Republic of the Philippines

SUPREME COURT
Manila
G.R. No. L-24332 January 31, 1978
RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS, petitioner,
vs.
FELIX GO CHAN & SONS REALTY CORPORATION and COURT OF APPEALS, respondents.
Seno, Mendoza & Associates for petitioner.
Ramon Duterte for private respondent.

MUOZ PALMA, J.:

This is a case of an attorney-in-fact, Simeon Rallos, who after of his death of his principal, Concepcion
Rallos, sold the latter's undivided share in a parcel of land pursuant to a power of attorney which the
principal had executed in favor. The administrator of the estate of the went to court to have the sale
declared uneanforceable and to recover the disposed share. The trial court granted the relief prayed
for, but upon appeal the Court of Appeals uphold the validity of the sale and the complaint.
Hence, this Petition for Review on certiorari.
The following facts are not disputed. Concepcion and Gerundia both surnamed Rallos were sisters
and registered co-owners of a parcel of land known as Lot No. 5983 of the Cadastral Survey of Cebu
covered by Transfer Certificate of Title No. 11116 of the Registry of Cebu. On April 21, 1954, the
sisters executed a special power of attorney in favor of their brother, Simeon Rallos, authorizing him
to sell for and in their behalf lot 5983. On March 3, 1955, Concepcion Rallos died. On September 12,
1955, Simeon Rallos sold the undivided shares of his sisters Concepcion and Gerundia in lot 5983 to
Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. The deed of sale was registered
in the Registry of Deeds of Cebu, TCT No. 11118 was cancelled, and a new transfer certificate of Title
No. 12989 was issued in the named of the vendee.
On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos filed a
complaint docketed as Civil Case No. R-4530 of the Court of First Instance of Cebu, praying (1) that
the sale of the undivided share of the deceased Concepcion Rallos in lot 5983 be d unenforceable,
and said share be reconveyed to her estate; (2) that the Certificate of 'title issued in the name of Felix
Go Chan & Sons Realty Corporation be cancelled and another title be issued in the names of the
corporation and the "Intestate estate of Concepcion Rallos" in equal undivided and (3) that plaintiff be
indemnified by way of attorney's fees and payment of costs of suit. Named party defendants were
Felix Go Chan & Sons Realty Corporation, Simeon Rallos, and the Register of Deeds of Cebu, but
subsequently, the latter was dropped from the complaint. The complaint was amended twice;
defendant Corporation's Answer contained a crossclaim against its co-defendant, Simon Rallos while
the latter filed third-party complaint against his sister, Gerundia Rallos While the case was pending in
the trial court, both Simon and his sister Gerundia died and they were substituted by the respective
administrators of their estates.
After trial the court a quo rendered judgment with the following dispositive portion:

A. On Plaintiffs Complaint
(1) Declaring the deed of sale, Exh. "C", null and void insofar as the
one-half pro-indiviso share of Concepcion Rallos in the property in
question, Lot 5983 of the Cadastral Survey of Cebu is concerned;
(2) Ordering the Register of Deeds of Cebu City to cancel Transfer
Certificate of Title No. 12989 covering Lot 5983 and to issue in lieu
thereof another in the names of FELIX GO CHAN & SONS REALTY
CORPORATION and the Estate of Concepcion Rallos in the proportion
of one-half (1/2) share each pro-indiviso;
(3) Ordering Felix Go Chan & Sons Realty Corporation to deliver the
possession of an undivided one-half (1/2) share of Lot 5983 to the
herein plaintiff;
(4) Sentencing the defendant Juan T. Borromeo, administrator of the
Estate of Simeon Rallos, to pay to plaintiff in concept of reasonable
attorney's fees the sum of P1,000.00; and
(5) Ordering both defendants to pay the costs jointly and severally.
B. On GO CHANTS Cross-Claim:
(1) Sentencing the co-defendant Juan T. Borromeo, administrator of
the Estate of Simeon Rallos, to pay to defendant Felix Co Chan & Sons
Realty Corporation the sum of P5,343.45, representing the price of
one-half (1/2) share of lot 5983;
(2) Ordering co-defendant Juan T. Borromeo, administrator of the
Estate of Simeon Rallos, to pay in concept of reasonable attorney's
fees to Felix Go Chan & Sons Realty Corporation the sum of P500.00.
C. On Third-Party Complaint of defendant Juan T. Borromeo administrator of Estate
of Simeon Rallos, against Josefina Rallos special administratrix of the Estate of
Gerundia Rallos:
(1) Dismissing the third-party complaint without prejudice to filing either a complaint
against the regular administrator of the Estate of Gerundia Rallos or a claim in the
Intestate-Estate of Cerundia Rallos, covering the same subject-matter of the third-party
complaint, at bar. (pp. 98-100, Record on Appeal)
Felix Go Chan & Sons Realty Corporation appealed in due time to the Court of Appeals from the
foregoing judgment insofar as it set aside the sale of the one-half (1/2) share of Concepcion Rallos.
The appellate tribunal, as adverted to earlier, resolved the appeal on November 20, 1964 in favor of
the appellant corporation sustaining the sale in question. 1 The appellee administrator, Ramon Rallos,
moved for a reconsider of the decision but the same was denied in a resolution of March 4, 1965.

What is the legal effect of an act performed by an agent after the death of his principal? Applied more
particularly to the instant case, We have the query. is the sale of the undivided share of Concepcion
Rallos in lot 5983 valid although it was executed by the agent after the death of his principal? What is

the law in this jurisdiction as to the effect of the death of the principal on the authority of the agent to
act for and in behalf of the latter? Is the fact of knowledge of the death of the principal a material factor
in determining the legal effect of an act performed after such death?
Before proceedings to the issues, We shall briefly restate certain principles of law relevant to the matter
tinder consideration.
1. It is a basic axiom in civil law embodied in our Civil Code that no one may contract in the name of
another without being authorized by the latter, or unless he has by law a right to represent him. 3 A
contract entered into in the name of another by one who has no authority or the legal representation or who
has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the
person on whose behalf it has been executed, before it is revoked by the other contracting party. 4 Article
1403 (1) of the same Code also provides:

ART. 1403. The following contracts are unenforceable, unless they are justified:
(1) Those entered into in the name of another person by one who hi - been given no
authority or legal representation or who has acted beyond his powers; ...
Out of the above given principles, sprung the creation and acceptance of the relationship of
agency whereby one party, caged the principal (mandante), authorizes another, called the agent
(mandatario), to act for and in his behalf in transactions with third persons. The essential elements of
agency are: (1) there is consent, express or implied of the parties to establish the relationship; (2) the
object is the execution of a juridical act in relation to a third person; (3) the agents acts as a
representative and not for himself, and (4) the agent acts within the scope of his authority. 5
Agency is basically personal representative, and derivative in nature. The authority of the agent to act
emanates from the powers granted to him by his principal; his act is the act of the principal if done
within the scope of the authority. Qui facit per alium facit se. "He who acts through another acts
himself". 6
2. There are various ways of extinguishing agency, 7 but her We are concerned only with one cause
death of the principal Paragraph 3 of Art. 1919 of the Civil Code which was taken from Art. 1709 of the
Spanish Civil Code provides:

ART. 1919. Agency is extinguished.

xxx xxx xxx
3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent;
... (Emphasis supplied)
By reason of the very nature of the relationship between Principal and agent, agency is extinguished
by the death of the principal or the agent. This is the law in this jurisdiction. 8
Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for the law is
found in thejuridical basis of agency which is representation Them being an in. integration of the
personality of the principal integration that of the agent it is not possible for the representation to
continue to exist once the death of either is establish. Pothier agrees with Manresa that by reason of
the nature of agency, death is a necessary cause for its extinction. Laurent says that the juridical tie
between the principal and the agent is severed ipso jure upon the death of either without necessity for
the heirs of the fact to notify the agent of the fact of death of the former. 9

The same rule prevails at common law the death of the principal effects instantaneous and absolute
revocation of the authority of the agent unless the Power be coupled with an interest. 10 This is the
prevalent rule in American Jurisprudence where it is well-settled that a power without an interest confer.
red upon an agent is dissolved by the principal's death, and any attempted execution of the power afterward
is not binding on the heirs or representatives of the deceased. 11

3. Is the general rule provided for in Article 1919 that the death of the principal or of the agent
extinguishes the agency, subject to any exception, and if so, is the instant case within that exception?
That is the determinative point in issue in this litigation. It is the contention of respondent corporation
which was sustained by respondent court that notwithstanding the death of the principal Concepcion
Rallos the act of the attorney-in-fact, Simeon Rallos in selling the former's sham in the property is valid
and enforceable inasmuch as the corporation acted in good faith in buying the property in question.
Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule afore-mentioned.
ART. 1930. The agency shall remain in full force and effect even after the death of the
principal, if it has been constituted in the common interest of the latter and of the agent,
or in the interest of a third person who has accepted the stipulation in his favor.
ART. 1931. 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.
Article 1930 is not involved because admittedly the special power of attorney executed in favor of
Simeon Rallos was not coupled with an interest.
Article 1931 is the applicable law. Under this provision, an act done by the agent after the death of his
principal is valid and effective only under two conditions, viz: (1) that the agent acted without
knowledge of the death of the principal and (2) that the third person who contracted with the agent
himself acted in good faith. Good faith here means that the third person was not aware of the death of
the principal at the time he contracted with said agent. These two requisites must concur the absence
of one will render the act of the agent invalid and unenforceable.
In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death of his
principal at the time he sold the latter's share in Lot No. 5983 to respondent corporation. The
knowledge of the death is clearly to be inferred from the pleadings filed by Simon Rallos before the
trial court. 12 That Simeon Rallos knew of the death of his sister Concepcion is also a finding of fact of the
court a quo 13 and of respondent appellate court when the latter stated that Simon Rallos 'must have known
of the death of his sister, and yet he proceeded with the sale of the lot in the name of both his sisters
Concepcion and Gerundia Rallos without informing appellant (the realty corporation) of the death of the
former. 14

On the basis of the established knowledge of Simon Rallos concerning the death of his principal
Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law expressly requires for its
application lack of knowledge on the part of the agent of the death of his principal; it is not enough that
the third person acted in good faith. Thus in Buason & Reyes v. Panuyas, the Court applying Article
1738 of the old Civil rode now Art. 1931 of the new Civil Code sustained the validity , of a sale made
after the death of the principal because it was not shown that the agent knew of his principal's
demise. 15 To the same effect is the case of Herrera, et al., v. Luy Kim Guan, et al., 1961, where in the
words of Justice Jesus Barrera the Court stated:

... even granting arguemendo that Luis Herrera did die in 1936, plaintiffs presented no
proof and there is no indication in the record, that the agent Luy Kim Guan was aware
of the death of his principal at the time he sold the property. The death 6f the principal
does not render the act of an agent unenforceable, where the latter had no knowledge
of such extinguishment of the agency. (1 SCRA 406, 412)
4. In sustaining the validity of the sale to respondent consideration the Court of Appeals reasoned out
that there is no provision in the Code which provides that whatever is done by an agent having
knowledge of the death of his principal is void even with respect to third persons who may have
contracted with him in good faith and without knowledge of the death of the principal. 16
We cannot see the merits of the foregoing argument as it ignores the existence of the general rule
enunciated in Article 1919 that the death of the principal extinguishes the agency. That being the
general rule it follows a fortiorithat any act of an agent after the death of his principal is void ab
initio unless the same fags under the exception provided for in the aforementioned Articles 1930 and
1931. Article 1931, being an exception to the general rule, is to be strictly construed, it is not to be
given an interpretation or application beyond the clear import of its terms for otherwise the courts will
be involved in a process of legislation outside of their judicial function.
5. Another argument advanced by respondent court is that the vendee acting in good faith relied on
the power of attorney which was duly registered on the original certificate of title recorded in the
Register of Deeds of the province of Cebu, that no notice of the death was aver annotated on said
certificate of title by the heirs of the principal and accordingly they must suffer the consequences of
such omission. 17
To support such argument reference is made to a portion in Manresa's Commentaries which We quote:
If the agency has been granted for the purpose of contracting with certain persons, the
revocation must be made known to them. But if the agency is general iii nature, without
reference to particular person with whom the agent is to contract, it is sufficient that
the principal exercise due diligence to make the revocation of the agency publicity
known.
In case of a general power which does not specify the persons to whom represents'
on should be made, it is the general opinion that all acts, executed with third persons
who contracted in good faith, Without knowledge of the revocation, are valid. In such
case, the principal may exercise his right against the agent, who, knowing of the
revocation, continued to assume a personality which he no longer had. (Manresa Vol.
11, pp. 561 and 575; pp. 15-16, rollo)
The above discourse however, treats of revocation by an act of the principal as a mode of terminating
an agency which is to be distinguished from revocation by operation of law such as death of the
principal which obtains in this case. On page six of this Opinion We stressed that by reason of the very
nature of the relationship between principal and agent, agency is extinguished ipso jure upon the death
of either principal or agent. Although a revocation of a power of attorney to be effective must be
communicated to the parties concerned, 18 yet a revocation by operation of law, such as by death of the
principal is, as a rule, instantaneously effective inasmuch as "by legal fiction the agent's exercise of authority
is regarded as an execution of the principal's continuing will. 19 With death, the principal's will ceases or is
the of authority is extinguished.

The Civil Code does not impose a duty on the heirs to notify the agent of the death of the principal
What the Code provides in Article 1932 is that, if the agent die his heirs must notify the principal

thereof, and in the meantime adopt such measures as the circumstances may demand in the interest
of the latter. Hence, the fact that no notice of the death of the principal was registered on the certificate
of title of the property in the Office of the Register of Deeds, is not fatal to the cause of the estate of
the principal
6. Holding that the good faith of a third person in said with an agent affords the former sufficient
protection, respondent court drew a "parallel" between the instant case and that of an innocent
purchaser for value of a land, stating that if a person purchases a registered land from one who
acquired it in bad faith even to the extent of foregoing or falsifying the deed of sale in his favor
the registered owner has no recourse against such innocent purchaser for value but only against the
forger. 20
To support the correctness of this respondent corporation, in its brief, cites the case of Blondeau, et
al., v. Nano and Vallejo, 61 Phil. 625. We quote from the brief:
In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil. 630, one Vallejo
was a co-owner of lands with Agustin Nano. The latter had a power of attorney
supposedly executed by Vallejo Nano in his favor. Vallejo delivered to Nano his land
titles. The power was registered in the Office of the Register of Deeds. When the
lawyer-husband of Angela Blondeau went to that Office, he found all in order including
the power of attorney. But Vallejo denied having executed the power The lower court
sustained Vallejo and the plaintiff Blondeau appealed. Reversing the decision of the
court a quo, the Supreme Court, quoting the ruling in the case of Eliason v.
Wilborn, 261 U.S. 457, held:
But there is a narrower ground on which the defenses of the defendantappellee must be overruled. Agustin Nano had possession of Jose
Vallejo's title papers. Without those title papers handed over to Nano
with the acquiescence of Vallejo, a fraud could not have been
perpetuated. When Fernando de la Canters, a member of the
Philippine Bar and the husband of Angela Blondeau, the principal
plaintiff, searched the registration record, he found them in due form
including the power of attorney of Vallajo in favor of Nano. If this had
not been so and if thereafter the proper notation of the encumbrance
could not have been made, Angela Blondeau would not have sent
P12,000.00 to the defendant Vallejo.' An executed transfer of
registered lands placed by the registered owner thereof in the hands
of another operates as a representation to a third party that the holder
of the transfer is authorized to deal with the land.
As between two innocent persons, one of whom must suffer the
consequence of a breach of trust, the one who made it possible by his
act of coincidence bear the loss. (pp. 19-21)
The Blondeau decision, however, is not on all fours with the case before Us because here We are
confronted with one who admittedly was an agent of his sister and who sold the property of the latter
after her death with full knowledge of such death. The situation is expressly covered by a provision of
law on agency the terms of which are clear and unmistakable leaving no room for an interpretation
contrary to its tenor, in the same manner that the ruling in Blondeau and the cases cited therein found
a basis in Section 55 of the Land Registration Law which in part provides:
xxx xxx xxx

The production of the owner's duplicate certificate whenever any voluntary instrument
is presented for registration shall be conclusive authority from the registered owner to
the register of deeds to enter a new certificate or to make a memorandum of
registration in accordance with such instruments, and the new certificate or
memorandum Shall be binding upon the registered owner and upon all persons
claiming under him in favor of every purchaser for value and in good faith: Provided
however, That in all cases of registration provided by fraud, the owner may pursue all
his legal and equitable remedies against the parties to such fraud without prejudice,
however, to the right, of any innocent holder for value of a certificate of title. ... (Act No.
496 as amended)
7. One last point raised by respondent corporation in support of the appealed decision is an 1842
ruling of the Supreme Court of Pennsylvania in Cassiday v. McKenzie wherein payments made to an
agent after the death of the principal were held to be "good", "the parties being ignorant of the death".
Let us take note that the Opinion of Justice Rogers was premised on the statement that the parties
were ignorant of the death of the principal. We quote from that decision the following:
... Here the precise point is, whether a payment to an agent when the Parties are
ignorant of the death is a good payment. in addition to the case in Campbell before
cited, the same judge Lord Ellenboruogh, has decided in 5 Esp. 117, the general
question that a payment after the death of principal is not good. Thus, a payment of
sailor's wages to a person having a power of attorney to receive them, has been held
void when the principal was dead at the time of the payment. If, by this case, it is meant
merely to decide the general proposition that by operation of law the death of the
principal is a revocation of the powers of the attorney, no objection can be taken to it.
But if it intended to say that his principle applies where there was 110 notice of death,
or opportunity of twice I must be permitted to dissent from it.
... That a payment may be good today, or bad tomorrow, from the accident
circumstance of the death of the principal, which he did not know, and which by no
possibility could he know? It would be unjust to the agent and unjust to the debtor. In
the civil law, the acts of the agent, done bona fide in ignorance of the death of his
principal are held valid and binding upon the heirs of the latter. The same rule holds in
the Scottish law, and I cannot believe the common law is so unreasonable... (39 Am.
Dec. 76, 80, 81; emphasis supplied)
To avoid any wrong impression which the Opinion in Cassiday v. McKenzie may evoke, mention may
be made that the above represents the minority view in American jurisprudence. Thus in Clayton v.
Merrett, the Court said.
There are several cases which seem to hold that although, as a general principle,
death revokes an agency and renders null every act of the agent thereafter performed,
yet that where a payment has been made in ignorance of the death, such payment will
be good. The leading case so holding is that of Cassiday v. McKenzie, 4 Watts & S.
(Pa) 282, 39 Am. 76, where, in an elaborate opinion, this view ii broadly announced. It
is referred to, and seems to have been followed, in the case of Dick v. Page,17 Mo.
234, 57 AmD 267; but in this latter case it appeared that the estate of the deceased
principal had received the benefit of the money paid, and therefore the representative
of the estate might well have been held to be estopped from suing for it again. . . .
These cases, in so far, at least, as they announce the doctrine under discussion, are
exceptional. The Pennsylvania Case, supra (Cassiday v. McKenzie 4 Watts & S. 282,

39 AmD 76), is believed to stand almost, if not quite, alone in announcing the principle
in its broadest scope. (52, Misc. 353, 357, cited in 2 C.J. 549)
So also in Travers v. Crane, speaking of Cassiday v. McKenzie, and pointing out that the opinion,
except so far as it related to the particular facts, was a mere dictum, Baldwin J. said:
The opinion, therefore, of the learned Judge may be regarded more as an extrajudicial
indication of his views on the general subject, than as the adjudication of the Court
upon the point in question. But accordingly all power weight to this opinion, as the
judgment of a of great respectability, it stands alone among common law authorities
and is opposed by an array too formidable to permit us to following it. (15 Cal. 12,17,
cited in 2 C.J. 549)
Whatever conflict of legal opinion was generated by Cassiday v. McKenzie in American jurisprudence,
no such conflict exists in our own for the simple reason that our statute, the Civil Code, expressly
provides for two exceptions to the general rule that death of the principal revokes ipso jure the agency,
to wit: (1) that the agency is coupled with an interest (Art 1930), and (2) that the act of the agent was
executed without knowledge of the death of the principal and the third person who contracted with the
agent acted also in good faith (Art. 1931). Exception No. 2 is the doctrine followed in Cassiday, and
again We stress the indispensable requirement that the agent acted without knowledge or notice of
the death of the principal In the case before Us the agent Ramon Rallos executed the sale
notwithstanding notice of the death of his principal Accordingly, the agent's act is unenforceable
against the estate of his principal.
IN VIEW OF ALL THE FOREGOING, We set aside the ecision of respondent appellate court, and We
affirm en toto the judgment rendered by then Hon. Amador E. Gomez of the Court of First Instance of
Cebu, quoted in pages 2 and 3 of this Opinion, with costs against respondent realty corporation at all
instances.
So Ordered.
Teehankee (Chairman), Makasiar, Fernandez and Guerrero, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-21601

December 17, 1966

NIELSON & COMPANY, INC., plaintiff-appellant,

vs.
LEPANTO CONSOLIDATED MINING COMPANY, defendant-appellee.
W. H. Quasha and Associates for plaintiff-appellant.
Ponce Enrile, Siguion-Reyna, Montecillo and Belo for defendant-appellee.
ZALDIVAR, J.:
On February 6, 1958, plaintiff brought this action against defendant before the Court of First Instance
of Manila to recover certain sums of money representing damages allegedly suffered by the former in
view of the refusal of the latter to comply with the terms of a management contract entered into
between them on January 30, 1937, including attorney's fees and costs.
Defendant in its answer denied the material allegations of the complaint and set up certain special
defenses, among them, prescription and laches, as bars against the institution of the present action.
After trial, during which the parties presented testimonial and numerous documentary evidence, the
court a quorendered a decision dismissing the complaint with costs. The court stated that it did not
find sufficient evidence to establish defendant's counterclaim and so it likewise dismissed the same.
The present appeal was taken to this Court directly by the plaintiff in view of the amount involved in
the case.
The facts of this case, as stated in the decision appealed from, are hereunder quoted for purposes of
this decision:
It appears that the suit involves an operating agreement executed before World War II between
the plaintiff and the defendant whereby the former operated and managed the mining
properties owned by the latter for a management fee of P2,500.00 a month and a 10%
participation in the net profits resulting from the operation of the mining properties. For brevity
and convenience, hereafter the plaintiff shall be referred to as NIELSON and the defendant,
LEPANTO.
The antecedents of the case are: The contract in question (Exhibit `C') was made by the parties
on January 30, 1937 for a period of five (5) years. In the latter part of 1941, the parties agreed
to renew the contract for another period of five (5) years, but in the meantime, the Pacific War
broke out in December, 1941.
In January, 1942 operation of the mining properties was disrupted on account of the war. In
February of 1942, the mill, power plant, supplies on hand, equipment, concentrates on hand
and mines, were destroyed upon orders of the United States Army, to prevent their utilization
by the invading Japanese Army. The Japanese forces thereafter occupied the mining

properties, operated the mines during the continuance of the war, and who were ousted from
the mining properties only in August of 1945.
After the mining properties were liberated from the Japanese forces, LEPANTO took
possession thereof and embarked in rebuilding and reconstructing the mines and mill; setting
up new organization; clearing the mill site; repairing the mines; erecting staff quarters and
bodegas and repairing existing structures; installing new machinery and equipment; repairing
roads and maintaining the same; salvaging equipment and storing the same within the
bodegas; doing police work necessary to take care of the materials and equipment recovered;
repairing and renewing the water system; and remembering (Exhibits "D" and "E"). The
rehabilitation and reconstruction of the mine and mill was not completed until 1948 (Exhibit
"F"). On June 26, 1948 the mines resumed operation under the exclusive management of
LEPANTO (Exhibit "F-l").
Shortly after the mines were liberated from the Japanese invaders in 1945, a disagreement
arose between NIELSON and LEPANTO over the status of the operating contract in question
which as renewed expired in 1947. Under the terms thereof, the management contract shall
remain in suspense in case fortuitous event or force majeure, such as war or civil commotion,
adversely affects the work of mining and milling.
"In the event of inundations, floodings of mine, typhoon, earthquake or any other force
majeure, war, insurrection, civil commotion, organized strike, riot, injury to the
machinery or other event or cause reasonably beyond the control of NIELSON and
which adversely affects the work of mining and milling; NIELSON shall report such fact
to LEPANTO and without liability or breach of the terms of this Agreement, the same
shall remain in suspense, wholly or partially during the terms of such inability." (Clause
II of Exhibit "C").
NIELSON held the view that, on account of the war, the contract was suspended during the
war; hence the life of the contract should be considered extended for such time of the period
of suspension. On the other hand, LEPANTO contended that the contract should expire in
1947 as originally agreed upon because the period of suspension accorded by virtue of the
war did not operate to extend further the life of the contract.
No understanding appeared from the record to have been bad by the parties to resolve the
disagreement. In the meantime, LEPANTO rebuilt and reconstructed the mines and was able
to bring the property into operation only in June of 1948, . . . .
Appellant in its brief makes an alternative assignment of errors depending on whether or not the
management contract basis of the action has been extended for a period equivalent to the period of
suspension. If the agreement is suspended our attention should be focused on the first set of errors
claimed to have been committed by the court a quo; but if the contrary is true, the discussion will then
be switched to the alternative set that is claimed to have been committed. We will first take up the
question whether the management agreement has been extended as a result of the supervening war,
and after this question shall have been determined in the sense sustained by appellant, then the
discussion of the defense of laches and prescription will follow as a consequence.
The pertinent portion of the management contract (Exh. C) which refers to suspension should any
event constituting force majeure happen appears in Clause II thereof which we quote hereunder:
In the event of inundations, floodings of the mine, typhoon, earthquake or any other force
majeure, war, insurrection, civil commotion, organized strike, riot, injury to the machinery or

other event or cause reasonably beyond the control of NIELSON and which adversely affects
the work of mining and milling; NIELSON shall report such fact to LEPANTO and without
liability or breach of the terms of this Agreement, the same shall remain in suspense, wholly
or partially during the terms of such inability.
A careful scrutiny of the clause above-quoted will at once reveal that in order that the management
contract may be deemed suspended two events must take place which must be brought in a
satisfactory manner to the attention of defendant within a reasonable time, to wit: (1) the event
constituting the force majeure must be reasonably beyond the control of Nielson, and (2) it must
adversely affect the work of mining and milling the company is called upon to undertake. As long as
these two condition exist the agreement is deem suspended.
Does the evidence on record show that these two conditions had existed which may justify the
conclusion that the management agreement had been suspended in the sense entertained by
appellant? Let us go to the evidence.
It is a matter that this Court can take judicial notice of that war supervened in our country and that the
mines in the Philippines were either destroyed or taken over by the occupation forces with a view to
their operation. The Lepanto mines were no exception for not was the mine itself destroyed but the
mill, power plant, supplies on hand, equipment and the like that were being used there were destroyed
as well. Thus, the following is what appears in the Lepanto Company Mining Report dated March 13,
1946 submitted by its President C. A. DeWitt to the defendant:1 "In February of 1942, our mill, power
plant, supplies on hand, equipment, concentrates on hand, and mine, were destroyed upon orders of
the U.S. Army to prevent their utilization by the enemy." The report also mentions the report submitted
by Mr. Blessing, an official of Nielson, that "the original mill was destroyed in 1942" and "the original
power plant and all the installed equipment were destroyed in 1942." It is then undeniable that
beginning February, 1942 the operation of the Lepanto mines stopped or became suspended as a
result of the destruction of the mill, power plant and other important equipment necessary for such
operation in view of a cause which was clearly beyond the control of Nielson and that as a
consequence such destruction adversely affected the work of mining and milling which the latter was
called upon to undertake under the management contract. Consequently, by virtue of the very terms
of said contract the same may be deemed suspended from February, 1942 and as of that month the
contract still had 60 months to go.
On the other hand, the record shows that the defendant admitted that the occupation forces operated
its mining properties subject of the management contract,2 and from the very report submitted by
President DeWitt it appears that the date of the liberation of the mine was August 1, 1945 although at
the time there were still many booby traps.3 Similarly, in a report submitted by the defendant to its
stockholders dated August 25, 1948, the following appears: "Your Directors take pleasure in reporting
that June 26, 1948 marked the official return to operations of this Company of its properties in
Mankayan, Mountain Province, Philippines."4
It is, therefore, clear from the foregoing that the Lepanto mines were liberated on August 1, 1945, but
because of the period of rehabilitation and reconstruction that had to be made as a result of the
destruction of the mill, power plant and other necessary equipment for its operation it cannot be said
that the suspension of the contract ended on that date. Hence, the contract must still be deemed
suspended during the succeeding years of reconstruction and rehabilitation, and this period can only
be said to have ended on June 26, 1948 when, as reported by the defendant, the company officially
resumed the mining operations of the Lepanto. It should here be stated that this period of suspension
from February, 1942 to June 26, 1948 is the one urged by plaintiff.5

It having been shown that the operation of the Lepanto mines on the part of Nielson had been
suspended during the period set out above within the purview of the management contract, the next
question that needs to be determined is the effect of such suspension. Stated in another way, the
question now to be determined is whether such suspension had the effect of extending the period of
the management contract for the period of said suspension. To elucidate this matter, we again need
to resort to the evidence.
For appellant Nielson two witnesses testified, declaring that the suspension had the effect of extending
the period of the contract, namely, George T. Scholey and Mark Nestle. Scholey was a mining
engineer since 1929, an incorporator, general manager and director of Nielson and Company; and for
some time he was also the vice-president and director of the Lepanto Company during the pre-war
days and, as such, he was an officer of both appellant and appellee companies. As vice-president of
Lepanto and general manager of Nielson, Scholey participated in the negotiation of the management
contract to the extent that he initialed the same both as witness and as an officer of both corporations.
This witness testified in this case to the effect that the standard force majeure clause embodied in the
management contract was taken from similar mining contracts regarding mining operations and the
understanding regarding the nature and effect of said clause was that when there is suspension of the
operation that suspension meant the extension of the contract. Thus, to the question, "Before the war,
what was the understanding of the people in the particular trend of business with respect to the force
majeure clause?", Scholey answered: "That was our understanding that the suspension meant the
extension of time lost."6
Mark Nestle, the other witness, testified along similar line. He had been connected with Nielson since
1937 until the time he took the witness stand and had been a director, manager, and president of the
same company. When he was propounded the question: "Do you know what was the custom or usage
at that time in connection withforce majeure clause?", Nestle answered, "In the mining world the force
majeure clause is generally considered. When a calamity comes up and stops the work like in war,
flood, inundation or fire, etc., the work is suspended for the duration of the calamity, and the period of
the contract is extended after the calamity is over to enable the person to do the big work or recover
his money which he has invested, or accomplish what his obligation is to a third person ."7
And the above testimonial evidence finds support in the very minutes of the special meeting of the
Board of Directors of the Lepanto Company issued on March 10, 1945 which was then chairmaned by
Atty. C. A. DeWitt. We read the following from said report:
The Chairman also stated that the contract with Nielson and Company would soon expire if
the obligations were not suspended, in which case we should have to pay them the retaining
fee of P2,500.00 a month. He believes however, that there is a provision in the contract
suspending the effects thereof in cases like the present, and that even if it were not there, the
law itself would suspend the operations of the contract on account of the war. Anyhow, he
stated, we shall have no difficulty in solving satisfactorily any problem we may have with
Nielson and Company.8
Thus, we can see from the above that even in the opinion of Mr. DeWitt himself, who at the time was
the chairman of the Board of Directors of the Lepanto Company, the management contract would then
expire unless the period therein rated is suspended but that, however, he expressed the belief that the
period was extended because of the provision contained therein suspending the effects thereof should
any of the case of force majeure happen like in the present case, and that even if such provision did
not exist the law would have the effect of suspending it on account of the war. In substance, Atty.
DeWitt expressed the opinion that as a result of the suspension of the mining operation because of
the effects of the war the period of the contract had been extended.

Contrary to what appellant's evidence reflects insofar as the interpretation of the force majeure clause
is concerned, however, appellee gives Us an opposite interpretation invoking in support thereof not
only a letter Atty. DeWitt sent to Nielson on October 20, 1945,9 wherein he expressed for the first time
an opinion contrary to what he reported to the Board of Directors of Lepanto Company as stated in the
portion of the minutes of its Board of Directors as quoted above, but also the ruling laid down by our
Supreme Court in some cases decided sometime ago, to the effect that the war does not have the
effect of extending the term of a contract that the parties may enter into regarding a particular
transaction, citing in this connection the cases of Victorias Planters Association v. Victorias Milling
Company, 51 O.G. 4010; Rosario S. Vda. de Lacson, et al. v. Abelardo G. Diaz, 87 Phil. 150; and Lo
Ching y So Young Chong Co. v. Court of Appeals, et al., 81 Phil. 601.
To bolster up its theory, appellee also contends that the evidence regarding the alleged custom or
usage in mining contract that appellant's witnesses tried to introduce was incompetent because (a)
said custom was not specifically pleaded; (b) Lepanto made timely and repeated objections to the
introduction of said evidence; (c) Nielson failed to show the essential elements of usage which must
be shown to exist before any proof thereof can be given to affect the contract; and (d) the testimony
of its witnesses cannot prevail over the very terms of the management contract which, as a rule, is
supposed to contain all the terms and conditions by which the parties intended to be bound.
It is here necessary to analyze the contradictory evidence which the parties have presented regarding
the interpretation of the force majeure clause in the management contract.
At the outset, it should be stated that, as a rule, in the construction and interpretation of a document
the intention of the parties must be sought (Rule 130, Section 10, Rules of Court). This is the basic
rule in the interpretation of contracts because all other rules are but ancilliary to the ascertainment of
the meaning intended by the parties. And once this intention has been ascertained it becomes an
integral part of the contract as though it had been originally expressed therein in unequivocal terms
(Shoreline Oil Corp. v. Guy, App. 189, So., 348, cited in 17A C.J.S., p. 47). How is this intention
determined?
One pattern is to ascertain the contemporaneous and subsequent acts of the contracting parties in
relation to the transaction under consideration (Article 1371, Civil Code). In this particular case, it is
worthy of note what Atty. C. A. DeWitt has stated in the special meeting of the Board of Directors of
Lepanto in the portion of the minutes already quoted above wherein, as already stated, he expressed
the opinion that the life of the contract, if not extended, would last only until January, 1947 and yet he
said that there is a provision in the contract that the war had the effect of suspending the agreement
and that the effect of that suspension was that the agreement would have to continue with the result
that Lepanto would have to pay the monthly retaining fee of P2,500.00. And this belief that the war
suspended the agreement and that the suspension meant its extension was so firm that he went to
the extent that even if there was no provision for suspension in the agreement the law itself would
suspend it.
It is true that Mr. DeWitt later sent a letter to Nielson dated October 20, 1945 wherein apparently he
changed his mind because there he stated that the contract was merely suspended, but not extended,
by reason of the war, contrary to the opinion he expressed in the meeting of the Board of Directors
already adverted to, but between the two opinions of Atty. DeWitt We are inclined to give more weight
and validity to the former not only because such was given by him against his own interest but also
because it was given before the Board of Directors of Lepanto and in the presence, of some Nielson
officials 10 who, on that occasion were naturally led to believe that that was the true meaning of the
suspension clause, while the second opinion was merely self-serving and was given as a mere
afterthought.

Appellee also claims that the issue of true intent of the parties was not brought out in the complaint,
but anent this matter suffice it to state that in paragraph No. 19 of the complaint appellant pleaded that
the contract was extended. 11 This is a sufficient allegation considering that the rules on pleadings
must as a rule be liberally construed.
It is likewise noteworthy that in this issue of the intention of the parties regarding the meaning and
usage concerning the force majeure clause, the testimony adduced by appellant is uncontradicted. If
such were not true, appellee should have at least attempted to offer contradictory evidence. This it did
not do. Not even Lepanto's President, Mr. V. E. Lednicky who took the witness stand, contradicted
said evidence.
In holding that the suspension of the agreement meant the extension of the same for a period
equivalent to the suspension, We do not have the least intention of overruling the cases cited by
appellee. We simply want to say that the ruling laid down in said cases does not apply here because
the material facts involved therein are not the same as those obtaining in the present. The rule of stare
decisis cannot be invoked where there is no analogy between the material facts of the decision relied
upon and those of the instant case.
Thus, in Victorias Planters Association vs. Victorias Milling Company, 51 O.G. 4010, there was no
evidence at all regarding the intention of the parties to extend the contract equivalent to the period of
suspension caused by the war. Neither was there evidence that the parties understood the suspension
to mean extension; nor was there evidence of usage and custom in the industry that the suspension
meant the extension of the agreement. All these matters, however, obtain in the instant case.
Again, in the case of Rosario S. Vda. de Lacson vs. Abelardo G. Diaz, 87 Phil. 150, the issue referred
to the interpretation of a pre-war contract of lease of sugar cane lands and the liability of the lessee to
pay rent during and immediately following the Japanese occupation and where the defendant claimed
the right of an extension of the lease to make up for the time when no cane was planted. This Court,
in holding that the years which the lessee could not use the land because of the war could not be
discounted from the period agreed upon, held that "Nowhere is there any insinuation that the
defendant-lessee was to have possession of lands for seven years excluding years on which he could
not harvest sugar." Clearly, this ratio decidendi is not applicable to the case at bar wherein there is
evidence that the parties understood the "suspension clause by force majeure" to mean the extension
of the period of agreement.
Lastly, in the case of Lo Ching y So Young Chong Co. vs. Court of Appeals, et al., 81 Phil. 601,
appellant leased a building from appellee beginning September 13, 1940 for three years, renewable
for two years. The lessee's possession was interrupted in February, 1942 when he was ousted by the
Japanese who turned the same over to German Otto Schulze, the latter occupying the same until
January, 1945 upon the arrival of the liberation forces. Appellant contended that the period during
which he did not enjoy the leased premises because of his dispossession by the Japanese had to be
deducted from the period of the lease, but this was overruled by this Court, reasoning that such
dispossession was merely a simple "perturbacion de merohecho y de la cual no responde el
arrendador" under Article 1560 of the old Civil Code Art. 1664). This ruling is also not applicable in the
instant case because in that case there was no evidence of the intention of the parties that any
suspension of the lease by force majeure would be understood to extend the period of the agreement.
In resume, there is sufficient justification for Us to conclude that the cases cited by appellee are
inapplicable because the facts therein involved do not run parallel to those obtaining in the present
case.

We shall now consider appellee's defense of laches. Appellee is correct in its contention that the
defense of laches applies independently of prescription. Laches is different from the statute of
limitations. Prescription is concerned with the fact of delay, whereas laches is concerned with the
effect of delay. Prescription is a matter of time; laches is principally a question of inequity of permitting
a claim to be enforced, this inequity being founded on some change in the condition of the property or
the relation of the parties. Prescription is statutory; laches is not. Laches applies in equity, whereas
prescription applies at law. Prescription is based on fixed time, laches is not. (30 C.J.S., p. 522; See
also Pomeroy's Equity Jurisprudence, Vol. 2, 5th ed., p. 177).
The question to determine is whether appellant Nielson is guilty of laches within the meaning
contemplated by the authorities on the matter. In the leading case of Go Chi Gun, et al. vs. Go Cho,
et al., 96 Phil. 622, this Court enumerated the essential elements of laches as follows:
(1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the
situation of which complaint is made and for which the complaint seeks a remedy; (2) delay in
asserting the complainant's rights, the complainant having had knowledge or notice of the
defendant's conduct and having been afforded an opportunity to institute a suit; (3) lack of
knowledge or notice on the part of the defendant that the complainant would assert the right
on which he bases his suit; and (4) injury or prejudice to the defendant in the event relief is
accorded to the complainant, or the suit is not held barred.
Are these requisites present in the case at bar?
The first element is conceded by appellant Nielson when it claimed that defendant refused to pay its
management fees, its percentage of profits and refused to allow it to resume the management
operation.
Anent the second element, while it is true that appellant Nielson knew since 1945 that appellee
Lepanto has refused to permit it to resume management and that since 1948 appellee has resumed
operation of the mines and it filed its complaint only on February 6, 1958, there being apparent delay
in filing the present action, We find the delay justified and as such cannot constitute laches. It appears
that appellant had not abandoned its right to operate the mines for even before the termination of the
suspension of the agreement as early as January 20, 194612 and even before March 10, 1945, it
already claimed its right to the extension of the contract,13 and it pressed its claim for the balance of
its share in the profits from the 1941 operation14 by reason of which negotiations had taken place for
the settlement of the claim15 and it was only on June 25, 1957 that appellee finally denied the claim.
There is, therefore, only a period of less than one year that had elapsed from the date of the final
denial of the claim to the date of the filing of the complaint, which certainly cannot be considered as
unreasonable delay.
The third element of laches is absent in this case. It cannot be said that appellee Lepanto did not know
that appellant would assert its rights on which it based suit. The evidence shows that Nielson had been
claiming for some time its rights under the contract, as already shown above.
Neither is the fourth element present, for if there has been some delay in bringing the case to court it
was mainly due to the attempts at arbitration and negotiation made by both parties. If Lepanto's
documents were lost, it was not caused by the delay of the filing of the suit but because of the war.
Another reason why appellant Nielson cannot be held guilty of laches is that the delay in the filing of
the complaint in the present case was the inevitable of the protracted negotiations between the parties
concerning the settlement of their differences. It appears that Nielson asked for arbitration16 which was
granted. A committee consisting of Messrs. DeWitt, Farnell and Blessing was appointed to act on said

differences but Mr. DeWitt always tried to evade the issue17 until he was taken ill and died. Mr. Farnell
offered to Nielson the sum of P13,000.58 by way of compromise of all its claim arising from the
management contract18 but apparently the offer was refused. Negotiations continued with the
exchange of letters between the parties but with no satisfactory result.19 It can be said that the delay
due to protracted negotiations was caused by both parties. Lepanto, therefore, cannot be permitted to
take advantage of such delay or to question the propriety of the action taken by Nielson. The defense
of laches is an equitable one and equity should be applied with an even hand. A person will not be
permitted to take advantage of, or to question the validity, or propriety of, any act or omission of another
which was committed or omitted upon his own request or was caused by his conduct (R. H. Stearns
Co. vs. United States, 291 U.S. 54, 78 L. Ed. 647, 54 S. Ct., 325; United States vs. Henry Prentiss &
Co., 288 U.S. 73, 77 L. Ed., 626, 53 S. Ct., 283).
Had the action of Nielson prescribed? The court a quo held that the action of Nielson is already barred
by the statute of limitations, and that ruling is now assailed by the appellant in this appeal. In urging
that the court a quoerred in reaching that conclusion the appellant has discussed the issue with
reference to particular claims.
The first claim is with regard to the 10% share in profits of 1941 operations. Inasmuch as appellee
Lepanto alleges that the correct basis of the computation of the sharing in the net profits shall be as
provided for in Clause V of the Management Contract, while appellant Nielson maintains that the basis
should be what is contained in the minutes of the special meeting of the Board of Directors of Lepanto
on August 21, 1940, this question must first be elucidated before the main issue is discussed.
The facts relative to the matter of profit sharing follow: In the management contract entered into
between the parties on January 30, 1937, which was renewed for another five years, it was stipulated
that Nielson would receive a compensation of P2,500.00 a month plus 10% of the net profits from the
operation of the properties for the preceding month. In 1940, a dispute arose regarding the
computation of the 10% share of Nielson in the profits. The Board of Directors of Lepanto, realizing
that the mechanics of the contract was unfair to Nielson, authorized its President to enter into an
agreement with Nielson modifying the pertinent provision of the contract effective January 1, 1940 in
such a way that Nielson shall receive (1) 10% of the dividends declared and paid, when and as paid,
during the period of the contract and at the end of each year, (2) 10% of any depletion reserve that
may be set up, and (3) 10% of any amount expended during the year out of surplus earnings for capital
account. 20 Counsel for the appellee admitted during the trial that the extract of the minutes as found
in Exhibit B is a faithful copy from the original. 21 Mr. George Scholey testified that the foregoing
modification was agreed upon. 22
Lepanto claims that this new basis of computation should be rejected (1) because the contract was
clear on the point of the 10% share and it was so alleged by Nielson in its complaint, and (2) the
minutes of the special meeting held on August 21, 1940 was not signed.
It appearing that the issue concerning the sharing of the profits had been raised in appellant's
complaint and evidence on the matter was introduced 23 the same can be taken into account even if
no amendment of the pleading to make it conform to the evidence has been made, for the same is
authorized by Section 4, Rule 17, of the old Rules of Court (now Section 5, Rule 10, of the new Rules
of Court).
Coming now to the question of prescription raised by defendant Lepanto, it is contended by the latter
that the period to be considered for the prescription of the claim regarding participation in the profits is
only four years, because the modification of the sharing embodied in the management contract is
merely verbal, no written document to that effect having been presented. This contention is untenable.
The modification appears in the minutes of the special meeting of the Board of Directors of Lepanto

held on August 21, 1940, it having been made upon the authority of its President, and in said minutes
the terms of the modification had been specified. This is sufficient to have the agreement considered,
for the purpose of applying the statute of limitations, as a written contract even if the minutes were not
signed by the parties (3 A.L.R., 2d, p. 831). It has been held that a writing containing the terms of a
contract if adopted by two persons may constitute a contract in writing even if the same is not signed
by either of the parties (3 A.L.R., 2d, pp. 812-813). Another authority says that an unsigned agreement
the terms of which are embodied in a document unconditionally accepted by both parties is a written
contract (Corbin on Contracts, Vol. 1, p. 85)
The modification, therefore, made in the management contract relative to the participation in the profits
by appellant, as contained in the minutes of the special meeting of the Board of Directors of Lepanto
held on August 21, 1940, should be considered as a written contract insofar as the application of the
statutes of limitations is concerned. Hence, the action thereon prescribes within ten (10) years
pursuant to Section 43 of Act 190.
Coming now to the facts, We find that the right of Nielson to its 10% participation in the 1941 operations
accrued on December 21, 1941 and the right to commence an action thereon began on January 1,
1942 so that the action must be brought within ten (10) years from the latter date. It is true that the
complaint was filed only on February 6, 1958, that is sixteen (16) years, one (1) month and five (5)
days after the right of action accrued, but the action has not yet prescribed for various reasons which
We will hereafter discuss.
The first reason is the operation of the Moratorium Law, for appellant's claim is undeniably a claim for
money. Said claim accrued on December 31, 1941, and Lepanto is a war sufferer. Hence the claim
was covered by Executive Order No. 32 of March 10, 1945. It is well settled that the operation of the
Moratorium Law suspends the running of the statue of limitations (Pacific Commercial Co. vs. Aquino,
G.R. No. L-10274, February 27, 1957).
This Court has held that the Moratorium Law had been enforced for eight (8) years, two (2) months
and eight (8) days (Tioseco vs. Day, et al., L-9944, April 30, 1957; Levy Hermanos, Inc. vs. Perez, L14487, April 29, 1960), and deducting this period from the time that had elapsed since the accrual of
the right of action to the date of the filing of the complaint, the extent of which is sixteen (16) years,
one (1) month and five (5) days, we would have less than eight (8) years to be counted for purposes
of prescription. Hence appellant's action on its claim of 10% on the 1941 profits had not yet prescribed.
Another reason that may be taken into account in support of the no-bar theory of appellant is the
arbitration clause embodied in the management contract which requires that any disagreement as to
any amount of profits before an action may be taken to court shall be subject to arbitration. 24 This
agreement to arbitrate is valid and binding. 25 It cannot be ignored by Lepanto. Hence Nielson could
not bring an action on its participation in the 1941 operations-profits until the condition relative to
arbitration had been first complied with. 26 The evidence shows that an arbitration committee was
constituted but it failed to accomplish its purpose on June 25, 1957. 27From this date to the filing of the
complaint the required period for prescription has not yet elapsed.
Nielson claims the following: (1) 10% share in the dividends declared in 1941, exclusive of interest,
amounting to P17,500.00; (2) 10% in the depletion reserves for 1941; and (3) 10% in the profits for
years prior to 1948 amounting to P19,764.70.
With regard to the first claim, the Lepanto's report for the calendar year of 1954 28 shows that it declared
a 10% cash dividend in December, 1941, the amount of which is P175,000.00. The evidence in this
connection (Exhibits L and O) was admitted without objection by counsel for Lepanto. 29 Nielson claims
10% share in said amount with interest thereon at 6% per annum. The document (Exhibit L) was even

recognized by Lepanto's President V. L. Lednicky, 30 and this claim is predicated on the provision of
paragraph V of the management contract as modified pursuant to the proposal of Lepanto at the
special meeting of the Board of Directors on August 21, 1940 (Exh. B), whereby it was provided that
Nielson would be entitled to 10% of any dividends to be declared and paid during the period of the
contract.
With regard to the second claim, Nielson admits that there is no evidence regarding the amount set
aside by Lepanto for depletion reserve for 1941 31 and so the 10% participation claimed thereon cannot
be assessed.
Anent the third claim relative to the 10% participation of Nielson on the sum of P197,647.08, which
appears in Lepanto's annual report for 1948 32 and entered as profit for prior years in the statement of
income and surplus, which amount consisted "almost in its entirety of proceeds of copper concentrates
shipped to the United States during 1947," this claim should to denied because the amount is not
"dividend declared and paid" within the purview of the management contract.
The fifth assignment of error of appellant refers to the failure of the lower court to order Lepanto to pay
its management fees for January, 1942, and for the full period of extension amounting to P150,000.00,
or P2,500.00 a month for sixty (60) months, a total of P152,500.00 with interest thereon from the
date of judicial demand.
It is true that the claim of management fee for January, 1942 was not among the causes of action in
the complaint, but inasmuch as the contract was suspended in February, 1942 and the management
fees asked for included that of January, 1942, the fact that such claim was not included in a specific
manner in the complaint is of no moment because an appellate court may treat the pleading as
amended to conform to the evidence where the facts show that the plaintiff is entitled to relief other
than what is asked for in the complaint (Alonzo vs. Villamor, 16 Phil. 315). The evidence shows that
the last payment made by Lepanto for management fee was for November and December, 1941. 33 If,
as We have declared, the management contract was suspended beginning February 1942, it follows
that Nielson is entitled to the management fee for January, 1942.
Let us now come to the management fees claimed by Nielson for the period of extension. In this
respect, it has been shown that the management contract was extended from June 27, 1948 to June
26, 1953, or for a period of sixty (60) months. During this period Nielson had a right to continue in the
management of the mining properties of Lepanto and Lepanto was under obligation to let Nielson do
it and to pay the corresponding management fees. Appellant Nielson insisted in performing its part of
the contract but Lepanto prevented it from doing so. Hence, by virtue of Article 1186 of the Civil Code,
there was a constructive fulfillment an the part of Nielson of its obligation to manage said mining
properties in accordance with the contract and Lepanto had the reciprocal obligation to pay the
corresponding management fees and other benefits that would have accrued to Nielson if Lepanto
allowed it (Nielson) to continue in the management of the mines during the extended period of five (5)
years.
We find that the preponderance of evidence is to the effect that Nielson had insisted in managing the
mining properties soon after liberation. In the report 34 of Lepanto, submitted to its stockholders for the
period from 1941 to March 13, 1946, are stated the activities of Nielson's officials in relation to Nielson's
insistence in continuing the management. This report was admitted in evidence without objection. We
find the following in the report:
Mr. Blessing, in May, 1945, accompanied Clark and Stanford to San Fernando (La Union) to await the
liberation of the mines. (Mr. Blessing was the Treasurer and Metallurgist of Nielson). Blessing with
Clark and Stanford went to the property on July 16 and found that while the mill site had been cleared

of the enemy the latter was still holding the area around the staff houses and putting up a strong
defense. As a result, they returned to San Fernando and later went back to the mines on July 26. Mr.
Blessing made the report, dated August 6, recommending a program of operation. Mr. Nielson himself
spent a day in the mine early in December, 1945 and reiterated the program which Mr. Blessing had
outlined. Two or three weeks before the date of the report, Mr. Coldren of the Nielson organization
also visited the mine and told President C. A. DeWitt of Lepanto that he thought that the mine could
be put in condition for the delivery of the ore within ten (10) days. And according to Mark Nestle, a
witness of appellant, Nielson had several men including engineers to do the job in the mines and to
resume the work. These engineers were in fact sent to the mine site and submitted reports of what
they had done. 35
On the other hand, appellee claims that Nielson was not ready and able to resume the work in the
mines, relying mainly on the testimony of Dr. Juan Nabong, former secretary of both Nielson and
Lepanto, given in the separate case of Nancy Irving Romero vs. Lepanto Consolidated Mining
Company (Civil Case No. 652, CFI, Baguio), to the effect that as far as he knew "Nielson and Company
had not attempted to operate the Lepanto Consolidated Mining Company because Mr. Nielson was
not here in the Philippines after the last war. He came back later," and that Nielson and Company had
no money nor stocks with which to start the operation. He was asked by counsel for the appellee if he
had testified that way in Civil Case No. 652 of the Court of First Instance of Baguio, and he answered
that he did not confirm it fully. When this witness was asked by the same counsel whether he confirmed
that testimony, he said that when he testified in that case he was not fully aware of what happened
and that after he learned more about the officials of the corporation it was only then that he became
aware that Nielson had really sent his men to the mines along with Mr. Blessing and that he was aware
of this fact personally. He further said that Mr. Nielson was here in 1945 and "he was going out and
contacting his people." 36
Lepanto admits, in its own brief, that Nielson had really insisted in taking over the management and
operation of the mines but that it (Lepanto) unequivocally refuse to allow it. The following is what
appears in the brief of the appellee:
It was while defendant was in the midst of the rehabilitation work which was fully described
earlier, still reeling under the terrible devastation and destruction wrought by war on its mine
that Nielson insisted in taking over the management and operation of the mine. Nielson thus
put Lepanto in a position where defendant, under the circumstances, had to refuse, as in fact
it did, Nielson's insistence in taking over the management and operation because, as was
obvious, it was impossible, as a result of the destruction of the mine, for the plaintiff to manage
and operate the same and because, as provided in the agreement, the contract was
suspended by reason of the war. The stand of Lepanto in disallowing Nielson to assume again
the management of the mine in 1945 was unequivocal and cannot be misinterpreted, infra.37
Based on the foregoing facts and circumstances, and Our conclusion that the management contract
was extended, We believe that Nielson is entitled to the management fees for the period of extension.
Nielson should be awarded on this claim sixty times its monthly pay of P2,500.00, or a total of
P150,000.00.
In its sixth assignment of error Nielson contends that the lower court erred in not ordering Lepanto to
pay it (Nielson) the 10% share in the profits of operation realized during the period of five (5) years
from the resumption of its post-war operations of the Mankayan mines, in the total sum of
P2,403,053.20 with interest thereon at the rate of 6% per annum from February 6, 1958 until full
payment. 38

The above claim of Nielson refers to four categories, namely: (1) cash dividends; (2) stock dividends;
(3) depletion reserves; and (4) amount expended on capital investment.
Anent the first category, Lepanto's report for the calendar year 1954 39 contains a record of the cash
dividends it paid up to the date of said report, and the post-war dividends paid by it corresponding to
the years included in the period of extension of the management contract are as follows:
POST-WAR
8

10%

November

1949

P 200,000.00

10%

July

1950

300,000.00

10

10%

October

1950

500,000.00

11

20%

December

1950

1,000,000.00

12

20%

March

1951

1,000,000.00

13

20%

June

1951

1,000,000.00

14

20%

September

1951

1,000,000.00

15

40%

December

1951

2,000,000.00

16

20%

March

1952

1,000,000.00

17

20%

May

1952

1,000,000.00

18

20%

July

1952

1,000,000.00

19

20%

September

1952

1,000,000.00

20

20%

December

1952

1,000,000.00

21

20%

March

1953

1,000,000.00

22

20%

June

1953

TOTAL

1,000,000.00
P14,000,000.00

According to the terms of the management contract as modified, appellant is entitled to 10% of the
P14,000,000.00 cash dividends that had been distributed, as stated in the above-mentioned report, or
the sum of P1,400,000.00.
With regard to the second category, the stock dividends declared by Lepanto during the period of
extension of the contract are: On November 28, 1949, the stock dividend declared was 50% of the
outstanding authorized capital of P2,000,000.00 of the company, or stock dividends worth
P1,000,000.00; and on August 22, 1950, the stock dividends declared was 66-2/3% of the standing
authorized capital of P3,000,000.00 of the company, or stock dividends worth P2,000,000.00. 40
Appellant's claim that it should be given 10% of the cash value of said stock dividends with interest
thereon at 6% from February 6, 1958 cannot be granted for that would not be in accordance with the

management contract which entitles Nielson to 10% of any dividends declared paid, when and as paid.
Nielson, therefore, is entitled to 10% of the stock dividends and to the fruits that may have accrued to
said stock dividends pursuant to Article 1164 of the Civil Code. Hence to Nielson is due shares of
stock worth P100,000.00, as per stock dividends declared on November 28, 1949 and all the fruits
accruing to said shares after said date; and also shares of stock worth P200,000.00 as per stock
dividends declared on August 20, 1950 and all fruits accruing thereto after said date.
Anent the third category, the depletion reserve appearing in the statement of income and surplus
submitted by Lepanto corresponding to the years covered by the period of extension of the contract,
may be itemized as follows:
In 1948, as per Exh. F, p. 36 and Exh. Q, p. 5, the depletion reserve set up was P11,602.80.
In 1949, as per Exh. G, p. 49 and Exh. Q, p. 5, the depletion reserve set up was P33,556.07.
In 1950, as per Exh. H, p. 37, Exh. Q, p. 6 and Exh. I, p. 37, the depletion reserve set up was
P84,963.30.
In 1951, as per Exh. I, p. 45, Exh. Q, p. 6, and Exh. J, p. 45, the depletion reserve set up was
P129,089.88.
In 1952, as per Exh. J, p. 45, Exh. Q, p. 6 and Exh. K p. 41, the depletion reserve was
P147,141.54.
In 1953, as per Exh. K, p. 41, and Exh. Q, p. 6, the depletion reserve set up as P277,493.25.
Regarding the depletion reserve set up in 1948 it should be noted that the amount given was for the
whole year. Inasmuch as the contract was extended only for the last half of the year 1948, said amount
of P11,602.80 should be divided by two, and so Nielson is only entitled to 10% of the half amounting
to P5,801.40.
Likewise, the amount of depletion reserve for the year 1953 was for the whole year and since the
contract was extended only until the first half of the year, said amount of P277,493.25 should be
divided by two, and so Nielson is only entitled to 10% of the half amounting to P138,746.62. Summing
up the entire depletion reserves, from the middle of 1948 to the middle of 1953, we would have a total
of P539,298.81, of which Nielson is entitled to 10%, or to the sum of P53,928.88.
Finally, with regard to the fourth category, there is no figure in the record representing the value of the
fixed assets as of the beginning of the period of extension on June 27, 1948. It is possible, however,
to arrive at the amount needed by adding to the value of the fixed assets as of December 31, 1947
one-half of the amount spent for capital account in the year 1948. As of December 31, 1947, the value
of the fixed assets was P1,061,878.8841 and as of December 31, 1948, the value of the fixed assets
was P3,270,408.07. 42 Hence, the increase in the value of the fixed assets for the year 1948 was
P2,208,529.19, one-half of which is P1,104,264.59, which amount represents the expenses for capital
account for the first half of the year 1948. If to this amount we add the fixed assets as of December
31, 1947 amounting to P1,061,878.88, we would have a total of P2,166,143.47 which represents the
fixed assets at the beginning of the second half of the year 1948.
There is also no figure representing the value of the fixed assets when the contract, as extended,
ended on June 26, 1953; but this may be computed by getting one-half of the expenses for capital
account made in 1953 and adding the same to the value of the fixed assets as of December 31, 1953

is P9,755,840.41 43 which the value of the fixed assets as of December 31, 1952 is P8,463,741.82,
the difference being P1,292,098.69. One-half of this amount is P646,049.34 which would represent
the expenses for capital account up to June, 1953. This amount added to the value of the fixed assets
as of December 31, 1952 would give a total of P9,109,791.16 which would be the value of fixed assets
at the end of June, 1953.
The increase, therefore, of the value of the fixed assets of Lepanto from June, 1948 to June, 1953 is
P6,943,647.69, which amount represents the difference between the value of the fixed assets of
Lepanto in the year 1948 and in the year 1953, as stated above. On this amount Nielson is entitled to
a share of 10% or to the amount of P694,364.76.
Considering that most of the claims of appellant have been entertained, as pointed out in this decision,
We believe that appellant is entitled to be awarded attorney's fees, especially when, according to the
undisputed testimony of Mr. Mark Nestle, Nielson obliged himself to pay attorney's fees in connection
with the institution of the present case. In this respect, We believe, considering the intricate nature of
the case, an award of fifty thousand (P50,000.00) pesos for attorney's fees would be reasonable.
IN VIEW OF THE FOREGOING CONSIDERATIONS, We hereby reverse the decision of the court a
quo and enter in lieu thereof another, ordering the appellee Lepanto to pay appellant Nielson the
different amounts as specified hereinbelow:
(1) 10% share of cash dividends of December, 1941 in the amount of P17,500.00, with legal interest
thereon from the date of the filing of the complaint;
(2) management fee for January, 1942 in the amount of P2,500.00, with legal interest thereon from
the date of the filing of the complaint;
(3) management fees for the sixty-month period of extension of the management contract, amounting
to P150,000.00, with legal interest from the date of the filing of the complaint;
(4) 10% share in the cash dividends during the period of extension of the management contract,
amounting to P1,400,000.00, with legal interest thereon from the date of the filing of the complaint;
(5) 10% of the depletion reserve set up during the period of extension, amounting to P53,928.88, with
legal interest thereon from the date of the filing of the complaint;
(6) 10% of the expenses for capital account during the period of extension, amounting to P694,364.76,
with legal interest thereon from the date of the filing of the complaint;
(7) to issue and deliver to Nielson and Co., Inc. shares of stock of Lepanto Consolidated Mining Co.
at par value equivalent to the total of Nielson's l0% share in the stock dividends declared on November
28, 1949 and August 22, 1950, together with all cash and stock dividends, if any, as may have been
declared and issued subsequent to November 28, 1949 and August 22, 1950, as fruits that accrued
to said shares;
If sufficient shares of stock of Lepanto's are not available to satisfy this judgment, defendant-appellee
shall pay plaintiff-appellant an amount in cash equivalent to the market value of said shares at the time
of default (12 C.J.S., p. 130), that is, all shares of the stock that should have been delivered to Nielson
before the filing of the complaint must be paid at their market value as of the date of the filing of the
complaint; and all shares, if any, that should have been delivered after the filing of the complaint at the
market value of the shares at the time Lepanto disposed of all its available shares, for it is only then

that Lepanto placed itself in condition of not being able to perform its obligation (Article 1160, Civil
Code);
(8) the sum of P50,000.00 as attorney's fees; and
(9) the costs. It is so ordered.
Concepcion, C.J., Regala, Makalintal, Bengzon, J.P., Sanchez and Castro, JJ., concur.
Reyes, J.B.L. and Barrera, JJ., took no part.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-7089

August 31, 1954

DOMINGO DE LA CRUZ, plaintiff-appellant,

vs.
NORTHERN THEATRICAL ENTERPRISES INC., ET AL., defendants-appellees.
Conrado Rubio for appellant.
Ruiz, Ruiz, Ruiz, Ruiz, and Benjamin Guerrero for appellees.
MONTEMAYOR, J.:
The facts in this case based on an agreed statement of facts are simple. In the year 1941 the Northern
Theatrical Enterprises Inc., a domestic corporation operated a movie house in Laoag, Ilocos Norte,
and among the persons employed by it was the plaintiff DOMINGO DE LA CRUZ, hired as a special
guard whose duties were to guard the main entrance of the cine, to maintain peace and order and to
report the commission of disorders within the premises. As such guard he carried a revolver. In the
afternoon of July 4, 1941, one Benjamin Martin wanted to crash the gate or entrance of the movie
house. Infuriated by the refusal of plaintiff De la Cruz to let him in without first providing himself with a
ticket, Martin attacked him with a bolo. De la Cruz defendant himself as best he could until he was
cornered, at which moment to save himself he shot the gate crasher, resulting in the latter's death.
For the killing, De la Cruz was charged with homicide in Criminal Case No. 8449 of the Court of First
Instance of Ilocos Norte. After a re-investigation conducted by the Provincial Fiscal the latter filed a
motion to dismiss the complaint, which was granted by the court in January 1943. On July 8, 1947, De
la Cruz was again accused of the same crime of homicide, in Criminal Case No. 431 of the same
Court. After trial, he was finally acquitted of the charge on January 31, 1948. In both criminal cases
De la Cruz employed a lawyer to defend him. He demanded from his former employer reimbursement
of his expenses but was refused, after which he filed the present action against the movie corporation
and the three members of its board of directors, to recover not only the amounts he had paid his
lawyers but also moral damages said to have been suffered, due to his worry, his neglect of his
interests and his family as well in the supervision of the cultivation of his land, a total of P15,000. On
the basis of the complaint and the answer filed by defendants wherein they asked for the dismissal of
the complaint, as well as the agreed statement of facts, the Court of First Instance of Ilocos Norte after
rejecting the theory of the plaintiff that he was an agent of the defendants and that as such agent he
was entitled to reimbursement of the expenses incurred by him in connection with the agency (Arts.
1709-1729 of the old Civil Code), found that plaintiff had no cause of action and dismissed the
complaint without costs. De la Cruz appealed directly to this Tribunal for the reason that only questions
of law are involved in the appeal.
We agree with the trial court that the relationship between the movie corporation and the plaintiff was
not that of principal and agent because the principle of representation was in no way involved. Plaintiff
was not employed to represent the defendant corporation in its dealings with third parties. He was a
mere employee hired to perform a certain specific duty or task, that of acting as special guard and
staying at the main entrance of the movie house to stop gate crashers and to maintain peace and
order within the premises. The question posed by this appeal is whether an employee or servant who
in line of duty and while in the performance of the task assigned to him, performs an act which

eventually results in his incurring in expenses, caused not directly by his master or employer or his
fellow servants or by reason of his performance of his duty, but rather by a third party or stranger not
in the employ of his employer, may recover said damages against his employer.
The learned trial court in the last paragraph of its decision dismissing the complaint said that "after
studying many laws or provisions of law to find out what law is applicable to the facts submitted and
admitted by the parties, has found none and it has no other alternative than to dismiss the complaint."
The trial court is right. We confess that we are not aware of any law or judicial authority that is directly
applicable to the present case, and realizing the importance and far-reaching effect of a ruling on the
subject-matter we have searched, though vainly, for judicial authorities and enlightenment. All the laws
and principles of law we have found, as regards master and servants, or employer and employee,
refer to cases of physical injuries, light or serious, resulting in loss of a member of the body or of any
one of the senses, or permanent physical disability or even death, suffered in line of duty and in the
course of the performance of the duties assigned to the servant or employee, and these cases are
mainly governed by the Employer's Liability Act and the Workmen's Compensation Act. But a case
involving damages caused to an employee by a stranger or outsider while said employee was in the
performance of his duties, presents a novel question which under present legislation we are neither
able nor prepared to decide in favor of the employee.
In a case like the present or a similar case of say a driver employed by a transportation company, who
while in the course of employment runs over and inflicts physical injuries on or causes the death of a
pedestrian; and such driver is later charged criminally in court, one can imagine that it would be to the
interest of the employer to give legal help to and defend its employee in order to show that the latter
was not guilty of any crime either deliberately or through negligence, because should the employee
be finally held criminally liable and he is found to be insolvent, the employer would be subsidiarily
liable. That is why, we repeat, it is to the interest of the employer to render legal assistance to its
employee. But we are not prepared to say and to hold that the giving of said legal assistance to its
employees is a legal obligation. While it might yet and possibly be regarded as a normal obligation, it
does not at present count with the sanction of man-made laws.
If the employer is not legally obliged to give, legal assistance to its employee and provide him with a
lawyer, naturally said employee may not recover the amount he may have paid a lawyer hired by him.
Viewed from another angle it may be said that the damage suffered by the plaintiff by reason of the
expenses incurred by him in remunerating his lawyer, is not caused by his act of shooting to death the
gate crasher but rather by the filing of the charge of homicide which made it necessary for him to
defend himself with the aid of counsel. Had no criminal charge been filed against him, there would
have been no expenses incurred or damage suffered. So the damage suffered by plaintiff was caused
rather by the improper filing of the criminal charge, possibly at the instance of the heirs of the deceased
gate crasher and by the State through the Fiscal. We say improper filing, judging by the results of the
court proceedings, namely, acquittal. In other words, the plaintiff was innocent and blameless. If
despite his innocence and despite the absence of any criminal responsibility on his part he was
accused of homicide, then the responsibility for the improper accusation may be laid at the door of the
heirs of the deceased and the State, and so theoretically, they are the parties that may be held
responsible civilly for damages and if this is so, we fail to see now this responsibility can be transferred
to the employer who in no way intervened, much less initiated the criminal proceedings and whose
only connection or relation to the whole affairs was that he employed plaintiff to perform a special duty
or task, which task or duty was performed lawfully and without negligence.
Still another point of view is that the damages incurred here consisting of the payment of the lawyer's
fee did not flow directly from the performance of his duties but only indirectly because there was an
efficient, intervening cause, namely, the filing of the criminal charges. In other words, the shooting to

death of the deceased by the plaintiff was not the proximate cause of the damages suffered but may
be regarded as only a remote cause, because from the shooting to the damages suffered there was
not that natural and continuous sequence required to fix civil responsibility.
In view of the foregoing, the judgment of the lower court is affirmed. No costs.
Bengzon, Padilla, Reyes, A., Bautista Angelo, Labrador, Concepcion, and Reyes, J.B.L., JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-10918

March 4, 1916

WILLIAM FRESSEL, ET AL., plaintiffs-appellants,

vs.
MARIANO UY CHACO SONS & COMPANY, defendant-appellee.
Rohde and Wright for appellants.
Gilbert, Haussermann, Cohn and Fisher for appellee.
TRENT, J.:
This is an appeal from a judgment sustaining the demurrer on the ground that the complaint does not
state a cause of action, followed by an order dismissing the case after the plaintiffs declined to amend.
The complaint, omitting the caption, etc., reads:
2. That during the latter part of the year 1913, the defendant entered into a contract with one
E. Merritt, whereby the said Merritt undertook and agreed with the defendant to build for the
defendant a costly edifice in the city of Manila at the corner of Calle Rosario and Plaza del
Padre Moraga. In the contract it was agreed between the parties thereto, that the defendant
at any time, upon certain contingencies, before the completion of said edifice could take
possession of said edifice in the course of construction and of all the materials in and about
said premises acquired by Merritt for the construction of said edifice.
3. That during the month of August land past, the plaintiffs delivered to Merritt at the said
edifice in the course of construction certain materials of the value of P1,381.21, as per detailed
list hereto attached and marked Exhibit A, which price Merritt had agreed to pay on the 1st
day of September, 1914.
4. That on the 28th day of August, 1914, the defendant under and by virtue of its contract with
Merritt took possession of the incomplete edifice in course of construction together with all the
materials on said premises including the materials delivered by plaintiffs and mentioned in
Exhibit A aforesaid.
5. That neither Merritt nor the defendant has paid for the materials mentioned in Exhibit A,
although payment has been demanded, and that on the 2d day of September, 1914, the
plaintiffs demanded of the defendant the return or permission to enter upon said premises and
retake said materials at the time still unused which was refused by defendant.
6. That in pursuance of the contract between Merritt and the defendant, Merritt acted as the
agent for defendant in the acquisition of the materials from plaintiffs.
The appellants insist that the above quoted allegations show that Merritt acted as the agent of the
defendant in purchasing the materials in question and that the defendant, by taking over and using
such materials, accepted and ratified the purchase, thereby obligating itself to pay for the same. Or,

viewed in another light, if the defendant took over the unfinished building and all the materials on the
ground and then completed the structure according to the plans, specifications, and building permit, it
became in fact the successor or assignee of the first builder, and as successor or assignee, it was as
much bound legally to pay for the materials used as was the original party. The vendor can enforce
his contract against the assignee as readily as against the assignor. While, on the other hand, the
appellee contends that Merritt, being "by the very terms of the contract" an independent contractor, is
the only person liable for the amount claimed.
It is urged that, as the demurrer admits the truth of all the allegations of fact set out in the complaint,
the allegation in paragraph 6 to the effect that Merritt "acted as the agent for defendant in the
acquisition of the materials from plaintiffs," must be, at this stage of the proceedings, considered as
true. The rule, as thus broadly stated, has many limitations and restrictions.
A more accurate statement of the rule is that a demurrer admits the truth of all material and
relevant facts which are well pleaded. . . . .The admission of the truth of material and relevant
facts well pleaded does not extend to render a demurrer an admission of inferences or
conclusions drawn therefrom, even if alleged in the pleading; nor mere inferences or
conclusions from facts not stated; nor conclusions of law. (Alzua and Arnalot vs. Johnson, 21
Phil. Rep., 308, 350.)
Upon the question of construction of pleadings, section 106 of the Code of Civil Procedure provides
that:
In the construction of a pleading, for the purpose of determining its effects, its allegations shall
be liberally construed, with a view of substantial justice between the parties.
This section is essentially the same as section 452 of the California Code of Civil Procedure.
"Substantial justice," as used in the two sections, means substantial justice to be ascertained and
determined by fixed rules and positive statutes. (Stevens vs. Ross, 1 Cal. 94, 95.) "Where the language
of a pleading is ambiguous, after giving to it a reasonable intendment, it should be resolved against
the pleader. This is especially true on appeal from a judgment rendered after refusal to amend; where
a general and special demurrer to a complaint has been sustained, and the plaintiff had refused to
amend, all ambiguities and uncertainties must be construed against him." (Sutherland on Code
Pleading, vol. 1, sec. 85, and cases cited.)
The allegations in paragraphs 1 to 5, inclusive, above set forth, do not even intimate that the relation
existing between Merritt and the defendant was that of principal and agent, but, on the contrary, they
demonstrate that Merritt was an independent contractor and that the materials were purchased by him
as such contractor without the intervention of the defendant. The fact that "the defendant entered into
a contract with one E. Merritt, where by the said Merritt undertook and agreed with the defendant to
build for the defendant a costly edifice" shows that Merritt was authorized to do the work according to
his own method and without being subject to the defendant's control, except as to the result of the
work. He could purchase his materials and supplies from whom he pleased and at such prices as he
desired to pay. Again, the allegations that the "plaintiffs delivered the Merritt . . . . certain materials
(the materials in question) of the value of P1,381.21, . . . . which price Merritt agreed to pay," show
that there were no contractual relations whatever between the sellers and the defendant. The mere
fact that Merritt and the defendant had stipulated in their building contract that the latter could, "upon
certain contingencies," take possession of the incompleted building and all materials on the ground,
did not change Merritt from an independent contractor to an agent. Suppose that, at the time the
building was taken over Merritt had actually used in the construction thus far P100,000 worth of
materials and supplies which he had purchased on a credit, could those creditors maintain an action
against the defendant for the value of such supplies? Certainly not. The fact that the P100,000 worth

of supplies had been actually used in the building would place those creditors in no worse position to
recover than that of the plaintiffs, although the materials which the plaintiffs sold to Merritt had not
actually gone into the construction. To hold that either group of creditors can recover would have the
effect of compelling the defendants to pay, as we have indicated, just such prices for materials as
Merritt and the sellers saw fit to fix. In the absence of a statute creating what is known as mechanics'
liens, the owner of a building is not liable for the value of materials purchased by an independent
contractor either as such owner or as the assignee of the contractor.
The allegation in paragraph 6 that Merritt was the agent of the defendant contradicts all the other
allegations and is a mere conclusion drawn from them. Such conclusion is not admitted, as we have
said, by the demurrer.
The allegations in the complaint not being sufficient to constitute a cause of action against the
defendant, the judgment appealed from is affirmed, with costs against the appellants. So ordered.
Arellano, C.J., Torres, Johnson and Araullo, JJ., concur.
Moreland, J., concurs in the result.
Carson, J., dissents.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-8169

January 29, 1957

THE SHELL COMPANY OF THE PHILIPPINES, LTD., petitioner,

vs.
FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY COMMERCIAL CASUALTY
INSURANCE CO., SALVADOR SISON, PORFIRIO DE LA FUENTE and THE COURT OF
APPEALS (First Division),respondents.
Ross, Selph, Carrascoso & Janda for petitioner.
J. A. Wolfson and Manuel Y. Macias for respondents.
PADILLA, J.:
Appeal by certiorari under Rule 46 to review a judgment of the Court of Appeals which reversed that
of the Court of First Instance of Manila and sentenced ". . . the defendants-appellees to pay, jointly
and severally, the plaintiffs-appellants the sum of P1,651.38, with legal interest from December 6,
1947 (Gutierrez vs. Gutierrez, 56 Phil., 177, 180), and the costs in both instances."
The Court of Appeals found the following:
Inasmuch as both the Plaintiffs-Appellants and the Defendant-Appellee, the Shell Company of
the Philippine Islands, Ltd. accept the statement of facts made by the trial court in its decision
and appearing on pages 23 to 37 of the Record on Appeal, we quote hereunder such
statement:
This is an action for recovery of sum of money, based on alleged negligence of the defendants.
It is a fact that a Plymounth car owned by Salvador R. Sison was brought, on September 3,
1947 to the Shell Gasoline and Service Station, located at the corner of Marques de Comillas
and Isaac Peral Streets, Manila, for washing, greasing and spraying. The operator of the
station, having agreed to do service upon payment of P8.00, the car was placed on a hydraulic
lifter under the direction of the personnel of the station.
What happened to the car is recounted by Perlito Sison, as follows:
Q. Will you please describe how they proceeded to do the work?
A. Yes, sir. The first thing that was done, as I saw, was to drive the car over the lifter.
Then by the aid of the two grease men they raised up my car up to six feet high, and
then washing was done. After washing, the next step was greasing. Before greasing
was finished, there is a part near the shelf of the right fender, right front fender, of my
car to be greased, but the the grease men cannot reached that part, so the next thing
to be done was to loosen the lifter just a few feet lower. Then upon releasing the valve
to make the car lower, a little bit lower . . .

Q. Who released the valve?

A. The greasemen, for the escape of the air. As the escape of the air is too strong for
my ear I faced backward. I faced toward Isaac Peral Street, and covered my ear. After
the escaped of the air has been finished, the air coming out from the valve, I turned to
face the car and I saw the car swaying at that time, and just for a few second the car
fell., (t.s.n. pp. 22-23.)
The case was immediately reported to the Manila Adjustor Company, the adjustor of the firemen's
Insurance Company and the Commercial Casualty Insurance Company, as the car was insured with
these insurance companies. After having been inspected by one Mr. Baylon, representative of the
Manila Adjustor Company, the damaged car was taken to the shops of the Philippine Motors,
Incorporated, for repair upon order of the Firemen's Insurance Company and the Commercial Casualty
Company, with the consent of Salvador R. Sison. The car was restored to running condition after
repairs amounting to P1,651.38, and was delivered to Salvador R. Sison, who, in turn made
assignments of his rights to recover damages in favor of the Firemen's Insurance Company and the
Commercial Casualty Insurance Company.
On the other hand, the fall of the car from the hydraulic lifter has been explained by Alfonso
M. Adriano, a greaseman in the Shell Gasoline and Service Station, as follows:
Q. Were you able to lift the car on the hydraulic lifter on the occasion, September 3,
1947?
A. Yes, sir.
Q. To what height did you raise more or less?
A. More or less five feet, sir.
Q. After lifting that car that height, what did you do with the car?
A. I also washed it, sir.
Q. And after washing?
A. I greased it.
Q. On that occasion, have you been able to finish greasing and washing the car?
A. There is one point which I could not reach.
Q. And what did you do then?
A. I lowered the lifter in order to reach that point.
Q. After lowering it a little, what did you do then?
A. I pushed and pressed the valve in its gradual pressure.

Q. Were you able to reach the portion which you were not able to reach while it was
lower?
A. No more, sir.
Q. Why?
A. Because when I was lowering the lifter I saw that the car was swinging and it fell.
THE COURT. Why did the car swing and fall?
WITNESS: 'That is what I do not know, sir'. (t.s.n., p.67.)
The position of Defendant Porfirio de la Fuente is stated in his counter-statement of facts which is
hereunder also reproduced:
In the afternoon of September 3, 1947, an automobile belonging to the plaintiff Salvador Sison
was brought by his son, Perlito Sison, to the gasoline and service station at the corner of
Marques de Comillas and Isaac Peral Streets, City of Manila, Philippines, owned by the
defendant The Shell Company of the Philippine Islands, Limited, but operated by the defendant
Porfirio de la Fuente, for the purpose of having said car washed and greased for a
consideration of P8.00 (t.s.n., pp. 19-20.) Said car was insured against loss or damage by
Firemen's Insurance Company of Newark, New Jersey, and Commercial Casualty Insurance
Company jointly for the sum of P10,000 (Exhibits "A', "B", and "D").
The job of washing and greasing was undertaken by defendant Porfirio de la Fuente through
his two employees, Alfonso M. Adriano, as greaseman and one surnamed de los Reyes, a
helper and washer (t.s.n., pp. 65-67). To perform the job the car was carefully and centrally
placed on the platform of the lifter in the gasoline and service station aforementioned before
raising up said platform to a height of about 5 feet and then the servicing job was started. After
more than one hour of washing and greasing, the job was about to be completed except for
an ungreased portion underneath the vehicle which could not be reached by the greasemen.
So, the lifter was lowered a little by Alfonso M. Adriano and while doing so, the car for unknown
reason accidentally fell and suffered damage to the value of P1, 651.38 (t.s.n., pp. 65-67).
The insurance companies after paying the sum of P1,651.38 for the damage and charging the
balance of P100.00 to Salvador Sison in accordance with the terms of the insurance contract,
have filed this action together with said Salvador Sison for the recovery of the total amount of
the damage from the defendants on the ground of negligence (Record on Appeal, pp. 1-6).
The defendant Porfirio de la Fuente denied negligence in the operation of the lifter in his
separate answer and contended further that the accidental fall of the car was caused by
unforseen event (Record on Appeal, pp. 17-19).
The owner of the car forthwith notified the insurers who ordered their adjustor, the Manila Adjustor
Company, to investigate the incident and after such investigation the damaged car, upon order of the
insures and with the consent of the owner, was brought to the shop of the Philippine Motors, Inc. The
car was restored to running condition after thereon which amounted to P1,651.38 and returned to the
owner who assigned his right to collect the aforesaid amount to the Firemen's Insurance Company
and the Commercial Casualty Insurance Company.

On 6 December 1947 the insures and the owner of the car brought an action in the Court of First
Instance of Manila against the Shell Company of the Philippines, Ltd. and Porfirio de la Fuente to
recover from them, jointly and severally, the sum of P1,651.38, interest thereon at the legal rate from
the filing of the complaint until fully paid, the costs. After trial the Court dismissed the complaint. The
plaintiffs appealed. The Court of Appeals reversed the judgment and sentenced the defendant to pay
the amount sought to be recovered, legal interest and costs, as stated at the beginning of this opinion.
In arriving at the conclusion that on 3 September 1947 when the car was brought to the station for
servicing Profirio de la Fuente, the operator of the gasoline and service station, was an agent of the
Shell Company of the Philippines, Ltd., the Court of Appeals found that
. . . De la Fuente owned his position to the Shell Company which could remove him terminate
his services at any time from the said Company, and he undertook to sell the Shell Company's
products exculusively at the said Station. For this purpose, De la Fuente was placed in
possession of the gasoline and service station under consideration, and was provided with all
the equipments needed to operate it, by the said Company, such as the tools and articles listed
on Exhibit 2 which the hydraulic lifter (hoist) and accessories, from which Sison's automobile
fell on the date in question (Exhibit 1 and 2). These equipments were delivered to De la Fuente
on a so-called loan basis. The Shell Company took charge of its care and maintenance and
rendered to the public or its customers at that station for the proper functioning of the
equipment. Witness Antonio Tiongson, who was sales superintendent of the Shell Company,
and witness Augusto Sawyer, foreman of the same Company, supervised the operators and
conducted periodic inspection of the Company's gasoline and service station, the service
station in question inclusive. Explaining his duties and responsibilities and the reason for the
loan, Tiongson said: "mainly of the supervision of sales or (of) our dealers and rountinary
inspection of the equipment loaned by the Company" (t.s.n., 107); "we merely inquire about
how the equipments are, whether they have complaints, and whether if said equipments are
in proper order . . .", (t.s.n., 110); station equipments are "loaned for the exclusive use of the
dealer on condition that all supplies to be sold by said dealer should be exclusively Shell, so
as a concession we loan equipments for their use . . .," "for the proper functioning of the
equipments, we answer and see to it that the equipments are in good running order usable
condition . . .," "with respect to the public." (t.s.n., 111-112). De la Fuente, as operator, was
given special prices by the Company for the gasoline products sold therein. Exhibit 1 Shell,
which was a receipt by Antonio Tiongson and signed by the De la Fuente, acknowledging the
delivery of equipments of the gasoline and service station in question was subsequently
replaced by Exhibit 2 Shell, an official from of the inventory of the equipment which De la
Fuente signed above the words: "Agent's signature" And the service station in question had
been marked "SHELL", and all advertisements therein bore the same sign. . . .
. . . De la Fuente was the operator of the station "by grace" of the Defendant Company which
could and did remove him as it pleased; that all the equipments needed to operate the station
was owned by the Defendant Company which took charge of their proper care and
maintenance, despite the fact that they were loaned to him; that the Defendant company did
not leave the fixing of price for gasoline to De la Fuente; on the other hand, the Defendant
company had complete control thereof; and that Tiongson, the sales representative of the
Defendant Company, had supervision over De la Fuente in the operation of the station, and in
the sale of Defendant Company's products therein. . . .
Taking into consideration the fact that the operator owed his position to the company and the latter
could remove him or terminate his services at will; that the service station belonged to the company
and bore its tradename and the operator sold only the products of the company; that the equipment
used by the operator belonged to the company and were just loaned to the operator and the company
took charge of their repair and maintenance; that an employee of the company supervised the operator

and conducted periodic inspection of the company's gasoline and service station; that the price of the
products sold by the operator was fixed by the company and not by the operator; and that the receipt
signed by the operator indicated that he was a mere agent, the finding of the Court of Appeals that the
operator was an agent of the company and not an independent contractor should not be disturbed.
To determine the nature of a contract courts do not have or are not bound to rely upon the name or
title given it by the contracting parties, should there be a controversy as to what they really had
intended to enter into, but the way the contracting parties do or perform their respective obligation
stipulated or agreed upon may be shown and inquired into, and should such performance conflict with
the name or title given the contract by the parties, the former must prevail over the latter.
It was admitted by the operator of the gasoline and service station that "the car was carefully and
centrally placed on the platform of the lifter . . ." and the Court of Appeals found that
. . . the fall of Appellant Sison's car from the hydraulic lift and the damage caused therefor,
were the result of the jerking and swaying of the lift when the valve was released, and that the
jerking was due to some accident and unforeseen shortcoming of the mechanism itself, which
caused its faulty or defective operation or functioning,
. . . the servicing job on Appellant Sison's automobile was accepted by De la Fuente in the
normal and ordinary conduct of his business as operator of his co-appellee's service station,
and that the jerking and swaying of the hydraulic lift which caused the fall of the subject car
were due to its defective condition, resulting in its faulty operation. . . .
As the act of the agent or his employees acting within the scope of his authority is the act of the
principal, the breach of the undertaking by the agent is one for which the principal is answerable.
Moreover, the company undertook to "answer and see to it that the equipments are in good running
order and usable condition;" and the Court of Appeals found that the Company's mechanic failed to
make a thorough check up of the hydraulic lifter and the check up made by its mechanic was "merely
routine" by raising "the lifter once or twice and after observing that the operator was satisfactory, he
(the mechanic) left the place." The latter was negligent and the company must answer for the negligent
act of its mechanic which was the cause of the fall of the car from the hydraulic lifter.
The judgment under review is affirmed, with costs against the petitioner.
Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes,
J.B.L., Endencia and Felix, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-12986

March 31, 1966

THE SPOUSES BERNABE AFRICA and SOLEDAD C. AFRICA, and the HEIRS OF DOMINGA
ONG,petitioners-appellants,
vs.
CALTEX (PHIL.), INC., MATEO BOQUIREN and THE COURT OF APPEALS, respondentsappellees.
Ross, Selph, Carrascoso and Janda for the respondents.
Bernabe Africa, etc. for the petitioners.
MAKALINTAL., J.:
This case is before us on a petition for review of the decision of the Court of Appeals, which affirmed
that of the Court of First Instance of Manila dismissing petitioners' second amended complaint against
respondents.
The action is for damages under Articles 1902 and 1903 of the old Civil Code. It appears that in the
afternoon of March 18, 1948 a fire broke out at the Caltex service station at the corner of Antipolo
street and Rizal Avenue, Manila. It started while gasoline was being hosed from a tank truck into the
underground storage, right at the opening of the receiving tank where the nozzle of the hose was
inserted. The fire spread to and burned several neighboring houses, including the personal properties
and effects inside them. Their owners, among them petitioners here, sued respondents Caltex (Phil.),
Inc. and Mateo Boquiren, the first as alleged owner of the station and the second as its agent in charge
of operation. Negligence on the part of both of them was attributed as the cause of the fire.
The trial court and the Court of Appeals found that petitioners failed to prove negligence and that
respondents had exercised due care in the premises and with respect to the supervision of their
employees.
The first question before Us refers to the admissibility of certain reports on the fire prepared by the
Manila Police and Fire Departments and by a certain Captain Tinio of the Armed Forces of the
Philippines. Portions of the first two reports are as follows:
1. Police Department report:
Investigation disclosed that at about 4:00 P.M. March 18, 1948, while Leandro Flores
was transferring gasoline from a tank truck, plate No. T-5292 into the underground
tank of the Caltex Gasoline Station located at the corner of Rizal Avenue and Antipolo
Street, this City, an unknown Filipino lighted a cigarette and threw the burning match
stick near the main valve of the said underground tank. Due to the gasoline fumes, fire
suddenly blazed. Quick action of Leandro Flores in pulling off the gasoline hose
connecting the truck with the underground tank prevented a terrific explosion.
However, the flames scattered due to the hose from which the gasoline was spouting.
It burned the truck and the following accessorias and residences.

2. The Fire Department report:

In connection with their allegation that the premises was (sic) subleased for the installation of
a coca-cola and cigarette stand, the complainants furnished this Office a copy of a photograph
taken during the fire and which is submitted herewith. it appears in this picture that there are
in the premises a coca-cola cooler and a rack which according to information gathered in the
neighborhood contained cigarettes and matches, installed between the gasoline pumps and
the underground tanks.
The report of Captain Tinio reproduced information given by a certain Benito Morales regarding the
history of the gasoline station and what the chief of the fire department had told him on the same
subject.
The foregoing reports were ruled out as "double hearsay" by the Court of Appeals and hence
inadmissible. This ruling is now assigned as error. It is contended: first, that said reports were admitted
by the trial court without objection on the part of respondents; secondly, that with respect to the police
report (Exhibit V-Africa) which appears signed by a Detective Zapanta allegedly "for Salvador
Capacillo," the latter was presented as witness but respondents waived their right to cross-examine
him although they had the opportunity to do so; and thirdly, that in any event the said reports are
admissible as an exception to the hearsay rule under section 35 of Rule 123, now Rule 130.
The first contention is not borne out by the record. The transcript of the hearing of September 17, 1953
(pp. 167-170) shows that the reports in question, when offered as evidence, were objected to by
counsel for each of respondents on the ground that they were hearsay and that they were "irrelevant,
immaterial and impertinent." Indeed, in the court's resolution only Exhibits J, K, K-5 and X-6 were
admitted without objection; the admission of the others, including the disputed ones, carried no such
explanation.
On the second point, although Detective Capacillo did take the witness stand, he was not examined
and he did not testify as to the facts mentioned in his alleged report (signed by Detective Zapanta). All
he said was that he was one of those who investigated "the location of the fire and, if possible, gather
witnesses as to the occurrence, and that he brought the report with him. There was nothing, therefore,
on which he need be cross-examined; and the contents of the report, as to which he did not testify,
did not thereby become competent evidence. And even if he had testified, his testimony would still
have been objectionable as far as information gathered by him from third persons was concerned.
Petitioners maintain, however, that the reports in themselves, that is, without further testimonial
evidence on their contents, fall within the scope of section 35, Rule 123, which provides that "entries
in official records made in the performance of his duty by a public officer of the Philippines, or by a
person in the performance of a duty specially enjoined by law, are prima facie evidence of the facts
therein stated."
There are three requisites for admissibility under the rule just mentioned: (a) that the entry was made
by a public officer, or by another person specially enjoined by law to do so; (b) that it was made by the
public officer in the performance of his duties, or by such other person in the performance of a duty
specially enjoined by law; and (c) that the public officer or other person had sufficient knowledge of
the facts by him stated, which must have been acquired by him personally or through official
information (Moran, Comments on the Rules of Court, Vol. 3 [1957] p. 398).
Of the three requisites just stated, only the last need be considered here. Obviously the material facts
recited in the reports as to the cause and circumstances of the fire were not within the personal
knowledge of the officers who conducted the investigation. Was knowledge of such facts, however,

acquired by them through official information? As to some facts the sources thereof are not even
identified. Others are attributed to Leopoldo Medina, referred to as an employee at the gas station
were the fire occurred; to Leandro Flores, driver of the tank truck from which gasoline was being
transferred at the time to the underground tank of the station; and to respondent Mateo Boquiren, who
could not, according to Exhibit V-Africa, give any reason as to the origin of the fire. To qualify their
statements as "official information" acquired by the officers who prepared the reports, the persons who
made the statements not only must have personal knowledge of the facts stated but must have the
duty to give such statements for record.1
The reports in question do not constitute an exception to the hearsay rule; the facts stated therein
were not acquired by the reporting officers through official information, not having been given by the
informants pursuant to any duty to do so.
The next question is whether or not, without proof as to the cause and origin of the fire, the doctrine
of res ipsa loquitur should apply so as to presume negligence on the part of appellees. Both the trial
court and the appellate court refused to apply the doctrine in the instant case on the grounds that "as
to (its) applicability ... in the Philippines, there seems to he nothing definite," and that while the rules
do not prohibit its adoption in appropriate cases, "in the case at bar, however, we find no practical use
for such doctrine." The question deserves more than such summary dismissal. The doctrine has
actually been applied in this jurisdiction, in the case of Espiritu vs. Philippine Power and Development
Co. (CA-G.R. No. 3240-R, September 20, 1949), wherein the decision of the Court of Appeals was
penned by Mr. Justice J.B.L. Reyes now a member of the Supreme Court.
The facts of that case are stated in the decision as follows:
In the afternoon of May 5, 1946, while the plaintiff-appellee and other companions were loading
grass between the municipalities of Bay and Calauan, in the province of Laguna, with clear
weather and without any wind blowing, an electric transmission wire, installed and maintained
by the defendant Philippine Power and Development Co., Inc. alongside the road, suddenly
parted, and one of the broken ends hit the head of the plaintiff as he was about to board the
truck. As a result, plaintiff received the full shock of 4,400 volts carried by the wire and was
knocked unconscious to the ground. The electric charge coursed through his body and caused
extensive and serious multiple burns from skull to legs, leaving the bone exposed in some
parts and causing intense pain and wounds that were not completely healed when the case
was tried on June 18, 1947, over one year after the mishap.
The defendant therein disclaimed liability on the ground that the plaintiff had failed to show any specific
act of negligence, but the appellate court overruled the defense under the doctrine of res ipsa loquitur.
The court said:
The first point is directed against the sufficiency of plaintiff's evidence to place appellant on its
defense. While it is the rule, as contended by the appellant, that in case of noncontractual
negligence, or culpa aquiliana, the burden of proof is on the plaintiff to establish that the
proximate cause of his injury was the negligence of the defendant, it is also a recognized
principal that "where the thing which caused injury, without fault of the injured person, is under
the exclusive control of the defendant and the injury is such as in the ordinary course of things
does not occur if he having such control use proper care, it affords reasonable evidence, in
the absence of the explanation, that the injury arose from defendant's want of care."
And the burden of evidence is shifted to him to establish that he has observed due care and
diligence. (San Juan Light & Transit Co. v. Requena, 244, U.S. 89, 56 L. ed. 680.) This rule is
known by the name of res ipsa loquitur (the transaction speaks for itself), and is peculiarly

applicable to the case at bar, where it is unquestioned that the plaintiff had every right to be
on the highway, and the electric wire was under the sole control of defendant company. In the
ordinary course of events, electric wires do not part suddenly in fair weather and injure people,
unless they are subjected to unusual strain and stress or there are defects in their installation,
maintenance and supervision; just as barrels do not ordinarily roll out of the warehouse
windows to injure passersby, unless some one was negligent. (Byrne v. Boadle, 2 H & Co.
722; 159 Eng. Reprint 299, the leading case that established that rule). Consequently, in the
absence of contributory negligence (which is admittedly not present), the fact that the wire
snapped suffices to raise a reasonable presumption of negligence in its installation, care and
maintenance. Thereafter, as observed by Chief Baron Pollock, "if there are any facts
inconsistent with negligence, it is for the defendant to prove."
It is true of course that decisions of the Court of Appeals do not lay down doctrines binding on the
Supreme Court, but we do not consider this a reason for not applying the particular doctrine of res ipsa
loquitur in the case at bar. Gasoline is a highly combustible material, in the storage and sale of which
extreme care must be taken. On the other hand, fire is not considered a fortuitous event, as it arises
almost invariably from some act of man. A case strikingly similar to the one before Us is Jones vs.
Shell Petroleum Corporation, et al., 171 So. 447:
Arthur O. Jones is the owner of a building in the city of Hammon which in the year 1934 was
leased to the Shell Petroleum Corporation for a gasoline filling station. On October 8, 1934,
during the term of the lease, while gasoline was being transferred from the tank wagon, also
operated by the Shell Petroleum Corporation, to the underground tank of the station, a fire
started with resulting damages to the building owned by Jones. Alleging that the damages to
his building amounted to $516.95, Jones sued the Shell Petroleum Corporation for the
recovery of that amount. The judge of the district court, after hearing the testimony, concluded
that plaintiff was entitled to a recovery and rendered judgment in his favor for $427.82. The
Court of Appeals for the First Circuit reversed this judgment, on the ground the testimony failed
to show with reasonable certainty any negligence on the part of the Shell Petroleum
Corporation or any of its agents or employees. Plaintiff applied to this Court for a Writ of Review
which was granted, and the case is now before us for decision.
1wph1.t

In resolving the issue of negligence, the Supreme Court of Louisiana held:

Plaintiff's petition contains two distinct charges of negligence one relating to the cause of
the fire and the other relating to the spreading of the gasoline about the filling station.
Other than an expert to assess the damages caused plaintiff's building by the fire, no witnesses
were placed on the stand by the defendant.
Taking up plaintiff's charge of negligence relating to the cause of the fire, we find it established
by the record that the filling station and the tank truck were under the control of the defendant
and operated by its agents or employees. We further find from the uncontradicted testimony
of plaintiff's witnesses that fire started in the underground tank attached to the filling station
while it was being filled from the tank truck and while both the tank and the truck were in charge
of and being operated by the agents or employees of the defendant, extended to the hose and
tank truck, and was communicated from the burning hose, tank truck, and escaping gasoline
to the building owned by the plaintiff.
Predicated on these circumstances and the further circumstance of defendant's failure to
explain the cause of the fire or to show its lack of knowledge of the cause, plaintiff has evoked

the doctrine of res ipsa loquitur. There are many cases in which the doctrine may be
successfully invoked and this, we think, is one of them.
Where the thing which caused the injury complained of is shown to be under the management
of defendant or his servants and the accident is such as in the ordinary course of things does
not happen if those who have its management or control use proper care, it affords reasonable
evidence, in absence of explanation by defendant, that the accident arose from want of care.
(45 C.J. #768, p. 1193).
This statement of the rule of res ipsa loquitur has been widely approved and adopted by the
courts of last resort. Some of the cases in this jurisdiction in which the doctrine has been
applied are the following, viz.: Maus v. Broderick, 51 La. Ann. 1153, 25 So. 977; Hebert v.
Lake Charles Ice, etc., Co., 111 La. 522, 35 So. 731, 64 L.R.A. 101, 100 Am. St. Rep. 505;
Willis v. Vicksburg, etc., R. Co., 115 La. 63, 38 So. 892; Bents v. Page, 115 La. 560, 39 So.
599.
The principle enunciated in the aforequoted case applies with equal force here. The gasoline station,
with all its appliances, equipment and employees, was under the control of appellees. A fire occurred
therein and spread to and burned the neighboring houses. The persons who knew or could have
known how the fire started were appellees and their employees, but they gave no explanation thereof
whatsoever. It is a fair and reasonable inference that the incident happened because of want of care.
In the report submitted by Captain Leoncio Mariano of the Manila Police Department (Exh. X-1 Africa)
the following appears:
Investigation of the basic complaint disclosed that the Caltex Gasoline Station complained of
occupies a lot approximately 10 m x 10 m at the southwest corner of Rizal Avenue and
Antipolo. The location is within a very busy business district near the Obrero Market, a railroad
crossing and very thickly populated neighborhood where a great number of people mill around
t
until
gasoline
tever be theWactjvities of these peopleor lighting a cigarette cannot be excluded and this
constitute a secondary hazard to its operation which in turn endangers the entire neighborhood
to conflagration.
Furthermore, aside from precautions already taken by its operator the concrete walls south
and west adjoining the neighborhood are only 2-1/2 meters high at most and cannot avoid the
flames from leaping over it in case of fire.
Records show that there have been two cases of fire which caused not only material damages
but desperation and also panic in the neighborhood.
Although the soft drinks stand had been eliminated, this gasoline service station is also used
by its operator as a garage and repair shop for his fleet of taxicabs numbering ten or more,
adding another risk to the possible outbreak of fire at this already small but crowded gasoline
station.

The foregoing report, having been submitted by a police officer in the performance of his duties on the
basis of his own personal observation of the facts reported, may properly be considered as an
exception to the hearsay rule. These facts, descriptive of the location and objective circumstances
surrounding the operation of the gasoline station in question, strengthen the presumption of
negligence under the doctrine of res ipsa loquitur, since on their face they called for more stringent
measures of caution than those which would satisfy the standard of due diligence under ordinary
circumstances. There is no more eloquent demonstration of this than the statement of Leandro Flores
before the police investigator. Flores was the driver of the gasoline tank wagon who, alone and without
assistance, was transferring the contents thereof into the underground storage when the fire broke
out. He said: "Before loading the underground tank there were no people, but while the loading was
going on, there were people who went to drink coca-cola (at the coca-cola stand) which is about a
meter from the hole leading to the underground tank." He added that when the tank was almost filled
he went to the tank truck to close the valve, and while he had his back turned to the "manhole" he,
heard someone shout "fire."
Even then the fire possibly would not have spread to the neighboring houses were it not for another
negligent omission on the part of defendants, namely, their failure to provide a concrete wall high
enough to prevent the flames from leaping over it. As it was the concrete wall was only 2-1/2 meters
high, and beyond that height it consisted merely of galvanized iron sheets, which would predictably
crumple and melt when subjected to intense heat. Defendants' negligence, therefore, was not only
with respect to the cause of the fire but also with respect to the spread thereof to the neighboring
houses.
There is an admission on the part of Boquiren in his amended answer to the second amended
complaint that "the fire was caused through the acts of a stranger who, without authority, or permission
of answering defendant, passed through the gasoline station and negligently threw a lighted match in
the premises." No evidence on this point was adduced, but assuming the allegation to be true
certainly any unfavorable inference from the admission may be taken against Boquiren it does not
extenuate his negligence. A decision of the Supreme Court of Texas, upon facts analogous to those
of the present case, states the rule which we find acceptable here. "It is the rule that those who
distribute a dangerous article or agent, owe a degree of protection to the public proportionate to and
commensurate with a danger involved ... we think it is the generally accepted rule as applied to torts
that 'if the effects of the actor's negligent conduct actively and continuously operate to bring about
harm to another, the fact that the active and substantially simultaneous operation of the effects of a
third person's innocent, tortious or criminal act is also a substantial factor in bringing about the harm,
does not protect the actor from liability.' (Restatement of the Law of Torts, vol. 2, p. 1184, #439). Stated
in another way, "The intention of an unforeseen and unexpected cause, is not sufficient to relieve a
wrongdoer from consequences of negligence, if such negligence directly and proximately cooperates
with the independent cause in the resulting injury." (MacAfee, et al. vs. Traver's Gas Corporation, 153
S.W. 2nd 442.)
The next issue is whether Caltex should be held liable for the damages caused to appellants. This
issue depends on whether Boquiren was an independent contractor, as held by the Court of Appeals,
or an agent of Caltex. This question, in the light of the facts not controverted, is one of law and hence
may be passed upon by this Court. These facts are: (1) Boquiren made an admission that he was an
agent of Caltex; (2) at the time of the fire Caltex owned the gasoline station and all the equipment
therein; (3) Caltex exercised control over Boquiren in the management of the state; (4) the delivery
truck used in delivering gasoline to the station had the name of CALTEX painted on it; and (5) the
license to store gasoline at the station was in the name of Caltex, which paid the license fees. (Exhibit
T-Africa; Exhibit U-Africa; Exhibit X-5 Africa; Exhibit X-6 Africa; Exhibit Y-Africa).
In Boquiren's amended answer to the second amended complaint, he denied that he directed one of
his drivers to remove gasoline from the truck into the tank and alleged that the "alleged driver, if one

there was, was not in his employ, the driver being an employee of the Caltex (Phil.) Inc. and/or the
owners of the gasoline station." It is true that Boquiren later on amended his answer, and that among
the changes was one to the effect that he was not acting as agent of Caltex. But then again, in his
motion to dismiss appellants' second amended complaint the ground alleged was that it stated no
cause of action since under the allegations thereof he was merely acting as agent of Caltex, such that
he could not have incurred personal liability. A motion to dismiss on this ground is deemed to be an
admission of the facts alleged in the complaint.
Caltex admits that it owned the gasoline station as well as the equipment therein, but claims that the
business conducted at the service station in question was owned and operated by Boquiren. But
Caltex did not present any contract with Boquiren that would reveal the nature of their relationship at
the time of the fire. There must have been one in existence at that time. Instead, what was presented
was a license agreement manifestly tailored for purposes of this case, since it was entered into shortly
before the expiration of the one-year period it was intended to operate. This so-called license
agreement (Exhibit 5-Caltex) was executed on November 29, 1948, but made effective as of January
1, 1948 so as to cover the date of the fire, namely, March 18, 1948. This retroactivity provision is quite
significant, and gives rise to the conclusion that it was designed precisely to free Caltex from any
responsibility with respect to the fire, as shown by the clause that Caltex "shall not be liable for any
injury to person or property while in the property herein licensed, it being understood and agreed that
LICENSEE (Boquiren) is not an employee, representative or agent of LICENSOR (Caltex)."
But even if the license agreement were to govern, Boquiren can hardly be considered an independent
contractor. Under that agreement Boquiren would pay Caltex the purely nominal sum of P1.00 for the
use of the premises and all the equipment therein. He could sell only Caltex Products. Maintenance
of the station and its equipment was subject to the approval, in other words control, of Caltex. Boquiren
could not assign or transfer his rights as licensee without the consent of Caltex. The license agreement
was supposed to be from January 1, 1948 to December 31, 1948, and thereafter until terminated by
Caltex upon two days prior written notice. Caltex could at any time cancel and terminate the agreement
in case Boquiren ceased to sell Caltex products, or did not conduct the business with due diligence,
in the judgment of Caltex. Termination of the contract was therefore a right granted only to Caltex but
not to Boquiren. These provisions of the contract show the extent of the control of Caltex over
Boquiren. The control was such that the latter was virtually an employee of the former.
Taking into consideration the fact that the operator owed his position to the company and the
latter could remove him or terminate his services at will; that the service station belonged to
the company and bore its tradename and the operator sold only the products of the company;
that the equipment used by the operator belonged to the company and were just loaned to the
operator and the company took charge of their repair and maintenance; that an employee of
the company supervised the operator and conducted periodic inspection of the company's
gasoline and service station; that the price of the products sold by the operator was fixed by
the company and not by the operator; and that the receipts signed by the operator indicated
that he was a mere agent, the finding of the Court of Appeals that the operator was an agent
of the company and not an independent contractor should not be disturbed.
To determine the nature of a contract courts do not have or are not bound to rely upon the
name or title given it by the contracting parties, should thereby a controversy as to what they
really had intended to enter into, but the way the contracting parties do or perform their
respective obligations stipulated or agreed upon may be shown and inquired into, and should
such performance conflict with the name or title given the contract by the parties, the former
must prevail over the latter. (Shell Company of the Philippines, Ltd. vs. Firemens' Insurance
Company of Newark, New Jersey, 100 Phil. 757).

The written contract was apparently drawn for the purpose of creating the apparent relationship
of employer and independent contractor, and of avoiding liability for the negligence of the
employees about the station; but the company was not satisfied to allow such relationship to
exist. The evidence shows that it immediately assumed control, and proceeded to direct the
method by which the work contracted for should be performed. By reserving the right to
terminate the contract at will, it retained the means of compelling submission to its orders.
Having elected to assume control and to direct the means and methods by which the work has
to be performed, it must be held liable for the negligence of those performing service under its
direction. We think the evidence was sufficient to sustain the verdict of the jury. (Gulf Refining
Company v. Rogers, 57 S.W. 2d, 183).
Caltex further argues that the gasoline stored in the station belonged to Boquiren. But no cash invoices
were presented to show that Boquiren had bought said gasoline from Caltex. Neither was there a sales
contract to prove the same.
As found by the trial court the Africas sustained a loss of P9,005.80, after deducting the amount of
P2,000.00 collected by them on the insurance of the house. The deduction is now challenged as
erroneous on the ground that Article 2207 of the New Civil Code, which provides for the subrogation
of the insurer to the rights of the insured, was not yet in effect when the loss took place. However,
regardless of the silence of the law on this point at that time, the amount that should be recovered be
measured by the damages actually suffered, otherwise the principle prohibiting unjust enrichment
would be violated. With respect to the claim of the heirs of Ong P7,500.00 was adjudged by the lower
court on the basis of the assessed value of the property destroyed, namely, P1,500.00, disregarding
the testimony of one of the Ong children that said property was worth P4,000.00. We agree that the
court erred, since it is of common knowledge that the assessment for taxation purposes is not an
accurate gauge of fair market value, and in this case should not prevail over positive evidence of such
value. The heirs of Ong are therefore entitled to P10,000.00.
Wherefore, the decision appealed from is reversed and respondents-appellees are held liable
solidarily to appellants, and ordered to pay them the aforesaid sum of P9,005.80 and P10,000.00,
respectively, with interest from the filing of the complaint, and costs.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Regala, Bengzon, J.P.,
Zaldivar and Sanchez, JJ., concur.
Dizon, J., took no part.
Footnotes
Thus, for instance, the record of a justice of the peace of marriage certificates transmitted to
him by the corresponding priest is admissible. The justice of the peace has no personal
knowledge of the marriage, but it was reported to him by a priest whose duty it was, under
the law, to make the report for record purposes. Similarly, the tax records of a provincial
assessor are admissible even if the assessments were made by subordinates. So also are
entries of marriages made by a municipal treasurer in his official record, because he
acquires knowledge thereof by virtue of a statutory duty on the part of those authorized to
solemnize marriages to send a copy of each marriage contract solemnized by them to the
local civil registrar. (See Moran, Comments on the Rules of Court, Vol. 3 [1957] pp. 389395.)
1

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-5486

August 17, 1910

JOSE DE LA PEA Y DE RAMON, plaintiff-appellant,

vs.
FEDERICO HIDALGO, defendant-appellant.
O'Brien and DeWitt, for plaintiff and appellant.
E. Gutierrez Repilde, for defendant and appellant.
TORRES, J.:
On May 23, 1906, Jose dela Pea y de Ramon, and Vicenta de Ramon, in her own behalf and as the
legal guardian of her son Roberto de la Pea, filed in the Court of First Instance of Manila a written
complaint against of Federico Hidalgo, Antonio Hidalgo, and Francisco Hidalgo, and, after the said
complaint, already amended, had been answered by the defendants Antonio and Francisco Hidalgo,
and the other defendant, Federico Hidalgo, had moved for the dismissal of this complaint, the plaintiff,
Jose de la Pea y de Ramon, as the judicial administrator of the estate of the deceased Jose de la
Pea y Gomiz, with the consent of the court filed a second amended complaint prosecuting his action
solely against Federico Hidalgo, who answered the same in writing on the 21st of may and at the same
time filed a counterclaim, which was also answered by the defendant.
On October 22, 1907, the case was brought up for hearing and oral testimony was adduced by both
parties, the exhibits introduced being attached to the record. In view of such testimony and of
documentary evidence, the court, on March 24, 1908, rendered judgment in favor of the plaintiffadministrator for the sum of P13,606.19 and legal interest from the date of the filing of the complaint
on May 24, 1906, and the costs of the trial.
Both the plaintiff and the defendant filed notice of appeal from this judgment and also asked for the
annulment of the same and for a new trial, on the ground that the evidence did not justify the said
judgment and that the latter was contrary to law. The defendant, on April 1, 1908, presented a written
motion for new hearing, alleging the discovery of new evidence favorable to him and which would
necessarily influence the decision such evidence or to introduce it at the trial of the case,
notwithstanding the fact that he had used all due diligence. His petition was accompanied by affidavits
from Attorney Eduardo Gutierrez Repilde and Federico Hidalgo, and was granted by order of the court
of the 4th of April.
At this stage of the proceedings and on August 10, 1908, the plaintiff Pea y De Ramon filed a third
amended complaint, with the permission of the court, alleging, among other things, as a first cause of
action, that during the period of time from November 12, 1887, to January 7, 1904, when Federico
Hidalgo had possession of and administered the following properties, to wit; one house and lot at No.
48 Calle San Luis; another house and lot at No. 6 Calle Cortada; another house and lot at 56 Calle
San Luis, and a fenced lot on the same street, all of the district of Ermita, and another house and lot
at No. 81 Calle Looban de Paco, belonging to his principal, Jose de la Pea y Gomiz, according to the
power of attorney executed in his favor and exhibited with the complaint under letter A, the defendant,
as such agent, collected the rents and income from the said properties, amounting to P50,244, which
sum, collected in partial amounts and on different dates, he should have deposited, in accordance

with the verbal agreement between the deceased and himself, the defendant, in the general treasury
of the Spanish Government at an interest of 5 per cent per annum, which interest on accrual was
likewise to be deposited in order that it also might bear interest; that the defendant did not remit or pay
to Jose de la Pea y Gomiz, during the latter's lifetime, nor to nay representative of the said De la
Pea y Gomiz, the sum aforestated nor any part thereof, with the sole exception of P1,289.03, nor has
he deposited the unpaid balance of the said sum in the treasury, according to agreement, wherefore
he has become liable to his principal and to the defendant-administrator for the said sum, together
with its interest, which amounts to P72,548.24 and that, whereas the defendant has not paid over all
nor any part of the last mentioned sum, he is liable for the same, as well as for the interest thereon at
6 per cent per annum from the time of the filing of the complaint, and for the costs of the suit.
In the said amended complaint, the plaintiff alleged as a second cause of action: That on December
9, 1887, Gonzalo Tuason deposited in the general treasury of the Spanish Government, to the credit
of Pea y Gomiz, the sum of 6,360 pesos, at 5 per cent interest per annum, and on December 20,
1888, the defendant, as the agent of Pea y Gomiz, withdrew the said amount with its interest, that is,
6,751.60 pesos, and disposed of the same for his own use and benefit, without having paid all or any
part of the said sum to Pea y Gomiz, or to the plaintiff after the latter's death, notwithstanding the
demands made upon him: wherefore the defendant now owes the said sum of 6,751.60 pesos, with
interest at the rate of 5 per cent per annum, compounded annually, from the 20th of December, 1888,
to the time of the filing of this complaint, and from the latter date at 6 per cent, in accordance with law.
The complaint recites as a third cause of action: that, on or about November 25, 1887, defendant's
principal, Pea y Gomiz, on his voyage to Spain, remitted from Singapore, one of the ports to call, to
Father Ramon Caviedas, a Franciscan friar residing in this city, the sum of 6,000 pesos with the
request to deliver the same, which he did, to defendant, who, on receiving this money, appropriated it
to himself and converted it to his own use and benefit, since he only remitted to Pea y Gomiz in
Sapin, by draft, 737.24 pesos, on December 20, 1888; and, later, on December 21, 1889, he likewise
remitted by another draft 860 pesos, without having returned or paid the balance of the said sum,
notwithstanding the demands made upon him so to do: wherefore the defendant owes to the plaintiff,
for the third cause of action, the sum of P4,402.76, with interest at the rate of 5 per cent per annum,
compounded yearly, to the time of the filing of the complaint and with interest at 6 per cent from that
date, as provided by law.
As a fourth cause of action the plaintiff alleges that, on or about January 23, 1904, on his arrival from
Spain and without having any knowledge or information of the true condition of affairs relative to the
property of the deceased Pea y Gomiz and its administration, he delivered and paid to the defendant
at his request the sum of P2,000, derived from the property of the deceased, which sum the defendant
has not returned notwithstanding the demands made upon him so to do.
Wherefore the plaintiff petitions the court to render judgment sentencing the defendant to pay, as first
cause of action, the sum of P72,548.24, with interest thereon at the rate of 6 per cent per annum from
May 24, 1906, the date of the filing of the complaint, and the costs; as a second cause of action, the
sum of P15,774.19, with interest at the rate of 6 per cent per annum from the said date of the filing of
the complaint, and costs; as a third cause of action, P9,811.13, with interest from the aforesaid date,
and costs; and, finally, as a fourth cause of action, he prays that the defendant be sentenced to refund
the sum of P2,000, with interest thereon at the rate of 6 per cent per annum from the 23d of January,
1904, and to pay the costs of trial.
The defendant, Federico Hidalgo, in his answer to the third amended complaint, sets forth: That he
admits the second, third, and fourth allegations contained in the first, second, third, and fourth causes
of action, and denies generally and specifically each one and all of the allegations contained in the
complaint, with the exception of those expressly admitted in his answer; that, as a special defense

against the first cause of action, he, the defendant, alleges that on November 18, 1887, by virtue of
the powers conferred upon him by Pea y Gomiz, he took charge of the administration of the latter's
property and administered the same until December 31, 1893, when for reasons of health he ceased
to discharge the duties of said position; that during the years 1889, 1890, 1891, and 1892, the
defendant continually by letter requested Pea y Gomiz, his principal, to appoint a person to substitute
him in the administration of the latter's property, inasmuch as the defendant, for reasons of health,
was unable to continue in his trust; that, on March 22, 1894, the defendant Federico Hidalgo, because
of serious illness, was absolutely obliged to leave these Islands and embarked on the steamer Isla de
Luzon for Sapin, on which date the defendant notified his principal that, for the reason aforestated, he
had renounced his powers and turned over the administration of his property to Antonio Hidalgo, to
whom he should transmit a power of attorney for the fulfillment, in due form, of the trust that the
defendant had been discharging since January 1, 1894, or else execute a power of attorney in favor
of such other person as he might deem proper;
That prior to the said date of March 22, the defendant came, rendered accounts to his principal, and
on the date when he embarked for Spain rendered the accounts pertaining to the years 1892 and
1893, which were those that yet remained to be forwarded, and transmitted to him a general statement
of accounts embracing the period from November 18, 1887, to December 31, 1893, with a balance of
6,774.50 pesos in favor of Pea y Gomiz, which remained in the control of the acting administrator,
Antonio Hidalgo; that from the 22nd of March, 1894, when the defendant left these Islands, to the date
of his answer to the said complaint, he has not again intervened nor taken any part directly or indirectly
in the administration of the property of Pea y Gomiz, the latter's administrator by express
authorization having been Antonio Hidalgo, from January 1, 1894, to October, 1902, who, on this latter
date, delegated his powers to Francisco Hidalgo, who in turn administered the said property until
January 7, 1904; that the defendant, notwithstanding his having rendered, in 1894, all his accounts to
Jose Pea y Gomiz, again rendered to the plaintiff in 1904 those pertaining to the period from 1887 to
December 31, 1893, which accounts the plaintiff approved without any protest whatever and received
to his entire satisfaction the balance due and the vouchers and documents and documents relating to
the property of the deceased Pea y Gomiz and issued to the defendant the proper acquaintance
therefor.
As a special defense to the second cause of action, the defendant alleged that, on December 9, 1886,
Jose de la Pea y Gomiz himself deposited in the caja general de depositos (General Deposit Bank)
the sum of 6,000 pesos, at 6 per cent interest for the term of one year, in two deposit receipts of 3,000
pesos each, which two deposit receipts, with the interest accrued thereon, amounted to 6,360 pesos,
ad were collected by Gonzalo Tuason, through indorsement by Pea y Gomiz, on December 9, 1887,
and on this same date Tuason, in the name of Pea y Gomiz, again deposited the said sum of 6,360
pesos in the General Deposit Bank, at the same rate of interest, for the term of one year and in two
deposit receipts of 3,180 pesos each, registered under Nos. 1336 and 1337; that, on December 20,
1888, father Ramon Caviedas, a Franciscan friar, delivered to the defendant, Federico Hidalgo, by
order of De la Pea y Gomiz, the said two deposit receipts with the request to collect the interest due
thereon viz., 741.60 pesos an to remit it by draft on London, drawn in favor of De la Pea y Gomiz, to
deposit again the 6,000 pesos in the said General Deposit Bank, for one year, in a single deposit, and
in the latter's name, and to deliver to him, the said Father Caviedas, the corresponding deposit receipt
and the draft on London for their transmittal to Pea y Gomiz: all of which was performed by the
defendant who acquired the said draft in favor of De la Pea y Gomiz from the Chartered Bank of
India, Australia and China, on December 20, 1888, and delivered the draft, together with the receipt
from the General Deposit Bank, to Father Caviedas, and on the same date, by letter, notified Pea y
Gomiz of the transactions executed; that on December 20, 1889, the said Father Hidalgo, by order of
Pea y Gomiz, the aforesaid deposit receipt from the General Deposit Bank, with the request to remit,
in favor of his constituent, the interest thereon, amounting to 360 pesos, besides 500 pesos of the
capital, that is 860 pesos in all, and to again deposit the rest, 5,500 pesos, in the General Deposit
Bank for another year in Pea y Gomiz's own name, and to deliver to Father Caviedas the deposit

receipt and the draft on London, for their transmittal to his constituent; all of which the defendant did;
he again deposited the rest of the capital, 5,500 pesos, in the General Deposit Bank, in the name of
Pea y Gomiz, for one year at 5 per cent interest, under registry number 3,320, and obtained from the
house of J. M. Tuason and Co. a draft on London for 860 pesos in favor of Pea y Gomiz, on December
21, 1889, and thereupon delivered the said receipt and draft to Father Caviedas, of which acts, when
performed, the defendant advised Pea y Gomiz by letter of December 24, 1889' and that, on
December 20, 1890, the said Father Ramon Caviedas delivered to the defendant, by order of Pea y
Gomiz, the said deposit receipt for 5,500 pesos with the request that he withdraw from the General
Deposit Bank the capital and accrued interest, which amounted all together to 5,775 pesos, and that
he deliver this amount to Father Caviedas, which he did, in order that it might be remitted to Pea y
Gomiz.
The defendant denied each of the allegations contained in the third cause of action, and avers that
they are all false and calumnious.
He likewise makes a general and specific denial of all the allegations of the fourth cause of action.
As a counterclaim the defendant alleges that Jose Pea y Gomiz owed and had not paid the
defendant, up to the date of his death, the sum of 4,000 pesos with interest at 6 per cent per annum,
and 3,600 pesos, and on the plaintiff's being presented with the receipt subscribed by his father, Pea
y Gomiz, on the said date of January 15th, and evidencing his debt, plaintiff freely and voluntarily
offered to exchange for the said receipt another document executed by him, and transcribed in the
complaint. Defendant further alleges that, up to the date of his counterclaim, the plaintiff has not paid
him the said sum, with the exception of 2,000 pesos. Wherefore the defendant prays the court to
render judgment absolving him from the complaint with the costs against the plaintiff, and to adjudge
that the latter shall pay to the defendant the sum 9,000 pesos, which he still owes defendant, with
legal interest thereon from the date of the counterclaim, to wit, May 21, 1907, and to grant such other
and further relief as may be just and equitable.
On the 25th of September, 1908, and subsequent dates, the new trial was held; oral testimony was
adduced by both parties, and the documentary evidence was attached to the record of the
proceedings, which show that the defendant objected and took exception to the introduction of certain
oral and documentary evidence produced by the plaintiff. On February 26, 1909, the court in deciding
the case found that the defendant, Federico Hidalgo, as administrator of the estate of the deceased
Pea y Gomiz, actually owed by the plaintiff, on the date of the filing of the complaint, the sum of
P37,084.93; that the plaintiff was not entitled to recover any sum whatever from the defendant for the
alleged second, third, and fourth causes of action; that the plaintiff actually owed the defendant, on
the filing of the complaint, the sum of P10,155, which the defendant was entitled to deduct from the
sum owing by him to the plaintiff. Judgment was therefore entered against the defendant, Federico
Hidalgo, for the payment of P26,629.93, with interest thereon at the rate of 6 per cent per annum from
May 23, 1906, and the costs of the trial.
Both parties filed written exceptions to this judgment and asked, separately, for its annulment and that
a new trial be ordered, on the grounds that the findings of fact contained in the judgment were not
supported nor justified by the evidence produced, and because the said judgment was contrary to law,
the defendant stating in writing that his exception and motion for a new trial referred exclusively to that
part of the judgment that was condemnatory to him. By order of the 10th of April, 1909, the motions
made by both parties were denied, to which they excepted and announced their intention to file their
respective bills of exceptions.
By written motions of the 24th of March, 1909, the plaintiff prayed for the execution of the said
judgment, and the defendant being informed thereof solicited a suspension of the issuance of the

corresponding writ of execution until his motion for a new trial should be decided or his bill of
exceptions for the appeal be approved, binding himself to give such bond as the court might fix. The
court, therefore, by order of the 25th of the same month, granted the suspension asked for, conditioned
upon the defendants giving a bond, fixed at P34,000 by another order of the same date, to guarantee
compliance with the judgment rendered should it be affirmed, or with any other decision that might be
rendered in the case by the Supreme Court. This bond was furnished by the defendant on the 26th of
the same month.
On April 16 and May 4, 1909, the defendant and the plaintiff filed their respective bills of exceptions,
which were certified to and approved by order of May 8th and forwarded to the clerk of this court.
Before proceeding to examine the disputed facts to make such legal findings as follows from a
consideration of the same and of the questions of law to which such facts give rise, and for the purpose
of avoiding confusion and obtaining the greatest clearness and an easy comprehension of this
decision, it is indispensable to premise: First, that as before related, the original and first complaint
filed by the plaintiff was drawn against Federico Hidalgo, Antonio Hidalgo, and Francisco Hidalgo, the
three persons who had successively administered the property of Jose de la Pea y Gomiz, now
deceased; but afterwards the action was directed solely against Federico Hidalgo, to the exclusion of
the other defendants, Antonio and Francisco Hidalgo, in the second and third amended complaints,
the latter of the date of August 10, 1908, after the issuance by the court of the order of April 4th of the
same year, granting the new trial solicited by the defendant on his being notified of the ruling of the
24th of the previous month of March; second, that the administration of the property mentioned, from
the time its owner left these Islands and returned to Spain, lasted from November 18, 1887, to January
7, 1904; and third that, the administration of the said Federico, Antonio, and Francisco Hidalgo, having
lasted so long, it is necessary to divide it into three periods in order to fix the time during which they
respectively administered De la Pea's property: During the first period, from November 18, 1887, to
December 31, 1893, the property of the absent Jose de la Pea y Gomiz was administered by his
agent, Federico Hidalgo, under power of attorney; during the second period, from January 1, 1894, to
September, 1902, Antonio Hidalgo administered the said property, and during the third period, from
October, 1902, to January 7, 1904, Francisco Hidalgo was its administrator.
Before Jose de la Pea y Gomiz embarked for Spain, on November 12, 1887, he executed before a
notary a power of attorney in favor of Federico Hidalgo, Antonio L. Rocha, Francisco Roxas and Isidro
Llado, so that, as his agents, they might represent him and administer, in the order in which they were
appointed, various properties he owned and possessed in Manila. The first agent, Federico Hidalgo,
took charge of the administration of the said property on the 18th of November, 1887.
After Federico Hidalgo had occupied the position of agent and administrator of De la Pea's property
for several years, the former wrote to the latter requesting him to designate a person who might
substitute him in his said position in the event of his being obliged to absent himself from these Islands,
as one of those appointed in the said power of attorney had died and the others did not wish to take
charge of the administration of their principal's property. The defendant, Hidalgo, stated that his
constituent, Pea y Gomiz, did not even answer his letters, to approve or object to the former's
accounts, and did not appoint or designate another person who might substitute the defendant in his
administration of his constituent's property. These statements were neither denied nor proven to be
the record show any evidence tending to disapprove them, while it does show, attached to the record
and exhibited by the defendant himself, several letters written by Hidalgo and addressed to Pea y
Gomiz, which prove the said statements, and also a letter from the priest Pedro Gomiz, a relative of
the deceased Jose de la Pea y Gomiz, addressed to Federico Hidalgo, telling the latter that the writer
had seen among the papers of the deceased several letters from the agent, Federico Hidalgo, in which
the latter requested the designation of a substitute, because he had to leave this country for Spain,
and also asked for the approval or disapproval of the accounts of his administration which had been
transmitted to his constituent, Pea y Gomiz.

For reasons of health and by order of his physician, Federico Hidalgo was obliged, on March 22, 1894,
to embark for Spain, and, on preparing for his departure, he rendered the accounts of his
administration corresponding to the last quarters, up to December 31, 1893, not as yet transmitted,
and forwarded them to his constituent with a general statement of all the partial balances, which
amounted to the sum total of 6,774.50 pesos, by letter of the date of March 22, 1894, addressed to
his principal, Pea y Gomiz. In this letter the defendant informed the latter of the writer's intended
departure from this country and of his having provisionally turned over the administration of the said
property to his cousin, Antonio Hidalgo, upon whom the writer had conferred a general power of
attorney, but asking, in case that this was not sufficient, that Pea send to Antonio Hidalgo a new
power of attorney.
This notifications is of the greatest importance in the decision of this case. The plaintiff avers that he
found no such letter among his father's papers after the latter's death, for which reason he did not
have it in his possession, but on the introduction of a copy thereof by the defendant at the trial, it was
admitted without objection by the plaintiff (p. 81 of the record); wherefore, in spite of the denial of the
plaintiff and of his averment of his not having found that said original among his father's papers, justice
demands that it be concluded that this letter of the 22d of March, 1894, was sent to, and was received
by Jose de la Pea y Gomiz, during his lifetime, for its transmittal, with inclosure of the last partial
accounts of Federico Hidalgo's administration and of the general resume of balances, being affirmed
by the defendant, the fact of the plaintiff's having found among his deceased father's paper's the said
resume which he exhibited at the trial, shows conclusively that it was received by the deceased, as
well as the letter of transmittal of the 22nd of March, 1894, one of the several letters written by Hidalgo,
which the said priest, Father Gomiz, affirms that he saw among the papers of the deceased Pea, the
dates of which ran from 1890 to 1894; and it is also shown by the record that the defendant Hidalgo
positively asserted that the said letter of March was the only one that he wrote to Pea during the year
1894; From all of which it is deduced that the constituent, Pea y Gomiz, was informed of the departure
of his agent from these Islands for reasons of health and because of the physician's advice, of the
latter's having turned over the administration of the property to Antonio Hidalgo, and of his agent's the
defendant's petition that he send a new power of attorney to the substitute.
The existence, amount the papers of the deceased, of the aforementioned statement of all accounts
rendered, which comprise the whole period of the administration of the property of the constituent by
the defendant, Federico Hidalgo, from November 18, 1887, to December 31, 1893 a statement
transmitted with the last partial accounts which were a continuation of those already previously
received and the said letter of March 22, 1894, fully prove that Jose de la Pea y Gomiz also
received the said letter, informed himself of its contents, and had full knowledge that Antonio Hidalgo
commenced to administer his property from January of that year. They likewise prove that he did no
see fit to execute a new power of attorney in the letter's favor, nor to appoint or designate a new agent
to take charge of the administration of his property that had been abandoned by the defendant,
Federico Hidalgo.
From the procedure followed by the agent, Federico Hidalgo, it is logically inferred that he had
definitely renounced his agency was duly terminated, according to the provisions of article 1732 of the
Civil Code, because, although in the said letter of March 22, 1894, the word "renounce" was not
employed in connection with the agency or power of attorney executed in his favor, yet when the agent
informs his principal that for reasons of health and by medical advice he is about to depart from the
place where he is exercising his trust and where the property subject to his administration is situated,
abandons the property, turns it over a third party, without stating when he may return to take charge
of the administration, renders accounts of its revenues up to a certain date, December 31, 1893, and
transmits to his principal a general statement which summarizes and embraces all the balances of his
accounts since he began to exercise his agency to the date when he ceased to hold his trust, and
asks that a power of attorney in due form in due form be executed and transmitted to another person
who substituted him and took charge of the administration of the principal's property, it is then

reasonable and just to conclude that the said agent expressly and definitely renounced his agency,
and it may not be alleged that the designation of Antonio Hidalgo to take charge of the said
administration was that of a mere proceed lasted for more than fifteen years, for such an allegation
would be in conflict with the nature of the agency.
This renouncement was confirmed by the subsequent procedure, as well as of the agent as of the
principal, until the latter died, on August 2, 1902, since the principal Pea did not disapprove the
designation of Antonio Hidalgo, nor did he appoint another, nor send a new power of attorney to the
same, as he was requested to by the previous administrator who abandoned his charge; and the trial
record certainly contains no proof that the defendant, since he left these Islands in March, 1894, until
January, 1904, when he returned to this city, took any part whatever, directly or even indirectly, in the
said administration of the principal's property, while Antonio Hidalgo was the only person who was in
charge of the aforementioned administration of De la Pea y Gomiz's property and the one who was
to represent the latter in his business affairs, with his tacit consent. From all of which it is perfectly
concluded (unless here be proof to the contrary, and none appears in the record), that Antonio Hidalgo
acted in the matter of the administration of the property of Jose de la Pea y Gomiz by virtue of an
implied agency derived from the latter, in accordance with the provisions of article 1710 of the Civil
Code.
The proof of the tacit consent of the principal, Jose de la Pea y Gomiz, the owner of the property
administered a consent embracing the essential element of a legitimate agency, article 1710 before
cited consists in that Pea, knowing that on account of the departure of Federico Hidalgo from the
Philippines for reasons of health, Antonio Hidalgo took charge of the administration of his property, for
which Federico Hidalgo, his agent, who was giving up his trust, requested him to send a new power
of attorney in favor of the said Antonio Hidalgo, nevertheless he, Jose de la Pea y Gomiz, saw fit not
to execute nor transmit any power of attorney whatever to the new administrator of his property and
remained silent for nearly nine years; and, in that the said principal, being able to prohibit the party
designated, Antonio Hidalgo, from continuing in the exercise of his position as administrator, and being
able to appoint another agent, did neither the one nor the other. Wherefore, in permitting Antonio
Hidalgo to administer his property in this city during such a number of years, it is inferred, from the
procedure and silence of the owner thereof, that he consented to have Antonio Hidalgo administer his
property, and in fact created in his favor an implied agency, as the true and legitimate administrator.
Antonio Hidalgo administered the aforementioned property of De la Pea y Gomiz, not in the character
of business manager, but as agent by virtue of an implied agency vested in him by its owner who was
not unaware of the fact, who knew perfectly well that the said Antonio Hidalgo took charge of the
administration of that property on account of the obligatory absence of his previous agent for whom it
was an impossibility to continue in the discharge of his duties.
It is improper to compare the case where the owner of the property is ignorant of the officious
management of the third party, with the case where he had perfect knowledge of the management
and administration of the same, which administration and management, far from being opposed by
him was indeed consented to by him for nearly nine years, as was done by Pea y Gomiz. The
administration and management, by virtue of an implied agency, is essentially distinguished from that
management of another's business, in this respect, that while the former originated from a contract,
the latter is derived only from a qausi-contract.
The implied agency is founded on the lack of contradiction or opposition, which constitutes
simultaneous agreement on the part of the presumed principal to the execution of the contract, while
in the management of another's business there is no simultaneous consent, either express or implied,
but a fiction or presumption of consent because of the benefit received.

The distinction between an agency and a business management has been established by the
jurisprudence of the supreme court (of Spain) in its noteworthy decision of the 7th of July, 1881, setting
up the following doctrine:
That laws 28 and 32, title 12 Partida 3, refer to the expenses incurred in things not one's own
and without power of attorney from those to whom they belong, and therefore the said laws
are not applicable to this suit where the petition of the plaintiff is founded on the verbal request
made to him by the defendant or the latter's employees to do some hauling, and where,
consequently, questions that arise from a contract that produces reciprocal rights and duties
can not be governed by the said laws.
It being absolutely necessary for Federico Hidalgo to leave this city and abandon the administration
of the property of his principal, Pea y Gomiz, for reasons of health, he made delivery of the property
and of his administration to Antonio Hidalgo and gave notice of what he had done to his constituent,
Pea, in order that the latter might send a new power of attorney to Antonio Hidalgo, the person
charged with the administration of the property. Pea y Gomiz did not send the power of attorney
requested, did not oppose or prohibit Antonio Hidalgo's containing to administer his property, and
consented to his doing so for nearly nine years. Consequently the second administrator must be
considered as a legitimate agent of the said principal, as a result of the tacit agreement on the latter's
part, and the previous agent, who necessarily abandoned and ceased to hold his position, as
completely free and clear from the consequences and results of the second administration, continued
by a third party and accepted by his principal; for it is a fact, undenied nor even doubted, that the said
first administrator had to abandon this country and the administration of Pea's property for reasons
of health, which made it possible for him to continue in the discharge of his duties without serious
detriment to himself, his conduct being in accordance with the provisions of article 1736 of the Civil
Code.
In the power of attorney executed by Pea y Gomiz in this city on November 12, 1887, in favor of,
among others, Federico Hidalgo, no authority was conferred upon the latter by his principal to
substitute the power or agency in favor of another person; wherefore the agent could not, by virtue of
the said power of attorney, appoint any person to substitute or relieve him in the administration of the
principal's property, for the lack of a clause of substitution in the said instrument authorizing him so to
do.
The designation of Antonio Hidalgo was not made as a result of substitution of the power of attorney
executed by Pea in favor of the defendant, but in order that the principal's property should not be
abandoned, inasmuch as, for the purposes of the discharge of the duties of administrator of the same,
the agent, who was about to absent himself from this city, requested his principal to send to the party,
provisionally designated by the former, a new power of attorney, for the reason that the general power
of attorney which Federico Hidalgo had left, executed in favor of his cousin Antonio Hidalgo, was so
executed in his own name and for his own affairs, and not in the name of Pea y Gomiz, as the latter
had not authorized him to take such action.
If the owner of the property provisionally administered at the time by Antonio Hidalgo, saw fit to keep
silent, even after having received the aforesaid letter of March 22, 1894, and during the lapse of nearly
ten years, without counter commanding or disapproving the designation of the person who took charge
of the administration of his property, knowing perfectly well that his previous agent was obliged, by
sickness and medical advice to leave this city where such property was situated, he is not entitled
afterwards to hold amenable the agent who had to abandon this country for good and valid reasons,
inasmuch as the latter immediately reported to his principal the action taken by himself and informed
him of the person who had taken charge of the administration of his property, which otherwise would
have been left abandoned. From the time of that notification the agent who, for legitimate cause,

ceased to exercise his trust, was free and clear from the results and consequences of the management
of the person who substituted him with the consent, even only a tacit one, of the principal, inasmuch
as the said owner of the property could have objected to could have prohibited the continuance in the
administration thereof, of the party designated by his agent, and could have opportunely appointed
another agent or mandatory of his own confidence to look after his property and if he did not do so, he
is obliged to abide by the consequences of his negligence and abandonment and has no right to claim
damages against his previous agent, who complied with his duty and did all that he could and ought
to have done, in accordance with the law.
The defendant Federico Hidalgo, having ceased in his administration of the property belonging to Pea
y Gomiz, on account of physical impossibility, which cessation he duly reported to his principal and
also informed him of the person who relieved him as such administrator, and for whom he had
requested a new power of attorney, is only liable for the results and consequences of his administration
during the period when the said property was in his charge, and therefore his liability can not extend
beyond the period of his management, as his agency terminated by the tacit or implied approval of his
principal, judging from the latter's silence in neither objecting to nor in anywise prohibiting Antonio
Hidalgo's continuing to administer his property, notwithstanding the lapse of the many years since he
learned by letter of the action taken by his previous agent, Federico Hidalgo.
Moreover, this latter, in announcing the termination of his agency, transmitted the last partial accounts
that he had not rendered, up to December 31, 1893, together with a general statement of all the
resulting balances covering the period of his administration, and Jose de la Pea y Gomiz remained
silent and offered no objection whatever to the said accounts and did not manifest his disapproval of
the same nor of the general statement, which he must have received in April or may, 1894, to the time
he died, in August, 1902; and when his son, the plaintiff, came to this city in company with the
defendant, Federico Hidalgo, they traveled together from Spain and arrived in Manila during one of
the early days of January, 1904, the former, for the purpose of taking charge of the estate left by his
father, and after the plaintiff had examined the accounts kept by Federico Hidalgo, his deceased
father's first agent, he approved them and therefore issued in favor of the defendant the document,
Exhibit 5, found on page 936 of the second record of trial, dated January 15, 1904, in which Jose de
la Pea y de Ramon acknowledged having received from his deceased father's old agent the accounts,
balances, and vouchers to his entire satisfaction, and gave an acquittance in full settlement of the
administration that had been commended to the defendant Hidalgo.
This document, written in the handwriting of the plaintiff, Pea y de Ramon, appears to be executed
in a form considered to be sufficient by its author, and, notwithstanding the allegations of the said
plaintiff, the record contains no proof of any kind of Federico Hidalgo's having obtained it by coercion,
intimidation, deceit, or fraud; neither is its shown to have been duly impugned as false, criminally or
civilly, for the statements therein made by the plaintiff are too explicit and definite to allow, without
proof of some vice or defect leading to nullification, of its being considered as void and without value
or legal effect.
With respect to the responsibility contracted by the defendant, as regards the payment of the balance
shown by the accounts rendered by him, it is not enough that the agent should have satisfactorily
rendered the accounts pertaining to his trust, but it is also indispensable that it be proved that he had
paid to his principal, or to the owner of the property administered, the balance resulting from his
accounts. This balance, which was allowed in the judgment appealed from, notwithstanding the
allegations of the plaintiff, which were not deemed as established, amounts to P6,774.50, according
to the proofs adduced at the trial. It was the imperative duty of the administrator, Federico Hidalgo, to
transmit this sum to his principal, Jose de la Pea y Gomiz, as the final balance of the accounts of his
administration, struck on December 31, 1893, and by his failure so to do and delivery of the said sum
to his successor, Antonio Hidalgo, he acted improperly, and must pay the same to the plaintiff.

Antonio Hidalgo took charge of the administration of Pea y Gomiz's property from January, 1894, to
September, 1902, that is, during the second period of administration of the several properties that
belonged to the deceased Pea.
Although the plaintiff, in his original complaint, had included the said Antonio Hidalgo as one of the
responsible defendants, yet he afterwards excluded him, as well from the second as from the third
amended complaint, and consequently the liability that might attach to Antonio Hidalgo was not
discussed, nor was it considered in the judgment of the lower court; neither can it be in the decision,
for the reason that the said Antonio Hidalgo is not a party to this suit. However, the said liability of
Antonio Hidalgo is imputed to Federico Hidalgo, and so it is that, in the complain t, the claim is made
solely against Federico Hidalgo, in order that the latter might be adjudged to pay the amounts which
constitute the balance owing from him who might be responsible, Antonio Hidalgo, during the period
of this latter's administration.
Federico Hidalgo, in our opinion, could not and can not be responsible for the administration of the
property that belonged to the deceased Pea y Gomiz, which was administered by Antonio Hidalgo
during eight years and some months, that is, during the second period, because of the sole fact of his
having turned over to the latter the administration of the said property on his departure from this city
of Spain. Neither law nor reason obliged Federico Hidalgo to remain in this country at the cost of his
health and perhaps of his life, even though he were the administrator of certain property belonged to
Pea y Gomiz, since the care of the property and interests of another does not require sacrifice on the
part of the agent of his own life and interests. Federico Hidalgo was obliged to deliver the said property
belonging to Pea y Gomiz to Antonio Hidalgo for good and valid reasons, and reasons, and in
proceeding in the manner aforesaid he complied with the duty required of him by law and justice and
acted as a diligent agent. If the principal, Jose de la Pea Gomiz, the owner of the property mentioned,
although informed opportunely of what had occurred saw fit to keep silent, not to object to the
arrangements made, not to send the power of attorney requested by Federico Hidalgo in favor of
Antonio Hidalgo, and took no action nor made any inquiry whatever to ascertain how his property was
being administered by the second agent, although to the time of his death more than eight years had
elapsed, the previous agent, who ceased in the discharge of his duties, can in nowise be held liable
for the consequences of such abandonment, nor for the results of the administration of property by
Antonio Hidalgo, for the reason that, since his departure from this country, he has not had the least
intervention nor even indirect participation in the aforementioned administration of the said Antonio
Hidalgo who, under the law, was the agent or administrator by virtue of an implied agency, which is
equivalent in its results to an express agency, executed by the owner of the property. Consequently,
Federico Hidalgo is not required to render accounts of the administration corresponding to the second
period mentioned, nor to pay the balance that such accounts may show to be owing.
At the first trial of this cause, Federico Hidalgo, testified under oath that his principal, Jose Pea y
Gomiz, did not agree to the appointment of Antonio Hidalgo, chosen by the witness, not to such
appointee's taking charge of the administration of his property. Aside from the fact that the trial record
does not show honor on what date Pea expressed such disagreement it is certain that, in view of the
theory of defense maintained by the defendant Hidalgo could have said, by means of a no, that his
principal did not agree to the appointment of the said Antonio Hidalgo, and the intercalation of the word
no in the statement quoted is more inexplicable in that the attorney for the adverse party moved that
the said answer be stricken from the record, as he objected to its appearing therein.
Were it true that the principal Jose de la Pea by Gomiz, had neither agreed to the designation of
Antonio Hidalgo, nor to the latter's administering his property, he would immediately have appointed
another agent and administrator, since he knew that Federico Hidalgo had left the place where his
property was situated and that it would be abandoned, had he not wished that Antonio Hidalgo should
continue to administer it. If the latter continued in the administration of the property for so long a time,
nearly nine years, it was because the said Pea agreed and gave his consent to the acts performed

by his outgoing agent, and for this reason the answer given by Federico Hidalgo mistakenly, or not,
that his principal, Pea, did not agree to the appointment of Antonio Hidalgo, is immaterial and does
not affect the terms of this decision.
If the defendant is not responsible for the results of the administration of said property administered
by Antonio Hidalgo during the second period before referred to, neither is he responsible for that
performed during the third period by Francisco Hidalgo, inasmuch as the latter was not even chosen
by the defendant who, on October 1, 1902, when Francisco Hidalgo took charge of Peas' property
that had been turned over to him by Antonio Hidalgo, was in Spain and had no knowledge of nor
intervention in such delivery; wherefore the defendant can in no manner be obliged to pay to the
plaintiff any sum that may be found owing by Francisco Hidalgo.
The trial judge taking into consideration that, by the evidence adduced at the hearing, it was proved
that Francisco Hidalgo rendered accounts to the plaintiff of the administration of the property in
question during the said third period, that is, for one year, three months, and someday, and that he
delivered to the plaintiff the balance of 1,280.03 pesos, for which the latter issued to the said third
administrator the document Exhibit 2, written in his own handwriting under date of January 7, 1904,
and the signature which, affixed by himself, he admitted in his testimony was authentic, on its being
exhibited to him found that the plaintiff, Pea y de Ramon, was not entitled to recover any sum
whatever for the rents pertaining to the administration of his property by the said Francisco Hidalgo.
All the reasons hereinbefore given relate to the first cause of action, whereby claim is made against
Federico Hidalgo for the payment of the sum of P72,548.24 and interest at the rate of 6 per cent per
centum, and they have decided some of the errors assigned by the appellants in their briefs to the
judgment appealed from.
Two amounts are have claimed which have one and the same origin, yet are based on two causes of
action, the second and the third alleged by the plaintiff; and although the latter, afterwards convinced
by the truth and of the impropriety of his claim, had to waive the said third cause of action during the
second hearing of this cause (pp. 57 and 42 of the record of the evidence), the trial judge, on the
grounds that the said second and third causes of action refer to the same certificates of deposit of the
treasury of the Spanish Government, found, in the judgment appealed from, that the plaintiff was not
entitled to recover anything for the aforesaid second and third causes of action a finding that is
proper and just, although qualified as erroneous by the plaintiff in his brief.
It appears, from the evidence taken in this cause, that Jose de la Pea y Gomiz, according to the
certificates issued by the chief of the division his lifetime, after having in 1882 withdrawn from the
General Deposit Bank of the Spanish Government a deposit of 17,000 pesos and its interest deposit
any sum therein until December 9, 1886, when he deposited two amounts of 3,000 pesos each, that
is, 6,000 pesos in all, the two deposit receipts for the same being afterwards endorsed in favor of
Gonzalo Tuason. The latter, on December 9, 1887, withdrew the deposit and took out the said two
amounts, together with the interest due thereon, and on the same date redeposited them in the sum
of 6,360 pesos at 5 per cent per annum in the name of Jose de la Pea y Gomiz. On the 20th of
December of the following year, 1888, the defendant Hidalgo received from his principal, Pea y
Gomiz, through Father Ramon Caviedas, the two said letters of credit, in order that he might withdraw
from the General Deposit Bank the two amounts deposited, together with the interest due thereon,
amounting to 741 pesos, and with this interest purchase a draft on London in favor of its owner and
then redeposit the original capital of 6,000 pesos. This, the defendant Hidalgo did and then delivered
the draft and the deposit receipt to Father Caviedas, of all of which transactions he informed his
principal by letter of the same date, transcribed on page 947 of the second trial record.

In the following year, 1889, Father Ramon Caviedas again delivered to the defendant Hidalgo the
aforementioned deposit receipt with the request to withdraw from the General Deposit bank the sum
deposited and to purchase a draft of 860 pesos on London in favor of their owner, Jose de la Pea y
Gomiz, and, after deducting the cost of the said draft from the capital and interest withdrawn from
deposit, amounting to 6,360 pesos, to redeposit the remainder, 5,500 pesos, in the bank mentioned,
in accordance with the instructions from Pea y Gomiz: All of which was done by the defendant
Hidalgo, who delivered to Father Caviedas the receipt for the new deposit of 5,500 pesos as accredited
by the reply-letter, transcribed on page 169 of the record, and by the letter addressed by Hidalgo to
Pea, of the date of December 20 of that year and shown as an original exhibit by the plaintiff himself
on page 29 of the record of the evidence.
Lastly, in December, 1890, Father Caviedas, aforementioned, delivered to the defendant Hidalgo the
said deposit receipt for 5,500 pesos in order that he might withdraw this amount from deposit and
deliver it with the interest thereon to the former for the purpose of remitting it by draft to Jose de la
Pea; this Hidalgo did, according to a reply-letter from Father Caviedas, the original of which appears
on page 979 of the file of exhibits and is copied on page 171 of the trial record, and is apparently
confirmed by the latter in his sworn testimony.
So that the two amounts of 3,000 pesos each, expressed in two deposit receipts received from De la
Pea y Gomiz by Father Ramon Caviedas and afterwards delivered to Francisco Hidalgo for the
successive operations of remittance and redeposit in the bank before mentioned, are the same and
only ones that were on deposit in the said bank in the name of their owner, Pea y Gomiz. The
defendant Hidalgo made two remittances by drafts of London, one in 1888 for 741.60 pesos, through
a draft purchased from the Chartered Bank, and another in 1889 for 860 pesos, through a draft
purchased from the house of Tuason & Co., and both in favor of Pea y Gomiz, who received through
Father Ramon Caviedas the remainder, 5,500 pesos, of the sums deposited. For these reasons, the
trial judge was of the opinion that the certificates of deposit sent by Pea y Gomiz to Father Ramon
Caviedas and those received from the latter by the defendant Hidalgo were identicals, as were likewise
the total amounts expressed by the said receipts or certificates of deposit, from the sum of which were
deducted the amounts remitted to Pea y Gomiz and the remainder deposited after each anual
operation until, finally, the sum of 5,500 pesos was remitted to its owner, Pea y Gomiz, according to
his instructions, through the said Father Caviedas. The lower court, in concluding its judgment, found
that the plaintiff was entitled to recover any sum whatever for the said second and third causes of
action, notwithstanding that, as hereinbefore stated, the said plaintiff withdrew the third cause of action.
This finding of the court, with respect to the collection of the amounts of the aforementioned deposit
receipts, is perfectly legal and in accordance with justice, inasmuch as it is a sustained by abundant
and conclusive documentary evidence, which proves in an incontrovertible manner the
unrighteousness of the claim made by the plaintiff in twice seeking payment, by means of the said
second and third causes of action, of the said sum which, after various operations of deposit and
remittance during three years, was finally returned with its interest to the possession of its owner, Pea
y Gomiz.
From the trial had in this case, it also appears conclusively proved that Jose de la Pea y Gomiz owed,
during his lifetime, to Federico Hidalgo, 7,600 pesos, 4,000 pesos of which were to bear interest at the
rate of 6 per cent per annum, and the remainder without any interest, and that, notwithstanding the
lapse of the period of three years, from November, 1887, within which he bound himself to repay the
amount borrowed, and in spite of his creditor's demand of payment, made by registered letter, the
original copy of which is on page 38 of the file of exhibits and a transcription thereof on page 930 of
the first and second record of the evidence, the debt was not paid up to the time of the debtor's death.
For such reasons, the trial court, in the judgment appealed from, found that there was a preponderance
of evidence to prove that this loan had been made and that the plaintiff actually owed the defendant
the sum loaned, as well as the interest thereon, after deducting therefrom the 2,000 pesos which the

defendant received from the plaintiff on account of the credit, and that the former was entitled to
recover.
It appears from the pleadings and evidence at the trial that in January, 1904, on the arrival in this city
of Federico de la Pea de Ramon, and on the occasion of the latter's proceeding to examine the
accounts previously rendered, up to December 31, 1893, by the defendant Hidalgo to the plaintiff's
father, then deceased, Hidalgo made demand upon the plaintiff, Pea y de Ramon, for the payment
of the said debt of his father, although the creditor Hidalgo acceded to the requests of the plaintiff to
grant the latter an extension of time until he should be able to sell one of the properties of the estate.
It was at that time, according to the defendant, that the plaintiff Pea took up the instrument of
indebtedness, executed by his deceased father during his lifetime, and delivered to the defendant in
exchange therefor the document of the date of January 15, 1904, found on page 924 of the second
record of evidence, whereby the plaintiff, Jose de la Pea, bound himself to pay his father's debt of
11,000 pesos, owing to the defendant Hidalgo, out of the proceeds of the sale of some of the properties
specified in the said document, which was written and signed by the plaintiff in his own handwriting.
The plaintiff not only executed the said document acknowledging his father's debt and binding himself
to settle it, but also, several days after the sale of a lot belonging to the estate, paid to the creditor on
account the sum of 2,000 pesos, according to the receipt issued by the latter and exhibited on page
108 of the first record of evidence.
The said document, expressive of the obligation contracted by the plaintiff Pea y de Ramon that he
would pay to the defendant the debt of plaintiff's deceased father, amounting to 11,000 pesos, out of
the proceeds from some of the properties of the estate, has not been denied nor impugned as false;
and not withstanding the averment made by the plaintiff that when he signed he lacked information
and knowledge of the true condition of the affairs concerning Hidalgo's connection with the property
that be absolutely no proof whatever is shown in the trial record of the creditor's having obtained the
said document through deceit or fraud circumstances in a certain manner incompatible with the
explicit statements contained therein. For these reasons, the trial court, weighing the whole of the
evidence furnished by the record, found that the loan of the said 7,600 pesos was truly and positively
made, and that the plaintiff must pay the same to the defendant, with the interest thereon, and that he
was not entitled to recover the 2,000 pesos, as an undue payment made by him to the defendant
creditor. For the foregoing reason the others errors assigned by the plaintiff to the judgment appealed
from are dismissed.
With respect to the obligation to pay the interest due on the amounts concerned in this decision, it
must be borne in mind that, as provided by article 1755 of the Civil Code, interest shall only be owed
when it has been expressly stipulated, and that should the debtor, who is obliged to pay a certain sum
of money, be in default and fail to fulfill the agreement made with his creditor, he must pay, as
indemnity for losses and damages, the interest agreed upon, and should there be no express
stipulation, the legal interest (art. 1108 of the Civil Code); but, in order that the debtor may be
considered to be in default and obliged to pay the indemnity, it is required, as a general rule, that his
creditor shall demand of such debtor the fulfillment of his obligation, judicially or extrajudicially, except
in such cases as are limitedly specified in article 1100 of the Civil Code.
It was not expressly stipulated that either the balance of the last account rendered by the defendant
Federico Hidalgo in 1893, or the sum which the plaintiff bound himself to pay to the defendant, in the
instrument of the 15th of January, 1904, should bear interest; nor is there proof that a judicial or
extrajudicial demand was made, on the part of the respective creditors concerned, until the date of
complaint, on the part of the plaintiff, and that of the counterclaim, on the part of the defendant.
Therefore no legal interest is owing for the time prior to the respectives dates of the complaint and
counterclaim.

By virtue, then, of the reasons herein before set forth, it is proper, in our opinion, to adjudge, as we do
hereby adjudge, that the defendant, Federico Hidalgo, shall pay to the plaintiff, Jose de la Pea y de
Ramon, as administrator of the estate of the deceased Jose de la Pea y Gomiz, the sum of P6,774.50,
and the legal interest thereon at the rate of 6 per cent per annum from 23rd of May, 1906, the date of
the filing of the original complaint in this case; that we should and hereby do declare that the said
defendant Federico Hidalgo, is not bound to gibe nor render accounts of the administration of the
property of the said deceased Jose de la Pea y Gomiz administered, respectively, by Antonio
Hidalgo, from January, 1894, to September 30, 1902, and by Francisco Hidalgo, from October 1, 1902,
to January 7, 1904, and therefore the defendant, Federico Hidalgo, not being responsible for the
results of the administration of the said property administered by the said Antonio and Francisco
Hidalgo, we do absolve the said defendant from the complaint filed by the plaintiff, in so far as it
concerns the accounts pertaining to the aforesaid two periods of administration and relates to the
payment of the balances resulting from such accounts; and that we should and hereby do absolve the
defendant Hidalgo from the complaint with respect to the demand for the payment of the sums of
P15,774.19 and P2,000, with their respective interests, on account of the second and the fourth cause
of action, respectively, and because the plaintiff renounced and withdrew his complaint, with respect
to the third cause of action; and that we should and do likewise adjudge, that the plaintiff, Jose de la
Pea y de Ramon, shall pay to Federico Hidalgo, by reason of the counterclaim, the sum of P9,000
with legal interest thereon at the rate of 6 per cent per annum from 21st of may, 1907, the date of the
counterclaim.
The judgment appealed from, together with that part thereof relative to the statement it contains
concerning the equivalence between the Philippine peso and the Mexican peso, is affirmed in so far
as it is in agreement with the findings of this decision, and the said judgment is reversed in so far as it
is not in accordance herewith. No special finding is made as to costs assessed in either instance, and
to the plaintiff is reserved any right that he may be entitled to enforce against Antonio Hidalgo.
Arellano, C.J., Johnson, Moreland and Trent, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-11491

August 23, 1918

ANDRES QUIROGA, plaintiff-appellant,

vs.
PARSONS HARDWARE CO., defendant-appellee.
Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for appellant.
Crossfield & O'Brien for appellee.
AVANCEA, J.:
On January 24, 1911, in this city of manila, a contract in the following tenor was entered into by and
between the plaintiff, as party of the first part, and J. Parsons (to whose rights and obligations the
present defendant later subrogated itself), as party of the second part:
CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J.
PARSONS, BOTH MERCHANTS ESTABLISHED IN MANILA, FOR THE EXCLUSIVE
SALE OF "QUIROGA" BEDS IN THE VISAYAN ISLANDS.
ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan
Islands to J. Parsons under the following conditions:
(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's
establishment in Iloilo, and shall invoice them at the same price he has fixed for sales, in
Manila, and, in the invoices, shall make and allowance of a discount of 25 per cent of the
invoiced prices, as commission on the sale; and Mr. Parsons shall order the beds by the dozen,
whether of the same or of different styles.
(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within a period of sixty
days from the date of their shipment.
(C) The expenses for transportation and shipment shall be borne by M. Quiroga, and the
freight, insurance, and cost of unloading from the vessel at the point where the beds are
received, shall be paid by Mr. Parsons.
(D) If, before an invoice falls due, Mr. Quiroga should request its payment, said payment when
made shall be considered as a prompt payment, and as such a deduction of 2 per cent shall
be made from the amount of the invoice.
The same discount shall be made on the amount of any invoice which Mr. Parsons may deem
convenient to pay in cash.
(E) Mr. Quiroga binds himself to give notice at least fifteen days before hand of any alteration
in price which he may plan to make in respect to his beds, and agrees that if on the date when
such alteration takes effect he should have any order pending to be served to Mr. Parsons,

such order shall enjoy the advantage of the alteration if the price thereby be lowered, but shall
not be affected by said alteration if the price thereby be increased, for, in this latter case, Mr.
Quiroga assumed the obligation to invoice the beds at the price at which the order was given.
(F) Mr. Parsons binds himself not to sell any other kind except the "Quiroga" beds.
ART. 2. In compensation for the expenses of advertisement which, for the benefit of both
contracting parties, Mr. Parsons may find himself obliged to make, Mr. Quiroga assumes the
obligation to offer and give the preference to Mr. Parsons in case anyone should apply for the
exclusive agency for any island not comprised with the Visayan group.
ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of "Quiroga"
beds in all the towns of the Archipelago where there are no exclusive agents, and shall
immediately report such action to Mr. Quiroga for his approval.
ART. 4. This contract is made for an unlimited period, and may be terminated by either of the
contracting parties on a previous notice of ninety days to the other party.
Of the three causes of action alleged by the plaintiff in his complaint, only two of them constitute the
subject matter of this appeal and both substantially amount to the averment that the defendant violated
the following obligations: not to sell the beds at higher prices than those of the invoices; to have an
open establishment in Iloilo; itself to conduct the agency; to keep the beds on public exhibition, and to
pay for the advertisement expenses for the same; and to order the beds by the dozen and in no other
manner. As may be seen, with the exception of the obligation on the part of the defendant to order the
beds by the dozen and in no other manner, none of the obligations imputed to the defendant in the
two causes of action are expressly set forth in the contract. But the plaintiff alleged that the defendant
was his agent for the sale of his beds in Iloilo, and that said obligations are implied in a contract of
commercial agency. The whole question, therefore, reduced itself to a determination as to whether the
defendant, by reason of the contract hereinbefore transcribed, was a purchaser or an agent of the
plaintiff for the sale of his beds.
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 subject matter, is that the plaintiff was to
furnish the defendant with the beds which the latter might order, at the price stipulated, and that the
defendant was to pay the price in the manner stipulated. The price agreed upon was the one
determined by the plaintiff for the sale of these beds in Manila, with a discount 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 so preferred, and in these last two cases an additional
discount was to be allowed for prompt payment. These are precisely the essential features of a
contract of purchase and sale. There was the obligation on the part of the plaintiff to supply the beds,
and, on the part of the defendant, to pay their price. These features exclude the legal conception of
an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not
pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third
person, and if he does not succeed in selling it, he returns it. By virtue of the contract between the
plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price
within the term fixed, without any other consideration and regardless as to whether he had or had not
sold the beds.
It would be enough to hold, as we do, that the contract by and between the defendant and the plaintiff
is one of purchase and sale, in order to show that it was not one made on the basis of a commission
on sales, as the plaintiff claims it was, for these contracts are incompatible with each other. But,
besides, examining the clauses of this contract, none of them is found that substantially supports the

plaintiff's contention. Not a single one of these clauses necessarily conveys the idea of an agency.
The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the
contract itself, than a mere discount on the invoice price. The word agency, also used in articles 2 and
3, only expresses that the defendant was the only one that could sell the plaintiff's beds in the Visayan
Islands. With regard to the remaining clauses, the least that can be said is that they are not
incompatible with the contract of purchase and sale.
The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-president of the defendant
corporation and who established and managed the latter's business in Iloilo. It appears that this
witness, prior to the time of his testimony, had serious trouble with the defendant, had maintained a
civil suit against it, and had even accused one of its partners, Guillermo Parsons, of falsification. He
testified that it was he who drafted the contract Exhibit A, and, when questioned as to what was his
purpose in contracting with the plaintiff, replied that it was to be an agent for his beds and to collect a
commission on sales. However, according to the defendant's evidence, it was Mariano Lopez Santos,
a director of the corporation, who prepared Exhibit A. But, even supposing that Ernesto Vidal has
stated the truth, his statement as to what was his idea in contracting with the plaintiff is of no
importance, inasmuch as the agreements contained in Exhibit A which he claims to have drafted,
constitute, as we have said, a contract of purchase and sale, and not one of commercial agency. This
only means that Ernesto Vidal was mistaken in his classification of the contract. But it must be
understood that a contract is what the law defines it to be, and not what it is called by the contracting
parties.
The plaintiff also endeavored to prove that the defendant had returned beds that it could not sell; that,
without previous notice, it forwarded to the defendant the beds that it wanted; and that the defendant
received its commission for the beds sold by the plaintiff directly to persons in Iloilo. But all this, at the
most only shows that, on the part of both of them, there was mutual tolerance in the performance of
the contract in disregard of its terms; and it gives no right to have the contract considered, not as the
parties stipulated it, but as they performed it. Only the acts of the contracting parties, subsequent to,
and in connection with, the execution of the contract, must be considered for the purpose of
interpreting the contract, when such interpretation is necessary, but not when, as in the instant case,
its essential agreements are clearly set forth and plainly show that the contract belongs to a certain
kind and not to another. Furthermore, the return made was of certain brass beds, and was not effected
in exchange for the price paid for them, but was for other beds of another kind; and for the letter Exhibit
L-1, requested the plaintiff's prior consent with respect to said beds, which shows that it was not
considered that the defendant had a right, by virtue of the contract, to make this return. As regards the
shipment of beds without previous notice, it is insinuated in the record that these brass beds were
precisely the ones so shipped, and that, for this very reason, the plaintiff agreed to their return. And
with respect to the so-called commissions, we have said that they merely constituted a discount on
the invoice price, and the reason for applying this benefit to the beds sold directly by the plaintiff to
persons in Iloilo was because, as the defendant obligated itself in the contract to incur the expenses
of advertisement of the plaintiff's beds, such sales were to be considered as a result of that
advertisement.
In respect to the defendant's obligation to order by the dozen, the only one expressly imposed by the
contract, the effect of its breach would only entitle the plaintiff to disregard the orders which the
defendant might place under other conditions; but if the plaintiff consents to fill them, he waives his
right and cannot complain for having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and the
defendant was one of purchase and sale, and that the obligations the breach of which is alleged as a
cause of action are not imposed upon the defendant, either by agreement or by law.

The judgment appealed from is affirmed, with costs against the appellant. So ordered.
Arellano, C.J., Torres, Johnson, Street and Malcolm, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-47538

June 20, 1941

GONZALO PUYAT & SONS, INC., petitioner,

vs.
ARCO AMUSEMENT COMPANY (formerly known as Teatro Arco), respondent.
Feria & Lao for petitioner.
J. W. Ferrier and Daniel Me. Gomez for respondent.
LAUREL, J.:
This is a petition for the issuance of a writ of certiorari to the Court of Appeals for the purpose of
reviewing its Amusement Company (formerly known as Teatro Arco), plaintiff-appellant, vs. Gonzalo
Puyat and Sons. Inc., defendant-appellee."
It appears that the respondent herein brought an action against the herein petitioner in the Court of
First Instance of Manila to secure a reimbursement of certain amounts allegedly overpaid by it on
account of the purchase price of sound reproducing equipment and machinery ordered by the
petitioner from the Starr Piano Company of Richmond, Indiana, U.S.A. The facts of the case as found
by the trial court and confirmed by the appellate court, which are admitted by the respondent, are as
follows:
In the year 1929, the "Teatro Arco", a corporation duly organized under the laws of the
Philippine Islands, with its office in Manila, was engaged in the business of operating
cinematographs. In 1930, its name was changed to Arco Amusement Company. C. S. Salmon
was the president, while A. B. Coulette was the business manager. About the same time,
Gonzalo Puyat & Sons, Inc., another corporation doing business in the Philippine Islands, with
office in Manila, in addition to its other business, was acting as exclusive agents in the
Philippines for the Starr Piano Company of Richmond, Indiana, U.S. A. It would seem that this
last company dealt in cinematographer equipment and machinery, and the Arco Amusement
Company desiring to equipt its cinematograph with sound reproducing devices, approached
Gonzalo Puyat & Sons, Inc., thru its then president and acting manager, Gil Puyat, and an
employee named Santos. After some negotiations, it was agreed between the parties, that is
to say, Salmon and Coulette on one side, representing the plaintiff, and Gil Puyat on the other,
representing the defendant, that the latter would, on behalf of the plaintiff, order sound
reproducing equipment from the Starr Piano Company and that the plaintiff would pay the
defendant, in addition to the price of the equipment, a 10 per cent commission, plus all
expenses, such as, freight, insurance, banking charges, cables, etc. At the expense of the
plaintiff, the defendant sent a cable, Exhibit "3", to the Starr Piano Company, inquiring about
the equipment desired and making the said company to quote its price without discount. A
reply was received by Gonzalo Puyat & Sons, Inc., with the price, evidently the list price of
$1,700 f.o.b. factory Richmond, Indiana. The defendant did not show the plaintiff the cable of
inquiry nor the reply but merely informed the plaintiff of the price of $1,700. Being agreeable
to this price, the plaintiff, by means of Exhibit "1", which is a letter signed by C. S. Salmon
dated November 19, 1929, formally authorized the order. The equipment arrived about the end
of the year 1929, and upon delivery of the same to the plaintiff and the presentation of

necessary papers, the price of $1.700, plus the 10 per cent commission agreed upon and plus
all the expenses and charges, was duly paid by the plaintiff to the defendant.
Sometime the following year, and after some negotiations between the same parties, plaintiff
and defendants, another order for sound reproducing equipment was placed by the plaintiff
with the defendant, on the same terms as the first order. This agreement or order was
confirmed by the plaintiff by its letter Exhibit "2", without date, that is to say, that the plaintiff
would pay for the equipment the amount of $1,600, which was supposed to be the price quoted
by the Starr Piano Company, plus 10 per cent commission, plus all expenses incurred. The
equipment under the second order arrived in due time, and the defendant was duly paid the
price of $1,600 with its 10 per cent commission, and $160, for all expenses and charges. This
amount of $160 does not represent actual out-of-pocket expenses paid by the defendant, but
a mere flat charge and rough estimate made by the defendant equivalent to 10 per cent of the
price of $1,600 of the equipment.
About three years later, in connection with a civil case in Vigan, filed by one Fidel Reyes
against the defendant herein Gonzalo Puyat & Sons, Inc., the officials of the Arco Amusement
Company discovered that the price quoted to them by the defendant with regard to their two
orders mentioned was not the net price but rather the list price, and that the defendants had
obtained a discount from the Starr Piano Company. Moreover, by reading reviews and
literature on prices of machinery and cinematograph equipment, said officials of the plaintiff
were convinced that the prices charged them by the defendant were much too high including
the charges for out-of-pocket expense. For these reasons, they sought to obtain a reduction
from the defendant or rather a reimbursement, and failing in this they brought the present
action.
The trial court held that the contract between the petitioner and the respondent was one of outright
purchase and sale, and absolved that petitioner from the complaint. The appellate court, however,
by a division of four, with one justice dissenting held that the relation between petitioner and
respondent was that of agent and principal, the petitioner acting as agent of the respondent in the
purchase of the equipment in question, and sentenced the petitioner to pay the respondent alleged
overpayments in the total sum of $1,335.52 or P2,671.04, together with legal interest thereon from the
date of the filing of the complaint until said amount is fully paid, as well as to pay the costs of the suit
in both instances. The appellate court further argued that even if the contract between the petitioner
and the respondent was one of purchase and sale, the petitioner was guilty of fraud in concealing the
true price and hence would still be liable to reimburse the respondent for the overpayments made by
the latter.
The petitioner now claims that the following errors have been incurred by the appellate court:
I. El Tribunal de Apelaciones incurrio en error de derecho al declarar que, segun hechos, entre
la recurrente y la recurrida existia una relacion implicita de mandataria a mandante en la
transaccion de que se trata, en vez de la de vendedora a compradora como ha declarado el
Juzgado de Primera Instncia de Manila, presidido entonces por el hoy Magistrado Honorable
Marcelino Montemayor.
II. El Tribunal de Apelaciones incurrio en error de derecho al declarar que, suponiendo que
dicha relacion fuerra de vendedora a compradora, la recurrente obtuvo, mediante dolo, el
consentimiento de la recurrida en cuanto al precio de $1,700 y $1,600 de las maquinarias y
equipos en cuestion, y condenar a la recurrente ha obtenido de la Starr Piano Company of
Richmond, Indiana.

We sustain the theory of the trial court that the contract between the petitioner and the respondent
was one of purchase and sale, and not one of agency, for the reasons now to be stated.
In the first place, the contract is the law between the parties and should include all the things they are
supposed to have been agreed upon. What does not appear on the face of the contract should be
regarded merely as "dealer's" or "trader's talk", which can not bind either party. (Nolbrook v. Conner,
56 So., 576, 11 Am. Rep., 212; Bank v. Brosscell, 120 III., 161; Bank v. Palmer, 47 III., 92; Hosser v.
Copper, 8 Allen, 334; Doles v. Merrill, 173 Mass., 411.) The letters, Exhibits 1 and 2, by which the
respondent accepted the prices of $1,700 and $1,600, respectively, for the sound reproducing
equipment subject of its contract with the petitioner, are clear in their terms and admit no other
interpretation that the respondent in question at the prices indicated which are fixed and determinate.
The respondent admitted in its complaint filed with the Court of First Instance of Manila that the
petitioner agreed to sell to it the first sound reproducing equipment and machinery. The third paragraph
of the respondent's cause of action states:
3. That on or about November 19, 1929, the herein plaintiff (respondent) and defendant
(petitioner) entered into an agreement, under and by virtue of which the herein defendant was
to secure from the United States, and sell and deliver to the herein plaintiff, certain sound
reproducing equipment and machinery, for which the said defendant, under and by virtue of
said agreement, was to receive the actual cost price plus ten per cent (10%), and was also to
be reimbursed for all out of pocket expenses in connection with the purchase and delivery of
such equipment, such as costs of telegrams, freight, and similar expenses. (Emphasis ours.)
We agree with the trial judge that "whatever unforseen events might have taken place unfavorable to
the defendant (petitioner), such as change in prices, mistake in their quotation, loss of the goods not
covered by insurance or failure of the Starr Piano Company to properly fill the orders as per
specifications, the plaintiff (respondent) might still legally hold the defendant (petitioner) to the prices
fixed of $1,700 and $1,600." This is incompatible with the pretended relation of agency between the
petitioner and the respondent, because in agency, the agent is exempted from all liability in the
discharge of his commission provided he acts in accordance with the instructions received from his
principal (section 254, Code of Commerce), and the principal must indemnify the agent for all damages
which the latter may incur in carrying out the agency without fault or imprudence on his part (article
1729, Civil Code).
While the latters, Exhibits 1 and 2, state that the petitioner was to receive ten per cent (10%)
commission, this does not necessarily make the petitioner an agent of the respondent, as this provision
is only an additional price which the respondent bound itself to pay, and which stipulation is not
incompatible with the contract of purchase and sale. (See Quiroga vs. Parsons Hardware Co., 38 Phil.,
501.)
In the second place, to hold the petitioner an agent of the respondent in the purchase of equipment
and machinery from the Starr Piano Company of Richmond, Indiana, is incompatible with the admitted
fact that the petitioner is the exclusive agent of the same company in the Philippines. It is out of the
ordinary for one to be the agent of both the vendor and the purchaser. The facts and circumstances
indicated do not point to anything but plain ordinary transaction where the respondent enters into a
contract of purchase and sale with the petitioner, the latter as exclusive agent of the Starr Piano
Company in the United States.
It follows that the petitioner as vendor is not bound to reimburse the respondent as vendee for any
difference between the cost price and the sales price which represents the profit realized by the vendor
out of the transaction. This is the very essence of commerce without which merchants or middleman
would not exist.

The respondents contends that it merely agreed to pay the cost price as distinguished from the list
price, plus ten per cent (10%) commission and all out-of-pocket expenses incurred by the petitioner.
The distinction which the respondents seeks to draw between the cost price and the list price we
consider to be spacious. It is to be observed that the twenty-five per cent (25%) discount granted by
the Starr piano Company to the petitioner is available only to the latter as the former's exclusive agent
in the Philippines. The respondent could not have secured this discount from the Starr Piano Company
and neither was the petitioner willing to waive that discount in favor of the respondent. As a matter of
fact, no reason is advanced by the respondent why the petitioner should waive the 25 per cent discount
granted it by the Starr Piano Company in exchange for the 10 percent commission offered by the
respondent. Moreover, the petitioner was not duty bound to reveal the private arrangement it had with
the Starr Piano Company relative to such discount to its prospective customers, and the respondent
was not even aware of such an arrangement. The respondent, therefore, could not have offered to
pay a 10 per cent commission to the petitioner provided it was given the benefit of the 25 per cent
discount enjoyed by the petitioner. It is well known that local dealers acting as agents of foreign
manufacturers, aside from obtaining a discount from the home office, sometimes add to the list price
when they resell to local purchasers. It was apparently to guard against an exhorbitant additional price
that the respondent sought to limit it to 10 per cent, and the respondent is estopped from questioning
that additional price. If the respondent later on discovers itself at the short end of a bad bargain, it
alone must bear the blame, and it cannot rescind the contract, much less compel a reimbursement of
the excess price, on that ground alone. The respondent could not secure equipment and machinery
manufactured by the Starr Piano Company except from the petitioner alone; it willingly paid the price
quoted; it received the equipment and machinery as represented; and that was the end of the matter
as far as the respondent was concerned. The fact that the petitioner obtained more or less profit than
the respondent calculated before entering into the contract or reducing the price agreed upon between
the petitioner and the respondent. Not every concealment is fraud; and short of fraud, it were better
that, within certain limits, business acumen permit of the loosening of the sleeves and of the
sharpening of the intellect of men and women in the business world.
The writ of certiorari should be, as it is hereby, granted. The decision of the appellate court is
accordingly reversed and the petitioner is absolved from the respondent's complaint in G. R. No. 1023,
entitled "Arco Amusement Company (formerly known as Teatro Arco), plaintiff-appellant, vs. Gonzalo
Puyat & Sons, Inc., defendants-appellee," without pronouncement regarding costs. So ordered.
Avancea, C.J., Diaz, Moran and Horrilleno, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-49395 December 26, 1984
GREEN VALLEY POULTRY & ALLIED PRODUCTS, INC., petitioner
vs.
THE INTERMEDIATE APPELLATE COURT and E.R. SQUIBB & SONS PHILIPPINE
CORPORATION,respondents.

ABAD SANTOS, J.:

This is a petition to review a decision of the defunct Court of Appeals which affirmed the judgment of
the trial court whereby:
... judgment is hereby rendered in favor of the plaintiff [E.R. Squibb & Sons Philippine
Corporation], ordering the defendant [Green Valley Poultry & Allied Products, Inc.] to
pay the sum of P48,374.74 plus P96.00 with interest at 6% per annum from the filing
of this action; plus attorney's fees in the amount of P5,000.00 and to pay the costs.
On November 3, 1969, Squibb and Green Valley entered into a letter agreement the text of which
reads as follows:
E.R. Squibb & Sons Philippine Corporation is pleased to appoint Green Valley Poultry
& Allied Products, Inc. as a non-exclusive distributor for Squibb Veterinary Products,
as recommended by Dr. Leoncio D. Rebong, Jr. and Dr. J.G. Cruz, Animal Health
Division Sales Supervisor.
As a distributor, Green Valley Poultry & Allied Products, Inc. wig be entitled to a
discount as follows:
Feed Store Price (Catalogue)
Less 10%
Wholesale Price
Less 10%
Distributor Price
There are exceptions to the above price structure. At present, these are:
1. Afsillin Improved 40 lbs. bag

The distributor commission for this product size is 8% off P120.00

2. Narrow Spectrum Injectible Antibiotics
These products are subject to price fluctuations. Therefore, they are invoiced at net
price per vial.
3. Deals and Special Offers are not subject to the above distributor price structure. A
5% distributor commission is allowed when the distributor furnishes copies for each
sale of a complete deal or special offer to a feedstore, drugstore or other type of
account.
Deals and Special Offers purchased for resale at regular price invoiced at net deal or
special offer price.
Prices are subject to change without notice. Squibb will endeavor to advise you
promptly of any price changes. However, prices in effect at the tune orders are
received by Squibb Order Department will apply in all instances.
Green Valley Poultry & Allied Products, Inc. win distribute only for the Central Luzon
and Northern Luzon including Cagayan Valley areas. We will not allow any transfer or
stocks from Central Luzon and Northern Luzon including Cagayan Valley to other parts
of Luzon, Visayas or Mindanao which are covered by our other appointed Distributors.
In line with this, you will follow strictly our stipulations that the maximum discount you
can give to your direct and turnover accounts will not go beyond 10%.
It is understood that Green Valley Poultry and Allied Products, Inc. will accept turnover orders from Squibb representatives for delivery to customers in your area. If for
credit or other valid reasons a turn-over order is not served, the Squibb representative
will be notified within 48 hours and hold why the order will not be served.
It is understood that Green Valley Poultry & Allied Products, Inc. will put up a bond of
P20,000.00 from a mutually acceptable bonding company.
Payment for Purchases of Squibb Products will be due 60 days from date of invoice or
the nearest business day thereto. No payment win be accepted in the form of postdated checks. Payment by check must be on current dating.
It is mutually agreed that this non-exclusive distribution agreement can be terminated
by either Green Valley Poultry & Allied Products, Inc. or Squibb Philippines on 30 days
notice.
I trust that the above terms and conditions will be met with your approval and that the
distributor arrangement will be one of mutual satisfaction.
If you are agreeable, please sign the enclosed three (3) extra copies of this letter and
return them to this Office at your earliest convenience.
Thank you for your interest and support of the products of E.R. Squibb & Sons
Philippines Corporation. (Rollo, pp. 12- 13.)

For goods delivered to Green Valley but unpaid, Squibb filed suit to collect. The trial court as aforesaid
gave judgment in favor of Squibb which was affirmed by the Court of Appeals.
In both the trial court and the Court of Appeals, the parties advanced their respective theories.
Green Valley claimed that the contract with Squibb was a mere agency to sell; that it never purchased
goods from Squibb; that the goods received were on consignment only with the obligation to turn over
the proceeds, less its commission, or to return the goods ff not sold, and since it had sold the goods
but had not been able to collect from the purchasers thereof, the action was premature.
Upon the other hand, Squibb claimed that the contract was one of sale so that Green Valley was
obligated to pay for the goods received upon the expiration of the 60-day credit period.
Both courts below upheld the claim of Squibb that the agreement between the parties was a sales
contract.
We do not have to categorize the contract. Whether viewed as an agency to sell or as a contract of
sale, the liability of Green Valley is indubitable. Adopting Green Valley's theory that the contract is an
agency to sell, it is liable because it sold on credit without authority from its principal. The Civil Code
has a provision exactly in point. It reads:
Art. 1905. The commission agent cannot, without the express or implied consent of the
principal, sell on credit. Should he do so, the principal may demand from him payment
in cash, but the commission agent shall be entitled to any interest or benefit, which
may result from such sale.
WHEREFORE, the petition is hereby dismissed; the judgment of the defunct Court of Appeals is
affirmed with costs against the petitioner.
SO ORDERED.
Aquino, Concepcion, Jr., Escolin and Cuevas, JJ., concur.
Makasiar (Chairman), reserves his vote.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-56545 January 28, 1983
BERT OSMEA & ASSOCIATES, petitioners,
vs.
THE COURT OF APPEALS and SPOUSES PEDRO QUIMBO and LEONADIZA
QUIMBO, respondents.
Siguion Reyna, Montecillo & Ongsiako for petitioners.
Hilario Davide, Jr., for private respondents.
RESOLUTION

MELENCIO-HERRERA, J.:
Sought to be reversed in this Petition for Review on certiorari is the Decision of respondent Court of
Appeals in CA-G.R. No. 62601-R, entitled "Pedro Quimbo and Leonadiza Quimbo vs. Carmen
Siguenza and Helena Siguenza, Bert Osmea & Associates, Inc." sentencing defendants, jointly and
severally, to pay damages to the plaintiffs, who are the private respondents herein.
Upon a review of the evidence, we find as established: (1) that on June 3, 1971, a "Contract of Sale"
over Lots 1 and 2, Block I, Phase II of the Clarita Subdivision, Cebu City, for the total price of
P15,200.00, was executed in favor of the Quimbo spouses. The sellers were petitioner company,
developer of the subdivision, and Carmen and Helena Siguenza, owners of the property, represented
by petitioner. Antonio V. Osmea signed the contract on behalf of the company. Signing as witness
was one C. Siguenza.
(2) The spouses had intended to construct a house thereon inasmuch as their rented abode, for which
they were paying P170.00 monthly, had become inconvenient for their family. Plans for the house
were drawn. The spouses were ready to pay the purchase price in full even before the due date of the
first installment and advised Helena Siguenza accordingly so that title in their names could be
delivered to them. On the pretext that a road would traverse the lots purchased, Helena proposed to
exchange another lot (Lot 409) with the same area for the lots purchased by the spouses to which the
latter hesitating agreed. Until 1973, however, no title could be given the Quimbo spouses.
(3) It turned out that on December 15, 1969, or approximately a year and a half prior to the sale in the
spouses' favor, Lots Nos. 1 and 2 had already been sold to Dr. Francisco Maningo (Exhs. "G " and
"G-1 "), and that Transfer Certificates of Title Nos. 48546 and 48547 were issued in favor of Irenea
Maningo on September 21, 1970 (Exhs. "H" and "H-1 "), or about nine months before. the sale.
Annotated on said titles were mortgages in favor of petitioner.

(4) Discovering this fact only in 1973, respondent spouses instituted this suit for Damages against
petitioner company and the Siguenzas on March 25, 1974.
In its judgment, the lower Court ordered petitioner company and the Siguenzas to pay damages to
respondent spouses as follows:
WHEREFORE, based on all the foregoing considerations, judgment is hereby
rendered in favor of the plaintiffs and against the defendants ordering the latter:
To pay, jointly and severally, the plaintiffs P3,040.00, with interest at the legal rate from
June 2, 1971 until the same shall have been fully paid; P100,000.00 as compensation
for the pecuniary loss plaintiffs suffered for failure to construct their residential house;
P5,610.00 as reimbursement for the rentals plaintiffs paid from January 1972 to
September 6, 1974; P50,000.00 as moral damages, P25,000.00 as exemplary
damages, P5,000.00 as attorney's fees; and the cost. 1
The Appellate Court affirmed the judgment of the Trial Court in toto. Hence, this recourse by petitioner
company, advancing tile following arguments:
1) The Honorable Court of Appeals seriously erred in not having considered the
contract as having been novated by virtue of the change in the subject matter or object
of the contract;
2) The courts below seriously erred for having found petitioner to have acted
fraudulently where there is no evidence to support such a finding;
3) The Court of Appeals committed serious error in law when it held petitioner jointly
and severally liable to pay P100,000.00 as compensation for the pecuniary loss
suffered by Mrs. Quimbo;
4) The Court seriously erred in holding petitioner jointly and severally liable with the
Siguenzas to pay moral damages to Quimbo, there being no evidence showing fraud
or bad faith perpetrated by petitioner;
5) The lower court seriously erred in holding petitioner liable to pay the sum of
P5,610.00 as reimbursement for rentals because Quimbo was no longer interested in
the lots on which her house was supposed to have been constructed but sought only
for reimbursement of the downpayment;
6) The Court below erred in holding petitioner liable jointly and severally for exemplary
damages, attorneys fees and costs;
7) The court seriously erred in fact and in law in holding petitioner jointly and severally
with the Siguenzas to return the downpayment.
Except for some items of damages awarded, we affirm.
1) Petitioner's contention that in. as much as respondent spouses had agreed to exchange Lot 409 for
Lots 1 and 2, the contract of sale had been novated and its liability extinguished, in untenable. No new
contract was ever executed between. petitioner and respondent spouses, notwithstanding Helena
Siguenza's assurances to that effect. As held by respondent Court:

This stand taken by appellant only reveals its misconception of novation. Novation is
a contract containing two stipulations: one to extinguish an existing obligation, the
other to substitute a new one in its place. It requires the creation of a new contractual
relation as well as the extinguishment of the old. There must be a consent of all the
parties to the substitution, resulting in the extinction of the old obligation and the
creation of a new valid one (Tiu Suico vs. Habana, 45 Phil. 707). 2
2) Fraud has been established. As the trial Court had concluded:
There is no question that the defendants have conveyed and disposed of Lots 1 and
2, Block I, Phase II of the Clarita Village Subdivision to the plaintiffs at a time when
they were no longer the owners thereof. At the time of the execution of the contract of
sale, their only interest thereon was a mortgage lien in the amount of P13,440.00. As
mortgagee they did not have the right to sell the same. Helena and Carmen Siguenza
did not reveal this fact to the plaintiffs and the latter relied on their assurances that the
same belong to them. Bert Osmea and Associates, Inc. as developer and at the same
time attorney-in-fact for Carmen and Helena Siguenza similarly concealed this
fact. Their efforts to cover up this fraud make the acts more detestable and obnoxious.
Defendants demonstrated palpable malice, bad faith, wantonness and incurable
dishonesty. 3
1wph1.t

The finding of fraud in this case was a finding of fact and there are no factors which can justify a
reversal thereof.
3) The award in the amount of P100,000.00 representing pecuniary loss for not having been able to
build a P100,000.00 house should be eliminated. Respondent spouses did not lose that amount. It
was only the estimated cost of the house they were unable to construct. It was an expense item, not
expected income.
4) The amount of P5,610.00 awarded representing rentals the spouses could have saved, from the
time when the house was to be finished to the date when respondent Leonadiza testified in Court
(January 1972 to September 6, 1974), should also be eliminated for being speculative. If they had built
their P100,000.00 house, thus avoiding the payment of rentals, they would, on the other hand, be
losing interest or income from that amount. Evidence that the plaintiff could have bettered his position
had it not been for the defendant's wrongful act cannot serve as basis for an award of damages. 4
5) Fraud and bad faith by petitioner company and the Siguenzas having been established, the award
of moral damages is in order. Moral damages should be reduced, however, from P50,000.00 to
P10,000.00.
6) Moral damages having been awarded, exemplary damages were also properly awarded.

They

should be reduced, however, from P25,000.00 to P5,000.00.

7) The award of P5,000.00 as attorney's fees is affirmed inasmuch as respondent spouses were
compelled to litigate for the protection of their interests. 6
8) The portion of the Decision requiring petitioners and the Siguenzas to return the downpayment of
P3,040.00 is also justified. The Quimbo spouses are entitled to the return of their downpayment, with
interest at the legal rate from March 25, 1974 when the instant, suit was commenced. 7
9) Petitioner's plea for exception from liability for damages on the ground that it was a mere agent of
the Siguenzas is untenable. The contract of sale describes petitioner as seller together with the

Siguenzas. In fact, petitioner was the lone signatory for the sellers in said contract. As held by
respondent Court:
The contract ... is clear that appellant is one of the Seller-of the lots in question. We
will not allow a variation of the terms of the written contract by parole evidence, for
there is never an allegation in the appellant's answer that Exhibit 6-Osmea does not
express the true intent of the parties or that it is suffering from a vice or mistake or
imperfection. Further, appellant never asserted in its answer that it is a mere agent of
its co-defendant Helena. Indeed, the tenor of its Answer is one which shows its
admission that it is a co-seller of all lots in subdivision which it is developing. We take
particular attention to appellant's admission in its answer to the allegations in par. 4, 8
and 9 of appellees' complaint, which show that appellant was not an agent but a coseller of the lots. 8
ACCORDINGLY, the judgment appealed from is hereby modified in that petitioner is hereby ordered
to pay private respondents the following sums: P3,040.00 with interest at the legal rate from March
25, 1974 until fully paid; P10,000.00 as moral damages; P5,000.00 as exemplary damages; and
P5,000.00 as attorney's fees. Costs against petitioner company.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-45976

July 20, 1939

PACIFIC COMMERCIAL COMPANY, plaintiff-appellant,

vs.
ALFREDO L. YATCO, defendant-appellee.
E.P. Revilla for appellant.
Office of the Solicitor-General Tuason for appellee.
AVANCEA, C.J.:
The plaintiff, a corporation engaged in business as a merchant, with offices in Manila, Cebu and Iloilo,
during the period from April 1, 1934 to December 31, 1935, sold in the Philippines, for the account of
Victorias Milling Co., another Philippine corporation, refined sugar, manufactured by the said
corporation, up to the total amount of P1,126,135.96, having received by way of commission for this
sale the amount of P29,534.29. The corporation Victorias Milling Co., paid to the Collector of Internal
Revenue for this sale the amount of P16,944.90 as merchant sales tax in its capacity as manufacturer
and owner of the sugar sold. Notwithstanding this payment made by Victorias Milling Co., the Collector
of Internal Revenue also collected from the plaintiff the same tax for the same amount of P16,944.90.
The sales of this sugar were made by the plaintiff in two ways. The plaintiff looked for purchasers of
the sugar, and once the corresponding purchase order is obtained from them, the same is sent to the
office of Victorias Milling Co., in Manila, which, in turn, endorsed the order to its office in Negros, with
instructions to ship the sugar thus ordered to Manila, Cebu or Iloilo, as the case may be. At times, the
purchase is made for the delivery of the sugar ex-warehouse of the plaintiff and at other times for
delivery ex-ship. In all cases, the billing of lading is sent to the plaintiff. If the sugar was to be delivered
ex-ship, all that the plaintiff did was to hand over the bill of lading to the purchaser and collect the
price. If it was for delivery ex-warehouse, the sugar is first deposited in the warehouse of the plaintiff
before delivery to the purchaser.
The court found that of the price of sugar sold by the plaintiff, the amount of P558,550.41 corresponds
to sugar sold for delivery ex-warehouse and that of P567,585.55 corresponds to sugar sold for delivery
ex-ship, and considering that in the first case the plaintiff acted as a commission merchant, and in the
second case a broker, it ordered the defendant to return to the plaintiff the amount collected from it,
by way of tax on the sale of sugar to be delivered ex-ship, and denied the prayer in the complaint for
the return of the amount paid for the sales of sugar to be delivered ex-warehouse.
Both parties appealed from this decision.
The appeal raises three questions: (a) whether there is double taxation in the present case; (b) whether
the plaintiff acted as a commission merchant as to the sugar delivered ex-warehouse; (c) whether the
plaintiff acted as a mere commercial broker as to the sugar delivered ex-ship.
As to the first question, it should be borne in mind that Victorias Milling Co. already paid the merchant
sales tax for the sales of sugar, in its capacity as manufacturer and owner of the sugar sold. It is said

that the payment of another tax by the plaintiff, who effected the sale, constitutes double taxation,
there having been only one sale. In Gil Hermanos vs. Hord (10 Phil., 218), this question was already
decided in the sense that there is no double taxation. In that case, Aldecoa & Co., remitted abaca to
Gil Hermanos, which the latter sold on commission for the account of the former. Aldecoa & Co. paid
the tax for one-third of 1 per cent upon the value of the abaca sold by Gil Hermanos, and the latter
also paid another one-third of 1 per cent of the same sale. It was held that, although there was only
one sale, this is not a case of double taxation, because the tax is not upon property or products, but
upon occupation or industry. The tax was paid by Aldecoa & Co. and Gil Hermanos in consideration
of the occupation or industry in which each is engaged. The value of the thing sold is taken into account
only as a basis for the fixing of the amount of the tax and not as the reason and purpose thereof. The
case at bar is identical in all respects.
It is said that this decision was reversed in Atkins, Kroll & Co. vs. Posadas (48 Phil., 352), and other
cases. This, however, is not correct. Neither in Atkins, Kroll & Co. vs. Posadas, nor in the other cases
mentioned by the plaintiff, has the decision in Gil Hermanos vs. Hord been reversed. Although a
distinct result was reached in these cases, this was only because they have been found to be different
from the case of Gil Hermanos vs. Hord. On the contrary , in F.E. Zuellig, Inc. vs. Collector of Internal
Revenue (51 Phil., 629), the doctrine in gil Hermanos was followed.
The question of whether the appellant, in connection with the sugar delivered ex-warehouse and
thereafter sold to the purchasers, acted as a commission merchant , presents no doubt. A commission
merchant is one engaged in the purchase or sale for another of personal property which, for this
purpose, is placed in his possession and at his disposal. He maintains a relation not only with his
principal and the purchasers or vendors, but also with the property which is the subject matter of the
transaction. In the present case, the sugar was shipped by Victorias Milling Co., and upon arrival at
the port of destination, the plaintiff received and transferred it for deposit in its warehouses until the
purchaser called for it. The deposit of the sugar in the warehouses of the plaintiff was made upon its
own account and at its own risk until it was sold and taken by the purchaser. There is, therefore, no
doubt that the plaintiff, after taking the sugar on board until it was sold, had it in its possession and at
its own risk, circumstances determinative of its status as a commission merchant in connection with
the sale of sugar under these conditions.
There is also no doubt on the question of whether the plaintiff merely acted as a commercial broker
as to the sale of the sugar delivered to the purchaser ex-ship. The broker, unlike the commission
merchant, has no relation with the thing he sells or buys. He is merely an intermediary between the
purchaser and the vendor. He acquires neither the possession nor the custody of the things sold. His
only office is to bring together the parties to the transaction. These circumstances are present in
connection with the plaintiff's sale of the sugar which was delivered to the purchaser's ex-ship. The
sugar sold under these conditions was shipped by the plaintiff at its expense and risk until it reached
its destination, where it was later taken ex-ship by the purchaser. The plaintiff never had possession
of the sugar at any time. The circumstance that the bill of lading was sent to the plaintiff does not alter
its character of being merely a broker, or constitute possession by it of the sugar shipped , inasmuch
as the same was sent to it for the sole purpose of turning it over to the purchaser for the collection of
the price. The sugar did not come to its possession in any sense.
In view of the foregoing, the appealed decision is affirmed, without special pronouncement as to the
costs. So ordered.
Villa-Real, Imperial, Diaz, Laurel, and Concepcion, JJ., concur.

Separate Opinions
MORAN, J., dissenting:
I regret to dissent form the majority opinion penned by our illustrious and beloved Chief Justice.
The tax on the sale made by the plaintiff Pacific Commercial Company, for the account of Victorias
Milling Company, has already been paid by the latter, as the majority admits. Hence, to require the
Pacific Commercial Company to pay the same tax is clearly to impose double taxation upon one and
the same sale.
But the majority maintains that this is not a case of double taxation, because the tax in question is not
a tax "upon property or products, but upon occupation or industry." Although, in my opinion, the tax,
according to the language of the law, is imposed upon the transaction rather than upon the occupation,
or, at most, upon both, I would say that the distinction made by the majority is not of much importance.
The important thing is, as the majority holds, that the value of the transaction "is taken into account
only as a basis for the fixing of the amount of the tax"; which means, in the last analysis, that the
transaction is the basis of the tax and that , as a consequence, where there is only one transaction,
there is no more basis but for a single tax. In the present case, there is only one sale, that made by
the plaintiff in the name of Victorias Milling Company, and two taxes cannot be demanded of these
two companies because they have brought about only one basis for the payment of one tax. To impose
two taxes upon them would be like holding that the plaintiff has effected one sale and the Victorias
Milling Company another, which is not true, as both have realized but one sale. To make this sale
twice as a basis for the collection of two taxes is unjust and unlawful, because a single transaction is
thereby pluralized and, moreover, in such case, the proportion between the amount of the total tax
collected and the true value of the only transaction made would exceed the rate fixed by law. The
Government is not entitled to receive more than one tax for a single transaction.
Note that the law imposes the tax upon the vendor of merchandise. In the present case, who sold the
merchandise? Was it the Victorias Milling Company of the Pacific Commercial Company? As to this,
there is no controversy on the facts. The Victorias Milling Company sold the merchandise through the
Pacific Commercial Company, or, otherwise stated, the latter sold the merchandise in the former's
name. The Victorias Milling Company is the vendor in law, and the Pacific Commercial Company is
the vendor in fact; one completes the personality of the other and both constitute one efficient subject
of the sale. In reality, therefore, there is but one vendor and but one sale and only one thing sold,
hence, only one tax may be collected, which may be paid by Victorias Milling Company or by the
Pacific Commercial Company, alternatively.
It is true that the doctrine laid down in Gil Hermanos vs. Hord (10 Phil., 218), and F.E. Zuellig,
Inc. vs. Collector of Internal Revenue (51 Phil., 629), supports the theory held by the majority; but this
doctrine runs counter to that established in Atkins, Kroll & Co. vs. Posadas (48 Phil., 352). In this case,
Atkins, Kroll & Co., through Macleod & Co., Inc., a commission merchant, shipped a certain amount
of copra to the United States. The Government sought to collect the total tax on the consignment both
from the owner of the copra as well as from the commission merchant, and this court held that the
Government "held no legal right to levy and collect the same tax from two different persons on one
consignment abroad on one shipment of the same copra" (page 359). In other words, this court held
that for a single consignment, the Government is not entitled to collect two taxes, one from the owner
of the merchandise and the other from the commission merchant. It is true that it had to do with a
consignment and not a sale; but both transactions are governed by the same legal provision, namely
section 1459 of the Administrative Code.

Upon the question at issue, our jurisprudence is wavering, if not confusing and contradictory, and I
had wished that this court make a revision thereof to lay down clearly and definitely a more just and
equitable doctrine for the good of commerce. In my opinion, the Government has no right to receive
more than one tax for a single transaction. A contrary doctrine would be detrimental to local merchants.
If a foreign merchant sells his merchandise through a resident commission merchant, the Government
will not collect more than one tax, and will do so from the commission merchant. But if a resident
merchant makes a similar transaction, the Government will collect tax twice, from the merchant and
from the commission merchant. I do not believe that the legislator intended a measure so unjust to the
merchants of the country.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-48264 February 21, 1980
SWITZERLAND GENERAL INSURANCE COMPANY, LTD., petitioner,
vs.
HON. PEDRO A. RAMIREZ, Presiding Judge of the Court of First Instance of Manila, Branch
XXX, OYAMA LINES, CITADEL LINES and MABUHAY BROKERAGE CO., INC., respondents.
Manuel N. Camacho, for petitioner.
Bito, Misa & Lozada for respondents Oyama Lines and Citadel Lines.
Gregorio Gonzales for respondent Company.

ANTONIO, J.:
Petition for review of the decision, dated February 24, 1978 of the Court of First Instance of Manila in
Civil Case No. 100704, entitled "Switzerland General Insurance Co., Ltd. v. Oyama Lines and Citadel
Lines, and/or Mabuhay Brokerage Co., Inc."
On December 24, 1975, petitioner, a foreign insurance company authorized to do business in the
Philippines thru its agent, F. E. Zuellig Inc., filed an admiralty case (Civil Case No. 100704) against
private respondents Oyama Shipping Co., Ltd. (referred to as Oyama Lines), a foreign firm doing
business in the Philippines, and Citadel Lines, Inc. which is the local agent of private, respondent
Oyama Shipping Co., Inc. and/or Mabuhay Brokerage Co., Inc.
The complaint alleged that on December 21, 1974, 60,000 bags of Urea Nitrogen were shipped from
Niihama Japan, on board the S/S St. Lourdes", claimed to be owned and operated by defendant
Citadel Lines, Inc. The goods were consigned to Borden International Phils., Inc., and insured by
petitioner for the sum of P9,319,105.00 against all risks.
The shipment was discharged from the vessel S/S "St. Lourdes" shipside into lighters owned by
Mabuhay Brokerage Company, Inc., but when the same was subsequently delivered to and received
by the consignee, it was found to have sustained losses and/or damage amounting to P38.698.94.
This amount was paid by petitioner insurance company to the consignee/assured, by virtue of which
payment it became subrogated to the rights of the latter.
Petitioner made repeated demands against herein private respondents for payment of the aforesaid
losses or damaged but no payment was made and, uncertain in whose custody the goods were
damaged, impleaded the private respondents as alternative defendants to determine their respective
liability.
Defendant Citadel Lines, Inc. filed an Answer with Compulsory Counterclaim and Cross-claim,
interposing special and affirmative defenses and alleging that defendant Citadel Lines was merely the

civil agent in the Philippines for the Japanese firm Oyama Shipping Co., Ltd., which was the charterer
of the vessel S/S "St. Lourdes", said vessel being owned by Companies Maritime de Brios, Sociedad
Anonima a Panamanian corporation. It was further alleged that the principal agency relationship
between the said Oyama Shipping Co., Ltd. and defendant Citadel Lines, Inc. was terminated on
August 21, 1975 when the Tokyo District Court declared and decreed the insolvency of the said Oyama
Shipping Co., Ltd.
It was argued that defendant Citadel Lines "has always acted as an agent of a disclosed principal and,
therefore, the herein defendant is without any liability at all" in connection with the plaintiff's claim.
By way of cross-claim, defendant Citadel Lines alleged that the loss/damaged to the cargo took place
while the latter was being delivered to the consignee thereof by the Mabuhay Brokerage, Inc. and said
corporation should be held liable therefor, as well as for all damages suffered and expenses incurred
by defendant Citadel Lines as a result of the filing of the suit. Defendant likewise interposed a
counterclaim for damages against plaintiff Switzerland General Insurance Company, Ltd. (herein
petitioner).
Defendant Oyama Shipping Co. Ltd. likewise filed its Answer, denying the material averments of the
complaint, alleging that it ceased to be represented in the Philippines upon the declaration of its
insolvency by the Tokyo Court; that it was a mere charterer of the S/S "St. Lourdes" which is owned
by Companies Maritime de Brios, Sociedad Anonima a Panamanian corporation; that due to the
insolvency of Oyama Shipping Co. Ltd., the case as against it should be dismissed, the remedy for
the plaintiff being to file its claim before the insolvency court in Tokyo, Japan. Further, it imputed the
loss or damage to the shipment to the shipper, Sumitomo Shoji Kaisha, Ltd. for failing to provide
seaworthy packages for the goods, and/or the Mabuhay Brokerage for failure to exercise utmost
diligence after it took possession of the cargo from the vessel S/S "St. Lourdes". Finally, it was averred
that plaintiff's reinsurer had already paid the plaintiff's claim and, hence, said reinsurer is the real party
to the action, and that assumming defendant Oyama Shipping Co., Ltd. to be liable, its liability is limited
to the amount of the loss in relation to the total amount of the freight of the goods, which if computed,
would be a much lower amount. It was prayed that the complaint be dismissed as against this
defendant.
After trial on the merits, respondent court rendered a decision, dated February 23, 1978, in favor of
petitioner as against therein defendant Oyama Shipping Co., Ltd., but absolving Citadel Lines, Inc.
and Mabuhay Brokerage Co., Inc. from liability. The decision reads, in part, as follows:
Since in the case at bar there is no question that the shipment in question has suffered
loss or damage while in the custody of the carrier, the herein defendant Oyama Line,
but it has not adduced evidence to prove that it was caused by any of those factors or
reasons exempting it from liability, particularly that the bags became torn or burst and
the contents spilled because of the character of the shipment or defects in the packing
or in the containers, or the nature or defect of the article itself. the defendant Oyama
Line, as carrier, cannot avoid liability to the consignee or its subrogee the plaintiff
herein.
The defendant Oyama Line pleads prescription of the plaintiff's cause of action under
Article 366 of the Code of Commerce. The defense is untenable. to begin with, the
required claim that the owner of merchandise is supposed to make within 24 hours
from receipt is but in the nature of a limitation upon his right to recovery and the burden
of proof is accordingly on the carrier to show that the limitation is reasonable and in
proper form or without the time stated (Southern Lines, Inc. vs. Court of Appeals, 4
SCRA 258, 261-262). And it is incumbent upon the said defendant to prove its defense,

particularly that no such claim was filed within the required period. Without such proof
of a negative allegation, which it has failed to adduce, the pleader must suffer defeat
under the rules of evidence (section 1, Rule 131, Revised Rules of Court). Be that as
it may, the survey report submitted in evidence by the plaintiff states that after
completion of delivery the consignee signified its 'intention to file a claim for the full
value of the loss sustained by the shipment' (Exhibits 1, 1-1 to 1-5), a fact that has not
at all been refuted by the defendant Oyama Line.
The fact that the defendant Oyama Line has been declared insolvent by the Tokyo
District Court of Japan since August 21, 1975, is no defense at all. For such declaration
of insolvency, even under Philippine Laws, does not bar recovery of damages based
on contract. Neither can it successfully ward off liability on a claim that it is a mere
charterer of the carrying vessel, having represented on the face of the bill of lading as
the carrier itself (Exhibit A; Exhibit 1-Oyama) And even if it is but a charterer of the
vessel that it claims it is, it cannot avoid its liability as a carrier for loss and damage
suffered by the goods it has transported.
As a mere agent in the Philippines of the defendant Oyama Line, the defendant Citadel
Line (see paragraph 1, complaint) cannot be held liable for the damages recoverable
from its principal. But for failure to substantiate it, its counterclaim against the plaintiff
should be dismissed. So must its crossclaim against its co-defendant brokerage
company be dismissed since it has not at all been held liable to the plaintiff.
Neither can the defendant Mabuhay Brokerage Company, Inc. be held answerable for
the loss and damage sustained by the cargo in question while still in custody of the
carrying vessel, for obvious reasons. Nor can it be made liable, jointly and severally,
with the defendant Oyama Line for further loss and damage to the contents of the torn
or burst bags turned over to its custody in that condition in view of the required
extraordinary diligence that it has observed to prevent further loss or damage to them.
According to the defendant brokerage's witness, Virgilio de Jesus, as soon as the bags
in bad order were received from the lighters they were tied and the torn parts sewed
the falsity of which the plaintiff has failed to prove.
WHEREFORE, the Court hereby renders judgment in favor of the plaintiff Switzerland
General Insurance Company, Ltd. and against the defendant Oyama Line, ordering
the latter to pay the former the amount of P38,698.94, with interest thereon at the legal
rate from the date of the filing of the complaint on December 24, 1975, until fully paid,
P5,000.00 as attorney's fees and the costs of the suit. The plaintiff's complaint against
the defendants Citadel Line and Mabuhay Brokerage Company, Inc. are dismissed.
So is the defendant Citadel Lines' counterclaim against the plaintiff and crossclaim
against its co-defendant brokerage company dismissed.
Petitioner filed a Motion for Reconsideration of the aforesaid decision insofar as it absolves
respondents Citadel Lines, Inc. and Mabuhay Brokerage Co., Inc. from liability, but said Motion for
Reconsideration was denied on April 21, 1979; hence, the instant petition for review.
The main issue raised in the instant petition is whether or not respondent Citadel Lines, Inc., the local
agent of a foreign ocean going vessel, the S/S "St. Lourdes", may be held primarily liable for the
loss/damage found to have been sustained by subject shipment while on board and/or still in the
custody of the said vessel.

Petitioner contends that respondent Citadel Lines, Inc., being the ship agent for the vessel S/S "St.
Lourdes", is liable under the pertinent provisions of the Code of Commerce and applicable
jurisprudence.
Respondent Citadel Lines, Inc., in its Comment to the petition, alleges that the lower court had made
a finding that it is a mere agent of Oyama Shipping Co., Ltd., and not a ship agent, and this, being a
finding of fact, can no longer be questioned in the instant proceedings. Further, it argues that the
provisions of the Code of Commerce relied upon by petitioner are applicable to a ship agent, but not
to a mere agent like private respondent, and that granting that it is a ship agent, it contends that it
should not be held liable because the principal, Oyama Shipping Co., Ltd. has been declared insolvent.
it is claimed that petitioner, upon being informed of the insolvency of the Oyama Shipping Co., Ltd.,
should have filed its claim before the Trustee of the Oyama Shipping Co., Ltd. in Japan.
In fine, private respondents do not dispute that a ship agent is liable to third persons under certain
circumstances as provided in the Code of Commerce, but insists that it is not a ship agent but a mere
agent and hence, not liable.
We find the instant petition meritorious the error of the lower court lies in its application of the general
rule on agency to the case a quo, when the applicable law is contained in the pertinent provisions of
the Code of Commerce as applied in relevant decisions of this Court. Its finding. therefore, that
respondent Citadel Lines, Inc. was a mere agent of Oyama Shipping Co., Ltd. was a result of its
erroneous application of the law of agency to the instant case. Considering the relationship of the
parties, respondent Citadel Lines, Inc. cannot be considered as a "mere agent" under the civil law on
agency as distinguished from a ship agent, within the context of the Code of Commerce. In Yu Biao
Sontua & Co. v. Ossorio, 1 for example, it was held that the doctrines having reference to the relations
Between principal and agent cannot be applied in the case of ship agents and ship owners. For this reason,
respondent cannot validly claim that the court a quo made a finding of fact which is conclusive upon this
Court. A ship agent, according to Article 586 of the Code of Commerce, is the person entrusted with the
provisioning of a vessel or who represents her in the port in which she happens to be." (Emphasis supplied.)

It is not disputed by the private respondent that it is the local representative in the Philippines of the
Oyama Shipping Co., Ltd. and, as alleged by petitioner, upon arrival of the vessel S/S "St. Lourdes"
in Manila, it took charge of the unloading of the cargo and issued cargo receipts (or tally sheets) in its
own name, for the purpose of evidencing discharge of cargoes and the conditions thereof from the
vessel to the arrastre operators and/or unto barges/lighters, and that claims against the vessel S/S
"St. Lourdes" for losses/damages sustained by shipments were in fact filed and processed by
respondent Citadel Lines, Inc. These facts point to the inevitable conclusion that private respondent is
the entity that represents the vessel in the port of Manila and hence is a ship agent within the meaning
and context of Article 586 of the Code of Commerce.
The Code of Commerce provides, among others, that the ship agent shall also be liable for the
indemnities in favor of third persons which arise from the conduct of the captain in the care of the
goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel with
all her equipments and the freightage he may have earned during the voyage. (Article 587).
In addition, Article 618 of the same Code states:
Art. 618. The captain shall be civilly liable to the ship agent and the latter to the third
persons who may have made contracts with the former

1. For all the damages sufferred by the vessel and its cargo by reason of want of skill
or negligence on his part. If a misdemeanor or crime has been committed he shall be
liable in accordance with the Penal Code.
2. For all the thefts and robberies committed by the crew, reserving his right of action
against the guilty parties.
3. For the losses, fines, and confiscations imposed on account of violation. of the laws
and regulations of customs, police, health, and navigation
4. For the losses and damages caused by mutinies on board the vessel or by reason
of faults committed by the crew in the service and defense of the same, if he does not
prove Chat, he made full use of his authority to prevent or avoid them.
5. For those arising by reason of a misuse of powers and non-fulfillment of the duties
which pertain to him in accordance with Articles 610 and 612.
6. For those arising by reason of his going out of his course or taking a course which,
in the opinion of the officers of the vessel, at a meeting attended by the shippers or
super cargoes who may be on board, he should not have taken without sufficient
cause.
No exception whatsoever shall exempt him from his obligation.
7. For those arising by reason of his voluntarily entering a port other than his
destination, with the exception of the cases or without the formalities referred to in
Article 612.
8. For those arising by reason of the non-observance of the provisions contained in
the regulations for lights and maneuvers for the purpose of preventing collisions.
The foregoing provisions have been repeatedly applied by this Court in various cases, among
them: Pons y Compaia v. La Compania Maritima; 2 Behn, Meyer & Co. v. McMicking, et al.: 3 Yu Biao
Sontua & Co. v. Ossorio, 4Wing Kee Compradoring Co. v. Bark "Monongahela"
Insurance Co., Inc. v. Macondray & Co., Inc. 6

and The American

In Pons v. La Compania Maritima, supra, it was held that for damages resulting to merchandize in
transit due to negligence of the officers of the ship, a cause of action arises against the owners or
agents of the vessels which may be prosecuted by the shipper or consignor the damaged goods.
At any rate, the liabilities of the ship agent are not disputed by private respondent. It appearing that
the Citadel Lines is the ship agent for the vessel S/S "St. Lourdes" at the port of Manila, it is, therefore,
liable to the petitioner, solidarily with its principal, Oyama Shipping Co., Ltd., in an amount representing
the value of the goods lost and or damaged, amounting to P38,698.94, which was likewise the amount
paid by petitioner, as insurer, to the insured consignee As found by the court a quo, there has been
no proof presented to show that the officers of the vessel, in whose custody the goods were lost or
damaged, are exempt from liability therefrom and that the damage was caused by factors and
circumstances exempting them from liability.

The insolvency of Oyama Lines has no bearing on the instant case insofar as the liability of Citadel
Lines, Inc. is concerned. The law does does not make the liability of the ship agent dependent upon
the solvency or insolvency of the ship owner.
WHEREFORE, the decision appealed from is modified, and private respondent Citadel Lines, Inc. is
hereby ordered to pay, solidarily with its principal, Oyama Lines (Oyama Shipping Co., LTD.), the
amount of P38,698.94, with interest thereon at the legal rate from the date of the filing of the complaint
on December 24, 1975 until fully paid, P5,000.00 as attorney's fees and the costs of suit. The rest of
the decision is affirmed. No pronouncement as to costs.
SO ORDERED.
Barredo (Chairman), and Concepcion Jr., JJ., concur.
Justice Vicente Abad Santos is on leave.
Justice Pacifico P. de Castro, a Member of the First Division was designated to sit in the Second
Division.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-6530

October 6, 1911

LA COMPAIA GENERAL DE TABACOS DE FILIPINAS, plaintiff-appellant,

vs.
DIABA, defendant-appellee.
Orense and Gonzales diez, for appellant.
No appearance for appellee.

JOHNSON, J.:
On the 19th of July, 1909, the plaintiff commenced an action against the defendant in the Court of First
Instance of the Province of Leyte, for the purpose of recovering the sum of P442, for goods sold and
delivered by the plaintiff, through its agent (Gutierrez) to the defendant, between the 11th of January,
1909, and the 1st of April, 1909.
To this complaint the defendant, in his special answer, admitted that he had purchased from the agent
of the plaintiff (Gutierrez) goods, wares, and merchandise, between the 12th of January, 1909, and
the 15th of March, 1909, amounting to the sum of P692, and that he had sold to the agent of the
plaintiff (Gutierrez) abaca and other effects, between the 25th of January, 1909, and the 6th of
February, 1909, amounting to P1,308.80, leaving a balance due him (the defendant) of P616.80.
1awphil.net

After hearing the evidence, the Hon. Charles A. Low, judge, found that the plaintiff was indebted to the
defendant in the sum of P616.80, and rendered a judgment against the plaintiff for said sum. From
that judgment the plaintiff appealed for said sum. From that judgment the plaintiff appealed and made
several assignments of error in this court.
An examination of the record brought to this court shows by a large preponderance of the evidence
that the agent of the plaintiff (Gutierrez) had been selling goods, wares, and merchandise to the
defendant, and buying abaca and other agricultural products of the defendant for a period covering
more than eight years; that the particular transactions to which the present action related took place
between the 11th of January, 1909, and the 1st of April, 1909. The plaintiff attempted to show that it
had suspended its agent (Gutierrez), as its agent, and that he (Gutierrez) had no further authority to
represent it (the plaintiff). There is no convincing proof in the record that the orders given by the plaintiff
to its agent (Gutierrez) had ever been communicated to the defendant. The defendant had a perfect
right to believe, until otherwise informed, that the agent of the plaintiff, in his purchase of abaca and
other effects was still representing the plaintiff in said transactions. The plaintiff, during the trial of the
cause, placed Gutierrez, its agent, upon the stand as a witness. He testified that the abaca which was
purchased of the defendant was purchased by him a agent of the plaintiff and that said abaca was
actually delivered to the plaintiff. The plaintiff, it appears, was perfectly willing to ratify the acts of its
agent in selling goods to the defendant, but seemed to be unwilling to ratify said agent's acts in
purchasing goods from the defendant.

Under all of the facts of record, we see no reason for modifying the judgment of the lower court; the
same is, therefore, hereby affirmed with costs.
Torres, Mapa, Carson and Moreland, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 2962

February 27, 1907

B. H. MACKE, ET AL., plaintiffs-appellees,

vs.
JOSE CAMPS, defendant-appellant.
Manuel G. Gavieres for appellant.
Gibbs & Gale for appellees.
CARSON, J.:
The plaintiffs in this action, B. H. Macke and W. H. Chandler, partners doing business under the firm
name of Macke, Chandler & Company, allege that during the months of February and March, 1905,
they sold to the defendant and delivered at his place of business, known as the "Washington Cafe,"
various bills of goods amounting to P351.50; that the defendant has only paid on account of said
accounts the sum of P174; that there is still due them on account of said goods the sum of P177.50;
that before instituting this action they made demand for the payment thereof; and that defendant had
failed and refused to pay the said balance or any part of it up to the time of the filing of the complaint.
B. H. Macke, one of the plaintiffs, testified that on the order of one Ricardo Flores, who represented
himself to be agent of the defendant, he shipped the said goods to the defendants at the Washington
Cafe; that Flores later acknowledged the receipt of said goods and made various payments thereon
amounting in all to P174; that on demand for payment of balance of the account Flores informed him
that he did not have the necessary funds on hand, and that he would have to wait the return of his
principal, the defendant, who was at that time visiting in the provinces; that Flores acknowledged the
bill for the goods furnished and the credits being the amount set out in the complaint; that when the
goods were ordered they were ordered on the credit of the defendant and that they were shipped by
the plaintiffs after inquiry which satisfied the witness as to the credit of the defendant and as to the
authority of Flores to act as his agent; that the witness always believed and still believes that Flores
was the agent of the defendant; and that when he went to the Washington Cafe for the purpose of
collecting his bill he found Flores, in the absence of the defendant in the provinces, apparently in
charge of the business and claiming to be the business manager of the defendant, said business being
that of a hotel with a bar and restaurant annexed.
A written contract dated May 25, 1904, was introduced in evidence, from which it appears that one
Galmes, the former owner of the business now know as the "Washington Cafe," subrented the building
wherein the business was conducted, to the defendant for a period of one year, for the purpose of
carrying on that business, the defendant obligating himself not to sublet or subrent the building or the
business without the consent of the said Galmes. This contract was signed by the defendant and the
name of Ricardo Flores appears thereon as a witness, and attached thereto is an inventory of the
furniture and fittings which also is signed by the defendant with the word "sublessee" (subarrendatario)
below the name, and at the foot of this inventory the word "received" (recibo) followed by the name
"Ricardo Flores," with the words "managing agent" (el manejante encargado) immediately following
his name.

Galmes was called to the stand and identified the above- described document as the contract and
inventory delivered to him by the defendant, and further stated that he could not tell whether Flores
was working for himself or for some one else that it to say, whether Flores was managing the
business as agent or sublessee.
The defendant did not go on the stand nor call any witnesses, and relies wholly on his contention that
the foregoing facts are not sufficient to establish the fact that he received the goods for which payment
is demanded.
In the absence of proof of the contrary we think that this evidence is sufficient to sustain a finding that
Flores was the agent of the defendant in the management of the bar of the Washington Cafe with
authority to bind the defendant, his principal, for the payment of the goods mentioned in the complaint.
The contract introduced in evidence sufficiently establishes the fact that the defendant was the owner
of business and of the bar, and the title of "managing agent" attached to the signature of Flores which
appears on that contract, together with the fact that, at the time the purchases in question were made,
Flores was apparently in charge of the business, performing the duties usually entrusted to managing
agent, leave little room for doubt that he was there as authorized agent of the defendant. One who
clothes another apparent authority as his agent, and holds him out to the public as such, can not be
permitted to deny the authority of such person to act as his agent, to the prejudice of innocent third
parties dealing with such person in good faith and in the following preassumptions or deductions,
which the law expressly directs to be made from particular facts, are deemed conclusive:
(1) "Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led
another to believe a particular thing true, and to act upon such belief, he can not, in any litigation
arising out such declaration, act, or omission, be permitted to falsify it" (subsec. 1, sec. 333, Act no.
190); and unless the contrary appears, the authority of an agent must be presumed to include all the
necessary and usual means of carrying his agency into effect. (15 Conn., 347; 90 N. C. 101; 15 La.
Ann, 247; 43 Mich., 364; 93 N. Y., 495; 87 Ind., 187.)
That Flores, as managing agent of the Washington Cafe, had authority to buy such reasonable
quantities of supplies as might from time to time be necessary in carrying on the business of hotel bar
may fairly be presumed from the nature of the business, especially in view of the fact that his principal
appears to have left him in charge during more or less prolonged periods of absence; from an
examination of the items of the account attached to the complaint, we are of opinion that he was acting
within the scope of his authority in ordering these goods are binding on his principal, and in the
absence of evidence to the contrary, furnish satisfactory proof of their delivery as alleged in the
complaint.
The judgment of the trial court is affirmed with the costs of his instance against the appellant. After
expiration of twenty days judgment will be rendered in accordance herewith, and ten days thereafter
the case remanded to the lower court for proper action. So ordered.
Arellano, C.J., Torres and Willard, JJ., concur.
Tracey, J., dissents.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-12579

July 27, 1918

GREGORIO JIMENEZ, plaintiff-appellee,

vs.
PEDRO RABOT, NICOLASA JIMENEZ and her husband EMILIO RODRIGUEZ, defendants.
PEDRO RABOT, appellant.
Antonio Bengson for appellant.
Jose Rivera for appellee.
STREET, J.:
This action was instituted by the plaintiff, Gregorio Jimenez, to recover from the defendant, Pedro
Rabot, a parcel of land situated in the municipality of Alaminos, in the Province of Pangasinan, and
described in the complaint as follows:
Approximate area of three hectares; bounded on the north and west with land of Pedro
Reynoso, on the south with land of Nicolasa Jimenez, and on the east with land of Calixta
Apostol before, at present with that of Juan Montemayor and Simon del Barrio. It is situated in
Dinmayat Tancaran, barrio of Alos of this same municipality of Alaminos, Pangasinan.
From a judgment rendered in favor of the plaintiff, Pedro Rabot has appealed; but his co-defendants,
Nicolasa Jimenez and her husband, who were cited by the defendant for the purpose of holding her
liable upon her warranty in case of his eviction, have not appealed.
It is admitted that the parcel of land in question, together with two other parcels in the same locality
originally belonged of the heirs in the division of the estate of his father. It is further appears that while
Gregorio was staying at Vigan, in the Province of Ilocos Sur, during the year 1911, his property in
Alaminos was confided by him to the care of his elder sister Nicolasa Jimenez. On February 7 of that
year he wrote this sister a letter from Vigan in which he informed her that he was pressed for money
and requested her to sell one of his parcels of land and send him the money in order that he might
pay his debts. This letter contains no description of the land to be sold other than is indicated in the
words "one of my parcels of land" ("uno de mis terrenos").
Acting upon this letter Nicolasa approached the defendant Pedro Rabot, and the latter agreed to buy
the parcel in question for the sum of P500. Two hundred and fifty peso were paid at once, with the
understanding that a deed of conveyance would be executed when the balance should be paid.
Nicolasa admits having received this payment of P250 at the time stated; but there is no evidence that
she sent any of it to her brother.
About one year later Gregorio came down to Alaminos and demanded that his sister should surrender
this piece of land to him, it being then in her possession. She refused upon some pretext or other to
do so; and as a result Gregorio, in conjunction with others of his brothers and sisters, whose properties
were also in the hands of Nicolasa, instituted an action in the Court of First Instance for the purpose

of recovering their land from her control. This action was decided favorably to the plaintiffs upon August
12, 1913; and no appeal was taken from the judgment.
Meanwhile, upon May 31, 1912, Nicolasa Jimenez executed and delivered to Pedro Rabot a deed
purporting to convey to him the parcel of land which is the subject of this controversy. The deed recites
that the sale was made in consideration of the sum of P500, the payment of which is acknowledged.
Pedro Rabot went into possession, and the property was found in his hands at the time when final
judgment was entered in favor of the plaintiffs in the action above mentioned. It will thus be seen that
Pedro Rabot acquired possession under the deed from Nicolasa during the pendency of the litigation
appear that he was at the time cognizant of that circumstance.
In considering the questions presented by this appeal one or two preliminary observations may be
made. The first is that, as a matter of formality, a power of attorney to convey real property ought to
appear in a public document, just as any other instrument intended to transmit or convey an interest
in such property ought to appear in a public document. (Art. 1280, Civil Code.) But inasmuch as it is
an established doctrine that a private document is competent to create, transmit, modify, or extinguish
a right in real property (Thunga Chui vs. Que Bentec, 2 Phil. Rep., 561; Couto Soriano vs. Cortes, 8
Phil. Rep., 459), it follows that a power of attorney to convey such property, even though in the form
of a private document, will operate with effect. Again, supposing that the letter contained adequate
authority for Nicolasa to sell the property in question, her action in conveying the property in her own
name, without showing the capacity in which she acted, was doubtless irregular. Nevertheless, such
deed would in any event operate to bind her brother, the plaintiff in its character as a contract
(Lyon vs. Pollock, 99 U.S., 668; 25 L. ed., 265), and supposing that the authority was sufficient, he
could be compelled by a proper judicial proceeding to execute a document to carry such contract into
effect. (Art. 1279, Civil Code.)
The principal question for consideration therefore in the end resolves itself into this, whether the
authority conferred on Nicolasa by the letter of February 7, 1911, was sufficient to enable her to bind
her brother. The only provisions of law bearing on this point are contained in article 1713 of the Civil
Code and in section 335 of the Code of Civil Procedure. Article 1713 of the Civil Code requires that
the authority to alienate land shall be contained in an express mandate; while subsection 5 of section
335 of the Code of Civil Procedure says that the authority of the agent must be in writing and
subscribed by the party to be charged. We are of the opinion that the authority expressed in the letter
is a sufficient compliance with both requirements.
It has been urged here that in order for the authority to be sufficient under section 335 of the Code of
Civil Procedure the authorization must contain a particular description of the property which the agent
is to be permitted to sell. There is no such requirement in subsection 5 of section 335; and we do not
believe that it would be legitimate to read such a requirement into it. The purpose in giving a power of
attorney is to substitute the mind and hand of the agent for the mind and hand of the principal; and if
the character and extent of the power is so far defined as to leave no doubt as to the limits within which
the agent is authorized to act, and he acts within those limits, the principal cannot question the validity
of his act. It is not necessary that the particular act to be accomplished should be predestinated by the
language of the power. The question to be answered always, after the power has been exercised, is
rather this: Was the act which the agent performed within the scope of his authority? In the case before
us, if the question is asked whether the act performed by Nicolasa Jimenez was within the scope of
the authority which had been conferred upon her, the answer must be obviously in the affirmative.
It should not escape observation that the problem with which we are here concerned relates to the
sufficiency of the power of attorney under subsection 5 of section 335 of the Code of Civil Procedure
and not to the sufficiency of the note or memorandum of the contract, or agreement of sale, required
by the same subsection, in connection with the first paragraph of the same section. It is well-settled in

the jurisprudence of England and the United States that when the owner, or his agent, comes to make
a contract to sell, or a conveyance to effect a transfer, there must be a description of the property
which is the subject of the sale or conveyance. This is necessary of course to define the object of the
contract. (Brockway vs. Frost, 40 Minn., 155; Carr vs. Passaic Land etc. Co., 19 N. J. Eq., 424;
Lippincott vs. Bridgewater, 55 N. J. Eq., 208; Craig vs. Zelian, 137 Cal., 105; 20 Cyc., 271.)
The general rule here applicable is that the description must be sufficiently definite to identify the land
either from the recitals of the contract or deed or from external facts referred to in the document,
thereby enabling one to determine the identity of the land and if the description is uncertain on its face
or is shown to be applicable with equal plausibility to more than one tract, it is insufficient. The principle
embodied in these decisions is not, in our opinion, applicable to the present case, which relates to the
sufficiency of the authorization, not to the sufficiency of the contract or conveyance. It is
unquestionable that the deed which Nicolasa executed contains a proper description of the property
which she purported to convey.
There is ample authority to the effect that a person may by a general power of attorney an agent to
sell "all" the land possessed by the principal, or all that he possesses in a particular city, county, or
state. (Roper vs.McFadden, 48 Cal., 346; Rownd vs. Davidson, 113 La., 1047; Carson vs. Ray, 52 N.
C., 609; 78 Am. Dec., 267; 31 Cyc., 1229.) It is also held that where a person authorizes an agent to
sell a farm ("my farm") in a certain county, this is sufficient, if it be shown that such party has only one
farm in that country. (Marriner vs. Dennison, 78 Cal., 202.) In Linton vs. Moorhead (209 Pa. St., 646),
the power authorized the agent to sell or convey "any or all tracts, lots, or parcels" of land belonging
to the plaintiff. It was held that this was adequate. In Lyon vs. Pollock (99 U.S., 668), the owner in
effect authorized an agent to sell everything he had in San Antonio Texas. The authority was held
sufficient. In Linan vs. Puno (31 Phil. Rep., 259), the authority granted was to the effect that the agent
might administer "the interests" possessed by the principal in the municipality of Tarlac and to that end
he was authorized to purchase, sell, collect, and pay, etc. It was held that this was a sufficient power.
In the present case the agent was given the power to sell either of the parcels of land belonging to the
plaintiff. We can see no reason why the performance of an act within the scope of this authority should
not bind the plaintiff to the same extent as if he had given the agent authority to sell "any or all" and
she had conveyed only one.
From what have been said it is evident that the lower court should have absolved the defendant Pedro
Rabot from the complaint. Judgment will accordingly be reversed, without any express adjudication of
costs this instance. So ordered.
Torres, Johnson, Malcolm, Avancea and Fisher, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-9608

August 7, 1915

DIEGO LIAN, plaintiff-appellee,

vs.
MARCOS P. PUNO, ET AL., defendants-appellants.
Mariano Escueta for appellants.
S. Lopez for appellee.
JOHNSON, J.:
The facts upon which the decision in this case depends are as follows:
(1) The the plaintiff, in the month of May, 1908, and for a long time prior thereto, was the owner of a
certain parcel of land particularly described in paragraph 2 of the complaint.
(2) That on the 16th day of May, 1908, the plaintiff executed the following document, which conferred
upon the defendant Marcos P. Puno the power, duties and obligations therein contained:
I, Diego Lian, of age, married, a resident of Daet, Province of Ambos Camarines, Philippine
Islands, and at the present time temporarily residing in this city of Tarlac, capital of the Province
of Tarlac, P.I., set forth that I hereby confer sufficient power, such as the law requires, upon
Mr. Marcos P. Puno, likewise a resident of this city of Tarlac, capital of the Province of Tarlac,
in order that in my name and representation he may administer the interest I possess within
this municipality of Tarlac, purchase, sell, collect and pay, as well as sue and be sued before
any authority, appear before the courts of justice and administrative officers in any proceeding
or business concerning the good administration and advancement of my said interests, and
may, in necessary cases, appoint attorneys at law or attorneys in fact to represent him.
The meaning, purport, and power conferred by this document constitute the very gist of the present
action.
(3) That in June, 1911, the defendant Puno, for the sum of P800, sold and delivered said parcel of
land to the other defendants.
The plaintiff alleges that the said document (Exhibit A) did not confer upon the defendant Puno the
power to sell the land and prayed that the sale be set aside; that the land be returned to him, together
with damages.
The defendants at first presented a demurrer to the complaint, which was overruled. To the order
overruling the demurrer the defendants duly excepted. They later answered. In their answer they first
denied generally and specially all of the important facts stated in the complaint. In their special answer
or defense they admitted the sale of the land by Puno to the other defendants and alleged that the
same was a valid sale and prayed to be relieved from the liability under the complaint, with their costs.

Upon the issue thus presented the lower court decided: (1) That the document Exhibit A did not give
Puno authority to sell the land; (2) that the sale was illegal and void; (3) That defendants should return
to the land to the plaintiff; and (4) That the defendants should pay to the plaintiff the sum of P1,000 as
damages, P400 of which the defendant Puno should alone be responsible for, and to pay the costs.
From that decision the defendants appealed to this court and made the following assignments of error:
I. The lower court erred in overruling the demurrer filed by the appellants to the complaints.
II. The lower court erred in holding that the appellant Marcos P. Puno was not authorized to
sell the land in question and that the sale executed by the said Marcos P. Puno to the other
appellants, Enrique, Vicente, Aquilina and Remedios, surnamed Maglanok, is null and void.
III. The lower court erred in ordering the appellee, Diego Lian, to return to the appellants,
Enrique, Vicente, Aquilina, and Remedios Maglanok the sum of P800, the selling price of the
land question.
III. And, finally, the lower court erred in sentencing the appellants to pay to the appellee the
sum of P1,000, the value of the products collected, and to pay the costs.
IV. And, finally, the lower court erred in sentencing the appellant to pay to the appellee the
sum of P1,000, the value of the products collected, and to pay the costs.
With reference to the first assignment of error, we are of the opinion that the facts stated in the opinion
are sufficient to constitute a cause of action.
With reference to the second assignment of error, the plaintiff alleges that the power of attorney, as
contained in Exhibit A, did not authorize the defendant Puno had full and complete power and authority
to do what he did. The lower court held that Exhibit A only gave Puno power and authority to administer
the land; that he was not authorized to sell it. Omitting the purely explanatory parts of Exhibit A, it
reads as follows: "I, Diego Lian, ... set forth that I ... confer sufficient power, such as the law requires,
upon Mr. Marcos P. Puno ... in order that in my name and representation he may administer ...
purchase, sell, collect and pay ... in any proceeding or business concerning the good administration
and advancement of my said interests, and may, in necessary cases, appoint at law or attorneys in
fact to represent him."
Contracts of agency as well as general powers of attorney must be interpreted in accordance with the
language used by the parties. the real intention of the parties is primarily to be determined from the
language used. The intention is to be gathered from the whole instrument. In case of doubt resort must
be had to the situation, surroundings and relations of the parties. Whenever it is possible, effect is to
be given to every word and clause used by the parties. It is to be presumed that the parties said what
they intended to say and that they used each word or clause with some purpose and that purpose is,
if possible, to be ascertained and enforced. The intention of the parties must be sustained rather than
defeated. If the contract be open to two constructions, one of which would uphold while the other would
overthrow it, the former is to be chosen. So, if by one construction the contract would be illegal, and
by another equally permissible construction it would be lawful, the latter must be adopted. The acts of
the parties in carrying out the contract will be presumed to be done in good faith. The acts of the parties
will be presumed to have been done in conformity with and not contrary to the intent of the contract.
The meaning of generals words must be construed with reference to the specific object to be
accomplished and limited by the recitals made in reference to such object.

With these general observations in mind, ,let us examine the terms of the power conferred upon the
defendant Puno (Exhibit A) and ascertain, if possible, what was the real intent of the plaintiff. The lower
court held that the "only power conferred was the power to administer." Reading the contract we find
it says that the plaintiff "I confer ... power ... that ... he may administer ... purchase, sell, collect and
pay ... in any proceeding or business concerning the good administration and advancement of my said
interests." The words "administer, purchase, sell," etc., seem to be used coordinately. Each has equal
force with the other. There seems to be no good reason for saying that Puno had authority to
administer and not to sell when "to sell" was as advantageous to the plaintiff in the administration of
his affairs as "to administer." To hold that the power was "to administer" only when the power "to sell"
was equally conferred would be to give to special words of the contract a special and limited meaning
to the exclusion of other general words of equal import.
The record contains no allegation on proof that Puno acted in bad faith or fraudulently in selling the
land. It will be presumed that he acted in good faith and in accordance with his power as he understood
it. That his interpretation of his power, as gathered from the contract (Exhibit A), is tenable cannot, we
believe, be successfully denied. In view of that fact and view of the fact that, so far as the record
shows, the other defendants acted in good faith, we are of the opinion that the contract, liberally
construed, as we think it should be, justifies the interpretation given it by Puno. In reaching this
conclusion, we have taken into account the fact that the plaintiff delayed his action to annul said sale
from the month of June, 1911, until the 15th of February, 1913. Neither have we overlooked the fact
in the brief of the appellants that the plaintiff has not returned, nor offered to return, nor indicated a
willingness to return, the purchase price. (Art. 1308 of the Civil Code; Manikis vs. Blas, No. 7585.1).
In view of all the foregoing, we are of the opinion that the lower court committed the error complained
of in the second assignment, and, without discussing the other assignments of error, we are of the
opinion, and so hold, that the judgment of the lower court should be and is hereby revoked and that
the appellants should be relieved from all liability under the complaint. Without any finding as to costs,
it is so ordered.
Arellano, C.J., Torres, Carson, and Araullo, JJ., concur.

Separate Opinions
TRENT, J., dissenting:
The power of attorney, the identity of the land sold, the fact of sale, and the identity of the parties are
admitted.
I agree with the majority that "the meaning, purport, and power conferred by this document (Exhibit A,
the power of attorney) constitute the very gist of the present action," and that the acted in good faith.
But I cannot see how "the fact that the plaintiff delayed his action to annul said sale from the month of
June, 1911, to February, 15, 1913," and the fact that the appellants have charged in their brief that the
"plaintiff has not returned, nor offered, to return, ,nor indicated a willingness to return the purchase
price," can affect in any way the issues involved in this case. the record shows that the land is situated
in the Province of Tarlac and the plaintiff lives in the Province of Ambos Camarines. The record fails
to show whether or not the plaintiff has returned, or offered to return, or is willing to return to the
vendees the purchase price of the land. The charge in appellant's brief that the plaintiff has not done
these things is not proof and should not be taken as establishing a fact or facts.

The controlling question is, Was Puno authorized under the power of attorney, which is set out in full
in the majority opinion, to sell the real estate of his principal? The solution of this question must depend
solely and exclusively upon the language used in that power of attorney Exhibit A. There is no claim
that the plaintiff enlarged the powers of his agent Puno after the execution of Exhibit A or that he
ratified the sale in question after it had been made.
Article 1713 of the Civil Code reads:
An agency in general only includes acts of administration.
In order to compromise, alienate, mortgage, or to execute any other act of a strict ownership
an express commission is required.
The power to compromise does not give authority to place the matter in the hands of arbitrators
or amicable compromisers.
The Director General de los Registros, in its resolution of November 20, 1900 (90 Juris. Civ., 677),
construed a power of attorney given by a father to his son, authorizing the latter to administer the
property of his principal, "to lease and to rent his principal's reality to the persons and for the time,
price and conditions he deems best, and also to make ejectments, to sign documents, to make
collections, to make changes in anything belonging to his principal, and to compromise any questions
that may arise." Under color of this authority, the son leased for a period of twelve years several parcels
of land and charged several other parcels with pensiones de censos in favor of a third person. I quote
from the syllabus: "In the present case, the lessor was authorized by his principal to lease and to rent
the latter's realty to the persons and for the price, time and conditions that seemed best to him, and
such authorization must be understood to have been granted for the simple contract of lease, which
produces only personal obligations, and consequently cannot be regarded as extended, without
express command, to the stipulation of such conditions as might alter the nature of the contract by
transforming it into a partial conveyance of ownership in the things leased, as happened in said case,
wherein the agent has thereby exceeded the limits of his agency."
A quite similar power of attorney was disposed of in the same manner in the resolution of October 26,
1904 (99Juris. Civ., 245) where an agent leased property for thirty years under color of authority to
lease the property "for the time, price, and conditions" which he might think desirable.
In the Resolution of April 5, 1907 (Juris. Civ., 68), the facts were as follows: A power of attorney
executed by a wife authorized her husband to administer a vineyard belonging to her as might be
necessary for its preservation, improvement, and increase. Under this power the husband entered into
an agreement with several other adjoining owners with reference to the irrigation of their respective
properties by means of an aqueduct. To insure the accomplishment of various stipulations inserted in
this contract, the various parties thereto hypothecated their respective properties and sought to have
the same inscribed in the property registry. Registration was denied on the ground, among others, that
the power of attorney in question did not authorize the husband to perform any act of strict ownership,
but only those of administration.
In commenting upon article 1713, Manresa quotes approvingly from Goyena as follows: "As Garcia
Goyena says, 'The law, which must look after the interests of all, cannot permit a man to express
himself in vague and general way with reference to the right he confers upon another for the purposes
of alienation or hypothecation, whereby he might easily be despoiled of all he possessed and be
brought to ruin; such excessive authority must be set down in the most formal and explicit terms; and
when this is not done, the law reasonably presumes that the principal did not mean to confer it.' " (Vol.
11, p. 460.)

Bonel, in commenting upon the same article, says: "Our code, in looking after the interests of all and
thereby furnishing a proof of common sense, does not permit a vague expression in a general and
indefinite manner of the right one confers upon another to make alienations and hypothecations, for
in this way a man could with good faith on his part be despoiled of all he possessed and be brought
to ruin; hence it provides that such excessive authority must be set down in the most favorable and
explicit terms; and when this is not done, reason and common sense induce the presumption that the
principal did not mean to confer it." (Vol. 4, p. 728.)
The supreme court of Louisiana, which also interprets the civil law, was considering the following
power of attorney in Lafourche Transportation Co. vs. Pugh (52 La. Ann., 1517); "We ... have
appointed, ... (defendant) our true and lawful agent and attorney in fact, for us, and in our name, place
and stead, to manage, control, take charge of, compromise and do any and all things, necessary and
requisite, touching and concerning our interests in the succession of the late Robert Lawrence Pugh,
and to make any and all settlements for us, and in our behalf, with the legatees under the last will and
testament of the said R. L. Pugh, vesting our said attorney and agent with full power and authority, to
do any and all acts that we might do if personally present . . .."
The remarks of the court are brief and instructive; "It further appears that, neither at the date of the
execution of the note and act of mortgage sued on, nor any at any other time, has W.W. Pugh held
any other procuration, the attempt the prove the contrary having failed. there is no doubt that, at the
time that the note and act or mortgage were executed, he supposed that the power of attorney held
by him conferred the authority which he undertook to exercise, but the bare reading of it shows that it
did not."
In Lord vs. Sherman (2 Cal., 498), a power of attorney authorized an agent to "attend to all business
affairs appertaining to real or personal estate, bank business, or business at the customhouse, or
insurance or law business, or the commencement, settlement, or defending any suit or suits in law or
equity. Also for me and in my name, place, and stead, to sign, seal, execute, and deliver all and any
instrument under seal that he may think proper in and about my said business, either individually or
as a member of the firm of Shermans & Stork. Also to settle, compromise, and adjust, pay and
discharge all claims and demands, accounts due or owing to me, or from me, or in which I am
interested, and give all proper receipts or discharges therefor, whether under seal or not; and to attend
to all my business for me of any name or nature, whether real or personal, that may arise during my
absence, and whether to use my name in and about the same, the same as I could do if personally
present. Also to make, indorse, or accept any drafts, bills of exchange, or promissory notes. Also to
settle and adjust all claims, etc." The court said: "The power of attorney contains no authority to convey
real estate, eo nomine. The power given `to attend to all business affairs appertaining to real or
personal estate' is too indefinite to sustain a transfer or real estate, more particularly that acquired
long subsequent to its execution."
In Billings vs. Morrow (7 Cal., 171), a power of attorney was in question which authorized the agent
"for me and in my name to superintend my real and personal estate, to make contracts, to settle
outstanding debts, and generally to do all things that concern my interest in any way, real or personal
whatsoever, giving my said attorney full power to use my name to release others or bind myself, as
he may deem proper and expedient; ..." The court said: "It requires but a glance at this instrument to
perceive that no authority is contained in it to convey real estate. The power is limited and special, and
cannot be extended by implication to other acts more important in their character than those expressly
provided in the body of the instrument. The rule may be thus stated; that where the authority to perform
specific acts is given in the power, and general words are also employed, such words are limited to
the particular acts authorized."

In Clark & Skyles on Agency, section 213, it is said: All powers conferrred upon an agent by a formal
instrument are to receive a strict interpretation, and the authority is never extended by intendment or
construction beyond that which is given in terms or is necessary for carrying the authority into effect,
and that authority must be strictly pursued."
Upon the same point Story says in his work on Agency, section 68: "Indeed formal instruments of this
sort are ordinarily subjected to a strict interpretation, and the authority is never extended beyond that
which is given in terms, or which is necessary and proper for carrying the authority so given into full
effect."
In Reynolds vs. Rowley (4 La. Ann., 396), it was said: "We take it for granted that, under the common
law as with us, powers of attorneys are subjected to a strict interpretation, and that the authority is
never extended beyond that which is given in terms, or which is necessary and proper for carrying the
authority so given into full effect; that language, however general in its form, when used in connection
with a particular subject matter, will be presumed to be used in subordination to that matter, and
therefore is to be construed and limited accordingly; that a general power to buy property for the
constituent, or to make any contracts, and do any other acts whatever, which he could if personally
present, must be construed to apply only to buying or contracting connected with his ordinary business,
and would not authorize any contracts of an extraordinary character to be made."
In Clark & Skyles on Agency, section 227, it is said: "In order that an agent may have authority to sell
real estate it is necessary that such authority should be clearly and distinctly given to him, in such a
manner that a reasonably prudent person would have no hesitancy in seeing that such a power was
given. We have herefore seen that all written powers will be strictly construed and will not be extended
beyond their obvious purpose; and unless power to sell real estate is clearly given to him, the agent
cannot sell it."
In sections 261 to 265 of the same work, the general scope of powers delegated by the authority to
manage the business of the principal is discussed. It is there stated that aside from the particular facts
and circumstances surrounding the parties, it is a general rule that an agency to manage implies
authority to with the property or in the business what has previously been done by the principals, or
by others with their express or implied consent; or further to do what is necessary or usual and
customary to do with the property, or in business of the same kind in the same locality. But the power
to dispose of the business or embark on some unusual enterprise with the principal's capital is not
included in such an agency.
The rule that formal powers of attorney must be strictly construed and limited in their scope to what is
expressly stated and to such incidental powers as may be necessary in the fulfillment of the powers
expressly given is well settled, both in Anglo-American and in the civil law. The authorities supporting
this doctrine are legion. So, general expressions conferring power an agent, such as "to do any and
every act," "do and transact all manner of business," to lease real property "for the time, price and with
the conditions which he deems desirable," "attend to all business affairs appertaining to real or
personal estate," "to my real and personal estate," "to superintend my real and personal estate" are
to be construed in subordination to the express powers granted, and not to refer to other unusual or
extraordinary powers of which no mention is made in the instrument. In addition to the cases given
above which illustrate the rule, many others may be found in the books of the same character.
Likewise, it is a rule uniformly stated that the power to sell real estate must necessarily be express,
and cannot be implied from any general language used.
Let us now examine the power of attorney executed by the plaintiff and see if, according to the rules
stated, it can be held to include the power to sell real estate. There is no description of the plaintiff's
property in Tarlac. The document simply designates his property as "interests." This, of course, would

ordinarily be taken to include every species of property, real or personal, owned by him in that
municipality. That the power to administer these "interests" is expressly delegated admits of no denial,
as well as to the power to appear in court, the power to engage counsel, and to appoint sub-agents.
But we are interested in determining if the power is expresslydelegated (for that is the only manner in
which it could have been given) to sell real estate. The grammatical construction of the instrument
admits of its division into two portions, as follows: "(a) He may administer such interests as I possess
within this municipality of Tarlac; (b) And may buy, sell, collect, and pay, ... in any way whatsoever for
the good administration and furtherance of my said interests."
Certainly, the power to sell real estate is not expressly delegated in the first division. True, in the
second section are the words "buy," "sell," "in any way whatsoever," and which, standing alone, might
easily refer to either real or personal property or both. But these powers are restricted by the stated
purpose for which the grant is given; that is, "for the good administration and furtherance of my said
interests." This qualifying phrase brings these general words "buy" and "sell" "in any way whatsoever"
down to the level of administrative acts. The agent may buy or sell for the good administration and
furtherance of the principal's interests, but he may not sell those interests themselves. As a matter of
fact, the second division is but little more than a repetition of the first, with the added feature that it
enumerates a number of those powers customarily incident to the management of a principal's
business by his agent.
It develops that the plaintiff owned a parcel of agricultural land in the municipality of Tarlac. This was
one of the "interests" which the defendant Puno was to "administer." Manifestly, the power to "buy"
seed, farming implements, and material for the repair and preservation of that land, and the power to
"sell" its products were incidental powers of a general power of management of such an "interest."
The full extent of the plaintiff's business "interests" in the municipality of Tarlac is not disclosed by the
record. But it is clear that he was not engaged in the business of buying and selling real estate.
Assuming that his "interests" in the said municipality were of almost any other description, it is evident
that the sale of real estate by the defendant agent was an extraordinary act, not capable of being
classified as an act of administration. I am unable to discover any express delegation of power to sell
"real estate" in the document in question. Not only is "real estate" not expressly mentioned, but the
words "buy" and "sell," which, it is argued, delegate that power, are, by the grammatical construction
of the document, subordinated to the "good administration and furtherance" of the plaintiff's "interests."
For the foregoing reasons I do not agree to the disposition of this case.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-6389

November 29, 1954

PASTOR AMIGO and JUSTINO AMIGO, petitioners,

vs.
SERAFIN TEVES, respondent.
Enrique Medina for petitioner.
Capistrano and Capistrano for respondent.
BAUTISTA ANGELO, J.:
This is a petition for review of a decision of the Court of Appeals modifying that of the court of origin in
the sense that plaintiffs, now petitioners, should not be made to pay the sum of P100 as attorney's
fees.
This petition stems from an action filed by petitioners in the Court of First Instance of Negros Oriental
praying that judgment be rendered: (a) declaring that the contract entered into between Marcelino M.
Amigo and Sefarin Teves on October 30, 1938 is merely a contract of mortgage and not a sale with
right to repurchase; (b) declaring that even if said contract be one of sale with right to repurchase, the
offer to repurchase by the vendors was made within the period agreed upon; (c) condemning
respondents to execute a deed of reconveyance; and (c) condemning respondents to restore the
property to petitioners and to pay P2,500 as damages.
The important facts which need to be considered for purposes of this petition as found by the Court of
Appeals may be briefly summarized as follows: On August 11, 1937, Macario Amigo and Anacleto
Cagalitan executed in favor of their son, Marcelino Amigo, a power of attorney granting to the latter,
among others, the power "to lease, let, bargain, transfer, convey and sell, remise, release, mortgage
and hypothecate, part or any of the properties . . . upon such terms and conditions, and under such
covenants as he shall think fit."
On October 30, 1938, Marcelino Amigo, in his capacity as attorney-in-fact, executed a deed of sale of
a parcel of land for a price of P3,000 in favor of Serafin Teves stipulating therein that the vendors could
repurchase the land within a period of 18 months from the date of the sale. In the same document, it
was also stipulated that vendors would remain in possession of the land as lessees for a period of 18
months subject to the following terms and conditions: (a) the lessees shall pay P180 as rent every six
months from the date of the agreement; (b) the period of the lease shall terminate on April 30, 1940;
(c) in case of litigation, the lessees shall pay P100 as attorney's fees; and (d) in case of failure to pay
any rental as agreed upon, the lease shall automatically terminate and the right of ownership of vendee
shall become absolute.
On July 20, 1939, the spouses Macario Amigo and Anacleta Cagalitan donated to their sons Justino
Amigo and Pastor Amigo several parcels of land including their right to repurchase the land in litigation.
The deed of donation was made in a public instrument, was duly accepted by the donees, and was
registered in the Office of the Register of Deeds.

The vendors-lessees paid the rental corresponding to the first six months, but not the rental for the
subsequent semester, and so on January 8, 1940, Serafin Teves, the vendee-lessor, executed an
"Affidavit of Consolidation of Title" in view of the failure of the lessees to pay the rentals as agreed
upon, and registered said affidavit in the Office of the Register of Deeds of Negros Oriental, who, on
January 28, 1940, issued to Serafin Teves the corresponding transfer of title over the land in question.
On March 9, 1940, Justino Amigo and Pastor Amigo, as donees of the right to repurchase the land in
question, offered to repurchase the land from Serafin Teves by tendering to him the payment of the
redemption price but the latter refused on the ground that the ownership had already been
consolidated in him as purchaser a retro. Hence, on April 26, 1940, before the expiration of the 18thmonth period stipulated for the redemption of the land, the donees instituted the present action.
The issues posed by petitioners are: (1) The lease covenant contained in the deed of sale with pacto
de retroexecuted by Marcelino Amigo as attorney-in-fact in favor of Serafin Teves is not germane to,
nor within the purview of, the powers granted to said attorney-in-fact and, therefore, is ultra vires and
null and void; (2) the penal clause stipulated in the lease covenant referring to the automatic
termination of the period of redemption is null and void; and (3) petitioners should be allowed to
repurchase the land on equitable grounds considering the great disproportion between the redemption
price and the market value of the land on the date the period of redemption is supposed to expire.
Petitioners contend that, while the attorney-in-fact, Marcelino Amigo, had the power to execute a deed
of sale with right to repurchase under the power of attorney granted to him, however, the covenant of
lease contained in said deed whereby the vendors agreed to remain in possession of the land as
lessees is not germane to said power of attorney and, therefore, Marcelino Amigo acted in excess of
his powers as such attorney-in-fact. The Court of Appeals, therefore, committed an error in not
declaring said covenant of lease ultra vires and null and void.
The Court of Appeals, after analyzing the extent and scope of the powers granted to Marcelino Amigo
in the power of Attorney executed in his favor by his principals, found that such powers are broad
enough to justify the execution of any contract concerning the lands covered by the authority even if
this be a contract of lease. The court even went further: even in the supposition that the power to take
the land under lease is not included within the authority granted, petitioners cannot now impugn the
validity of the lease covenant because such right devolves upon the principals, who are the only one
who can claim that their agent has exceeded the authority granted to him, and because said principals
had tacitly ratified the act done by said agent.
We find no plausible reason to disturb this findings of the Court of Appeals. The same, in our opinion,
is in consonance with the evidence presented and with the conclusions that should be drawn from said
evidence. This can be shown from a mere examination of the power of attorney (Exhibit D.) A cursory
reading thereof would at once reveal that the power granted to the agent is so broad that it practically
covers the celebration of any contract and the conclusion of any covenant or stipulation. Thus, among
the powers granted are: to bargain,contract, agree for, purchase, receive, and keep lands, tenements,
hereditaments, and accept the seizing and possessing of all lands," or "to lease, let, bargain, transfer,
convey and sell, remise, release, mortgage and hypothecate . . . upon such terms and conditions, and
under such covenants as he shall think fit." (Emphasis supplied). When the power of attorney says
that the agent can enter into any contract concerning the land, or can sell the land under any term or
condition and covenant he may think fit, it undoubtedly means that he can act in the same manner
and with the same breath and latitude as the principal could concerning the property. The fact that the
agent has acted in accordance with the wish of his principals can be inferred from their attitude in
donating to the herein petitioners the right to redeem the land under the terms and conditions
appearing in the deed of sale executed by their agent.

On the other hand, we find nothing unusual in the lease covenant embodied in the deed of sale for
such is common in contracts involving sales of land with pacto de retro. The lease that a vendor
executes on the property may be considered as a means of delivery or tradition by constitutum
possessorium. Where the vendor a retrocontinues to occupy the land as lessee, by fiction of law, the
possession is deemed to be constituted in the vendee by virtue of this mode of tradition (10 Manresa,
4th ed. p.124). We may say therefore that this covenant regarding the lease of the land sold is germane
to the contract of sale with pacto de retro.
While the lease covenant may be onerous or may work hardship on the vendor because of its clause
providing for the automatic termination of the period of redemption, however, the same is not contrary
to law, morals, or public order, which may serve as basis for its nullification. Rather than obnoxious
are oppressive , it is a clause common in a sale with pacto de retro, and as such it received the
sanction of our courts. As an instance, we may cite the case of Vitug Dimatulac vs. Coronel, 40 Phil.,
686, which, because of its direct bearing on our case, we will presently discuss.
In that case, Dimatulac sold a piece of land to Dolores Coronel for the sum of P9,000, reserving the
privilege to repurchase within the period of 5 years. The contract contained a provision "commonly
found in contracts of this character" converting the vendor into a lessee of the vendee at an agreed
rental, payable annually in the months of January and February, and permitting the vendor to retain
possession of the property as lessee until the time allowed for its repurchase. It was also stipulated
that in the event the vendor should fail to pay the agreed rental for any year of the five, the right to
repurchase would be lost and the ownership consolidated in the vendee. The vendor fails to perform
this obligation and continued in arrears in the payment of rent for at least three years, and taking
advantage of the clause by which the consolidation of the property was accelerated, the vendee
impleaded the vendor in a civil action to compel him to surrender the property. This case, however,
was settled by a compromise by virtue of which the vendor agreed to place the property at the disposal
of the vendee so that the latter may apply to products of the land to the payment of the rent. Later, the
vendor offered to redeem the property under the contract of sale with pacto de retro, the period of
redemption not having as yet expired. The vendee refused the offer on the ground that her title to the
property had already been consolidated. This Court declared the lease covenant contained in the
contract as lawful, although it found that the act of the vendee in taking possession of the land by way
of compromise constituted a waiver of the penal provision relative to the acceleration of the period of
redemption. On this point, the Court said:
It is undeniable that the clause in the contract of sale with pacto de retro of June 30, 1911,
providing for extinction of the right of the plaintiff to repurchase in case he should default in the
payment of the rent for any year was lawful. The parties to a contract of this character may
legitimately fix any period to please, not in excess of ten years, for the redemption of the
property by the vendor; and no sufficient reason occurs to us why the determination of the right
of redemption may not be made to depend upon the delinquency of the vendor now become
lessee-in the payment of the stipulated rent. The Supreme Court of Spain sustains the
affirmative of this proposition (decision of January 18,1900); and although such a provision,
being of a penal nature, may involve hardships to the lessee, the consequence are not worse
than such as follow from many other forms of agreement to which contracting parties may
lawfully attach their signatures. Nevertheless, admitting the validity of such a provision, it is
not be expected that any court will be reluctant to relieve from its effects wherever this can be
done consistently with established principles of law.
We have not failed to take notice of the Court's warning that "admitting the validity of such a provision,
it is not to be expected that any court will be reluctant to relieve from its effects wherever this can be
done consistently with established principles of law." We only wish that in this case, as in the Dimatulac
case, a way may be found consistent with law whereby we would relieve the petitioners from the effects
of the penal clause under consideration, but, to our regret, none we have found, for respondent has

been alert and quick enough to assert his right by consolidating his ownership when the first chance
to do so has presented itself. He has shown no vacillation, nor offered any compromise which may
deem as a waiver or a justification for forfeiting the privilege given him under the penal clause. The
only alternative left is to enforce it as stipulated in the agreement.
Petitioners also contend that as the assessed value of the land in 1938, when the contract was
celebrated, was P4,280, the selling price of P3,000 agreed upon is considered as not written, and
petitioners should be allowed to exercise the right to repurchase on equitable considerations. And in
support of this contention, counsel presented evidence to show that the market price of the land in
1940, the year the period of redemption was supposed to expire was fourteen times more than the
money paid for it by respondent such that, if that should be taken as basis, the value of the land would
be P43,004.50.
While this contention may have some basis when considered with reference to an absolute contract
of sale, it loses weight when applied to a contract of sale with pacto de retro, where the price is usually
less than in absolute sale for the reason that in a sale with pacto de retro, the vendor expects to reacquire or redeem the property sold. Another flaw we find is that all the evidence presented refers to
sales which were executed in 1940 and 1941 and none was presented pertaining to 1938, or its
neighborhood, when the contract in question was entered into. And the main reason we find for not
entertaining this claim is that it involves a question of fact and as the Court of Appeals has found that
the price paid for the land is not unreasonable as to justify the nullification of the sale, such finding, in
appeal by certiorari, is final and conclusive upon this Court.
Finding no error in the decision appealed from, the same is hereby affirmed, without pronouncement
as to costs.
Pablo, Bengzon, Padilla, Montemayor, Reyes, A., Jugo and Concepcion, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-24543

July 12, 1926

ROSA VILLA MONNA, plaintiff-appellee,

vs.
GUILLERMO GARCIA BOSQUE, ET AL., defendants.
GUILLERMO GARCIA BOSQUE, F. H. GOULETTE, and R. G. FRANCE, appellants.
Eiguren and Razon for the appellant Garcia Bosque.
Benj. S. Ohnick for the appellants France and Goulette.
Fisher, DeWitt, Perkins and Brady and John R. McFie, jr., for appellee.
STREET, J.:
This action was instituted in the Court of First Instance of Manila by Rosa Villa y Monna, widow of
Enrique Bota, for the purpose of recovering from the defendants, Guillermo Garcia Bosque and Jose
Romar Ruiz, as principals, and from the defendants R. G. France and F. H. Goulette, as solidary
sureties for said principals, the sum of P20,509.71, with interest, as a balance alleged to be due to the
plaintiff upon the purchase price of a printing establishment and bookstore located at 89 Escolta,
Manila, which had been sold to Bosque and Ruiz by the plaintiff, acting through her attorney in fact,
one Manuel Pirretas y Monros. The defendant Ruiz put in no appearance, and after publication
judgment by default was entered against him. The other defendants answered with a general denial
and various special defenses. Upon hearing the cause the trial judge gave judgment in favor of the
plaintiff, requiring all of the defendants, jointly and severally, to pay to the plaintiff the sum of
P19,230.01, as capital, with stipulated interest at the rate of 7 per centum per annum, plus the further
sum of P1,279.70 as interest already accrued and unpaid upon the date of the institution of the action,
with interest upon the latter amount at the rate of 6 per centum per annum. From this judgment
Guillermo Garcia Bosque, as principal, and R. G. France and F.H. Goulette, as sureties. appealed.
It appears that prior to September 17, 1919, the plaintiff, Rosa Villa y Monna, viuda de E. Bota, was
the owner of a printing establishment and bookstore located at 89 Escolta, Manila, and known as La
Flor de Cataluna, Viuda de E. Bota, with the machinery, motors, bindery, type material furniture, and
stock appurtenant thereto. Upon the date stated, the plaintiff, then and now a resident of Barcelona,
Spain, acting through Manuel Pirretas, as attorney in fact, sold the establishment above-mentioned to
the defendants Guillermo Garcia Bosque and Jose Pomar Ruiz, residents of the City of Manila, for the
stipulated sum of P55,000, payable as follows: Fifteen thousand pesos (P15,000) on November 1,
next ensuing upon the execution of the contract, being the date when the purchasers were to take
possession; ten thousand pesos (P10,000) at one year from the same date; fifteen thousand pesos
(P15,000) at two years; and the remaining fifteen thousand pesos (P15,000) at the end of three years.
By the contract of sale the deferred installments bear interest at the rate of 7 per centum per annum.
In the same document the defendants France and Goulette obligated themselves as solidary sureties
with the principals Bosque and Ruiz, to answer for any balance, including interest, which should remain
due and unpaid after the dates stipulated for payment of said installments, expressly renouncing the
benefit of exhaustion of the property of the principals. The first installment of P15,000 was paid
conformably to agreement.

In the year 1920, Manuel Pirretas y Monros, the attorney in fact of the plaintiff, absented himself from
the Philippine Islands on a prolonged visit to Spain; and in contemplation of his departure he executed
a document, dated January 22, 1920, purporting to be a partial substitution of agency, whereby he
transferred to "the mercantile entity Figueras Hermanos, or the person, or persons, having legal
representation of the same," the powers that had been previously conferred on Pirretas by the plaintiff
"in order that," so the document runs, "they may be able to effect the collection of such sums of money
as may be due to the plaintiff by reason of the sale of the bookstore and printing establishment already
mentioned, issuing for such purpose the receipts, vouchers, letters of payment, and other necessary
documents for whatever they shall have received and collected of the character indicated."
When the time came for the payment of the second installment and accrued interest due at the time,
the purchasers were unable to comply with their obligation, and after certain negotiations between
said purchasers and one Alfredo Rocha, representative of Figueras Hermanos, acting as attorney in
fact for the plaintiff, an agreement was reached, whereby Figueras Hermanos accepted the payment
of P5,800 on November 10, 1920, and received for the balance five promissory notes payable,
respectively, on December 1, 1920, January 1, 1921, February 1, 1921, March 1, 1921, and April 1,
1921. The first three of these notes were in the amount of P1,000 each, and the last two for P2,000
each, making a total of P7,000. It was furthermore agreed that the debtors should pay 9 per centum
per annum on said deferred installments, instead of the 7 per centum mentioned in the contract of
sale. These notes were not paid promptly at maturity but the balance due upon them was finally paid
in full by Bosque on December 24, 1921.
About this time the owners of the business La Flor de Catalua, appear to have converted it into a
limited partnership under the style of Guillermo Garcia Bosque, S. en C.;" and presently a corporation
was formed to take over the business under the name "Bota Printing Company, Inc." By a document
executed on April 21, 1922, the partnership appears to have conveyed all its assets to this corporation
for the purported consideration of P15,000, Meanwhile the seven notes representing the unpaid
balance of the second installment and interest were failing due without being paid. Induced by this
dilatoriness on the part the debtor and supposedly animated by a desire to get the matter into better
shape, M. T. Figueras entered into the agreement attached as Exhibit 1 to the answer of Bosque. In
this document it is recited that Guillermo Garcia Bosque. S. en C., is indebted to Rosa Villa, viuda de
E. Bota, in the amount of P32,000 for which R. G. France and F. H. Goulette are bound as joint and
several sureties, and that the partnership mentioned had transferred all its assets to the Bota Printing
Company, Inc., of which one George Andrews was a principal stockholder. It is then stipulated that
France and Goulette shall be relieved from all liability on their contract as sureties and that in lieu
thereof the creditor, Doa Rosa Villa y Monna, accepts the Bota Printing Company, Inc., as debtor to
the extent of P20,000, which indebtedness was expressly assumed by it, and George Andrews as
debtor to the extent of P12,000, which he undertook to pay at the rate of P200 per month thereafter.
To this contract the name of the partnership Guillermo Garcia Bosque, S. en C., was affixed by
Guillermo Garcia Bosque while the name of the Bota Printing Company, Inc., was signed by G.
Andrews, the latter also signing in his individual capacity. The name of the plaintiff was affixed by M.T.
Figueras in the following style: "p.p. Rosa Villa, viuda de E. Bota, M. T. Figueras, party of the second
part."
No question is made as to the authenticity of this document or as to the intention of Figueras to release
the sureties; and the latter rely upon the discharge as complete defense to the action. The defendant
Bosque also relies upon the same agreement as constituting a novation such as to relieve him from
personal liability. All of the defendants furthermore maintain that even supposing that M. T. Figueras
authority to novate the original contract and discharge the sureties therefrom, nevertheless the plaintiff
has ratified the agreement by accepting part payment of the amount due thereunder with full
knowledge of its terms. In her amended complaint the plaintiff asserts that Figueras had no authority
to execute the contract containing the release (Exhibit 1) and that the same had never been ratified
by her.

The question thus raised as to whether the plaintiff is bound by Exhibit 1 constitutes the main
controversy in the case, since if this point should be determined in the affirmative the plaintiff obviously
has no right of action against any of the defendants. We accordingly address ourselves to this point
first.
The partial substitution of agency (Exhibit B to amended complaint) purports to confer on Figueras
Hermanos or the person or persons exercising legal representation of the same all of the powers that
had been conferred on Pirretas by the plaintiff in the original power of attorney. This original power of
attorney is not before us, but assuming, as is stated in Exhibit B, that this document contained a
general power to Pirretas to sell the business known as La Flor de Catalua upon conditions to be
fixed by him and power to collect money due to the plaintiff upon any account, with a further power of
substitution, yet it is obvious upon the face of the act of substitution (Exhibit B) that the sole purpose
was to authorize Figueras Hermanos to collect the balance due to the plaintiff upon the price of La
Flor de Catalua, the sale of which had already been affected by Pirretas. The words of Exhibit B on
this point are quite explicit ("to the end that the said lady may be able to collect the balance of the
selling price of the Printing Establishment and Bookstore above-mentioned, which has been sold to
Messrs. Bosque and Pomar"). There is nothing here that can be construed to authorize Figueras
Hermanos to discharge any of the debtors without payment or to novate the contract by which their
obligation was created. On the contrary the terms of the substitution shows the limited extent of the
power. A further noteworthy feature of the contract Exhibit 1 has reference to the personality of the
purported attorney in fact and the manner in which the contract was signed. Under the Exhibit B the
substituted authority should be exercised by the mercantile entity Figueras Hermanos or the person
duly authorized to represent the same. In the actual execution of Exhibit 1, M. T. Figueras intervenes
as purpoted attorney in fact without anything whatever to show that he is in fact the legal representative
of Figueras Hermanos or that he is there acting in such capacity. The act of substitution conferred no
authority whatever on M. T. Figueras as an individual. In view of these defects in the granting and
exercise of the substituted power, we agree with the trial judge that the Exhibit 1 is not binding on the
plaintiff. Figueras had no authority to execute the contract of release and novation in the manner
attempted; and apart from this it is shown that in releasing the sureties Figueras acted contrary to
instructions. For instance, in a letter from Figueras in Manila, dated March 4, 1922, to Pirretas, then in
Barcelona, the former stated that he was attempting to settle the affair to the best advantage and
expected to put through an arrangement whereby Doa Rosa would receive P20,000 in cash, the
balance to be paid in installments, "with the guaranty of France and Goulette." In his reply of April 29
to this letter, Pirretas expresses the conformity of Doa Rosa in any adjustment of the claim that
Figueras should see fit to make, based upon payment of P20,000 in cash, the balance in installments,
payable in the shortest practicable periods, it being understood, however, that the guaranty of Messrs.
France and Goulette should remain intact. Again, on May 9, Pirretas repeats his assurance that the
plaintiff would be willing to accept P20,000 down with the balance in interest-bearing installments "with
the guaranty of France and Goulette." From this it is obvious that Figueras had no actual authority
whatever to release the sureties or to make a novation of the contract without their additional guaranty.
But it is asserted that the plaintiff ratified the contract (Exhibit 1) by accepting and retaining the sum of
P14,000 which, it is asserted, was paid by the Bota Printing Co., Inc., under that contract. In this
connection it should be noted that when the firm of Guillermo Garcia Bosque, S. en C., conveyed all
it assets on April 21, 1922 to the newly formed corporation, Bota Printing Co., Inc., the latter obligated
itself to pay al the debts of the partnership, including the sum of P32,000 due to the plaintiff. On April
23, thereafter, Bosque, acting for the Bota Printing Co., Inc., paid to Figueras the sum of P8,000 upon
the third installment due to the plaintiff under the original contract of sale, and the same was credited
by Figueras accordingly. On May 16 a further sum of P5,000 was similarly paid and credited; and on
May 25, a further sum of P200 was likewise paid, making P14,000 in all. Now, it will be remembered
that in the contract (Exhibit 1), executed on May 17, 1922, the Bota Printing Co., Inc., undertook to
pay the sum of P20,00; and the parties to the agreement considered that the sum of P13,800 then
already paid by the Bota Printing Co., Inc., should be treated as a partial satisfaction of the larger sum

of P20,000 which the Bota Printing Co., Inc., had obligated itself to pay. In the light of these facts the
proposition of the defendants to the effect that the plaintiff has ratified Exhibit 1 by retaining the sum
of P14,000, paid by the Bota Printing Co., Inc., as above stated, is untenable. By the assumption of
the debts of its predecessor the Bota Printing Co., Inc., had become a primary debtor to the plaintiff;
and she therefore had a right to accept the payments made by the latter and to apply the same to the
satisfaction of the third installment of the original indebtedness. Nearly all of this money was so paid
prior to the execution of Exhibit 1 and although the sum of P200 was paid a few days later, we are of
the opinion that the plaintiff was entitled to accept and retain the whole, applying it in the manner above
stated. In other words the plaintiff may lawfully retain that money notwithstanding her refusal to be
bound by Exhibit 1.
A contention submitted exclusively in behalf of France and Goulette, the appellant sureties, is that they
were discharged by the agreement between the principal debtor and Figueras Hermanos, as attorney
in fact for the plaintiff, whereby the period for the payment of the second installment was extended,
without the assent of the sureties, and new promissory notes for unpaid balance were executed in the
manner already mentioned in this opinion. The execution of these new promissory notes undoubtedly
constituted and extension of time as to the obligation included therein, such as would release a surety,
even though of the solidary type, under article 1851 of the Civil Code. Nevertheless it is to be borne in
mind that said extension and novation related only to the second installment of the original obligation
and interest accrued up to that time. Furthermore, the total amount of these notes was afterwards paid
in full, and they are not now the subject of controversy. It results that the extension thus effected could
not discharge the sureties from their liability as to other installments upon which alone they have been
sued in this action. The rule that an extension of time granted to the debtor by the creditor, without the
consent of the sureties, extinguishes the latter's liability is common both to Spanish jurisprudence and
the common law; and it is well settled in English and American jurisprudence that where a surety is
liable for different payments, such as installments of rent, or upon a series of promissory notes, an
extension of time as to one or more will not affect the liability of the surety for the others. (32 Cyc.,
196; Hopkirk vs. McConico, 1 Brock., 220; 12 Fed. Cas., No. 6696; Coe vs. Cassidy, 72 N. Y., 133;
Cohn vs. Spitzer, 129 N. Y. Supp., 104; Shephard Land Co. vs. Banigan, 36 R. I., 1; I. J. Cooper
Rubber Co. vs. Johnson, 133 Tenn., 562; Bleeker vs. Johnson, 190, N. W. 1010.) The contention of
the sureties on this point is therefore untenable.
There is one stipulation in the contract (Exhibit A) which, at first suggests a doubt as to propriety of
applying the doctrine above stated to the case before us. We refer to cause (f) which declares that the
non-fulfillment on the part of the debtors of the stipulation with respect to the payment of any
installment of the indebtedness, with interest, will give to the creditor the right to treat and declare all
of said installments as immediately due. If the stipulation had been to the effect that the failure to pay
any installment when due would ipso facto cause to other installments to fall due at once, it might be
plausibly contended that after default of the payment of one installment the act of the creditor in
extending the time as to such installment would interfere with the right of the surety to exercise his
legal rights against the debtor, and that the surety would in such case be discharged by the extension
of time, in conformity with articles 1851 and 1852 of the Civil Code. But it will be noted that in the
contract now under consideration the stipulation is not that the maturity of the later installments shall
be ipso facto accelerated by default in the payment of a prior installment, but only that it shall give the
creditor a right to treat the subsequent installments as due, and in this case it does not appear that the
creditor has exercised this election. On the contrary, this action was not instituted until after all of the
installments had fallen due in conformity with the original contract. It results that the stipulation
contained in paragraph (f) does not affect the application of the doctrine above enunciated to the case
before us.
Finally, it is contended by the appellant sureties that they were discharged by a fraud practiced upon
them by the plaintiff in failing to require the debtor to execute a mortgage upon the printing
establishment to secure the debt which is the subject of this suit. In this connection t is insisted that at

the time France and Goulette entered into the contract of suretyship, it was represented to them that
they would be protected by the execution of a mortgage upon the printing establishment by the
purchasers Bosque and Pomar. No such mortgage was in fact executed and in the end another
creditor appears to have obtained a mortgage upon the plant which is admitted to be superior to the
claim of the plaintiff. The failure of the creditor to require a mortgage is alleged to operate as a
discharge of the sureties. With this insistence we are unable to agree, for the reason that the proof
does not show, in our opinion, that the creditor, on her attorney in fact, was a party to any such
agreement. On the other hand it is to be collected from the evidence that the suggestion that a
mortgage would be executed on the plant to secure the purchase price and that this mortgage would
operate for the protection of the sureties came from the principal and not from any representative of
the plaintiff.
As a result of our examination of the case we find no error in the record prejudicial to any of the
appellants, and the judgment appealed from will be affirmed, So ordered, with costs against the
appellants.
Avancea, C. J., Villamor, Ostrand, Johns, Romualdez and Villa-Real, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-30181

July 12, 1929

THE DIRECTOR OF PUBLIC WORKS, plaintiff-appellee,

vs.
SING JUCO, ET AL., defendants.
SING JUCO, SING BENGCO and PHILIPPINE NATIONAL BANK, appellants.
Roman J. Lacson for appellant National Bank.
Soriano and Nepomuceno for appellants Sing Juco and Sing Bengco.
Attorney-General Jaranilla for appellee.
STREET, J.:
From Torrens certificate of title No. 1359 relating to land in the municipality of Iloilo, it appears that on
September 28, 1920, the title of the property described therein was owned, in undivided shares, by
Mariano de la Rama, Gonzalo Mariano Tanboontien, Sing Juco and Sing Bengco. The interest vested
by said certificate in Mariano de la Rama was subsequently transferred to sale to Enrique Enchaus. It
further appears that on November 23, 1020, the owners of the property covered by the said certificate
conveyed it by way of a mortgage to the Philippine National Bank for the purpose of securing a credit
in current account in a mount not in excess of P170,000, with interest at a rate of 12 percent per
annum. The indebtedness covered by this mortgage has not been satisfied, and upon the date of the
decision of the court below it amounted to the sum of P170,000, plus interest at 12 percent per annum
from November 24, 1920.
The land above referred to contains an area of nearly 16 hectares, or to be exact, 158,589.44 square
meters according to the certificate. It is located on "Point Llorente" at the mouth of Iloilo river, near the
City of Iloilo, and it is of so low a level that, prior to the improvement to which reference is to be made,
it was subject to frequent flooding. In 1921, the Government of the Philippine Islands was planning
extensive harbor improvements in this vicinity, requiring extensive dredging by the Bureau of Public
Works in the mouth of said river. The conduct of these dredging operations made it necessary for the
Director of Public Works to find a place of deposit for the dirt and mud taken from the place, or places,
dredged. As the land already referred to was low and easily accessible to the spot where dredging
was to be conducted, it was obviously for the interest of the Government and the said owners of the
land that the material taken out by the dredges should be deposited on the said property. Accordingly,
after preliminary negotiations to this effect have been conducted, a contract was made between the
Director of Public Works, representing the Government of the Philippine Islands, and the four owners,
M. de la Rama, Sing Juco, G. M. Tanboontien, and Seng Bengco, of which, as modified by some
respects by subsequent agreement, the following features are noteworthy.
(1) The Bureau of Public Works agreed to deposit the material to be dredged by it from the Iloilo River,
in connection with the contempted improvement, upon the lot of the land, already described as covered
by certificate No. 1359, at a price to be determined at the actual cost of the filling, with certain
surcharges to be determined by the Director of Public Works. It was contemplated in the original draft
of the contract that the Bureau would be able to furnish some 250,000 cubic meters of dredged material
for filling in the land, was limited to the material which should be dredged from the river as a result of

the proposed improvement. To this stipulation the four owners of the property assented on March 14,
1921.
(2) With respect to the compensation it was agreed that the amount due should be determined by the
Director of Public Works, under certain conditions mentioned in the contract, of an amount of not less
that 20 nor more than 75 centavos per cubic meter. It was further agreed that, when the work should
be finished, the cost thereof should be paid by the owners in 5 annual installments and that for failure
to pay such installment the whole of the amount thereafter to accrue should become at once due. This
contract was noted in the Torrens certificate of title on January 8, 1924.
In connection with the making of the contract abovementioned, the, Director of Public Works required
a bond to be supplied by the owners in the penal amount of P150,000, approximately twice the
estimated cost of the filling, conditioned for the payment of the amount due from the owners. This bond
was executed contemporaneously with the main contract; and in connection therewith it should be
noted that one of the names appearing upon said contract was that of "Casa Viuda de Tan Toco,"
purporting to be signed by M. de la Rama.
The dredging operation were conducted by the Bureau of Public Works in substantial accomplice, we
find, with the terms of said agreement; and after the account with the owners were liquidated and the
amount due from them determined, demand was made upon them for the payment of the first
installment. No such payment was, however, made as a consequence this action was instituted by the
Director of Public Works on October 14, 1926, for the purpose of recovering the amount due to the
Government under the contract from the original owners of the property from the sureties whose
names were signed to the contract of suretyship, and to enforce the obligation as a real lien upon the
property. In said action the Philippine National Bank was made a party defendant, as having an interest
under its prior mortgage upon the property, while Enrique Enchaus was made defendant as successor
in interest of M. de la Rama, and Tan Ong Sze widow of Tan Toco, was also made defendant by
reason of her supposed liability derived from the act of De la Rama in signing the firm "Casa Viuda de
Tan Toco" as a surety on bond. It was noteworthy that in the complaint it was asked that, in the
enforcement of the government's lien, the property should be sold "subject to the first mortgage in
favor of the Philippine National Bank."
To this complaint different defenses were set up, as follows: On behalf of the owners of the property,
it was contended that the government has not complied with that contract, in that dredged material
deposited on the land had not been sufficient in quantity to raise the level of the land above high water,
and that, as a consequence, the land had not been much benefited. It is therefore asserted that the
owners of the property are not obligated to pay the filling operation. These defendants sought to
recover further damages by way of cross-complaint for the same supposed breach of contract on the
part of the Government. On the part of Viuda de Tan Toco the defense was interposed that the name
"Casa Viuda de Tan Toco" signed to the contract of suretyship by Mariano de la Rama was signed
without authority; while on the part of the Philippine National Bank was asserted that the mortgage
credit pertaining to the bank is superior to the Governments lien for improvement, and by way of
counterclaim the bank asked that its mortgage be foreclosed for the amount of its mortgage credit,
and that the four mortgagors, Sing Juco, Sing Bengco, M. de la Rama and G.M. Tanboontien, be
required to pay the amount due to the bank, and that in case of their failure to do so the mortgaged
property should be sold and the proceeds paid preferentially to the bank upon its mortgage.
Upon hearing the cause the trial court, ignoring that part of the original complaint wherein the
Government seeks to enforce its lien in subordination to its first mortgage, made pronouncements:

(1) Declaring Sing Juco, Sing Bengco, M. de la Rama and G. M. Tanboontien indebted to the
Government in the amount of P70, 938, with interest from the date of the filing of the complaint,
and requiring them to pay the said sum to the plaintiff;
(2) Declaring, in effect, that the lien of the Government for the filing improvement was superior
to the mortgage of the Philippine National Bank; and finally
(3) Declaring the defendant Tan Ong Sze, Viuda de Tan Toco, personally liable upon the
contract of suretyship, in case the four principal obligors should not satisfy their indebtedness
to the Government, or if the land should not sell enough to satisfy the same.
From this judgment various parties defendant appealed as follows: All of the defendants, except the
Philippine National Bank, appealed from so much of the decision as held that the defendant owners
and signatories to the contract of suretyship has not been released by non-performance of the contract
on the part of the Bureau of Public Works, and from the refusal of the court to give to the defendant
owners damages for breach of contract on the part of the Government. On the part of Tan Ong Sze,
Viuda de Tan Toco, error is assigned to the action of the court in holding said defendant liable upon
the contract of suretyship. Finally, the Philippine National Bank appealed from so much of the decision
as gave the lien of the Government for improvement priority over the mortgagee executed in favor of
the bank.
Dealing with these contentions in the order indicated, we find the contention of the appellants (except
the Philippine National Bank), to the effect that the Director of Public Works has failed to comply with
the obligations imposed upon the government by the contract, is wholly untenable. By said contract,
the Government was not obligated to raise the land on which the dredged material was deposited to
any specified level. The Government only obligated itself upon said land the material should be
dredged from the mouth of the Iloilo River in the course of the improvement undertaken by the
Government in and near that place. Under the original contract as originally drafted, the Government
agreed to furnish 250,000 cubic meters, more or less, of dredged material; but on Mar. 14, 1921, the
owners of the property indicated their acceptance of a modification of the contract effected by the
Director of Public Works and the Secretary of Commerce and Communications, in which it was made
clear that the material to be supplied would be such only as should be dredged from the river as a
result of the proposed improvement. In the endorsement of the Director of Public Works, thus accepted
by the owners, it was made clear that the Bureau of Public Works did not undertake to furnish material
to complete the filling of the land to any specified level. Proof submitted on the part of the owners
tends to show that parts of the filled land are still subject to inundation in rainy weather; and it is
contended, that the owners have, for this reason, been able to sell in lots the property to individual
occupants. the sum of P15,000, which is claimed upon this account, as damages by the owners, is
the amount of interest alleged to have been accrued upon their investment, owing to their inability to
place the land advantageously upon the market. The claim is, as already suggested, untenable. There
has been no breach on the part of the Government in fulfilling the contract. In fact it appears that the
Government deposited in the period covered by the contract 236,460 cubic meters, and after the
amount thus deposited had been reduced by 21,840 cubic meters, owing to the natural process of
drying, the Bureau of Public Works further deposited 53,000 cubic meters on the same land. In this
connection, the district engineer testified that the filling which has been charged to the owners at
P70,938 actually cost the Government the amount of P88,297.85. The charge made for the work was
evidently computed on a very moderate basis; and the owners of the property have no just ground of
complaint whatever.
The contention of Tan Ong Sze, widow of Tan Toco, to the effect that she was not, and is not, bound
by the contract of suretyship, is our pinion, well-founded. It will be remembered that said contract
purports to have been signed by Mariano de la Rama, acting for this defendant under the power of

attorney. But the Government has exhibited no power of attorney which would authorize the creation,
by the attorney-in-fact, of an obligation in the nature of suretyship binding upon this principal.
It is true that the Government introduced in evidence 2 documents exhibiting powers of attorney,
conferred by these documents (Exhibit K, identical with Exhibit 5) Mariano de la Rama was given the
power which reads as follows:
. . . and also for me and in my name to sign, seal and execute, and as my act and deed deliver,
any lease or any other deed for the conveying any real or personal property or the other matter
or thing wherein I am or may be personally interested or concerned. And I do hereby further
authorize and empower my said attorney to substitute and point any other attorney or attorneys
under him for the purposes aforesaid, and the same again and pleasure to revoke; and
generally for me and in my name to do, perform, and execute all and any other lawful and
reasonable acts and things whatsoever as fully and effectually as I, the said Tan Ong Sze
might or could do if personally present.
In another document, (Exhibits L and M), executed in favor of the same Mariano de la Rama by his
uncle Tan Lien Co, attorney-in-fact of Tan Ong Sze, with power of substitution, there appears the
following:
. . . and also for her and for her name to sign, seal and execute, and as her act and deed
deliver, any lease, release, bargain, sale, assignment, conveyance or assurance, any other
deed for the conveying any real or personal property or other matter or thing wherein she or
may be personally interested or concerned.
Neither of these powers officially confers upon Mariano de la Rama the power to bind a principal by a
contract of suretyship. The clauses noted relate more specifically to the execution of contracts relating
to property; and the more general words at the close of the quoted clauses should be interpreted,
under the general rule ejusdem generis, as referring to the contracts of like character. Power to
execute a contract so exceptional a nature as a contract of suretyship or guaranty cannot be inferred
from the general words contained in these powers.
In article 1827 of the Civil Code it is declared that guaranty shall not be presumed; it must be expressed
and cannot be extended beyond its specified limits. By analogy a power of attorney to execute a
contract of guaranty should not be inferred from vague or general words, especially when such words
have their origin and explanation in particular powers of a wholly different nature. It results that the
trial court was in error in giving personal judgment against Tan Ong Sze upon the bond upon which
she was sued in this case.
We now proceed to consider the last important disputed question involved in this case, which is,
whether the indebtedness owing to the Government under the contract for filling the parcel of land
already mentioned is entitled to preference over the mortgage credit due to the Philippine National
Bank, as the trial judge held, or whether on the contrary, the latter claim is entitled to priority over the
claim of the Government Upon entering into the discussion of the feature of the case it is well to recall
the fact that the bank's mortgage was registered in the office of the Register of Deeds of the province
of Iloilo on November 26, 1920, while the filing contract was registered on January 8, 1924, that is to
say, there is a priority of more than three years, in point of time, in the inscription of the mortgage
credit under the filling contract was made an express lien upon the property which was the subject of
improvement.
In the brief submitted in behalf of the bank it appears to be assumed that the Government credit under
the filling contract is a true refectionary credit (credito refacionario) under subsection 2 of Article 1923

of the Civil Code. It may be observed, however, that in a precise and technical sense, this credit is not
exactly of the nature of the refectionary credit as known to the civil law. In the civil law the refectionary
credit is primarily an indebtedness incurred in the repair or reconstruction of something previously
made, such repair or reconstruction being made necessary by the deterioration or destruction as it
formerly existed. The conception does not ordinarily include an entirely new work, though Spanish
jurisprudence appears to have sanctioned this broader conception in certain cases as may be
gathered from the decision in the Enciclopedia Juridica Espanola (vol. 26, pp. 888-890) s.
v.Refaccionario. The question whether the credit we are considering falls precisely under the
conception of the refectionary credit in the civil law is in this case academic rather than practical, for
the reason that by the express terms of the filling contract the credit was constituted a lien upon the
improved property. But assuming, as might be tenable in the state of jurisprudence, that said credit is
a refectionary credit enjoying preference under subsection 3 or article 1923 of the Civil code , then the
mortgage credit must be given priority under subsection 2 of the article 1927 of the same code, for the
reason that the mortgage was registered first.
Possibly the simpler view of the situation is to consider the Government's right under the stipulation
expressly making the credit a lien upon the property, for it was certainly lawful for the parties to the
filling contract to declare the credit a lien upon the property to be improved to the extent hereinafter
define whether the credit precisely fulfills the conception of refectionary credit or not. In this aspect
we have before us a competition between the real lien created by the filling contract of the later
registration. The true solution to the problem is, in our opinion, not open to doubt; and again the result
is that priority must be conceded to the mortgage. The mortgage was created by the lawful owners at
a time when no other competing interest existed in the property. The lien of the mortgage therefore
attached to the fee, or unlimited interest of the owners in the property. On the other hand, the lien
created by the filling contract was created after the mortgage had been made and registered, and
therefore, after the owners of the property had parted with the interest created by the mortgage. The
Government's lien owes its origin to the contract, and derives its efficacy from the volition of the
contracting parties. But no party can by contract create a right in another intrinsically greater than that
which he himself possess. The owners, at the time this contract was made, were owners of the equity
of redemption only and not of the entire interest in the property, and the lien created by the contract
could only operate upon the equity of redemption.
In this connection, we observed that, as the new material was deposited from the Government dredges
upon the property in question, it became an integral part of the soil and an irremovable fixture; and the
deposit having been made under contract between the Government and the owners of the equity of
redemption, without the concurrence of the mortgage creditor in said contract the latter could not be
prejudiced thereby. The trial court, in declaring that the Government's lien should have preference
over the mortgage, seems to have proceeded upon the idea that, at the time the mortgage was
created, the new soil had yet been deposited under the filling contract and that as a consequence the
mortgage lien should not been considered as attaching to the value added by deposit of the additional
material. This proposition, however, overlooks the fact that the deposited material became an
irremovable fixture, by the act and intention of the parties to the filling contract, and the lien of the
mortgage undoubtedly attached to the increment thus spread over and affixed to the mortgaged land.
If the idea which prevailed in the trial court should be accepted as law upon this point, the result would
be that a mortgage creditor could, by the act of strangers, be entirely proved out of his property by
making of improvements to which he has not assented. This cannot be accepted as good law.
We may add that the case cannot, on this point, be resolved favorably to the contention of the Director
of Public Works, upon the authority of Unson vs. Urquijo, Zuluoaga and Escubi (50 Phil., 160), for the
reason that upon the deposit of the dredged material on the land such material lost its identity. In the
case cited the machinery in respect to which the vendor's preference was upheld by this court retained
its separate existence and remained perfectly capable of identification at all times.

From what it has been said it results that the appealed judgment must be affirmed, and the same is
hereby affirmed, in dismissing, in effect, the cross-complaint filed by some of the defendants against
the plaintiff, the Director of Public Works. Such judgment is further affirmed in its findings, which are
not dispute, with respect to the amount of the Government's claim under the filling contract and the
amount of mortgage credit of the bank, as it is also affirmed in respect to the joint and several judgment
entered in favor of the plaintiff against Sing Juco, Sing Bengco, Tanboontien and Mariano de la Rama
Tanbunco (alias Mariano de la Rama) for the amount due to the Government
Said judgment, however, must be reversed and the same is being reversed in so far as it holds that
Tan Ong Sze, Viuda de Tan Toco, is liable upon the contract of suretyship, and she is hereby absolved
from the complaint. The judgment must also be reversed in so far as it declares that the Government's
lien under the filling contract is entitled to priority over the bank's mortgage. On the contrary it is hereby
declared that the bank's credit is entitled to priority out of the proceeds of the foreclosure sale, the
residue, if any, to be applied to the Government's lien created by the filling contract and otherwise in
accordance with law. For further proceedings in conformity with this opinion, the cause is hereby
remanded to the cause of origin, without pronouncements as to costs. So ordered.
Johnson, Villamor, Johns, Romualdez, and Villa-Real, JJ., concur.
Malcolm and Ostrand, JJ., also voted as indicated in the dispositive part of their decision, but their
names are not signed to opinion owing to their absence of leave at the time of their promulgation.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-23181

March 16, 1925

THE BANK OF THE PHILIPPINE ISLANDS, plaintiff-appellee,

vs.
GABRIELA ANDREA DE COSTER Y ROXAS, ET AL., defendants.
LA ORDEN DE DOMINICOS or PP. PREDICADORES DE LA PROVINCIA DEL SANTISIMO
ROSARIO,defendants-appellees;
GABRIELA ANDREA DE COSTER Y ROXAS, defendant-appellant.
Antonio M. Opisso for appellant.
Araneta and Zaragoza for the bank as appellee.
Perfecto Gabriel for the Dominican Corporation as appellee.
STATEMENT
March 10, 1924, the plaintiff filed a complaint in which it was alleged that it was a domestic banking
corporation with its principal office and place of business in the City of Manila; that the defendant
Gabriela Andrea de Coster y Roxas was the wife of the defendant Jean M. Poizat, both of whom were
residents of the City of Manila; that the defendant J. M. Poizat and Co. was a duly registered
partnership with its principal office and place of business in the City of Manila; that the defendant La
Orden de Dominicos or PP. Predicadores de la Provincia del Santisimo Rosario was a religious
corporation duly organized and existing under the laws of the Philippine Islands with its principal office
and place of business in the City of Manila; that on December 29, 1921, for value, the defendant
Gabriela Andrea de Coster y Roxas, having the consent and permission of her husband, and he acting
as her agent, said defendants made to the plaintiff a certain promissory note for P292,000, payable
one year after date, with interest of 9 per cent per annum, payable monthly, in which, among other
things, it is provided that in the event of a suit or action, the defendants should pay the further sum of
P10,000, as attorney's fees; that the note in question was a joint and several note; that to secure the
payment thereof, the defendants Jean M. Poizat and J. M. Poizat and Co. executed a chattel mortgage
to the plaintiff on the steamers Roger Poizat and Gabrielle Poizat, with the machinery and materials
belonging to the Poizat Vegetable Oil Mills and certain merchandise; that at the same time and for the
same purpose, the defendant Gabriela Andrea de Coster y Roxas, having the consent and permission
of her husband, and he acting as her agent, they acknowledged and delivered to this plaintiff a
mortgage on certain real property lying and being situated in the City of Manila, which is specifically
described in the mortgage; that the real property was subject to a prior mortgage in favor of La Orden
de Dominicos or PP. Predicadores de la Provincia del Santisimo Rosario, hence it is made a party
defendant; that the note in question is long past due and owing. The plaintiff having brought action
against the defendants on the note in the Court of First Instance of the City of Manila, civil case No.
25218; that in such case the court rendered judgment against the defendants Gabriela Andrea de
Coster y Roxas, Jean M. Poizat and J. M. Poizat and Co. jointly and severally for P292,000, with
interest at the rate of 9 per cent per annum from the 31st of August, 1923, P10,000 as attorney's fees,
and P2,500 for and in account of insurance upon the steamer Gabrielle Poizat, with interest on that
amount from February 9, 1924, at the rate of 9 per cent per annum, and costs; that the said defendants
have not paid the judgment or any part thereof, and that the full amount of the debt secured by the
mortgaged on the property described in the complaint is now due and owing. Wherefore, plaintiff prays
for an order of the court to direct the sheriff of the City of Manila to take immediate possession of the

property described in the chattel mortgage and sell the same according to the Chattel Mortgage Law;
that the property described in the real mortgage or so much thereof as may be required to pay the
amount due the plaintiff be sold according to law; that out of such sales plaintiff shall be paid the
amount due and owing it; and that such defendants be adjudged to pay any remaining deficiency.
Copies of the chattel and real mortgage are attached to, and made a part of, the complaint and marked,
respectively, Exhibits A and B.
On April 24, 1924, the La Orden de Dominicos or PP. Predicadores de la Provincia del Santisimo
Rosario appeared in the suit and filed the following plea:
The defendant corporation, La Orden de Dominicos or PP. Predicadores de la Provincia del
Santisimo Rosario, for answer to the complaint, shows:
I. That the encumbrance above-mentioned, but not determined in paragraph V of the
complaint, consisting of a first mortgage in favor of the aforesaid religious corporation on the
property described in paragraph IV of the same complaint is P125,000 with interest of 10 per
cent per annum;
II. That the mortgagors Jean M. Poizat and Gabriela Andrea de Coster y Roxas, have not paid
the principal or the interest stipulated and agreed upon from the 16th of December, 1921 up
to the present date;
III. The interest due up to the 30th of April of the present year 1924 amounts to a total sum of
P27,925.34.
Wherefore, it is prayed that the credit above-mentioned be taken into account when the second
mortgage is foreclosed.
May 3, 1924, on motion of the plaintiff, for failure to appear or answer, the defendants Gabriela Andrea
de Coster y Roxas and Jean M. Poizat and J.M. Poizat & Co. were declared in default.
Without giving any notice of the defendants Jean M. Poizat, J.M. Poizat & Co. and Gabriela Andrea
de Coster y Roxas, and after the introduction of evidence on the part of the plaintiff and the defendant
Dominican Fathers, on June 24, 1924, the court rendered an opinion in substance and to the effect
that the plaintiff should have judgment as prayed for in its complaint, and that the Dominican Fathers
should have judgment for the amount of their claim, and that the property should be sold and the
proceeds applied to satisfy the respective judgments.
About August 26, although her attorney, the defendant Gabriela Andrea de Coster y Roxas filed a
motion in which she recites that she is the legitimate wife of the defendant Jean M. Poizat; that she
had been absent from the Philippine Islands and residing in the City of Paris from the year 1908 to
April 30, 1924, when she returned to Manila; that at that time of the filing of the complaint and the
issuance of the summons, she was absent from the Philippine Islands; that the summons was
delivered by the sheriff of the City of Manila to her husband, and that through his malicious negligence,
default was taken and judgment entered for the respective amounts; that she never had any
knowledge of the actual facts until the latter part of July, 1924, when, through the local newspapers,
she learned that a default judgment had been rendered against her on July 28, 1924; that when she
first knew of that fact, she was unable to obtain the rendition of accounts, because her husband had
left the Philippine Islands two days previous and gone to Hongkong; that she then went to Hongkong
and learned that her husband had left there under a false name and had gone to the port of Singapore
from whence he went to other places unknown to thus defendant; that she then returned to Manila,

and that in August, 1924, she came into possession of documents showing the illegally of the notes
and mortgage in question; that she has a good and legal defense to the action, which involves the
validity of the order of the Dominican Fathers in this, that their mortgage does not guarantee any loan
made to this defendant; that it is a security only given for a credit of a third person; that the mortgage
was executed without the marital consent of the wife; and that he did not have nay authority to make
her liable as surety on the debt of a third person; that as regards the notes to the plaintiff: First, it does
not represent any money paid to the defendant by the bank; second, that it is exclusively the personal
debt of the defendants Jean M. Poizat and J.M. Poizat & Co., third, that it was executed by her
husband, because the bank desired more security for the payment of her husband's debt to the bank;
fourth, that it was executed by her husband in excess of the powers given to him under his power of
attorney; fifth, that it was executed as the result of collusion between the bank and the defendant liable
for the obligation of a third person. That as to the mortgage: First, it was executed to secure a void
obligation; second, it does not guarantee any loan made to this defendant; third, it was executed to
secure a void litigation; second, it does not guarantee any loan made to third defendant; third, it was
executed without the express marital consent which the law requires; fourth, it was executed through
collusion. That if the judgment is not set aside, the defendant will suffer irreparable injury; that through
surprise and negligence, for which she was not responsible, this defendant was prevented from
defending herself in this action; that this is a case which comes under section 113 of the Code of Civil
Procedure. She prays that the judgment annulled and set aside and the case be reopened, and that
she be permitted to file an answer, and that the case be tried on its merits, and that a final judgment
be rendered, absolving her from all liability.
The motion was based upon, and supported by, the affidavit of the defendant wife, to which was
attached a large number of exhibits all of which tended to support the motion.
After counter showings by the bank and the Dominican Fathers and the arguments of respective
counsel, the motion to set aside and vacate the judgment was denied. A motion for a reconsideration
was then made, and the motion of the defendant to file an answer and make a defense was again
denied. The defendant Gabriela Andrea de Coster y Roxas appeals, assigning the following errors;
PART
AS TO THE JURISDICTION

I. The lower court erred in holding that it had acquired jurisdiction on the defendant Gabriela
Andrea de Coster y Roxas,
(1) There having been no service of the summons on her in the manner required by
section 396 of the Code of Civil Procedure, she being absent from the Philippine
Islands at the time of the filing of the complaint and of the issuance of the summons in
this case, and a resident of Paris, France, where she had lived permanently and
continuously for fifteen years prior thereof, and
(2) There having been no se rive by publication in the manner required by section 398
of the Code of Civil Procedure.
II. The lower court erred in considering that in a case where the wife is the only necessary
party, service of the summons on the husband, at a place which is not "the usual place of
residence" of the wife and where the wife has never lived or resided, is sufficient to give the
court jurisdiction on the person and property of the wife and to render judgment by default
against her.

III. The court erred in admitting and considering evidence, outside of the sheriff's return, of the
fact that the husband of the defendant Gabriela Andrea de Coster y Roxas was her attorney
in fact with power to appear for the defendant in court.
IV. The court erred in holding that the non-appearance of an agent of the defendant when
service of the summons has been made on him not as the agent of the defendant but in other
capacity, will entitle the plaintiff who has misstated the material jurisdictional facts of the
complaint to a judgment by default against the principal.
V. The lower court erred in refusing to vacate a judgment by default against the defendant
Gabriela Andrea de Coster y Roxas rendered on a defective summons, served in a manner
not provided for by the law, and in a case where the complaint shows that plaintiff has no right
of action.
PART
AS TO THE MERITS OF THE DEFENSE

II

I. The lower court erred, with abuse of discretion, in holding that the negligence, if any, of J.M.
Poizat in not appearing on behalf of the defendant Gabriela Andrea de Coster y Roxas, can
be imputed to this defendant, without redress, and to the advantage of the plaintiff bank who
in collusion with said J.M. Poizat caused the latter to contract beyond the scope of his powers
as agent of this defendant the obligation which is the subject matter of this case.
II. The lower court erred in holding that the relief on the part of J.M. Poizat that there was no
defense against the claim of the plaintiff on an obligation contracted by said J.M. Poizat
apparently as agent of the defendant Gabriela Andrea de Coster y Roxas, but in truth beyond
the scope of his authority, and with knowledge on the part of the plaintiff bank that he was so
acting beyond his powers, was such an error was can be imputed to this defendant, and
against which she can obtain no redress.
III. The lower court erred in not holding that a principal is not liable for an obligation contracted
by his agent beyond his power even when both the creditor and the agent believed that the
latter was acting within the scope of his powers.
IV. The lower court erred in holding that because the agent of the defendant Gabriela Andrea
de Coster y Roxas had power to appear for her in court, his non-appearance could render this
defendant liable to a judgment by default, when the record shows that there was no service of
the summons in accordance with any of the forms of service provided by law.
V. The lower court erred in holding that J.M. Poizat was summoned as agent of hi wife, the
defendant Gabriela Andrea de Coster y Roxas, and was, in that capacity, notified of all the
decisions rendered in this case, there being nothing in the record to support the truth of such
finding.
VI. The lower court erred in holding that in contracting the obligations in favor of the plaintiff
Bank of the Philippine Islands and of the defendant Orden de PP. Predicadores de la Provincia
del Santisimo Rosario, the agent of the defendant Gabriela Andrea de Coster y Roxas acted
within the scope of his powers.
VII. The lower court erred in not holding that the plaintiff Bank of the Philippine Islands and the
defendant Orden de PP. Predicadores de la Provincia del Santisimo Rosario had knowledge
of the fact that J.M. Poizat in contracting the respective obligations in their favor, pretending to

act as agent of the defendant Gabriela Andrea de Coster y Roxas, was acting beyond the
scope of his powers as such agent.
VIII. The lower court erred in making the following statement:
"It is however alleged, by the petitioner, that these loans were obtained to pay debts,
of strangers. Even so, this would not render the loan obtained by the attorney in fact
null and void. The circumstance that the agent used the money, borrowed by him within
the scope of his powers, to purposes for which he was not authorized by his principal,
may entitle the latter to demand from him the corresponding liability for the damages
suffered, but it cannot prejudice the creditor and cause the nullity of the loan. But, even
admitting that the money borrowed was used by Poizat to pay debts which did not
belong to his principal, even then, he would have acted within his powers, since his
principal, together with the power to borrow money, had given her agent power to loan
any amount of money, and the payment of the debts of a stranger would amount to a
loan made by the agent on behalf of his principal to the person or entity whose debt
was paid with the money obtained from the creditors."
IX. The lower court erred in applying to this case the principle involved in the case of
Palanca vs. Smith, Bell and Co., 9 Phil., 131.
X. The court erred in supplying from its own imagination facts which did not take place, of
which there is no evidence in the record, and which the parties never claimed to have existed,
and then draw the conclusion that if under those hypothetical facts the transaction between
J.M. Poizat and the Bank of the Philippine Islands might have been legal, then the transaction
as it actually took place was also legal.
XI. The lower court erred in holding that defendant has not alleged any of the grounds
enumerated in section 113 of the Code of Civil Procedure.
XII. The lower court erred in holding that this defendant-appellant has no meritorious defense
against the Dominican Order and the Bank of the Philippine Islands.
XIII. The lower court erred in taking into consideration Exhibit A appearing at pages 156-165
of the bill of exceptions.
XIV. The lower court erred in denying the motion filed by this defendant-appellant.
XV. The lower court has acted throughout these proceedings with a clear abuse of discretion.

JOHNS, J.:
We will decide the case of the bank first
The petition of the appellant states under oath:
II. That this defendant has been absent from the Philippine Islands and residing in the City of
Paris, France, since the year 1908 (1909), up to April 30, 1924, on which date she arrived in
this City of Manila, Philippine Islands.

III. That at the time when the complaint in this case was filed and the summons issued, she
was still absent from the Philippine Islands and had no knowledge either of the filing of this
action or of the facts which led to it.
Under oath the plaintiff, through its acting president, says:
I-II. That it admits the allegations contained in paragraphs I and II of the aforesaid motion.
III. That it admits the first part of this paragraph, to wit: That at the time that the complaint in
the above entitled case was filed, the defendant Gabriela Andrea de Coster y Roxas was
absent from the Philippine Islands.
Paragraph 6 of section 396 of the Code of Civil Procedure provides:
In all other cases, to the defendant personally, or by leaving a copy at his usual place of
residence, in the hands of some person resident therein of sufficient discretion to receive the
same. But service upon a corporation, as provided in subsections one and two, may be made
by leaving the copy at the office of the proper officer thereof if such officer cannot be found.
The return of the sheriff as to the service is as follows:
On this date I have served a copy of the within summons, and of the complaint
attached, upon Jean M. Poizat, personally, and the copies corresponding to J.M.
Poizat and Co., a company duly organized under the laws of the Philippine Islands, by
delivering said copies to its President Mr. Jean M. Poizat, personally, and the copies
corresponding to Gabriela Andrea de Coster y Roxas, by leaving the same in the place
of her usual residence in the City of Manila and in the hands of her husband, Mr. J.M.
Poizat, a person residing therein and of sufficient discretion to receive it, personally.
Done at Manila, P.I., this 13th day of March, 1924.
RICARDO
Sheriff
By GREGORIO GARCIA

of

SUMMERS
Manila

I hereby certify that on this date I have delivered a copy of this summons and of the
complaint corresponding to the "La Orden de Dominicos or PP. Predicadores de la
Provincia del Santisimo Rosario," through Father Pedro Pratt, Procurador General of
said Orden de Dominicos or PP. Predicadores de la Provincia del Santisimo Rosario,
personally.
Manila, P.I., April 1, 1924.
RICARDO
Sheriff
By SIMEON D. SERDEA

of

SUMMERS
Manila

It will be noted that the service of summons and complaint was made on this defendant on the 13th
day of March, 1924, and that it is a stipulated fact that since the year 1908 and up to April 30, 1924,
she was "residing in the City of Paris, France." Even so, it is contended that the service was valid by
reason of the fact that it was made at the usual place of residence and abode of the defendant

husband, and that legally the residence of the wife is that of the husband. That contention is in direct
conflict with the admission of the plaintiff that since the year 1908 and up to April 30, 1924, the wife
was residing in the City of Paris. The residence of the wife in the City of Paris covered a period of
sixteen years.
It may be that where in the ordinary course of business the wife is absent from the residence of
husband on a pleasure trip or for business reasons or to visit friends or relatives that, in the nature of
such things, the residence of the wife would continue and remain to be that of the husband. That is
not this case. For sixteen years the residence of the husband was in the City of Manila, and the
residence of the wife was in the City of Paris.
Upon the admitted facts, we are clearly of the opinion that the residence of the husband was not the
usual place of residence of the wife. Giving full force and effect to the legal presumption that the usual
place of residence of the wife is that of her husband, that presumption is overcome by the admitted
fact that the wife was "residing in the City of Paris, France, since the year 1908 up to April 30, 1924."
Without placing a limitation upon the length of time sufficient to overcome the legal presumption,
suffice it to say that sixteen years is amply sufficient.
It follows that the substituted service attempted to be made under the provisions of section 396 of the
Code of Civil Procedure is null and void, and that by such service the court never acquired jurisdiction
of the person of the defendant wife. In that event the plaintiff contends that under his power of attorney,
the husband was the general agent of the wife with authority to accept service of process for her and
in her name, and that by reason of the fact that the husband was duly served and that he failed or
neglected to appear or answer, his actions and conduct were binding on the defendant wife. Be that
as it may, there is nothing in the record tending to show that the husband accepted service of any
process for or on account of his wife or as her agent, or that he was acting for or representing her in
his failure and neglect to appear or answer.
The first appearance in court of the defendant wife was made when she filed the motion of August 26,
1924, in which she prays in legal effect that the judgment against her be annulled and set aside and
the case reopened, and that she be permitted to file an answer and to have the case tried on its merits.
That was a general appearance as distinguished from a special appearance. When she filed that
motion asking to be relieved from the legal force and effect of the judgment, she submitted herself to
the jurisdiction of the court. If, in the first instance, she had made a special appearance to question
only the jurisdiction of the court, and had not appeared for any other or different purpose, another and
a different question would have been presented. Having made a general appearance for one purpose,
she is now in court for all purposes.
It is an elementary rule of law that as a condition precedent, to entitle a party to relief from a judgment
"taken against him through his mistake, inadvertence, surprise or excusable neglect," that, among
other things, he must show to the court that he has a meritorious defense. Based upon that legal
principle the bank contends that no such a showing has been made by the defendant wife. That
involves the legal construction of the power of attorney which, it is admitted, the wife gave to her
husband on August 25, 1903, which, among other things material to this opinion, recites that she gave
to him:
Such full and ample power as required or necessary, to the end that he may perform on my
behalf, and in my name and availing himself of all my rights and actions, the following acts:
5. Loan or borrow any sums of money or fungible things at the rate of interest and for the time
and under the conditions which he might deem convenient, collecting or paying the capital or

the interest on their respective due dates; executing and signing the corresponding public or
private documents related thereto, and making all these transactions with or without
mortgages, pledges or personal guaranty.
6. Enter into any kind of contracts whether civil or mercantile, giving due form thereof either by
private documents or public deeds with all clauses and requisites provided by law for their
validity and effect, having due regard to the nature of each contract.
7. Draw, endorse, accept, issue and negotiate any drafts, bills of exchange, letters of credit,
letters of payment, bills, vales, promissory notes and all kinds of documents representative of
value; paying or collecting the value thereof on their respective due dates, or protesting them
for non-acceptance or non-payment, utilizing in this case the rights granted by the Code of
Commerce now in force, in order to collect the value thereof, interests, expenses and damages
against whomsoever should be liable therefor.
8. Institute before the competent courts the corresponding action in justification of the
possession which I have or might have over any real estate, filing the necessary pleadings,
evidencing them by means of documentary or oral testimony admissible by law; accepting
notices and summons, and instituting all necessary proceedings for the termination thereof
and the consequent inscription of said action in the corresponding office of the Register of
Deeds, in the same manner in which I might do if personally present and acting.
9. Represent me in all cases before the municipal courts, justice of the peace courts, courts of
first instance, supreme court and all other courts of regular or any other special jurisdiction,
appearing before them in any civil or criminal proceedings, instituting and filing criminal and
ordinary civil actions, claims in intestate and testamentary proceedings, insolvencies and other
actions provided by law; filing complaints, answers, counterclaims, cross complaints, criminal
complaints and such other pleadings as might be necessary; filing demurrers, taking and
offering judicial admissions, documentary, expert, oral evidence, and others provided by law,
objecting to and opposing whatever contrary actions are taken, offered and presented;
accepting notices, citations and summons and acknowledging their receipt to the proper
judicial officials.
10. For to the end stated above and the incidents related thereto, I confer on him ample and
complete power, binding myself in the most solemn manner as required by law to recognize
as existing and valid all that he might do by virtue hereof.
It is admitted that on December 29, 1921, the defendant husband signed the name of the defendant
wife to the promissory note in question, and that to secure the payment of the note, upon the same
date and as attorney in fact for his wife, the husband signed the real mortgage in question in favor of
the bank, and that the mortgage was duly executed.
Based upon such admissions, the bank vigorously contends that the defendant wife has not shown a
meritorious defense. In fact that it appears from her own showing that she does not have a legal
defense. It must be admitted that upon the face of the instruments, that fact appears to be true. To
meet that contention, the defendant wife points out, first, that the note in question is a joint and several
note, and, second, that it appears from the evidence, which she submitted, that she is nothing more
than an accommodation maker of the note. She also submits evidence which tends to show:
First. That prior to July 25, 1921, Jean M. Poizat was personally indebted to the Bank of the
Philippine Islands in the sum of P290,050.02 (Exhibit H, page 66, bill of exceptions);

Second. That on July 25, 1921, the personal indebtedness of Jean M. Poizat was converted
into six promissory notes aggregating the sum of P308,458.58 of which P16,180 were paid,
leaving an outstanding balance of P292,278.58 (Exhibits D, E, F, G, H and I, pages 75-80, bill
of exceptions);
Third. That on December 29, 1921, the above promissory notes were cancelled and
substituted by a joint and several note signed by Jean M. Poizat in his personal capacity and
as agent of Gabriela Andrea de Coster y Roxas and as member of the firm J.M. Poizat and
Co.
In other words, that under the power of attorney, the husband had no authority for and on behalf of the
wife to execute a joint and several note or to make her liable as an accommodation maker. That the
debt in question was a preexisting debt of her husband and of the firm of J.M. Poizat and Co., to which
she was not a party, and for which she was under no legal obligation to pay. That she never borrowed
any money from the bank, and that previous to the signing of the note, she never had any dealings
with the bank and was not indebted to the bank in any amount. That the old, original debts of her
husband and J.M. Poizat and Co. to the bank, to which she was not a party, were all taken up and
merged in the new note of December 29, 1921, in question, and that at the time the note was signed,
she did not borrow any money, and that no money was loaned by the bank to the makers of the note.
Assuming such facts to be true, it would be a valid defense by the defendant wife to the payment of
the note. There is no claim or pretense that the bank was misled or deceived. If it had made an actual
loan of P292,000 at the time the note was executed, another and a different question would be
presented. In the ordinary course of its business, the bank knew that not a dollar was loaned or
borrowed on the strength of the note. It was given at the urgent and pressing demand of the bank to
obtain security for the six different notes which it held against J.M. Poizat and Co. and Jean M. Poizat
of date July 25, 1921, aggregating about P292,000, and at the time it was given, those notes were
taken up and merged in the note of December 29, 1921, now in question. Upon the record before us,
there is no evidence that the defendant wife was a party to the notes of July 25, 1921, or that she was
under any legal liability to pay them.
The note and mortgage in question show upon their face that at the time they were executed, the
husband was attorney in fact for the defendant wife, and the bank knew or should have known the
nature and extent of his authority and the limitations upon his power.
You will search the terms and provisions of the power of attorney in vain to find any authority for the
husband to make his wife liable as a surety for the payment of the preexisting debt of a third person.
Paragraph 5 of the power of attorney above quoted authorizes the husband for in the name of his wife
to "loan or borrow any sums of money or fungible things, etc." This should be construed to mean that
the husband had power only to loan his wife's money and to borrow money for or on account of his
wife as her agent and attorney in fact. That does not carry with it or imply that he had the legal right to
make his wife liable as a surety for the preexisting debt of a third person.
Paragraph 6 authorizes him to "enter into any kind of contracts whether civil or mercantile, giving due
form thereof either by private documents or public deeds, etc."
Paragraph 7 authorizes him to "draw, endorse, accept, issue and negotiate any drafts, bills of
exchange, letters of credit, letters of payment, bills, vales, promissory notes, etc."
The foregoing are the clauses in the power of attorney upon which the bank relies for the authority of
the husband to execute promissory notes for and on behalf of his wife and as her agent.

It will be noted that there is no provision in either of them which authorizes or empowers him to sign
anything or to do anything which would make his wife liable as a surety for a preexisting debt.
It is fundamental rule of construction that where in an instrument powers and duties are specified and
defined, that all of such powers and duties are limited and confined to those which are specified and
defined, and that all other powers and duties are excluded.
Paragraph 8 of the power of attorney authorizes the husband to institute, prosecute and defend all
actions or proceedings in a court of justice, including "accepting notices and summons."
There is nothing in the record tending to show that the husband accepted the service of any notice or
summons in the action on behalf of the bank, and even so, if he had, it would not be a defense to open
up and vacate a judgment under section 113 of the Code of Civil Procedure. The same thing is true
as to paragraph 9 of the power of attorney.
The fact that an agent failed and neglected to perform his duties and to represent the interests of his
principal is not a bar to the principal obtaining legal relief for the negligence of her agent, provided that
the application for such a relief is duly and properly made under the provisions of section 113.
It is very apparent from the face of the instrument that the whole purpose and intent of the power of
attorney was to empower and authorize the husband to look after and protect the interests of the wife
and for her and in her name to transact any and all of her business. But nowhere does it provide or
authorize him to make her liable as a surety for the payment of the preexisting debt of a third person.
Hence, it follows that the husband was not authorized or empowered to sign the note in question for
and on behalf of the wife as her act and deed, and that as to her the note is void for want of power of
her husband to execute it.
The same thing is true as to the real mortgage to the bank. It was given to secure the note in question
and was not given for any other purpose. The real property described in the mortgage to the bank was
and is the property of the wife. The note being void as to her, it follows that as to her the real mortgage
to the bank is also void for want of power to execute it.
It appears that before the motion in question was filed, there were certain negotiations between the
bank and the attorney for the wife with a view of a compromise or settlement of the bank's claim against
her, and that during such negotiations, there was some evidence or admissions on the part of her
attorney that she was liable for the bank's claim. It now contends that as a result of such negotiations
and admissions, the wife is estopped to deny her liability. but it also appears that during such
negotiations, both the wife and her attorney did not have any knowledge of the actual facts, and that
she was then ignorant of the defense upon which she now relies. Be that as it may, such negotiations
were more or less in the nature of a compromise which was rejected by the bank, and it appears that
in any event both the wife and her attorney did not have any knowledge of the facts upon which they
now rely as a defense.
There is no claim or pretense that the debt in question was contracted for or on account of the "usual
daily expenses of the family, incurred by the wife or by her order, with the tacit consent of the husband,"
as provided for in article 1362 of the Civil Code. Neither is there any evidence tending to show that the
wife was legally liable for any portion of the original debt evidence by the note in question.
This decision as to the bank on this motion is based on the assumption that the facts are true as set
forth and alleged in the petition to set aside and vacate the judgment as to the wife, but we are not

making any finding as to the actual truth of such facts. That remains for the defendant wife to prove
such alleged facts when the case is tried on its merits.
It follows that the opinion of the lower court in refusing to set aside and vacate the judgment of the
plaintiff bank against the defendant wife is reversed, and that judgment is vacated and set aside, and
as to the bank the case is remanded to the lower court, with leave for the wife to file an answer to
plaintiff's cause of action, and to have the case tried on its merits and for any further proceedings not
inconsistent with this opinion.
As to the judgment in favor of the Dominican Fathers, it appears that their plea above quoted in the
statement of facts was filed on April 24, 1924. In that plea they say that they have a first mortgage on
the property described in paragraph IV of the complaint for P125,000 with interest at 10 per cent per
annum. That the mortgagors Jean M. Poizat and Gabriela Andrea de Coster y Roxas have not paid
the principal or the stipulated interest from December 16, 1921, to date, which up to the 30th day of
April, 1924, amounts to P27,925.34. Wherefore, it is prayed that the credit above-mentioned be taken
into account when the second mortgage is foreclosed.
No other plea of any kind, nature or description was filed by it. The record shows that a copy of this
alleged plea was served upon the attorneys for the plaintiff bank. There is nothing in the record which
shows or tends to show that a copy of it was ever served on either one of the defendants. Neither is
there any evidence that either of the defendants ever appeared in the original action. In fact, judgment
was rendered against them by default.
Under such a state of facts, the judgment in favor of the Dominican Fathers cannot be sustained. In
the first place, the plea above quoted filed on April 24, 1924, would not be sufficient to sustain a
judgment. It does not even ask for a judgment of the foreclosure of its mortgage. In the second place,
no copy of the plea was ever served upon either of the defendants, who were the real parties in
interest, and against whom a judgment was rendered for the full amount of the note and the foreclosure
of the mortgage. Such a proceeding cannot be sustained on any legal principle.
Unless waived, a defendant has a legal right to service of process, to his day in court and to be heard
in his defense.
From what has been said, it follows that, if the transaction between the Dominican Fathers and Jean
M. Poizat as attorney in fact for his wife was an original one and the P125,000 was actually loaned at
the time the note and mortgage were executed and the money was in good faith delivered to the
husband as the agent and attorney in fact of the wife, it would then be a valid exercise of the power
given to the husband, regardless of the question as to what he may have done with the money.
Paragraph 5 of the power of attorney specifically authorizes him to borrow money for and on account
of his wife and her name, "and making all these transactions with or without mortgages, pledges or
personal guaranty."
It follows that the judgment of the lower court in favor of La Orden de Dominicos or PP. Predicadores
de la Provincia del Santisimo Rosario is reversed, without prejudice to its right to either file an original
suit to foreclose its mortgage or to file a good and sufficient plea as intervenor in the instant suit, setting
forth the facts upon which it relies for a judgment on its note and the foreclosure of its mortgage, copies
of which should be served upon the defendants.
Neither party to recover costs. So ordered.

Ostrand and Romualdez, JJ., concur.

Johnson and Malcolm, JJ., concur in the result.

Separate Opinions
VILLAMOR, J., concurring and dissenting:
I concur in the result reached by the court in ordering the remanding of the case for further
proceedings, for in my opinion, the defendant-appellant, against whom a judgment by default was
rendered, has the right, under section 113 of the Code of Civil Procedure, to have said judgment set
aside and to be given an opportunity to appear, having alleged facts which, if proven, would
constitute a good defense, but I dissent from the opinion of the majority in so far as it attempts to
decide certain features of the case raised by the defendant-appellant, without waiting for the
outcome of the new trial wherein the other parties must naturally have the same opportunity to
present their defenses against the facts alleged by the appellant. In my opinion, the merits of the
question should not now be discussed without giving the trial court an opportunity to pass upon the
allegations and evidence of the parties litigant.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-439

November 11, 1901

GERMANN & CO., plaintiff-appellees,

vs.
DONALDSON, SIM & CO., defendants-appellants.
Fernando de la Cantera, for appellants.
Francisco Ortigas, for appellees.

LADD, J.:
This is an incident of want of personality of the plaintiff's attorney. The action is to recover a sum
claimed to be due for freight under a charter party. It was brought by virtue of a general power for suits,
executed in Manila October 27, 1900, by Fernando Kammerzell, and purporting to be a substitution in
favor of several attorneys of powers conferred upon Kammerzell in an instrument executed in Berlin,
Germany, February 5, 1900, by Max Leonard Tornow, the sole owner of the business carried on in
Berlin and Manila under the name of Gemann & Co. The first-named instrument was authenticated by
a notary with the formalities required by the domestic laws. The other was not so authenticated. Both
Tornow and Kammerzell are citizens of Germany. Tornow is a resident of Berlin and Kammerzell of
Manila.
The defendants claim that the original power is invalid under article 1280, No. 5, of the Civil Code,
which provides that powers for suits must be contained in a public instrument. No claim is made that
the document was not executed with the formalities required by the German law in the case of such
an instrument. We see no reason why the general principle that the formal validity of contracts is to be
tested by the laws of the country where they are executed should not apply. (Civil Code, art. 11.)
The defendants also claim that the original power can not be construed as conferring upon Kammerzell
authority to institute or defend suits, from which contention, if correct, it would of course follow that the
delegated power is invalid. In support of this contention reliance is placed upon article 1713 of the Civil
Code, by which it is provided that "an agency stated in general terms only includes acts of
administration," and that "in order to compromise, alienate, mortgage, or to execute any other act of
strict ownership an express commission is required."
It has been argued by counsel for the plaintiff that these provisions of the domestic law are not
applicable to the case of an agency conferred, as was that in question, by one foreigner upon another
in an instrument executed in the country of which both were citizens. We shall not pass upon this
question, since we are clearly of opinion that the instrument contains an explicit grant of a power broad
enough to authorize the bringing of the present action, even assuming the applicability of the domestic
law as claimed by the defendants.
lawphil .net

By this instrument Tornow constitutes Kammerzell his "true and lawful attorney with full power to enter
the firm name of Germann & Co. in the Commercial Registry of the city of Manila as a branch of the

house of Germann & Co. in Berlin, it being the purpose of this power to invest said attorney will full
legal powers and authorization to direct and administer in the city of Manila for us and in our name a
branch of our general commercial business of important and exportation, for which purpose he may
make contracts of lease and employ suitable assistants, as well as sign every kind of documents,
accounts, and obligations connected with the business which may be necessary, take charge in
general of the receipt and delivery of merchandise connected with the business, sign all receipts for
sums of money and collect them and exact their payment by legal means, and in general execute all
the acts and things necessary for the perfect carrying on of the business committed to his charge in
the same manner as we could do ourselves if we were present in the same place."
We should not be inclined to regard in institution of a suit like the present, which appears to be brought
to collect a claim accruing in the ordinary course of the plaintiff's business, as properly belonging to
the class of acts described in article 1713 of the Civil Code as acts "of strict ownership." It seems
rather to be something which is necessarily a part of the mere administration of such a business as
that described in the instrument in question and only incidentally, if at all, involving a power to dispose
of the title to property.
But whether regarded as an act of strict ownership or not, it appears to be expressly and specially
authorized by the clause conferring the power to "exact the payment" of sums of money "by legal
means." This must mean the power to exact the payment of debts due the concern by means of the
institution of suits for their recovery. If there could be any doubt as to the meaning of this language
taken by itself, it would be removed by a consideration of the general scope and purpose of the
instrument in which it occurs. (See Civil Code, art. 1286.) The main object of the instrument is clearly
to make Kammerzell the manager of the Manila branch of the plaintiff's business, with the same
general authority with reference to its conduct which his principal would himself possess if he were
personally directing it. It can not be reasonably supposed, in the absence of very clear language to
that effect, that it was the intention of the principal to withhold from his agent a power so essential to
the efficient management of the business entrusted to his control as that to sue for the collection of
debts.
Arellano, C.J., Torres, Cooper, Willard, and Mapa, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-32977

November 17, 1930

THE MUNICIPAL COUNCIL OF ILOILO, plaintiff-appellee,

vs.
JOSE EVANGELISTA, ET AL., defendants-appellees.
TAN ONG SZE VDA. DE TAN TOCO, appellant.
Trenas & Laserna for defendant-appellant.
Provincial Fiscal Blanco of Iloilo for plaintiff-appellees.
Felipe Ysmael for appellee Mauricio Cruz & Co.
No appearance for other appellees.

VILLA-REAL, J.:
This is an appeal taken by the defendant Tan Ong Sze Vda. de Tan Toco from the judgment of the
Court of First Instance of Iloilo, providing as follows:
Wherefore, judgment is hereby rendered, declaring valid and binding the deed of assignment
of the credit executed by Tan Toco's widow, through her attorney-in-fact Tan Buntiong, in favor
of late Antero Soriano; likewise the assignment executed by the latter during his lifetime in
favor of the defendant Mauricio Cruz & Co., Inc., and the plaintiff is hereby ordered to pay the
said Mauricio Cruz & Co., Inc., the balance of P30,966.40; the plaintiff is also ordered to
deposit said sum in a local bank within the period of ninety days from the time this judgment
shall become final, at the disposal of the aforesaid Mauricio Cruz & Co. Inc., and in case that
the plaintiff shall not make such deposit in the manner indicated, said amount shall bear the
legal interest of six percent per annum from the date when the plaintiff shall fail to make the
deposit within the period herein set forth, until fully paid.
Without special pronouncement of costs.
In support of its appeal, the appellant assigns the following alleged errors as committed by the trial
court in its decision, to wit:
1. The lower court erred in rejecting as evidence Exhibit 4-A, Tan Toco, and Exhibit 4-B, Tan
Toco.
2. The lower court erred in sustaining the validity of the deed of assignment of the credit,
Exhibit 2-Cruz, instead of finding that said assignment made by Tan Buntiong to Attorney
Antero Soriano was null and void.
3. The lower court erred in upholding the assignment of that credit by Antero Soriano to
Mauricio Cruz & Co., Inc., instead of declaring it null and void.

4. The court below erred in holding that the balance of the credit against the municipality of
Iloilo should be adjudicated to the appellant herein, Tan Toco's widow.
5. The lower court erred in denying the motion for a new trial filed by the defendant-appellant.
The facts of the case are as follows:
On March 20, 1924, the Court of First Instance of Iloilo rendered judgment in civil case No. 3514
thereof, wherein the appellant herein, Tan Ong Sze Vda. de Tan Toco was the plaintiff, and the
municipality of Iloilo the defendant, and the former sought to recover of the latter the value of a strip
of land belonging to said plaintiff taken by the defendant to widen a public street; the judgment entitled
the plaintiff to recover P42,966.40, representing the value of said strip of land, from the defendant
(Exhibit A). On appeal to this court (G. R. No .22617) 1 the judgment was affirmed on November 28,
1924 (Exhibit B).
After the case was remanded to the court of origin, and the judgment rendered therein had become
final and executory, Attorney Jose Evangelista, in his own behalf and as counsel for the administratrix
of Jose Ma .Arroyo's intestate estate, filed a claim in the same case for professional services rendered
by him, which the court, acting with the consent of the appellant widow, fixed at 15 per cent of the
amount of the judgment (Exhibit 22 Soriano).
At the hearing on said claim, the claimants appeared, as did also the Philippine National Bank, which
prayed that the amount of the judgment be turned over to it because the land taken over had been
mortgaged to it. Antero Soriano also appeared claiming the amount of the judgment as it had been
assigned to him, and by him, in turn, assigned to Mauricio Cruz & Co., Inc.
After hearing all the adverse claims on the amount of the judgment the court ordered that the attorney's
lien in the amount of 15 per cent of the judgment, be recorded in favor of Attorney Jose Evangelista,
in his own behalf and as counsel for the administratrix of the deceased Jose Ma .Arroyo, and directed
the municipality of Iloilo to file an action of interpleading against the adverse claimants, the Philippine
National Bank, Antero Soriano, Mauricio Cruz & Co., Jose Evangelista and Jose Arroyo, as was done,
the case being filed in the Court of First Instance of Iloilo as civil case No. 7702.
After due hearing, the court rendered the decision quoted from at the beginning.
On March 29, 1928, the municipal treasurer of Iloilo, with the approval of the auditor of the provincial
treasurer of Iloilo and of the Executive Bureau, paid the late Antero Soriano the amount of P6,000 in
part payment of the judgment mentioned above, assigned to him by Tan Boon Tiong, acting as
attorney-in-fact of the appellant herein, Tan Ong Sze Vda. de Tan Toco.
On December 18, 1928, the municipal treasurer of Iloilo deposited with the clerk of the Court of First
Instance of Iloilo the amount of P6,000 on account of the judgment rendered in said civil case No.
3514. In pursuance of the resolution of the court below ordering that the attorney's lien in the amount
of 15 per cent of the judgment be recorded in favor of Attorney Jose Evangelista, in his own behalf
and as counsel for the late Jose Ma. Arroyo, the said clerk of court delivered on the same date to said
Attorney Jose Evangelista the said amount of P6,000. At the hearing of the instant case, the
codefendants of Attorney Jose Evangelista agreed not to discuss the payment made to the latter by
the clerk of the Court of First Instance of Iloilo of the amount of P6,000 mentioned above in
consideration of said lawyer's waiver of the remainder of the 15 per cent of said judgment amounting
to P444.69.

With these two payments of P6,000 each making a total of P12,000, the judgment for P42,966.44
against the municipality of Iloilo was reduced to P30,966.40, which was adjudicated by said court to
Mauricio Cruz & Co.
This appeal, then, is confined to the claim of Mauricio Cruz & Co. as alleged assignee of the rights of
the late Attorney Antero Soriano by virtue of the said judgment in payment of professional services
rendered by him to the said widow and her coheirs.
The only question to be decided in this appeal is the legality of the assignment made by Tan Boon
Tiong as attorney-in-fact of the appellant Tan Ong Sze Viuda de Tan Toco, to Attorney Antero Soriano,
of all the credits, rights and interests belonging to said appellant Tan Ong Sze Viuda de Tan Toco by
virtue of the judgment rendered in civil case No .3514 of the Court of First Instance of Iloilo, entitled
Viuda de Tan Toco vs. The Municipal Council of Iloilo, adjudicating to said widow the amount of
P42,966.40, plus the costs of court, against said municipal council of Iloilo, in consideration of the
professional services rendered by said attorney to said widow of Tan Toco and her coheirs, by virtue
of the deed Exhibit 2.
The appellant contends, in the first place, that said assignments was not made in consideration of
professional services by Attorney Antero Soriano, for they had already been satisfied before the
execution of said deed of assignment, but in order to facilitate the collection of the amount of said
judgment in favor of the appellant, for the reason that, being Chinese, she had encountered many
difficulties in trying to collect.
law phil.net

In support of her contention on this point, the appellant alleges that the payments admitted by the court
in its judgment, as made by Tan Toco's widow to Attorney Antero Soriano for professional services
rendered to her and to her coheirs, amounting to P2,900, must be added to the P700 evidenced by
Exhibits 4-A, Tan Toco, and 4-B Tan Toco, respectively, which exhibits the court below rejected as
evidence, on the ground that they were considered as payments made for professional services
rendered, not by Antero Soriano personally, by the firm of Soriano & Arroyo.
A glance at these receipts shows that those amounts were received by Attorney Antero Soriano for
the firm of Soriano & Arroyo, which is borne out by the stamp on said receipts reading, "Befete Soriano
& Arroyo," and the manner in which said attorney receipted for them, "Soriano & Arroyo, by A.
Soriano."
Therefore, the appellant's contention that the amounts of P200 and P500 evidence by said receipts
should be considered as payments made to Attorney Antero Soriano for professional services
rendered by him personally to the interests of the widow of Tan Toco, is untenable.
Besides, if at the time of the assignments to the late Antero Soriano his professional services to the
appellant widow of Tan Toco had already been paid for, no reason can be given why it was necessary
to write him money in payment of professional services on March 14, 1928 (Exhibit 5-G Tan Toco) and
December 15, of the same year (Exhibit 5-H Tan Toco) after the deed of assignment, (Exhibit 2-Cruz)
dated September 27, 1927, had been executed. In view of the fact that the amounts involved in the
cases prosecuted by Attorney Antero Soriano as counsel for Tan Toco's widow, some of which cases
have been appealed to this court, run into the hundreds of thousands of pesos, and considering that
said attorney had won several of those cases for his clients, the sum of P10,000 to date paid to him
for professional services is wholly inadequate, and shows, even if indirectly, that the assignments of
the appellant's rights and interests made to the late Antero Soriano and determined in the judgment
aforementioned, was made in consideration of the professional services rendered by the latter to the
aforesaid widow and her coheirs.

The defendant-appellant also contends that the deed of assignment Exhibit 2-Cruz was drawn up in
contravention of the prohibition contained in article 1459, case 5, of the Civil Code, which reads as
follows:
ART. 1459. The following persons cannot take by purchase, even at a public or judicial auction,
either in person or through the mediation of another:
xxx

xxx

xxx

5. Justices, judges, members of the department of public prosecution, clerks of superior and
inferior courts, and other officers of such courts, the property and rights in litigation before the
court within whose jurisdiction or territory they perform their respective duties .This prohibition
shall include the acquisition of such property by assignment.
Actions between co-heirs concerning the hereditary property, assignments in payment of
debts, or to secure the property of such persons, shall be excluded from this rule.
The prohibition contained in this paragraph shall include lawyers and solicitors with respect to
any property or rights involved in any litigation in which they may take part by virtue of their
profession and office.
It does not appear that the Attorney Antero Soriano was counsel for the herein appellant in civil case
No. 3514 of the Court of First Instance of Iloilo, which she instituted against the municipality of Iloilo,
Iloilo, for the recovery of the value of a strip of land expropriated by said municipality for the widening
of a certain public street. The only lawyers who appear to have represented her in that case were
Arroyo and Evangelista, who filed a claim for their professional fees .When the appellant's credit, right,
and interests in that case were assigned by her attorney-in-fact Tan Boon Tiong, to Attorney Antero
Soriano in payment of professional services rendered by the latter to the appellant and her coheirs in
connection with other cases, that particular case had been decided, and the only thing left to do was
to collect the judgment. There was no relation of attorney and client, then, between Antero Soriano
and the appellant, in the case where that judgment was rendered; and therefore the assignment of her
credit, right and interests to said lawyer did not violate the prohibition cited above.
As to whether Tan Boon Tiong as attorney-in-fact of the appellant, was empowered by his principal to
make as assignment of credits, rights and interests, in payment of debts for professional services
rendered by lawyers, in paragraph VI of the power of attorney, Exhibit 5-Cruz, Tan Boon Tiong is
authorized to employ and contract for the services of lawyers upon such conditions as he may deem
convenient, to take charge of any actions necessary or expedient for the interests of his principal, and
to defend suits brought against her. This power necessarily implies the authority to pay for the
professional services thus engaged. In the present case, the assignment made by Tan Boon Tiong,
as Attorney-in-fact for the appellant, in favor of Attorney Antero Soriano for professional services
rendered in other cases in the interests of the appellant and her coheirs, was that credit which she
had against the municipality of Iloilo, and such assignment was equivalent to the payment of the
amount of said credit to Antero Soriano for professional services.
With regard to the failure of the other attorney-in-fact of the appellant, Tan Montano, authorized by
Exhibit 1 Tan Toco, to consent to the deed of assignment, the latter being also authorized to pay,
in the name and behalf of the principal, all her debts and the liens and encumbrances her property,
the very fact that different letters of attorney were given to each of these two representatives shows
that it was not the principal's intention that they should act jointly in order to make their acts valid.
Furthermore, the appellant was aware of that assignment and she not only did not repudiate it, but
she continued employing Attorney Antero Soriano to represent her in court.

For the foregoing considerations, the court is of opinion and so holds: (1) That an agent of attorney-in
-fact empowered to pay the debts of the principal, and to employ lawyers to defend the latter's
interests, is impliedly empowered to pay the lawyer's fees for services rendered in the interests of said
principal, and may satisfy them by an assignment of a judgment rendered in favor of said principal; (2)
that when a person appoints two attorneys-in-fact independently, the consent of the one will not be
required to validate the acts of the other unless that appears positively to have been the principal's
attention; and (3) that the assignment of the amount of a judgment made by a person to his attorney,
who has not taken any part in the case wherein said judgment was rendered, made in payment of
professional services in other cases, does not contravene the prohibition of article 1459, case 5, of the
Civil Code.
By virtue whereof, and finding no error in the judgment appealed from, the same is affirmed in its
entirety, with costs against the appellant. So ordered.
Avancea, C.J., Johnson, Street, Malcolm, Villamor, Ostrand, Johns and Romualdez, JJ., concur.