DIEGO LINAN, PLAINTIFF AND APPELLEE, VS. MARCOS P. PUNO ET AL., DEFENDANTS AND APPELLANTS.

Linan versus Puno

The Case

This is an action by Diego Linan against Marcos P. Puno and the several defendants who bought land from him, to annul a sale of real property allegedly made without authority. The plaintiff executed a power of attorney in favor of Puno and later claimed that the instrument conferred only the power to administer, not the power to sell. The case matters because it fixes the rule on how general powers of attorney are construed, and it is the classic illustration of the tension between a liberal reading of the whole instrument and the strict construction required before an agent may alienate real property.

Procedural History

The defendants first filed a demurrer to the complaint, which the lower court overruled, and the defendants excepted. They then answered, denying the material facts and setting up the validity of the sale as a special defense. After trial, the lower court held that the document did not give Puno authority to sell, that the sale was illegal and void, that the defendants should return the land, and that the defendants should pay the plaintiff one thousand pesos in damages, four hundred pesos of which Puno alone should bear, plus costs. The defendants appealed to the Supreme Court, assigning as errors the overruling of the demurrer, the finding that Puno was not authorized to sell, the failure to order the return of the eight hundred pesos purchase price, and the award of damages and costs.

Facts

In May 1908, and for a long time before, Diego Linan owned a parcel of land in the municipality of Tarlac. On the sixteenth of May 1908, he executed a document conferring power upon Marcos P. Puno so that, in his name and representation, Puno might administer his interests in Tarlac, purchase, sell, collect and pay, sue and be sued before any authority, appear before the courts and administrative officers in any proceeding concerning the good administration and advancement of those interests, and in necessary cases appoint attorneys at law or attorneys in fact.

In June 1911, Puno sold and delivered the land to the other defendants for eight hundred pesos. Linan then brought suit, insisting that the document did not confer the power to sell, and praying that the sale be set aside, the land returned, and damages awarded. The defendants admitted the sale but claimed it was valid.

The record contained no allegation or proof that Puno acted in bad faith or fraudulently, and no showing that the buyers acted other than in good faith. The plaintiff delayed in bringing his action to annul the sale from June 1911 until the fifteenth of February 1913.

Issues

• Whether or not the complaint stated a sufficient cause of action against the demurrer.
• Whether or not the power of attorney conferred upon Puno the authority to sell the land in question.
• Whether or not the sale made by Puno to the other defendants is valid.

Applicable Provisions

Article 1713 of the Civil Code, as invoked in the dissenting opinion, provides:

An agency stated in general terms only includes acts of administration. In order to compromise, alienate, mortgage, or to execute any other act of a strict ownership an express commission is required.

This is the provision on which the whole question turns, because it draws the line between acts of mere administration and acts of strict ownership such as selling real property.

Ruling

On the first issue, the Court held that the facts stated in the complaint were sufficient to constitute a cause of action, so the demurrer was properly overruled.

On the second issue, the Court held that the power of attorney did authorize the sale. The Court laid down the governing principle of interpretation:

Contracts of agency as well as general powers of attorney must be interpreted in accordance with the language used by the parties.

Reading the instrument as a whole, the Court found that the words administer, purchase, sell, collect and pay were used coordinately, each with equal force. There was no good reason, the Court said, for holding that Puno had authority to administer but not to sell, when the power to sell was as advantageous to the plaintiff in the administration of his affairs as the power to administer. To hold otherwise would give effect to a portion of the contract only, giving special words a limited meaning to the exclusion of other general words of equal import.

Because there was no proof of bad faith or fraud, Puno was presumed to have acted in good faith and in accordance with his power as he understood it, and his interpretation was held tenable. The Court also weighed the plaintiff's delay in seeking annulment and the fact that he had not returned nor offered to return the purchase price.

On the third issue, the Court held that the contract, liberally construed, justified the interpretation given it by Puno, and that the sale was valid. The lower court therefore committed the error assigned.

Doctrine

A contract of agency, like a general power of attorney, is interpreted according to the language the parties used, and their real intention is gathered from the whole instrument. Every word and clause is to be given effect, and the intention of the parties must be sustained rather than defeated. Where general words are used coordinately with specific powers, each carries equal force, and the instrument must be read as a whole rather than by isolating one term. The agent is presumed to have acted in good faith and in conformity with the power as he understood it, and a construction that upholds the contract is preferred to one that overthrows it. The case must be paired with Article 1713 of the Civil Code, which requires an express commission before an agent may alienate property, and the dissent of Justice Trent is the classic statement of that strict-construction rule.

Disposition

The Supreme Court reversed the judgment of the lower court and relieved the defendants from all liability under the complaint, without any finding as to costs.

Remember This

The one line to memorize is that a power of attorney is read as a whole, and words used coordinately, such as administer and sell, carry equal force. Examiners use this case to test agency and the construction of powers of attorney, and they love to set it against Article 1713 and the dissent, which insists that the power to sell real estate must be express.