ATP CASES

D
 G.R. No. L-36585 July 16, 1984

MARIANO DIOLOSA vs. CA and QUIRINO BATERNA

Appeal by certiorari from a decision of the then Court of Appeals ordering herein
petitioners to pay private respondent "the sum of P10,000.00 as damages and the sum
of P2,000.00 as attorney's fees, and the costs."

This case originated in the then Court of First Instance of Iloilo where private
respondents instituted a case of recovery of unpaid commission against petitioners
over some of the lots subject of an agency agreement that were not sold. Said
complaint, docketed as Civil Case No. 7864 and entitled: "Quirino Baterna vs. Mariano
Diolosa and Alegria Villanueva-Diolosa", was dismissed by the trial court after hearing.
Thereafter, private respondent elevated the case to respondent court whose decision
is the subject of the present petition.

The parties — petitioners and respondents-agree on the findings of facts made by

respondent court which are based largely on the pre-trial order of the trial court, as
follows:

PRE-TRIAL ORDER

When this case was called for a pre-trial conference today, the plaintiff, assisted by Atty.
Domingo Laurea, appeared and the defendants, assisted by Atty. Enrique Soriano, also
appeared.

A. — During the pre-trial conference the parties, in addition to what have been admitted
in the pleadings, have agreed and admitted that the following facts are attendant in this
case and that they will no longer adduce evidence to prove them:

1. That the plaintiff was and still is a licensed real estate broker, and as
such licensed real estate broker on June 20, 1968, an agreement was
entered into between him as party of the second part and the defendants
spouses as party of the first part, whereby the former was constituted as
exclusive sales agent of the defendants, its successors, heirs and assigns,
to dispose of, sell, cede, transfer and convey the lots included in VILLA
ALEGRE SUBDIVISION owned by the defendants, under the terms and
conditions embodied in Exhibit "A", and pursuant to said agreement
(Exhibit "A"), the plaintiff acted for and in behalf of the defendants as their
agent in the sale of the lots included in the VILLA ALEGRE
SUBDIVISION;

2. That on September 27, 1968, the defendants terminated the services of

plaintiff as their exclusive sales agent per letter marked as Exhibit "B", for
the reason stated in the latter.

B. — During the trial of this case on the merit, the plaintiff will adduce by competent
evidence the following facts:
 1. That as a real estate broker, he had sold the lots comprised in several
subdivisions, to wit: Greenfield Subdivision, the Villa Beach Subdivision,
the Juntado Subdivision, the St. Joseph Village, the Ledesma Subdivision,
the Brookside Subdivision, the Villa Alegre Subdivision, and Cecilia
Subdivision, all in the City of Iloilo except St. Joseph which is in Pavia
Iloilo.

2. That the plaintiff, as a licensed real estate broker, has been seriously
damaged by the action of the defendants in rescinding, by Exhibit "B", the
contract (Exhibit "A") for which the plaintiff suffered moral damages in the
amount of P50,000.00, damages to his good will in the amount of
P100,000.00, for attorney's fees in the amount of P10,000.00 to protect his
rights and interests, plus exemplary damages to be fixed by the Court.

3. That the plaintiff is entitled to a commission on the lots unsold because

of the rescission of the contract.

C. — The defendants during the trial will ill prove by competent evidence the following:

1. That the plaintiff's complaint was filed to make money out of the suit
from defendants, to harrass and to molest defendants;

2. That because of the unjustified and unfounded complaint of the plaintiff,

the defendants suffered moral damages in the amount of P50,000.00, and
that for the public good, the court may order the plaintiff to pay the
defendants exemplary damages in the amount of P20,000.00, plus
attorney's fees of P10,000.00.

D.— Contentions of the parties:

1. The plaintiff contends:

(a) That under the terms of the contract (Exhibit "A") the
plaintiff had unrevocable authority to sell all the lots included
in the Villa Alegre Subdivision and to act as exclusive sales
agent of the defendants until all the lots shall have been
disposed of;

(b) That the rescission of the contract under Exhibit "B",

contravenes the agreement of the parties.

2. The defendants contend:

(a) That they were within their legal right to terminate the
agency on the ground that they needed the undisposed lots
for the use of the family;

(b) That the plaintiff has no right in law to case for

commission on lots that they have not sold.

E. — The parties hereby submit to the Court the following issues:

 1. Whether under the terms of Exhibit "A" the plaintiff has the irrevocable
right to sen or dispose of all the lots included within Villa Alegre
Subdivision;

2. Can the defendants terminate their agreement with the plaintiff by a

letter like Exhibit "B"?

F. — The plaintiff submitted the following exhibits which were admitted by the
defendants:

Exhibit "A" — agreement entered into between the parties on June 20,
1968 whereby the plaintiff had the authority to sell the subdivision lots
included in Villa Alegre subdivision;

Exhibit "B" — Letter of the defendant Alegria V. Diolosa dated September

27, 1968 addressed to the plaintiff terminating the agency and rescinding
Exhibit "A" for the reason that the lots remained unsold lots were for
reservation for their grandchildren.

The Court will decide this case based on the facts admitted in the pleadings, those
agreed by the parties during the pre-trial conference, and those which they can prove
during the trial of this case, in accordance with the contention of the parties based on
the issues submitted by them during the pre-trial conference.

SO ORDERED.

Iloilo City, Philippines, August 14, 1969.

(SGD) VALERIO V.
ROVIRA
Judge
(pp. 22-25, Rollo)

The only issue in this case is whether the petitioners could terminate the agency
agreement, Exhibit "A", without paying damages to the private respondent. Pertinent
portion of said Exhibit "A" reads:

That the PARTY OF THE FIRST PART is the lawful and absolute owner in fee simple of
VILLA ALEGRE SUBDIVISION situated in the District of Mandurriao, Iloilo City, which
parcel of land is more particularly described as follows, to wit:

A parcel of land, Lot No. 2110-b-2-C, PSD 74002, Transfer Certificate of

Title No. T_____ situated in the District of Mandurriao, Iloilo, Philippines,
containing an area of 39016 square meters, more or less, with
improvements thereon.

That the PARTY OF THE FIRST PART by virtue of these presents, to enhance the sale
of the lots of the above-described subdivision, is engaging as their EXCLUSIVE SALES
AGENT the PARTY OF THE SECOND PART, its successors, heirs and assigns to
dispose of, sell, cede, transfer and convey the above-described property in whatever
manner and nature the PARTY OF THE SECOND PART, with the concurrence of the
 PARTY OF THE FIRST PART, may deem wise and proper under the premises, whether
it be in cash or installment basis, until all the subject property as subdivided is fully
disposed of. (p. 7 of Petitioner's brief. Emphasis supplied).

Respondent court, in its decision which is the subject of review said:

Article 1920 of the Civil Code of the Philippines notwithstanding, the defendants could
not terminate the agency agreement, Exh. "A", at will without paying damages. The said
agency agreement expressly stipulates ... until all the subject property as subdivided is
fully disposed of ..." The testimony of Roberto Malundo(t.s.n. p. 99) that the plaintiff
agreed to the intention of Mrs. Diolosa to reserve some lots for her own famay use
cannot prevail over the clear terms of the agency agreement. Moreover, the plaintiff
denied that there was an agreement to reserve any of the lots for the family of the
defendants. (T.s.n. pp. 16).

There are twenty seven (27) lots of the subdivision remaining unsold on September 27,
1968 when the defendants rescinded the agency agreement, Exhibit "A". On that day
the defendants had only six grandchildren. That the defendants wanted to reserve the
twenty seven remaining lots for the six grandchildren is not a legal reason for
defendants rescind the agency agreement. Even if the grandchildren were to be given
one lot each, there would still be twenty-one lots available for sale. Besides it is
undisputed that the defendants have other lands which could be reserved for their
grandchildren. (pp. 26-27, Rollo)

The present appeal is manifestly without merit.

Under the contract, Exhibit "A", herein petitioners allowed the private respondent "to
dispose of, sell, cede, transfer and convey ... until out the subject property as
subdivided is fully disposed of." The authority to sell is not extinguished until all the lots
have been disposed of. When, therefore, the petitioners revoked the contract with
private respondent in a letter, Exhibit "B" —

Dear Mr. Baterna:

Please be informed that we have finally decided to reserve the remaining unsold lots, as
of this date of our VILLA ALEGRE Subdivision for our grandchildren.

In view thereof, notice is hereby served upon you to the effect that our agreement dated
June 20, 1968 giving you the authority to sell as exclusive sales agent of our subdivision
is hereby rescinded.

Please be duly guided.

Very truly yours,

(SGD) ALEGRIA V. DIOLOSA

Subdivision Owner

(p. 11 of Petitioner's Brief)

they become liable to the private respondent for damages for breach of contract.

And, it may be added that since the agency agreement, Exhibit "A", is a valid contract,
the same may be rescinded only on grounds specified in Articles 1381 and 1382 of the
Civil Code, as follows:

ART. 1381. The following contracts are rescissible:

(1) Those which are entered in to by guardians whenever the wards whom
they represent suffer lesion by more than one-fourth of the value of the
things which are the object thereof;

(2) Those agreed upon in representation of absentees, if the latter suffer

the lesion stated in the preceding number;

(3) Those undertaken in fraud of creditors when the latter cannot in any
other name collect the claims due them;

(4) Those which refer to things under litigation if they have been entered
into by the defendant without the knowledge and approval of the litigants
or of competent judicial authority;

(5) All other contracts specially declared by law to be subject to

rescission.

ART. 1382. Payments made in a state of insolvency for obligations to whose fulfillment
the debtor could not be compelled at the time they were effected, are also rescissible."

In the case at bar, not one of the grounds mentioned above is present which may be
the subject of an action of rescission, much less can petitioners say that the private
respondent violated the terms of their agreement-such as failure to deliver to them
(Subdivision owners) the proceeds of the purchase price of the lots.

ACCORDINGLY, the petition is hereby dismissed without pronouncement as to

costs. SO ORDERED.
 G.R. No. 6906 September 27, 1911

FLORENTINO RALLOS, ET AL. vs. TEODORO R. YANGCO

This is an appeal from a judgment of the Court of First Instance of the Province of Cebu, the Hon.
Adolph Wislizenus presiding, in favor of the plaintiffs, in the sum of P1,537.08, with interest at 6
per cent per annum from the month of July, 1909, with costs. The defendant in this case on the
27th day of November, 1907, sent to the plaintiff Florentino Rallos, among others, the following
letter:

CIRCULAR NO. 1.

MANILA, November 27, 1907

MR. FLORENTINO RALLOS, Cebu.

DEAR SIR: I have the honor to inform you that I have on this date opened in my steamship
office at No. 163 Muelle de la Reina, Binondo, Manila, P. I., a shipping and commission
department for buying and selling leaf tobacco and other native products, under the following
conditions:

1. When the consignment has been received, the consignor thereof will be credited with a sum
not to exceed two-thirds of the value of the goods shipped, which may be made available by
acceptance of a draft or written order of the consignor on five to ten day's sight, or by his
ordering at his option a bill of goods. In the latter case he must pay a commission of 2 per cent.

2. No draft or written order will be accepted without previous notice forwarding the
consignment of goods to guarantee the same.

3. Expenses of freight, hauling and everything necessary for duly executing the commission
will be charged in the commission.

4. All advances made under sections (1) and (3) shall bear interest at 10 per cent a year,
counting by the sale of the goods shipped or remittance of the amount thereof.

5. A commission of 2 ½ per cent will be collected on the amount realized from the sale of the
goods shipped.

6. A Payment will be made immediately after collection of the price of the goods shipped.

7. Orders will be taken for the purchase of general merchandise, ship-stores, cloths, etc., upon
remittance of the amount with the commission of 2 per cent on the total value of the goods
bought. Expenses of freight, hauling, and everything necessary for properly executing the
commission will be charged to the consignor.

8. The consignor of the good may not fix upon the consignee a longer period than four months,
counting from the date of receipt, for selling the same; with the understanding that after such
period the consignee is authorized to make the sale, so as to prevent the advance and cost of
storage from amounting to more than the actual value of said goods, as has often happened.
 9. The shipment to the consignors of the goods ordered on account of the amount realized
from the sale of the goods consigned and of the goods bought on remittance of the value
thereof, under sections (1) and (3), will not be insured against risk by sea and land except on
written order of the interested parties.

10. On all consignments of goods not insured according to the next preceding section, the
consignors will bear the risk.

11. All the foregoing conditions will take effect only after this office has acknowledged the
consignor's previous notice.

12. All other conditions and details will be furnished at the office of the undersigned.

If you care to favor me with your patronage, my office is at No. 163 Muelle de la Reinna,
Binondo, Manila, P. I., under the name of "Teodoro R. Yangco." In this connection it gives me
great pleasure to introduce to you Mr. Florentino Collantes, upon whom I have conferred public
power of attorney before the notary, Mr. Perfecto Salas Rodriguez, dated November 16, 1907,
to perform in my name and on my behalf all acts necessary for carrying out my plans, in the
belief that through his knowledge and long experience in the business, along with my
commercial connections with the merchants of this city and of the provinces, I may hope to
secure the most advantageous prices for my patrons. Mr. Collantes will sign by power of
attorney, so I beg that you make due note of his signature hereto affixed.

Very respectfully,

(Sgd.) T. R. YANGCO.

(Sgd.) F. COLLANTES.

Accepting this invitation, the plaintiffs proceeded to do a considerable business with the
defendant through the said Collantes, as his factor, sending to him as agent for the defendant a
good deal of produce to be sold on commission. Later, and in the month of February, 1909, the
plaintiffs sent to the said Collantes, as agent for the defendant, 218 bundles of tobacco in the leaf
to be sold on commission, as had been other produce previously. The said Collantes received
said tobacco and sold it for the sum of P1,744. The charges for such sale were P206.96. leaving
in the hands of said Collantes the sum of P1,537.08 belonging to the plaintiffs. This sum was,
apparently, converted to his own use by said agent.

It appears, however, that prior to the sending of said tobacco the defendant had severed his
relations with Collantes and that the latter was no longer acting as his factor. This fact was not
known to the plaintiffs; and it is conceded in the case that no notice of any kind was given by the
defendant to the plaintiffs of the termination of the relations between the defendant and his agent.
The defendant refused to pay the said sum upon demand of the plaintiffs, placing such refusal
upon the ground that at the time the said tobacco was received and sold by Collantes he was
acting personally and not as agent of the defendant. This action was brought to recover said sum.

As is seen, the only question for our decision is whether or not the plaintiffs, acting in good faith
and without knowledge, having sent produce to sell on commission to the former agent of the
defendant, can recover of the defendant under the circumstances above set forth. We are of the
opinion that the defendant is liable. Having advertised the fact that Collantes was his agent and
having given them a special invitation to deal with such agent, it was the duty of the defendant on
the termination of the relationship of principal and agent to give due and timely notice thereof to
the plaintiffs. Failing to do so, he is responsible to them for whatever goods may have been in
good faith and without negligence sent to the agent without knowledge, actual or constructive, of
the termination of such relationship. For these reasons the judgment appealed from is confirmed,
without special finding as to costs.

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

VICENTE M. COLEONGCO vs. EDUARDO L. CLAPAROLS

Appeal by plaintiff Vicente Coleongco from a decision of the Court of First Instance of
Negros Occidental (in its Civil Case No. 4170) dismissing plaintiff's action for damages,
and ordering him to pay defendant Eduardo Claparols the amount of P81,387.27 plus
legal interest from the filing of the counterclaim till payment thereof; P50,000 as moral
and compensatory damages suffered by defendant; and costs.

A writ of preliminary attachment for the sum of P100,000 was subsequently issued
against plaintiff's properties in spite of opposition thereto.

Plaintiff Coleongco, not being in conformity with the judgment appealed to this Court
directly, the claims involved being in excess of P200,000.

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

Since 1951, defendant-appellee, Eduardo L. Claparols, operated a factory for the manufacture of
nails in Talisay, Occidental Negros, under the style of "Claparols Steel & Nail Plant". The raw
material, nail wire, was imported from foreign sources, specially from Belgium; and Claparols had
a regular dollar allocation therefor, granted by the Import Control Commission and the Central
Bank. The marketing of the nails was handled by the "ABCD Commercial" of Bacolod, which was
owned by a Chinaman named Kho To.

Losses compelled Claparols in 1953 to look for someone to finance his imports of nail wires. At
first, Kho To agreed to do the financing, but on April 25, 1953, the Chinaman introduced his
compadre, appellant Vicente Coleongco, to the appellee, recommending said appellant to be the
financier in the stead of Kho To. Claparols agreed, and on April 25 of that year a contract (Exhibit
B) was perfected between them whereby Coleongco undertook to finance and put up the funds
required for the importation of the nail wire, which Claparols bound himself to convert into nails at
his plant. It was agreed that Coleongco would have the exclusive distribution of the product, and
the "absolute care in the marketing of these nails and the promotion of sales all over the
Philippines", except the Davao Agency; that Coleongco would "share the control of all the cash"
from sales or deposited in banks; that he would have a representative in the management; that all
contracts and transactions should be jointly approved by both parties; that proper books would be
kept and annual accounts rendered; and that profits and losses would be shared "on a 50-50
basis". The contract was renewed from one year to year until 1958, and Coleongco's share
subsequently increased by 5% of the net profit of the factory (Exhibits D, E, F).

Two days after the execution of the basic agreement, Exhibit "B", on April 27, 1953, Claparols
executed in favor of Coleongco, at the latter's behest a special power of attorney (Exhibit C) to
open and negotiate letters of credit, to sign contracts, bills of lading, invoices, and papers
covering transactions; to represent appellee and the nail factory; and to accept payments and
cash advances from dealers and distributors. Thereafter, Coleongco also became the assistant
manager of the factory, and took over its business transactions, while Claparols devoted most of
his time to the nail manufacture processes.

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

alias writ of execution to enforce a judgment obtained against him by the Philippine National
Bank, despite the fact that on the preceding September he had submitted an amortization plan to
settle the account. Worried and alarmed, Claparols immediately left for Manila to confer with the
bank authorities. Upon arrival, he learned to his dismay that the execution had been procured
because of derogatory information against appellee that had reached the bank from his
associate, appellant Coleongco. On July 6, 1956, the latter, without appellee's knowledge, had
written to the bank —in connection with the verbal offer — for the acquisition by me of the whole
interest of Mr. Eduardo L. Claparols in the Claparols Steel & Nail Plant and the Claparols Hollow
Blocks Factory" (Exhibit 36);

and later, on October 29, 1956, Coleongco had written again the bank another letter
(Exhibit 35), also behind the back of appellee, wherein Coleongco charged Claparols
with taking machines mortgaged to the bank, and added - .

In my humble personal opinion I presume that Mr. Eduardo L. Claparols is not serious in
meeting his obligations with your bank, otherwise he had not taken these machines and
equipments a sign of bad faith since the factory is making a satisfactory profit of my
administration.

Fortunately, Claparols managed to arrange matters with the bank and to have the execution levy
lifted. Incensed at what he regarded as disloyalty of his attorney-in-fact, he consulted lawyers.
The upshot was that appellee revoked the power of attorney (Exhibit "C"), and informed
Coleongco thereof (Exhibits T, T-1), by registered mail, demanding a full accounting at the same
time. Coleongco, as could be expected, protested these acts of Claparols, but the latter insisted,
and on the first of January, 1957 wrote a letter to Coleongco dismissing him as assistant manager
of the plant and asked C. Miller & Company, auditors, to go over the books and records of the
business with a view to adjusting the accounts of the associates. These last steps were taken in
view of the revelation made by his machinery superintendent, Romulo Agsam, that in the course
of the preceding New Year celebrations Coleongco had drawn Agsam aside and proposed that
the latter should pour acid on the machinery to paralyze the factory. The examination by the
auditors, summarized in Exhibits 80 and 87, found that Coleongco owed the Claparols Nail
Factory the amount of P87,387.37, as of June 30, 1957.

In the meantime, Claparols had found in the factory files certain correspondence in February,
1955 between Coleongco and the nail dealer Kho To whereby the former proposed to Kho that
the latter should cut his monthly advances to Claparols from P2,000 to P1,000 a month, because
—
 I think it is time that we do our plan to take advantage of the difficulties of Eddie with the banks
for our benefit. If we can squeeze him more. I am sure that we can extend our contract with
him before it ends next year, and perhaps on better terms. If we play well our cards we might
yet own his factory (Exhibit 32);

and conformably to Coleongco's proposal, Kho To had written to Claparols that "due to present
business conditions" the latter could only be allowed to draw P1,000 a month beginning April,
1955 (Exhibit 33).

As the parties could not amicably settle their accounts, Coleongco filed a suit against
Claparols charging breach of contract, asking for accounting, and praying for
P528,762.19 as damages, and attorney's fees, to which Claparols answered, denying
the charge, and counter-claiming for the rescission of the agreement with Coleongco
for P561,387.99 by way of damages. After trial, the court rendered judgment, as stated
at the beginning of this opinion.

In this appeal, it is first contended by the appellant Coleongco that the power of
attorney (Exhibit "C") was made to protect his interest under the financing agreement
(Exhibit "B") and was one coupled with an interest that the appellee Claparols had no
legal power to revoke. This point can not be sustained. The financing agreement itself
already contained clauses for the protection of appellant's interest, and did not call for
the execution of any power of attorney in favor of Coleongco. But granting appellant's
view, it must not be forgotten that a power of attorney can be made irrevocable by
contract only in the sense that the principal may not recall it at his pleasure; but
coupled with interest or not, the authority certainly can be revoked for a just cause,
such as when the attorney-in-fact betrays the interest of the principal, as happened in
this case. It is not open to serious doubt that the irrevocability of the power of attorney
may not be used to shield the perpetration of acts in bad faith, breach of confidence, or
betrayal of trust, by the agent for that would amount to holding that a power coupled
with an interest authorizes the agent to commit frauds against the principal.

Our new Civil Code, in Article 1172, expressly provides the contrary in prescribing that
responsibility arising from fraud is demandable in all obligations, and that any waiver of
action for future fraud is void. It is also on this principle that the Civil Code, in its Article
1800, declares that the powers of a partner, appointed as manager, in the articles of
co-partnership are irrevocable without just or lawful cause; and an agent with power
coupled with an interest can not stand on better ground than such a partner in so far as
irrevocability of the power is concerned.

That the appellee Coleongco acted in bad faith towards his principal Claparols is, on
the record, unquestionable. His letters to the Philippine National Bank (Exhibits 35 and
36) attempting to undermine the credit of the principal and to acquire the factory of the
latter, without the principal's knowledge; Coleongco's letter to his cousin, Kho To
(Exhibit 32), instructing the latter to reduce to one-half the usual monthly advances to
Claparols on account of nail sales in order to squeeze said appellee and compel him to
extend the contract entitling Coleongco to share in the profits of the nail factory on
better terms, and ultimately "own his factory", a plan carried out by Kho's letter, Exhibit
33, reducing the advances to Claparols; Coleongco's attempt to, have Romulo Agsam
pour acid on the machinery; his illegal diversion of the profits of the factory to his own
benefit; and the surreptitious disposition of the Yates band resaw machine in favor of
his cousin's Hong Shing Lumber Yard, made while Claparols was in Baguio in July and
August of 1956, are plain acts of deliberate sabotage by the agent that fully justified the
revocation of the power of attorney (Exhibit "C") by Claparols and his demand for an
accounting from his agent Coleongco.

Appellant attempts to justify his letter to the Philippine National Bank (Exhibits 35 and
36), claiming that Claparols' mal-administration of the business endangered the
security for the advances that he had made under the financing contract (Exhibit "B").
But if that were the case, it is to be expected that Coleongco would have first protested
to Claparols himself, which he never did. Appellant likewise denies the authorship of
the letter to Kho (Exhibit 32) as well as the attempt to induce Agsam to damage the
machinery of the factory. Between the testimony of Agsam and Claparols and that of
Coleongco, the court below whose to believe the former, and we see no reason to alter
the lower court's conclusion on the value of the evidence before it, considering that
Kho's letter to Claparols (Exhibit 33) plainly corroborates and dovetails with the plan
outlined in Coleongco's own letter (Exhibit 32), signed by him, and that the credibility of
Coleongco is affected adversely by his own admission of his having been previously
convicted of estafa (t.s.n., pp. 139, 276), a crime that implies moral turpitude. Even
disregarding Coleongco's letter to his son-in-law (Exhibit 82) that so fully reveals
Coleongco's lack of business scruples, the clear preponderance of evidence is against
appellant.

The same remarks apply to the finding of the trial court that it was appellant
Coleongco, and not Claparols, who disposed of the band resawing equipment, since
said machine was received in July, 1956 and sold in August of that year to the Hong
Shing Lumber Co., managed by appellant's cousin Vicente Kho. The untruth of
Coleongco's charge that Claparols, upon his return from Baguio in September, 1956,
admitted having sold the machine behind his associate's back is further evidenced by
(a) Coleongco's letter, Exhibit "V", dated October 29, 1956, inquiring the whereabouts
of the resaw equipment from Claparols (an inquiry incompatible with Claparols'
previous admission); (b) by the undenied fact that the appellee was in Baguio and
Coleongco was acting for him during the months of July and August when the machine
was received and sold; and (c) the fact that as between the two it is Coleongco who
had a clear interest in selling the sawing machine to his cousin Kho To's lumber yard. If
Claparols wished to sell the machine without Coleongco's knowledge, he would not
have picked the latter's cousin for a buyer.

The action of plaintiff-appellant for damages and lost profits due to the discontinuance
of the financing agreement, Exhibit "B", may not prosper, because the record shows
that the appellant likewise breached his part of the contract. It will be recalled that
paragraph 2 of the contract, Exhibit "B", it was stipulated:
 That the Party of the Second Part (Coleongco) has agreed to finance and put up all the
necessary money which may be needed to pay for the importation of the raw materials needed
by such nail factory and allocated by the ICC from time to time, either in cash of with whatever
suitable means which the Party of the Second Part may be able to make by suitable
arrangements with any well-known banking institution recognized by the Central Bank of the
Philippines.

Instead of putting up all the necessary money needed to finance the imports of raw
material, Coleongco merely advanced 25% in cash on account of the price and had the
balance covered by surety agreements executed by Claparols and others as solidary,
(joint and several) guarantors (see Exhibits G, H, I). The upshot of this arrangement
was that Claparols was made to shoulder 3/4 of the payment for the imports, contrary
to the financing agreement. Paragraph 11 of the latter expressly denied Coleongco any
power or authority to bind Claparols without previous consultation and authority. When
the balances for the cost of the importations became due, Coleongco, in some
instances, paid it with the dealers' advances to the nail factory against future sales
without the knowledge of Claparols (Exhibits "K" to K-11, K-13). Under paragraphs 8
and 11 of the financing agreement, Coleongco was to give preference to the operating
expenses before sharing profits, so that until the operating costs were provided for,
Coleongco had no right to apply the factory's income to pay his own obligations.

Again, the examination of the books by accountant Atienza of C. Miller and Co.,
showed that from 1954 onwards Coleongco (who had the control of the factory's cash
and bank deposits, under Paragraph 11 of Exhibit "B") never liquidated and paid in full
to Claparols his half of the profits, so that by the end of 1956 there was due to
Claparols P38,068.41 on this account (Exhibit 91). For 1957 to 1958 Claparols
financed the imports of nail wire without the help of appellant, and in view of the latter's
infringement of his obligations, his acts of disloyalty previously discussed, and his
diversions of factory funds (he even bought two motor vehicles with them), we find no
justification for his insistence in sharing in the factory's profit for those years, nor for the
restoration of the revoked power of attorney.

The accountant's reports and testimony (specially Exhibits 80 to 87) prove that as of
June 30, 1957, Coleongco owed to Claparols the sum of P83,466.34 that after some
adjustment was reduced to P81,387.37, practically accepted even by appellant's
auditor. The alleged discrepancies between the general ledger and the result thus
arrived at was satisfactorily explained by accountant Atienza in his testimony (t.s.n.,
1173-1178).

No error was, therefore, committed by the trial court in declaring the financing contract
(Exh. B) properly resolved by Claparols or in rendering judgment against appellant in
favor of appellee for the said amount of P81,387.37. The basic rule of contracts
requires parties to act loyally toward each other in the pursuit of the common end, and
appellant clearly violated the rule of good faith prescribed by Art. 1315 of the new Civil
Code.
The lower court also allowed Claparols P50,000 for damages, material, moral, and
exemplary, caused by the appellant Coleongco's acts in maliciously undermining
appellee's credit that led the Philippine National Bank to secure a writ of execution
against Claparols. Undeniably, the attempts of Coleongco to discredit and "squeeze"
Claparols out of his own factory and business could not but cause the latter mental
anguish and serious anxiety, as found by the court below, for which he is entitled to
compensation; and the malevolence that lay behind appellee's actions justified also the
imposition of exemplary or deterrent damages (Civ. Code, Art. 2232). While the award
could have been made larger without violating the canons of justice, the discretion in
fixing such damages primarily lay in the trial court, and we feel that the same should be
respected.

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

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

FEDERICO VALERA vs. MIGUEL VELASCO

This is an appeal taken by Federico Valera from the judgment of the Court of First
Instance of Manila dismissing his complaint against Miguel Velasco, on the ground that
he has not satisfactorily proven his right of action.

In support of his appeal, the appellant assigns the following alleged as committed by
the trial court in its judgment, to wit: (1) The lower court erred in holding that one of the
ways of terminating an agency is by the express or tacit renunciation of the agent; (2)
the lower court erred in holding that the institution of a civil action and the execution of
the judgment obtained by the agent against his principal is but renunciation of the
powers conferred on the agent; (3) the lower erred in holding that, even if the sale by
Eduardo Hernandez to the plaintiff Federico Valera be declared void, such a
declaration could not prevail over the rights of the defendant Miguel Velasco inasmuch
as the right redemption was exercised by neither Eduardo Hernandez nor the plaintiff
Federico Valera; (4) the lower court erred in not finding that the defendant Miguel
Velasco was, and at present is, an authorized representative of the plaintiff Federico
Valera; (5) the lower court erred in not annulling the sale made by the sheriff at public
auction to defendant Miguel Velasco, Exhibit K; (6) the lower court erred in failing to
annul the sale executed by Eduardo Hernandez to the plaintiff Federico Valera, Exhibit
C; (7) the lower court erred in not annulling Exhibit L, that is, the sale at public auction
of the right to repurchase the land in question to Salvador Vallejo; (8) the lower court
erred in not declaring Exhibit M null and void, which is the sale by Salvador Vallejo to
defendant Miguel Velasco; (9) the lower court erred in not ordering the defendant
Miguel Velasco to liquidate his accounts as agent of the plaintiff Federico Valera; (10)
the lower court erred in not awarding plaintiff the P5,000 damages prayed for.

The pertinent facts necessary for the solution of the questions raised by the above
quoted assignments of error are contained in the decision appealed from and are as
follows:

By virtue of the powers of attorney, Exhibits X and Z, executed by the plaintiff on April 11,
1919, and on August 8, 1922, the defendant was appointed attorney-in-fact of the said plaintiff
with authority to manage his property in the Philippines, consisting of the usufruct of a real
property located of Echague Street, City of Manila.

The defendant accepted both powers of attorney, managed plaintiff's property, reported his
operations, and rendered accounts of his administration; and on March 31, 1923 presented
exhibit F to plaintiff, which is the final account of his administration for said month, wherein it
appears that there is a balance of P3,058.33 in favor of the plaintiff.

The liquidation of accounts revealed that the plaintiff owed the defendant P1,100, and as
misunderstanding arose between them, the defendant brought suit against the plaintiff, civil
case No. 23447 of this court. Judgment was rendered in his favor on March 28, 1923, and after
the writ of execution was issued, the sheriff levied upon the plaintiff's right of usufruct, sold it at
public auction and adjudicated it to the defendant in payment of all of his claim.

Subsequently, on May 11, 1923, the plaintiff sold his right of redemption to one Eduardo
Hernandez, for the sum of P200 (Exhibit A). On September 4, 1923, this purchaser conveyed
the same right of redemption, for the sum of P200, to the plaintiff himself, Federico Valera
(Exhibit C).

After the plaintiff had recovered his right of redemption, one Salvador Vallejo, who had an
execution upon a judgment against the plaintiff rendered in a civil case against the latter, levied
upon said right of redemption, which was sold by the sheriff at public auction to Salvador
Vallejo for P250 and was definitely adjudicated to him. Later, he transferred said right of
redemption to the defendant Velasco. This is how the title to the right of usufruct to the
aforementioned property later came to vest the said defendant.

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

Article 1732 of the Civil Code reads as follows:

Art. 1732. Agency is terminated:

1. By revocation;

2. By the withdrawal of the agent;

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

And article 1736 of the same Code provides that:

 Art. 1736. An agent may withdraw from the agency by giving notice to the principal. Should the
latter suffer any damage through the withdrawal, the agent must indemnify him therefore,
unless the agent's reason for his withdrawal should be the impossibility of continuing to act as
such without serious detriment to himself.

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

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

administrator of property informs his principal by letter that for reasons of health and medical
treatment he is about to depart from the place where he is executing his trust and wherein the
said property is situated, and abandons the property, turns it over to a third party, renders
accounts of its revenues up to the date on which he ceases to hold his position and transmits
to his principal statement which summarizes and embraces all the balances of his accounts
since he began the administration to the date of the termination of his trust, and, without
stating when he may return to take charge of the administration of the said property, asks his
principal to execute a power of attorney in due form in favor of a transmit the same to another
person who took charge of the administration of the said property, it is but reasonable and just
to conclude that the said agent had expressly and definitely renounced his agency and that
such agency duly terminated, in accordance with the provisions of article 1732 of the Civil
Code, and, although the agent in his aforementioned letter did not use the words "renouncing
the agency," yet such words, were undoubtedly so understood and accepted by the principal,
because of the lapse of nearly nine years up to the time of the latter's death, without his having
interrogated either the renouncing agent, disapproving what he had done, or the person who
substituted the latter.

The misunderstanding between the plaintiff and the defendant over the payment of the
balance of P1,000 due the latter, as a result of the liquidation of the accounts between
them arising from the collections by virtue of the former's usufructuary right, who was
the principal, made by the latter as his agent, and the fact that the said defendant
brought suit against the said principal on March 28, 1928 for the payment of said
balance, more than prove the breach of the juridical relation between them; for,
although the agent has not expressly told his principal that he renounced the agency,
yet neither dignity nor decorum permits the latter to continue representing a person
who has adopted such an antagonistic attitude towards him. When the agent filed a
complaint against his principal for recovery of a sum of money arising from the
liquidation of the accounts between them in connection with the agency, Federico
Valera could not have understood otherwise than that Miguel Velasco renounced the
agency; because his act was more expressive than words and could not have caused
any doubt. (2 C. J., 543.) In order to terminate their relations by virtue of the agency
the defendant, as agent, rendered his final account on March 31, 1923 to the plaintiff,
as principal.

Briefly, then, the fact that an agent institutes an action against his principal for the
recovery of the balance in his favor resulting from the liquidation of the accounts
between them arising from the agency, and renders and final account of his
operations, is equivalent to an express renunciation of the agency, and terminates the
juridical relation between them.
If, as we have found, the defendant-appellee Miguel Velasco, in adopting a hostile
attitude towards his principal, suing him for the collection of the balance in his favor,
resulting from the liquidation of the agency accounts, ceased ipso facto to be the agent
of the plaintiff-appellant, said agent's purchase of the aforesaid principal's right of
usufruct at public auction held by virtue of an execution issued upon the judgment
rendered in favor of the former and against the latter, is valid and legal, and the lower
court did not commit the fourth and fifth assignments of error attributed to it by the
plaintiff-appellant.

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

validity of the sale made by Federico Valera to Eduardo Hernandez of his right of
redemption in the sale of his usufructuary right made by the sheriff by virtue of the
execution of the judgment in favor of Miguel Velasco and against the said Federico
Valera; and the same thing is true as to the validity of the resale of the same right of
redemption made by Eduardo Hernandez to Federico Valera; inasmuch as Miguel
Velasco's purchase at public auction held by virtue of an execution of Federico Valera's
usufructuary right is valid and legal, and as neither the latter nor Eduardo Hernandez
exercised his right of redemption within the legal period, the purchaser's title became
absolute.

Moreover, the defendant-appellee, Miguel Velasco, having acquired Federico Valera's

right of redemption from Salvador Vallejo, who had acquired it at public auction by
virtue of a writ of execution issued upon the judgment obtained by the said Vallejo
against the said Valera, the latter lost all right to said usufruct.

And even supposing that Eduardo Hernandez had been tricked by Miguel Velasco into
selling Federico Valera's right of repurchase to the latter so that Salvador Vallejo might
levy an execution on it, and even supposing that said resale was null for lack of
consideration, yet, inasmuch as Eduardo Hernandez did not present a third party claim
when the right was levied upon for the execution of the judgment obtained by Vallejo
against Federico Vallera, nor did he file a complaint to recover said right before the
period of redemption expired, said Eduardo Hernandez, and much less Federico
Valera, cannot now contest the validity of said resale, for the reason that the one-year
period of redemption has already elapsed.

Neither did the trial court err in not ordering Miguel Velasco to render a liquidation of
accounts from March 31, 1923, inasmuch as he had acquired the rights of the plaintiff
by purchase at the execution sale, and as purchaser, he was entitled to receive the
rents from the date of the sale until the date of the repurchase, considering them as
part of the redemption price; but not having exercised the right repurchase during the
legal period, and the title of the repurchaser having become absolute, the latter did not
have to account for said rents.

Summarizing, the conclusion is reached that the disagreements between an agent and
his principal with respect to the agency, and the filing of a civil action by the former
against the latter for the collection of the balance in favor of the agent, resulting from a
liquidation of the agency accounts, are facts showing a rupture of relations, and the
complaint is equivalent to an express renunciation of the agency, and is more
expressive than if the agent had merely said, "I renounce the agency."

By virtue of the foregoing, and finding no error in the judgment appealed from, the
same is hereby affirmed in all its parts, with costs against the appellant. So ordered.

G.R. No. L-11415 May 25, 1959

MANUEL BUASON and LOLITA M. REYES vs. MARIANO PANUYAS

This is an appeal from a judgment of the Court of First Instance of Nueva Ecija
dismissing an action brought by the spouses Manuel Buason and Lolita M. Reyes for
annulment of a deed of sale in favor of the defendant, cancellation of transfer
certificate of title No. 8419 issued in the name of the defendant and his wife,
declaration that the sale in their favor is valid, recovery of possession of the parcel of
land described in the complaint from the defendant, damages, attorney's fees and
costs. (Civil No. 2144.)

In their lifetime the spouses Buenaventura Dayao and Eugenia Vega acquired by
homestead patent a parcel of land situated at barrio Gabaldon, municipality of Muñoz,
province of Nueva Ecija, containing an area of 14.8413 hectares covered by original
certificate of title No. 1187 (Exhibit C). On 29 October 1930 they executed a power of
attorney authorizing Eustaquio Bayuga to engage the services of an attorney to
prosecute their case against Leonardo Gambito for annulment of a contract of sale of
the parcel of land (civil No. 5787 of the same court) and after the termination of the
case in their favor to sell it, and from the proceeds of the sale to deduct whatever
expenses he had incurred in the litigation (Exhibit B). On 14 March 1934 Buenaventura
Dayao died leaving his wife Eugenia Vega and children Pablo, Teodoro, Fortunata and
Juliana, all surnamed Dayao. On 21 march 1939 his four children executed a deed of
sale conveying 12.8413 hectares of the parcel of land to the appellants, the spouses
Manuel Buason and Lolita M. Reyes (Exhibit A). Their mother Eugenia Vega affixed
her thumbmark to the deed of sale as witness (Exhibit A). The appellants took
possession of the parcel of land through their tenants in 1939. On 18 July 1944
Eustaquio Bayuga sold 8 hectares of the same parcel of land to the spouses Mariano
Panuyas (appellee herein) and Sotera B. Cruz (Exhibit D). Eustaquio Bayuga died on
25 March 1946 and Eugenia Vega in 1954.

The appellants and the appellee claim ownership to the same parcel of land. In their
complaint the appellants prayed that the appellee be ordered to deliver possession of
the part of the parcel of land held by him; that the deed of sale of that part of the parcel
of land held by the appellee executed by Eustaquio Bayuga in his favor and of his wife
(Exhibit D) be declared null and void and that transfer certificate of title No. 8419
issued in their name be cancelled; that the deed of sale of the parcel of land executed
by the children and heirs of Buenaventura Dayao in their favor (Exhibit A) be declared
valid; that the appellee be ordered to pay them damages and attorney's fees in the
sum of P9,600; and that he ordered to pay the costs of the suit. The appellees
affirmative defenses are that he and his wife were buyers in good faith and for valuable
consideration; that appellant's causes of action are barred by the statute of limitations;
that the complaint states no cause of action; that the claim on which their action is
based is unenforceable under the statute of frauds; and that the appellants are guilty of
laches. By way of counterclaim, he prayed that for bringing a clearly unfounded suit
against him which depreciated the value of the land and injured his good reputation,
the appellants be ordered to pay him the sums of P5,000 as actual damages and
P10,000 as moral damages.

After trial on 20 August 1956 the Court rendered judgment holding that the appellants'
action is barred by the statute of limitations and dismissing their complaint. Their
motion for reconsideration filed on 23 August 1956. Hence this appeal upon questions
of law.

It appears that the appellants did not register the sale of 12.8413 hectares of the parcel
of land in question executed in their favor by the Dayao children on 21 March 1939
after the death of their father Buenaventura Dayao. On the other hand, the power of
attorney executed by Buenaventura Dayao on 29 October 1930 authorizing Eustaquio
Bayuga to sell the parcel of land (Exhibit B) was annotated or inscribed on the back of
the original certificate of title No. 1187 (Exhibit C) as Entry No. 16836/H-1187, and the
sale executed by Eustaquio Bayuga in favor of the appellee Mariano Panuyas and his
wife Sotera B. Cruz under the aforesaid power of attorney was annotated or inscribed
on the back of the same original certificate of title (Exhibit C) as Entry No 778/H-1187.
It does not appear that the appellee and his wife had actual knowledge of the previous
sale. In the absence of such knowledge, they had a right to rely on the face of the
certificate of title of the registered owners and of the authority conferred by them upon
the agent also recorded on the back of the certificate of title. As this is a case of double
sale of land registered under the Land Registration Act, he who recorded the sale in
the Registry of Deeds has a better right than he who did not.1

As to the appellants' contention that, as the death of the principal on 14 March 1934
ended the authority of the agent,2 the sale of 8 hectares of the parcel of land by the
agent to the appellee Mariano Panuyas and his wife Sotera B. Cruz was null and void,
suffice it to state that is has not been shown that the agent knew of his principal's
demise, and for that reason article 1738, old Civil code or 1931, new Civil Code, which
provides:
Anything done by the agent, without knowledge of the death of the principal or of any
other cause which extinguishes the agency, is valid and shall be fully effective with
respect to third persons who may have contracted with him in good faith is the law
applicable to the point raised by the appellants.

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