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Republic of the Philippines

G.R. No. L-17131
June 30, 1922
SING JUCO and SING BENGCO, plaintiffs-appellees,
Montinola, Montinola and Hontiveros for appellants.
Fisher and De Witt for appellees.
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 Sunyantong 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 also sufficiently established in the records 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 along in itself cannot be taken to mean any
wrongful intent on the part of said defendant, but it ceases 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
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 at an early hour in the morning of June 17, 1919, only the
midday of which the term of plaintiff's 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 Sunyantong called at
the house of Mari Gay when she was having breakfast, and offered to buy the estate on the
same terms proposed by her not yet accepted by the plaintiffs, making the offer to buy not for the
benefit of the plaintiff's, but for own wife, his codefendant Vicenta Llorente de Sunyatong. 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 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 plaintiff 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 Philippine 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
Bengco 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 Sunyantong.

Even supposing that this latter interpretation of the phrase in question was actual intention of
Sing Bengco, the action of the defendant Sunyantong 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 owed loyalty and faithfullnes.
Even though it be concede that when he closed the contract of sale with Maria Gay the plaintiffs'
option had expired, but the fact cannot be 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
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 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 facere 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 the
confidence sanctioned in our Penal Code as a generic circumstances, 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 at 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 the case
of commercial agents ( factories) it is expressly established. Undoubtedly, formerly under the
circumstances then prevailing such sanction was not necessary in the field of civil law, because
is sphere of action is the general relations of society; but event 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 imperatives 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 Baliuag (28 Phil., 466.)
And in the North American law such sanction is expressly recognized, and the transaction of this
nature might be regarded as an "equitable trust" by virtue of which the things acquired by 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
errors assigned to it; wherefore the same is affirmed with costs against the appellants. So
Araullo, C.J., Malcolm, Avancea and Ostrand, JJ., concur.

G.R. No. L-21036
April 5, 1924
RAMON ABOITIZ, plaintiff-appellant,
ARNALDO F. DE SILVA, ET AL., defendants.
ARNALDO F. DE SILVA, appellant.
Block, Johnston and Greenbaum for plaintiff-appellant.
Del Rosario and Del Rosario and Andres Jayme for defendant-appellant.
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 of 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 Doa Dolores S. de Aboitiz, mayor de edad y vecino del Municipio
de Cebu, Provincia de Cebu, Islas Filipinas; y de otra parte los Senores 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.
Primero. Que Ramon Aboitiz, por y en consideracion a la cantidad de doscientos
veinticinco mil pesos, moneda filipina, pagaderos en la forma y plazos ques mas abajo
se mencionaran, cede, vende, y transpasa 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 y 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 creditos 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 formado parte de la misma, y cuyos inventarios se ajustan
al balance correspondiente al 31 de diciembre de 1918.
Segundo. Que la citada cantidad de doscientos veintecinco 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 siguintes 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 interes del siete por ciento (7%) anual a contar desde el primero de mayo
de 1919, pagaderos mensualmente.
Tercero. Las utilidades que puede rebicir el vendedor Ramon Aboitiz en los negocios, en
ambas sociedades, asi pueda tener como Gerente y como socio 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 halla avaluado en cincuenta mil
pesos (P50,000) de cuya cantidad solamente se ha pagado al vendedor la mitad, o sean
veintecinco mil pesos (P25,000), teniendo por consiguiente el vendedor una participacion
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 diferencia a
los compradores; pero si el costo es menos los compradores pagaran la diferencia al
vendedor Ramon Abotiz.
Quito. Que para garantizar el pago de la mencionada cantidad de doscientos quince mil
pesos (P215,000) en los plazos arriba mencionados y sus intereses convenidos a razon
del siete por ciento (7%) anual, los compradores Arnaldo F. de Silva, Guillermo Aboitiz 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
formado parte de la misma a favor del vendador Sr. Ramon Aboitiz.
Sexto. Que en caso de venta de cualesquiera 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 veintecinco 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 arriba mencionados.
Septimo. Que la falta de pago de cualquiera de los plazos arriba mencionados y de
todas y de cada una de las demas 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 vigencia 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
realizar 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 Isla de Camiguin y en otro donde actualmente tengan dichas sociedades
En testimonio de todo lo 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
price the 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 of 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 required 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 and 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 Philippine
Islands and De Silva was promptly ousted from the management of the business of the
corporation. In the meantime, the defendants had, 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 on 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 were 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 interests at the rate of 7 per cent per annum from December 31, 1920, with
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 assignments of error the defendant-appellant maintains that the liability of the
defendants under the "Hipoteca-Venta" had, with the plaintiff's 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 the shifting of the liability from themselves to another
party. Neither does the fact that the plaintiff subsequently accepted payments on the "HipotecaVenta Account" from Aboitiz & Co. work a novation. (See Pacific Commercial Co. vs. Sotto, 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 interests 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 what was done not only with the full knowledge of the
defendant-appellant, 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
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.
Cabellon 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 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
uncontradicted 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 costs 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 that 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 paragraphs 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 theLolita 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 onehalf 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 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 P19,452.68
for construction and equipment, making a total sum of P90,029.92 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 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 one-half
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 sum 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.
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 theLolita 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 counter claim for illegal
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 to the defendant may be inferred or presumed. It is admitted
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 25,000. 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.

G.R. No. L-12743
August 25, 1917
THE UNITED STATES, plaintiff-appellee,
DOMINGO REYES, defendant-appellant.
Antonio Bengson for appellant.
Acting Attorney-General for appellee.
This is an appeal from a judgment finding Domingo Reyes guilty of estafa and sentencing him to
four months and one day of arresto mayor, to the accessory penalties of the law, and to
indemnify R. B. Blackman in the sum of P118, with subsidiary imprisonment in case of
insolvency, and to pay the costs.
Marked discrepancies in connection with the evidence, particularly that which concerns the
figures, are to be noted. Accepting the findings of the trial court, we can summarize the facts as
R. B. Blackman is a surveyor in the Province of Pangasinan. Domingo Reyes, the accused, also
lives in that province. Blackman employed Reyes to collect certain amounts due from twelve
individuals for Blackman's work in connection with the survey of their lands. The total amount to
be collected by Reyes was P860. He only succeeded in collecting P540. He delivered to
Blackman P368. He retained the balance, or P172. So far as good. The difficult point concerns
the exact terms of the contract. It was merely an oral agreement between Blackman and Reyes.
Blackman claims that he agreed to pay Reyes a commission of 10 per cent. Reyes claims that he
was to receive a commission of 20 per cent. The trial court, in its decision, states that "R. B.
Blackman, agrimensor, dio al aqui acusado el encargo de cobrar algunas cuentas de honorarios
devengados per mediciones practicadas por el como agrimensor, concediendole un 10 por
ciento sobre todas las cobranzas." (R. B. Blackman, the surveyor, ordered the said accused to
collect certain debts due for surveying and offered a 10 per cent commission on all accounts
To return to the figures again, it will be noticed that if we accept the statements of Blackman,
Reyes was entitled to 10 per cent of P540 (or P530), or P54, making P172 misappropriated, or, if
we deduct his commission, P118. On the other hand, if we accept the statements of Reyes, then
20 per cent of the total amount to be collected, P860, is exactly P172, the amount claimed to
have been misappropriated.
There are a number of reasons which impel us to the conclusion that the defendant and
appellant is guilty as charged. In the first place, in view of the discrepancy in the evidence we are
not disposed to set up our judgment as superior to that of the trial court. In the second place,
conceding that Reyes was to receive 20 per cent, this, unless some contrary and express
stipulation was included, would not entitle him in advance to 20 per cent of the amount actually
collected. In the third place, the right to receive a commission of either 10 or 20 per cent did not
make to hold out any sum he chose. (Campbell vs. The State [1878], 35 Ohio St., 70.) In the
fourth place, under the oral contract Reyes was an agent who was bound to pay to the principal
all that he had received by virtue of the agency. (Civil Code, article 1720; U. S. vs. Kiene [1907],
7 Phil. Rep., 736.) And, lastly, since for all practical purposes, the agency was terminated, the
agent was under the obligation to turn over to the principal the amount collected, minus his
commission on that amount. (U. S. vs. Schneer [1907], 7 Phil. Rep., 523.)
All the requisites of estafa as punished by article 535, paragraph 5, of the Penal Code, and as
construed by the commentators, are here present. The assignment of error relative to the
nonproduction by the fiscal of the transcription of the preliminary investigation is not particularly
important as secondary evidence was admitted and the substantial rights of the accused were
not affected.
The judgment of the trial court being in accord with the facts and the law is hereby affirmed with
the costs. So ordered.
Arellano, C.J., Johnson, Cars

Republic of the Philippines

G.R. No. L-7154
February 21, 1912
ELEANOR ERICA STRONG, ET AL., plaintiffs-appellees,
FRANCISCO GUTIERREZ REPIDE, defendant-appellant.
Chicote and Miranda and Tirso de Irureta Goyena for appellant.
Bruce, Lawrence, Ross and Block for appellees.
Prior to October 10, 1903, the plaintiff, Eleanor Erica Strong, was the owner of 800 shares of the
capital stock of the Philippine Sugar Estates Development Company, Limited (sociedad
anonima), of the par value of P100 each, evidenced by certificates Nos. 2125 to 2924, inclusive.
On the said 10th day of October, 1903, the defendant, Francisco Gutierrez Repide, by means
subsequently found and adjudged to have been fraudulent, obtained possession of said shares
and thereafter alleged to be the owner thereof. On the 12th day of January, 1904, the plaintiff
commenced an action against the defendant in the Court of First Instance of the city of Manila
(case No. 2365) asking that the fraudulent sale by means of which the defendant obtained
possession of the said shares be declared null and void and that they be returned to her. On the
29th of April, 1904, the Court of First Instance of the city of Manila rendered its decision, finding
in part as follows:
Upon the facts stated, the court holds that the sale of these shares was made without the
authority of Mrs. Strong, that she never ratified the sale but repudiated it as soon as she
learned of it, that this sale was induced by fraud on the part of the defendant, and
therefore was a fraudulent sale.
The court, therefore, declares that the purchase of these shares of stock by the
defendant is fraudulent and void, and it is ordered by the court that the same be set aside
and for nothing held.
This judgment fixed the value of the shares at P138,352.71, awarding judgment in this amount to
the plaintiff and directing that the said judgment might be satisfied by defendant's delivering to
the plaintiff the said shares, in which event the plaintiff should pay to the defendant $16,000
Mexican currency, or its equivalent in Philippine currency. This judgment was, on appeal to the
Supreme Court of the Philippine Islands, reversed, and plaintiff's complaint dismissed on the
merits.1 Thereupon plaintiff prosecuted an appeal to the Supreme Court of the United States,
which court, on the 3d of May, 1909, rendered its judgment, reversing the decision of the
Supreme Court of the Philippine Islands and affirming the judgment of the trial court. On the 27th
of July, 1909, the said judgment of April 29, 1904, was satisfied by defendant's returning to the
plaintiff 800 shares of stock of said company, evidenced by certificates Nos. 1621, 1623, 1624,
1625, 1626, 1628, 1629, and 1630, and the payment by the plaintiff to the defendant of
P14,159.29 Philippine currency, equivalent to $16,000 Mexican currency. Said satisfaction was
effected by means of a stipulation or agreement entered into between the attorneys for the
plaintiff and the defendant, in which the satisfaction of the judgment was acknowledged by both
parties. From the 10th day of October, 1903, the date of the said fraudulent purchase by the
defendant, until the 27th day of July, 1909, the defendant retained said shares in his possession
or under his control and after the rendition of said judgment of April 29, 1904, collected the
dividends earned by said shares for the years 1905, 1906, 1907, and 1908 at the rate of 6 per
cent per annum, amounting to a total of P19,200, which sum the defendant retained and refused
to pay over to the plaintiff. After demand upon and refusal by the defendant, the plaintiff began
this action for the recovery of said sum. On the 24th of March, 1911, the Court of First Instance of
the city of Manila rendered judgment in favor of the plaintiff for the said sum of P19,200, with
interest thereon at the rate of 6 per cent per annum from the date of the filing of the complaint,
allowing to the defendant as an offset interest on P14,159.29 at 6 per cent per annum from
October 10, 1903, to July 27, 1909, being the dates, respectively, of the purchase of the stock by
the defendant and the satisfaction of the judgment in case No. 2365. Both parties excepted to

this judgment and filed motions for a new trial, and the court upon the hearings modified its
judgment by allowing defendant to offset against plaintiff's judgment interest on P14,159.29 at
the rate of 6 per cent per annum from the 10th day of October, 1903, to the 12th day of January,
1904, the latter date being that of plaintiff's tender of repayment of defendant. From said
judgment as modified the defendant prosecutes this appeal. The plaintiff is satisfied.
The appellant in this case relies for the success of this appeal upon the form of the judgment of
the court below in said action No. 2365. He asserts that that judgment is for a sum of money and
not for the rescission of a contract and the return of shares of stock. This being so, he maintains
that the payment of the sum named in the judgment, whether by money or by shares of stock,
was a complete satisfaction of the judgment in that case. The mere fact that it was paid in shares
of stock did not indicate that the judgment of the trial court was for shares of stock but said
judgment was, on the contrary, in reality and in legal effect for a sum of money which could be
paid in shares of stock as well as in coin of the realm. Basing himself upon this contention
appellant asserts that that judgment having been satisfied by the payment of the sum adjudged
to be due, a subsequent action for dividends on said stock is in effect an action for interest on the
said sum found to be due, that it affects the subject matter of a judgment already paid and
We do not believe that the contention of the appellant is sound. The action begun in the trial
court was to set aside a sale made by the plaintiff to the defendant and for the return of the
shares of stock which were the subject of that sale. The basis of that action was the claim that
the plaintiff had been deprived of the shares of stock in question by false and fraudulent
representations and fraudulent concealment on the part of the defendant, or of his agents, and
that thereby she had been induced to part with those shares without just compensation and, in
reality, without her legal consent. The trial court found in favor of the plaintiff, declaring the sale of
the stock to have been fraudulently obtained and setting aside the sale absolutely, as is indicated
by that portion of its opinion heretofore quoted. On the appeal to the Supreme Court of the
United States the fraudulent character of the representations by which the plaintiff had been
induced to part with her stock was fully affirmed after a thorough consideration of the facts and
circumstances of the case and the judgment of the trial court setting aside the sale on the ground
of fraud was affirmed in every particular. It is a necessary conclusion, therefore, that the action
was in reality for the return of the stock itself, with appropriate damages in case the return was
not made by the defendant. The finding of the court that the value of the stock was P138,352.71
was not made for the purpose of declaring the nature of the action to be one for the recovery of
money, but rather, for the purpose of giving to the plaintiff her alternative remedy in case the
stock itself should not be returned. That the same identical shares of stock obtained by the
defendant were not, as a matter of fact, returned to plaintiff is not controlling. They were identical
in everything except their numbers and were tendered and received in fulfillment of the
provisions of the judgment. All of the stock of said company was the same kind and paid the
same dividend.
The judgment of the trial court, as affirmed by the Supreme Court of the United States, set aside
the sale as fraudulent, and, therefore, by necessary result, the title to the shares of stock in
question passed to the plaintiff if it be conceded that the title ever legally passed from her. The
delivery of those shares to her by the defendant under that judgment was an admission of her
title as declared by the court and was a delivery of possession in pursuance of that declaration of
ownership. Under the decisions referred to, as between the parties thereto, the plaintiff was
legally the owner of said stock from the time when she was fraudulently deprived of it until the
time it was returned to her as fully and as completely as she was after the adjudication of the title
and return of the stock itself. Whoever, therefore, during that period collected the dividends upon
the said stock took from the plaintiff something which belonged to her. While the defendant
asserts that he was at no time the owner of said stock, the finding of the trial court and the finding
of the Supreme Court of the United States on appeal were to the effect that the defendant was
the real purchaser of the stock from the plaintiff under the fraudulent sale, although the
negotiations leading up to the sale were carried on by other persons. The fraudulent sale having
been made to him, it is unquestionable that he became responsible to the plaintiff from that
moment forward. So far as the responsibility of the defendant was concerned, it is of no
consequence who actually collected and retained the dividends. The plaintiff had a right to look
to the defendant and to him alone.

Unless, therefore, the plaintiff has, by some act subsequent to obtaining the judgment referred to,
released her rights to recover of the defendant the income of the stock during the time he held it,
that right still subsists. The consideration of this question brings us to the other contention of the
appellant. It is to the effect that when the judgement in question was paid a stipulation or
agreement was entered into between him and the plaintiff by virtue of which the plaintiff released
him from all responsibility in connection with the transaction relating to the stock. That
agreement, translated, reads as follows:
I, W. H. Lawrence, lawyer, with full authority from the plaintiff in the above-entitled action
for the purpose of this instrument; and I, Eduardo Gutierrez Repide, lawyer, and being
also fully authorized and empowered hereto by the defendant in said action, now, for the
purpose of satisfying the judgment rendered therein, I, W. H. Lawrence, hereby deliver to
Eduardo Gutierrez P14,159.29, and I, Eduardo Gutierrez, on my part deliver to said W. H.
Lawrence the cost of this action and eight certificates of stock of the Philippine Sugar
Estates Development Company, each certificate representing 100 shares, which
certificates are of the par value of P10,000 each, and are numbered 1621, 1623, 1624,
1625, 1626, 1628, 1629, and 1630. Wherefore, both parties agree and stipulate that, by
reason of the said payments hereby mutually made, the judgment in the above-entitled
action is entirely paid and the action is finally settled and terminated, together with all the
legal results flowing from said judgment.
We see nothing in this written discharge which could properly be given the legal effects which the
appellant in this case assigns to it. It is a discharge of a judgment and nothing more. Being such,
it reaches no further than the terms of the judgment itself. It is to be presumed that an instrument
satisfying a debt or obligation manifested in another instrument extends no further than the terms
of the instrument which manifests the obligation to be discharged, unless, from the terms of the
instrument, it is clear that the parties intended something more. So far as the record discloses, at
the time this satisfaction was executed nothing whatever occurred between the parties relative to
the dividends on the stock which formed the subject-matter of that judgment, nor did anything
transpire as to any other relations between the parties than those embraced within the judgment
itself. There was nothing in the conduct of the parties, or in their relations or attitudes, from which
it could be implied or inferred that they were dealing with aught else than the judgement itself.
There is no basis, then, for the contention of the appellant unless it be found in the wording of
that instrument itself. As we have already indicated, however, there is nothing in the phraseology
of that document which in the remotest way touches the rights of the parties as to the dividends
upon the stock or which embraces any other matter between the parties than the subject matter
of the judgment itself. The words employed in such an instrument should not be extended
beyond the consideration upon which the instrument was executed as otherwise the courts would
be making for the parties a release which they never intended or contemplated.
Relative to the scope and extent of the satisfaction referred to the trial court said:
While it may appear from the stipulation entered into when the judgment was satisfied
between the parties interchanging the shares of stock and money, as before stated, that
the plaintiff had no further claim against the defendant, because at that time the plaintiff
paid the defendant a large sum of money without making claim, it also appears that the
plaintiff was not aware that the defendant had collected the dividends before referred to.
In arguing this question plaintiff's counsel devotes himself at some length to sustaining this
finding of fact, and asserts that "even had she been aware of this fact it would make no
difference for the reason that the matter of dividends was not and could not have been involved
in the original suit." It is true that the dividends were not included in the cause of action set forth
in the complaint in cause No. 2365 and were not, therefore, a subject of adjudication in that
action. We are of the opinion, however, that they might have been, at least in part. The plaintiff in
suing for the recovery of shares illegally taken from her by the defendant had the right to demand
their return and with them whatever damages she had sustained by reason of their retention,
which would be in this case the dividends which had been collected on them by the defendant
while they were in his possession. That is, strictly speaking, what the plaintiff should have
demanded in her complaint. Generally speaking, it is not permitted that a plaintiff sue for the
recovery of property which is illegally detained by another, and, after recovering that property,
sue in a separate action for the damages sustained by that illegal detention. The law seeks to
prevent multiplicity of actions, and it is the duty of every person suing to join in one action every

cause of action which he has against the defendant, to the end that all questions between the
parties be litigated in one suit and multiplicity of actions and resulting expenses prevented. This
is a question, however, which could have been raised in the court below by the defendant. He did
not do so. Neither has he raised the question in this court directly. We, therefore, do not pass
upon it or base any finding upon it. The purpose which we have in referring to it at all is to
indicate that the real question arising from the controversy between the parties relative to this
particular assignment of error really resolves itself into one of multiplicity of actions, that is, of the
duty of the plaintiff to join all her causes of action against the defendant in one complaint, and not
the one presented by the appellant in his argument relative to the reach which should be given to
the document of satisfaction. We, therefore, disapprove of the contention of the appellant that the
satisfaction of the judgment reaches further than the terms of the judgment itself. It does not
embrace any other relations between the parties than those embraced in the plain wording of the
judgment. While the dividends might, in part, have been included in the cause of action set forth
in the complaint in that action and, as far as possible, should have been incorporated therein,
nevertheless they were not so made and, therefore, formed no part of the judgment in which that
action terminated. When, therefore, after the satisfaction of that judgment, plaintiff began a
separate action to recover the dividends, the only defense available to the defendant was the
plea of multiplicity. That plea not having been made, no question relating thereto is presented on
this appeal.
It is true that plaintiff could have included in her action and recovered at the most only those
dividends which were due at the time judgment in her favor was entered. It happens in this case
that most of the dividends became payable after the plaintiff had secured her judgment. That
being so, they could not have been included by her in the original complaint, not could they have
been incorporated within the judgment in that action. This, then, furnishes another reason why
the contention of the appellant in this regard cannot be sustained. Under such circumstances a
plea of multiplicity, even if made, would not have been available as to those dividends which
became payable after the judgment was entered in that action.
The remaining question presented by appellant relates to the interest which he was entitled to
recover or the amount due him from the plaintiff. As we have already seen, the judgment of the
court in the first place gave him the interest on said amount from the 10th day of October, 1903,
to the 27th day of July, 1909. On motion made by the plaintiff the court amended that judgment
by giving the defendant interest on said sum from the 10th day of October, 1903, to the 12th day
of January, 1904. The reason for the amendment was the fact, as disclosed by the proofs, that
on the latter date the plaintiff tendered to the defendant said sum of money and the defendant at
that time refused to accept the same. Under such circumstances, the court properly held that the
tender of the sum and its refusal by the defendant stopped the running of interest in favor of the
latter and he was not, therefore, entitled to recover interest from that day forward. The appellant
argues in this connection that he should not be blamed or punished for the refusal to accept the
tender of the plaintiff for the reason that he was not the owner of the stock at the time of such
tender and, therefore, could not accept it. As we have already seen in touching another question
raised on this appeal, the court, in a judgment now final, found that the sale of stock afterwards
declared fraudulent was executed between the plaintiff and the defendant. As to this there can be
no question. As a necessary result the plaintiff need look for her redress no further than the
defendant himself and she could produce all of the legal effects possible in her favor by dealing
directly with him, as she did when she made the tender in question.

Republic of the Philippines

G.R. No. L-20274
October 30, 1969
Silvestre Br. Bello for petitioners.
Teofilo A. Leonin for respondent.
Petition for review on certiorari of the decision and the two resolutions of the Court of Appeals
promulgated on May 10, July 23, and September 5, all in the year 1962, in CA-G.R.-16497-R,
entitled "Eloy Miguel and Demetrio Miguel, plaintiffs-appellees vs. Anacleta M. Vda. de Reyes,
During the Spanish regime and prior to July 26, 1894, Eloy Miguel, then single and resident of
Laoag, Ilocos Norte, went to Isabela and for some appreciable period of time stayed with his
kinsman Juan Felipe in Barrio Ingud Norte, Municipality of Angadanan. There he spotted an
uncultivated parcel of land, one hectare of which he forthwith occupied, and then cleared and
planted to corn. After the Philippine Revolution, he returned to Laoag, Ilocos Norte and took a
wife. In the early years of the ensuing American regime, Eloy Miguel returned to Ingud Norte with
his family, resettled on the same land, cultivated and planted it to rice, declared it for taxation
purposes, and paid the annual realty taxes thereon.
During the year 1932, Leonor Reyes, an ambulatory notary public and husband of the private
respondent Anacleta M. Reyes, used to visit Barrio Ingud Norte, looking for documents to
notarize. He and Eloy Miguel became acquaintances. Later, Leonor Reyes asked Miguel if he
wanted to secure expeditiously a title to his landholding. Having received an affirmative answer
and after Eloy Miguel had handed to him the tax declaration and tax receipts covering the land,
Leonor Reyes prepared and filed a homestead application in the name of Eloy Miguel and,
furthermore, promised to work for the early approval of the said application. Reyes handed to
Miguel the receipt for the filing fee (exh. A) corresponding to the homestead application, advising
the latter to keep it, but he (Reyes) withheld other papers including the tax declaration and tax
receipts, assuring Miguel that he would return them as soon as the homestead patent was issued
in Miguel's name. Reyes likewise advised Miguel to cease paying the land taxes until the patent
shall have been issued by the Bureau of Lands.
After a long wait and becoming impatient about the issuance of the promised title, Eloy Miguel
inquired from Leonor Reyes about the status of his application. Reyes promised to send a lettertracer to the Bureau of Lands, and, in fact, asked Eloy Miguel to affix his thumbmark to a blank
paper upon which was supposed to be written a letter-tracer. However, World War II broke out in
the Pacific, and Miguel did not hear of and about his homestead application; after the war he had
no way of ascertaining the outcome of his application because Leonor Reyes had died
meanwhile during the Japanese occupation of the Philippines.
For the services rendered and still to be rendered by Leonor Reyes in preparing the homestead
application and in securing the issuance of the correspondent patent, Miguel gave the former 1/5
of his yearly harvest from the land. After the death of Leonor Reyes Miguel continued to deliver
an equal number of cavanes of palay to the former's widow, Anacleta M. Vda. de Reyes, who
likewise promised to help him secure the necessary homestead patent.
Meanwhile, Demetrio Miguel helped his father, Eloy Miguel, clear and cultivate the land.
Sometime in 1932, on the occasion of the marriage of Demetrio, Eloy Miguel ceded to Demetrio
14 hectares of the southern portion of the land as a gift propter nuptias. Demetrio forthwith
declared the said portion for taxation purposes in his name, as evidenced by tax declaration
7408 (exh. G).

However, unknown to Eloy and Demetrio Miguel, Leonor Reyes on June 25, 1935 filed sales
application 20240 in the name of his wife, Anacleta M. Vda. de Reyes (hereinafter referred to as
the private respondent), covering the same parcel of land occupied and cultivated by the Miguels
and the subject of Eloy Miguel's homestead-application. The sales application was duly
acknowledged by the Bureau of Lands on June 29, 1935, and a sale at public auction took place
on August 3, 1939 whereat the private respondent was the sole bidder. The Director of lands
awarded the land to her on March 7, 1940, the value of which was to be paid on installments.
Sometime in 1950, the private respondent had the land surveyed by Maximo Lorenzo who, in the
course of the survey, assured Eloy Miguel that the land was being surveyed in the latter's name.
The private respondent, who was present during the survey, made the same assurance to Eloy
Miguel. However, because his suspicions were aroused by the act of the private respondent of
having the land surveyed, Eloy Miguel directed his son, Demetrio, to inquire from the office of the
district land officer of Ilagan, Isabela, about the status of his (Eloy's) homestead application.
Demetrio discovered that their land was covered by the sales application of the private
respondent. Eloy Miguel forthwith filed on February 16, 1950 a protest with the Bureau of Lands
against sales application 20240 of the private respondent. Consequently, on February 21, 1950,
the Director of Lands ordered an investigation. Hearing of the protest was scheduled for May 26,
1950 by deputy public lands inspector Alejandro Ramos of Land District 4, Bureau of Lands,
Ilagan, Isabela, but was postponed at the instance of the private respondent. The hearing was
then reset for February 10, 1951, by assistant public lands inspector Hilarion Briones. However,
the Miguels had in the interim discovered that notwithstanding their protest and the investigation
ostensibly being conducted by the administrative branch of the Government, sales patent V-522
and original certificate of title P-1433, covering the parcel of land in question, were granted and
issued to the private respondent on January 10, 1951 and January 22, 1951, respectively.
Consequently, on February 17, 1951 Eloy and Demetrio Miguel lodged a complaint with the
Court of First Instance of Isabela against the private respondent, Anacleta M. Vda. de Reyes, the
Director of Lands, and the Register of Deeds of Isabela, for the annulment of sales patent V-522
and the cancellation of original certificate of title P-1433. That case, docketed as civil case 315 of
the Court of First Instance of Isabela, was dismissed by that court on grounds that the plaintiffs
did not have personality to institute the action, and that it was prematurely filed the Miguels
not having exhausted all administrative remedies, more specifically not appealing to the
Secretary of Agriculture and Natural Resources from the grant by the Director of Land of the
patent to the private respondent. On appeal to this Court, the dismissal was affirmed on the
second ground (G.R. No. L-4851, promulgated July 31, 1953).
On September 7, 1953, Eloy and Demetrio Miguel commenced the action (civil case 616) in the
Court of First Instance of Isabela against the private respondent to compel her to reconvey to
them the land covered by the abovementioned patent and title. After due hearing, the trial court
found that Eloy Miguel "has always been, and up to this time, in physical possession of the whole
tract of land in question under claim of ownership thru occupancy, he having occupied and
cultivated the land since the Spanish regime;" that he was a homestead applicant way back in
1932 for the land possessed by him; that there exists a trust relationship Eloy Miguel would
himself have personally attented to his own application; and that, through fraud and
misrepresentations, Leonor Reyes caused the filing and approval of an application and the
issuance by the Bureau of Lands of a sales patent covering the property in the name of his wife,
the private respondent, without the consent and knowledge of the Miguels. The lower court,
however, held that reconveyance is not proper because the land in question is not the private
property of the Miguels since time immemorial but remains a part of the public domain, and
instead declared that Eloy Miguel "should be given priority to acquire the land under the
foregoing premises, the court a quo rendered judgment ordering (1) the Director of Land to
cancel patent V-522 issued in the name of Anacleta M. Vda. de Reyes, (2) the Registrar of
Deeds of Isabela to cancel original certificate of title P-1433 in the name of Anacleta M. Vda. de
Reyes and to return Patent V-522 to the Bureau of Lands, and (3) the Director of Lands to give
due course to the homestead application of Eloy Miguel over the land.
The private respondent appealed to the Court of Appeals (hereafter referred to as the respondent
Court) which dismissed the complaint upon the ground that the judgment appealed from could
not and did not bind the Director of Lands and the Registrar of Deeds of Isabela who were not
parties thereto. Eloy and, Demetrio Miguel (hereafter referred to as the petitioners) filed a motion

for reconsideration, wherein they argued that while the trial court might have incurred error in the
legal conclusions drawn from its own findings of fact, the respondent Court was not legally
precluded by the Rules of Court and applicable jurisprudence to modify the judgment of the trial
court, so as to make it conform to the evidence, and to grant the relief of reconveyance sought in
the action, in which action the Director of Land and the Register of Deeds of Isabela are not
proper or necessary parties. The motion for reconsideration wag denied in an extended
resolution of the respondent Court Promulgated on July 23, 1962, which ruled that the petitioners
should have appealed from the decision of the trial court. A second motion for reconsideration
was denied in a minute resolution dated September 5, 1962.
The petitioners are now before us on appeal by certiorari, assigning as errors (1) the Court of
Appeals' holding that they should have appealed from the decision of the trial court, and (2) its
finding that, assuming that reconveyance in favor of the petitioners as mere appellees is still
proper, the cases cited in the latter's first motion for reconsideration are not in point.
It has been postulated and, we think, correctly that the Supreme Court is vested with ample
authority to review matters not assigned as errors in an appeal, if it finds that their consideration
and resolution are indispensable or necessary in arriving at a just decision in a given
case.1 Thus, before passing upon the foregoing assigned errors, we shall first resolve in
seriatim the matters raised in both the appealed decision and resolutions of the respondent Court
because to do so is imperative in arriving at a fair and equitable adjudication of this case.
1. The respondent Court points up the failure of the petitioners to present a petition for judicial
confirmation of imperfect title, if they indeed had been in possession of the land since July 26,
1894, in accordance with the Public Land Act. Eloy Miguel should not, however, be expected to
file such a petition because all along he was relying on the solemn assurances of Leonor Reyes
and later his wife, the private respondent, that they were in the process of securing a homestead
patent for him.
2. The respondent Court observed in its decision that the evidence on the allegation that Leonor
Reyes acted fraudulently in applying for the purchase of the land and later transferring his right to
his wife, is sharply conflicting, and that even granting that there was fraud in the obtention of the
issuance of the patent, any objection based on that ground should have been interposed within
one year from the date of its issuance.
We cannot give our approval to this view. As found by the court below, the petitioners have
proven by preponderance of evidence the fraud perpetrated by the private respondent and her
husband on Eloy Miguel. The weight of evidence leans heavily in favor of the fact of occupation
by Eloy Miguel of the land from prior to July 26, 1894. This was the finding of the lower court
which belies the private respondent's allegation that Eloy Miguel entered as her tenant only in
1935. There is also the receipt, exh. A, evidencing the payment of a filing fee for a homestead
application, which receipt, in the session of Eloy Miguel, raises at least the presumption that he
had filed a homestead application. That the records of the Bureau of Lands or of any of its units,
particularly the district land office at Ilagan, Isabela, do not show that such application was ever
filed, supports the petitioners' thesis, concurred in by the trial court, that the blank paper which
Eloy Miguel thumbmarked at the behest of Leonor Reyes was used by the latter to withdraw the
formers application instead of to trace the application. Finally, there is the private respondent's
and her husband's act of misleading the Bureau of Lands by falsely stating in their application for
a sales patent that there was no improvement on the land, when, as found by the lower court, the
land had already been cultivated and improved by Eloy Miguel since 1932, by the latest. (This
misleading statement, noted by the court a quo on exh. 15 dated March 28, 1939 of the private
respondent, significantly, is not impugned by the latter.) In fact, the lower court observed that the
private respondent herself affirmed on the witness stand that Eloy Miguel was in 1935 already
working on the land, although supposedly as her tenant. Therefore, at the time the private
respondent's sales patent application was filed in 1935, Leonor Reyes and she led the Bureau of
Lands to believe that the land was uncultivated and unoccupied by other claimants. The very
relevant question arises: Why did the Reyes spouses conceal from the Bureau of Lands the fact
that the land was occupied and being cultivated by the Miguels, when there existed no prohibition
against having the land cultivated for them by tenants? There are only two logical reasons for the
mysterious conduct of the Reyes spouses. First, had they stated in their sales application that the
whole parcel of land was under cultivation by the petitioners, the Director of Lands would have in
all probability discovered that the land applied for was covered by the prior homestead

application of Eloy Miguel and most likely would have disapproved the sales application of the
private respondent. Second, had a survey of the land been conducted earlier, this would have
aroused the suspicions of Eloy Miguel earlier and enabled him to discover much sooner the fraud
perpetrated by Leonor Reyes before the sales application of the private respondent was given
due course. Indeed, the private respondent waited until she had just about paid all the
installments on the land before ordering a final survey thereof. It was this survey which aroused
Eloy Miguel's suspicions and enabled him and his son to discover the fraud perpetrated upon
The respondent Court's holding that any objection based on fraud should have been interposed
within one year from the date the issuance of the sales patent has no relevance to the case at
bar. This is an action for theenforcement of a constructive trust the ultimate object of which is
the reconveyance of property lost through breach of fiduciary relations and/or fraud. Therefore, it
can be filed within four years from the discovery of the fraud.2 And since the petitioners
discovered the fraud committed against them by the Reyes spouses in 1950, they had until 1954
within which to bring this action. This action was seasonably instituted because the complaint
was filed on September 7, 1953.
3. The respondent Court also held that the only remedy available at the time the action below
was instituted was for the Government (through the Solicitor General) to file an action for the
reversion of the land to the public domain based on the illegality of the grant a suit which a
private person is not authorized to file. The foregoing rule is correct but inapplicable in this case,
which, as earlier mentioned, is an action for reconveyance of a piece of land through
enforcement of a constructive trust. For this same reason, the provision of Land Administrative
Order 6 of the Secretary of Agriculture and Natural Resources, cited in the respondent court's
decision, is likewise inapt.
4. The respondent Court attributes error to the lower court's finding that Eloy Miguel filed a
homestead application for the land in question, stating that no other evidence was presented to
show that such application was filed except the testimony of Eloy Miguel and the receipt for the
filing fee of a homestead application; and that if such application was really filed, some trace or
tell-tale evidence of it would be extant, and the application could have been easily reconstituted
after the liberation in 1945 when the Government adopted a policy to enable all public land
applicants to reconstitute their applications. It is too well-settled to require any citation of authority
that the lower Court's findings of fact are entitled to considerable weight, especially with respect
to the appreciation of the testimony of witnesses on the stand, since it was in the best position to
observe the demeanor of the witnesses. The testimony of Eloy Miguel regarding his filing of a
homestead application over the parcel of land as found by the lower court should not
therefore lightly be brushed aside. The receipt, exh. A, for the filing of the homestead application
raises a presumption in favor of Eloy Miguel's having filed such an application. As earlier
explained, if no trace of the said application could be found among the records of the Bureau of
Lands or of any of its units particularly the district land office at Ilagan, Isabela, it is because
through fraud i.e., by asking Eloy Miguel to thumbmark a blank piece of paper Leonor
Reyes succeeded in withdrawing the application of Miguel. And he did this to pave the way for
his wife, the private respondent herein, herself to apply for the land under a sales application. Of
course, having relied on the assurances of the Reyes spouses that they would help him secure a
homestead patent, Eloy Miguel found no need to reconstitute his homestead application. It is not
even farfetched to suppose that Miguel, being illiterate, never even came to learn of the
Government's policy of enabling public land applicants to reconstitute their applications.
5. Coming now to the assigned errors, the respondent Court's view is not correct that it cannot
grant the relief of reconveyance because the petitioners did not appeal from the decision of the
lower court. There exist sufficient bases, hereinafter to be discussed, for the respondent Court to
award said relief in the exercise of its broad appellate powers to affirm, reverse or modify the
judgment or order appealed from.
To start with, the petitioners cannot entirely be blamed if they thought it the better part of
prudence not to appeal. For although it did not incorporate a decree of reconveyance, still the
decision of the court below was favorable to them because it vindicated their actual possession
of the land under a bona fide claim of ownership since the Spanish regime, and adjudged them
as having a better right to the land and the priority to own it under the Public Land Act. Besides, it

was their legitimate desire to avoid incurring additional expenses incident to the bringing of an
However, as appellees in the Court of Appeals, the petitioners pointedly called the attention of
the respondent Court in their brief to several questions decided against them in the court below.
Thus, working on the theory that it was plain error for the trial court to order the Director of Lands
and the Register of Deeds of Isabela to implement its decision, the petitioners called the attention
of the respondent Court to the precise nature of the action below in which the Director of Lands
and the Register of Deeds of Isabela need not be impleaded.
... The action in this case is reconveyance, the purpose of which is to compel the
defendant to return to the plaintiffs-appellees the land in question which she has acquired
through fraudulent means. Such being the case, it would have been utterly improper for
the plaintiffs to have impleaded the Director of Lands or the Register of Deeds of Isabela
inasmuch as the action is personal in nature directed against the person of the
defendant." .
The petitioners likewise called the attention of the respondent Court to the trust relationship
existing between them, on one hand, and the Reyes spouses, on the other, which was breached
by the latter. Thus, to justify the reconveyance to them of the property, they stated that:
Moreover, a situation of trust has been created in the instant case between the plaintiff
and the defendant-appellant deceased husband upon whom the plaintiff Eloy Miguel
relied through his (Reyes') representations that the corresponding title to said land would
be secured in favor of the plaintiff Eloy Miguel. The evidence likewise shows that the
defendant Vda. de Reyes promised the plaintiff to continue the work begun by her late
husband with the ultimate result of securing the said homestead patent and title in favor
of the plaintiff Eloy Miguel. Inasmuch as the said promise was violated by the defendant
who secretly worked toward the acquisition of the said land for her own self, fraudulently
and stealthily, no prescription can run as against plaintiffs' right to claim ownership of the
said property.
We held in one case that appellants need not make specific assignment of errors provided they
discuss at length and assail in their brief the correctness of the trial court's findings regarding the
matter. Said discussion warrants the appellate court to rule upon the point because it
substantially complies with sec. 7, Rule 51 of the Revised Rules of Court, intended merely to
compel the appellant to specify the questions which he wants to raise and be disposed of in his
appeal. A clear discussion regarding an error allegedly committed by the trial court accomplishes
the purpose of a particular assignment of error.3
Reasoning a fortiori from the above-cited authority, an appellee who occupies a purely defensive
position and is not required to make assignments of errors, need only discuss or call the attention
of the appellate court in his brief to the issues erroneously decided against him by the trial
court.4 Here the petitioners (appellees in the Court of Appeals) stated quite explicitly in their brief
that since the action was for reconveyance, it was utterly improper to implead the Director of
Lands and the Register of Deeds in effect calling the attention of the respondent Court to a
plain error committed by the trial court in ordering the Director of Lands and the Register of
Deeds to nullify the sales patent and original certificate of title issued to the private respondent.
And, in discussing the trust relationship between the Miguels and the Reyes spouses which was
breached by the latter, the petitioners (as appellees) also clearly brought to the attention of the
respondent Court a valid ground disregarded by the lower court as a basis for granting the relief
of reconveyance.
Moreover, the Rules of Court5 and jurisprudence authorize a tribunal to consider errors, although
unassigned, if they involve (1) errors affecting the lower court's jurisdiction over the subject
matter, (2) plain errors 6 not specified, and (3) clerical errors. Certainly, the mandate contained in
the dispositive portion of the lower court's decision and addressed to the Director of Lands and
the Register of Deeds, who were not parties to the case, is a plain error which the respondent
Court properly corrected. As aforenarrated, the petitioners (as appellees) brought this error to the
attention of the respondent Court. Another plain error which the respondent Court should have
considered was the court a quo's conclusion that the land in litigation was still part of the public
domain, in the face of the parties' mutual allegations to the contrary and despite the admitted fact

that a sales patent and an original certificate of title over the land had already been issued, thus
segregating the land from the public domain and making it private land.
It is noteworthy that the complaint for reconveyance was not dismissed by the trial court. What it
denied was merely the relief or remedy of reconveyance. However, in its decision, the trial court
made certain findings of fact which justified the relief of reconveyance e.g., that Eloy Miguel
"has always been, and up to this time, in physical possession of the whole tract of land in
question under claim of ownership thru occupancy, he having occupied and cultivated the land
since the Spanish regime;" that there was a trust relationship between Eloy Miguel and the
Reyes spouses; and that the Reyes spouses have fraudulently and in bad faith breached that
trust. Hence, in reiterating their positions before the respondent Court on the private nature of the
land, on the impropriety of impleading the Director of Lands and the Register of Deeds of
Isabela, and on the existence of a trust relationship between the petitioners and the Reyes
spouses, the petitioners were in point of fact inviting the respondent Court's attention to
questions erroneously decided against them by the trial court, in the hope that the respondent
Court would render judgment in accordance with the facts adjudged by the trial court as proven.
If the complaint states a claim upon which any relief can be given, it is immaterial what
the plaintiff has asked for in his prayer or whether he has asked for the proper relief; the
court will grant him the relief to which he is entitled under the facts proven (Kansas City
St. L. and C. R. Co. v. Alton R. Co., 5 Fed. Rules Service, p. 638; U.S. Circuit Court of
Appeals, Seventh Circuit, Dec. 18, 1941).
On appeal to the respondent Court by the private respondent, the suit was, as it has always been
in the court of origin, one for reconveyance. And of course, the petitioners did not ask the
respondent Court for an affirmative relief different from what was logically justified by the facts
found by and proven in the court a quo.
6. The respondent Court opined that the cases cited by the petitioners in their motion for
reconsideration (i.e., Republic of the Philippines v. Carle Heirs, L-12485, July 21, 1959, and
Roco, et al. v. Gimeda L-11651, Dec. 27, 1958) are not applicable because they involved
properties which admittedly belonged to the parties entitled to reconveyance, unlike the herein
petitioners who are mere public land applicants and have not acquired title under the Public Land
Act. Assuming the respondent Court to be correct, a legion of cases there are which can be cited
in favor of the petitioners' position. Since the law of trust has been more frequently applied in
England and in the United States than it has been in Spain, we may draw freely upon American
precedents in determining the effects of trusts, especially so because the trusts known to
American and English equity jurisprudence are derived from the fidei commissa of the Roman
Law and are based entirely upon civil law principles.7 Furthermore, because the case presents
problems not directly covered by statutory provisions or by Spanish or local precedents, resort for
their solution must be had to the underlying principles of the law on the subject. Besides, our Civil
Code itself directs the adoption of the principles of the general law of trusts, insofar as they are
not in conflict with said Code, the Code of Commerce, the Rules of Court and special laws. 8
In holding that the cases cited by the petitioners in their motion for reconsideration (i,e., Republic
of the Philippines v. Carle Heirs, supra, and Roco, et al. v. Gimeda, supra) are inapplicable, the
respondent Court advances the theory that an action for reconveyance based on constructive
trust will prosper only if the properties involved belong to the parties suing for and entitled to
reconveyance. This is not entirely accurate. In Fox v. Simons9 the plaintiff employed the
defendant to assist him in obtaining oil leases in a certain locality in Illinois, the former paying the
latter a salary and his expenses. The defendant acquired some leases for the plaintiff and others
for himself. Whereupon, the plaintiff brought suit to compel the defendant to assign the leases
which he had acquired for himself. The court found for the plaintiff, holding that it was a breach of
the defendant's fiduciary duty to purchase for himself the kind of property which he was
employed to purchase for the plaintiff. 10
It is to be observed that in Fox v. Simons, supra, the plaintiff was not the original owner of the oil
leases. He merely employed the defendant to obtain them for him, but the latter obtained some
for the plaintiff and some for himself. Yet, despite the absence of this former-ownership
circumstance, the court there did not hesitate to order the defendant to assign or convey the
leases he obtained for himself to the plaintiff because of the breach of fiduciary duty committed
by said defendant. Indeed, there need only be a fiduciary relation and a breach of fiduciary duty

before reconveyance may be adjudged. In fact, a fiduciary may even be chargeable as a

constructive trustee of property which he purchases for himself, even though he has not
undertaken to purchase it for the beneficiary if in purchasing it he was improperly competing with
the beneficiary.11
Parenthetically, a fiduciary relation arises where one man assumes to act as agent for another
and the other reposes confidence in him, although there is no written contract or no contract at
all. If the agent violates his duty as fiduciary, a constructive trust arises. It is immaterial that there
was no antecedent fiduciary relation and that it arose contemporaneously with the particular
transaction. 12
In the case at bar, Leonor Reyes, the private respondent's husband, suggested that Eloy Miguel
file a homestead application over the land and offered his services in assisting the latter to
secure a homestead patent. Eloy Miguel accepted Leonor Reyes' offer of services, thereby
relying, on his word and reposing confidence in him. And in payment for the services rendered by
Leonor Reyes in preparing and filing the homestead application and those still to be rendered by
him in securing the homestead patent, Eloy Miguel delivered to Reyes 1/5 of his yearly harvest
from the said land. When Leonor Reyes died, the petitioners continued to deliver the same
percentage of their annual harvest to the private respondent who undertook to continue assisting
the former to secure a homestead patent over said land. However, in breach of their fiduciary
duty and through fraud, Leonor Reyes and the private respondent filed a sales application and
obtained a sales patent and ultimately an original certificate of title over the same parcel of land.
Therefore, following the ruling in Fox v. Simons, supra, the private respondent can be compelled
to reconvey or assign to the petitioners the parcel of land in the proportion of nine hectares in
favor of Eloy Miguel and 14 hectares in favor of Demetrio Miguel, respectively.
The private respondent argues that there is no violation of trust relationship because the
petitioners could have participated in the public bidding. She avers that the alleged fraud
supposedly committed upon the petitioners, and on which the claim for reconveyance is founded,
is clearly of no moment because the sales patent in question was not the necessary
consequence thereof, but rather, it was granted in consideration of her being the highest bidder
and the purchaser of the land. In refutation of the foregoing argument, it must be observed, firstly,
that the petitioners because of the fraud practised on them by the Reyes spouses never
came to know about the public bidding in which the land was offered for sale and therefore could
not have participated therein. Had not the Reyes spouses misrepresented in their sales
application that the land was uncultivated and unoccupied, the Director of Lands would in all
probability have found out about the occupancy and cultivation of the said land by the petitioners
and about Eloy Miguel's homestead application over the same, and consequently would have
denied the sales application of the Reyes spouses. Secondly, it may justifiably be postulated that
equity will convert one who, for any reason recognized by courts of equity as a ground for
interference, has received legal title from the Government to lands, which in equity and by the
laws of Congress ought to have gone to another, into a trustee for such other and compel him to
convey the legal title accordingly.13 Thirdly, Eloy Miguel could have very easily obtained title to
the said parcel of land in either of two ways, had he not been inveigled by Leonor Reyes to file a
homestead application. Thus, since he is a natural-born Filipino citizen, who is not an owner of
more than twenty-four hectares of land, and who since prior to July 4, 1926 (under R.A. 782,
approved June 21, 1952, occupation and cultivation since July 4, 1945, or prior thereto, is
deemed sufficient) has continuously occupied and cultivated a parcel of land not more than
twenty-four hectares in area, he was entitled to apply for a free patent for, or gratuitous grant, of
said land. This is known as confirmation of imperfect or incomplete titles by administrative
legalization.14 Or, since Eloy Miguel has possessed the land prior to July 26, 1894 and said
possession has been continuous, uninterrupted, open, adverse and in the concept of an owner,
there is a presumption juris et de jure that all necessary conditions for a grant by the State have
been complied with, and he would have been by force of law entitled pursuant to the
provisions of sec. 48(b) of the Public Land Act to the registration of his title to the land. 15
ACCORDINGLY, the decision of the Court of Appeals of May 10, 1962 and its resolutions of July
23 and September 5, 1962, are set aside. Another judgment is hereby entered, ordering the
private respondent Anacleta M. Vda. de Reyes to convey the land subject matter of the
complaint, in fee simple, to the petitioners, in the proportion of nine (9) hectares in favor of Eloy
Miguel and fourteen (14) hectares in favor of Demetrio Miguel. In the event of failure of the said

private respondent, for any reason whatsoever, to convey within thirty (30) days from the date
this judgment becomes final, it is hereby decreed that at the end of that period she will be
automatically divested of her title to the property in dispute, and this decision shall be authority
for the Register of Deeds to forthwith cancel the original of the original certificate of title P1433 in
his office and the owner's copy thereof in the name of Anacleta M. Vda. de Reyes, and to issue
in favor of Eloy Miguel and Demetrio Miguel new Torrens titles over the land in the proportion
above indicated. Costs against the private respondent Reyes.

Republic of the Philippines

G.R. No. L-21237
March 22, 1924
JAMES D. BARTON, plaintiff-appellee,
LEYTE ASPHALT & MINERAL OIL CO., LTD., defendant-appellant.
Block, Johnston & Greenbaum and Ross, Lawrence & Selph for appellant.
Frank B. Ingersoll for appellee.
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 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 defendant 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 $405,000,
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 law 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 by 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.
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
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)
October 1, 1920.
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., May
first, 1922, in the following territory:



New Zealand






Siam and the Straits Settlements, also in the United States of America until May 1, 1921.
As regard 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:
Per ton
In 1,000 ton
lots ................................
In 2,000 ton
lots ................................
In 5,000 ton
lots ................................
In 10,000 ton
lots ................................
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 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 for any sum 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 collection in excess of the prices quoted, we agree to remit
same to your within ten (10) days of the date of such collections or payments.
All contracts taken with municipal governments will be subject to inspector before shipping, by
any authorized representative of such governments at whatever price may be contracted for by
you and we agree to accept such contracts subject to draft attached to bill of lading in full
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
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
prompty and without delay and load not less than 1,000 tons each twenty-four hours after March
1, 1921, unless we so notify you specifically prior to that date we are prepared to load 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 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.
(Sgd.) W. C. A. PALMER
Approved by Board of Directors,
October 1, 1920.
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 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 hi that 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
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, 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 Anderson definitely informed the plaintiff that the contracts which be 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 to proceed 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 indicated as 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 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
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
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 be consigned 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, 1921, questioning the
right of the defendant to insist upon a cash 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 the
purchaser, or purchases, of these intended Australian consignments.
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 our order on delivery of documents covering bill of
lading of shipments, 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 amounts so that payment can be
ordered by cable, in reply to your cable advising shipping date."
In a 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 further arrangements when the manager of the bank should return from
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 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 Exhibit 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 March 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 plaintiff of an order from Hiwatari, of Tokio, approved
by the Bank of Taiwan, for a minimum of ten thousand 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 H 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 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 the letters, Exhibits G, L, M,
and W, containing the orders from Ludvigen & 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 conspiring 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 (Exhibit L
and M), and by Hiwatari in Exhibit W; and the appealed 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 Exhibit G, L, M, and W, in connection with the subsequent notification thereof
given by the plaintiff to the defendant, are sufficient to support the judgment rendered by the trial
The transaction indicated in the orders from Ludvigsen, & McCurdy and from Frank B. Smith
must, in our opinion, be at once excluded from consideration as emanating from persons who
had been constituted mere agents of the plaintiff. The San Francisco order and the Australian
orders are the same in legal effect as if they were orders signed by the plaintiff and drawn upon
himself; and it cannot be pretended that those orders represent sales to bona fide purchasers
found by the plaintiff. The original contract by which the plaintiff was appointed sales agent for a
limited period of time in Australia and the United States contemplated that he should find reliable
and solvent buyers who should be prepared to obligate themselves to take the quantity of
bituminous limestone contracted for upon terms consistent with the contract. These conditions
were not met by the taking of these orders from the plaintiff's own subagents, which was as if the
plaintiff had bought for himself the commodity which he was authorized to sell to others. Article

267 of the Code of Commerce declares that no agent shall purchase for himself or for another
that which he has been ordered to sell. The law has placed its ban upon a broker's purchasing
from his principal unless the latter with full knowledge of all the facts and circumstances
acquiesces in such course; and even then the broker's action must be characterized by the
utmost good faith. A sale made by a broker to himself without the consent of the principal is
ineffectual whether the broker has been guilty of fraudulent conduct or not. (4 R. C. L., 276-277.)
We think, therefore, that the position of the defendant company is indubitably sound in so far as it
rest upon the contention that the plaintiff has not in fact found any bona fidepurchasers ready
and able to take the commodity contracted for upon terms compatible with the contract which is
the basis of the action.
It will be observed that the contract set out at the beginning of this opinion contains provisions
under which the period of the contract might be extended. That privilege was probably
considered a highly important incident of the contract and it will be seen that the sale of five
thousand tons which the plaintiff reported for shipment to San Francisco was precisely adjusted
to the purpose of the extension of the contract for the United States for the period of an additional
year; and the sales reported for shipment to Australia were likewise adjusted to the requirements
for the extention of the contract in that territory. Given the circumstances surrounding these
contracts as they were reported to the defendant company and the concealment by the plaintiff of
the names of the authors of the orders, -- who after all were merely the plaintiff's subagents,
the officers of the defendant company might justly have entertained the suspicion that the real
and only person behind those contracts was the plaintiff himself. Such at least turns out to have
been the case.
Much energy has been expended in the briefs upon his appeal over the contention whether the
defendant was justified in laying down the condition mentioned in the letter of March 26, 1921, to
the effect that no order would be entertained unless cash should be deposited with either the
International Banking Corporation of the Chartered Bank of India, Australia and China, in Cebu.
In this connection the plaintiff points to the stipulation of the contract which provides that
contracts with responsible parties are to be accepted "subject to draft attached to bill of lading in
full payment of such shipment." What passed between the parties upon this point appears to
have the character of mere diplomatic parrying, as the plaintiff had no contract from any
responsible purchaser other than his own subagents and the defendant company could no
probably have filled the contracts even if they had been backed by the Bank of England.
Upon inspection of the plaintiff's letters (Exhibit Y and AA), there will be found ample assurance
that deposits for the amount of each shipment would be made with a bank in Manila provided the
defendant would indicated its ability to fill the orders; but these assurance rested upon no other
basis than the financial responsibility of the plaintiff himself, and this circumstance doubtless did
not escape the discernment of the defendant's officers.
With respect to the order from H. Hiwatari, we observe that while he intimates that he had been
promised the exclusive agency under the plaintiff for Japan, nevertheless it does not affirmatively
appear that he had been in fact appointed to be such at the time he signed to order Exhibit W at
the request of the plaintiff. It may be assumed, therefore, that he was at that time a stranger to
the contract of agency. It clearly appears, however, that he did not expect to purchase the
thousand tons of bituminous limestone referred to in his order without banking assistance; and
although the submanager of the Bank of Taiwan had said something encouraging in respect to
the matter, nevertheless that official had refrained from giving his approval to the order Exhibit W.
It is therefore not shown affirmatively that this order proceeds from a responsible source.
The first assignment of error in the appellant's brief is directed to the action of the trial judge in
refusing to admit Exhibit 2, 7, 8, 9 and 10, offered by the defendant, and in admitting Exhibit E,
offered by the plaintiff. The Exhibit 2 is a letter dated June 25, 1921, or more than three weeks
after the action was instituted, in which the defendant's assistant general manager undertakes to
reply to the plaintiff's letter of March 29 proceeding. It was evidently intended as an
argumentative presentation of the plaintiff's point of view in the litigation then pending, and its
probative value is so slight, even if admissible at all, that there was no error on the part of the trial
court in excluding it.
Exhibit 7, 8, 9 and 10 comprise correspondence which passed between the parties by mail or
telegraph during the first part of the year 1921. The subject-matter of this correspondence relates

to efforts that were being made by Anderson to dispose of the controlling in the defendant
corporation, and Exhibit 9 in particular contains an offer from the plaintiff, representing certain
associates, to but out Anderson's interest for a fixed sum. While these exhibits perhaps shed
some light upon the relations of the parties during the time this controversy was brewing, the
bearing of the matter upon the litigation before us is too remote to exert any definitive influence
on the case. The trial court was not in error in our opinion in excluding these documents.
Exhibit E is a letter from Anderson to the plaintiff, dated April 21, 1920, in which information is
given concerning the property of the defendant company. It is stated in this letter that the output
of the Lucio (quarry) during the coming year would probably be at the rate of about five tons for
twenty-four hours, with the equipment then on hand, but that with the installation of a model
cableway which was under contemplation, the company would be able to handle two thousand
tons in twenty-four hours. We see no legitimate reason for rejecting this document, although of
slight probative value; and her error imputed to the court in admitting the same was not
Exhibit 14, which was offered in evidence by the defendant, consists of a carbon copy of a letter
dated June 13, 1921, written by the plaintiff to his attorney, Frank B. Ingersoll, Esq., of Manila,
and in which plaintiff states, among other things, that his profit from the San Francisco contract
would have been at the rate of eigthy-five cents (gold) per ton. The authenticity of this city
document is admitted, and when it was offered in evidence by the attorney for the defendant the
counsel for the plaintiff announced that he had no objection to the introduction of this carbon
copy in evidence if counsel for the defendant would explain where this copy was secured. Upon
this the attorney for the defendant informed the court that he received the letter from the former
attorneys of the defendant without explanation of the manner in which the document had come
into their possession. Upon this the attorney for the plaintiff made this announcement: "We
hereby give notice at this time that unless such an explanation is made, explaining fully how this
carbon copy came into the possession of the defendant company, or any one representing it, we
propose to object to its admission on the ground that it is a confidential communication between
client and lawyer." No further information was then given by the attorney for the defendant as to
the manner in which the letter had come to his hands and the trial judge thereupon excluded the
document, on the ground that it was a privileged communication between client and attorney.
We are of the opinion that this ruling was erroneous; for even supposing that the letter was within
the privilege which protects communications between attorney and client, this privilege was lost
when the letter came to the hands of the adverse party. And it makes no difference how the
adversary acquired possession. The law protects the client from the effect of disclosures made
by him to his attorney in the confidence of the legal relation, but when such a document,
containing admissions of the client, comes to the hand of a third party, and reaches the
adversary, it is admissible in evidence. In this connection Mr. Wigmore says:
The law provides subjective freedom for the client by assuring him of exemption from its
processes of disclosure against himself or the attorney or their agents of communication.
This much, but not a whit more, is necessary for the maintenance of the privilege. Since
the means of preserving secrecy of communication are entirely in the client's hands, and
since the privilege is a derogation from the general testimonial duty and should be strictly
construed, it would be improper to extend its prohibition to third persons who obtain
knowledge of the communications. One who overhears the communication, whether with
or without the client's knowledge, is not within the protection of the privilege. The same
rule ought to apply to one who surreptitiously reads or obtains possession of a document
in original or copy. (5 Wigmore on Evidence, 2d ed., sec. 2326.)
Although the precedents are somewhat confusing, the better doctrine is to the effect that when
papers are offered in evidence a court will take no notice of how they were obtained, whether
legally or illegally, properly or improperly; nor will it form a collateral issue to try that question. (10
R. C. L., 931; 1 Greenl. Evid., sec. 254a; State vs. Mathers, 15 L. R. A., 268; Gross vs. State, 33
L. R. A., [N. S.], 477, note.)
Our conclusion upon the entire record is that the judgment appealed from must be reversed; and
the defendant will be absolved from the complaint. It is so ordered, without special
pronouncement as to costs of either instance.