G.R. No. L-8169 December 29, 1913 ANTONIO M. A. BARRETTO, plaintiff-appellant, vs. JOSE SANTA MARINA, defendant-appellee.

Hausserman, Cohn and Fisher, for appellant. W. A. Kincaid and Thos. L. Hartigan, for appellee. TORRES, J.: These cases were appealed by counsel for the plaintiff, through a bill of exceptions, from the judgment of January 17, 1912, and the order of February 5 of the same year, whereby the Honorable S. del Rosario, judge, sentenced the defendant to pay to the plaintiff the salary to which he was entitled for the first eight days of January, 1910, also that for the following month, at the rate of P3,083.33 per month, without special finding as to costs, and dismissed the second cause of action contained in the complaint presented in that case. On January 5, 1911, for the plaintiff Antonio M.a Barretto filed suit against Jose Santa Marina, alleging that the defendant, a resident of Spain, was then the owner and proprietor of the business known as the La Insular Cigar and Cigarette Factory, established in these Islands, which business consisted in the purchase of leaf tobacco and other raw material, in the preparation of the same, and in the sale of cigars and cigarettes in large quantities; that on January 8, 1910, and for a long time prior thereto, the plaintiff held and had held the position of agent of the defendant in the Philippine Islands for the management of the said business in the name and for the account of the said defendant; that the plaintiff's services were rendered in pursuance of a contract whereby the defendant obligated himself in writing to hire the said services for so long a time as the plaintiff should not show discouragement and to compensate such services at the rate of P37,000 Philippine currency per annum; that, on the aforesaid 8th day of January, 1910, the defendant, without reason, justification, or pretext and in violation of the contract before mentioned, summarily and arbitrarily dispensed with the plaintiff's services and removed him from the management of the business, since which date the defendant had refused to pay him the compensation, or any part thereof, due him and payable in full for services rendered subsequent to December 31, 1909; and that, as a second cause of action based upon the facts aforestated, the plaintiff had suffered losses and damages in the sum of P100,000 Philippine currency. Said counsel therefore prayed that judgment be rendered against

the defendant by sentencing him to pay to the plaintiff P137,000 Philippine currency, and the interest thereon at the legal rate, in addition to the payment of the costs, together with such other equitable remedies as the law allows. By an order of March 14, 1911, the Honorable A. S. Crossfield, judge overruled the demurrer to the first cause of action, but sustained that to the second. Counsel for the plaintiff entered an exception to this order in so far as it sustained the demurrer interposed by the defendant to the second cause of action. By his written answer to the complaint, on July 19, 1911, counsel for the defendant, reserving his exception to the order of the court overruling his demurrer filed against the first cause of action, denied each and all of the allegations contained in the complaint, relative to such first cause of action. As a special defense of the latter, he set forth that the plaintiff had no contract whatever with the defendant in which any period of time was stipulated during which the former was to render his services as manager of the La Insular factory; that the defendant revoked for just cause the power conferred upon the plaintiff; that subsequent to the revocation of such power, and on the occasion of the plaintiff's having sold all his rights and interests in the business of the La Insular factory to the defendant, in consideration of the sum received by him, the plaintiff renounced all action, intervention and claim that he might have against the defendant relative to the business aforementioned, whereby all the questions that might have arisen between them were settled. On December 19, 1911, counsel for each of the parties presented to the court as stipulation of the following purport: In clause 11 of the will executed by Don Joaquin Santa Marina y Perez in Madrid before a notary public on August 4, 1901, and duly legalized in these Islands, there appears the following: "The testator provides that the testamentary executor who is holding office as such shall enjoy a salary, allotment, or emolument of 4,000 pesos per annum which shall be paid out of the testator's estate; but that in case of consultation, the testamentary executors consulted shall not be entitled to this allotment, nor to any other, on account of such consultation." According to the statement of the sums collected by Antonio M.a Barretto as the judicial administrator of the estate of Joaquin Santa Marina from November, 1908, to March, 1910, and during twentythree days of April of the latter year, the total amount so collected

was P5,923.28. Antonio M.a Barretto ceased to manage the La Insular factory, as the judicial administrator of the estate of the deceased Joaquin Santa Marina, in October, 1909, and not on November 7, 1908, as erroneously out in the stenographic notes. The remuneration paid to Barretto as judicial administrator of the estate of Santa Marina was independent of that which pertained to him for his services as manager of the La Insular factory both before and after the date on which he ceased to administer the said factory as such judicial administrator. In the stipulation before mentioned there also appears the following: "The facts above stated are true, but there is a controversy between the attorneys for the plaintiff and the defendant, as to whether such facts are relevant as evidence in the said case. They therefore submit this question to the court if it determines that they are relevant as evidence they should be admitted as such, with exception by the defendant, but if it determines that they are not relevant as evidence they should be excluded, with exception by the plaintiff." After the hearing of the case, with the introduction of evidence by both parties, the court, on January 17, 1912, rendered the judgment aforementioned, to which an exception was taken by counsel for the plaintiff, who by written motion asked that the said judgment be set aside and a new trial granted, because such judgment was not sufficiently warranted by the evidence and was contrary to law and because the findings of fact therein contained were openly and manifestly contrary to the weight of the evidence. This motion was denied, with exception by the plaintiff. By an order of the 5th of the following month of February, issued in view of a petition presented by counsel for the plaintiff, the court dismissed the second cause of action set out in the complaint, to which order said counsel likewise excepted. Upon presentation of the proper bill of exceptions, the same was approved, certified, and forwarded to the clerk of this court. Demand is made in this suit for the payment of the considerable sum of P137,000, together with the legal interest thereon. Two amounts make up this sum: One of P37,000, as salary for the year 1910, claimed to be due for services rendered by the plaintiff as agent and manager of the tobacco factory known as La Insular; and the other of P100,000, as an indemnity for losses and damages, on account of the plaintiff's removal without just cause from his position as agent and manager of said factory, effected arbitrarily and in violation of the contract of hire of services

between the parties, the plaintiff claiming to be still entitled to hold the position from which he was dismissed. The most important fact in this case, which stands out prominently from the evidence regarded as a whole, is that of the plaintiff Barretto's renunciation or registration of the position he held as agent and manager of the said factory, which was freely and voluntarily made by him on the occasion of the insolvency and disappearance of the Chinaman Uy Yan, who had bought from the factory products aggregating in value the considerable sum of P97,000 and, without paying this large debt, disappeared and has not been seen since. Antonio M.a Barretto the agent and manager of the said factory, said among other things the following, in the letter, Exhibit 3, addressed by him to Jose Santa Marina, on January 2, 1909: I have to report to you an exceedingly disagreeable matter. This Chinaman Uy Yan, with whose name I begin this paragraph, has failed and owes the factory the considerable sum of P97,000. We will see that I can get from him, although when these Chinamen fail it is because they have spent everything. I will turned the matter over to my attorney in order that he may sue the party. I am not attempting to make light of this matter. I acknowledge that I have been rather more generous with this fellow than I should have been; but this is the way of doing business here. . . . I have always thought that when the manager of a business trips up in a matter like this he should tender his resignation, and I still think so. The position is at your disposal to do as you like. This letter is authentic and was neither denied nor rejected by the plaintiff, Barretto. Although Santa Marina did not immediately reply and tell him what opinion he may have formed and the decision he had reached in the matter, it is no less true that the silence and lack of reply on the part of the chief owner of the factory were sufficient indications that the resignation had been virtually accepted and that if he did not reply immediately it was because he intended to act cautiously. As the addressee, the chief owner of the factory, knew of no one at that time whom he could appoint relieve the writer, who had resigned, it was to be presumed that he was thereafter looking for some trustworthy person who might substitute the plaintiff in his position of agent and manager of the factory, communicated to the plaintiff that he had revoked the power conferred upon him and had appointed Mr. J. McGavin to substitute him in his position of
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manager of the La Insular factory, whereby the plaintiff's resignation, tendered in his aforesaid letter of January 2, 1909, Exhibit 3, was expressly accepted. After the plaintiff had resigned the position he held, and notwithstanding the lapse of several months before its express acceptance, it cannot be understood that he has any right to demand an indemnity for losses and damages particularly since he ostensibly and frankly acknowledged that he had been negligent in the discharge of his duties and that he had overstepped his authority in the management of the factory, with respect to the Chinaman mentioned. The record does not show that Santa Marina, his principal, required him to resign his position as manager, but that Barretto himself voluntarily stated by letter to his principal that, for the reasons therein mentioned, he resigned and placed at the latter's disposal the position of agent and manager of the La Insular factory; and if the principal, Santa Marina, deemed it suitable to relieve the agent, for having been negligent and overstepping his authority in the discharge of his office, and furthermore because of his having expressly resigned his position, and placed it at the disposal of the chief owner of the business, it cannot be explained how such person can be entitled to demand an indemnity for losses and damages, from his principal, who merely exercised his lawful right of relieving the plaintiff from the position which he had voluntarily given up. So, the agent and manager Barretto was not really dismissed or removed by the defendant Santa Marina. What did occur was that, in view of the resignation rendered by the plaintiff for the reasons which he himself conscientiously deemed to warrant his surrender of the position he was holding in the La Insular factory, the principal owner of the establishment, the defendant Santa Marina, had to took for and appoint another agent and manager to relieve and substitute him in the said employment a lawful act performed by the principal owner of the factory and one which cannot serve as a ground upon which to demand from the latter an indemnity for losses and damages, inasmuch as, in view of the facts that occurred and were acknowledged and confessed by Barretto in his letters, Exhibits 3 and 6, the plaintiff could not expect, nor ought to have expected, that the defendant should have insisted on the unsuccessful agent's continuance in his position, or that he should not have accepted the resignation tendered by the plaintiff in his first letter. By the mere fact that the defendant remained silent and designated another person, Mr. J. McGavin, to, discharge in the plaintiff's stead the powers and

duties of agent and manager of the said factory, Barretto should have understood that his resignation had been accepted and that if its acceptance was not communicated to him immediately it was owing to the circumstance that the principal owner of the factory did not then have, nor until several months afterwards, any other person whom he could appoint and place in his stead, for, as soon as the defendant Santa Marina could appoint the said McGavin, he revoked the power he had conferred upon the plaintiff and communicated this fact to the latter, by means of the letter, Exhibit D, which was presented to him by the bearer thereof, McGavin himself, the new manager and agent appointed. Omitting consideration for the moment of the first error attributed to the trial judge by his sustaining the demurrer filed against the second cause of action, relative to the collection of P100,000 as the amount of the losses and damages occasioned to the plaintiff, and turning our attention to the second error imputed to him by his refusal to sentence the defendant, for the first cause of action, to the payment of P37,000 or of any sum over P3,083.33, we shall proceed to examine the question whether any period or term for the duration of the position of agent and manager was fixed in the verbal contract made between the deceased Joaquin Santa Marina, the defendant's predecessor in interest, and the plaintiff antonio M.a Barretto a contract which, after Joaquin Santa Marina's death was ratified by his brother and heir, the defendant Jose Santa Marina. The defendant acknowledged the said verbal contract and also its ratification by him after his brother's death; but he denied any stipulation therein that Barretto should hold his office for any specific period of time fixed by and between the contracting parties, for the deceased Joaquin Santa Marina, in conferring power upon the plaintiff, did not do so for any specific time nor did he set any period within which he should hold his office of agent and manager of the La Insular factory; neither did he fix the date for the termination of such services, in the instrument of power of attorney executed by the defendant Santa Marina before a notary on the 25th of September, 1908. (Record, p. 20.) From the context of the instrument just mentioned it can not be concluded that any time whatever was fixed during which the plaintiff should hold his position of agent. The defendant, in executing that instrument, whereby the agreement made between his brother Joaquin and Barretto was ratified, did no more than accord to the plaintiff the same confidence that the defendant's predecessor in interest had in him; and so long as this merely

subjective condition of trust lodged in the agent existed, the time during which the latter might hold his office could be considered indefinite or undetermined, but as soon as that indespensable condition of a power of attorney disappeared and the conduct of the agent deceased to inspire confidence, the principal had a right to revoke the power he had conferred upon his agent, especially when the latter, for good reasons, gave up the office he was holding. Article 1733 of the civil Code, applicable to the case at bar, according to the provisions of article 2 of the Code of Commerce, prescribes: "The principal may, at his will, revoke the power and compel the agent to return the instrument containing the same in which the authority was given." Article 279 of the Code of Commerce provides: "The principal may revoke the commission intrusted to an agent at any stage of the transaction, advising him thereof, but always being liable for the result of the transactions which took place before the latter was informed of the revocation." From the above legal provisions it is clearly to be inferred that the contract of agency can subsist only so long as the principal has confidence in his agent, because, from the moment such confidence disappears and although there be a fixed period for the excercise of the office of agent, a circumstance that does not appear in the present case the principal has a perfect right to revoke the power that he had conferred upon the agent owing to the confidence he had in him and which for sound reasons had ceased to exist. The record does not show it to have been duly proved. notwithstanding the plaintiff's allegation, that a period was fixed for holding his agency or office of agent and manager of the La Insular factory. It would be improper, for the purpose of supplying such defect, to apply to the present case the provisions of article 1128 of the Civil Code. This article relates to obligation for which no period has been fixed for their fulfillment, but, which, from their nature and circumstances, allow the inference that there was an intention to grant such period to the debtor, wherefore the courts are authorized to fix the duration of the same, and the reason why it is inapplicable is that the rights and obligations existing between Barretto and Santa Marina are absolutely different from those to which it refers, for, according to article 1732 of the Civil Code, agency is terminated: 1. By revocation. 2. By withdrawal of the agent.
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3. By death, interdiction, bankruptcy, or insolvency of the principal or of the agent. It is not incumbent upon the courts to fix the period during which contracts for services shall last. Their duration is understood to be implicity fixed, in default of express stipulation, by the period for the payment of the salary of the employee. Therefore the doctrine of the tacit renewal of leases of property, established in article 1566 of the Civil Code, is not applicable to the case at bar. And even though the annual salary fixed for the services to be rendered by the plaintiff as agent and manager of the La Insular factory, was P37,000, yet, in accordance with the custom universally observed throughout the world, salaries fixed for the year are collected and paid in monthly installments as they fall due, and so the plaintiff collected and was paid his remuneration; therefore, on the latter's discontinuance in his office as agent, he would at most be entitled to the salary for one month and some odd days, allowed in the judgment of the lower court. Article 302 of the Code of Commerce reads thus: In cases in which no special time is fixed in the contracts of service, any one of the parties thereto may dissolve it, advising the other party thereof one month in advance. The factor or shop clerk shall be entitled, in such case, to the salary due for one month. From the mere fact that the principal no longer had confidence in the agent, he is entitled to withdraw it and to revoke the power he conferred upon the latter, even before the expiration of the period of the engagement or of the agreement made between them; but, in the present case, once it has been shown that, between the deceased Joaquin Santa Marina and the latter's heir, now the defendant, on the one hand, and the plaintiff Barretto, on the other, no period whatever was stipulated during which the last-named should hold the office and manager of the said factory, it is unquestionable that the defendant, even without good reasons, could lawfully revoke the power conferred upon the plaintiff and appoint in his place Mr. McGavin, and thereby contracted no liability whatever other than the obligation to pay the plaintiff the salary pertaining to one month and some odd days, as held in the judgment below. Barretto himself acknowledged in his aforesaid letter, Exhibit 3, that he had exceeded his authority and acted negligently in selling on credit to the said Chinaman a large quantity of the products of the factory under the plaintiff's management, reaching the considerable value of P97,000; whereby he confessed one of the

causes which led to his removal, the revocation of the power conferred upon him and the appointment of a new agent in his place. The defendant, Jose Santa Marina, in his letter of December 2, 1909, whereby he communicated to the plaintiff the revocation of the power he had conferred upon him and the appointment of another new agent, Mr. McGavin, stated among other things that the loan contracted by the agent Barretto, without the approval of the principal, caused a great panic among the stockholders of the factory and that the defendant hoped to allay it by the new measure that he expected to adopt. This, then, was still another reason the induced the principal to withdraw the confidence placed in the plaintiff and to revoke the power he had conferred upon him. Therefore, even omitting consideration of the resignation before mentioned, we find duly warranted the reasons which impelled the defendant to revoke the said power and relieve the plaintiff from the position of agent and manager of the La Insular factory. In accordance with the provisions of article 283 of the Code of Commerce, the manager of an enterprise or manufacturing or commercial establishment, authorized to administer it and direct it, with more or less powers, as the owner may have considered advisable, shall have the legal qualifications of an agent. Article 300 of the same code prescribes: "The following shall be special reasons for which principals may discharge their employees, even though the time of service of the contract has not elapsed: Fraud or breach of trust in the business intrusted to them . . . " By reason of these legal provisions the defendant, in revoking the authority conferred upon the plaintiff, acted within his unquestionable powers and did not thereby violate any statute whatever that may have limited them; consequently, he could not have caused the plaintiff any harm or detriment to his rights and interests, for not only had Santa Marina a justifiable reason to proceed as he did, but also no period whatever had been stipulated during which the plaintiff should be entitled to hold his position; and furthermore, because, in relieving the latter and appointing another person in his place, the defendant acted in accordance with the renunciation and resignation which the plaintiff had tendered. If the plaintiff is entitled to any indemnity in accordance with law, such was awarded to him in the judgment of the lower court by granting him the right to collect salary for one month and some odd days. As for the other features of the case, the record does not show that

the plaintiff has any good reason or legal ground upon which to claim an indemnity for losses and damages in the sum of P100,000, for it was not proved that he suffered to that extent, and the judgment appealed from has awarded him the month's salary to which he is entitled. Therefore that judgment and the order of March 14 sustaining the demurrer to the second cause of action are both in accordance with the law. For the foregoing reasons, whereby the errors assigned to the said judgment and order are deemed to have been refuted, both judgment and order are hereby affirmed, with costs against the appellant. Arellano, C.J., Johnson and Carson, JJ., concur. Moreland, J., concurs in the result.

G.R. No. L-18616 March 31, 1964 VICENTE M. COLEONGCO, plaintiff-appellant, vs. EDUARDO L. CLAPAROLS, defendant-appellee. San Juan, Africa and Benedicto for plaintiff-appellant. Alberto Jamir for defendant-appellee. REYES, J.B.L., J.: Appeal by plaintiff Vicente Coleongco from a decision of the Court of First Instance of Negros Occidental (in its Civil Case No. 4170) dismissing plaintiff's action for damages, and ordering him to pay defendant Eduardo Claparols the amount of P81,387.27 plus legal interest from the filing of the counterclaim till payment thereof; P50,000 as moral and compensatory damages suffered by defendant; and costs. A writ of preliminary attachment for the sum of P100,000 was subsequently issued against plaintiff's properties in spite of opposition thereto. Plaintiff Coleongco, not being in conformity with the judgment appealed to this Court directly, the claims involved being in excess of P200,000. The antecedent facts as found by the trial court and shown by the records, are as follows: Since 1951, defendant-appellee, Eduardo L. Claparols, operated a factory for the manufacture of nails in Talisay, Occidental Negros, under the style of "Claparols Steel & Nail Plant". The raw material, nail wire, was imported from foreign sources, specially from Belgium; and Claparols had a regular dollar allocation therefor,

granted by the Import Control Commission and the Central Bank. The marketing of the nails was handled by the "ABCD Commercial" of Bacolod, which was owned by a Chinaman named Kho To. Losses compelled Claparols in 1953 to look for someone to finance his imports of nail wires. At first, Kho To agreed to do the financing, but on April 25, 1953, the Chinaman introduced his compadre, appellant Vicente Coleongco, to the appellee, recommending said appellant to be the financier in the stead of Kho To. Claparols agreed, and on April 25 of that year a contract (Exhibit B) was perfected between them whereby Coleongco undertook to finance and put up the funds required for the importation of the nail wire, which Claparols bound himself to convert into nails at his plant. It was agreed that Coleongco would have the exclusive distribution of the product, and the "absolute care in the marketing of these nails and the promotion of sales all over the Philippines", except the Davao Agency; that Coleongco would "share the control of all the cash" from sales or deposited in banks; that he would have a representative in the management; that all contracts and transactions should be jointly approved by both parties; that proper books would be kept and annual accounts rendered; and that profits and losses would be shared "on a 50-50 basis". The contract was renewed from one year to year until 1958, and Coleongco's share subsequently increased by 5% of the net profit of the factory (Exhibits D, E, F). Two days after the execution of the basic agreement, Exhibit "B", on April 27, 1953, Claparols executed in favor of Coleongco, at the latter's behest a special power of attorney (Exhibit C) to open and negotiate letters of credit, to sign contracts, bills of lading, invoices, and papers covering transactions; to represent appellee and the nail factory; and to accept payments and cash advances from dealers and distributors. Thereafter, Coleongco also became the assistant manager of the factory, and took over its business transactions, while Claparols devoted most of his time to the nail manufacture processes. Around mid-November of 1956, appellee Claparols was disagreeably surprised by service of an alias writ of execution to enforce a judgment obtained against him by the Philippine National Bank, despite the fact that on the preceding September he had submitted an amortization plan to settle the account. Worried and alarmed, Claparols immediately left for Manila to confer with the bank authorities. Upon arrival, he learned to his dismay that the execution had been procured because of derogatory information
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against appellee that had reached the bank from his associate, appellant Coleongco. On July 6, 1956, the latter, without appellee's knowledge, had written to the bank in connection with the verbal offer for the acquisition by me of the whole interest of Mr. Eduardo L. Claparols in the Claparols Steel & Nail Plant and the Claparols Hollow Blocks Factory" (Exhibit 36); and later, on October 29, 1956, Coleongco had written again the bank another letter (Exhibit 35), also behind the back of appellee, wherein Coleongco charged Claparols with taking machines mortgaged to the bank, and added - . In my humble personal opinion I presume that Mr. Eduardo L. Claparols is not serious in meeting his obligations with your bank, otherwise he had not taken these machines and equipments a sign of bad faith since the factory is making a satisfactory profit of my administration. Fortunately, Claparols managed to arrange matters with the bank and to have the execution levy lifted. Incensed at what he regarded as disloyalty of his attorney-in-fact, he consulted lawyers. The upshot was that appellee revoked the power of attorney (Exhibit "C"), and informed Coleongco thereof (Exhibits T, T-1), by registered mail, demanding a full accounting at the same time. Coleongco, as could be expected, protested these acts of Claparols, but the latter insisted, and on the first of January, 1957 wrote a letter to Coleongco dismissing him as assistant manager of the plant and asked C. Miller & Company, auditors, to go over the books and records of the business with a view to adjusting the accounts of the associates. These last steps were taken in view of the revelation made by his machinery superintendent, Romulo Agsam, that in the course of the preceding New Year celebrations Coleongco had drawn Agsam aside and proposed that the latter should pour acid on the machinery to paralyze the factory. The examination by the auditors, summarized in Exhibits 80 and 87, found that Coleongco owed the Claparols Nail Factory the amount of P87,387.37, as of June 30, 1957. In the meantime, Claparols had found in the factory files certain correspondence in February, 1955 between Coleongco and the nail dealer Kho To whereby the former proposed to Kho that the latter should cut his monthly advances to Claparols from P2,000 to P1,000 a month, because I think it is time that we do our plan to take advantage of the difficulties of Eddie with the banks for our benefit. If we can squeeze him more. I am sure that we can extend our

contract with him before it ends next year, and perhaps on better terms. If we play well our cards we might yet own his factory (Exhibit 32); and conformably to Coleongco's proposal, Kho To had written to Claparols that "due to present business conditions" the latter could only be allowed to draw P1,000 a month beginning April, 1955 (Exhibit 33). As the parties could not amicably settle their accounts, Coleongco filed a suit against Claparols charging breach of contract, asking for accounting, and praying for P528,762.19 as damages, and attorney's fees, to which Claparols answered, denying the charge, and counter-claiming for the rescission of the agreement with Coleongco for P561,387.99 by way of damages. After trial, the court rendered judgment, as stated at the beginning of this opinion. In this appeal, it is first contended by the appellant Coleongco that the power of attorney (Exhibit "C") was made to protect his interest under the financing agreement (Exhibit "B") and was one coupled with an interest that the appellee Claparols had no legal power to revoke. This point can not be sustained. The financing agreement itself already contained clauses for the protection of appellant's interest, and did not call for the execution of any power of attorney in favor of Coleongco. But granting appellant's view, it must not be forgotten that a power of attorney can be made irrevocable by contract only in the sense that the principal may not recall it at his pleasure; but coupled with interest or not, the authority certainly can be revoked for a just cause, such as when the attorney-in-fact betrays the interest of the principal, as happened in this case. It is not open to serious doubt that the irrevocability of the power of attorney may not be used to shield the perpetration of acts in bad faith, breach of confidence, or betrayal of trust, by the agent for that would amount to holding that a power coupled with an interest authorizes the agent to commit frauds against the principal. Our new Civil Code, in Article 1172, expressly provides the contrary in prescribing that responsibility arising from fraud is demandable in all obligations, and that any waiver of action for future fraud is void. It is also on this principle that the Civil Code, in its Article 1800, declares that the powers of a partner, appointed as manager, in the articles of co-partnership are irrevocable without just or lawful cause; and an agent with power coupled with an interest can not stand on better ground than such a partner in so far as irrevocability of the power is concerned. That the appellee Coleongco acted in bad faith towards his principal Claparols is, on the record, unquestionable. His letters to

the Philippine National Bank (Exhibits 35 and 36) attempting to undermine the credit of the principal and to acquire the factory of the latter, without the principal's knowledge; Coleongco's letter to his cousin, Kho To (Exhibit 32), instructing the latter to reduce to one-half the usual monthly advances to Claparols on account of nail sales in order to squeeze said appellee and compel him to extend the contract entitling Coleongco to share in the profits of the nail factory on better terms, and ultimately "own his factory", a plan carried out by Kho's letter, Exhibit 33, reducing the advances to Claparols; Coleongco's attempt to, have Romulo Agsam pour acid on the machinery; his illegal diversion of the profits of the factory to his own benefit; and the surreptitious disposition of the Yates band resaw machine in favor of his cousin's Hong Shing Lumber Yard, made while Claparols was in Baguio in July and August of 1956, are plain acts of deliberate sabotage by the agent that fully justified the revocation of the power of attorney (Exhibit "C") by Claparols and his demand for an accounting from his agent Coleongco. Appellant attempts to justify his letter to the Philippine National Bank (Exhibits 35 and 36), claiming that Claparols' maladministration of the business endangered the security for the advances that he had made under the financing contract (Exhibit "B"). But if that were the case, it is to be expected that Coleongco would have first protested to Claparols himself, which he never did. Appellant likewise denies the authorship of the letter to Kho (Exhibit 32) as well as the attempt to induce Agsam to damage the machinery of the factory. Between the testimony of Agsam and Claparols and that of Coleongco, the court below whose to believe the former, and we see no reason to alter the lower court's conclusion on the value of the evidence before it, considering that Kho's letter to Claparols (Exhibit 33) plainly corroborates and dovetails with the plan outlined in Coleongco's own letter (Exhibit 32), signed by him, and that the credibility of Coleongco is affected adversely by his own admission of his having been previously convicted of estafa (t.s.n., pp. 139, 276), a crime that implies moral turpitude. Even disregarding Coleongco's letter to his son-in-law (Exhibit 82) that so fully reveals Coleongco's lack of business scruples, the clear preponderance of evidence is against appellant. The same remarks apply to the finding of the trial court that it was appellant Coleongco, and not Claparols, who disposed of the band resawing equipment, since said machine was received in July, 1956 and sold in August of that year to the Hong Shing Lumber Co., managed by appellant's cousin Vicente Kho. The untruth of

Coleongco's charge that Claparols, upon his return from Baguio in September, 1956, admitted having sold the machine behind his associate's back is further evidenced by (a) Coleongco's letter, Exhibit "V", dated October 29, 1956, inquiring the whereabouts of the resaw equipment from Claparols (an inquiry incompatible with Claparols' previous admission); (b) by the undenied fact that the appellee was in Baguio and Coleongco was acting for him during the months of July and August when the machine was received and sold; and (c) the fact that as between the two it is Coleongco who had a clear interest in selling the sawing machine to his cousin Kho To's lumber yard. If Claparols wished to sell the machine without Coleongco's knowledge, he would not have picked the latter's cousin for a buyer. The action of plaintiff-appellant for damages and lost profits due to the discontinuance of the financing agreement, Exhibit "B", may not prosper, because the record shows that the appellant likewise breached his part of the contract. It will be recalled that paragraph 2 of the contract, Exhibit "B", it was stipulated: That the Party of the Second Part (Coleongco) has agreed to finance and put up all the necessary money which may be needed to pay for the importation of the raw materials needed by such nail factory and allocated by the ICC from time to time, either in cash of with whatever suitable means which the Party of the Second Part may be able to make by suitable arrangements with any well-known banking institution recognized by the Central Bank of the Philippines. Instead of putting up all the necessary money needed to finance the imports of raw material, Coleongco merely advanced 25% in cash on account of the price and had the balance covered by surety agreements executed by Claparols and others as solidary, (joint and several) guarantors (see Exhibits G, H, I). The upshot of this arrangement was that Claparols was made to shoulder 3/4 of the payment for the imports, contrary to the financing agreement. Paragraph 11 of the latter expressly denied Coleongco any power or authority to bind Claparols without previous consultation and authority. When the balances for the cost of the importations became due, Coleongco, in some instances, paid it with the dealers' advances to the nail factory against future sales without the knowledge of Claparols (Exhibits "K" to K-11, K-13). Under paragraphs 8 and 11 of the financing agreement, Coleongco was to give preference to the operating expenses before sharing profits, so that until the operating costs were provided for, Coleongco had no right to apply the factory's income to pay his

own obligations. Again, the examination of the books by accountant Atienza of C. Miller and Co., showed that from 1954 onwards Coleongco (who had the control of the factory's cash and bank deposits, under Paragraph 11 of Exhibit "B") never liquidated and paid in full to Claparols his half of the profits, so that by the end of 1956 there was due to Claparols P38,068.41 on this account (Exhibit 91). For 1957 to 1958 Claparols financed the imports of nail wire without the help of appellant, and in view of the latter's infringement of his obligations, his acts of disloyalty previously discussed, and his diversions of factory funds (he even bought two motor vehicles with them), we find no justification for his insistence in sharing in the factory's profit for those years, nor for the restoration of the revoked power of attorney. The accountant's reports and testimony (specially Exhibits 80 to 87) prove that as of June 30, 1957, Coleongco owed to Claparols the sum of P83,466.34 that after some adjustment was reduced to P81,387.37, practically accepted even by appellant's auditor. The alleged discrepancies between the general ledger and the result thus arrived at was satisfactorily explained by accountant Atienza in his testimony (t.s.n., 1173-1178). No error was, therefore, committed by the trial court in declaring the financing contract (Exh. B) properly resolved by Claparols or in rendering judgment against appellant in favor of appellee for the said amount of P81,387.37. The basic rule of contracts requires parties to act loyally toward each other in the pursuit of the common end, and appellant clearly violated the rule of good faith prescribed by Art. 1315 of the new Civil Code. The lower court also allowed Claparols P50,000 for damages, material, moral, and exemplary, caused by the appellant Coleongco's acts in maliciously undermining appellee's credit that led the Philippine National Bank to secure a writ of execution against Claparols. Undeniably, the attempts of Coleongco to discredit and "squeeze" Claparols out of his own factory and business could not but cause the latter mental anguish and serious anxiety, as found by the court below, for which he is entitled to compensation; and the malevolence that lay behind appellee's actions justified also the imposition of exemplary or deterrent damages (Civ. Code, Art. 2232). While the award could have been made larger without violating the canons of justice, the discretion in fixing such damages primarily lay in the trial court, and we feel that the same should be respected. IN VIEW OF THE FOREGOING, the decision appealed from is

affirmed. Costs against appellant Vicente Coleongco. Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC DECISION October 2, 1934 G.R. No. L-40681 DY BUNCIO & COMPANY, INC., plaintiff-appelle, vs. ONG GUAN CAN, ET AL., defendants. JUAN TONG and PUA GIOK ENG, appellants. Pedro Escolin for appellants. G. Viola Fernando for appellee. , J.: This is a suit over a rice mill and camarin situated at Dao, Province of Capiz. Plaintiff claims that the property belongs to its judgment debtor, Ong Guan Can, while defendants Juan Tong and Pua Giok Eng claim as owner and lessee of the owner by virtue of a deed dated July 31, 1931, by Ong Guan Can, Jr. After trial the Court of First Instance of Capiz held that the deed was invalid and that the property was subject to the execution which has been levied on said properties by the judgment creditor of the owner. Defendants Juan Tong and Pua Giok bring this appeal and insist that the deed of the 31st of July, 1931, is valid. The first recital of the deed is that Ong Guan Can, Jr., as agent of Ong Guan Can, the proprietor of the commercial firm of Ong Guan Can & Sons, sells the rice-mill and camarin for P13,000 and gives as his authority the power of attorney dated the 23d of May, 1928, a copy of this public instrument being attached to the deed and recorded with the deed in the office of the register of deeds of Capiz. The receipt of the money acknowledged in the deed was to the agent, and the deed was signed by the agent in his own name and without any words indicating that he was signing it for the principal. Leaving aside the irregularities of the deed and coming to the power of attorney referred to in the deed and registered therewith, it is at once seen that it is not a general power of attorney but a limited

one and does not give the express power to alienate the properties in question. (Article 1713 of the Civil Code.) Appellants claim that this defect is cured by Exhibit 1, which purports to be a general power of attorney given to the same agent in 1920. Article 1732 of the Civil Code is silent over the partial termination of an agency. The making and accepting of a new power of attorney, whether it enlarges or decreases the power of the agent under a prior power of attorney, must be held to supplant and revoke the latter when the two are inconsistent. If the new appointment with limited powers does not revoke the general power of attorney, the execution of the second power of attorney would be a mere futile gesture. The title of Ong Guan Can not having been divested by the so-called deed of July 31, 1931, his properties are subject to attachment and execution. The judgment appealed from is therefore affirmed. Costs against appellants. So ordered. Avancea, C.J., Abad Santos, Vickers and Diaz, JJ., concur.

G.R. No. L-14248 April 28, 1960 NEW MANILA LUMBER COMPANY, INC., plaintiff-appellant, vs. REPUBLIC OF THE PHILIPPINES, defendant-appellee. S. F. Alidio and Associates for appellant. Office of the Solicitor General Edilberto Barot and Solicitor Ceferino S. Gaddi for appellee. GUTIERREZ DAVID, J.: Appeal from an order of dismissal of the Court of First Instance of Manila. On May 8, 1958, the plaintiff lumber company filed in the court below a complaint against the defendant Republic of the Philippines for the recovery of a sum of money. The complaint alleges, among other things, that defendant, thru the Director of Schools, entered into a contract with one Alfonso Mendoza to build two school houses; that plaintiff furnished the lumber materials in the construction of the said buildings; that prior to the payment by defendant of any amount due the contractor, the latter executed powers of attorney in favor of the plaintiff "constituting it as his sole, true and lawful attorney-in-fact with specific and exclusive authority to collect and receive from the defendant any and all amounts due or may be due to said contractor from the defendant

in connection with the construction of the aforesaid school buildings, as may be necessary to pay materials supplied by the plaintiff"; and that originals of the powers of attorney were received by defendant (thru the Director of Public Schools) who promised to pay plaintiff, but that it, nevertheless, paid the contractor several amounts on different occasions without first making payment to plaintiff. The complaint, therefore, prays that defendant be ordered to pay plaintiff the sum of P18,327.15, the unpaid balance of the cost of lumber supplied and used in the construction of the school buildings, with interest at the legal rate from the date same was due, plus attorney's fees and costs. Served with a copy of the complaint, the defendant Republic of the Philippines, through the Solicitor General, moved to dismiss the same on the grounds (1) that it does not allege a sufficient cause of action, (2) that plaintiff has no right to institute the action under Act No. 3688, and (3) that the court is without jurisdiction to entertain the same against the defendant. The motion was opposed by plaintiff, but after hearing, the court below holding that "there is no juridical tie between plaintiffsupplier and defendant-owner sustained the motion to dismiss on the first ground, and on June 23, 1958 issued an order dismissing plaintiff's complaint. Its motion for reconsideration having been denied, plaintiff took the present appeal. The appeal is without merit. Briefly stated, plaintiff's complaint seeks to enforce against the Republic of the Philippines a money claim for the payment of materials it furnished for the construction of two public school buildings undertaken by contractor Alfonso Mendoza, on the basis of powers of attorney executed by the latter authorizing said plaintiff to collect and receive from defendant Republic any amount due or may be due to said contractor as contract price for the payment of the materials so supplied. Section one of Public Act No. 3688, entitled "An Act for the protection of persons furnishing material and labor for the construction of public works", reads in part as follows: SECTION 1. Any person, partnership or corporation entering into a formal contract with the Government of the Philippine Islands for the construction of any public building, or the prosecution and completion of any public work, or for repairs upon any public building or public work, shall be required, before commencing such work, to execute the usual penal bond, with good and sufficient sureties, with the additional obligation that such contractor or his or its sub-contractors

shall promptly make payments to all persons supplying him or them with labor and materials in the prosecution of the work provided for in such contract; and any person, company or corporation who has furnished labor or materials in the construction or repair of any public building or public work, and payment for which has not been made, shall have the right to intervene and be made a party to any action instituted by the Government of the Philippine Islands on the bond of the contractor, and to have their rights and claims adjudicated in such action and judgment rendered thereon, subject, however, to the priority of the claim and judgment of the Government of the Philippine Islands. If the full amount of the liability of the surety on said bond is insufficient to pay the full amount of said claims and demands, then, after paying the full amount due the Government, the remainder shall be distributed pro rata among said intervenors. If no suit should be brought by the Government of the Philippine Islands within six months from the completion and final settlement of said contract, or if the Government expressly waives its right to institute action on the penal bond, then the person or persons supplying the contractor with labor and materials shall, upon application therefor, and furnishing affidavit to the department under the direction of which said work has been prosecuted, that labor or materials for the prosecution of such work have been supplied by him or them, and payment for which has not been made, be furnished with a certified copy of said contract and bond, upon which he or they shall have a right of action, and shall be, and are hereby, authorized to bring suit in the name of the Government of the Philippine Islands in the Court of First Instance in the district in which said contract was to be performed and executed, and not elsewhere, for his or their use and benefit, against said contractor and his sureties, and to prosecute the same to final judgment and execution, . . . . In the case at bar, it is not disputed that defendant Republic has already instituted a suit against the contractor for the forfeiture of the latter's bond posted to secure the faithful performance of stipulations in the construction contract with regards to one of the two school buildings (Civil Case No. 26815, Court of First Instance of Manila). The contractor has a similar bond with respect to the other school building. Pursuant to Act 3688, plaintiff's legal remedy is, not to bring suit against the Government, there being no privity of contract between them, but to intervene in the civil case above-

mentioned as an unpaid supplier of materials to the contractor, or file an action in the name of the Republic against said contractor on the latter's other bond. Plaintiff argues that an implied contract between it and the defendant Republic arose, when the latter, thru the Director of Public Schools, on being furnished copies of the powers of attorney executed by the contractor, promised to make payment to plaintiff for the materials supplied for the construction of the school buildings. It will be observed, however, that defendant was not a party to the execution of the powers of attorney. Besides, the Director of Public Schools had no authority to bind defendant on the payment. While he was the official who entered into contract with the contractor for the construction of the school buildings, payment of the contract price was not within his exclusive control but subject to approval under existing laws not only by the Department Head (Sec. 568, Rev. Adm, Code), but also by the Auditor General. At any rate, under the facts alleged in the complaint, the powers of attorney in question made plaintiff the contractor's agent in the collection of whatever amounts may be due the contractor from the defendant. And since it is also alleged that, after the execution of the powers of attorney, the contractor (principal) demanded and collected from defendant the money the collection of which he entrusted to plaintiff, the agency apparently has already been revoked. (Articles 1920 and 1924, new Civil Code.) The point is made by plaintiff that the powers of attorney executed by the contractor in its favor are irrevocable and are coupled with interest. But even supposing that they are, still their alleged irrevocability cannot affect defendant who is not a party thereto. They are obligatory only on the principal who executed the agency. Plaintiff also cites Article 1729 of the new Civil Code, which provides that Those who put their labor upon or furnish materials for a piece of work undertaken by the contractor have an action against the owner up to the amount owing from the latter to the contractor at the time the claim is made. . . . This article, however, as expressly provided in its last paragraph, "is subject to the provisions of special law." The special law governing in the present case, as already seen, is Act No. 3688. There is another reason for upholding the order of dismissal complained of. Plaintiff's action being a claim for sum of money arising from an alleged implied contract between it and the Republic of the Philippines, the same should have been lodged

with the Auditor General. The state cannot be sued without its consent. In view of the foregoing, the order of dismissal appealed from is affirmed, with costs against plaintiff-appellant. Paras, C. J., Labrador, Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Endencia, and Barrera, JJ.,concur.

G.R. No. L-5180 August 31, 1953 CONSEJO INFANTE, petitioner, vs. JOSE CUNANAN, JUAN MIJARES and THE COURT OF APPEALS, SECOND DIVISION, respondents. Yuseco, Abdon & Yuseco for petitioner. Jose E. Erfe and Maria Luisa Gomez for respondents. BAUTISTA ANGELO, J.: This is a petition for review of a decision of the Court of appeals affirming the judgement of the court of origin which orders the defendant to pay the plaintiffs the sum of P2,500 with legal interest thereon from February 2,1949 and the costs of action. Consejo Infante, defendant herein, was the owner of two parcels of land, together with a house built thereon, situated in the City of Manila and covered by Transfer Certificate of Title No. 61786. On or before November 30, 1948, she contracted the services of Jose Cunanan and Juan Mijares, plaintiff herein, to sell the abovementioned property for a price of P30,000 subject to the condition that the purchaser would assume the mortgage existing thereon in the favor of the Rehabilitation Finance Corporation. She agreed to pay them a commission of 5 per cent on the purchase price plus whatever overprice they may obtain for the property. Plaintiffs found one Pio S. Noche who was willing to buy the property under the terms agreed upon with defendant, but when they introduced him to defendant, the latter informed them that she was no longer interested in selling the property and succeeded in making them sign a document stating therein that the written authority she had given them was already can-celled. However, on December 20, 1948, defendant dealt directly with Pio S. Noche selling to him the property for P31,000. Upon learning this transaction, plaintiffs demanded from defendant the payment of their commission, but she refused and so they brought the present action. Defendant admitted having contracted the services of the plaintiffs

to sell her property as set forth in the complaint, but stated that she agreed to pay them a commission of P1,200 only on condition that they buy her a property somewhere in Taft Avenue to where she might transfer after selling her property. Defendant avers that while plaintiffs took steps to sell her property as agreed upon, they sold the property at Taft Avenue to another party and because of this failure it was agreed that the authority she had given them be cancelled. The lower court found that the preponderance of evidence was in favor of the plaintiffs and rendered judgement sentensing the defendant to pay the plaintiff the sum of P2,500 with legal interest thereon from February 2,1949 plus the costs of action. This decision was affirmed in toto by the Court of Appeals. There is no dispute that respondents were authorized by petitioner to sell her property for the sum of P30,000 with the understanding that they will be given a commission of 5 percent plus whatever overprice they may obtain for the property. Petitioner, however, contends that authority has already been withdrawn on November 30, 1948 when, by the voluntary act of respondents, they executed a document stating that said authority shall be considered cancelled and without any effect, so that when petitioner sold the property to Pio S. Noche on December 20, 1948, she was already free from her commitment with respondents and, therefore, was not in duty bound to pay them any commission for the transaction.. If the facts were as claimed by petitioner, there is in-deed no doubt that she would have no obligation to pay respondents the commission which was promised them under the original authority because, under the old Civil Code, her right to withdraw such authority is recognized. A principal may withdraw the authority given to an agent at will. (Article 1733.) But this fact is disputed. Thus, respondents claim that while they agreed to cancel the written authority given to them, they did so merely upon the verbal assurance given by petitioner that, should the property be sold to their own buyer, Pio S. Noche, they would be given the commission agreed upon. True, this verbal assurance does not appear in the written cancellation, Exhibit 1, and, on the other hand, it is disputed by petitioner, but respondents were allowed to present oral evidence to prove it, and this is now assigned as error in this petition for review. The plea that oral evidence should not have been allowed to prove the alleged verbal assurance is well taken it appearing that the written authority given to respondents has been cancelled in a written statement. The rule on this matter is that "When the terms

of an agreement have been reduced to writing, it is to be considered as containing all those terms, and, therefore, there can be, between parties and their successors in interest, no evidence of the terms of the agreement other than the contents of the writing." (Section 22, Rule 123, Rules of Court.) The only exceptions to this rule are: "(a)Where a mistake or imperfection of the writing, or its failure to express the true intent and agreement of the parties, or the validity of the agreement is put in issue by the pleadings"; and "(b) Where there is an intrinsic ambiguity in the writing." (Ibid.) There is no doubt that the point raised does not come under any of the cases excepted, for there is nothing therein that has been put in issue by respondents in their complaint. The terms of the document, Exhibit 1, seem to be clear and they do not contain any reservation which may in any way run counter to the clear intention of the parties. But even disregarding the oral evidence adduced by respondents in contravention of the parole evidence rule, we are, however, of the opinion that there is enough justification for the conclusion reached by the lower court as well as by the Court of Appeals to the effect that respondents are entitled to the commission originally agreed upon. It is a fact found by the Court of Appeals that after petitioner had given the written authority to respondents to sell her land for the sum of P30,000, respondents found a buyer in the person of one Pio S. Noche who was willing to buy the property under the terms agreed upon, and this matter was immediately brought to the knowledge of petitioner. But the latter, perhaps by way of strategem, advised respondents that she was no longer interested in the deal and was able to prevail upon them to sign a document agreeing to the cancellation of the written authority. That petitioner had changed her mind even if respondents had found a buyer who was willing to close the deal, is a matter that would not give rise to a legal consequence if respondents agree to call off the transaction in deference to the request of the petitioner. But the situation varies if one of the parties takes advantage of the benevolence of the other and acts in a manner that would promote his own selfish interest. This act is unfair as would amount to bad faith. This act cannot be sanctioned without ac-cording to the party prejudiced the reward which is due him. This is the situation in which respondents were placed by petitioner. Petitioner took advantage of the services rendered by respondents, but believing that she could evade payment of their commission, she made use of a ruse by inducing them to sign the deed of cancellation Exhibit 1. This act of subversion cannot be sanctioned and cannot serve

as basis for petitioner to escape payment of the commission agreed upon. Wherefore, the decision appealed from is hereby affirmed, with costs against petitioner. Paras, C.J., Pablo, Bengzon, Padilla, Tuason, Monte-mayor, Reyes, and Jugo, JJ., concur. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-28050 March 13, 1928 FEDERICO VALERA, plaintiff-appellant, vs. MIGUEL VELASCO, defendant-appellee. Jose Martinez San Agustin for appellant. Vicente O. Romualdez, Crispulo T. Manubay and Placido P. Reyes for appellee. VILLA-REAL, J.: This is an appeal taken by Federico Valera from the judgment of the Court of First Instance of Manila dismissing his complaint against Miguel Velasco, on the ground that he has not satisfactorily proven his right of action. In support of his appeal, the appellant assigns the following alleged as committed by the trial court in its judgment, to wit: (1) The lower court erred in holding that one of the ways of terminating an agency is by the express or tacit renunciation of the agent; (2) the lower court erred in holding that the institution of a civil action and the execution of the judgment obtained by the agent against his principal is but renunciation of the powers conferred on the agent; (3) the lower erred in holding that, even if the sale by Eduardo Hernandez to the plaintiff Federico Valera be declared void, such a declaration could not prevail over the rights of the defendant Miguel Velasco inasmuch as the right redemption was exercised by neither Eduardo Hernandez nor the plaintiff Federico Valera; (4) the lower court erred in not finding that the defendant Miguel Velasco was, and at present is, an authorized representative of the plaintiff Federico Valera; (5) the lower court erred in not annulling the sale made by the sheriff at public auction to defendant Miguel Velasco, Exhibit K; (6) the lower court erred in failing to annul the sale executed by Eduardo Hernandez to the plaintiff Federico Valera, Exhibit C; (7) the lower court erred in not

annulling Exhibit L, that is, the sale at public auction of the right to repurchase the land in question to Salvador Vallejo; (8) the lower court erred in not declaring Exhibit M null and void, which is the sale by Salvador Vallejo to defendant Miguel Velasco; (9) the lower court erred in not ordering the defendant Miguel Velasco to liquidate his accounts as agent of the plaintiff Federico Valera; (10) the lower court erred in not awarding plaintiff the P5,000 damages prayed for. The pertinent facts necessary for the solution of the questions raised by the above quoted assignments of error are contained in the decision appealed from and are as follows: By virtue of the powers of attorney, Exhibits X and Z, executed by the plaintiff on April 11, 1919, and on August 8, 1922, the defendant was appointed attorney-in-fact of the said plaintiff with authority to manage his property in the Philippines, consisting of the usufruct of a real property located of Echague Street, City of Manila. The defendant accepted both powers of attorney, managed plaintiff's property, reported his operations, and rendered accounts of his administration; and on March 31, 1923 presented exhibit F to plaintiff, which is the final account of his administration for said month, wherein it appears that there is a balance of P3,058.33 in favor of the plaintiff. The liquidation of accounts revealed that the plaintiff owed the defendant P1,100, and as misunderstanding arose between them, the defendant brought suit against the plaintiff, civil case No. 23447 of this court. Judgment was rendered in his favor on March 28, 1923, and after the writ of execution was issued, the sheriff levied upon the plaintiff's right of usufruct, sold it at public auction and adjudicated it to the defendant in payment of all of his claim. Subsequently, on May 11, 1923, the plaintiff sold his right of redemption to one Eduardo Hernandez, for the sum of P200 (Exhibit A). On September 4, 1923, this purchaser conveyed the same right of redemption, for the sum of P200, to the plaintiff himself, Federico Valera (Exhibit C). After the plaintiff had recovered his right of redemption, one Salvador Vallejo, who had an execution upon a judgment against the plaintiff rendered in a civil case against the latter, levied upon said right of redemption, which was sold by the sheriff at public auction to Salvador Vallejo for P250 and was definitely adjudicated to him. Later, he transferred said right of redemption to the defendant Velasco. This is how the title

to the right of usufruct to the aforementioned property later came to vest the said defendant. As the first two assignments of error are very closely related to each other, we will consider them jointly. Article 1732 of the Civil Code reads as follows: Art. 1732. Agency is terminated: 1. By revocation; 2. By the withdrawal of the agent; 3. By the death, interdiction, bankruptcy, or insolvency of the principal or of the agent. And article 1736 of the same Code provides that: Art. 1736. An agent may withdraw from the agency by giving notice to the principal. Should the latter suffer any damage through the withdrawal, the agent must indemnify him therefore, unless the agent's reason for his withdrawal should be the impossibility of continuing to act as such without serious detriment to himself. In the case of De la Pea vs. Hidalgo (16 Phil., 450), this court said laid down the following rule: 1. AGENCY; ADMINISTRATION OF PROPERTY; IMPLIED AGENCY. When the agent and administrator of property informs his principal by letter that for reasons of health and medical treatment he is about to depart from the place where he is executing his trust and wherein the said property is situated, and abandons the property, turns it over to a third party, renders accounts of its revenues up to the date on which he ceases to hold his position and transmits to his principal statement which summarizes and embraces all the balances of his accounts since he began the administration to the date of the termination of his trust, and, without stating when he may return to take charge of the administration of the said property, asks his principal to execute a power of attorney in due form in favor of a transmit the same to another person who took charge of the administration of the said property, it is but reasonable and just to conclude that the said agent had expressly and definitely renounced his agency and that such agency duly terminated, in accordance with the provisions of article 1732 of the Civil Code, and, although the agent in his aforementioned letter did not use the words "renouncing the agency," yet such words, were undoubtedly so understood and accepted by the principal, because of the lapse of nearly nine years up to the time of the latter's death, without his having interrogated either the

renouncing agent, disapproving what he had done, or the person who substituted the latter. The misunderstanding between the plaintiff and the defendant over the payment of the balance of P1,000 due the latter, as a result of the liquidation of the accounts between them arising from the collections by virtue of the former's usufructuary right, who was the principal, made by the latter as his agent, and the fact that the said defendant brought suit against the said principal on March 28, 1928 for the payment of said balance, more than prove the breach of the juridical relation between them; for, although the agent has not expressly told his principal that he renounced the agency, yet neither dignity nor decorum permits the latter to continue representing a person who has adopted such an antagonistic attitude towards him. When the agent filed a complaint against his principal for recovery of a sum of money arising from the liquidation of the accounts between them in connection with the agency, Federico Valera could not have understood otherwise than that Miguel Velasco renounced the agency; because his act was more expressive than words and could not have caused any doubt. (2 C. J., 543.) In order to terminate their relations by virtue of the agency the defendant, as agent, rendered his final account on March 31, 1923 to the plaintiff, as principal. Briefly, then, the fact that an agent institutes an action against his principal for the recovery of the balance in his favor resulting from the liquidation of the accounts between them arising from the agency, and renders and final account of his operations, is equivalent to an express renunciation of the agency, and terminates the juridical relation between them. If, as we have found, the defendant-appellee Miguel Velasco, in adopting a hostile attitude towards his principal, suing him for the collection of the balance in his favor, resulting from the liquidation of the agency accounts, ceased ipso facto to be the agent of the plaintiff-appellant, said agent's purchase of the aforesaid principal's right of usufruct at public auction held by virtue of an execution issued upon the judgment rendered in favor of the former and against the latter, is valid and legal, and the lower court did not commit the fourth and fifth assignments of error attributed to it by the plaintiff-appellant. In regard to the third assignment of error, it is deemed unnecessary to discuss the validity of the sale made by Federico Valera to Eduardo Hernandez of his right of redemption in the sale of his usufructuary right made by the sheriff by virtue of the execution of the judgment in favor of Miguel Velasco and against

the said Federico Valera; and the same thing is true as to the validity of the resale of the same right of redemption made by Eduardo Hernandez to Federico Valera; inasmuch as Miguel Velasco's purchase at public auction held by virtue of an execution of Federico Valera's usufructuary right is valid and legal, and as neither the latter nor Eduardo Hernandez exercised his right of redemption within the legal period, the purchaser's title became absolute. Moreover, the defendant-appellee, Miguel Velasco, having acquired Federico Valera's right of redemption from Salvador Vallejo, who had acquired it at public auction by virtue of a writ of execution issued upon the judgment obtained by the said Vallejo against the said Valera, the latter lost all right to said usufruct. And even supposing that Eduardo Hernandez had been tricked by Miguel Velasco into selling Federico Valera's right of repurchase to the latter so that Salvador Vallejo might levy an execution on it, and even supposing that said resale was null for lack of consideration, yet, inasmuch as Eduardo Hernandez did not present a third party claim when the right was levied upon for the execution of the judgment obtained by Vallejo against Federico Vallera, nor did he file a complaint to recover said right before the period of redemption expired, said Eduardo Hernandez, and much less Federico Valera, cannot now contest the validity of said resale, for the reason that the one-year period of redemption has already elapsed. Neither did the trial court err in not ordering Miguel Velasco to render a liquidation of accounts from March 31, 1923, inasmuch as he had acquired the rights of the plaintiff by purchase at the execution sale, and as purchaser, he was entitled to receive the rents from the date of the sale until the date of the repurchase, considering them as part of the redemption price; but not having exercised the right repurchase during the legal period, and the title of the repurchaser having become absolute, the latter did not have to account for said rents. Summarizing, the conclusion is reached that the disagreements between an agent and his principal with respect to the agency, and the filing of a civil action by the former against the latter for the collection of the balance in favor of the agent, resulting from a liquidation of the agency accounts, are facts showing a rupture of relations, and the complaint is equivalent to an express renunciation of the agency, and is more expressive than if the agent had merely said, "I renounce the agency." By virtue of the foregoing, and finding no error in the judgment

appealed from, the same is hereby affirmed in all its parts, with costs against the appellant. So ordered. Johnson, Malcolm, Villamor, Ostrand and Johns, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-11415 May 25, 1959 MANUEL BUASON and LOLITA M. REYES, plaintiffs-appellants, vs. MARIANO PANUYAS, defendant-appellee. Garcia and Jacinto, for appellants. Servando Cleto for appellee. PADILLA, J.: This is an appeal from a judgment of the Court of First Instance of Nueva Ecija dismissing an action brought by the spouses Manuel Buason and Lolita M. Reyes for annulment of a deed of sale in favor of the defendant, cancellation of transfer certificate of title No. 8419 issued in the name of the defendant and his wife, declaration that the sale in their favor is valid, recovery of possession of the parcel of land described in the complaint from the defendant, damages, attorney's fees and costs. (Civil No. 2144.) In their lifetime the spouses Buenaventura Dayao and Eugenia Vega acquired by homestead patent a parcel of land situated at barrio Gabaldon, municipality of Muoz, province of Nueva Ecija, containing an area of 14.8413 hectares covered by original certificate of title No. 1187 (Exhibit C). On 29 October 1930 they executed a power of attorney authorizing Eustaquio Bayuga to engage the services of an attorney to prosecute their case against Leonardo Gambito for annulment of a contract of sale of the parcel of land (civil No. 5787 of the same court) and after the termination of the case in their favor to sell it, and from the proceeds of the sale to deduct whatever expenses he had incurred in the litigation (Exhibit B). On 14 March 1934 Buenaventura Dayao died leaving his wife Eugenia Vega and children Pablo, Teodoro, Fortunata and Juliana, all surnamed Dayao. On 21 march 1939 his four children executed a deed of sale conveying 12.8413 hectares of the parcel of land to the appellants, the spouses Manuel Buason and Lolita M. Reyes (Exhibit A). Their mother Eugenia Vega affixed her

thumbmark to the deed of sale as witness (Exhibit A). The appellants took possession of the parcel of land through their tenants in 1939. On 18 July 1944 Eustaquio Bayuga sold 8 hectares of the same parcel of land to the spouses Mariano Panuyas (appellee herein) and Sotera B. Cruz (Exhibit D). Eustaquio Bayuga died on 25 March 1946 and Eugenia Vega in 1954. The appellants and the appellee claim ownership to the same parcel of land. In their complaint the appellants prayed that the appellee be ordered to deliver possession of the part of the parcel of land held by him; that the deed of sale of that part of the parcel of land held by the appellee executed by Eustaquio Bayuga in his favor and of his wife (Exhibit D) be declared null and void and that transfer certificate of title No. 8419 issued in their name be cancelled; that the deed of sale of the parcel of land executed by the children and heirs of Buenaventura Dayao in their favor (Exhibit A) be declared valid; that the appellee be ordered to pay them damages and attorney's fees in the sum of P9,600; and that he ordered to pay the costs of the suit. The appellees affirmative defenses are that he and his wife were buyers in good faith and for valuable consideration; that appellant's causes of action are barred by the statute of limitations; that the complaint states no cause of action; that the claim on which their action is based is unenforceable under the statute of frauds; and that the appellants are guilty of laches. By way of counterclaim, he prayed that for bringing a clearly unfounded suit against him which depreciated the value of the land and injured his good reputation, the appellants be ordered to pay him the sums of P5,000 as actual damages and P10,000 as moral damages. After trial on 20 August 1956 the Court rendered judgment holding that the appellants' action is barred by the statute of limitations and dismissing their complaint. Their motion for reconsideration filed on 23 August 1956. Hence this appeal upon questions of law. It appears that the appellants did not register the sale of 12.8413 hectares of the parcel of land in question executed in their favor by the Dayao children on 21 March 1939 after the death of their father Buenaventura Dayao. On the other hand, the power of attorney executed by Buenaventura Dayao on 29 October 1930 authorizing Eustaquio Bayuga to sell the parcel of land (Exhibit B) was annotated or inscribed on the back of the original certificate of title No. 1187 (Exhibit C) as Entry No. 16836/H-1187, and the sale executed by Eustaquio Bayuga in favor of the appellee Mariano Panuyas and his wife Sotera B. Cruz under the aforesaid power of

attorney was annotated or inscribed on the back of the same original certificate of title (Exhibit C) as Entry No 778/H-1187. It does not appear that the appellee and his wife had actual knowledge of the previous sale. In the absence of such knowledge, they had a right to rely on the face of the certificate of title of the registered owners and of the authority conferred by them upon the agent also recorded on the back of the certificate of title. As this is a case of double sale of land registered under the Land Registration Act, he who recorded the sale in the Registry of Deeds has a better right than he who did not.1 As to the appellants' contention that, as the death of the principal on 14 March 1934 ended the authority of the agent,2 the sale of 8 hectares of the parcel of land by the agent to the appellee Mariano Panuyas and his wife Sotera B. Cruz was null and void, suffice it to state that is has not been shown that the agent knew of his principal's demise, and for that reason article 1738, old Civil code or 1931, new Civil Code, which provides: Anything done by the agent, without knowledge of the death of the principal or of any other cause which extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have contracted with him in good faith is the law applicable to the point raised by the appellants. The judgment appealed from is affirmed, with costs against the appellants. Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion and Endencia, JJ., concur.

G.R. No. L-17043 January 31, 1961 NATIVIDAD HERRERA, assisted by her husband EMIGDIO SALAZAR, plaintiffs-appellants, vs. LUY KIM GUAN and LINO BANGAYAN, defendants-appellees. T. de los Santos for plaintiffs-appellants. Rafael C. Climaco and Abelardo S. Fernandez for defendantsappellees. BARRERA, J.: This is an appeal from the decision of the Court of First Instance of Zamboanga City (a) dismissing plaintiff-appellant's complaint for the recovery of three (3) parcels of land and their produce in the sum of P320,000.00; and (b) instead, sentencing plaintiff to pay

P2,000.00 for attorney's fees and P1,000.00 for expenses of litigation, to defendant Lino Bangayan, and P2,000.00 as attorney's fees and P500.00 as expenses of litigation, to the other defendant Luy Kim Guan. The pertinent facts as found by the trial court and upon which its decision was predicated are set forth in the following portion of the decision appealed from: The Plaintiff Natividad Herrera is the legitimate daughter of Luis Herrera, now deceased and who died in China sometime after he went to that country in the last part of 1931 or early part of 1932. The said Luis Herrera in his lifetime was the owner of three (3) parcels of land and their improvements, known as Lots 1740, 4465 and 4467 of Expediente No. 5, G.L.R.O. Record 477 and the area, nature, improvements and bound of each and every of these three (3) lots are sufficiently described in the complaint filed by the plaintiffs. Before leaving for China, however, Luis Herrera executed on December 1, 1931, a deed of General Power of Attorney, Exhibit 'B', which authorized and empowered the defendant Kim Guan, among others to administer and sell the properties of said Luis Herrera. Lot 1740 was originally covered by Original Certificate Title 8601 registered in the name of Luis Herrera, married to GO Bang. This lot was sold by the defendant Luy Kim in his capacity as attorney-in-fact of the deceased Luis Her to Luy Chay on September 11, 1939, as shown in Exhibit "2", corresponding deed of sale. Transfer Certificate of Title 3162, Exhibit "3", was issued to Luy Chay by virtue of deed of sale. On August 28, 1941, to secure a loan of P2,00 a deed of mortgage to the Zamboanga Mutual Building and Association was executed by Luy Chay, Exhibit "4". On January 31, 1947, the said Luy Chay executed a deed of sale, Exhibit "E", in favor of Lino Bangayan. By virtue of this Transfer Certificate of Title T-2567 was issued to Lino Bangayan on June 24, 1949, Exhibit "1": Lots 4465 and 4467 were originally registered in the of Luis Herrera, married to Go Bang, under Original Certificate of Title No. 0-14360, Exhibit "5". On December 1, 1931, Luis Herrera sold one-half () undivided share and to Herrera and Go Bang, the other half (), as shown by Exhibit "12" and Exhibit "12-A", the latter an annotation made the Register of Deeds of the City of Zamboanga, in which stated

as follows: Cancelado el presente Certificado en virtud de una escritura de traspaso y en su lugar se ha expedido el Certificado de T No. 494-(T-13045) del Tomo 2 del Libro de Certificado de Transferencias. (Fdo) R. D. MACROHON Registrador de Titulos Ciudad de Zamboanga On July 23, 1937, Luis Herrera thru his attorney-in-fact Luy Kim Guan, one of the defendants, sold to Nicomedes Salazar his one half () participation in these two (2) lots, as shown in Exhibit "C", the corresponding deed of sale for P3,000.00 Transfer Certificate of Title No. T-494-(T-13045) was is to Nicomedes Salazar and to the defendant Luy Kim Guan, Exhibit '7'. On August 4, 1937, the defendant Luy Kim Guan Nicomedes Salazar executed a deed of mortgage in favor of Bank of the Philippine Islands to secure a loan of P3,500.00, Exhibit '6'. On August 17, 1937, the defendant Luy Kim Guan and Nicomedes Salazar sold Lot 4465 to Carlos Eijansantos for the sum of P100.00 as shown in Exhibit "9", the corresponding deed of sale, and Transfer Certificate of Title No. T-2653 was issued on September 7, 1939 to Carlos Eijansantos, Exhibit "10". Nicomedes Salazar sold his one half () interest on Lot 4467 to the defendant Lino Bangayan for P3,000.00 on February 22, 1949, Exhibit 'B', and the corresponding Transfer Certificate of Title T-2654 was issued to Lino Bangayan and to Luy Kim Guan, both are co-owners in equal shares, Exhibit "8". Opinion of the City Attorney, Exhibit "p", and an affidavit of Atty. Jose T. Atilano, Exhibit "O", state that Lino Bangayan is a Filipino citizen. As admitted by both parties (plaintiffs and defendants), Luis Herrera is now deceased, but as to the specific and precise date of his death the evidence of both parties failed to show. It is the contention of plaintiff-appellant that all the transactions mentioned in the preceding quoted portion of the decision were fraudulent and were executed after the death of Luis Herrera and, consequently, when the power of attorney was no longer operative. It is also claimed that the defendants Lino Bangayan and Luy Kim Guan who now claim to be the owners of Lots Nos. 1740 and 4467 are Chinese by nationality and, therefore, are disqualified to acquire real properties. Plaintiff-appellant, in addition, questions the supposed deed of sale allegedly executed

by Luis Herrera on December 1, 1931 in favor of defendant Luy Kim Guan, conveying one-half interest on the two lots, Nos. 4465 and 4467, asserting that what was actually executed on that date, jointly with the general power of attorney, was a lease contract over the same properties for a period of 20 years for which Luy Kim Guan paid the sum of P2,000.00. We find all the contentions of plaintiff-appellant untenable. Starting with her claim that the second deed executed on December 1, 1931 by Luis Herrera was a lease contract instead of a deed of sale as asserted by defendant Luy Kim Guan, we find that the only evidence in support of her contention is her own testimony and that of her husband to the effect that the deceased Luis Herrera showed the said document to them, and they remembered the same to be a lease contract on the three properties for a period of 20 years in consideration of P2,000.00. Their testimony was sought to be corroborated by the declaration of the clerk of Atty. Enrique A. Fernandez, who allegedly notarized the document. Outside of this oral testimony, given more than 23 years after the supposed instrument was read by them, no other evidence was adduced. On the other hand, defendant Luy Kim Gua produced in evidence a certification1 signed by the Register of Deeds of Dipolog, Zamboanga (Exh. 11) to the effect that a deed of sale, dated December 1, 1931, was execute by Luis Herrera in favor of Luy Kim Guan and entered in the Primary Book No. 4 as duly registered on September 30, 1936 under Original Certificate of Title No. 14360. It is to be noted that the deed of sale was registered shortly after the issuance in the name of Luis Herrera of Origin Certificate of Title No. 14360 pursuant to Decree No. 59093, covering the two lots, Nos. 4465 and 4467 (Exh. 5) dated April 7, 1936. In virtue of said deed of sale of December 1, 1931, Original Certificate of Title No. 1436 was cancelled and Transfer Certificate of Title No. 1304 (Exh. 12) in the names of the conjugal partnership of the spouses Luis Herrera and Go Bang, one-half share, an Luy Kim Guan, single, one-half share, was issued on September 30, 1936. Later, or on July 23, 1937, Luy Kim Guan, in his capacity as attorney-in-fact of Luis Herrera, sold the half interest of the latter in the two parcels o land, in favor of Nicomedes Salazar, whereupon TCT No. 13045 was cancelled and TCT No. RT-657 (494-T-13045 (Exh. 7) was issued in the names of Luy Kim Guan an Nicomedes Salazar in undivided equal shares. On August 4, 1937, both Luy Kim Guan and Nicomedes Salazar mortgaged the two parcels in favor of the Bank of the Philippine Islands for the sum of P3,500.00 (Exh. 6). On August

17, 1937, Nicomedes Salazar and Luy Kim Gua sold their respective shares in Lot No. 4465 to Carlo Eijansantos (Exh. 9), subject to the mortgage, resulting in the issuance of TCT No. 2653 (Exh. 10) covering the entire lot No. 4465 in the name of said Carlos Eijansantos. On February 23, 1949, Nicomedes Salazar sold his shall share in Lot No. 4467 to Lino Bangayan, as a consequence of which, TCT No. 2654 (Exh. B) was issued covering said Lot No. 4467 in the names of Luy Kim Guan and Lino Bangayan in undivided equal shares. With respect to Lot No. 1740, the same was sold by Luy Kim Guan, in his capacity as attorney-in-fact of Luis Herrera, on September 11, 1939 to Luy Chay (See Exh. 2) who, in August, 1941, mortgaged the same (Exh. 4) to the Zamboanga Mutual Loan and Building Association (See TCT No. 3162 [Exh. 3] issued in the name of Luy Chay). Later on, Luy Chay sold the entire lot to defendant Lino Bangayan by virtue of the deed of sale dated January 31, 1947 (Exh. E), and as a consequence thereof, TCT No. 2567 was issued in the name of said vendee. (See Exh. 1). As a result of these various transactions, duly recorded in the corresponding office of the Register of Deeds, and covered by appropriate transfer certificates of title, the properties are now registered in the following manner: Lot No. 1740, in the name of Lino Bangayan; Lot No. 4465, in the name of Carlos Eijansantos; and Lot No. 4467, in the names of Lino Bangayan and Luy Kim Guan in undivided equal shares. In the face of these documentary evidence presented by the defendants, the trial court correctly upheld the contention of the defendants as against that of plaintiff-appellant who claims that the second deed executed by Luis Herrera in 1931 was a lease contract. It is pertinent to note what the lower court stated in this regard, that is, if the second deed executed by Luis Herrera was a lease contract covering, the 3 lots in question for a period of twenty (20) years, there would have been no purpose for him to constitute Luy Kim Guan as. his attorney-in-fact to administer and take charge of the same properties already covered by the lease contract. Coming now to the contention that these transactions are null and void and of no effect because they were executed by the attorneyin-fact after the death of his Principal, suffice it to say that as found by the lower court, the date of death of Luis Herrera has not been satisfactorily proven. The only evidence presented by the Plaintiffappellant in this respect is a supposed letter received from a certain "Candi", dated at Amoy in November, 1936, purporting to

give information that Luis Herrera (without mentioning his name) had died in August of that year. This piece of evidence was properly rejected by the lower court for lack of identification. the other hand, we have the testimony of the witness Chung Lian to the effect that when he was in Amoy the year 1940, Luis Herrera visited him and had a conversation with him, showing that the latter was still alive at the time. Since the documents had been executed the attorney-in-fact one in 1937 and the other in 1939, it is evident, if we are to believe this testimony, that the documents were executed during the lifetime of the principal. Be that as it may, even granting arguendo that Luis Herrera did die in 1936, plaintiffs presented no proof and there is no indication in the record, that the age Luy Kim Guan was aware of the death of his prince at the time he sold the property. The death of the principal does not render the act of an agent unenforceable, where the latter had no knowledge of such extinguishment the agency.2 Appellants also raise the question of the legality of the titles acquired by Luy Chay and Lino Bangayan, on ground that they are disqualified to acquire real properties in the Philippines. This point is similarly without me because there is no evidence to support the claim. In fact, in the deed of sale as well as in TCT No. 3162 issued to Luy Chay, the latter was referred to as a citizen of the Philippines. Nevertheless, the lower court acknowledged the probability that Luy Chay could have been actually a Chinese citizens.3 At any rate, the property was subsequently purchased by Lino Bangayan, as a result which TCT No. 3162 in the name of Luy Chay was cancelled and another certificate (TCT No. T-2567) was issued in favor of said vendee. As to Bangayan's qualification, the lower court held that said defendant had sufficiently established his Philippine citizenship through Exhibit P, concurred in by the Secretary of Justice. We find no reason to disturb such ruling. With respect to Luy Kim Guan, while it is true that he is a Chinese citizen, nevertheless, inasmuch as he acquired his one-half share in Lot No. 4467 in 1931, long before the Constitution was adopted, his ownership can not be attacked on account of his citizenship. Appellants, in this appeal, contest the judgment of the court a quo awarding defendants Lino Bangayan and Luy Kim Guan attorney's fees in the sum of P2,000.00 each, and expenses of litigation in the amounts of P1,000.00 and P500.00, respectively. We agree with the appellant in this regard. This Court has laid down the rule that in the absence of stipulation, a winning party may be awarded attorney's fees only in case

plaintiff's action or defendant's stand is so untenable as to amount to gross and evident bad faith.4 The same thing however, can not be said of the case at bar. As a matter of fact, the trial court itself declared that the complaint was filed in good faith. Attorney's fees, therefore, can not be awarded to defendants simply because the judgment was favorable to them and adverse to plaintiff, for it may amount to imposing a premium on the right to redress grievances in court. And so with expenses of litigation. A winning party may be entitled to expenses of litigation only where he, by reason of plaintiff's clearly unjustifiable claims or defendant's unreasonable refusal to his demands, was compelled to incur said expenditures. Evidently, the facts of this case do not warrant the granting of such litigation expenses to defendants. In the absence of proof that the action was intended for reasons other than honest, we may agree with the trial court that the same must have been instituted by plaintiffs in their belief that they have a valid cause against the defendants. WHEREFORE, and with the above modification, the decision appealed from is hereby affirmed in all other respects without prejudice to appellants' right to demand from the agent (Luy Kim Guan) an accounting of proceeds of the agency, if such right is still available. No costs. So ordered. Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes and Dizon, concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-10881 September 30, 1958 EULOGIO DEL ROSARIO, AURELIO DEL ROSARIO, BENITO DEL ROSARIO, BERNARDO DEL ROSARIO, ISIDRA DEL ROSARIO, DOMINGA DEL ROSARIO and CONCEPCION BORROMEO, plaintiff-appellees, vs. PRIMITIVO ABAD and TEODORICO ABAD, defendantsappellants. Baustita and Bautista for appellees. Agustin C. Bagasao for appellants. PADILLA, J.: Appeal from a judgment rendered by the Court of First Instance of

Nueva Ecija in civil case No. 1084. The facts are undisputed, the parties having entered into an agreed statement thereof, the pertinent and materials part of which are: The plaintiffs are the children and heirs of the late Tiburcio del Rosario. On 12 December 1936, the Secretary of Agriculture and Commerce, by authority of the President of the Commonwealth of the Philippines, issued under the provisions of the Public Land Act (Act No. 2874) homestead patent No. 40596 to Tiburcio del Rosario. The homestead with an area of 9 hectares, 43 ares and 14 centares is situated in barrio San Mauricio, municipality of San Jose, province of Nueva Ecija. On 11 February 1937, the Registrar of Deeds in and for the province of Nueva Ecija issued original certificate of title No. 4820 in the name of the homesteader (Annex A, stipulation of facts, pp. 25-30, Rec. on App.). On 24 February 1937, Tiburcio del Rosario obtained a loan from Primitivo Abad in the sum of P2,000 with interest at the rate of 12% per annum, payable on 31 December 1941. As security for the payment thereof he mortgaged the improvements of the parcel of land in favor of the creditor (Annex B, complaint, pp. 10-13, Rec. on App.). On the same day, 24 February, the mortgagor executed an "irrevocable special power of attorney coupled with interest" in favor of the mortgagee, authorizing him, among others, to sell and convey the parcel of land (Annex A, complaint, pp. 7-9, Rec. on App.). Thereafter the mortgagor and his family moved to Santiago, Isabela, and there established a new residence. Sometime in December 1945 the mortgagor died leaving the mortgage debt unpaid. On 9 June 1947, Primitivo Abad, acting as attorney-in-fact of Tiburcio del Rosario, sold the parcel of land to his son Teodorico Abad for and in consideration of the token sum of P1.00 and the payment by the vendee of the mortgage debt of Tiburcio del Rosario to Primitivo Abad (Annex C, complaint, pp. 13-16, Rec. on App.). The vendee took possession of the parcel of land. Upon the filing and registration of the last deed of sale, the Registrar of Deeds in and for the province of Nueva Ecija cancelled original certificate of title No. 4820 in the name of Tiburcio del Rosario and in lieu thereof issued transfer certificate of title No. 1882 in favor of the vendee Teodorico Abad. On 29 December 1952 the plaintiffs brought suit against the defendants to recover possession and ownership of the parcel of land, damages, attorney's fees and costs. The defendants answered the complaint and prayed for the dismissal thereof, damages, attorney's fees and costs. On 25 October 1954, after the parties had submitted the case

upon a stipulation of facts, the Court rendered judgment, the dispositive part of which is: WHEREFORE, the deed of sale executed by Primitivo Abad in favor of Teodorica Abad, Annex C, is hereby declared null and void; and Teodorico Abad is hereby ordered to execute a deed of reconveyance of the land originally with OCT No. 4820, now covered by Transfer Certificate of Title No. 1880, in favor of the plaintiffs. No pronouncement as to costs. The defendants appealed to the Court of Appeals, which certified the case to this Court as no question of fact is involved. Section 116 of the Public Land Act (Act No. 2874), under which the homestead was granted to the appellees' father, provides: Lands acquired under the free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of five years from and after the date of the issuance of the patent or grant, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period; but the improvements or crops on the land may be mortgaged or pledged to qualified persons, associations, or corporations. The encumbrance or alienation of lands acquired by free patent or homestead in violation of this section is null and void.1 There is no question that the mortgage on the improvements of the parcel of land executed by Tiburcio del Rosario in favor of Primitivo Abad (Annex B, complaint, pp. 10-13, Rec. on App.) is valid. The power of attorney executed by Tiburcio del Rosario in favor of Primitivo Abad (Annex A, complaint, pp. 7-9, Rec. on App.) providing, among others, that is coupled with an interest in the subject matter thereof in favor of the said attorney and are therefore irrevocable, and . . . conferring upon my said attorney full and ample power and authority to do and perform all things reasonably necessary and proper for the due carrying out of the said powers according to the true tenor and purport of the same, . . ." does not create an agency coupled with an interest nor does it clothe the agency with an irrevocable character. A mere statement in the power of attorney that it is coupled with an interest is not enough. In what does such interest consist must be stated in the power of attorney. The fact that Tiburcio del Rosario, the principal, had mortgaged the improvements of the parcel of land to Primitivo Abad, the agent, (Annex B, complaint, pp. 10-13, Rec. on App.) is not such an interest as could render irrevocable the power of attorney executed by the principal in favor of the agent. In fact no

mention of it is made in the power of attorney. The mortgage on the improvements of the parcel of land has nothing to do with the power of attorney and may be foreclosed by the mortgagee upon failure of the mortgagor to comply with his obligation. As the agency was not coupled with an interest, it was terminated upon the death of Tiburcio del Rosario, the principal, sometime in December 1945, and Primitivo Abad, the agent, could no longer validly convey the parcel of land to Teodorico Abad on 9 June 1947. The sale, therefore, to the later was null and void. But granting that the irrevocable power of attorney was lawful and valid it would subject the parcel of land to an encumbrance. As the homestead patent was issued on 12 December 1936 and the power of attorney was executed on 24 February 1937, it was in violation of the law that prohibits the alienation or encumbrance of land acquired by homestead from the date of the approval of the application and for a term of five years from and after the issuance of the patent or grant. Appellants contend that the power of attorney was to be availed of by the agent after the lapse of the prohibition period of five years, and that in fact Primitivo Abad sold the parcel of land on 9 June 1947, after the lapse of such period. Nothing to that effect is found in the power of attorney. Appellants claim that the trial court should have directed the appellees to reimburse Teodorico Abad for what he had paid to Primitivo Abad to discharge the mortgage in the latter's favor as part of the consideration of the sale. As the sale to Teodorico Abad is null and void, the appellees can not be compelled to reimburse Teodorico Abad for what he had paid to Primitivo Abad. The former's right of action is against the latter, without prejudice to the right of Primitive Abad to foreclose the mortgage on the improvements of the parcel of land if the mortgage debt is not paid by the appellees, as heirs and successors-in-interest of the mortgagor. The judgment appealed from is affirmed, with costs against the appellants. Paras, C. J., Bengzon, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., and Endencia, JJ.,concur. G.R. No. L-31581 February 3, 1930 Estate of the deceased Gabina Labitoria. ENRIQUE M. PASNO, petitioner-appellee, vs. FORTUNATA RAVINA and PONCIANA RAVINA, oppositorsappellants.

PHILIPPINE NATIONAL BANK, appellant. Camus and Delgado for appellant National Bank. Domingo Lopez for appellee. MALCOLM, J.: There are two appeals in this case. One appeal has been taken by the oppositors to the legalization of the will of Gabina Labitoria, and concerns the validity of that will. The other appeal has been taken by the Philippine National Bank and concerns the survivability of the right of sale of the mortgaged property under special power while the mortgaged property is in custodia legis. We will deal with these appeals separately. I. ENRIQUE M. PASNO, petitioner and appellee, vs. FORTUNATA RAVINA and PONCIANO RAVINA, oppositors and appellants. Validity of Gabina Labitoria's will. As the stenographic notes have not been written up and elevated to this court, any discussion of the evidence is rendered impossible. The single question to be decided is whether the admitted fact that the will was executed on July 27, 1928, although stating that it was executed on February 6, 1926, invalidates the will. As said by the trial judge, the reason for the error was on account of the will being in great part a reproduction of another will of February 6, 1926, and inadvertently retaining this date. Section 618, as amended, of the Code of Civil Procedure prescribes the requisites necessary to the execution of a valid will. The law does not require that the will shall be dated. Accordingly, a will without a date is valid. So likewise an erroneous date will not defeat a will. (Wright vs. Wright [1854], 5 Ind., 389; Peace vs. Edwards [1915], 170 N. C., 64; Ann. Cas. 1918-A, 778; L. R. A. 1916-E, 501 note.) It results that the trial judge was right in admitting the will of Gabina Labitoria to probate. II. ENRIQUE M. PASNO, petitioner and appellee, vs. PHILIPPINE NATIONAL BANK, appellant. Right of the mortgagee, the Philippine National Bank, to foreclose the mortgage in its favor executed by Gabina Labitoria during her lifetime now that the mortgaged property is in the hands of an administrator. The facts are not in dispute. Gabina Labitoria during her lifetime mortgaged three parcels of land to the Philippine National Bank to secure an indebtedness of P1,600. It was stipulated in the mortgage, among other things, that the mortgagee "may remove, sell or dispose of the mortgaged property or any buildings, improvements or other property in, on or attached to it and belonging to the mortgagor in accordance with the provisions of

Act No. 3135 or take other legal action that it may deem necessary." The mortgagor died, and a petition was presented in court for the probate of her last will and testament. During the pendency of these proceedings, a special administrator was appointed by the lower court who took possession of the estate of the deceased, including the three parcels of land mortgaged to the Philippine National Bank. The estate having failed to comply with the conditions of the mortgage, the Philippine National Bank, pursuant to the stipulations contained in the same, asked the sheriff of Tayabas to proceed with the sale of the parcels of land. When the attorney for the special administrator received notice of the proposed action, he filed a motion in court in which an order was asked requiring the sheriff to vacate the attachment over the mortgaged properties and to abstain from selling the same. The lower court granted the petition in an order of February 14, 1929, and later denied a motion for reconsideration presented on behalf of the Philippine National Bank. The mortgage makes special reference to Act No. 3135. That Act is one to regulate the sale of property under special powers inserted in or annexed to real-estate mortgages. It fails to make provision regarding the sale of mortgaged property which is in custodia legis. Under these circumstances, it would be logical to suppose that the general provisions of Philippine law would govern this latter contingency. It is a familiar rule that statutes in pari materia are to be read together. The legislative body which enacted Act No. 3135 must be presumed to have been acquainted with the provisions of such a well known law as the Code of Civil Procedure and to have passed Act No. 3135 with reference thereto. The appellant practically concedes that the law applicable to the case is section 708 of the Code of Civil Procedure. The cited section reads: "A creditor holding a claim against the deceased, secured by mortgage or other collateral security, may abandon the security and prosecute his claim before the committee, and share in the general distribution of the assets of the estate; or he may foreclose his mortgage or realize upon his security, by ordinary action in court, making the executor or administrator a party defendant; and if there is a judgment for a deficiency, after the sale of the mortgaged premises, or the property pledged, in the foreclosure or other proceeding to realize upon the security, he may prove his deficiency judgment before the committee against the estate of the deceased; or he may rely upon his mortgage or other security alone, and foreclose the same at any time, within the

period of the statute of limitations, and in that even he shall not be admitted as a creditor, and shall receive no share in the distribution of the other assets of the estate; but nothing herein contained shall prohibit the executor or administrator from redeeming the property mortgaged or pledged, by paying the debt for which it is held as security, under the direction of the court, if the court shall adjudge it to be for the best interest of the estate that such redemption shall be made." In this connection, it is to be noted that the law provides two remedies (Osorio vs. San Agustin [1913], 25 Phil., 404). The creditor here is not taking advantage of the first remedy for the mortgage security has not been abandoned. Rather is the second remedy invoked but until now unsuccessfully since the mortgagee has not begun an ordinary action in court to foreclose the mortgage making the special administrator a party defendant. The power of sale given in a mortgage is a power coupled with an interest which survives the death of the grantor. One case, that of Carter vs. Slocomb ([1898], 122 N. C., 475), has gone so far as to hold that a sale after the death of the mortgagor is valid without notice to the heirs of the mortgagor. However that may be, conceding that the power of sale is not revoked by the death of the mortgagor, nevertheless in view of the silence of Act No. 3135 and in view of what is found in section 708 of the Code of Civil Procedure, it would be preferable to reach the conclusion that the mortgagee with a power of sale should be made to foreclose the mortgage in conformity with the procedure pointed out in section 708 of the Code of Civil Procedure. That would safeguard the interests of the estate by putting the estate on notice while it would not jeopardize any rights of the mortgagee. The only result is to suspend temporarily the power to sell so as not to interfere with the orderly administration of the estate of a decedent. A contrary holding would be inconsistent with the portion of our law governing the settlement of estates of deceased persons. It results that the trial judge committed no error in sustaining the petition of the administrator of the estate of the deceased Gabina Labitoria and in denying the motion of the Philippine National Bank. Agreeable to the foregoing pronouncements, the judgment and orders appealed from will be affirmed, with one-half of the costs of this instance against the oppositors and appellants Fortunata Ravina and Ponciano Ravina, and the other half of the costs of this instance against the Philippine National Bank. Johnson, Johns, Romualdez and Villa-Real, JJ., concur.

Separate Opinions STREET, VILLAMOR, and OSTRAND, JJ., concurring and dissenting: We concur in so much of the opinion of the court in this case as is concerned with the probate of the will of Gabina Labitoria, but are unable to concur in the second part of the decision wherein it is held that, after the death of the mortgagor, the mortgage can only be foreclosed in an ordinary action in court even though it may contain a clause expressly conferring upon the mortgagee the power to sell the property extrajudicially. It is our opinion that, under such a power, the sale may be proceeded with under the provisions of Act No. 3135, which is expressly referred to in the mortgage now under consideration. The decisions of English and American courts are almost unanimous to the effect that a power of sale contained in a mortgage is a power coupled with an interest and is not revoked by the mortgagor's death. In the titleMortgages, in 41 C. J., p. 927, decisions from Great Britain and nearly twenty American States are cited to this proposition; and the contrary rule, adopted in one or two American States, is so opposed to the current of authority as to be entitled to no weight. The opinion of the court refers to section 708 of the Code of Civil Procedure as determining the proposition that, after the death of the mortgagor, foreclosure can be effected only by an ordinary action in court; but if this section be attentively examined, it will be seen that the bringing of an action to foreclose is necessary only when the mortgagee wishes to obtain a judgment over for the deficiency remaining unpaid after foreclosure is effected. In fact this section gives to the mortgagee three distinct alternatives, which are, first, to waive his security and prove his credit as an ordinary debt against the estate of the deceased; secondly, to foreclose the mortgage by ordinary action in court and recover any deficiency against the estate in administration; and, thirdly, to foreclose without action at any time within the period allowed by the statute of limitations. The third mode of procedure is indicated in that part of section 708 which is expressed in these words: Or he may reply upon his mortgage or other security alone, and foreclose the same at any time, within the period of the statute of limitations, and in that event he shall not be admitted as a creditor, and shall receive no share in the

distribution of the other assets of the estate. The alternative here contemplated is, evidently, a foreclosure under power of sale contained in the mortgage. It must be so, since there are no other modes of foreclosure known to the law than by ordinary action and foreclosure under power, and the procedure by action is covered in that part of section 708 which immediately precedes the words which we have quoted above. It will be noted that the result of adopting the last mode of foreclosure is that the creditor waives his right to recover any deficiency from the estate. In addition to what is said above, we submit that the policy of the court in requiring foreclosure by action in case of the death of a mortgagor, where a power of sale is inserted in the mortgage, will prove highly prejudicial to the estates of deceased mortgagors. Nowadays nearly every mortgage executed in this country contains a stipulation for the payment of attorney's fees and expenses of foreclosure, usually in an amount not less than 20 or 25 per cent of the mortgage debt. This means, in practical effect, that the creditor can recover, for attorney's fees and expenses, whatever the court will allow as reasonable, within the stipulated limit. On the other hand, if an extrajudicial foreclosure is effected under the power of sale, the expenses of foreclosure are limited to the cost of advertising and other actual expenses of the sale, not including the attorney's fee. Again, if foreclosure is effected extrajudicially under the power, in conformity with the provisions of Act No. 3135, the mortgagor or his representative has a full year, from the date of the sale, within which to redeem the property, this being the same period of time that is allowed to judgment debtors for redeeming after sale under execution. On the other hand, the provisions of the Code of Civil Procedure relative to the foreclosure of mortgages by action allows no fixed period for redemption after sale; and although, in the closing words of section 708 of the Code of Civil Procedure the court is authorized to permit the administrator to redeem mortgaged property, this evidently refers to redemption to be effected before the foreclosure becomes final. When account is further taken of the fact that a creditor who elects to foreclose by extrajudicial sale waives all right to recover against the estate of the deceased debtor for any deficiency remaining unpaid after the sale, it will be readily seen that the decision in this case will impose a burden upon the estates of deceased persons who have mortgaged real property for the security of debts, without any compensatory advantage.

We permit ourselves to make one more suggestion, which is that the courts ought to be friendly to the provisions of law relating to mortgages, and they should not, by strict interpretation, deprive the mortgagee of any right fairly deducible from the contract. In this country the contract of sale with pacto de retro, as used in lieu of the mortgage, has an almost uncontrollable vogue, undoubtedly due to the defects of our laws relating to mortgages, and the slender reliance that can be placed upon them. And as long as the attitude of the Legislature and the courts remains unfriendly to the mortgage, to that extent the day is postponed when borrowers, upon the security of real property, can be freed from the dangers incident to the contract of sale with pacto de retro.

G.R. No. L-21813 July 30, 1966 AMPARO G. PEREZ, ET AL., plaintiffs and appellees, vs. PHILIPPINE NATIONAL BANK, Binalbagan Branch, ET AL., defendants and appellants. Tomas Besa and A. Galang for defendants and appellants. Jose U. Carbonell and Celso B. Zamora for plaintiffs and appellees. REYES, J.B.L., J.: Appeal from a decision, in Civil Case No. 100 of the Court of First Instance of Negros Occidental, annulling the extra-judicial foreclosure sale of Lot No. 286-E of the Kabankalan Cadastre, standing in the name of Vicente Perez, in favor of the Philippine National Bank, as well as the cancellation of the mortgagor's Original Certificate of Title No. 29530 and the issuance of a new Certificate T-32066 in the Bank's name; and ordering the said Bank to pay the heirs of Vicente Perez P3,000 damages and P2,000 attorney's fees, and costs. The antecedents of the case were as follows: On August 29, 1939, Vicente Perez mortgaged Lot No. 286-E of the Kabankalan Cadastre, with Transfer certificate of Title No. 29530, to the appellant Philippine National Bank, Bacolod Branch, in order to secure payment of a loan of P2,500, plus interest, payable in yearly installments. On October 7, 1942, Vicente Perez, mortgagor, died intestate, survived by his widow and children (appellees herein). At that time, there was an outstanding balance of P1,917.00, and corresponding interest, on the mortgage indebtedness.

On October 18, 1956, the widow of Perez instituted Special Proceedings No. 512 of the Court of First Instance of Occidental Negros for the settlement of the estate of Vicente Perez. The widow was appointed Administratrix and notice to creditors was duly published. The Bank did not file a claim. The project of partition was submitted on July 18, 1956; it was approved and the properties distributed accordingly. Special Proceedings No. 512 was then closed. It appears also that, as early as March of 1947, the widow of the late Vicente Perez inquired by letter from the Bank the status of her husband's account; and she was informed that there was an outstanding balance thereon of P2,758.84 earning a daily interest of P0.4488. She was furnished a copy of the mortgage and, on April 2, 1947, a copy of the Tax Declaration (Rec. App. pp. 45-48). On January 2, 1963, the Bank, pursuant to authority granted it in the mortgage deed, caused the mortgaged properties to be extrajudicially foreclosed. The Provincial Sheriff accordingly sold Lot No. 286-E at auction, and it was purchased by the Bank. In the ordinary course after the lapse of the year of redemption, Certificate of Title No. T-29530 in the name of Vicente Perez was cancelled, and Certificate T-32066, dated May 11, 1962, was issued in the name of the Bank. The widow and heirs were not notified. Three months later, on August 15, 1962, the widow and heirs of Vicente Perez instituted this case against the Bank in the court below, seeking to annul the extra-judicial foreclosure sale and the transfer of the Certificate of Title as well as to recover damages, claiming that the Bank had acted illegally and in bad faith. The Bank answered, denying the charges. After trial, the court a quo, on December 15, 1962, rendered judgment holding that, according to the doctrine of this Supreme Court in Pasno vs. Ravina 54 Phil. 382, the Bank should have foreclosed its mortgage in court; that the power to sell contained in the deed of mortgage had terminated upon the death of the mortgagor, Vicente Perez. Wherefore, the trial court declared null and void the extra-judicial foreclosure sale to the Bank, as well as the cancellation of the Certificate of Title of Vicente Perez and issuance in it's stead of a new certificate in the name of the Bank, and ordered the latter to pay the plaintiffs P3,000 damages and P2,000 attorney's fees and cost. The Bank appealed to this Supreme Court. The main issue in this appeal is the application of section 7, Rule 87, of the original Rules of Court adopted in 1941 (now Section 7,
1wph1.t

Rule 68, of the 1964 Revised Rules), and which was, in turn, a reproduction of section 708 of the Code of Civil Procedure (Act 190). The text is as follows: SEC. 7. Mortgage debt due from estate. A creditor holding a claim against the deceased secured by mortgage or other, collateral security, may abandon the security and prosecute his claim in the manner provided in this rule, and share in the general distribution of the assets of the estate; or he may foreclose his mortgage or realize upon his security, by action in court, making the executor or administrator a party defendant, and if there is a judgment for a deficiency, after the sale of the mortgaged premises, or the property pledged, in the foreclosure or other proceeding to realize upon the security, he may claim his deficiency judgment in the manner provided in the preceding section; or he may rely upon his mortgage other security alone, and foreclose the same at any time within the period of the statute of limitations, and in that event he shall not be admitted as a creditor and shall receive no share in the distribution of the other assets of the estate, but nothing herein contained shall prohibit the executor or administrator from redeeming the property mortgaged or pledged, by paying the debt for which it is held as security, under the direction of the court, if the court shall adjudge it to be for the best interest of the estate that such redemption shall be made. The lower court held that the Rule inhibits any extrajudicial foreclosure of the mortgage constituted by a deceased debtormortgagor, following the majority opinion of five justices in Pasno vs. Ravina, 54 Phil. 382 said the Court in that case (382): The power of sale given in a mortgage is a power coupled with an interest which survives the death of the grantor. One case, that of Carter vs. Slocomb ([1898], 122 N.C., 475), has gone so far as to hold that a sale after the death of the mortgagor is valid without notice to the heirs of the mortgagor. However that may be, conceding that the power of sale is not revoked by the death of the mortgagor, nevertheless in view of the silence of Act No. 3135 and in view of what is found in section 708 of the Code of Civil Procedure, it would be preferable to reach the conclusion that the mortgage with a power of sale should be made to foreclose the mortgage in conformity with the procedure pointed out in section 708 of the Code of Civil Procedure. That would safeguard the interests of the estate by putting

the estate on notice while it would not jeopardize any rights of the mortgagee. The only result is to suspend temporarily the power to sell so as not to interfere with the orderly administration of the estate of a decedent. A contrary holding would be inconsistent with the portion of the settlement of estates of deceased persons. A vigorous and able dissenting opinion, subscribed by Justices Street, Villamor and Ostrand, held that an extrajudicial foreclosure was authorized (cas. cit. pp. 383-385). The dissent argues: The opinion of the Court refers to section 708 of the Code of Civil Procedure as determining the proposition that, after the death of the mortgagor, foreclosure can be effected only by an ordinary action in court; but if this section be attentively examined, it will be seen that the bringing of an action to foreclose is necessary only when the mortgagee wishes to obtain a judgment over for the deficiency remaining unpaid after foreclosure is effected. In fact this section gives to the mortgagee three distinct alternatives, which are first, to waive his security and prove his credit as an ordinary debt against the estate of the deceased; secondly to foreclose the mortgage by ordinary action in court and recover any deficiency against the estate in administration; and, thirdly, to foreclose without action at any time within the period allowed by the statute of limitations. The third mode of procedure is indicated in that part of section 708 which is expressed in these words: "Or he may rely upon his mortgage or other security alone, and foreclose the same at any time, within the period of the statute of limitations, and in that event he shall not be admitted as a creditor, and shall receive no share in the distribution of the other assets of the estate." The alternative here contemplated is, evidently, foreclosure under power of sale contained in the mortgage. It must be so, since there are no other modes of foreclosure known to the law than by ordinary action and foreclosure under power, and the procedure by action is covered in that part of section 708 which immediately precedes the words which we have quoted above. It will be noted that the result of adopting the last mode of foreclosure is that the creditor waives his right to recover any deficiency from the estate. In addition to what is said above, we submit that the policy of the court in requiring foreclosure by action in case of the

death of a mortgagor, where a power of sale is inserted in the mortgage, will prove highly prejudicial to the estates of deceased mortgagors. Nowadays nearly every mortgage executed in this country contains a stipulation for the payment of attorney's fees and expenses of foreclosure, usually in an amount not less than 20 or 25 per cent of the mortgage debt. This means, in practical effect, that the creditor can recover, for attorney's fee and expenses, whatever the Court will allow a reasonable, within the stipulated limit. On the other hand, if an extra-judicial foreclosure is effected under the power of sale, the expenses of foreclosure are limited to the cost of advertising and other actual expenses of the sale, not including the attorney's fee. Again, if foreclosure is effected extrajudicially, under the power, in conformity with the provisions of Act No. 3135, the mortgagor or his representative has a full year, from the date of the sale, within which to redeem the property, this being the same period of time that is allowed to judgment debtors for redeeming after sale under execution. On the other hand, the provisions of the Code of Civil Procedure relative to the foreclosure of mortgages by action allows no fixed period for redemption after sale; and although, in the closing words of section 708 of the Code of Civil Procedure the court is authorized to permit the administrator to redeem mortgaged property, this evidently refers to redemption to be effected before the foreclosure becomes final. When account is further taken of the fact that a creditor who elects to foreclose by extrajudicial sale waives all right to recover against the estate of the deceased debtor for any deficiency remaining unpaid after the sale, it will be readily seen that the decision in this case will impose a burden upon the estates of deceased persons who have mortgaged real property for the security debts, without any compensatory advantage. The ruling in Pasno vs. Ravina not having been reiterated in any other case, We have carefully reexamined the same after mature deliberation have reached the conclusion that the dissenting opinion is more in conformity with reason and law. Of the three alternative courses that section 7, Rule 87 (now Rule 86), offers the mortgage creditor, to wit, (1) to waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim; (2) to foreclose the mortgage judicially and prove any deficiency as an ordinary claim; and (3) to rely on the mortgage

exclusively, foreclosing the same at any time before it is barred by prescription, without right to file a claim for any deficiency, the majority opinion in Pasno vs. Ravina, in requiring a judicial foreclosure, virtually wipes out the third alternative conceded by the Rules to the mortgage creditor, and which would precisely include extra-judicial foreclosures by contrast with the second alternative. This result we do not consider warranted by the text of the Rules; and, in addition, the recognition of creditor's right to foreclose extra-judicially presents undoubted advantages for the estate of the mortgagor, as pointed out by the dissenting opinion inPasno vs. Ravina, supra. In the light of these considerations, we have decided to overrule the majority decision in said case, and uphold the right of the mortgage creditor to foreclose extrajudicially in accordance with section 7, Rule 86, of the Revised Rules (old Rule 87). The argument that foreclosure by the Bank under its power of sale is barred upon death of the debtor, because agency is extinguished by the death of the principal, under Article 1732 of the Civil Code of 1889 and Article 1919 of the Civil Code of the Philippines, neglects to take into account that the power to foreclose is not an ordinary agency that contemplates exclusively the representation of the principal by the agent but is primarily an authority conferred upon the mortgagee for the latter's own protection. It is, in fact, an ancillary stipulation supported by the same causa or consideration for the mortgage and forms an essential and inseparable part of that bilateral agreement. As can be seen in the preceding quotations from Pasno vs. Ravina, 54 Phil. 382, both the majority and the dissenting opinions conceded that the power to foreclose extrajudicially survived the death of the mortgagor, even under the law prior to the Civil Code of the Philippines now in force. Nevertheless, while upholding the validity of the appellant Bank's foreclosure, We can not close our eyes to the fact that the Bank was apprised since 1947 of the death of its debtor, Vicente Perez, yet it failed and neglected to give notice of the foreclosure to the latter's widow and heirs as expressly found by the court a quo. Such failure, in effect, prevented them from blocking the foreclosure through seasonable payment, as well as impeded their effectuating a seasonable redemption. In view of these circumstances, it is our view that both justice and equity would be served by permitting herein appellees to redeem the foreclosed property within a reasonable time, by paying the capital and interest of the indebtedness up to the time of redemption, plus

foreclosure and useful expenses, less any rents and profits obtained by the Bank from and after the same entered into its possession. Wherefore, the judgment appealed from is hereby modified, as follows: (1) Declaring valid and effective the extra-judicial foreclosure of the mortgage over Lot 286-E of the Kabankalan Cadastre; (2) Upholding and confirming the cancellation of Transfer Certificate of Title No. 29350 of the Registry of Deeds of Occidental Negros in the name of the late Vicente Perez, as well as its replacement by Certificate of Title T-32066 of the same Registry in the name of appellant Philippine National Bank; (3) Declaring the appellees herein, widow and other heirs of Vicente Perez entitled to redeem the property in question by paying or tendering to the Bank the capital of the debt of Vicente Perez, with the stipulated interest to the date of foreclosure, plus interest thereafter at 12% per annum; and reimbursing the Bank the value of any useful expenditures on the said property but deducting from the amounts thus payable the value of any rents and profits derived by the appellee National Bank from the property in question. Such payment to be made within sixty (60) days after the balance is determined by the court of origin. Neither party to recover damages or costs. Let the records be returned to the court of origin for further proceedings in conformity with this decision. So ordered. Concepcion, C.J., Barrera, Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur.