for 8,000 tons of hot asphalt. Of this amount, 2,000 tons worth P279,000.00 were released and delivered to Adams & Taguba Corporation (known as ATACO) under a trust receipt guaranteed by Manila Surety & Fidelity Co. up to the amount of P75,000.00. To pay for the asphalt, ATACO constituted the Bank its assignee and attorney-in-fact to receive and collect from the Bureau of Public Works the amount aforesaid out of funds payable to the assignor under Purchase Order No. 71947. This assignment (Exhibit "A") stipulated that: "The conditions of this assignment are as follows: 1.The same shall remain irrevocable until the said credit accommodation is fully liquidated. 2.The PHILIPPINE NATIONAL BANK is hereby appointed as our Attorney-in-fact for us and in our name, place and stead, to collect and to receive the payments to be made by virtue of the aforesaid Purchase Order, with full power and authority to execute and deliver on our behalf, receipt for all payments made to it; to endorse for deposit or encashment checks, money order and treasury warrants which said Bank may receive, and to apply said payments to the settlement of said credit accommodation. This power of attorney shall also remain irrevocable until our total indebtedness to the said Bank have been fully liquidated. (Exhibit E)" ATACO delivered to the Bureau of Public Works, and the latter accepted, asphalt to the total value of P431,466.52. Of this amount the Bank regularly collected, from April 21, 1948 to November 18, 1948, P106,382.01. Thereafter, for unexplained reasons, the Bank ceased to collect, until in 1952 its investigators found that more moneys were payable to ATACO from the Public Works office, because the latter had allowed another creditor to collect funds due to ATACO under the same purchase order, to a total of P311,230.41. Its demands on the principal debtor and the Surety having been refused, the Bank sued both in the Court of First Instance of Manila to recover the balance of P158,563.18 as of February 15, 1950, plus interests and costs. On October 4, 1958, the trial court rendered a decision, the dispositive portion of which reads: "WHEREFORE, judgment is hereby rendered as follows: "1.Ordering defendants, Adams & Taguba Corporation and Manila Surety & Fidelity Co., Inc., to pay plaintiff, Philippine National Bank, the sum of P174,462.34 as of February 24, 1956, minus the amount of P8,000 which defendant, Manila Surety Co., Inc. paid from March, 1956 to October, 1956, with interest at the rate of 5% per annum from February 25, 1956, until fully paid provided that the total amount that should be paid by defendant Manila Surety Co., Inc., on account of this case shall not exceed P75,000.00, and to pay the costs; "2.Ordering cross-defendant, Adams & Taguba Corporation, and third-party defendant, Pedro A. Taguba, jointly and severally, to pay cross and third-party plaintiff, Manila Surety & Fidelity Co., Inc., whatever amount the latter has paid or shall pay under this judgment; 3.Dismissing the complaint insofar as the claim for 17% special tax is concerned; and "4.Dismissing the counterclaims of defendants Adams & Taguba Corporation and Manila Surety & Fidelity Co., Inc. From said decision, only the defendant Surety Company has duly perfected its appeal. The Central Bank of the Philippines did not appeal, while defendant ATACO failed to perfect its appeal. The Bank recoursed to the Court of Appeals, which rendered an adverse decision and modified the judgment of the court of origin as to the surety's liability. Its motions for reconsideration having proved unavailing, the Bank appealed to this Court. The Court of Appeals found the Bank to have been negligent in having stopped collecting from the Bureau of Public Works the moneys falling due in favor of the principal debtor, ATACO, from and after November 18, 1948, before the debt was fully collected, thereby allowing such funds to be taken and exhausted by other creditors, to the prejudice of the surety, and held that the Bank's negligence resulted in the exoneration of respondent Manila Surety & Fidelity Company. This holding is now assailed by the Bank. It contends that the power of attorney obtained from ATACO was merely an additional security in its favor, and that it was the duty of the surety, and not that of the

Agency Part D: Obligations of the Agents (Art. 1884 1888) 12 creditor, to see to it that the obligor fulfills his obligation, and that the creditor owed the surety no duty of active diligence to collect any sum from the principal debtor, citing Judge Advocate General vs. Court of Appeals, G. R. No. L-10671, October 23, 1958. This argument of appellant Bank misses the point. The Court of Appeals did not hold the Bank answerable for negligence in failing to collect from the principal debtor but for its neglect in collecting the sums due to the debtor from the Bureau of Public Works, contrary to its duty as holder of an exclusive and irrevocable power of attorney to make such collections, since an agent is required to act with the care of a good father of a family (Civ. Code, Art. 1887) and becomes liable for the damages which the principal may suffer through his non-performance (Civ. Code, Art. 1884). Certainly, the Bank could not expect either ATACO or the surety to collect from the Bureau of Public Works the moneys it had failed to demand. Not only because these parties had the right to expect that the Bank would diligently perform its duty under its power of attorney, but because they could not have collected from the Bureau even if they had attempted to do so. It must not be forgotten that the Bank's power to collect was expressly made irrevocable, so that the Bureau of Public Works could very well refuse to make payments to the principal debtor itself, and a fortiori reject any demands by the surety. Even if the assignment with power of attorney from the principal debtor were considered as more additional security, still, by allowing the assigned funds to be exhausted without notifying the surety, the Bank deprived the former of any possibility of recoursing against that security. The Bank thereby exonerated the surety, pursuant to Article 2080 of the Civil Code: "Art. 2080. The guarantors, even though they be solidary, are released from their obligation whenever by some act of the creditor they can not be subrogated to the rights, mortgages and preferences of the latter." (Emphasis supplied.) The appellant points out to its letter of demand, Exhibit "K", addressed to the Bureau of Public Works, on May 5, 1949, and its letter to ATACO, Exhibit "G", informing the debtor that as of its date, October 31, 1949, its outstanding balance was P156,374.83. Said Exhibit "G" has no bearing on the issue whether the Bank has exercised due diligence in collecting from the Bureau of Public Works, since the letter was addressed to ATACO, and the funds were to come from elsewhere. As to the letter of demand on the Public Works office, it does not appear that any reply thereto was made; nor that the demand was pressed, nor that the debtor or the surety were ever apprised that payment was not being made. The fact remains that because of the Bank's inactivity the other creditors were enabled to collect P173,870.31, when the balance due to appellant Bank was only P158,563.18. The finding of negligence made by the Court of Appeals is thus not only conclusive on us but fully supported by the evidence. Even if the Court of Appeals erred on the second reason it advanced in support of the decision now under appeal, because the rules on application of payments, giving preference to secured obligations, are only operative in cases where there are several distinct debts, and not where there is only one that is partially secured, the error is of no importance, since the principal reason based on the Bank's negligence furnishes adequate support to the decision of the Court of Appeals that the surety was thereby released. WHEREFORE, the appealed decision is affirmed, with costs against appellant Philippine National Bank. Bengzon, C.J., Concepcion, Paredes, Dizon, Regala, Makalintal, Bengzon, J.P. and Zaldivar, JJ., concur. Bautista Angelo, J., took no part. Barrera, J., on leave, did not take part. --------------------------------------------------------------------------------------------------------------------------------------FIRST DIVISION [G.R. No. L-3298. February 27, 1907.] FELISA NEPOMUCENO AND MARCIANA CANON, plaintiffs-appellees, vs. GENARO HEREDIA, defendant-appellant. Ramon Salinas, for appellant. Hartigan, Rohde & Gutierrez, for appellees. SYLLABUS REALTY; SALE; TITLE; GUARANTY. Plaintiffs bought a piece of land, and defendant, at their request and by their direction, examined the title and prepared the necessary documents evidencing the transfer. An alleged defect in the title developed about a year later. It does not appear that defendant undertook to guarantee the title, or that he failed to exercise reasonable care and diligence in the performance of his duty as agent for the plaintiffs. Held, That he can not be held responsible for hidden defects in the title to the land purchased. DECISION CARSON, J p: The complaint alleges that on the 24th of September, 1904, the defendant had in his possession for administration 500 pesos, the property of Felisa Nepomuceno, and 1,500 pesos, the property of Marciana Canon; that on that day he entered into an agreement with them, in accordance with which he was to invest this money in a mortgage, or conditional purchase of good real estate, the investment to bring in 1 per centum per month, and the principal to be payable in one year; and that the defendant has failed to make the investment in accordance with his agreement and has refused, and continues to refuse, to return the money. The following facts are fully established by the evidence of record, and are substantially uncontroverted: That the defendant is the business adviser of the plaintiff, Marciana Canon, and as such had in his hands 1,500 pesos paid to him on her account on the 22d of September, 1904; that about the same time Felisa Nepomuceno, the other plaintiff, had an unsecured debt due her of 500 pesos from one Marcelo Leao; that on demand for security her debtor proposed to give her a deed of conditional sale (venta con pacto de retro) to a certain tract of land, together with the buildings and improvements thereon, in consideration of 2,000 pesos, she to be credited with 500 pesos on the purchase price and that to advance the balance of 1,500 pesos; that knowing that the defendant had in his hands that amount of money, the property of her coplaintiff, Marciana Canon, she proposed to the said Marciana Canon that they make a joint investment in the land; that together they discussed the proposition with the defendant and later directed him to draw up the necessary documents; that a deed of conditional sale of the land was executed on the 24th of September, 1904, the vendor reserving the privilege of repurchasing the land at the end of one year and obligating himself to make monthly payments in considerations of the right to retain the land in possession in sufficient amount to bring the plaintiffs' interest on their money at the rate of 17 per centum per annum, and the vendees, the plaintiffs in this action, paying to the vendor the sum of 1,500 pesos, cash, and discharging the above mentioned credit of 500 pesos due the plaintiff, Felisa Nepomuceno; that the title to the land under the deed was placed in the name of

Agency Part D: Obligations of the Agents (Art. 1884 1888) 13 the defendant, Genaro Heredia; and that a few days thereafter the defendant, at the request of the plaintiffs, executed before a notary public a formal memorandum of the fact that the plaintiff had furnished the money with which the land had been purchased, said memorandum setting forth the amount furnished by each and their proportionate interest in the investment. The plaintiffs insists that the defendant took the deed to the land in his own name without their knowledge or consent, but we think that the weight of the evidence sustains the defendant's claim that he did so by their express direction as their agent, and for their convenience, and that in any event his action in this regard was ratified and approved by their request for and acceptance of the memorandum setting out the facts and by their continuance in the enjoyment of the profits of the transaction after the purchase and without making any effort to have the title transferred in their own names. The plaintiffs also allege that the defendant, without express authority from them, undertook to extend, and did extend, the period within which the vendor had the privilege or repurchase, but we think that this action in this contention was also ratified, approved, and acquiesced in by the plaintiffs and that in any event it can have no bearing on the merits of the question submitted on appeal. More than a year after the transactions above set out, during which time the vendor of the land continued to pay, and the plaintiff to receive, the stipulated payments in consideration of the right to retain possession, a cloud was cast on the title to the land by the institution of proceedings for the recovery of possession by third parties, which proceedings are still pending on appeal from the judgment of the Court of First Instance, and the plaintiffs thereupon brought this action in which they are seeking to recover from the defendant the whole of the amount of money invested, with interest from the date of the investment, alleging with that purchase of the land was not made in accordance with their instructions, or on their account. The trial court gave judgment in favor of the plaintiffs for the full amount claimed on the ground that while acting as their agent the defendant invested their money in land to which the vendor had not a good and sufficient title, contrary to the tenor of his instructions. On appeal the plaintiffs ask that this judgment be affirmed, not on the grounds assigned by the trial judge, but because, as they insists, their money was invested by the defendant in his own name and on his account, and not as their agent, or on behalf. The judgment can not be sustained on either ground. It was clearly established at the trial that the defendant was acting merely as the agent for the plaintiffs throughout the entire transaction; that the purchase of the land was made not only with their full knowledge and consent, but at their suggestion; and that after the purchase had been effected, the plaintiffs, with full knowledge of the facts, approved and ratified the actions of their agent in the premises. There is nothing in the record which would indicate that the defendant failed to exercise reasonable care and diligence in the performance of his duty as such agent, or that he undertook to guarantee the vendors title to the land purchased by direction of the plaintiffs. The judgment of the lower court should be, and is hereby, reversed, with the costs against the plaintiffs in the first instance and without special condemnation of costs in this instance. After the expiration of twenty days let judgment be entered in accordance herewith, and ten days thereafter let the record be returned to the court wherein it originated for execution. So ordered. Arellano, C.J., Torres, Mapa, Willard, and Tracey, JJ., concur. --------------------------------------------------------------------------------------------------------------------------------------EN BANC [G.R. No. 8346. March 30, 1915.] GUTIERREZ HERMANOS, plaintiff-appellant, vs. ORIA HERMANOS & CO., defendantappellant. Rafael de la Sierra for plaintiff. Chicote & Miranda for defendant. SYLLABUS 1.ACCOUNTS; SET-OFF AND COUNTERCLAIM. If a creditor is under obligation to render an account of the result of certain commercial operations carried on between him and his debtor, even though the latter may unquestionably appear to owe him a certain sum, it is impossible to determine whether said plaintiff creditor is or is not entitled to collect the whole amount claimed in the complaint until it is demonstrated by the account rendered at the request of said debtor whether or not his creditor owes him anything which, although it may not entirely offset the sum claimed by the creditor, may at least reduce his indebtedness by that amount. 2.ID.; RECONSIDERATION OF APPROVAL. After an account has been submitted by the party obligated to render it and it has been approved by the one whom it affects, it cannot be again revised at the latter's request, unless it be demonstrated that in the approval thereof intervened deceit, fraud, or error gravely prejudicial to the party who gave said approval. (Civil Code, arts. 1265, 1266; Pastor vs. Nicasio, 6 Phil. Rep., 152.) 3.PRINCIPAL AND AGENT; RESPONSIBILITY OF AGENT FOR ACTS OF PRINCIPAL. When an agent in executing the orders and commissions of his principal carries out the instructions he has received from his principal, and does not appear to have exceeded his authority or to have acted with negligence, deceit, or fraud, he cannot be held responsible for the failure of his principal to accomplish the object of the agency. 4.CONTRACTS; EFFECT OF FAILURE OF PERFORMANCE. When one party to a mutual obligation fails duly to carry out his agreement, he thereby releases the other, who does not thus become delinguent. Delinquency commences when one of the contracting parties fulfills his obligation and becomes invested with power to terminate the contract because of failure on the other's part to carry out the agreement. 5.INTEREST; STIPULATION AS TO TIME OF PAYMENT. In the absence of a written contract regarding the date when mutual interest verbally stipulated at the rate of 8 per cent a year, should be paid, the approval given by one of the interested parties to seventeen accounts submitted semiannually by the other for a period of more than nine years, during which the interest was paid semiannually, gives rise to the presumption that the interested parties had verbally contracted to that effect, especially when this verbal contract is sustained and continually corroborated without protest or objection on the part of the one who now claims that such payment ought to be made annually instead of semiannually; and the assent and acquiescence given seventeen times cannot later be changed in order to set aside said semi-annual payments, repeatedly made in accord with

Agency Part D: Obligations of the Agents (Art. 1884 1888) 14 the other party, once the accumulation of interest on the principal has been authorized by article 317 of the Code of Commerce. DECISION TORRES, J p: On August 12, 1909, counsel for the mercantile firm of Gutierrez Hermanos of this city filed a written complaint in the Court of First Instance of Manila against the commercial concern of Oria Hermanos & Co. of Laoang, Province of Samar, alleging therein as a cause of action that between plaintiff and defendant there have existed commercial relations which gave rise to the opening of a mutual current account, at 8 per cent interest, under the name of Oria Hermanos & Co., on the books of the plaintiff Gutierrez Hermanos; that, on January 11, 1909, plaintiff transmitted to defendant an abstract of the latter's current account on December 31, 1908, which showed a balance in plaintiff's favor of P144,473.78 and which was approved by defendant, Oria Hermanos & Co., by a letter of March 9, 1909, which was copied literally in the complaint; that, on May 25, 1909, plaintiff notified defendant that the current account existing between them would be closed at the end of thirty days counting from that date, at the expiration of which period defendant should pay any debit balance that might be owing; that, on June 30 of the same year, Gutierrez Hermanos transmitted to the defendant, Oria Hermanos & Co., the statement of the latter's current account up to that date and, confirming its previous letter to the defendant of May 25, 1909, called attention to the necessity of paying the balance, which then amounted to P147,204.28; that the defendant firm, notwithstanding the said demands and others subsequently made, and without having made any objection whatever to the said statement of account, refused to pay the principal and interest owing on the said account. Plaintiff's counsel therefore prayed that Oria Hermanos & Co. be sentenced to pay the sum of P147,204.28, besides the interest thereon at the rate of 8 per cent per annum from June 30, 1909, and the costs. Defendant filed its answer on November 9, 1909, setting up four cross complaints and six counterclaims against the plaintiff, Gutierrez Hermanos, and specifically denied such of the allegations of the complaint as were not in agreement with its answer. Plaintiff demurred to certain paragraphs of the answer and as to the others thereof prayed the court to order defendant to make its allegations more specific. The court overruled this demurrer, but granted the petition that defendant should make its allegations more specific in the second, third, and fourth cross complaints and first counterclaim In compliance with the said order, defendant, on May 4 1910, filed an amended answer in which it specifically admitted paragraphs 1 and 2 of the complaint, and, as the first cross complaint, alleged that, by reason of mercantile relations and the opening of a mutual current account from May 1, 1900, the plaintiff had obligated itself periodically to send to the defendant firm a memorandum or statement of the current account, and further obligated itself, in case the said mercantile relations should be finally terminated, to present a general and complete account, duly supported by vouchers and other proofs; that plaintiff, Gutierrez Hermanos, had contented itself by sending to Oria Hermanos & Co. some memoranda or abstracts of account, accepted by defendant as such "abstracts of account," without the latter's having waived its right to demand the presentation, as agreed upon, of the vouchers and other proofs upon the closing of the current account, a stipulation which Gutierrez Hermanos had failed to comply with. Defendant therefore prayed that the plaintiff, Gutierrez Hermanos, be sentenced to render and present the said final account, duly accompanied by vouchers, in conformity with the agreement made. In the second cross complaint defendant alleged that, by virtue of a commission contract, Oria Hermanos & Co. had from the 1st of May, 1900, to the 7th of September, 1909, forwarded 65,119.66 piculs of copra, 70,420 bales of hemp, and 5,176.03 piculs of loose hemp to Gutierrez Hermanos for sale on commission; that the latter firm informed the defendant that it, the plaintiff, had sold the said products to third persons for the account of the defendant, Oria Hermanos & Co.; that by reason of said sale or sales Gutierrez Hermanos collected large and important sums for commission and brokerage and had turned in for the goods sold amounts less than what they were actually worth in Manila; that defendant, Oria Hermanos & Co., had recently received information that these lots of hemp and copra were purchased by the firm of Gutierrez Hermanos for itself, notwithstanding that the latter had stated to its principals, Oria Hermanos & Co., that they had been sold to third persons; that it collected by reason of such sale, commission and brokerage; acts which redound to the fraud, injury, and prejudice of the defendant, Oria Hermanos & Co. Therefore the latter prayed that Gutierrez Hermanos be sentenced to render a general and complete account of the amounts of hemp and copra received by it for sale on commission from the year 1900 to 1909, setting out the dates of the receipt of the said merchandise, dates of the sales, names of the purchasers, prices stipulated, discounts obtained, and commissions collected by Gutierrez Hermanos, etc. Defendant alleged as the third cross complaint that, by virtue of the said commission contract, Gutierrez Hermanos sent to the firm of Oria Hermanos & Co., at different times according to the latter's request, from May 1, 1900, up to the date of the closing of the current account, 193,310 sacks of rice alleged to have been purchased from third persons, wherefore Oria Hermanos & Co. paid a certain stipulated percentage as commission or brokerage for the sales; but that now Oria Hermanos & Co. have received information which it believes to be true, and so alleges, that the rice so forwarded had not been purchased from third persons, but belonged to Gutierrez Hermanos who sold it directly to defendant, collecting from the latter excessive prices, advance payments, commission and interest, all to the fraud and injury of the defendant firm. Oria Hermanos & Co., therefore, prayed that Gutierrez Hermanos be sentenced to render an account, duly supported by vouchers, of all the lots of rice forwarded to Oria Hermanos, with a statement of the dates of the orders, amounts, dates of the purchases, names of purchasers, amounts charged to Oria Hermanos & Co., etc. In the fourth cross complaint defendant related that, by reason of the same commission contract existing between the two firms, Gutierrez Hermanos had sent to Oria Hermanos & Co., from the 1st of May, 1900, up to the closing of the current account, various quantities of salt, petroleum, tobacco groceries and beverages, and had collected a commission for the purchase thereof, that afterwards Oria Hermanos & Co. learned that the forwarding firm, the plaintiff, had set larger prices on the said goods than it had actually paid for them and had unduly charged such prices, before it had paid them, to the defendant's account, collecting for itself commission and interest thereon, to the fraud and prejudice of the defendant firm. Therefore the latter prayed that

Agency Part D: Obligations of the Agents (Art. 1884 1888) 15 Gutierrez Hermanos be sentenced to render a complete account, accompanied by vouchers, of the shipments aforementioned. In the first counterclaim filed by the defendant, Oria Hermanos & Co., petition was made that Gutierrez Hermanos be sentenced to pay it the sum of P13,894.60, as the amount of an overcharge of 3 per cent in interest collected from defendant, in a charge of 8 per cent interest per annum on a private debt of P47,649 drawing 5 per cent interest per annum, which latter amount Juan T. Molleda owed the firm of Gutierrez Hermanos and payment for which was assumed by Oria Hermanos & Co. upon its organization into a mercantile firm in May, 1900. In the second counterclaim the defendant firm, Oria Hermanos & Co. set forth: That, on April 18, 1900, its predecessor had ordered its consignee in Manila, Gutierrez Hermanos, to insure against all war risks the stocks of hemp and merchandise which the said firm possessed in the pueblo of Laoang, for P35,000, and likewise those it had in Catubig, for P32,000; that Gutierrez Hermanos did not comply with the said order, only insuring the stocks in Laoang for P67,000, leaving those of Catubig totally unprotected; that when, on May 10, 1900, this latter pueblo was destroyed by fire Oria Hermanos & Co. lost all its stocks there and could not collect the insurance of P32,000 on the said property, which, through the fault, negligence, and omission of Gutierrez Hermanos had not been insured. This amount last mentioned, added to the premiums, expenses, and interest paid by Oria Hermanos & Co. aggregates the sum of P63,700, payment of which defendant demanded of plaintiff. As a third counterclaim it is alleged that, on May 18, 1900, the firm of Gutierrez Hermanos, complying with orders from Oria Hermanos, & Co., insured against all war risks, in a certain insurance company of London, England, whose agent in the Philippine Islands was Stevenson & Co., the stock of hemp which the defendant company had in the pueblo of Catarman, Samar, for 3,000 pounds sterling, and paid the premiums thereon at the rate of 10 per cent per quarter; that, during the first quarter for which the premiums had been so paid, all the insured tobacco belonging to Oria Hermanos & Co., in Catarman, was stolen by the insurgent forces; that then the underwriter refused to pay the amount of the insurance on the ground that Gutierrez Hermanos had made out the said insurance defectively, wherefore Oria Hermanos & Co. ordered its agent Gutierrez Hermanos to institute proceedings before the courts of these Islands for the collection of the amount of the said insurance; but that plaintiff instead brought suit for the purpose before the courts of England and by its negligence, indolence, and carelessness had, during a period of eight years, obliged the defendant firm to incur costly expenditures which, added to the amount of the insurance premiums paid, attorney's fees, costs, interest, etc., aggregated P67,000; that for this sum, together with legal interests thereon, it prayed that it be reimbursed by Gutierrez Hermanos. With respect to the fourth counterclaim, the defendant firm set forth that, under the commission contract and the current account contract existing between both companies, Gutierrez Hermanos bound itself to acquire for and forward to Oria Hermanos & Co. such rice and other effects, including cash, as defendant might order from plaintiff; but that, since the beginning of 1904, the firm of Gutierrez Hermanos maliciously failed to make the consignments of rice and other effects, under the false pretext that there were no such articles in the market, thereby preventing the said firm of Oria Hermanos & Co. from obtaining a profit of not less than P25,000 and, besides, injuring its fame, credit, and mercantile reputation in the Island of Samar to the extent of approximately P50,000. Therefore defendant prayed that Gutierrez Hermanos be sentenced to pay ;t the sum of P75,000 as the amount of such losses and damages occasioned it. As the fifth counterclaim defendant alleged that, for a period of twenty-two months, from the month of May, 1900, it chartered several of its boats to the American military government; that the charter parties aggregated a value of P400,000; that these contracts were executed and the amounts thereof collected by Messrs. Oria & Fuster, members of the defendant company, who turned the said amounts into the current account they had with the firm of Gutierrez Hermanos; but that plaintiff charged in the current account, appropriated to itself, and collected from the funds of Oria Hermanos & Co. which it had in its possession, 2 per cent of the amount collected by reason of the said charter parties for commission and brokerage there being no stipulation whatever relative to the collection of this commission; that Gutierrez Hermanos, moreover, charged against the said amount collected by it 8 per cent compound interest; and that the sum in such wise improperly charged and appropriated amounted, together with the accumulated interest, to P15,000, which defendant prayed be returned to it by Gutierrez Hermanos. The object of the sixth counterclaim is the recovery of P31,000, in which amount defendant, Oria Hermanos & Co., alleged it was injured by Gutierrez Hermanos having arbitrarily charged in the current account compound interest at the rate of 8 per cent per semester from the year 1900 up to the time of the closing of the said current account, while the agreement made between both firms upon opening the said account was that the latter should bear a mutual interest of 8 per cent per annum only. On May 14, 1910, counsel for Gutierrez Hermanos filed a written answer to the foregoing countercomplaints and counterclaims, and prayed that plaintiff be absolved therefrom. On August 1, 1910, this case came up for hearing and was continued on the following days until on April 24, 1912, the Honorable S. del Rosario, judge, rendering judgment therein, the dispositive part of which is as follows: "Messrs. Oria Hermanos & Co. are sentenced to pay to Messrs. Gutierrez Hermanos the sum of P147,204.28, with interest thereon at the rate of 8 per cent per annum from the 30th of June, 1909, after deduction of all the sums that result as balances, in favor of the former, from the accounts that shall be rendered by the latter, in conformity with the cross complaints and counterclaims that have been admitted. "Messrs. Gutierrez Hermanos are sentenced: "(a)With respect to the first cross complaint, to render to Messrs. Oria Hermanos & Co. accounts, supported by vouchers, only of those articles in the acquisiton of which fraud, deceit, or error has been proven and to which the following pronouncements refer. "(b)As regards the second cross complaint, to return to Messrs. Oria Hermanos & Co., after due settlement of the accounts, all the sums collected as internal-revenue tax and referred to in the invoices of rice, salt, petroleum, lime, rattan, flour, aniseed spirit, cigarettes, and other articles mentioned in their respective places in the record, unless plaintiff shows in a satisfactory

Agency Part D: Obligations of the Agents (Art. 1884 1888) 16 manner that it did actually pay to the Bureau of Internal Revenue, the contents of Exhibit 178 notwithstanding, the sums which, for the reason aforestated, were debited to defendant, in which case the latter may bring an action against the said Bureau of Internal Revenue. "(c)With respect to the third cross complaint, plaintiff must render to defendant an account, supported by vouchers, of the shipments of rice concerned in the invoices examined in which fraud or error was discovered, and said account shall embrace the 153 invoices referred to by the litigants in this suit (page 324 of the transcript of the stenographic notes, session of November 29, 1910). "(d)With regard to the fourth cross complaint, plaintiff shall render an account, supported by vouchers, of all the purchases it made of petroleum for Messrs. Oria Hermanos & Co., and in connection with the invoices held in the latter's possession and referred to on page 391 of the transcript of the stenographic notes of the session of November 29, 1910. "(e)In the matter of the second counterclaim, plaintiff shall return to Messrs. Oria Hermanos & Co. the sum of P1,812 with interest thereon at the rate of 8 per cent per annum from the 5th of May, 1910, to the date of payment. The interest due shall be compounded after each semester, reckoning from June 1, 1900, and both the principal and the interest so compounded shall bear the same interest of 8 per cent per annum. "Messrs. Gutierrez Hermanos are absolved, in the first place, from the second cross complaint in so far as concerns the demand therein made for a rendition of accounts in connection with the hemp and copra; and in the second place, from the first, third, fourth, fifth, and sixth counter-claims. "Without special finding as to costs." The parties, upon their notification of this judgment, duly excepted thereto and by written motion prayed for a reopening of the case and a new trial. These motions were overruled, with exception by the appellants, and the proper bills of exceptions having been filed, the same were approved and forwarded to the clerk of this court. This action was brought to recover the sum of P147,204.28, the balance of a current account opened on May 1, 1900, between Gutierrez Hermanos and the commercial firm of Oria Hermanos & Co., at the rate 8 per cent mutual interest up to June 30, 1909, which sum was found to be owing by Oria Hermanos & Co. to the commercial firm of Gutierrez Hermanos. Other subject matters of the present suit are the rendition of accounts by Gutierrez Hermanos, as commission agent, to Oria Hermanos & Co., as principal, and the collection of various sums demanded by the latter in the cross complaints and counterclaims filed, during the trial, by its counsel against the claim made by Gutierrez Hermanos for the payment of the amount specified in the preceding paragraph. To prove the propriety and justice of its complaint, Gutierrez Hermanos, the plaintiff, alleged: That, in accordance with the agreement made, it sent semiannually a general account that "LAOANG, March 9, 1909. "Messrs. GUTIERREZ HERMANOS, Manila. "DEAR SIRS:In our possession, your very esteemed letter dated December 31 last, from which we have withdrawn the extract of our current account with your firm, closed the same day, showing a balance in your favor of P144,473.78, which extract meets with our approval. "We remain,"Yours, very respectfully, "OBIA HERMANOS & Co. That, on May 25, 1909, the plaintiff firm notified the defendant firm that it could not continue to do business with the latter and therefore the current account stipulated between both parties would be closed within a period of thirty days; plaintiff therefore transmitted to defendant a general detailed account that comprised the period from January, 1909, to June 30 of the same year, with the warning that after that date (May 25, 1909) defendant would have to pay the debit balance, inasmuch as, although the said last account had not been approved, no objection whatever had been made thereto by Oria Hermanos & Co. Therefore, in the said letter of May 25, plaintiff demanded of defendant the payment of the sum mentioned of P147,204.28 which the latter had not paid in spite of plaintiff's demands and notwithstanding the fact that defendant had made no objection whatever to the last account rendered. Counsel for defendant, Oria Hermanos & Co., after a denial of the facts that had not been admitted prayed in special defense and in four cross complaints that the plaintiff, Gutierrez Hermanos, be compelled to present a general account, duly verified and supported by vouchers, of all the shipments of hemp, copra, rice and other effects specifically mentioned, and to render a final account in conformity with the agreement made between both parties and convering the details mentioned in the said cross complaints. Notwithstanding the proof shown in the record of the certainty and reality of the debt as a balance resulting from the current account kept between the parties, it is of course impossible to determine the net amount, the object of the claim presented by plaintiff, until there shall have first been decided whether there should or not be rendered a general account, accompanied by vouchers, comprehensive of the business transacted in connection with the different commercial articles dealt in, and of the mercantile relations between both firms from May 1, 1900, to June 30, comprised a statement of the business transacted during the preceding six months, to Oria Hermanos & Co. who, after examining the account with its specification and vouchers, sometimes approved the same without comment of any kind, and at others, after some objections, but that, in the latter cases, upon explanations being subsequently given by Gutierrez Hermanos, the defendant firm used at last to accept the account rendered; that such was the procedure followed during the nine years approximately that both firms maintained commercial relations, and that the record showed that during the said nine years Oria Hermanos & Co. had given in favor of Gutierrez Hermanos 17 agreements or approvals of account, the last of which, transcribed in the complaint, is of the following tenor:

Agency Part D: Obligations of the Agents (Art. 1884 1888) 17 1909, and also whether Gutierrez Hermanos is indebted to Oria Hermanos & Co. and what is the amount of the debt. Even upon the supposition that the plaintiff, Gutierrez Hermanos, is obliged to make a general rendition of accounts comprehensive of the business transacted between both firms within the dates mentioned, it is evident that, until it be known whether plaintiff is or is not indebted to Oria Hermanos & Co. and what is the amount owing as disclosed by the account rendered, it cannot be decided whether plaintiff is or is not entitled to collect the whole amount claimed in the complaint, for only in view of the result of the rendition of accounts requested by plaintiff can it be lawfully established whether Gutierrez Hermanos is a creditor of Oria Hermanos & Co. and what amount is owing to it by the latter. All this is referred to in the first error alleged by defendant. In case it should be held that the law does not allow the rendition of accounts requested by the defendant, Oria Hermanos & Co., and that this latter is not a creditor of Gutierrez Hermanos, it is evident of course that plaintiff would be unquestionably entitled to collect the amount specified in the complaint, or some other amount duly proved at trial to be owing it by defendant. It is therefore incumbent upon us to elucidate hereinafter the propriety or impropriety of the contentions made by defendant in its four cross complaints. Defendant's counsel in his first cross-complaint and special defense prayed that the plaintiff, Gutierrez Hermanos, be compelled to render and present a general, final, complete and verified account, pursuant to the agreement made between both parties, inasmuch as plaintiff bound itself to send periodically to defendant a note or numerical extract of the current account, and in case the mercantile relations between both firms should come to an end or be finally closed, Gutierrez Hermanos bound itself to present a general and complete account, duly supported by vouchers, and defendant, in accepting and approving the semiannual accounts rendered by plaintiff, did not waive its right to demand the general account agreed upon, at the time of the final closing of the said current account, the obligation to furnish which was not complied with by the plaintiff, Gutierrez Hermanos. The latter denied in its answer the allegations made by Oria Hermanos & Co. in its crosscomplaint, and set forth that, in consequence of the mutual current account opened between the parties from the year 1900, plaintiff transmitted weekly or fortnightly, according to circumstances, a specific statement of the transactions effected, as well as, semiannually, a general account of the business done during the six months last elapsed, and that defendant, after an examination of such semiannual account together with its details and vouchers, and after some objections thereto had been explained, was accustomed to approve the same. This was the procedure carried on for more than nine years during which Oria Hermanos & Co. from time to time approved each one of the 17 accounts that were presented to it, and upon Gutierrez Hermanos closing the current account from January to June, 1909, it also presented to defendant a general detailed account, which, notwithstanding that no objection whatever was made to it, was not approved. Therefore the complaint was filed that initiated this litigation. Had the agreement between the parties been recorded with all its conditions in some instrument, it would have appeared whether Gutierrez Hermanos actually bound itself to present to Oria Hermanos & Co., besides the semiannual accounts rendered, a general account comprising In the decision rendered in the case of Pastor vs. Nicasio, (6 Phil. Rep., 152), the following doctrine was laid down: "When accounts of the agent to the principal are once approved by the principal, the latter has no right to ask afterwards for a revision of the same or for a detailed account of the business, unless he can show that there was fraud, deceit, error or mistake in the approval of the accounts facts not proven in this case." The record does not show it to have been duly proven that upon Oria Hermanos & Co. giving its approval to the 17 accounts presented by Gutierrez Hermanos there was deceit, fraud, or mistake prejudicial to the former's interests. For the sole reason that Gutierrez Hermanos, upon closing the current account with Oria Hermanos & Co. was obliged, certainly an unwarranted obligation, to render a general account comprehensive of all the business transacted between both parties during more than nine years, and there being no proof of the alleged agreement between them, it would be improper to hold that plaintiff is obliged to render and present a general account in the sense requested by Oria Hermanos & Co. in its first cross-complaint. With respect to the second cross-complaint, relative to the sale on commission of lots of hemp and copra by defendant to plaintiff during the period from May, 1900, until the close of the mercantile relations between both firms, it was alleged that for such sale or sales on commission all the business undertaken between 1900 and June, 1909, on which latter date it was considered by Gutierrez Hermanos as terminated. The allegation made by defendant relative to this point has not been substantiated by any evidence whatever, and therefore there is no reason nor legal ground whereby plaintiff could be compelled to present that general account requested in the first cross-complaint. It is, in our opinion, appropriate to insert hereinafter what the trial court, in the judgment rendered, says with respect to this matter: "If commission agents be obliged to render to their principals itemized accounts, supported by vouchers, of the sums they collect as commission and of the transactions effected by them in relation with their principals, as often as the latter may desire, in cases where there arises some trouble, some difference of opinion or a conflict of interests, or where the commission agents close the account, as occurs in the case at bar, because the principals did not pay what they were owing or because, instead of the debt being diminished, it was increased, the commission contract would become an inexhaustible and never-ending source of litigation and of claims without number, a formidable arm for spiteful principals against which it would be insufficient to oppose an arsenal of vouchers such as might be treasured by the most prescient commission agent, because there could be avoided neither the bother resulting from their necessary examination, nor the heavy expenses and loss of time that are the inevitable accompaniment of this class of work." When an account has been presented or rendered and has been approved by the party whom it concerns or interests, it is not proper to revise it, unless it should be proved that in its approval there was deceit, fraud, or error seriously prejudicial to the party who gave such approval. (Arts. 1265 and 1266, Civil Code.)

Agency Part D: Obligations of the Agents (Art. 1884 1888) 18 Gutierrez Hermanos collected a large and important commission of many thousands of pesos and credited defendant in the current account with lesser prices than those obtained, and that defendant received information that these lots of hemp and copra which were said to have been sold to third persons were afterwards found to have been purchased by the firm of Gutierrez Hermanos itself, to the fraud, injury, and prejudice of the defendant, Oria Hermanos & Co.; wherefore the latter prayed that plaintiff should present a general and complete account, duly verified by vouchers and with the details specified, of each and all of the shipments of hemp and copra forwarded to plaintiff from May, 1900, to 1909. These facts were denied by plaintiff, and the court, in view of the evidence adduced by both parties, held that the record showed absolutely no proof that plaintiff, Gutierrez Hermanos, had committed any fraud or error prejudicial to defendant. In fact it was not proved that Gutierrez Hermanos credited in the current account a lesser price than that obtained from the sale on commission of the lots of hemp and copra sent to it by Oria Hermanos & Co., for from the documentary evidence consisting of accounts transmitted by plaintiff to the commercial firms of Stevenson & Co. and Warner, Barnes & Co. (Limited), in collection of the price of hemp and copra acquired by these houses, it appears that the prices fixed at sale to the latter are the same and agree with those specified in the statements transmitted by plaintiff to defendant, Oria Hermanos & Co., and that the hemp and copra shipped by the defendant were sold on commission to third persons that is, to the aforesaid commercial firms. The charge laid against plaintiff, that it did not disclose the name of the commercial firm or concern from whom the hemp that it sold had come, does not, although it may have concealed this fact. constitute a fraudulent act, nor one originating civil liability, inasmuch as plaintiff realized on the lots of hemp under the marks of Oria Hermanos & Co. which they bore from their point of origin and by which they were known both in Manila and abroad (Exhibit DD) and not only in the invoices, but also in the accounts presented by Gutierrez Hermanos upon its collecting the price of such hemp sold on commission, there appeared the marks stamped by Oria Hermanos & Co. on their lots of hemp, and therefore it cannot be affirmed that Gutierrez Hermanos superseded Oria Hermanos & Co. as the owner of the hemp that plaintiff sold on commission and that came from defendant during the more than nine years in which the former was a commission agent of the latter. With respect to the fact of Gutierrez Hermanos not having disclosed the name of the concern to which the hemp belonged, in the cases where plaintiff sold it in its own name, plaintiff's procedure cannot be qualified as deceitful or fraudulent, inasmuch as article 245 of the Code of Commerce authorized it to act as it did, to contract on its own account without need of disclosing the name of its principal, in which case Gutierrez Hermanos was liable to the person or concern with whom it contracted, as if the business were its own. So, then, the purchaser has no right of action against the principal, nor the latter against the former, without prejudice to the actions which lie respectively in behalf of the principal and the commission agent, pursuant to the provisions of article 246 of the Civil Code. With regard to the lots of copra, notwithstanding the allegations made in this crosscomplaint, defendant has not produced any proof whatever of the facts charged, in face of plaintiff's denial in its answer. Therefore, in consideration of the reasons set forth with respect to the lots of hemp, the judgment of the lower court disallowing defendant's petition that plaintiff render accounts relative to the sales of hemp and copra is held to be in accordance with law. In this part of the judgment of the trial court consideration was also given to the fact of plaintiff's having debited against defendant in the account rendered it the payment of the internalrevenue tax of one-third of 1 per cent. With respect to the tax paid on the price of the hemp and copra sold by the plaintiff in the name and for the account of the defendant, the procedure of the plaintiff is perfectly legal, in accordance with the provisions of section 139 of the Internal Revenue Law, in laying upon Oria Hermanos & Co. the obligation to pay the said tax as the owner of the hemp and copra sold, and, therefore, the claim made by defendant against the account drawn up by Gutierrez Hermanos is unreasonable and unfounded. As regards the tax of one-third of 1 per cent which, according to accounts presented by Gutierrez Hermanos to Oria Hermanos & Co., plaintiff had paid on the price of the rice, salt, kerosene, lime, mats, rattan, flour, anise-seed spirits, and cigarettes, inasmuch as the said section of the above cited Act obliges the vendors and not the purchasers of these articles to pay the said tax, it is undeniable that the firm of Gutierrez Hermanos that had acquired the said articles which were forwarded to Oria Hermanos & Co. should neither have paid the tax in question, nor should have charged it for payment against defendant, since it had already been paid to the Government by the owners of the articles sold to plaintiff. In view of the provisions of law contained in the aforesaid section 139, it is not understood how Gutierrez Hermanos could have been compelled to pay the said tax on the rice, salt, petroleum, lime, mats, rattan, flour, anise-seed spirit, and cigarettes, nor on the price of the beer, on the supposition that plaintiff acquired these articles from third persons in this city. In the case of the rice imported from abroad, the payment of the tax thereon pertains to the importer who sells it to third persons. If Gutierrez Hermanos made a mistake, notwithstanding the clear phraseology of the said section, said mistake should not prejudice defendant who, in July, 1905, had already stated that it did not agree with plaintiff's action in the matter for, in the letter Exhibit FF, defendant demanded that plaintiff investigate the case in order to avoid a double payment of the tax. For the foregoing reasons the plaintiff, Gutierrez Hermanos, after liquidation of the sums paid as a tax of one-third of 1 per cent on the price of the rice acquired in this city and of the salt, kerosene, lime, mats, flour, anise-seed spirit, cigarettes, and beer, referred to in the second counter-complaint, must pay to Oria Hermanos & Co. the amount shown by said liquidation to be owing. As regards the third cross-complaint, wherein it is alleged that fraud, deceit, or error was committed or incurred by Gutierrez Hermanos in connection with the accounts for the rice forwarded to Oria Hermanos & Co., a fact denied by plaintiff, the trial judge, in view of the evidence introduced at the hearing of the case, established the following conclusion:

Agency Part D: Obligations of the Agents (Art. 1884 1888) 19 "Justice, therefore, demands that Messrs. Gutierrez Hermanos render a new account of the lots of rice which they shipped to Messrs. Oria Hermanos & Co., inasmuch as they, as proved in the verification of some of the lots, committed the fraud of having collected a commission of 2 per cent for the purchase of the rice, as commission agents, in addition to a profit in reference to the said lots, in their capacity of merchants, on the price of the rice imported by them from Saigon. "If they acted as commission agents, they should have contented themselves with the 2 per cent commission and should not have charged any extra price. If, as commission agents, it was more advantageous for them to reap the profits from the rice they imported from Saigon, they should neither have charged nor collected the 2 per cent commission. The commission agent is obliged to acquire the articles or effects for which he has received an order from his principal in the most advantageous and less onerous conditions for the latter. Such an obligation, prescribed by article 258 of the Code of Commerce, was not fulfilled by the procedure observed by plaintiff in the matter of the verified invoices of rice, in some of which, as has been proved, there appears to have been charged a larger amount than the cost price." This court reserves its opinion, until at such proper time it shall have seen the result, shown by the new accounts to be presented by plaintiff, as to whether, in the rice accounts rendered by it to defendant, there was fraud or only error susceptible of correction, for plaintiff alleges in turn, as shown in the letter Exhibit NN, that Oria Hermanos & Co. required plaintiff to increase the price in the invoices of rice, anise-seed spirit, petroleum, etc., by 25 per cent of the cost of these articles. Therefore plaintiff shall render an account, verified by vouchers, to Oria Hermanos of all the shipments of rice concerned, not only in the invoices examined, but also in those that have not been examined, up to No. 153, which invoices are those mentioned on page 324 of the transcript of the stenographic notes of the session of November 29, 1910. The approval and agreement given by defendant to the 17 semiannual accounts presented by plaintiff is no impediment to a revision of the same, once it shall have been shown that there was fraud, error, or serious incorrection prejudicial to the party who accepted the said accounts. The law which protects him who acts in good faith cannot permit any considerable prejudice to be caused to the rights and interests of a third party who had neither the occasion nor the opportunity to acquaint himself with the truth of the facts which he had admitted as true in such manner as they were presented to him. Oria Hermanos & Co., upon its accepting and approving the accounts which were presented to it by Gutierrez Hermanos, as transcripts or copies from the latter's books, did not have an opportunity to make the required verification of the entries of rice contained in the said accounts or of the invoices of this article in all their details, and whenever it has discovered that Gutierrez Hermanos, as commission agent, has made overcharges or placed extra prices in addition to the 2 per cent commission, it has a right to demand reimbursement of the excess in price which it had erroneously paid as principal. The judgment of the lower court must, therefore, be affirmed with As regards the petroleum, it is undeniable that in the invoices to which the fourth crosscomplaint refers higher prices were given than those it actually cost. Moreover, Oria Hermanos & Co. is entitled to the discount obtained by the commission house from the commercial firm which sold the petroleum. The trial judge, as grounds for his finding, says the following: "It is therefore evident that, according to the proofs submitted, Messrs. Gutierrez Hermanos committed fraud in the purchase and shipments of the said article, not only because they kept the discount allowed by the selling firm by which their principals, for whom they purchased the petroleum should have profited, and not the commission agents who acted for them simply in the capacity of agents; but also because in one of the invoices they charged, besides, a greater price than they paid to the vendors, and then collected a commission of 2 per cent on all the invoices. It is the obligation of commission agents to make the purchases for their principals on the most advantageous terms. For this they are paid the rate of commission stipulated. They have no right to keep the discount allowed by the vendors on the price of the articles they purchase for their principals, even less to increase, to their benefit, the price charged them." In consideration, then, of the evidence introduced relative to the purchase of the petroleum shipped to defendant, referred to in the fourth cross-complaint, plaintiff must render an account, verified by vouchers, of the price of all the petroleum that it acquired for Oria Hermanos & Co. and which is covered by the invoices mentioned on page 391 of the transcript of the stenographic notes taken of the session of December 28, 1910. The judgment of the lower court treats of the fact that Gutierrez Hermanos charged interest on the value of the articles which it had purchased for Oria Hermanos & Co., before even having paid the vendors the price of the articles acquired. Defendant has complained against this procedure on the part of plaintiff and qualifies as improper and illegal the collection of the 8 per cent interest on the price of the effects forwarded to Oria Hermanos & Co. from the date of their shipment, when actual payment of such purchases was made many days afterwards. The accounts presented by Gutierrez Hermanos, wherein note was made of the collection of interest at the rate of 8 per cent on the price of the effects acquired by plaintiff for respect to the entries of rice made in the 170 invoices referred to in the accounts presented by plaintiff, by means of a revision of the accounts presented in connection with the said article of the Code of Commerce. With respect to the fourth cross-complaint relative to Gutierrez Hermanos having entered in the invoices transmitted to Oria Hermanos & Co. higher prices than those paid for the salt, beverages, tobacco, wine, beer, and groceries, in spite of the allegations made by plaintiff the record of the proceedings shows no proof of the truth of the act charged to plaintiff. The fact of not having recorded in the invoices of the said effects shipped to defendant the names of the persons who had acquired them does not constitute proof nor even a presumption of illegal procedure on the part of Gutierrez Hermanos. Neither is plaintiff obliged by any law to state the names of the owners of such articles, nor does the omission thereof show bad faith on the part of the commission agents.

Agency Part D: Obligations of the Agents (Art. 1884 1888) 20 Oria Hermanos & Co. and shipped to defendant for its disposal, notwithstanding that they were not paid for until many days afterwards, were approved and accepted by plaintiff without any objection thereto whatever and with no protest against the notation of the interest on the price of the articles purchased. Therefore, aside from the reasons given by the lower court in his judgment and relative to this point, it can not be held that there was either fraud or error in the procedure observed by Gutierrez Hermanos in charging in its account the stipulated interest from the date when it acquired the effects, afterwards shipped to the defendant, Oria Hermanos & Co., because Gutierrez Hermanos could have paid cash for the articles purchased. Even though payment might have been delayed for a few days more it is certain that Gutierrez Hermanos as commission agent was obliged to pay the price of the articles acquired and, consequently, said price began to draw interest chargeable to the consignee who, as owner of such articles, could dispose of them freely. For these reasons defendant's claim can not be sustained. We now take up the fifth special defense, or the first counterclaim presented by defendant against plaintiff, wherein it is prayed that the latter be sentenced to pay to the former the sum of P13,894.60, together with the legal interest thereon, which sum is the difference between the 5 per cent which was all Oria Hermanos & Co. should have paid and the 8 per cent which was unduly charged them on the sum of P47,649, the debt contracted by Juan T. Molleda in favor of Gutierrez Hermanos and transferred to Oria Hermanos & Co. who assumed its payment instead of Molleda. The reasons, set forth in the judgment appealed from and based on documentary evidence, are so clear and conclusive that they could not be rejected by defendant, nor invalidated at trial by other evidence in rebuttal. Consequently, we are constrained to admit them as decisive of the point in controversy and as duly showing that the interest stipulated on the amount which Juan T. Molleda owed Gutierrez Hermanos and which was transferred to Oria Hermanos & Co. is 8 per cent and not 5 per cent as defendant claims. Therefore the sum of P13,894.60 claimed cannot be recovered, and it is held that the finding made by the trial judge in respect to the first counterclaim filed by defendant is in accord with the law and the evidence. This finding is based on the following grounds: "If the firm of Molleda & Oria as well as that of Oria Hermanos & Co., of which latter Mr. Tomas Oria is manager, both consented to Messrs. Gutierrez Hermanos charging in all the extracts of current account sent to them an interest of 8 per cent on the sum of P47,649.56; and if they willingly and constantly acquiesced in the payment of a particular rate of interest instead of that of 5 per cent, during nine years without raising any objection whatever, they are not en- titled to obtain restitution for the difference paid of 3 per cent, nor have they any right to consider as unlawfully collected the 8 per cent interest on the sum above mentioned. The record shows no proof of the existence of any of the vices which, according to law, might invalidate the consent given by defendant to the collection from it of the interest of 8 per cent, which must be that stipulated, nor was such a vice alleged by Oria Hermanos & Co." Moreover, against this finding in plaintiff's favor no error whatever has been alleged by defendant. In the second counterclaim, the sixth special defense, defendant prays that Gutierrez Hermanos be sentenced to the payment of P63,700, with legal interest thereon from the date of the presentation of this counterclaim, and alleges- that the firm of Gutierrez Hermanos, disregarding the instructions of Molleda & Oria, the predecessor of Oria Hermanos & Co., merely insured the stocks of hemp and merchandise which the latter had in Laoang, for an imaginary value of P67,000, leaving totally unprotected the stocks of hemp and merchandise in Catubig, valued at P32,000; that such failure to comply with the said instructions caused Oria Hermanos & Co., by reason of the fire that occurred in Catubig, to lose the sum of P63,700, including the premiums, expenses, and interest paid, and that defendant, immediately upon discovery of the loss by plaintiff's fault and negligence, filed claim therefor and protested against the same. In answer Gutierrez Hermanos alleged that in the letter from Oria Hermanos & Co., of the date of April 28, 1900, the latter stated that it recommended to plaintiff the question of the insurance of the warehouses in Laoang and of the houses in Catubig, and advised that if the stocks of hemp and merchandise therein were insured, as defendant believed they were, plaintiff should endeavor to increase the insurance thereon; and that in another letter of the same date Don Tomas Oria, after relating the fact that the insurgents had attacked the pueblo of Catubig and killed the troops there garrisoned, stated that he earnestly recommended to Gutierrez the matter of the insurance in order that it might be made as soon as possible in the manner explained in the official letter of the same date. Gutierrez Hermanos, supposing that Catubig might already have been burned and destroyed as a result of the occurrences related by Oria in his letter, judging by the news published in the newspapers of this city on May 2, 1900, deemed that it would be a useless expense to increase the insurance of the merchandise held in stock in the said pueblo under ordinary fire insurance which was that taken out by the firm of Molleda & Oria, for the reason that the insurance companies would refuse to pay the amount of the insurance in case the damage was caused by war, invasion, riot, military force, etc. As Gutierrez Hermanos then had no means whereby it might communicate with Molleda & Oria to request specific instructions from this latter firm is regard to the insurance ordered, which was ordinary and not war insurance, it had to consult Don Casimiro Oria, a partner of Oria Hermanos & Co., and this gentleman, with a full knowledge of the state of affairs in Catubig, advised that no further attempt be made to increase the ordinary fire insurance on the goods in Catubig, because it would be a useless expense and because there were well-founded reasons for supposing that at that date the pueblo had already been completely destroyed, together with the buildings and stocks of merchandise which it was proposed to insure. But after taking into account the importance of the buildings and the large stocks of goods stored in Laoang, which pueblo, according to a letter from Oria to Gutierrez Hermanos, was also in danger of being attacked by the insurgents, plaintiff proceeded to insure them against war risks for three months for P7,000 sterling, a transaction which was communicated by plaintiff to Molleda & Oria by a letter of May 5, 1900, and which this latter firm acknowledged without making any objection whatever to the war insurance placed; that, since the 2d of June of the same year, neither was any claim or protest made by the firm of Oria Hermanos & Co. against the insurance taken out by Gutierrez Hermanos, but, on the contrary, Oria Hermanos & Co. applied to the Government of the United States claiming an indemnity of P90,000 Philippine currency for the burning of the buildings and goods in the pueblo of Catubig a claim still pending decision by the Government.

Agency Part D: Obligations of the Agents (Art. 1884 1888) 21 The judge of the Court of First Instance, deciding the question raised in this counterclaim, set forth among others the following considerations: 'If Messrs. Gutierrez Hermanos had taken steps to insure the stocks of merchandise in Catubig and had declared to any officer of the insuring company the truth about the terrible slaughter which had just taken place, it would have been impossible to obtain a war insurance on the said merchandise; and if, instead of declaring the truth, plaintiff had omitted it, the insurance if obtained could not have been collected. The insurance company would have learned of the circumstances which had not been stated and had been omitted in the application and would have refused to pay the insurance, as it did in the case of the Catarman insurance, as will be seen further on. And if plaintiff had applied to the English courts, as it did in the case referred to, the result would have been the same." Even though Gutierrez Hermanos had increased the value of the insurance on the hemp and merchandise in Catubig through means of ordinary fire insurance, pursuant to the instructions given by Molleda & Oria, the predecessors of Oria Hermanos & Co. and whose rights this latter firm represents, the same result would have followed, inasmuch as in this class of insurance the insuring company does not assume risks for fires and damages caused by war, riot, and military force; and as in the official letter aforementioned plaintiff was not authorized to increase the insurance through means of a war insurance policy, it is unquestionable that plaintiff, in not increasing the ordinary insurance. proceeded in a prudent and reasonable manner and for the benefit of the defendant by saving the latter from uselessly paying an important premium for an insurance which it afterwards could not have collected. Furthermore, the news was already disseminated in Manila that the pueblo of Catubig had been completely burned to the ground. Not only, therefore, would it have been impossible to obtain the increase of an ordinary insurance, but even a war insurance, though offering to pay a large and excessive premium. In the letter of the date o May 24, 1900, Exhibit 5, page 190 of the first file of the record, Gutierrez Hermanos informed Oria Hermanos & Co. that the insurance firm refused to pay the amount of the insurance on the merchandise in Catubig, for the reason that the cases of fire caused through military force, etc., were excluded from the policy. So that even though Gutierrez Hermanos had, in compliance with orders from Oria Hermanos & Co., increased the amount of the insurance on the stock of merchandise stored in Catubig, Oria Hermanos & Co. would not have been benefited thereby, because the insurance company would have refused to pay the increase, just as it did not pay the amount of the original insurance for the reason aforementioned. Furthermore, as we have already stated, the order to increase the insurance only refers to ordinary insurance against fire, and not to extraordinay insurance against war risks. With respect to the war insurance placed on the stocks of goods in Laoang, the trial court could not in accordance with law hold plaintiff to be liable for the payment of the sum of P1,812, with interest at 8 per cent for the reason that Oria Hermanos & Co. did not protest nor object in any wise against the placing of the said war insurance on the merchandise in Laoang, and also because in the second counterclaim no petition or demand whatever was made in connection with this transaction. For these reasons therefore, Gutierrez Hermanos must be absolved of the second counterclaim. We now come to the third counterclaim, the seventh special defense presented by defendant, wherein petition was made that the firm of Gutierrez Hermanos be compelled to pay to Oria Hermanos the sum of P67,000, besides the legal interest thereon since the filing of this claim, which sum was the amount of the insurance, premiums paid, fees, costs, interest, and charges for telegrams, etc., alleged to have been expended and lost through the inattention, negligence, improvidence, and carelessness of the plaintiff, Gutierrez Hermanos, without defendant's being able to collect the amount of the insurance on the stock of hemp in Catarman, Samar. In a letter of May 10, 1900, addressed by Oria Hermanos & Co. to Gutierrez Hermanos, the former commissioned the latter to try to insure against war risks some 1,400 piculs of hemp that Oria Hermanos & Co. had in the pueblo of Catarman which had been evacuated by the American troops; and in another letter of the same date Tomas Oria said to Gutierrez Hermanos that Catarman had been evacuated by the troops three days after the departure of the steamer Santander which was unable to load about 3,000 piculs of hemp that his firm had there, and, as he knew that the said pueblo had not been burned, he wished to have insurance taken out on the value of about 1,400 piculs of hemp stored in the Delgado warehouse. Gutierrez Hermanos had Stevenson & Co., of Manila, cable to the latter's head office in London for the desired insurance, and as soon as it was obtained Gutierrez Hermanos wrote to Oria Hermanos & Co. informing defendant that plaintiff had insured against war risks 1,400 piculs of hemp deposited in the Delgado warehouse in Catarman, for three months from the 18th of May, 1900. A few days subsequent to the placing of this insurance, Oria Hermanos & Co. ordered Gutierrez Hermanos to collect the amount of the insurance, for the reason that all the stock of hemp in Catarman had been stolen by the insurgents. The representative of the underwriter refused, however, to pay the amount of the insurance because Oria Hermanos & Co. had concealed certain facts which, had they been known to the underwriter, would have deterred the company from issuing a policy for the hemp, and all the steps taken for the purpose of obtaining the collection of the 3,000 sterling for which the hemp had been insured, resulted in failure. Therefore, on petition of the firm of Oria Hermanos & Co. through the firm of Stevenson & Co., suit was duly brought before the English courts in London. The prosecution of this suit was commended to English attorneys to whom Oria Hermanos & Co. furnished, through Gutierrez Hermanos, all the documents and data conducive to a successful issue. Notwithstanding, the claim of Oria Hermanos & Co. was rejected by the London courts. No liability attached to Gutierrez Hermanos for the failure of the suit in London. The firm of Gutierrez Hermanos merely complied with the orders of Oria Hermanos & Co. to insure the stock of hemp in Catarman, with an insurance company established in London, through Stevenson & Co. of Manila, in view of the fact that there was no insurance company in this city which would issue policies against war risks. For this purpose, by a letter of October 17, 1905, Exhibit F-2, Oria Hermanos & Co. transmitted to Gutierrez Hermanos the power of attorney and the letter for Messrs. Horsley, Kibble & Co. for the purpose of the latter's negotiating with the underwriters for some honorable settlement of the matter, during the time required for the receipt of all the documents that had been requested. In another letter of January 25, 1906, Oria Hermanos & Co. stated to Stevenson & Co. that it took pleasure in replying to the latter's favor of

Agency Part D: Obligations of the Agents (Art. 1884 1888) 22 the 19th instant, addressed to Mr. Oria; that Delgado's letter to Oria of the date of October 19, 1901, was forwarded in the original to London, through Messrs. Gutierrez Hermanos, to Stevenson & Co., on July 16, 1904; that defendant inclosed a copy of Delgado's declaration before the municipal judge of Catarman, transmitted to Stevenson & Co. on November 21, 1903; and that the two letters to Gutierrez Hermanos, of May 28, 1903, and October 2, 1901, as well as the memorandum of the values of the goods, had been transmitted to Gutierrez Hermanos with a telegraphic order to said firm to deliver them to Stevenson & Co. If the amount of the insurance could not afterwards be collected, it was not through fault of Gutierrez Hermanos, who acted in the matter in accordance with instructions from Oria Hermanos & Co. So that the firm of Gutierrez Hermanos was a mere conductor through which the stock of hemp in Catarman was insured by a firm in London through mediation of Messrs. Stevenson & Co., for the firm of Oria Hermanos & Co. had to grant a power of attorney in behalf of the said Messrs. Horsley, Kibble & Co. in order that the latter might represent the former before the courts in England. If afterwards the representatives of Oria Hermanos & Co. did not obtain a favorable decision in those courts, the loss of the suit cannot be ascribed to either the fault or the negligence of Gutierrez Hermanos, inasmuch as this plain- tiff merely complied with the orders of the defendant, Oria Hermanos & Co., to bring suit in the English courts, not against Stevenson & Co. of these Islands, but against the insurance company of London. The firm of Gutierrez Hermanos, in executing orders and charges of Oria Hermanos & Co., became, by virtue of an implied agency, an agent of the latter and, in the fulfillment of the orders of the principal, adjusted its action to the instructions of Oria Hermanos & Co. The record does not show that in so doing it proceeded with negligence or with deceit. Therefore there is no reason nor legal ground whereby plaintiff should be compelled to pay the sum demanded in the third counterclaim for the causes therein stated. (Arts. 1710, 1719 and 1726 of the Civil Code.) Consequently Gutierrez Hermanos should be absolved from the third counterclaim filed by defendant. In the fourth counterclaim, the eighth special defense, defendant, Oria Hermanos & Co., prays that plaintiff, Gutierrez Hermanos, be sentenced to pay P75,000 for losses and damages, with interest, inasmuch as by reason of a contract executed between both parties, plaintiff bound itself to acquire for and to transmit to defendant rice and other articles, including coin, which Oria Hermanos & Co. might request at Laoang, Samar, and so plaintiff did; but since 1904, the fifth year of their mercantile relations, plaintiff failed repeatedly to comply with its obligation to send the rice and other articles requested by defendant, totally sometimes and at other times partially limiting the shipment of the effects ordered and excusing itself from remitting money on the pretext that it could not obtain insurance for the shipment of cash; that defendant afterwards discovered that there were in this city large stocks of rice and other effects which plaintiff [defendant] had requested, and could surely have been sold in Laoang and the pueblos of the coast of Samar, as Oria Hermanos & Co. was the only importing firm in that island; and had defendant received from plaintiff the rice and the other effects the former had requested to be shipped to it, defendant would have obtained a profit of not less than P25,000 whereupon it could have bought large quantities of hemp which would have brought it great profit. Defendant further alleged that such Plaintiff, Gutierrez Hermanos, specifically denied the facts alleged by defendant in its counterclaim and set forth that the evidence introduced relative to such facts showed that since 1904 plaintiff had been reducing the shipments of rice, wine, and other effects to such extent that in 1906 and 1907 cases occured where the order shipped was reduced to one-third, and in 1908 also where the steamer Serantes was sent without any cargo whatever, for the reason that the debit balance in defendant's current account amounted, in 1905, to P321,000 and because Oria Hermanos & Co. did not send a quantity of hemp and copra sufficient in value to cover the value of the remittances of money and of the shipments of the effects requested; that defendant, instead of sending hemp to plaintiff for the gradual payment of its debt, sent it to Cebu; that therefore Oria Hermanos & Co. had no well-founded grounds whereupon to claim indemnity for losses and damages, especially since, according to the stipulations of the agreement and as shown by the evidence, the part of the credit utilized by defendant was to be covered and paid for with the price of the hemp, copra and other effects which Oria Hermanos & Co. should have to send to Gutierrez Hermanos; and that, if the debtor balance of the current account continued to increase instead of decreasing, it must be concluded that the procedure of Gutierrez Hermanos in reducing the amount of the shipments of the orders was due to the conduct of Oria Hermanos & Co. who did not endeavor by the shipment of copra, hemp, and other effects gradually to pay even a part of the credit opened, notwithstanding that the rights and obligations established in the contract should have been mutual. If defendant, without concerning itself with diminishing its debtor balance, did no more than order goods for sale and remit drafts to be paid by Gutierrez Hermanos, not sending in exchange to plaintiff hemp, copra, and other effects, plaintiff, Gutierrez Hermanos, in refusing discretionally to furnish certain effects to defendant and to pay drafts drawn by the latter, did not violate the obligations it assumed in the contract. The fact that the debtor balance accepted by Oria Hermanos & Co. on March 9, 1909, Exhibit A, was raised to P144,473.78, is the best proof of the good conduct observed by plaintiff during the nine years of mercantile relations between both parties, and is at the same time the most graphical demonstration that defendant's contention made in its fourth counterclaim is not based on any just or legal grounds. Article 1100, last paragraph of subarticle 2, of the Civil Code prescribes: "In mutual obligations none of the persons bound shall incur default if the other does not fulfill or does not submit to properly fulfill what is incumbent upon him. From the time one of the persons obligated fulfills his obligation the default begins for the other party." Article 1124 of the same Code provides failure on the part of plaintiff to comply with the agreement made caused injury to the reputation and mercantile credit of Oria Hermanos & Co., in Samar, and losses and damages of the value of about P50,000, the total of the losses and damages suffered on both accounts amounting to a sum of not less than P75,000; and that the motive of such procedure on the part of Gutierrez Hermanos was to injure and destroy defendant's credit in Laoang and on the entire coast of Samar, because plaintiff planned to establish there a business of its own like that of Oria Hermanos & Co.

Agency Part D: Obligations of the Agents (Art. 1884 1888) 23 as follows: "The right to rescind the obligations is considered as implied in mutual ones, in case one of the obligated persons does not comply with what is incumbent upon him. "The person prejudiced may choose between exacting the fulfillment of the obligation or its rescission, with indemnity for damages and payment of interest in either case. He may also demand the rescission, even after having requested its fulfillment, should the latter appear impossible." Under these grounds we hold that the absolutory finding contained in the judgment appealed from is in accordance with the law and the evidence. In the fifth counterclaim, the ninth special defense, defendant, Oria Hermanos & Co., prayed that Gutierrez Hermanos be sentenced to pay the sum of P15,000, together with the legal interest-thereon, inasmuch as plaintiff, Gutierrez Hermanos, charged in the current account, collected and appropriated to itself the funds which Oria Hermanos & Co. had in plaintiff's possession and assessed against the same compound interest at 8 per cent and 2 per cent on the net amount of the collection made as charterage for the steamers Serantes and Laoang, the launches Comillas and Golondrina, and the cutter Remedios, as commission for said charterage, when all the steps for the collection of the same were taken personally by Messrs. Oria & Fuster, defendant's partners and there was no contract whatever between the parties whereby Gutierrez Hermanos might collect, enter into the current account and appropriate to itself the said amount as commission through the collection of the aforesaid charterage. Plaintiff's counsel merely denied the facts alleged, which certainly were not proved at the trial. It was, on the contrary, fully proven that Don Tomas Oria and the managers of Oria Hermanos & Co. knew, by reason of the accounts Gutierrez Hermanos had been sending them, that the plaintiff firm charged the 2 per cent commission on the amount of the charterages, for it is so recorded in the letter from Oria addressed to Gutierrez Hermanos under date of June 12, 1901, in which P690 appears annotated as the amount of plaintiff's 2 per cent commission for the charterage of the Laoang and the Serantes, and in another letter from Oria Hermanos & Co. of October 18, 1900, (Exhibit A-2, page 476 of the record) wherein demand was made for vouchers and a memorandum of the collections effected for the charterage of these steamers, the Laoang, and the Serantes. Furthermore, it appears in this same letter for it is stated that credit has been given in Gutierrez Hermanos' account for P272.50, as being the amount this firm was entitled to receive as 2 per cent commission on the P15,625 collected by it from the quartermaster for the charterage of the Serantes and for the transportation of eight passengers on the steamer Laoang; and it is also therein stated that Gutierrez Hermanos' account has been credited with the sum of P24, as the amount of 2 per cent commission on P1,200 collected for four days' charterage of the Laoang. These documents show that Gutierrez Hermanos has taken part in the collection of the said charterages and, therefore, was entitled to receive the amount agreed upon as commission for such collection. Oria's assertion that Gutierrez Hermanos did nothing for the collection of the P400,000, the amount of the charterage for the boats of Oria Hermanos & Co., is contradicted by several letters written by Oria himself to Gutierrez Hermanos relative to the collection of the charterages due for the launches Golondrina and Adela, and for this purpose he sent the proper vouchers for such collection. Consequently there is neither reason nor legal ground to prevent our holding as proper the finding established by the trial court that Oria Hermanos & Co. did, with due knowledge of the matter, approve the amount of the commissions collected by Gutierrez Hermanos on the sums it had collected as charterage for the defendant's boats, in accordance with the agreement made between the parties, which defendant can not repudiate, nor can its regret for the part it took therein avail it for the reimbursement sought in its fifth counterclaim. The finding of the trial judge in regard to the latter is, therefore, in conformity with the law. The object of the sixth counterclaim is to obtain reimbursement of the sum of P31,000, the amount of the interest charged and compounded semiannually, instead of annually, at the rate of 8 per cent net interest. Oria Hermanos & Co. demands this sum from Gutierrez Hermanos, alleging that there was an agreement between the parties to the effect that a settlement of the interest should be made at the end of each year, and also that the interest due and unpaid should be capitalized annually. The firm of Oria Hermanos & Co., Tomas Oria, one of the partners of the same, and the defendant's bookkeeper, a relative of the said Oria and also a partner of the firm, had been receiving extracts or copies of the semiannual accounts rendered by Gutierrez Hermanos, and, after a careful examination of the same, after offering objections thereto which sometimes delayed Oria Hermanos & Co.'s approval thereof for more than six months, after receiving the explanations requested and vouchers demanded of plaintiff, they concluded by admitting and agreeing to the accounts rendered and the amounts involved, and made neither objection nor protest whatever against the system or method employed by Gutierrez Hermanos in capitalizing at the end of each year the interest of the semiannual accounts rendered, nor against the interest charged on the capitalized interest, not only in defendant's debit, but also by reciprocation in the credit given it in the account of the receipts obtained from the price of the hemp, copra and other products shipped to Gutierrez Hermanos. All the foregoing facts appear on page 18 of the transcript of the stenographic notes taken of the hearing on July 14, 1914. The transaction effected by Gutierrez Hermanos in the accounts it presented to defendant, Oria Hermanos & Co., is confirmed by some twenty letters signed, some of them, by Oria Hermanos & Co., others, the greater part of them, by Tomas Oria, and still others by Mr. Fuster, a partner of the latter firm. Therefore the semiannual capitalization made by plaintiff, Gutierrez Hermanos, was sanctioned and approved by defendant on the seventeen occasions that it approved the accounts presented by plaintiff, expressive of such capitalizations of the reciprocal interest stipulated between the contracting parties. Article 1109 of the Civil Code prescribes as follows: "Interest due shall earn legal interest from the time it is judicially demanded, even if the obligation should have been silent on this point. "In commercial transactions the provisions of the Code of Commerce shall be observed." Article 317 of the Code of Commerce provides: "Interest which has fallen due and has not been paid shall not earn interest. The contracting parties may, however, capitalize the net interest which has not been paid, which, as new principal, shall earn interest."

Agency Part D: Obligations of the Agents (Art. 1884 1888) 24 Upon the execution of the contract which was the origin of the mercantile relations between Gutierrez Hermanos and Oria Hermanos & Co., the stipulations made between both parties were not set forth in any document, they being content with a verbal agreement in which it was stipulated that the rate of interest of the reciprocal current account to be kept between them should be 8 per cent, without determining whether such interest was to fall due annually, as affirmed by Tomas Oria, the manager of Oria Hermanos & Co., or semiannually, as contended by Gutierrez Hermanos. However, it is certain that in the seventeen accounts presented by plaintiff to defendant, at the end of each period of six months from 1900 to December 31, 1908, embracing nearly nine years, the interest due was liquidated every six months in the reciprocal current account between both firms, without opposition or protest on the part of Oria Hermanos & Co. In the absence of a written agreement defendant's procedure raises the presumption that such were the stipulations verbally made between the interested parties, and the verbal agreement was constantly maintained and confirmed without protest or objection whatever on the part of the managers of Oria Hermanos & Co. If Tomas Oria, changing his opinion, after the firm of which he is a principal member had approved the said seventeen accounts, believed that he was authorized to contradict his own acts and to allege another manner of computing and liquidating the 8 per cent interests stipulated by stating that it should have been collected annually, and not semiannually as was done and approved in the seventeen accounts rendered during a period of more than nine years, the rectification afterwards made of an assent and agreement repeatedly given has come too late to undo by his repentance what he himself did in agreement with defendant, since they were authorized to take such action by article 317 of the Code of Commerce. Therefore the ruling of the trial judge absolving plaintiff of the sixth counterclaim filed by defendant is in accordance with the law and with the evidence as disclosed by the record. For all the reasons hereinabove set forth as grounds for the findings rendered in respect to the complaint and to each one of the cross-complaints and counterclaims presented by defendant, the errors assigned to the judgment appealed from and not admitted in this decision have been duly refuted. Therefore, for the reasons assigned in this decision, we sentence the commercial firm of Oria Hermanos & Co. to the payment of the sum of P147,204.28 and of the stipulated interest at the rate of 8 per cent per annum from June 30, 1909, after deduction of all the sums which as balances in favor of defendant may result from the accounts to be rendered by Gutierrez Hermanos, in conformity with the findings made, especially in reference to the second, third, and fourth cross-complaints. Gutierrez Hermanos is absolved from the first cross-complaint, and also from the second, in which latter defendant prayed for an accounting of the hemp and copra business. Plaintiff is likewise absolved from the fourth cross-complaint, excepting the part thereof relative to the petroleum, and also from the first, second, third, fourth, fifth, and sixth counterclaims filed by defendant. Held:(1) That Gutierrez Hermanos, after liquidation of the sums paid as a one-third per cent tax on the price of the rice acquired in this city, of that of the salt, kerosene, lime, mats, rattan, flour, anisette, cigarettes, beer, and other articles, for which plaintiff paid said sums and charged them to defendant's account, must pay to Oria Hermanos & Co. the sum disclosed by the said liquidation, in conformity with the second cross-complaint. (2)That Gutierrez Hermanos shall render to defendant an account, supported by vouchers, of the price, expenses, and all amounts paid for the shipments of rice covered by the invoices examined during the trial of this case, as well as the 153 invoices mentioned by the parties in the hearing of November 29, 1910. (3)That plaintiff shall render an account, supported by vouchers, of all the petroleum it acquired for Oria Hermanos & Co., the invoices of which are mentioned in the transcript of the stenographic notes taken at the hearing of December 28, 1910. The judgment appealed from is affirmed in so far as it is in accord with this decision and is reversed in so far as it is not, without special finding as to costs. Arellano, C.J. and Johnson, J., concur. Carson and Trent. JJ., concur in the result. Separate Opinions MORELAND, J., dissenting: I do not agree to the return of this case to the court below for the purpose of having the plaintiff "render accounts." In the first place, there is no account to render, and the finding of the trial court and this court to the contrary is clearly erroneous. In the second place, the parties offered, or had every opportunity to offer, all of their evidence relative to the sale and delivery of the merchandise described in the complaint and the payment of the purchase price. It is a plain case of a sale of goods by plaintiff to defendant. If there is evidence supporting the allegations of the complaint, plaintiff is entitled to a judgment. If not, the defendant wins. There is no reason for a return of the cause. The parties have already had every opportunity warranted by law. (Hicks vs. Manila Hotel Co., 28 Phil. Rep., 325; Gov. of Phil. Islands vs. Philippine Sugar Estates Development Co., Ltd., ante, p. 27.) In the third place, if this court is correct in its ruling, the judgment appealed from is not final and we can do nothing but dismiss the appeal. The judgment of the lower court is in part as follows: "Judgment is, therefore, rendered against Oria Hermanos y Compaia and in favor of Gutierrez Hermanos for the sum of one hundred and forty-seven thousand two hundred and four pesos and twenty-eight centavos (P147,204.28), with interest at eight per cent per annum from the 30th of June, 1909, but there must be deducted therefrom the sums which are found in favor of the said Oria Hermanos y Compaia from the rendition of accounts by said Gutierrez Hermanos in accordance with the counterclaims and cross complaint which have heretofore been allowed." The judgment further says: "(a) With reference to the first counterclaim, to render accounts duly vouchered to Oria Hermanos y Compaia with reference to those articles as to which fraud or error has been proved and to which the subsequent pronouncements herein made refer. "(b)With reference to the second counterclaim, to restore to Oria Hermanos y Compaia after the proper rendering of accounts with reference thereto, all of the sums, etc.

Agency Part D: Obligations of the Agents (Art. 1884 1888) 25 xxx xxx xxx "(d)With reference to the fourth counterclaim, to render vouchered accounts of all the purchases of petroleum which Oria Hermanos y Compaia have made from the plaintiffs, etc." If we take this judgment at its face, then it is clear that it is not final, that something is necessary yet to be done before the sum due from defendant to plaintiff, if anything, can be determined. There a judgment is not final, we have no authority to take jurisdiction for the purpose of determining the merits; and the determination of this court in the prevailing opinion of many of the questions which would have been presented if the judgment was final is without authority. This proposition has been so frequently held by this court that the contrary doctrine laid down by this case will come as a shock to both the bench and bar (Code of Civil Procedure, sections 123 and 143; International Bank vs. Martinez, 220 U. S., 214). In the case of Montemayor vs. Cunanan (14 Phil. Rep., 454), it appeared that "M commenced an action in the Court of First Instance against C for divorce and also for a division of the marital property. The court, after hearing the evidence, entered a decree granting to M her divorce and appointed a commission to make an inventory of the marital property and report to the court for a division of the same. C duly excepted to the order decreeing the divorce and without waiting for a division of the marital property presented a bill of exceptions, which was duly allowed. After the bill of exceptions was received in the Supreme Court M presented a motion asking that the appeal of C be not allowed upon the ground that the judgment of the lower court was not final." In that case the court held "that said motion should be granted for the reason that the lower court had only resolved a part of the question presented to it and that the decree of the lower court did not finally determine the action or proceeding in said cause; that bills of exceptions should only be allowed upon final judgments which finally determine the action or proceeding in the lower court." In the opinion the court said: "We are of the opinion and so hold that it was the purpose of the Legislature in enacting the provisions of sections 123 and 143 of the Code of Procedure in Civil Actions to prohibit appeals except from decisions of the lower court which finally determine the action or proceeding." The opinion cites many cases from the Supreme Court of the United States and other American courts and several decisions of this court. It is entirely in point with the case at bar and should be followed. No one has offered any explanation why it is not followed and I know of none. In the case of Toribio vs. Toribio (7 Phil. Rep., 526), the judgment provided that "therefore, the court, after considering the facts proved and the law applicable thereto, orders that the defendants within sixty days submit for the consideration of the court an inventory of all of the goods and property of the deceased Narciso Natalio Lopez, and that they render accounts of administration of the same in order that the court may make the proper order for the protection of the respective rights of all the parties interested, reserving final decision of the cause until the proper time." The opinion, after citing sections 123 and 143 of the Code of Civil Procedure and decisions of the Supreme Court of the United States, held that the judgment was not final inasmuch as the court required the rendering of an account by the defendants. Many of the cases cited assert the proposition that, under laws such as are found in sections 123 and 143 of the Code of Civil Procedure, an appellate court has no jurisdiction in an appeal taken from a judgment which is not final. ( Guarantee Company vs. Mechanics' Savings Bank etc., 173 U. S., 582.) In the case of Ron vs. Mojica (8 Phil. Rep., 328), it was held that "in a suit for the partition of property, brought in accordance with the provisions of the Code of Civil Procedure, the judicial order or resolution by virtue of which the judge declares who are the parties who have a right to certain property belonging to several owners is not final, nor does it definitely close the case, and is subject to exception." (Araullo vs. Araullo, 3 Phil. Rep., 567.) I am of the opinion that the cases cited fully dispose of the right of the parties to appeal in this case, as the judgment is not final by virtue of its very terms and the amount thereof cannot possibly be known, if we accept the decision of the court below and of this court, until the accountings required have been duly made and the amount fixed which one party owes to the other. This court, in dealing with the merits of this cause, has definitely settled the liability of the defendant for many thousands of pesos. Will the judgment of this court as to this sum become final at the end of the time prescribed by law? If so, what will the situation be if, on the rendering of the accounts ordered by this decision, it shall be determined that the plaintiff owes to the defendant a sum sufficient to offset the amount already found to be due from the defendant to the plaintiff by the judgment of this court? Will the defendant be able to reduce the final judgment in favor of the plaintiff, rendered by this court, by the amount which is found due on the accounting ? Or will it be obliged to offset the judgment of this court in favor of the plaintiff by the sums found due it on the accounting in a separate proceeding for that purpose? If there is a judgment in favor of the plaintiff and against the defendant for P100,000, how can the defendant get the benefit of subsequent accountings for P100,000 in its favor? This is not like an action of divorce or partition which can be divided into two parts, each separate and distinct from the other, and the judgment as to one part be, in a way, independent of the other. This is an action for a sum of money and the several amounts claimed by the plaintiff and defendant, respectively, must be aggregated and a balance struck before it can be determined how much one owes the other. The action cannot be divided into parts. It is one single action; it cannot be determined that the plaintiff is entitled to P100,000 on one cause of action, and that determination affirmed by this court, and then the cause be sent back for the determination of how much the plaintiff owes defendant on counterclaims. The determination necessary to be made in an action for a sum of money is the amount due from defendant to plaintiff. In the very nature of things, no final judgment can be rendered until the amount due is actually determined and fixed. No such determination has been made in this case. For these reasons I dissent. The treatment of this case by the court is without precedent.