De la Pea vs. Hidalgo

An agent who renounces his agency for a valid cause and gives proper notice to the principal is released from liability for the subsequent administration of the property by a third party, if the principal, with knowledge, tacitly consents to the new arrangement.

Jose de la Peña y Gomiz executed a power of attorney in 1887 in favor of Federico Hidalgo and others to administer his properties in Manila while he resided in Spain. Hidalgo acted as agent from November 1887 until his departure for Spain in March 1894 due to serious illness. Before leaving, he rendered final accounts and turned over the administration to his cousin, Antonio Hidalgo, notifying the principal and requesting a new power of attorney for Antonio. The principal did not respond but allowed Antonio to administer the properties for nearly nine years until his death in 1902. A third administrator, Francisco Hidalgo, then managed the properties until 1904. The plaintiff, the principal's son and judicial administrator, sued Federico Hidalgo for an accounting and payment of sums allegedly owed from the entire period of administration (1887-1904).

• Filed in the Court of First Instance (CFI) of Manila.
• The CFI rendered judgment partially in favor of the plaintiff.
• Both parties appealed. After a new trial was granted, the CFI again rendered a modified judgment.
• Both parties appealed to the Supreme Court.

• Jose de la Peña y Gomiz (principal) granted a power of attorney to Federico Hidalgo (agent) to administer his Manila properties.
• Hidalgo administered the properties from November 18, 1887, to December 31, 1893.
• Due to severe illness, Hidalgo was compelled to leave for Spain on March 22, 1894. He rendered final accounts to the principal and turned over administration to Antonio Hidalgo.
• Hidalgo notified the principal of his departure, the handover, and requested a new power of attorney for Antonio Hidalgo.
• The principal did not object, appoint a new agent, or send a power of attorney. He remained silent until his death in 1902.
• Antonio Hidalgo administered the properties from January 1, 1894, to September 1902. Francisco Hidalgo administered from October 1902 to January 7, 1904.
• The plaintiff, as administrator of the principal's estate, sued Federico Hidalgo for an accounting and payment of alleged balances from the entire 1887-1904 period, plus other sums related to deposits and loans.

• Federico Hidalgo, as the original agent, remained liable for the entire administration period, including the actions of his successors, Antonio and Francisco Hidalgo.
• The handover to Antonio Hidalgo was an invalid substitution, as the power of attorney did not authorize it.
• The principal never approved the appointment of Antonio Hidalgo.
• Hidalgo was liable for sums related to certain treasury deposits and a loan.

• Hidalgo validly terminated his agency due to physical impossibility (illness) as allowed by law.
• He duly notified the principal of his renunciation and the handover.
• The principal's prolonged silence and failure to object constituted tacit approval of Antonio Hidalgo as the new agent, creating an implied agency.
• Therefore, Hidalgo was only liable for his own administration period (1887-1893).
• The claims regarding treasury deposits were unfounded, as the funds were properly remitted.
• The plaintiff had acknowledged and assumed his father's debt to Hidalgo.

• Procedural Issues: N/A
• Substantive Issues:
  1. Whether Federico Hidalgo validly terminated his agency.
  2. Whether Hidalgo is liable for the administration of the property by Antonio and Francisco Hidalgo after his departure.
  3. Whether the plaintiff is entitled to recover sums related to the second, third, and fourth causes of action (deposits and alleged undue payment).
  4. Whether the defendant is entitled to recover on his counterclaim for the loan.

• Substantive:
  1. Yes. Hidalgo validly renounced his agency. His departure due to illness constituted a valid cause for renunciation under Article 1736 of the Civil Code. He fulfilled his duty by notifying the principal, rendering final accounts, and turning over the property.
  2. No. Hidalgo is not liable for the administrations of Antonio and Francisco Hidalgo. The principal, with full knowledge, remained silent for years and took no action to revoke or replace Antonio Hidalgo. This inaction constituted tacit consent, creating an implied agency (Article 1710, Civil Code) between the principal and Antonio Hidalgo. Consequently, Hidalgo's liability ended with his own administration.
  3. No. The plaintiff is not entitled to recover for the second, third, and fourth causes of action. Documentary evidence proved the treasury deposit transactions were properly conducted and the funds returned to the principal. The claim for P2,000 as an undue payment failed because the plaintiff had acknowledged and assumed his father's debt to Hidalgo.
  4. Yes. The defendant is entitled to recover on his counterclaim. The evidence proved the existence of the loan from Hidalgo to the principal. The plaintiff voluntarily assumed the debt by executing a document binding himself to pay it.

• Implied Agency (Article 1710, Civil Code) — An agency may be implied from the principal's conduct. The SC applied this by ruling that the principal's years of silence and acquiescence after being informed of Antonio Hidalgo's administration created an implied agency, absolving the original agent of further liability.
• Renunciation of Agency (Article 1736, Civil Code) — An agent may renounce the agency for a valid cause, such as illness. The SC held that Hidalgo's illness and departure constituted a valid renunciation, which was effective upon notice to the principal.
• Liability of Agent — An agent is only liable for the period of his own administration and for his own acts, provided he has lawfully terminated the agency and the principal has acquiesced to a successor.

• "From the time of that notification the agent who, for legitimate cause, ceased to exercise his trust, was free and clear from the results and consequences of the management of the person who substituted him with the consent, even only a tacit one, of the principal..."
• "The administration and management, by virtue of an implied agency, is essentially distinguished from that management of another's business, in this respect, that while the former originated from a contract, the latter is derived only from a quasi-contract."

• N/A (The decision does not extensively cite prior jurisprudence, relying primarily on codal provisions and factual analysis.)

• Article 1710, Civil Code — On implied agency.
• Article 1732, Civil Code — On the termination of agency.
• Article 1736, Civil Code — On the agent's right to renounce for valid cause.
• Article 1755, Civil Code — On the obligation to pay interest only when expressly stipulated.
• Article 1100, Civil Code — On when a debtor is in default.
• Article 1108, Civil Code — On legal interest as indemnity.

• N/A (All justices concurred with the decision penned by Justice Torres.)