Solidary Liability of Co-Principals in Agency: Agent May Collect Full Commission From Any Principal

The Supreme Court's 2002 decision in Amor de Castro v. Court of Appeals (G.R. No. 115838) clarifies an important rule for real estate agents and other professionals acting under a contract of agency: when two or more persons appoint an agent for a common undertaking, they are solidarily liable to the agent. This means the agent may recover the entire compensation from any one of the co-principals, without needing to sue all of them.

The case also offers practical lessons on partial payment, laches, and the evidentiary rules that apply when a written deed states a price different from what was actually paid.

The Facts of the Case

Francisco Artigo was authorized by Constante de Castro, acting for himself and his co-owners, to sell four lots in Cubao, Quezon City for P23 million, with a 5% commission. The handwritten authorization expressly stated that Artigo was the real estate broker and that the authority was on a "first-come, first-serve basis."

Artigo introduced Times Transit Corporation as a buyer. The sale of two lots was eventually consummated, but a dispute arose over the commission. Artigo claimed he was entitled to 5% of the actual purchase price of P7.05 million, or P352,500. He received only P48,893.76 and sued to collect the balance.

The De Castros argued that Artigo was just one of many agents involved, that the purchase price was only P3.6 million as stated in the deed, and that the other co-owners should have been impleaded as indispensable parties.

The Issue

The central legal questions were: (1) whether the failure to implead the other co-owners warranted dismissal of the case, and (2) whether Artigo's claim was barred by payment, waiver, or laches.

The Ruling: Solidary Liability of Co-Principals

The Supreme Court denied the petition and affirmed the lower courts' decisions in full.

On the issue of indispensable parties, the Court applied Article 1915 of the Civil Code, which states that if two or more persons appoint an agent for a common transaction, they are solidarily liable to the agent for all the consequences of the agency. Because the co-owners were solidarily liable, the agent could proceed against any one of them.

The Court cited Article 1216 of the Civil Code, which allows a creditor to proceed against any one of the solidary debtors, some of them, or all of them simultaneously. As the Court held in Operators Incorporated v. American Biscuit Co., Inc., solidarity does not make a solidary obligor an indispensable party in a suit filed by the creditor.

Partial Payment Does Not Extinguish the Obligation

The Court also rejected the argument that Artigo's acceptance of partial payment extinguished his claim. The Court distinguished between acceptance of performance and mere receipt of payment. Receiving a partial payment without protest does not amount to a waiver of the balance.

The Court likewise rejected the defense of laches. Artigo filed his case within the ten-year prescriptive period for written contracts under Article 1144 of the Civil Code. The Court noted that a delay within the prescriptive period is not considered unreasonable and will not bar recovery, and that laches cannot be used to defeat a collection suit filed on time.

Evidence of the Actual Purchase Price

The De Castros also argued that the courts erred in relying on evidence showing the actual purchase price was P7.05 million, not P3.6 million as stated in the deed of sale. The Court refused to re-examine the factual findings, noting that a petition for review on certiorari under Rule 45 may raise only questions of law, not issues of fact.

Practical Takeaways

• Co-principals are solidarily liable. When several persons appoint an agent for a common transaction, each is liable for the full amount of the agent's commission. The agent may choose which principal to sue.
• No need to implead all co-principals. Because of solidary liability, the agent need not sue all co-owners. Any one of them can be compelled to pay the entire obligation.
• Partial payment is not waiver. Accepting a partial commission does not extinguish the right to collect the balance, unless the agent clearly accepts the payment as full satisfaction.
• Laches does not apply within the prescriptive period. A delay in filing suit that is within the statutory prescriptive period is not considered unreasonable and will not bar recovery.
• Facts are for the trial court. In appeals to the Supreme Court, only questions of law may be raised. Factual findings of the trial and appellate courts are generally binding.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.