G.R. No. L-30573. October 29, 1971
VICENTE M. DOMINGO, REPRESENTED BY HIS HEIRS, ANTONINA RAYMUNDO VDA. DE DOMINGO, RICARDO, CESAR, AMELIA, VICENTE JR., SALVACION, IRENE AND JOSELITO, ALL SURNAMED DOMINGO, PETIT…
MAKASIAR, J.:
Petitioner-appellant Vicente M. Domingo, now deceased and
represented by his heirs, Antonina Raymundo vda. de Domingo,
Ricardo, Cesar, Amelia, Vicente Jr., Salvacion, Irene
and Joselito, all surnamed Domingo, sought the
reversal of the majority decision dated March 12, 1969 of the Special Division
of Five of the Court of Appeals affirming the judgment of the trial court,
which sentenced the said Vicente M. Domingo to pay Gregorio M. Domingo
P2,307.50 and the intervenor Teofilo
P. Purisima P2,607.50 with legal interest on both
amounts from the date of the filing of the complaint, to pay Gregorio Domingo
P1,000.00 as moral and exemplary damages and P500.00 as attorney’s fees plus
costs.
The following facts were found to be established by the majority
of the special Division of Five of the Court of Appeals:
In a document Exhibit “A” executed on June 2, 1956,
Vicente M. Domingo granted Gregorio Domingo, a real estate broker, the
exclusive agency to sell his lot No. 883 of Piedad
Estate with an area of about 88,477 square meters at the rate of P2.00 per
square meter (or for P176,954.00) with a commission of 5% on the total price,
if the property is sold by Vicente or by anyone else during the 30-day duration
of the agency or if the property is sold by Vicente within three months from
the termination of the agency to a purchaser to whom it was submitted by Gregorio
during the continuance of the agency with notice to Vicente. The said agency contract was in triplicate,
one copy was given to Vicente, while the original and another copy were
retained by Gregorio.
On June 3, 1956,
Gregorio authorized the intervenor Teofilo P. Purisima to look for a
buyer, promising him one-half of the 5% commission.
Thereafter, Teofilo Purisima
introduced Oscar de Leon to Gregorio as a prospective buyer.
Oscar de Leon submitted a written offer which was very much lower
than the price of P2.00 per square meter (Exhibit “B”). Vicente directed Gregorio to tell Oscar de
Leon to raise his offer. After several
conferences between Gregorio and Oscar de Leon, the latter raised his offer to
P109,000.00 on June 20, 1956 as evidenced by Exhibit “C”, to which
Vicente agreed by signing Exhibit “C”. Upon demand of Vicente, Oscar de Leon issued
to him a check in the amount of P1,000.00 as earnest money, after which Vicente
advanced to Gregorio the sum of P300.00.
Oscar de Leon confirmed his former offer to pay for the property at
P1.20 per square meter in another letter, Exhibit “D”. Subsequently, Vicente asked for an additional
amount of P1,000.00 as earnest money, which Oscar de Leon promised to deliver
to him. Thereafter, Exhibit “C” was
amended to the effect that Oscar de Leon will vacate on or about September 15, 1956 his house and lot
at Denver Street, Quezon City which is part of the
purchase price. It was again amended to
the effect that Oscar will vacate his house and lot on December 1, 1956,
because his wife was on the family way and Vicente could stay in lot No. 883 of
Piedad Estate until June 1, 1957, in a document
dated June 30, 1956 (the year 1957 therein is a mere typographical error) and
marked Exhibit “D”. Pursuant
to his promise to Gregorio, Oscar gave him as a gift or propina
the sum of One Thousand Pesos (P1,000.00) for succeeding in persuading Vicente
to sell his lot at P1.20 per square meter or a total in round figure of One
Hundred Nine Thousand Pesos (P109,000.00).
This gift of One Thousand Pesos P1,000.00) was not disclosed by Gregorio
to Vicente. Neither did Oscar pay
Vicente the additional amount of One Thousand Pesos (P1,000.00) by way of
earnest money when the deed of sale was not executed on August 1, 1956 as stipulated
in Exhibit “C” nor on August 15, 1956 as extended by Vicente, Oscar
told Gregorio that he did not receive his money from his brother in the United
States, for which reason he was giving up the negotiation including the amount
of One Thousand Pesos (P1,000.00) given as earnest money to Vicente and the One
Thousand Pesos (P1,000.00) given to Gregorio as propina
or gift. When Oscar did not see him
after several weeks, Gregorio sensed something fishy. So, he went to Vicente and read a portion of
Exhibit “A” marked Exhibit “A-1” to the effect that Vicente
was still committed to pay him 5% commission, if the sale is consummated within
three months after the expiration of the 30-day period of the exclusive agency
in this favor from the execution of the agency contract on June 2, 1956 to a
purchaser brought by Gregorio to Vicente during the said 30-day period. Vicente grabbed the original of Exhibit
“A” and tore it to pieces.
Gregorio held his peace, not wanting to antagonize Vicente further,
because he had still the duplicate of Exhibit “A”. From his meeting with Vicente, Gregorio
proceeded to the office of the Register of Deeds of Quezon
City, where he discovered Exhibit “G”, a deed of sale executed on
September 17, 1956 by Amparo Diaz, wife of Oscar de
Leon, over their house and lot at No. 40 Denver Street, Cubao,
Quezon City, in favor of Vicente as down payment by
Oscar de Leon on the purchase price of Vicente’s lot No. 383 of Piedad Estate. Upon
thus learning that Vicente sold his property to the same buyer, Oscar de Leon
and his wife, he demanded in writing payment of his commission on the sale
price of One Hundred Nine Thousand Pesos (P109,000.00), Exhibit
“H”. He also conferred with
Oscar de Leon, who told him that Vicente went to him and asked him to eliminate
Gregorio in the transaction and that he would sell his property to him for One
Hundred Four Thousand Pesos (P104,000.00).
In Vicente’s reply to Gregorio’s letter, Exhibit “H”, Vicente
stated that Gregorio is not entitled to the 5% commission because he sold the
property not to Gregorio’s buyer, Oscar de Leon, but to another buyer, Amparo Diaz, wife of Oscar de Leon.
The Court of Appeals found from the evidence that Exhibit “A”,
the exclusive agency contract, is genuine; that Amparo
Diaz, the vendee, being the wife of Oscar de Leon, the sale by Vicente of his
property is practically a sale to Oscar de Leon since husband and wife have
common or identical interests; that Gregorio and intervenor
Teofilo Purisima were the
efficient cause in the consummation of the sale in favor of the spouses Oscar
de Leon and Amparo Diaz; that Oscar de Leon paid
Gregorio the sum of One Thousand Pesos (P1,000, 000.00) as “propina” or gift and not as additional earnest money
to be given to the plaintiff, because Exhibit “6”, Vicente’s letter
addressed to Oscar de Leon with respect to the additional earnest money, does
not appear to have been answered by Oscar de Leon and therefore there is no
writing or document supporting Oscar de Leon’s testimony that he paid an
additional earnest money of One Thousand Pesos (P1,000.00) to Gregorio for
delivery to Vicente, unlike the first amount of One Thousand Pesos (P1,000.00)
paid by Oscar de Leon to Vicente as earnest money, evidenced by the letter
Exhibit “4”; and that Vicente did not even mention such additional earnest
money in his two replies Exhibits “I” and “J” to Gregorio’s
letter of demand of the 5% commission.
The three issues in this appeal are (1) whether the failure on
the part of Gregorio to disclose to Vicente the payment to him by Oscar de
Leon of the amount of One Thousand Pesos (P1,000.00) as gift or “propina” for having persuaded Vicente to reduce the
purchase price from P2.00 to P1.20 per square meter, so constitutes fraud as to
cause a forfeiture of his 5% commission on the sale price; (2) whether Vicente or Gregorio should be liable
directly to the intervenor Teofilo
Purisima for the latter’s share in the expected
commission of Gregorio by reason of the sale; and (3) whether the award of
legal interest, moral and exemplary damages, attorney’s fees and costs, was
proper.
Unfortunately, the majority opinion penned by Justice Edilberto Soriano and concurred
in by Justice Juan Enriquez did not touch on these issues which were extensively
discussed by Justice Magno Gatmaitan
in his dissenting opinion. However,
Justice Esguerra, in his concurring opinion, affirmed
that it does not constitute breach of trust or fraud on the part of the broker
and regarded the same as merely part of the whole process of bringing about the
meeting of the minds of the seller and the purchaser and that the commitment
from the prospective buyer that he would give a reward to Gregorio if he could
effect better terms for him from the seller, independent of his legitimate
commission, is not fraudulent, because the principal can reject the terms
offered by the prospective buyer if he believes that such terms are onerous or
disadvantageous to him. On the other
hand, Justice Gatmaitan, with whom Justice Antonio Cañizares concurred, held the view that such an act on the
part of Gregorio was fraudulent and constituted a breach of trust, which should
deprive him of his right to the commission.
The duties and liabilities of a broker to his employer are
essentially those which an agent owes to his principal[1]
Consequently, the decisive legal provisions are found in articles
1891 and 1909 of the New Civil Code.
“Art. 1891. Every agent
is bound to render an account of his transactions and to deliver to the
principal whatever he may have received by virtue of the agency, even though it
may not be owing to the principal.
“Every stipulation exempting the agent from the obligation to
render an account shall be void.”
xx x xx x xx
“Art. 1909. The agent
is responsible not only for fraud, but also for negligence, which shall be
judged with more or less rigor by the courts, according to whether the agency
was or was not for a compensation.”
Article 1891 of the New Civil Code amends Article 1727 of the old
Spanish Civil Code which provides that:
“Art. 1720. Every agent
is bound to give an account of his transaction and to pay to the principal
whatever he may have received by virtue of the agency, even though what he has
received is not due to the principal.”
The modification contained in the first paragraph of Article 1891
consists in changing the phrase “to pay” to “to deliver”,
which latter term is more comprehensive than the former.
Paragraph 2 of Article 1891 is a new addition designed to stress
the highest loyalty that is required of an agent — condemning as void any
stipulation exempting the agent from the duty and liability imposed on him in
paragraph one thereof.
Article 1909 of the New Civil Code is essentially a
re-instatement of Article 1726 of the old Spanish Civil Code which reads thus:
“Art. 1726. The agent
is liable not only for fraud, but also for negligence, which shall be judged
with more or less severity by the courts, according to whether the agency was
gratuitous or for a price or reward.”
The aforecited provisions demand the utmost good faith, fidelity,
honesty, candor and fairness on the part of the agent, the real estate broker
in this case, to his principal, the vendor.
The law imposes upon the agent the absolute obligation to make a full
disclosure or complete account to his principal of all his transactions and
other material facts relevant to the agency, so much so that the law as amended
does not countenance any stipulation exempting the agent from such an
obligation and considers such an exemption as void. The duty of an agent is likened to that of a
trustee. This is not a technical or
arbitrary rule but a rule founded on the highest and truest principle of
morality as well as of the strictest justice.[2]
Hence, an agent who takes a secret profit in the nature of a
bonus, gratuity or personal benefit from the vendee, without revealing the same
to his principal, the vendor, is guilty of a breach of his loyalty to the
principal and forfeits his right to collect the commission from his principal,
even if the principal does not suffer any injury by reason of such breach of fidelity,
or that he obtained better results or that the agency is a gratuitous one, or
that usage or custom allows it; because the rule is to prevent the possibility
of any wrong, not to remedy or repair an actual damage.[3]
By taking such profit or bonus or gift or propina
from the vendee, the agent thereby assumes a position wholly inconsistent with
that of being an agent for his principal, who has a right to treat him, insofar
as his commission is concerned, as if no agency had existed. The fact that the principal may have been
benefited by the valuable services of the said agent does not exculpate the
agent who has only himself to blame for such a result by reason of his
treachery or perfidy.
This Court has been consistent in the rigorous application of Article
17 of the old Spanish Civil Code. Thus,
for failure to deliver sums money paid to him as an insurance agent for the
account of his employer as required by said Article 1720, said insurance agent
was convicted of estafa.[4]
An administrator of an estate was likewise liable under the same Article 1720
for failure to render an account of his administration to the heirs unless the
heirs consented thereto or are estopped by having
accepted the correctness of his account previously rendered.[5]
Because of his responsibility under the aforecited Article 1720,
an agent is likewise liable for estafa for failure to
deliver to his principal the total amount collected by in behalf of his
principal and cannot retain the commission pertaining to him by subtracting the
same from his collections.[6]
A lawyer is equally liable under said Article 1720 if he fails to
deliver to his client all the money and property received by him for his client
despite his attorney’s lien.[7]
The duty of a commission agent to render a full account of his operations to
his principal was reiterated in Duhart, etc. vs.
Macias.[8]
The American jurisprudence on this score is well-nigh unanimous.
“Where a principal has paid an agent or broker a commission
while ignorant of the fact that the latter has been unfaithful, the principal
may recover back the commission paid, since an agent or broker who has been
unfaithful is not entitled to any compensation.
xx x xx x xx
“In discussing the right of the principal to recover
commissions retained by an unfaithful agent, the court in Little vs. Phipps
(1911) 208 Mass 331, 94 NE 260, 34 LRA(NS) 1046, said: ‘It is well settled that the agent is bound
to exercise the utmost good faith in his dealings with his principal. As Lord Cairns said, this rule “is not a
technical or arbitrary rule. It is a
rule founded on the highest and truest principles of morality.” Parker vs.
McKenna (1874) LR 10 Ch(Eng) 96, 118… If
the agent does not conduct himself with entire fidelity towards his principal,
but is guilty of taking a secret profit or commission in regard the matter in
which he is employed he loses his right to compensation on the ground that he
has taken a position wholly inconsistent with that of agent for his employer,
and which gives his employer, upon discovering it, the right to treat him so
far as compensation, at least, is concerned as if no agency had existed. This may operate to give to the principal the
benefit of valuable services rendered by the agent, but the agent has only
himself to blame for that result.’
xx x xx x xx
“The intent with which the agent took a secret profit has been
held immaterial where the agent has in fact entered into a relationship
inconsistent with his agency, since the law condemns the corrupting tendency of
the inconsistent relationship. Little
vs. Phipps (1911) 94 NE 260.”[9]
“As a general rule, it is a breach of good faith and loyalty
to his principal for an agent, while the agency exists, so to deal with the
subject matter thereof, or with information acquired during the course of the
agency, as to make a profit out of it for himself in excess of his lawful
compensation; and if he does so he may be held as a trustee and may be
compelled to account to his principal for all profits, advantages, rights, or
privileges acquired by him in such dealings, whether in performance or in
violation of his duties, and be required to transfer them to his principal upon being reimbursed for his
expenditures for the same, unless the principal has consented to or ratified
the transaction knowing that benefit or profit would accrue, or had accrued,
to the agent, or unless with such
knowledge he has allowed the agent so as to change his condition that he cannot be put in status quo.
The application of this rule is not affected by the fact that the principal
did not suffer any injury by reason of the agent’s dealings, or that he in fact
obtained better results; nor is it affected by the fact that there is a usage
or custom to the contrary, or that the agency is a gratuitous one.”
(Underscoring supplied.)[10]
In the case at bar, defendant-appellee
Gregorio Domingo as the broker, received a gift or propina
in the amount of One Thousand Pesos (P1,000.00) from the prospective buyer
Oscar de Leon, without the knowledge and consent of his principal, herein
petitioner-appellant Vicente Domingo.
His acceptance of said substantial monetary gift corrupted his duty to
serve the interests only of his principal and undermined his loyalty to his
principal, who gave him a partial advance of Three Hundred Pesos (P300.00) on
his commission. As a consequence,
instead of exerting his best to persuade his prospective buyer to purchase the
property on the most advantageous terms desired by his principal, the broker,
herein defendant-appellee Gregorio Domingo, succeeded
in persuading his principal to accept the counter-offer of the prospective
buyer to purchase the property at P1.20 per square meter or One Hundred Nine
Thousand Pesos (P109,000.00) in round figure for the lot of 86,477 square
meters, which is very much lower than the price of P2.00 per square meter or
One Hundred Seventy Six Thousand Nine Hundred Fifty-Four Pesos (P178,954.00)
for said lot originally offered by his principal.
The duty embodied in Article 1891 of the New Civil Code will not
apply if the agent or broker acted only as a middleman with the task of merely
bringing together the vendor and vendee, who themselves thereafter will
negotiate on the terms and conditions of the transaction. Neither would the rule apply if the agent or broker
had informed the principal of the gift or bonus or profit he received from the
purchaser and his principal did not object thereto.[11]
Herein defendant-appellee Gregorio Domingo was not
merely a middleman of the petitioner-appellant Vicente Domingo and the buyer
Oscar de Leon. He was the broker and
agent of said petitioner-appellant only.
And herein petitioner-appellant was not aware of the gift of One
Thousand Pesos (P1,000.00) received by Gregorio Domingo from the prospective
buyer; much less did he consent to his agent’s accepting such a gift.
The fact that the buyer appearing in the deed of sale is Amparo Diaz, the wife of Oscar de Leon, does not materially
alter the situation; because the transaction, to be valid, must necessarily be
with the consent of the husband Oscar de Leon, who is the administrator of
their conjugal assets including their house and lot at No. 40 Denver Street, Cubao, Quezon City, which were
given as part of and constituted the down payment on, the purchase price of
herein petitioner-appellant’s lot No. 883 of Piedad
Estate. Hence, both in law and in fact,
it was still Oscar de Leon who was the buyer.
As a necessary consequence of such breach of trust, defendant-appellee Gregorio Domingo must forfeit his right to the
commission and must return the part of the commission he received from his
principal.
Teofilo Purisima,
the sub-agent of Gregorio Domingo, can only recover from Gregorio Domingo his
one-half share of whatever amounts Gregorio Domingo received by virtue of the
transaction as his sub-agency contract was with Gregorio Domingo alone and not
with Vicente Domingo, who was not even aware of such sub-agency. Since Gregorio Domingo received from Vicente
Domingo and Oscar de Leon respectively the amounts of Three Hundred Pesos
(P300.00) and One Thousand Pesos (P1,000.00) or a total of One Thousand Three
Hundred Pesos (P1,300.00), one-half of the same, which is six Hundred Fifty
Pesos (P650.00), should be paid by Gregorio Domingo to Teofilo
Purisima.
Because Gregorio Domingo’s clearly unfounded complaint caused
Vicente Domingo mental anguish and serious anxiety as well as wounded feelings,
petitioner-appellant Vicente Domingo should be awarded moral damages in the
reasonable amount of One Thousand Pesos (P1,000.00) and attorney’s fees in the
reasonable amount of One Thousand Pesos (P1,000.00), considering that this case
has been pending for the last fifteen (15) years from its filing on October 3,
1956.
WHEREFORE, the judgment is hereby rendered, reversing the
decision of the Court of Appeals and directing the defendant-appellee Gregorio Domingo:
(1) to pay to the heirs of Vicente Domingo the sum of One Thousand Pesos
(P1,000.00) as moral damages and One Thousand Pesos (P1,000.00) as attorney’s
fees; (2) to pay Teofilo Purisima
the sum of Six Hundred Fifty Pesos (P650.00); and (3) to pay the costs.
Concepcion, C.J., Reyes, Makalintal, Zaldivar, Castro,
Fernando, Teehankee, Barredo,
and Villamor,
JJ., concur.
[1]
12 Am. Jur. 2d 835; 134 ALR 1346; 1 ALR 2d 987; Brown
vs. Coates, 67 ALR 2d 943; Haymes vs. Rogers,
17 ALR 2d 896; Moore vs. Turner, 32 ALR 2d 713.
[2]
See also Manresa,
Vol. 2, p. 461, 4th ed.
[3]
12 Am. Jur. 2d Sec. 171, 811-12.
[4] U.S.
vs. Kiene, 7 Phil. 736.
[5] Ojinaga vs. Estate of Perez, 9 Phil. 185.
[6] U.S.
vs. Reyes, 36 Phil. 791.
[7]
In Re: Bamberger, 49 Phil. 962.
[8]
54 Phil. 513.
[9]
134 ALR, Ann. pp. 1346, 1347-1348; see also 1 ALR 2d, 987.
[10]
3 CJS, 53-54; see also 12 Am. Jur. 2d 835-841,
908-912.
[11]
12 Am. Jur. 2d, 835-841, 908-912; Raymond vs.
Davis, Jan. 3, 1936, 199 NE
321, 102 ALR, 1112-1115, 1116-1121.