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Cases in Agency 1
776 SUPREME COURT REPORTS ANNOTATED
Philippine National Bank vs. Manila Surety & Fidelity Co., Inc.
No. L-20567. July 30, 1965.
PHILIPPINE NATIONAL BANK, petitioner, vs. MANILA SURETY &
FIDELITY CO., INC. and THE COURT OF APPEALS (Second Division),
respondents.
Agency; Duty of agent to act with the care of a good father of a
family. An agent is required to act with the care of a good father of a
family and becomes liable for the damages which the principal may
suffer through his non-performance.
Same; Same; Bank liable for neglect in collecting sums due its
debtor. A bank is answerable for negligence in failing to collect the
sums due its debtor from the latters own debtor, contrary to said banks
duty as holder of an exclusive and irrevocable power of attorney to make
such collections.
Suretyship; Surety released when assigned funds permitted by
creditor to be exhausted without notifying former. By allowing the
assigned funds to be exhausted without notifying the surety, the creditor
deprives the surety of any possibility of recoursing against that security,
and therefore the surety is released.
PETITION for review of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Besa, Galang & Medina for petitioner.
De Santos & Delfino for respondents.
777
VOL. 14, JULY 30, 1965 777
Philippine National Bank vs. Manila Surety & Fidelity Co., Inc.
REYES, J.B.L., J .:
The Philippine National Bank petitions for the review and reversal of the
decision rendered by the Court of Appeals (Second Division), in its case
CA-G.R. No. 24232- R, dismissing the Banks complaint against
respondent Manila Surety & Fidelity Co., Inc., and modifying the
judgment of the Court of First Instance of Manila in its Civil Case No.
11263.
The material facts of the case, as found by the appellate Court, are
as follows:
The Philippine National Bank had opened a letter of credit and
advanced thereon $120,000.00 to Edgington Oil Refinery for 8,000 tons
of hot asphalt. Of this amount, 2,000 tons worth P279,000.00 were
released and delivered to Adams & Taguba Corporation (known as
ATACO) under a trust receipt guaranteed by Manila Surety & Fidelity Co.
up to the amount of P75,000.00. To pay for the asphalt, ATACO
constituted the Bank its assignee and attorney-infact to receive and
collect from the Bureau of Public Works the amount aforesaid out of
funds payable to the assignor under Purchase Order No. 71947. This
assig nment (Exhibit A) stipulated that:
The conditions of this assignment are as follows:
1. 1. The same shall remain irrevocable until the said credit
accommodation is fully liquidated.
2. 2. The PHILIPPINE NATIONAL BANK is hereby appointed as our
Attorney-in-Fact for us and in our name, place and stead, to
collect and to receive the payments to be made by virtue of the
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Cases in Agency 2
aforesaid Purchase Order, with full power and authority to
execute and deliver on our behalf, receipt for all payments made
to it; to endorse for deposit or encashment checks, money order
and treasury warrants which said Bank may receive, and to
apply said payments to the settlement of said credit
accommodation.
This power of attorney shall also remain irrevocable until our total
indebtedness to the said Bank have been fully liquidated. (Exhibit E)
ATACO delivered to the Bureau of Public Works, and the latter accepted,
asphalt to the total value of P431,466.-52. Of this amount the Bank
regularly collected, from
778
778 SUPREME COURT REPORTS ANNOTATED
Philippine National Bank vs. Manila Surety & Fidelity Co., Inc.
April 21, 1948 to November 18, 1948, P106,382.01. Thereafter, for
unexplained reasons, the Bank ceased to collect, until in 1952 its
investigators found that more moneys were payable to ATACO from the
Public Works office, because the latter had allowed another creditor to
collect funds due to ATACO under the same purchase order, to a total of
P311,230.41.
Its demands on the principal debtor and the Surety having been
refused, the Bank sued both in the Court of First Instance of Manila to
recover the balance of P158,563.18 as of February 15, 1950, plus
interests and costs.
On October 4, 1958, the trial court rendered a decision, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered as follows:
1. 1. Ordering defendants, Adams & Taguba Corporation and Manila
Surety & Fidelity Co., Inc., to pay plaintiff, Philippine National
Bank, the sum of P174,462.34 as of February 24, 1956, minus
the amount of P8,000 which defendant, Manila Surety Co., Inc.
paid from March, 1956 to October, 1956 with interest at the rate
of 5% per annum from February 25, 1956, until fully paid
provided that the total amount that should be paid by defendant
Manila Surety Co., Inc., on account of this case shall not exceed
P75,000.00, and to pay the costs;
2. 2. Ordering cross-defendant, Adams & Taguba Corporation, and
third-party defendant, Pedro A. Taguba, jointly and severally, to
pay cross and third-party plaintiff, Manila Surety & Fidelity Co ,
Inc., whatever amount the latter has paid or shall pay under this
judgment;
3. 3. Dismissing the complaint insofar as the claim for 17% special tax
is concerned; and
4. 4. Dismissing the counterclaim of defendants Adams & Taguba
Corporation and Manila Surety & Fid elity Co., Inc.
From said decision, only the defendant Surety Company has duly
perfected its appeal. The Central Bank of the Philippines did not appeal,
while defendant ATACO failed to perfect its appeal.
The Bank recoursed to the Court of Appeals, which rendered an
adverse decision and modified the judgment of the court of origin as to
the suretys liability. Its motions for reconsideration having proved
unavailing, the Bank appealed to this Court.
779
VOL. 14, JULY 30, 1965
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Cases in Agency 3
Philippine National Bank vs. Manila Surety & Fidelity Co., Inc.
The Court of Appeals found the Bank to have been negligent in having
stopped collecting from the Bureau of Public Works the moneys falling
due in favor of the principal debtor, ATACO, from and after November
18, 1948, before the debt was fully collected, thereby allowing such funds
to be taken and exhausted by other creditors to the prejudice of the
surety, and held that the Banks negligence resulted in exoneration of
respondent Manila Surety & Fidelity Company.
This holding is now assailed by the Bank. It contends the power of
attorney obtained from ATACO was merely an additional security in its
favor, and that it was the duty of the surety, and not that of the creditor,
to see to it that the obligor fulfills his obligation, and that the creditor
owed the surety no duty of active diligence to collect any sum from the
principal debtor, citing Judge Advocate General vs. Court of Appeals,
G.R. No. L-10671, October 23, 1958.
This argument of appellant Bank misses the point. The Court of
Appeals did not hold the Bank answerable for negligence in failing to
collect from the principal debtor but for its neglect in collecting the sums
due to the debtor from the Bureau of Public Works, contrary to its duty as
holder of an exclusive and irrevocable power of attorney to make such
collections, since an agent is required to act with the care of a good
father of a family (Civ. Code, Art. 1887) and becomes liable for the
damages which the principal may suffer through his non-performance
(Civ. Code, Art. 1884). Certainly, the Bank could not expect that the Bank
would diligently perform its duty under its power of attorney, but because
they could not have collected from the Bureau even if they had attempted
to do so. It must not be forgotten that the Banks power to collect was
expressly made irrevocable, so that the Bureau of Public Works could
very well refuse to make payments to the principal debtor itself, and a
fortiori reject any demands by the surety.
Even if the assignment with power of attorney from the principal
debtor were considered as mere additional secu-
780
780 SUPREME COURT REPORTS ANNOTATED
Philippine National Bank vs. Manila Surety & Fidelity Co., Inc.
rity, still, by allowing the assigned funds to be exhausted without notifying
the surety, the Bank deprived the former of any possibility of recoursing
against that security. The Bank thereby exonerated the surety, pursuant
to Article 2080 of the Civil Code:
ART. 2080. The guarantors, even though they be solidary, are
released from their obligation whenever by some act of the creditor they
cannot be subrogated to the rights, mortgages and preferences of the
latter. (Italics supplied.)
The appellant points out to its lett er of demand, Exhibit K, addressed to
the Bureau of Public Works, on May 5, 1949, and its letter to ATACO,
Exhibit G, informing the debtor that as of its date, October 31, 1949, its
outstanding balance was P156,374.83. Said Exhibit G has no bearing
on the issue whether the Bank has exercised due diligence in collecting
from the Bureau of Public Works, since the letter was addressed to
ATACO, and the funds were to come from elsewhere. As to the letter of
demand on the Public Works office, it does not appear that any reply
thereto was made; nor that the demand was pressed, nor that the debtor
or the surety were ever apprised that payment was not being made. The
fact remains that because of the Banks inactivity the other creditors were
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enabled to collect P173,870.31, when the balance due to appellant Bank
was only P158,563.18. The finding of negligence made by the Court of
Appeals is thus not only conclusive on us but fully supported by the
evidence.
Even if the Court of Appeals erred on the second reason it advanced
in support of the decision now under appeal, because the rules on
application of payments, giving preference to secured obligations are
only operative in cases where there are several distinct debts, and not
where there is only one that is partially secured, the error is of no
importance, since the principal reason based on the Banks negligence
furnishes adequate support to the decision of the Court of Appeals that
the surety was thereby released.
WHEREFORE, the appealed decision is affirmed, with costs against
appellant Philippine National Bank.
781
VOL. 14, JULY 30, 1965 781
Free Employees and Workers Asso. (FEWA) vs. Court of Industrial Relations
Bengzon, C.J., Concepcion, Paredes, Dizon, Regala,
Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur.
Bautista Angelo, J., took no part.
Barrera, J., on leave, did not take part
Decision affirmed.
o0o
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Cases in Agency 5
[No. 49219. December 11, 1946]
PABLO D. PALMA, petitioner, vs. EDUARDO REYES CRISTOBAL,
respondent.
3. 1. PRINCIPAL AND AGENT; FIDUCIARY RELATIONS; AGENT
CANNOT ACQUIRE TlTLE TO SUBJECT MATTER OF
AGENCY ADVERSE TO THAT OF PRINCIPAL. The relations
of an agent to his principal
713
VOL. 77, DECEMBER 11, 1946 713
Palma vs. Cristobal
5. are fiduciary and in regard to property forming the subject matter of the
agency, he is estopped from acquiring or asserting a title
adverse to that of 'the principal. His position is analogous to that
of a trustee and he cannot consistently, with the principles of
good faith, be allowed to create in himself an interest in
opposition to that of his principal or cestui que trust.
1. 2. TRUSTS AND TRUSTEES; LAND REGISTRATION ;
REGISTRATION IN NAME OF TRUSTEES FOR BENEFIT OF
"CESTUI QUE TRUST." The registration of the property in the
name of the trustees in possession thereof, must be deemed to
have been effected for the benefit of the cestui que trust.
1. 3. LAND REGISTRATION ; RIGHT OF REAL OWNERS TO
RECOVER LAND DECREED IN FAVOR OF ANOTHER;
EXCEPTION. Whether or not there is bad faith or fraud in
obtaining a decree with respect to a registered property, the
same does not belong to the person in whose favor it was
issued, and the real owners would be entitled to recover the
ownership of the property so long as the same has not been
transferred to a third person who had acquired it in good faith
and for a valuable consideration. This right to recover is
sanctioned by section 58 of Act No. 496, as amended by Act No.
3322.
1. 4. ID.; ID.; ESTOPPEL; APPEARANCE OF CO-OWNER AS
ATTORNEY FOR PERSON SECURING REGISTRATION.
Respondent is not barred from claiming that he is a co-owner
because his appearance as attorney for petitioner was not a
misrepresentation which would induce petitioner to believe that
respondent recognized the former as the sole owner of the
property in controversy. The misrepresentation could deceive the
court and outsiders, because they were not aware of the
understanding between the co-owners that the property be
registered in the name of petitioner.
1. 5. TRUSTS AND TRUSTEES; TRUSTEE CANNOT ACQUIRE BY
PRESCRIPTION PROPERTY HELD IN TRUST. A trustee
cannot acquire by prescription the ownership of a property
entrusted to him. The position of a trustee is of representative
nature. It is logical that all benefits derived by the possession
and acts of the agent, as such agent, should accrue to the
benefit of his principal.
ORIGINAL ACTION in the Supreme Court. Certiorari.
The facts are stated in the opinion of the court..
Vicente J. Francisco and Guillermo B. Guevara for petitioner.
714
714 PHILIPPINE REPORTS ANNOTATED
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Cases in Agency 6
Palma vs. Cristobal
Antonio Gonzales for respondent.
PERFECTO, J.:
A parcel of land located in Quesada Street, Tondo Manila, covered by
transfer certificate of title No. 31073 of the Register of Deeds of Manila,
issued in favor of petitioner Pablo D. Palma, is the subject of contention
between the parties.
Petitioner sought, at first, to eject respondent Eduardo Cristobal
Reyes from the land in question in a complaint filed with the Municipal
Court of Manila. As respondent raised the question of ownership, the
complaint was dismissed, and petitioner filed with the Court of First
Instance of Manila the complaint which initiated this case, petitioner
praying that he be declared the owner of the land and that respondent be
ordered to restore its possession and to remove his house therefrom.
The complaint was dismissed and petitioner brought the case to the
Court of Appeals, where he again failed, the appealed judgment having
been affirmed by a decision penned by Mr. Justice Padilla, concurred in
by Mr. Justice Jose G. Generoso and Mr. Justice Pedro Tuason.
The case is now before us on appeal by certiorari.
In 1909, after registration proceedings under the provisions of Act
No. 496, original certificate of title No. 1627 was issued in the names of
petitioner and his wife Luisa Cristobal. In 1923, said certificate was
cancelled and substituted by certificate of title No. 20968 by virtue of a
decree issued by the Court of First Instance of Manila in connection with
the Manila cadastre. It was later substituted by certificate of title No.
26704, also in the name of petitioner and his wife. After the latter's death
in 1922, a new certificate of title was issued in 1923 only in the name of
petitioner, substituted in 1928 by certificate of title No. 31073.
The Court of Appeals, upon the evidence, concluded with the Court
of First Instance of Manila that the parcel of land in question is a
community property held by petitioner
715
VOL. 77, DECEMBER 11, 1946
Palma vs. Cristobal
in trust for the real owners (the respondent being an heir of one of them),
the registration having been made in accordance with an understanding
between the co-owners, by reason of the confidence they had in
petitioner and his wife. This confidence, close relationship, and the fact
that the co-owners were receiving their shares in the rentals, were the
reasons why no step had been taken to partition the property.
The Court of Appeals explains' that it was only after the death of
Luisa Cristobal and petitioner had taken a second wife that trouble on
religious matters arose between petitioner and respondent, and it gives
credence to the testimony of Apolonia Reyes and respondent to the
effect that Luisa, before her death, called her husband, the petitioner,
and enjoined him to give her co-owners their shares in the parcel of land;
but respondent told her then not to worry about it, for it was more
important to them to have her cured of the malady that affected her.
Petitioner answered his wif e that she should not worry because he
would take care of the matter by giving the co-owners their respective
shares.
Petitioner assigns as first error of the Court of Appeals the fact that it
considered the oral testimony adduced in behalf of respondent sufficient
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to rebut the legal presumption that petitioner is the owner of the land in
controversy.
In Severino vs. Severino (43 Phil., 343), this court declared that "the
relations of an agent to his principal are fiduciary and it is an elementary
and very old rule that in regard to property forming the subject-matter of
the agency, he is estopped from acquiring or asserting a title adverse to
that of the principal. His position is analogous to that of a trustee and he
cannot consistently, with the principles of good faith, be allowed to create
in himself an interest in opposition to that of his principal or cestui que
trust" Affirming the said doctrine in Barretto vs. Tuason (50 Phil., 888),
the Supreme Court declared that the registration of the property in the
name of the trustees
716
716 PHILIPPINE REPORTS ANNOTATED
Palma vs. Cristobal
in possession thereof, must be deemed to have been effected for the
benefit of the cestui que trust. In Palet vs. Tejedor (55 Phil., 790), it was
declared that whether or not there is bad faith or fraud in obtaining a
decree with respect to a registered property, the same does not belong
to the person in whose favor it was issued, and the real owners would be
entitled to recover the ownership of the property so long as the same has
not been transferred to a third person who has acquired it in good faith
and for a valuable consideration. This right to recover is sanctioned by
section 55 of Act No. 496, as amended by Act No. 3322.
There is no showing why the conclusions of facts of the Court of
Appeals should be disturbed, and upon said facts petitioner's first
assignment of error appears to be untenable in the light of law and of the
decisions of this court.
Petitioner alleged that the Court of Appeals erred in not holding the
respondent estopped from claiming that petitioner is not the absolute
owner of the property in question because, after Luisa Cristobal,
petitioner's wife, died in 1922, instead of moving for the partition of the
property, considering specially that petitioner had promised such a
partition at the deathbed of the deceased, respondent appeared as
attorney for petitioner and prayed that a new certificate of title be issued
in the name of said petitioner as the sole owner of the property.
Petitioner insisted with energy that respondent himself was a party
to the fraud upon the court, as guilty as petitioner himself, and that
estops him from asserting that he is the co-owner of the land involved
herein.
There is no merit in petitioner's contention. The fact that respondent
has been a party to the deception which resulted in petitioner's securing
in his name the title to a property not belonging to him, is not a valid
reason for changing the legal relationship between the latter and its true
owners to such an extent as to let them lose their ownership to a person
trying to usurp it.
717
VOL. 77, DECEMBER 11, 1946
Palma vs. Cristobal
Whether petitioner and respondent are or are not jointly responsible for
any fraud upon a court of justice, cannot affect the substantial rights of
the real owners of the title of a real property.
Respondent is not barred because his appearance as attorney for
petitioner was not a misrepresentation which would induce petitioner to
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Cases in Agency 8
believe that respondent recognized the former as the sole owner of the
property in controversy. The misrepresentation could deceive the court
and outsiders, because they were not aware of the understanding
between the co-owners that the property be registered in the name of
petitioner. The Court of Appeals found, and the finding is not now in
issue, that petitioner was a party to the understanding and assumed the
rle of an instrument to make it effective. Respondent's appearance, as
attorney for petitioner in 1923, was a consequence of the understanding,
and petitioner could not legitimately assume that it had the effect of
breaking or reversing said understanding.
Lastly, it is contended by petitioner that, even conceding that the
controverted property was owned in common by several co-owners, yet
the Court of Appeals erred in not holding that, as against respondent,
petitioner had acquired absolute ownership of the same through
prescription.
Upon the premise that the registration in 1909 in the name of
petitioner and his wife, Luisa Cristobal, was in accordance with an
agreement among the co-owners, petitioner advances the theory that
when he, upon the death of his wife in 1922, caused the trust property to
be registered in his sole name in 1923, and subsequently partitioned
between himself and his daughter, Ildefonsa Cristobal Ditangco, as heirs
of the decedent, "he openly breached the agreement of 1909 as well as
the promise made to his dying wife of giving the co-owners their
respective shares," concluding that "that breach was an assumption of
ownership, and could be the basis of title by prescription."
718
718 PHILIPPINE REPORTS ANNOTATED
Arcilla vs. David
This theory holds no water because, according to the pronouncement of
the Court of Appeals, upon the evidence, petitioner held the property and
secured its registration in his name in a fiduciary capacity, and it is
elementary that a trustee cannot acquire by prescription the ownership of
a property entrusted to him. The position of a trustee is of representative
nature. His position is the position of a cestui que trust. It is logical that all
benefits derived by the possession and acts of the agent, as such agent,
should accrue to the benefit of his principal.
Petitioner's pretension of building his right to claim ownership by
prescription upon his own breach of a trust cannot be countenanced by
any court, being subversive of generally accepted ethical principles.
The decision of the Court of Appeals is affirmed. No costs.
Moran, C. J., Pars, Feria, Pablo, Hilado, Bengzon, and Briones,
JJ., concur.
Decision of Court of Appeals affirmed
_______________
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Cases in Agency 9
[No. 38479. November 20, 1933]
QUINTIN DE BORJA, judicial administrator of the intestate estate of the
deceased Marcelo de Borja, plaintiff and appellant, vs. FRANCISCO DE
BORJA, defendant and appellant.
4. 1. PLEADING AND PRACTICE; PERIOD FOR FILING OF
COUNTERCLAIMS. The plaintiff-appellant's contention that the
counterclaims presented by the defendant have already
prescribed is untenable. The counterclaims in question are
based on instruments in writing marked Exhibits 1 to 6. The
period of prescription thereof is not six (6) years, as claimed, but
ten (10) years, in accordance with the provisions of section 43
(1) of the Code of Civil Procedure.
6. 2. DEBTS AND DEBTORS; PAYMENT OF INTEREST. Neither is
the plaintiff entitled to the interest claimed by him upon the
alleged sums of money loaned to and collected by the defendant
from various persons for his deceased father. In all the aforesaid
transactions, the defendant acted in his capacity as attorney-in-
fact of his deceased father and, there being no evidence
showing that he converted the money entrusted to him to his
own use, he is not liable for interest thereon in accordance with
the provisions of article 1724 of the Civil Code.
APPEAL from a judgment of the Court of First Instance of Rizal.
Carballo. J.
812
812 PHILIPPINE REPORTS ANNOTATED
De Borja vs. De Borja
The facts are stated in the opinion of the court.
M. H. de Joya and Quintin Paredes for plaintiff-appellant.
Jose de Borja for defendant-appellant.
IMPERIAL, J.:
The plaintiff herein, in his capacity as judicial administrator of the estate
of the deceased Marcelo de Borja, instituted this action in the Court of
First Instance of Rizal, to recover from the defendant the sum of
P61,376.56 which, according to the amended complaint, the said
defendant owed the aforesaid deceased, for certain sums of money
loaned to and collected by him from other persons with the obligation to
render an accounting thereof to the said deceased.
In his amended answer, the defendant interposed various
counterclaims for alleged sums of money owed him by the aforesaid
deceased.
After the trial thereof and the presentation of voluminous evidence
therein, the trial court reached the conclusion and held that, from his
various causes of action, the plaintiff was entitled to recover the sum of
P33,218.86 from the defendant, and that, by way of counterclaim, the
said defendant, in turn, was entitled to collect the sum of P39,683 from
the plaintiff, and rendered judgment in favor of the def endant in the sum
of P6,464.14 with legal interest thereon from the date of the
counterclaim, with the costs. Both parties appealed therefrom.
The trial court made a very careful analysis of the oral and
documentary evidence presented therein, and from the preponderance
thereof, inferred the findings of fact stated in its decision. We are
convinced that, from the evidence presented, the liquidation made by the
trial court is the nearest approach to its findings of fact, and for this
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Cases in Agency 10
reason we do not feel inclined to alter or modify it.
The plaintiff-appellant's contention that the counterclaims presented
by the defendant have already prescribed, is untenable. The
counterclaims in question are based on instruments in writing marked
Exhibits 1 to 6. The period
813
VOL. 58, NOVEMBER 21, 1933 813
In the Matter of the Estate of Goulette
of prescription thereof is not six (6) years, as claimed, but ten (10) years,
in accordance with the provisions of section 43 (1) of the Code of Civil
Procedure.
Neither is the plaintiff entitled to the interest claimed by him upon the
alleged sums loaned to and collected by the defendant from various
persons for his deceased father. In all the aforementioned transactions,
the defendant acted in his capacity as attorney-in-fact of his deceased
father, and there being no evidence showing that he converted the
money entrusted to him to his own use, he is not liable for interest
thereon, in accordance with the provisions of article 1724 of the Civil
Code.
The defendant-appellant's claim to the effect that he is entitled to
collect the rents for the use of the earthen jar factory and the buildings
thereof, is, likewise, unfounded. The trial court held that all there existed
between the parties was a mere gratuitous commodatum and that the
most that the deceased bound himself to do was to pay the taxes on the
properties in question. There is nothing in the records of the case to
justify reversing the judgment rendered therein.
The judgment appealed from being, in our opinion, in accordance
with the law and sufficiently supported by a preponderance of the
evidence presented therein, it is hereby affirmed, without special
pronouncement as to the costs of this instance. So ordered.
Avancea, C. J., Malcolm, Villa-Real, and Hull, JJ., concur.
Judgment affirmed.
__________
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Cases in Agency 11
710 SUPREME COURT REPORTS ANNOTATED
Mindanao Motor Line, Inc. vs. Court of Industrial Relations
No. L-18418. November 29, 1962.
MINDANAO MOTOR LINE,INC., ET AL., petitioners, vs. HON. COURT
OF INDUSTRIAL RELATIONS, ET AL., respondents.
No. L-18419. November 29, 1962.
ABOITIZ & Co., INC., petitioner, vs. HON.COURT OF INDUSTRIAL
RELATIONS, ET AL., respondents.
_______________
3 Salmon & Pacific Commercial Co. v. Tan Cueco, 36 Phil 556.
711
VOL. 6, NOVEMBER 29, 1962 711Mindanao Motor Line, Inc. vs. Court of Industrial Relations
Employer and Employees; Back Wages; Employees entitled to
back wages although reinstatement cannot be ordered. While as a rule
the payment of back wages follows as a necessary consequence of an
order for reinstatement, it does not follow that if reinstatement can not be
ordered, as when the service is discontinued, the employees illegally laid
off should be deprived of the wages they are entitled to, as should be the
case when the company or employer is found guilty of unfair laborpractice. The industrial court found respondents guilty of the unfair labor
practice imputed to them and so it is but fair that they be paid their wages
for the period they had been deprived of their employment.
Same; Same; Agents who acted within scope of authority, not
liable. Two of the respondents were merely agents who acted within the
scope of their corporate positions as resident manager and general
manager, respectively, of the aforesaid company. Since they were
impleaded merely as officers of the company and have acted only as
such within the scope of their authority, if any one should be held
responsible for the consequence of their acts as such officers it is their
employer, unless of course it is shown that they have acted negligently or
in bad faith. The evidence discloses nothing in this respect. It is a well-
known principle of law that an agent who acts in behalf of a disclosed
principal within the scope of his authority cannot be held liable to third
persons (Article 1897, new Civil Code; Banque Generale Belge, et al. vs.
Walter Bull & Co., Inc., et al., 47 O.G. 138; Zialcita-Yuseco vs. Simmons,
L-7912, Aug. 30, 1955).
Same; Same; Employees who were re-employed in other lines not
entitled to back wages during period of re-employment. Of the 71
employees who were laid off on February 1, 1955 because of the alleged
unfair labor practice, 31 were re-employed on other lines operated by the
company. It is unfair to order the company to pay them back wages even
during the period of their re-employment, for the result would be that they
will receive double compensation during that period. The order should,
therefore, be modified in the sense of ordering the payment of back
wages only from the date of their separation to the date of their re-
employment. Same; Same; Set-off of whatever wages the employees
may have obtained during their period of separation. The industrial
court did not make any provision relative to the set-off or compensation
of whatever wages or earnings the complaining employees may have
obtained during the period of their separation, which omission should be
rectified, for, as this Cour t has aptly said In estimating the damages in
an action of this character for the period of time already past the
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Cases in Agency 12
employer may show in mitigation of damages that the discharged
employee obtained
712
712 SUPREME COURT REPORTS ANNOTATED
Mindanao Motor Line, Inc. vs. Court of Industrial Relations
remunerative employment elsewhere or that in the exercise of due
diligence he might have obtained such employment.
PETITIONS for review of an order of the Court of Industrial Relations.
The facts are stated in the opinion of the Court.
Carlos Dominguez, Jr., Ambrosio Padilla and Ciriaco Lopez, Jr.,
for petitioners.
Victor Clapano for respondents.
BAUTISTA ANGELO, J .:
On May 5, 1955, the Mindanao Federation of Labor, together with some
laid off employees, filed a complaint for unfair labor practice against the
Mindanao Motor Line, Inc., its General Manager Jesus Moraza and
Resident Manager Enrique Ponce, as well as against Aboitiz & Co., Inc.,
charging them with having interfered with the complaining employees in
their exercise of their right to organize as guaranteed by the Magna
Charta of Labor.
Respondents, in their answer, stated that the Mindanao Motor Line,
Inc. is a corporate entity distinct and separate from the Aboitiz & Co.,
Inc., and that if the operation of the Cotabato-Parang-Iligan line was
suspended on February 1, 1955, it was merely to protect the interest of
the Mindanao Motor Line, Inc. which had incurred heavy losses in its
operation, which suspension resulted in the laying off of the employees
working on that line. They further averred that they never interfered with
the union activities of the complaining employees who were laid off only
for the above reason and were given due notice of their separation and
payment of their separation pay equivalent to one month salary.
After due trial, the Court of Industrial Relations, in an order issued on
January 4, 1961, ordered respondent Mindanao Motor Line, Inc. to pay
back wages to the laid-off employees without reinstatement from
February 1, 1955, the date of separation, up to and until June 10, 1958,
the date prior to the cancellation of the certificate of public convenience
covering the line that was suspended. The full tenor of the dispositive
part of the order reads as follows:
713
VOL. 6, NOVEMBER 29, 1962
Mindanao Motor Line, Inc. vs. Court of Industrial Relations
IN VIEW OF THE FOREGOING, the Court believes that the
respondents are guilty of the unfair labor practice as charged, thus
violating sec. 4(a), subsections 1 and 4 of R.A. No. 875. Due to the fact
that the certificate of public convenience of respondent Mindanao Motor
Line, Inc., which has been issued for the operation of its TPU service has
already been cancelled on June 11, 1958, as per Exh. 17, the
respondent company is hereby ordered to pay complainants to the
exclusion of Antonio Actub, Orlando Siasico, Feliciano Legaspi and
Nieves Mendoza, back wages from February 1, 1955, the day of
dismissal up to and until June 10, 1958, the day before the cancellation
of the certificate of public convenience without the necessity of
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reinstatement.
Both complainants and respondents filed a motion for reconsideration of
the above order, complainants inviting attention to the fact that, if they
were to be accorded back wages the ones responsible would be not only
the Mindanao Motor Line, Inc., but all the respondents jointly and
severally. Both motions were denied. However, alleging that a clerical
error has been committed in issuing the dispositive part of the order
because not all the respondents were included in the payment of the
pecuniary liability, the industrial court modified said dispositive part so as
to read as follows:
x x x the corrected portion should read in the following manner: the
respondents, Mindanao Motor Line, Inc., and/or Enrique Ponce, Aboitiz
and Co. and/or Jesus Moraza, are hereby ordered to pay complainants
to the exclusion of Antonio Actub, Orlando Siasico, Feliciano Legaspi
and Nieves Mendoza, back wages from February 1, 1955 the day of
dismissal up to and until June 10, 1958, the day before the cancellation
of the certificate of public convenience without the necessity of
reinstatement.
Respondents again filed a motion for reconsideration, and the same
having been denied, they interposed separately a petition for review. The
petition filed by Mindanao Motor Line, Inc., with respondents Enrique
Ponce and Jesus Moraza was docketed as G.R. No. L-18418, whereas
the petition filed by Aboitiz & Co., Inc. was docketed as G.R. No. L-
18419. Because of their close interrelation, these two petitions were
consolidated in one single decision. It is contended that respondents
cannot be ordered to
714
714 SUPREME COURT REPORTS ANNOTATED
Mindanao Motor Line, Inc. vs. Court of Industrial Relations
pay back wages to the complaining employees for the reason that the
operation of the transportation line where they were employed has been
suspended and the certificate of public convenience that was issued for
such operation has been cancelled by the Public Service Commission.
As a matter of fact, they contend, the reinstatement of said complaining
employees was not ordered by the court for the same was not possible
because the operation of the line where they were employed was never
resumed. In short, they argue, if no reinstatement can be ordered no
back wages can be granted because from the phraseology of the law,
the payment of back wages presupposes an accompanying order for
reinstatement. And continuing with his argument, counsel says: An
award for the payment of back wages necessarily implies reinstatement,
or, at least, the possibility of reinstatement of the discharged employees.
It is implicit then that when the court does not or can not order the
reinstatement of employees, there is absolutely no factual or legal basis
for the payment of back wages.
We disagree. While as a rule the payment of back wages follows as
a necessary consequence of an order for reinstatement, it does not
follow that if reinstatement cannot be ordered, as when the service is
discontinued, the employees illegally laid off should be deprived of the
wages they are entitled to, as should be the case when the company or
employer is found guilty of unfair labor practice. This is the situation that
obtains herein. The industrial court found respondents guilty of the unfair
labor practice imputed to them and so it is but fair that they be paid their
wages for the period they had been deprived of their employment.
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Cases in Agency 14
We find, however, merit in the contention that respondent Enrique
Ponce and Jesus Moraza who were included as such should not be
made solidarily responsible for the payment of back wages, together with
their employer the Mindanao Motor Line, Inc., for it clearly appears from
the record that they were merely agents who acted within the scope of
their corporate positions as resident manager and general manager,
respectively, of the aforesaid com-
715
VOL. 6, NOVEMBER 29, 1962 715
Mindanao Motor Line, Inc. vs. Court of Industrial Relations
pany. Since they were impleaded merely as officers of the company and
have acted only as such within the scope of their authority, if any one
should be held responsible for the consequence of their acts as such
officers it is their employer, unless of course it is shown that they have
acted negligently or in bad faith. The evidence discloses nothing in this
respect. It is a well-known principle of law that an agent who acts in
behalf of a disclosed principal within the scope of his authority cannot be
held liable to third persons (Article 1897, new Civil Code; Banque
Generate Belge, et al. vs. Walter Bull & Co., Inc., et al., 47 O.G. 138;
Zialcita-Yuseco v. Simmons, G.R. No. L-7912, August 30, 1955).
We also find that of the 71 employees who were laid off on February
1, 1955, because of the alleged unfair labor practice, 31 were re-
employed on other lines operated by the company. If this is true, which
apparently is, because it is not denied, it is unfair to order the company to
pay them back wages even during the period of their re-employment, for
the result would be that they will receive double compensation during
that period. The order should therefore, be modified in the sense of
ordering the payment of back wages only from the date of their
separation to the date of their re-employment.
We likewise notice that the industrial court did not make any
provision relative to the set-off or compensation of whatever wages or
earnings the complaining employees may have obtained during the
period of their separation, which omission should be rectified, for, as this
Court has aptly said, In estimating the damages in an action of this
character for the period of time already past the employer may show in
mitigation of damages that the discharged employee obtained
remunerative employment elsewhere or that in the exercise of due
diligence he might have obtained such employment. 1
_______________
1 Garcia Palomar v. Hotel de France Co., 42 Phil., 660; See also
MaCleod & Company of the Philippines v. Progressive Federation of
Labor, G.R. No. L-7887, May 31, 1955; Potenciano v. Estefani, L-7690,
July 27, 1955; Western Mindanao Lumber Co. v. Mindanao Federation of
Labor, L-10170, April 25, 1957;
716
716 SUPREME COURT REPORTS ANNOTATED
Mindanao Motor Line, Inc. vs. Court of Industrial Relations Finally, we find no merit in the contention that respondent Aboitiz & Co.,
Inc. should not have been included as such not being the operator nor
financier of the Mindanao Motor Line, Inc., for there is enough evidence
on record to show the connection between the two companies. In the first
place, having been included as respondent, Aboitiz & Co., Inc. did not file
any answer denying the acts constituting the unfair labor practice
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Cases in Agency 15
charged one of which is the fact that the Land Transportation Division of
Aboitiz & Co., Inc., of which Jesus Moraza is the general manager
controls and supervises the management and operation of the Mindanao
Motor Line, Inc. In the second place, the record of the case discloses that
the central office of the Mindanao Motor Line, Inc. and the office of the
Aboitiz & Co., Inc.. are located in the same place and have the same
postal address, namely, P. O. Box 65. It also appears that the thing that
sparked the separation of the complainants is the letter of one Ramon
Aboitiz, apparently the manager of Aboitiz & Co., Inc., where it is shown
that said company has suffered a heavy loss because of the funds it had
advanced to the Mindanao Motor Line, Inc. for which reason he
recommended that the operation of the line in question be suspended.
Indeed, the following argument advanced by the counsel of respondent
court is very impressive.
The fact that Ramon Aboitiz admits that the Aboitiz & Company had
advanced the funds, x x x for the operation of respondent Mindanao
Motor Line, Inc.; the fact that he had even decided for Aboitiz &
Company to discontinue this financial assistance; and the further fact that
the common principal address of the principal actors responsible in the
dismissal of respondent-workers herein is P.O. Box 65, Cebu City, all
show that Aboitiz & Company as alleged in the complaint a quo, controls
and supervises the management and operation of respondent Mindanao
Motor Line, Inc. These facts were dug out from the records of the case a
quo to show how truly unfounded is petitioner- appellants claim that there
is a x x x total and complete a bsence of any evidence supporting this
charge; x x x.
_______________
Philippine Air Lines, Inc. v. Philippine Air Lines Employees
Association, L-15544, July 26, 1960.
717
VOL. 6, NOVEMBER 29, 1962
Rebodos vs. Workmens Compensation Commission
WHEREFORE, the order of respondent court dated March 8, 1961, is
hereby amended with regard to the following respects: (1) the 31
employees who were re-employed should be given back wages only
from February 1, 1955, the day of dismissal, up to the date they were
reemployed; (2) respondents Enrique Ponce and Jesus Moraza should
not be made responsible for the back wages that were ordered paid to
the complaining employees; (3) respondent companies are hereby
authorized to set off from the back wages they were ordered to pay
whatever earnings the complaining employees may have obtained during
the period of their separation. In all other respects, the said order is
hereby affirmed. No pronouncement as to costs.
Bengzon, C.J., Padilla, Labrador, Concepcion, Reyes, J.B.L.,
Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.
Order affirmed with modifications. N o t e . See annotation on Jurisdiction of the Court of Industrial
Relations in 19 SCRA 136 -146.
______________
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36 PHILIPPINE REPORTS ANNOTATED
Kerr & Co vs. Administrador de Rentas Internas
con las costas a la recurrente. As se ordena.
Avancea, Pres., Imperial, Laurel, y Moran, MM. , estn
conformes.
Se confirma la decisin.
__________
[No. 46667. Junio 20, 1940]
KERR & COMPANY, LTD., demandante y apelante, contra El
ADMINISTRADOR DE RENTAS INTERNAS, demandado y
apelado.
1. Impuesto de Comerciante; Distincion entre UN Corredor Y UN
Comerciante. El corredor nunca contrata en nombre propio, sino
en el de su mandante. En el presente caso, Kerr & Compaa al
contratar con Shaw, Wallace & Compaa ofreciendo comprar ciertas
mercancas a un precio que ha ofrecido y quo Shaw, Wallace &
Compaa ha aceptado, o a un precio que Shaw, Wallace &
Compaa ha cotizado y que Kerr & Compaa ha aceptado, ha
celebrado un contrato de compraventa
perfecto. (Art. 1460 del Cdigo Civil.)
2. d. ; Id. El corredor efecta la transaccin con un tercero a nobre de
su mandante, a base de una comisin fija y determinada. En el
presente caso, Kerr & Compaa y Shaw, Wallace & Compaa en
ningn tiempo haban fijado una comisin a base de la cual Kerr &
Compaa efectuara la venta de mercancas a los comerciantes
locales.
3.Id. ; Id. El corredor no garantiza el pago de las mercancas quevende
a un tercero, porque solamente es un mediador que se ocupa en
hacer que las partes interesadas se entiendan en un negocio o
negocios en asuntos mercantiles o de navegacin. (Behn, Meyer &
Co. contra Nolting y Garcia, 35 Jur. Fil., 284; Pacific Commercial
Company contra Yatco, R. G. No. 45976, julio 20, 1939.) En el
presente caso, Kerr & Company garantizo a Shaw, Wallace &
Company el pago de la letra girada por esta compaa contra los
compradores locales.
APELACION contra una sentencia del Juzgado de Primera Instancia de
Manila. De la Costa, J.
Los hechos aparecen relacionados en la decisin del Tri bunal.
Sres. Ross, Lawrence, Delphi y Carrascoso y D. Robert Janda en
representacin de la apelante.
37
VOL. 70, JUNE 20, 1940
Kerr & Co vs. Administrador de Rentas Internas
El Procurador General Sr. Ozaeta y los Auxiliares del Procurador
General Sres. Concepcin y Amparo en repre-sentacion del apelado.
CONCEPCION, M.:
Esta es una apelacin que tiene por objeto determinar si un
impuesto de comerciante pagado por la apelante, bajo protesta, era o no
legalmente exigible segn los hechos que en la decision apelada se
relacionan como sigue:
"It appears from the stipulation of facts that in effect ing the sales
under consideration the plaintiff sent a cable to Shaw, Wallace & Co. of
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Cases in Agency 17
Calcutta, India, offering a price for certain merchandise or asking for
quotation. The Cal cutta firm either accepted the offer or gave its
quotation of the price. After the price was thus agreed upon, plaintiff
entered into a contract of sale with local buyers quoting a price higher
than that agreed upon or fixed by the Calcutta firm; and the price of the
merchandise for local buyers was fixed by the plaintiff. After the contract
of sale was thus entered into, plaintiff instructed the Calcutta firm to send
the goods to, and draw a draft on, the local buyers. This draft bore the
price agreed upon between the plaintiff and local buyers, and was drawn
against a local bank in ac cordance with the letter of guarantee executed
in the form of the local bank by the buyer and by the plaintiff. After
receiving the draft and shipping documents, the local bank released the
merchandise to the buyer against a trust re ceipt. In due course, the draft
was paid by the buyers to the local bank and after the proceeds of the
draft were re ceived by the Calcutta firm, the latter paid the plaintiff the
difference between the price agreed upon between plaintiff and the
Calcutta firm, and the price for which the mer chandise was actually sold
to the local buyers".
El Juzgado decidi el caso declarando que la apelante en las
transacciones arriba mencionadas debe ser considerada como
comerciante, de acuerdo con las provisiones del artculo 1459 delCdigo Administrativo Revisado que dispone:
"Sec. 1459. Percentage tax on merchants sale's. All
38
38 PHILIPPINE REPORTS ANNOTATED
Kerr & Co vs. Administrador de Rentas Internas
merchants not herein specifically exempted shall pay a tax of one per
centum on the gross value in money of the com modities, goods, wares,
and merchandise sold, bartered, exchanged, or consigned abroad by
them, such tax to be based on the actual selling price or value of the
things in question at the time they are disposed of or consigned, whether
consisting of raw material or of manufactured or partially manufactured
products, and whether of domestic or foreign origin. The tax upon things
consigned abroad shall be refunded upon satisfactory proof of the return
thereof to the Philippine Islands unsold.
"The following shall be exempt from this tax:
(a) Persons engaged in public market in the sale of food products at
retail, and other small merchants whose gross quarterly sales do not
exceed two hundred pesos.
(b) Peddlers and sellers at fixed stands of fruit, pro duce, and food,
raw or otherwise, the total selling value whereof does not exceed three
pesos per day and who do not renew their stock oftener than once every
twenty-four hours.
(c) Producers of commodities of all classes working in their own
homes, consisting of parents and children living as one family, when the
value of each day's production by each person capable of working is not
in excess of one peso.
"Merchants, as here used, means a person engaged in the sale,barter, or exchange of personal property of whatever character. Except
as specially provided, the term includes manufacturers who sell articles
of their owh production, and commission merchants having
establishments of their own for the keeping and disposal of goods of
which sales or exchanges are effected, but does not include
merchan dise brokers."
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La apelante contiende que el Juzgado incurri en error al declarar
que ella haba comprado las mercancas de Shaw, Wallace & Co. de
Calcuta, India, y las haba vendido a los compradores locales por su
propia cuenta, y que actu como comerciante en las transacciones
arriba mencionadas y que,
39
VOL. 70, JUNE 20, 1940 39
Kerr & Co vs. Administrador de Rentas Internas
como tal deba pagar el impuesto correspondiente. La contencin de la
apelante es que ella actu en dichas transacciones como un corredor de
comercio. La cuestin a determinar en el presente caso es, pues, en que
capacidad la ape lante efectu las ventas de las mercancas en cuestin
a los compradores locales. Para resolver esta cuestin, debemos
considerar no las relaciones jurdicas entre la apelante y los
compradores locales sino las relaciones que mediaron entre la apelante
y Shaw, Wallace & Co.; porque las transacciones empezaron con dicha
firma y terminaron con la misma. Ms claro, hubo dos transacciones:- la,
entre Kerr & Company y Shaw, Wallace & Co.; y la 2.a entre Kerr &
Company y los compradores locales; pero la actuacin de Kerr &
Company no se termin con los compradores locales, sino con Shaw,
Wallace & Co.
En ltimo anlisis, de los hechos, se hallan en la transaccin con la
firma de Calcutta ciertas circunstancias que son pruebas concluyentes
de que la apelante obro en el pre sente caso como un comerciante.
Ante todo conviene tener presente, que "al corredor se le define en
trminos generales como el que negocia para otros en contratos de
comisin relativos a fincas, cuya custodia en nada le atae; el que
negocia como intermediario de otros, sin negociar jams en nombre
propio sino en el de aquellos que le utilizan; estrictamente hablando es
un mediador, y en cierto modo el mandatorio de ambas partes. (19 Cyc.
186; Henderson vs. The State, 50 Ind., 234 Black's Law Dictionary.) El
corredor es el que se ocupa en hacer que los interesados se entiendan
en un negocio o en negocios para ellos en asuntos mercantiles o de
navegacin. (Mechem on Agency, section 13, Wharton on Agency,
sec tion 695.) El Juez Storey en su obra titulada Agency , define al
corredor, diciendo que es un mandatorio que se utiliza para realizar
negocios y contratos con otras personas, en asuntos mercantiles o de
navegacin, mediante una compensacin que generalmente se llama
corretaje. (Storey on Agency, section 28.)" Behn, Meyer & Co., Ltd.,
contra Nolting y Garcia, 35 Jur. Fil., 284.
40
40 PHILIPPINE REPORTS ANNOTATED
Kerr & Co vs. Administrador de Rentas Internas
Desprenderse de lo transcrito.
l. Que el corredor nunca contrata en nombre propio, sino en el de
su mandante. En el presente caso, Kerr & Company al contratar con
Shaw, Wallace & Company ofreciendo comprar ciertas mercancas a un
precio que ha ofrecido y que Shaw, W allace & Company ha aceptado, o
a un precio que Shaw, Wallace & Company ha cotizado y que Kerr &
Company ha aceptado, ha celebrado un contrato de compra-venta
perfecto. (Art. 1450 del Cdigo Civil.) No importa que las mercancas no
hayan pasado a la posesin de Kerr & Company porque la tradicin de
la cosa comprada es necesaria para la consumacin del contrato de
compra-venta, pero no para su perfeccin. Despus de efectuado el
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contrato de compraventa, Kerr & Company, en su propio nombre,
convino en vender a los comerciantes locales las mercancas que haba
comprado. Tan cierto es que Kerr & Company, contrato con los
comerciantes loca les en nombre propio, independientemente y con
posterioridad a la transaccin habida con Shaw, Wallace & Company,
que Kerr & Company fijo el precio de las ventas a los compradores
locales, precio que no era el precio convenido con Shaw, Wallace &
Company sino mayor al que haba ofrecido a Shaw, Wallace &
Company, o que haba sido aceptado por dicha compaa.
2. El corredor efecta la transaccin con un tercero a nombre de su
mandante, a base de una comisin fija y determinada. En el presente
caso, Kerr & Company y Shaw, Wallace & Company en ningn tiempo
haban fijado una comisin a base de la cual Kerr & Company efectuara
la venta de mercancas a los comerciantes locales.
Kerr & Company despus de efectuada la venta de las mercancas
a los compradores locales por un precio mayor del que haba convenido
con Shaw, Wallace & Company, cobro la diferencia en su beneficio,
diferencia que no puede conceptuarse como una comisin, porque, 1.,
las partes no convinieron en ninguna comisin; y 2., porque la cantidad
as cobrada dependa nica y exclusivamente de Kerr & Company,
segn el precio que ella hubiese fijado a las mer- 41
VOL. 70, JUNE 20, 1940 41
Kerr & Co vs. Administrador de Rentas Internas
cancas por ella vendidas. La comisin es un tanto de dinero que se
estipula entre el corredor y el mandante y se paga por este a aquel, de
su propio peculio, cosa que no ocurre en el presente caso, porque la
diferencia de precio que Kerr & Company cobra, no es dinero de Shaw,
Wallace & Company.
3. El corredor no garantiza el pago de las mercancas que vende a
un tercero, porque solamente es un mediador que se ocupa en hacer
que las partes interesadas se entiendan en un negocio o negocios en
asuntos mercantiles o de navegacin. (Behn, Meyer & Co., Ltd. contra
Nolting y Garca, supra ; Pacific Commercial Company contra Alfredo L.
Yatco, R. G. No. 45976, Julio 20, 1939.) En el presente caso Kerr &
Company garantiz a Shaw, Wallace & Com pany el pago de la letra
girada por esta compaa contra los compradores locales.
Se arguye por la apelante, que ella no era la compradora de las
mercancas, porque, si lo fuese, la letra se habra girado contra ella y no
contra los compradores locales, y ella no garantizara el pago del
importe de la letra. Este argumento, sin embargo, no tiene peso, porque
una vez compradas las mercancas por Kerr & Company, ella podra
ordenar que las mercancas fuesen enviadas a cualquier otra persona,
puesto que lo ms importante para Shaw, Wallace & Company es que
se pague el importe de las mercancas, y esta obligacin la ha asumido
Kerr & Company para el caso de que los compradores locales no
pagasen la letra a su vencimiento.
El hecho de que en el contrato celebrado por Kerr y Com pany conel comprador local Lim Ki Choa & Company,Kerr & Company, segun el
Exhibit D, haya hecho constar que en esta transaccin con Lim Ki Choa
& Company ella actuaba en la capacidad de corredor solamente y que
ella no asume ninguna responsabilidad, no demuestra que realmente
Kerr & Company era un mero corredor cuando con trato con Lim Ki
Choa & Company, porque para determinar la naturaleza de la
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Cases in Agency 20
transaccin que Kerr & Company tuvo con Shaw, Wallace & Company, y
para juzgar si Kerr
42
42 PHILIPPINE REPORTS ANNOTATED
Kerr & Co vs. Administrador de Rentas Internas
& Company contrato en nombre propio con la firma de Calcutta, o si
contrato en nombre de Shaw, Wallace & Com pany y con los
compradores locales, no vamos a tener en cuenta lo que Kerr &
Company haya dicho o dejado de decir a Lim Ki Choa & Co., sino los
trminos y condiciones del contrato mismo que realmente se ha
celebrado entre Shaw, Wallace & Company y Kerr & Company.
Adems, en el caso de incumplimiento de Kerr & Com pany del
contrato otorgado con los compradores locales, estos no tendran accin
alguna para dirigirse contra Shaw, Wallace & Company para exigir de
esta compaa el cumplimiento del contrato, puesto que ninguno han
celebrado con Shaw, Wallace & Co., pues los hechos revelan que Kerr &
Company primero contrato en nombre propio con Shaw, Wallace &
Company, y despus contrato tambin en nom bre propio con los
compradores locales.
Todas las anteriores consideraciones demuestran una misma y una
sola proposicin: que Kerr & Company contrato en nombre propio y por
cuenta propia con Shaw, Wallace & Company como comerciante, y
vendi en nombre propio como comerciante; y por tanto est sujeta al
pago del impuesto de comerciante.
Se confirma la decisin apelada, con las costas a la apelante. As
se ordena.
Avancea, Pres., Imperial, Diaz, Laurel y Morn, MM. , estn
conformes.
Se confirma la sentencia.
________
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Cases in Agency 21
[No. 21237. March 22, 1924]
JAMES D. BARTON, plaintiff and appellee, vs. LEYTE ASPHALT &
MINERAL OIL Co., LTD., defendant and appellant.
5. 1. PRINCIPAL AND AGENT; AUTHORITY OF SELLING AGENT;
SALES TO SUBAGENT. An agent who is clothed with authority
to sell a given commodity cannot bind the principal by selling to
himself, either directly or indirectly. It results that the principal is
not obligated to fill orders taken by the agent from his own
subagent, unless the principal ratifies such sale with full
knowledge of the facts.
7. 2. EVIDENCE; PRIVILEGE OF ATTORNEY AND CLIENT; LOSS OF
PRIVILEGE. The privilege which protects communications
between attorney and client does not extend to a copy of a letter
written by the client to his attorney which comes to the hands of
the adverse party. Where the authenticity of such a document is
admitted, the court will take no notice of the manner in which it
was obtained.
APPEAL from a judgment of the Court of First Instance of Manila.
Harvey, J.
The facts are stated in the opinion of the court.
Block, Johnston & Greenbaum and Ross, Lawrence & Selph forappellant.
Frank B. lngersoll for appellee.
STREET, J.:
This action was instituted in the Court of First Instance of the City of
Manila by James D. Barton, to recover of the Leyte Asphalt & Mineral Oil
Co., Ltd., as damages for
939
VOL. 46, MARCH 22, 1924
Barton vs. Leyte Asphalt & Mineral Oil Co.
breach of contract, the sum of $318,563.30, United States currency, and
further to secure a judicial pronouncement to the effect that the plaintiff is
entitled to an extension of the terms of the sales agencies specified in
the contract Exhibit A. The def endant answered with a general denial,
and the cause was heard upon the proof, both documentary and oral,
after which the trial judge entered a judgment absolving the defendant
corporation from four of the six causes of action set forth in the complaint
and giving judgment for the plaintiff to recover of said defendant, upon
the first and fourth causes of action, the sum of $202,500, United States
currency, equivalent to P405,000, Philippine currency, with legal interest
from June 2, 1921, 'and with costs. From this judgment the defendant
company appealed.
The plaintiff is a citizen of the United States, resident in the City of
Manila, while the defendant is a corporation organized under the laws of
the Philippine Islands with its principal office in the City of Cebu, Province
of Cebu, Philippine Islands. Said company appears to be the owner of a
valuable deposit of bituminous limestone and other asphalt products,
located on the Island of Leyte and known as the Lucio mine. On April 21,
1920, one William Anderson, as president and general manager of the
defendant company, addressed a letter Exhibit B, to the plaintiff Barton,
authorizing the latter to sell the products of the Lucio mine in the
Commonwealth of Australia and New Zealand upon a scale of prices
indicated in said letter.
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In the third cause of action stated in the complaint the plaintiff
alleges that during the life of the agency indicated in Exhibit B, he
rendered services to the defendant company in the way of advertising
and demonstrating the products of the defendant and expended large
sums of money in visiting various parts of the world for the purpose of
carrying on said advertising and demonstrations, in shipping to various
parts of the world samples of the products of the defendant, and in
otherwise carrying on advertising work. For these services and
expenditures
940
940 PHILIPPINE REPORTS ANNOTATED
Barton vs. Leyte Asphalt & Mineral Oil Co.
the plaintiff sought, in said third cause of action, to recover the sum of
$16,563.80, United States currency. The court, however, absolved the
defendant from all liability on this cause of action and the plaintiff did not
appeal, with the result that we are not now concerned with this phase of
the case. Besides, the authority contained in said Exhibit B was
admittedly superseded by the authority expressed in a later letter, Exhibit
A, dated October 1, 1920. This document bears the approval of the
board of directors of the defendant company and was formally accepted
by the plaintiff. As it supplies the principal basis of the action, it will be
quoted in its entirety.
"(Exhibit A) "CEBU, CEBU,
P. L, "October 1, 1920.
"JAMES D. BARTON, Esq.,
"Cebu Hotel City.
"DEAR SIR: You are hereby given the sole and exclusive sales
agency for our bituminous limestone and other asphalt products of the
Leyte Asphalt and Mineral Oil Company, Ltd., until May f irst, 1922, in the
following territory:
Australia Saigon Java
New Zealand India China
Tasmania Sumatra Hongkong
"Siam and the Straits Settlements, also in the United States of America
until May 1, 1921.
"As regards bituminous limestone mined from the Lucio property. No
orders for less than one thousand (1,000) tons will be accepted except
under special agreement with us. All orders for said products are to be
billed to you as follows:
In 1,000 ton lots .......................................................................
In 2,000 ton lots .......................................................................
In 5,000 ton lots .......................................................................
In 10,000 ton lots .....................................................................
941
VOL. 46, MARCH 22, 1924
Barton vs. Leyte Asphalt & Mineral Oil Co.
with the understanding, however, that, should the sales in the above
territory equal or exceed ten thousand (10,000) tons in the year ending
October 1, 1921, then in that event the price of all shipments made
during the above period shall be ten pesos (P10) per ton, and any sum
charged to any of your customers or buyers in the aforesaid territory in
excess of ten pesos (P10) per ton, shall be rebated to you. Said rebate to
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be due and payable when the gross sales have equalled or exceeded ten
thousand (10,000) tons in the twelve months period as hereinbefore
described. Rebates on lesser sales to apply as per above price list.
"You are to have full authority to sell said product of the Lucio mine f
or any sum you see fit in excess of the prices quoted above and such
excess in price shall be your extra and additional profit and commission.
Should we make any collections in excess of the prices quoted, we agree
to remit same to you within ten (10) days of the date of such collections
or payments.
"All contracts taken with municipal governments will be subject to
inspection before shipping, by any authorized representative of such
governments at whatever price may be contracted f or by you and we
agree to accept such contracts subject to draft attached to bill of lading infull payment of such shipment.
"It is understood that the purchasers of the products of the Lucio
mine are to pay freight from the mine carriers to destination and are to be
responsible for all freight, insurance and other charges, providing said
shipment has been accepted by their inspectors.
"All contracts taken with responsible firms are to be under the same
conditions as with municipal governments.
"All contracts will be subject to delays caused by the acts of God,over which the parties hereto have no control.
"It is understood and agreed that we agree to load all ships,
steamers, boats or other carriers promptly and without delay and load not
less than 1,000 tons each twentyfour hours after March 1, 1921, unless
we so notify you specifically prior to that date that we are prepared to
load
942
942 PHILIPPINE REPORTS ANNOTATED
Barton vs. Leyte Asphalt & Mineral Oil Co.
at that rate, and it is also stipulated that we shall not be required to ship
orders of 5,000 tons except on 30 days notice and 10,000 tons except on
60 days notice.
"If your sales in the United States reach five thousand tons on or
before May 1, 1921, you are to have sole rights for this territory also for
one year additional and should your sales in the second year reach or
exceed ten thousand tons you are to have the option to renew the
agreement for this territory on the same terms for an additional two
years.
"Should your sales equal or exceed ten thousand (10,000) tons in
the year ending October 1, 1921, or twenty thousand (20,000) tons by
May 1, 1922, then this contract is to be continued automatically for an
additional three years ending April 30, 1925, under the same terms and
conditions as above stipulated.
"The products of the other mines can be sold by you in the aforesaid
territories under the same terms and conditions as the products of the
Lucio mine; scale of prices to be mutually agreed upon between us.
"LEYTE ASPHALT & MINERAL OIL Co., LTD. "By (Sgd.)
WM.
ANDERSON "President
(Sgd.) "W. C. A.
PALMER "Secretary
"Approved by Board of Directors,
"October 1, 1920.
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Cases in Agency 24
(Sgd.) "WM. ANDERSON
"President
"Accepted.
(Sgd.) "JAMES D. BARTON
"Witness D. G. MCVEAN"
Upon careful perusal of the fourth paragraph from the end of this
letter it is apparent that some negative word has been inadvertently
omitted before "prepared," so that the full expression should be "unless
we should notify you
943
VOL. 46, MARCH 22, 1924 943
Barton vs. Leyte Asphalt & Mineral Oil Co.
specifically prior to that date that we are unprepared to load at that rate,"
or "not prepared to load at that rate."
Very soon after the aforesaid contract became effective, the plaintiff
requested the defendant company to give him a similar selling agency for
Japan. To this request the defendant company, through its president,
Wm. Anderson, replied, under date of November 27, 1920, as follows:
"In re your request for Japanese agency, will say, that we are willing
to give you, the same commission on all sales made by you in Japan, on
the same basis as your Australian sales, but we do not feel like giving
you a regular agency for Japan until you can make some large sized
sales there, because some other people have given us assurances that
they can handle our Japanese sales, therefore we have decided to leave
this agency open for a time."
Meanwhile the plaintiff had embarked for San Francisco and upon
arriving at that port he entered into an agreement with Ludvigsen &
McCurdy, of that city, whereby said firm was constituted a subagent and
given the sole selling rights for the bituminous limestone products of the
defendant company for the period of one year from November 11, 1920,
on terms stated in the letter Exhibit K. The territory assigned to
Ludvigsen & McCurdy included San Francisco and all territory in
California north of said city. Upon an earlier voyage during the same year
to Australia, the plaintiff had already made an agreement with Frank B.
Smith, of Sydney, whereby the latter was to act as the plaintiff's sales
agent for bituminous limestone mined at the defendant's quarry in Leyte,
until February 12, 1921. Later the same agreement was extended for the
period of one year from January 1, 1921. (Exhibit Q.)
On February 5, 1921, Ludvigsen & McCurdy, of San Francisco,
addressed a letter to the plaintiff, then in San Francisco, advising himthat he might enter an order for six thousand tons of bituminous
limestone to be loaded at Leyte not later than May 5, 1921, upon terms
stated in the
944
944 PHILIPPINE REPORTS ANNOTATED
Barton vs. Leyte Asphalt & Mineral Oil Co.
letter Exhibit G. Upon this letter the plaintiff immediately indorsed his
acceptance.
The plaintiff then returned to Manila; and on March 2, 1921,
Anderson wrote to him from Cebu, to the effect that the company was
behind with construction and was not then able to handle big contracts.
(Exhibit FF.) On March 12, Anderson was in Manila and the two had an
interview in the Manila Hotel, in the course of which the plaintiff informed
Anderson of the San Francisco order. Anderson thereupon said that,
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Cases in Agency 25
owing to lack of capital, adequate facilities had not been provided by the
company for filling large orders and suggested that the plaintiff had better
hold up in the matter of taking orders. The plaintiff expressed surprise at
this and told Anderson that he had not only the San Francisco order
(which he says he exhibited to Anderson) but other orders for large
quantities of bituminous limestone to be shipped to Australia and
Shanghai. In another interview on the same day Anderson definitely
informed the plaintiff that the contracts which he claimed to have
procured would not be filled.
Three days later the plaintiff addressed a letter (Exhibit Y) to the
defendant company in Cebu, in which he notified the company to be
prepared to ship five thousand tons of bituminous limestone to John
Chapman Co., San Francisco, loading to commence on May 1, and toproceed at the rate of one thousand tons per day of each twenty-four
hours, weather permitting.
On March 5, 1921, Frank B. Smith, of Sydney, had cabled the
plaintiff an order for five thousand tons of bituminous limestone; and in
his letter of March 15 to the defendant, the plaintiff advised the defendant
company to be prepared to ship another five thousand tons of bituminous
limestone, on or about May 6, 1921, in addition to the intended
consignment for San Francisco. The name Henry E. White was indicatedas the name of the person through whom this contract had been made,
and it was stated that the consignee would be named later, no
destination for the
945
VOL. 46, MARCH 22, 1924 945
Barton vs. Leyte Asphalt & Mineral Oil Co.
shipment being given. The plaintiff explains that the name White, as used
in this letter, was based on an inference which he had erroneously drawn
from the cable sent by Frank B. Smith, and his intention was to have the
second shipment consigned to Australia in response to Smith's order.
It will be noted in connection with this letter of the plaintiff, of March
15, 1921, that no mention was made of the names of the person, or firm,
for whom the shipments were really intended. The obvious explanation
that occurs in connection with this is that the plaintiff did not then care to
reveal the fact that the two orders had originated from his own subagents
in San Francisco and Sydney.
To the plaintiff's letter of March 15, the assistant manager of the
defendant company replied on March 25, 1921, acknowledging the
receipt of an order for five thousand tons of bituminous limestone to beconsigned to John Chapman Co., of San Francisco, and the further
amount of five thousand tons of the same material to be consigned to
Henry E. White; and it was stated that "no orders can be entertained
unless cash has been actually deposited with either the International
Banking Corporation or the Chartered Bank of India, Australia and China,
Cebu." (Exhibit Z.)
To this letter the plaintiff in turn replied from Manila, under date of
March 29, 1921, questioning the right of the defendant to insist upon acash deposit in Cebu prior to the filling of the-orders. In conclusion the
plaintiff gave orders for shipment to Australia of five thousand tons, or
more, about May 22, 1921, and ten thousand tons, or more, about June
1, 1921. In conclusion the plaintiff said "I have arranged for deposits to
be made on these additional shipments if you will signify your ability to
fulfill these orders on the dates mentioned." No name was mentioned as
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the purchaser, or purchasers, of these intended Australian
consignments.
946
946 PHILIPPINE REPORTS ANNOTATED
Barton vs. Leyte Asphalt & Mineral Oil Co.
Soon after writing the letter last above-mentioned, the plaintiff embarked
for China and Japan. With his activities in China we are not here
concerned, but we note that in Tokio, Japan, he came in contact with one
H. Hiwatari, who appears to have been a suitable person for handling
bituminous limestone for construction work in Japan. In the letter Exhibit
X, Hiwatari speaks of himself as if he had been appointed exclusive
sales agent for the plaintiff in Japan, but no document expressly
appointing him such is in evidence.
While the plaintiff was in Tokio he procured the letter Exhibit W,
addressed to himself, to be signed by Hiwatari. This letter, endited by the
plaintiff himself, contains an order for one thousand tons of bituminous
limestone from the quarries of the defendant company, to be delivered as
soon after July 1, 1921, as possible. In this letter Hiwatari states, "on
receipt of the cable from you, notifying me of date you will be ready to
ship, and also tonnage rate, I will agree to transfer through. the Bank of
Taiwan, of Tokio, to the Asia Banking Corporation, of Manila, P. I., the
entire payment of $16,000 gold, to be subject to your order on delivery of
documents covering bill of lading of shipment, the customs report of
weight, and prepaid export tax receipt. I will arrange in advance a
confirmed or irrevocable letter of credit for the above amount so that
payment can be ordered by cable, in reply to your cable advising
shipping date."
In a later letter, Exhibit X, of May 16, 1921, Hiwatari informs the
plaintiff that he had shown the contract, signed by himself, to the
submanager of the Taiwan Bank who had given it as his opinion that he
would be able to issue, upon request of Hiwatari, a credit note for the
contracted amount, but he added that the submanager was not
personally able to place his approval on the contract as that was a matter
beyond his authority. Accordingly Hiwatari advised that he was intending
to make f urther arrangements when the manager of the bank should
return from Formosa.
947
VOL. 46, MARCH 22, 1924
Barton vs. Leyte Asphalt & Mineral Oil Co.
In the letter of May 5, 1921, containing Hiwatari's order for one thousand
tons of bituminous limestone, it was stated that if the material should
prove satisfactory after being thoroughly tested by the Paving
Department of the City of Tokio, he would contract with the plaintiff for a
minimum quantity of ten thousand additional tons, to be used within a
year from September 1, 1921, and that in this event the contract was to
be automatically extended for an additional four years. The contents of
the letter of May 5 seems to have been conveyed, though imperfectly, by
the plaintiff to his attorney, Mr. Frank B. Ingersoll, of Manila; and on May
17, 1921, Ingersoll addressed a note to the defendant company in Cebu
in which he stated that he had been requested by the plaintiff to notify the
defendant that the plaintiff had accepted an order from Hiwatari, of Tokio,
approved by the Bank of Taiwan, for a minimum order of ten thousand
tons of the stone annually for a period of five years, the first shipment of
one thousand tons to be made as early after July 1 as possible. It will be
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noted that this communication did not truly reflect the contents of
Hiwatari's letter, which called unconditionally for only one thousand tons,
the taking of the remainder being contingent upon future eventualities.
It will be noted that the only written communications between the
plaintiff and the defendant company in which the former gave notice of
having any orders for the sale of bituminous limestone are the four letters
Exhibits Y, AA, BB, and II. In the first of these letters, dated March 15,
1921, the plaintiff advises the defendant company to be prepared to ship
five thousand tons of bituminous limestone, to be consigned to John
Chapman Co., of San Francisco, to be loaded by May 5, and a further
consignment of five thousand tons, through a contract with Henry E.
White, consignees to be named later. In the letter Exhibit BB dated May
17, 1921, the plaintiff's attorney gives notice of the acceptance by plaintiffof an order from Hiwatari, of Tokio, approved by the Bank of Taiwan, for
a minimum
948
948 PHILIPPINE REPORTS ANNOTATED
Barton vs. Leyte Asphalt & Mineral Oil Co.
of ten thousand tons annually for a period of five years, first shipment of
a thousand tons to be as early after July 1 as possible. In the letter
Exhibit II the plaintiff gives notice of an "additional" (?) order from H. E.
White, Sydney, for two lots of bituminous limestone of five thousand tons
each, one for shipment not later than June 30, 1921, and the other by
July 20, 1921. In the same letter the plaintiff reports for the first time an
order for five thousand tons from F. B. Smith, to be shipped to Brisbane,
Australia, by June 30, and a similar amount within thirty days later.
After the suit was brought, the plaintiff filed an amendment to his
complaint in which he set out, in tabulated form, the orders which he
claims to have received and upon which his letters of notification to the
defendant company were based. In this amended answer the name of
Ludvigsen & McCurdy appears for the first time; and the name of Frank
B. Smith, of Sydney, is used for the first time as the source of the
intended consignments of May 1, May 22, and June 1. We note,
furthermore, that the letters, Exhibits G, L, M, and W, containing the
orders from Ludvigsen & McCurdy, Frank B. Smith and H. Hiwatari were
at no time submitted for inspection to any officer of the defendant
company, except possibly the Exhibit G, which the plaintiff claims to have
shown to Anderson in Manila on March 12, 1921.
The different items comprising the award which the trial judge gave
in favor of the plaintiff are all based upon the orders given by Ludvigsen& McCurdy (Exhibit G), by Frank B. Smith (Exhibits L and M), and by
Hiwatari in Exhibit W; and the appeal does not involve an order which
came from Shanghai, China. We therefore now address ourselves to the
question whether or not the orders contained in Exhibits G, L, M, and W,
in connection with the subsequent notific