2nd Batch of Agency Cases

8/13/2019 2nd Batch of Agency Cases

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Cases in Agency 1

776 SUPREME COURT REPORTS ANNOTATED

Philippine National Bank vs. Manila Surety & Fidelity Co., Inc.

No. L-20567. July 30, 1965.

PHILIPPINE NATIONAL BANK, petitioner, vs. MANILA SURETY &

FIDELITY CO., INC. and THE COURT OF APPEALS (Second Division),

respondents.

Agency; Duty of agent to act with the care of a good father of a

family. An agent is required to act with the care of a good father of a

family and becomes liable for the damages which the principal may

suffer through his non-performance.

Same; Same; Bank liable for neglect in collecting sums due its

debtor. A bank is answerable for negligence in failing to collect the

sums due its debtor from the latters own debtor, contrary to said banks

duty as holder of an exclusive and irrevocable power of attorney to make

such collections.

Suretyship; Surety released when assigned funds permitted by

creditor to be exhausted without notifying former. By allowing the

assigned funds to be exhausted without notifying the surety, the creditor

deprives the surety of any possibility of recoursing against that security,

and therefore the surety is released.

PETITION for review of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Besa, Galang & Medina for petitioner.

De Santos & Delfino for respondents.

777

VOL. 14, JULY 30, 1965 777


REYES, J.B.L., J .:

The Philippine National Bank petitions for the review and reversal of the

decision rendered by the Court of Appeals (Second Division), in its case

CA-G.R. No. 24232- R, dismissing the Banks complaint against

respondent Manila Surety & Fidelity Co., Inc., and modifying the

judgment of the Court of First Instance of Manila in its Civil Case No.

11263.

The material facts of the case, as found by the appellate Court, are

as follows:

The Philippine National Bank had opened a letter of credit and

advanced thereon $120,000.00 to Edgington Oil Refinery for 8,000 tons

of hot asphalt. Of this amount, 2,000 tons worth P279,000.00 were

released and delivered to Adams & Taguba Corporation (known as

ATACO) under a trust receipt guaranteed by Manila Surety & Fidelity Co.

up to the amount of P75,000.00. To pay for the asphalt, ATACO

constituted the Bank its assignee and attorney-infact to receive and

collect from the Bureau of Public Works the amount aforesaid out of

funds payable to the assignor under Purchase Order No. 71947. This

assig nment (Exhibit A) stipulated that:

The conditions of this assignment are as follows:

1. 1. The same shall remain irrevocable until the said credit

accommodation is fully liquidated.

2. 2. The PHILIPPINE NATIONAL BANK is hereby appointed as our

Attorney-in-Fact for us and in our name, place and stead, to

collect and to receive the payments to be made by virtue of the


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Cases in Agency 2

aforesaid Purchase Order, with full power and authority to

execute and deliver on our behalf, receipt for all payments made

to it; to endorse for deposit or encashment checks, money order

and treasury warrants which said Bank may receive, and to

apply said payments to the settlement of said credit

accommodation.

This power of attorney shall also remain irrevocable until our total

indebtedness to the said Bank have been fully liquidated. (Exhibit E)

ATACO delivered to the Bureau of Public Works, and the latter accepted,

asphalt to the total value of P431,466.-52. Of this amount the Bank

regularly collected, from

778



April 21, 1948 to November 18, 1948, P106,382.01. Thereafter, for

unexplained reasons, the Bank ceased to collect, until in 1952 its

investigators found that more moneys were payable to ATACO from the

Public Works office, because the latter had allowed another creditor to

collect funds due to ATACO under the same purchase order, to a total of

P311,230.41.

Its demands on the principal debtor and the Surety having been

refused, the Bank sued both in the Court of First Instance of Manila to

recover the balance of P158,563.18 as of February 15, 1950, plus

interests and costs.

On October 4, 1958, the trial court rendered a decision, the

dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered as follows:

1. 1. Ordering defendants, Adams & Taguba Corporation and Manila

Surety & Fidelity Co., Inc., to pay plaintiff, Philippine National

Bank, the sum of P174,462.34 as of February 24, 1956, minus

the amount of P8,000 which defendant, Manila Surety Co., Inc.

paid from March, 1956 to October, 1956 with interest at the rate

of 5% per annum from February 25, 1956, until fully paid

provided that the total amount that should be paid by defendant

Manila Surety Co., Inc., on account of this case shall not exceed

P75,000.00, and to pay the costs;

2. 2. Ordering cross-defendant, Adams & Taguba Corporation, and

third-party defendant, Pedro A. Taguba, jointly and severally, to

pay cross and third-party plaintiff, Manila Surety & Fidelity Co ,

Inc., whatever amount the latter has paid or shall pay under this

judgment;

3. 3. Dismissing the complaint insofar as the claim for 17% special tax

is concerned; and

4. 4. Dismissing the counterclaim of defendants Adams & Taguba

Corporation and Manila Surety & Fid elity Co., Inc.

From said decision, only the defendant Surety Company has duly

perfected its appeal. The Central Bank of the Philippines did not appeal,

while defendant ATACO failed to perfect its appeal.

The Bank recoursed to the Court of Appeals, which rendered an

adverse decision and modified the judgment of the court of origin as to

the suretys liability. Its motions for reconsideration having proved

unavailing, the Bank appealed to this Court.

779

VOL. 14, JULY 30, 1965


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Cases in Agency 3


The Court of Appeals found the Bank to have been negligent in having

stopped collecting from the Bureau of Public Works the moneys falling

due in favor of the principal debtor, ATACO, from and after November

18, 1948, before the debt was fully collected, thereby allowing such funds

to be taken and exhausted by other creditors to the prejudice of the

surety, and held that the Banks negligence resulted in exoneration of

respondent Manila Surety & Fidelity Company.

This holding is now assailed by the Bank. It contends the power of

attorney obtained from ATACO was merely an additional security in its

favor, and that it was the duty of the surety, and not that of the creditor,

to see to it that the obligor fulfills his obligation, and that the creditor

owed the surety no duty of active diligence to collect any sum from the

principal debtor, citing Judge Advocate General vs. Court of Appeals,

G.R. No. L-10671, October 23, 1958.

This argument of appellant Bank misses the point. The Court of

Appeals did not hold the Bank answerable for negligence in failing to

collect from the principal debtor but for its neglect in collecting the sums

due to the debtor from the Bureau of Public Works, contrary to its duty as

holder of an exclusive and irrevocable power of attorney to make such

collections, since an agent is required to act with the care of a good

father of a family (Civ. Code, Art. 1887) and becomes liable for the

damages which the principal may suffer through his non-performance

(Civ. Code, Art. 1884). Certainly, the Bank could not expect that the Bank

would diligently perform its duty under its power of attorney, but because

they could not have collected from the Bureau even if they had attempted

to do so. It must not be forgotten that the Banks power to collect was

expressly made irrevocable, so that the Bureau of Public Works could

very well refuse to make payments to the principal debtor itself, and a

fortiori reject any demands by the surety.

Even if the assignment with power of attorney from the principal

debtor were considered as mere additional secu-

780



rity, still, by allowing the assigned funds to be exhausted without notifying

the surety, the Bank deprived the former of any possibility of recoursing

against that security. The Bank thereby exonerated the surety, pursuant

to Article 2080 of the Civil Code:

ART. 2080. The guarantors, even though they be solidary, are

released from their obligation whenever by some act of the creditor they

cannot be subrogated to the rights, mortgages and preferences of the

latter. (Italics supplied.)

The appellant points out to its lett er of demand, Exhibit K, addressed to

the Bureau of Public Works, on May 5, 1949, and its letter to ATACO,

Exhibit G, informing the debtor that as of its date, October 31, 1949, its

outstanding balance was P156,374.83. Said Exhibit G has no bearing

on the issue whether the Bank has exercised due diligence in collecting

from the Bureau of Public Works, since the letter was addressed to

ATACO, and the funds were to come from elsewhere. As to the letter of

demand on the Public Works office, it does not appear that any reply

thereto was made; nor that the demand was pressed, nor that the debtor

or the surety were ever apprised that payment was not being made. The

fact remains that because of the Banks inactivity the other creditors were


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Cases in Agency 4

enabled to collect P173,870.31, when the balance due to appellant Bank

was only P158,563.18. The finding of negligence made by the Court of

Appeals is thus not only conclusive on us but fully supported by the

evidence.

Even if the Court of Appeals erred on the second reason it advanced

in support of the decision now under appeal, because the rules on

application of payments, giving preference to secured obligations are

only operative in cases where there are several distinct debts, and not

where there is only one that is partially secured, the error is of no

importance, since the principal reason based on the Banks negligence

furnishes adequate support to the decision of the Court of Appeals that

the surety was thereby released.

WHEREFORE, the appealed decision is affirmed, with costs against

appellant Philippine National Bank.

781

VOL. 14, JULY 30, 1965 781

Free Employees and Workers Asso. (FEWA) vs. Court of Industrial Relations

Bengzon, C.J., Concepcion, Paredes, Dizon, Regala,

Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur.

Bautista Angelo, J., took no part.

Barrera, J., on leave, did not take part

Decision affirmed.

o0o

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Cases in Agency 5

[No. 49219. December 11, 1946]

PABLO D. PALMA, petitioner, vs. EDUARDO REYES CRISTOBAL,

respondent.

3. 1. PRINCIPAL AND AGENT; FIDUCIARY RELATIONS; AGENT

CANNOT ACQUIRE TlTLE TO SUBJECT MATTER OF

AGENCY ADVERSE TO THAT OF PRINCIPAL. The relations

of an agent to his principal

713

VOL. 77, DECEMBER 11, 1946 713

Palma vs. Cristobal

5. are fiduciary and in regard to property forming the subject matter of the

agency, he is estopped from acquiring or asserting a title

adverse to that of 'the principal. His position is analogous to that

of a trustee and he cannot consistently, with the principles of

good faith, be allowed to create in himself an interest in

opposition to that of his principal or cestui que trust.

1. 2. TRUSTS AND TRUSTEES; LAND REGISTRATION ;

REGISTRATION IN NAME OF TRUSTEES FOR BENEFIT OF

"CESTUI QUE TRUST." The registration of the property in the

name of the trustees in possession thereof, must be deemed to

have been effected for the benefit of the cestui que trust.

1. 3. LAND REGISTRATION ; RIGHT OF REAL OWNERS TO

RECOVER LAND DECREED IN FAVOR OF ANOTHER;

EXCEPTION. Whether or not there is bad faith or fraud in

obtaining a decree with respect to a registered property, the

same does not belong to the person in whose favor it was

issued, and the real owners would be entitled to recover the

ownership of the property so long as the same has not been

transferred to a third person who had acquired it in good faith

and for a valuable consideration. This right to recover is

sanctioned by section 58 of Act No. 496, as amended by Act No.

3322.

1. 4. ID.; ID.; ESTOPPEL; APPEARANCE OF CO-OWNER AS

ATTORNEY FOR PERSON SECURING REGISTRATION.

Respondent is not barred from claiming that he is a co-owner

because his appearance as attorney for petitioner was not a

misrepresentation which would induce petitioner to believe that

respondent recognized the former as the sole owner of the

property in controversy. The misrepresentation could deceive the

court and outsiders, because they were not aware of the

understanding between the co-owners that the property be

registered in the name of petitioner.

1. 5. TRUSTS AND TRUSTEES; TRUSTEE CANNOT ACQUIRE BY

PRESCRIPTION PROPERTY HELD IN TRUST. A trustee

cannot acquire by prescription the ownership of a property

entrusted to him. The position of a trustee is of representative

nature. It is logical that all benefits derived by the possession

and acts of the agent, as such agent, should accrue to the

benefit of his principal.

ORIGINAL ACTION in the Supreme Court. Certiorari.

The facts are stated in the opinion of the court..

Vicente J. Francisco and Guillermo B. Guevara for petitioner.

714

714 PHILIPPINE REPORTS ANNOTATED


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Cases in Agency 6

Palma vs. Cristobal

Antonio Gonzales for respondent.

PERFECTO, J.:

A parcel of land located in Quesada Street, Tondo Manila, covered by

transfer certificate of title No. 31073 of the Register of Deeds of Manila,

issued in favor of petitioner Pablo D. Palma, is the subject of contention

between the parties.

Petitioner sought, at first, to eject respondent Eduardo Cristobal

Reyes from the land in question in a complaint filed with the Municipal

Court of Manila. As respondent raised the question of ownership, the

complaint was dismissed, and petitioner filed with the Court of First

Instance of Manila the complaint which initiated this case, petitioner

praying that he be declared the owner of the land and that respondent be

ordered to restore its possession and to remove his house therefrom.

The complaint was dismissed and petitioner brought the case to the

Court of Appeals, where he again failed, the appealed judgment having

been affirmed by a decision penned by Mr. Justice Padilla, concurred in

by Mr. Justice Jose G. Generoso and Mr. Justice Pedro Tuason.

The case is now before us on appeal by certiorari.

In 1909, after registration proceedings under the provisions of Act

No. 496, original certificate of title No. 1627 was issued in the names of

petitioner and his wife Luisa Cristobal. In 1923, said certificate was

cancelled and substituted by certificate of title No. 20968 by virtue of a

decree issued by the Court of First Instance of Manila in connection with

the Manila cadastre. It was later substituted by certificate of title No.

26704, also in the name of petitioner and his wife. After the latter's death

in 1922, a new certificate of title was issued in 1923 only in the name of

petitioner, substituted in 1928 by certificate of title No. 31073.

The Court of Appeals, upon the evidence, concluded with the Court

of First Instance of Manila that the parcel of land in question is a

community property held by petitioner

715

VOL. 77, DECEMBER 11, 1946

Palma vs. Cristobal

in trust for the real owners (the respondent being an heir of one of them),

the registration having been made in accordance with an understanding

between the co-owners, by reason of the confidence they had in

petitioner and his wife. This confidence, close relationship, and the fact

that the co-owners were receiving their shares in the rentals, were the

reasons why no step had been taken to partition the property.

The Court of Appeals explains' that it was only after the death of

Luisa Cristobal and petitioner had taken a second wife that trouble on

religious matters arose between petitioner and respondent, and it gives

credence to the testimony of Apolonia Reyes and respondent to the

effect that Luisa, before her death, called her husband, the petitioner,

and enjoined him to give her co-owners their shares in the parcel of land;

but respondent told her then not to worry about it, for it was more

important to them to have her cured of the malady that affected her.

Petitioner answered his wif e that she should not worry because he

would take care of the matter by giving the co-owners their respective

shares.

Petitioner assigns as first error of the Court of Appeals the fact that it

considered the oral testimony adduced in behalf of respondent sufficient


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Cases in Agency 7

to rebut the legal presumption that petitioner is the owner of the land in

controversy.

In Severino vs. Severino (43 Phil., 343), this court declared that "the

relations of an agent to his principal are fiduciary and it is an elementary

and very old rule that in regard to property forming the subject-matter of

the agency, he is estopped from acquiring or asserting a title adverse to

that of the principal. His position is analogous to that of a trustee and he

cannot consistently, with the principles of good faith, be allowed to create

in himself an interest in opposition to that of his principal or cestui que

trust" Affirming the said doctrine in Barretto vs. Tuason (50 Phil., 888),

the Supreme Court declared that the registration of the property in the

name of the trustees

716


Palma vs. Cristobal

in possession thereof, must be deemed to have been effected for the

benefit of the cestui que trust. In Palet vs. Tejedor (55 Phil., 790), it was

declared that whether or not there is bad faith or fraud in obtaining a

decree with respect to a registered property, the same does not belong

to the person in whose favor it was issued, and the real owners would be

entitled to recover the ownership of the property so long as the same has

not been transferred to a third person who has acquired it in good faith

and for a valuable consideration. This right to recover is sanctioned by

section 55 of Act No. 496, as amended by Act No. 3322.

There is no showing why the conclusions of facts of the Court of

Appeals should be disturbed, and upon said facts petitioner's first

assignment of error appears to be untenable in the light of law and of the

decisions of this court.

Petitioner alleged that the Court of Appeals erred in not holding the

respondent estopped from claiming that petitioner is not the absolute

owner of the property in question because, after Luisa Cristobal,

petitioner's wife, died in 1922, instead of moving for the partition of the

property, considering specially that petitioner had promised such a

partition at the deathbed of the deceased, respondent appeared as

attorney for petitioner and prayed that a new certificate of title be issued

in the name of said petitioner as the sole owner of the property.

Petitioner insisted with energy that respondent himself was a party

to the fraud upon the court, as guilty as petitioner himself, and that

estops him from asserting that he is the co-owner of the land involved

herein.

There is no merit in petitioner's contention. The fact that respondent

has been a party to the deception which resulted in petitioner's securing

in his name the title to a property not belonging to him, is not a valid

reason for changing the legal relationship between the latter and its true

owners to such an extent as to let them lose their ownership to a person

trying to usurp it.

717

VOL. 77, DECEMBER 11, 1946

Palma vs. Cristobal

Whether petitioner and respondent are or are not jointly responsible for

any fraud upon a court of justice, cannot affect the substantial rights of

the real owners of the title of a real property.

Respondent is not barred because his appearance as attorney for

petitioner was not a misrepresentation which would induce petitioner to


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Cases in Agency 8

believe that respondent recognized the former as the sole owner of the

property in controversy. The misrepresentation could deceive the court

and outsiders, because they were not aware of the understanding

between the co-owners that the property be registered in the name of

petitioner. The Court of Appeals found, and the finding is not now in

issue, that petitioner was a party to the understanding and assumed the

rle of an instrument to make it effective. Respondent's appearance, as

attorney for petitioner in 1923, was a consequence of the understanding,

and petitioner could not legitimately assume that it had the effect of

breaking or reversing said understanding.

Lastly, it is contended by petitioner that, even conceding that the

controverted property was owned in common by several co-owners, yet

the Court of Appeals erred in not holding that, as against respondent,

petitioner had acquired absolute ownership of the same through

prescription.

Upon the premise that the registration in 1909 in the name of

petitioner and his wife, Luisa Cristobal, was in accordance with an

agreement among the co-owners, petitioner advances the theory that

when he, upon the death of his wife in 1922, caused the trust property to

be registered in his sole name in 1923, and subsequently partitioned

between himself and his daughter, Ildefonsa Cristobal Ditangco, as heirs

of the decedent, "he openly breached the agreement of 1909 as well as

the promise made to his dying wife of giving the co-owners their

respective shares," concluding that "that breach was an assumption of

ownership, and could be the basis of title by prescription."

718


Arcilla vs. David

This theory holds no water because, according to the pronouncement of

the Court of Appeals, upon the evidence, petitioner held the property and

secured its registration in his name in a fiduciary capacity, and it is

elementary that a trustee cannot acquire by prescription the ownership of

a property entrusted to him. The position of a trustee is of representative

nature. His position is the position of a cestui que trust. It is logical that all

benefits derived by the possession and acts of the agent, as such agent,

should accrue to the benefit of his principal.

Petitioner's pretension of building his right to claim ownership by

prescription upon his own breach of a trust cannot be countenanced by

any court, being subversive of generally accepted ethical principles.

The decision of the Court of Appeals is affirmed. No costs.

Moran, C. J., Pars, Feria, Pablo, Hilado, Bengzon, and Briones,

JJ., concur.

Decision of Court of Appeals affirmed

_______________



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Cases in Agency 9

[No. 38479. November 20, 1933]

QUINTIN DE BORJA, judicial administrator of the intestate estate of the

deceased Marcelo de Borja, plaintiff and appellant, vs. FRANCISCO DE

BORJA, defendant and appellant.

4. 1. PLEADING AND PRACTICE; PERIOD FOR FILING OF

COUNTERCLAIMS. The plaintiff-appellant's contention that the

counterclaims presented by the defendant have already

prescribed is untenable. The counterclaims in question are

based on instruments in writing marked Exhibits 1 to 6. The

period of prescription thereof is not six (6) years, as claimed, but

ten (10) years, in accordance with the provisions of section 43

(1) of the Code of Civil Procedure.

6. 2. DEBTS AND DEBTORS; PAYMENT OF INTEREST. Neither is

the plaintiff entitled to the interest claimed by him upon the

alleged sums of money loaned to and collected by the defendant

from various persons for his deceased father. In all the aforesaid

transactions, the defendant acted in his capacity as attorney-in-

fact of his deceased father and, there being no evidence

showing that he converted the money entrusted to him to his

own use, he is not liable for interest thereon in accordance with

the provisions of article 1724 of the Civil Code.

APPEAL from a judgment of the Court of First Instance of Rizal.

Carballo. J.

812


De Borja vs. De Borja

The facts are stated in the opinion of the court.

M. H. de Joya and Quintin Paredes for plaintiff-appellant.

Jose de Borja for defendant-appellant.

IMPERIAL, J.:

The plaintiff herein, in his capacity as judicial administrator of the estate

of the deceased Marcelo de Borja, instituted this action in the Court of

First Instance of Rizal, to recover from the defendant the sum of

P61,376.56 which, according to the amended complaint, the said

defendant owed the aforesaid deceased, for certain sums of money

loaned to and collected by him from other persons with the obligation to

render an accounting thereof to the said deceased.

In his amended answer, the defendant interposed various

counterclaims for alleged sums of money owed him by the aforesaid

deceased.

After the trial thereof and the presentation of voluminous evidence

therein, the trial court reached the conclusion and held that, from his

various causes of action, the plaintiff was entitled to recover the sum of

P33,218.86 from the defendant, and that, by way of counterclaim, the

said defendant, in turn, was entitled to collect the sum of P39,683 from

the plaintiff, and rendered judgment in favor of the def endant in the sum

of P6,464.14 with legal interest thereon from the date of the

counterclaim, with the costs. Both parties appealed therefrom.

The trial court made a very careful analysis of the oral and

documentary evidence presented therein, and from the preponderance

thereof, inferred the findings of fact stated in its decision. We are

convinced that, from the evidence presented, the liquidation made by the

trial court is the nearest approach to its findings of fact, and for this


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Cases in Agency 10

reason we do not feel inclined to alter or modify it.

The plaintiff-appellant's contention that the counterclaims presented

by the defendant have already prescribed, is untenable. The

counterclaims in question are based on instruments in writing marked

Exhibits 1 to 6. The period

813

VOL. 58, NOVEMBER 21, 1933 813

In the Matter of the Estate of Goulette

of prescription thereof is not six (6) years, as claimed, but ten (10) years,

in accordance with the provisions of section 43 (1) of the Code of Civil

Procedure.

Neither is the plaintiff entitled to the interest claimed by him upon the

alleged sums loaned to and collected by the defendant from various

persons for his deceased father. In all the aforementioned transactions,

the defendant acted in his capacity as attorney-in-fact of his deceased

father, and there being no evidence showing that he converted the

money entrusted to him to his own use, he is not liable for interest

thereon, in accordance with the provisions of article 1724 of the Civil

Code.

The defendant-appellant's claim to the effect that he is entitled to

collect the rents for the use of the earthen jar factory and the buildings

thereof, is, likewise, unfounded. The trial court held that all there existed

between the parties was a mere gratuitous commodatum and that the

most that the deceased bound himself to do was to pay the taxes on the

properties in question. There is nothing in the records of the case to

justify reversing the judgment rendered therein.

The judgment appealed from being, in our opinion, in accordance

with the law and sufficiently supported by a preponderance of the

evidence presented therein, it is hereby affirmed, without special

pronouncement as to the costs of this instance. So ordered.

Avancea, C. J., Malcolm, Villa-Real, and Hull, JJ., concur.

Judgment affirmed.

__________



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Cases in Agency 11


Mindanao Motor Line, Inc. vs. Court of Industrial Relations

No. L-18418. November 29, 1962.

MINDANAO MOTOR LINE,INC., ET AL., petitioners, vs. HON. COURT

OF INDUSTRIAL RELATIONS, ET AL., respondents.

No. L-18419. November 29, 1962.

ABOITIZ & Co., INC., petitioner, vs. HON.COURT OF INDUSTRIAL

RELATIONS, ET AL., respondents.

_______________

3 Salmon & Pacific Commercial Co. v. Tan Cueco, 36 Phil 556.

711

VOL. 6, NOVEMBER 29, 1962 711Mindanao Motor Line, Inc. vs. Court of Industrial Relations

Employer and Employees; Back Wages; Employees entitled to

back wages although reinstatement cannot be ordered. While as a rule

the payment of back wages follows as a necessary consequence of an

order for reinstatement, it does not follow that if reinstatement can not be

ordered, as when the service is discontinued, the employees illegally laid

off should be deprived of the wages they are entitled to, as should be the

case when the company or employer is found guilty of unfair laborpractice. The industrial court found respondents guilty of the unfair labor

practice imputed to them and so it is but fair that they be paid their wages

for the period they had been deprived of their employment.

Same; Same; Agents who acted within scope of authority, not

liable. Two of the respondents were merely agents who acted within the

scope of their corporate positions as resident manager and general

manager, respectively, of the aforesaid company. Since they were

impleaded merely as officers of the company and have acted only as

such within the scope of their authority, if any one should be held

responsible for the consequence of their acts as such officers it is their

employer, unless of course it is shown that they have acted negligently or

in bad faith. The evidence discloses nothing in this respect. It is a well-

known principle of law that an agent who acts in behalf of a disclosed

principal within the scope of his authority cannot be held liable to third

persons (Article 1897, new Civil Code; Banque Generale Belge, et al. vs.

Walter Bull & Co., Inc., et al., 47 O.G. 138; Zialcita-Yuseco vs. Simmons,

L-7912, Aug. 30, 1955).

Same; Same; Employees who were re-employed in other lines not

entitled to back wages during period of re-employment. Of the 71

employees who were laid off on February 1, 1955 because of the alleged

unfair labor practice, 31 were re-employed on other lines operated by the

company. It is unfair to order the company to pay them back wages even

during the period of their re-employment, for the result would be that they

will receive double compensation during that period. The order should,

therefore, be modified in the sense of ordering the payment of back

wages only from the date of their separation to the date of their re-

employment. Same; Same; Set-off of whatever wages the employees

may have obtained during their period of separation. The industrial

court did not make any provision relative to the set-off or compensation

of whatever wages or earnings the complaining employees may have

obtained during the period of their separation, which omission should be

rectified, for, as this Cour t has aptly said In estimating the damages in

an action of this character for the period of time already past the


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Cases in Agency 12

employer may show in mitigation of damages that the discharged

employee obtained

712



remunerative employment elsewhere or that in the exercise of due

diligence he might have obtained such employment.

PETITIONS for review of an order of the Court of Industrial Relations.

The facts are stated in the opinion of the Court.

Carlos Dominguez, Jr., Ambrosio Padilla and Ciriaco Lopez, Jr.,

for petitioners.

Victor Clapano for respondents.

BAUTISTA ANGELO, J .:

On May 5, 1955, the Mindanao Federation of Labor, together with some

laid off employees, filed a complaint for unfair labor practice against the

Mindanao Motor Line, Inc., its General Manager Jesus Moraza and

Resident Manager Enrique Ponce, as well as against Aboitiz & Co., Inc.,

charging them with having interfered with the complaining employees in

their exercise of their right to organize as guaranteed by the Magna

Charta of Labor.

Respondents, in their answer, stated that the Mindanao Motor Line,

Inc. is a corporate entity distinct and separate from the Aboitiz & Co.,

Inc., and that if the operation of the Cotabato-Parang-Iligan line was

suspended on February 1, 1955, it was merely to protect the interest of

the Mindanao Motor Line, Inc. which had incurred heavy losses in its

operation, which suspension resulted in the laying off of the employees

working on that line. They further averred that they never interfered with

the union activities of the complaining employees who were laid off only

for the above reason and were given due notice of their separation and

payment of their separation pay equivalent to one month salary.

After due trial, the Court of Industrial Relations, in an order issued on

January 4, 1961, ordered respondent Mindanao Motor Line, Inc. to pay

back wages to the laid-off employees without reinstatement from

February 1, 1955, the date of separation, up to and until June 10, 1958,

the date prior to the cancellation of the certificate of public convenience

covering the line that was suspended. The full tenor of the dispositive

part of the order reads as follows:

713

VOL. 6, NOVEMBER 29, 1962


IN VIEW OF THE FOREGOING, the Court believes that the

respondents are guilty of the unfair labor practice as charged, thus

violating sec. 4(a), subsections 1 and 4 of R.A. No. 875. Due to the fact

that the certificate of public convenience of respondent Mindanao Motor

Line, Inc., which has been issued for the operation of its TPU service has

already been cancelled on June 11, 1958, as per Exh. 17, the

respondent company is hereby ordered to pay complainants to the

exclusion of Antonio Actub, Orlando Siasico, Feliciano Legaspi and

Nieves Mendoza, back wages from February 1, 1955, the day of

dismissal up to and until June 10, 1958, the day before the cancellation

of the certificate of public convenience without the necessity of


13/33

Cases in Agency 13

reinstatement.

Both complainants and respondents filed a motion for reconsideration of

the above order, complainants inviting attention to the fact that, if they

were to be accorded back wages the ones responsible would be not only

the Mindanao Motor Line, Inc., but all the respondents jointly and

severally. Both motions were denied. However, alleging that a clerical

error has been committed in issuing the dispositive part of the order

because not all the respondents were included in the payment of the

pecuniary liability, the industrial court modified said dispositive part so as

to read as follows:

x x x the corrected portion should read in the following manner: the

respondents, Mindanao Motor Line, Inc., and/or Enrique Ponce, Aboitiz

and Co. and/or Jesus Moraza, are hereby ordered to pay complainants

to the exclusion of Antonio Actub, Orlando Siasico, Feliciano Legaspi

and Nieves Mendoza, back wages from February 1, 1955 the day of

dismissal up to and until June 10, 1958, the day before the cancellation

of the certificate of public convenience without the necessity of

reinstatement.

Respondents again filed a motion for reconsideration, and the same

having been denied, they interposed separately a petition for review. The

petition filed by Mindanao Motor Line, Inc., with respondents Enrique

Ponce and Jesus Moraza was docketed as G.R. No. L-18418, whereas

the petition filed by Aboitiz & Co., Inc. was docketed as G.R. No. L-

18419. Because of their close interrelation, these two petitions were

consolidated in one single decision. It is contended that respondents

cannot be ordered to

714



pay back wages to the complaining employees for the reason that the

operation of the transportation line where they were employed has been

suspended and the certificate of public convenience that was issued for

such operation has been cancelled by the Public Service Commission.

As a matter of fact, they contend, the reinstatement of said complaining

employees was not ordered by the court for the same was not possible

because the operation of the line where they were employed was never

resumed. In short, they argue, if no reinstatement can be ordered no

back wages can be granted because from the phraseology of the law,

the payment of back wages presupposes an accompanying order for

reinstatement. And continuing with his argument, counsel says: An

award for the payment of back wages necessarily implies reinstatement,

or, at least, the possibility of reinstatement of the discharged employees.

It is implicit then that when the court does not or can not order the

reinstatement of employees, there is absolutely no factual or legal basis

for the payment of back wages.

We disagree. While as a rule the payment of back wages follows as

a necessary consequence of an order for reinstatement, it does not

follow that if reinstatement cannot be ordered, as when the service is

discontinued, the employees illegally laid off should be deprived of the

wages they are entitled to, as should be the case when the company or

employer is found guilty of unfair labor practice. This is the situation that

obtains herein. The industrial court found respondents guilty of the unfair

labor practice imputed to them and so it is but fair that they be paid their

wages for the period they had been deprived of their employment.


14/33

Cases in Agency 14

We find, however, merit in the contention that respondent Enrique

Ponce and Jesus Moraza who were included as such should not be

made solidarily responsible for the payment of back wages, together with

their employer the Mindanao Motor Line, Inc., for it clearly appears from

the record that they were merely agents who acted within the scope of

their corporate positions as resident manager and general manager,

respectively, of the aforesaid com-

715

VOL. 6, NOVEMBER 29, 1962 715


pany. Since they were impleaded merely as officers of the company and

have acted only as such within the scope of their authority, if any one

should be held responsible for the consequence of their acts as such

officers it is their employer, unless of course it is shown that they have

acted negligently or in bad faith. The evidence discloses nothing in this

respect. It is a well-known principle of law that an agent who acts in

behalf of a disclosed principal within the scope of his authority cannot be

held liable to third persons (Article 1897, new Civil Code; Banque

Generate Belge, et al. vs. Walter Bull & Co., Inc., et al., 47 O.G. 138;

Zialcita-Yuseco v. Simmons, G.R. No. L-7912, August 30, 1955).

We also find that of the 71 employees who were laid off on February

1, 1955, because of the alleged unfair labor practice, 31 were re-

employed on other lines operated by the company. If this is true, which

apparently is, because it is not denied, it is unfair to order the company to

pay them back wages even during the period of their re-employment, for

the result would be that they will receive double compensation during

that period. The order should therefore, be modified in the sense of

ordering the payment of back wages only from the date of their

separation to the date of their re-employment.

We likewise notice that the industrial court did not make any

provision relative to the set-off or compensation of whatever wages or

earnings the complaining employees may have obtained during the

period of their separation, which omission should be rectified, for, as this

Court has aptly said, In estimating the damages in an action of this

character for the period of time already past the employer may show in

mitigation of damages that the discharged employee obtained

remunerative employment elsewhere or that in the exercise of due

diligence he might have obtained such employment. 1

_______________

1 Garcia Palomar v. Hotel de France Co., 42 Phil., 660; See also

MaCleod & Company of the Philippines v. Progressive Federation of

Labor, G.R. No. L-7887, May 31, 1955; Potenciano v. Estefani, L-7690,

July 27, 1955; Western Mindanao Lumber Co. v. Mindanao Federation of

Labor, L-10170, April 25, 1957;

716


Mindanao Motor Line, Inc. vs. Court of Industrial Relations Finally, we find no merit in the contention that respondent Aboitiz & Co.,

Inc. should not have been included as such not being the operator nor

financier of the Mindanao Motor Line, Inc., for there is enough evidence

on record to show the connection between the two companies. In the first

place, having been included as respondent, Aboitiz & Co., Inc. did not file

any answer denying the acts constituting the unfair labor practice


15/33

Cases in Agency 15

charged one of which is the fact that the Land Transportation Division of

Aboitiz & Co., Inc., of which Jesus Moraza is the general manager

controls and supervises the management and operation of the Mindanao

Motor Line, Inc. In the second place, the record of the case discloses that

the central office of the Mindanao Motor Line, Inc. and the office of the

Aboitiz & Co., Inc.. are located in the same place and have the same

postal address, namely, P. O. Box 65. It also appears that the thing that

sparked the separation of the complainants is the letter of one Ramon

Aboitiz, apparently the manager of Aboitiz & Co., Inc., where it is shown

that said company has suffered a heavy loss because of the funds it had

advanced to the Mindanao Motor Line, Inc. for which reason he

recommended that the operation of the line in question be suspended.

Indeed, the following argument advanced by the counsel of respondent

court is very impressive.

The fact that Ramon Aboitiz admits that the Aboitiz & Company had

advanced the funds, x x x for the operation of respondent Mindanao

Motor Line, Inc.; the fact that he had even decided for Aboitiz &

Company to discontinue this financial assistance; and the further fact that

the common principal address of the principal actors responsible in the

dismissal of respondent-workers herein is P.O. Box 65, Cebu City, all

show that Aboitiz & Company as alleged in the complaint a quo, controls

and supervises the management and operation of respondent Mindanao

Motor Line, Inc. These facts were dug out from the records of the case a

quo to show how truly unfounded is petitioner- appellants claim that there

is a x x x total and complete a bsence of any evidence supporting this

charge; x x x.

_______________

Philippine Air Lines, Inc. v. Philippine Air Lines Employees

Association, L-15544, July 26, 1960.

717

VOL. 6, NOVEMBER 29, 1962

Rebodos vs. Workmens Compensation Commission

WHEREFORE, the order of respondent court dated March 8, 1961, is

hereby amended with regard to the following respects: (1) the 31

employees who were re-employed should be given back wages only

from February 1, 1955, the day of dismissal, up to the date they were

reemployed; (2) respondents Enrique Ponce and Jesus Moraza should

not be made responsible for the back wages that were ordered paid to

the complaining employees; (3) respondent companies are hereby

authorized to set off from the back wages they were ordered to pay

whatever earnings the complaining employees may have obtained during

the period of their separation. In all other respects, the said order is

hereby affirmed. No pronouncement as to costs.

Bengzon, C.J., Padilla, Labrador, Concepcion, Reyes, J.B.L.,

Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.

Order affirmed with modifications. N o t e . See annotation on Jurisdiction of the Court of Industrial

Relations in 19 SCRA 136 -146.

______________



16/33

Cases in Agency 16


Kerr & Co vs. Administrador de Rentas Internas

con las costas a la recurrente. As se ordena.

Avancea, Pres., Imperial, Laurel, y Moran, MM. , estn

conformes.

Se confirma la decisin.

__________

[No. 46667. Junio 20, 1940]

KERR & COMPANY, LTD., demandante y apelante, contra El

ADMINISTRADOR DE RENTAS INTERNAS, demandado y

apelado.

1. Impuesto de Comerciante; Distincion entre UN Corredor Y UN

Comerciante. El corredor nunca contrata en nombre propio, sino

en el de su mandante. En el presente caso, Kerr & Compaa al

contratar con Shaw, Wallace & Compaa ofreciendo comprar ciertas

mercancas a un precio que ha ofrecido y quo Shaw, Wallace &

Compaa ha aceptado, o a un precio que Shaw, Wallace &

Compaa ha cotizado y que Kerr & Compaa ha aceptado, ha

celebrado un contrato de compraventa

perfecto. (Art. 1460 del Cdigo Civil.)

2. d. ; Id. El corredor efecta la transaccin con un tercero a nobre de

su mandante, a base de una comisin fija y determinada. En el

presente caso, Kerr & Compaa y Shaw, Wallace & Compaa en

ningn tiempo haban fijado una comisin a base de la cual Kerr &

Compaa efectuara la venta de mercancas a los comerciantes

locales.

3.Id. ; Id. El corredor no garantiza el pago de las mercancas quevende

a un tercero, porque solamente es un mediador que se ocupa en

hacer que las partes interesadas se entiendan en un negocio o

negocios en asuntos mercantiles o de navegacin. (Behn, Meyer &

Co. contra Nolting y Garcia, 35 Jur. Fil., 284; Pacific Commercial

Company contra Yatco, R. G. No. 45976, julio 20, 1939.) En el

presente caso, Kerr & Company garantizo a Shaw, Wallace &

Company el pago de la letra girada por esta compaa contra los

compradores locales.

APELACION contra una sentencia del Juzgado de Primera Instancia de

Manila. De la Costa, J.

Los hechos aparecen relacionados en la decisin del Tri bunal.

Sres. Ross, Lawrence, Delphi y Carrascoso y D. Robert Janda en

representacin de la apelante.

37

VOL. 70, JUNE 20, 1940


El Procurador General Sr. Ozaeta y los Auxiliares del Procurador

General Sres. Concepcin y Amparo en repre-sentacion del apelado.

CONCEPCION, M.:

Esta es una apelacin que tiene por objeto determinar si un

impuesto de comerciante pagado por la apelante, bajo protesta, era o no

legalmente exigible segn los hechos que en la decision apelada se

relacionan como sigue:

"It appears from the stipulation of facts that in effect ing the sales

under consideration the plaintiff sent a cable to Shaw, Wallace & Co. of


17/33

Cases in Agency 17

Calcutta, India, offering a price for certain merchandise or asking for

quotation. The Cal cutta firm either accepted the offer or gave its

quotation of the price. After the price was thus agreed upon, plaintiff

entered into a contract of sale with local buyers quoting a price higher

than that agreed upon or fixed by the Calcutta firm; and the price of the

merchandise for local buyers was fixed by the plaintiff. After the contract

of sale was thus entered into, plaintiff instructed the Calcutta firm to send

the goods to, and draw a draft on, the local buyers. This draft bore the

price agreed upon between the plaintiff and local buyers, and was drawn

against a local bank in ac cordance with the letter of guarantee executed

in the form of the local bank by the buyer and by the plaintiff. After

receiving the draft and shipping documents, the local bank released the

merchandise to the buyer against a trust re ceipt. In due course, the draft

was paid by the buyers to the local bank and after the proceeds of the

draft were re ceived by the Calcutta firm, the latter paid the plaintiff the

difference between the price agreed upon between plaintiff and the

Calcutta firm, and the price for which the mer chandise was actually sold

to the local buyers".

El Juzgado decidi el caso declarando que la apelante en las

transacciones arriba mencionadas debe ser considerada como

comerciante, de acuerdo con las provisiones del artculo 1459 delCdigo Administrativo Revisado que dispone:

"Sec. 1459. Percentage tax on merchants sale's. All

38



merchants not herein specifically exempted shall pay a tax of one per

centum on the gross value in money of the com modities, goods, wares,

and merchandise sold, bartered, exchanged, or consigned abroad by

them, such tax to be based on the actual selling price or value of the

things in question at the time they are disposed of or consigned, whether

consisting of raw material or of manufactured or partially manufactured

products, and whether of domestic or foreign origin. The tax upon things

consigned abroad shall be refunded upon satisfactory proof of the return

thereof to the Philippine Islands unsold.

"The following shall be exempt from this tax:

(a) Persons engaged in public market in the sale of food products at

retail, and other small merchants whose gross quarterly sales do not

exceed two hundred pesos.

(b) Peddlers and sellers at fixed stands of fruit, pro duce, and food,

raw or otherwise, the total selling value whereof does not exceed three

pesos per day and who do not renew their stock oftener than once every

twenty-four hours.

(c) Producers of commodities of all classes working in their own

homes, consisting of parents and children living as one family, when the

value of each day's production by each person capable of working is not

in excess of one peso.

"Merchants, as here used, means a person engaged in the sale,barter, or exchange of personal property of whatever character. Except

as specially provided, the term includes manufacturers who sell articles

of their owh production, and commission merchants having

establishments of their own for the keeping and disposal of goods of

which sales or exchanges are effected, but does not include

merchan dise brokers."


18/33

Cases in Agency 18

La apelante contiende que el Juzgado incurri en error al declarar

que ella haba comprado las mercancas de Shaw, Wallace & Co. de

Calcuta, India, y las haba vendido a los compradores locales por su

propia cuenta, y que actu como comerciante en las transacciones

arriba mencionadas y que,

39

VOL. 70, JUNE 20, 1940 39


como tal deba pagar el impuesto correspondiente. La contencin de la

apelante es que ella actu en dichas transacciones como un corredor de

comercio. La cuestin a determinar en el presente caso es, pues, en que

capacidad la ape lante efectu las ventas de las mercancas en cuestin

a los compradores locales. Para resolver esta cuestin, debemos

considerar no las relaciones jurdicas entre la apelante y los

compradores locales sino las relaciones que mediaron entre la apelante

y Shaw, Wallace & Co.; porque las transacciones empezaron con dicha

firma y terminaron con la misma. Ms claro, hubo dos transacciones:- la,

entre Kerr & Company y Shaw, Wallace & Co.; y la 2.a entre Kerr &

Company y los compradores locales; pero la actuacin de Kerr &

Company no se termin con los compradores locales, sino con Shaw,

Wallace & Co.

En ltimo anlisis, de los hechos, se hallan en la transaccin con la

firma de Calcutta ciertas circunstancias que son pruebas concluyentes

de que la apelante obro en el pre sente caso como un comerciante.

Ante todo conviene tener presente, que "al corredor se le define en

trminos generales como el que negocia para otros en contratos de

comisin relativos a fincas, cuya custodia en nada le atae; el que

negocia como intermediario de otros, sin negociar jams en nombre

propio sino en el de aquellos que le utilizan; estrictamente hablando es

un mediador, y en cierto modo el mandatorio de ambas partes. (19 Cyc.

186; Henderson vs. The State, 50 Ind., 234 Black's Law Dictionary.) El

corredor es el que se ocupa en hacer que los interesados se entiendan

en un negocio o en negocios para ellos en asuntos mercantiles o de

navegacin. (Mechem on Agency, section 13, Wharton on Agency,

sec tion 695.) El Juez Storey en su obra titulada Agency , define al

corredor, diciendo que es un mandatorio que se utiliza para realizar

negocios y contratos con otras personas, en asuntos mercantiles o de

navegacin, mediante una compensacin que generalmente se llama

corretaje. (Storey on Agency, section 28.)" Behn, Meyer & Co., Ltd.,

contra Nolting y Garcia, 35 Jur. Fil., 284.

40



Desprenderse de lo transcrito.

l. Que el corredor nunca contrata en nombre propio, sino en el de

su mandante. En el presente caso, Kerr & Company al contratar con

Shaw, Wallace & Company ofreciendo comprar ciertas mercancas a un

precio que ha ofrecido y que Shaw, W allace & Company ha aceptado, o

a un precio que Shaw, Wallace & Company ha cotizado y que Kerr &

Company ha aceptado, ha celebrado un contrato de compra-venta

perfecto. (Art. 1450 del Cdigo Civil.) No importa que las mercancas no

hayan pasado a la posesin de Kerr & Company porque la tradicin de

la cosa comprada es necesaria para la consumacin del contrato de

compra-venta, pero no para su perfeccin. Despus de efectuado el


19/33

Cases in Agency 19

contrato de compraventa, Kerr & Company, en su propio nombre,

convino en vender a los comerciantes locales las mercancas que haba

comprado. Tan cierto es que Kerr & Company, contrato con los

comerciantes loca les en nombre propio, independientemente y con

posterioridad a la transaccin habida con Shaw, Wallace & Company,

que Kerr & Company fijo el precio de las ventas a los compradores

locales, precio que no era el precio convenido con Shaw, Wallace &

Company sino mayor al que haba ofrecido a Shaw, Wallace &

Company, o que haba sido aceptado por dicha compaa.

2. El corredor efecta la transaccin con un tercero a nombre de su

mandante, a base de una comisin fija y determinada. En el presente

caso, Kerr & Company y Shaw, Wallace & Company en ningn tiempo

haban fijado una comisin a base de la cual Kerr & Company efectuara

la venta de mercancas a los comerciantes locales.

Kerr & Company despus de efectuada la venta de las mercancas

a los compradores locales por un precio mayor del que haba convenido

con Shaw, Wallace & Company, cobro la diferencia en su beneficio,

diferencia que no puede conceptuarse como una comisin, porque, 1.,

las partes no convinieron en ninguna comisin; y 2., porque la cantidad

as cobrada dependa nica y exclusivamente de Kerr & Company,

segn el precio que ella hubiese fijado a las mer- 41

VOL. 70, JUNE 20, 1940 41


cancas por ella vendidas. La comisin es un tanto de dinero que se

estipula entre el corredor y el mandante y se paga por este a aquel, de

su propio peculio, cosa que no ocurre en el presente caso, porque la

diferencia de precio que Kerr & Company cobra, no es dinero de Shaw,

Wallace & Company.

3. El corredor no garantiza el pago de las mercancas que vende a

un tercero, porque solamente es un mediador que se ocupa en hacer

que las partes interesadas se entiendan en un negocio o negocios en

asuntos mercantiles o de navegacin. (Behn, Meyer & Co., Ltd. contra

Nolting y Garca, supra ; Pacific Commercial Company contra Alfredo L.

Yatco, R. G. No. 45976, Julio 20, 1939.) En el presente caso Kerr &

Company garantiz a Shaw, Wallace & Com pany el pago de la letra

girada por esta compaa contra los compradores locales.

Se arguye por la apelante, que ella no era la compradora de las

mercancas, porque, si lo fuese, la letra se habra girado contra ella y no

contra los compradores locales, y ella no garantizara el pago del

importe de la letra. Este argumento, sin embargo, no tiene peso, porque

una vez compradas las mercancas por Kerr & Company, ella podra

ordenar que las mercancas fuesen enviadas a cualquier otra persona,

puesto que lo ms importante para Shaw, Wallace & Company es que

se pague el importe de las mercancas, y esta obligacin la ha asumido

Kerr & Company para el caso de que los compradores locales no

pagasen la letra a su vencimiento.

El hecho de que en el contrato celebrado por Kerr y Com pany conel comprador local Lim Ki Choa & Company,Kerr & Company, segun el

Exhibit D, haya hecho constar que en esta transaccin con Lim Ki Choa

& Company ella actuaba en la capacidad de corredor solamente y que

ella no asume ninguna responsabilidad, no demuestra que realmente

Kerr & Company era un mero corredor cuando con trato con Lim Ki

Choa & Company, porque para determinar la naturaleza de la


20/33

Cases in Agency 20

transaccin que Kerr & Company tuvo con Shaw, Wallace & Company, y

para juzgar si Kerr

42



& Company contrato en nombre propio con la firma de Calcutta, o si

contrato en nombre de Shaw, Wallace & Com pany y con los

compradores locales, no vamos a tener en cuenta lo que Kerr &

Company haya dicho o dejado de decir a Lim Ki Choa & Co., sino los

trminos y condiciones del contrato mismo que realmente se ha

celebrado entre Shaw, Wallace & Company y Kerr & Company.

Adems, en el caso de incumplimiento de Kerr & Com pany del

contrato otorgado con los compradores locales, estos no tendran accin

alguna para dirigirse contra Shaw, Wallace & Company para exigir de

esta compaa el cumplimiento del contrato, puesto que ninguno han

celebrado con Shaw, Wallace & Co., pues los hechos revelan que Kerr &

Company primero contrato en nombre propio con Shaw, Wallace &

Company, y despus contrato tambin en nom bre propio con los

compradores locales.

Todas las anteriores consideraciones demuestran una misma y una

sola proposicin: que Kerr & Company contrato en nombre propio y por

cuenta propia con Shaw, Wallace & Company como comerciante, y

vendi en nombre propio como comerciante; y por tanto est sujeta al

pago del impuesto de comerciante.

Se confirma la decisin apelada, con las costas a la apelante. As

se ordena.

Avancea, Pres., Imperial, Diaz, Laurel y Morn, MM. , estn

conformes.

Se confirma la sentencia.

________



21/33

Cases in Agency 21

[No. 21237. March 22, 1924]

JAMES D. BARTON, plaintiff and appellee, vs. LEYTE ASPHALT &

MINERAL OIL Co., LTD., defendant and appellant.

5. 1. PRINCIPAL AND AGENT; AUTHORITY OF SELLING AGENT;

SALES TO SUBAGENT. An agent who is clothed with authority

to sell a given commodity cannot bind the principal by selling to

himself, either directly or indirectly. It results that the principal is

not obligated to fill orders taken by the agent from his own

subagent, unless the principal ratifies such sale with full

knowledge of the facts.

7. 2. EVIDENCE; PRIVILEGE OF ATTORNEY AND CLIENT; LOSS OF

PRIVILEGE. The privilege which protects communications

between attorney and client does not extend to a copy of a letter

written by the client to his attorney which comes to the hands of

the adverse party. Where the authenticity of such a document is

admitted, the court will take no notice of the manner in which it

was obtained.

APPEAL from a judgment of the Court of First Instance of Manila.

Harvey, J.

The facts are stated in the opinion of the court.

Block, Johnston & Greenbaum and Ross, Lawrence & Selph forappellant.

Frank B. lngersoll for appellee.

STREET, J.:

This action was instituted in the Court of First Instance of the City of

Manila by James D. Barton, to recover of the Leyte Asphalt & Mineral Oil

Co., Ltd., as damages for

939

VOL. 46, MARCH 22, 1924

Barton vs. Leyte Asphalt & Mineral Oil Co.

breach of contract, the sum of $318,563.30, United States currency, and

further to secure a judicial pronouncement to the effect that the plaintiff is

entitled to an extension of the terms of the sales agencies specified in

the contract Exhibit A. The def endant answered with a general denial,

and the cause was heard upon the proof, both documentary and oral,

after which the trial judge entered a judgment absolving the defendant

corporation from four of the six causes of action set forth in the complaint

and giving judgment for the plaintiff to recover of said defendant, upon

the first and fourth causes of action, the sum of $202,500, United States

currency, equivalent to P405,000, Philippine currency, with legal interest

from June 2, 1921, 'and with costs. From this judgment the defendant

company appealed.

The plaintiff is a citizen of the United States, resident in the City of

Manila, while the defendant is a corporation organized under the laws of

the Philippine Islands with its principal office in the City of Cebu, Province

of Cebu, Philippine Islands. Said company appears to be the owner of a

valuable deposit of bituminous limestone and other asphalt products,

located on the Island of Leyte and known as the Lucio mine. On April 21,

1920, one William Anderson, as president and general manager of the

defendant company, addressed a letter Exhibit B, to the plaintiff Barton,

authorizing the latter to sell the products of the Lucio mine in the

Commonwealth of Australia and New Zealand upon a scale of prices

indicated in said letter.


22/33

Cases in Agency 22

In the third cause of action stated in the complaint the plaintiff

alleges that during the life of the agency indicated in Exhibit B, he

rendered services to the defendant company in the way of advertising

and demonstrating the products of the defendant and expended large

sums of money in visiting various parts of the world for the purpose of

carrying on said advertising and demonstrations, in shipping to various

parts of the world samples of the products of the defendant, and in

otherwise carrying on advertising work. For these services and

expenditures

940



the plaintiff sought, in said third cause of action, to recover the sum of

$16,563.80, United States currency. The court, however, absolved the

defendant from all liability on this cause of action and the plaintiff did not

appeal, with the result that we are not now concerned with this phase of

the case. Besides, the authority contained in said Exhibit B was

admittedly superseded by the authority expressed in a later letter, Exhibit

A, dated October 1, 1920. This document bears the approval of the

board of directors of the defendant company and was formally accepted

by the plaintiff. As it supplies the principal basis of the action, it will be

quoted in its entirety.

"(Exhibit A) "CEBU, CEBU,

P. L, "October 1, 1920.

"JAMES D. BARTON, Esq.,

"Cebu Hotel City.

"DEAR SIR: You are hereby given the sole and exclusive sales

agency for our bituminous limestone and other asphalt products of the

Leyte Asphalt and Mineral Oil Company, Ltd., until May f irst, 1922, in the

following territory:

Australia Saigon Java

New Zealand India China

Tasmania Sumatra Hongkong

"Siam and the Straits Settlements, also in the United States of America

until May 1, 1921.

"As regards bituminous limestone mined from the Lucio property. No

orders for less than one thousand (1,000) tons will be accepted except

under special agreement with us. All orders for said products are to be

billed to you as follows:

In 1,000 ton lots .......................................................................

In 2,000 ton lots .......................................................................

In 5,000 ton lots .......................................................................

In 10,000 ton lots .....................................................................

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VOL. 46, MARCH 22, 1924


with the understanding, however, that, should the sales in the above

territory equal or exceed ten thousand (10,000) tons in the year ending

October 1, 1921, then in that event the price of all shipments made

during the above period shall be ten pesos (P10) per ton, and any sum

charged to any of your customers or buyers in the aforesaid territory in

excess of ten pesos (P10) per ton, shall be rebated to you. Said rebate to


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Cases in Agency 23

be due and payable when the gross sales have equalled or exceeded ten

thousand (10,000) tons in the twelve months period as hereinbefore

described. Rebates on lesser sales to apply as per above price list.

"You are to have full authority to sell said product of the Lucio mine f

or any sum you see fit in excess of the prices quoted above and such

excess in price shall be your extra and additional profit and commission.

Should we make any collections in excess of the prices quoted, we agree

to remit same to you within ten (10) days of the date of such collections

or payments.

"All contracts taken with municipal governments will be subject to

inspection before shipping, by any authorized representative of such

governments at whatever price may be contracted f or by you and we

agree to accept such contracts subject to draft attached to bill of lading infull payment of such shipment.

"It is understood that the purchasers of the products of the Lucio

mine are to pay freight from the mine carriers to destination and are to be

responsible for all freight, insurance and other charges, providing said

shipment has been accepted by their inspectors.

"All contracts taken with responsible firms are to be under the same

conditions as with municipal governments.

"All contracts will be subject to delays caused by the acts of God,over which the parties hereto have no control.

"It is understood and agreed that we agree to load all ships,

steamers, boats or other carriers promptly and without delay and load not

less than 1,000 tons each twentyfour hours after March 1, 1921, unless

we so notify you specifically prior to that date that we are prepared to

load

942



at that rate, and it is also stipulated that we shall not be required to ship

orders of 5,000 tons except on 30 days notice and 10,000 tons except on

60 days notice.

"If your sales in the United States reach five thousand tons on or

before May 1, 1921, you are to have sole rights for this territory also for

one year additional and should your sales in the second year reach or

exceed ten thousand tons you are to have the option to renew the

agreement for this territory on the same terms for an additional two

years.

"Should your sales equal or exceed ten thousand (10,000) tons in

the year ending October 1, 1921, or twenty thousand (20,000) tons by

May 1, 1922, then this contract is to be continued automatically for an

additional three years ending April 30, 1925, under the same terms and

conditions as above stipulated.

"The products of the other mines can be sold by you in the aforesaid

territories under the same terms and conditions as the products of the

Lucio mine; scale of prices to be mutually agreed upon between us.

"LEYTE ASPHALT & MINERAL OIL Co., LTD. "By (Sgd.)

WM.

ANDERSON "President

(Sgd.) "W. C. A.

PALMER "Secretary

"Approved by Board of Directors,

"October 1, 1920.


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Cases in Agency 24

(Sgd.) "WM. ANDERSON

"President

"Accepted.

(Sgd.) "JAMES D. BARTON

"Witness D. G. MCVEAN"

Upon careful perusal of the fourth paragraph from the end of this

letter it is apparent that some negative word has been inadvertently

omitted before "prepared," so that the full expression should be "unless

we should notify you

943

VOL. 46, MARCH 22, 1924 943


specifically prior to that date that we are unprepared to load at that rate,"

or "not prepared to load at that rate."

Very soon after the aforesaid contract became effective, the plaintiff

requested the defendant company to give him a similar selling agency for

Japan. To this request the defendant company, through its president,

Wm. Anderson, replied, under date of November 27, 1920, as follows:

"In re your request for Japanese agency, will say, that we are willing

to give you, the same commission on all sales made by you in Japan, on

the same basis as your Australian sales, but we do not feel like giving

you a regular agency for Japan until you can make some large sized

sales there, because some other people have given us assurances that

they can handle our Japanese sales, therefore we have decided to leave

this agency open for a time."

Meanwhile the plaintiff had embarked for San Francisco and upon

arriving at that port he entered into an agreement with Ludvigsen &

McCurdy, of that city, whereby said firm was constituted a subagent and

given the sole selling rights for the bituminous limestone products of the

defendant company for the period of one year from November 11, 1920,

on terms stated in the letter Exhibit K. The territory assigned to

Ludvigsen & McCurdy included San Francisco and all territory in

California north of said city. Upon an earlier voyage during the same year

to Australia, the plaintiff had already made an agreement with Frank B.

Smith, of Sydney, whereby the latter was to act as the plaintiff's sales

agent for bituminous limestone mined at the defendant's quarry in Leyte,

until February 12, 1921. Later the same agreement was extended for the

period of one year from January 1, 1921. (Exhibit Q.)

On February 5, 1921, Ludvigsen & McCurdy, of San Francisco,

addressed a letter to the plaintiff, then in San Francisco, advising himthat he might enter an order for six thousand tons of bituminous

limestone to be loaded at Leyte not later than May 5, 1921, upon terms

stated in the

944



letter Exhibit G. Upon this letter the plaintiff immediately indorsed his

acceptance.

The plaintiff then returned to Manila; and on March 2, 1921,

Anderson wrote to him from Cebu, to the effect that the company was

behind with construction and was not then able to handle big contracts.

(Exhibit FF.) On March 12, Anderson was in Manila and the two had an

interview in the Manila Hotel, in the course of which the plaintiff informed

Anderson of the San Francisco order. Anderson thereupon said that,


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Cases in Agency 25

owing to lack of capital, adequate facilities had not been provided by the

company for filling large orders and suggested that the plaintiff had better

hold up in the matter of taking orders. The plaintiff expressed surprise at

this and told Anderson that he had not only the San Francisco order

(which he says he exhibited to Anderson) but other orders for large

quantities of bituminous limestone to be shipped to Australia and

Shanghai. In another interview on the same day Anderson definitely

informed the plaintiff that the contracts which he claimed to have

procured would not be filled.

Three days later the plaintiff addressed a letter (Exhibit Y) to the

defendant company in Cebu, in which he notified the company to be

prepared to ship five thousand tons of bituminous limestone to John

Chapman Co., San Francisco, loading to commence on May 1, and toproceed at the rate of one thousand tons per day of each twenty-four

hours, weather permitting.

On March 5, 1921, Frank B. Smith, of Sydney, had cabled the

plaintiff an order for five thousand tons of bituminous limestone; and in

his letter of March 15 to the defendant, the plaintiff advised the defendant

company to be prepared to ship another five thousand tons of bituminous

limestone, on or about May 6, 1921, in addition to the intended

consignment for San Francisco. The name Henry E. White was indicatedas the name of the person through whom this contract had been made,

and it was stated that the consignee would be named later, no

destination for the

945

VOL. 46, MARCH 22, 1924 945


shipment being given. The plaintiff explains that the name White, as used

in this letter, was based on an inference which he had erroneously drawn

from the cable sent by Frank B. Smith, and his intention was to have the

second shipment consigned to Australia in response to Smith's order.

It will be noted in connection with this letter of the plaintiff, of March

15, 1921, that no mention was made of the names of the person, or firm,

for whom the shipments were really intended. The obvious explanation

that occurs in connection with this is that the plaintiff did not then care to

reveal the fact that the two orders had originated from his own subagents

in San Francisco and Sydney.

To the plaintiff's letter of March 15, the assistant manager of the

defendant company replied on March 25, 1921, acknowledging the

receipt of an order for five thousand tons of bituminous limestone to beconsigned to John Chapman Co., of San Francisco, and the further

amount of five thousand tons of the same material to be consigned to

Henry E. White; and it was stated that "no orders can be entertained

unless cash has been actually deposited with either the International

Banking Corporation or the Chartered Bank of India, Australia and China,

Cebu." (Exhibit Z.)

To this letter the plaintiff in turn replied from Manila, under date of

March 29, 1921, questioning the right of the defendant to insist upon acash deposit in Cebu prior to the filling of the-orders. In conclusion the

plaintiff gave orders for shipment to Australia of five thousand tons, or

more, about May 22, 1921, and ten thousand tons, or more, about June

1, 1921. In conclusion the plaintiff said "I have arranged for deposits to

be made on these additional shipments if you will signify your ability to

fulfill these orders on the dates mentioned." No name was mentioned as


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Cases in Agency 26

the purchaser, or purchasers, of these intended Australian

consignments.

946



Soon after writing the letter last above-mentioned, the plaintiff embarked

for China and Japan. With his activities in China we are not here

concerned, but we note that in Tokio, Japan, he came in contact with one

H. Hiwatari, who appears to have been a suitable person for handling

bituminous limestone for construction work in Japan. In the letter Exhibit

X, Hiwatari speaks of himself as if he had been appointed exclusive

sales agent for the plaintiff in Japan, but no document expressly

appointing him such is in evidence.

While the plaintiff was in Tokio he procured the letter Exhibit W,

addressed to himself, to be signed by Hiwatari. This letter, endited by the

plaintiff himself, contains an order for one thousand tons of bituminous

limestone from the quarries of the defendant company, to be delivered as

soon after July 1, 1921, as possible. In this letter Hiwatari states, "on

receipt of the cable from you, notifying me of date you will be ready to

ship, and also tonnage rate, I will agree to transfer through. the Bank of

Taiwan, of Tokio, to the Asia Banking Corporation, of Manila, P. I., the

entire payment of $16,000 gold, to be subject to your order on delivery of

documents covering bill of lading of shipment, the customs report of

weight, and prepaid export tax receipt. I will arrange in advance a

confirmed or irrevocable letter of credit for the above amount so that

payment can be ordered by cable, in reply to your cable advising

shipping date."

In a later letter, Exhibit X, of May 16, 1921, Hiwatari informs the

plaintiff that he had shown the contract, signed by himself, to the

submanager of the Taiwan Bank who had given it as his opinion that he

would be able to issue, upon request of Hiwatari, a credit note for the

contracted amount, but he added that the submanager was not

personally able to place his approval on the contract as that was a matter

beyond his authority. Accordingly Hiwatari advised that he was intending

to make f urther arrangements when the manager of the bank should

return from Formosa.

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VOL. 46, MARCH 22, 1924


In the letter of May 5, 1921, containing Hiwatari's order for one thousand

tons of bituminous limestone, it was stated that if the material should

prove satisfactory after being thoroughly tested by the Paving

Department of the City of Tokio, he would contract with the plaintiff for a

minimum quantity of ten thousand additional tons, to be used within a

year from September 1, 1921, and that in this event the contract was to

be automatically extended for an additional four years. The contents of

the letter of May 5 seems to have been conveyed, though imperfectly, by

the plaintiff to his attorney, Mr. Frank B. Ingersoll, of Manila; and on May

17, 1921, Ingersoll addressed a note to the defendant company in Cebu

in which he stated that he had been requested by the plaintiff to notify the

defendant that the plaintiff had accepted an order from Hiwatari, of Tokio,

approved by the Bank of Taiwan, for a minimum order of ten thousand

tons of the stone annually for a period of five years, the first shipment of

one thousand tons to be made as early after July 1 as possible. It will be


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Cases in Agency 27

noted that this communication did not truly reflect the contents of

Hiwatari's letter, which called unconditionally for only one thousand tons,

the taking of the remainder being contingent upon future eventualities.

It will be noted that the only written communications between the

plaintiff and the defendant company in which the former gave notice of

having any orders for the sale of bituminous limestone are the four letters

Exhibits Y, AA, BB, and II. In the first of these letters, dated March 15,

1921, the plaintiff advises the defendant company to be prepared to ship

five thousand tons of bituminous limestone, to be consigned to John

Chapman Co., of San Francisco, to be loaded by May 5, and a further

consignment of five thousand tons, through a contract with Henry E.

White, consignees to be named later. In the letter Exhibit BB dated May

17, 1921, the plaintiff's attorney gives notice of the acceptance by plaintiffof an order from Hiwatari, of Tokio, approved by the Bank of Taiwan, for

a minimum

948



of ten thousand tons annually for a period of five years, first shipment of

a thousand tons to be as early after July 1 as possible. In the letter

Exhibit II the plaintiff gives notice of an "additional" (?) order from H. E.

White, Sydney, for two lots of bituminous limestone of five thousand tons

each, one for shipment not later than June 30, 1921, and the other by

July 20, 1921. In the same letter the plaintiff reports for the first time an

order for five thousand tons from F. B. Smith, to be shipped to Brisbane,

Australia, by June 30, and a similar amount within thirty days later.

After the suit was brought, the plaintiff filed an amendment to his

complaint in which he set out, in tabulated form, the orders which he

claims to have received and upon which his letters of notification to the

defendant company were based. In this amended answer the name of

Ludvigsen & McCurdy appears for the first time; and the name of Frank

B. Smith, of Sydney, is used for the first time as the source of the

intended consignments of May 1, May 22, and June 1. We note,

furthermore, that the letters, Exhibits G, L, M, and W, containing the

orders from Ludvigsen & McCurdy, Frank B. Smith and H. Hiwatari were

at no time submitted for inspection to any officer of the defendant

company, except possibly the Exhibit G, which the plaintiff claims to have

shown to Anderson in Manila on March 12, 1921.

The different items comprising the award which the trial judge gave

in favor of the plaintiff are all based upon the orders given by Ludvigsen& McCurdy (Exhibit G), by Frank B. Smith (Exhibits L and M), and by

Hiwatari in Exhibit W; and the appeal does not involve an order which

came from Shanghai, China. We therefore now address ourselves to the

question whether or not the orders contained in Exhibits G, L, M, and W,

in connection with the subsequent notific

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