Digested by: Grace Jayne DingalSubject: Insurance LawTitle:
VALENZUELA v. COURT OF APPEALS, ARAGON et al.
Topic: Effects of Nonpayment/Partial PaymentFacts: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-lifeinsurance, and in consideration of services rendered was entitled to receive the full agent'scommission of 32.5% from Philamgen under the scheduled commission rates. From 1973 to1975, Valenzuela solicited marine insurance from one of his clients, the Delta Motors in theamount 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 P4.4Million insurance coverage of the Delta Motors. In 1977, Philamgen started to becomeinterested 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 AgencyAgreement of Valenzuela.Issue:whether or not Philamgen could continue to hold Valenzuela jointly and severally liable withthe insured for unpaid premiumsHeld: NO.The principal cause of the termination of Valenzuela as General Agent of Philamgen arosefrom his refusal to share his Delta commission. The apparent
of the privaterespondents in terminating the General Agency Agreement of petitioners. The agencyinvolving 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 theGeneral Agency Agreement, Valenzuela would no longer be entitled to commission on therenewal of insurance policies of clients sourced from his agency.Despite the termination of the agency, Philamgen continued to hold Valenzuela jointly andseverally liable with the insured for unpaid premiums. Valenzuela had an interest in thecontinuation of the agency when it was unceremoniously terminated not only because of thecommissions he should continue to receive from the insurance business he has solicited andprocured but also for the fact that by the very acts of the respondents, he was made liableto Philamgen in the event the insured fail to pay the premiums due. They are estopped bytheir own positive averments and claims for damages. Therefore, the respondents cannotstate that the agency relationship between Valenzuela and Philamgen is not coupled withinterest. There is an exception to the principle that an agency is revocable at will and that iswhen the agency has been given not only for the interest of the principal but for the interestof third persons or for the mutual interest of the principal and the agent. In these cases, itis 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 thetermination by them of the General Agency Agreement was tainted with bad faith. If aprincipal acts in bad faith and with abuse of right in terminating the agency, then he is liablein damages.Valenzuela is not liable to Philamgen for the unpaid and uncollected premiums. UnderSection 77 of the Insurance Code, the remedy for the non-payment of premiums is to putan end to and render the insurance policy not binding —