Agency Part E: Liabilities (Art. 1889 - 1893) 1 SECOND DIVISION [G.R. No. 21036. April 5, 1924.

.] RAMON ABOITIZ, plaintiff-appellant, vs. ARNALDO F. DE SILVA ET AL., defendants. ARNALDO F. DE SILVA, appellant. Block, Johnston & Greenbaum for plaintiff-appellant. Del Rosario & Del Rosario and Andres Jayme for defendant-appellant. SYLLABUS 1.CONTRACTS; NOVATION. Novation of a contract is never presumed and unless it is clearly shown either by express agreement between the parties or by acts of equal import, this defense will not be allowed. 2.PRINCIPAL AND AGENT; AGENT'S SCOPE OF AUTHORITY. An agent cannot represent both himself and his principal in a transaction involving the shifting to another person of the agent's liability for a debt to the principal. 3.EVIDENCE; MERCHANTS; BOOKS OF ACCOUNT AND MANNER IN WHICH THEY ARE KEPT. A merchant will not be heard to object to the form of his own account books or to the manner in which they are kept. 4.ID.; ID.; ID.; ENTRIES IN BOOKS AS ADMISSIONS AGAINST INTEREST. Entries in books of account do not of themselves create estoppel, but may be regarded as admissions against the interest of the person under whose directions they are made and such admissions may be overcome by the weight of other competent evidence, unless the adverse party has been misled to his prejudice by the entries or admissions. 5.CIVIL PROCEDURE; ATTACHMENT OF SHARES OF STOCK. Under the circumstances of this case a writ of attachment of certain shares of stock owned by one of the defendants was lawfully issued. DECISION OSTRAND, J p: This action is brought to recover the sum of P159,000, the alleged unpaid balance of the purchase price of the plaintiff's shares in the partnerships G. & R. Aboitiz and Viuda e Hijos de P. Aboitiz, sold by him to the defendants. The answer of the defendants Guillermo and Vidal Aboitiz constitutes a confession of judgment for the full amount demanded; the defendant De Silva, in his second amended answer, sets up various special defenses together with a cross-complaint and a counterclaim alleging that the accounts between the parties upon the books of Aboitiz & Co. are inaccurate and that instead of a balance being due the plaintiff there is in reality a balance in favor of the defendants in the sum of P41,186.88. The action is based on a notarial document, Exhibit A, and two statements of account, Exhibits C and D. Exhibit A reads as follows: "Sepan todos por la presente: Que este documento otorgado de una parte por Ramon Aboitiz, casado con Dona Dolores S. de Aboitiz, mayor de edad y vecino del Municipio de Cebu, provincia de Cebu, Islas Filipinas, y de otra parte los Seores Arnaldo F. de Silva, Guillermo Aboitiz, ambos casados y Vidal Aboitiz, soltero, todos mayores de edad, el primero vecino del Municipio de Cebu, Provincia de Cebu, Islas Filipinas y los dos ultimos de Ormoc, Provincia de Leyte, I. F. "MANIFIESTA Y HACE CONSTAR: "Primero. Que Ramon Aboitiz, por y en consideracion a la cantidad de doscientos veinticinco mil pesos, moneda filipina, pagaderos en la forma y plazos que mas abajo se mencionaran, cede, vende, y traspasa de un modo absoluto y a perpetuidad, libre de toda carga y gravamen a favor de los mencionados Arnaldo F. de Silva, Guillermo Aboitiz y Vidal Aboitiz, sus herederos y causahabientes, el negocio y participacion que dicho Ramon Aboitiz tiene en la Sociedad 'Viuda e Hijos de P. Aboitiz' y en la de "G. & R. Aboitiz' en las proporciones siguientes: (a)Una novena parte de la mitad del negocio participacion en la sociedad 'Viuda e Hijos de P. Aboitiz' y la mitad del negocio y participacion en la sociedad 'G. & R. Aboitiz.' "El negocio referido consiste en los objetos, bienes y creditors que se hallan inventariados, cuyos inventarios tanto el de 'Viuda e Hijos de P. Aboitiz' como el de "G. & R. Aboitiz' se hallan unidos a esta escritura formando parte de la misma, y cuyos inventarios se ajustan al balance correspondiente al 31 de diciembre de 1918. "Segundo. Que la citada cantidad de coscientos veinticinco mil pesos (P225,000), precio de esta venta, se pagara por dichos compradores Arnaldo F. de Silva, Guillermo Aboitiz y Vidal Aboitiz en la forma y plazos siguientes a saber: "(a)Diez mil pesos (P10,000) al contado y al firmarse la presente escritura, y los doscientos quince mil pesos (P215,000) restantes a razon de cuatro mil pesos (P4,000)mensuales y al interest del siete por ciento (7%) anual a contar des de el primero de mayo de 1919, pagaderos mensualmente. "Tercero. Las utilidades que pueda recibir el vendedor Ramon Aboitiz en los negocios, en ambas sociedades, asi como la compensacion que dicho Ramon Aboitiz tenga y pueda tener como Gerente y como sofico de las mencionadas sociedades, desde el primero de enero hasta la fecha en que se ha enajenado este negocio, quedaran por cuenta de los compradores, renunciando por consiguiente a ellos el vendedor Ramon Aboitiz. "Cuarto. Se hace constar tambien que el motor Lolita se alla avaluado en cincuenta mil pesos (P50,000) de cuya cantidad solamente se ha pagado al vendedor la mitad, a sean veinticinco mil pesos (P25,000), teniendo por consiguiente el vendedor una praticipacion de dicho motor en la proporcion de una mitad; Entendiendose, sin embargo, Que si despues que dicho motor hayan terminado las obras que actualmente se estan realizando en el mismo, ascendiera su costo en una cantidad mayor o menor que la avaluacion actual; si el costo es mas, el vendedor Ramon Aboitiz pagara la differencia a los compradores; pero si el costo es menos los compradores pagaran la diferencia al vendedor Ramon Aboitiz. "Quinton. Que para garantizar el pago de la mencionada cantidad de doscientos quince mil pesos (P215,000) en los plazos arrib mencionados y sus intereses convenidos a razon del siete por ciento (7%) anual, los compradores Arnaldo F. de Silva, Guillermo y Vidal Aboitiz, constituyen primera hipoteca especial y voluntaria sobre los bienes muebles inventariados y descritos en los dos inventarios que van unidos a esta escritura formando parte de la misma a favor del vendedor Sr. Ramon Aboitiz. "Sexto. Que en caso de venta de caulesquiera propiedades inventariadas o cualquiera parte de las mismas por los compradores Arnaldo F. de Silva, Guillermo Aboitiz y Vidal Aboitiz, estos quedan obligados a entregar el producto de dicha venta al Sr. Ramon Aboitiz hasta la cantidad de ciento vienticinco mil pesos (P125,000) y pasando de esta suma la mitad del producto de dichas ventas, cuyas cantidades se destinan o se aplican a la amortizacion de los plazos arrib mencionados. "Septimo. Que la falta de pago de cualquiera de los plazos arriba mencionados y de toda y de cada unda de las demans condiciones de este contrato dara lugar al vencimiento total de la hipoteca como si naturalmente hubiera expirado el termino de la misma, pudiendo en tal caso exigir el pago de todas las cantidades que aun adeudaren los citados compradores Arnaldo F. de Silva, Guillermo Aboitiz y Vidal Aboitiz. "Octavo. se hace constar que el vendedor Ramon Aboitiz, durante la vigenicia de esta escritura y cinco anos despues del completo pago de las obligaciones contraidas en virtud de la presente escritura por los compradores, se abstendra de emprender o realizer cualesquiera negocios similares a los que actualmente tienen establecidos los Sres. 'Viuda e Hijos de P. Aboitiz' y 'G. & R. Aboitiz' en las provincias de Leyte, Samar, Cebu y la Islad Filipinas y en otro donde actualmente tengan dichas sociedades negocios. "En testimonio de todo cual firman las partes en Cebu, Cebu, I. F., hoy dia 28 de abril de 1919." (Signatures and acknowledgment) This document is referred to in the briefs as the "Hipoteca-Venta" and the account relating to the transaction therein set forth is designated as the "Hipoteca-Venta Account." Of the purchase

Agency Part E: Liabilities (Art. 1889 - 1893) 2 price other sum of P10,000 was, as provided in the document, paid in cash and for the subsequent installments fifty-three promissory notes of P4,000 each were given, the first note to be paid on June 1, 1919, and the rest of them falling due successively on the 1st day of each f the following months. The last installment of P3,000 was not covered by any note. Subsequently to the purchase of the interests of plaintiff in the two partnerships, the defendants also acquired the interests of the plaintiff's partners, and on March 26, 1920, the three defendants, together with Manuel Moraza and Joaquin Irastorza, formed a corporation under the name of Aboitiz & Co., Inc. the defendants transferring to the corporation the property and good will of Viuda e Hijos de P. Aboitiz, and G. & R. Aboitiz. The defendant De Silva was the general manager of the business of the two partnerships from the time of the purchase from Ramon Aboitiz an continued as general manager after the incorporation. Shortly after the sale of his business to the defendants, the plaintiff left the Philippine Islands for Spain, his brother, the defendant Guillermo Aboitiz, looking after his remaining interests here under a power of attorney and making the necessary collections and disbursements in connection with these interests, for which a separate personal account was kept on the books of G. & R. Aboitiz in addition to the "Hipoteca-Venta Account." On November 30, 1919, the two accounts were consolidated by the personal direction of De Silva, the balance of P803.53 being transferred to the "Hipoteca-Venta Account," and thereafter all entries of Ramon Aboitiz' credits and debits were made under the head of "Hipoteca-Venta" on the books of G. & R. Aboitiz and subsequently on the books of the corporation. De Silva denies that this was done in pursuance of his instructions, but the weight of the evidence is decidedly against his contention. The business of Aboitiz & Co. did not prosper under De Silva's management and in October, 1920, Ramon Aboitiz, at the urgent request of Guillermo Aboitiz, returned to the Philippines Islands and de Silva was promptly ousted from the management of the business of the corporation. In the meantime, the defendants and, according to the books of account of Aboitiz & Co., defaulted in the payment of the installments due on the purchase price under Exhibit A, and after fruitless negotiations for a settlement between the parties, this action was finally brought. Upon the filing of the complaint and at the instance of the plaintiff, a preliminary attachment was levied n the defendant De Silva's stock in Aboitiz & Co., and the latter's cross-complaint relates to the damages alleged to have been suffered by him in consequence of this attachment. The trial court held that as the books of account of Aboitiz & Co. were under the control of De Silva and as the entries in them made under his direction, he was estopped from questioning the correctness of the entries there found, and judgment was rendered against the defendants for the sum of P154,298..88, the balance in favor of the plaintiff appearing upon said books, together with interest at the rate of 7 per cent per annum from December 31, 1920, with the costs. The court further found that the attachment above-mentioned was wrongful and rendered judgment against the plaintiff on the defendant De Silva's cross-complaint in the sum of P6,000. Both the plaintiff and the defendant De Silva appeal. The defendant-appellant makes six assignments of error. The fifth assignment intimates that the primary purpose of this action is to ruin the defendant De Silva. The assignment, in common with the insinuations against the trial judge found elsewhere in the defendant-appellant's brief, finds no support in the record and is, under the circumstances, highly improper. The plaintiff does not appear to have dealt ungenerously with the defendant; indeed, as far as the record shows, he might possibly be criticised for having placed too much confidence in the latter. Under the fourth assignment of error the defendant-appellant maintains that th liability of the defendants under the "Hipoteca-Venta" had, with the plaintiff implied consent, been transferred to Aboitiz & Co.; that there consequently had been a novation of the original agreement; and that the action, therefore, should have been directed against Aboitiz & Co. and not against the defendants individually. There is nothing in this contention. It is true that the three defendants transferred all the assets and liabilities of G. & R. Aboitiz to the corporation Aboitiz & Co. (Exhibit 9), and that at the time at least two of the defendants, Guillermo and Vidal Aboitiz, held a general power of attorney from the plaintiff. But, in the first place, the defendants appear to have acted for themselves only and none of them pretended to act on behalf of Ramon Aboitiz; in the second place, the defendant's liability under the "Hipoteca-Venta" was a personal and individual liability, while the transfer in question related to the business of the partnership of G. & R. Aboitiz, and, in the third place, the defendants who held powers of attorney could not represent both themselves and their principal in a transaction involving th shifting of the liability from themselves to another party. Neither does the fact that the plaintiff subsequently accepted payments on the "Hipoteca-Venta Account" from Aboitiz & Co. work of novation. (See Pacific Commercial Co. vs. Sott. 34 Phil. 237.) Novation is never presumed. Unless it is clearly shown either by express agreement of the parties or by acts of equivalent import, this defense will never be allowed. (Civil Code, art. 1205; Zapanta vs. De Rotaeche, 21 Phil., 154; Martinez vs. Cavives, 25 Phil., 581; Vaca vs. Kosca, 26 Phil., 388.) The first assignment of error relates to the conclusion of the trial court that in view of the fact that the account books of G. & R. Aboitiz and Aboitiz & Co. have been kept under the defendant De Silva's direction and control, he is now estopped from questioning the correctness of the entries therein. In so holding, the court was clearly in error. It is true that a party will not be heard to object to the form of his own account books or the manner in which they are kept, but the entries therein can only be regarded as admissions against interest which may be overcome by other competent evidence, unless the adverse party has been misled to his prejudice by such entries or admissions. (See 22 C. J., 889-892) It does not appear that the plaintiff has been so misled in the present case. Under the remaining assignments of error, the defendant-appellant impugns the correctness of the balance in favor of the plaintiff as shown by Exhibits C and D, which are copies of the "Hipoteca-Venta Account" in the books of G. & R. Aboitiz and Aboitiz & Co., and in connection therewith he strenuously objects to the mingling of the plaintiff's personal current account with the "Hipoteca-Venta Account," but as that was done not only with the full knowledge of the defendantappellant, but also, according to the weight of the evidence, by his express instructions, he cannot now be heard to complain. As we have already stated, the entries appearing in Exhibits C and D having been copied from books kept under the defendant-appellant's direction, must be regarded as admissions against

Agency Part E: Liabilities (Art. 1889 - 1893) 3 interest which, unless overcome by the weight of other evidence, are conclusive. To rebut these admissions we have only the defendant-appellant's testimony and that of the witness Cabellon. Cabello testified as an expert accountant who "audited": the portions of the books in question relating to the account of the plaintiff. His figures seem to be correct as far as the mathematical operations are concerned, and, in fact, in that respect, do not necessarily conflict with the plaintiff's figures, but it appears that he has obtained his data as to the origin of the entries from the defendant-appellant himself, so that in the last analysis his testimony is that of the defendantappellant and stands and falls with that of the latter. The testimony of the defendant De Silva covers one hundred seventy pages of the transcript and a careful reading thereof does not inspire us with confidence in his good faith. Even if it were contradicted by other testimony, we should hardly regard it as sufficient to overcome the implied admissions contained in the accounts in question. To indicate the general character of his attacks upon the accounts in question, we shall briefly discuss the most plausible of his contentions, namely, that relating to the motor boat Lolita. Exhibit A, the "Hipoteca-Venta," was drafted by Mr. De Silva. Reading the document, it will be observed that its paragraph 4 is somewhat ambiguous and in apparent conflict with paragraphs 1 and 2 of the same document. According to paragraphs 1 and 2, all of the plaintiff's participation in Viuda e Hijos de P. Aboitiz and G. & R. Aboitiz is sold to the defendants for the sum of P225,000; in paragraph 4 the Lolita is valued at P50,000, of which the vendor (the plaintiff) has received only one-half and therefore remains the owner of a one-half interest in the boat, with the understanding that if certain work which is being done on the boat brings its cost above the sum of P50,000, the vendor will pay the difference to the vendees (the defendants), but that if the cost of the boat proves to be less than P50,000, the vendees will pay the difference to the vendor. In view of the ambiguity of the language of paragraph 4, in connection with paragraph 1 and 2, parol evidence was properly admitted by the trial court to explain the circumstances of the transactions there referred to. (Sec. 289, Code of Civil Procedure.) It appears from the oral evidence that at the time the transaction took place the Lolita was under construction and that when her construction and equipment was completed the total cost was found to be P95,378.23 instead of P50,000. A fair construction of paragraph 4 would be to charge the plaintiff with one-half of the cost and the defendants with the other half, but De Silva, in the so-called "Corrected Account" (defendant's Exhibit 13) which has been prepared by himself and Cabellon and upon which his counterclaim for a balance of P43,097.56 in his favor is based, debits the plaintiff and credits the defendant with P25,000 for the plaintiff's half interest in the Lolita plus P45,578.24, the entire difference between P50,000 and the actual cost of the construction, plus the sum of P19,029.92 charged to the plaintiff. in other words, the plaintiff's half of the Lolita cost him P90,029.92, while the defendants obtained their half for only P5,348.31. This is, of course, absurd on its face. But assuming, for the sake of argument, that it is true that the intention of the parties was that the estimated cost of the plaintiff's one-half interest in the Lolita, P25,000, was to be deducted from the P225,000, the purchase price stated in Exhibit A, why then were fifty-three notes for P4,000 each issued instead of only forty-seven? The defendant is apparently a very intelligent man, the transaction was of great importance to him and had been discussed for some Considerable space and energy have been devoted by counsel to pointing out that in the document Exhibit C the plaintiff is credited with the sum of P250,000 instead of P225,000 as the purchase price of the business sold by him to the defendants. But in the same account the plaintiff is debited with P25,000 for his retained one-half of the Lolita which bears out plaintiff's statement that the purchase price was reduced from P250,000 to P225,000 in consideration of his retaining a one-half interest in the boat. The result is, of course, the same whether the account states a purchase price of P225,000 without a debit, or whether it states a purchase price of P250,000 with a debit of P25,000. We have not lost sight of the fact that one may infer from Exhibit C that the P25,000 in excess of the P225,000 was paid by the defendants for the plaintiff's share of the business of Viuda e Hijos de P. Aboitiz; but that may be due to a misunderstanding by the person making the entry in question and is not binding upon the plaintiff. The defendant-appellant has been no more successful in his attacks upon the other items of the accounts in question. The additional alleged debits with which he seeks to charge the plaintiff have been fully explained by the latter and are, in our opinion, unfounded. it can serve no useful purpose to devote time and space to their discussion in detail. The plaintiff, as appellant, makes only one assignment of error, namely, that "The court erred in awarding damages to the defendant Arnaldo F. de Silva upon his counterclaim for illegal attachment." The assignment is well taken. The defendant De Silva has proved no specific damages. His testimony that the levy of the attachment and his consequent loss of reputation prevented the consummation of a, to him, very advantageous business arrangement with Gabino Veloso, is contradicted by Veloso himself. Neither is there any evidence before us from which malice on the part of the plaintiff or loss of credit of the defendant may be inferred or presumed. It is admitted time. In these circumstances it is inconceivable that he would have signed notes for a total amount of P24,000 for a debt he and the other two defendants did not owe. The conclusion is irresistible that his explanation is not given in good faith, that he did not tell the truth upon the witness stand, and what is still worse, that he knew he did not tell the truth. The plaintiff explains that at the beginning of the negotiations for the sale of the business to the defendants, he demanded a minimum price of P250,000. Later on he decided to retain a onehalf interest in the Lolita and made the corresponding reduction of P25,000 in the purchase price; that the provisions in paragraph 4 that in the event the cost of the boat proved more than the estimated cost of P50,000 he would pay the difference was, at the time of the execution of the document, understood by all parties to mean that he would reimburse the defendants for the extra cost of his half of the boat, and that he therefore owed them only one-half of P45,578.24, i. e., the su of P22,789.12. The boat being treated as an asset to the extent of P50,000 at the time of the sale and therefore assuming, as we must, in the absence of evidence to the contrary, that at that time he had already paid P50,000, on account of its construction, and the extra cost was subsequently paid to the builders and outfitters by the defendant, the plaintiff's explanation seems reasonable and is in reality not in conflict with Exhibit A.

Agency Part E: Liabilities (Art. 1889 - 1893) 4 by Mr. De Silva that he contemplated going abroad at the time the action was brought and the order of attachment levied. As far as the record shows, his only assets consisted in his interest in Aboitiz & Co., but this interest might have been disposed of through the sale of the shares. The attachment was unobtrusively levied and was accomplished by simply giving a written notice to the bank in which the defendant had mortgaged his shares for P25,000. In these circumstances, the defendant-appellant is clearly not entitled to damages. The judgment against the defendants for the sum of P154,298.05 is therefore affirmed and that against the plaintiff for P6,000 is reversed. The appellant De Silva will pay the costs. So ordered. Johnson, Street, Avancea, Johns, and Romualdez, JJ., concur. ---------------------------------------------------------------------------------------------------------------------------------------EN BANC [G.R. No. L-17131. June 30, 1922.] SING JUCO and SING BENGCO, plaintiffs-appellees, vs. ANTONIO SUYANTONG and his wife VICENTA LLORENTE DE SUYANTONG, defendants-appellants. Montinola, Montinola & Hontiveros for appellants. Fisher & DeWitt for appellees. SYLLABUS 1.MASTER AND SERVANT; DISLOYALTY AND INFIDELITY. A confidential employee who, knowing that his principal was negotiating with the owner of some land for the purchase thereof, surreptitiously succeeds in buying it in the name of his wife, commits an act of disloyalty and infidelity to his principal, whereby he becomes liable, among other things, for the damages caused. (Article 1902, Civil Code, and article 288, Code of Commerce.) 2.ID.; ID.; REPARATION OF DAMAGES. In such cases the reparation of the damages must consist in respecting the contract which was about to be concluded, and which was frustrated by such an act of disloyalty and infidelity, and transferring the said land for the same price and upon the same terms as those on which the purchase was made for the land sold to the wife of said employee passed to them as what might be regarded an equitable trust, by virtue of which the thing thus acquired by an employee is deemed to have been acquired not for his own benefit or that of any other person but for his principal and held in trust for the latter. (21 R. C. L., 2 Corpus Juris, 353.) DECISION ROMUALDEZ, J p: On May 20, 1919, the plaintiffs obtained from Maria Gay a written option to purchase an estate known as "San Antonio Estate," containing more than 2,000 hectares situated in the municipality of Passi, Province of Iloilo, together with the large cattle existing on said estate. The term of the option expired, but the plaintiffs had it extended verbally until 12 o'clock noon of June 17, 1919. The defendant Antonio Suyantong was at the time an employee of the plaintiffs, and the preponderance of evidence shows that they reposed confidence in him and did not mind disclosing their plans to him, concerning the purchase of the aforesaid estate and the progress of their negotiations with Maria Gay. It is also sufficiently established in the record that in one of the conferences held by the plaintiffs among themselves, relative to the purchase of the aforesaid estate, at which the defendant was present, the latter remarked that it would be advisable to let some days elapse before accepting the terms of the transfer as proposed by Maria Gay, in order that the latter might not think that they were coveting said property. This mere remark alone in itself cannot be taken to mean any wrongful intent on the part of said defendant, but it cases to be innocent when taken in connection with the fact, also proven, that when the defendant met Alipio de los Santos after the latter's return to Iloilo, sent by the plaintiffs to examine the estate and satisfy himself of its condition, and Alipio de los Santos told him of his favorable impression of the estate, he advised De los Santos not to report the estate to the plaintiffs as being so highly valuable, for if it proved a failure they might blame him, De los Santos. One becomes more strongly convinced that this defendant has been unfaithful to his principals, the plaintiffs, when these circumstances are considered in connection with the fact that at an early hour in the morning of June 17, 1919, on the midday of which the term of plaintiff's option to purchase was to expire, said defendant Antonio Suyantong called at the house of Maria Gay when she was having breakfast, and offered to buy the estate on the same terms proposed by her and not yet accepted by the plaintiffs, making the offer to buy not for the benefit of the plaintiffs, but for his own wife, his codefendant Vicenta Llorente de Suyantong. In view of the opportunity that offered itself, but respecting the option granted the plaintiffs, Maria Gay communicated by telephone with Manuel Sotelo, who was acting as broker for the plaintiffs in these transactions, and told him that another buyer of the estate had presented himself who would accept the terms proposed by her and that she would like to know immediately what decision had been reached by the plaintiffs on the matter. In view of Maria Gay's insistence that the plaintiffs give a categorical answer, Sing Bengco, one of the plaintiffs who happened to be present at the time the telephone conversation between Maria Gay and Manuel Sotelo took place, instructed Sotelo to inform her at the time that if she did not care to wait until 12 o'clock, "ella cuidado" (she could do as she pleased). This is a purely Philippines phrase, an exact translation of the Tagalog "siya ang bahala" and approximately of the Visayan "ambut sa iya," which has very different, and even contradictory, meanings. It might be interpreted in several different ways, such as a threat on the part of Sing Bengo to take legal action against Maria Gay in case she did not wait until the expiration of the option, or that they would waive all claims to the option and be agreeable to whatever action she might take. Interpreting the phrase to mean that the plaintiffs waived their option to buy, Maria Gay closed the sale of the estate in favor of the defendant Antonio Suyantong. Even supposing that this latter interpretation of the phrase in question was the actual intention of Sing Bengco, the action of the defendant Suyantong in intervening in the negotiations in the manner in which he did does not make him innocent of infidelity in view of the fact that he was an employee of the plaintiffs to whom he owned loyalty and faithfulness. Even though it be conceded that when he closed the contract of sale with Maria Gay the plaintiff's option had expired, but the fact cannot or denied that he was the cause of the option having precipitously come to such an end. his disloyalty to his employers was responsible for Maria Gay not accepting the terms proposed by the plaintiffs because of being certain of another less

Agency Part E: Liabilities (Art. 1889 - 1893) 5 exigent buyer. Without such intervention on the part of the defendant it is presumed, taking into account all the circumstances of the case, that the sale of the estate in question would have been consummated between Maria Gay and the plaintiffs, perhaps with such advantages to the plaintiffs, as they expected to obtain by prolonging the negotiations. Such an act of infidelity committed by a trusted employee calculated to redound to his own benefit and to the detriment of his employers cannot pass without legal sanction. Nemo debet aliena jactura locupletari; nemo ex suo delicto meliorem suam conditionem facera potest. It is an illicit act committed with culpa and therefore, its agent is liable (art. 1089, Civil Code), for the damage caused (art. 1902, ibidem). Not identical, but similar, to this infidelity is the abuse of confidence sanctioned in our Penal Code as a generic circumstance, nay as specific aggravating one, and even as an essential element of certain crimes. This reparation provided for in the Civil Code and applied to the case of bar seems to be limited to the indemnification of damages, as we are not aware of any express provision in said Code which imposes upon the person thus held liable, any obligation, such as that of transferring to plaintiffs the estate in question. Such principle, however, in case of this nature is generally recognized in our laws, since in the case of commercial agents (factores) it is expressly established. Undoubtedly, formerly under the circumstances then prevailing such sanction was not necessary in the in the field of civil law, because its sphere of action is the general relations of society; but even then it was deemed necessary expressly to protect with such sanction the commercial relations wherein the question of gain was involved, which is sometimes so imperative as to ignore everything, even the very principles of loyalty, honesty, and fidelity. This specific relief, however, has already come to be applied in this jurisdiction in similar cases, among which can be cited that of Camacho vs. Municipality of Baliug (28 Phil., 466.) And in the North American law such sanction is expressly recognized, and a transaction of this nature might be regarded as an employee is deemed not to have been acquired for his own benefit or that of any other person but for his principal, and held in trust for the latter (21 R. C. L., 825; 2 Corpus Juris, 353). After examination and consideration of the case we do not find in the appealed judgment any of the errors assigned to it; wherefore the same is affirmed with costs against the appellants. So ordered. Araullo, C.J., Malcolm, Avancea, and Ostrand, JJ., concur. Separate Opinions VILLAMOR, J., dissenting: In my opinion, the judgment of the lower court ordering the defendants to execute a deed of conveyance to the plaintiffs of the San Antonio Estate for the same price and with the same conditions as those of the purchase thereof from Maria Gay, which is now in question, should be reversed, for I think that the case has been decided from a point of view which, it may be stated, is strictly moral, but not juridical, as is required in judicial cases. The defendant Suyantong is held civilly liable for having purchased the land in question in behalf of his wife, Vicenta Llorente, with knowledge of the fact that the plaintiffs, by whom he was The court itself says in its decision: "This reparation provided for in the Civil Code (art. 1902) and applied to the case at bar seems to be limited to the indemnification of damages, as we are not aware of any express provision in said Code, which impose upon the person thus held liable, any obligation, such as that of transferring to plaintiffs the estate in question." But, in an attempt to solve the difficulty, the case of commercial agents and the doctrine laid down in the case of Camacho vs. Municipality of Baliuag (28 Phil., 466) are invoked. With all due respect to the opinion of my worthy colleagues, permit me to say that, in my humble opinion, no application can be made to the case at bar of article 288 of the Code of Commerce which says: "Factors can not transact business for their own account, nor interest themselves in their own name or in that of another person, in negotiations of the same character as those they are engaged in for their principals, unless the latter expressly authorize them thereto. "Should they negotiate without this authorization, the profits of the negotiation shall be for the principal and the losses for the account of the factor. "If the principal has granted the factor authorization to make transactions for his own account or in union with other persons, the former shall not be entitled to the profits, nor shall he participate in the losses which may be suffered. "If the principal has permitted the factor to have an interest in some transaction, the participation of the latter in the profits shall be, unless there is an agreement to the contrary, in proportion to the capital he may have contributed; and should he not have contributed any capital, he shall be considered a working partner." employed, were negotiating with the owner of the land for the purchase of the same. And he is held guilty of infidelity and even of abuse of confidence, under the provisions of article 1902 of the Civil Code. Accepting the statement of facts which appears in the majority opinion the liability of the defendant Suyantong should consist in the reparation of the damage caused to the plaintiffs. Has any damage been proven to have arisen from the culpable act of the defendant Suyantong? I do not think that it has, and indeed no damage could have been caused to the plaintiff Sing Bengco, for the record shows that he had every opportunity to take advantage of the option that was granted him to buy the land, and until the last moment the owner, in view of the fact that another offer to purchase, which was that of the defendant Sunyantong, was being made to her, requested said Sing Bengco to give her a definite answer and the latter simply answered through Manuel Sotelo that "if she (the owner) could not wait until 12 o'clock ella cuidado (she could do as she pleased)." By this plaintiff Sing Bengco gave it to understand that he waived his right to the option and the owner was free to dispose of the estate. Application is to be made here of the juridical principle scienti et volenti nihil fit injuria.

Agency Part E: Liabilities (Art. 1889 - 1893) 6 It is not necessary to enter into a lengthy discussion in order to demonstrate the inapplicability of the article cited to the case under consideration; it is sufficient to say that, as shown in the record, the plaintiffs, as merchants were dealing in dry goods and sugar and other articles connected with the sugar business. It does not appear that the firm was also engaged in the purchase of real properties. There is no proof that the defendants Suyantong was in charge of a commercial establishment, managing it in the name of the plaintiffs. Also, I do not think that the decision of this court in the case of Camacho vs. Municipality of Baliug, supra, can be invoked in support of the appealed judgment. In the syllabus of that decision it is said: "The settled doctrine in this jurisdiction is that realty acquired with funds and at the instance of another in the discharge of an undisclosed agency, express or implied, belongs to the principal, and an action lies in favor of such undisclosed principal to compel a conveyance to himself so long as the rights of innocent third parties have not intervened." This is the doctrine maintained in the case of Camacho vs. Municipality of Baliuag, above cited, and in that of Uy Aloc vs. Cho Jan Ling (19 Phil., 202). In the first case, Camacho succeeded in registering in his name two parcels of land occupied by the municipality of Baliuag as school and municipality building site. It was proven that the plaintiff Camacho bought said parcels of land at a public auction, having paid the price with money furnished by the then parish priest of the town, Father Prada, who had been requested by influential persons in the locality to furnish the money for the purchase of said lands in order that the same might remain in the hands of the municipality, with the understanding that the latter would repay it to him at a future date. The court held that the plaintiff should execute a conveyance of the lands in dispute to the municipality. In Uy Aloc vs. Cho Jan Ling, the members of a Chinese club agreed to acquire certain real property and for that purpose subscribed a fund and placed it in the hands of the defendant, who made the purchase in his own name. Subsequently he refused to account for the rents of the estate and claimed it as his own. This court held that the parole proof of the trust was sufficient to throw down the rights which the plaintiff had by reason of the duly registered title deeds, and decreed that a conveyance be made by the defendant to the members of the association. In the cited case of Camacho vs. Municipality of Baliuag the court said: "There have been a number of cases before this court in which a title to real property was acquired by a person in his own name while acting in a fiduciary capacity, and who afterwards sought to take advantage of the confidence reposed in him by claiming the ownership of the property for himself. This court has invariably held such evidence competent as between the fiduciary and the cestui que trust." But in the case under consideration there is no proof of the defendants having acquired the land in question in the name or in behalf of the plaintiffs, or at the request of the latter, or with funds furnished by them. Said defendants had legal capacity to buy (art. 1457, Civil Code) and are not within any of the cases prohibited by article 1459 of the same Code. To my mind, there is in the cause no sufficient ground for compelling the defendants to transfer the land in question to plaintiffs, and so I am constrained to dissent from the opinion of the majority. 2. ID.; REAL PROPERTY; CONVEYANCE BY AGENT TO PRINCIPAL. An action in personam will lie against an agent to compel him to return or transfer to his principal, or the latter's estate, the real properly committed to his custody as such agent and also it execute the necessary documents of conveyance to effect such retransfer. 3. ID.; ID.; REGISTRATION OF LAND. The principal's right of action to compel a reconveyance is not extinguished through the registration of the land in favor of the agent; though the final decree of registration may not be reopened after the expiration of one year from the date of its entry, there appears to be no reason why the agent should not be compelled, through a suit in equity, to make such reparation as may lie within his power for the breach of trust committed by him, and as long as the land stands registered in his name such reparation may take the form of a conveyance or transfer of the title to the cestui que trust, i.e., the principal. 4. LAND REGISTRATION ; ACTION TO COMPEL CONVEYANCE; EVIDENCE. There is a strong presumption in favor of the regularity and validity of a registered title, and in order to maintain an action to compel the transfer of the title to a cestui que trust, proof of the fiduciary relations and of the breach of trust must be clear and convincing. 5. CIVIL PROCEDURE; RECOGNITION OF NATURAL CHILD; PARTIES. In an action for a judicial declaration of the right person, the potential heirs of the deceased are necessary parties. DECISION OSTRAND, J p: This is an action brought by the plaintiff as the alleged natural daughter and sole heir of one Melecio Severino, deceased, to compel the defendant Guillermo Severino to convey to her four parcels of land described in the complaint, or in default there of to pay her the sum of P800,000 in damages for wrongfully causing said land to be registered in his own name. Felicitas Villanueva, in her capacity as administratrix of the estate of Melecio Severino, has filed a complaint in intervention claiming the same relief as the original plaintiff, except in so far as she prays that the conveyance be made, or damages paid, to the estate instead of to the plaintiff Fabiola Severino. The defendant answered both complaints with a general denial. The lower court rendered a judgment recognizing the plaintiff Fabiola Severino as the acknowledged natural child of the said Melecio Severino and ordering the defendant to convey 428 hectares of the land in question to the intervenor as administratrix of the estate of the said Melecio ---------------------------------------------------------------------------------------------------------------------------------------EN BANC [G.R. No. 18058. January 16, 1923.] FABIOLA SEVERINO, plaintiff-appellee, vs. GUILLERMO SEVERINO, defendant-appellant. FELICITAS VILLANUEVA, intervenor-appellee. Serafin P Hilado and A. P. Seva for appellant. Jose Ma. Arroyo, Jose Lopez Vito, and Fisher & De Witt for appellees. SYLLABUS 1. PRINCIPAL AND AGENT; ADVERSE TITLE; ESTOPPEL. The relations of an agent to his principal are fiduciary and in regard to the property forming the subject-matter of the agency, he is stopped from acquiring or asserting a title adverse to that of the principal.

Agency Part E: Liabilities (Art. 1889 - 1893) 7 Severino, to deliver to her the proceeds in his possession of a certain mortgage placed thereon by him and to pay the costs. From this judgment only the defendant appeals. The land described in the complaint forms one continuous tract and consists of lots Nos. 827, 828, and 874 of the cadaster of Silay, Province of Occidental Negros, which measure, respectively, 61 hectares, 74 ares and 79 centiares; 76 hectares, 34 ares, and 79 centiares; 52 hectares, 86 ares and 60 centiares and 608 hectares, 77 ares and 28 centiares, or a total of 799 hectares, 75 ares, and 46 centiares. The evidence shows that Melecio Severino died on the 25th day of May, 1915; that some 428 hectares of the land were recorded in the Mortgage Law Register in his name in the year 1901 by virtue of possessory information proceedings instituted on the 9th day of May of that year by his brother Agapito Severino in his behalf; that during the lifetime of Melecio Severino the land was worked by the defendant, Guillermo Severino, his brother, as administrator for and on behalf of the said Melecio Severino; that after Melencio's death, the defendant Guillermo Severino continued to occupy the land; that in 1916 a parcel survey was made of the lands in the municipality of Silay, including the land here in question, and cadastral proceedings were instituted for the registration of the land titles within the surveyed area; that in the cadastral proceedings the land here in question was described as four separate lots numbered as above stated; that Roque Hofilea, as lawyer for Guillermo Severino, filed answers in behalf of the latter in said proceedings claiming the lots mentioned as the property of his client; that no opposition was presented in the proceedings to the claims of Guillermo Severino and the court therefore decreed the title in his favor, in pursuance of which decree certificates of title were issued to him in the month of March, 1917. It may be further observed that at the time of the cadastral proceedings the plaintiff Fabiola Severino was a minor; that Guillermo Severino did not appear personally in proceedings and did not there testify; that the only testimony in support of his claim was that of his attorney Hofilea, who swore that he knew the land and that he also knew that Guillermo Severino inherited the land from his father and that he, by himself, and through his predecessors in interest, had possessed the land for thirty years. The appellant presents the following nine assignments of error: "1.The trial court erred in admitting the evidence that was offered by plaintiff in order to establish the fact that said plaintiff was the legally acknowledged natural child of the deceased Melecio Severino. "2.The trial court erred in finding that, under the evidence presented, plaintiff was the legally acknowledged natural child of Melecio Severino. "3.The trial court erred in rejecting the evidence offered by defendant to establish the absence of fraud on his part in securing title to the lands in Nacayao. "4.The trial court erred in concluding that the evidence adduced by plaintiff and intervenor established that defendant was guilty of fraud in procuring title to the lands in question in his name. "5.The trial court erred in declaring that land that was formerly placed in the name of Melecio Severino had an extent of either placed in the name of Melecio Severino had an extent of either 434 hectares at the time of his death. "6.The trial court erred in declaring that the value of the land in litigation is P500 per hectare. "7.The trial court erred in granting the petition of plaintiff for an attachment without first giving the defendant an opportunity to be heard. "8.The trial court erred in ordering the conveyance of 428 hectares of land by defendant to the administratrix. "9.The trial court erred in failing or refusing to make any finding as to the defendant's contention that the petition for attachment was utterly devoid of any reasonable ground." In regard to the first two assignments of error, we agree with the appellant that the trial court erred in making a declaration in the present case as to the recognition of Fabiola Severino as the natural child of Melecio Severino. We have held in the case of Briz and Remigio (43 Phil., 763), that "The legitimate heirs or kin of a deceased person who would be prejudiced by a declaration that another person in entitled to recognition as the natural child of such decedent, are necessary and indispensable parties to any action in which a judgment declaring the right to recognition is sought." In the present action only the widow, the alleged natural child, and one of the brothers have not been included. But, inasmuch as the judgment appealed from is in favor of the intervenor and not of the plaintiff, except to the extent of holding that the latter is a recognized natural child of deceased, this question is, from the view we take of the case, of no importance in its final disposition. We may say, however, in this connection, that the point urged in appellant's brief that it does not appear affirmatively from the time of the conception of Fabiola, her mother was a single woman, may be sufficiently disposed of by a reference to article 130 of the Civil Code and subsection 1 of section 1 of section 334 of the Code of Civil Procedure which create the presumption that a child born out of wedlock is natural rather than illegitimate. The question of the status of the plaintiff Fabiola Severino and her right to share in the inheritance may, upon notice to all the interested parties, be determined in the probate proceedings for the settlement of the estate of the deceased. The fifth assignment of error relates to the finding of the trial court that the land belonging to Melecio Severino had an area of 428 hectares. The appellant contends that the court should have found that there were only 324 hectares inasmuch as one hundred hectares of the original area were given to Melecio's brother Donato during the lifetime of the father Ramon Severino. As it appears that Ramon Severino died in 1896 and that the possessory in formation proceedings, upon which the finding of the trial court as to the area of the land is principally based, were not instituted until the year 1901, we are not disposed to disturb the conclusions if the trial court on this point. Moreover, in the year 1913, the defendant Guillermo Severino testified under oath, in the case of Montelibano vs. Severino, that the area of the land by Melecio Severino and of which he (Guillermo) was the administrator, embraced an area of 424 hectares. The fact that Melecio Severino, in declaring the land for taxation in 1906, stated that the area was only 324 hectares and

Agency Part E: Liabilities (Art. 1889 - 1893) 8 60 ares while entitled to some weight is not conclusive and is not sufficient to overcome the positive statement of the defendant and the recitals in the record of the possessory information proceedings. The sixth assignment of error is also of minor importance in view of the fact that in the dispositive part of the decision of the trial court, the only relief given is an order requiring the appellant to convey to the administratrix the land in question, together with such parts of the proceeds of the mortgage thereon as remain in his hands. We may say further that the court's estimate of the value of the land does not appear unreasonable and that, upon the evidence before us, it will not be disturbed. The seventh and ninth assignments of error relate to the ex parte granting by the trial court of a preliminary attachment in the case and the refusal of the court to dissolve the same. We find no merit whatever in these assignments and a detailed discussion of them is unnecessary. The third, fourth, and eighth assignments of error involve the vital points in the case, are inter-related and may be conveniently considered together. The defendant argues that the gist of the instant action is the alleged fraud on his part in causing the land in question to be registered in his name; that the trial court therefore erred in rejecting his offer of evidence to the effect that the land was owned in common by all the heirs of Ramon Severino and did not belong to Melecio Severino exclusively; that such evidence, if admitted, would have shown that he did not act with fraudulent intent in taking title to the land; that the trial court erred in holding him estopped from denying Melecio's title; that more than a year having elapsed since the entry of the final decree adjudicating the land to the defendant, said decree cannot now be re-opened; that the ordering of the defendant to convey the decreed land to the administratrix is, for all practical purposes, equivalent to the reopening of the decree of registration; that under section 38 of the Land Registration Act the defendant has an indefeasible title to the land; and that the question of ownership of the land being thus judicially settled, the question as to the previous relations between the parties cannot now be inquired into. Upon no point can the defendant's contentions be sustained. It may first be observed that this is not an action under section 38 of the Land Registration Act to reopen or set aside a decree; it is an action in personam against an agent to compel him to return, or retransfer, to the heirs or the estate of its principal, the property committed to his custody as such agent, to execute the necessary documents thereof, to pay damages. That the defendant came into the possession of the property here in question as the agent of the deceased Melecio Severino in the administration of the property, cannot be successfully disputed. His testimony in the case of Montelibano vs. Severino (civil case No. 902 of the Court of First Instance of Occidental Negros and which forms a part of the evidence in the present case) is, in fact, conclusive in this respect. He there stated under oath that from the year 1902 up to the time the testimony was given, in the year 1913, he had been continuously in charge and occupation of the land as the encargado or administrator of Melecio Severino; that he had always known the land as the property of Melecio Severino; and that the possession of the latter had been peaceful, continuous, and exclusive. In his answer filed in the same case, the same defendant, through his In the case of Massie vs. Watts (6 Cranch, 148), the United States Supreme Court, speaking through Chief Justice Marshall, said: "But Massie, the agent of Oneale, has entered and surveyed a portion of that land for himself and obtained a patent for it in his own name. According to the clearest and best established principles of equity, the agent who so acts becomes a trustee for his principal. He cannot hold the land under an entry for himself otherwise than as trustee for his principal." attorney, disclaimed all personal interest in the land and averred that it was wholly the property of this brother Melecio. Neither is it disputed that the possession enjoyed by the defendant at the time of obtaining his decree was of the same character as that held during the lifetime of his brother, except in so far as shortly before the trial of the cadastral case the defendant had secured from his brothers and sisters a relinquishment in his favor of such rights as they might have in the land. 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. Upon this ground, and substantially in harmony with the principles of the Civil Law (see sentence of the supreme court of Spain of May 1, 1900), the English Chancellors held that in general whatever a trustee does for the advantage of the trust estate inures to the benefit of the cestui que trust. (Greenlaw vs. King, 5 Jur., 18; Ex parte Burnell, 7 Jur., 116; Ex parte Hughes, 6 Ves., 617; Ex parte James, 8 Ves., 337; Oliver vs. Court, 8 price, 127.) The same principle has been consistently adhered to in so many American cases and is so well established that exhaustive citations of authorities are superfluous and we shall therefore limit ourselves to quoting a few of the numerous judicial expressions upon the subject. The principle is well stated in the case of Gilber vs. Hewetson (79 Minn., 326): "A receiver, trustee, attorney, agent, or any other person occupying fiduciary relations respecting property or persons, is utterly disabled from acquiring for his own benefit the property committed to his custody for management. This rule is entirely independent of the fact whether any fraud has intervened. No fraud in fact need be shown, and no excuse will be heard from the trustee. It is to avoid the necessity of any such inquiry that the rule takes so general a form. The rule stands on the moral obligation to refrain from placing one's self in positions which ordinarily excite conflicts between selfinterest and integrity. It seeks to remove the temptation that might arise out of such a relation to serve one's self-interest at the expense of one's integrity and duty to another, by making it impossible to profit by yielding to temptation. It applies universally to all who come within its principle."

Agency Part E: Liabilities (Art. 1889 - 1893) 9 In the case of Felix vs. Patrick (145 U. S., 317), the United States Supreme Court, after examining the authorities, said: "The substance of these authorities is that, wherever a person obtains the legal title to land by any artifice or concealment, or by making use of facilities intended for the benefit of another, a court of equity will impress upon the land so held by him a trust in favor of the party who is justly entitled to them, and will order the trust executed by decreeing their conveyance to the party in whose favor the trust was created." (Citing Bank of Metropolis vs. Guttschlick, 14 Pet., 19, 31; Moses vs. Murgatroyd, 1 Johns. Ch., 119; Cumberland vs. Codrington, 3 Johns. Ch., 229, 261; Neilson vs. Blight, 1 Johns. Cas., 205; Weston vs. Barker, 12 Johns., 276.) The same doctrine has also been adopted in the Philippines. In the of Uy Aloc vs. Cho Jan Ling (19 Phil., 202), the facts are stated by the court as follows: "From the facts proven at the trial it appears that a number of Chinese merchants raised a fund by voluntary subscription with which they purchased a valuable tract of land and erected a large building to be used as a sort of club house for the mutual benefit of the subscribers to the fund. The subscribers organized themselves into an irregular association, which had no regular articles of association, and was not incorporated or registered in the commercial registry or elsewhere. The association not having any existence as a legal entity, it was agreed to have the title to the property placed in the name of one of the members, the defendant, Cho Jan Ling, who on his part accepted the trust, and agreed to hold the property as the agent of the members of the association. After the club building was completed with the funds of the members of the association, Cho Jan Ling collected some 25,000 in rests for which he failed and refused to account, and upon proceedings being instituted to compel him to do so, he set up title in himself to the club property as well as to the rents accruing therefrom, falsely alleging that he had bought the real estate and constructed the building with his own funds, and denying the claims of the association that it was their funds which had been used for that purpose." The decree of the court provided, among other things, for the conveyance of the club house and the land on which it stood from the defendant, Cho Jan Ling, in whose name it was registered, to the members of the association. In affirming the decree, this court said: "In the case at bar the legal title of the holder of the registered title is not question; it is admitted that the members of the association voluntarily obtained the inscription in the name of Cho Jan Ling, and that they had no right to have that inscription cancelled; they do not seek such cancellation, and on the contrary they allege and prove that the duly registered legal title to the property is in Cho Jan Ling, but they maintain, and we think that they rightly xxx xxx xxx "What judgment ought to be entered in this case? The court below simply absolved the defendant from the complaint. The defendant municipality does not ask for a cancellation of the deed. On the contrary, the deed is relied upon to supplement the oral evidence showing that the title to the land is in the defendant. As we have indicated in Consunji vs. Tison, 15 Phil., 81, Uy Aloc vs. Cho Jan Ling, 19 Phil., 202, the proper procedure in such a case, so long as the rights of innocent third persons have not intervened, is to compel a conveyance to the rightful owner. This ought and can be done under the issues raised and the proof presented in the case at bar." The case of Sy-Juco and Viardo vs. Sy-Juco (40 Phil., 634) is also in point. As will be seen from the authorities quoted, an agent is not only estopped from denying hi principal's title to the property, but he is also disable from acquiring interests therein adverse to those of his principal during the term of the agency. But the defendant argues that his title has become res adjudicata through the decree of registration and cannot now be disturbed. This contention may, at first sight, appear to possess some force, but on closer examination it proves untenable. The decree of registration determined the legal title to the land as of the date of the decree; as to that there is no question. That, under section 38 of the Land Registration Act, this decree became conclusive after one year from the date of the entry is not disputed and no one attempts to disturb the decree of the proceedings upon which it is based; the plaintiff in intervention merely contends that in equity the legal title so acquired inured to the benefit of the estate of Melecio Severino, the defendant's principal and cestui que trust and asks that this superior equitable right be made effective by compelling the defendant, as the holder of the legal title, to transfer it to the estate. We have already shown that before the issuance of the decree of registration it was the undoubted duty of the defendant to restore the property committed to his custody to his principal, or to the latter's estate, and that the principal had a right of action in personam to enforce the performance of this duty and to compel the defendant to execute the necessary conveyance to In the case of Camacho vs. Municipality of Baliuag (28 Phil., 466), the plaintiff, Camacho, took title to the land in his own name, while acting as agent for the municipality. The court said: "There have been a number of cases before this court in which a title to real property was acquired by a person in his own name, while acting under a fiduciary capacity, and who afterwards sought to take advantage of the confidence reposed in him by claiming the ownership of the property for himself. This court has invariably held such evidence competent as between the fiduciary and the cestui que trust. maintain, that he holds it under an obligation, both express and implied, to deal with it exclusively for the benefit of the members of the association, and subject to their will."

Agency Part E: Liabilities (Art. 1889 - 1893) 10 that effect. The only question remaining for consideration is, therefore, whether the decree of registration extinguished this personal right of action. In Australia and New Zealand, under statutes in this respect similar to ours, courts of equity exercise general jurisdiction in matters of fraud and error with reference to Torrens registered lands, and giving attention to the special provisions of the Torrens acts, will issue such orders and directions to all the parties to the proceedings as may seem just and proper under the circumstances. They may order parties to make deeds of conveyance and if the order is disobeyed, they may cause proper conveyances to be made by a Master in Chancery or Commissioner in accordance with the practice in equity (Hogg, Australian Torrens System, p. 847). In the United States courts have even gone so far in the exercise of their equity jurisdiction as to set aside final decrees after the expiration of the statutory period of limitation for the reopening of such decrees (Baart vs. Martin, 99 Minn., 197). But, considering that equity follows the law and that our statutes expressly prohibit the reopening of a decree after one year from the date of its entry, this practice would probably be out of question here, especially so as the ends of justice may be attained by other equally effective, and less objectionable means. Turning to our own Land Registration Act, we find no indication there of an intention to cut off, through the issuance of a decree of registration, equitable rights or remedies such as those here in question. On the contrary, section 70 of the Act provides: "Registered lands and ownership therein, shall in all respects be subject to the same burdens and incidents attached by law to unregistered land. Nothing contained in this Act shall in any way be construed to relieve registered land or the owners thereof from any rights incident to the relation of husband and wife, or from liability to attachment on mesne process or levy on execution, or from liability to any lien of any description established by law on land and the buildings thereon, or the interest of the owner in such land or buildings, or to change the laws of descent, or the rights of partition between copartners, joint tenants and other cotenants, or the right to take the same by eminent domain, or to relieve such land from liability to be appropriated in any lawful manner for the payment of debts, or to change or affect in any other way any other rights or liabilities created by law and applicable to unregistered land, except as otherwise expressly provided in this Act or in the amendments hereof." Section 102 of the Act, after providing for actions for damages in which the Insular Treasurer, as the Custodian of the Assurance Fund is a party, contains the following proviso: "Provided, however, That nothing in this Act shall be construed to deprive the plaintiff of any action which he may have against any person for such loss or damage or deprivation of land or of any estate or interest therein without joining the Treasurer of the Philippine Archipelago as a defendant therein." That an action such as the present one is covered by this proviso can hardly admit of doubt. Such was also the view taken by this court in the case of Medina One-Quingco vs. Imaz and Warner, Barnes & Co. (27 Phil., 314), in which the plaintiff was seeking to take advantage of his possession of a certificate of title to deprive the defendant of land included in that certificate and sold to him by the former owner before the land was registered. The court decided adversely to plaintiff and in so doing said: "As between them no question as to the indefeasibility of a Torrens title could arise. Such an action could have been maintained at any time while the property remained in the hands of the purchaser. The peculiar force of a Torrens title would have been brought into play only when the purchaser had sold to an innocent third person for value the lands described in his conveyance . . . Generally speaking, as between the vendor and the purchaser the same rights and remedies exists with reference to land registered under Act No. 496, as exist in relation to land not so registered." In Cabanos vs. Register of Deeds of Laguna and Obinana (40 Phil., 620), it was held that, while a purchaser of land under a pacto de retro cannot institute a real action for the recovery thereof where the vendor under said sale has caused such lands to be registered in his name without said vendee's consent, yet he may have his personal action based on the contract of sale to compel the execution of an unconditional deed for the said lands when the period for repurchase has passed. Torrens titles being based on judicial decrees there is, of course, a strong presumption in favor of their regularity or validity, and in order to maintain an action such as the present the proof as to the fiduciary relation of the parties and of the breach of trust must be clear and convincing. Such proof is, as we have seen, not lacking in this case. But once the relation and the breach of trust on the part of the fiduciary is thus established, there is no reason, neither practical nor legal, why he should not be compelled to make such reparation as may lie within his power for the injury caused by his wrong, and as long as the land stands registered in the name of the party who is guilty of the breach of trust and no rights of innocent third parties are adversely affected, there can be no reason why such reparation should not, in the proper case, take the form of a conveyance or transfer of the title to the cestui que trust. No reasons of public policy demand that a person guilty of fraud or breach of trust be permitted to use his certificate of title as a shield against the consequences of his own wrong. The judgment of the trial court is in accordance with the facts and the law. In order to prevent unnecessary delay and further litigation it may, however, be well to attach some additional directions to its dispositive clauses. It will be observed that lots Nos. 827, 828, and 834 of a total area of approximately 191 hectares, lie wholly within the area to be conveyed to the plaintiff in intervention and these lots may, therefore, be so conveyed without subdivision. The remaining 237 hectares to be conveyed lie within the western part of lot No. 874 and before a conveyance of this portion can be affected a subdivision of that lot must be made and a technical description of the portion to be conveyed, as well as of the remaining portion of the lot, must be prepared. The subdivision shall be made by an authorized surveyor and in accordance with the provisions of Circular No. 31 of the General Land Registration Office, and the subdivision and technical descriptions shall be submitted t the Chief of that office for his approval. Within thirty days after being notified of the approval of said subdivision and technical descriptions, the defendant Guillermo Severino shall execute good and sufficient deed or deeds of conveyance in favor of the administratrix of the estate of the deceased Melecio Severino for said lots Nos. 827, 828, 834, and

Agency Part E: Liabilities (Art. 1889 - 1893) 11 the 237 hectares segregated from the western part of lot No. 874 and shall deliver to the register of deeds his duplicate certificates may be cancelled and new certificates issued. The cost of the subdivision and the fees of the register of deeds will be paid by the plaintiff in intervention. It is so ordered. With these additional directions the judgment appealed from is affirmed, with the costs against the appellant. The right of the plaintiff Fabiola Severino to establish in the probate proceedings of the estate of Melecio Severino her status as his recognized natural child is reserved. Araullo, C.J., Johnson, Street, Malcolm, Avancea, Villamor, Johns, and Romualdez, JJ., concur. ---------------------------------------------------------------------------------------------------------------------------------------EN BANC [G.R. No. L-42958. October 21, 1936.] C.N. HODGES, plaintiff-appellant, vs. CARLOTA SALAS and PAZ SALAS, defendants-appellees. Jose P. Orozco and Gibbs, McDonough & Ozaeta for appellant. Vicente Varela and Conrado V. Sanchez for appellees. SYLLABUS 1. EVIDENCE; PROBATORY VALUE OF SECONDARY EVIDENCE ADMITTED WITHOUT OBJECTION. It is universally accepted that when secondary or incompetent evidence is presented and accepted without any objection on the part of the other party, the latter is bound thereby and the court is obliged to grant it the probatory value it deserves. (City of Manila vs. Cabangis, 10 Phil., 151; Bersabal vs. Bernal, 13 Phil., 463; Kuenzle & Streiff vs. Jiongco, 22 Phil., 110; U.S. vs. Choa Tong, 22 Phil., 562; U.S. vs. Ong Shiu, 28 Phil., 242; De Leon vs. Director of Prisons, 31 Phil., 60; U.S. vs. Hernandez, 31 Phil., 342; 23 C.J., 39, section 1783, and the cases therein cited; 10 R.C.L., 1008, paragraph 197, and the cases therein cited.) 2. MORTGAGES; LOANS; CHARGING COMPOUND INTEREST; APPLICATION OF THE SAME . The fact of charging illegal interest, although it exceeds the maximum limit of interest that may be charged, does not make the loan or the mortgage usurious because the transactions took place subsequent to the execution of said contracts and the latter do not appear to be void ab initio (66 C.J., pages 243, 244, section 194). Said interest should be applied first to the payment of the stipulated and unpaid interest and, later, to that of the capital. (Aguilar vs. Rubiato and Gonzalez Vila, 40 Phil., 570; Go Chioco vs. Martinez, 45 Phil., 256; Gui Jong & Co. vs. Rivera and Avellar, 45 Phil., 778; Lopez and Javelona vs. El Hogar Filipino, 47 Phil., 249; Sajo vs. Gustilo, 48 Phil., 451.) 3. ID.; ID.; CHARGING INTEREST IN ADVANCE. Section 5 of Act No. 2655, as amended by section 3 of Act No. 3291, expressly permits a creditor to charge in advance interest corresponding to not more than one year, whatever the duration of the loan. What is prohibited is the charging in advance of interest for more than one year. Section 6 reiterates said rule in exempting a creditor found guilty of usury from the obligation to return the interest and commissions collected by him in advance, provided said interest and commissions are not for a period of more than one year and the rate of interest does not exceed the maximum limit fixed by law. 4. USURY, ACTION FOR; PRESCRIPTION; REQUISITES FOR PRESCRIPTION TO CONSTITUTE VALID DEFENSE. In order that prescription may constitute a valid defense and it may be considered on appeal, it must be specifically pleaded in the answer and proven with the same degree of certainty with which an essential allegation in a civil action is established. Otherwise it will not be taken into consideration, much less if it is alleged for the first time on appeal. (Aldeguer vs. Hoskyn, 2 Phil., 500; Domingo vs. Osorio, 7 Phil., 405; Marzon vs. Udtujan, 20 Phil., 232; Pelaez vs. Abreu, 26 Phil., 415; Corporacion de PP. Agustinos Recoletos vs. Crisostomo, 32 Phil., 427; Karagdag vs. Barado, 33 Phil., 529.) 5. AGENCY; POWERS OF THE AGENT; LIMITATIONS. The pertinent clauses of the power of attorney from which may be determined the intention of the principals in authorizing their agent to obtain a loan, securing it with their real property, were quoted at the beginning of the decision. The terms thereof are limited; the agent was thereby authorized only to borrow any amount of money which he deemed necessary. There is nothing, however, to indicate that the defendants had likewise authorized him to convert the money obtained by him to his personal use. With respect to a power of attorney of special character, it cannot be interpreted as also authorizing the agent to use the money as he pleased, particularly when it does not appear that such was the intention of the principals, and in applying part of the funds to pay his personal obligations, he exceeded his authority (art. 1714, Civil Code; Bank of the Philippine Islands vs. De Coster, 47 Phil., 594 and 49 Phil., 574). In cases like the present one, it should be understood that the agent was obliged to turn over the money to the principals or, at least, place it at their disposal. DECISION IMPERIAL, J p: The action was brought by the plaintiff to foreclose a certain real estate mortgage constituted by the defendants to secure a loan. The plaintiff appealed from the judgment of the Court of First Instance of Occidental Negros absolving the defendants from the complaint and stating: That of the capital of P28,000 referred to in Exhibit A, the defendants were liable only for the sum of P14,451.71; that the transactions and negotiations specified in Exhibit A as well as the interest charged are usurious; that the sum of P14,778.77 paid by the defendants to the plaintiff should be applied to the payment of the capital of P14,451.71; that the plaintiff must refund the sum of P3,327.06 to the defendants and, lastly, he must pay the costs. On September 2, 1923, the defendants executed a power of attorney in favor of their brother-in-law Felix S. Yulo to enable him to obtain a loan and secure it with a mortgage on the real property described in transfer certificate of title No. 3335. The power of attorney was registered in the registry of deeds of the Province of Occidental Negros and the pertinent clauses thereof read as follows:. "That we confer upon our brother-in-law Mr. Felix S. Yulo, married, of age and resident of the municipality of Bago, Province of Occidental Negros, P.I., as required by law, a special power of attorney to obtain, in our respective names and representation, a loan in any amount which our said brother-in-law may deem necessary, being empowered, by virtue of the authority conferred in this power of attorney, to constitute a mortgage on a parcel of land absolutely belonging to us, the technical description of which is as follows: "'TRANSFER CERTIFICATE OF TITLE NO. 3335

Agency Part E: Liabilities (Art. 1889 - 1893) 12 "'A parcel of land (lot No. 2464 of the Cadastral Survey of Bago) with the improvements thereon, situated in the municipality of Bago. Bounded on the NE. and NW. by the Lonoy Sapa and lot No. 2465; on the SE. by the Ilabo Sapa; and on the SW by the Ilabo Sapa, lot No. 2508 and the Sapa Talaptapan. Containing an area of one million nine hundred ninety-four thousand eight hundred and thirty-four square meters (1,994,834), more or less.' "That we confer and grant to our said brother-in-law Mr. Felix S. Yulo power and authority to perform and execute each and every act necessary to the performance of his trust, which acts shall be for all purposes as if we had performed or executed them personally, hereby ratifying and confirming everything that our said brother-in-law Mr. Felix S. Yulo may execute or cause to be executed." Acting under said power of attorney, Felix S. Yulo, on March 27, 1926, obtained a loan of P28,000 from the plaintiff, binding his principals jointly and severally to pay it within ten (10) years, together with interest thereon at 12 per cent per annum payable annually in advance, to which effect he signed a promissory note for said amount and executed a deed of mortgage of the real property described in transfer certificate of title No. 3335 and the improvements thereon consisting in concrete buildings. It was stated in the deed that in case the defendants failed to pay the stipulated interest and the taxes on the real property mortgaged and if the plaintiff were compelled to bring an action to recover his credit, said defendants would be obliged to pay 10 per cent more on the unpaid capital, as fees for the plaintiff's attorneys. The mortgage so constituted was registered in the registry of deeds of the Province of Occidental Negros and noted on the back of the transfer certificate of title. The sum of P28,000 was not delivered to Felix S. Yulo, but by agreement between him and the plaintiff, it was employed as follows: Interest for one year from March 27, 1926, to March 26, 1927, collected in advance by the plaintiffP3,360.00 Paid for the mortgage constituted by Felix S. Yulo, cancelled on the date of the loan8,188.29 Paid by Felix S. Yulo on account of the purchase price of the real property bought by him on Ortiz Street2,000.00 Check No. 4590 delivered to Felix S. Yulo3,391.71 Check No. 4597 in the name of Rafael Santos, paid to him to cancel the mortgage constituted by the defendants9,200.00 Check No. 4598 delivered to Felix S. Yulo1,860.00 _________ Total28,000.00 ========= I.The action brought by the plaintiff was for the foreclosure of a mortgage in accordance with the provision of sections 254 to 261 of the Code of Civil Procedure. It was not expressly alleged in the complaint that the mortgage deed had been registered in accordance with Act No. 496, which was the law applicable in the case of the real property registered under the Torrens system. A copy of The defendants failed to pay at maturity the interest stipulated, which would have been paid one year in advance. All the sums paid by them on account of accrued interest up to March 27, 1934, on which the complaint was filed, together with the corresponding exhibits, are as follows: DateAmount. Exhibit 1 April 5, 1927P1,500.00 Exhibit 2 May 2, 1927500.00 Exhibit 4 August 30, 1927336.00 Exhibit 7 June 4, 19283,360.00 Exhibit 8 May 15, 192967.20 Exhibit 9 June 19, 192967.20 Exhibit 10 July 25, 192933.60 Exhibit 11 August 26, 192933.60 Exhibit 12 October 7, 1929392.55 Exhibit 13 October 7, 192930.00 Exhibit 14 November 9, 192929.67 Exhibit 15 November 9, 1929938.95 Exhibit 16 February 8, 193061.04 Exhibit 17 February 8, 1930936.46 Exhibit 18 No date498.75 Exhibit 19 February 10, 1931498.75 Exhibit 20 August 20, 1931498.75 Exhibit 21 July 7, 1932498.75 Exhibit 22 July 29, 1932500.00 Exhibit 23 September 23, 1932500.00 Exhibit 24 December 17, 1932997.50 Exhibit 25 No date1,000.00 Exhibit 26 January 23, 1934500.00 ________ Total14,778.77 ======== To the foregoing amount must be added the sum of P3,360 deducted by the plaintiff upon granting the loan, as interest for one year, thereby making the total amount of interest paid by the defendants and received by the plaintiff P18,138.77. The foregoing are facts inferred from the evidence and are not controverted by the parties, with the exception of the existence of the promissory note, the registration of the mortgage deed and the notation thereof on the back of the certificate of title.

Agency Part E: Liabilities (Art. 1889 - 1893) 13 the mortgage deed was attached to the complaint and made a part thereof, but said copy did not show that the original had been duly registered. In paragraph 3 of the complaint, however, it was alleged that the mortgage deed had been noted on the back of transfer certificate of title No. 3335 by the register of deeds of the Province of Occidental Negros, in accordance with the provisions of the Mortgage Law. This specific allegation is equivalent to a statement that the mortgage deed had been duly registered. At the trial of the case, the attorney for the plaintiff did not present the mortgage deed showing the registration thereof in the registry, or the owner's transfer certificate of title. In their stead the plaintiff testified that the mortgage had been duly registered in the registry of deeds of Occidental Negros and had been noted on the back of the transfer certificate of title. The oral evidence was admitted without any objection on the part of the attorney for the defendants. In the appealed decision the court held that the plaintiff had failed to substantiate his foreclosure suit and, not having presented competent evidence, the action arising from his evidence was merely a personal action for the recovery of a certain sum of money. The plaintiff excepted to this conclusion and assigns it in his brief as the first error of law committed by the court. Section 284 of the Code of Civil Procedure requires the contents of a writing to be proven by the writing itself, except in cases therein specified. Section 313, No. 6, provides that official or public documents must be proven by presenting the original or a copy certified by the legal keeper thereof. According to this, the plaintiff was obliged to present the original or a certified copy of the mortgage deed showing the registration thereof, as well as the owner's transfer certificate of title. Both would have been the best evidence to prove the registration of the mortgage and the notation thereof on the back of the title. Had the defendants objected to the oral evidence offered, there is no doubt that it would have been rejected as incompetent. But it is universally accepted that when secondary or incompetent evidence is presented and accepted without any objection on the part of the other party, the latter is bound thereby and the court is obliged to grant it the probatory value it deserves. (City of Manila vs. Cabangis, 10 Phil., 151; Bersabal vs. Bernal, 13 Phil., 463; Kuenzle & Streiff vs. Jiongco, 22 Phil., 110; U.S. vs. Choa Tong, 22 Phil., 562; U.S. vs. Ong Shiu, 28 Phil., 242; De Leon vs. Director of Prisons, 31 Phil., 60; U.S. vs. Hernandez, 31 Phil., 342; 23 C.J., 39, section 1783, and the cases therein cited; 10 R.C.L., 1008, paragraph 197, and the cases therein cited.). Inasmuch as the registration of the mortgage and the notation thereof on the back of the transfer certificate of title have been established by the oral evidence abovestated, the court was without authority to conclude that the action was personal in character and, consequently, the first assignment of error is well founded. II.The court held that the loan and the mortgage were usurious and illegal for two reasons: First, because the plaintiff charged compound interest notwithstanding the fact that it had not been stipulated, and second, because the plaintiff charged interest yearly in advance in accordance with the agreement. These conclusions are the subject matter of the plaintiff's second assignment of error. The plaintiff categorically denied having charged compound interest, stating in his brief that all the interest charged by him should be applied to the interest unpaid by the defendants. We have examined Exhibits 8 to 17 of the defendants, which are the evidence offered to establish the fact that compound interest had been charged, and we have, without any difficulty, arrived at the conclusion that the plaintiff has really charged said unauthorized and unstipulated interest. If there is any doubt on this fact, it is dispelled by Exhibit 10, in the handwriting of the plaintiff himself, wherein it appears that the sum of P33.60 was charged by him on account of interest on unpaid interest. But the fact of charging illegal interest, although it exceeds the maximum limit of interest that may be charged, does not make the loan or the mortgage usurious because the transactions took place subsequent to the execution of said contracts and the latter do not appear to be void ab initio (66 C.J., pages 243, 244, section 194). Said interest should be applied first to the payment of the stipulated and unpaid interest and, later, to that of the capital. (Aguilar vs. Rubiato and Gonzalez Vila, 40 Phil., 570; Go Chioco vs. Martinez, 45 Phil., 256; Gui Jong & Co. vs. Rivera and Avellar, 45 Phil., 778; Lopez and Javelona vs. El Hogar Filipino, 47 Phil., 249; Sajo vs. Gustilo, 48 Phil., 451.) The plaintiff admits having charged in advance the interest corresponding to the first year. The mortgage deed contains the stipulation that the defendants should pay in advance the stipulated interest corresponding to each year. The court declared the contract usurious for this reason, basing its opinion upon some American authorities holding the same point of view. This court cannot adopt said doctrine in this jurisdiction. Section 5 of Act No. 2655, as amended by section 3 of Act No. 3291, expressly permits a creditor to charge in advance interest corresponding to not more than one year, whatever the duration of the loan. What is prohibited is the charging in advance of interest for more than one year. Section 6 reiterates said rule in exempting a creditor found guilty of usury from the obligation to return the interest and commissions collected by him in advance, provided said interest and commissions are not for a period of more than one year and the rate of interest does not exceed the maximum limit fixed by law. This court concludes, therefore, that the second assignment of error is well founded in the sense that both the loan and the mortgage are not usurious or illegal. III.In his third assignment of error, the plaintiff contends that the court should have declared the action for usury interposed by the defendants in their cross-complaint barred by the statute of limitations, in accordance with the provision of section 6 of Act No. 2655, as amended by section 4 of Act No. 3291. It is true that according to the evidence more than two years have already elapsed from the time the defendants paid and the plaintiff received the usurious interest to the registration of the cross-complaint, but the plaintiff cannot successfully invoke the defense of prescription because he failed to allege it in his reply to the cross-complaint. In order that prescription may constitute a valid defense and it may be considered on appeal, it must be specifically pleaded in the answer and proven with the same degree of certainty with which an essential allegation in a civil action is established. Otherwise it will not be taken into consideration, much less if it is alleged for the first time on appeal. (Aldeguer vs. Hoskyn, 2 Phil., 500; Domingo vs. Osorio, 7 Phil., 405; Marzon vs. Udtujan, 20 Phil., 232; Pelaez. Abreu, 26 Phil., 415; Corporacion de PP. Agustinos Recoletos vs. Crisostomo, 32 Phil., 427; Karagdag vs. Barado, 33 Phil., 529.). IV.The defendants proved that their attorney's fees were contracted at P3,000. The evidence has not been contradicted. The amount so fixed is not unreasonable or unconscionable. In the fourth

Agency Part E: Liabilities (Art. 1889 - 1893) 14 assignment or error, the plaintiff questions that part of the judgment ordering him to pay said fees. He contends that he is not responsible for the payment thereof because neither the loan nor the mortgage is usurious. However, this court has already stated that the plaintiff violated the Usury Law in charging compound interest notwithstanding the fact that it has not been so stipulated and that adding these sums to the stipulated interest the average thereof exceeds the maximum rate of interest that may be charged for the loan which has been the subject matter of the transaction. This violation falls under the precept of section 6 of the Usury Law and the plaintiff is obliged to pay the fees of the attorney for the defendants. This court holds that the fourth assignment or error is unfounded. V.In the fifth assignment of error, the plaintiff alleges that the judgment is erroneous for not having declared that the defendants ratified all the obligations contracted by their attorney in fact. In the sixth assignment or error he contends that an error was likewise committed in not declaring that by virtue of the authority conferred by the defendants, agent Yulo was authorized to borrow money and invest it as he wished, without being obliged to apply it necessarily for the benefit of his principals. In the seventh assignment of error the plaintiff alleges that the court erred in fixing the capital, which the defendants are obliged to pay him by virtue of the power of attorney executed by them, at only P14,451.71. In the eighth and last assignment of error, he insists that the court should have ordered the defendants to pay the entire capital owed, with interest thereon in accordance with the mortgage deed, together with 10 per cent thereof as attorney's fees, the action having been instituted due to nonfeasance on the part of the defendants. These four assignments of error refer to the interpretation and scope of the power of attorney and to the computation of the capital and the interest to be paid by the defendants and, finally, to whether or not be paid by the defendants and, finally, to whether or not the latter are obliged to pay the fees of the attorney for the plaintiff. For this reason, this court passes upon them jointly. The pertinent clauses of the power of attorney from which may be determined the intention of the principals in authorizing their agent to obtain a loan, securing it with their real property, were quoted at the beginning. The terms thereof are limited; the agent was thereby authorized only to borrow any amount of money which he deemed necessary. There is nothing, however, to indicate that the defendants had likewise authorized him to convert the money obtained by him to him personal use. With respect to a power of attorney of special character, it cannot be interpreted as also authorizing the agent to dispose of the money as he pleased, particularly when it does not appear that such was the intention of the principals, and in applying part of the funds to pay his personal obligations, he exceeded his authority (art. 1714, Civil Code; Bank of the Philippine Islands vs. De Coster, 47 Phil., 594 and 49 Phil., 574). In cases like the present one, it should be understood that the agent was obliged to turn over the money to the principals or, at least, place it at their disposal. In the case of Manila Trading & Supply Co. vs. Uy Tiepo (G.R. No. 30339, March 2, 1929, not reported), referring to a power of attorney to borrow any amount of money in cash and to guarantee the payment thereof by the mortgage of certain property belonging to the principals, this court held that the agent exceeded his authority in guaranteeing his personal account for automobile parts by the mortgage, not having been specially authorized to do so. This court then said: "Inasmuch as Jose S. Uy Tiepo, as agent of Daniel Ramos and Emilio Villarosa, was only authorized to 'borrow any amount of cash', and to guaranty the payment of the sums of money so borrowed by the mortgage of the property stated in the power of attorney, he exceeded the authority conferred upon him in mortgaging him principal's property to secure the payment of his personal debt for automobile parts, and the guaranties so made are null and void, the principals in question not being responsible for said obligations." The plaintiff contends that the agent's act of employing part of the loan to pay his personal debts was ratified by the defendants in their letter to him dated August 21, 1927 (Exhibit E). This court has carefully read the contents of said document and has found nothing implying ratification or approval of the agent's act. In it the defendants confined themselves to stating that they would notify their agent of the maturity of the obligation contracted by him. They said nothing about whether or not their agent was authorized to use the funds obtained by him in the payment of his personal obligations. In view of the foregoing, this court concludes that the fifth and sixth assignments of error are unfounded. In the seventh assignment of error, the plaintiff insists that the defendants should answer for the entire loan plus the stipulated interest thereon. This court has already stated the manner in which the agent employed the loan, according to the plaintiff. Of the loan of P28,000, the agent applied the sum of P10,188.29 to the payment of his personal debt to the plaintiff. The balance of P17,811.71 constitutes the capital which the defendants are obliged to pay by virtue of the power conferred upon their agent and the mortgage deed. In connection with the stipulated interest, it appears that the capital of P17,811.71 bore interest at 12 per cent per annum from March 277, 1926, to September 30, 1936, equivalent to P22,460.56. All the interest paid by the defendants to the plaintiff, including that which is considered indebted in said concept in the sum of P4,321.79. Adding this sum to the capital of P17,811.71, makes a total of P22,133.50, from which the sum of P3,000 constituting the fees of the attorney for the defendants must be deducted, defendants must pay to the plaintiff up to said date. The foregoing disposes of the seventh assignment of error. In the mortgage deed the defendants bound themselves to pay the fees of the attorney for the plaintiff in case they failed to comply with the terms thereof or pay the land tax, or the plaintiff were to resort to the courts to foreclose the mortgage. Said fees were fixed at 10 per cent of the capital which the defendants might owe. This penalty, according to what has been stated heretofore, amounts to P1,781,17 which would have to be added to the total amount to be paid to the plaintiff by the defendants. The court, having declared the contracts usurious, did not order the defendants to pay the penalty and for this reason the plaintiff assigns the omission as the eighth and last assignment of alleged error. Inasmuch as the fees agreed upon are neither excessive nor

Agency Part E: Liabilities (Art. 1889 - 1893) 15 unreasonable, this court finds no good reason to disapprove it, particularly because the defendants were also granted a larger amount in the same concept. In view of the conclusions arrived at, the motion for a new trial filed by the attorneys for the plaintiff on March 12, 1935, is denied, and the amendments to the complaint proposed by them in their pleading of March 20 of said year are admitted. For all the foregoing reasons, the appealed judgment is modified and the defendants are ordered to pay jointly and severally to the plaintiff the sums of P19,133.50 and P1,781.17. Within three months they shall make payment of said two sums of money or deposit them with the clerk or court, at the disposal of the plaintiff, upon failure to do which the real property mortgaged with the improvements thereon shall be sold at public auction and the proceeds thereon applied to the payment of the two sums of money above-stated; without special pronouncement as to the costs of this instance. So ordered. Avancea, C.J., Villa-Real, Abad Santos, Diaz and Laurel, JJ., concur. RESOLUTION UPON MOTION FOR RECONSIDERATION December 29, 1936 IMPERIAL, J.: The motion for reconsideration presented by the appellees is based upon three grounds: (1) That the capital for which they must answer to the appellant should be only P16,422.39, not P17,811.71 as stated in the decision; (2) that the computation of the payments made is incorrect, and (3) that the oral evidence relative to the registration of the mortgage is insufficient. I.It is claimed that as the true capital for which the appellees were held responsible amounts only to P16,422.39, excluding the sum of P3,360 paid in advance as interest corresponding to the first year, this latter sum should not be paid in its entirety by the appellees but only that part thereof in proportion to the capital owed. The contention is without any foundation because, as was already stated in the decision, the agent was expressly authorized to borrow and receive the total amount of P28,000. On the other hand, as it was stipulated that the interest should be paid annually in advance, it is evident and just that the entire sum of P3,360 representing said interest be paid by the appellees who contracted the debt through an agent. The fact that after the contract had been consummated and the interest for the first year paid, the agent, exceeding his authority, unduly used part of the funds intrusted to him, does not relieve the appellees of their obligation to answer for the entire interest for the first year. For this reason, this court declares that the first ground is unfounded. II.In the computation of the interest paid by the appellees and of that which they should pay to the appellant by virtue of the terms of the contract, this court proceeded to determine the time that elapsed from the date the contract became effective and debited to the appellees the interest at the rate agreed upon, deducting therefrom what they had paid in said concept, including the interest paid by them for the first year because the computation commenced from the date fixed in the contract, which is March 27, 1926. The difference represents the interest unpaid by the appellees up to September 30, 1936, considered by this court as the date on which the appellees' account with the appellant was finally liquidated and closed, and added to the capital they The facts as stated above were fully established at the trial of the case; the accused offered no evidence on his own behalf and rest his appeal substantially upon the alleged failure of the prosecution to establish the existence of a duty or obligation imposed on the defendant to turn over his principal the funds which he is charged with appropriating to his own use. Counsel for the defendant contends that the trial court erroneously admitted in evidence a certain document purporting to be a contract of agency signed by the defendant. The name of the accused is attached to this document, and one of the witnesses, the district agent of the China Mutual Life Insurance Company, stated that it was the contract of agency it purported to be, but failed to state specifically that the signature attached thereto was the signature of the defendant, though he declared that he knew his signature and had seen him write it on various occasions. represent the amount appearing in the decision. This court sees no error of accounting in this computation. III.The appellees insist that the oral evidence upon which this court based its opinion in declaring that the mortgage deed is registered, is insufficient. What has been said in the decision on this point is so clear and understandable that this court believes itself relieved from the obligation of reproducing it. There is no merit in the last ground of the motion. In answering the appellees' motion for reconsideration, the appellant likewise seeks reconsideration of the decision, alleging that he is entitled to a larger amount. Without going into details, because this court deems it unnecessary, it is held that the appellant is not entitled to ask for reconsideration of the decision of the ground that his petition to that effect has been filed too late, after the decision in question became final with respect to him. The appellees' motion for reconsideration is denied. Avancea, C.J., Villa-Real, Abad Santos, Diaz and Laurel, JJ., concur. ---------------------------------------------------------------------------------------------------------------------------------------FIRST DIVISION [G.R. No. L-3188. March 12, 1907.] THE UNITED STATES, plaintiff-appellee, vs. ALEC KIENE, defendant-appellant. Hartigan, Marple, Rohde & Gutierrez, for appellant. Attorney-General Araneta, for appellee. SYLLABUS AGENCY; OBLIGATION. Where noting to the contrary appears, the provisions of article 1720 of the Civil Code impose upon an agent the obligation to deliver to his principal all funds collected on his account. DECISION CARSON, J p: The defendant was an insurance agent. As such agent there was paid over to him for the account of his employers, the China Mutual Life Insurance Company, the sum of 1,539.20 pesos, Philippine currency, which he failed and refused to turn over to them. For his failure and refusal so to do, he was convicted of the crime of estafa in the Court of First Instance of the city Manila in sentenced to be imprisoned for one year and six months in Bilibid, and to pay the costs of the trial.

Agency Part E: Liabilities (Art. 1889 - 1893) 16 An examination of the record seems to indicate that the failure of the witness to expressly identify the signature of the defendant attached to the document was due to an oversight, but however this may be, it is contented that the execution of the document was not formally established, and the trial court erred in taking into consideration one of its provisions whereby the defendant appears to have expressly obligated himself to deliver to the China Mutual Life Insurance Company the funds collected on its account, without deduction for any purpose whatever. We do not deem it necessary to review the action of the court in admitting this document in evidence, because we are of opinion that the obligation of the defendant to deliver the funds in question to his employers is determined by the provision of article 1720 of the Civil Code, which is as follows: "Every agent is bound to give an account of his transactions and to pay to the principal all that he may have received by virtue of the agency, even though what has been received is not owed to the principal." Nothing to the contrary appearing in the record, and the existence of the agency and the collection of the funds on account of the principal having been established, the obligation to deliver these funds to the principal must be held to have been imposed upon the agent by virtue of the contract of agency. Counsel for the appellant further contented that the court erred in admitting in evidence a certain letter written by the defendant wherein he admitted the collection of certain funds on account of his principal, but we think that the execution of this letter was conclusively established, and that it was properly admitted, being pertinent and material to the issue in the case. There were other objections to the admission of certain testimony at the trial of the case, but we find no error in the proceedings prejudicial to the real rights of the accused, and it is unnecessary to discuss the assignments of error based on these objections. The crime of which the accused was convicted is defined and penalized in paragraph 5 of article 535, read together with paragraph 3 of article 534, of the Penal Code, and the penalty prescribed is that of presidio correccional in its minimum and medium degrees. There being no aggravating or extenuating circumstance to be taken into consideration, this penalty should be imposed in its medium degree ,which, in accordance with the provisions of article 82 of the said code, is from one year eight months and twenty-one days to two years eleven months and ten days of presidio correccional. The trial court imposed the penalty of one year and six months of imprisonment in Bilibid, and failed to impose the accessory penalties prescribed by law, and this sentence should therefore be reversed, and is hereby reversed, and instead thereof we impose the penalty of one year eight months and twenty-one days' imprisonment ( presidio correccional), together with the accessory penalties prescribed by law, and the payment to the agents of the China Mutual Life Insurance Company, Limited, of the sum of 1,550.30 pesos, Philippine currency, with subsidiary imprisonment in case of insolvency, and the costs in both instances. After the expiration of ten days let judgment be entered in accordance herewith, and ten days thereafter let the case be remanded to the lower court for proper action. So ordered. Arellano, C.J., Torres, Mapa, Willard, and Tracey, JJ., concur. Domingo Perez died in the town of Nueva Caceres in 1882, leaving as surviving heir ten children, six by one marriage and four by another. His estate was administered by one Manuel Achondo until 1889, when the administration was assumed by Tomas R. Perez, one of the heirs. In April, 1890, a partition of such estate was had among the heirs of Domingo Perez. By this partition the six children of the first marriage received 31,608.90 pesos each, and the four children of the second marriage 17,241.24 pesos each. Two of the children of the first marriage, Adela and Aurora, withdrew their participation. The remaining children, however, four of the first marriage and four of the second Tomas R. Perez being included among the former continued Tomas R. Perez in the administration of their respective portions. The community as thus constituted was as follows: Of the first marriage, Tomas R. Perez, Patricio Perez, Juan Perez and Eladio Ojinaga, the latter being the surviving husband and successor in interest of Isabel Perez, one of the children of the first marriage. These four contributed to the community their respective portions, i. e., 31,608.90 pesos each. Of the second marriage, Filomena, Jose, Rodolfo, and Margarita Perez, who contributed 17,241.24 pesos each. Tomas R. Perez continued the administration of this property from April 20, 1890, to May, 1893. In such administration he acted as guardian for all the persons interested except Eladio Ojinaga, and as to him Tomas R. Perez acted as agent. In 1893, when, apparently, Juan and Patricio Perez became of age, Tomas R. Perez filed an account of his administration in the Court of First Instance at Nueva Caceres. In this accounting he showed the net profits of the business for the period stated as 8,084 pesos. The brothers Juan and Patricio refused to accept this statement as correct, claiming that the profits actually derived by Tomas R. Perez from such business during the SYLLABUS ESTATES; ADMINISTRATION; AGENCY; CONTRACT. In the management of property, where a principal receives from an agent periodical statements of account and, knowing all the facts in the case, repeatedly agrees to the correction between upon which any other contract may be annulled or rescinded. DECISION WILLARD, J p: The appellant, Doa Angela Ojinaga, as judicial administratrix of Eladio Ojinaga, deceased, presented to the commissioners appointed to hear claims against the estate of Tomas R. Perez, deceased, a demand for 12,053.54 pesos with interest from the 1st of May, 1893. This claim was disallowed by the commissioners and from that disallowance the appellant appealed to the Court of First Instance. That court entered judgment against the appellant and from that judgment she has appealed to this court. ---------------------------------------------------------------------------------------------------------------------------------------FIRST DIVISION [G.R. No. L-3754. November 15, 1907.] ANGELA OJINAGA, plaintiff-appellant, vs. THE ESTATE OF TOMAS R. PEREZ, defendant-appellee. Haussermann, Cohn and Williams, for appellant. Chicote and Miranda, for appellee.

Agency Part E: Liabilities (Art. 1889 - 1893) 17 period named were greater than shown by him. Eladio Ojinaga accepted the account as rendered and permitted Tomas R. Perez to continue in the administration of his interest. Patricio Perez and his brother Juan persisted in their charge that the account was not correct and continued to demand a new accounting from Tomas R. Perez. The result was that in 1896 or 1897 arbitrators were appointed to examine the accounts of Tomas R. Perez from April 20, 1890, to May 1, 1893. These arbitrators had before them the books of Tomas R. Perez which were examined by Patricio Perez. While this examination was going on, and before it had been completed, Patricio Perez offered to accept 32,000 pesos as a final settlement and determination of the whole question. It seems that Thomas R. Perez was willing to pay this amount as a settlement of the transaction, but Patricio Perez and his associates insisted that in the division of this 32,000 pesos among the heirs Eladio Ojinaga be excluded, and that it be divided among seven heirs instead of being divided among eight heirs. Patricio Perez knew at this time that Eladio Ojinaga was satisfied with the accounting rendered in 1893, and, testifying at the trial, he said that the reason why they excluded Ojinaga from participation in this amount was because they suspected that there was an agreement between him and Tomas R. Perez and that the idea of Tomas R. Perez was to take his own share out so as to reduce the share of each for his own benefit. This settlement, therefore, was never carried out. Litigation was begun by Patricio and Juan Perez against Tomas R. Perez for an accounting. Other judicial proceedings were commenced by Tomas R. Perez against the heirs, or some of them. A final settlement of all the suits and proceedings then pending and of the entire matter in controversy was made on the 14th of August, 1901, in a public document of that date. By that agreement: "4. Don Tomas R. Perez binds himself to pay Don Patricio Perez the sum of 12,053.54 pesos, as profits, together with the interests agreed upon during the period of his administration from April 20, 1890, to May 1, 1893." He agreed to pay to the other heirs who joined in the agreement, and who were all of the heirs except Eladio Ojinaga, a proportionate amount. It is claimed by the appellant that this document proves conclusively that the amount of the profits to which Eladio Ojinaga was entitled for the period in question was this sum of 12,053.54 pesos and that he is entitled to that sum with interest thereon from the 1st of May, 1893. It is, however, apparent from the whole document, and from the testimony of Patricio Perez, a witness presented by the appellant at the trial, that this agreement was a compromise settlement and that this sum of 12,000 pesos included interest, costs, and expenses. Patricio Perez testified: "Q.What is the ultimate account on which was calculated your share of 12,053 pesos? A.I can not tell precisely now from whence that account was taken, but, adding my share to the shares of my brothers and the other four, this was the total sum to be given to us, including the prejudice and damage suffered by us. xxx xxx xxx "Q.What was to be your share of this 32,000 pesos? A.I do not know exactly. "Q.More or less? A.about 6,000 pesos, approximately. "Q.And how was it that you ultimately received 12,000 pesos? A.Because here in Manila I had incurred further expense and the interest had been accumulating. The appellant sought to prove at the trial the actual amount of the profits during the period in question by the books kept at the time, but it appears that these had been lost and destroyed. With the exception of these compromise settlements, the only evidence as to the actual profits was that furnished by Patricio Perez. He testified that the reason why he would not accept 8,084 pesos as the amount of the profits was "because the first year he (Tomas R. Perez) rendered the account to the court there was 17,000 pesos profit, and the second year not more than 8,000 pesos profit, and the third year not more than 4,000 pesos profit, but my brother stated to me that on account of some mistakes in the account the profits became reduced by reason of paying off some expenses." It appears from testimony that Tomas R. Perez filed yearly statements in regard to the profits and that from these yearly statements they would appear to amount to 29,000 pesos, but when he presented his final account for the whole time he showed profits of only 8,084 pesos, claiming that expenses had been paid which had not been included in the yearly accounts. Tomas R. Perez having died in 1903, his explanation of this difference could not be given. But assuming that the profits for the period above mentioned were 29,000 pesos instead of 8,000, the question is whether Eladio Ojinaga so conducted himself with regard to the transaction that his administratrix has now lost the right to claim a proportionate share of the said 29,000 pesos. On the 25th of October, 1894, Tomas R. Perez rendered to Eladio Ojinaga an account of his administration from April 1, 1893, to October 25, 1894. In that account are found the following items: Pesos Proportionate share of profits during 91, 92 and 931,662.006 per cent interest on the above amount99.72 On the 29th of October, 1894, Ojinaga stated in writing his consent to this account and left to the administration of Tomas R. Perez all the property which belonged to him coming from the estate. The rendition of this account and the agreement of Ojinaga to the correctness thereof constituted a contract between these parties (Ternate vs. Aniversario, 1 5 Off. Gaz., 462; Enriquez, vs. Enriquez, 2 5 Off. Gaz., 739), a contract which can be set aside only upon the grounds upon which any other contract can be annulled. It is claimed by the appellant that it can be annulled on the ground o fraud committed by Tomas R. Perez in concealing from Ojinaga the truth in regard to the amount of profits for the period in question. No contract can be set aside on the ground of fraud if the person who claims to be defrauded knew all of the facts upon which his claim of fraud is based. Patricio Perez, who testified as a witness for the appellant, stated that ". . . In the year 1894 Eladio Ojinaga invited me to approve that account because he had done so, and he advised me to approve it because it would be more just to him, and I did not like to follow his advice.

Agency Part E: Liabilities (Art. 1889 - 1893) 18 xxx xxx xxx "Q.Did Eladio Ojinaga know all this trouble between you and Tomas R. Perez, and your brothers? A.Yes, sir. He had knowledge of that at the time when he invited me to approve the account. I informed him about that. I gave him all of my reasons for not wishing to approve the account and he told me that he on his part approved it." It is thus seen that in 1894 Ojinaga knew practically everything that is known to-day. Whether this conversation took place before and after the 29th day of October, 1894, is immaterial, because on the 30th of April, 1895, Perez rendered another account to Ojinaga for the time between the 25th of October, 1894, and the 30th of April, 1895. The first item in this account approved by Ojinaga on the 29th of October, 1894. On the 30th of April, 1896, he rendered another account to Ojinaga for the time between 1st day of May, 1895, and the 30th of April, 1896. The first item in this account is the balance of the last preceding account. On the 30th of November, 1896, Ojinaga agreed in writing to the correctness of this account. On the 30th of June, 1897, Tomas R. Perez rendered another account to Ojinaga for the time between the 1st of May, 1896, and the 30th of June, 1897. The first item in this account is the balance of the last preceding account. On September 18, 1897, Ojinaga agreed in writing to the correctness of this account. The appellant admitted at the trial that when litigation was commenced against Tomas R. Perez, about 1897, Ojinaga complained bitterly of the conduct of Juan and Patricio and accused them of being unkind to their brother. Evidence was introduced at the trial as to the contents of two letters said to be lost, written by Tomas R. Perez to Ojinaga at the time the settlement of 32,000 pesos was under discussion, in which Perez advised Ojinaga to claim his part of that sum. Even then Ojinaga took no action in the matter. He died in Kobe in July, 1898. His will, made in that month, stated that the last time when he settled accounts with Tomas R. Perez was in 1894, but that this settlement was not made effective because there were discovered certain irregularities in the account, irregularities which had been, and are now, the subject to litigation, and he added: "At any rate, it is my desire that whatever profit may accrue from this property, it should be equally divided between my son and my wife." From what has been said it is seen that this statement is not exactly correct as he kept on approving the accounts of Perez up to the time of his death. The appellant testified at the trial that she learned the facts in regard to these accounts before her husband's death, and that after his death Juan and Patricio Perez proposed to her to join them in this litigation. This she refused to do, but said that in case they won the suit she would pay her share of the expenses when they paid her proportionate share of what they obtained. No action in court was taken by her until November, 1902. Under the circumstances above stated this action can not be maintained. Eladio Ojinaga not only agreed to the correctness of this account in 1894, but after he was thoroughly informed in the same year as to all the facts in the case he agreed to other accounts, which necessarily, as he then knew, involved in a repetition of his agreement to the account of 1894. And knowing all the facts in the case, he not only did not join in litigation commenced for the purpose of securing a true statement of the profits but expressly refused to do so and censured the persons who promoted such litigation. The judgment of the court below is affirmed, with the costs of this instance against the appellant. So ordered. Arellano, C.J., Torres, and Tracey, JJ., concur. Separate Opinions JOHNSON, J., dissenting: I can not agree with the conclusion in this case. The following facts were admitted: (1)That the defendant was the administrator or agent in charge of the property of the plaintiff. (2)That the actual profits accruing to the plaintiff by virtue of such administration amounted to about 12,000 pesos. (3)That the defendant paid to the plaintiff of such profits the sum of 1,761.72 pesos. (4)That the plaintiff believed that this amount so received was her share of the accrued profits and gave a receipt for the same. Under these facts the majority of the court held that the receipt so given to the agent was a bar to her right to recover the amount of her share growing out of the administration of her estate by the administrator or agent. Under the view we take of the case it is unimportant whether the defendant was administrator or agent. The rule of law, as we understand it, is exactly the same. No rule of law is better settled than that an agent can not retain for his own use profits made in the course of the agency. Such profits belong to the principal. The well-settled and salutary principle that a person who undertakes to act for another shall not, in the same matter, act for himself, results also in the order rule that all profits made and advantage gained by the agent in the execution of the agency belong to the principal. It matters not whether such profit or advantage be the result of the performance or the violation of the duty of the agent, if his duty be strictly performed, the resulting profit accrues to the principal as the legitimate consequence of the relation; even if the profit accrues from his violation of duty, that likewise belongs to the principal, not only because the principal has to assume the responsibility of the transaction but also because the agent can not be permitted to derive advantage from his own default. The mere fact that the agent, by some means or other, by stating facts or refusing to state all of the facts, induces the principal to accept a certain amount as the profits made in the course of the agency, this fact can not be used for the purpose of preventing the principal from recovering the true amount when the true amount is actually discovered. It is only by rigid adherence to this rule of law that all temptation can be removed from one acting in a fiduciary capacity to abuse his trust or seek his own advantage in the position which it affords him. It matters not how fair the conduct of the agent may have been in a particular case, nor that the principal would have been no better off if the agent had strictly pursued his power, nor that the principal was not, in fact, injured by the intervention of the agent for his own profit. The result in both cases must be the same.

Agency Part E: Liabilities (Art. 1889 - 1893) 19 If an agent dealing legitimately with the subject-matter of his agency acquires a profit, or if by departing from his instructions he obtains better results than would have been obtained by following them, the principal may yet claim the advantage thus obtained, even though the agent may have contributed his own funds or responsibility in producing the result. All profits and every advantage, beyond lawful compensation, made by the agent in a business or by dealing or speculating with the effects of his principal, though in violation of his duty as agent, and though the loss, if one had occurred, would have fallen on the agent, are for the benefit of the principal. (Dutton vs. Willner, 52 N. Y., 312; Gardner vs. Ogden, 22 N. Y., 327; 78 American Decisions, 192.) The principal may, at his own option, in such cases, compel the agent to account for or convey to him the profits thus acquired. (Gardner vs. Ogden, supra.) In no instance and under no condition will the courts allow an agent or trustee to make a profit for his own benefit in the course of his agency or trust relation. The law holds out no such inducement to agents or trustees so to misapply their services to the funds intrusted to their care. An agent by concealing facts from his principal can under no condition be permitted, by sound jurisprudence, to profit thereby. The principal, once such facts are discovered, has the right to recover whatever may be due to him from the agent as the result of the agency. (Merryman vs. David, 31 Ill., 404; Kerfoot vs. Hyman, 52 Ill., 512; Bunker vs. Miles, 30 Maine, 431; 50 American Decisions, 632; Montgomery County vs. Robinson, 85 Ill., 174; In re rose, 80 Cal., 166; Estate of Knight, 12 Cal., 200; 73 American Decisions, 531; Ward vs. Tinkham, 65 Mich., 695.) It is found also that the rule under the Spanish law is no different from the above quoted. Article 1720 of the Civil Code provides: "Every agent is bound to give an account of his transactions and to pay to the principal all that he may have received by virtue of the agency, even though what has been received is not owed to the principal." Not only is he liable to the principal for any sum or sums resulting from such agency, but if he has applied the same to his own use he is liable for interest upon the same. (Art. 1724, Civil Code.) The judgment of the lower court should be reversed and the plaintiff should be permitted to recover, with interest, whatever sum or sums the defendant received as a result of the agency or administration, with costs. ---------------------------------------------------------------------------------------------------------------------------------------EN BANC[G.R. No. L-30573. October 29, 1971.] VICENTE M. DOMINGO, represented by his heirs, ANTONIA RAYMUNDO VDA. DE DOMINGO, RICARDO, CESAR, AMELIA, VICENTE JR., SALVADOR, IRENE and JOSELITO, all surnamed DOMINGO, petitionersappellants, vs. GREGORIO M. DOMINGO, intervenor-respondent. Teofilo Leonin for petitioners-appellants. Osorio, Osorio & Osorio for respondent-appellee. Teofilo P. Purisima in his own behalf as intervenor-respondent. SYLLABUS 1. CIVIL LAW; AGENCY; ARTICLES 1891 AND 1909 OF THE NEW CIVIL CODE; DUTY OF AGENT TO PRINCIPAL. The duties and liabilities of a broker to his employer are essentially those which an agent owes to his principal. Consequently, the decisive legal provisions are found in Articles 1891 and 1909 of 2. ID.; ID.; ID.; ID.; EFFECT OF BREACH OF LOYALTY. An agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from the vendee, without revealing the same to his principal, the vendor, is guilty of a breach of his loyalty to the principal and forfeits his right to collect the commission from his principal, even if the principal does not suffer any injury by reason of such breach of fidelity, or that he obtained better results or that the agency is a gratuitous one, or that usage or custom allows it, because the rule is to prevent the possibility of any wrong, not to remedy or repair an actual damage. 3. ID.; ID.; ID.; ID.; ID.; TAKING OF SECRET PROFIT, TANTAMOUNT TO BREACH. By taking such profit or bonus or gift or propina from the vendee, the agent thereby assumes a position wholly inconsistent with that of being an agent for his principal, who has a right to treat him, insofar as his commission is concerned, as if no agency had existed. The fact that the principal may have been benefited by the valuable services of the said agent does not exculpate the agent who has only himself to blame for such a result by reason of his treachery or perfidy. 4. ID.; ID.; ID.; ID.; ID.; LIABILITY FOR ESTAFA. Because of his responsibility under the aforecited Article 1720, an agent is likewise liable for estafa for failure to deliver to his principal the total amount collected by him in behalf of his principal and cannot retain the commission pertaining to him by subtracting the same from his collections. 5. ID.; ID.; ID.; ID.; ID.; ID.; PRINCIPAL ENTITLED TO RECOVERY OF COMMISSIONS PAID. Where a principal has paid an agent or broker a commission while ignorant of the fact that the latter has been unfaithful, the principal may recover back the commission paid, since an agent or broker who has been unfaithful is not entitled to any compensation. If the agent does not conduct himself with entire fidelity towards his principal, but is guilty of taking a secret profit or commission in regard the matter in which he is employed, he loses his right to compensation on the ground that he has taken a position wholly inconsistent with that of agent for his employer, and which gives his employer, upon discovering it, the right to treat him so far as compensation, at least, is concerned as if no agency had existed. This may operate to give to the principal the benefit of valuable services rendered by the agent, but the agent has only himself to blame for that result. 6. ID.; ID.; ID.; ID.; ID.; ACCOUNTABILITY OF AGENT FOR ALL PROFITS RECEIVED. As a general rule, it is a breach of good faith and loyalty to his principal for an agent, while the agency exists, so to deal with the subject matter thereof, or with information acquired during the course of the agency, as to make a profit out of it for himself in excess of his lawful compensation; and if he does so he may be held as a trustee and may be compelled to account to his principal for all profits, advantages, rights, the New Civil Code. The aforecited provisions demand the utmost good faith, fidelity, honesty, candor and fairness on the part of the agent, the real estate broker in this case, to his principal, the vendor. The law imposes upon the agent the absolute obligation to make a full disclosure or complete account to his principal of all his transactions and other material facts relevant to the agency, so much so that the law as amended does not countenance any stipulation exempting the agent from such an obligation and considers such an exemption as void. The duly of an agent is likened to that of a trustee. This is not a technical or arbitrary rule but a rule founded on the highest and truest principle of morality as well as of the strictest justice.

Agency Part E: Liabilities (Art. 1889 - 1893) 20 or privileges acquired by him in such dealings, whether in performance or in violation of his duties, and be required to transfer them to his principal upon being reimbursed for his expenditures for the same, unless the principal has consented to or ratified the transaction knowing that benefit or profit would accrue, or had accrued, to the agent, or unless with such knowledge he has allowed the agent so as to change his condition that he cannot be put in status quo. The application of this rule is not affected by the fact that the principal did not suffer any injury by reason of the agent's dealings, or that he in fact obtained better results; nor is it affected by the fact that there is a usage or custom to the contrary, or that the agency is a gratuitous one. 7. ID.; ID.; ID.; ID.; WHEN INAPPLICABLE. The duty embodied in Article 1891 of the New Civil Code will not apply if the agent or broker acted only as a middleman with the task of merely bringing together the vendor and vendee, who themselves thereafter will negotiate on the terms and conditions of the transaction. Neither would the rule apply if the agent or broker had informed the principal of the gift or bonus or profit he received from the purchaser and his principal did not object thereto. Herein defendant-appellee Gregorio Domingo was not merely a middleman of the petitioner-appellant Vicente Domingo and the buyer Oscar de Leon. He was the broker and agent of said petitionerappellant only. And herein petitioner-appellant was not aware of the gift of One Thousand Pesos (P1,000.00) received by Gregorio Domingo form the prospective buyer; much less did he consent to his agent's accepting such a gift. DECISION MAKASIAR, J p: Petitioner-appellant Vicente M. Domingo, now deceased and represented by his heirs, Antonina Raymundo vda. de Domingo, Ricardo, Cesar, Amelia, Vicente Jr., Salvacion, Irene and Joselito, all surnamed Domingo, sought the reversal of the majority decision dated March 12, 1969 of the Special Division of Five of the Court of Appeals affirming the judgment of the trial court, which sentenced the said Vicente M. Domingo to pay Gregorio M. Domingo P2,307.50 and the intervenor Teofilo P. Purisima P2,607.50 with legal interest on both amounts from the date of the filing of the complaint, to pay Gregorio Domingo P1,000.00 as moral and exemplary damages and P500.00 as attorney's fees plus costs. The following facts were found to be established by the majority of the Special Division of Five of the Court of Appeals: In a document Exhibit "A" executed on June 2, 1956, Vicente M. Domingo granted Gregorio Domingo, a real estate broker, the exclusive agency to sell his lot No. 883 of Piedad Estate with an area of about 88,477 square meters at the rate of P2.00 per square meter (or for P176,954.00) with a commission of 5% on the total price, if the property is sold by Vicente or by anyone else during the 30-day duration of the agency or if the property is sold by Vicente within three months from the termination of the agency to a purchaser to whom it was submitted by Gregorio during the continuance of the agency with notice to Vicente. The said agency contract was in triplicate, one copy was given to Vicente, while the original and another copy were retained by Gregorio. On June 3, 1956, Gregorio authorized the intervenor Teofilo P. Purisima to look for a buyer, promising him one-half of the 5% commission. Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio as a prospective buyer. Oscar de Leon submitted a written offer which was very much lower than the price of P2.00 per square meter (Exhibit "B"). Vicente directed Gregorio to tell Oscar de Leon to raise his offer. After several conferences between Gregorio and Oscar de Leon, the latter raised his offer to P109,000.00 on June 20, 1956 as evidenced by Exhibit "C", to which Vicente agreed by signing Exhibit "C". Upon demand of Vicente, Oscar de Leon issued to him a check in the amount of P1,000.00 as earnest money, after which Vicente advanced to Gregorio the sum of P300.00. Oscar de Leon confirmed his former offer to pay for the property at P1.20 per square meter in another letter, Exhibit "D". Subsequently, Vicente asked for an additional amount of P1,000.00 as earnest money, which Oscar de Leon promised to deliver to him. Thereafter, Exhibit "C" was amended to the effect that Oscar de Leon will vacate on or about September 15, 1956 his house and lot at Denver Street, Quezon City which is part of the purchase price. It was again amended to the effect that Oscar will vacate his house and lot on December 1, 1956, because his wife was on the family way and Vicente could stay in lot No. 883 of Piedad Estate until June 1, 1957, in a document dated June 30, 1956 (the year 1957 therein is a mere typographical error) and marked Exhibit "D". Pursuant to his promise to Gregorio, Oscar gave him as a gift or propina the sum of One Thousand Pesos (P1,000.00) for succeeding in persuading Vicente to sell his lot at P1.20 per square meter or a total in round figure of One Hundred Nine Thousand Pesos (P109,000.00). This gift of One Thousand Pesos (P1,000.00) was not disclosed by Gregorio to Vicente. Neither did Oscar pay Vicente the additional amount of One Thousand Pesos (P1,000.00) by way of earnest money. When the deed of sale was not executed on August 1, 1956 as stipulated in Exhibit "C" nor on August 16, 1956 as extended by Vicente, Oscar told Gregorio that he did not receive his money from his brother in the United States, for which reason he was giving up the negotiation including the amount of One Thousand Pesos (P1,000.00) given as earnest money to Vicente and the One Thousand Pesos (P1,000.00) given to Gregorio as propina or gift. When Oscar did not see him after several weeks, Gregorio sensed something fishy. So, he went to Vicente and read a portion of Exhibit "A" marked Exhibit "A-1" to the effect that Vicente was still committed to pay him 5% commission, if the sale is consummated within three months after the expiration of the 30-day period of the exclusive agency in his favor from the execution of the agency contract on June 2, 1956 to a purchaser brought by Gregorio to Vicente during the said 30-day period. Vicente grabbed the original of Exhibit "A" and tore it to pieces. Gregorio held his peace, not wanting to antagonize Vicente further, because he had still the duplicate of Exhibit "A". From his meeting with Vicente, Gregorio proceeded to the office of the Register of Deeds of Quezon City, where he discovered Exhibit "G", a deed of sale executed on September 17, 1956 by Amparo Diaz, wife of Oscar de Leon, over their house and lot at No. 40 Denver Street, Cubao, Quezon City, in favor of Vicente as down payment by Oscar de Leon on the purchase price of Vicente's lot No. 883 of Piedad Estate. Upon thus learning that Vicente sold his property to the same buyer, Oscar de Leon and his wife, he demanded in writing payment of his commission on the sale price of One Hundred Nine Thousand Pesos (P109,000.00), Exhibit "H". He also conferred with Oscar de Leon, who told him that Vicente went to him and asked him to eliminate Gregorio in the transaction and that he would sell his property to him for One Hundred Four Thousand Pesos (P104,000.00). In Vicente's reply to Gregorio's letter, Exhibit "H", Vicente stated that Gregorio is not entitled to the 5 % commission because he sold the property not to Gregorio's buyer, Oscar de Leon, but to another buyer, Amparo Diaz, wife of Oscar de Leon.

Agency Part E: Liabilities (Art. 1889 - 1893) 21 The Court of Appeals found from the evidence that Exhibit "A", the exclusive agency contract, is genuine; that Amparo Diaz, the vendee, being the wife of Oscar de Leon, the sale by Vicente of his property is practically a sale to Oscar de Leon since husband and wife have common or identical interests; that Gregorio and intervenor Teofilo Purisima were the efficient cause in the consummation of the sale in favor of the spouses Oscar de Leon and Amparo Diaz; that Oscar de Leon paid Gregorio the sum of One Thousand Pesos (P1,000.00) as "propina" or gift and not as additional earnest money to be given to the plaintiff, because Exhibit "66", Vicente's letter addressed to Oscar de Leon with respect to the additional earnest money, does not appear to have been answered by Oscar de Leon and therefore there is no writing or document supporting Oscar de Leon's testimony that he paid an additional earnest money of One Thousand Pesos (P1,000.00) to Gregorio for delivery to Vicente, unlike the first amount of One Thousand Pesos (P1,000.00) paid by Oscar de Leon to Vicente as earnest money, evidenced by the letter Exhibit "4"; and that Vicente did not even mention such additional earnest money in his two replies Exhibits "I" and "J" to Gregorio's letter of demand of the 5% commission. The three issues in this appeal are (1) whether the failure on the part of Gregorio to disclose to Vicente the payment to him by Oscar de Leon of the amount of One Thousand Pesos (P1,000.00) as gift or "propina" for having persuaded Vicente to reduce the purchase price from P2.00 to P1.20 per square meter, so constitutes fraud as to cause a forfeiture of his 5% commission on the sale price; (2) whether Vicente or Gregorio should be liable directly to the intervenor Teofilo Purisima for the latter's share in the expected commission of Gregorio by reason of the sale; and (3) whether the award of legal interest, moral and exemplary damages, attorney's fees and costs, was proper. Unfortunately, the majority opinion penned by Justice Edilberto Soriano and concurred in by Justice Juan Enriquez did not touch on these issues which were extensively discussed by Justice Magno Gatmaitan in his dissenting opinion. However, Justice Esguerra, in his concurring opinion, affirmed that it does not constitute breach of trust or fraud on the part of the broker and regarded the same as merely part of the whole process of bringing about the meeting of the minds of the seller and the purchaser and that the commitment from the prospective buyer that he would give a reward to Gregorio if he could effect better terms for him from the seller, independent of his legitimate commission, is not fraudulent, because the principal can reject the terms offered by the prospective buyer if he believes that such terms are onerous or disadvantageous to him. On the other hand, Justice Gatmaitan, with whom Justice Antonio Caizares concurred, held the view that such an act on the part of Gregorio was fraudulent and constituted a breach of trust, which should deprive him of his right to the commission. The duties and liabilities of a broker to his employer are essentially those which an agent owes to his principal. 1 Consequently, the decisive legal provisions are found in Articles 1891 and 1909 of the New Civil Code. "Art. 1891.Every agent is bound to render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency, even though it may not be owing to the principal. "Every stipulation exempting the agent from the obligation to render an account shall be void." xxx xxx xxx that: "Art. 1720.Every agent is bound to give an account of his transaction and to pay to the principal whatever he may have received by virtue of the agency, even though what he has received is not due to the principal." The modification contained in the first paragraph of Article 1891 consists in changing the phrase "to pay" to "to deliver", which latter term is more comprehensive than the former. Paragraph 2 of Article 1891 is a new addition designed to stress the highest loyalty that is required to an agent condemning as void any stipulation exempting the agent from the duty and liability imposed on him in paragraph one thereof. Article 1909 of the New Civil Code is essentially a reinstatement of Article 1726 of the old Spanish Civil Code which reads thus: "Art. 1726.The agent is liable not only for fraud, but also for negligence, which shall be judged with more or less severity by the courts, according to whether the agency was gratuitous or for a price or reward." The aforecited provisions demand the utmost good faith, fidelity, honesty, candor and fairness on the part of the agent, the real estate broker in this case, to his principal, the vendor. The law imposes upon the agent the absolute obligation to make a full disclosure or complete account to his principal of all his transactions and other material facts relevant to the agency, so much so that the law as amended does not countenance any stipulation exempting the agent from such an obligation and considers such an exemption as void. The duty of an agent is likened to that of a trustee. This is not a technical or arbitrary rule but a rule founded on the highest and truest principle of morality as well as of the strictest justice. 2 Hence, an agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from the vendee, without revealing the same to his principal, the vendor, is guilty of a breach of his loyalty to the principal and forfeits his right to collect the commission from his principal, even if the principal does not suffer any injury by reason of such breach of fidelity, or that he obtained better results or that the agency is a gratuitous one, or that usage or custom allows it; because the rule is to prevent the possibility of any wrong, not to remedy or repair an actual damage. 3 By taking such profit or bonus or gift or propina from the vendee, the agent thereby assumes a position wholly inconsistent with that of being an agent for his principal, who has a right to treat him, insofar as his Commission is concerned, as if no agency had existed. The fact that the principal may have been benefited by the valuable services of the said agent does not exculpate the agent who has only himself to blame for such a result by reason of his treachery or perfidy. This Court has been consistent in the rigorous application of Article 1720 of the old Spanish Civil Code. Thus, for failure to deliver sums of money paid to him as an insurance agent for the account of his employer as required by said Article 1720, said insurance agent was convicted of estafa. 4 An administrator of an estate was likewise liable under the same Article 1720 for failure to render an "Art. 1909.The agent is responsible not only for fraud, but also for negligence, which shall be judged with more or less rigor by the courts, according to whether the agency was or was not for a compensation." Article 1891 of the New Civil Code amends Article 1720 of the old Spanish Civil Code which provides

Agency Part E: Liabilities (Art. 1889 - 1893) 22 account of his administration to the heirs unless the heirs consented thereto or are estopped by having accepted the correctness of his account previously rendered. 5 Because of his responsibility under the aforecited Article 1720, an agent is likewise liable for estafa for failure to deliver to his principal the total amount collected by him in behalf of his principal and cannot retain the commission pertaining to him by subtracting the same from his collections. 6 A lawyer is equally liable under said Article 1720 if he fails to deliver to his client all the money and property received by him for his client despite his attorney's lien. 7 The duty of a commission agent to render a full account of his operations to his principal was reiterated in Duhart, etc. vs. Macias. 8 The American jurisprudence on this score is well-nigh unanimous. "Where a principal has paid an agent or broker a commission while ignorant of the fact that the latter has been unfaithful, the principal may recover back the commission paid, since an agent or broker who has been unfaithful is not entitled to any compensation. xxx xxx xxx "In discussing the right of the principal to recover commissions retained by an unfaithful agent, the court in Little vs. Phipps (1911) 208 Mass. 331, 94 NE 260, 34 LRA (NS) 1046, said: 'It is well settled that the agent is bound to exercise the utmost good faith in his dealings with his principal. As Lord Cairns said, this rule "is not a technical or arbitrary rule. It is a rule founded on the highest and truest principles of morality." Parker vs. McKenna (1874) LR 10 Ch (Eng) 96, 118.. If the agent does not conduct himself with entire fidelity towards his principal, but is guilty of taking a secret profit or commission in regard the matter in which he is employed, he loses his right to compensation on the ground that he has taken a position wholly inconsistent with that of agent for his employer, and which gives his employer, upon discovering it, the right to treat him so far as compensation, at least, is concerned as if no agency had existed. This may operate to give to the principal the benefit of valuable services rendered by the agent, but the agent has only himself to blame for that result.' xxx xxx xxx "The intent with which the agent took a secret profit has been held immaterial where the agent has in fact entered into a relationship inconsistent with his agency, since the law condemns the corrupting tendency of the inconsistent relationship. Little vs. Phipps (1911) 94 NE 260." 9 "As a general rule, it is a breach of good faith and loyalty to his principal for an agent, while the agency exists, so to deal with the subject matter thereof, or with information acquired during the course of the agency, as to make a profit out of it for himself in excess of his lawful compensation: and if he does so he may be held as a trustee and may be compelled to account to his principal for all profits, advantages, rights, or privileges acquired, by him in such dealings, whether in performance or in violation of his duties, and be required to transfer them to his principal upon being reimbursed for his expenditures for the same, In the case at bar, defendant-appellee Gregorio Domingo as the broker, received a gift or propina in the amount of One Thousand Pesos (P1,000.00) from the prospective buyer Oscar de Leon, without the knowledge and consent of his principal, herein petitioner-appellant Vicente Domingo. His acceptance of said substantial monetary gift corrupted his duty to serve the interests only of his principal and undermined his loyalty to his principal, who gave him a partial advance of Three Hundred Pesos (P300.00) on his commission. As a consequence, instead of exerting his best to persuade his prospective buyer to purchase the property on the most advantageous terms desired by his principal, the broker, herein defendant-appellee Gregorio Domingo, succeeded in persuading his principal to accept the counter-offer of the prospective buyer to purchase the property at P1.20 per square meter or One Hundred Nine Thousand Pesos (P109,000.00) in round figure for the lot of 88,477 square meters, which is very much lower than the price of P2.00 per square meter or One Hundred Seventy-Six Thousand Nine Hundred Fifty-Four Pesos (P176,954.00) for said lot originally offered by his principal. The duty embodied in Article 1891 of the New Civil Code will not apply if the agent or broker acted only as a middleman with the task of merely bringing together the vendor and vendee, who themselves thereafter will negotiate on the terms and conditions of the transaction. Neither would the rule apply if the agent or broker had informed the principal of the gift or bonus or profit he received from the purchaser and his principal did not object thereto 11 Herein defendant appellee Gregorio Domingo was not merely a middleman of the petitioner-appellant Vicente Domingo and the buyer Oscar de Leon. He was the broker and agent of said petitioner-appellant only. And therein petitioner-appellant was not aware of the gift of One Thousand Pesos (P1,000.00) received by Gregorio Domingo from the prospective buyer; much less did he consent to his agent's accepting such a gift. The fact that the buyer appearing in the deed of sale is Amparo Diaz, the wife of Oscar de Leon, does not materially alter the situation; because the transaction, to be valid, must necessarily be with the consent of the husband Oscar de Leon, who is the administrator of their conjugal assets including their house and lot at No. 40 Denver Street, Cubao, Quezon City, which were given as part of and constituted the down payment on, the purchase price of herein petitioner-appellant's lot No. 883 of Piedad Estate. Hence, both in law and in fact, it was still Oscar de Leon who was the buyer. As a necessary consequence of such breach of trust, defendant-appellee Gregorio Domingo must forfeit his right to the commission and must return the part of the commission he received from his principal. Teofilo Purisima, the sub-agent of Gregorio Domingo, can only recover from Gregorio Domingo his one-half share of whatever amounts Gregorio Domingo received by virtue of the transaction as his subunless the principal has consented to or ratified the transaction knowing that benefit or profit would accrue, or had accrued, to the agent, or unless with such knowledge he has allowed the agent so as to change his condition that he cannot be put in status quo. The application of this rule is not affected by the fact that the principal did not suffer any injury by reason of the agent's dealings, or that he in fact obtained better results; nor is it affected by the fact that there is a usage or custom to the contrary, or that the agency is a gratuitous one ." (Emphasis supplied.) 10

Agency Part E: Liabilities (Art. 1889 - 1893) 23 agency contract was with Gregorio Domingo alone and not with Vicente Domingo, who was not even aware of such sub-agency. Since Gregorio Domingo received from Vicente Domingo and Oscar de Leon respectively the amounts of Three Hundred Pesos (P300.00) and One Thousand Pesos (P1,000.00) or a total of One Thousand Three Hundred Pesos (P1,300.00), one-half of the same, which is Six Hundred Fifty Pesos (P650.00), should be paid by Gregorio Domingo to Teofilo Purisima. Because Gregorio Domingo's clearly unfounded complaint caused Vicente Domingo mental anguish and serious anxiety as well as wounded feelings, petitioner-appellant Vicente Domingo should be awarded moral damages in the reasonable amount of One Thousand Pesos (P1,000.00) and attorney's fees in the reasonable amount of One Thousand Pesos (P1,000.00), considering that this case has been pending for the last fifteen (15) years from its filing on October 3, 1956. WHEREFORE, the judgment is hereby rendered, reversing the decision of the Court of Appeals and directing the defendant-appellee Gregorio Domingo: (1) to pay to the heirs of Vicente Domingo the sum of One Thousand Pesos (P1,000.00) as moral damages and One Thousand Pesos (P1,000.00) as attorney's fees; (2) to pay Teofilo Purisima the sum of Six Hundred Fifty Pesos (P650.00); and (3) to pay the costs. Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo and Villamor, JJ., concur. ---------------------------------------------------------------------------------------------------------------------------------------FIRST DIVISION [G.R. No. 10099. January 27, 1916.] TEOFILA DEL ROSARIO DE COSTA and BERNARDINO COSTA, plaintiffs-appellants, vs. LA BADENIA, a corporation, defendant-appellee. Albert E. Somersille for appellants. Williams, Ferrier & SyCip for appellee. SYLLABUS 1. PRINCIPAL AND AGENT; LIABILITY OF PRINCIPAL. The principal is liable upon subagency contracts entered into by a general agent in the name of the principal, when it appears that the general agent was clothed with such broad powers as to justify the inference that he was authorized to execute contracts of this kind, and it not appearing from the record what limitations, if any, were placed upon his powers to act for his principal. DECISION CARSON, J p: The plaintiffs, Teofila del Rosario de Costa and her husband, Bernardino Costa, brought this action to recover from the defendant corporation the sum of P1,795.25 a balance alleged to be due Teofila del Rosario de Costa as the agent of the defendant corporation for services rendered and expenses incurred in the sale of its products. The defendant denied the claim and set up counterclaim for P55.43. Judgment having been rendered in favor of the defendant, the record is now before us on plaintiffs' bill of exceptions. The plaintiffs are residents of Legaspi, Albay, and the defendant corporation is engaged in the manufacture and sale of tobacco products with its head office in the city of Manila. The record shows that in the year 1911 the defendant corporation, a new concern, inaugurated an extensive selling campaign for the purpose of introducing its product to the retail trade. Celestino Aragon, a general agent of the defendant corporation, was in charge of this campaign in Albay, Sorsogon, and other provinces in the southern end of Luzon. He established a central distributing agency or depot at Legaspi with the plaintiff, Teofila del Rosario de Costa, nominally in charge, though her husband, Bernardino de Costa appears to have been the actual manager of the agency. The business relations between the plaintiffs and the defendant extended from February 1, 1911, to March 24, 1912, and during this time no settlement of their accounts was ever had. When Aragon, the general agent, came to Legaspi in 1911 he established his headquarters there and took up his residence with the plaintiffs, using the lower part of their house as a store room or depository for large quantities of cigarettes and cigars. He employed a number of persons as solicitors and paid their salaries; he paid the internal revenue fees incident to the conduct of the business in Legaspi, and also the rent of the building in which he lived with the plaintiffs and which he made use of as the general headquarters for the agency. The record shows that business amounting to more than P24,000 (wholesale) was done by the Legaspi agency from February 1, 1911, to March 24, 1912. All goods sent to Legaspi were charged by the head office at Manila against the general agent, Aragon, while on the books kept by Aragon these goods were charged against the plaintiffs, and as goods were withdrawn by himself, he credited the amount of the withdrawals to the account of the plaintiffs. The business at Legaspi appears to have been that of a distributing agency actively in charge of the plaintiffs but over which the general agent maintained a close supervision. Goods were withdrawn from the depository at Legaspi from time to time by the general agent for shipment to other points; goods were likewise withdrawn by plaintiffs and shipped to neighboring towns without any intervention on the part of the general agent. All accounts incident to the business were carried on the books of Aragon. The plaintiffs do not appear to have kept a separate set of books. The account as carried on the books of Aragon, the general agent, was between Teofila del Rosario de Costa and La Badenia, the defendant corporation. On March 24, 1912, the general agent had a settlement with the plaintiffs and acknowledged over his signature that these books showed a balance in favor of the plaintiffs amounting to P1,795.25. Plaintiffs' Exhibit B is a tabulated statement taken from the books of account kept by Aragon and shows in detail the whole course of the business at Legaspi from February 1, 1911, to March 24, 1912. In this statement goods received by the Legaspi agency from the factory in Manila are charged against Teofila del Rosario de Costa, while credits are given on various items, such as, withdrawals of goods from the depository at Legaspi shipped to other towns, remittances made to the head office in Manila, money paid over to the general agent, advertising expenses, commissions on sales, salaries of employees, and other expenses incident to the conduct of the business. When this final settlement of accounts was had on the 24th of March, 1912, both Aragon and the plaintiff, Teofila del Rosario de Costa, confirmed it as a true statement of the account. The defendant corporation however, refused to pay over to plaintiffs the balance of P1,795.25, claiming that plaintiffs had been improperly allowed a credit of P1,850.68 which represented unpaid accounts due the business in Legaspi for cigars and cigarettes sold by it. If these uncollected claims are charged to the defendant corporation a balance is left in favor of plaintiffs amounting to P1,795.25; and if charged to plaintiffs there remains a balance in favor of the defendant corporation amounting to P55.43.

Agency Part E: Liabilities (Art. 1889 - 1893) 24 It is the contention of the defendant corporation that the plaintiffs were simply merchants who purchased the goods at fixed wholesale prices and sold them on their own account, and that they were never employed as their agents. On the other hand plaintiffs contend that they were the agents of the defendant corporation; that they received commissions on the sales made by the agency; and that they were authorized to extend a reasonable credit under the supervision of the general agent. It is not clear from the record just what were the precise terms of the arrangement made by Aragon with the plaintiffs. It is not denied however, that Aragon was acting as the general agent of the defendant corporation and that as such he was invested with authority to inaugurate and carry out a selling campaign with a view of interesting the sale of the defendant's products in the territory assigned to him. The record does not show what limitations, if any, were placed upon his powers to act for the corporation. The general conduct of the selling campaign intrusted to him was approved and commended by the head office, and judging from the amount of the sales the business appears to have been a very prosperous one for the corporation. It appears further that the head office at Manila was fully informed of plaintiffs' relations with the general agent in extending the sales of its products. Plaintiffs made direct remittances to the head office in Manila and these remittances were credited to the account of the agency at Legaspi, and acknowledgment was made directly to the plaintiffs. Neither the head office nor Aragon appear to have made any distinction between the business done by Aragon and that done by the plaintiffs. The purchases, sales and remittances made by the plaintiffs do not seem to have been considered as those of an independent business concern, but rather as a part of the work of the Legaspi agency under the control and supervision of Aragon. The fact that the defendant corporation carried the Legaspi account in the name of the general agent, Aragon, and carried no account with the plaintiffs, would seem to negative the contention that plaintiffs were simply merchants purchasing their goods in Manila at wholesale ad selling them locally on their own account. The active management and participation of the plaintiffs in the conduct of the business at Legaspi are fully recognized in the following letters written by the assistant manager of the defendant corporation to one of the plaintiffs. EXHIBIT A. "MANILA, P. I., October 9, 1911. "Mr. BERNARDINO COSTA, Legaspi, Albay. "DEAR SIR: We have the pleasure of hereby acknowledging receipt of your two letters dated the 4th instant, in which we found enclosed two drafts, to wit: "No. 528c/ Ang SiliongP200 "No. 1240c/ Smith, Bell & Co980 _____ "1,180 Which sum of one thousand one hundred and eighty pesos we have duly credited on the account current of Mr. Celestino Aragon. Aragon extended credit to certain purchasers of cigars and cigarettes and the entries made by him on his books of account show that he knew that the plaintiff were also extending credit to some of the purchasers of the goods shipped from Legaspi. He approved the very items now questioned when as general agent of the defendant corporation he signed the statement of account showing a balance of P1,795.25 in favor of the plaintiffs. Aragon thereby admitted that he, at least, considered these outstanding claims as properly chargeable against the defendant corporation, and unless the plaintiffs had been specifically authorized by him to extend credit it seems certain that he would never have approved this balance in their favor. It is contended that it is unreasonable that plaintiffs would have so large a balance in their favor, and that they are now merely seeking to saddle upon the defendant corporation a lot of charge. "We are, yours very sincerely, "LA BADENIA, INC., "______ ______, Assistant Manager." Several other letters received by the plaintiffs from the defendant corporation were offered in evidence, but the two letters just quoted are sufficient to show that the defendant was fully aware of plaintiffs' connection with the agency at Legaspi, and recognized them as agents of the company, and clearly did not consider them as independent merchants buying solely on their own account, but rather as subagents working under the supervision of the general agent, Aragon. It seems equally clear that Aragon did not consider the plaintiffs as independent merchants operating on their own account, but rather as agents cooperating with him and working under his supervision. This fact is clearly borne out by the nature of the entries made in his books of account. A reference to that statement taken from the books of account shows that the plaintiffs were given credit on various items, such as advertising expenses, the free distribution of cigars and cigarettes for advertising purposes, freight and carriage charges on shipments to neighboring towns, and the like, and it does not seem at all likely that plaintiffs would have been allowed credit on such items if they had been conducting the business solely on their own account. EXHIBIT B. "MANILA, P. I., Sept. 19, 1911. "Mr. BERNARDINO COSTA, Legaspi, Albay. "DEAR SIR: We have the pleasure of hereby acknowledging receipt of your letter dated the 12th instant, of which we have made note. "By the steamer Cebu we are sending, according to the attached invoice, 3 boxes of small cigars (cajas de tabaquitos) for the agency in your "We also acknowledge receipt of the bill of lading for the eight packages you have forwarded to us, but to date we have not received said packages. As soon as we get them we will send you timely notice. "We are, yours very sincerely, "LA BADENIA, INC., "______ _______, Assistant Manager."

Agency Part E: Liabilities (Art. 1889 - 1893) 25 unpaid accounts. In view of the fact that plaintiffs are only seeking to enforce the payment of a balance admitted by the general agent of the defendant corporation to be rightly due them, we fail to see how it can be reasonably urged that plaintiffs are attempting to saddle these unpaid claims on the defendant. The general agent who was in control of the Legaspi business, and who was fully conversant with all of its details, clearly recognized the right of the plaintiffs to have credit on their account for the amount of these unpaid claims. This agent had employed the plaintiffs to assist him in extending the sale of the defendant's products, and the defendant was well aware of this fact. Certainly the only reliable source of information as to what plaintiffs' account with the defendant corporation was, is to be found in the books kept by the general agent, Aragon. The defendant carried no account whatever with the plaintiffs, and having intrusted the entire management of the Legaspi business to Aragon, it can not now come into court and repudiate the account confirmed by him, unless it can show that he acted beyond the scope of his authority in making the arrangement he did with the plaintiffs. Aragon's powers as a selling agent appear to have been very broad, and there is no evidence in the record to indicate that he acted beyond his powers in conducting the business at Legaspi as he did; and there can be no doubt that plaintiffs had been authorized by him to extend credit on behalf of the agency. There is no other reasonable explanation of the entries made by Aragon in his books of account, and his approval of the balance in favor of the plaintiffs. The lower court was of the opinion that the specific goods sold to the delinquent debtors, whose unpaid accounts form the basis of this litigation, had already been paid for by the plaintiffs and that this was conclusive evidence that the plaintiffs were not acting as the agents of the defendant corporation, and that in effect, the purpose of this suit was to recover back money already paid for the goods purchased and sold by the plaintiffs. We find ourselves unable to agree with the conclusions of the trial court in this respect. It appears that the plan under which the business was conducted was as follows: a shipment of cigars and cigarettes was made from the Manila office and charged against the account of the general agent, Aragon; these goods were deposited in the store room at Legaspi, and in the account carried by Aragon were charged against the plaintiffs. Withdrawals were made from the Legaspi stock by Aragon and the plaintiffs, and credit was given the plaintiffs for the amount of the withdrawals made by Aragon. Both Aragon and the plaintiffs drew on the Legaspi stock for advertising purposes, such as the free distribution of cigars and cigarettes, and plaintiffs were credited with the value of the goods so withdrawn. The stock on hand was being replenished from time to time by new shipments received from Manila. The plaintiffs made remittances to Manila which were credited to the account of the Legaspi agency and this account included not only the goods sold and withdrawn from stock by the plaintiffs, but also the goods withdrawn by Aragon. Thus evidently these remittances were not in payment of any particular shipments, but were simply payments on account and covered goods sold by Aragon as well as those sold by the plaintiffs. Remittances were doubtless made to Manila by Aragon and credited on the agency account in the same manner. Under this method of conducting the business a balance for or against the plaintiffs might well remain at any time, and such a balance would not be determined solely by the value of the goods withdrawn from stock by the plaintiffs, and the amount of the remittances made by them, but would be determined by the total value of the stock of the Legaspi agency charged against the plaintiffs and the amounts allowed them as credits; these credits would include not only the remittances made to Manila, but also goods withdrawn by Aragon, and such other items as might constitute proper credits on the account. We do not therefore think it at all unreasonable that a balance should have remained in favor of the plaintiffs when the settlement was made, nor do we see that the existence of such a balance would necessarily indicate that the plaintiffs had overpaid their account with the defendant corporation. It is further contended that the goods were charged to plaintiffs at wholesale prices, and that they were to have as profits any amounts received over and above the wholesale cost price on the goods sold by them, and it is urged that such an arrangement indicates that they were independent merchants doing business on their own account. Even granting that such was the arrangement made with the plaintiffs by Aragon, it does not necessarily follow that they were conducting an independent business on their own account. As already stated, the record does not disclose what were the precise terms of the arrangement made with the plaintiffs. The record does show however, that in many instances the plaintiffs were allowed commissions on sales made by them, but whether or not these were in addition to other profits allowed them the record does not show. Upon a careful examination of the whole record we are satisfied that plaintiffs were not conducting an independent business but were the agents of the defendant corporation operating under the supervision of the general agent, Aragon. For the reasons set out we are of the opinion, and so hold, that plaintiffs are entitled to the reversal of the judgment appealed from and to a judgment against La Badenia, the defendant corporation, for the sum of P1,795.25, with legal interest thereon from August 5, 1914, the date of filing the complaint, until paid, and their costs in both instances. Let judgment be entered in accordance herewith. So ordered. Arellano, C. J., Torres, Johnson, Moreland, and Trent, JJ., concur.