G.R. No. 28050 , March 13, 1928
FEDERICO VALERA, plaintiff-appellant, vs. MIGUEL VELASCO, defendant-appellee.

FACTS

Federico Valera (principal) appointed Miguel Velasco (agent) as his attorney-in-fact to manage his usufructuary right over a property in Manila. After rendering accounts, a misunderstanding arose when the liquidation showed Valera owed Velasco P1,100. Velasco sued Valera to collect this debt, obtained a favorable judgment, and levied execution on Valera’s usufructuary right. The sheriff sold the usufruct at public auction to Velasco himself.

Subsequently, Valera sold his right of redemption over the usufruct to Eduardo Hernandez. Hernandez later reconveyed this right of redemption back to Valera. However, another creditor of Valera, Salvador Vallejo, obtained a judgment against Valera, levied upon this same right of redemption, and purchased it at a sheriff’s auction. Vallejo then sold this right to Velasco. Valera filed a complaint seeking, among others, the annulment of the various sales and an accounting from Velasco as his agent.

The trial court dismissed Valera’s complaint, ruling he failed to prove his cause of action. Valera appealed.

ISSUE

1. Whether the agency relationship between Valera and Velasco was terminated by Velasco’s act of filing a lawsuit against his principal.
2. Whether Valera retained any right to the usufruct or right of redemption after the execution sales and the lapse of the redemption period.

RULING

The Supreme Court AFFIRMED the trial court’s decision.

1. On the Termination of Agency: The Court held that the agency was terminated. Under Articles 1732 and 1736 of the Civil Code, an agency may be terminated by the withdrawal or renunciation of the agent. The act of the agent (Velasco) in filing a civil action against his principal (Valera) to collect a debt arising from their agency accounts constituted a clear and express renunciation of the agency. This adversarial act created a rupture in their fiduciary relationship, making its continuation untenable. The lawsuit was “more expressive than words” and equivalent to a declaration of renunciation.

2. On Valera’s Rights to the Property: The Court ruled that Valera lost all rights to the usufruct. Velasco’s purchase of the usufruct at the execution sale was valid. Neither Valera nor his transferee, Eduardo Hernandez, exercised the right of redemption within the one-year legal period. Consequently, Velasco’s title became absolute. Furthermore, Valera’s subsequent right of redemption (reacquired from Hernandez) was validly levied upon and sold at auction to Salvador Vallejo due to another debt, and Vallejo’s subsequent sale of that right to Velasco was also valid. Since the redemption period had lapsed, Valera could no longer challenge these transactions.

3. On the Claim for Accounting: The Court found no error in the trial court’s refusal to order an accounting from Velasco for rents collected after March 31, 1923. As the absolute owner of the usufruct after the lapse of the redemption period, Velasco was entitled to all rents and had no obligation to account for them to Valera.

DOCTRINE:
The institution of a civil action by an agent against his principal for matters arising from the agency constitutes an express renunciation of the agency, terminating the fiduciary relationship. Such an adversarial act is a clear manifestation of the agent’s intent to withdraw, more forceful than a mere verbal renunciation.