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NATURE, FORM AND KINDS OF AGENCYArt. 1868. By the contract of agency a person binds himselfto render some service or to do something in representationor on behalf of another, with the consent or authority of thelatter. (1709a)

Art. 1869. Agency may be express, or implied from the actsof the principal, from his silence or lack of action, or hisfailure to repudiate the agency, knowing that another personis acting on his behalf without authority.

Agency may be oral, unless the law requires a specific form.(1710a)

Art. 1870. Acceptance by the agent may also be express, orimplied from his acts which carry out the agency, or from hissilence or inaction according to the circumstances. (n)

Art. 1871. Between persons who are present, the acceptanceof the agency may also be implied if the principal delivers hispower of attorney to the agent and the latter receives itwithout any objection. (n)

Art. 1872. Between persons who are absent, the acceptanceof the agency cannot be implied from the silence of theagent, except:

(1) When the principal transmits his power ofattorney to the agent, who receives it without anyobjection;(2) When the principal entrusts to him by letter ortelegram a power of attorney with respect to thebusiness in which he is habitually engaged as anagent, and he did not reply to the letter or telegram.

Art. 1873. If a person specially informs another or states bypublic advertisement that he has given a power of attorneyto a third person, the latter thereby becomes a dulyauthorized agent, in the former case with respect to theperson who received the special information, and in the lattercase with regard to any person.

The power shall continue to be in full force until thenotice is rescinded in the same manner in which it was given.

Art. 1874. When a sale of a piece of land or any interesttherein is through an agent, the authority of the latter shallbe in writing; otherwise, the sale shall be void.

Art. 1875. Agency is presumed to be for a compensation,unless there is proof to the contrary. (n)

Art. 1876. An agency is either general or special. The former comprises all the business of the

principal. The latter, one or more specific transactions.(1712)

Art. 1877. An agency couched in general terms comprisesonly acts of administration, even if the principal should state

that he withholds no power or that the agent may executesuch acts as he may consider appropriate, or even thoughthe agency should authorize a general and unlimitedmanagement. (n)

Art. 1878. Special powers of attorney are necessary in thefollowing cases:

(1) To make such payments as are not usuallyconsidered as acts of administration;(2) To effect novations which put an end toobligations already in existence at the time theagency was constituted;

(3) To compromise, to submit questionsto arbitration, to renounce the right to appeal from a

judgment, to waive objections to the venue of anaction or to abandon a prescription already acquired;(4) To waive any obligation gratuitously;(5) To enter into any contract by which theownership of an immovable is transmitted oacquired either gratuitously or for a valuableconsideration;(6) To make gifts, except customary ones for charity

or those made to employees in the businessmanaged by the agent;(7) To loan or borrow money, unless the latter act beurgent and indispensable for the preservation of thethings which are under administration;(8) To lease any real property to another person fomore than one year;(9) To bind the principal to render some servicewithout compensation;(10) To bind the principal in a contract opartnership;(11) To obligate the principal as a guarantor osurety;(12) To create or convey real rights over immovableproperty;

(13) To accept or repudiate an inheritance;(14) To ratify or recognize obligations contractedbefore the agency;(15) Any other act of strict dominion. (n)

Art. 1879. A special power to sell excludes the power tomortgage; and a special power to mortgage does not includethe power to sell. (n)

Art. 1880. A special power to compromise does not authorizesubmission to arbitration. (1713a)

Art. 1881. The agent must act within the scope of hisauthority. He may do such acts as may be conducive to theaccomplishment of the purpose of the agency. (1714a)

Art. 1882. The limits of the agent's authority shall not beconsidered exceeded should it have been performed in amanner more advantageous to the principal than thaspecified by him. (1715)

Art. 1883. If an agent acts in his own name, the principal hasno right of action against the persons with whom the agenthas contracted; neither have such persons against theprincipal.In such case the agent is the one directly bound in favor ofthe person with whom he has contracted, as if thetransaction were his own, except when the contract involvesthings belonging to the principal.

The provisions of this article shall be understood tobe without prejudice to the actions between the principal and

agent.

SPOUSES YU ENG CHO & FRANCISCO TAO YU v. PANAMERICAN WORLD AIRWAYS, INC.

(GR 123560, March 27, 2000)

FACTS:Plaintiff Yu Eng Cho is the owner of Young Hardware

Co. and Achilles Marketing. In connection with [this] businesshe travels from time to time to Malaysia, Taipei andHongkong. On July 10, 1976, plaintiffs bought plane tickets(Exhs. A & B) from defendant Claudia Tagunicar whorepresented herself to be an agent of defendant Touris

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World Services, Inc. (TWSI). The destination[s] are Hongkong,Tokyo, San Francisco, U.S.A., for the amount of P25,000.00per computation of said defendant Claudia Tagunicar (Exhs.C & C-1). The purpose of this trip is to go to Fairfield, New

Jersey, U.S.A. to buy to two (2) lines of infrared heatingsystem processing textured plastic article

A few days before the scheduled flight of plaintiffs,their son, Adrian Yu, called the Pan Am office to verify thestatus of the flight. According to said Adrian Yu, personnel ofdefendant Pan Am told him over the phone that plaintiffs'

booking[s] are confirmed.On July 23, 1978, plaintiffs left for Hongkong and

stayed there for five (5) days. They left Hongkong for Tokyoon July 28, 1978. Upon their arrival in Tokyo, they called upPan-Am office for reconfirmation of their flight to SanFrancisco. Said office, however, informed them that theirnames are not in the manifest. Since plaintiffs were supposedto leave on the 29th of July, 1978, and could not remain in

Japan for more than 72 hours, they were constrained toagree to accept airline tickets for Taipei instead, per adviseof JAL officials. This is the only option left to them becauseNorthwest Airlines was then on strike, hence, there was nochance for the plaintiffs to obtain airline seats to the UnitedStates within 72 hours. Plaintiffs paid for these tickets.

Upon reaching Taipei, there were no flight[s]

available for plaintiffs, thus, they were forced to return backto Manila on August 3, 1978, instead of proceeding to theUnited States. [Japan] Air Lines (JAL) refunded the plaintiffsthe difference of the price for Tokyo-Taipei [and] Tokyo-SanFrancisco (Exhs. I & J) in the total amount of P2,602.00.

In view of their failure to reach Fairfield, New Jersey,Radiant Heat Enterprises, Inc. cancelled Yu Eng Cho's optionto buy the two lines of infra-red heating system (Exh. K). Theagreement was for him to inspect the equipment and makefinal arrangement[s] with the said company not later thanAugust 7, 1978. From this business transaction, plaintiff YuEng Cho expected to realize a profit of P300,000.00 toP400,000.00.

Defendant Tagunicar claims that on July 13, 1978, afew days before the scheduled flight, plaintiff Yu Eng Chopersonally went to her office, pressing her about their flight.

She called up defendant Julieta Canilao, and the latter toldher "o sige Claudia, confirm na." She even noted this in herindex card (Exh. L), that it was Julieta who confirmed thebooking (Exh. L-1). It was then that she allegedly attachedthe confirmation stickers (Exhs. 2, 2-B TWSI) to the tickets.

These stickers came from TWSI.Defendant Tagunicar alleges that it was only in the

first week of August, 1978 that she learned from Adrian Yu,son of plaintiffs, that the latter were not able to take theflight from Tokyo to San Francisco, U.S.A. After a few days,said Adrian Yu came over with a gentleman and a lady, whoturned out to be a lawyer and his secretary. Defendant

Tagunicar claims that plaintiffs were asking for her help sothat they could file an action against Pan-Am. Because ofplaintiffs' promise she will not be involved, she agreed to sign

the affidavit prepared by the lawyer.A complaint for damages was filed by petitionersagainst private respondents Pan American World Airways,Inc. (Pan Am), Tourist World Services, Inc. (TWSI), JulietaCanilao (Canilao), and Claudia Tagunicar (Tagunicar) forexpenses allegedly incurred such as costs of tickets andhotel accommodations when petitioners were compelled tostay in Hongkong and then in Tokyo by reason of the non-confirmation of their booking with Pan-Am. In a Decisiondated November 14, 1991, the Regional Trial Court of Manila,Branch 3, held the defendants jointly and severally liable,except defendant Julieta Canilao

Only respondents Pan Am and Tagunicarappealed to the Court of Appeals. On 11 August 1995, theappellate court rendered judgment modifying the amount ofdamages awarded, holding private respondent Tagunicasolely liable therefor, and absolving respondents Pan Am and

TWSI from any and all liability.

ISSUE:Whether here is no agency relationship among PAN

AM, TWSI and Tagunicar are contrary to the judicia

admissions of PAN-AM, TWSI and Tagunicar and likewisecontrary to the findings of fact of the trial court.

HELD:By the contract of agency, a person binds himself to

render some service or to do something in representation oon behalf of another, with the consent or authority of thelatter. 7 The elements of agency are: (1) consent, express oimplied, of the parties to establish the relationship; (2) theobject is the execution of a juridical act in relation to a thirdperson; (3) the agent acts as a representative and not forhimself; (4) the agent acts within the scope of his authority.It is a settled rule that persons dealing with an assumedagent are bound at their peril, if they would hold the principaliable, to ascertain not only the fact of agency but also the

nature and extent of authority, and in case either iscontroverted, the burden of proof is upon them to establishit.

In the case at bar, petitioners rely on the affidavit ofrespondent Tagunicar where she stated that she is anauthorized agent of TWSI. This affidavit, however, has weakprobative value in light of respondent Tagunicar's testimonyin court to the contrary. Affidavits, being taken ex parte, arealmost always incomplete and often inaccurate, sometimesfrom partial suggestion, or for want of suggestion andinquiries. Their infirmity as a species of evidence is a matterof judicial experience and are thus considered inferior to thetestimony given in court. 10 Further, affidavits are nocomplete reproductions of what the declarant has in mindbecause they are generally prepared by the administeringofficer and the affiant simply signs them after the same have

been read to her. 11 Respondent Tagunicar testified that heaffidavit was prepared and typewritten by the secretary opetitioners' lawyer, Atty. Acebedo, who both came withAdrian Yu, son of petitioners, when the latter went to see herat her office. This was confirmed by Adrian Yu who testifiedthat Atty. Acebedo brought his notarial seal and notarizedthe affidavit of the same day. 12 The circumstances undewhich said affidavit was prepared put in doubt petitionersclaim that it was executed voluntarily by responden

Tagunicar. It appears that the affidavit was prepared and wasbased on the answers which respondent Tagunicar gave tothe questions propounded to her by Atty. Acebedo. 13 Theynever told her that the affidavit would be used in a case to befiled against her. 14 They even assured her that she wouldnot be included as defendant if she agreed to execute the

affidavit. 15 Respondent Tagunicar was prevailed upon bypetitioners' son and their lawyer to sign the affidavit despiteher objection to the statement therein that she was an agentof TWSI. They assured her that "it is immaterial" 16and tha"if we file a suit against you we cannot get anything fromyou." 17 This purported admission of respondent Tagunicacannot be used by petitioners to prove their agencyrelationship. At any rate, even if such affidavit is to be givenany probative value, the existence of the agency relationshipcannot be established on its sole basis. The declarations othe agent alone are generally insufficient to establish the factor extent of his authority. 18 In addition, as between thenegative allegation of respondents Canilao and Tagunica

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that neither is an agent nor principal of the other, and theaffirmative allegation of petitioners that an agencyrelationship exists, it is the latter who have the burden ofevidence to prove their allegation, 19 failing in which, theirclaim must necessarily fail.We stress that respondent Tagunicar categorically denied inopen court that she is a duly authorized agent of TWSI, anddeclared that she is an independent travel agent. 20 We haveconsistently ruled that in case of conflict between statementsin the affidavit and testimonial declarations, the latter

command greater weight. 21As further proofs of agency, petitioners call our

attention to TWSI's Exhibits "7", "7-A", and "8" which showthat Tagunicar and TWSI received sales commissions fromPan Am. Exhibit "7" 22 is the Ticket Sales Report submitted by

TWSI to Pan Am reflecting the commissions received by TWSIas an agent of Pan Am. Exhibit "7-A" 23 is a listing of theroutes taken by passengers who were audited to TWSI's salesreport. Exhibit "8" 24 is a receipt issued by TWSI covering thepayment made by Tagunicar for the tickets she bought from

TWSI. These documents cannot justify the decision thatTagunicar was paid a commission either by TWSI or Pan Am.On the contrary, Tagunicar testified that when she pays

TWSI, she already deducts in advance her commission andmerely gives the net amount to TWSI. 25 From all sides of the

legal prism, the transaction is simply a contract of salewherein Tagunicar buys airline tickets from TWSI and thensells it at a premium to her clients.

WHEREFORE, the decision appealed from is herebyAFFIRMED. Cost against petitioners. SO ORDERED.

CONSTANTE AMOR DE CASTRO v. CA(GR 115838, July 8 2002)

FACTS:Appellants5 were co-owners of four (4) lots located at

EDSA corner New York and Denver Streets in Cubao, QuezonCity. In a letter dated January 24, 1984 (Exhibit "A-1, p. 144,Records), appellee6 was authorized by appellants to act asreal estate broker in the sale of these properties for theamount of P23,000,000.00, five percent (5%) of which will begiven to the agent as commission. It was appellee who firstfound Times Transit Corporation, represented by its presidentMr. Rondaris, as prospective buyer which desired to buy two(2) lots only, specifically lots 14 and 15. Eventually,sometime in May of 1985, the sale of lots 14 and 15 wasconsummated. Appellee received from appellants P48,893.76as commission.It was then that the rift between the contending parties soonemerged. Appellee apparently felt short changed becauseaccording to him, his total commission should beP352,500.00 which is five percent (5%) of the agreed price ofP7,050,000.00 paid by Times Transit Corporation toappellants for the two (2) lots, and that it was he whointroduced the buyer to appellants and unceasinglyfacilitated the negotiation which ultimately led to theconsummation of the sale. Hence, he sued below to collectthe balance of P303,606.24 after having received P48,893.76

in advance.On the other hand, appellants completely traverse

appellee's claims and essentially argue that appellee isselfishly asking for more than what he truly deserved ascommission to the prejudice of other agents who were moreinstrumental in the consummation of the sale. Althoughappellants readily concede that it was appellee who firstintroduced Times Transit Corp. to them, appellee was notdesignated by them as their exclusive real estate agent butthat in fact there were more or less eighteen (18) otherswhose collective efforts in the long run dwarfed those ofappellee's, considering that the first negotiation for the salewhere appellee took active participation failed and it was

these other agents who successfully brokered inthe second negotiation. But despite this and out oappellants' "pure liberality, beneficence and magnanimity"appellee nevertheless was given the largest cut in thecommission (P48,893.76), although on the principle oquantum meruit he would have certainly been entitled toless. So appellee should not have been heard to complain ogetting only a pittance when he actually got the lion's shareof the commission and worse, he should not have beenallowed to get the entire commission. Furthermore, the

purchase price for the two lots was only P3.6 million asappearing in the deed of sale and not P7.05 million asalleged by appellee. Thus, even assuming that appellee isentitled to the entire commission, he would only be getting5% of the P3.6 million, or P180,000.00."

Private respondent Francisco Artigo ("Artigo" fobrevity) sued petitioners Constante A. De Castro("Constante" for brevity) and Corazon A. De Castro("Corazon" for brevity) to collect the unpaid balance of hisbroker's commission from the De Castros. The Trial Courtfinds defendants Constante and Corazon Amor de Castro

jointly and solidarily liable to plaintiff.The Court of Appeals affirmed in toto the decision o

the RTC. Hence, this petition.

ISSUE: Whether the complaint merits dismissal for failure toimplead other co-owners as indispensable parties

HELD:The De Castros argue that Artigo's complaint should

have been dismissed for failure to implead all the co-ownersof the two lots. The De Castros claim that Artigo always knewthat the two lots were co-owned by Constante and Corazonwith their other siblings Jose and Carmela whom Constantemerely represented. The De Castros contend that failure toimplead such indispensable parties is fatal to the complaintsince Artigo, as agent of all the four co-owners, would be paidwith funds co-owned by the four co-owners.

The De Castros' contentions are devoid of legabasis.

An indispensable party is one whose interest will beaffected by the court's action in the litigation, and withoutwhom no final determination of the case can be had. 7 The

joinder of indispensable parties is mandatory and courtcannot proceed without their presence.8 Whenever it appearsto the court in the course of a proceeding that anindispensable party has not been joined, it is the duty of thecourt to stop the trial and order the inclusion of such party.9However, the rule on mandatory joinder of indispensableparties is not applicable to the instant case.

There is no dispute that Constante appointed Artigo in ahandwritten note dated January 24, 1984 to sell theproperties of the De Castros for P23 million at a 5 percentcommission. The authority was on a first come, first servebasis.

Constante signed the note as owner and asrepresentative of the other co-owners. Under this note, acontract of agency was clearly constituted betweenConstante and Artigo. Whether Constante appointed Artigoas agent, in Constante's individual or representativecapacity, or both, the De Castros cannot seek the dismissaof the case for failure to implead the other co-owners asindispensable parties. The De Castros admit that theother co-owners are solidarily liable under thecontract of agency,10 citing Article 1915 of the Civil Codewhich reads:

Art. 1915. If two or more persons have appointed anagent for a common transaction or undertaking, they

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shall be solidarily liable to the agent for all theconsequences of the agency.

The solidary liability of the four co-owners, however, militatesagainst the De Castros' theory that the other co-ownersshould be impleaded as indispensable parties.

When the law expressly provides for solidarity of theobligation, as in the liability of co-principals in a contract ofagency, each obligor may be compelled to pay the entireobligation.12 The agent may recover the whole compensationfrom any one of the co-principals, as in this case.

Indeed, Article 1216 of the Civil Code provides that acreditor may sue any of the solidary debtors. This articlereads:

Art. 1216. The creditor may proceed against any oneof the solidary debtors or some or all of themsimultaneously. The demand made against one ofthem shall not be an obstacle to those which maysubsequently be directed against the others, so longas the debt has not been fully collected.

Thus, the Court has ruled in Operators Incorporatedvs. American Biscuit Co., Inc. that

"x x x solidarity does not make a solidaryobligor an indispensable party in a suit filedby the creditor. Article 1216 of the Civil Code saysthat the creditor `may proceed against anyone of

the solidary debtors or some or all of themsimultaneously'." (Emphasis supplied)

BA FINANCE CORPORATION v. CAGR 94566, July 1992

FACTS:On December 17, 1980, Renato Gaytano, doing

business under the name Gebbs International, applied forand was granted a loan with respondent Traders Royal Bankin the amount of P60,000.00. As security for the payment ofsaid loan, the Gaytano spouses executed a deed ofsuretyship whereby they agreed to pay jointly and severallyto respondent bank the amount of the loan includinginterests, penalty and other bank charges.

In a letter dated December 5, 1980 addressed torespondent bank, Philip Wong as credit administrator of BAFinance Corporation for and in behalf of the latter, undertookto guarantee the loan of the Gaytano spouses.Partial payments were made on the loan leaving an unpaidbalance in the amount of P85,807.25. Since the Gaytanospouses refused to pay their obligation, respondent bankfiled with the trial court complaint for sum of money againstthe Gaytano spouses and petitioner corporation asalternative defendant.

The Gaytano spouses did not present evidence fortheir defense. Petitioner corporation, on the other hand,raised the defense of lack of authority of its creditadministrator to bind the corporation.

On December 12, 1988, the trial court rendered adecision in favor of plaintiff and against defendants/Gaytano

spouses, ordering the latter to jointly and severally pay theplaintiff.

Not satisfied with the decision, respondent bankappealed with the Court of Appeals. On March 13, 1990,respondent appellate court rendered judgment modifying thedecision of the trial court. Hence, this petition.

ISSUE:Whether the letter of guaranty is ultra vires and thus

invalid and/or unenforceable.

HELD:It is a settled rule that persons dealing with an

assumed agent, whether the assumed agency be a generaor special one are bound at their peril, if they would hold theprincipal liable, to ascertain not only the fact of agency butalso the nature and extent of authority, and in case either iscontroverted, the burden of proof is upon them to establish it(Harry Keeler v. Rodriguez, 4 Phil. 19). Hence, the burden ison respondent bank to satisfactorily prove that the creditadministrator with whom they transacted acted within the

authority given to him by his principal, petitioner corporationThe only evidence presented by respondent bank was thetestimony of Philip Wong, credit administrator, who testifiedthat he had authority to issue guarantees as can be deducedfrom the wording of the memorandum given to him bypetitioner corporation on his lending authority. The saidmemorandum which allegedly authorized Wong not only toapprove and grant loans but also to enter into contracts oguaranty in behalf of the corporation.

Although Wong was clearly authorized to approveloans even up to P350,000.00 without any securityrequirement, which is far above the amount subject of theguaranty in the amount of P60,000.00, nothing in the saidmemorandum expressly vests on the credit administratopower to issue guarantees. We cannot agree with

respondent's contention that the phrase "contingencommitment" set forth in the memorandum meansguarantees. It has been held that a power of attorney orauthority of an agent should not be inferred from the use ovague or general words. Guaranty is not presumed, it mustbe expressed and cannot be extended beyond its specifiedlimits (Director v. Sing Juco, 53 Phil. 205). In one case, whereit appears that a wife gave her husband power of attorney toloan money, this Court ruled that such fact did not authorizehim to make her liable as a surety for the payment of thedebt of a third person (Bank of Philippine Islands v. Coster47 Phil. 594).

The sole allegation of the credit administrator in the absenceof any other proof that he is authorized to bind petitioner in acontract of guaranty with third persons should not be givenweight. The representation of one who acts as agent cannot

by itself serve as proof of his authority to act as agent or ofthe extent of his authority as agent (Velasco v. La Urbana, 58Phil. 681). Wong's testimony that he had entered into similartransactions of guaranty in the past for and in behalf of thepetitioner, lacks credence due to his failure to showdocuments or records of the alleged past transactions. Theactuation of Wong in claiming and testifying that he has theauthority is understandable. He would naturally take steps tosave himself from personal liability for damages torespondent bank considering that he had exceeded hisauthority. The rule is clear that an agent who exceeds hisauthority is personally liable for damages (National PowerCorporation v. National Merchandising Corporation, Nos. L33819 andL-33897, October 23, 1982, 117 SCRA 789).

Anent the conclusion of respondent appellate court thapetitioner is estopped from alleging lack of authority due toits failure to cancel or disallow the guaranty, We find that thesaid conclusion has no basis in fact. Respondent bank hadnot shown any evidence aside from the testimony of thecredit administrator that the disputed transaction of guarantywas in fact entered into the official records or files opetitioner corporation, which will show notice or knowledgeon the latter's part and its consequent ratification of the saidtransaction. In the absence of clear proof, it would be unfaito hold petitioner corporation guilty of estoppel in allowing itscredit administrator to act as though the latter had power toguarantee.

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ACCORDINGLY, the petition is GRANTED and the assaileddecision of the respondent appellate court dated March 13,1990 is hereby REVERSED and SET ASIDE and another one isrendered dismissing the complaint for sum of money againstBA Finance Corporation. SO ORDERED.

QUIROGA v PARSONS HARDWARE CO38 Phil

FACTS:On January 24, 1911, in this city of manila, a contract

was entered into by and between the plaintiff, as party of thefirst part, and J. Parsons (to whose rights and obligations thepresent defendant later subrogated itself), as party of thesecond part.

Of the three causes of action alleged by the plaintiffin his complaint, only two of them constitute the subjectmatter of this appeal and both substantially amount to theaverment that the defendant violated the followingobligations: not to sell the beds at higher prices than those ofthe invoices; to have an open establishment in Iloilo; itself toconduct the agency; to keep the beds on public exhibition,and to pay for the advertisement expenses for the same; andto order the beds by the dozen and in no other manner. Asmay be seen, with the exception of the obligation on the partof the defendant to order the beds by the dozen and in no

other manner, none of the obligations imputed to thedefendant in the two causes of action are expressly set forthin the contract. But the plaintiff alleged that the defendantwas his agent for the sale of his beds in Iloilo, and that saidobligations are implied in a contract of commercial agency.

ISSUE:whether the defendant, by reason of the contract

hereinbefore transcribed, was a purchaser or an agent of theplaintiff for the sale of his beds..

HELD:In order to classify a contract, due regard must be

given to its essential clauses. In the contract in question,what was essential, as constituting its cause and subjectmatter, is that the plaintiff was to furnish the defendant withthe beds which the latter might order, at the price stipulated,and that the defendant was to pay the price in the mannerstipulated. The price agreed upon was the one determined bythe plaintiff for the sale of these beds in Manila, with adiscount of from 20 to 25 per cent, according to their class.Payment was to be made at the end of sixty days, or before,at the plaintiff's request, or in cash, if the defendant sopreferred, and in these last two cases an additional discountwas to be allowed for prompt payment. These are preciselythe essential features of a contract of purchase and sale.

There was the obligation on the part of the plaintiff to supplythe beds, and, on the part of the defendant, to pay theirprice. These features exclude the legal conception of anagency or order to sell whereby the mandatory or agentreceived the thing to sell it, and does not pay its price, but

delivers to the principal the price he obtains from the sale ofthe thing to a third person, and if he does not succeed inselling it, he returns it. By virtue of the contract between theplaintiff and the defendant, the latter, on receiving the beds,was necessarily obliged to pay their price within the termfixed, without any other consideration and regardless as towhether he had or had not sold the beds.

It would be enough to hold, as we do, that thecontract by and between the defendant and the plaintiff isone of purchase and sale, in order to show that it was notone made on the basis of a commission on sales, as theplaintiff claims it was, for these contracts are incompatiblewith each other. But, besides, examining the clauses of this

contract, none of them is found that substantiallysupports the plaintiff's contention. Not a single one of theseclauses necessarily conveys the idea of an agency. Thewords commission on sales used in clause (A) of article 1mean nothing else, as stated in the contract itself, than amere discount on the invoice price. The word agency, alsoused in articles 2 and 3, only expresses that the defendantwas the only one that could sell the plaintiff's beds in theVisayan Islands. With regard to the remaining clauses, theleast that can be said is that they are not incompatible with

the contract of purchase and sale. The plaintiff calls attention to the testimony o

Ernesto Vidal, a former vice-president of the defendancorporation and who established and managed the latter'sbusiness in Iloilo. It appears that this witness, prior to thetime of his testimony, had serious trouble with thedefendant, had maintained a civil suit against it, and hadeven accused one of its partners, Guillermo Parsons, ofalsification. He testified that it was he who drafted thecontract Exhibit A, and, when questioned as to what was hispurpose in contracting with the plaintiff, replied that it was tobe an agent for his beds and to collect a commission onsales. However, according to the defendant's evidence, iwas Mariano Lopez Santos, a director of the corporation, whoprepared Exhibit A. But, even supposing that Ernesto Vida

has stated the truth, his statement as to what was his idea incontracting with the plaintiff is of no importance, inasmuchas the agreements contained in Exhibit A which he claims tohave drafted, constitute, as we have said, a contract opurchase and sale, and not one of commercial agency. Thisonly means that Ernesto Vidal was mistaken in hisclassification of the contract. But it must be understood thata contract is what the law defines it to be, and not what it iscalled by the contracting parties.

The plaintiff also endeavored to prove that thedefendant had returned beds that it could not sell; thatwithout previous notice, it forwarded to the defendant thebeds that it wanted; and that the defendant received itscommission for the beds sold by the plaintiff directly topersons in Iloilo. But all this, at the most only shows that, onthe part of both of them, there was mutual tolerance in the

performance of the contract in disregard of its terms; and itgives no right to have the contract considered, not as theparties stipulated it, but as they performed it. Only the actsof the contracting parties, subsequent to, and in connectionwith, the execution of the contract, must be considered fothe purpose of interpreting the contract, when suchinterpretation is necessary, but not when, as in the instancase, its essential agreements are clearly set forth andplainly show that the contract belongs to a certain kind andnot to another. Furthermore, the return made was of certainbrass beds, and was not effected in exchange for the pricepaid for them, but was for other beds of another kind; and fothe letter Exhibit L-1, requested the plaintiff's prior consentwith respect to said beds, which shows that it was noconsidered that the defendant had a right, by virtue of the

contract, to make this return. As regards the shipment ofbeds without previous notice, it is insinuated in the recordthat these brass beds were precisely the ones so shippedand that, for this very reason, the plaintiff agreed to theireturn. And with respect to the so-called commissions, wehave said that they merely constituted a discount on theinvoice price, and the reason for applying this benefit to thebeds sold directly by the plaintiff to persons in Iloilo wasbecause, as the defendant obligated itself in the contract toincur the expenses of advertisement of the plaintiff's bedssuch sales were to be considered as a result of thaadvertisement.

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In respect to the defendant's obligation to order by thedozen, the only one expressly imposed by the contract, theeffect of its breach would only entitle the plaintiff todisregard the orders which the defendant might place underother conditions; but if the plaintiff consents to fill them, hewaives his right and cannot complain for having acted thus athis own free will.For the foregoing reasons, we are of opinion that the contractby and between the plaintiff and the defendant was one ofpurchase and sale, and that the obligations the breach of

which is alleged as a cause of action are not imposed uponthe defendant, either by agreement or by law.

The judgment appealed from is affirmed, with costsagainst the appellant. So ordered.

ALBALADEJO v PHILIPPINE REFINING CO45 Phil 556

FACTS:It appears that Albaladejo y Cia. is a limited

partnership, organized in conformity with the laws of theseIslands, and having its principal place of business at Legaspi,in the Province of Albay; and during the transactions whichgave origin to this litigation said firm was engaged in thebuying and selling of the products of the country, especiallycopra, and in the conduct of a general mercantile business in

Legaspi and in other places where it maintained agencies, orsub-agencies, for the prosecution of its commercialenterprises.

The Visayan Refining Co. is a corporation organized underthe laws of the Philippine Islands; and prior to July 9, 1920, itwas engaged in operating its extensive plant at Opon, Cebu,for the manufacture of coconut oil.

On August 28, 1918, the plaintiff made a contractwith the Visayan Refining Co.

Pursuant to this agreement the plaintiff, during theyear therein contemplated, bought copra extensively for theVisayan Refining Co. At the end of said year both partiesfound themselves satisfied with the existing arrangement,and they therefore continued by tacit consent to govern theirfuture relations by the same agreement. In this situationaffairs remained until July 9, 1920, when the Visayan RefiningCo. closed down its factory at Opon and withdrew from thecopra market.

When the contract above referred to was originallymade, Albaladejo y Cia. apparently had only one commercialestablishment, i.e., that at Legaspi; but the largerequirements of the Visayan Refining Co. for copra appearedso far to justify the extension of the plaintiff's business thatduring the course of the next two or three years itestablished some twenty agencies, or subagencies, invarious ports and places of the Province of Albay andneighboring provinces.

After the Visayan Refining Co. had ceased to buycopra, as above stated, of which fact the plaintiff was dulynotified, the supplies of copra already purchased by theplaintiff were gradually shipped out and accepted by the

Visayan Refining Co., and in the course of the next eight orten months the accounts between the two parties wereliquidated. The last account rendered by the Visayan RefiningCo. to the plaintiff was for the month of April, 1921, and itshowed a balance of P288 in favor of the defendant. Underdate of June 25, 1921, the plaintiff company addressed aletter from Legaspi to the Philippine Refining Co. (which hadnow succeeded to the rights and liabilities of the VisayanRefining Co.), expressing its approval of said account. In thisletter no dissatisfaction was expressed by the plaintiff as tothe state of affairs between the parties; but about six weeksthereafter the present action was begun.

This action was instituted in the Court ofFirst Instance of the Province of Albay by Albaladejo y Cia., Sen C., to recover a sum of money from the Philippine RefiningCo., as successor to the Visayan Refining Co., two causes ofaction being stated in the complaint. Upon hearing the causethe trial judge absolved the defendant from the first cause ofaction but gave judgment for the plaintiff to recover the sumof P49,626.68, with costs, upon the second cause of actionFrom this judgment the plaintiff appealed with respect to theaction taken upon the first cause of action, and the

defendant appealed with respect to the action taken uponthe second cause of action. It results that, by the appeal othe two parties, the decision of the lower court is here underreview as regards the action taken upon both grounds ofaction set forth in the complaint.

ISSUE:Whether he defendant liable for the expenses

incurred by the plaintiff in keeping its organization intactduring the period now under consideration.

HELD:We note that in his letter of July 10, 1920, Mr. Day

suggested that if the various purchasing agents of theVisayan Refining Co. would keep their organization intact, the

company would endeavor to see that they should not lose bythe transaction in the long run. These words afford nosufficient basis for the conclusion, which the trial judgededuced therefrom, that the defendant is bound tocompensate the plaintiff for the expenses incurred inmaintaining its organization. The correspondence sufficientlyshows on its face that there was no intention on the part ofthe company to lay a basis for contractual liability of anysort; and the plaintiff must have understood the letters inthat light. The parties could undoubtedly have contractedabout it, but there was clearly no intention to enter intocontractual relation; and the law will not raise a contract byimplication against the intention of the parties. Theinducement held forth was that, when purchasing should beresumed, the plaintiff would be compensated by the profitsthen to be earned for any expense that would be incurred in

keeping its organization intact. It is needless to say thathere is no proof showing that the officials of the defendantacted in bad faith in holding out this hope.

In the appellant's brief the contention is advancedthat the contract between the plaintiff and the VisayanRefining Co. created the relation of principal and agenbetween the parties, and the reliance is placed upon article1729 of the Civil Code which requires the principal toindemnify the agent for damages incurred in carrying out theagency. Attentive perusal of the contract is, howeverconvincing to the effect that the relation between the partieswas not that of principal and agent in so far as relates to thepurchase of copra by the plaintiff. It is true that the VisayanRefining Co. made the plaintiff one of its instruments for thecollection of copra; but it is clear that in making its purchases

from the producers the plaintiff was buying upon its ownaccount and that when it turned over the copra to theVisayan Refining Co., pursuant to that agreement, a secondsale was effected. In paragraph three of the contract it isdeclared that during the continuance of this contract theVisayan Refining Co. would not appoint any other agent forthe purchase of copra in Legaspi; and this gives riseindirectly to the inference that the plaintiff was considered itsbuying agent. But the use of this term in one clause of thecontract cannot dominate the real nature of the agreementas revealed in other clauses, no less than in the caption othe agreement itself. In some of the trade letters also thevarious instrumentalities used by the Visayan Refining Co. for

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the collection of copra are spoken of as agents. But thisdesignation was evidently used for convenience; and it isvery clear that in its activities as a buyer the plaintiff wasacting upon its own account and not as agents, in the legalsense, of the Visayan Refining Co. The title to all of the coprapurchased by the plaintiff undoubtedly remained in it until itwas delivered by way of subsequent sale to said company.

For the reasons stated we are of the opinion that noliability on the part of the defendant is shown upon theplaintiff's second cause of action, and the judgment of the

trial court on this part of the case is erroneous.The appealed judgment will therefore be affirmed in

so far as it absolves the defendant from the first cause ofaction and will be reversed in so far as it gives judgmentagainst the defendant upon the second cause of action; andthe defendant will be completely absolved from thecomplaint. So ordered, without express findings as to costs ofeither instance.

CARAM v. LAURETA103 SCRA 7

FACTS:This is a petition for certiorari to review the decision

of the Court of Appeals promulgated on January 29, 1968 in

CA-G. R. NO. 35721-R entitled "Claro L. Laureta, plaintiff-appellee versus Marcos Mata, Codidi Mata and FerminCaram, Jr., defendants- appellants; Tampino (Mansaca), et al.Intervenors-appellants," affirming the decision of the Court ofFirst Instance of Davao in Civil Case No. 3083.

On June 25, 1959, Claro L. Laureta filed in the Courtof First Instance of Davao an action for nullity, recovery ofownership and/or reconveyance with damages and attorney'sfees against Marcos Mata, Codidi Mata, Fermin Z. Caram, Jr.and the Register of Deeds of Davao City.

On June 10, 1945, Marcos Mata conveyed a largetract of agricultural land covered by Original Certificate of

Title No. 3019 in favor of Claro Laureta, plaintiff, therespondent herein. The deed of absolute sale in favor of theplaintiff was not registered because it was not acknowledgedbefore a notary public or any other authorized officer. At thetime the sale was executed, there was no authorized officerbefore whom the sale could be acknowledged inasmuch asthe civil government in Tagum, Davao was not as yetorganized. However, the defendant Marcos Mata delivered toLaureta the peaceful and lawful possession of the premisesof the land together with the pertinent papers thereof suchas the Owner's Duplicate Original Certificate of Title No.3019, sketch plan, tax declaration, tax receipts and otherpapers related thereto. Since June 10, 1945, the plaintiffLaureta had been and is stin in continuous, adverse andnotorious occupation of said land, without being molested,disturbed or stopped by any of the defendants or theirrepresentatives. In fact, Laureta had been paying realtytaxes due thereon and had introduced improvements worthnot less than P20,000.00 at the time of the filing of the

complaint.On May 5, 1947, the same land covered by Original

Certificate of Title No. 3019 was sold by Marcos Mata todefendant Fermin Z. Caram, Jr., petitioner herein. The deedof sale in favor of Caram was acknowledged before Atty.Abelardo Aportadera. On May 22, 1947, Marcos Mata,through Attys. Abelardo Aportadera and Gumercindo Arcilla,filed with the Court of First Instance of Davao a petition forthe issuance of a new Owner's Duplicate of OriginalCertificate of Title No. 3019, alleging as ground therefor theloss of said title in the evacuation place of defendant MarcosMata in Magugpo, Tagum, Davao. On June 5, 1947, the Courtof First Instance of Davao issued an order directing the

Register of Deeds of Davao to issue a newOwner's Duplicate Certificate of Title No. 3019 in favor ofMarcos Mata and declaring the lost title as null and void. OnDecember 9, 1947, the second sale between Marcos Mataand Fermin Caram, Jr. was registered with the Register oDeeds. On the same date, Transfer Certificate of Title No140 was issued in favor of Fermin Caram Jr.

On August 29, 1959, the defendants Marcos Mataand Codidi Mata filed their answer with counterclaimadmitting the existence of a private absolute deed of sale of

his only property in favor of Claro L. Laureta but alleging thathe signed the same as he was subjected to duress, threatand intimidation for the plaintiff was the commanding officeof the 10th division USFIP operating in the unoccupied areasof Northern Davao with its headquarters at Project No. 7 (Km60, Davao Agusan Highways), in the Municipality of TagumProvince of Davao; that Laureta's words and requests werelaws; that although the defendant Mata did not like to sell hisproperty or sign the document without even understandingthe same, he was ordered to accept P650.00 MindanaoEmergency notes; and that due to his fear of harm or dangerthat will happen to him or to his family, if he refused he hadno other alternative but to sign the document.

The defendants Marcos Mata and Codidi Mata alsoadmit the existence of a record in the Registry of Deeds

regarding a document allegedly signed by him in favor of hisco-defendant Fermin Caram, Jr. but denies that he evesigned the document for he knew before hand that he hadsigned a deed of sale in favor of the plaintiff and that theplaintiff was in possession of the certificate of title; that iever his thumb mark appeared in the document purportedlyalienating the property to Fermin Caram, did his consent wasobtained through fraud and misrepresentation for thedefendant Mata is illiterate and ignorant and did not knowwhat he was signing; and that he did not receive aconsideration for the said sale.

The defendant Fermin Caram Jr. filed his answer on Octobe23, 1959 alleging that he has no knowledge or informationabout the previous encumbrances, transactions, andalienations in favor of plaintiff until the filing of thecomplaints.

The trial court rendered a decision declaring that thedeed of sale, Exhibit A, executed by Marcos Mata in favor ofClaro L. Laureta stands and prevails over the deed of sale, infavor of Fermin Caram, Jr.

The defendants appealed from the judgment to theCourt of Appeals which promulgated its decision affirming the

judgment of the trial court.

ISSUE:Whether there is a valid sale of the property was

made through his representatives, Pedro Irespe and AttyAbelardo Aportadera.

HELD:The contention of the petitioner has no merit. The

facts of record show that Mata, the vendor, and Caram, thesecond vendee had never met. During the trial, Marcos Matatestified that he knows Atty. Aportadera but did not knowCaram. Thus, the sale of the property could have only beenthrough Caram's representatives, Irespe and Aportadera. Thepetitioner, in his answer, admitted that Atty. Aportaderaacted as his notary public and attorney-in-fact at the sametime in the purchase of the property.

The petitioner contends that he cannot bconsidered to have acted in bad faith because there is nodirect proof showing that Irespe and Aportadera, his allegedagents, had knowledge of the first sale to Laureta. Thicontention is also without merit.

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Even if Irespe and Aportadera did not have actual knowledgeof the first sale, still their actions have not satisfied therequirement of good faith. Bad faith is not based solely onthe fact that a vendee had knowledge of the defect or lack oftitle of his vendor.

In the instant case, Irespe and Aportadera hadknowledge of circumstances which ought to have put theman inquiry. Both of them knew that Mata's certificate of titletogether with other papers pertaining to the land was takenby soldiers under the command of Col. Claro L. Laureta. 16

Added to this is the fact that at the time of the second saleLaureta was already in possession of the land. Irespe andAportadera should have investigated the nature of Laureta'spossession. If they failed to exercise the ordinary careexpected of a buyer of real estate they must suffer theconsequences. The rule of caveat emptor requires thepurchaser to be aware of the supposed title of the vendorand one who buys without checking the vendor's title takesall the risks and losses consequent to such failure.

The principle that a person dealing with the owner ofthe registered land is not bound to go behind the certificateand inquire into transactions the existence of which is notthere intimated should not apply in this case. It was ofcommon knowledge that at the time the soldiers of Lauretatook the documents from Mata, the civil government of

Tagum was not yet established and that there were noofficials to ratify contracts of sale and make themregisterable. Obviously, Aportadera and Irespe knew thateven if Mata previously had sold t he Disputed such salecould not have been registered.

There is no doubt then that Irespe and Aportadera, acting asagents of Caram, purchased the property of Mata in badfaith. Applying the principle of agency, Caram as principal,should also be deemed to have acted in bad faith.

Since Caram was a registrant in bad faith, thesituation is as if there was no registration at all.

The question to be determined now is, who was first inpossession in good faith? A possessor in good faith is onewho is not aware that there exists in his title or mode ofacquisition any flaw which invalidates it. Laureta was first inpossession of the property. He is also a possessor in good

faith. It is true that Mata had alleged that the deed of sale infavor of Laureta was procured by force. 21 Such defect,however, was cured when, after the lapse of four years fromthe time the intimidation ceased, Marcos Mata lost both hisrights to file an action for annulment or to set up nullity ofthe contract as a defense in an action to enforce the same.

Anent the fourth error assigned, the petitionercontends that the second deed of sale, Exhibit "F", is avoidable contract. Being a voidable contract, the action forannulment of the same on the ground of fraud must bebrought within four (4) years from the discovery of the fraud.In the case at bar, Laureta is deemed to have discovered thatthe land in question has been sold to Caram to his prejudiceon December 9, 1947, when the Deed of Sale, Exhibit "F" wasrecorded and entered in the Original Certificate of Title by

the Register of Deeds and a new Certificate of Title No. 140was issued in the name of Caram. Therefore, when thepresent case was filed on June 29, 1959, plaintiff's cause ofaction had long prescribed.

The petitioner's conclusion that the second deed ofsale, "Exhibit F", is a voidable contract is not correct. I norder that fraud can be a ground for the annulment of acontract, it must be employed prior to or simultaneous tothe, consent or creation of the contract. The fraud or dolocausante must be that which determines or is the essentialcause of the contract. Dolo causante as a ground for theannulment of contract is specifically described in Article 1338of the New Civil Code of the Philippines as "insidious words or

machinations of one of the contracting parties"which induced the other to enter into a contract, and"without them, he would not have agreed to".

The second deed of sale in favor of Caram is not a voidablecontract. No evidence whatsoever was shown that throughinsidious words or machinations, the representatives oCaram, Irespe and Aportadera had induced Mata to enter intothe contract.

Since the second deed of sale is not a voidablecontract, Article 1391, Civil Code of the Philippines which

provides that the action for annulment shall be broughwithin four (4) years from the time of the discovery of frauddoes not apply. Moreover, Laureta has been in continuouspossession of the land since he bought it in June 1945.A more important reason why Laureta's action could not haveprescribed is that the second contract of sale, having beenregistered in bad faith, is null and void. Article 1410 of theCivil Code of the Philippines provides that any action odefense for the declaration of the inexistence of a contractdoes not prescribe.

In a Memorandum of Authorities submitted to thiCourt on March 13, 1978, the petitioner insists that theaction of Laureta against Caram has prescribed because thesecond contract of sale is not void under Article 1409 23 othe Civil Code of the Philippines which enumerates the kinds

of contracts which are considered void. Moreover, Article1544 of the New Civil Code of the Philippines does notdeclare void a second sale of immovable registered in badfaith.

The fact that the second contract is not considered voidunder Article 1409 and that Article 1544 does not declarevoid a deed of sale registered in bad faith does not meanthat said contract is not void. Article 1544 specificallyprovides who shall be the owner in case of a double sale ofan immovable property. To give full effect to this provisionthe status of the two contracts must be declared valid so thatone vendee may contract must be declared void to cut off alrights which may arise from said contract. Otherwise, Article1544 win be meaningless.

The first sale in favor of Laureta prevails over the sale infavor of Caram.

WHEREFORE, the petition is hereby denied and thedecision of the Court of Appeals sought to be reviewed isaffirmed, without pronouncement as to costs. SO ORDERED.

FIEGE & BROWN v SMITH, BELL & COMPANY, LTD.43 Phil 113

FACTS: The defendant, Smith, Bell & Co. Ltd., is

corporation organized under the laws of the Philippine Islandswith its principal office in the city of Manila. In 1918, thedefendant Cowper was in the employ of the defendancorporation, which among other things, was engaged in thesale of machinery and equipment for the use omanufacturers of coconut oil.

As the result of negotiations with the company, onMay 6, 1918, Cowper wrote a letter.

This letter referred to what is known in the evidenceas the Harden contract. Later, both plaintiffs here becameassociated with Cowper in finding purchasers and in the saleof such machinery for the defendant corporation. Outside othe above letter, there is no written contract as to what theplaintiffs should receive or the defendant should pay themfor their services, and there is but little, if any, oral evidenceof any contract between Fiege, Brown, and Cowper, as oneparty, and the defendant corporation, as the other.As a result of their services, a number of purchasers werefound for the machinery with whom the defendan

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corporation entered into written contracts for its sale anddelivery, and undertook in good faith to carry out the termsand provisions of the different contracts with the respectivepurchasers. The plaintiffs Fiege and Brown now claim thatthe signing of the respective purchasers made andconstituted a complete sale of the machinery, and that theircompensation should be based upon the gross amount of thecontracts, which should be construed as completed sales. Inother words, which when the contracts were signed, theirservices were complete and their commissions were earned.

Claiming that the defendant company has breachedits contract, and refused to account or settle with theplaintiffs for their services, they commenced this action, torecover from the defendant corporation, and becauseCowper refused to join the plaintifs, he was made adefendant in the action.Among other things, the complaint alleges that, under theterms and conditions of the contract, the plaintiffs and theirassociate Cowper were to seek buyers for the machinerywhich were acceptable to the defendant company, and thatthe prices were to be fixed by the plaintiffs, as brokers, butwhich should, in no case, be less than P10,000 for eachexpeller, and that the date of delivery should not be specificbut only approximate.

That the plaintiffs secured order for machinery and

equipment and which were delivered to, and accepted by ,the defendant company, as follows: (Here follows a list of thecontracts, dates, with whom made, and amounts aggregatingto P313,000.)

It is then alleged that, for the purpose of carrying outthe respective contracts, the defendant imported all of thespecified machinery, but that it has failed and refused andstill refuses to make any settlement with the plaintiffs or torender any accounting of the cost of the machinery, or tomake any payment, either in full or on account, of theservices rendered. That the plaintiffs have no way todetermine the amount of the compensation which theyshould receive, and that it can only ascertained by means ofan accounting, which the defendant company should make.

That they are entitled to recover approximately P35,000, andthey pray that the defendant company be required within a

reasonable time to furnish the plaintiffs a full and completeaccounting, and to pay them the amount found to be due forthe service rendered, upon which they should have interestfrom the time the machinery was imported, and for suchother and further relief as may be just and equitable.

For answer, the defendant admits that at the timesalleged the plaintiffs were associated, as partners, under thefirm name of the Philippine General Commercial Company;that it is a corporation as alleged; and that in the year, 1918,it engaged the plaintiffs to act as brokers for the sale ofmachinery and equipmetn, and they delivered purchasers'contracts to the defendant company, which it accepted,amounting to P313,000 as alleged in paragraph 6 of thecomplaint. The defendant J.C. Cowper was formerly a partnerof the plaintiffs, and withdrew from the partnership won

August 8, 1918, and that he had an interest in the amountwhich the plaintiffs should recover, but refused to join withthem, and denies all other material allegations of thecomplaint, and, as a further and separate defense, allegesthat the plaintiffs and defendant Cowper secured orders formachinery and equipment, for which the company, "agreedto pay plaintiffs and the defendant J.C. Cowper, in equalshares, one-half of the net profits derived by said defendant,Smith, Bell & Co., Ltd., from said orders."

It is then alleged that outside of P2,000 paid by theInsular Coconut Oil, Co., on its order of August 22, 1918, noother payment s have been made on the respectivecontracts by any of the other purchaser, which were secured

by the plaintiffs. That until such payments havebeen made, the defendant company cannot ascertain the netprofits, but that it has not received any profits whatever fromany of the other orders, and that, as soon as full payment ofany order is made by the purchaser, the company will rendean accounting to plaintiffs, and pay them any amount founddue.

Upon such issues, the case was tried, and ajudgment was rendered for plaintiffs for P6,511.17, withoutinterest or costs, from which they appealed, claiming that the

court erred in failing to find that the plaintifs were entitled tocommissions on two different contracts; that the court erredin failing to find that the plaintiffs were entitled tocommissions on two different contracts; that the court erredin holding that plaintiffs' recovery should be based upon thedefendant company realizing a profit on the respectivecontracts; and in rendering judgement without interest ocosts.

ISSUE:Whether the one half agreed upon by the party

should be one-half of the difference between the cost of themachinery laid down at Manila and the price specified in thecontracts with the respective purchasers or "one-half of thenet profits."

HELD:Although the oral evidence pro and con is more or

less conflicting, the trial court found that the letter of May 61918, above quoted, was basis of the contract under whichthe services were rendered, and that the plaintiffs were onlyentitled to recover one-half of the net profits that thecompany made out of its contracts with the purchasers, andlimited the amount of plaintiffs' recovery to the one-half ofthe net profits, which the company had actually received andcollected under the contracts ,or P6,511.17.

April 15, 1918, Fiege, Brown and Cowper formed apartnership known as the Philippine General CommerciaCompany to do a general brokerage business. It is admittedthat on May 6, 1918, Cowper wrote the letter above quotedand that the different members of the firm and the defendant

company knew that the letter was written and receivedAugust 15, 1918, the respective members of the firm signeda writing, which, among, other things, recites:

It is further agreed that whatever commissions maybe due or become due to the members of thecopartnership on order for machinery omerchandise shall be paid by Smith, Bell & Co. prorata among the three partners, etc."and that on thesame date the three members of the firm addressedthe following letter to the defendant company:

The undersigned hereby request that acommissions that may accrue on orders fomachinery or merchandise accepted or pendingacceptance in which we, or any of us, may beinterested, be paid as same fall due to the

undersigned individually in pro rata shares of one-third of such commissions . . . . "

The contract with Harden was dated May 16; with VicenteSotelo two contracts were dated August 16, and two August20; one with A. Chicote was August 11; and the other August19, and the one with the Insular Coconut Oil Co., August 22all in the year, 1918. When you consider the dates of therespective contracts, the recital in the agreement betweenthe members of the firm, and the letter to the firm of August15, become important. The firm agreement recites "thawhatever commissions may be due or become due," and theletter recites " that all commission that may accrue on orders

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for machinery or merchandise accepted or pendingacceptance."

The expellers were not to be sold for less than P10,000. Aswe construe the contract, the plaintiffs and Cowper duringhis partnership, as one party, and the defendant company, asthe other party, were to divide equally the profits of eachcontract, and until such time as the company made a profiton a given contract, plaintiffs' commission was not earned asto that contract. There was no profit through the meresigning of the contract by the purchaser and its acceptance

by the company. There would not be any profit until thepurchaser paid all the money and complied with his contract.Until such time as the company realized a profit on thecontracts, there was nothing to share or divide.

The authorities cited by the attorneys for theappellants are good law, but, under the facts in this case,they are not in point.

Plaintiffs commission was to paid out of, and islimited to, net profits, and except as to the amount found bythe trial court, there is no evidence of net profit on any of thecontracts.No tender was made before October 15, 1919, the date offiling the complaint, and none is alleged in the answer.September 8, 1920, through its attorneys, the defendantwrote a letter to plaintiffs' attorneys, in which they say they

are willing to pay as commissions on contracts for the sale ofa machinery the sum of P6,511.17, "in full settlement of allclaims which they have upon our clients on that behalf as ofthis date," and we "hereby tender you the sum of P6,511.17in full settlement of all claims due by our clients as of thisdate."

As applied to the existing facts, it might bequestioned as to whether this was a good tender of theP6,511.17. But, assuming that it was valid for that amount, itwas made nearly one year after the action was commencedand more than one year after the defendant had collectedthe money upon the contracts, and it does not includeinterest on the money collected or the accrued costs.

The evidence shows, and the company in effectadmits, that from and out of moneys which it had previouslycollected on the contracts, the plaintiffs were entitled to have

and received P6,511.17. Under the contract between theplaintiffs and the company, this money should have beenpaid to the plaintiffs when it was collected.

The lower court found that the plaintiffs were notentitled to interest and costs. That was error. In so far as itfound that the plaintiffs were entitled to judgment forP6,511.17, the judgment of the lower court is affirmed. In allother respects, it is reversed, and a judgement will beentered here in favor of the plaintiffs for P6,511.17, withinterest from the 15th of October,1919, at the rate of six percent per annum, together with costs in favor of the plaintiffsin both this and the lower court.

This judgment to be without prejudice to plaintiffs'right to recover any other profits which may have accrued orwhich may hereafter accrue upon any of the remaining

contracts. So ordered.

LIM TEK GOAN v AZORES76 Phil 363

FACTS:The accused was arraigned on August 7, 1952 and

the case set for hearing on September 19, 1952. On thelatter date, after the first witness for the prosecution hastestified, counsel for private prosecution moved for thepostponement of the trial on the ground that their nextwitness was sick and unable to come to court. This motionwas granted and the trial was postponed to October 17,1952, this time to be held at Calamba, Laguna. When this

date came, the private prosecution, throughcounsel, presented an urgent motion for continuance of thetrial, which was granted with the conformity of the defensethe court setting it on November 13, 1952.

On said date, November 13, counsel for privateprosecution, instead of going to trial, again filed a motion fopostponement, this time seeking to transfer the case to theSan Pablo branch alleging as reasons that his witnesses wereall residents of San Pablo City and it would be to theiconvenience, as well as of the defendants, who were likewise

residing in the same place, that the trial be continued thereThis motion was objected to not only by the defense but alsoby Fiscal David Carreon who argued that he saw no reasonfor the transfer in view of the fact that the case had alreadybeen partially tried at the Calamba branch. In the course othe argument that ensued, counsel for the accusedintervened and joined Fiscal David Carreon in his oppositionto the transfer making the observation in passing that sincethe private prosecutor was acting under the direction andcontrol of the fiscal and the latter had registered hisobjection, he found no reason for him to insist on his petitionmore so when his appearance in this case was not as amatter of right but merely by tolerance on the part of thecourt.

This observation came as a surprise to the counse

for private prosecution who then and there asked the courtfor a ruling as to whether his appearance in the case was amatter of right or a matter of tolerance as insinuatedintimating that if this should be resolved against him hewould bring the matter to the Supreme Court for a definiteruling. Forthwith, the court ruled that in cases of this naturewhich do not involve any civil liability the appearance of aprivate prosecutor cannot be considered as a matter of rightand if allowed it would only be upon tolerance of the courtand of the parties. This conclusion notwithstanding, the courtnoted that counsel for the private prosecution cannot claimany prejudice on his part for he could continue appearing assuch by tolerance of the court until after the final terminationof the case. Not satisfied with this ruling, counsel interposedthe present petition for certiorari.

ISSUE:Whether in the prosecution of a criminal case

commenced either by complaint or by information anoffended party may intervene, personally or by attorney, as amatter of right as claimed by petitioner, or upon meretolerance, as ruled by respondent judge.

HELD:The law on this point is clear. Section 4, Rule 106

provides that "all criminal actions either commenced bycomplaint or by information shall be prosecuted under thedirection and control of the fiscal"' and, as a corollary, it isalso provided that "unless the offended party has waived thecivil action or expressly reserved the right to institute it afterthe termination of the criminal case, . . . he may intervene,

personally or by attorney, in the prosecution of the offense."(Section 15, Rule 106.) From these provisions we can clearlyinfer that while criminal actions as a rule are prosecutedunder the direction and control of the fiscal, however, anoffended party may intervene in the proceeding, personallyor by attorney, specially in cases of offenses which cannot beprosecuted except at the instance of the offended party(People vs. Dizon, 44 Phil., 267; Herrero vs. Diaz, 75 Phil.489.) The only exception to this rule is when the offendedparty waives his right to civil action or expressly reserves hisright to institute it after the termination of the case, in whichcase he loses his right to intervene upon the theory that he isdeemed to have lost his interest in its prosecution.(People vs

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Velez, 77 Phil., 1026, 44 Off. Gaz., [6], 1811; People vs.Capistrano, 90 Phil., 823.) And in any event, whether anoffended party intervenes in the prosecution of a criminalaction, his intervention must always be subject to thedirection and control of the prosecuting official (Idem.).Considering the foregoing observations, it is apparent thatthe ruling of respondent judge that in cases like the oneunder consideration which do not involve any civil liability anoffended party can only appear upon tolerance on the part ofthe court is not well taken it being contrary to the law and

precedents obtaining in this jurisdiction. In this respect, thelaw makes no distinction between cases that are public innature and those that can only be prosecuted at the instanceof the offended party. In either case the law gives to theoffended party the right to intervene, personally or bycounsel, and he is deprived of such right only when hewaives the civil action or reserves his right to institute one.Such is not the situation in the present case. The case at barinvolves a public crime and the private prosecution hasasserted its right to intervene in the proceedings. Therespondent judge, therefore, erred in considering theappearance of counsel merely as a matter of tolerance.

We believe, however, that the incident at bar is notof such a character as to give rise to a petition for certiorarifor it does not involve grave abuse of discretion. While the

ruling of the judge is erroneous, he has however caused noprejudice to counsel since he has expressly manifested in hisorder that he could continue representing the interest of hisclient. The action of the judge may at most be considered anerror of judgment which can be remedied by appeal. We findtherefore no reason for granting the relief now urged bycounsel in his petition for certiorari.

Wherefore, the petition is denied, withoutpronouncement as to costs.

OBLIGATIONS OF AGENT

Art. 1884. The agent is bound by his acceptance to carryout the agency, and is liable for the damages which, throughhis non-performance, the principal may suffer.

He must also finish the business already begun onthe death of the principal, should delay entail any danger.(1718)Art. 1885. In case a person declines an agency, he is boundto observe the diligence of a good father of a family in thecustody and preservation of the goods forwarded to him bythe owner until the latter should appoint an agent or takecharge of the goods. (n)Art. 1886. Should there be a stipulation that the agent shalladvance the necessary funds, he shall be bound to do soexcept when the principal is insolvent. (n)Art. 1887. In the execution of the agency, the agent shallact in accordance with the instructions of the principal.

In default thereof, he shall do all that a good fatherof a family would do, as required by the nature of thebusiness.

Art. 1888. An agent shall not carry out an agency if itsexecution would manifestly result in loss or damage to theprincipal. (n)Art. 1889. The agent shall be liable for damages if, therebeing a conflict between his interests and those of theprincipal, he should prefer his own. (n)

Art. 1890. If the agent has been empowered to borrowmoney, he may himself be the lender at the current rate ofinterest. If he has been authorized to lend money at interest,he cannot borrow it without the consent of the principal. (n)Art. 1891. Every agent is bound to render an account of histransactions and to deliver to the principal whatever he may

have received by virtue of the agency, eventhough it may not be owing to the principal.

Every stipulation exempting the agent from theobligation to render an account shall be void. (1720a)Art. 1892. The agent may appoint a substitute if theprincipal has not prohibited him from doing so; but he shalbe responsible for the acts of the substitute:

(1) When he was not given the power to appoint one(2) When he was given such power, but withoudesignating the person, and the person appointed

was notoriously incompetent or insolvent.All acts of the substitute appointed against the prohibition othe principal shall be void. (1721)

Art. 1893. In the cases mentioned in Nos. 1 and 2 of thepreceding article, the principal may furthermore bring anaction against the substitute with respect to the obligationswhich the latter has contracted under the substitution(1722a)Art. 1894. The responsibility of two or more agents, eventhough they have been appointed simultaneously, is nosolidary, if solidarity has not been expressly stipulated(1723)Art. 1895. If solidarity has been agreed upon, each of theagents is responsible for the non-fulfillment of agency, and

for the fault or negligence of his fellows agents, except in thelatter case when the fellow agents acted beyond the scope otheir authority. (n)Art. 1896. The agent owes interest on the sums he hasapplied to his own use from the day on which he did so, andon those which he still owes after the extinguishment of theagency. (1724a)Art. 1897. The agent who acts as such is not personallyliable to the party with whom he contracts, unless heexpressly binds himself or exceeds the limits of his authoritywithout giving such party sufficient notice of his powers(1725)Art. 1898. If the agent contracts in the name of theprincipal, exceeding the scope of his authority, and theprincipal does not ratify the contract, it shall be void if theparty with whom the agent contracted is aware of the limits

of the powers granted by the principal. In this case, however,the agent is liable if he undertook to secure the principal'sratification. (n)Art. 1899. If a duly authorized agent acts in accordance withthe orders of the principal, the latter cannot set up theignorance of the agent as to circumstances whereof hehimself was, or ought to have been, aware. (n)Art. 1900. So far as third persons are concerned, an act isdeemed to have been performed within the scope of theagent's authority, if such act is within the terms of the powerof attorney, as written, even if the agent has in facexceeded the limits of his authority according to anunderstanding between the principal and the agent. (n)Art. 1901. A third person cannot set up the fact that theagent has exceeded his powers, if the principal has ratified

or has signified his willingness to ratify the agent's acts. (n)Art. 1902. A third person with whom the agent wishes tocontract on behalf of the principal may require thepresentation of the power of attorney, or the instructions asregards the agency. Private or secret orders and instructionsof the principal do not prejudice third persons who haverelied upon the power of attorney or instructions shownthem. (n)Art. 1903. The commission agent shall be responsible fothe goods received by him in the terms and conditions andas described in the consignment, unless upon receiving them

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he should make a written statement of the damage anddeterioration suffered by the same. (n)Art. 1904. The commission agent who handles goods of thesame kind and mark, which belong to different owners, shalldistinguish them by countermarks, and designate themerchandise respectively belonging to each principal. (n)Art. 1905. The commission agent cannot, without theexpress or implied consent of the principal, sell on credit.Should he do so, the principal may demand from himpayment in cash, but the commission agent shall be entitled

to any interest or benefit, which may result from such sale.(n)Art. 1906. Should the commission agent, with authority ofthe principal, sell on credit, he shall so inform the principal,with a statement of the names of the buyers. Should he failto do so, the sale shall be deemed to have been made forcash insofar as the principal is concerned. (n)Art. 1907. Should the commission agent receive on a sale,in addition to the ordinary commission, another called aguarantee commission, he shall bear the risk of collectionand shall pay the principal the proceeds of the sale on thesame terms agreed upon with the purchaser. (n)Art. 1908. The commission agent who does not collect thecredits of his principal at the time when they become dueand demandable shall be liable for damages, unless he

proves that he exercised due diligence for that purpose. (n)Art. 1909. The agent is responsible not only for fraud, butalso for negligence, which shall be judged with more or lessrigor by the courts, according to whether the agency was orwas not for a compensation. (1726)

DOMINGO v. DOMINGO42 SCRA 131

FACTS:In a document, Vicente M. Domingo granted

Gregorio Domingo, a real estate broker, the exclusive agencyto sell his lot No. 883 of Piedad Estate with an area of about88,477 square meters at the rate of P2.00 per square meter(or for P176,954.00) with a commission of 5% on the totalprice, if the property is sold by Vicente or by anyone elseduring the 30-day duration of the agency or if the property issold by Vicente within three months from the termination ofthe agency to apurchaser to whom it was submitted byGregorio during the continuance of the agency with notice toVicente. The said agency contract was in triplicate, one copywas given to Vicente, while the original and another copywere retained by Gregorio.On June 3, 1956, Gregorio authorized the intervenor TeofiloP. Purisima to look for a buyer, promising him one-half of the5% commission.

Thereafter, Teofilo Purisima introduced Oscar deLeon to Gregorio as a prospective buyer.

After several conferences between Gregorio andOscar de Leon, the latter raised his offer to P109,000.00 on

June 20, 1956 , to which Vicente agreed by signing. Upondemand of Vicente, Oscar de Leon issued to him a check in

the amount of P1,000.00 as earnest money, after whichVicente advanced to Gregorio the sum of P300.00. Oscar deLeon confirmed his former offer to pay for the property atP1.20 per square meter in another letter. Subsequently,Vicente asked for an additional amount of P1,000.00 asearnest money, which Oscar de Leon promised to deliver tohim. Pursuant to his promise to Gregorio, Oscar gave him asa gift or propina the sum of One Thousand Pesos (P1,000.00)for succeeding in persuading Vicente to sell his lot at P1.20per square meter or a total in round figure of One HundredNine Thousand Pesos (P109,000.00). This gift of One

Thousand Pesos (P1,000.00) was not disclosed by Gregorio toVicente. Neither did Oscar pay Vicente the additional amount

of One Thousand Pesos (P1,000.00) by way ofearnest money. In the deed of sale was not executed onAugust 1, 1956 as stipulated in Exhibit "C" nor on August 15,1956 as extended by Vicente, Oscar told Gregorio that he didnot receive his money from his brother in the United Statesfor which reason he was giving up the negotiation includingthe amount of One Thousand Pesos (P1,000.00) given asearnest money to Vicente and the One Thousand Pesos(P1,000.00) given to Gregorio as propina or gift. When Oscadid not see him after several weeks, Gregorio sensed

something fishy. So, he went to Vicente and read a portion ofExhibit "A" marked habit "A-1" to the effect that Vicente wasstill committed to pay him 5% commission, if the sale isconsummated within three months after the expiration of the30-day period of the exclusive agency in his favor from theexecution of the agency contract on June 2, 1956 to apurchaser brought by Gregorio to Vicente during the said 30day period. Vicente grabbed the original of Exhibit "A" andtore it to pieces. Gregorio held his peace, not wanting toantagonize Vicente further, because he had still duplicate ofExhibit "A". From his meeting with Vicente, Gregorioproceeded to the office of the Register of Deeds of QuezonCity, where he discovered Exhibit "G' deed of sale executedon September 17, 1956 by Amparo Diaz, wife of Oscar deLeon, over their house and lot No. 40 Denver Street, Cubao

Quezon City, in favor Vicente as down payment by Oscar deLeon on the purchase price of Vicente's lot No. 883 of PiedadEstate. Upon thus learning that Vicente sold his property tothe same buyer, Oscar de Leon and his wife, he demanded inwritting payment of his commission on the sale price of OneHundred Nine Thousand Pesos (P109,000.00), Exhibit "H". Healso conferred with Oscar de Leon, who told him that Vicentewent to him and asked him to eliminate Gregorio in thetransaction and that he would sell his property to him for OneHundred Four Thousand Pesos (P104,000.0 In Vicente's replyto Gregorio's letter, Exhibit "H", Vicente stated that Gregoriois not entitled to the 5% commission because he sold theproperty not to Gregorio's buyer, Oscar de Leon, but toanother buyer, Amparo Diaz, wife of Oscar de Leon.

The Court of Appeals found from the evidence thaExhibit "A", the exclusive agency contract, is genuine; that

Amparo Diaz, the vendee, being the wife of Oscar de Leonthe sale by Vicente of his property is practically a sale toOscar de Leon since husband and wife have common oridentical interests; that Gregorio and intervenor TeofiloPurisima were the efficient cause in the consummation of thesale in favor of the spouses Oscar de Leon and Amparo Diazthat Oscar de Leon paid Gregorio the sum of One ThousandPesos (P1,000.00) as "propina" or gift and not as additionaearnest money to be given to the plaintiff, because Exhibit"66", Vicente's letter addressed to Oscar de Leon withrespect to the additional earnest money, does not appear tohave been answered by Oscar de Leon and therefore there isno writing or document supporting Oscar de Leon's testimonythat he paid an additional earnest money of One ThousandPesos (P1,000.00) to Gregorio for delivery to Vicente, unlike

the first amount of One Thousand Pesos (P1,000.00) paid byOscar de Leon to Vicente as earnest money, evidenced bythe letter Exhibit "4"; and that Vicente did not even mentionsuch additional earnest money in his two replies Exhibits "I"and "J" to Gregorio's letter of demand of the 5% commission.

ISSUE:(1) whether the failure on the part of Gregorio to disclose toVicente the payment to him by Oscar de Leon of the amountof One Thousand Pesos (P1,000.00) as gift or "propina" forhaving persuaded Vicente to reduce the purchase price fromP2.00 to P1.20 per square meter, so constitutes fraud as tocause a forfeiture of his commission on the sale price.

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HELD:In the case at bar, defendant-appellee Gregorio

Domingo as the broker, received a gift or propina in theamount of One Thousand Pesos (P1,000.00) from theprospective buyer Oscar de Leon, without the knowledge andconsent of his principal, herein petitioner-appellant VicenteDomingo. His acceptance of said substantial monetary giftcorrupted his duty to serve the interests only of his principaland undermined his loyalty to his principal, who gave him

partial advance of Three Hundred Pesos (P300.00) on hiscommission. As a consequence, instead of exerting his bestto persuade his prospective buyer to purchase the propertyon the most advantageous terms desired by his principal, thebroker, herein defendant-appellee Gregorio Domingo,succeeded in persuading his principal to accept the counter-offer of the prospective buyer to purchase the property atP1.20 per square meter or One Hundred Nine ThousandPesos (P109,000.00) in round figure for the lot of 88,477square meters, which is very much lower the the price ofP2.00 per square meter or One Hundred Seventy-Six

Thousand Nine Hundred Fifty-Four Pesos (P176,954.00) forsaid lot originally offered by his principal.

The duty embodied in Article 1891 of the New Civil Code willnot apply if the agent or broker acted only as a middleman

with the task of merely bringing together the vendor andvendee, who themselves thereafter will negotiate on theterms and conditions of the transaction. Neither would therule apply if the agent or broker had informed the principal ofthe gift or bonus or profit he received from the purchaser andhis principal did not object therto. 11 Herein defendant-appellee Gregorio Domingo was not merely a middleman ofthe petitioner-appellant Vicente Domingo and the buyerOscar de Leon. He was the broker and agent of saidpetitioner-appellant only. And therein petitioner-appellantwas not aware of the gift of One Thousand Pesos (P1,000.00)received by Gregorio Domingo from the prospective buyer;much less did he consent to his agent's accepting such a gift.

The fact that the buyer appearing in the deed of saleis Amparo Diaz, the wife of Oscar de Leon, does notmaterially alter the situation; because the transaction, to be

valid, must necessarily be with the consent of the husbandOscar de Leon, who is the administrator of their conjugalassets including their house and lot at No. 40 Denver Street,Cubao, Quezon City, which were given as part of andconstituted the down payment on, the purchase price ofherein petitioner-appellant's lot No. 883 of Piedad Estate.Hence, both in law and in fact, it was still Oscar de Leon whowas the buyer.

As a necessary consequence of such breach of trust,defendant-appellee Gregorio Domingo must forfeit his rightto the commission and must return the part of thecommission he received from his principal.

Teofilo Purisima, the sub-agent of Gregorio Domingo,can only recover from Gregorio Domingo his one-half shareof whatever amounts Gregorio Domingo received by virtue of

the transaction as his sub-agency contract was with GregorioDomingo alone