About this time Quizquiz, having continued his march towards Quito, had his advanced guard attacked and defeated by one of the officers belonging to Benalcazar. Quizquiz was much afflicted by this loss, and knew not well what to do or how to conduct himself. The curacas or native chiefs in his army advised him to make his peace with Benalcazar; but he would not listen to this proposal, even threatening to put them to death if they ever mentioned such a thing again, and ordered them to prepare for returning into Peru. But, as they were in want of provisions, and had no hopes of procuring any in the retreat which Quizquiz meditated, several of the curacas, at the head of whom was Huaypalca, remonstrated with him that it was better to die like brave men in battle against the Spaniards, than to retreat as he desired and to die of famine in a desert country. As Quizquiz gave a very unsatisfactory answer to this remonstrance, Huaypalca gave him a thrust in the breast with his lance, and all the other curacas fell upon him with their clubs and axes, cutting him to pieces. After this they dismissed the troops, allowing every one to go where he pleased.

On the arrival of Almagro and Alvarado at Pachacamac, they were joyfully received by the governor, who had come there from Xauxa to meet them. Pizarro honourably fulfilled the entire agreement which Almagro had made with Alvarado, by the payment of the stipulated sum of 100,000 gold pesos; though several persons remonstrated against paying so large a sum, and alleged that Almagro had been constrained to enter into the agreement by necessity, and that Alvarado, instead of receiving so much money, deserved to be sent prisoner into Spain, for having invaded the government belonging to another person. After receiving the money, Alvarado returned quietly to his government of Guatimala179.

After the departure of Alvarado, the governor Pizarro began the establishment of a colony or settlement in the district of Pachacamac, which he named Ciudad de los Reyes, or the City of the Kings, otherwise called Lima, to which place he removed the colonists whom he had formerly established at Xauxa or Jauja; as the situation of Lima appeared to him exceedingly well calculated for trade, being near the sea180. From that place, Almagro went with a considerable force to Cuzco, and Pizarro visited Truxillo on purpose to place that colony on a proper footing, by making an equitable repartition of the lands and Indians among the colonists.

While at Truxillo, Pizarro received information that Almagro was inclined to take possession of the city of Cuzco, having been apprized by Ferdinand Pizarro, who was sent to Spain, that his majesty had appointed him a separate government extending a hundred leagues beyond the boundaries which had been assigned to Pizarro, and which Almagro alleged were considerably to the north of Cuzco. Juan and Gonzalo Pizarro, brothers of the governor, who were then in Cuzco, and several other persons of consideration, vigorously opposed Almagro and Hernando Soto, who took the part of Almagro, and a civil war seemed on the point of breaking out: But Almagro was unable to succeed in his design, as the great majority of the senators or members of the Cabildo took the part of the governor and his brothers. Immediately on receiving intelligence of these disputes, Pizarro posted with all expedition to Cuzco, where he soon re-established tranquillity by his presence. He pardoned Almagro, who was much ashamed of having occasioned so much confusion by attempting a matter of such high importance on such slight grounds as a mere hearsay or report. The ancient friendship and association between Pizarro and Almagro was renewed, and it was agreed that Almagro should go with a military force on discovery to the south, and if he found any country worth taking possession of, that the associates were to use their joint interest at the court of Spain to procure the government of it for him; but, if no good country were to be found, the government of Peru was then to be divided between Pizarro and Almagro. This agreement was solemnly ratified by oath upon the consecrated host, pledging themselves never to attempt in future to do any thing contrary to the interests of each other. Some have said that Almagro, on this occasion, swore that he would never make any future attempt upon Cuzco, or any part of the country to the distance of a hundred and thirty leagues to the south of that city, even in the event of being named by the king to to its government; and they add, that in addressing himself on this occasion to the holy body of Christ, he used these words, "If I should violate the oath which I now make, I pray, O Lord! that thou mayest punish and confound me in body and soul."

After this solemn agreement; Almagro prepared everything for his departure, and accordingly set out with above five hundred men, as shall be related in the next section. Pizarro returned to Lima, whence he sent Alfonso de Alvarado to conquer the country of the Chachapoyas, which is in the mountainous region of Peru about sixty leagues from Truxillo. This officer and his followers encountered much difficulty and labour in this enterprize, in which they at length succeeded, by forming establishments and reducing the inhabitants to submission; after which, the government of the province was conferred upon Alvarado, by whom the conquest had been effected.

Inconsequence of the agreement between Pizarro and Almagro, which was ratified on the 12th of June 1535, Almagro soon afterwards set out upon the proposed discovery and conquest at the head of five hundred and seventy men, partly cavalry and part infantry; for so great were the hopes of acquiring riches in this expedition, that several who had already acquired establishments in Peru, abandoned their houses, lands, and Indians, to follow the fortunes of Almagro181. Juan, de Saavedra was sent on before the main body of the army with a detachment of a hundred men; and, in the course of his march through that province which has since been called Los Charcas, he met with some Indians on their road from Chili to Peru, who were going to pay their homage to the Inca. Almagro having along with him a body of two hundred men, both horse and foot, made a march of two hundred and fifty leagues, reducing the whole country in his way, till he arrived in the district of the Chichas, where he learnt that he was followed by a body of fifty Spaniards commanded by Niguerol de Ulloa. Almagro commanded that party to join him, and continued his march towards Chili, which is 350 leagues beyond the province, of Chichas, reducing all the tribes on his route to submission. Almagro halted at this place with half his troops, and sent on the rest under Gomez de Aivarado, who proceeded sixty leagues farther; but was forced to return to Almagro, in consequence of the severity of the weather.

After the departure of Almagro from Cuzco, the Inca Manco Capac and his, brother Villaoma entered into a plot for massacring all the Spaniards in Peru on a certain day. Manco Capac had engaged execute to that part of the conspiracy which had for its object the destruction of Almagro and his troops, but which he was unable to accomplish. What was done by his brother will be related afterwards. Philipillo, the Peruvian interpreter who has been formerly mentioned, was acquainted with this conspiracy, on which account he made his escape from Almagro, and being pursued and taken was condemned to be quartered. Before his execution, he confessed that he had unjustly procured the death of Atahualpa, that he might thereby secure to himself one of the wives of that unhappy prince, of whom he was enamoured.