Vicente Domingo v.

Gregorio Domingo and Teofilo Purisima

Oct 29, 1971 | Makasiar, J. | Account/Deliver

SUMMARY: Principal contracted an agent real-estate broker to sell his lot and agreed on a 5% commission. The
broker was able to find a buyer but he convinced his principal to sell at a lower price. The buyer gave the broker
a gift for being able to convince the principal to sell at such lower price. The broker did not inform his principal
about such gift. The buyer later on informed the broker that he would no longer pursue the purchase of the lot.
The broker found out that the sale indeed took place but it was sold to the wife of the buyer. He demanded his
commission. His principal denied such on the ground that the sale was made not to the buyer but the buyer’s
wife.

SC: Denied broker’s commission but for a different cause. The SC said that the fact that the sale was made to
the wife was unimportant since husband and wife had the same interests. The reason for denying such
commission was the non-disclosure of the broker of the gift received from the buyer.

DOCTRINE: An agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from the
vendee, without revealing the same to his principal is guilty of a breach of his loyalty to the latter and forfeits
his right to collect the commission that may be due him, even if the principal does not suffer any injury by
reason of such breach of fidelity, or that he obtained better results or that the agency is a gratuitous one, or that
usage or custom allows it; because the rule is to prevent the possibility of any wrong, not to remedy or repair
an actual damage.

FACTS:
Main Parties: Vicente = Principal; Gregorio = Agent; Oscar = Buyer
Minor Party: Teofilo = Sub-Agent;

1. Vicente M. Domingo granted Gregorio Domingo, a real estate broker, the exclusive agency to sell his lot
at the rate of P2.00 per square meter with a commission of 5% on the total price.
2. Gregorio authorized Teofilo P. Purisima to look for a buyer, promising him one half of the 5%
commission. Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio as a prospective buyer.
3. Oscar gave an offer very much lower than the initial P2.00. After conferences with Gregorio, Oscar
raised the offer to P1.20 per square meter, or a total of P109,000, which was still low. However, this
offer was accepted by Vicente.
4. Upon demand of Vicente, Oscar de Leon issued to him a check in the amount of Pl,000.00 as earnest
money, after which Vicente paid Gregorio the sum of P300.00 as advance on his commission.
5. Oscar gave Gregorio as a gift Pl,000.00 for succeeding in persuading Vicente to sell his lot at P1.20 per
square meter. This gift was not disclosed by Gregorio to Vicente.
6. After a while, when no Deed of Sale was executed as previously agreed upon by the parties, Oscar told
Gregorio that he did not receive his money from his brother in the USA, for which reason he was giving
up the negotiation including the amount of P1,000.00 given as earnest money to Vicente and the
P1,000.00 given to Gregorio as gift.
7. Oscar, sensing something fishy, went to Vicente and presented the original document embodying their
agreement where Vicente bound himself to pay 5% commission should Gregorio be able to find a
buyer. However, Vicente tore said document to pieces.
8. Gregorio then proceeded to the Register of Deeds of Quezon City where he found out that Vicente sold
the lot to Oscar’s wife, Amparo Diaz, through a Deed of Sale executed by Oscar’s wife over their house
which formed part of the downpayment for Vicente’s lot (House of Buyer was used to pay for the
subject lot).
9. Upon thus learning that Vicente sold his property to the same buyer, Oscar de Leon and his wife, he
demanded in writing payment of his 5% commission on the sale price of P109,000. He also conferred
with Oscar de Leon, who told him that Vicente went to him and asked him to eliminate Gregorio in the
transaction and that he would sell his property to him for P104,000.00.
 10. In Vicente’s reply, he stated that Gregorio is not entitled to the 5 % commission because he sold the
property not to Gregorio’s buyer, Oscar de Leon, but to another buyer, Amparo Diaz, wife of Oscar de
Leon.

ISSUE / HELD + RATIO

WON the failure by Gregorio to disclose to Vicente the P1,000 gift from Oscar constitutes fraud as to cause a
forfeiture of his 5% commission on the sale price - YES

Art. 1891. Every agent is bound to render an account of his transactions and to deliver to the principal whatever
he may have Received by virtue of the agency, even though it may not be owing to the principal.

Art. 1909. The agent is responsible not only for fraud, but also for negligence, which shall be judged with more
or less rigor by the courts, according to whether the agency was or was not for a compensation.

The above provisions demand the utmost good faith on the part of the agent, the real estate broker in this case,
to his principal, the vendor. The law imposes upon the agent the absolute obligation to make a full disclosure
or complete account to his principal of all his transactions and other material facts relevant to the agency, so
much so that the law does not countenance any stipulation exempting the agent from such an obligation and
considers such an exemption as void. The duty of an agent is likened to that of a trustee.

Hence, an agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from the
vendee, without revealing the same to his principal, the vendor, is guilty of a breach of his loyalty to the
principal and forfeits his right to collect the commission from his principal, even if the principal does not
suffer any injury by reason of such breach of fidelity, or that he obtained better results or that the agency is a
gratuitous one, or that usage or custom allows it; because the rule is to prevent the possibility of any wrong,
not to remedy or repair an actual damage. By taking such profit or bonus or gift or propina from the vendee,
the agent thereby assumes a position wholly inconsistent with that of being an agent for his principal, who has
a right to treat him, insofar as his commission is concerned, as if no agency had existed. The fact that the
principal may have been benefited by the valuable services of the said agent does not exculpate the agent who
has only himself to blame for such a result by reason of his treachery or perfidy.

In the case at bar, Gregorio received a gift from the prospective buyer without the knowledge and consent of
his principal. His acceptance of said substantial monetary gift corrupted his duty to serve the interests only of
his principal and undermined his loyalty to his principal, who gave him a partial advance of P300.00 on his
commission. As a consequence, instead of exerting his best to persuade his prospective buyer to purchase the
property on the most advantageous terms desired by his principal, the broker, succeeded in persuading his
principal to accept the counteroffer of the prospective buyer to purchase the property at a price very much
lower than the original offer.

The duty embodied in Article 1891 of the New Civil Code will not apply if the agent or broker acted only as a
middleman with the task of merely bringing together the vendor and vendee, who themselves thereafter will
negotiate on the terms and conditions of the transaction. Neither would the rule apply if the agent or broker
had informed the principal of the gift or bonus or profit he received from the purchaser and his principal did
not object thereto.

In this case, Gregorio was not merely a middleman of Vicente and Oscar. He was the broker and agent of Vicente
only, who was not aware of the gift of Pl,000.00; much less did he consent to his agent’s accepting such a gift.

As a necessary consequence of such breach of trust, Gregorio must forfeit his right to the commission and must
return the part of the commission he received from his principal.
The fact that the buyer appearing on the deed of sale is the wife of Oscar does not materially alter the situation
as husband and wife hold the same interests. Besides, the sale must necessarily be with the consent of the
husband Oscar de Leon, who is the administrator of their conjugal assets.

(MINOR ISSUE)WON Vicente or Gregorio should be liable directly to Teofilo Purisima (sub-agent under Facts
#2) for the latter’s share in the expected commission of Gregorio by reason of the sale.

Teofilo can only recover from Gregorio his one half share of whatever amounts Gregorio received by virtue of
the transaction as his sub-agency contract was with Gregorio alone and not with Vicente, who was not even
aware of such subagency. Since Gregorio received from Vicente and Oscar respectively the amounts of
P300.00 and P1,000.00 or a total of P1,300.00 one half of the same, which is P650.00 should be paid by
Gregorio to Teofilo.