Valera vs. Velasco

The institution of a civil action by an agent against the principal for recovery of a balance resulting from the liquidation of agency accounts, and the rendition of a final account, constitutes an express renunciation of the agency that terminates the juridical relation ipso facto under Article 1732(2) of the Civil Code.

Federico Valera executed two powers of attorney in 1919 and 1922 appointing Miguel Velasco as attorney-in-fact to manage his usufructuary right over a property on Echague Street, Manila. Velasco administered the property, collected rents, and submitted periodic accounts. A final accounting as of March 31, 1923 showed a balance in Valera’s favor, but a subsequent liquidation disclosed that Valera owed Velasco P1,100. A dispute over that amount led Velasco to file a collection suit against Valera.

• Agency and Administration: By powers of attorney dated April 11, 1919 (Exhibit X) and August 8, 1922 (Exhibit Z), plaintiff-appellant Federico Valera appointed defendant-appellee Miguel Velasco as his attorney-in-fact to manage his property in the Philippines, consisting of the usufruct of real property on Echague Street, Manila. Velasco accepted, administered the property, reported operations, and rendered accounts.
• Final Account and Disagreement: On March 31, 1923, Velasco presented Exhibit F, a final account showing a balance of P3,058.33 in Valera’s favor. Liquidation, however, disclosed that Valera owed Velasco P1,100. A misunderstanding ensued.
• Velasco’s Suit and Execution Sale: Velasco filed Civil Case No. 23447 against Valera for recovery of the balance. Judgment was rendered in Velasco’s favor on March 28, 1923. A writ of execution issued, and the sheriff levied upon Valera’s right of usufruct, sold it at public auction, and adjudicated it to Velasco in satisfaction of his claim.
• Transfers of Redemption Right: On May 11, 1923, Valera sold his right of redemption to Eduardo Hernandez for P200 (Exhibit A). On September 4, 1923, Hernandez sold the same right back to Valera for P200 (Exhibit C).
• Vallejo’s Execution and Subsequent Transfer: After Valera reacquired the redemption right, Salvador Vallejo, holding an execution upon a judgment against Valera, levied upon that right. The sheriff sold it at public auction to Vallejo for P250, who was definitively adjudicated the right. Vallejo later transferred the right of redemption to Velasco. As a result, Velasco consolidated title to the usufructuary right.

• Termination of Agency: Valera argued that the trial court erred in holding that an agency is terminated by express or tacit renunciation of the agent, and that the filing of a civil action and execution of judgment by the agent against the principal constituted such renunciation.
• Continuing Agency: He maintained that Velasco remained his authorized representative and that the trial court should have so found.
• Validity of Sales: Valera contended that the sheriff’s sale to Velasco (Exhibit K), the sale of the redemption right by Hernandez to Valera (Exhibit C), the auction sale to Salvador Vallejo (Exhibit L), and Vallejo’s transfer to Velasco (Exhibit M) should all be annulled.
• Accounting and Damages: He asserted that Velasco should be ordered to liquidate his accounts as agent and that he was entitled to P5,000 in damages.

• Renunciation: Velasco countered that his suit against Valera for the balance of accounts, coupled with the rendition of a final account, constituted an express renunciation of the agency under Article 1732 of the Civil Code, thereby terminating the fiduciary relation.
• Validity of Purchase: He argued that once the agency was terminated, his purchase of the usufruct at the execution sale was valid and legal, and that because neither Valera nor Hernandez exercised the right of redemption within the statutory period, his title became absolute.
• Loss of Right: Velasco further maintained that Valera lost all right to the usufruct after the redemption right was acquired from Vallejo, who had obtained it through a valid execution sale.

• Termination of Agency: Whether the filing of a civil action by an agent against his principal for collection of a balance due from the agency accounts, together with the rendition of a final account, constitutes an express renunciation of the agency under Article 1732 of the Civil Code, thereby terminating the juridical relation.
• Validity of Execution Sale: Whether the agent’s purchase of the principal’s property at an execution sale held pursuant to a judgment obtained by the agent against the principal is valid following such termination.
• Effect of Subsequent Transfers: Whether the subsequent transfers of the right of redemption by Valera, Hernandez, and Vallejo affected Velasco’s title.

• Termination of Agency: The filing of a civil action by the agent against the principal for the balance of accounts arising from the agency, and the rendition of a final account, was held to be an express renunciation of the agency. The fiduciary relationship was incompatible with the agent’s adversarial stance; the act of suing was “more expressive than words” and could not have left any doubt of renunciation. Under Articles 1732(2) and 1736 of the Civil Code, an agent may withdraw by giving notice, and such notice was effectively given through the complaint and final accounting. The precedent in De la Peña v. Hidalgo (16 Phil. 450) was applied, where similar conduct—abandonment of the property, turnover to a third party, and rendition of final accounts—was deemed an express and definite renunciation even without an explicit statement.
• Validity of Execution Sale: Since the agency was terminated ipso facto by the renunciation, Velasco was no longer Valera’s agent at the time he purchased the usufruct at the execution sale. Consequently, the purchase was valid and legal, and the trial court correctly refused to annul it.
• Effect of Subsequent Transfers: The validity of the Hernandez-to-Valera resale was deemed unnecessary to resolve. Velasco’s purchase at the initial execution sale was valid, and neither Valera nor Hernandez exercised the right of redemption within the legal period, rendering Velasco’s title absolute. Even assuming the resale was void, Hernandez failed to file a third-party claim or an action to recover the right before the redemption period expired, barring any subsequent challenge. Moreover, Velasco later acquired the same right of redemption from Vallejo, who had obtained it at a valid execution sale. Thus, Valera lost all right to the usufruct.

• Renunciation of Agency by Hostile Act — The filing of a civil action by an agent against the principal for recovery of a balance resulting from the liquidation of agency accounts, and the rendition of a final account, operates as an express renunciation of the agency under Article 1732(2) of the Civil Code. The juridical relation is terminated ipso facto from that moment. This doctrine rests on the incompatibility of the fiduciary relationship with an adversarial stance; the agent’s act of suing is deemed a clearer expression of withdrawal than an explicit verbal renunciation.
• Effect of Renunciation on Subsequent Transactions — Once the agency is terminated by renunciation, the former agent is no longer disqualified from dealing with the principal’s property. A purchase by the former agent at an execution sale held pursuant to a judgment obtained against the principal is valid and not voidable on the ground of breach of fiduciary duty, provided the agency had already ceased.

• “The fact that an agent institutes an action against his principal for the recovery of the balance in his favor resulting from the liquidation of the accounts between them arising from the agency, and renders a final account of his operations, is equivalent to an express renunciation of the agency, and terminates the juridical relation between them.”
• “When the agent filed a complaint against his principal … Federico Valera could not have understood otherwise than that Miguel Velasco renounced the agency; because his act was more expressive than words and could not have caused any doubt.”
• “[T]he complaint is equivalent to an express renunciation of the agency, and is more expressive than if the agent had merely said, ‘I renounce the agency.’”

• De la Peña v. Hidalgo, 16 Phil. 450 — Followed. The earlier ruling in De la Peña was applied, under which an agent who abandons the property, turns it over to a third party, renders final accounts, and asks the principal to execute a power of attorney for a substitute has expressly and definitely renounced the agency, even without using the words of renunciation. The same principle governed Velasco’s hostile suit and final accounting.

• Article 1732, Civil Code — Provides that agency is terminated, among other causes, by the withdrawal of the agent. Velasco’s suit and final account were treated as a withdrawal (renunciation) under this provision.
• Article 1736, Civil Code — Allows an agent to withdraw from the agency by giving notice to the principal, subject to indemnity for any damage caused. The final account and complaint were deemed sufficient notice of withdrawal.

Johnson, Malcolm, Villamor, Ostrand, and Johns, JJ., concurred.