1
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-7144 May 31, 1955
FAR EASTERN EXPORT & IMPORT CO., petitioner,
vs.
LIM TECK SUAN, respondent.
Juan Nabong and Crisolito Pascual for petitioner.
Jose P. Laurel, Marciano Almario and Jose T. Lojom for
respondent.
MONTEMAYOR, J.:
This is a petition for certiorari to review a decision of the
Court of Appeals dated September 25, 1953, reversing the
decision of the Court of First Instance of Manila, and
sentencing the defendant-petitioner Far Eastern Export &
Import Co. later referred to as export company, to pay the
plaintiff-respondent Lim Teck Suan later to be referred to as
Suan, the sum of P11,4476.60, with legal interest from the
date of the filing of the complaint and to pay the costs.
As to the facts and the issue in the case we are reproducing
the findings of the Court of Appeals, which findings are
binding on this Tribunal in case of similar appeals:
Sometime in November, 1948, Ignacio Delizalde, an agent of
the Far Eastern Export & Import Company, went to the store
of Lim Teck Suan situated at 267 San Vicente Street, Manila,
and offered to sell textile, showing samples thereof, and
having arrived at an agreement with Bernardo Lim, the
General Manager of Lim Teck Suan, Delizalde returned on
November 17 with the buyer's order, Exhibit A, already
prepared which reads:
FAR EASTERN EXPORT & IMPORT COMPANY
75 Escolta 2nd Floor Brias Roxas Bldg., Manila
Ship to LIM TECK SUAN Date Written 11/17/48
475 Nueva St., Manila Your No.
Our No. 276
I hereby commission you to procure for me the following
merchandise, subject to the terms and conditions listed
below:
==================================================
====
Quantity Unit Particulars Amount
10,000 yds Ashtone Acetate & Rayon-No. 13472
Width: 41/42 inches; Weight:
Approximately 8 oz. per yd; Ten (10)
colors, buyers choice, as per attached
samples, equally assorted; at $1.13
per yard F.A.S. New York U. S. $11,500.00
Item herein sold are FOB-FAS X C. & F
CIF
==================================================
====
TERMS AND CONDITIONS
Acceptance
This Buyer's Order is subject to confirmation by the exporter.
Shipment
Period of Shipment is to be within December. Bank
Documents should be for a line of 45 days to allow for
presentation and payment against "ON BOARD" bills of
lading. Partial shipments permitted.
Payment
Payment will be by "Confirmed Irrevocable Letter of Credit"
to be opened in favor of Frenkel International Corporation, 52
Broadway, New York, 4, N. Y. for the full amount of the above
cost of merchandise plus (approximately) for export packing:
insurance, freight, documentation, forwarding, etc. which are
for the buyers accounts, IMMEDIATELY upon written
Confirmation. Our Guarantee In case shipment is not
affected, seller agrees to reimburse buyer for all banking
expenses. Confirmed Accepted
Signed Nov. 17, 1948
Authorized official
Confirmed
Accepted (Sgd.) Illegible Date Nov. 1948 to be signed by our
representative upon confirmation.
In accordance with said Exhibit A, plaintiff established a letter
of credit No. 6390 (Exhibit B) in favor of Frenkel International
Corporation through the Hongkong and Shanghai Bangking
Corporation, attached to the agreed statement of facts. On
February 11, 1949, the textile arrived at Manila on board the
vessel M. S. Arnold Maersk, covered by bill of lading No. 125
(Exhibit C), Invoice No. 1684-M (Exhibit D) issued by Frenkel
International Corporation direct to the plaintiff. The plaintiff
complained to the defendant of the inferior quality of the
textile received by him and had them examined by Marine
Surveyor Del Pan & Company. Said surveyor took swatches of
the textile and had the same analyzed by the Institute of
Science (Exhibit E-1) and submitted a report or survey under
date of April 9, 1949 (Exhibit E). Upon instructions of the
defendants plaintiff deposited the goods with the United
Warehouse Corporation (Exhibits H, H-1 to H-6. As per
suggestion of the Far Eastern Export and Import Company
contained in its letter dated June 16, 1949, plaintiff withdrew

from the United Bonded Warehouse, Port Area, Manila, the
fifteen cases of Ashtone Acetate and Rayon Suiting for the
purpose of offering them for sale which netted P11,907.30.
Deducting this amount from the sum of P23,686.96 which
included the amount paid by plaintiff for said textile and the
warehouse expenses, a difference of P11,476.66 is left,
representing the net direct loss.
The defense set up is that the Far Eastern Export and Import
Company only acted as a broker in this transaction; that after
placing the order the defendants took no further action and
the cargo was taken directly by the buyer Lim Teck Suan, the
shipment having been made to him and all the documents
were also handled by him directly without any intervention
on the part of the defendants; that upon receipt of Lim Teck
Suan's complaint the defendants passed it to its principal,
Frenkel International Corporation, for comment, and the
latter maintained that the merchandise was up to standard
called for.
The lower court acquitted the defendants from the complaint
asking for damages in the sum of P19,500.00 representing the
difference in price between the textile ordered and those
received, plus profits unrealized and the cost of this suit, and
dismissed the counterclaim filed by the defendants without
pronouncement as to costs.
As already stated, the Court of Appeals reversed the
judgment entered by the Court of First Instance of Manila,
basing its decision of reversal on the case of Jose Velasco, vs.
Universal Trading Co., Inc., 45 Off. Gaz. 4504 where the
transaction therein involved was found by the court to be one
of purchase and sale and not of brokerage or agency. We
have carefully examined the Velasco case and we agree with
the Court of Appeals that the facts in that case are very
similar to those in the present case. In the case of Velasco, we
have the following statement by the court itself which we
reproduced below:
Prior to November 8, 1945 a salesman or agent of the
Universal Trading Co., Inc. informed Jose Velasco, Jr. that his
company was in a position to accept and fill in orders for
Panamanian Agewood Bourbon Whisky because there were
several thousand cases of this article ready for shipment to
the company by its principal office in America. Acting upon
this offer and representative Velasco went to the Universal
Trading Co., Inc., and after a conversation with the latter's
official entered into an agreement couched in the following
terms:
"Agreement is hereby made between Messrs. Jose Velasco,
Jr., 340 Echaque, Manila, and the Universal Trading Company,
Manila, for order as follows and under the following terms:
Quantity Merchan
dise and Unit Unit Amount
Price
Description
100 Panamanian Agewood Bourbon
2
Whisky ..........................Case $17.00 $1,700
_______
Total amount of order ........... $1,700
Terms of Agreement:
"1. That the Universal Trading Company agrees to order the
above merchandise from their Los Angeles Office at the price
quoted above, C.I.F. Manila, for December shipment;
"2. That Messrs. Jose Velasco, Jr., 340 Echaque, Manila,
obligates myself/themselves to take the above merchandise
when advised of its arrival from the United States and to pay
in cash the full amount of the order in the Philippine Currency
at the office of the Universal Trading Company;
"3. This order may be subject to delay because of uncertain
shipping conditions. War risk insurance, transhipping charges,
if any, port charges, and any storage that may be incurred
due to your not taking delivery of the order upon being
notified by us that the order is ready for delivery, and
government taxes, are all for your account;
"4. The terms of this agreement will be either of the
following:
"a. To open up irrevocable letter of credit for the value of the
order with any of the local banks, or thru bills of lading
payable to A. J. Wilson Company, 1263 South North Avenue,
Los Angeles, California;
"b. To put up a cash deposit equivalent to 50 % of the order;
"5. Reasonable substitute, whenever possible, will be shipped
in lieu of items called for, if order is not available."
Accordingly, Velasco deposited with the defendant the sum
of $1,700 which is 50% of the price of the whisky pursuant to
agreement made, instead of 'to open up irrevocable letter of
credit for the value of the order with any of the local banks,
or through bills of lading payable to A. J. Wilson Company.'
On November 6, 1945, the same date that the contract or
agreement, Exhibit A, was signed an invoice under the name
of the Universal Trading Co., Inc. was issued to Velasco for
the 100 cases of Panamanian Agewood Bourbon Whisky for
the price of $1,700 which invoice manifested that the article
was sold to Jose Velasco, Jr. On January 15, 1946 another
invoice was issued containing besides the list price of $1,700
or P3,400, a statement of bank charges, customs duties,
internal revenue taxes, etc., giving a total amount of
P5,690.10 which after deducting the deposit of $1,700, gives
a balance of P3,990.01.
On January 25, 1946 the Universal Trading Co., Inc. wrote
Exhibit 4 to Mr. Velasco advising him that the S. S. Manoeran
had docked and that they would appreciate it if he would pay
the amount of P3,990.10 direct to them. It turned out,
however, that after the ship arrived, what the Universal
Trading Co., Inc. tried to deliver to Velasco was not
Panamanian Agewood Bourbon Whisky but Panamanian
Agewood Blended Whisky. Velasco refused to receive the
 3

shipment and in turn filed action against the defendant for

the return of his deposit of $ 1,700 with interest. For its As was held by this Tribunal in the case of Gonzalo Puyat &
defense, defendant contends that it merely acted as agent for Sons Incorporated vs. Arco Amusement, 72 Phil., 402, where
Velasco and could not be held responsible for the a foreign company has an agent here selling its goods and
substitution of Blended Whisky for Bourbon Whisky and that merchandise, that same agent could not very well act as
furthermore the Blended Whisky was a reasonable substitute agent for local buyers, because the interests of his foreign
for Bourbon. After due hearing the Court of First Instance of principal and those of the buyer would be in direct conflict.
Manila held that the transaction was purchase and sale and He could not serve two masters at the same time. In the
ordered the defendant to refund to the plaintiff his deposit of present case, the Export company being an agent of the
P1,700 with legal interest from the date of the filing of the Frenkel International Corporation could not, as it claims, have
suit with costs, which decision on appeal was affirmed by this acted as an agent or broker for Suan.
Court.
Finding no reversible error in the decision appealed from, the
We notice the following similarities. In the present case, the same is hereby affirmed, with costs.
export company acted as agent for Frenkel International
Corporation, presumably the supplier of the textile sold. In Pablo, Bengzon, Reyes, A., Bautista Angelo, Labrador,
the Velasco case, the Universal Trading Co., was acting as Concepcion, and Reyes, J. B. L., JJ., concur.
agent for A. J. Wilson Company, also the supplier of the
whisky sold. In the present case, Suan according to the first
part of the agreement is said merely to be commissioning the The Lawphil Project - Arellano Law Foundation
Export Company to procure for him the merchandise in
question, just as in the other case, Velasco was supposed to
be ordering the whisky thru the Universal Trading Co. In the ========================
present case, the price of the merchandise bought was paid
for by Suan by means of an irrevocable letter of credit
opened in favor of the supplier, Frenkel International
Corporation. In the Velasco case, Velasco was given the
choice of either opening a similar irrevocable letter of credit
in favor of the supplier A. J. Wilson Company or making a
cash deposit. It is true that in the Velasco case, upon the
arrival of the whisky and because it did not conform to
specifications, Velasco refused to received it; but in the
present case although Suan received the merchandise he
immediately protested its poor quality and it was deposited
in the warehouse and later withdrawn and sold for the best
price possible, all at the suggestion of the Export company.
The present case is in our opinion a stronger one than that of
Velasco for holding the transaction as one of purchase and
sale because as may be noticed from the agreement (Exhibit
"A"), the same speaks of the items (merchandise) therein
involved as sold, and the sale was even confirmed by the
Export company. In both cases, the agents Universal Trading
Co. and the export company dealt directly with the local
merchants Velasco and Suan without expressly indicating or
revealing their principals. In both cases there was no privity
of contract between the buyers Suan and Velasco and the
suppliers Frenkel International Corporation and A. J. Wilson
Company, respectively. In both cases no commission or
monetary consideration was paid or agreed to be paid by the
buyers to the Export company and the Universal Trading Co.,
proof that there was no agency or brokerage, and that the
profit of the latter was undoubtedly the difference between
the price listed to the buyers and the net or special price
quoted to the sellers, by the suppliers. As already stated, it
was held in the Velasco case that the transaction therein
entered into was one of purchase and sale, and for the same
reasons given there, we agreed with the Court of Appeals
that the transaction entered into here is one of purchase and
sale.

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Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-21601 December 17, 1966
NIELSON & COMPANY, INC., plaintiff-appellant,
vs.
LEPANTO CONSOLIDATED MINING COMPANY, defendant-
appellee.
W. H. Quasha and Associates for plaintiff-appellant.
Ponce Enrile, Siguion-Reyna, Montecillo and Belo for
defendant-appellee.
ZALDIVAR, J.:
On February 6, 1958, plaintiff brought this action against
defendant before the Court of First Instance of Manila to
recover certain sums of money representing damages
allegedly suffered by the former in view of the refusal of the
latter to comply with the terms of a management contract
entered into between them on January 30, 1937, including
attorney's fees and costs.
Defendant in its answer denied the material allegations of the
complaint and set up certain special defenses, among them,
prescription and laches, as bars against the institution of the
present action.
After trial, during which the parties presented testimonial
and numerous documentary evidence, the court a quo
rendered a decision dismissing the complaint with costs. The
court stated that it did not find sufficient evidence to
establish defendant's counterclaim and so it likewise
dismissed the same.
The present appeal was taken to this Court directly by the
plaintiff in view of the amount involved in the case.
The facts of this case, as stated in the decision appealed from,
are hereunder quoted for purposes of this decision:
It appears that the suit involves an operating agreement
executed before World War II between the plaintiff and the
defendant whereby the former operated and managed the
mining properties owned by the latter for a management fee
of P2,500.00 a month and a 10% participation in the net
profits resulting from the operation of the mining properties.
4
For brevity and convenience, hereafter the plaintiff shall be
referred to as NIELSON and the defendant, LEPANTO.
The antecedents of the case are: The contract in question
(Exhibit `C') was made by the parties on January 30, 1937 for
a period of five (5) years. In the latter part of 1941, the
parties agreed to renew the contract for another period of
five (5) years, but in the meantime, the Pacific War broke out
in December, 1941.
In January, 1942 operation of the mining properties was
disrupted on account of the war. In February of 1942, the
mill, power plant, supplies on hand, equipment, concentrates
on hand and mines, were destroyed upon orders of the
United States Army, to prevent their utilization by the
invading Japanese Army. The Japanese forces thereafter
occupied the mining properties, operated the mines during
the continuance of the war, and who were ousted from the
mining properties only in August of 1945.
After the mining properties were liberated from the Japanese
forces, LEPANTO took possession thereof and embarked in
rebuilding and reconstructing the mines and mill; setting up
new organization; clearing the mill site; repairing the mines;
erecting staff quarters and bodegas and repairing existing
structures; installing new machinery and equipment;
repairing roads and maintaining the same; salvaging
equipment and storing the same within the bodegas; doing
police work necessary to take care of the materials and
equipment recovered; repairing and renewing the water
system; and remembering (Exhibits "D" and "E"). The
rehabilitation and reconstruction of the mine and mill was
not completed until 1948 (Exhibit "F"). On June 26, 1948 the
mines resumed operation under the exclusive management
of LEPANTO (Exhibit "F-l").
Shortly after the mines were liberated from the Japanese
invaders in 1945, a disagreement arose between NIELSON
and LEPANTO over the status of the operating contract in
question which as renewed expired in 1947. Under the terms
thereof, the management contract shall remain in suspense
in case fortuitous event or force majeure, such as war or civil
commotion, adversely affects the work of mining and milling.
"In the event of inundations, floodings of mine, typhoon,
earthquake or any other force majeure, war, insurrection,
civil commotion, organized strike, riot, injury to the
machinery or other event or cause reasonably beyond the
control of NIELSON and which adversely affects the work of
mining and milling; NIELSON shall report such fact to
LEPANTO and without liability or breach of the terms of this
Agreement, the same shall remain in suspense, wholly or
partially during the terms of such inability." (Clause II of
Exhibit "C").
NIELSON held the view that, on account of the war, the
contract was suspended during the war; hence the life of the
contract should be considered extended for such time of the
period of suspension. On the other hand, LEPANTO

contended that the contract should expire in 1947 as
originally agreed upon because the period of suspension
accorded by virtue of the war did not operate to extend
further the life of the contract.
No understanding appeared from the record to have been
bad by the parties to resolve the disagreement. In the
meantime, LEPANTO rebuilt and reconstructed the mines and
was able to bring the property into operation only in June of
1948, . . . .
Appellant in its brief makes an alternative assignment of
errors depending on whether or not the management
contract basis of the action has been extended for a period
equivalent to the period of suspension. If the agreement is
suspended our attention should be focused on the first set of
errors claimed to have been committed by the court a quo;
but if the contrary is true, the discussion will then be
switched to the alternative set that is claimed to have been
committed. We will first take up the question whether the
management agreement has been extended as a result of the
supervening war, and after this question shall have been
determined in the sense sustained by appellant, then the
discussion of the defense of laches and prescription will
follow as a consequence.
The pertinent portion of the management contract (Exh. C)
which refers to suspension should any event constituting
force majeure happen appears in Clause II thereof which we
quote hereunder:
In the event of inundations, floodings of the mine, typhoon,
earthquake or any other force majeure, war, insurrection,
civil commotion, organized strike, riot, injury to the
machinery or other event or cause reasonably beyond the
control of NIELSON and which adversely affects the work of
mining and milling; NIELSON shall report such fact to
LEPANTO and without liability or breach of the terms of this
Agreement, the same shall remain in suspense, wholly or
partially during the terms of such inability.
A careful scrutiny of the clause above-quoted will at once
reveal that in order that the management contract may be
deemed suspended two events must take place which must
be brought in a satisfactory manner to the attention of
defendant within a reasonable time, to wit: (1) the event
constituting the force majeure must be reasonably beyond
the control of Nielson, and (2) it must adversely affect the
work of mining and milling the company is called upon to
undertake. As long as these two condition exist the
agreement is deem suspended.
Does the evidence on record show that these two conditions
had existed which may justify the conclusion that the
management agreement had been suspended in the sense
entertained by appellant? Let us go to the evidence.
It is a matter that this Court can take judicial notice of that
war supervened in our country and that the mines in the
5
Philippines were either destroyed or taken over by the
occupation forces with a view to their operation. The Lepanto
mines were no exception for not was the mine itself
destroyed but the mill, power plant, supplies on hand,
equipment and the like that were being used there were
destroyed as well. Thus, the following is what appears in the
Lepanto Company Mining Report dated March 13, 1946
submitted by its President C. A. DeWitt to the defendant:1 "In
February of 1942, our mill, power plant, supplies on hand,
equipment, concentrates on hand, and mine, were destroyed
upon orders of the U.S. Army to prevent their utilization by
the enemy." The report also mentions the report submitted
by Mr. Blessing, an official of Nielson, that "the original mill
was destroyed in 1942" and "the original power plant and all
the installed equipment were destroyed in 1942." It is then
undeniable that beginning February, 1942 the operation of
the Lepanto mines stopped or became suspended as a result
of the destruction of the mill, power plant and other
important equipment necessary for such operation in view of
a cause which was clearly beyond the control of Nielson and
that as a consequence such destruction adversely affected
the work of mining and milling which the latter was called
upon to undertake under the management contract.
Consequently, by virtue of the very terms of said contract the
same may be deemed suspended from February, 1942 and as
of that month the contract still had 60 months to go.
On the other hand, the record shows that the defendant
admitted that the occupation forces operated its mining
properties subject of the management contract,2 and from
the very report submitted by President DeWitt it appears that
the date of the liberation of the mine was August 1, 1945
although at the time there were still many booby traps.3
Similarly, in a report submitted by the defendant to its
stockholders dated August 25, 1948, the following appears:
"Your Directors take pleasure in reporting that June 26, 1948
marked the official return to operations of this Company of
its properties in Mankayan, Mountain Province, Philippines."4
It is, therefore, clear from the foregoing that the Lepanto
mines were liberated on August 1, 1945, but because of the
period of rehabilitation and reconstruction that had to be
made as a result of the destruction of the mill, power plant
and other necessary equipment for its operation it cannot be
said that the suspension of the contract ended on that date.
Hence, the contract must still be deemed suspended during
the succeeding years of reconstruction and rehabilitation,
and this period can only be said to have ended on June 26,
1948 when, as reported by the defendant, the company
officially resumed the mining operations of the Lepanto. It
should here be stated that this period of suspension from
February, 1942 to June 26, 1948 is the one urged by
plaintiff.5
It having been shown that the operation of the Lepanto
mines on the part of Nielson had been suspended during the
period set out above within the purview of the management
contract, the next question that needs to be determined is
the effect of such suspension. Stated in another way, the

question now to be determined is whether such suspension
had the effect of extending the period of the management
contract for the period of said suspension. To elucidate this
matter, we again need to resort to the evidence.
For appellant Nielson two witnesses testified, declaring that
the suspension had the effect of extending the period of the
contract, namely, George T. Scholey and Mark Nestle. Scholey
was a mining engineer since 1929, an incorporator, general
manager and director of Nielson and Company; and for some
time he was also the vice-president and director of the
Lepanto Company during the pre-war days and, as such, he
was an officer of both appellant and appellee companies. As
vice-president of Lepanto and general manager of Nielson,
Scholey participated in the negotiation of the management
contract to the extent that he initialed the same both as
witness and as an officer of both corporations. This witness
testified in this case to the effect that the standard force
majeure clause embodied in the management contract was
taken from similar mining contracts regarding mining
operations and the understanding regarding the nature and
effect of said clause was that when there is suspension of the
operation that suspension meant the extension of the
contract. Thus, to the question, "Before the war, what was
the understanding of the people in the particular trend of
business with respect to the force majeure clause?", Scholey
answered: "That was our understanding that the suspension
meant the extension of time lost."6
Mark Nestle, the other witness, testified along similar line. He
had been connected with Nielson since 1937 until the time he
took the witness stand and had been a director, manager,
and president of the same company. When he was
propounded the question: "Do you know what was the
custom or usage at that time in connection with force
majeure clause?", Nestle answered, "In the mining world the
force majeure clause is generally considered. When a
calamity comes up and stops the work like in war, flood,
inundation or fire, etc., the work is suspended for the
duration of the calamity, and the period of the contract is
extended after the calamity is over to enable the person to
do the big work or recover his money which he has invested,
or accomplish what his obligation is to a third person ."7
And the above testimonial evidence finds support in the very
minutes of the special meeting of the Board of Directors of
the Lepanto Company issued on March 10, 1945 which was
then chairmaned by Atty. C. A. DeWitt. We read the following
from said report:
The Chairman also stated that the contract with Nielson and
Company would soon expire if the obligations were not
suspended, in which case we should have to pay them the
retaining fee of P2,500.00 a month. He believes however,
that there is a provision in the contract suspending the
effects thereof in cases like the present, and that even if it
were not there, the law itself would suspend the operations
of the contract on account of the war. Anyhow, he stated, we
6
shall have no difficulty in solving satisfactorily any problem
we may have with Nielson and Company.8
Thus, we can see from the above that even in the opinion of
Mr. DeWitt himself, who at the time was the chairman of the
Board of Directors of the Lepanto Company, the management
contract would then expire unless the period therein rated is
suspended but that, however, he expressed the belief that
the period was extended because of the provision contained
therein suspending the effects thereof should any of the case
of force majeure happen like in the present case, and that
even if such provision did not exist the law would have the
effect of suspending it on account of the war. In substance,
Atty. DeWitt expressed the opinion that as a result of the
suspension of the mining operation because of the effects of
the war the period of the contract had been extended.
Contrary to what appellant's evidence reflects insofar as the
interpretation of the force majeure clause is concerned,
however, appellee gives Us an opposite interpretation
invoking in support thereof not only a letter Atty. DeWitt sent
to Nielson on October 20, 1945,9 wherein he expressed for
the first time an opinion contrary to what he reported to the
Board of Directors of Lepanto Company as stated in the
portion of the minutes of its Board of Directors as quoted
above, but also the ruling laid down by our Supreme Court in
some cases decided sometime ago, to the effect that the war
does not have the effect of extending the term of a contract
that the parties may enter into regarding a particular
transaction, citing in this connection the cases of Victorias
Planters Association v. Victorias Milling Company, 51 O.G.
4010; Rosario S. Vda. de Lacson, et al. v. Abelardo G. Diaz, 87
Phil. 150; and Lo Ching y So Young Chong Co. v. Court of
Appeals, et al., 81 Phil. 601.
To bolster up its theory, appellee also contends that the
evidence regarding the alleged custom or usage in mining
contract that appellant's witnesses tried to introduce was
incompetent because (a) said custom was not specifically
pleaded; (b) Lepanto made timely and repeated objections to
the introduction of said evidence; (c) Nielson failed to show
the essential elements of usage which must be shown to exist
before any proof thereof can be given to affect the contract;
and (d) the testimony of its witnesses cannot prevail over the
very terms of the management contract which, as a rule, is
supposed to contain all the terms and conditions by which
the parties intended to be bound.
It is here necessary to analyze the contradictory evidence
which the parties have presented regarding the
interpretation of the force majeure clause in the
management contract.
At the outset, it should be stated that, as a rule, in the
construction and interpretation of a document the intention
of the parties must be sought (Rule 130, Section 10, Rules of
Court). This is the basic rule in the interpretation of contracts
because all other rules are but ancilliary to the ascertainment
of the meaning intended by the parties. And once this

intention has been ascertained it becomes an integral part of
the contract as though it had been originally expressed
therein in unequivocal terms (Shoreline Oil Corp. v. Guy, App.
189, So., 348, cited in 17A C.J.S., p. 47). How is this intention
determined?
One pattern is to ascertain the contemporaneous and
subsequent acts of the contracting parties in relation to the
transaction under consideration (Article 1371, Civil Code). In
this particular case, it is worthy of note what Atty. C. A.
DeWitt has stated in the special meeting of the Board of
Directors of Lepanto in the portion of the minutes already
quoted above wherein, as already stated, he expressed the
opinion that the life of the contract, if not extended, would
last only until January, 1947 and yet he said that there is a
provision in the contract that the war had the effect of
suspending the agreement and that the effect of that
suspension was that the agreement would have to continue
with the result that Lepanto would have to pay the monthly
retaining fee of P2,500.00. And this belief that the war
suspended the agreement and that the suspension meant its
extension was so firm that he went to the extent that even if
there was no provision for suspension in the agreement the
law itself would suspend it.
It is true that Mr. DeWitt later sent a letter to Nielson dated
October 20, 1945 wherein apparently he changed his mind
because there he stated that the contract was merely
suspended, but not extended, by reason of the war, contrary
to the opinion he expressed in the meeting of the Board of
Directors already adverted to, but between the two opinions
of Atty. DeWitt We are inclined to give more weight and
validity to the former not only because such was given by him
against his own interest but also because it was given before
the Board of Directors of Lepanto and in the presence, of
some Nielson officials 10 who, on that occasion were
naturally led to believe that that was the true meaning of the
suspension clause, while the second opinion was merely self-
serving and was given as a mere afterthought.
Appellee also claims that the issue of true intent of the
parties was not brought out in the complaint, but anent this
matter suffice it to state that in paragraph No. 19 of the
complaint appellant pleaded that the contract was extended.
11 This is a sufficient allegation considering that the rules on
pleadings must as a rule be liberally construed.
It is likewise noteworthy that in this issue of the intention of
the parties regarding the meaning and usage concerning the
force majeure clause, the testimony adduced by appellant is
uncontradicted. If such were not true, appellee should have
at least attempted to offer contradictory evidence. This it did
not do. Not even Lepanto's President, Mr. V. E. Lednicky who
took the witness stand, contradicted said evidence.
In holding that the suspension of the agreement meant the
extension of the same for a period equivalent to the
suspension, We do not have the least intention of overruling
the cases cited by appellee. We simply want to say that the
7
ruling laid down in said cases does not apply here because
the material facts involved therein are not the same as those
obtaining in the present. The rule of stare decisis cannot be
invoked where there is no analogy between the material facts
of the decision relied upon and those of the instant case.
Thus, in Victorias Planters Association vs. Victorias Milling
Company, 51 O.G. 4010, there was no evidence at all
regarding the intention of the parties to extend the contract
equivalent to the period of suspension caused by the war.
Neither was there evidence that the parties understood the
suspension to mean extension; nor was there evidence of
usage and custom in the industry that the suspension meant
the extension of the agreement. All these matters, however,
obtain in the instant case.
Again, in the case of Rosario S. Vda. de Lacson vs. Abelardo G.
Diaz, 87 Phil. 150, the issue referred to the interpretation of a
pre-war contract of lease of sugar cane lands and the liability
of the lessee to pay rent during and immediately following
the Japanese occupation and where the defendant claimed
the right of an extension of the lease to make up for the time
when no cane was planted. This Court, in holding that the
years which the lessee could not use the land because of the
war could not be discounted from the period agreed upon,
held that "Nowhere is there any insinuation that the
defendant-lessee was to have possession of lands for seven
years excluding years on which he could not harvest sugar."
Clearly, this ratio decidendi is not applicable to the case at
bar wherein there is evidence that the parties understood the
"suspension clause by force majeure" to mean the extension
of the period of agreement.
Lastly, in the case of Lo Ching y So Young Chong Co. vs. Court
of Appeals, et al., 81 Phil. 601, appellant leased a building
from appellee beginning September 13, 1940 for three years,
renewable for two years. The lessee's possession was
interrupted in February, 1942 when he was ousted by the
Japanese who turned the same over to German Otto Schulze,
the latter occupying the same until January, 1945 upon the
arrival of the liberation forces. Appellant contended that the
period during which he did not enjoy the leased premises
because of his dispossession by the Japanese had to be
deducted from the period of the lease, but this was overruled
by this Court, reasoning that such dispossession was merely a
simple "perturbacion de merohecho y de la cual no responde
el arrendador" under Article 1560 of the old Civil Code Art.
1664). This ruling is also not applicable in the instant case
because in that case there was no evidence of the intention
of the parties that any suspension of the lease by force
majeure would be understood to extend the period of the
agreement.
In resume, there is sufficient justification for Us to conclude
that the cases cited by appellee are inapplicable because the
facts therein involved do not run parallel to those obtaining in
the present case.

We shall now consider appellee's defense of laches. Appellee
is correct in its contention that the defense of laches applies
independently of prescription. Laches is different from the
statute of limitations. Prescription is concerned with the fact
of delay, whereas laches is concerned with the effect of
delay. Prescription is a matter of time; laches is principally a
question of inequity of permitting a claim to be enforced, this
inequity being founded on some change in the condition of
the property or the relation of the parties. Prescription is
statutory; laches is not. Laches applies in equity, whereas
prescription applies at law. Prescription is based on fixed
time, laches is not. (30 C.J.S., p. 522; See also Pomeroy's
Equity Jurisprudence, Vol. 2, 5th ed., p. 177).
The question to determine is whether appellant Nielson is
guilty of laches within the meaning contemplated by the
authorities on the matter. In the leading case of Go Chi Gun,
et al. vs. Go Cho, et al., 96 Phil. 622, this Court enumerated
the essential elements of laches as follows:
(1) conduct on the part of the defendant, or of one
under whom he claims, giving rise to the situation of which
complaint is made and for which the complaint seeks a
remedy; (2) delay in asserting the complainant's rights, the
complainant having had knowledge or notice of the
defendant's conduct and having been afforded an
opportunity to institute a suit; (3) lack of knowledge or notice
on the part of the defendant that the complainant would
assert the right on which he bases his suit; and (4) injury or
prejudice to the defendant in the event relief is accorded to
the complainant, or the suit is not held barred.
Are these requisites present in the case at bar?
The first element is conceded by appellant Nielson when it
claimed that defendant refused to pay its management fees,
its percentage of profits and refused to allow it to resume the
management operation.
Anent the second element, while it is true that appellant
Nielson knew since 1945 that appellee Lepanto has refused to
permit it to resume management and that since 1948
appellee has resumed operation of the mines and it filed its
complaint only on February 6, 1958, there being apparent
delay in filing the present action, We find the delay justified
and as such cannot constitute laches. It appears that
appellant had not abandoned its right to operate the mines
for even before the termination of the suspension of the
agreement as early as January 20, 194612 and even before
March 10, 1945, it already claimed its right to the extension
of the contract,13 and it pressed its claim for the balance of
its share in the profits from the 1941 operation14 by reason
of which negotiations had taken place for the settlement of
the claim15 and it was only on June 25, 1957 that appellee
finally denied the claim. There is, therefore, only a period of
less than one year that had elapsed from the date of the final
denial of the claim to the date of the filing of the complaint,
which certainly cannot be considered as unreasonable delay.
8
The third element of laches is absent in this case. It cannot be
said that appellee Lepanto did not know that appellant would
assert its rights on which it based suit. The evidence shows
that Nielson had been claiming for some time its rights under
the contract, as already shown above.
Neither is the fourth element present, for if there has been
some delay in bringing the case to court it was mainly due to
the attempts at arbitration and negotiation made by both
parties. If Lepanto's documents were lost, it was not caused
by the delay of the filing of the suit but because of the war.
Another reason why appellant Nielson cannot be held guilty
of laches is that the delay in the filing of the complaint in the
present case was the inevitable of the protracted
negotiations between the parties concerning the settlement
of their differences. It appears that Nielson asked for
arbitration16 which was granted. A committee consisting of
Messrs. DeWitt, Farnell and Blessing was appointed to act on
said differences but Mr. DeWitt always tried to evade the
issue17 until he was taken ill and died. Mr. Farnell offered to
Nielson the sum of P13,000.58 by way of compromise of all
its claim arising from the management contract18 but
apparently the offer was refused. Negotiations continued
with the exchange of letters between the parties but with no
satisfactory result.19 It can be said that the delay due to
protracted negotiations was caused by both parties. Lepanto,
therefore, cannot be permitted to take advantage of such
delay or to question the propriety of the action taken by
Nielson. The defense of laches is an equitable one and equity
should be applied with an even hand. A person will not be
permitted to take advantage of, or to question the validity, or
propriety of, any act or omission of another which was
committed or omitted upon his own request or was caused
by his conduct (R. H. Stearns Co. vs. United States, 291 U.S.
54, 78 L. Ed. 647, 54 S. Ct., 325; United States vs. Henry
Prentiss & Co., 288 U.S. 73, 77 L. Ed., 626, 53 S. Ct., 283).
Had the action of Nielson prescribed? The court a quo held
that the action of Nielson is already barred by the statute of
limitations, and that ruling is now assailed by the appellant in
this appeal. In urging that the court a quo erred in reaching
that conclusion the appellant has discussed the issue with
reference to particular claims.
The first claim is with regard to the 10% share in profits of
1941 operations. Inasmuch as appellee Lepanto alleges that
the correct basis of the computation of the sharing in the net
profits shall be as provided for in Clause V of the
Management Contract, while appellant Nielson maintains
that the basis should be what is contained in the minutes of
the special meeting of the Board of Directors of Lepanto on
August 21, 1940, this question must first be elucidated before
the main issue is discussed.
The facts relative to the matter of profit sharing follow: In the
management contract entered into between the parties on
January 30, 1937, which was renewed for another five years,
it was stipulated that Nielson would receive a compensation

of P2,500.00 a month plus 10% of the net profits from the
operation of the properties for the preceding month. In 1940,
a dispute arose regarding the computation of the 10% share
of Nielson in the profits. The Board of Directors of Lepanto,
realizing that the mechanics of the contract was unfair to
Nielson, authorized its President to enter into an agreement
with Nielson modifying the pertinent provision of the
contract effective January 1, 1940 in such a way that Nielson
shall receive (1) 10% of the dividends declared and paid,
when and as paid, during the period of the contract and at
the end of each year, (2) 10% of any depletion reserve that
may be set up, and (3) 10% of any amount expended during
the year out of surplus earnings for capital account. 20
Counsel for the appellee admitted during the trial that the
extract of the minutes as found in Exhibit B is a faithful copy
from the original. 21 Mr. George Scholey testified that the
foregoing modification was agreed upon. 22
Lepanto claims that this new basis of computation should be
rejected (1) because the contract was clear on the point of
the 10% share and it was so alleged by Nielson in its
complaint, and (2) the minutes of the special meeting held on
August 21, 1940 was not signed.
It appearing that the issue concerning the sharing of the
profits had been raised in appellant's complaint and evidence
on the matter was introduced 23 the same can be taken into
account even if no amendment of the pleading to make it
conform to the evidence has been made, for the same is
authorized by Section 4, Rule 17, of the old Rules of Court
(now Section 5, Rule 10, of the new Rules of Court).
Coming now to the question of prescription raised by
defendant Lepanto, it is contended by the latter that the
period to be considered for the prescription of the claim
regarding participation in the profits is only four years,
because the modification of the sharing embodied in the
management contract is merely verbal, no written document
to that effect having been presented. This contention is
untenable. The modification appears in the minutes of the
special meeting of the Board of Directors of Lepanto held on
August 21, 1940, it having been made upon the authority of
its President, and in said minutes the terms of the
modification had been specified. This is sufficient to have the
agreement considered, for the purpose of applying the
statute of limitations, as a written contract even if the
minutes were not signed by the parties (3 A.L.R., 2d, p. 831).
It has been held that a writing containing the terms of a
contract if adopted by two persons may constitute a contract
in writing even if the same is not signed by either of the
parties (3 A.L.R., 2d, pp. 812-813). Another authority says that
an unsigned agreement the terms of which are embodied in a
document unconditionally accepted by both parties is a
written contract (Corbin on Contracts, Vol. 1, p. 85)
The modification, therefore, made in the management
contract relative to the participation in the profits by
appellant, as contained in the minutes of the special meeting
of the Board of Directors of Lepanto held on August 21, 1940,
9
should be considered as a written contract insofar as the
application of the statutes of limitations is concerned. Hence,
the action thereon prescribes within ten (10) years pursuant
to Section 43 of Act 190.
Coming now to the facts, We find that the right of Nielson to
its 10% participation in the 1941 operations accrued on
December 21, 1941 and the right to commence an action
thereon began on January 1, 1942 so that the action must be
brought within ten (10) years from the latter date. It is true
that the complaint was filed only on February 6, 1958, that is
sixteen (16) years, one (1) month and five (5) days after the
right of action accrued, but the action has not yet prescribed
for various reasons which We will hereafter discuss.
The first reason is the operation of the Moratorium Law, for
appellant's claim is undeniably a claim for money. Said claim
accrued on December 31, 1941, and Lepanto is a war
sufferer. Hence the claim was covered by Executive Order No.
32 of March 10, 1945. It is well settled that the operation of
the Moratorium Law suspends the running of the statue of
limitations (Pacific Commercial Co. vs. Aquino, G.R. No. L-
10274, February 27, 1957).
This Court has held that the Moratorium Law had been
enforced for eight (8) years, two (2) months and eight (8)
days (Tioseco vs. Day, et al., L-9944, April 30, 1957; Levy
Hermanos, Inc. vs. Perez, L-14487, April 29, 1960), and
deducting this period from the time that had elapsed since
the accrual of the right of action to the date of the filing of
the complaint, the extent of which is sixteen (16) years, one
(1) month and five (5) days, we would have less than eight (8)
years to be counted for purposes of prescription. Hence
appellant's action on its claim of 10% on the 1941 profits had
not yet prescribed.
Another reason that may be taken into account in support of
the no-bar theory of appellant is the arbitration clause
embodied in the management contract which requires that
any disagreement as to any amount of profits before an
action may be taken to court shall be subject to arbitration.
24 This agreement to arbitrate is valid and binding. 25 It
cannot be ignored by Lepanto. Hence Nielson could not bring
an action on its participation in the 1941 operations-profits
until the condition relative to arbitration had been first
complied with. 26 The evidence shows that an arbitration
committee was constituted but it failed to accomplish its
purpose on June 25, 1957. 27 From this date to the filing of
the complaint the required period for prescription has not yet
elapsed.
Nielson claims the following: (1) 10% share in the dividends
declared in 1941, exclusive of interest, amounting to
P17,500.00; (2) 10% in the depletion reserves for 1941; and
(3) 10% in the profits for years prior to 1948 amounting to
P19,764.70.
With regard to the first claim, the Lepanto's report for the
calendar year of 1954 28 shows that it declared a 10% cash

dividend in December, 1941, the amount of which is
P175,000.00. The evidence in this connection (Exhibits L and
O) was admitted without objection by counsel for Lepanto. 29
Nielson claims 10% share in said amount with interest
thereon at 6% per annum. The document (Exhibit L) was even
recognized by Lepanto's President V. L. Lednicky, 30 and this
claim is predicated on the provision of paragraph V of the
management contract as modified pursuant to the proposal
of Lepanto at the special meeting of the Board of Directors on
August 21, 1940 (Exh. B), whereby it was provided that
Nielson would be entitled to 10% of any dividends to be
declared and paid during the period of the contract.
With regard to the second claim, Nielson admits that there is
no evidence regarding the amount set aside by Lepanto for
depletion reserve for 1941 31 and so the 10% participation
claimed thereon cannot be assessed.
Anent the third claim relative to the 10% participation of
Nielson on the sum of P197,647.08, which appears in
Lepanto's annual report for 1948 32 and entered as profit for
prior years in the statement of income and surplus, which
amount consisted "almost in its entirety of proceeds of
copper concentrates shipped to the United States during
1947," this claim should to denied because the amount is not
"dividend declared and paid" within the purview of the
management contract.
The fifth assignment of error of appellant refers to the failure
of the lower court to order Lepanto to pay its management
fees for January, 1942, and for the full period of extension
amounting to P150,000.00, or P2,500.00 a month for sixty
(60) months, a total of P152,500.00 with interest
thereon from the date of judicial demand.
It is true that the claim of management fee for January, 1942
was not among the causes of action in the complaint, but
inasmuch as the contract was suspended in February, 1942
and the management fees asked for included that of January,
1942, the fact that such claim was not included in a specific
manner in the complaint is of no moment because an
appellate court may treat the pleading as amended to
conform to the evidence where the facts show that the
plaintiff is entitled to relief other than what is asked for in the
complaint (Alonzo vs. Villamor, 16 Phil. 315). The evidence
shows that the last payment made by Lepanto for
management fee was for November and December, 1941. 33
If, as We have declared, the management contract was
suspended beginning February 1942, it follows that Nielson is
entitled to the management fee for January, 1942.
Let us now come to the management fees claimed by Nielson
for the period of extension. In this respect, it has been shown
that the management contract was extended from June 27,
1948 to June 26, 1953, or for a period of sixty (60) months.
During this period Nielson had a right to continue in the
management of the mining properties of Lepanto and
Lepanto was under obligation to let Nielson do it and to pay
the corresponding management fees. Appellant Nielson
10
insisted in performing its part of the contract but Lepanto
prevented it from doing so. Hence, by virtue of Article 1186
of the Civil Code, there was a constructive fulfillment an the
part of Nielson of its obligation to manage said mining
properties in accordance with the contract and Lepanto had
the reciprocal obligation to pay the corresponding
management fees and other benefits that would have
accrued to Nielson if Lepanto allowed it (Nielson) to continue
in the management of the mines during the extended period
of five (5) years.
We find that the preponderance of evidence is to the effect
that Nielson had insisted in managing the mining properties
soon after liberation. In the report 34 of Lepanto, submitted
to its stockholders for the period from 1941 to March 13,
1946, are stated the activities of Nielson's officials in relation
to Nielson's insistence in continuing the management. This
report was admitted in evidence without objection. We find
the following in the report:
Mr. Blessing, in May, 1945, accompanied Clark and Stanford
to San Fernando (La Union) to await the liberation of the
mines. (Mr. Blessing was the Treasurer and Metallurgist of
Nielson). Blessing with Clark and Stanford went to the
property on July 16 and found that while the mill site had
been cleared of the enemy the latter was still holding the
area around the staff houses and putting up a strong defense.
As a result, they returned to San Fernando and later went
back to the mines on July 26. Mr. Blessing made the report,
dated August 6, recommending a program of operation. Mr.
Nielson himself spent a day in the mine early in December,
1945 and reiterated the program which Mr. Blessing had
outlined. Two or three weeks before the date of the report,
Mr. Coldren of the Nielson organization also visited the mine
and told President C. A. DeWitt of Lepanto that he thought
that the mine could be put in condition for the delivery of the
ore within ten (10) days. And according to Mark Nestle, a
witness of appellant, Nielson had several men including
engineers to do the job in the mines and to resume the work.
These engineers were in fact sent to the mine site and
submitted reports of what they had done. 35
On the other hand, appellee claims that Nielson was not
ready and able to resume the work in the mines, relying
mainly on the testimony of Dr. Juan Nabong, former secretary
of both Nielson and Lepanto, given in the separate case of
Nancy Irving Romero vs. Lepanto Consolidated Mining
Company (Civil Case No. 652, CFI, Baguio), to the effect that
as far as he knew "Nielson and Company had not attempted
to operate the Lepanto Consolidated Mining Company
because Mr. Nielson was not here in the Philippines after the
last war. He came back later," and that Nielson and Company
had no money nor stocks with which to start the operation.
He was asked by counsel for the appellee if he had testified
that way in Civil Case No. 652 of the Court of First Instance of
Baguio, and he answered that he did not confirm it fully.
When this witness was asked by the same counsel whether
he confirmed that testimony, he said that when he testified in
that case he was not fully aware of what happened and that
 11

after he learned more about the officials of the corporation it

was only then that he became aware that Nielson had really 1949
sent his men to the mines along with Mr. Blessing and that he
was aware of this fact personally. He further said that Mr. P 200,000.00
Nielson was here in 1945 and "he was going out and
contacting his people." 36 9

Lepanto admits, in its own brief, that Nielson had really 10%
insisted in taking over the management and operation of the
mines but that it (Lepanto) unequivocally refuse to allow it. July
The following is what appears in the brief of the appellee:
1950
It was while defendant was in the midst of the rehabilitation
work which was fully described earlier, still reeling under the 300,000.00
terrible devastation and destruction wrought by war on its
mine that Nielson insisted in taking over the management 10
and operation of the mine. Nielson thus put Lepanto in a
position where defendant, under the circumstances, had to 10%
refuse, as in fact it did, Nielson's insistence in taking over the
management and operation because, as was obvious, it was October
impossible, as a result of the destruction of the mine, for the
plaintiff to manage and operate the same and because, as 1950
provided in the agreement, the contract was suspended by
reason of the war. The stand of Lepanto in disallowing 500,000.00
Nielson to assume again the management of the mine in
1945 was unequivocal and cannot be misinterpreted, infra.37 11

Based on the foregoing facts and circumstances, and Our 20%

conclusion that the management contract was extended, We
believe that Nielson is entitled to the management fees for December
the period of extension. Nielson should be awarded on this
claim sixty times its monthly pay of P2,500.00, or a total of 1950
P150,000.00.
1,000,000.00
In its sixth assignment of error Nielson contends that the
lower court erred in not ordering Lepanto to pay it (Nielson) 12
the 10% share in the profits of operation realized during the
period of five (5) years from the resumption of its post-war 20%
operations of the Mankayan mines, in the total sum of
P2,403,053.20 with interest thereon at the rate of 6% per March
annum from February 6, 1958 until full payment. 38
1951
The above claim of Nielson refers to four categories, namely:
(1) cash dividends; (2) stock dividends; (3) depletion reserves; 1,000,000.00
and (4) amount expended on capital investment.
13
Anent the first category, Lepanto's report for the calendar
year 1954 39 contains a record of the cash dividends it paid 20%
up to the date of said report, and the post-war dividends paid
by it corresponding to the years included in the period of June
extension of the management contract are as follows:
1951
POST-WAR
1,000,000.00
8
14
10%
20%
November
 12

September
December
1951
1952
1,000,000.00
1,000,000.00
15
21
40%
20%
December
March
1951
1953
2,000,000.00
1,000,000.00
16
22
20%
20%
March
June
1952
1953
1,000,000.00
1,000,000.00
17
TOTAL
20%
P14,000,000.00
May
According to the terms of the management contract as
1952 modified, appellant is entitled to 10% of the P14,000,000.00
cash dividends that had been distributed, as stated in the
1,000,000.00 above-mentioned report, or the sum of P1,400,000.00.

18 With regard to the second category, the stock dividends

declared by Lepanto during the period of extension of the
20% contract are: On November 28, 1949, the stock dividend
declared was 50% of the outstanding authorized capital of
July P2,000,000.00 of the company, or stock dividends worth
P1,000,000.00; and on August 22, 1950, the stock dividends
1952 declared was 66-2/3% of the standing authorized capital of
P3,000,000.00 of the company, or stock dividends worth
1,000,000.00 P2,000,000.00. 40

19 Appellant's claim that it should be given 10% of the cash

value of said stock dividends with interest thereon at 6% from
20% February 6, 1958 cannot be granted for that would not be in
accordance with the management contract which entitles
September Nielson to 10% of any dividends declared paid, when and as
paid. Nielson, therefore, is entitled to 10% of the stock
1952 dividends and to the fruits that may have accrued to said
stock dividends pursuant to Article 1164 of the Civil Code.
1,000,000.00 Hence to Nielson is due shares of stock worth P100,000.00, as
per stock dividends declared on November 28, 1949 and all
20 the fruits accruing to said shares after said date; and also
shares of stock worth P200,000.00 as per stock dividends
20%

declared on August 20, 1950 and all fruits accruing thereto
after said date.
Anent the third category, the depletion reserve appearing in
the statement of income and surplus submitted by Lepanto
corresponding to the years covered by the period of
extension of the contract, may be itemized as follows:
In 1948, as per Exh. F, p. 36 and Exh. Q, p. 5, the depletion
reserve set up was P11,602.80.
In 1949, as per Exh. G, p. 49 and Exh. Q, p. 5, the depletion
reserve set up was P33,556.07.
In 1950, as per Exh. H, p. 37, Exh. Q, p. 6 and Exh. I, p. 37, the
depletion reserve set up was P84,963.30.
In 1951, as per Exh. I, p. 45, Exh. Q, p. 6, and Exh. J, p. 45, the
depletion reserve set up was P129,089.88.
In 1952, as per Exh. J, p. 45, Exh. Q, p. 6 and Exh. K p. 41, the
depletion reserve was P147,141.54.
In 1953, as per Exh. K, p. 41, and Exh. Q, p. 6, the depletion
reserve set up as P277,493.25.
Regarding the depletion reserve set up in 1948 it should be
noted that the amount given was for the whole year.
Inasmuch as the contract was extended only for the last half
of the year 1948, said amount of P11,602.80 should be
divided by two, and so Nielson is only entitled to 10% of the
half amounting to P5,801.40.
Likewise, the amount of depletion reserve for the year 1953
was for the whole year and since the contract was extended
only until the first half of the year, said amount of
P277,493.25 should be divided by two, and so Nielson is only
entitled to 10% of the half amounting to P138,746.62.
Summing up the entire depletion reserves, from the middle
of 1948 to the middle of 1953, we would have a total of
P539,298.81, of which Nielson is entitled to 10%, or to the
sum of P53,928.88.
Finally, with regard to the fourth category, there is no figure
in the record representing the value of the fixed assets as of
the beginning of the period of extension on June 27, 1948. It
is possible, however, to arrive at the amount needed by
adding to the value of the fixed assets as of December 31,
1947 one-half of the amount spent for capital account in the
year 1948. As of December 31, 1947, the value of the fixed
assets was P1,061,878.88 41 and as of December 31, 1948,
the value of the fixed assets was P3,270,408.07. 42 Hence,
the increase in the value of the fixed assets for the year 1948
was P2,208,529.19, one-half of which is P1,104,264.59, which
amount represents the expenses for capital account for the
first half of the year 1948. If to this amount we add the fixed
assets as of December 31, 1947 amounting to P1,061,878.88,
we would have a total of P2,166,143.47 which represents the
13
fixed assets at the beginning of the second half of the year
1948.
There is also no figure representing the value of the fixed
assets when the contract, as extended, ended on June 26,
1953; but this may be computed by getting one-half of the
expenses for capital account made in 1953 and adding the
same to the value of the fixed assets as of December 31, 1953
is P9,755,840.41 43 which the value of the fixed assets as of
December 31, 1952 is P8,463,741.82, the difference being
P1,292,098.69. One-half of this amount is P646,049.34 which
would represent the expenses for capital account up to June,
1953. This amount added to the value of the fixed assets as of
December 31, 1952 would give a total of P9,109,791.16 which
would be the value of fixed assets at the end of June, 1953.
The increase, therefore, of the value of the fixed assets of
Lepanto from June, 1948 to June, 1953 is P6,943,647.69,
which amount represents the difference between the value
of the fixed assets of Lepanto in the year 1948 and in the year
1953, as stated above. On this amount Nielson is entitled to a
share of 10% or to the amount of P694,364.76.
Considering that most of the claims of appellant have been
entertained, as pointed out in this decision, We believe that
appellant is entitled to be awarded attorney's fees, especially
when, according to the undisputed testimony of Mr. Mark
Nestle, Nielson obliged himself to pay attorney's fees in
connection with the institution of the present case. In this
respect, We believe, considering the intricate nature of the
case, an award of fifty thousand (P50,000.00) pesos for
attorney's fees would be reasonable.
IN VIEW OF THE FOREGOING CONSIDERATIONS, We hereby
reverse the decision of the court a quo and enter in lieu
thereof another, ordering the appellee Lepanto to pay
appellant Nielson the different amounts as specified
hereinbelow:
(1) 10% share of cash dividends of December, 1941 in
the amount of P17,500.00, with legal interest thereon from
the date of the filing of the complaint;
(2) management fee for January, 1942 in the amount of
P2,500.00, with legal interest thereon from the date of the
filing of the complaint;
(3) management fees for the sixty-month period of
extension of the management contract, amounting to
P150,000.00, with legal interest from the date of the filing of
the complaint;
(4) 10% share in the cash dividends during the period of
extension of the management contract, amounting to
P1,400,000.00, with legal interest thereon from the date of
the filing of the complaint;
 14

(5) 10% of the depletion reserve set up during the 9 Exhibit O.

period of extension, amounting to P53,928.88, with legal
interest thereon from the date of the filing of the complaint; 10 Exh. B, p. 3; Exh. N. p. 4.

(6) 10% of the expenses for capital account during the 11 Page 7, Record on Appeal.
period of extension, amounting to P694,364.76, with legal
interest thereon from the date of the filing of the complaint; 12 Exhibit P.

(7) to issue and deliver to Nielson and Co., Inc. shares of 13 Exhibit B, p. 4.
stock of Lepanto Consolidated Mining Co. at par value
equivalent to the total of Nielson's l0% share in the stock 14 14 Exhibit P.
dividends declared on November 28, 1949 and August 22,
1950, together with all cash and stock dividends, if any, as 15 Exhibit U.
may have been declared and issued subsequent to November
28, 1949 and August 22, 1950, as fruits that accrued to said 16 T.s.n., July 3, 1962, p. 37.
shares;
17 Exhibit 3, p. 3.
If sufficient shares of stock of Lepanto's are not available to
satisfy this judgment, defendant-appellee shall pay plaintiff- 18 Exhibit U.
appellant an amount in cash equivalent to the market value
of said shares at the time of default (12 C.J.S., p. 130), that is, 19 Exhibits V to V-5.
all shares of the stock that should have been delivered to
Nielson before the filing of the complaint must be paid at 20 Exhibits B, B-1, pp. 2-3.
their market value as of the date of the filing of the
complaint; and all shares, if any, that should have been 21 T.s.n., July 3, 1962, p. 7.
delivered after the filing of the complaint at the market value
of the shares at the time Lepanto disposed of all its available 22 T.s.n., June 27, 1962, p. 14.
shares, for it is only then that Lepanto placed itself in
condition of not being able to perform its obligation (Article 23 Exhibit B is admitted as evidence without objection by
1160, Civil Code); counsel for the appellee, t.s.n., October 24, 1962, p. 3.

(8) the sum of P50,000.00 as attorney's fees; and 24 Clause XIII, Exh. C; See Record on Appeal pp. 54-55.

(9) the costs. It is so ordered. 25 Chong vs. Assurance Corp., 8 Phil. 399.

Concepcion, C.J., Regala, Makalintal, Bengzon, J.P., Sanchez 26 17-A C.J.S., pp. 918-919; Chitty on Contracts, 22nd ed.,
and Castro, JJ., concur. 1961, Vol. I, pp. 315-316.

Reyes, J.B.L. and Barrera, JJ., took no part. 27 Exhibit V-6.

28 Exhibit L, p. 3; Exhibit Q. p. 1.
Footnotes
39 T.s.n., October 24, 1962, p. 3.
1 Exhibit D.
30 T.s.n., July 6, 1962, p. 34.
2 Par 15, Defendant's Answer, pp. 63-64, Record on Appeal.
31 Appellant's Brief, p. 59.
3 Page 7, Exhibit D.
32 Exhibit F, p. 36.
4 Page 1, Exhibit F-1.
33 Lepanto's Exhibit 1.
5 Appellant's Brief, pp. 86-87.
34 Exhibit D, pp. 7, 11, 12.
6 T.s.n., June 27, 1962, p. 25.
35 T.s.n., July 3, 1962, pp. 32-34.
7 T.s.n., July 3, 1962, pp. 24-25.
36 T.s.n., November 29, 1962, pp. 6-9.
8 Page 4, Exhibit B.
37 Appellee's Brief, pp. 9-10.

38 Appellant's Brief, pp. 97, 98, 111.
49 Exhibit L, p. 3.
40 Exhibit L, p. 2.
41 Exhibit E, p. 6.
42 Exhibit E, p. 6.
43 Exhibit K, p. 39.
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Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-8169 January 29, 1957
THE SHELL COMPANY OF THE PHILIPPINES, LTD., petitioner,
vs.
FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY
COMMERCIAL CASUALTY INSURANCE CO., SALVADOR SISON,
PORFIRIO DE LA FUENTE and THE COURT OF APPEALS (First
Division), respondents.
Ross, Selph, Carrascoso & Janda for petitioner.
J. A. Wolfson and Manuel Y. Macias for respondents.
PADILLA, J.:
Appeal by certiorari under Rule 46 to review a judgment of
the Court of Appeals which reversed that of the Court of First
Instance of Manila and sentenced ". . . the defendants-
appellees to pay, jointly and severally, the plaintiffs-
appellants the sum of P1,651.38, with legal interest from
December 6, 1947 (Gutierrez vs. Gutierrez, 56 Phil., 177, 180),
and the costs in both instances."
The Court of Appeals found the following:
Inasmuch as both the Plaintiffs-Appellants and the
Defendant-Appellee, the Shell Company of the Philippine
Islands, Ltd. accept the statement of facts made by the trial
15
court in its decision and appearing on pages 23 to 37 of the
Record on Appeal, we quote hereunder such statement:
This is an action for recovery of sum of money, based on
alleged negligence of the defendants.
It is a fact that a Plymounth car owned by Salvador R. Sison
was brought, on September 3, 1947 to the Shell Gasoline and
Service Station, located at the corner of Marques de Comillas
and Isaac Peral Streets, Manila, for washing, greasing and
spraying. The operator of the station, having agreed to do
service upon payment of P8.00, the car was placed on a
hydraulic lifter under the direction of the personnel of the
station.
What happened to the car is recounted by Perlito Sison, as
follows:
Q. Will you please describe how they proceeded to do the
work?
A. Yes, sir. The first thing that was done, as I saw, was to drive
the car over the lifter. Then by the aid of the two grease men
they raised up my car up to six feet high, and then washing
was done. After washing, the next step was greasing. Before
greasing was finished, there is a part near the shelf of the
right fender, right front fender, of my car to be greased, but
the the grease men cannot reached that part, so the next
thing to be done was to loosen the lifter just a few feet lower.
Then upon releasing the valve to make the car lower, a little
bit lower . . .
Q. Who released the valve?
A. The greasemen, for the escape of the air. As the escape of
the air is too strong for my ear I faced backward. I faced
toward Isaac Peral Street, and covered my ear. After the
escaped of the air has been finished, the air coming out from
the valve, I turned to face the car and I saw the car swaying at
that time, and just for a few second the car fell., (t.s.n. pp. 22-
23.)
The case was immediately reported to the Manila Adjustor
Company, the adjustor of the firemen's Insurance Company
and the Commercial Casualty Insurance Company, as the car
was insured with these insurance companies. After having
been inspected by one Mr. Baylon, representative of the
Manila Adjustor Company, the damaged car was taken to the
shops of the Philippine Motors, Incorporated, for repair upon
order of the Firemen's Insurance Company and the
Commercial Casualty Company, with the consent of Salvador
R. Sison. The car was restored to running condition after
repairs amounting to P1,651.38, and was delivered to
Salvador R. Sison, who, in turn made assignments of his rights
to recover damages in favor of the Firemen's Insurance
Company and the Commercial Casualty Insurance Company.

On the other hand, the fall of the car from the hydraulic lifter
has been explained by Alfonso M. Adriano, a greaseman in
the Shell Gasoline and Service Station, as follows:
Q. Were you able to lift the car on the hydraulic lifter on the
occasion, September 3, 1947?
A. Yes, sir.
Q. To what height did you raise more or less?
A. More or less five feet, sir.
Q. After lifting that car that height, what did you do with the
car?
A. I also washed it, sir.
Q. And after washing?
A. I greased it.
Q. On that occasion, have you been able to finish greasing
and washing the car?
A. There is one point which I could not reach.
Q. And what did you do then?
A. I lowered the lifter in order to reach that point.
Q. After lowering it a little, what did you do then?
A. I pushed and pressed the valve in its gradual pressure.
Q. Were you able to reach the portion which you were not
able to reach while it was lower?
A. No more, sir.
Q. Why?
A. Because when I was lowering the lifter I saw that the car
was swinging and it fell.
THE COURT. Why did the car swing and fall?
WITNESS: 'That is what I do not know, sir'. (t.s.n., p.67.)
The position of Defendant Porfirio de la Fuente is stated in his
counter-statement of facts which is hereunder also
reproduced:
In the afternoon of September 3, 1947, an automobile
belonging to the plaintiff Salvador Sison was brought by his
son, Perlito Sison, to the gasoline and service station at the
corner of Marques de Comillas and Isaac Peral Streets, City of
Manila, Philippines, owned by the defendant The Shell
Company of the Philippine Islands, Limited, but operated by
16
the defendant Porfirio de la Fuente, for the purpose of having
said car washed and greased for a consideration of P8.00
(t.s.n., pp. 19-20.) Said car was insured against loss or damage
by Firemen's Insurance Company of Newark, New Jersey, and
Commercial Casualty Insurance Company jointly for the sum
of P10,000 (Exhibits "A', "B", and "D").
The job of washing and greasing was undertaken by
defendant Porfirio de la Fuente through his two employees,
Alfonso M. Adriano, as greaseman and one surnamed de los
Reyes, a helper and washer (t.s.n., pp. 65-67). To perform the
job the car was carefully and centrally placed on the platform
of the lifter in the gasoline and service station
aforementioned before raising up said platform to a height of
about 5 feet and then the servicing job was started. After
more than one hour of washing and greasing, the job was
about to be completed except for an ungreased portion
underneath the vehicle which could not be reached by the
greasemen. So, the lifter was lowered a little by Alfonso M.
Adriano and while doing so, the car for unknown reason
accidentally fell and suffered damage to the value of P1,
651.38 (t.s.n., pp. 65-67).
The insurance companies after paying the sum of P1,651.38
for the damage and charging the balance of P100.00 to
Salvador Sison in accordance with the terms of the insurance
contract, have filed this action together with said Salvador
Sison for the recovery of the total amount of the damage
from the defendants on the ground of negligence (Record on
Appeal, pp. 1-6).
The defendant Porfirio de la Fuente denied negligence in the
operation of the lifter in his separate answer and contended
further that the accidental fall of the car was caused by
unforseen event (Record on Appeal, pp. 17-19).
The owner of the car forthwith notified the insurers who
ordered their adjustor, the Manila Adjustor Company, to
investigate the incident and after such investigation the
damaged car, upon order of the insures and with the consent
of the owner, was brought to the shop of the Philippine
Motors, Inc. The car was restored to running condition after
thereon which amounted to P1,651.38 and returned to the
owner who assigned his right to collect the aforesaid amount
to the Firemen's Insurance Company and the Commercial
Casualty Insurance Company.
On 6 December 1947 the insures and the owner of the car
brought an action in the Court of First Instance of Manila
against the Shell Company of the Philippines, Ltd. and Porfirio
de la Fuente to recover from them, jointly and severally, the
sum of P1,651.38, interest thereon at the legal rate from the
filing of the complaint until fully paid, the costs. After trial the
Court dismissed the complaint. The plaintiffs appealed. The
Court of Appeals reversed the judgment and sentenced the
defendant to pay the amount sought to be recovered, legal
interest and costs, as stated at the beginning of this opinion.

In arriving at the conclusion that on 3 September 1947 when
the car was brought to the station for servicing Profirio de la
Fuente, the operator of the gasoline and service station, was
an agent of the Shell Company of the Philippines, Ltd., the
Court of Appeals found that
. . . De la Fuente owned his position to the Shell Company
which could remove him terminate his services at any time
from the said Company, and he undertook to sell the Shell
Company's products exculusively at the said Station. For this
purpose, De la Fuente was placed in possession of the
gasoline and service station under consideration, and was
provided with all the equipments needed to operate it, by the
said Company, such as the tools and articles listed on Exhibit
2 which the hydraulic lifter (hoist) and accessories, from
which Sison's automobile fell on the date in question (Exhibit
1 and 2). These equipments were delivered to De la Fuente
on a so-called loan basis. The Shell Company took charge of
its care and maintenance and rendered to the public or its
customers at that station for the proper functioning of the
equipment. Witness Antonio Tiongson, who was sales
superintendent of the Shell Company, and witness Augusto
Sawyer, foreman of the same Company, supervised the
operators and conducted periodic inspection of the
Company's gasoline and service station, the service station in
question inclusive. Explaining his duties and responsibilities
and the reason for the loan, Tiongson said: "mainly of the
supervision of sales or (of) our dealers and rountinary
inspection of the equipment loaned by the Company" (t.s.n.,
107); "we merely inquire about how the equipments are,
whether they have complaints, and whether if said
equipments are in proper order . . .", (t.s.n., 110); station
equipments are "loaned for the exclusive use of the dealer on
condition that all supplies to be sold by said dealer should be
exclusively Shell, so as a concession we loan equipments for
their use . . .," "for the proper functioning of the equipments,
we answer and see to it that the equipments are in good
running order usable condition . . .," "with respect to the
public." (t.s.n., 111-112). De la Fuente, as operator, was given
special prices by the Company for the gasoline products sold
therein. Exhibit 1 Shell, which was a receipt by Antonio
Tiongson and signed by the De la Fuente, acknowledging the
delivery of equipments of the gasoline and service station in
question was subsequently replaced by Exhibit 2 Shell, an
official from of the inventory of the equipment which De la
Fuente signed above the words: "Agent's signature" And the
service station in question had been marked "SHELL", and all
advertisements therein bore the same sign. . . .
. . . De la Fuente was the operator of the station "by grace" of
the Defendant Company which could and did remove him as
it pleased; that all the equipments needed to operate the
station was owned by the Defendant Company which took
charge of their proper care and maintenance, despite the fact
that they were loaned to him; that the Defendant company
did not leave the fixing of price for gasoline to De la Fuente;
on the other hand, the Defendant company had complete
control thereof; and that Tiongson, the sales representative
of the Defendant Company, had supervision over De la
17
Fuente in the operation of the station, and in the sale of
Defendant Company's products therein. . . .
Taking into consideration the fact that the operator owed his
position to the company and the latter could remove him or
terminate his services at will; that the service station
belonged to the company and bore its tradename and the
operator sold only the products of the company; that the
equipment used by the operator belonged to the company
and were just loaned to the operator and the company took
charge of their repair and maintenance; that an employee of
the company supervised the operator and conducted periodic
inspection of the company's gasoline and service station; that
the price of the products sold by the operator was fixed by
the company and not by the operator; and that the receipt
signed by the operator indicated that he was a mere agent,
the finding of the Court of Appeals that the operator was an
agent of the company and not an independent contractor
should not be disturbed.
To determine the nature of a contract courts do not have or
are not bound to rely upon the name or title given it by the
contracting parties, should there be a controversy as to what
they really had intended to enter into, but the way the
contracting parties do or perform their respective obligation
stipulated or agreed upon may be shown and inquired into,
and should such performance conflict with the name or title
given the contract by the parties, the former must prevail
over the latter.
It was admitted by the operator of the gasoline and service
station that "the car was carefully and centrally placed on the
platform of the lifter . . ." and the Court of Appeals found that
. . . the fall of Appellant Sison's car from the hydraulic lift and
the damage caused therefor, were the result of the jerking
and swaying of the lift when the valve was released, and that
the jerking was due to some accident and unforeseen
shortcoming of the mechanism itself, which caused its faulty
or defective operation or functioning,
. . . the servicing job on Appellant Sison's automobile was
accepted by De la Fuente in the normal and ordinary conduct
of his business as operator of his co-appellee's service station,
and that the jerking and swaying of the hydraulic lift which
caused the fall of the subject car were due to its defective
condition, resulting in its faulty operation. . . .
As the act of the agent or his employees acting within the
scope of his authority is the act of the principal, the breach of
the undertaking by the agent is one for which the principal is
answerable. Moreover, the company undertook to "answer
and see to it that the equipments are in good running order
and usable condition;" and the Court of Appeals found that
the Company's mechanic failed to make a thorough check up
of the hydraulic lifter and the check up made by its mechanic
was "merely routine" by raising "the lifter once or twice and
after observing that the operator was satisfactory, he (the

mechanic) left the place." The latter was negligent and the
company must answer for the negligent act of its mechanic
which was the cause of the fall of the car from the hydraulic
lifter.
The judgment under review is affirmed, with costs against the
petitioner.
Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo,
Labrador, Concepcion, Reyes, J.B.L., Endencia and Felix, JJ.,
concur.
The Lawphil Project - Arellano Law Foundation
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-41182-3 April 16, 1988
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-
appellants,
vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC.,
ELISEO S.CANILAO, and SEGUNDINA NOGUERA, respondents-
appellees.
SARMIENTO , J.:
The petitioners invoke the provisions on human relations of
the Civil Code in this appeal by certiorari. The facts are
beyond dispute:
xxx xxx xxx
On the strength of a contract (Exhibit A for the appellant
Exhibit 2 for the appellees) entered into on Oct. 19, 1960 by
and between Mrs. Segundina Noguera, party of the first part;
the Tourist World Service, Inc., represented by Mr. Eliseo
Canilao as party of the second part, and hereinafter referred
to as appellants, the Tourist World Service, Inc. leased the
premises belonging to the party of the first part at Mabini St.,
Manila for the former-s use as a branch office. In the said
contract the party of the third part held herself solidarily
liable with the party of the part for the prompt payment of
the monthly rental agreed on. When the branch office was
opened, the same was run by the herein appellant Una 0.
Sevilla payable to Tourist World Service Inc. by any airline for
any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was
to go to Lina Sevilla and 3% was to be withheld by the Tourist
World Service, Inc.
On or about November 24, 1961 (Exhibit 16) the Tourist
World Service, Inc. appears to have been informed that Lina
18
Sevilla was connected with a rival firm, the Philippine Travel
Bureau, and, since the branch office was anyhow losing, the
Tourist World Service considered closing down its office. This
was firmed up by two resolutions of the board of directors of
Tourist World Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and
13), the first abolishing the office of the manager and vice-
president of the Tourist World Service, Inc., Ermita Branch,
and the second,authorizing the corporate secretary to receive
the properties of the Tourist World Service then located at
the said branch office. It further appears that on Jan. 3, 1962,
the contract with the appellees for the use of the Branch
Office premises was terminated and while the effectivity
thereof was Jan. 31, 1962, the appellees no longer used it. As
a matter of fact appellants used it since Nov. 1961. Because
of this, and to comply with the mandate of the Tourist World
Service, the corporate secretary Gabino Canilao went over to
the branch office, and, finding the premises locked, and,
being unable to contact Lina Sevilla, he padlocked the
premises on June 4, 1962 to protect the interests of the
Tourist World Service. When neither the appellant Lina Sevilla
nor any of her employees could enter the locked premises, a
complaint wall filed by the herein appellants against the
appellees with a prayer for the issuance of mandatory
preliminary injunction. Both appellees answered with
counterclaims. For apparent lack of interest of the parties
therein, the trial court ordered the dismissal of the case
without prejudice.
The appellee Segundina Noguera sought reconsideration of
the order dismissing her counterclaim which the court a quo,
in an order dated June 8, 1963, granted permitting her to
present evidence in support of her counterclaim.
On June 17,1963, appellant Lina Sevilla refiled her case
against the herein appellees and after the issues were joined,
the reinstated counterclaim of Segundina Noguera and the
new complaint of appellant Lina Sevilla were jointly heard
following which the court a quo ordered both cases dismiss
for lack of merit, on the basis of which was elevated the
instant appeal on the following assignment of errors:
I. THE LOWER COURT ERRED EVEN IN APPRECIATING
THE NATURE OF PLAINTIFF-APPELLANT MRS. LINA O.
SEVILLA'S COMPLAINT.
II. THE LOWER COURT ERRED IN HOLDING THAT
APPELLANT MRS. LINA 0. SEVILA'S ARRANGEMENT (WITH
APPELLEE TOURIST WORLD SERVICE, INC.) WAS ONE MERELY
OF EMPLOYER-EMPLOYEE RELATION AND IN FAILING TO
HOLD THAT THE SAID ARRANGEMENT WAS ONE OF JOINT
BUSINESS VENTURE.
III. THE LOWER COURT ERRED IN RULING THAT
PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA IS ESTOPPED
FROM DENYING THAT SHE WAS A MERE EMPLOYEE OF
DEFENDANT-APPELLEE TOURIST WORLD SERVICE, INC. EVEN
AS AGAINST THE LATTER.

IV. THE LOWER COURT ERRED IN NOT HOLDING THAT
APPELLEES HAD NO RIGHT TO EVICT APPELLANT MRS. LINA O.
SEVILLA FROM THE A. MABINI OFFICE BY TAKING THE LAW
INTO THEIR OWN HANDS.
V. THE LOWER COURT ERRED IN NOT CONSIDERING AT
.ALL APPELLEE NOGUERA'S RESPONSIBILITY FOR APPELLANT
LINA O. SEVILLA'S FORCIBLE DISPOSSESSION OF THE A.
MABINI PREMISES.
VI. THE LOWER COURT ERRED IN FINDING THAT
APPELLANT APPELLANT MRS. LINA O. SEVILLA SIGNED
MERELY AS GUARANTOR FOR RENTALS.
On the foregoing facts and in the light of the errors asigned
the issues to be resolved are:
1. Whether the appellee Tourist World Service
unilaterally disco the telephone line at the branch office on
Ermita;
2. Whether or not the padlocking of the office by the
Tourist World Service was actionable or not; and
3. Whether or not the lessee to the office premises
belonging to the appellee Noguera was appellees TWS or
TWS and the appellant.
In this appeal, appealant Lina Sevilla claims that a joint
bussiness venture was entered into by and between her and
appellee TWS with offices at the Ermita branch office and
that she was not an employee of the TWS to the end that her
relationship with TWS was one of a joint business venture
appellant made declarations showing:
1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and
wife of an eminent eye, ear and nose specialist as well as a
imediately columnist had been in the travel business prior to
the establishment of the joint business venture with appellee
Tourist World Service, Inc. and appellee Eliseo Canilao, her
compadre, she being the godmother of one of his children,
with her own clientele, coming mostly from her own social
circle (pp. 3-6 tsn. February 16,1965).
2. Appellant Mrs. Sevilla was signatory to a lease
agreement dated 19 October 1960 (Exh. 'A') covering the
premises at A. Mabini St., she expressly warranting and
holding [sic] herself 'solidarily' liable with appellee Tourist
World Service, Inc. for the prompt payment of the monthly
rentals thereof to other appellee Mrs. Noguera (pp. 14-15,
tsn. Jan. 18,1964).
3. Appellant Mrs. Sevilla did not receive any salary from
appellee Tourist World Service, Inc., which had its own,
separate office located at the Trade & Commerce Building;
nor was she an employee thereof, having no participation in
nor connection with said business at the Trade & Commerce
Building (pp. 16-18 tsn Id.).
19
4. Appellant Mrs. Sevilla earned commissions for her
own passengers, her own bookings her own business (and not
for any of the business of appellee Tourist World Service, Inc.)
obtained from the airline companies. She shared the 7%
commissions given by the airline companies giving appellee
Tourist World Service, Lic. 3% thereof aid retaining 4% for
herself (pp. 18 tsn. Id.)
5. Appellant Mrs. Sevilla likewise shared in the
expenses of maintaining the A. Mabini St. office, paying for
the salary of an office secretary, Miss Obieta, and other
sundry expenses, aside from desicion the office furniture and
supplying some of fice furnishings (pp. 15,18 tsn. April
6,1965), appellee Tourist World Service, Inc. shouldering the
rental and other expenses in consideration for the 3% split in
the co procured by appellant Mrs. Sevilla (p. 35 tsn Feb.
16,1965).
6. It was the understanding between them that
appellant Mrs. Sevilla would be given the title of branch
manager for appearance's sake only (p. 31 tsn. Id.), appellee
Eliseo Canilao admit that it was just a title for dignity (p. 36
tsn. June 18, 1965- testimony of appellee Eliseo Canilao pp.
38-39 tsn April 61965-testimony of corporate secretary
Gabino Canilao (pp- 2-5, Appellants' Reply Brief)
Upon the other hand, appellee TWS contend that the
appellant was an employee of the appellee Tourist World
Service, Inc. and as such was designated manager.1
xxx xxx xxx
The trial court2 held for the private respondent on the
premise that the private respondent, Tourist World Service,
Inc., being the true lessee, it was within its prerogative to
terminate the lease and padlock the premises. 3 It likewise
found the petitioner, Lina Sevilla, to be a mere employee of
said Tourist World Service, Inc. and as such, she was bound
by the acts of her employer. 4 The respondent Court of
Appeal 5 rendered an affirmance.
The petitioners now claim that the respondent Court, in
sustaining the lower court, erred. Specifically, they state:
I
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND
GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT "THE
PADLOCKING OF THE PREMISES BY TOURIST WORLD SERVICE
INC. WITHOUT THE KNOWLEDGE AND CONSENT OF THE
APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA
O. SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT
INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO
IMMEDIATELY BEFORE THE PADLOCKING INCIDENT, WAS IN
CONFERENCE WITH THE CORPORATE SECRETARY OF TOURIST
WORLD SERVICE (ADMITTEDLY THE PERSON WHO
PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP AMICABLY
SETTLE THE CONTROVERSY BETWEEN THE APPELLANT
(SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT)

ENTITLE THE LATTER TO THE RELIEF OF DAMAGES" (ANNEX
"A" PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE
PROCESS WHICH ADHERES TO THE RULE OF LAW.
II
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND
GRAVELY ABUSED ITS DISCRETION IN DENYING APPELLANT
SEVILLA RELIEF BECAUSE SHE HAD "OFFERED TO WITHDRAW
HER COMP PROVIDED THAT ALL CLAIMS AND
COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE
WITHDRAWN." (ANNEX "A" P. 8)
III
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND
GRAVELY ABUSED ITS DISCRETION IN DENYING-IN FACT NOT
PASSING AND RESOLVING-APPELLANT SEVILLAS CAUSE OF
ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL
CODE ON RELATIONS.
IV
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND
GRAVELY ABUSED ITS DISCRETION IN DENYING APPEAL
APPELLANT SEVILLA RELIEF YET NOT RESOLVING HER CLAIM
THAT SHE WAS IN JOINT VENTURE WITH TOURIST WORLD
SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN
INTEREST WHICH COULD NOT BE TERMINATED OR REVOKED
UNILATERALLY BY TOURIST WORLD SERVICE INC.6
As a preliminary inquiry, the Court is asked to declare the
true nature of the relation between Lina Sevilla and Tourist
World Service, Inc. The respondent Court of see fit to rule on
the question, the crucial issue, in its opinion being "whether
or not the padlocking of the premises by the Tourist World
Service, Inc. without the knowledge and consent of the
appellant Lina Sevilla entitled the latter to the relief of
damages prayed for and whether or not the evidence for the
said appellant supports the contention that the appellee
Tourist World Service, Inc. unilaterally and without the
consent of the appellant disconnected the telephone lines of
the Ermita branch office of the appellee Tourist World
Service, Inc.7 Tourist World Service, Inc., insists, on the other
hand, that Lina SEVILLA was a mere employee, being "branch
manager" of its Ermita "branch" office and that inferentially,
she had no say on the lease executed with the private
respondent, Segundina Noguera. The petitioners contend,
however, that relation between the between parties was one
of joint venture, but concede that "whatever might have
been the true relationship between Sevilla and Tourist World
Service," the Rule of Law enjoined Tourist World Service and
Canilao from taking the law into their own hands, 8 in
reference to the padlocking now questioned.
The Court finds the resolution of the issue material, for if, as
the private respondent, Tourist World Service, Inc.,
maintains, that the relation between the parties was in the
character of employer and employee, the courts would have
20
been without jurisdiction to try the case, labor disputes being
the exclusive domain of the Court of Industrial Relations,
later, the Bureau Of Labor Relations, pursuant to statutes
then in force. 9
In this jurisdiction, there has been no uniform test to
determine the evidence of an employer-employee relation. In
general, we have relied on the so-called right of control test,
"where the person for whom the services are performed
reserves a right to control not only the end to be achieved
but also the means to be used in reaching such end." 10
Subsequently, however, we have considered, in addition to
the standard of right-of control, the existing economic
conditions prevailing between the parties, like the inclusion
of the employee in the payrolls, in determining the existence
of an employer-employee relationship.11
The records will show that the petitioner, Lina Sevilla, was not
subject to control by the private respondent Tourist World
Service, Inc., either as to the result of the enterprise or as to
the means used in connection therewith. In the first place,
under the contract of lease covering the Tourist Worlds
Ermita office, she had bound herself in solidum as and for
rental payments, an arrangement that would be like claims of
a master-servant relationship. True the respondent Court
would later minimize her participation in the lease as one of
mere guaranty, 12 that does not make her an employee of
Tourist World, since in any case, a true employee cannot be
made to part with his own money in pursuance of his
employer's business, or otherwise, assume any liability
thereof. In that event, the parties must be bound by some
other relation, but certainly not employment.
In the second place, and as found by the Appellate Court,
'[w]hen the branch office was opened, the same was run by
the herein appellant Lina O. Sevilla payable to Tourist World
Service, Inc. by any airline for any fare brought in on the
effort of Mrs. Lina Sevilla. 13 Under these circumstances, it
cannot be said that Sevilla was under the control of Tourist
World Service, Inc. "as to the means used." Sevilla in pursuing
the business, obviously relied on her own gifts and
capabilities.
It is further admitted that Sevilla was not in the company's
payroll. For her efforts, she retained 4% in commissions from
airline bookings, the remaining 3% going to Tourist World.
Unlike an employee then, who earns a fixed salary usually,
she earned compensation in fluctuating amounts depending
on her booking successes.
The fact that Sevilla had been designated 'branch manager"
does not make her, ergo, Tourist World's employee. As we
said, employment is determined by the right-of-control test
and certain economic parameters. But titles are weak
indicators.
In rejecting Tourist World Service, Inc.'s arguments however,
we are not, as a consequence, accepting Lina Sevilla's own,
that is, that the parties had embarked on a joint venture or

otherwise, a partnership. And apparently, Sevilla herself did
not recognize the existence of such a relation. In her letter of
November 28, 1961, she expressly 'concedes your [Tourist
World Service, Inc.'s] right to stop the operation of your
branch office 14 in effect, accepting Tourist World Service,
Inc.'s control over the manner in which the business was run.
A joint venture, including a partnership, presupposes
generally a of standing between the joint co-venturers or
partners, in which each party has an equal proprietary
interest in the capital or property contributed 15 and where
each party exercises equal rights in the conduct of the
business.16 furthermore, the parties did not hold themselves
out as partners, and the building itself was embellished with
the electric sign "Tourist World Service, Inc. 17in lieu of a
distinct partnership name.
It is the Court's considered opinion, that when the petitioner,
Lina Sevilla, agreed to (wo)man the private respondent,
Tourist World Service, Inc.'s Ermita office, she must have
done so pursuant to a contract of agency. It is the essence of
this contract that the agent renders services "in
representation or on behalf of another.18 In the case at bar,
Sevilla solicited airline fares, but she did so for and on behalf
of her principal, Tourist World Service, Inc. As compensation,
she received 4% of the proceeds in the concept of
commissions. And as we said, Sevilla herself based on her
letter of November 28, 1961, pre-assumed her principal's
authority as owner of the business undertaking. We are
convinced, considering the circumstances and from the
respondent Court's recital of facts, that the ties had
contemplated a principal agent relationship, rather than a
joint managament or a partnership..
But unlike simple grants of a power of attorney, the agency
that we hereby declare to be compatible with the intent of
the parties, cannot be revoked at will. The reason is that it is
one coupled with an interest, the agency having been created
for mutual interest, of the agent and the principal. 19 It
appears that Lina Sevilla is a bona fide travel agent herself,
and as such, she had acquired an interest in the business
entrusted to her. Moreover, she had assumed a personal
obligation for the operation thereof, holding herself solidarily
liable for the payment of rentals. She continued the business,
using her own name, after Tourist World had stopped further
operations. Her interest, obviously, is not to the commissions
she earned as a result of her business transactions, but one
that extends to the very subject matter of the power of
management delegated to her. It is an agency that, as we
said, cannot be revoked at the pleasure of the principal.
Accordingly, the revocation complained of should entitle the
petitioner, Lina Sevilla, to damages.
As we have stated, the respondent Court avoided this issue,
confining itself to the telephone disconnection and
padlocking incidents. Anent the disconnection issue, it is the
holding of the Court of Appeals that there is 'no evidence
showing that the Tourist World Service, Inc. disconnected the
telephone lines at the branch office. 20 Yet, what cannot be
denied is the fact that Tourist World Service, Inc. did not take
21
pains to have them reconnected. Assuming, therefore, that it
had no hand in the disconnection now complained of, it had
clearly condoned it, and as owner of the telephone lines, it
must shoulder responsibility therefor.
The Court of Appeals must likewise be held to be in error with
respect to the padlocking incident. For the fact that Tourist
World Service, Inc. was the lessee named in the lease con-
tract did not accord it any authority to terminate that
contract without notice to its actual occupant, and to padlock
the premises in such fashion. As this Court has ruled, the
petitioner, Lina Sevilla, had acquired a personal stake in the
business itself, and necessarily, in the equipment pertaining
thereto. Furthermore, Sevilla was not a stranger to that
contract having been explicitly named therein as a third party
in charge of rental payments (solidarily with Tourist World,
Inc.). She could not be ousted from possession as summarily
as one would eject an interloper.
The Court is satisfied that from the chronicle of events, there
was indeed some malevolent design to put the petitioner,
Lina Sevilla, in a bad light following disclosures that she had
worked for a rival firm. To be sure, the respondent court
speaks of alleged business losses to justify the closure '21 but
there is no clear showing that Tourist World Ermita Branch
had in fact sustained such reverses, let alone, the fact that
Sevilla had moonlit for another company. What the evidence
discloses, on the other hand, is that following such an
information (that Sevilla was working for another company),
Tourist World's board of directors adopted two resolutions
abolishing the office of 'manager" and authorizing the
corporate secretary, the respondent Eliseo Canilao, to effect
the takeover of its branch office properties. On January 3,
1962, the private respondents ended the lease over the
branch office premises, incidentally, without notice to her.
It was only on June 4, 1962, and after office hours
significantly, that the Ermita office was padlocked, personally
by the respondent Canilao, on the pretext that it was
necessary to Protect the interests of the Tourist World
Service. " 22 It is strange indeed that Tourist World Service,
Inc. did not find such a need when it cancelled the lease five
months earlier. While Tourist World Service, Inc. would not
pretend that it sought to locate Sevilla to inform her of the
closure, but surely, it was aware that after office hours, she
could not have been anywhere near the premises. Capping
these series of "offensives," it cut the office's telephone lines,
paralyzing completely its business operations, and in the
process, depriving Sevilla articipation therein.
This conduct on the part of Tourist World Service, Inc. betrays
a sinister effort to punish Sevillsa it had perceived to be
disloyalty on her part. It is offensive, in any event, to
elementary norms of justice and fair play.
We rule therefore, that for its unwarranted revocation of the
contract of agency, the private respondent, Tourist World
Service, Inc., should be sentenced to pay damages. Under the
 22

Civil Code, moral damages may be awarded for "breaches of 2 Court of First Instance of Manila, Branch XIX
contract where the defendant acted ... in bad faith. 23 Montesa, Agustin, Presiding Judge.

We likewise condemn Tourist World Service, Inc. to pay
further damages for the moral injury done to Lina Sevilla from
its brazen conduct subsequent to the cancellation of the
power of attorney granted to her on the authority of Article
21 of the Civil Code, in relation to Article 2219 (10) thereof
ART. 21. Any person who wilfully causes loss or injury to
another in a manner that is contrary to morals, good customs
or public policy shall compensate the latter for the
damage.24
3 Rollo, Id 55; Record on Appeal, 38.
4 Record on Appeal, Id., 37-38.
5 Gaviola, Jr., RAmon, J., Reyes, Luis, and De Castro,
Pacific, JJ., Conccurring
6 Rollo, Id., 124; Brief for Petitioners, 1-2.
7 Rollo, Id., 36.

ART. 2219. Moral damages25 may be recovered in the 8 Id., 21; emphasis in the original.
following and analogous cases:
9 See Rep. Act No. 875 See also Rep. Act No. 1052, as
xxx xxx xxx amended by Rep. Act No. 1787.

(10) Acts and actions refered into article 21, 26, 27, 28,
29, 30, 32, 34, and 35.
The respondent, Eliseo Canilao, as a joint tortfeasor is
likewise hereby ordered to respond for the same damages in
a solidary capacity.
10 LVN Pictures, Inc. v. Philippine Musicians Guild, No.
L-12582, January 28,1961, 1 SCRA 132,173 (1961); emphasis
in the original.
11 Visayan Stevedore Trans. Co., et al. v. C.I.R., et al.,
No. L-21696, February 25,1967,19 SCRA 426 (1967).

Insofar, however, as the private respondent, Segundina 12 Rollo, Id., 40.

Noguera is concerned, no evidence has been shown that she
had connived with Tourist World Service, Inc. in the 13 Id 31.
disconnection and padlocking incidents. She cannot therefore
be held liable as a cotortfeasor. 14 Id., 47.

The Court considers the sums of P25,000.00 as and for moral
damages,24 P10,000.00 as exemplary damages, 25 and
P5,000.00 as nominal 26 and/or temperate27 damages, to be
just, fair, and reasonable under the circumstances.
WHEREFORE, the Decision promulgated on January 23, 1975
as well as the Resolution issued on July 31, 1975, by the
respondent Court of Appeals is hereby REVERSED and SET
ASIDE. The private respondent, Tourist World Service, Inc.,
and Eliseo Canilao, are ORDERED jointly and severally to
indemnify the petitioner, Lina Sevilla, the sum of 25,00.00 as
and for moral damages, the sum of P10,000.00, as and for
exemplary damages, and the sum of P5,000.00, as and for
nominal and/or temperate damages.
15 BAUTISTA, TREATISE ON PHILIPPINE PARTNERSHIP
LAW 34 (1978).
16 Op cit 37. In Tuazon v. Balanos [95 Phil. 106 (1954)],
this Court distinguished between a joint venture and a
partnership but this view has since raised questions from
authorities. According to Campos, there seems to be no
fundamental distinction between the two forms of business
combinations. CAMPOS, THE CORPORATION CODE 12 (1981).]
For p of this case, we use the terms of interchangeable.
17 See rollo, id.
18 CIVIL CODE, art. 1868.

Costs against said private respondents. 19 See VI PADILLA, CIVIL LAW 350 (1974).

SO ORDERED. 20 Rollo, id., 36.

Yap (Chairman), Melencio-Herrera, Paras and Padilla, JJ., 21 Id, 31.

concur.
22 Id.
Footnotes
23 CIVIL CODE, art. 2220.
1 Rollo, 30-45.
24 Supra.

25 Supra, art. 2232.
26 Supra art. 2221.
27 Supra, art. 2224.
The Lawphil Project - Arellano Law Foundation
=============================
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 190834 November 26, 2014
ARIEL T. LIM, Petitioner,
vs.
PEOPLE OF THE PHILIPPINES, Respondent.
DECISION
PERALTA, J.:
This is to resolve the petition for review on certiorari seeking
the reversal of the Decision1 of the Court of Appeals (CA)
promulgated on June 30, 2009, and its Resolution2 dated
January 4, 2010. The CA affirmed the judgment of the
Regional Trial Court of Manila (RTC), convicting petitioner of
one (1) count of violation of Batas Pambansa (B.P.) Bilang 22
in Criminal Case No. 07-249932.
Records reveal that petitioner issued Bank of Commerce
Check Nos. 0013813 and 0013814, dated June 30, 1998 and
July 15, 1998, respectively, payable to CASH, in the amount of
One Hundred Thousand Pesos (PI00,000.00) for each check.
He gave the checks to Mr. Willie Castor (Castor) as his
campaign donation to the latter's candidacy in the elections
of 1998. It was Castor who ordered the delivery of printing
materials and used petitioner's checks to pay for the same.
Claiming that the printing materials were delivered too late,
Castor instructed petitioner to issue a "Stop Payment" order
for the two checks. Thus, the checks were dishonored by the
bank because of said order and during trial, when the bank
officer was presented on the witness stand, he admitted that
said checks were drawn against insufficient funds (DAIF).
Private complainant Magna B. Badiee sent two demand
letters to petitioner, dated July 20, 1998 and July 23, 1998
and, subsequently, private complainant filed a complaint
23
against petitioner before the Office of the Prosecutor. After
the lapse of more than one month from receipt of the
demand letters, and after receiving the subpoena from the
Office of the Prosecutor, petitioner issued a replacement
check dated September 8, 1998 in the amount of Two
Hundred Thousand Pesos (200,000.00). Private complainant
Magna B. Badiee was able to encash said replacement check.
Nevertheless, on March 19, 1999, or six (6) months after
petitioner had paid the amount of the bounced checks, two
Informations were filed against him before the Metropolitan
Trial Court of Manila (MeTC), to wit:
CRIMINAL CASE No. 327138-CR
INFORMATION
The undersigned accuses ARIEL LIM of violation of B.P. Blg. 22
committed as follows:
That sometime in the month of April, 1998 in the City of
Manila, Philippines, the said accused did thenand there
willfully, unlawfully and feloniously make or draw and issue
to MAGNA B. BADIEE to apply on account or for value BANK
OF COMMERCE CHECK No. 0013814 dated July 15, 1998,
payable to Cash in the amount of 100,000.00 said accused
knowing fully well that at the time of issue he did not have
sufficient funds in or credit with the drawee bank for
payment of such check in full upon its presentment, which
check when presented for payment within ninety (90) days
from the date thereof, was subsequently dishonored by the
drawee bank for the reason "PAYMENT STOPPED," but the
same would have been dishonored for insufficient funds had
not the accused, without any valid reason, ordered the bank
to stop payment, the said accused, despite receipt of notice
of such dishonor failed to pay said Magna B. Badiee the
amount of the said check or to make arrangement for
payment in full of the same within five (5) banking days after
receiving said notice.
CONTRARY TO LAW.3
CRIMINAL CASE No. 327139 CR
INFORMATION
The undersigned accuses ARIEL LIM of violation of B.P. Blg. 22
committed as follows:
That sometime in the month of April, 1998 in the City of
Manila, Philippines, the said accused did then and there
willfully, unlawfully and feloniously make or draw and issue
to MAGNA B. BADIEE to apply on account or for value BANK
OF COMMERCE CHECK No. 0013813 dated June 30, 1998
payable to Cashin the amount of 100,000.00 said accused
knowing fully well that at the time of issue he did not have
sufficient funds in or credit with the drawee bank for
payment of such check in full upon its presentment, which
check when presented for payment within ninety (90) days

from the date thereof, was subsequently dishonored by the
drawee bank for the reason "PAYMENT STOPPED," but the
same would have been dishonored for insufficient funds had
not the accused, without any valid reason, ordered the bank
to stop payment, the said accused, despite receipt of notice
of such dishonor failed to pay said Magna B. Badiee the
amount of the said check or to make arrangement for
payment in full of the same within five (5) banking days after
receiving said notice.
CONTRARY TO LAW.4
On September 12, 2006, the MeTC promulgated its Decision
finding petitioner guilty of two (2) counts of violation of B.P.
Blg. 22. Petitioner appealed to the Regional Trial Court of
Manila (RTC), and on July 20, 2007, the RTC issued a Decision,
the dispositive portion of which reads as follows:
WHEREFORE, this court therefore modifies the lower court
decision with respect to criminal case no. 327138 (07-
249931), because the lower court of Manila has no
jurisdiction to try and decide cases where the essential
ingredients of the crime charged happened in Quezon City.
The decision of the lower court with respect to criminal case
no. 327138 (07-249931) is ordered vacated and set aside for
lack of jurisdiction.
The lower court findings that accused is found guilty beyond
reasonable doubt for Violation of BP 22 with respect to
criminal case no. 07-24992 is affirmed and is ordered to pay a
fine of 100,000.00 plus costs. No findings as to civil liability
because the court agrees with the lower court that the check
was paid, is affirmed and there is no cogent reason to disturb
the same. In case of failure to pay fine, the accused shall
undergo subsidiary imprisonment of not more than six (6)
months.
SO ORDERED.5
A petition for review was then filed with the Court of Appeals,
and on June 30, 2009, the CA promulgated its Decision
affirming in toto the RTC judgment. Petitioner's motion for
reconsideration thereof was denied per Resolution dated
January 4, 2010.
Thus, the present petition wherein petitioner posits that
jurisprudence dictates the dismissal of the criminal case
against him on the ground that he has fully paid the amount
of the dishonored checks even before the Informations
against him were filed incourt. Petitioner mainly relies on
Griffith v. Court of Appeals.6 The Office of the Solicitor
General (OSG) likewise recommends the acquittal of
petitioner, opining that Griffith7 is applicable to the present
case.
The Court finds the petition meritorious.
In Griffith,the Court acquitted the accused therein due to the
fact that two years before the filing of the Information for
24
violation of B.P. No. 22, the accused had, in effect, paid the
complainant an amount greater than the value of the
bounced checks. The CA held that the factual circumstances
in Griffith are dissimilar from those in the present case. The
Court disagrees with such conclusion.
The CA found Griffithin applicable to the present case,
because the checks subject of this case are personal checks,
whilethe check involved in Griffithwas a corporate check and,
hence, some confusion or miscommunication could easily
occur between the signatories of the check and the corporate
treasurer. Although the factual circumstances in the present
case are not exactlythe same as those in Griffith, it should be
noted that the same kind of confusion giving rise to
petitioner's mistake very well existed in the present case.
Here, the check was issued by petitioner merely as a
campaign contribution to Castor's candidacy. As found by the
trial court, it was Castor who instructed petitioner to issue a
"Stop Payment" order for the two checks because the
campaign materials, for which the checks were used as
payment, were not delivered on time. Petitioner relied on
Castor's word and complied with his instructions, as it was
Castor who was supposed to take delivery of said materials.
Verily, it is easy to see how petitioner made the mistake of
readily complying with the instruction to stop payment since
he believed Castor's wordthat there is no longer any valid
reason to pay complainant as delivery was not made as
agreed upon. Nevertheless, two monthsafter receiving the
demand letter from private complainant and just several days
after receiving the subpoena from the Office of the
Prosecutor, accused issued a replacement check which was
successfully encashed by private complainant.
The CA also took it against petitioner that he paid the amount
of the checks only after receiving the subpoena from the
Office of the Prosecutor, which supposedly shows that
petitioner was motivated to pay not because he wanted to
settle his obligation but because he wanted to avoid
prosecution. This reasoning is tenuous, because in Griffith,
the accused therein did not even voluntarily pay the value of
the dishonored checks; rather, the complainant was paid
from the proceeds of the invalid foreclosure of the accused's
property. In saidcase, the Court did not differentiate as to
whether payment was made before or after the complaint
had been filed with the Office of the Prosecutor. It only
mattered that the amount stated in the dishonored check
had actually been paid before the Information against the
accused was filed in court. In thiscase, petitioner even
voluntarily paid value of the bounced checks. The Court,
therefore, sees no justification for differentiating this case
from that of Griffith. Records show that both in Griffithand in
this case, petitioner had paid the amount of the dishonored
checks before the filing of the Informations in court. Verily,
there is no reason why the same liberality granted to the
accused in Griffithshould not likewise be extended to herein
petitioner. The precept enunciated in Griffith is herein
reiterated, to wit:

While we agree with the private respondent that the
gravamen of violation of B.P. 22 is the issuance of worthless
checks that are dishonored upon their presentment for
payment, we should not apply penal laws mechanically. We
must find if the application of the law is consistent with the
purpose of and reason for the law. Ratione cessat lex, et
cessat lex. (When the reason for the law ceases, the law
ceases.) It is not the letter alone but the spirit of the law also
that gives it life. This is especially so in this case where a
debtors criminalization would not serve the ends of justice
but in fact subvert it. The creditor having collected already
more than a sufficient amount to cover the value of the
checks for payment of rentals, viaauction sale, we find that
holding the debtors president to answer for a criminal
offense under B.P. 22 two years after said collection is no
longer tenable nor justified by law or equitable
considerations.
In sum, considering that the money value of the two checks
issued by petitioner has already been effectively paid two
years before the informations against him were filed, we find
merit in this petition. We hold that petitioner herein could
not be validly and justly convicted or sentenced for violation
of B.P. 22. x x x8 (Emphasis supplied)
In the more recent case of Tan v. Philippine Commercial
International Bank,9 the foregoing principle articulated in
Griffithwas the precedent cited to justify the acquittal of the
accused in said case. Therein, the Court enumerated the
elements for violation of B.P. Blg. 22 being "(1) The accused
makes, draws or issues a check to apply to account or for
value; (2) The accused knows at the time of the issuance that
he or she does not have sufficient funds in, or credit with the
drawee bank for the payment of the check in full upon its
presentment; and (3) The check is subsequently dishonored
by the drawee bank for insufficiency of funds or credit, or it
would have been dishonored for the same reason had not the
drawer, without any valid reason, ordered the bank to stop
payment."10 To facilitate proving the second element, the
law created a prima faciepresumption of knowledge of
insufficiency of funds or credit, which is established when it is
shown that the drawer of the check was notified of its
dishonor and, within five banking days thereafter, failed to
fully pay the amount of the check or make arrangements for
its full payment. If the check, however, is made good or the
drawer pays the value of the check within the five-day period,
then the presumption is rebutted. Evidently, one of the
essential elements of the violation is no longer present and
the drawer may no longer be indicted for B.P. Blg. 22. Said
payment withinthe period prescribed by the law is a
complete defense.
Generally, only the full payment of the value of the
dishonored check during the five-day grace period would
exculpate the accused from criminal liability under B.P. Blg.
22 but, as the Court further elaborated in Tan:
In Griffith v. Court of Appeals, the Court held that were the
creditor had collected more than a sufficient amount to cover
25
the value of the checks representing rental arrearages,
holding the debtor's president to answer for a criminal
offense under B.P. Blg. 22 two years after the said collection
is no longer tenable nor justified by law or equitable
considerations.In that case, the Court ruled that albeit made
beyond the grace period but two years prior to the institution
of the criminal case, the payment collected from the
proceeds of the foreclosure and auction sale of the
petitioner's impounded properties, with more than a million
pesos to spare, justified the acquittal of the petitioner.
xxxx
In the present case, PCIB already extracted its proverbial
pound of flesh by receiving and keeping in possession the
four buses trust properties surrendered by petitioner in
about mid 1991 and March 1992 pursuant to Section 7 of the
Trust Receipts Law, the estimated value of which was "about
6.6 million." It thus appears that the total amount of the
dishonored checks 1,785,855.75 , x x x was more than
fully satisfied priorto the transmittal and receiptof the July 9,
1992 letter of demand. In keeping with jurisprudence, the
Court then considers such payment of the dishonored checks
to have obliterated the criminal liability of petitioner.
It is consistent rule that penal statutes are construed strictly
against the State and liberally in favor of the
accused.1wphi1 And since penal laws should not be applied
mechanically, the Court must determine whether the
application of the penal law is consistent with the purpose
and reason of the law. x x x11 (Underscoring supplied)
Thus, although payment of the value of the bounced check, if
made beyond the 5-day period provided for in B.P. Blg. 22,
would normally not extinguish criminal liability, the
aforementioned cases show that the Court acknowledges the
existence of extraordinary cases where, even if all the
elements of the crime or offense are present, the conviction
of the accused would prove to be abhorrent to society's
sense of justice. Just like in Griffith and in Tan,12 petitioner
should not be penalized although all the elements of violation
of B.P. Blg. 22 are proven to bepresent. The fact that the
issuer of the check had already paid the value of the
dishonored check after having received the subpoena from
the Office of the Prosecutor should have forestalled the filing
of the Information incourt. The spirit of the law which, for
B.P. Blg. 22, is the protection of the credibility and stability of
the banking system, would not be served by penalizing
people who have evidently made amends for their mistakes
and made restitution for damages even before charges have
been filed against them. In effect, the payment of the checks
before the filing of the informations has already attained the
purpose of the law.
It should be emphasized as well that payment of the value of
the bounced check after the information has been filed in
court would no longer have the effect of exonerating the
accused from possible conviction for violation of B.P. Blg. 22.
Since from the commencement of the criminal proceedings in
 26

court, there is no circumstance whatsoever to show that the

accused had every intention to mitigate or totally alleviate CERTIFICATION
the ill effects of his issuance of the unfunded check, then
there is no equitable and compelling reason to preclude his Pursuant to Section 13, Article VIII of the Constitution and the
prosecution. In such a case, the letter of the law should be Division Chairperson's Attestation, I certify that the
applied to its full extent. conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the
Furthermore, to avoid any confusion, the Court's ruling in this opinion of the Court's Division.
case should be well differentiated from cases where the
accused is charged with estafa under Article 315, par. 2(d) of MARIA LOURDES P.A. SERENO
the Revised Penal Code, where the fraud is perpetuated by Chief Justice
postdating a check, or issuing a check in payment of an
obligation when the offender had no funds in the bank, or his
funds deposited therein were not sufficient to cover the Footnotes
amount of the check. In said case of estafa, damage and
deceit are the essential elements of the offense, and the 1 Penned by Associate Justice Pampio A. Abarintos, with
check is merely the accused's tool in committing fraud. In Associate Justices Amelita G Tolentino and Sixto C. Marella,
such a case, paying the value of the dishonored check will not Jr., concurring.
free the accused from criminal liability. It will merely satisfy
the civil liability of the crime but not the criminal liability. 2 Id.

In fine, the Court holds that herein petitioner must be 3 CA rollo, p. 40.
exonerated from the imposition of penalties for violation of
B.P. Blg. 22 as he had already paid the amount of the 4 Id. at 39.
dishonored checks six (6) months before the filing of
Informations with the court. Such a course of action is more 5 Rollo, pp. 40-41.
in keeping with justice and equity.
6 428 Phil. 878 (2002).
WHEREFORE, the Decision of the Court of Appeals, dated
June 30, 2009, in CA-GR. CR No. 31725, is hereby REVERSED 7 Supra.
and SET ASIDE. Petitioner Ariel T. Lim is ACQUITTED in
Criminal Case No. 07-249932. 8 Griffith v. Court of Appeals, supranote 6, at 892.

SO ORDERED. 9 575 Phil. 485 (2008).

DIOSDADO M. PERALTA 10 Id. at 494.

Associate Justice
11 Id. at 496-497. (Underscoring ours)
WE CONCUR:
12 Supra.
PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson The Lawphil Project - Arellano Law Foundation

MARTIN S. VILLARAMA, JR.

Associate Justice BIENVENIDO L. REYES
Associate Justice ================
FRANCIS H. JARDELEZA
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been

reached in consultation before the case was assigned to the
writer of the opinion of the Court's Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairpeson, Third Division

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-19265 May 29, 1964
MOISES SAN DIEGO, SR., petitioner,
vs.
ADELO NOMBRE and PEDRO ESCANLAR, respondents.
A. R. Castaeda and M. S. Roxas for petitioner.
Amado B. Parreo Law Office for respondents.
PAREDES, J.:
The case at bar had its origin in Special Proceedings No. 7279
of the CFI of Negros Occidental wherein respondent Adelo
Nombre was the duly constituted judicial administrator. On
May 1, 1960, Nombre, in his capacity was judicial
administrator of the intestate estate subject of the Sp. Proc.
stated above, leased one of the properties of the estate (a
fishpond identified as Lot No. 1617 of the cadastral survey of
Kabankaban, Negros Occidental), to Pedro Escanlar, the other
respondent. The terms of the lease was for three (3) years,
with a yearly rental of P3,000.00 to expire on May 1, 1963,
the transaction having been done, admittedly, without
previous authority or approval of the Court where the
proceedings was pending. On January 17, 1961, Nombre was
removed as administrator by Order of the court and one
Sofronio Campillanos was appointed in his stead. The appeal
on the Order of Nombre's removal is supposedly pending
with the Court of Appeals. Respondent Escanlar was cited for
contempt, allegedly for his refusal to surrender the fishpond
to the newly appointed administrator. On March 20, 1961,
Campillanos filed a motion asking for authority to execute a
lease contract of the same fishpond, in favor of petitioner
herein, Moises San Diego, Sr., for 5 years from 1961, at a
yearly rental of P5,000.00. Escanlar was not notified of such
motion. Nombre, the deposed administrator, presented a
27
written opposition to the motion of Campillanos on April 11,
1964, pointing out that the fishpond had been leased by him
to Escanlar for 3 years, the period of which was going to
expire on May 1, 1963. In a supplemental opposition, he also
invited the attention of the Court that to grant the motion of
the new administrator would in effect nullify the contract in
favor of Escanlar, a person on whom the Court had no
jurisdiction. He also intimated that the validity of the lease
contract entered into by a judicial administrator, must be
recognized unless so declared void in a separate action. The
opposition notwithstanding, the Court on April 8, 1961, in
effect declared that the contract in favor of Escanlar was null
and void, for want of judicial authority and that unless he
would offer the same as or better conditions than the
prospective lessee, San Diego, there was no good reason why
the motion for authority to lease the property to San Diego
should not be granted. Nombre moved to reconsider the
Order of April 8, stating that Escanlar was willing to increase
the rental of P5,000.00, but only after the termination of his
original contract. The motion for reconsideration was denied
on April 24, 1961, the trial judge stating that the contract in
favor of Escanlar was executed in bad faith and was
fraudulent because of the imminence of Nombre's removal as
administrator, one of the causes of which was his
indiscriminate pleasant, of the property with inadequate
rentals.
From this Order, a petition for Certiorari asking for the
annulment of the Orders of April 8 and 24, 1961 was
presented by Nombre and Escanlar with the Court of Appeals.
A Writ of preliminary injunction was likewise prayed for to
restrain the new administrator Campillanos from possessing
the fishpond and from executing a new lease contract
covering it; requiring him to return the possession thereof to
Escanlar, plus damages and attorney's fees in the amount of
P10,000.00 and costs. The Court of Appeals issued the
injunctive writ and required respondents therein to Answer.
Campillanos insisted on the invalidity of the contract in favor
of Escanlar; the lower court alleged that it did not exactly
annul or invalidate the lease in his questioned orders but
suggested merely that Escanlar "may file a separate ordinary
action in the Court of general jurisdiction."
The Court of Appeals, in dismissing the petition for certiorari,
among others said
The controlling issue in this case is the legality of the contract
of lease entered into by the former administrator Nombre,
and Pedro Escanlar on May 1, 1960.
Respondents contend that this contract, not having been
authorized or approved by the Court, is null and void and
cannot be an obstacle to the execution of another of lease by
the new administrator, Campillanos. This contention is
without merit. ... . It has been held that even in the absence
of such special powers, a contract or lease for more than 6
years is not entirely invalid; it is invalid only in so far as it
exceeds the six-year limit (Enrique v. Watson Company, et al.,
6 Phil. 84). 1

No such limitation on the power of a judicial administrator to
grant a lease of property placed under his custody is provided
for in the present law. Under Article 1647 of the present Civil
Code, it is only when the lease is to be recorded in the
Registry of Property that it cannot be instituted without
special authority. Thus, regardless of the period of lease,
there is no need of special authority unless the contract is to
be recorded in the Registry of Property. As to whether the
contract in favor of Escanlar is to be so recorded is not
material to our inquiry. 1wph1.t Special powers of attorneys are necessary in the following
On the contrary, Rule 85, Section 3, of the Rules of Court
authorizes a judicial administrator, among other things, to
administer the estate of the deceased not disposed of by will.
Commenting on this Section in the light of several Supreme
Court decisions (Jocson de Hilado v. Nava, 69 Phil. 1; Gamboa
v. Gamboa, 68 Phil. 304; Ferraris v. Rodas, 65 Phil. 732;
Rodriguez v. Borromeo, 43 Phil. 479), Moran says: "Under this
provision, the executor or administrator has the power of
administering the estate of the deceased for purposes of
liquidation and distribution. He may, therefore, exercise all
acts of administration without special authority of the Court.
For instance, he may lease the property without securing
previously any permission from the court. And where the
lease has formally been entered into, the court cannot, in the
same proceeding, annul the same, to the prejudice of the
lessee, over whose person it had no jurisdiction. The proper
remedy would be a separate action by the administrator or
the heirs to annul the lease. ... .
On September 13, 1961, petitioner herein Moises San Diego,
Sr., who was not a party in the case, intervened and moved
for a reconsideration of the above judgment. The original
parties (the new administrator and respondent judge) also
filed Motions for reconsideration, but we do not find them in
the record. On November 18, 1961, the Court of Appeals
denied the motions for reconsideration. With the denial of
the said motions, only San Diego, appealed therefrom, raising
legal questions, which center on "Whether a judicial
administrator can validly lease property of the estate without
prior judicial authority and approval", and "whether the
provisions of the New Civil Code on Agency should apply to
judicial administrators."
The Rules of Court provide that
An executor or administrator shall have the right to the
possession of the real as well as the personal estate of the
deceased so long as it is necessary for the payment of the
debts and the expenses of administration, and shall
administer the estate of the deceased not disposed of by his
will. (Sec. 3, Rule 85, old Rules).
Lease has been considered an act of administration (Jocson v.
Nava; Gamboa v. Gamboa; Rodriguez v. Borromeo; Ferraris v.
Rodas, supra).
The Civil Code, on lease, provides:
28
If a lease is to be recorded in the Registry of Property, the
following persons cannot constitute the same without proper
authority, the husband with respect to the wife's paraphernal
real estate, the father or guardian as to the property of the
minor or ward, and the manager without special power. (Art.
1647).
The same Code, on Agency, states:
cases:
(8) To lease any real property to another person for more
than one year. (Art. 1878)
Petitioner contends, that No. 8, Art. 1878 is the limitation to
the right of a judicial administrator to lease real property
without prior court authority and approval, if it exceeds one
year. The lease contract in favor of Escanlar being for 3 years
and without such court approval and authority is, therefore,
null and void. Upon the other hand, respondents maintain
that there is no limitation of such right; and that Article 1878
does not apply in the instant case.
We believe that the Court of Appeals was correct in
sustaining the validity of the contract of lease in favor of
Escanlar, notwithstanding the lack of prior authority and
approval. The law and prevailing jurisprudence on the matter
militates in favor of this view. While it may be admitted that
the duties of a judicial administrator and an agent (petitioner
alleges that both act in representative capacity), are in some
respects, identical, the provisions on agency (Art. 1878, C.C.),
should not apply to a judicial administrator. A judicial
administrator is appointed by the Court. He is not only the
representative of said Court, but also the heirs and creditors
of the estate (Chua Tan v. Del Rosario, 57 Phil. 411). A judicial
administrator before entering into his duties, is required to
file a bond. These circumstances are not true in case of
agency. The agent is only answerable to his principal. The
protection which the law gives the principal, in limiting the
powers and rights of an agent, stems from the fact that
control by the principal can only be thru agreements,
whereas the acts of a judicial administrator are subject to
specific provisions of law and orders of the appointing court.
The observation of former Chief Justice Moran, as quoted in
the decision of the Court of Appeals, is indeed sound, and We
are not prone to alter the same, at the moment.
We, likewise, seriously doubt petitioner's legal standing to
pursue this appeal. And, if We consider the fact that after the
expiration of the original period of the lease contract
executed by respondent Nombre in favor of Escanlar, a new
contract in favor of said Escanlar, was executed on May 1,
1963, by the new administrator Campillanos. who,
incidentally, did not take any active participation in the
present appeal, the right of petitioner to the fishpond
becomes a moot and academic issue, which We need not
pass upon.

WHEREFORE, the decision appealed from should be, as it is
hereby affirmed, in all respects, with costs against petitioner
Moises San Diego, Sr.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L.,
Barrera, Regala and Makalintal, JJ., concur.
Padilla, Labrador and Dizon, JJ., took no part.
Footnotes
1Referring to Art. 1548 of the old Civil Code.
The Lawphil Project - Arellano Law Foundation
=================
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-5486 August 17, 1910
JOSE DE LA PEA Y DE RAMON, plaintiff-appellant,
vs.
FEDERICO HIDALGO, defendant-appellant.
O'Brien and DeWitt, for plaintiff and appellant.
E. Gutierrez Repilde, for defendant and appellant.
TORRES, J.:
On May 23, 1906, Jose dela Pea y de Ramon, and Vicenta de
Ramon, in her own behalf and as the legal guardian of her son
Roberto de la Pea, filed in the Court of First Instance of
Manila a written complaint against of Federico Hidalgo,
Antonio Hidalgo, and Francisco Hidalgo, and, after the said
complaint, already amended, had been answered by the
defendants Antonio and Francisco Hidalgo, and the other
defendant, Federico Hidalgo, had moved for the dismissal of
this complaint, the plaintiff, Jose de la Pea y de Ramon, as
the judicial administrator of the estate of the deceased Jose
de la Pea y Gomiz, with the consent of the court filed a
second amended complaint prosecuting his action solely
against Federico Hidalgo, who answered the same in writing
on the 21st of may and at the same time filed a counterclaim,
which was also answered by the defendant.
On October 22, 1907, the case was brought up for hearing
and oral testimony was adduced by both parties, the exhibits
introduced being attached to the record. In view of such
testimony and of documentary evidence, the court, on March
24, 1908, rendered judgment in favor of the plaintiff-
administrator for the sum of P13,606.19 and legal interest
from the date of the filing of the complaint on May 24, 1906,
and the costs of the trial.
29
Both the plaintiff and the defendant filed notice of appeal
from this judgment and also asked for the annulment of the
same and for a new trial, on the ground that the evidence did
not justify the said judgment and that the latter was contrary
to law. The defendant, on April 1, 1908, presented a written
motion for new hearing, alleging the discovery of new
evidence favorable to him and which would necessarily
influence the decision such evidence or to introduce it at the
trial of the case, notwithstanding the fact that he had used all
due diligence. His petition was accompanied by affidavits
from Attorney Eduardo Gutierrez Repilde and Federico
Hidalgo, and was granted by order of the court of the 4th of
April.
At this stage of the proceedings and on August 10, 1908, the
plaintiff Pea y De Ramon filed a third amended complaint,
with the permission of the court, alleging, among other
things, as a first cause of action, that during the period of
time from November 12, 1887, to January 7, 1904, when
Federico Hidalgo had possession of and administered the
following properties, to wit; one house and lot at No. 48 Calle
San Luis; another house and lot at No. 6 Calle Cortada;
another house and lot at 56 Calle San Luis, and a fenced lot
on the same street, all of the district of Ermita, and another
house and lot at No. 81 Calle Looban de Paco, belonging to
his principal, Jose de la Pea y Gomiz, according to the power
of attorney executed in his favor and exhibited with the
complaint under letter A, the defendant, as such agent,
collected the rents and income from the said properties,
amounting to P50,244, which sum, collected in partial
amounts and on different dates, he should have deposited, in
accordance with the verbal agreement between the deceased
and himself, the defendant, in the general treasury of the
Spanish Government at an interest of 5 per cent per annum,
which interest on accrual was likewise to be deposited in
order that it also might bear interest; that the defendant did
not remit or pay to Jose de la Pea y Gomiz, during the
latter's lifetime, nor to nay representative of the said De la
Pea y Gomiz, the sum aforestated nor any part thereof, with
the sole exception of P1,289.03, nor has he deposited the
unpaid balance of the said sum in the treasury, according to
agreement, wherefore he has become liable to his principal
and to the defendant-administrator for the said sum,
together with its interest, which amounts to P72,548.24 and
that, whereas the defendant has not paid over all nor any
part of the last mentioned sum, he is liable for the same, as
well as for the interest thereon at 6 per cent per annum from
the time of the filing of the complaint, and for the costs of the
suit.
In the said amended complaint, the plaintiff alleged as a
second cause of action: That on December 9, 1887, Gonzalo
Tuason deposited in the general treasury of the Spanish
Government, to the credit of Pea y Gomiz, the sum of 6,360
pesos, at 5 per cent interest per annum, and on December
20, 1888, the defendant, as the agent of Pea y Gomiz,
withdrew the said amount with its interest, that is, 6,751.60
pesos, and disposed of the same for his own use and benefit,

without having paid all or any part of the said sum to Pea y
Gomiz, or to the plaintiff after the latter's death,
notwithstanding the demands made upon him: wherefore
the defendant now owes the said sum of 6,751.60 pesos, with
interest at the rate of 5 per cent per annum, compounded
annually, from the 20th of December, 1888, to the time of
the filing of this complaint, and from the latter date at 6 per
cent, in accordance with law.
The complaint recites as a third cause of action: that, on or
about November 25, 1887, defendant's principal, Pea y
Gomiz, on his voyage to Spain, remitted from Singapore, one
of the ports to call, to Father Ramon Caviedas, a Franciscan
friar residing in this city, the sum of 6,000 pesos with the
request to deliver the same, which he did, to defendant, who,
on receiving this money, appropriated it to himself and
converted it to his own use and benefit, since he only
remitted to Pea y Gomiz in Sapin, by draft, 737.24 pesos, on
December 20, 1888; and, later, on December 21, 1889, he
likewise remitted by another draft 860 pesos, without having
returned or paid the balance of the said sum,
notwithstanding the demands made upon him so to do:
wherefore the defendant owes to the plaintiff, for the third
cause of action, the sum of P4,402.76, with interest at the
rate of 5 per cent per annum, compounded yearly, to the
time of the filing of the complaint and with interest at 6 per
cent from that date, as provided by law.
As a fourth cause of action the plaintiff alleges that, on or
about January 23, 1904, on his arrival from Spain and without
having any knowledge or information of the true condition of
affairs relative to the property of the deceased Pea y Gomiz
and its administration, he delivered and paid to the
defendant at his request the sum of P2,000, derived from the
property of the deceased, which sum the defendant has not
returned notwithstanding the demands made upon him so to
do.
Wherefore the plaintiff petitions the court to render
judgment sentencing the defendant to pay, as first cause of
action, the sum of P72,548.24, with interest thereon at the
rate of 6 per cent per annum from May 24, 1906, the date of
the filing of the complaint, and the costs; as a second cause of
action, the sum of P15,774.19, with interest at the rate of 6
per cent per annum from the said date of the filing of the
complaint, and costs; as a third cause of action, P9,811.13,
with interest from the aforesaid date, and costs; and, finally,
as a fourth cause of action, he prays that the defendant be
sentenced to refund the sum of P2,000, with interest thereon
at the rate of 6 per cent per annum from the 23d of January,
1904, and to pay the costs of trial.
The defendant, Federico Hidalgo, in his answer to the third
amended complaint, sets forth: That he admits the second,
third, and fourth allegations contained in the first, second,
third, and fourth causes of action, and denies generally and
specifically each one and all of the allegations contained in
the complaint, with the exception of those expressly
admitted in his answer; that, as a special defense against the
30
first cause of action, he, the defendant, alleges that on
November 18, 1887, by virtue of the powers conferred upon
him by Pea y Gomiz, he took charge of the administration of
the latter's property and administered the same until
December 31, 1893, when for reasons of health he ceased to
discharge the duties of said position; that during the years
1889, 1890, 1891, and 1892, the defendant continually by
letter requested Pea y Gomiz, his principal, to appoint a
person to substitute him in the administration of the latter's
property, inasmuch as the defendant, for reasons of health,
was unable to continue in his trust; that, on March 22, 1894,
the defendant Federico Hidalgo, because of serious illness,
was absolutely obliged to leave these Islands and embarked
on the steamer Isla de Luzon for Sapin, on which date the
defendant notified his principal that, for the reason
aforestated, he had renounced his powers and turned over
the administration of his property to Antonio Hidalgo, to
whom he should transmit a power of attorney for the
fulfillment, in due form, of the trust that the defendant had
been discharging since January 1, 1894, or else execute a
power of attorney in favor of such other person as he might
deem proper;
That prior to the said date of March 22, the defendant came,
rendered accounts to his principal, and on the date when he
embarked for Spain rendered the accounts pertaining to the
years 1892 and 1893, which were those that yet remained to
be forwarded, and transmitted to him a general statement of
accounts embracing the period from November 18, 1887, to
December 31, 1893, with a balance of 6,774.50 pesos in favor
of Pea y Gomiz, which remained in the control of the acting
administrator, Antonio Hidalgo; that from the 22nd of March,
1894, when the defendant left these Islands, to the date of
his answer to the said complaint, he has not again intervened
nor taken any part directly or indirectly in the administration
of the property of Pea y Gomiz, the latter's administrator by
express authorization having been Antonio Hidalgo, from
January 1, 1894, to October, 1902, who, on this latter date,
delegated his powers to Francisco Hidalgo, who in turn
administered the said property until January 7, 1904; that the
defendant, notwithstanding his having rendered, in 1894, all
his accounts to Jose Pea y Gomiz, again rendered to the
plaintiff in 1904 those pertaining to the period from 1887 to
December 31, 1893, which accounts the plaintiff approved
without any protest whatever and received to his entire
satisfaction the balance due and the vouchers and documents
and documents relating to the property of the deceased Pea
y Gomiz and issued to the defendant the proper acquaintance
therefor.
As a special defense to the second cause of action, the
defendant alleged that, on December 9, 1886, Jose de la Pea
y Gomiz himself deposited in the caja general de depositos
(General Deposit Bank) the sum of 6,000 pesos, at 6 per cent
interest for the term of one year, in two deposit receipts of
3,000 pesos each, which two deposit receipts, with the
interest accrued thereon, amounted to 6,360 pesos, ad were
collected by Gonzalo Tuason, through indorsement by Pea y
Gomiz, on December 9, 1887, and on this same date Tuason,

in the name of Pea y Gomiz, again deposited the said sum of
6,360 pesos in the General Deposit Bank, at the same rate of
interest, for the term of one year and in two deposit receipts
of 3,180 pesos each, registered under Nos. 1336 and 1337;
that, on December 20, 1888, father Ramon Caviedas, a
Franciscan friar, delivered to the defendant, Federico Hidalgo,
by order of De la Pea y Gomiz, the said two deposit receipts
with the request to collect the interest due thereon viz.,
741.60 pesos an to remit it by draft on London, drawn in
favor of De la Pea y Gomiz, to deposit again the 6,000 pesos
in the said General Deposit Bank, for one year, in a single
deposit, and in the latter's name, and to deliver to him, the
said Father Caviedas, the corresponding deposit receipt and
the draft on London for their transmittal to Pea y Gomiz: all
of which was performed by the defendant who acquired the
said draft in favor of De la Pea y Gomiz from the Chartered
Bank of India, Australia and China, on December 20, 1888,
and delivered the draft, together with the receipt from the
General Deposit Bank, to Father Caviedas, and on the same
date, by letter, notified Pea y Gomiz of the transactions
executed; that on December 20, 1889, the said Father
Hidalgo, by order of Pea y Gomiz, the aforesaid deposit
receipt from the General Deposit Bank, with the request to
remit, in favor of his constituent, the interest thereon,
amounting to 360 pesos, besides 500 pesos of the capital,
that is 860 pesos in all, and to again deposit the rest, 5,500
pesos, in the General Deposit Bank for another year in Pea y
Gomiz's own name, and to deliver to Father Caviedas the
deposit receipt and the draft on London, for their transmittal
to his constituent; all of which the defendant did; he again
deposited the rest of the capital, 5,500 pesos, in the General
Deposit Bank, in the name of Pea y Gomiz, for one year at 5
per cent interest, under registry number 3,320, and obtained
from the house of J. M. Tuason and Co. a draft on London for
860 pesos in favor of Pea y Gomiz, on December 21, 1889,
and thereupon delivered the said receipt and draft to Father
Caviedas, of which acts, when performed, the defendant
advised Pea y Gomiz by letter of December 24, 1889' and
that, on December 20, 1890, the said Father Ramon Caviedas
delivered to the defendant, by order of Pea y Gomiz, the
said deposit receipt for 5,500 pesos with the request that he
withdraw from the General Deposit Bank the capital and
accrued interest, which amounted all together to 5,775
pesos, and that he deliver this amount to Father Caviedas,
which he did, in order that it might be remitted to Pea y
Gomiz.
The defendant denied each of the allegations contained in
the third cause of action, and avers that they are all false and
calumnious.
He likewise makes a general and specific denial of all the
allegations of the fourth cause of action.
As a counterclaim the defendant alleges that Jose Pea y
Gomiz owed and had not paid the defendant, up to the date
of his death, the sum of 4,000 pesos with interest at 6 per
cent per annum, and 3,600 pesos, and on the plaintiff's being
presented with the receipt subscribed by his father, Pea y
31
Gomiz, on the said date of January 15th, and evidencing his
debt, plaintiff freely and voluntarily offered to exchange for
the said receipt another document executed by him, and
transcribed in the complaint. Defendant further alleges that,
up to the date of his counterclaim, the plaintiff has not paid
him the said sum, with the exception of 2,000 pesos.
Wherefore the defendant prays the court to render judgment
absolving him from the complaint with the costs against the
plaintiff, and to adjudge that the latter shall pay to the
defendant the sum 9,000 pesos, which he still owes
defendant, with legal interest thereon from the date of the
counterclaim, to wit, May 21, 1907, and to grant such other
and further relief as may be just and equitable.
On the 25th of September, 1908, and subsequent dates, the
new trial was held; oral testimony was adduced by both
parties, and the documentary evidence was attached to the
record of the proceedings, which show that the defendant
objected and took exception to the introduction of certain
oral and documentary evidence produced by the plaintiff. On
February 26, 1909, the court in deciding the case found that
the defendant, Federico Hidalgo, as administrator of the
estate of the deceased Pea y Gomiz, actually owed by the
plaintiff, on the date of the filing of the complaint, the sum of
P37,084.93; that the plaintiff was not entitled to recover any
sum whatever from the defendant for the alleged second,
third, and fourth causes of action; that the plaintiff actually
owed the defendant, on the filing of the complaint, the sum
of P10,155, which the defendant was entitled to deduct from
the sum owing by him to the plaintiff. Judgment was
therefore entered against the defendant, Federico Hidalgo,
for the payment of P26,629.93, with interest thereon at the
rate of 6 per cent per annum from May 23, 1906, and the
costs of the trial.
Both parties filed written exceptions to this judgment and
asked, separately, for its annulment and that a new trial be
ordered, on the grounds that the findings of fact contained in
the judgment were not supported nor justified by the
evidence produced, and because the said judgment was
contrary to law, the defendant stating in writing that his
exception and motion for a new trial referred exclusively to
that part of the judgment that was condemnatory to him. By
order of the 10th of April, 1909, the motions made by both
parties were denied, to which they excepted and announced
their intention to file their respective bills of exceptions.
By written motions of the 24th of March, 1909, the plaintiff
prayed for the execution of the said judgment, and the
defendant being informed thereof solicited a suspension of
the issuance of the corresponding writ of execution until his
motion for a new trial should be decided or his bill of
exceptions for the appeal be approved, binding himself to
give such bond as the court might fix. The court, therefore, by
order of the 25th of the same month, granted the suspension
asked for, conditioned upon the defendants giving a bond,
fixed at P34,000 by another order of the same date, to
guarantee compliance with the judgment rendered should it
be affirmed, or with any other decision that might be

rendered in the case by the Supreme Court. This bond was
furnished by the defendant on the 26th of the same month.
On April 16 and May 4, 1909, the defendant and the plaintiff
filed their respective bills of exceptions, which were certified
to and approved by order of May 8th and forwarded to the
clerk of this court.
Before proceeding to examine the disputed facts to make
such legal findings as follows from a consideration of the
same and of the questions of law to which such facts give
rise, and for the purpose of avoiding confusion and obtaining
the greatest clearness and an easy comprehension of this
decision, it is indispensable to premise: First, that as before
related, the original and first complaint filed by the plaintiff
was drawn against Federico Hidalgo, Antonio Hidalgo, and
Francisco Hidalgo, the three persons who had successively
administered the property of Jose de la Pea y Gomiz, now
deceased; but afterwards the action was directed solely
against Federico Hidalgo, to the exclusion of the other
defendants, Antonio and Francisco Hidalgo, in the second and
third amended complaints, the latter of the date of August
10, 1908, after the issuance by the court of the order of April
4th of the same year, granting the new trial solicited by the
defendant on his being notified of the ruling of the 24th of
the previous month of March; second, that the
administration of the property mentioned, from the time its
owner left these Islands and returned to Spain, lasted from
November 18, 1887, to January 7, 1904; and third that, the
administration of the said Federico, Antonio, and Francisco
Hidalgo, having lasted so long, it is necessary to divide it into
three periods in order to fix the time during which they
respectively administered De la Pea's property: During the
first period, from November 18, 1887, to December 31, 1893,
the property of the absent Jose de la Pea y Gomiz was
administered by his agent, Federico Hidalgo, under power of
attorney; during the second period, from January 1, 1894, to
September, 1902, Antonio Hidalgo administered the said
property, and during the third period, from October, 1902, to
January 7, 1904, Francisco Hidalgo was its administrator.
Before Jose de la Pea y Gomiz embarked for Spain, on
November 12, 1887, he executed before a notary a power of
attorney in favor of Federico Hidalgo, Antonio L. Rocha,
Francisco Roxas and Isidro Llado, so that, as his agents, they
might represent him and administer, in the order in which
they were appointed, various properties he owned and
possessed in Manila. The first agent, Federico Hidalgo, took
charge of the administration of the said property on the 18th
of November, 1887.
After Federico Hidalgo had occupied the position of agent
and administrator of De la Pea's property for several years,
the former wrote to the latter requesting him to designate a
person who might substitute him in his said position in the
event of his being obliged to absent himself from these
Islands, as one of those appointed in the said power of
attorney had died and the others did not wish to take charge
of the administration of their principal's property. The
32
defendant, Hidalgo, stated that his constituent, Pea y Gomiz,
did not even answer his letters, to approve or object to the
former's accounts, and did not appoint or designate another
person who might substitute the defendant in his
administration of his constituent's property. These
statements were neither denied nor proven to be the record
show any evidence tending to disapprove them, while it does
show, attached to the record and exhibited by the defendant
himself, several letters written by Hidalgo and addressed to
Pea y Gomiz, which prove the said statements, and also a
letter from the priest Pedro Gomiz, a relative of the deceased
Jose de la Pea y Gomiz, addressed to Federico Hidalgo,
telling the latter that the writer had seen among the papers
of the deceased several letters from the agent, Federico
Hidalgo, in which the latter requested the designation of a
substitute, because he had to leave this country for Spain,
and also asked for the approval or disapproval of the
accounts of his administration which had been transmitted to
his constituent, Pea y Gomiz.
For reasons of health and by order of his physician, Federico
Hidalgo was obliged, on March 22, 1894, to embark for Spain,
and, on preparing for his departure, he rendered the
accounts of his administration corresponding to the last
quarters, up to December 31, 1893, not as yet transmitted,
and forwarded them to his constituent with a general
statement of all the partial balances, which amounted to the
sum total of 6,774.50 pesos, by letter of the date of March
22, 1894, addressed to his principal, Pea y Gomiz. In this
letter the defendant informed the latter of the writer's
intended departure from this country and of his having
provisionally turned over the administration of the said
property to his cousin, Antonio Hidalgo, upon whom the
writer had conferred a general power of attorney, but asking,
in case that this was not sufficient, that Pea send to Antonio
Hidalgo a new power of attorney.
This notifications is of the greatest importance in the decision
of this case. The plaintiff avers that he found no such letter
among his father's papers after the latter's death, for which
reason he did not have it in his possession, but on the
introduction of a copy thereof by the defendant at the trial, it
was admitted without objection by the plaintiff (p. 81 of the
record); wherefore, in spite of the denial of the plaintiff and
of his averment of his not having found that said original
among his father's papers, justice demands that it be
concluded that this letter of the 22d of March, 1894, was sent
to, and was received by Jose de la Pea y Gomiz, during his
lifetime, for its transmittal, with inclosure of the last partial
accounts of Federico Hidalgo's administration and of the
general resume of balances, being affirmed by the defendant,
the fact of the plaintiff's having found among his deceased
father's paper's the said resume which he exhibited at the
trial, shows conclusively that it was received by the deceased,
as well as the letter of transmittal of the 22nd of March,
1894, one of the several letters written by Hidalgo, which the
said priest, Father Gomiz, affirms that he saw among the
papers of the deceased Pea, the dates of which ran from
1890 to 1894; and it is also shown by the record that the

defendant Hidalgo positively asserted that the said letter of
March was the only one that he wrote to Pea during the
year 1894; From all of which it is deduced that the
constituent, Pea y Gomiz, was informed of the departure of
his agent from these Islands for reasons of health and
because of the physician's advice, of the latter's having
turned over the administration of the property to Antonio
Hidalgo, and of his agent's the defendant's petition that he
send a new power of attorney to the substitute.
The existence, amount the papers of the deceased, of the
aforementioned statement of all accounts rendered, which
comprise the whole period of the administration of the
property of the constituent by the defendant, Federico
Hidalgo, from November 18, 1887, to December 31, 1893 a
statement transmitted with the last partial accounts which
were a continuation of those already previously received
and the said letter of March 22, 1894, fully prove that Jose de
la Pea y Gomiz also received the said letter, informed
himself of its contents, and had full knowledge that Antonio
Hidalgo commenced to administer his property from January
of that year. They likewise prove that he did no see fit to
execute a new power of attorney in the letter's favor, nor to
appoint or designate a new agent to take charge of the
administration of his property that had been abandoned by
the defendant, Federico Hidalgo.
From the procedure followed by the agent, Federico Hidalgo,
it is logically inferred that he had definitely renounced his
agency was duly terminated, according to the provisions of
article 1732 of the Civil Code, because, although in the said
letter of March 22, 1894, the word "renounce" was not
employed in connection with the agency or power of
attorney executed in his favor, yet when the agent informs
his principal that for reasons of health and by medical advice
he is about to depart from the place where he is exercising
his trust and where the property subject to his administration
is situated, abandons the property, turns it over a third party,
without stating when he may return to take charge of the
administration, renders accounts of its revenues up to a
certain date, December 31, 1893, and transmits to his
principal a general statement which summarizes and
embraces all the balances of his accounts since he began to
exercise his agency to the date when he ceased to hold his
trust, and asks that a power of attorney in due form in due
form be executed and transmitted to another person who
substituted him and took charge of the administration of the
principal's property, it is then reasonable and just to conclude
that the said agent expressly and definitely renounced his
agency, and it may not be alleged that the designation of
Antonio Hidalgo to take charge of the said administration was
that of a mere proceed lasted for more than fifteen years, for
such an allegation would be in conflict with the nature of the
agency.
This renouncement was confirmed by the subsequent
procedure, as well as of the agent as of the principal, until the
latter died, on August 2, 1902, since the principal Pea did
not disapprove the designation of Antonio Hidalgo, nor did he
33
appoint another, nor send a new power of attorney to the
same, as he was requested to by the previous administrator
who abandoned his charge; and the trial record certainly
contains no proof that the defendant, since he left these
Islands in March, 1894, until January, 1904, when he returned
to this city, took any part whatever, directly or even
indirectly, in the said administration of the principal's
property, while Antonio Hidalgo was the only person who
was in charge of the aforementioned administration of De la
Pea y Gomiz's property and the one who was to represent
the latter in his business affairs, with his tacit consent. From
all of which it is perfectly concluded (unless here be proof to
the contrary, and none appears in the record), that Antonio
Hidalgo acted in the matter of the administration of the
property of Jose de la Pea y Gomiz by virtue of an implied
agency derived from the latter, in accordance with the
provisions of article 1710 of the Civil Code.
The proof of the tacit consent of the principal, Jose de la Pea
y Gomiz, the owner of the property administered a
consent embracing the essential element of a legitimate
agency, article 1710 before cited consists in that Pea,
knowing that on account of the departure of Federico Hidalgo
from the Philippines for reasons of health, Antonio Hidalgo
took charge of the administration of his property, for which
Federico Hidalgo, his agent, who was giving up his trust,
requested him to send a new power of attorney in favor of
the said Antonio Hidalgo, nevertheless he, Jose de la Pea y
Gomiz, saw fit not to execute nor transmit any power of
attorney whatever to the new administrator of his property
and remained silent for nearly nine years; and, in that the
said principal, being able to prohibit the party designated,
Antonio Hidalgo, from continuing in the exercise of his
position as administrator, and being able to appoint another
agent, did neither the one nor the other. Wherefore, in
permitting Antonio Hidalgo to administer his property in this
city during such a number of years, it is inferred, from the
procedure and silence of the owner thereof, that he
consented to have Antonio Hidalgo administer his property,
and in fact created in his favor an implied agency, as the true
and legitimate administrator.
Antonio Hidalgo administered the aforementioned property
of De la Pea y Gomiz, not in the character of business
manager, but as agent by virtue of an implied agency vested
in him by its owner who was not unaware of the fact, who
knew perfectly well that the said Antonio Hidalgo took charge
of the administration of that property on account of the
obligatory absence of his previous agent for whom it was an
impossibility to continue in the discharge of his duties.
It is improper to compare the case where the owner of the
property is ignorant of the officious management of the third
party, with the case where he had perfect knowledge of the
management and administration of the same, which
administration and management, far from being opposed by
him was indeed consented to by him for nearly nine years, as
was done by Pea y Gomiz. The administration and
management, by virtue of an implied agency, is essentially
distinguished from that management of another's business,

in this respect, that while the former originated from a
contract, the latter is derived only from a qausi-contract.
The implied agency is founded on the lack of contradiction or
opposition, which constitutes simultaneous agreement on the
part of the presumed principal to the execution of the
contract, while in the management of another's business
there is no simultaneous consent, either express or implied,
but a fiction or presumption of consent because of the
benefit received.
The distinction between an agency and a business
management has been established by the jurisprudence of
the supreme court (of Spain) in its noteworthy decision of the
7th of July, 1881, setting up the following doctrine:
That laws 28 and 32, title 12 Partida 3, refer to the expenses
incurred in things not one's own and without power of
attorney from those to whom they belong, and therefore the
said laws are not applicable to this suit where the petition of
the plaintiff is founded on the verbal request made to him by
the defendant or the latter's employees to do some hauling,
and where, consequently, questions that arise from a
contract that produces reciprocal rights and duties can not be
governed by the said laws.
It being absolutely necessary for Federico Hidalgo to leave
this city and abandon the administration of the property of
his principal, Pea y Gomiz, for reasons of health, he made
delivery of the property and of his administration to Antonio
Hidalgo and gave notice of what he had done to his
constituent, Pea, in order that the latter might send a new
power of attorney to Antonio Hidalgo, the person charged
with the administration of the property. Pea y Gomiz did not
send the power of attorney requested, did not oppose or
prohibit Antonio Hidalgo's containing to administer his
property, and consented to his doing so for nearly nine years.
Consequently the second administrator must be considered
as a legitimate agent of the said principal, as a result of the
tacit agreement on the latter's part, and the previous agent,
who necessarily abandoned and ceased to hold his position,
as completely free and clear from the consequences and
results of the second administration, continued by a third
party and accepted by his principal; for it is a fact, undenied
nor even doubted, that the said first administrator had to
abandon this country and the administration of Pea's
property for reasons of health, which made it possible for him
to continue in the discharge of his duties without serious
detriment to himself, his conduct being in accordance with
the provisions of article 1736 of the Civil Code.
In the power of attorney executed by Pea y Gomiz in this
city on November 12, 1887, in favor of, among others,
Federico Hidalgo, no authority was conferred upon the latter
by his principal to substitute the power or agency in favor of
another person; wherefore the agent could not, by virtue of
the said power of attorney, appoint any person to substitute
or relieve him in the administration of the principal's
34
property, for the lack of a clause of substitution in the said
instrument authorizing him so to do.
The designation of Antonio Hidalgo was not made as a result
of substitution of the power of attorney executed by Pea in
favor of the defendant, but in order that the principal's
property should not be abandoned, inasmuch as, for the
purposes of the discharge of the duties of administrator of
the same, the agent, who was about to absent himself from
this city, requested his principal to send to the party,
provisionally designated by the former, a new power of
attorney, for the reason that the general power of attorney
which Federico Hidalgo had left, executed in favor of his
cousin Antonio Hidalgo, was so executed in his own name
and for his own affairs, and not in the name of Pea y Gomiz,
as the latter had not authorized him to take such action.
If the owner of the property provisionally administered at the
time by Antonio Hidalgo, saw fit to keep silent, even after
having received the aforesaid letter of March 22, 1894, and
during the lapse of nearly ten years, without counter
commanding or disapproving the designation of the person
who took charge of the administration of his property,
knowing perfectly well that his previous agent was obliged,
by sickness and medical advice to leave this city where such
property was situated, he is not entitled afterwards to hold
amenable the agent who had to abandon this country for
good and valid reasons, inasmuch as the latter immediately
reported to his principal the action taken by himself and
informed him of the person who had taken charge of the
administration of his property, which otherwise would have
been left abandoned. From the time of that notification the
agent who, for legitimate cause, ceased to exercise his trust,
was free and clear from the results and consequences of the
management of the person who substituted him with the
consent, even only a tacit one, of the principal, inasmuch as
the said owner of the property could have objected to could
have prohibited the continuance in the administration
thereof, of the party designated by his agent, and could have
opportunely appointed another agent or mandatory of his
own confidence to look after his property and if he did not do
so, he is obliged to abide by the consequences of his
negligence and abandonment and has no right to claim
damages against his previous agent, who complied with his
duty and did all that he could and ought to have done, in
accordance with the law.
The defendant Federico Hidalgo, having ceased in his
administration of the property belonging to Pea y Gomiz, on
account of physical impossibility, which cessation he duly
reported to his principal and also informed him of the person
who relieved him as such administrator, and for whom he
had requested a new power of attorney, is only liable for the
results and consequences of his administration during the
period when the said property was in his charge, and
therefore his liability can not extend beyond the period of his
management, as his agency terminated by the tacit or implied
approval of his principal, judging from the latter's silence in
neither objecting to nor in anywise prohibiting Antonio

Hidalgo's continuing to administer his property,
notwithstanding the lapse of the many years since he learned
by letter of the action taken by his previous agent, Federico
Hidalgo.
Moreover, this latter, in announcing the termination of his
agency, transmitted the last partial accounts that he had not
rendered, up to December 31, 1893, together with a general
statement of all the resulting balances covering the period of
his administration, and Jose de la Pea y Gomiz remained
silent and offered no objection whatever to the said accounts
and did not manifest his disapproval of the same nor of the
general statement, which he must have received in April or
may, 1894, to the time he died, in August, 1902; and when his
son, the plaintiff, came to this city in company with the
defendant, Federico Hidalgo, they traveled together from
Spain and arrived in Manila during one of the early days of
January, 1904, the former, for the purpose of taking charge of
the estate left by his father, and after the plaintiff had
examined the accounts kept by Federico Hidalgo, his
deceased father's first agent, he approved them and
therefore issued in favor of the defendant the document,
Exhibit 5, found on page 936 of the second record of trial,
dated January 15, 1904, in which Jose de la Pea y de Ramon
acknowledged having received from his deceased father's old
agent the accounts, balances, and vouchers to his entire
satisfaction, and gave an acquittance in full settlement of the
administration that had been commended to the defendant
Hidalgo.
This document, written in the handwriting of the plaintiff,
Pea y de Ramon, appears to be executed in a form
considered to be sufficient by its author, and,
notwithstanding the allegations of the said plaintiff, the
record contains no proof of any kind of Federico Hidalgo's
having obtained it by coercion, intimidation, deceit, or fraud;
neither is its shown to have been duly impugned as false,
criminally or civilly, for the statements therein made by the
plaintiff are too explicit and definite to allow, without proof
of some vice or defect leading to nullification, of its being
considered as void and without value or legal effect.
With respect to the responsibility contracted by the
defendant, as regards the payment of the balance shown by
the accounts rendered by him, it is not enough that the agent
should have satisfactorily rendered the accounts pertaining to
his trust, but it is also indispensable that it be proved that he
had paid to his principal, or to the owner of the property
administered, the balance resulting from his accounts. This
balance, which was allowed in the judgment appealed from,
notwithstanding the allegations of the plaintiff, which were
not deemed as established, amounts to P6,774.50, according
to the proofs adduced at the trial. It was the imperative duty
of the administrator, Federico Hidalgo, to transmit this sum
to his principal, Jose de la Pea y Gomiz, as the final balance
of the accounts of his administration, struck on December 31,
1893, and by his failure so to do and delivery of the said sum
to his successor, Antonio Hidalgo, he acted improperly, and
must pay the same to the plaintiff.
35
Antonio Hidalgo took charge of the administration of Pea y
Gomiz's property from January, 1894, to September, 1902,
that is, during the second period of administration of the
several properties that belonged to the deceased Pea.
Although the plaintiff, in his original complaint, had included
the said Antonio Hidalgo as one of the responsible
defendants, yet he afterwards excluded him, as well from the
second as from the third amended complaint, and
consequently the liability that might attach to Antonio
Hidalgo was not discussed, nor was it considered in the
judgment of the lower court; neither can it be in the decision,
for the reason that the said Antonio Hidalgo is not a party to
this suit. However, the said liability of Antonio Hidalgo is
imputed to Federico Hidalgo, and so it is that, in the complain
t, the claim is made solely against Federico Hidalgo, in order
that the latter might be adjudged to pay the amounts which
constitute the balance owing from him who might be
responsible, Antonio Hidalgo, during the period of this latter's
administration.
Federico Hidalgo, in our opinion, could not and can not be
responsible for the administration of the property that
belonged to the deceased Pea y Gomiz, which was
administered by Antonio Hidalgo during eight years and some
months, that is, during the second period, because of the sole
fact of his having turned over to the latter the administration
of the said property on his departure from this city of Spain.
Neither law nor reason obliged Federico Hidalgo to remain in
this country at the cost of his health and perhaps of his life,
even though he were the administrator of certain property
belonged to Pea y Gomiz, since the care of the property and
interests of another does not require sacrifice on the part of
the agent of his own life and interests. Federico Hidalgo was
obliged to deliver the said property belonging to Pea y
Gomiz to Antonio Hidalgo for good and valid reasons, and
reasons, and in proceeding in the manner aforesaid he
complied with the duty required of him by law and justice
and acted as a diligent agent. If the principal, Jose de la Pea
Gomiz, the owner of the property mentioned, although
informed opportunely of what had occurred saw fit to keep
silent, not to object to the arrangements made, not to send
the power of attorney requested by Federico Hidalgo in favor
of Antonio Hidalgo, and took no action nor made any inquiry
whatever to ascertain how his property was being
administered by the second agent, although to the time of his
death more than eight years had elapsed, the previous agent,
who ceased in the discharge of his duties, can in nowise be
held liable for the consequences of such abandonment, nor
for the results of the administration of property by Antonio
Hidalgo, for the reason that, since his departure from this
country, he has not had the least intervention nor even
indirect participation in the aforementioned administration of
the said Antonio Hidalgo who, under the law, was the agent
or administrator by virtue of an implied agency, which is
equivalent in its results to an express agency, executed by the
owner of the property. Consequently, Federico Hidalgo is not
required to render accounts of the administration

corresponding to the second period mentioned, nor to pay
the balance that such accounts may show to be owing.
At the first trial of this cause, Federico Hidalgo, testified
under oath that his principal, Jose Pea y Gomiz, did not
agree to the appointment of Antonio Hidalgo, chosen by the
witness, not to such appointee's taking charge of the
administration of his property. Aside from the fact that the
trial record does not show honor on what date Pea
expressed such disagreement it is certain that, in view of the
theory of defense maintained by the defendant Hidalgo could
have said, by means of a no, that his principal did not agree
to the appointment of the said Antonio Hidalgo, and the
intercalation of the word no in the statement quoted is more
inexplicable in that the attorney for the adverse party moved
that the said answer be stricken from the record, as he
objected to its appearing therein.
Were it true that the principal Jose de la Pea by Gomiz, had
neither agreed to the designation of Antonio Hidalgo, nor to
the latter's administering his property, he would immediately
have appointed another agent and administrator, since he
knew that Federico Hidalgo had left the place where his
property was situated and that it would be abandoned, had
he not wished that Antonio Hidalgo should continue to
administer it. If the latter continued in the administration of
the property for so long a time, nearly nine years, it was
because the said Pea agreed and gave his consent to the
acts performed by his outgoing agent, and for this reason the
answer given by Federico Hidalgo mistakenly, or not, that his
principal, Pea, did not agree to the appointment of Antonio
Hidalgo, is immaterial and does not affect the terms of this
decision.
If the defendant is not responsible for the results of the
administration of said property administered by Antonio
Hidalgo during the second period before referred to, neither
is he responsible for that performed during the third period
by Francisco Hidalgo, inasmuch as the latter was not even
chosen by the defendant who, on October 1, 1902, when
Francisco Hidalgo took charge of Peas' property that had
been turned over to him by Antonio Hidalgo, was in Spain and
had no knowledge of nor intervention in such delivery;
wherefore the defendant can in no manner be obliged to pay
to the plaintiff any sum that may be found owing by Francisco
Hidalgo.
The trial judge taking into consideration that, by the
evidence adduced at the hearing, it was proved that Francisco
Hidalgo rendered accounts to the plaintiff of the
administration of the property in question during the said
third period, that is, for one year, three months, and
someday, and that he delivered to the plaintiff the balance of
1,280.03 pesos, for which the latter issued to the said third
administrator the document Exhibit 2, written in his own
handwriting under date of January 7, 1904, and the signature
which, affixed by himself, he admitted in his testimony was
authentic, on its being exhibited to him found that the
plaintiff, Pea y de Ramon, was not entitled to recover any
36
sum whatever for the rents pertaining to the administration
of his property by the said Francisco Hidalgo.
All the reasons hereinbefore given relate to the first cause of
action, whereby claim is made against Federico Hidalgo for
the payment of the sum of P72,548.24 and interest at the
rate of 6 per cent per centum, and they have decided some of
the errors assigned by the appellants in their briefs to the
judgment appealed from.
Two amounts are have claimed which have one and the same
origin, yet are based on two causes of action, the second and
the third alleged by the plaintiff; and although the latter,
afterwards convinced by the truth and of the impropriety of
his claim, had to waive the said third cause of action during
the second hearing of this cause (pp. 57 and 42 of the record
of the evidence), the trial judge, on the grounds that the said
second and third causes of action refer to the same
certificates of deposit of the treasury of the Spanish
Government, found, in the judgment appealed from, that the
plaintiff was not entitled to recover anything for the aforesaid
second and third causes of action a finding that is proper
and just, although qualified as erroneous by the plaintiff in his
brief.
It appears, from the evidence taken in this cause, that Jose de
la Pea y Gomiz, according to the certificates issued by the
chief of the division his lifetime, after having in 1882
withdrawn from the General Deposit Bank of the Spanish
Government a deposit of 17,000 pesos and its interest
deposit any sum therein until December 9, 1886, when he
deposited two amounts of 3,000 pesos each, that is, 6,000
pesos in all, the two deposit receipts for the same being
afterwards endorsed in favor of Gonzalo Tuason. The latter,
on December 9, 1887, withdrew the deposit and took out the
said two amounts, together with the interest due thereon,
and on the same date redeposited them in the sum of 6,360
pesos at 5 per cent per annum in the name of Jose de la Pea
y Gomiz. On the 20th of December of the following year,
1888, the defendant Hidalgo received from his principal, Pea
y Gomiz, through Father Ramon Caviedas, the two said letters
of credit, in order that he might withdraw from the General
Deposit Bank the two amounts deposited, together with the
interest due thereon, amounting to 741 pesos, and with this
interest purchase a draft on London in favor of its owner and
then redeposit the original capital of 6,000 pesos. This, the
defendant Hidalgo did and then delivered the draft and the
deposit receipt to Father Caviedas, of all of which
transactions he informed his principal by letter of the same
date, transcribed on page 947 of the second trial record.
In the following year, 1889, Father Ramon Caviedas again
delivered to the defendant Hidalgo the aforementioned
deposit receipt with the request to withdraw from the
General Deposit bank the sum deposited and to purchase a
draft of 860 pesos on London in favor of their owner, Jose de
la Pea y Gomiz, and, after deducting the cost of the said
draft from the capital and interest withdrawn from deposit,
amounting to 6,360 pesos, to redeposit the remainder, 5,500

pesos, in the bank mentioned, in accordance with the
instructions from Pea y Gomiz: All of which was done by the
defendant Hidalgo, who delivered to Father Caviedas the
receipt for the new deposit of 5,500 pesos as accredited by
the reply-letter, transcribed on page 169 of the record, and
by the letter addressed by Hidalgo to Pea, of the date of
December 20 of that year and shown as an original exhibit by
the plaintiff himself on page 29 of the record of the evidence.
Lastly, in December, 1890, Father Caviedas, aforementioned,
delivered to the defendant Hidalgo the said deposit receipt
for 5,500 pesos in order that he might withdraw this amount
from deposit and deliver it with the interest thereon to the
former for the purpose of remitting it by draft to Jose de la
Pea; this Hidalgo did, according to a reply-letter from Father
Caviedas, the original of which appears on page 979 of the
file of exhibits and is copied on page 171 of the trial record,
and is apparently confirmed by the latter in his sworn
testimony.
So that the two amounts of 3,000 pesos each, expressed in
two deposit receipts received from De la Pea y Gomiz by
Father Ramon Caviedas and afterwards delivered to Francisco
Hidalgo for the successive operations of remittance and
redeposit in the bank before mentioned, are the same and
only ones that were on deposit in the said bank in the name
of their owner, Pea y Gomiz. The defendant Hidalgo made
two remittances by drafts of London, one in 1888 for 741.60
pesos, through a draft purchased from the Chartered Bank,
and another in 1889 for 860 pesos, through a draft purchased
from the house of Tuason & Co., and both in favor of Pea y
Gomiz, who received through Father Ramon Caviedas the
remainder, 5,500 pesos, of the sums deposited. For these
reasons, the trial judge was of the opinion that the
certificates of deposit sent by Pea y Gomiz to Father Ramon
Caviedas and those received from the latter by the defendant
Hidalgo were identicals, as were likewise the total amounts
expressed by the said receipts or certificates of deposit, from
the sum of which were deducted the amounts remitted to
Pea y Gomiz and the remainder deposited after each anual
operation until, finally, the sum of 5,500 pesos was remitted
to its owner, Pea y Gomiz, according to his instructions,
through the said Father Caviedas. The lower court, in
concluding its judgment, found that the plaintiff was entitled
to recover any sum whatever for the said second and third
causes of action, notwithstanding that, as hereinbefore
stated, the said plaintiff withdrew the third cause of action.
This finding of the court, with respect to the collection of the
amounts of the aforementioned deposit receipts, is perfectly
legal and in accordance with justice, inasmuch as it is a
sustained by abundant and conclusive documentary
evidence, which proves in an incontrovertible manner the
unrighteousness of the claim made by the plaintiff in twice
seeking payment, by means of the said second and third
causes of action, of the said sum which, after various
operations of deposit and remittance during three years, was
finally returned with its interest to the possession of its
owner, Pea y Gomiz.
37
From the trial had in this case, it also appears conclusively
proved that Jose de la Pea y Gomiz owed, during his
lifetime, to Federico Hidalgo, 7,600 pesos, 4,000 pesos of
which were to bear interest at the rate of 6 per cent per
annum, and the remainder without any interest, and that,
notwithstanding the lapse of the period of three years, from
November, 1887, within which he bound himself to repay the
amount borrowed, and in spite of his creditor's demand of
payment, made by registered letter, the original copy of
which is on page 38 of the file of exhibits and a transcription
thereof on page 930 of the first and second record of the
evidence, the debt was not paid up to the time of the
debtor's death. For such reasons, the trial court, in the
judgment appealed from, found that there was a
preponderance of evidence to prove that this loan had been
made and that the plaintiff actually owed the defendant the
sum loaned, as well as the interest thereon, after deducting
therefrom the 2,000 pesos which the defendant received
from the plaintiff on account of the credit, and that the
former was entitled to recover.
It appears from the pleadings and evidence at the trial that in
January, 1904, on the arrival in this city of Federico de la Pea
de Ramon, and on the occasion of the latter's proceeding to
examine the accounts previously rendered, up to December
31, 1893, by the defendant Hidalgo to the plaintiff's father,
then deceased, Hidalgo made demand upon the plaintiff,
Pea y de Ramon, for the payment of the said debt of his
father, although the creditor Hidalgo acceded to the requests
of the plaintiff to grant the latter an extension of time until he
should be able to sell one of the properties of the estate. It
was at that time, according to the defendant, that the
plaintiff Pea took up the instrument of indebtedness,
executed by his deceased father during his lifetime, and
delivered to the defendant in exchange therefor the
document of the date of January 15, 1904, found on page 924
of the second record of evidence, whereby the plaintiff, Jose
de la Pea, bound himself to pay his father's debt of 11,000
pesos, owing to the defendant Hidalgo, out of the proceeds
of the sale of some of the properties specified in the said
document, which was written and signed by the plaintiff in
his own handwriting.
The plaintiff not only executed the said document
acknowledging his father's debt and binding himself to settle
it, but also, several days after the sale of a lot belonging to
the estate, paid to the creditor on account the sum of 2,000
pesos, according to the receipt issued by the latter and
exhibited on page 108 of the first record of evidence.
The said document, expressive of the obligation contracted
by the plaintiff Pea y de Ramon that he would pay to the
defendant the debt of plaintiff's deceased father, amounting
to 11,000 pesos, out of the proceeds from some of the
properties of the estate, has not been denied nor impugned
as false; and not withstanding the averment made by the
plaintiff that when he signed he lacked information and
knowledge of the true condition of the affairs concerning
Hidalgo's connection with the property that be absolutely no
 38

proof whatever is shown in the trial record of the creditor's
having obtained the said document through deceit or fraud
circumstances in a certain manner incompatible with the
explicit statements contained therein. For these reasons, the
trial court, weighing the whole of the evidence furnished by
the record, found that the loan of the said 7,600 pesos was
truly and positively made, and that the plaintiff must pay the
same to the defendant, with the interest thereon, and that he
was not entitled to recover the 2,000 pesos, as an undue
payment made by him to the defendant creditor. For the
foregoing reason the others errors assigned by the plaintiff to
the judgment appealed from are dismissed.
With respect to the obligation to pay the interest due on the
amounts concerned in this decision, it must be borne in mind
that, as provided by article 1755 of the Civil Code, interest
shall only be owed when it has been expressly stipulated, and
that should the debtor, who is obliged to pay a certain sum of
money, be in default and fail to fulfill the agreement made
with his creditor, he must pay, as indemnity for losses and
damages, the interest agreed upon, and should there be no
express stipulation, the legal interest (art. 1108 of the Civil
Code); but, in order that the debtor may be considered to be
in default and obliged to pay the indemnity, it is required, as
a general rule, that his creditor shall demand of such debtor
the fulfillment of his obligation, judicially or extrajudicially,
except in such cases as are limitedly specified in article 1100
of the Civil Code.
complaint filed by the plaintiff, in so far as it concerns the
accounts pertaining to the aforesaid two periods of
administration and relates to the payment of the balances
resulting from such accounts; and that we should and hereby
do absolve the defendant Hidalgo from the complaint with
respect to the demand for the payment of the sums of
P15,774.19 and P2,000, with their respective interests, on
account of the second and the fourth cause of action,
respectively, and because the plaintiff renounced and
withdrew his complaint, with respect to the third cause of
action; and that we should and do likewise adjudge, that the
plaintiff, Jose de la Pea y de Ramon, shall pay to Federico
Hidalgo, by reason of the counterclaim, the sum of P9,000
with legal interest thereon at the rate of 6 per cent per
annum from 21st of may, 1907, the date of the counterclaim.
The judgment appealed from, together with that part thereof
relative to the statement it contains concerning the
equivalence between the Philippine peso and the Mexican
peso, is affirmed in so far as it is in agreement with the
findings of this decision, and the said judgment is reversed in
so far as it is not in accordance herewith. No special finding is
made as to costs assessed in either instance, and to the
plaintiff is reserved any right that he may be entitled to
enforce against Antonio Hidalgo.
Arellano, C.J., Johnson, Moreland and Trent, JJ., concur.

It was not expressly stipulated that either the balance of the The Lawphil Project - Arellano Law Foundation
last account rendered by the defendant Federico Hidalgo in
1893, or the sum which the plaintiff bound himself to pay to
the defendant, in the instrument of the 15th of January, ==================
1904, should bear interest; nor is there proof that a judicial or
extrajudicial demand was made, on the part of the respective
creditors concerned, until the date of complaint, on the part
of the plaintiff, and that of the counterclaim, on the part of
the defendant. Therefore no legal interest is owing for the
time prior to the respectives dates of the complaint and
counterclaim.

By virtue, then, of the reasons herein before set forth, it is

proper, in our opinion, to adjudge, as we do hereby adjudge,
that the defendant, Federico Hidalgo, shall pay to the
plaintiff, Jose de la Pea y de Ramon, as administrator of the
estate of the deceased Jose de la Pea y Gomiz, the sum of
P6,774.50, and the legal interest thereon at the rate of 6 per
cent per annum from 23rd of May, 1906, the date of the filing
of the original complaint in this case; that we should and
hereby do declare that the said defendant Federico Hidalgo,
is not bound to gibe nor render accounts of the
administration of the property of the said deceased Jose de la
Pea y Gomiz administered, respectively, by Antonio Hidalgo,
from January, 1894, to September 30, 1902, and by Francisco
Hidalgo, from October 1, 1902, to January 7, 1904, and
therefore the defendant, Federico Hidalgo, not being
responsible for the results of the administration of the said
property administered by the said Antonio and Francisco
Hidalgo, we do absolve the said defendant from the

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 70443 September 15, 1986
BRAULIO CONDE, RUFINA CONDE, GERARDO CONDE,
CONCHITA C. LUNDANG, and ALFREDO VENTURA, petitioners,
vs.
INTERMEDIATE APPELLATE COURT, HON. CESAR C. PERALEJO,
in his capacity as Presiding Judge, Regional Trial Court, Branch
LXVI, Third Judicial Region, Capas, Tarlac, and MARCELO
GUTIERREZ, respondents.
Tomas P. Matic, Jr. for petitioners.
Adelaido G. Rivera for private respondent.
GUTIERREZ, JR., J.:
On January 16, 1984, the petitioners filed an action to annul
the judgment of the Court of Appeals dated September 23,
1981, which reversed the decision of the Regional Trial Court
and ordered the petitioners and/or their successors-in-
interest to deliver immediately the ownership and possession
of the property in question to the then plaintiff-appellant
Marcelo Gutierrez. In their complaint filed before the
Regional Trial Court of Capas, Tarlac, the petitioners alleged
that through fraud, Gutierrez was able to make it appear that
he was the son of Esteban Gutierrez and Fermina Ramos and
as a necessary consequence of such filiation, was the
absolute owner by succession of the property in question.
On February 27, 1984, the trial court dismissed the
petitioners' complaint on the ground that it had no
jurisdiction to annul the judgment of the Court of Appeals.
Upon the denial of their motion for reconsideration, the
petitioners filed a petition for certiorari, mandamus and a
writ of injunction before the appellate court. The said court in
turn, dismissed the petition and a subsequent motion for
39
reconsideration on the grounds that a Regional Trial Court is
without jurisdiction to annul the judgment of the Court of
Appeals and that only the Supreme Court is empowered to
review the judgment of said appellate court. Hence, the
petitioners elevated the case before this Court.
On August 31, 1984, we issued a resolution dated August 22,
1984, remanding the case to the appellate court for decision
on the merits.
The resolution reads as follows:
The respondent intermediate Appellate Court erred when it
declared that the complaint for annulment of judgment in
this case should be filed with the Supreme Court. This Court
has no original jurisdiction to look into allegations of fraud
upon which the complaint for annulment is based. In January,
1984, the petitioners filed a complaint with the Regional Trial
Court of Tarlac seeking among other things the annulment of
a decision which had already passed, on appeal, the Court of
Appeals in CA-G.R. No. 60139-R. On February 17, 1984, the
lower court dismissed the petitioners' complaint for
annulment of judgment. The petitioners appealed the
dismissal to the respondent Intermediate Appellate Court
which denied due course to the petition stating that what is
sought to be annulled is a decision of the Court of Appeals
over which the regional trial court is obviously without
jurisdiction. The decision sought to be annulled calls for the
turning over of possession to the original respondent of the
disputed properties. While the judgment being enforced may
have been that of the Court of Appeals, it was actually an
appellate judgment rendered on a review of the trial court's
decision. Considering that Section 9 of the Judiciary
Reorganization Act of 1980-B.P. No. 129 gives the
Intermediate Appellate Court exclusive jurisdiction over
actions for annulment of judgments of regional trial courts,
the COURT RESOLVED to REMAND this case to the
Intermediate Appellate Court for it to hear and decide the
action.
On January 29, 1985, the appellate court rendered a decision
dismissing the petition for lack of jurisdiction and for lack of
merit. In its decision on the issue of jurisdiction, the
respondent court ruled that since the decision of the
Metropolitan Trial Court can be annulled by the Regional Trial
Court and a decision of the latter is annullable by the Court of
Appeals, then logically the decision of the appellate court
should be annullable only by the Supreme Court. Moreover,
the appellate court ruled that it is but logical to conclude that
it cannot annul its own decision unless there is an express
grant under the Judiciary Reorganization Act of 1980. Finding
none, it stated that it must perforce dismiss the case for lack
of jurisdiction.
On the merits of the petition, the appellate court ruled that
the fraud relied upon by the petitioners is only intrinsic and
thus, even on the assumption that it has jurisdiction to decide
the case, still the same has no merit. It dismissed the petition.
The petitioners elevated this decision to us.

On June 5, 1985, we resolved to require the respondents to
comment on the petition. Notwithstanding proof that a copy
of the petition was served on the respondents' counsel on
June 24, 1985, no comment has been filed.
We decide the petition.
We need not emphasize the rule that this Court decides
appeals which only involve questions of law and that "it is not
the function of the Supreme Court to analyze or weigh such
evidence all over again, its jurisdiction being limited to
receiving errors of law that might have been committed by
the lower court." (Baniqued v. Court of Appeals, 127 SCRA
596, 601; citing Tiongco v. de la Merced, 58 SCRA 89). It was,
thus, totally pointless for the Intermediate Appellate Court to
delve into the question of whether or not it has jurisdiction to
pass upon the merits of the petition which then alleged the
perpetration of fraud by one of the parties in the original
case, and which thereby called for a review of the factual
findings of the court. Furthermore, the fact that this Court
already remanded the case to the appellate court for decision
on the merits should have prompted the latter to limit its
decision only to the merits of the case.
There are instances when this Court desires a further review
of facts or a detailed analysis and systematic presentation of
issues which the appellate court is in a more favored position
to accomplish. Standing between the trial courts and the
Supreme Court, the appellate court was precisely created to
take over much of the work that used to be previously done
by this Court. It has been of great help to the Supreme Court
in synthesizing facts, issues, and rulings in an orderly and
intelligible manner and in Identifying errors which ordinarily
might have escaped detection. Statistics will show that the
great majority of petitions to review the decisions of the
appellate court have been denied due course for lack of merit
in minute resolutions. The appellate court has, therefore,
freed this Court to better discharge its constitutional duties
and perform its most important work which, in the words of
Dean Vicente G. Sinco, "is less concerned with the decision of
cases that begin and end with the transient rights and
obligations of particular individuals but is more intertwined
with the direction of national policies, momentous economic
and social problems, the delimitation of governmental
authority and its impact upon fundamental rights."
(Philippine Political Law, 10th Edition, p. 323). It is, therefore,
difficult to understand why a Division of the Intermediate
Appellate Court should hesitate to help the Supreme Court
and to act on an action which it was specifically ordered to
hear and decide.
If its initial hesitation was due to doubts about the
correctness of our action, then it should recall the admonition
in Tugade v. Court of Appeals (85 SCRA 226, 230-231) that:
xxx xxx xxx
40
Respondent Court of Appeals really was devoid of any choice
at all It could not have ruled in any other way on the legal
question raised. This Tribunal having spoken, its duty was to
obey. It is as simple as that. There is relevance to this excerpt
from Barrera v. Barrera (34 SCRA 98): 'The delicate task of
ascertaining the significance that attaches to a constitutional
or statutory provision, an executive order, a procedural norm
or a municipal ordinance is committed to the judiciary. It thus
discharges a role no less crucial than that appertaining to the
other two departments in the maintenance of the rule of law.
To assure stability in legal relations and avoid confusion, it
has to speak with one voice. It does so with finality, logically
and rightly, through the highest judicial organ, this Court.
What it says then should be definitive and authoritative,
binding on those occupying the lower ranks in the judicial
hierarchy. They have to defer and to submit.' (Ibid. 107. The
opinion of Justice Laurel in People v. Vera, 65 Phil. 56 [1937]
was cited.) The ensuing paragraphs of the opinion in Barrera
further emphasizes the point: 'Such a thought was reiterated
in an opinion of Justice J.B.L. Reyes and further emphasized in
these words: 'Judge Gaudencio Cloribel need not be
reminded that the Supreme Court, by tradition and in our
system of judicial administration, has the last word on what
the law is it is the final arbiter of any justifiable controversy.
There is only one Supreme Court from whose decisions an
other courts should take their bearings. (Justice J.B.L. Reyes
spoke thus in Albert v. Court of First Instance of Manila [Br.
VI], 23 SCRA 948, 961).
The fault of the Intermediate Appellate Court is mitigated by
the fact that it still decided the remanded case on the merits.
It stated:
On February of 1950 an original complaint for recovery of
possession of a parcel of land was filed before the Court of
First Instance of Tarlac, which was subsequently amended on
March 19, 1951.
On May 20, 1976, after a full blown trial the Regional Trial
Court Branch 64 (formerly Court of First Instance) of Tarlac,
rendered a decision dismissing the complaint and ordering
plaintiff Marcelo Gutierrez to pay the defendants the costs of
the suit. The dispositive portion of which reads as follows:
WHEREFORE, judgment is hereby rendered dismissing the
complaint and ordering plaintiff Marcelo Gutierrez to pay the
defendants the costs of this suit. He (sic) pronouncement as
to damages for want of proof.
From the above judgment an appeal was filed with the Court
of Appeals.
On September 23, 1981, the then Court of Appeals reversed
the decision of the Regional Trial Court, Branch 64, this time
ordering the ten appellees (now petitioners) to deliver the
ownership and possession of the litigated property to then
appellant (now respondent Marcelo Gutierrez), which
decision became final and executory on December 20, 1982,
the dispositive portion of which reads, as follows:

WHEREFORE, in the light of the foregoing, the decision
appealed from, not being in accordance with the applicable
law and evidence and finding validity in the errors assigned, is
hereby reversed and set aside. In lieu thereof, another one is
entered ordering defendants-appellees and/or their
successors-in-interest to deliver immediately the ownership
and possession of the property described under par. 3 of the
complaint to herein plaintiff- appellant Marcelo Gutierrez.
With costs.
On January 16, 1984, an action to annul the judgment of the
former Court of Appeals was filed before the Regional Trial
Court, Branch 56, Third Judicial Region in Capas, Tarlac.
On February 27, 1984, the respondent Court (Regional Trial
Court), dismissed the case for annulment of judgment on the
ground that it has no jurisdiction to annul the judgment of
the Court of Appeals.
On March 19, 1984, the motion for reconsideration filed by
herein petitioner was denied by the respondent court.
Accordingly, a petition for certiorari, mandamus and a writ of
injunction was filed before the Intermediate Appellate Court
and raffled to the Third Special Cases Division, The court
dismissed the petition for lack of merit on the ground that a
Regional Trial Court is without jurisdiction to annul a
judgment of the Intermediate Appellate Court, the dispositive
portion of which reads:
WHEREFORE, this case should be, as it is hereby DISMISSED
OUTRIGHT. With costs against the petitioners.
On June 14, 1984, the motion for reconsideration filed by
herein petitioner was denied by this Court.
xxx xxx xxx
Finally, a judgment based on alleged false testimony is not an
extrinsic fraud by which an action for annulment of judgment
could be grounded. The Supreme Court in Ilacad v. Court of
Appeals (supra, p. 302), declared that:
xxx xxx xxx
... and speaking of extrinsic fraud, it is that fraudulent scheme
of the prevailing litigant which prevents a party from having
his day in court from presenting his case. Fraud has been
regarded as extrinsic or collateral, within the meaning of the
rule 'where it is one of the effect of which prevents a party
from having a trial, or real contests, or from presenting all of
his case to the court, or where it operates upon matters
pertaining not to the judgment itself, but to the manner by
which it was procured so that there is not a fair submission of
the controversy. In other words, extrinsic fraud refers to any
fraudulent act of the prevailing party in the litigation which is
committed outside of the trial of the case, where the
defeated party has been prevented from presenting fully his
41
side of the case, by fraud or deception practiced on him by
his opponent.
The resort to fraud in introducing fabricated evidence is
definitely an intrinsic fraud, hence false testimony being a
matter of evidence is definitely intrinsic and not extrinsic.
Fraud consisting in acting fictitious cause of false testimony is
intrinsic (sic) (Francisco v. David, 38 CG 714). Intrinsic fraud
takes the form of acts of a party in a litigation during the trial
such as the use of forged instruments or perjured testimony,
which did not affect the presentation of the case, but did
prevent a fair and just determination of the case (Libudan v.
Palma, [S1, 45 SCRA 17]). Intrinsic fraud is not sufficient to
attack a judgment (Yatco v. Sumagui, 44623-R, July 31, 1971).
Petitioners stand that extrinsic fraud was employed by the
respondents, is bereft of any factual basis, hence, even on the
assumption that this court has jurisdiction to decide this
issue, still the petitioners cause of action must fail.
A careful review of the present petition and of the records of
the appellate court on this case shows that even on the
assumption that all the facts alleged in the petition are true,
the petition should be dismissed for lack of merit because the
fraud allegedly perpetrated by the private respondent in AC-
G.R. SP No. 03301 is only intrinsic in nature and not extrinsic.
Fraud is regarded as extrinsic or collateral where it has
prevented a party from having a trial or from presenting an of
his case to the court. (Asian Surety and Insurance Co. v. Island
Steel, Inc., 118 SCRA 233, 239; citing Amuran v. Aquino, 38
Phil. 29). In the case at bar, the fraud was in the nature of
documents allegedly manufactured by Marcelo Gutierrez to
make it appear that he was the rightful heir of the disputed
property, Hence, the Intermediate Appellate Court is correct
in finding the fraud to be intrinsic in nature.
WHEREFORE, the petition is hereby DISMISSED for lack of
merit. The respondents' counsel, Atty. Adelaido G. Rivera is
fined Five Hundred Pesos (P500.00) for his failure to act on
the order to file comment.
SO ORDERED.
Feria (Chairman), Fernan, Alampay and Paras, JJ., concur,
The Lawphil Project - Arellano Law Foundation
================

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-19001 November 11, 1922
HARRY E. KEELER ELECTRIC CO., INC., plaintiff-appellant,
vs.
DOMINGO RODRIGUEZ, defendant-appellee.
Hartford Beaumont for appellant.
Ross and Lawrence and Antonio T. Carrascoso, Jr., for
appellee.
STATEMENT
The plaintiff is a domestic corporation with its principal office
in the city of Manila and engaged in the electrical business,
and among other things in the sale of what is known as the
"Matthews" electric plant, and the defendant is a resident of
Talisay, Occidental Negros, and A. C. Montelibano was a
resident of Iloilo.
Having this information, Montelibano approached plaintiff at
its Manila office, claiming that he was from Iloilo and lived
with Governor Yulo; that he could find purchaser for the
"Matthews" plant, and was told by the plaintiff that for any
plant that he could sell or any customer that he could find he
would be paid a commission of 10 per cent for his services, if
the sale was consummated. Among other persons.
Montelibano interviews the defendant, and, through his
efforts, one of the "Matthews" plants was sold by the plaintiff
to the defendant, and was shipped from Manila to Iloilo, and
later installed on defendant's premises after which, without
the knowledge of the plaintiff, the defendant paid the
purchase price to Montelibano. As a result, plaintiff
commenced this action against the defendant, alleging that
about August 18, 1920, it sold and delivered to the defendant
the electric plant at the agreed price of P2,513.55 no part of
42
which has been paid, the demands judgment for the amount
with interest from October 20, 1920.
For answer, the defendant admits the corporation of the
plaintiff, and denies all other material allegations of the
complaint, and, as an affirmative defense, alleges "that on or
about the 18th of August, 1920, the plaintiff sold and
delivered to the defendant a certain electric plant and that
the defendant paid the plaintiff the value of said electric
plant, to wit: P2,513.55."
Upon such issues the testimony was taken, and the lower
court rendered judgment for the defendant, from which the
plaintiff appeals, claiming that the court erred in holding that
the payment to A. C. Montelibano would discharge the debt
of defendant, and in holding that the bill was given to
Montelibano for collection purposes, and that the plaintiff
had held out Montelibano to the defendant as an agent
authorized to collect, and in rendering judgment for the
defendant, and in not rendering judgment for the plaintiff.
JOHNS, J.:
The testimony is conclusive that the defendant paid the
amount of plaintiff's claim to Montelibano, and that no part
of the money was ever paid to the plaintiff. The defendant,
having alleged that the plaintiff sold and delivered the plant
to him, and that he paid the plaintiff the purchase price, it
devolved upon the defendant to prove the payment to the
plaintiff by a preponderance of the evidence.
It appears from the testimony of H. E. Keeler that he was
president of the plaintiff and that the plant in question was
shipped from Manila to Iloilo and consigned to the plaintiff
itself, and that at the time of the shipment the plaintiff sent
Juan Cenar, one of its employees, with the shipment, for the
purpose of installing the plant on defendant's premises. That
plaintiff gave Cenar a statement of the account, including
some extras and the expenses of the mechanic, making a
total of P2,563,95. That Montelibano had no authority from
the plaintiff to receive or receipt for money. That in truth and
in fact his services were limited and confined to the finding of
purchasers for the "Matthews" plant to whom the plaintiff
would later make and consummate the sale. That
Montelibano was not an electrician, could not install the
plant and did not know anything about its mechanism.
Cenar, as a witness for the plaintiff, testified that he went
with shipment of the plant from Manila to Iloilo, for the
purpose of installing, testing it, and to see that everything
was satisfactory. That he was there about nine days, and that
he installed the plant, and that it was tested and approved by
the defendant. He also says that he personally took with him
the statement of account of the plaintiff against the
defendant, and that after he was there a few days, the
defendant asked to see the statement, and that he gave it to
him, and the defendant said, "he was going to keep it." I said
that was all right "if you want." "I made no effort at all to
collect the amount from him because Mr. Rodriguez told me

he was going to pay for the plant here in Manila." That after
the plant was installed and approved, he delivered it to the
defendant and returned to Manila.
The only testimony on the part of the defendant is that of
himself in the form of a deposition in which he says that
Montelibano sold and delivered the plant to him, and "was
the one who ordered the installation of that electrical plant,"
and he introduced in evidence as part of his deposition a
statement and receipt which Montelibano signed to whom he
paid the money. When asked why he paid the money to
Montelibano, the witness says:
Because he was the one who sold, delivered, and installed
the electrical plant, and he presented to me the account,
Exhibits A and A-I, and he assured me that he was duly
authorized to collect the value of the electrical plant.
The receipt offered in evidence is headed:
STATEMENT Folio No. 2494
Mr. DOMINGO RODRIGUEZ,
Iloilo, Iloilo, P.I.
In account with
HARRY E. KEELER ELECTRIC COMPANY, INC.
221 Calle Echaque, Quiapo, Manila, P.I.
MANILA, P.I., August 18, 1920.
The answer alleges and the receipt shows upon its face that
the plaintiff sold the plant to the defendant, and that he
bought it from the plaintiff. The receipt is signed as follows:
Received payment
HARRY E. KEELER ELECTRIC CO. Inc.,
Recibi
(Sgd.) A. C. MONTELIBANO.
There is nothing on the face of this receipt to show that
Montelibano was the agent of, or that he was acting for, the
plaintiff. It is his own personal receipt and his own personal
signature. Outside of the fact that Montelibano received the
money and signed this receipt, there is no evidence that he
had any authority, real or apparent, to receive or receipt for
the money. Neither is there any evidence that the plaintiff
ever delivered the statement to Montelibano, or authorized
anyone to deliver it to him, and it is very apparent that the
statement in question is the one which was delivered by the
plaintiff to Cenar, and is the one which Cenar delivered to the
defendant at the request of the defendant.
The evidence of the defendant that Montelibano was the one
who sold him the plant is in direct conflict with his own
pleadings and the receipt statement which he offered in
evidence. This statement also shows upon its face that P81.60
of the bill is for:
43
To Passage round trip, 1st Class @
P40.80 a trip ........................................... P81.60.
Plus Labor @ P5.00 per day
Machine's transportation ................. 9.85.
This claim must be for the expenses of Cenar in going to Iloilo
from Manila and return, to install the plant, and is strong
evidence that it was Cenar and not Montelibano who
installed the plant. If Montelibano installed the plant, as
defendant claims, there would not have been any necessity
for Cenar to make this trip at the expense of the defendant.
After Cenar's return to Manila, the plaintiff wrote a letter to
the defendant requesting the payment of its account, in
answer to which the defendant on September 24 sent the
following telegram:
Electric plant accessories and installation are paid to
Montelibano about three weeks Keeler Company did not
present bill.
This is in direct conflict with the receipted statement, which
the defendant offered in evidence, signed by Montelibano.
That shows upon its face that it was an itemized statement of
the account of plaintiff with the defendant. Again, it will be
noted that the receipt which Montelibano signed is not
dated, and it does not show when the money was paid:
Speaking of Montelibano, the defendant also testified: "and
he assured me that he was duly authorized to collect the
value of the electrical plant." This shows upon its face that
the question of Montelibano's authority to receive the money
must have been discussed between them, and that, in making
the payment, defendant relied upon Montelibano's own
statements and representation, as to his authority, to receipt
for the money.
In the final analysis, the plant was sold by the plaintiff to the
defendant, and was consigned by the plaintiff to the plaintiff
at Iloilo where it was installed by Cenar, acting for, and
representing, the plaintiff, whose expense for the trip is
included in, and made a part of, the bill which was receipted
by Montelibano.
There is no evidence that the plaintiff ever delivered any
statements to Montelibano, or that he was authorized to
receive or receipt for the money, and defendant's own
telegram shows that the plaintiff "did not present bill" to
defendant. He now claims that at the very time this telegram
was sent, he had the receipt of Montelibano for the money
upon the identical statement of account which it is admitted
the plaintiff did render to the defendant.
Article 1162 of the Civil Code provides:
Payment must be made to the persons in whose favor the
obligation is constituted, or to another authorized to receive
it in his name.
And article 1727 provides:
 44

The principal shall be liable as to matters with respect to
which the agent has exceeded his authority only when he
ratifies the same expressly or by implication.
In the case of Ormachea Tin-Conco vs. Trillana (13 Phil., 194),
this court held:
The repayment of a debt must be made to the person in
whose favor the obligation is constituted, or to another
expressly authorized to receive the payment in his name.
Mechem on Agency, volume I, section 743, says:
And not only must the person dealing with the agent
ascertain the existence of the conditions, but he must also, as
in other cases, be able to trace the source of his reliance to
some word or act of the principal himself if the latter is to be
held responsible. As has often been pointed out, the agent
alone cannot enlarge or extend his authority by his own acts
or statements, nor can he alone remove limitations or waive
conditions imposed by his principal. To charge the principal in
such a case, the principal's consent or concurrence must be
shown. (Mechem on Agency, vol. I, section 757.)
This was a single transaction between the plaintiff and the
defendant.lawph!l.net

In approaching the consideration of the inquiry whether an Applying the above rules, the testimony is conclusive that the
assumed authority exist in a given case, there are certain plaintiff never authorized Montelibano to receive or receipt
fundamental principles which must not be overlooked. for money in its behalf, and that the defendant had no right
Among these are, as has been seen, (1) that the law indulges to assume by any act or deed of the plaintiff that
in no bare presumptions that an agency exists: it must be Montelibano was authorized to receive the money, and that
proved or presumed from facts; (2) that the agent cannot the defendant made the payment at his own risk and on the
establish his own authority, either by his representations or sole representations of Montelibano that he was authorized
by assuming to exercise it; (3) that an authority cannot be to receipt for the money.
established by mere rumor or general reputation; (4)that
even a general authority is not an unlimited one; and (5) that The judgment of the lower court is reversed, and one will be
every authority must find its ultimate source in some act or entered here in favor of the plaintiff and against the
omission of the principal. An assumption of authority to act defendant for the sum of P2,513.55 with interest at the legal
as agent for another of itself challenges inquiry. Like a rate from January 10, 1921, with costs in favor of the
railroad crossing, it should be in itself a sign of danger and appellant. So ordered.
suggest the duty to "stop, look, and listen." It is therefore
declared to be a fundamental rule, never to be lost sight of
and not easily to be overestimated, that persons dealing with Araullo, C. J., Johnson, Street, Malcolm, Avancea, Villamor,
an assumed agent, whether the assumed agency be a general Ostrand, and Romualdez, JJ., concur.
or special one, are bound at their peril, if they would hold the
principal, to ascertain not only the fact of the agency but the
nature and extent of the authority, and in case either is The Lawphil Project - Arellano Law Foundation
controverted, the burden of proof is upon them to establish
it.
===========
. . . It is, moreover, in any case entirely within the power of
the person dealing with the agent to satisfy himself that the
agent has the authority he assumes to exercise, or to decline
to enter into relations with him. (Melchem on Agency, vol. I,
sec. 746.)

The person dealing with the agent must also act with ordinary
prudence and reasonable diligence. Obviously, if he knows or
has good reason to believe that the agent is exceeding his
authority, he cannot claim protection. So if the suggestions of
probable limitations be of such a clear and reasonable
quality, or if the character assumed by the agent is of such a
suspicious or unreasonable nature, or if the authority which
he seeks to exercise is of such an unusual or improbable
character, as would suffice to put an ordinarily prudent man
upon his guard, the party dealing with him may not shut his
eyes to the real state of the case, but should either refuse to
deal with the agent at all, or should ascertain from the
principal the true condition of affairs. (Mechem on Agency,
vol. I, sec 752.)

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 6906 September 27, 1911
FLORENTINO RALLOS, ET AL., plaintiff-appellee,
vs.
TEODORO R. YANGCO, defendant-appellant.
Mariano Escueta, for appellant.
Martin M. Levering, for appellees.
MORELAND, J.:
This is an appeal from a judgment of the Court of First
Instance of the Province of Cebu, the Hon. Adolph Wislizenus
presiding, in favor of the plaintiffs, in the sum of P1,537.08,
with interest at 6 per cent per annum from the month of July,
1909, with costs.
The defendant in this case on the 27th day of November,
1907, sent to the plaintiff Florentino Rallos, among others,
the following letter:
CIRCULAR NO. 1.
MANILA, November 27, 1907
MR. FLORENTINO RALLOS, Cebu.
DEAR SIR: I have the honor to inform you that I have on this
date opened in my steamship office at No. 163 Muelle de la
Reina, Binondo, Manila, P. I., a shipping and commission
department for buying and selling leaf tobacco and other
native products, under the following conditions:
1. When the consignment has been received, the
consignor thereof will be credited with a sum not to exceed
two-thirds of the value of the goods shipped, which may be
45
made available by acceptance of a draft or written order of
the consignor on five to ten day's sight, or by his ordering at
his option a bill of goods. In the latter case he must pay a
commission of 2 per cent.
2. No draft or written order will be accepted without
previous notice forwarding the consignment of goods to
guarantee the same.
3. Expenses of freight, hauling and everything
necessary for duly executing the commission will be charged
in the commission.
4. All advances made under sections (1) and (3) shall
bear interest at 10 per cent a year, counting by the sale of the
goods shipped or remittance of the amount thereof.
5. A commission of 2 per cent will be collected on the
amount realized from the sale of the goods shipped.
6. A Payment will be made immediately after collection
of the price of the goods shipped.
7. Orders will be taken for the purchase of general
merchandise, ship-stores, cloths, etc., upon remittance of the
amount with the commission of 2 per cent on the total value
of the goods bought. Expenses of freight, hauling, and
everything necessary for properly executing the commission
will be charged to the consignor.
8. The consignor of the good may not fix upon the
consignee a longer period than four months, counting from
the date of receipt, for selling the same; with the
understanding that after such period the consignee is
authorized to make the sale, so as to prevent the advance
and cost of storage from amounting to more than the actual
value of said goods, as has often happened.
9. The shipment to the consignors of the goods
ordered on account of the amount realized from the sale of
the goods consigned and of the goods bought on remittance
of the value thereof, under sections (1) and (3), will not be
insured against risk by sea and land except on written order
of the interested parties.
10. On all consignments of goods not insured according
to the next preceding section, the consignors will bear the
risk.
11. All the foregoing conditions will take effect only after
this office has acknowledged the consignor's previous notice.
12. All other conditions and details will be furnished at
the office of the undersigned.
If you care to favor me with your patronage, my office is at
No. 163 Muelle de la Reinna, Binondo, Manila, P. I., under the
name of "Teodoro R. Yangco." In this connection it gives me
great pleasure to introduce to you Mr. Florentino Collantes,
 46

upon whom I have conferred public power of attorney before For these reasons the judgment appealed from is confirmed,
the notary, Mr. Perfecto Salas Rodriguez, dated November without special finding as to costs.
16, 1907, to perform in my name and on my behalf all acts
necessary for carrying out my plans, in the belief that through Torres, Mapa, Johnson and Carson, JJ., concur.
his knowledge and long experience in the business, along
with my commercial connections with the merchants of this
city and of the provinces, I may hope to secure the most The Lawphil Project - Arellano Law Foundation
advantageous prices for my patrons. Mr. Collantes will sign by
power of attorney, so I beg that you make due note of his
signature hereto affixed. ===============

Very respectfully,

(Sgd.) T. R. YANGCO.

(Sgd.) F. COLLANTES.

Accepting this invitation, the plaintiffs proceeded to do a

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

It appears, however, that prior to the sending of said tobacco

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

As is seen, the only question for our decision is whether or

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