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G.R. No.

41420 | July 10, 1992

CORPORATION, respondents.
Ponente: Nocon, J.
CMS Logging, Inc., a forest concessionaire, was engaged in the logging business, while
D.R. Aguinaldo Corporation (or DRACOR) was engaged in the exportation and sale of logs and
lumber. On August 28, 1957, they entered into a contract of agency. CMS appointed DRACOR
as its exclusive export and sales agent for all logs that the former may produce in a span of five
(5) years. They agreed that DRACOR would receive a five (5%) per cent commission from the
gross sales of logs, which would be deducted from the proceeds of any and/or all moneys
received by DRACOR for, in behalf, and for the account of CMS.
Through DRACOR, CMS was able to sell 77,264,672 board feet of logs from September
20, 1957 to April 4, 1962 in Japan.
However, about six months before the agreements expiration, CMS's president, Atty. Carlos
Moran Sison, and general manager and legal counsel, Atty. Teodoro R. Dominguez, discovered
that DRACOR had used Shinko Trading Co., Ltd. (or Shinko) as agent, representative or liaison
officer in selling CMS's logs in Japan. Shinko earned a commission of U.S. $1.00 per 1,000
board feet from the buyer of the logs. In total, Shinko was able to collect U.S. $77,264.67.
CMS sold and shipped logs valued at U.S. $739,321.13 (or PhP 2,883,351.90) directly to
several firms in Japan without DRACORs help. Then, CMS sued DRACOR for the commission
received by Shinko and for moral and exemplary damages. CMS claimed that the commission
paid to Shinko was in violation of the agreement. Hence, it (CMS) was entitled to this amount as
part of the proceeds of the sale of the logs. CMS contended that since DRACOR had been paid
the 5% commission under the agreement, it was no longer entitled to the additional commission
paid to Shinko, because this would be tantamount to double compensation.
Meanwhile, DRACOR counterclaimed for its commission, supposedly amounting to PhP
144,167.59, from the sales made by CMS of logs to Japanese firms. DRACOR retained PhP
101,167.59 as part of its commission for the sales made by CMS.
Thus, as its counterclaim to DRACOR's counterclaim, CMS demanded for the return of
the amount DRACOR unlawfully retained. DRACOR later filed an amended counterclaim,
alleging that the balance of its commission on the sales made by CMS was PhP 42,630.82, thus
impliedly admitting that it retained a sum of money.
The trial court dismissed the claim and counterclaim.
CMS appealed to the Court of Appeals, which affirmed the dismissal of the complaint.
CMS appealed to the Supreme Court by way of a petition for review on certiorari.
Whether or not DRACOR was entitled to its 5% commission arising from the direct sales
made by CMS to buyers in Japan
HELD: (Narvasa, C.J., Padilla and Regalado, JJ. concur.)
The principal has an absolute right to revoke a contract of agency at will, and such
revocation may be express or implied. It may be availed of even if the period fixed in the

contract of agency has not yet expired. The agent cannot object thereto or claim damages arising
from such revocation, unless it is shown that such was done to evade the payment of the agent's
According to Article 1924 of the Civil Code, implied revocation of the contract of agency
may occur in the following manner, to wit:
Art. 1924 The agency is revoked if the principal directly manages the business
entrusted to the agent, dealing directly with third persons.

The aforementioned provision of law is clearly illustrated in New Manila Lumber

Company, Inc. vs. Republic of the Philippines. In the said case, a contractor executed powers of
attorney in favor of another which empowered the latter to collect whatever amounts may be due
to him from the Government. Thereafter, though, he himself demanded and collected the money.
The Court held that such constituted revocation of the agency in favor of the attorney-in-fact.
Applying the foregoing to the case at bar, when, during the existence of the contract of
agency, CMS directly sold its logs to several Japanese firms, there was an implied revocation of
the contract of agency between it and DRACOR.
Therefore, DRACOR was no longer entitled to its commission from the proceeds of such
sale and was not entitled to retain whatever moneys it may have received as its commission for
said transactions.
Neither was DRACOR entitled to collect damages from CMS, because, generally,
damages are not awarded to the agent for the revocation of the agency. The case at bar did not
fall under the exception (that is, the payment of damages when revocation of the agency is done
to evade payment of the agent's commission).
The Court ordered DRACOR to remit to CMS the amount of PhP 101,536.77.