FIRST DIVISION
Whatever expenses of subdivision, registration, and other incidental
[G.R. No. 114311. November 29, 1996]
COSMIC LUMBER CORPORATION, petitioner, vs. COURT OF APPEALS and
ISIDRO PEREZ, respondents.
DECISION
BELLOSILLO, J.:
COSMIC LUMBER CORPORATION through its General Manager executed
on 28 January 1985 a Special Power of Attorney appointing Paz G. Villamil-Estrada
as attorney-in-fact -
x x x to initiate, institute and file any court action for the ejectment of third
persons and/or squatters of the entire lot 9127 and 443 and covered by
TCT Nos. 37648 and 37649, for the said squatters to remove their houses
and vacate the premises in order that the corporation may take material
possession of the entire lot, and for this purpose, to appear at the pre-trial
conference and enter into any stipulation of facts and/or compromise
agreement so far as it shall protect the rights and interest of the
corporation in the aforementioned lots.[1]
On 11 March 1985 Paz G. Villamil-Estrada, by virtue of her power of attorney,
instituted an action for the ejectment of private respondent Isidro Perez and recover
the possession of a portion of Lot No. 443 before the Regional Trial Court of
Dagupan, docketed as Civil Case No. D-7750.[2]
On 25 November 1985 Villamil-Estrada entered into a Compromise Agreement
with respondent Perez, the terms of which follow:
1. That as per relocation sketch plan dated June 5, 1985 prepared by
Engineer Rodolfo dela Cruz the area at present occupied by defendant
wherein his house is located is 333 square meters on the easternmost part
of lot 443 and which portion has been occupied by defendant for several
years now;
2. That to buy peace said defendant pays unto the plaintiff through herein
attorney-in-fact the sum of P26,640.00 computed at P80.00/square meter;
3. That plaintiff hereby recognizes ownership and possession of the
defendant by virtue of this compromise agreement over said portion of
333 square m. of lot 443 which portion will be located on the easternmost
part as indicated in the sketch as annex A;
4.
expenses shall be shouldered by the defendant.[3]
On 27 November 1985 the Compromise Agreement was approved by the trial
court and judgment was rendered in accordance therewith. [4]
Although the decision became final and executory it was not executed within
the 5-year period from date of its finality allegedly due to the failure of petitioner to
produce the owners duplicate copy of Title No. 37649 needed to segregate from Lot
No. 443 the portion sold by the attorney-in-fact, Paz G. Villamil-Estrada, to private
respondent under the compromise agreement. Thus on 25 January 1993 respondent
filed a complaint to revive the judgment, docketed as Civil Case No. D-10459.[5]
Petitioner asserts that it was only when the summons in Civil Case No. D-10459
for the revival of judgment was served upon it that it came to know of the
compromise agreement entered into between Paz G. Villamil-Estrada and
respondent Isidro Perez upon which the trial court based its decision of 26 July
1993 in Civil Case No. D-7750. Forthwith, upon learning of the fraudulent
transaction, petitioner sought annulment of the decision of the trial court before
respondent Court of Appeals on the ground that the compromise agreement was
void because: (a) the attorney-in-fact did not have the authority to dispose of, sell,
encumber or divest the plaintiff of its ownership over its real property or any
portion thereof; (b) the authority of the attorney-in-fact was confined to the
institution and filing of an ejectment case against third persons/squatters on the
property of the plaintiff, and to cause their eviction therefrom; (c) while the special
power of attorney made mention of an authority to enter into a compromise
agreement, such authority was in connection with, and limited to, the eviction of
third persons/squatters thereat, in order that the corporation may take material
possession of the entire lot; (d) the amount of P26,640.00 alluded to as alleged
consideration of said agreement was never received by the plaintiff; (e) the private
defendant acted in bad faith in the execution of said agreement knowing fully well
the want of authority of the attorney-in-fact to sell, encumber or dispose of the real
property of plaintiff; and, (f) the disposal of a corporate property indispensably
requires a Board Resolution of its Directors, a fact which is wanting in said Civil
Case No. D-7750, and the General Manager is not the proper officer to encumber a
corporate property.[6]
On 29 October 1993 respondent court dismissed the complaint on the basis of
its finding that not one of the grounds for annulment, namely, lack of jurisdiction,
fraud or illegality was shown to exist.[7] It also denied the motion for reconsideration
filed by petitioner, discoursing that the alleged nullity of the compromise judgment
on the ground that petitioners attorney in fact Villamit-Estrada was not authorized
to sell the subject property may be raised as a defense in the execution of the
compromise judgment as it does not bind petitioner, but not as a ground for
annulment of judgment because it does not affect the jurisdiction of the trial court
over the action nor does it amount to extrinsic fraud.[8]
Petitioner challenges this verdict. It argues that the decision of the trial court is
void because the compromise agreement upon which it was based is void. Attorney-
in-fact Villamil-Estrada did not possess the authority to sell or was she armed with
a Board Resolution authorizing the sale of its property. She was merely empowered
to enter into a compromise agreement in the recovery suit she was authorized to file
against persons squatting on Lot No. 443, such authority being expressly confined
to the ejectment of third persons or squatters of x x x lot x x x (No.) 443 x x x for the said
squatters to remove their houses and vacate the premises in order that the corporation may
take material possession of the entire lot x x x x
We agree with petitioner. The authority granted Villamil-Estrada under the
special power of attorney was explicit and exclusionary: for her to institute any
action in court to eject all persons found on Lots Nos. 9127 and 443 so that petitioner
could take material possession thereof, and for this purpose, to appear at the pre-
trial and enter into any stipulation of facts and/or compromise agreement but only
insofar as this was protective of the rights and interests of petitioner in the
property. Nowhere in this authorization was Villamil-Estrada granted expressly or
impliedly any power to sell the subject property nor a portion thereof. Neither can
a conferment of the power to sell be validly inferred from the specific authority to
enter into a compromise agreement because of the explicit limitation fixed by the
grantor that the compromise entered into shall only be so far as it shall protect the
rights and interest of the corporation in the aforementioned lots. In the context of the
specific investiture of powers to Villamil-Estrada, alienation by sale of an
immovable certainly cannot be deemed protective of the right of petitioner to
physically possess the same, more so when the land was being sold for a price
of P80.00 per square meter, very much less than its assessed value of P250.00 per
square meter, and considering further that petitioner never received the proceeds of
the sale.
When the sale of a piece of land or any interest thereon is through an agent, the
authority of the latter shall be in writing; otherwise, the sale shall be void. [9] Thus
the authority of an agent to execute a contract for the sale of real estate must be
conferred in writing and must give him specific authority, either to conduct the
general business of the principal or to execute a binding contract containing terms
and conditions which are in the contract he did execute. [10] A special power of
attorney is necessary to enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a valuable
consideration.[11] The express mandate required by law to enable an appointee of an
agency (couched) in general terms to sell must be one that expressly mentions a sale
or that includes a sale as a necessary ingredient of the act mentioned. [12] For the
principal to confer the right upon an agent to sell real estate, a power of attorney
must so express the powers of the agent in clear and unmistakable language. When
there is any reasonable doubt that the language so used conveys such power, no
such construction shall be given the document.[13]
It is therefore clear that by selling to respondent Perez a portion of petitioners
land through a compromise agreement, Villamil-Estrada acted without or in
obvious authority. The sale ipso jure is consequently void. So is the compromise
agreement. This being the case, the judgment based thereon is necessarily
void. Antipodal to the opinion expressed by respondent court in resolving
petitioners motion for reconsideration, the nullity of the settlement between
Villamil-Estrada and Perez impaired the jurisdiction of the trial court to render its
decision based on the compromise agreement. In Alviar v. Court of First Instance of La
Union,[14] the Court held -
x x x x this court does not hesitate to hold that the judgment in question is
null and void ab initio. It is not binding upon and cannot be executed
against the petitioners. It is evident that the compromise upon which the
judgment was based was not subscribed by them x x x x Neither could
Attorney Ortega bind them validly in the compromise because he had no
special authority x x x x
As the judgment in question is null and void ab initio, it is evident that the
court acquired no jurisdiction to render it, much less to order the
execution thereof x x x
x x x x A judgment, which is null and void ab initio, rendered by a court
without jurisdiction to do so, is without legal efficacy and may properly
be impugned in any proceeding by the party against whom it is sought to
be enforced x x x x
This ruling was adopted in Jacinto v. Montesa,[15] by Mr. Justice J.B.L. Reyes, a
much-respected authority on civil law, where the Court declared that a judgment
based on a compromise entered into by an attorney without specific authority from
the client is void.Such judgment may be impugned and its execution restrained in
any proceeding by the party against whom it is sought to be enforced. The Court
also observed that a defendant against whom a judgment based on a compromise is
sought to be enforced may file a petition for certiorari to quash the execution. He
could not move to have the compromise set aside and then appeal from the order of
denial since he was not a party to the compromise. Thus it would appear that the
obiter of the appellate court that the alleged nullity of the compromise agreement
should be raised as a defense against its enforcement is not legally
feasible. Petitioner could not be in a position to question the compromise agreement
in the action to revive the compromise judgment since it was never privy to such
agreement. Villamil-Estrada who signed the compromise agreement may have been
the attorney-in-fact but she could not legally bind petitioner thereto as she was not
entrusted with a special authority to sell the land, as required in Art. 1878, par. (5),
of the Civil Code.
Under authority of Sec. 9, par. (2), of B.P. Blg. 129, a party may now petition
the Court of Appeals to annul and set aside judgments of Regional Trial
Courts.[16] Thus, the Intermediate Appellate Court (now Court of Appeals) shall
exercise x x x x (2) Exclusive original jurisdiction over action for annulment of
judgments of the Regional Trial Courts x x x x However, certain requisites must first
be established before a final and executory judgment can be the subject of an action
for annulment. It must either be void for want of jurisdiction or for lack of due
process of law, or it has been obtained by fraud.[17]
Conformably with law and the above-cited authorities, the petition to annul
the decision of the trial court in Civil Case No. D-7750 before the Court of Appeals
was proper. Emanating as it did from a void compromise agreement, the trial court
had no jurisdiction to render a judgment based thereon. [18]
It would also appear, and quite contrary to the finding of the appellate court
that the highly reprehensible conduct of attorney-in-fact Villamil-Estrada in Civil
Case No. 7750 constituted an extrinsic or collateral fraud by reason of which the
judgment rendered thereon should have been struck down. Not all the legal
semantics in the world can becloud the unassailable fact that petitioner was
deceived and betrayed by its attorney-in-fact. Villamil-Estrada deliberately
concealed from petitioner, her principal, that a compromise agreement had been
forged with the end-result that a portion of petitioners property was sold to the
deforciant, literally for a song. Thus completely kept unaware of its agents artifice,
petitioner was not accorded even a fighting chance to repudiate the settlement so
much so that the judgment based thereon became final and executory.
For sure, the Court of Appeals restricted the concept of fraudulent acts within
too narrow limits. Fraud may assume different shapes and be committed in as many
different ways and here lies the danger of attempting to define fraud. For man in his
ingenuity and fertile imagination will always contrive new schemes to fool the
unwary.
There is extrinsic fraud within the meaning of Sec. 9, par. (2), of B.P. Blg. 129,
where it is one the effect of which prevents a party from hearing a trial, or real
contest, or from presenting all of his case to the court, or where it operates upon
matters, not pertaining to the judgment itself, but to the manner in which it was
procured so that there is not a fair submission of the controversy. In other words,
extrinsic fraud refers to any fraudulent act of the prevailing party in the litigation
which is committed outside of the trial of the case, whereby the defeated party has
been prevented from exhibiting fully his side of the case by fraud or deception
practiced on him by his opponent.[19] Fraud is extrinsic where the unsuccessful party
has been prevented from exhibiting fully his case, by fraud or deception practiced
on him by his opponent, as by keeping him away from court, a false promise of a
compromise; or where the defendant never had knowledge of the suit, being kept
in ignorance by the acts of the plaintiff; or where an attorney fraudulently or without
authority connives at his defeat; these and similar cases which show that there has
never been a real contest in the trial or hearing of the case are reasons for which a
new suit may be sustained to set aside and annul the former judgment and open the
case for a new and fair hearing.[20]
It may be argued that petitioner knew of the compromise agreement since the
principal is chargeable with and bound by the knowledge of or notice to his agent
received while the agent was acting as such. But the general rule is intended to
protect those who exercise good faith and not as a shield for unfair dealing. Hence
there is a well-established exception to the general rule as where the conduct and
dealings of the agent are such as to raise a clear presumption that he will not
communicate to the principal the facts in controversy.[21] The logical reason for this
exception is that where the agent is committing a fraud, it would be contrary to
common sense to presume or to expect that he would communicate the facts to the
principal. Verily, when an agent is engaged in the perpetration of a fraud upon his
principal for his own exclusive benefit, he is not really acting for the principal but is
really acting for himself, entirely outside the scope of his agency.[22] Indeed, the basic
tenets of agency rest on the highest considerations of justice, equity and fair play,
and an agent will not be permitted to pervert his authority to his own personal
advantage, and his act in secret hostility to the interests of his principal transcends
the power afforded him.[23]
WHEREFORE, the petition is GRANTED. The decision and resolution of
respondent Court of Appeals dated 29 October 1993 and 10 March 1994,
respectively, as well as the decision of the Regional Trial Court of Dagupan City in
Civil Case No. D-7750 dated 27 November 1985, are NULLIFIED and SET
ASIDE. The Compromise Agreement entered into between Attorney-in-fact Paz G.
Villamil-Estrada and respondent Isidro Perez is declared VOID. This is without
prejudice to the right of petitioner to pursue its complaint against private
respondent Isidro Perez in Civil Case No. D-7750 for the recovery of possession of
a portion of Lot No. 443.
SO ORDERED.
EN BANC indemnified for the rest of the period at the rate of 150 cavans of palay for each
agricultural year.
[G.R. No. L-1849. October 25, 1949.]
Raymundo Melliza died on December 11, 1945, and testamentary proceedings were
Testate estate of the deceased Raymundo Melliza y Angulo. LAUREANA thereafter instituted in the Court of First Instance of Iloilo for the administration and
GABIN, claimant-appellant, v. MARIA MELLIZA ET AL., Oppositors-Appellees. distribution of his estate.

Fulgencio Vega for Appellant. Having been deprived by the executrix Remedios S. de Villanueva of the
administration of the haciendas in question, Laureana Gabin presented to the
V. Sian Melliza and Juan Jamora, Jr. for Appellees. probate court a claim against the estate of the deceased Raymundo Melliza for the
payment to her by the executrix of 150 cavans of palay beginning the agricultural
SYLLABUS year 1945-1946 until the termination of the testamentary proceedings, and that
thereafter the heir or heirs to whom the haciendas may be adjudicated be ordered
1. EXECUTORS AND ADMINISTRATORS; CLAIMS AGAINST ESTATE; CASE AT to pay the claimant the same amount of palay every year until the expiration of
BAR. — In his lifetime M contracted the services of G to administer certain thirty years from the agricultural year 1945-1946.
haciendas belonging to M for a period of thirty years at a compensation of 350
cavans of palay per agricultural year, with the stipulation that G cannot be The heirs of the deceased opposed said claim on the following grounds: (1) That,
dismissed from the service without just and legal cause during the time she cared not being a claim for money, it is not a proper claim under section 5 of Rule 87; (2)
to serve within the said period of thirty years, and in case of dismissal she shall have that the agreement or contract on which it is based is one of agency which was
the right to be indemnified for the rest of the period at the rate of 150 cavans of palay terminated by the death of the principal; (3) that Raymundo Melliza could not,
for each agricultural year. After M’s death his executrix took from G the except by will, dispose of the administration of his properties after his death; and
administration of said haciendas, and G filed a claim against the estate for the (4) that there was no consideration for the granting of such administration for 30
payment of 150 cavans of palay per agricultural year for twenty-nine years. Held: years with remuneration.
That the claim is not allowable, first, because it arose after the death of the decedent
and, second, because it is not a claim for money falling under Rule 87 of the Rules The probate court sustained the first ground of the opposition and denied the claim.
of Court. Hence this appeal.

DECISION
OZAETA, J.:
On January 19, 1944, Raymundo Melliza and Laureana Gabin entered into a written
agreement whereby the former contracted the personal services of the latter to
administer certain haciendas owned by Raymundo Melliza for a period of thirty
years from said date, at the option of Laureana Gabin. As compensation for said
personal services Melliza agreed to pay Gabin 350 cavans of palay every agricultural
year. It was further stipulated that Laureana Gabin cannot be dismissed from the
service without just and legal cause during the time she cared to serve within the
said period of thirty years, and in case of dismissal she shall have the right to be
The question to determine is whether appellant’s claim for 150 cavans of palay a
year for the remainder of the thirty-year period mentioned in the agreement Exhibit
A is a proper claim which may be allowed in the testamentary proceedings under
Rule 87. Section 1 of said rule provides that immediately after the granting of letters
testamentary or of administration the court shall issue a notice requiring all persons
having money claims against the decedent to file them in the office of the clerk of
said court; and section 5 provides that all claims for money against the decedent
arising from contract, express or implied, whether the same be due, not due, or
contingent, all claims for funeral expenses and expenses of the last sickness of the
decedent, and judgment for money against the decedent, must be filed within the
time limited in the notice. "By money claims, is meant any claim for ’money, debt,
or interest thereon,’ according to section 21 of Rule 3 and section 1 of Rule 88. Not
all money claims may, however, be presented, but only those which are proper
against the decedent, that is, claims upon a liability contracted by the decedent
before his death. Accordingly, claims arising after his death cannot thus be
presented, except funeral expenses." (Moran on the Rules of Court, Volume 2,
second edition, p. 347.)

Upon the facts and the law involved in this case, we find no valid reason to reverse
the order appealed from.

In the first place, the claim in question arose after the death of the decedent.
Assuming without deciding that the contract on which the claim is based is valid,
the decedent appears to have complied with it up to the time of his death. It was the
executrix who dismissed the claimant from the service as administratrix or manager
of the haciendas of the deceased.

In the second place, the claim is not for money, debt, or interest thereon but for 150
cavans of palay a year for twenty-nine agricultural years (one agricultural year
having elapsed before the death of Raymundo Melliza). Even if it wanted to, the
probate court could not determine in advance the value of the palay in money
because the price of palay varies from year to year.

It appears from the record that before presenting the claim in question the claimant
filed a motion in the probate court praying that she be appointed coadministratrix
of the estate of the deceased on the strength of the contract of service hereinabove
mentioned. But Judge Blanco denied said motion without prejudice to the right of
the claimant to present a claim in due form against the estate. Appellant now
contends in her third assignment of error that said order of Judge Blanco not having
been appealed from, "the lower court erred in not holding that the question of the
presentation and admission of the claimant’s claim has become res judicata." This
assignment of error is without merit because the mere reservation by Judge Blanco
to the claimant of her right to present the claim in question in lieu of her
appointment as coadministratrix of the estate of the deceased did not preclude the
court from denying said claim if, after hearing, it found the same to be improper or
not allowable in these proceedings.

Wherefore, without deciding whether or not the contract claimed upon is valid and
binding against the heirs of the decedent, and without prejudice to any proper
action that the appellant may bring upon said contract, we affirm the order appealed
from, with costs against the Appellant.
SECOND DIVISION
on March 10, 1994. The price of the lot as indicated in the Deed of Absolute Sale is Two
GENEVIEVE LIM, G.R. No. 163720
Petitioner, Hundred Thousand Pesos (P200,000.00).[4] It appears, however, that the vendees
Present:
agreed to purchase the lot at the price of Six Hundred Thousand Pesos (P600,000.00),
PUNO, J., inclusive of taxes and other incidental expenses of the sale. After the sale, Lim
- versus - Chairman, remitted to Saban the amounts of One Hundred Thirteen Thousand Two Hundred
AUSTRIA-MARTINEZ,
CALLEJO, SR., Fifty Seven Pesos (P113,257.00) for payment of taxes due on the transaction as well
TINGA, and as Fifty Thousand Pesos (P50,000.00) as brokers commission.[5] Lim also issued in
FLORENCIO SABAN, CHICO-NAZARIO, JJ.
Respondent. the name of Saban four postdated checks in the aggregate amount of Two Hundred
Thirty Six Thousand Seven Hundred Forty Three Pesos (P236,743.00). These checks
Promulgated:
December 16, 2004 were Bank of the Philippine Islands (BPI) Check No. 1112645 dated June 12, 1994
for P25,000.00; BPI Check No. 1112647 dated June 19, 1994 for P18,743.00; BPI Check
x-------------------------------------------------------------------x
No. 1112646 dated June 26, 1994 for P25,000.00; and Equitable PCI Bank Check No.
DECISION 021491B dated June 20, 1994 for P168,000.00.

TINGA, J.:
Before the Court is a Petition for Review on Certiorari assailing
the Decision[1] dated October 27, 2003 of the Court of Appeals, Seventh Division, in
CA-G.R. V No. 60392.[2]
The late Eduardo Ybaez (Ybaez), the owner of a 1,000-square meter lot in Cebu City
(the lot), entered into an Agreement and Authority to Negotiate and Sell (Agency
Agreement) with respondent Florencio Saban (Saban) on February 8, 1994. Under
the Agency Agreement, Ybaez authorized Saban to look for a buyer of the lot for
Two Hundred Thousand Pesos (P200,000.00) and to mark up the selling price to
include the amounts needed for payment of taxes, transfer of title and other
expenses incident to the sale, as well as Sabans commission for the sale. [3]
Through Sabans efforts, Ybaez and his wife were able to sell the lot to the petitioner
Genevieve Lim (Lim) and the spouses Benjamin and Lourdes Lim (the Spouses Lim)
Subsequently, Ybaez sent a letter dated June 10, 1994 addressed to Lim. In the letter
Ybaez asked Lim to cancel all the checks issued by her in Sabans favor and to extend
another partial payment for the lot in his (Ybaezs) favor.[6]
After the four checks in his favor were dishonored upon presentment, Saban filed
a Complaint for collection of sum of money and damages against Ybaez and Lim
with the Regional Trial Court (RTC) of Cebu City on August 3, 1994. [7] The case was
assigned to Branch 20 of the RTC.
In his Complaint, Saban alleged that Lim and the Spouses Lim agreed to purchase
the lot for P600,000.00, i.e., with a mark-up of Four Hundred Thousand Pesos
(P400,000.00) from the price set by Ybaez. Of the total purchase price
of P600,000.00, P200,000.00 went to Ybaez, P50,000.00 allegedly went to Lims agent,
and P113,257.00 was given to Saban to cover taxes and other expenses incidental to
the sale. Lim also issued four (4) postdated checks[8] in favor of Saban for the
remaining P236,743.00.[9]
Saban alleged that Ybaez told Lim that he (Saban) was not entitled to any On October 27, 2003, the appellate court promulgated its Decision[12] reversing the
commission for the sale since he concealed the actual selling price of the lot from trial courts ruling. It held that Saban was entitled to his commission amounting
Ybaez and because he was not a licensed real estate broker. Ybaez was able to to P236,743.00.[13]
convince Lim to cancel all four checks. The Court of Appeals ruled that Ybaezs revocation of his contract of agency with
Saban was invalid because the agency was coupled with an interest and Ybaez
Saban further averred that Ybaez and Lim connived to deprive him of his sales
effected the revocation in bad faith in order to deprive Saban of his commission and
commission by withholding payment of the first three checks. He also claimed that
to keep the profits for himself.[14]
Lim failed to make good the fourth check which was dishonored because the
account against which it was drawn was closed. The appellate court found that Ybaez and Lim connived to deprive Saban of his
commission. It declared that Lim is liable to pay Saban the amount of the purchase
In his Answer, Ybaez claimed that Saban was not entitled to any commission because
price of the lot corresponding to his commission because she issued the four checks
he concealed the actual selling price from him and because he was not a licensed
knowing that the total amount thereof corresponded to Sabans commission for the
real estate broker.
sale, as the agent of Ybaez. The appellate court further ruled that, in issuing the
checks in payment of Sabans commission, Lim acted as an accommodation party.
Lim, for her part, argued that she was not privy to the agreement between Ybaez
She signed the checks as drawer, without receiving value therefor, for the purpose
and Saban, and that she issued stop payment orders for the three checks because
of lending her name to a third person. As such, she is liable to pay Saban as the
Ybaez requested her to pay the purchase price directly to him, instead of coursing it
holder for value of the checks.[15]
through Saban. She also alleged that she agreed with Ybaez that the purchase price
of the lot was only P200,000.00.
Lim filed a Motion for Reconsideration of the appellate courts Decision, but
her Motion was denied by the Court of Appeals in a Resolution dated May 6, 2004.[16]
Ybaez died during the pendency of the case before the RTC. Upon motion of his
counsel, the trial court dismissed the case only against him without any objection
Not satisfied with the decision of the Court of Appeals, Lim filed the present
from the other parties.[10]
petition.

On May 14, 1997, the RTC rendered its Decision[11] dismissing Sabans complaint,
Lim argues that the appellate court ignored the fact that after paying her
declaring the four (4) checks issued by Lim as stale and non-negotiable, and
agent and remitting to Saban the amounts due for taxes and transfer of title, she paid
absolving Lim from any liability towards Saban.
the balance of the purchase price directly to Ybaez.[17]

Saban appealed the trial courts Decision to the Court of Appeals.

She further contends that she is not liable for Ybaezs debt to Saban under
the Agency Agreement as she is not privy thereto, and that Saban has no one but
himself to blame for consenting to the dismissal of the case against Ybaez and not
moving for his substitution by his heirs.[18]
Lim also assails the findings of the appellate court that she issued the checks
as an accommodation party for Ybaez and that she connived with the latter to
deprive Saban of his commission.[19]
Lim prays that should she be found liable to pay Saban the amount of his
commission, she should only be held liable to the extent of one-third (1/3) of the
amount, since she had two co-vendees (the Spouses Lim) who should share such
liability.[20]
In his Comment, Saban maintains that Lim agreed to purchase the lot for P600,000.00,
which consisted of the P200,000.00 which would be paid to Ybaez, the P50,000.00
due to her broker, the P113,257.00 earmarked for taxes and other expenses
incidental to the sale and Sabans commission as broker for Ybaez. According to
Saban, Lim assumed the obligation to pay him his commission. He insists that Lim
and Ybaez connived to unjustly deprive him of his commission from the negotiation
of the sale.[21]
The issues for the Courts resolution are whether Saban is entitled to receive his
commission from the sale; and, assuming that Saban is entitled thereto, whether it
is Lim who is liable to pay Saban his sales commission.
The Court gives due course to the petition, but agrees with the result reached by the
Court of Appeals.
The Court affirms the appellate courts finding that the agency was not revoked since
Ybaez requested that Lim make stop payment orders for the checks payable to
Saban only after the consummation of the sale on March 10, 1994. At that time, Saban
had already performed his obligation as Ybaezs agent when, through his (Sabans)
efforts, Ybaez executed the Deed of Absolute Sale of the lot with Lim and the Spouses
Lim.
To deprive Saban of his commission subsequent to the sale which was
consummated through his efforts would be a breach of his contract of agency with
Ybaez which expressly states that Saban would be entitled to any excess in the
purchase price after deducting the P200,000.00 due to Ybaez and the transfer taxes
and other incidental expenses of the sale.[22]
In Macondray & Co. v. Sellner,[23] the Court recognized the right of a broker to his
commission for finding a suitable buyer for the sellers property even though the
seller himself consummated the sale with the buyer.[24] The Court held that it would
be in the height of injustice to permit the principal to terminate the contract of
agency to the prejudice of the broker when he had already reaped the benefits of the
brokers efforts.
In Infante v. Cunanan, et al.,[25] the Court upheld the right of the brokers to their
commissions although the seller revoked their authority to act in his behalf after
they had found a buyer for his properties and negotiated the sale directly with the
buyer whom he met through the brokers efforts. The Court ruled that the sellers
withdrawal in bad faith of the brokers authority cannot unjustly deprive the brokers
of their commissions as the sellers duly constituted agents.
The pronouncements of the Court in the aforecited cases are applicable to the
present case, especially considering that Saban had completely performed his
obligations under his contract of agency with Ybaez by finding a suitable buyer to
preparing the Deed of Absolute Sale between Ybaez and Lim and her co-vendees.
Moreover, the contract of agency very clearly states that Saban is entitled to the
excess of the mark-up of the price of the lot after deducting Ybaezs share
of P200,000.00 and the taxes and other incidental expenses of the sale.
However, the Court does not agree with the appellate courts pronouncement that
Sabans agency was one coupled with an interest. Under Article 1927 of the Civil
Code, an agency cannot be revoked if a bilateral contract depends upon it, or if it is
the means of fulfilling an obligation already contracted, or if a partner is appointed
manager of a partnership in the contract of partnership and his removal from the
management is unjustifiable. Stated differently, an agency is deemed as one coupled
with an interest where it is established for the mutual benefit of the principal and of
the agent, or for the interest of the principal and of third persons, and it cannot be
revoked by the principal so long as the interest of the agent or of a third person
subsists. In an agency coupled with an interest, the agents interest must be in the
subject matter of the power conferred and not merely an interest in the exercise of
the power because it entitles him to compensation. When an agents interest is
confined to earning his agreed compensation, the agency is not one coupled with an
interest, since an agents interest in obtaining his compensation as such agent is an
ordinary incident of the agency relationship.[26]
Sabans entitlement to his commission having been settled, the Court must
now determine whether Lim is the proper party against whom Saban should
address his claim.
Sabans right to receive compensation for negotiating as broker for Ybaez arises from
the Agency Agreement between them. Lim is not a party to the contract. However,
the record reveals that she had knowledge of the fact that Ybaez set the price of the
lot at P200,000.00 and that the P600,000.00the price agreed upon by her and
Sabanwas more than the amount set by Ybaez because it included the amount for
payment of taxes and for Sabans commission as broker for Ybaez.
According to the trial court, Lim made the following payments for the
lot: P113,257.00 for taxes, P50,000.00 for her broker, and P400.000.00 directly to
Ybaez, or a total of Five Hundred Sixty Three Thousand Two Hundred Fifty Seven
Pesos (P563,257.00).[27] Lim, on the other hand, claims that on March 10, 1994, the
date of execution of the Deed of Absolute Sale, she paid directly to Ybaez the amount
of One Hundred Thousand Pesos (P100,000.00) only, and gave to Saban P113,257.00
for payment of taxes and P50,000.00 as his commission,[28] and One Hundred Thirty
Thousand Pesos (P130,000.00) on June 28, 1994,[29] or a total of Three Hundred
Ninety Three Thousand Two Hundred Fifty Seven Pesos (P393,257.00). Ybaez, for
his part, acknowledged that Lim and her co-vendees paid him P400,000.00 which he
said was the full amount for the sale of the lot.[30] It thus appears that he
received P100,000.00 on March 10, 1994, acknowledged receipt (through Saban) of
the P113,257.00 earmarked for taxes and P50,000.00 for commission, and received
the balance of P130,000.00 on June 28, 1994. Thus, a total of P230,000.00 went directly
to Ybaez. Apparently, although the amount actually paid by Lim was P393,257.00,
Ybaez rounded off the amount to P400,000.00 and waived the difference.
Lims act of issuing the four checks amounting to P236,743.00 in Sabans favor belies
her claim that she and her co-vendees did not agree to purchase the lot
at P600,000.00. If she did not agree thereto, there would be no reason for her to issue
those checks which is the balance of P600,000.00 less the amounts of P200,000.00
(due to Ybaez), P50,000.00 (commission), and the P113,257.00 (taxes). The only
logical conclusion is that Lim changed her mind about agreeing to purchase the lot
at P600,000.00 after talking to Ybaez and ultimately realizing that Sabans
commission is even more than what Ybaez received as his share of the purchase
price as vendor. Obviously, this change of mind resulted to the prejudice of Saban
whose efforts led to the completion of the sale between the latter, and Lim and her
co-vendees. This the Court cannot countenance.
The ruling of the Court in Infante v. Cunanan, et al., cited earlier, is enlightening for
the facts therein are similar to the circumstances of the present case. In that case,
Consejo Infante asked Jose Cunanan and Juan Mijares to find a buyer for her two
lots and the house built thereon for Thirty Thousand Pesos (P30,000.00) . She Considering the circumstances surrounding the case, and the undisputed fact that
promised to pay them five percent (5%) of the purchase price plus whatever Lim had not yet paid the balance of P200,000.00 of the purchase price of P600,000.00,
overprice they may obtain for the property. Cunanan and Mijares offered the it is just and proper for her to pay Saban the balance of P200,000.00.
properties to Pio Noche who in turn expressed willingness to purchase the
Furthermore, since Ybaez received a total of P230,000.00 from Lim, or an excess
properties. Cunanan and Mijares thereafter introduced Noche to Infante. However,
of P30,000.00 from his asking price of P200,000.00, Saban may claim such excess
the latter told Cunanan and Mijares that she was no longer interested in selling the
from Ybaezs estate, if that remedy is still available,[32] in view of the trial courts
property and asked them to sign a document stating that their written authority to
dismissal of Sabans complaint as against Ybaez, with Sabans express consent, due
act as her agents for the sale of the properties was already cancelled. Subsequently,
to the latters demise on November 11, 1994.[33]
Infante sold the properties directly to Noche for Thirty One Thousand Pesos
(P31,000.00). The Court upheld the right of Cunanan and Mijares to their
The appellate court however erred in ruling that Lim is liable on the checks because
commission, explaining that
she issued them as an accommodation party. Section 29 of the Negotiable
Instruments Law defines an accommodation party as a person who has signed the
[Infante] had changed her mind even if respondent had found a
buyer who was willing to close the deal, is a matter that would not negotiable instrument as maker, drawer, acceptor or indorser, without receiving
give rise to a legal consequence if [Cunanan and Mijares] agreed to
value therefor, for the purpose of lending his name to some other person. The
call off the transaction in deference to the request of [Infante]. But
the situation varies if one of the parties takes advantage of the accommodation party is liable on the instrument to a holder for value even though
benevolence of the other and acts in a manner that would promote the holder at the time of taking the instrument knew him or her to be merely an
his own selfish interest. This act is unfair as would amount to bad
faith. This act cannot be sanctioned without according the party accommodation party. The accommodation party may of course seek
prejudiced the reward which is due him. This is the situation in reimbursement from the party accommodated.[34]
which [Cunanan and Mijares] were placed by [Infante]. [Infante]
took advantage of the services rendered by [Cunanan and Mijares],
but believing that she could evade payment of their commission, As gleaned from the text of Section 29 of the Negotiable Instruments Law,
she made use of a ruse by inducing them to sign the deed of the accommodation party is one who meets all these three requisites, viz: (1) he
cancellation.This act of subversion cannot be sanctioned and cannot
signed the instrument as maker, drawer, acceptor, or indorser; (2) he did not receive
serve as basis for [Infante] to escape payment of the commission
agreed upon.[31] value for the signature; and (3) he signed for the purpose of lending his name to
some other person. In the case at bar, while Lim signed as drawer of the checks she
The appellate court therefore had sufficient basis for concluding that Ybaez and Lim
did not satisfy the two other remaining requisites.
connived to deprive Saban of his commission by dealing with each other directly
and reducing the purchase price of the lot and leaving nothing to compensate Saban The absence of the second requisite becomes pellucid when it is noted at the
for his efforts. outset that Lim issued the checks in question on account of her transaction, along
with the other purchasers, with Ybaez which was a sale and, therefore, a reciprocal
contract. Specifically, she drew the checks in payment of the balance of the purchase
price of the lot subject of the transaction. And she had to pay the agreed purchase
price in consideration for the sale of the lot to her and her co-vendees. In other
words, the amounts covered by the checks form part of the cause or consideration
from Ybaezs end, as vendor, while the lot represented the cause or consideration on
the side of Lim, as vendee.[35] Ergo, Lim received value for her signature on the
checks.

Neither is there any indication that Lim issued the checks for the purpose
of enabling Ybaez, or any other person for that matter, to obtain credit or to raise
money, thereby totally debunking the presence of the third requisite of an
accommodation party.

WHEREFORE, in view of the foregoing, the petition is DISMISSED.

SO ORDERED.
EN BANC
G.R. No. L-8169 December 29, 1913
ANTONIO M. A. BARRETTO, Plaintiff-Appellant, vs. JOSE SANTA
MARINA, Defendant-Appellee.
Hausserman, Cohn and Fisher, for appellant.
W. A. Kincaid and Thos. L. Hartigan, for appellee.
TORRES, J.:
These cases were appealed by counsel for the plaintiff, through a bill of exceptions,
from the judgment of January 17, 1912, and the order of February 5 of the same year,
whereby the Honorable S. del Rosario, judge, sentenced the defendant to pay to the
plaintiff the salary to which he was entitled for the first eight days of January, 1910,
also that for the following month, at the rate of P3,083.33 per month, without special
finding as to costs, and dismissed the second cause of action contained in the
complaint presented in that case. library
On January 5, 1911, for the plaintiff Antonio M.a Barretto filed suit against Jose Santa
Marina, alleging that the defendant, a resident of Spain, was then the owner and
proprietor of the business known as the La Insular Cigar and Cigarette Factory,
established in these Islands, which business consisted in the purchase of leaf tobacco
and other raw material, in the preparation of the same, and in the sale of cigars and
cigarettes in large quantities; that on January 8, 1910, and for a long time prior
thereto, the plaintiff held and had held the position of agent of the defendant in the
Philippine Islands for the management of the said business in the name and for the
account of the said defendant; that the plaintiff's services were rendered in
pursuance of a contract whereby the defendant obligated himself in writing to hire
the said services for so long a time as the plaintiff should not show discouragement
and to compensate such services at the rate of P37,000 Philippine currency per
annum; that, on the aforesaid 8th day of January, 1910, the defendant, without
reason, justification, or pretext and in violation of the contract before mentioned,
summarily and arbitrarily dispensed with the plaintiff's services and removed him
from the management of the business, since which date the defendant had refused
to pay him the compensation, or any part thereof, due him and payable in full for
services rendered subsequent to December 31, 1909; and that, as a second cause of
action based upon the facts aforestated, the plaintiff had suffered losses and
damages in the sum of P100,000 Philippine currency. Said counsel therefore prayed
that judgment be rendered against the defendant by sentencing him to pay to the
plaintiff P137,000 Philippine currency, and the interest thereon at the legal rate, in
addition to the payment of the costs, together with such other equitable remedies as
the law allows.
By an order of March 14, 1911, the Honorable A. S. Crossfield, judge overruled the
demurrer to the first cause of action, but sustained that to the second. Counsel for
the plaintiff entered an exception to this order in so far as it sustained the demurrer
interposed by the defendant to the second cause of action.
By his written answer to the complaint, on July 19, 1911, counsel for the defendant,
reserving his exception to the order of the court overruling his demurrer filed
against the first cause of action, denied each and all of the allegations contained in
the complaint, relative to such first cause of action.
As a special defense of the latter, he set forth that the plaintiff had no contract
whatever with the defendant in which any period of time was stipulated during
which the former was to render his services as manager of the La Insular factory;
that the defendant revoked for just cause the power conferred upon the plaintiff;
that subsequent to the revocation of such power, and on the occasion of the
plaintiff's having sold all his rights and interests in the business of the La Insular
factory to the defendant, in consideration of the sum received by him, the plaintiff
renounced all action, intervention and claim that he might have against the
defendant relative to the business aforementioned, whereby all the questions that
might have arisen between them were settled.
On December 19, 1911, counsel for each of the parties presented to the court as
stipulation of the following purport:
In clause 11 of the will executed by Don Joaquin Santa Marina y Perez in Madrid
before a notary public on August 4, 1901, and duly legalized in these Islands, there
appears the following:
"The testator provides that the testamentary executor who is holding office as such
shall enjoy a salary, allotment, or emolument of 4,000 pesos per annum which shall
be paid out of the testator's estate; but that in case of consultation, the testamentary
executors consulted shall not be entitled to this allotment, nor to any other, on
account of such consultation."
According to the statement of the sums collected by Antonio M.a Barretto as the
judicial administrator of the estate of Joaquin Santa Marina from November, 1908,
to March, 1910, and during twenty-three days of April of the latter year, the total
amount so collected was P5,923.28. law library
Antonio M.a Barretto ceased to manage the La Insular factory, as the judicial
administrator of the estate of the deceased Joaquin Santa Marina, in October, 1909,
and not on November 7, 1908, as erroneously out in the stenographic notes.
The remuneration paid to Barretto as judicial administrator of the estate of Santa
Marina was independent of that which pertained to him for his services as manager
of the La Insular factory both before and after the date on which he ceased to
administer the said factory as such judicial administrator.
In the stipulation before mentioned there also appears the following: "The facts
above stated are true, but there is a controversy between the attorneys for the
plaintiff and the defendant, as to whether such facts are relevant as evidence in the
said case. They therefore submit this question to the court if it determines that they
are relevant as evidence they should be admitted as such, with exception by the
defendant, but if it determines that they are not relevant as evidence they should be
excluded, with exception by the plaintiff."
After the hearing of the case, with the introduction of evidence by both parties, the
court, on January 17, 1912, rendered the judgment aforementioned, to which an
exception was taken by counsel for the plaintiff, who by written motion asked that
the said judgment be set aside and a new trial granted, because such judgment was
not sufficiently warranted by the evidence and was contrary to law and because the
findings of fact therein contained were openly and manifestly contrary to the weight
of the evidence. This motion was denied, with exception by the plaintiff. By an order
of the 5th of the following month of February, issued in view of a petition presented
by counsel for the plaintiff, the court dismissed the second cause of action set out in
the complaint, to which order said counsel likewise excepted.
Upon presentation of the proper bill of exceptions, the same was approved, certified,
and forwarded to the clerk of this court.
Demand is made in this suit for the payment of the considerable sum of P137,000,
together with the legal interest thereon. Two amounts make up this sum: One of
P37,000, as salary for the year 1910, claimed to be due for services rendered by the
plaintiff as agent and manager of the tobacco factory known as La Insular; and the
other of P100,000, as an indemnity for losses and damages, on account of the
plaintiff's removal without just cause from his position as agent and manager of said
factory, effected arbitrarily and in violation of the contract of hire of services
between the parties, the plaintiff claiming to be still entitled to hold the position
from which he was dismissed. library
The most important fact in this case, which stands out prominently from the
evidence regarded as a whole, is that of the plaintiff Barretto's renunciation or
registration of the position he held as agent and manager of the said factory, which
was freely and voluntarily made by him on the occasion of the insolvency and
disappearance of the Chinaman Uy Yan, who had bought from the factory products
aggregating in value the considerable sum of P97,000 and, without paying this large
debt, disappeared and has not been seen since.
Antonio M.a Barretto the agent and manager of the said factory, said among other
things the following, in the letter, Exhibit 3, addressed by him to Jose Santa Marina,
on January 2, 1909:
I have to report to you an exceedingly disagreeable matter. This Chinaman Uy Yan,
with whose name I begin this paragraph, has failed and owes the factory the
considerable sum of P97,000. We will see that I can get from him, although when
these Chinamen fail it is because they have spent everything. I will turned the matter
over to my attorney in order that he may sue the party. I am not attempting to make
light of this matter. I acknowledge that I have been rather more generous with this
fellow than I should have been; but this is the way of doing business here. . . .
I have always thought that when the manager of a business trips up in a matter like
this he should tender his resignation, and I still think so. The position is at your
disposal to do as you like.
This letter is authentic and was neither denied nor rejected by the plaintiff, Barretto.
Although Santa Marina did not immediately reply and tell him what opinion he
may have formed and the decision he had reached in the matter, it is no less true
that the silence and lack of reply on the part of the chief owner of the factory were
sufficient indications that the resignation had been virtually accepted and that if he
did not reply immediately it was because he intended to act cautiously. As the
addressee, the chief owner of the factory, knew of no one at that time whom he could
appoint relieve the writer, who had resigned, it was to be presumed that he was
thereafter looking for some trustworthy person who might substitute the plaintiff
in his position of agent and manager of the factory, communicated to the plaintiff
that he had revoked the power conferred upon him and had appointed Mr. J.
McGavin to substitute him in his position of manager of the La Insular factory,
whereby the plaintiff's resignation, tendered in his aforesaid letter of January 2,
1909, Exhibit 3, was expressly accepted.
After the plaintiff had resigned the position he held, and notwithstanding the lapse
of several months before its express acceptance, it cannot be understood that he has
any right to demand an indemnity for losses and damages particularly since he
ostensibly and frankly acknowledged that he had been negligent in the discharge of
his duties and that he had overstepped his authority in the management of the
factory, with respect to the Chinaman mentioned. The record does not show that
Santa Marina, his principal, required him to resign his position as manager, but that
Barretto himself voluntarily stated by letter to his principal that, for the reasons
therein mentioned, he resigned and placed at the latter's disposal the position of
agent and manager of the La Insular factory; and if the principal, Santa Marina,
deemed it suitable to relieve the agent, for having been negligent and overstepping
his authority in the discharge of his office, and furthermore because of his having
expressly resigned his position, and placed it at the disposal of the chief owner of
the business, it cannot be explained how such person can be entitled to demand an
indemnity for losses and damages, from his principal, who merely exercised his
lawful right of relieving the plaintiff from the position which he had voluntarily
given up.
So, the agent and manager Barretto was not really dismissed or removed by the
defendant Santa Marina. What did occur was that, in view of the resignation
rendered by the plaintiff for the reasons which he himself conscientiously deemed
to warrant his surrender of the position he was holding in the La Insular factory, the
principal owner of the establishment, the defendant Santa Marina, had to took for
and appoint another agent and manager to relieve and substitute him in the said
employment - a lawful act performed by the principal owner of the factory and one
which cannot serve as a ground upon which to demand from the latter an indemnity
for losses and damages, inasmuch as, in view of the facts that occurred and were
acknowledged and confessed by Barretto in his letters, Exhibits 3 and 6, the plaintiff
could not expect, nor ought to have expected, that the defendant should have
insisted on the unsuccessful agent's continuance in his position, or that he should
not have accepted the resignation tendered by the plaintiff in his first letter. By the
mere fact that the defendant remained silent and designated another person, Mr. J.
McGavin, to, discharge in the plaintiff's stead the powers and duties of agent and
manager of the said factory, Barretto should have understood that his resignation
had been accepted and that if its acceptance was not communicated to him
immediately it was owing to the circumstance that the principal owner of the factory
did not then have, nor until several months afterwards, any other person whom he
could appoint and place in his stead, for, as soon as the defendant Santa Marina
could appoint the said McGavin, he revoked the power he had conferred upon the
plaintiff and communicated this fact to the latter, by means of the letter, Exhibit D,
which was presented to him by the bearer thereof, McGavin himself, the new
manager and agent appointed. library
Omitting consideration for the moment of the first error attributed to the trial judge
by his sustaining the demurrer filed against the second cause of action, relative to
the collection of P100,000 as the amount of the losses and damages occasioned to the
plaintiff, and turning our attention to the second error imputed to him by his refusal
to sentence the defendant, for the first cause of action, to the payment of P37,000 or
of any sum over P3,083.33, we shall proceed to examine the question whether any
period or term for the duration of the position of agent and manager was fixed in
the verbal contract made between the deceased Joaquin Santa Marina, the
defendant's predecessor in interest, and the plaintiff antonio M.a Barretto - a
contract which, after Joaquin Santa Marina's death was ratified by his brother and
heir, the defendant Jose Santa Marina.
The defendant acknowledged the said verbal contract and also its ratification by
him after his brother's death; but he denied any stipulation therein that Barretto
should hold his office for any specific period of time fixed by and between the
contracting parties, for the deceased Joaquin Santa Marina, in conferring power
upon the plaintiff, did not do so for any specific time nor did he set any period
within which he should hold his office of agent and manager of the La Insular
factory; neither did he fix the date for the termination of such services, in the
instrument of power of attorney executed by the defendant Santa Marina before a
notary on the 25th of September, 1908. (Record, p. 20.)
From the context of the instrument just mentioned it can not be concluded that any
time whatever was fixed during which the plaintiff should hold his position of
agent. The defendant, in executing that instrument, whereby the agreement made
between his brother Joaquin and Barretto was ratified, did no more than accord to
the plaintiff the same confidence that the defendant's predecessor in interest had in
him; and so long as this merely subjective condition of trust lodged in the agent
existed, the time during which the latter might hold his office could be considered
indefinite or undetermined, but as soon as that indespensable condition of a power
of attorney disappeared and the conduct of the agent deceased to inspire confidence,
the principal had a right to revoke the power he had conferred upon his agent,
especially when the latter, for good reasons, gave up the office he was holding.
Article 1733 of the civil Code, applicable to the case at bar, according to the
provisions of article 2 of the Code of Commerce, prescribes: "The principal may, at
his will, revoke the power and compel the agent to return the instrument containing
the same in which the authority was given."
Article 279 of the Code of Commerce provides: "The principal may revoke the
commission intrusted to an agent at any stage of the transaction, advising him
thereof, but always being liable for the result of the transactions which took place
before the latter was informed of the revocation."
From the above legal provisions it is clearly to be inferred that the contract of agency
can subsist only so long as the principal has confidence in his agent, because, from
the moment such confidence disappears and although there be a fixed period for
the excercise of the office of agent, a circumstance that does not appear in the present
case the principal has a perfect right to revoke the power that he had conferred upon
the agent owing to the confidence he had in him and which for sound reasons had
ceased to exist.
The record does not show it to have been duly proved. notwithstanding the
plaintiff's allegation, that a period was fixed for holding his agency or office of agent
and manager of the La Insular factory. It would be improper, for the purpose of
supplying such defect, to apply to the present case the provisions of article 1128 of
the Civil Code. This article relates to obligation for which no period has been fixed
for their fulfillment, but, which, from their nature and circumstances, allow the
inference that there was an intention to grant such period to the debtor, wherefore
the courts are authorized to fix the duration of the same, and the reason why it is
inapplicable is that the rights and obligations existing between Barretto and Santa
Marina are absolutely different from those to which it refers, for, according to article
1732 of the Civil Code, agency is terminated:
1. By revocation.
2. By withdrawal of the agent.
3. By death, interdiction, bankruptcy, or insolvency of the principal or of the agent.
It is not incumbent upon the courts to fix the period during which contracts for
services shall last. Their duration is understood to be implicity fixed, in default of
express stipulation, by the period for the payment of the salary of the employee.
Therefore the doctrine of the tacit renewal of leases of property, established in article
1566 of the Civil Code, is not applicable to the case at bar. And even though the
annual salary fixed for the services to be rendered by the plaintiff as agent and
manager of the La Insular factory, was P37,000, yet, in accordance with the custom
universally observed throughout the world, salaries fixed for the year are collected
and paid in monthly installments as they fall due, and so the plaintiff collected and
was paid his remuneration; therefore, on the latter's discontinuance in his office as
agent, he would at most be entitled to the salary for one month and some odd days,
allowed in the judgment of the lower court.
Article 302 of the Code of Commerce reads thus:
In cases in which no special time is fixed in the contracts of service, any one of the
parties thereto may dissolve it, advising the other party thereof one month in
advance.
The factor or shop clerk shall be entitled, in such case, to the salary due for one
month.
From the mere fact that the principal no longer had confidence in the agent, he is
entitled to withdraw it and to revoke the power he conferred upon the latter, even
before the expiration of the period of the engagement or of the agreement made
between them; but, in the present case, once it has been shown that, between the
deceased Joaquin Santa Marina and the latter's heir, now the defendant, on the one
hand, and the plaintiff Barretto, on the other, no period whatever was stipulated
during which the last-named should hold the office and manager of the said factory,
it is unquestionable that the defendant, even without good reasons, could lawfully
revoke the power conferred upon the plaintiff and appoint in his place Mr.
McGavin, and thereby contracted no liability whatever other than the obligation to
pay the plaintiff the salary pertaining to one month and some odd days, as held in
the judgment below.
Barretto himself acknowledged in his aforesaid letter, Exhibit 3, that he had
exceeded his authority and acted negligently in selling on credit to the said
Chinaman a large quantity of the products of the factory under the plaintiff's
management, reaching the considerable value of P97,000; whereby he confessed one
of the causes which led to his removal, the revocation of the power conferred upon
him and the appointment of a new agent in his place.
The defendant, Jose Santa Marina, in his letter of December 2, 1909, whereby he
communicated to the plaintiff the revocation of the power he had conferred upon
him and the appointment of another new agent, Mr. McGavin, stated among other
things that the loan contracted by the agent Barretto, without the approval of the
principal, caused a great panic among the stockholders of the factory and that the
defendant hoped to allay it by the new measure that he expected to adopt. This,
then, was still another reason the induced the principal to withdraw the confidence
placed in the plaintiff and to revoke the power he had conferred upon him.
Therefore, even omitting consideration of the resignation before mentioned, we find
duly warranted the reasons which impelled the defendant to revoke the said power
and relieve the plaintiff from the position of agent and manager of the La Insular
factory.

In accordance with the provisions of article 283 of the Code of Commerce, the
manager of an enterprise or manufacturing or commercial establishment,
authorized to administer it and direct it, with more or less powers, as the owner
may have considered advisable, shall have the legal qualifications of an agent.

Article 300 of the same code prescribes: "The following shall be special reasons for
which principals may discharge their employees, even though the time of service of
the contract has not elapsed: Fraud or breach of trust in the business intrusted to
them . . . "

By reason of these legal provisions the defendant, in revoking the authority

conferred upon the plaintiff, acted within his unquestionable powers and did not
thereby violate any statute whatever that may have limited them; consequently, he
could not have caused the plaintiff any harm or detriment to his rights and interests,
for not only had Santa Marina a justifiable reason to proceed as he did, but also no
period whatever had been stipulated during which the plaintiff should be entitled
to hold his position; and furthermore, because, in relieving the latter and appointing
another person in his place, the defendant acted in accordance with the renunciation
and resignation which the plaintiff had tendered. If the plaintiff is entitled to any
indemnity in accordance with law, such was awarded to him in the judgment of the
lower court by granting him the right to collect salary for one month and some odd
days.

As for the other features of the case, the record does not show that the plaintiff has
any good reason or legal ground upon which to claim an indemnity for losses and
damages in the sum of P100,000, for it was not proved that he suffered to that extent,
and the judgment appealed from has awarded him the month's salary to which he
is entitled. Therefore that judgment and the order of March 14 sustaining the
demurrer to the second cause of action are both in accordance with the law.

For the foregoing reasons, whereby the errors assigned to the said judgment and
order are deemed to have been refuted, both judgment and order are hereby
affirmed, with costs against the appellant.ch
EN BANC

[G.R. No. L-10881. September 30, 1958.] PADILLA, J.:

EULOGIO DEL ROSARIO, AURELIO DEL ROSARIO, BENITO DEL ROSARIO,

BERNARDO DEL ROSARIO, ISIDRA DEL ROSARIO, DOMINGA DEL
ROSARIO and CONCEPCION BORROMEO, Plaintiffs-Appellees, v.
PRIMITIVO ABAD and TEODORICO ABAD, Defendants-Appellants.
Bautista & Bautista for Appellees.
Agustin C. Bagasao for appellants.
SYLLABUS
1. AGENCY; POWER OF ATTORNEY WHEN COUPLED WITH INTEREST;
TERMINATION OF; CASE AT BAR. — Within the prohibitive period of five years,
the homesteader mortgaged the improvements of the homestead in favor of
defendant P. A. At the same time, he executed an "irrevocable special power of
attorney coupled with interest" in favor of the mortgagee authorizing him to sell the
land. After the lapse of the prohibitive period, the mortgagor died leaving the
mortgage debt unpaid. Thereafter, acting on the power of attorney, the mortgagee
sold the land. Held: The power of attorney executed by the homesteader in favor of
defendant did not create an agency with interest nor did it clothe the agency with
irrevocable character. A mere statement in the power of attorney that it is coupled
with interest is not enough. In what does such interest consist must be stated in the
power of attorney. The mortgage has nothing to do with the power of attorney and
may be foreclosed by the mortgagee upon failure of the mortgagor to comply with
his obligation. As the agency was not coupled with an interest, it was terminated
upon the death of the principal, and the agent could no longer validly convey the
land. Hence, the sale was null and void.
2. PUBLIC LAND; ENCUMBRANCE MADE WITHIN PROHIBITIVE PERIOD,
NULL AND VOID. — Granting that the power of attorney in question was valid it
would subject the land to an encumbrance. And the encumbrance having been
executed within the five-year period from and after the issuance of the patent, the
same is null and void.
DECISION
Appeal from a judgment rendered by the Court of First Instance of Nueva Ecija in
civil case No. 1084.
The facts are undisputed, the parties having entered into an agreed statement
thereof, the pertinent and materials part of which are: The plaintiffs are the children
and heirs of the late Tiburcio del Rosario. On 12 December 1936, the Secretary of
Agriculture and Commerce, by authority of the President of the Commonwealth of
the Philippines, issued under the provisions of the Public Land Act (Act No. 2874)
homestead patent No. 40596 to Tiburcio del Rosario. The homestead with an area of
9 hectares, 43 ares and 14 centares is situate in barrio San Mauricio, municipality of
San José, province of Nueva Ecija. On 11 February 1937, the Registrar of Deeds in
and for the province of Nueva Ecija issued original certificate of title No. 4820 in the
name of the homesteader (Annex A, stipulation of facts, pp. 25-30, Rec. on App.) .
On 24 February 1937, Tiburcio del Rosario obtained a loan from Primitivo Abad in
the sum of P2,000 with interest at the rate of 12% per annum, payable on 31
December 1941. As security for the payment thereof he mortgaged the
improvements of the parcel of land in favor of the creditor (Annex B, complaint, pp.
10-13, Rec. on App.) . On the same day, 24 February, the mortgagor executed an
‘irrevocable special power of attorney coupled with interest" in favor of the
mortgagee, authorizing him, among others, to sell and convey the parcel of land
(Annex A, complaint, pp. 7-9, Rec. on App.) . Thereafter the mortgagor and his
family moved to Santiago, Isabela, and there established a new residence. Sometime
in December 1945 the mortgagor died leaving the mortgage debt unpaid. On 9 June
1947, Primitivo Abad, acting as attorney-in-fact of Tiburcio del Rosario, sold the
parcel of land to his son Teodorico Abad for and in consideration of the token sum
of P1.00 and the payment by the vendee of the mortgage debt of Tiburcio del Rosario
to Primitivo Abad (Annex C, complaint, pp. 13-16, Rec. on App.) . The vendee took
possession of the parcel of land. Upon the filing and registration of the last deed of
sale, the Registrar of Deeds in and for the province of Nueva Ecija cancelled original
certificate of title No. 4820 in the name of Tiburcio del Rosario and in lieu thereof
issued transfer certificate of title No. 1882 in favor of the vendee Teodorico Abad.
On 29 December 1952 the plaintiffs brought suit against the defendants to recover
possession and ownership of the parcel of land, damages, attorney’s fees and costs.
The defendants answered the complaint and prayed for the dismissal thereof,
damages, attorney’s fees and costs.
On 25 October 1954, after the parties had submitted the case upon a stipulation of an interest as could render irrevocable the power of attorney executed by the
facts, the Court rendered judgment, the dispositive part of which is:chanrob1es principal in favor of the agent. In fact no mention of it is made in the power of
virtual 1aw library attorney. The mortgage on the improvements of the parcel of land has nothing to do
with the power of attorney and may be foreclosed by the mortgagee upon failure of
WHEREFORE, the deed of sale executed by Primitivo Abad in favor of Teodorico, the mortgagor to comply with his obligation. As the agency was not coupled with
Abad, Annex C, is hereby declared null and void; and Teodorico Abad is hereby an interest, it was terminated upon the death of Tiburcio del Rosario, the principal,
ordered to execute a deed of reconveyance of the land originally with OCT No. 4820, sometime in December 1945, and Primitivo Abad, the agent, could no longer validly
now covered by Transfer Certificate of Title No. 1880, in favor of the plaintiffs. No convey the parcel of land to Teodorico Abad on 9 June 1947. The sale, therefore, to
pronouncement as to costs. the latter was null and void. But granting that the irrevocable power of attorney was
lawful and valid it would subject the parcel of land to an encumbrance. As the
The defendants appealed to the Court of Appeals, which certified the case to this homestead patent was issued on 12 December 1936 and the power of attorney was
Court as no question of fact is involved. executed on 24 February 1937, it was in violation of the law that prohibits the
alienation or encumbrance of lands acquired by homestead from the date of the
Section 116 of the Public Land Act (Act No. 2874), under which the homestead was approval of the application and for a term of five years from and after the issuance
granted to the appellees’ father, provides:chanrob1es virtual 1aw library of the patent or grant. Appellants contend that the power of attorney was to be
availed of by the agent after the lapse of the prohibition period of five years, and
Lands acquired under the free patent or homestead provisions shall not be subject that in fact Primitivo Abad sold the parcel of land on 9 June 1947, after the lapse of
to encumbrance or alienation from the date of the approval of the application and such period. Nothing to that effect is found in the power of attorney.
for a term of five years from and after the date of the issuance of the patent or grant,
nor shall they become liable to the satisfaction of any debt contracted prior to the Appellants claim that the trial court should have directed the appellees to reimburse
expiration of said period; but the improvements or crops on the land may be Teodorico Abad for what he had paid to Primitivo Abad to discharge the mortgage
mortgaged or pledged to qualified persons, associations, or corporations. in the latter’s favor as part of the consideration of the sale. As the sale to Teodorico
Abad is null and void, the appellees can not be compelled to reimburse Teodorico
The encumbrance or alienation of lands acquired by free patent or homestead in Abad for what he had paid to Primitivo Abad. The former’s right of action is against
violation of this section is null and void. 1 the latter, without prejudice to the right of Primitivo Abad to foreclose the mortgage
on the improvements of the parcel of land if the mortgage debt is not paid by the
There is no question that the mortgage on the improvements of the parcel of land appellees, as heirs and successors-in-interest of the mortgagor.
executed by Tiburcio del Rosario in favor of Primitivo Abad (Annex B, complaint,
pp. 10-13, Rec. on App) is valid. The judgment appealed from is affirmed, with costs against the appellants.

The power of attorney executed by Tiburcio del Rosario in favor of Primitivo Abad
(Annex A, complaint, pp. 7-9, Rec. on App.) providing, among others, that is
coupled with an interest in the subject matter thereof in favor of the said attorney
and are therefore irrevocable, and . . . conferring upon my said attorney full and
ample power and authority to do and perform all things reasonably necessary and
proper for the due carrying out of the said powers according to the true tenor and
purport of the same, . . ." does not create an agency coupled with an interest nor
does it clothe the agency with an irrevocable character. A mere statement in the
power of attorney that it is coupled with an interest is not enough. In what does
such interest consist must be stated in the power of attorney. The fact that Tiburcio
del Rosario, the principal, had mortgaged the improvements of the parcel of land to
Primitivo Abad, the agent, (Annex B, complaint, pp. 10-13, Rec. on App.) is not such