G.R. No. L-30573 - Domingo vs. Domingo

Case Summary (G.R. No. L-30573)

Petitioner

Heirs of Vicente M. Domingo, who executed an exclusive agency contract authorizing Gregorio M. Domingo to sell Lot No. 883 of Piedad Estate at P2.00 per square meter with a 5% commission under stated conditions.

Respondent and Intervenor

Gregorio M. Domingo — the exclusive real estate broker who retained original and a copy of the agency contract and later received money from both vendor and purchaser. Teofilo P. Purisima — sub-agent authorized by Gregorio to find a buyer and promised one-half of Gregorio’s commission.

Key Dates and Documentary Milestones

June 2, 1956 — exclusive agency contract executed (Exhibit A). June 3, 1956 — Gregorio authorized Purisima. June 20, 1956 — buyer’s offer at P1.20 per square meter documented (Exhibit C, amended by Exhibit D). June 30, 1956 — further amendment regarding occupancy/vacation dates (Exhibit D). September 17, 1956 — deed of sale recorded showing Amparo Diaz as vendor to Vicente (Exhibit G). Demand letter for commission (Exhibit H) and correspondence between Gregorio and Vicente (Exhibits I, J, etc.) are part of the record.

Applicable Law and Constitutional Context

Governing civil law provisions: New Civil Code, Article 1891 (duty of agent to render account and deliver what he received by virtue of the agency; stipulations exempting the agent are void) and Article 1909 (agent liable for fraud and negligence). Historical comparative provisions from the old Spanish Civil Code (Articles 1720/1726) and cited jurisprudence—both Philippine and foreign—are treated as authoritative guidance in applying the duty of utmost good faith and fiduciary standards to agents/brokers. (The decision was rendered in 1971, under the constitutional order then applicable.)

Factual Findings

The exclusive agency was established in triplicate; Vicente retained a copy, Gregorio retained the original and another copy. Gregorio authorized Purisima to find buyers; Purisima introduced Oscar de Leon. Oscar submitted an initially low written offer, later raised to P109,000 (P1.20 per sq. m.), to which Vicente agreed and signed the offer. Oscar paid P1,000 as earnest money to Vicente and gave Gregorio P1,000 as a gift or propina for securing improved terms; Gregorio did not disclose this payment to Vicente. Vicente advanced Gregorio P300. Subsequent negotiations and amendments occurred; the deed of sale was later executed with Amparo Diaz (Oscar’s wife) as vendee, and the broker discovered the sale and demanded his 5% commission. Vicente denied entitlement, asserting the sale was not to Gregorio’s buyer but to another buyer.

Procedural History

The trial court entered judgment directing payment by Vicente to Gregorio and intervenor Purisima, plus damages, attorneys’ fees, interest and costs. The Special Division of Five of the Court of Appeals affirmed the trial court in a majority decision dated March 12, 1969. An appeal followed to the Supreme Court, where the matter was reconsidered and a different disposition was reached.

Issues Presented

Whether Gregorio’s failure to disclose receipt of P1,000 from the purchaser (propina) constituted fraud or breach of trust sufficient to forfeit his right to the 5% commission. 2) Whether Teofilo Purisima could recover directly from Vicente for his share of the commission. 3) Whether the awards of legal interest, moral and exemplary damages, attorney’s fees, and costs were appropriate.

Legal Analysis and Reasoning

The Court applied Articles 1891 and 1909 of the New Civil Code, emphasizing the fiduciary nature of the agent-principal relationship and the agent’s absolute duty to render a full account and to deliver whatever he may have received by virtue of the agency. Article 1891 abolishes any stipulation exempting an agent from this duty. The duty is equated to that of a trustee: agents must act with the utmost good faith, fidelity, honesty, candor and fairness toward the principal. The jurisprudential rule reiterated by the Court is that an agent who takes a secret profit (bonus, gratuity or gift) from the other contracting party, without disclosure to the principal, breaches loyalty and forfeits entitlement to compensation. This rule applies irrespective of whether the principal suffered actual injury, obtained better terms, or custom would tolerate such payments — the rule is prophylactic to prevent conflicts and corruption of the agent’s duty.

The Court distinguished situations where the agent is merely a middleman, or where the agent disclosed the bonus and the principal consented. Those exceptions did not obtain here: Gregorio was the exclusive broker (not a neutral middleman), he received a substantial monetary gift (P1,000) from Oscar, and he failed to disclose it to Vicente; Vicente never consented. The fact that the recorded vendee was Amparo Diaz, Oscar’s wife, did not change the substance of the transaction because conjugal administration and common interests meant Oscar effectively acted as buyer. Thus, Gregorio’s acceptance of secret payment placed him in a position inconsistent with his agency and corrupted his duty, justifying forfeiture.

The Court noted authorities (both Philippine and foreign) supporting recovery of commissions or forfeiture where secret profits were taken. The agent’s intent at the time of receipt was immaterial; the relationship created by accepting secret profits is inherently inconsistent with fidelity owed to the principal.

Application to Sub-Agent and Remedies

Purisima was Gregorio’s sub-agent; his contract and entitlement were with Gregorio alone, not

Case Syllabus (G.R. No. L-30573)

Procedural History

Petitioners-appellants (Vicente M. Domingo, now deceased, represented by his heirs) sought reversal of the March 12, 1969 majority decision of the Special Division of Five of the Court of Appeals which had affirmed the trial court judgment.
The trial court had sentenced Vicente M. Domingo to pay respondent-appellee Gregorio M. Domingo P2,307.50 and intervenor Teofilo P. Purisima P2,607.50 with legal interest from the date of 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 case reached the Supreme Court (G.R. No. L-30573), reported at 149 Phil. 183, decided October 29, 1971.
The Supreme Court rendered judgment reversing the Court of Appeals and directed specific payments and awards (detailed under Disposition).

Statement of Facts as Found by the Court of Appeals (Majority of Special Division of Five)

On June 2, 1956, Vicente M. Domingo executed Exhibit "A", an exclusive agency contract granting Gregorio Domingo, a real estate broker, the exclusive agency to sell lot No. 883 of Piedad Estate, described in the document as having an area of about 88,477 square meters, at P2.00 per square meter (P176,954.00), with a commission of 5% on the total price under specified conditions.
The exclusive agency was for thirty (30) days; commission payable if sold by Vicente or by anyone else during the 30-day duration, or if sold by Vicente within three (3) months from termination to a purchaser to whom it was submitted by Gregorio during the continuance of the agency with notice to Vicente.
The agency contract was in triplicate: one copy to Vicente, original and another copy retained by Gregorio.
On June 3, 1956, Gregorio authorized intervenor Teofilo P. Purisima to look for a buyer, promising him one-half of the 5% commission.
Teofilo Purisima introduced Oscar de Leon to Gregorio as a prospective buyer. Oscar initially submitted a written offer much lower than P2.00 per square meter (Exhibit B).
Vicente directed Gregorio to tell Oscar to raise his offer. After conferences, Oscar raised his offer to P109,000.00 on June 20, 1956, as evidenced by Exhibit "C", which Vicente agreed to by signing Exhibit "C".
Upon demand of Vicente, Oscar issued a check for P1,000.00 as earnest money to Vicente; Vicente then advanced Gregorio P300.00.
Oscar confirmed his offer at P1.20 per square meter in another letter, Exhibit "D".
Vicente later asked for an additional P1,000.00 earnest money; Oscar promised to deliver it but did not do so.
Exhibit "C" was amended to include that Oscar would vacate his house and lot at Denver Street, Quezon City as part of the purchase price; later amended in a June 30, 1956 document (Exhibit "D") to change the vacating date (year 1957 noted as a typographical error).
Oscar gave Gregorio P1,000.00 as a gift or "propina" for persuading Vicente to sell at P1.20 per square meter (P109,000.00). Gregorio did not disclose this gift to Vicente.
Oscar did not pay Vicente the additional P1,000.00 earnest money when the deed of sale was not executed on August 1, 1956 (as in Exhibit "C") nor on August 15, 1956 (extension by Vicente); Oscar informed Gregorio he did not receive money from his brother in the United States and was giving up negotiations and the earnest money.
Gregorio suspected irregularity, went to Vicente, and read Exhibit "A-1" (a portion of Exhibit "A") to remind Vicente of the commission provision; Vicente grabbed the original Exhibit "A" and tore it to pieces; Gregorio retained a duplicate.
Gregorio discovered at the Register of Deeds of Quezon City (Exhibit "G") a deed of sale dated September 17, 1956 executed by Amparo Diaz, wife of Oscar de Leon, in favor of Vicente as down payment by Oscar on the purchase price of Vicente’s lot No. 883.
Upon learning this, Gregorio demanded in writing his commission on the sale price of P109,000.00 (Exhibit "H"). Vicente replied (Exhibits "I" and "J") that Gregorio was not entitled to the 5% commission because Vicente sold to Amparo Diaz and not to Gregorio’s buyer, Oscar de Leon.

Core Legal Issues Presented

Whether Gregorio’s failure to disclose to Vicente the P1,000.00 gift (propina) he received from the buyer Oscar de Leon constituted fraud or breach of trust sufficient to forfeit his right to the 5% commission.
Whether Vicente or Gregorio should be directly liable to intervenor Teofilo P. Purisima for Purisima’s share in the expected commission by reason of the sale.
Whether the award of legal interest, moral and exemplary damages, attorney’s fees and costs was proper.

Court of Appeals’ Findings (as summarized by the Supreme Court)

Exhibit A (the exclusive agency contract) is genuine.
Amparo Diaz, the vendee, being the wife of Oscar de Leon, makes the sale in practical effect a sale to Oscar de Leon because husband and wife have common or identical interests; the conjugal assets (including the Denver Street property) were part of the down payment.
Gregorio and intervenor Teofilo Purisima were the efficient cause in consummating the sale in favor of the spouses Oscar de Leon and Amparo Diaz.
Oscar paid Gregorio P1,000.00 as "propina" or gift and not as additional earnest money to be delivered to Vicente, because Vicente’s letter regarding additional earnest money (Exhibit "6") shows no answer from Oscar—no writing supports Oscar’s testimony that he paid an additional P1,000.00 to Gregorio for delivery to Vicente—unlike the first P1,000.00 to Vicente evidenced by Exhibit "4".
Vicente did not mention the alleged additional earnest money in his replies (Exhibits "I" and "J") to Gregorio’s demand letter.

Applicable Statutory Provisions and Legal Principles Applied by the Supreme Court

The duties and liabilities of a broker are those of an agent