BEDIA vs WHITE
Hence, despite
1. CIVIL LAW; SPECIAL CONTRACTS; AGENCY; AGENT, NOT LIABLE FOR ACTS
PERFORMED BY HER FOR AND IMPUTABLE TO THE PRINCIPAL. If the plaintiffs had any doubt
about the capacity in which Bedia was acting, what they should have done was verify the matter with
Hontiveros. They did not. Instead, they simply accepted Bedia's representation that she was an agent
of Hontiveros and dealt with her as such. Under Article 1910 of the Civil Code, "the principal must
comply with all the obligations which the agent may have contracted within the scope of his authority."
Hence, the private respondents cannot now hold Bedia liable for the acts performed by her for, and
imputable to, Hontiveros as her principal.
2. ID.; ID.; ID.; WAIVER OF CLAIMS AGAINST THE PRINCIPAL; FORFEITS WHATEVER
CLAIMS AGAINST THE AGENT; CASE AT BAR. The plaintiffs' position became all the more untenable
when they moved on June 5, 1984, for the dismissal of the complaint against Hontiveros, leaving
Bedia as the sole defendant. Hontiveros had admitted as early as when it filed its answer that Bedia
was acting as its agent. The effect of the motion was to leave the plaintiffs without a cause of action
against Bedia for the obligation, if any, of Hontiveros. Our conclusion is that since it has not been
found that Bedia was acting beyond the scope of her authority when she entered into the Participation
Contract on behalf of Hontiveros, it is the latter that should be held answerable for any obligation
arising from that agreement. By moving to dismiss the complaint against Hontiveros, the plaintiffs
virtually disarmed themselves and forfeited whatever claims they might have proved against the latter
under the contract signed for it by Bedia. It should be obvious that having waived these claims against
the principal, they cannot now assert them against the agent.
FILIPINAS LIFE ASSURANCE COMPANY (now AYALA LIFE ASSURANCE, INC.), petitioner,
vs. CLEMENTE N. PEDROSO, TERESITA O. PEDROSO and JENNIFER N. PALACIO thru her
Attorney-in-Fact PONCIANO C. MARQUEZ, respondents.
G.R. No. 159489 February 4, 2008
Doctrine: The general rule is that the principal is responsible for the acts of its agent done within the
scope of its authority, and should bear the damage caused to third persons. When the agent exceeds
his authority, the agent becomes personally liable for the damage. But even when the agent exceeds
his authority, the principal is still solidarily liable together with the agent if the principal allowed the
agent to act as though the agent had full powers. In other words, the acts of an agent beyond the
scope of his authority do not bind the principal, unless the principal ratifies them, expressly or
impliedly. Ratification in agency is the adoption or confirmation by one person of an act performed on
his behalf by another without authority. Filipinas Life cannot profess ignorance of Valle's acts. Even if
Valle's representations were beyond his authority as a debit/insurance agent, Filipinas Life thru
Alcantara and Apetrior expressly and knowingly ratified Valle's acts.
Facts: Respondent Teresita O. Pedroso is a policyholder of a 20-year endowment life insurance issued
by petitioner Filipinas Life Assurance Company (Filipinas Life) thru her agent, Renato Valle.
In 1977, Valle told Pedrosa that the Filipinas Life Escolta Office was holding a promotional investment
program for policyholders. It was offering 8% prepaid interest a month for certain amounts deposited
on a monthly basis. Enticed, she initially invested and issued a post-dated check for P10,000. In
return, Valle issued Pedroso his personal check for P800 for the 8% prepaid interest and a Filipinas
Life "Agent's Receipt".
Subsequently, she called the Escolta office and talked to Francisco Alcantara, the administrative
assistant, who referred her to the branch manager, Angel Apetrior. Pedroso inquired about the
promotional investment and Apetrior confirmed that there was such a promotion. She was even told
she could "push through with the check" she issued.
Relying on the representations made by the petitioner's duly authorized representatives Apetrior and
Alcantara, as well as having known agent Valle for quite some time, Pedroso waited for the maturity of
her initial investment. A month after, her investment of P10,000 was returned to her after she made a
written request for its refund. The formal written request, dated February 3, 1977, was written on an
inter-office memorandum form of Filipinas Life prepared by Alcantara. To collect the amount, Pedroso
personally went to the Escolta branch where Alcantara gave her the P10,000 in cash. After a second
investment, she made 7 to 8 more investments in varying amounts, totaling P37,000 but at a lower
rate of 5% prepaid interest a month. Upon maturity of Pedroso's subsequent investments, Valle would
take back from Pedroso the corresponding yellow-colored agent's receipt he issued to the latter.
Pedroso told respondent Jennifer N. Palacio, also a Filipinas Life insurance policyholder, about the
investment plan. Palacio made a total investment of P49,550 but at only 5% prepaid interest.
However, when Pedroso tried to withdraw her investment, Valle did not want to return some P17,000
worth of it. Palacio also tried to withdraw hers, but Filipinas Life, despite demands, refused to return
her money. With the assistance of their lawyer, they went to Filipinas Life Escolta Office to collect their
respective investments, and to inquire why they had not seen Valle for quite some time. But their
attempts were futile. Hence, respondents filed an action for the recovery of a sum of money.
RTC held Filipinas Life and its co-defendants Valle, Apetrior and Alcantara jointly and solidarily liable to
the respondents.
On appeal, the Court of Appeals affirmed the trial court's ruling.
Issue: Whether or not the Court of Appeals erred in holding petitioner and its co-defendants jointly
and severally liable to the herein respondents?
Held: NO. Filipinas Life, as the principal, is liable for obligations contracted by its agent Valle. By the
contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter. The general rule is
that the principal is responsible for the acts of its agent done within the scope of its authority, and
should bear the damage caused to third persons. When the agent exceeds his authority, the agent
becomes personally liable for the damage. But even when the agent exceeds his authority, the
principal is still solidarily liable together with the agent if the principal allowed the agent to act as
though the agent had full powers. In other words, the acts of an agent beyond the scope of his
authority do not bind the principal, unless the principal ratifies them, expressly or impliedly.
Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf
by another without authority.
Filipinas Life cannot profess ignorance of Valle's acts. Even if Valle's representations were beyond his
authority as a debit/insurance agent, Filipinas Life thru Alcantara and Apetrior expressly and knowingly
ratified Valle's acts. It cannot even be denied that Filipinas Life benefited from the investments
deposited by Valle in the account of Filipinas Life. Filipinas Life had clothed Valle with apparent
authority; hence, it is now estopped to deny said authority. Innocent third persons should not be
prejudiced if the principal failed to adopt the needed measures to prevent misrepresentation, much
more so if the principal ratified his agent's acts beyond the latter's authority. The act of the agent is
considered that of the principal itself. Qui per alium facit per seipsum facere videtur. "He who does a
thing by an agent is considered as doing it himself."
Manila Remnant vs. CA
G.R. No. 82978. November 22, 1990
Fernan
FACTS:
Manila Remnant Co. owns Capital Homes Subdivision with Artemio Valencia as President
A.U. Valencia and Co., is the authorized agent of Manila Remnant to develop the
aforesaid subdivision with authority to manage the sales thereof, execute contracts to
sell to lot buyers and issue official receipts. Artemio Valencia is also the president of this
company.
Sometime in March 1970, Manila Remnant thru A.U. Valencia, executed contracts to sell
with Ventanilla covering two lots amounting to P66k to paid monthly for 10 years.
Ventanilla paid the downpayment.
After 10 days, Artemio Valencia sold the same lots without informing Ventanilla to
Crisostomo, his sales agent without any consideration.
Artemio Valencia then transmitted the fictitious Crisostomo contracts to Manila Remnant
while he kept in his files the contracts to sell in favor of the Ventanillas. All the amounts
paid by the Ventanillas were deposited in Valencia's bank account and this is remitted to
Manila Remnant in favor of Crisostomo. Receipts issued by Manila Remnant in favor of
Crisostomo are kept by Valencia. Ventanilla is not aware of Valencias scheme and thus
continued paying their monthly installments.
Sometime in May 1973, Manila Remnant terminated its collection agreement with AU
Valencia due to discrepancies and irregularities discovered in its collections and
remittances. Valencia was also removed as the President of Manila Remnant.
The Ventanilla couple unaware of the circumstances happened continued paying their
installments to Valencia. It is only in 1978 they learned the termination of Valencia, thus
they went immediately to Manila Remnant to pay their balance but to their shock they
discovered from Gloria Caballes, an accountant of Manila Remnant, that their names did
not appear in the records of A.U. Valencia and Co. as lot buyers.
Thus, the Ventanillas commenced an action for specific performance, annulment of deeds
and damages against Manila Remnant, A.U. Valencia and Co. and Carlos Crisostomo.
Lower courts rendered judgment in favor of Ventanilla, and in the decision, the court
ordered defendants A.U. Valencia and Co. Inc., Manila Remnant and Carlos Crisostomo
jointly and severally to pay the Ventanillas the amount of P100,000.00 as moral
damages, P100,000.00 as exemplary damages, and P100,000.00 as attorney's fees and
in case the transfer of lots cannot be effected for any legal reason, the defendants
should reimburse jointly and severally to the Ventanillas the total amount of
P73,122.35 representing the total amount paid for the two lots plus legal interest thereon
from March 1970 plus damages.
While petitioner Manila Remnant has not refuted the legality of the award of damages
per se, it believes that it cannot be made jointly and severally liable with its agent A.U.
Valencia and Co. since it was not aware of the illegal acts perpetrated nor did it consent
or ratify said acts of its agent.
ISSUE: Whether or not petitioner Manila Remnant should be held solidarily liable together with A.U.
Valencia and Co. and Carlos Crisostomo for the payment of moral, exemplary damages and attorney's
fees in favor of the Ventanillas
RULING:
Yes. Due to the following:
(1) The unique relationship existing between the principal and the agent at the time of the
dual sale must be underscored. Bear in mind that the president then of both firms was
Artemio U. Valencia, the individual directly responsible for the sale scam.
the fact that the double sale was beyond the power of the agent, Manila Remnant as
principal was chargeable with the knowledge or constructive notice of that fact and not
having done anything to correct such an irregularity was deemed to have ratified the
same.
(2) The principle of estoppel , Manila Remnant is deemed to have allowed its agent to act
as though it had plenary powers. Article 1911 of the Civil Code provides:
"Even when the agent has exceeded his authority, the principal is solidarily liable with the
agent if the former allowed the latter to act as though he had full powers."
Authority by estoppel has arisen in the instant case because by its negligence, the
principal, Manila Remnant, has permitted its agent, A.U. Valencia and Co., to exercise
powers not granted to it.
#8
CONSTANTE AMOR DE CASTRO VS CA
GR NO. 115838
JULY 18, 2002
FACTS:
Private respondent Artigo sued petitioners Constante and Amor De Castro to collect the
unpaid balance of his brokers commission from the De Castros.
The appellants, De Castros, were co-owners of 4 lots in Cubao, Quezon City. The
appellee, Artigo, was authorized by appellants to act as real estate broker in the sale of these
properties for the amount of P23,000,000.00, 5% of which will be given to the agent as commission.
Appellee first found the Times Transit Corporation and 2 lots were sold. In return, he received
P48,893.76 as commission.
Appellee apparently felt short changed because according to him, his total commission
should be P352,500.00 which is 5% of the agreed price of P7,050,000.00 paid by Times Transit
Corporation to appellants for the 2 lots and that it was he who introduced the buyer to appellants and
unceasingly facilitated the negotiation which ultimately led to the consummation of the sale. Hence,
he sued to collect the balance of P303,606.24 after having received P48,893.76 in advance.
Appellants argued that appellee is selfishly asking for more than what he truly deserved
as commission to the prejudice of other agents who were more instrumental to the consummation of
the sale and that there were more or less 18 others who took active efforts.
The De Castros argued that Artigos complaint should have been dismissed for failure to
implead all the co owners of the 2 lots. . The De Castros contend that failure to implead such
indispensable parties is fatal to the complaint since Artigo, as agent of all the four co-owners, would be
paid with funds co-owned by the four co-owners.
It was shown also that Constante Amor De Castro signed the authorization of Artigo as
owner and representative of the co-owners.
ISSUE:
Whether or not the complaint merits dismissal for failure to implead other co-owners as
indispensable parties
HELD:
No. The De Castros contentions are devoid of legal basis. The CA explained that it is not
necessary to implead the co-owners since the action is exclusively based on a contract of agency
between Artigo and Constante. The rule on mandatory joinder of indispensable parties is not
applicable to the instant case.
Constante signed the note as owner and as representative of the other co-owners.
Under this note, a contract of agency was clearly constituted between Constante and Artigo. Whether
Constante appointed Artigo as agent, in Constantes individual or representative capacity, or both, the
De Castros cannot seek the dismissal of the case for failure to implead the other co-owners as
indispensable parties. The De Castros admit that the other co-owners are solidarily liable under the
contract of agency, citing Article 1915 of the Civil Code, which reads:
Art. 1915. If two or more persons have appointed an agent for a common transaction or
undertaking, they shall be solidarily liable to the agent for all the consequences of the
agency.
The solidary liability of the four co-owners, however, militates against the De Castros
theory that the other co-owners should be impleaded as indispensable parties.
When the law expressly provides for solidarity of the obligation, as in the liability of co-
principals in a contract of agency, each obligor may be compelled to pay the entire obligation. The
agent may recover the whole compensation from any one of the co-principals, as in this case.
Indeed, Article 1216 of the Civil Code provides that a creditor may sue any of the solidary
debtors. This article reads:
Art. 1216. The creditor may proceed against any one of the solidary debtors or some or
all of them simultaneously. The demand made against one of them shall not be an
obstacle to those which may subsequently be directed against the others, so long as the
debt has not been fully collected.
PLEASANTVILLE DEVELOPMENT CORPORATION VS. COURT OF APPEALS
G.R. NO. 79688 253 SCRA 10 FEBRUARY 1, 1996
PONENTE: PANGANIBAN, J.
Doctrine: Good faith consists in the belief of the builder that he land he is building on is his and his
ignorance of any defect or flaw in his title. The burden of proving bad faith belongs to the one
asserting it.
Facts: Edith Robillo purchased from Pleasantville Development Corporation, herein petitioner a parcel
of land at Pleasantville Subdivision, Bacolod City. The property was designated as Lot 9, Phase II. In
1975, herein respondent Eldred Jardinico bought the said subject lot from the former purchaser.
Eldred later discovered that the property he purchased had improvements introduced therein by
respondent Wilson Kee.
Kee on the other hand bought on installments Lot 8 of the same subdivision from C.T.
Torres Enterprises, Inc. (CTTEI) which is the exclusive real estate agent of the petitioner. Under the
contract Kee was allowed to take possession of the property even before full payment of the price.
CTTEI through an employee, Zenaida Octaviano accompanied Kees wife Donabelle to inspect Lot No.
8. Octaviano however mistakenly pointed towards Lot 9. Hence spouses Kee had their residence, an
auto repair shop, a store and other improvements constructed on the wrong lot.
Upon discovery of the blunder both Kee and Jardinico tried to reach an amicable
settlement but they failed. Jardinico demanded that the improvements be removed but as Kee refused,
Jardinico filed a complaint for ejectment with damages against Kee at the Municipal Trial Court in
Cities (MTCC) of Bacolod City. Kee filed a third-party complaint against herein petitioner and CTTEI.
The MTCC found that the error was attributable to CTTEI also since at present the
contract with Kee has rescinded for Kees failure to pay installments. Kee no longer had any right over
the subject property and must pay rentals for its use. The Regional Trial Court (RTC) of Bacolod City
ruled that petitioner and CTTEI were not at fault or were not negligent. It argued that Kee was a
builder in bad faith. Even if assuming that he was in good faith, he was no longer so and must pay
rentals from the time that he was given notice to vacate the lot. The Court of Appeals ruled that Kee
was a builder in good faith as he was unaware of the mix-up when he constructed the improvements.
It was in fact due to the negligence and wrongful delivery of CTTEI which included its principal the
herein petitioner. It further ruled that the award of rental was without basis.
Pending the resolution of the case at the Court of Appeals Jardinico and Kee entered into
a deed of sale, wherein Lot 9 was sold to Kee. In the said deed a provision stating that regardless of
the outcome of the decision, such shall not be pursued by the parties and shall be considered
dismissed and without effect. The appellate court was not informed of this deal.
Issue: Whether or not a lot buyer who constructs improvements on the wrong property erroneously
delivered by the owners agent, a builder in good faith?
Held: Yes. Article 527 of the Civil Code provides the presumption that petitioner has the burden of
proving that Kee was a builder in bad faith. Kee may be made liable for the violation of the contract
with CTTEI but this may not be used as a basis of bad faith and as a sufficient ground to negate the
presumption of good faith. Jardinico is presently only allowed to file a complaint for unlawful detainer.
Good faith is based on the belief of the builder that the land he is building on is his and his ignorance
of any flaw or defect in is title. Since at the time when Kee constructed his improvements on Lot 8, he
was not aware that it was actually Lot 9 that was delivered to him. Petitioner further contends that
Kee was negligent as a provision in the Contract of Sale on Installment stated that the vendee must
have personally examined the property and shall bear on his own the consequential expenses in the
changes that may happen thereon. The court held that such provision cannot be interpreted as a
waiver of the vendees right to recover damages resulting from petitioners negligence. Such
interpretation of the waiver is contrary to law and public policy and cannot be allowed. Petitioner
cannot claim and excuse itself from liability by claiming that it was not directly involved in the delivery
of the property. The principal must be responsible for the acts of the agent done within the scope of
his authority. CTTEI was the sole real estate representative of the petitioner when the delivery was
made. Wilson Kee is therefore declared a builder in good faith. Petitioner and respondent CTTEI are
declared solidarily liable for damages due to negligence. The award of rentals to Jardinico is dispensed
with.
Genevieve Lim v. Florencio Saban
G.R. No. 163720 December 16, 2004
Tinga, J.
FACTS:
Eduardo Ybaez, owner of a 1,000-square meter lot in Cebu City, entered into an Agreement and
Authority to Negotiate and Sell with Florencio Saban. Under the Agency Agreement, Ybaez
authorized Saban to look for a buyer of the lot for P200,000.00 and to mark up the selling price to
include the amounts needed for payment of taxes, transfer of title and other expenses incident to
the sale, as well as Sabans commission for the sale.
Through Sabans efforts, Ybaez and his wife were able to sell the lot to Genevieve Lim and the
spouses Benjamin and Lourdes Lim. The price of the lot as indicated in the Deed of Absolute Sale is
P200,000.00. The vendees agreed to purchase the lot at the price of P600,000.00, inclusive of
taxes and other incidental expenses of the sale. After the sale, Lim remitted to Saban the amounts
of P113,257.00 for payment of taxes due on the transaction as well as P50,000.00 as brokers
commission.
Saban received checks in payment of his commission but all of them were dishonored upon
presentment. Thus, he filed a complaint for collection of sum of money and damages against
Ybaez and Lim. Saban alleged that Ybaez told Lim that he (Saban) was not entitled to any
commission for the sale since he concealed the actual selling price of the lot from Ybaez and
because he was not a licensed real estate broker.
ISSUES: (1) WON Saban is entitled to receive his commission from the sale; (2) if in the affirmative,
WON it is Lim who is liable to pay Saban his sales commission
HELD: (1) Yes.
The agency was not revoked since Ybaez requested that Lim make stop payment orders for the
checks payable to Saban only after the consummation of the sale. At that time, Saban had already
performed his obligation as Ybaezs agent when, through his (Sabans) efforts, Ybaez executed
the Deed of Absolute Sale of the lot with Lim and the Spouses Lim.
To deprive Saban of his commission subsequent to the sale which was consummated through his
efforts would be a breach of his contract of agency with Ybaez which expressly states that Saban
would be entitled to any excess in the purchase price after deducting the P200,000.00 due to
Ybaez and the transfer taxes and other incidental expenses of the sale.
Sabans agency was not one coupled with an interest. an agency is deemed as one coupled with an
interest where it is established for the mutual benefit of the principal and of the agent, or for the
interest of the principal and of third persons, and it cannot be revoked by the principal so long as
the interest of the agent or of a third person subsists. In an agency coupled with an interest, the
agents interest must be in the subject matter of the power conferred and not merely an interest in
the exercise of the power because it entitles him to compensation. When an agents interest is
confined to earning his agreed compensation, the agency is not one coupled with an interest, since
an agents interest in obtaining his compensation as such agent is an ordinary incident of the
agency relationship. (See Art. 1927)
HELD: (2) Yes. It is just and proper for Lim to pay Saban the balance of P200,000.00. Furthermore,
since Ybaez received a total of P230,000.00 from Lim, or an excess of P30,000.00 from his asking
price of P200,000.00, Saban may claim such excess from Ybaezs estate, if that remedy is still
available, in view of the trial courts dismissal of Sabans complaint as against Ybaez, with Sabans
express consent, due to the latters demise when the case was still pending.
Title: VALENZUELA v. COURT OF APPEALS, ARAGON et al.
Topic: Effects of Nonpayment/Partial Payment
Facts:
Arturo Valenzuela is a General Agent of Philippine American General Insurance (Philamgen) since
1965. He was authorized to solicit and sell in behalf of Philamgen all kinds of non-life insurance, and in
consideration of services rendered was entitled to receive the full agent's commission of 32.5% from
Philamgen under the scheduled commission rates. From 1973 to 1975, Valenzuela solicited marine
insurance from one of his clients, the Delta Motors in the amount of P4.4 Million from which he was
entitled to a commission of 32%. However, Valenzuela did not receive his full commission which
amounted to P1.6 Million from the P4.4 Million insurance coverage of the Delta Motors. In 1977,
Philamgen started to become interested in and expressed its intent to share in the commission due
Valenzuela on a fifty-fifty basis. Because of the refusal of Valenzuela, Philamgen terminated the
General Agency Agreement of Valenzuela.
Issue:
whether or not Philamgen could continue to hold Valenzuela jointly and severally liable with the
insured for unpaid premiums
Held: NO.
The principal cause of the termination of Valenzuela as General Agent of Philamgen arose from his
refusal to share his Delta commission. The apparent bad faith of the private respondents in
terminating the General Agency Agreement of petitioners. The agency involving petitioner and private
respondent is one "coupled with an interest," and, therefore, should not be freely revocable at the
unilateral will of the latter. With the termination of the General Agency Agreement, Valenzuela would
no longer be entitled to commission on the renewal of insurance policies of clients sourced from his
agency.
Despite the termination of the agency, Philamgen continued to hold Valenzuela jointly and severally
liable with the insured for unpaid premiums. Valenzuela had an interest in the continuation of the
agency when it was unceremoniously terminated not only because of the commissions he should
continue to receive from the insurance business he has solicited and procured but also for the fact that
by the very acts of the respondents, he was made liable to Philamgen in the event the insured fail to
pay the premiums due. They are estopped by their own positive averments and claims for damages.
Therefore, the respondents cannot state that the agency relationship between Valenzuela and
Philamgen is not coupled with interest. There is an exception to the principle that an agency is
revocable at will and that is when the agency has been given not only for the interest of the principal
but for the interest of third persons or for the mutual interest of the principal and the agent. In these
cases, it is evident that the agency ceases to be freely revocable by the sole will of the principal.
The factor rendering Philamgen and the private respondents liable in damages is that the termination
by them of the General Agency Agreement was tainted with bad faith. If a principal acts in bad faith
and with abuse of right in terminating the agency, then he is liable in damages.
Valenzuela is not liable to Philamgen for the unpaid and uncollected premiums. Under Section 77 of
the Insurance Code, the remedy for the non-payment of premiums is to put an end to and render the
insurance policy not binding
Sec. 77 ... [N]otwithstanding any agreement to the contrary, no policy or
contract of insurance is valid and binding unless and until the premiums
thereof have been paid except in the case of a life or industrial life policy
whenever the grace period provision applies
In Philippine Phoenix Surety v. Woodworks, we held that the non-payment of premium does not
merely suspend but puts an end to an insurance contract since the time of the payment is peculiarly of
the essence of the contract. And in Arce v. The Capital Insurance and Surety Co. Inc. (117 SCRA 63,
[1982]), we reiterated the rule that unless premium is paid, an insurance contract does not take effect.
Thus:
It is to be noted that Delgado (Capital Insurance & Surety Co., Inc. v.
Delgado, 9 SCRA 177 [1963] was decided in the light of the Insurance Act
before Sec. 72 was amended by the underscored portion. Supra. Prior to
the Amendment, an insurance contract was effective even if the premium
had not been paid so that an insurer was obligated to pay indemnity in
case of loss and correlatively he had also the right to sue for payment of
the premium. But the amendment to Sec. 72 has radically changed the
legal regime in that unless the premium is paid there is no insurance.
In Philippine Phoenix Surety case, we held:
Moreover, an insurer cannot treat a contract as valid for the purpose of
collecting premiums and invalid for the purpose of indemnity.
No contract of Insurance by an insurance company is valid and binding
unless and until the premium thereof has been paid, notwithstanding any
agreement to the contrary
Since admittedly the premiums have not been paid, the policies issued have lapsed. The insurance
coverage did not go into effect or did not continue and the obligation of Philamgen as insurer ceased.
Hence, for Philamgen which had no more liability under the lapsed and inexistent policies to demand,
much less sue Valenzuela for the unpaid premiums would be the height of injustice and unfair dealing.
In this instance, with the lapsing of the policies through the nonpayment of premiums by the insured
there were no more insurance contracts to speak of. As this Court held in the Philippine Phoenix
Surety case, supra "the non-payment of premiums does not merely suspend but puts an end to an
insurance contract since the time of the payment is peculiarly of the essence of the contract."
The circumstances of the case, however, require that the contractual relationship between the parties
shall be terminated upon the satisfaction of the judgment. No more claims arising from or as a result
of the agency shall be entertained by the courts after that date.
ACCORDINGLY, the petition is GRANTED.
CMS Logging v CA
July 10, 1992
CMS LOGGING, INC.
vs.
THE COURT OF APPEALS and D.R. AGUINALDO CORPORATION
NOCON, J.:
SUMMARY: DRACOR is the exclusive export and sales agent of CMS for all logs that CMS may
produce for a period of 5 years. However, CMS learned that DRACOR used Shinko Trading Co. as
agent in selling CMS' logs in Japan for which Shinko earned a commission from the buyer. After this
discovery, CMS sold and shipped logs directly to several firms in Japan without the aid of DRACOR.
CMS then sued DRACOR for the commission received by Shinko. DRACOR filed a counterclaim for its
commission from the sales made by CMS of logs directly to Japanese firms. HELD: CMS is not entitled
to recovery of Shinkos alleged commission because it adduced no evidence to show that Shinko did
receive the commission and even if shown, it is still not entitled as these were paid by the buyers to
Shinko for arranging the sale and not part of the gross sales of CMS's logs. DRACOR is also not entitled
to a commission from the direct sale made by CMS to the Japanese firms since the contract of agency
was impliedly revoked by CMS when it sold its logs to Japanese firms without the intervention of
DRACOR. Neither would DRACOR be entitled to collect damages from CMS as it was not made in order
to evade the payment of DRACOR's commission.
DOCTRINE: The principal may revoke a contract of agency at will, and such revocation may be
express, or implied, and may be availed of even if the period fixed in the contract of agency has not
yet expired. As the principal has this absolute right to revoke the agency, the agent can not object
thereto; neither may he claim damages arising from such revocation, unless it is shown that such was
done in order to evade the payment of agent's commission. NCC 1924 is an implied revocation of the
contract of agency in which the agency is revoked if the principal directly manages the business
entrusted to the agent, dealing directly with third persons.
FACTS:
CMS: Forest concessionaire engaged in the logging business
DRACOR (D.R. Aguinaldo Corp.): Engaged in the business of exporting and selling logs and
lumber.
Aug. 28, 57: CMS (principal) and DRACOR (agent) entered into a contract of agency whereby
DRACOR is appointed as CMS exclusive export and sales agent for all logs that CMS may
produce, for a period of 5 years.
Portions of the agreement (drawn up by DRACOR)
o 1. SISON [CMS] hereby appoints DRACOR as his sole and exclusive export
sales agent with full authority, subject to the conditions and limitations
hereinafter set forth, to sell and export under a firm sales contract
acceptable to SISON, all logs produced by SISON for a period of 5 years
commencing upon the execution of the agreement and upon the terms and
conditions hereinafter provided and DRACOR hereby accepts such appointment;
o 3. It is expressly agreed that DRACOR shall handle exclusively all negotiations of
all export sales of SISON with the buyers and arrange the procurement and
schedules of the vessel or vessels for the shipment of SISON's logs in accordance
with SISON's written requests, but DRACOR shall not in any way be liable or
 responsible for any delay, default or failure of the vessel or vessels to comply with
the schedules agreed upon;
o 9. It is expressly agreed by the parties hereto that DRACOR shall receive 5%
commission of the gross sales of logs of SISON based on F.O.B. invoice
value which commission shall be deducted from the proceeds of any and/or all
moneys received by DRACOR for and in behalf and for the account of SISON;
CMS was able to sell through DRACOR a total of 77,264,672 board feet of logs in Japan, from
Sept. 20, 57 to Apr. 4, 62.
While on a trip to Tokyo, CMS's president, Atty. Sison, and Gen. Mgr. & legal counsel, Atty.
Dominguez, discovered that DRACOR had used Shinko Trading Co. as agent,
representative or liaison officer, in selling CMS's logs in Japan for which Shinko earned a
commission of U.S. $1.00 per 1,000 board feet from the buyer of the logs.
o Under this arrangement, Shinko was able to collect a total of U.S. $77,264.67.
After this discovery, CMS sold and shipped logs valued at U.S. $739,321.13 or
P2,883,351.90, directly to several firms in Japan without the aid or intervention of
DRACOR.
CMS sued DRACOR for the commission received by Shinko and for moral and exemplary
damages
o Commission paid to Shinko was in violation of the agreement and CMS is entitled
to this amount as part of the proceeds of the sale of the logs.
o Since DRACOR had been paid the 5% commission under the agreement, it is no
longer entitled to the additional commission paid to Shinko as this is tantamount
to DRACOR receiving double compensation for the services it rendered.
DRACOR counterclaimed for its commission, amounting to P144,167.59, from the sales
made by CMS of logs to Japanese firms.
CMS averred as a defense to the counterclaim that DRACOR had retained the sum of
P101,167.59 as part of its commission for the sales made by CMS ( w/out DRACORs
help).
o As counterclaim to DRACOR's counterclaim, CMS demanded DRACOR to return
the amount it unlawfully retained.
DRACOR later filed an amended counterclaim, alleging that the balance of its commission on the
sales made by CMS was P42,630.82, thus impliedly admitting that it retained the amount
alleged by CMS.
CFI: Dismissed complaint and counterclaim. No evidence was presented to show that Shinko
received the commission of U.S. $77,264.67 arising from the sale of CMS's logs in Japan
o Though it also stated that "Shinko was able to collect the total amount of
$77,264.67 US Dollars
o As to counterclaim, it was shown that DRACOR had waived its rights to the
balance of its commission in a letter (Feb. 2, 63) to Atty. Sison.
Only CMS appealed to CA
CA (3 to 2 decision): Affirmed dismissal.
II. DRACOR is not entitled to commission for direct sales made by CMS
o CMS failed to prove by competent evidence its claims as to the commissions
received by Shinko
o However, it also held that there is reason to believe that Shinko was paid by
DRACOR out of its own commission of 5%.
Letter to Sison and in the Agreement bet. Aguinaldo Development
Corp. (ADECOR) and Shinko.
Daniel R. Aguinaldo (Pres of DRACOR) stated: I informed you that if
you wanted to pay me for the service, then it would be no more
than at the standard rate of 5% commission because in our own
case, we pay our Japanese agents 2-1/2%. Accordingly, we
would only add a similar amount of 2-1/2% for the service which we
would render you in the Philippines.
CMS appealed to SC by way of a petition for review on certiorari, alleging:
o Testimony of Atty Dominguez, regarding the admission by Shinko's president and
director that it collected a commission of U.S. $1.00 per 1,000 board feet of logs
from the Japanese buyers, is admissible against DRACOR
o Statement of DRACOR's chief legal counsel is an admission that Shinko was able
to collect the commission in question
o The fact that Shinko received the questioned commissions is deemed admitted by
DRACOR by its silence under Sec. 23, Rule 130 of ROC when it failed to reply to
Atty. Carlos Moran Sison's letter
o DRACOR is not entitled to its 5% commission arising from the direct
sales made by CMS to buyers in Japan
o DRACOR is guilty of fraud and bad faith in its dealings with CMS.
ISSUES:
1) Whether CMS is entitled to recover the commissions paid to Shinko? (NO)
2) Whether DRACOR is entitled to commission from the direct sales made by CMS to Japanese buyers?
When Entitled to Damages for Revocation of Agency
(NO)
RATIO:
I. CMS was not able to prove payment of commission to Shinko
CMS: Shinko received the commission in question; recovery is proper.
III. No Fraud and Bad faith by DRACOR
SC: Unmeritorious. These arguments question the findings of fact made by CA which are final
and conclusive and cannot be reviewed on appeal to SC (Amigo vs. Teves)
Evidence adduced establishes the fact that Shinko is DRACOR's agent or liaison in
Japan; HOWEVER, there is no evidence which established the fact that Shinko did
receive the amount of U.S. $77,264.67 as commission arising from the sale of CMS's DISPOSITIVE: Decision appealed from is hereby MODIFIED.
logs to various Japanese firms. AFFIRMED: CA ruling that there is no evidence to support CMS's contention that Shinko earned
Testimony of Atty. Dominguez : Shinko's president and director told him that Shinko received a a separate commission of U.S. $1.00 for every 1,000 board feet of logs from the buyer of CMS's
commission of U.S. $1.00 for every 1,000 board feet of logs sold, logs.
o SC: This is hearsay. REVERSED: CA ruling with regard to DRACOR's right to retain the amount of P101,536.77 as
Letter of Mr. K. Shibata of Toyo Menka Kaisha part of its commission from the sale of logs by CMS. DRACOR has no right to its commission.
o SC: Also hearsay since Mr. Shibata was not presented to testify on his letter. Consequently, DRACOR ordered to remit to CMS the amount of P101,536.77.
Statements in memorandum of Atty. Ciocon to DRACOR (May 31, 1965): xxx our shipment of
logs to Toyo Menka Kaisha, Ltd., is only for a net volume of 67,747,732 board feet which
should enable Shinko to collect a commission of US $67,747.73 only
o SC: This cannot be categorized as admissions that Shinko did receive the
commissions in question since the statement was made in the context of REPUBLIC OF THE PHILIPPINES, et al. vs. HON. VICTORINO EVANGELISTA, et al.
questioning CMS's tally of logs delivered to various Japanese firms. G.R. No. 156015. August 11, 2005.
Statement of Daniel R. Aguinaldo, president of DRACOR: xxx it is obvious that Toyo paid Shinko Nature: PETITION for review on certiorari
for certain services which Shinko must have satisfactorily performed for them in Japan Ponente: PUNO, J.
otherwise they would not have paid Shinko Facts:
And reply-letter by DRACOR's counsel Atty. Del Rosario to CMS's demand letter: It does not Private respondent Legaspi is the owner of a land located in Bulacan.
seem proper, for CMS Logging, Inc., as principal, to concern itself with, much less question , the Petitioner Calimlim (Lt. General), entered into a MOA with one Ciriaco Reyes. The MOA
right of Shinko, with which our client debt directly, to whatever benefits it might have derived granted Reyes a permit to hunt for treasure in a land in Bulacan. Reyes, with petitioners,
from the ultimate consumer/buyer of these logs, Toyo Menka Kaisha, Ltd . There appears to be started, digging, tunneling and blasting works on the said land of Legaspi. It was also
no justification for your client's contention that these benefits, whether they can be considered alleged that Calimlim assigned about 80 military personnel to guard the area and
as commissions paid by Toyo to Shinko, are to be regarded part of the gross sales. intimidate Legaspi and other occupants of the area from going near the subject land.
o SC: This cannot be categorized as admissions that Shinko did receive the Legaspi executed an SPA appointing his nephew, private respondent Gutierrez, as his
commissions in question since neither statements declared categorically that attorney-in-fact. Gutierrez was given the power to deal with the treasure hunting
Shinko did in fact receive the commissions and that these arose from the sale of activities on Legaspis land and to file charges against those who may enter it without the
CMS's logs. latters authority. Legaspi agreed to give Gutierrez 40% of the treasure that may be
It is a rule that "a statement is not competent as an admission where it does not, under a found in the land.
reasonable construction, appear to admit or acknowledge the fact which is sought to be proved Gutierrez filed a case against petitioners for illegally entering Legaspis land. He hired the
by it". An admission or declaration to be competent must have been expressed in legal services of Atty. Adaza (as legal fees, Atty. Adaza shall be entitled to 30% of
definite, certain and unequivocal language (BPI vs. Fidelity). Legaspis share in whatever treasure may be found in the land). Upon the filing of the
CMS: DRACOR had admitted by its silence the allegation that Shinko received the commissions complaint, a 72-hour TRO was issued against petitioners. The case was then raffled to
in question when it failed to respond to Atty. Sison's letter the court of Judge Evangelista, who then granted an extension to the TRO.
SC: DRACOR did reply to the letter of Atty. Sison, through a letter of a certain F.A. Novenario Petitioners filed a Motion to Dismiss contending. One issue that they raised was that
which stated: We have no record or knowledge of any such payment of commission made by there is no real party-in-interest as the SPA of Gutierrez to bring the suit was already
Toyo Menka to Shinko . If the payment was made by Toyo Menka to Shinko, as stated in your revoked by Legaspi as evidenced by a Deed of Revocation.
letter, we knew nothing about it and had nothing to do with it. RTC ruled in favor of the private respondents. CA affirmed the decision.
o TC finding that "Shinko was able to collect $77,264.67 US Dollars," cannot be
given weight since this was based on the summary prepared by CMS itself. Issue: Whether the contract of agency between Legaspi and Gutierrez has been effectively revoked
Even if it was shown that Shinko did in fact receive the commissions in question, by Legaspi.
CMS is not entitled thereto since these were apparently paid by the buyers to Shinko Held: NO. CA decision is Affirmed.
for arranging the sale. This is therefore not part of the gross sales of CMS's logs. Ratio:
A contract of agency is generally revocable as it is a personal contract of representation
CMS: CA erred in holding that DRACOR was entitled to its commission from the sales made by based on trust and confidence reposed by the principal on his agent.
An exception to the revocability of a contract of agency is when it is coupled with
CMS to Japanese firms.
SC: There is merit to this contention. interest, i.e., if a bilateral contract depends upon the agency. The reason for its irrevocability is
because the agency becomes part of another obligation or agreement. It is not solely the rights of the
The principal may revoke a contract of agency at will, and such revocation may be express,
principal but also that of the agent and third persons which are affected. Hence, the law provides that
or implied, (Art.1920) and may be availed of even if the period fixed in the contract of agency
in such cases, the agency cannot be revoked at the sole will of the principal.
has not yet expired (Barretto vs. Santa Marina).
In the case at bar, we agree with the finding of the trial and appellate courts that the
As the principal has this absolute right to revoke the agency , the agent can not object
agency granted by Legaspi to Gutierrez is coupled with interest as a bilateral contract depends on it. It
thereto; neither may he claim damages arising from such revocation (Padilla, Civil Law), unless
is clear from the records that Gutierrez was given by Legaspi, inter alia, the power to manage the
it is shown that such was done in order to evade the payment of agent's commission (Infante
treasure hunting activities in the subject land. It was likewise agreed upon that Gutierrez shall be
vs. Cunanan).
entitled to 40% of whatever treasure may be found in the land. When an agency is constituted as a
CAB: CMS appointed DRACOR as its agent for the sale of its logs to Japanese firms. Yet, during
clause in a bilateral contract, that is, when the agency is inserted in another agreement, the agency
the existence of the contract of agency, DRACOR admitted that CMS sold its logs directly to
ceases to be revocable at the pleasure of the principal as the agency shall now follow the condition of
several Japanese firms.
the bilateral agreement. Consequently, the Deed of Revocation executed by Legaspi has no effect. The
This act constituted an implied revocation of the contract of agency under NCC 1924.
authority of Gutierrez to file and continue with the prosecution of the case at bar is unaffected.
o Art. 1924 The agency is revoked if the principal directly manages the
business entrusted to the agent, dealing directly with third persons.
New Manila Lumber Company vs. RP: The act of a contractor, who, after executing powers of
attorney in favor of another empowering the latter to collect whatever amounts may be due to
him from the Government, and thereafter demanded and collected from the government
the money the collection of which he entrusted to his attorney-in-fact, constituted
revocation of the agency in favor of the attorney-in-fact.
CAB: Since the contract of agency was revoked by CMS when it sold its logs to Japanese firms
without the intervention of DRACOR, the latter is no longer entitled to its commission from the
proceeds of such sale and is not entitled to retain whatever moneys it may have received as its
commission for said transactions.
Neither would DRACOR be entitled to collect damages from CMS.
GEN: Damages are generally not awarded to the agent for the revocation of the agency
EX: Damages awarded if act of revocation is to evade the payment of the agent's commission.
CAB: Not falling under exception
CMS: CA erred in not finding that DRACOR had committed acts of fraud and bad faith
SC: Unmeritorious. Like the contention involving Shinko and the questioned commissions, CA
findings on the matter were based on its appreciation of the evidence, and these findings are
binding on SC.