Sing Juco vs. Sunyantong

A trusted employee who, through disloyal intervention in his employers' pending negotiations, causes their failure and acquires the subject property for himself or another is liable for the resulting damage and holds the property in equitable trust for his employers, subject to conveyance.

Sing Juco and Sing Bengco were engaged in business and reposed confidence in Antonio Sunyantong, their employee, disclosing to him their plans and negotiations for a large landed acquisition. Maria Gay was the owner of the San Antonio Estate, containing more than 2,000 hectares in Passi, Iloilo, together with large cattle thereon. Manuel Sotelo acted as broker for the plaintiffs in the purchase transactions.

On May 20, 1919, Sing Juco and Sing Bengco obtained from Maria Gay a written option to purchase the San Antonio Estate, containing more than 2,000 hectares in Passi, Iloilo, together with the large cattle thereon. The term of the option expired but was verbally extended until 12 o'clock noon of June 17, 1919. Antonio Sunyantong was then an employee of the plaintiffs, and the preponderance of evidence showed that they reposed confidence in him and disclosed their plans concerning the purchase and the progress of negotiations with Maria Gay.

In one conference among the plaintiffs concerning the purchase, at which Sunyantong was present, he remarked that it would be advisable to let some days elapse before accepting the transfer terms proposed by Maria Gay so she would not think they coveted the property. Thereafter, when Sunyantong met Alipio de los Santos after the latter's return to Iloilo, where plaintiffs had sent De los Santos to examine the estate and satisfy himself of its condition, De los Santos told him of his favorable impression of the estate. According to the findings, Sunyantong advised De los Santos not to report the estate to plaintiffs as so highly valuable, lest they blame De los Santos if it proved a failure.

At an early hour in the morning of June 17, 1919, the midday of which the plaintiffs' option was to expire, Sunyantong called at Maria Gay's house while she was having breakfast and offered to buy the estate on the same terms proposed by her and not yet accepted by plaintiffs, making the offer not for plaintiffs' benefit but for his wife, codefendant Vicenta Llorente de Sunyantong. Respecting plaintiffs' option, Maria Gay communicated by telephone with Manuel Sotelo, who was acting as broker for plaintiffs, stating that another buyer had presented himself who would accept her terms and that she wished to know immediately plaintiffs' decision. Because Maria Gay insisted on a categorical answer, Sing Bengco, who happened to be present during the telephone conversation between Maria Gay and Sotelo, instructed Sotelo to tell her that if she did not care to wait until 12 o'clock, "ella cuidado" — she could do as she pleased. Interpreting the phrase to mean plaintiffs waived their option, Maria Gay closed the sale in favor of Sunyantong.

The trial court found the foregoing course of conduct established infidelity by a trusted employee and ordered defendants to convey the estate to plaintiffs on the same price and conditions as the purchase from Maria Gay.

• Employee Infidelity and Liability: Whether an employee who intervenes in his employers' pending purchase negotiations and acquires the subject property for his wife is liable to his employers for infidelity committed with culpa.
• Relief — Conveyance Beyond Damages: Whether the employee-buyer may be compelled to transfer the estate acquired through such disloyal intervention to his employers, although the Civil Code reparation for fault is ordinarily stated as indemnification of damages.

• Employee Infidelity and Liability: Yes. Disloyal intervention by a trusted employee for his own benefit and to his employers' detriment is an illicit act committed with culpa, rendering the agent liable for the damage caused.
• Relief — Conveyance Beyond Damages: Yes. The transaction was treated as an equitable trust, the thing acquired being deemed held for the principal, and conveyance was therefore required, consistent with the rule expressly applied to commercial factors and with prior jurisprudence.

• Employee Infidelity and Liability: Sunyantong's remark about delay, his advice to De los Santos to understate the estate's value, and his early-morning offer to Maria Gay on the same unaccepted terms, made for his wife rather than his principals, were taken together as unfaithfulness to employers who had reposed confidence in him. Even conceding that the option had expired when the sale to him was closed, he was found to be the cause of its precipitous end, since Maria Gay was made certain of another less exigent buyer and therefore did not accept plaintiffs' terms. Without such intervention, consummation of the sale between Maria Gay and plaintiffs, perhaps with the advantages expected from prolonged negotiation, was presumed from all the circumstances.
• Relief — Conveyance Beyond Damages: While articles 1089 and 1902 of the Civil Code were noted as seemingly limited to indemnification of damages, with no express provision imposing transfer of the estate, specific relief of conveyance was sustained as generally recognized for cases of this nature. The analogy was drawn to commercial agents, for whom the sanction is expressly established, and to North American law, under which things acquired by an employee in such circumstances are deemed acquired for the principal and held in trust. Reliance was placed on Camacho vs. Municipality of Baliuag as applying such relief in this jurisdiction in a similar fiduciary acquisition.

• Liability for illicit acts committed with culpa — One who by an illicit act committed with fault or negligence causes damage to another is obliged to repair the damage, pursuant to articles 1089 and 1902 of the Civil Code. Applied here to hold a trusted employee liable where disloyal intervention for personal benefit caused his employers to lose the expected consummation of a pending purchase.
• Equitable trust from fiduciary acquisition — Things acquired by an employee under circumstances of infidelity toward his principal are deemed not acquired for his own benefit or that of another person but for his principal, and are held in trust for the latter, supporting an action to compel conveyance. Applied here to require transfer of the San Antonio Estate to the employers on the same terms as the disloyal purchase, by analogy to the rule for commercial factors and to Camacho vs. Municipality of Baliuag.
• Unjust enrichment — nemo debet aliena jactura locupletari — No one ought to enrich himself at another's expense, and no one may improve his condition through his own wrong. Invoked here to deny legal effect to the benefit obtained by the employee through breach of loyalty to his employers.

• "Such an act of infidelity committed by a trusted employee calculated to redound to his own benefit and to the detriment of his employers cannot pass without legal sanction." — States the controlling characterization of the employee's intervention as actionable disloyalty warranting relief.
• "Nemo debet aliena jactura locupletari; nemo ex suo delicto meliorem suam conditionem facere potest" — Supplies the juridical maxim against enrichment through another's loss and through one's own wrong, grounding liability for the disloyal acquisition.
• "the things acquired by an employee is deemed not to have been acquired for his own benefit or that of any other person but for his principal, and held in trust for the latter (21 R. C. L., 825; 2 Corpus Juris, 353)." — Formulates the equitable-trust basis for compelling conveyance rather than limiting recovery to damages.

• Camacho vs. Municipality of Baliuag, 28 Phil., 466 — Cited as authority already applying specific relief by conveyance in this jurisdiction in a similar fiduciary-acquisition case, supporting the order to transfer the estate to the principals.

• Articles 1089 and 1902, Civil Code — Invoked as the basis for obligation arising from illicit acts committed with culpa and the duty to repair damage caused; applied to the employee's infidelity that precipitated loss of the pending purchase.
• Rule on commercial agents (factores), Code of Commerce — Referred to as expressly establishing that profits of unauthorized negotiations of the same character as those entrusted to the factor belong to the principal; used by analogy to justify conveyance in the civil-employment context.

Araullo, C.J., Malcolm, Avanceña and Ostrand, JJ., concur.

• Villamor, J. — Maintained that the judgment ordering conveyance should be reversed because liability, if any under article 1902 of the Civil Code, was limited to proven damages, and no damage was shown where Sing Bengco, given a final opportunity to answer, told the owner through Sotelo "ella cuidado," thereby waiving the option under the principle scienti et volenti nihil fit injuria; further maintained that article 288 of the Code of Commerce on factors was inapplicable because plaintiffs dealt in dry goods and sugar rather than real property and Sunyantong was not shown to manage a commercial establishment, and that Camacho vs. Municipality of Baliuag and Uy Aloc vs. Cho Jan Ling were distinguishable because there the fiduciary acquired with the principal's funds, at the principal's instance, or in discharge of an undisclosed agency, whereas defendants here had legal capacity to buy and acquired neither in plaintiffs' name nor with their funds.