G.R. No.
163720 December 16, 2004 "extend another partial payment" for the lot in his (Ybaezs) favor.6
GENEVIEVE LIM, petitioner,
vs.
FLORENCIO SABAN, respondents.
DECISION
TINGA, J.:
Before the Court is a Petition for Review on Certiorari assailing the Decision1 dated
October 27, 2003 of the Court of Appeals, Seventh Division, in CA-G.R. V No. 60392.2
The late Eduardo Ybaez (Ybaez), the owner of a 1,000-square meter lot in Cebu
City (the "lot"), entered into an Agreement and Authority to Negotiate and Sell
(Agency Agreement) with respondent Florencio Saban (Saban) on February 8, 1994.
Under the Agency Agreement, Ybaez authorized Saban to look for a buyer of the lot
for Two Hundred Thousand Pesos (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.3
Through Sabans efforts, Ybaez and his wife were able to sell the lot to the
petitioner Genevieve Lim (Lim) and the spouses Benjamin and Lourdes Lim (the
Spouses Lim) on March 10, 1994. The price of the lot as indicated in the Deed of
Absolute Sale is Two Hundred Thousand Pesos (P200,000.00).4 It appears, however,
that the vendees agreed to purchase the lot at the price of Six Hundred Thousand
Pesos (P600,000.00), inclusive of taxes and other incidental expenses of the sale.
After the sale, Lim remitted to Saban the amounts of One Hundred Thirteen
Thousand Two Hundred Fifty Seven Pesos (P113,257.00) for payment of taxes due
on the transaction as well as Fifty Thousand Pesos (P50,000.00) as brokers
commission.5 Lim also issued in the name of Saban four postdated checks in the
aggregate amount of Two Hundred Thirty Six Thousand Seven Hundred Forty Three
Pesos (P236,743.00). These checks were Bank of the Philippine Islands (BPI) Check
No. 1112645 dated June 12, 1994 for P25,000.00; BPI Check No. 1112647 dated
June 19, 1994 for P18,743.00; BPI Check No. 1112646 dated June 26, 1994 for
P25,000.00; and Equitable PCI Bank Check No. 021491B dated June 20, 1994 for
P168,000.00.
Subsequently, Ybaez sent a letter dated June 10, 1994 addressed to Lim. In the
letter Ybaez asked Lim to cancel all the checks issued by her in Sabans favor and to
After the four checks in his favor were dishonored upon presentment, Saban filed a
Complaint for collection of sum of money and damages against Ybaez and Lim with
the Regional Trial Court (RTC) of Cebu City on August 3, 1994. 7 The case was
assigned to Branch 20 of the RTC.
In his Complaint, Saban alleged that Lim and the Spouses Lim agreed to purchase
the lot for P600,000.00, i.e., with a mark-up of Four Hundred Thousand Pesos
(P400,000.00) from the price set by Ybaez. Of the total purchase price of
P600,000.00, P200,000.00 went to Ybaez, P50,000.00 allegedly went to Lims agent,
and P113,257.00 was given to Saban to cover taxes and other expenses incidental to
the sale. Lim also issued four (4) postdated checks8 in favor of Saban for the
remaining P236,743.00.9
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. Ybaez was able to
convince Lim to cancel all four checks.
Saban further averred that Ybaez and Lim connived to deprive him of his sales
commission by withholding payment of the first three checks. He also claimed that
Lim failed to make good the fourth check which was dishonored because the account
against which it was drawn was closed.
In his Answer, Ybaez claimed that Saban was not entitled to any commission
because he concealed the actual selling price from him and because he was not a
licensed real estate broker.
Lim, for her part, argued that she was not privy to the agreement between Ybaez
and Saban, and that she issued stop payment orders for the three checks because
Ybaez requested her to pay the purchase price directly to him, instead of coursing it
through Saban. She also alleged that she agreed with Ybaez that the purchase price
of the lot was only P200,000.00.
Ybaez died during the pendency of the case before the RTC. Upon motion of his
counsel, the trial court dismissed the case only against him without any objection
from the other parties.10
On May 14, 1997, the RTC rendered its Decision11 dismissing Sabans complaint,
declaring the four (4) checks issued by Lim as stale and non-negotiable, and
absolving Lim from any liability towards Saban.
Saban appealed the trial courts Decision to the Court of Appeals.
On October 27, 2003, the appellate court promulgated its Decision12 reversing the
trial courts ruling. It held that Saban was entitled to his commission amounting to
P236,743.00.13
The Court of Appeals ruled that Ybaezs revocation of his contract of agency with
Saban was invalid because the agency was coupled with an interest and Ybaez
effected the revocation in bad faith in order to deprive Saban of his commission and
to keep the profits for himself.14
The appellate court found that Ybaez and Lim connived to deprive Saban of his
commission. It declared that Lim is liable to pay Saban the amount of the purchase
price of the lot corresponding to his commission because she issued the four checks
knowing that the total amount thereof corresponded to Sabans commission for the
sale, as the agent of Ybaez. The appellate court further ruled that, in issuing the
checks in payment of Sabans commission, Lim acted as an accommodation party.
She signed the checks as drawer, without receiving value therefor, for the purpose of
lending her name to a third person. As such, she is liable to pay Saban as the holder
for value of the checks.15
Lim filed a Motion for Reconsideration of the appellate courts Decision, but her
Motion was denied by the Court of Appeals in a Resolution dated May 6, 2004.16
Not satisfied with the decision of the Court of Appeals, Lim filed the present petition.
Lim argues that the appellate court ignored the fact that after paying her agent and
remitting to Saban the amounts due for taxes and transfer of title, she paid the
balance of the purchase price directly to Ybaez.17
She further contends that she is not liable for Ybaezs debt to Saban under the
Agency Agreement as she is not privy thereto, and that Saban has no one but himself
to blame for consenting to the dismissal of the case against Ybaez and not moving
for his substitution by his heirs.18
Lim also assails the findings of the appellate court that she issued the checks as an
accommodation party for Ybaez and that she connived with the latter to deprive
Saban of his commission.19
Lim prays that should she be found liable to pay Saban the amount of his
commission, she should only be held liable to the extent of one-third (1/3) of the
amount, since she had two co-vendees (the Spouses Lim) who should share such
liability.20
In his Comment, Saban maintains that Lim agreed to purchase the lot for
P600,000.00, which consisted of the P200,000.00 which would be paid to Ybaez, the
P50,000.00 due to her broker, the P113,257.00 earmarked for taxes and other
expenses incidental to the sale and Sabans commission as broker for Ybaez.
According to Saban, Lim assumed the obligation to pay him his commission. He
insists that Lim and Ybaez connived to unjustly deprive him of his commission from
the negotiation of the sale.21
The issues for the Courts resolution are whether Saban is entitled to receive his
commission from the sale; and, assuming that Saban is entitled thereto, whether it is
Lim who is liable to pay Saban his sales commission.
The Court gives due course to the petition, but agrees with the result reached by the
Court of Appeals.
The Court affirms the appellate courts finding that 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 on March 10, 1994. 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.22
In Macondray & Co. v. Sellner,23 the Court recognized the right of a broker to his
commission for finding a suitable buyer for the sellers property even though the
seller himself consummated the sale with the buyer.24 The Court held that it would be
in the height of injustice to permit the principal to terminate the contract of agency to
the prejudice of the broker when he had already reaped the benefits of the brokers
efforts.
In Infante v. Cunanan, et al.,25 the Court upheld the right of the brokers to their
commissions although the seller revoked their authority to act in his behalf after they
had found a buyer for his properties and negotiated the sale directly with the buyer
whom he met through the brokers efforts. The Court ruled that the sellers
withdrawal in bad faith of the brokers authority cannot unjustly deprive the brokers
of their commissions as the sellers duly constituted agents.
The pronouncements of the Court in the aforecited cases are applicable to the
present case, especially considering that Saban had completely performed his
obligations under his contract of agency with Ybaez by finding a suitable buyer to
preparing the Deed of Absolute Sale between Ybaez and Lim and her co-vendees.
Moreover, the contract of agency very clearly states that Saban is entitled to the
excess of the mark-up of the price of the lot after deducting Ybaezs share of
P200,000.00 and the taxes and other incidental expenses of the sale.
However, the Court does not agree with the appellate courts pronouncement that
Sabans agency was one coupled with an interest. Under Article 1927 of the Civil
Code, an agency cannot be revoked if a bilateral contract depends upon it, or if it is
the means of fulfilling an obligation already contracted, or if a partner is appointed
manager of a partnership in the contract of partnership and his removal from the
management is unjustifiable. Stated differently, 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.26
Sabans entitlement to his commission having been settled, the Court must now
determine whether Lim is the proper party against whom Saban should address his
claim.
Sabans right to receive compensation for negotiating as broker for Ybaez arises
from the Agency Agreement between them. Lim is not a party to the contract.
However, the record reveals that she had knowledge of the fact that Ybaez set the
price of the lot at P200,000.00 and that the P600,000.00the price agreed upon by
her and Sabanwas more than the amount set by Ybaez because it included the
amount for payment of taxes and for Sabans commission as broker for Ybaez.
According to the trial court, Lim made the following payments for the lot:
P113,257.00 for taxes, P50,000.00 for her broker, and P400.000.00 directly to
Ybaez, or a total of Five Hundred Sixty Three Thousand Two Hundred Fifty Seven
Pesos (P563,257.00).27 Lim, on the other hand, claims that on March 10, 1994, the
date of execution of the Deed of Absolute Sale, she paid directly to Ybaez the
amount of One Hundred Thousand Pesos (P100,000.00) only, and gave to Saban
P113,257.00 for payment of taxes and P50,000.00 as his commission,28 and One
Hundred Thirty Thousand Pesos (P130,000.00) on June 28, 1994,29 or a total of
Three Hundred Ninety Three Thousand Two Hundred Fifty Seven Pesos
(P393,257.00). Ybaez, for his part, acknowledged that Lim and her co-vendees paid
him P400,000.00 which he said was the full amount for the sale of the lot. 30 It thus
appears that he received P100,000.00 on March 10, 1994, acknowledged receipt
(through Saban) of the P113,257.00 earmarked for taxes and P50,000.00 for
commission, and received the balance of P130,000.00 on June 28, 1994. Thus, a total
of P230,000.00 went directly to Ybaez. Apparently, although the amount actually
paid by Lim was P393,257.00, Ybaez rounded off the amount to P400,000.00 and
waived the difference.
Lims act of issuing the four checks amounting to P236,743.00 in Sabans favor belies
her claim that she and her co-vendees did not agree to purchase the lot at
P600,000.00. If she did not agree thereto, there would be no reason for her to issue
those checks which is the balance of P600,000.00 less the amounts of P200,000.00
(due to Ybaez), P50,000.00 (commission), and the P113,257.00 (taxes). The only
logical conclusion is that Lim changed her mind about agreeing to purchase the lot at
P600,000.00 after talking to Ybaez and ultimately realizing that Sabans commission
is even more than what Ybaez received as his share of the purchase price as
vendor. Obviously, this change of mind resulted to the prejudice of Saban whose
efforts led to the completion of the sale between the latter, and Lim and her co-
vendees. This the Court cannot countenance.
The ruling of the Court in Infante v. Cunanan, et al., cited earlier, is enlightening for
the facts therein are similar to the circumstances of the present case. In that case,
Consejo Infante asked Jose Cunanan and Juan Mijares to find a buyer for her two lots
and the house built thereon for Thirty Thousand Pesos (P30,000.00) . She promised
to pay them five percent (5%) of the purchase price plus whatever overprice they
may obtain for the property. Cunanan and Mijares offered the properties to Pio Noche
who in turn expressed willingness to purchase the properties. Cunanan and Mijares
thereafter introduced Noche to Infante. However, the latter told Cunanan and Mijares
that she was no longer interested in selling the property and asked them to sign a
document stating that their written authority to act as her agents for the sale of the
properties was already cancelled. Subsequently, Infante sold the properties directly to
Noche for Thirty One Thousand Pesos (P31,000.00). The Court upheld the right of
Cunanan and Mijares to their commission, explaining that
[Infante] had changed her mind even if respondent had found a buyer who was
willing to close the deal, is a matter that would not give rise to a legal consequence if
[Cunanan and Mijares] agreed to call off the transaction in deference to the request
of [Infante]. But the situation varies if one of the parties takes advantage of the
benevolence of the other and acts in a manner that would promote his own selfish
interest. This act is unfair as would amount to bad faith. This act cannot be
sanctioned without according the party prejudiced the reward which is due him. This
is the situation in which [Cunanan and Mijares] were placed by [Infante]. [Infante]
took advantage of the services rendered by [Cunanan and Mijares], but believing that
she could evade payment of their commission, she made use of a ruse by inducing
them to sign the deed of cancellation.This act of subversion cannot be sanctioned
and cannot serve as basis for [Infante] to escape payment of the commission agreed
upon.31
The appellate court therefore had sufficient basis for concluding that Ybaez and Lim
connived to deprive Saban of his commission by dealing with each other directly and
reducing the purchase price of the lot and leaving nothing to compensate Saban for
his efforts.
Considering the circumstances surrounding the case, and the undisputed fact that
Lim had not yet paid the balance of P200,000.00 of the purchase price of
P600,000.00, it is just and proper for her 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,32 in view of the trial courts dismissal
of Sabans complaint as against Ybaez, with Sabans express consent, due to the
latters demise on November 11, 1994.33
The appellate court however erred in ruling that Lim is liable on the checks because
she issued them as an accommodation party. Section 29 of the Negotiable
Instruments Law defines an accommodation party as a person "who has signed the
negotiable instrument as maker, drawer, acceptor or indorser, without receiving value
therefor, for the purpose of lending his name to some other person." The
accommodation party is liable on the instrument to a holder for value even though
the holder at the time of taking the instrument knew him or her to be merely an
accommodation party. The accommodation party may of course seek reimbursement
from the party accommodated.34

As gleaned from the text of Section 29 of the Negotiable Instruments Law, the
accommodation party is one who meets all these three requisites, viz: (1) he signed
the instrument as maker, drawer, acceptor, or indorser; (2) he did not receive value
for the signature; and (3) he signed for the purpose of lending his name to some
other person. In the case at bar, while Lim signed as drawer of the checks she did
not satisfy the two other remaining requisites.

The absence of the second requisite becomes pellucid when it is noted at the outset
that Lim issued the checks in question on account of her transaction, along with the
other purchasers, with Ybaez which was a sale and, therefore, a reciprocal contract.
Specifically, she drew the checks in payment of the balance of the purchase price of
the lot subject of the transaction. And she had to pay the agreed purchase price in
consideration for the sale of the lot to her and her co-vendees. In other words, the
amounts covered by the checks form part of the cause or consideration from
Ybaezs end, as vendor, while the lot represented the cause or consideration on the
side of Lim, as vendee.35 Ergo, Lim received value for her signature on the checks.

Neither is there any indication that Lim issued the checks for the purpose of enabling
Ybaez, or any other person for that matter, to obtain credit or to raise money,
thereby totally debunking the presence of the third requisite of an accommodation
party.

WHEREFORE, in view of the foregoing, the petition is DISMISSED.

SO ORDERED.

G.R. No. 83122 October 19, 1990
ARTURO P. VALENZUELA and HOSPITALITA N. VALENZUELA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, BIENVENIDO M. ARAGON, ROBERT
E. PARNELL, CARLOS K. CATOLICO and THE PHILIPPINE AMERICAN
GENERAL INSURANCE COMPANY, INC., respondents.
Albino B. Achas for petitioners.
Angara, Abello, Concepcion, Regala & Cruz for private respondents.
GUTIERREZ, JR., J.:
This is a petition for review of the January 29, 1988 decision of the Court of Appeals
and the April 27, 1988 resolution denying the petitioners' motion for reconsideration,
which decision and resolution reversed the decision dated June 23,1986 of the Court
of First Instance of Manila, Branch 34 in Civil Case No. 121126 upholding the
petitioners' causes of action and granting all the reliefs prayed for in their complaint
against private respondents.
The antecedent facts of the case are as follows:
Petitioner Arturo P. Valenzuela (Valenzuela for short) is a General Agent of private
respondent Philippine American General Insurance Company, Inc. (Philamgen for
short) since 1965. As such, 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 (Exhibits "A" and "1"). From 1973 to 1975,
Valenzuela solicited marine insurance from one of his clients, the Delta Motors, Inc.
(Division of Electronics Airconditioning and Refrigeration) in the amount of P4.4
Million from which he was entitled to a commission of 32% (Exhibit "B"). 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. During the period 1976 to
1978, premium payments amounting to P1,946,886.00 were paid directly to
Philamgen and Valenzuela's commission to which he is entitled amounted to
P632,737.00.
In 1977, Philamgen started to become interested in and expressed its intent to share
in the commission due Valenzuela (Exhibits "III" and "III-1") on a fifty-fifty basis
(Exhibit "C"). Valenzuela refused (Exhibit "D").
On February 8, 1978 Philamgen and its President, Bienvenido M. Aragon insisted on
the sharing of the commission with Valenzuela (Exhibit E). This was followed by
another sharing proposal dated June 1, 1978. On June 16,1978, Valenzuela firmly
reiterated his objection to the proposals of respondents stating that: "It is with great
reluctance that I have to decline upon request to signify my conformity to your
alternative proposal regarding the payment of the commission due me. However, I
have no choice for to do otherwise would be violative of the Agency Agreement
executed between our goodselves." (Exhibit B-1)
Because of the refusal of Valenzuela, Philamgen and its officers, namely: Bienvenido
Aragon, Carlos Catolico and Robert E. Parnell took drastic action against Valenzuela.
They: (a) reversed the commission due him by not crediting in his account the
commission earned from the Delta Motors, Inc. insurance (Exhibit "J" and "2"); (b)
placed agency transactions on a cash and carry basis; (c) threatened the cancellation
of policies issued by his agency (Exhibits "H" to "H-2"); and (d) started to leak out
news that Valenzuela has a substantial account with Philamgen. All of these acts
resulted in the decline of his business as insurance agent (Exhibits "N", "O", "K" and
"K-8"). Then on December 27, 1978, Philamgen terminated the General Agency
Agreement of Valenzuela (Exhibit "J", pp. 1-3, Decision Trial Court dated June 23,
1986, Civil Case No. 121126, Annex I, Petition).
The petitioners sought relief by filing the complaint against the private respondents in
the court a quo (Complaint of January 24, 1979, Annex "F" Petition). After due
proceedings, the trial court found:
xxx xxx xxx
Defendants tried to justify the termination of plaintiff Arturo P. Valenzuela as one of
defendant PHILAMGEN's General Agent by making it appear that plaintiff Arturo P.
Valenzuela has a substantial account with defendant PHILAMGEN particularly Delta
Motors, Inc.'s Account, thereby prejudicing defendant PHILAMGEN's interest (Exhibits
6,"11","11- "12- A"and"13-A").
Defendants also invoked the provisions of the Civil Code of the Philippines (Article
1868) and the provisions of the General Agency Agreement as their basis for
terminating plaintiff Arturo P. Valenzuela as one of their General Agents.
That defendants' position could have been justified had the termination of plaintiff
Arturo P. Valenzuela was (sic) based solely on the provisions of the Civil Code and the
conditions of the General Agency Agreement. But the records will show that the
principal cause of the termination of the plaintiff as General Agent of defendant
PHILAMGEN was his refusal to share his Delta commission.
That it should be noted that there were several attempts made by defendant
Bienvenido M. Aragon to share with the Delta commission of plaintiff Arturo P.
Valenzuela. He had persistently pursued the sharing scheme to the point of
terminating plaintiff Arturo P. Valenzuela, and to make matters worse, defendants
made it appear that plaintiff Arturo P. Valenzuela had substantial accounts with
defendant PHILAMGEN.
Not only that, defendants have also started (a) to treat separately the Delta
Commission of plaintiff Arturo P. Valenzuela, (b) to reverse the Delta commission due
plaintiff Arturo P. Valenzuela by not crediting or applying said commission earned to
the account of plaintiff Arturo P. Valenzuela, (c) placed plaintiff Arturo P. Valenzuela's
agency transactions on a "cash and carry basis", (d) sending threats to cancel
existing policies issued by plaintiff Arturo P. Valenzuela's agency, (e) to divert plaintiff
Arturo P. Valenzuela's insurance business to other agencies, and (f) to spread wild
and malicious rumors that plaintiff Arturo P. Valenzuela has substantial account with
defendant PHILAMGEN to force plaintiff Arturo P. Valenzuela into agreeing with the
sharing of his Delta commission." (pp. 9-10, Decision, Annex 1, Petition).
xxx xxx xxx
These acts of harrassment done by defendants on plaintiff Arturo P. Valenzuela to
force him to agree to the sharing of his Delta commission, which culminated in the
termination of plaintiff Arturo P. Valenzuela as one of defendant PHILAMGEN's
General Agent, do not justify said termination of the General Agency Agreement
entered into by defendant PHILAMGEN and plaintiff Arturo P. Valenzuela.
That since defendants are not justified in the termination of plaintiff Arturo P.
Valenzuela as one of their General Agents, defendants shall be liable for the resulting
damage and loss of business of plaintiff Arturo P. Valenzuela. (Arts. 2199/2200, Civil
Code of the Philippines). (Ibid, p. 11)
The court accordingly rendered judgment, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against
defendants ordering the latter to reinstate plaintiff Arturo P. Valenzuela as its General
Agent, and to pay plaintiffs, jointly and severally, the following:
1. The amount of five hundred twenty-one thousand nine hundred sixty four and
16/100 pesos (P521,964.16) representing plaintiff Arturo P. Valenzuela's Delta
Commission with interest at the legal rate from the time of the filing of the complaint,
which amount shall be adjusted in accordance with Article 1250 of the Civil Code of
the Philippines;
2. The amount of seventy-five thousand pesos (P75,000.00) per month as
compensatory damages from 1980 until such time that defendant Philamgen shall
reinstate plaintiff Arturo P. Valenzuela as one of its general agents;
3. The amount of three hundred fifty thousand pesos (P350,000.00) for each plaintiff
as moral damages;
4. The amount of seventy-five thousand pesos (P75,000.00) as and for attorney's
fees;
5. Costs of the suit. (Ibid., P. 12)
From the aforesaid decision of the trial court, Bienvenido Aragon, Robert E. Parnell,
Carlos K. Catolico and PHILAMGEN respondents herein, and defendants-appellants
below, interposed an appeal on the following:
ASSIGNMENT OF ERRORS
I
THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF ARTURO P. VALENZUELA
HAD NO OUTSTANDING ACCOUNT WITH DEFENDANT PHILAMGEN AT THE TIME OF
THE TERMINATION OF THE AGENCY.
II
THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF ARTURO P. VALENZUELA
IS ENTITLED TO THE FULL COMMISSION OF 32.5% ON THE DELTA ACCOUNT.
III
THE LOWER COURT ERRED IN HOLDING THAT THE TERMINATION OF PLAINTIFF
ARTURO P. VALENZUELA WAS NOT JUSTIFIED AND THAT CONSEQUENTLY
DEFENDANTS ARE LIABLE FOR ACTUAL AND MORAL DAMAGES, ATTORNEYS FEES
AND COSTS.
IV
ASSUMING ARGUENDO THAT THE AWARD OF DAMAGES AGAINST DEFENDANT
PHILAMGEN WAS PROPER, THE LOWER COURT ERRED IN AWARDING DAMAGES
EVEN AGAINST THE INDIVIDUAL DEFENDANTS WHO ARE MERE CORPORATE
AGENTS ACTING WITHIN THE SCOPE OF THEIR AUTHORITY.
V
ASSUMING ARGUENDO THAT THE AWARD OF DAMAGES IN FAVOR OF PLAINTIFF
ARTURO P. VALENZUELA WAS PROPER, THE LOWER COURT ERRED IN AWARDING
DAMAGES IN FAVOR OF HOSPITALITA VALENZUELA, WHO, NOT BEING THE REAL
PARTY IN INTEREST IS NOT TO OBTAIN RELIEF.
On January 29, 1988, respondent Court of Appeals promulgated its decision in the
appealed case. The dispositive portion of the decision reads:
WHEREFORE, the decision appealed from is hereby modified accordingly and
judgment is hereby rendered ordering:
1. Plaintiff-appellee Valenzuela to pay defendant-appellant Philamgen the sum of one
million nine hundred thirty two thousand five hundred thirty-two pesos and
seventeen centavos (P1,902,532.17), with legal interest thereon from the date of
finality of this judgment until fully paid.
2. Both plaintiff-appellees to pay jointly and severally defendants-appellants the sum
of fifty thousand pesos (P50,000.00) as and by way of attorney's fees.
No pronouncement is made as to costs. (p. 44, Rollo)
There is in this instance irreconcilable divergence in the findings and conclusions of
the Court of Appeals, vis-a-vis those of the trial court particularly on the pivotal issue
whether or not Philamgen and/or its officers can be held liable for damages due to
the termination of the General Agency Agreement it entered into with the petitioners.
In its questioned decision the Court of Appeals observed that:
In any event the principal's power to revoke an agency at will is so pervasive, that
the Supreme Court has consistently held that termination may be effected even if the
principal acts in bad faith, subject only to the principal's liability for damages (Danon
v. Antonio A. Brimo & Co., 42 Phil. 133; Reyes v. Mosqueda, 53 O.G. 2158 and
Infante V. Cunanan, 93 Phil. 691, cited in Paras, Vol. V, Civil Code of the Philippines
Annotated [1986] 696).
The lower court, however, thought the termination of Valenzuela as General Agent
improper because the record will show the principal cause of the termination of the
plaintiff as General Agent of defendant Philamgen was his refusal to share his Delta
commission. (Decision, p. 9; p. 13, Rollo, 41)
Because of the conflicting conclusions, this Court deemed it necessary in the interest
of substantial justice to scrutinize the evidence and records of the cases. While it is
an established principle that the factual findings of the Court of Appeals are final and
may not be reviewed on appeal to this Court, there are however certain exceptions to
the rule which this Court has recognized and accepted, among which, are when the
judgment is based on a misapprehension of facts and when the findings of the
appellate court, are contrary to those of the trial court (Manlapaz v. Court of Appeals,
147 SCRA 236 [1987]); Guita v. Court of Appeals, 139 SCRA 576 [1986]). Where the
findings of the Court of Appeals and the trial court are contrary to each other, this
Court may scrutinize the evidence on record (Cruz v. Court of Appeals, 129 SCRA 222
[1984]; Mendoza v. Court of Appeals, 156 SCRA 597 [1987]; Maclan v. Santos, 156
SCRA 542 [1987]). When the conclusion of the Court of Appeals is grounded entirely
on speculation, surmises or conjectures, or when the inference made is manifestly
mistaken, absurd or impossible, or when there is grave abuse of discretion, or when
the judgment is based on a misapprehension of facts, and when the findings of facts
are conflict the exception also applies (Malaysian Airline System Bernad v. Court of
Appeals, 156 SCRA 321 [1987]).
After a painstaking review of the entire records of the case and the findings of facts
of both the court a quo and respondent appellate court, we are constrained to affirm
the trial court's findings and rule for the petitioners.
We agree with the court a quo that the principal cause of the termination of
Valenzuela as General Agent of Philamgen arose from his refusal to share his Delta
commission. The records sustain the conclusions of the trial court on the apparent
bad faith of the private respondents in terminating the General Agency Agreement of
petitioners. It is axiomatic that the findings of fact of a trial judge are entitled to
great weight (People v. Atanacio, 128 SCRA 22 [1984]) and should not be disturbed
on appeal unless for strong and cogent reasons, because the trial court is in a better
position to examine the evidence as well as to observe the demeanor of the
witnesses while testifying (Chase v. Buencamino, Sr., 136 SCRA 365 [1985]; People
v. Pimentel, 147 SCRA 25 [1987]; and Baliwag Trans., Inc. v. Court of Appeals, 147
SCRA 82 [1987]). In the case at bar, the records show that the findings and
conclusions of the trial court are supported by substantial evidence and there appears
to be no cogent reason to disturb them (Mendoza v. Court of Appeals. 156 SCRA 597
[1987]).
As early as September 30,1977, Philamgen told the petitioners of its desire to share
the Delta Commission with them. It stated that should Delta back out from the
agreement, the petitioners would be charged interests through a reduced commission
after full payment by Delta.
On January 23, 1978 Philamgen proposed reducing the petitioners' commissions by
50% thus giving them an agent's commission of 16.25%. On February 8, 1978,
Philamgen insisted on the reduction scheme followed on June 1, 1978 by still another
insistence on reducing commissions and proposing two alternative schemes for
reduction. There were other pressures. Demands to settle accounts, to confer and
thresh out differences regarding the petitioners' income and the threat to terminate
the agency followed. The petitioners were told that the Delta commissions would not
be credited to their account (Exhibit "J"). They were informed that the Valenzuela
agency would be placed on a cash and carry basis thus removing the 60-day credit
for premiums due. (TSN., March 26, 1979, pp. 54-57). Existing policies were
threatened to be cancelled (Exhibits "H" and "14"; TSN., March 26, 1979, pp. 29-30).
The Valenzuela business was threatened with diversion to other agencies. (Exhibit
"NNN"). Rumors were also spread about alleged accounts of the Valenzuela agency
(TSN., January 25, 1980, p. 41). The petitioners consistently opposed the pressures
to hand over the agency or half of their commissions and for a treatment of the Delta
account distinct from other accounts. The pressures and demands, however,
continued until the agency agreement itself was finally terminated.
It is also evident from the records that 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.
In the insurance business in the Philippines, the most difficult and frustrating period
is the solicitation and persuasion of the prospective clients to buy insurance policies.
Normally, agents would encounter much embarrassment, difficulties, and oftentimes
frustrations in the solicitation and procurement of the insurance policies. To sell
policies, an agent exerts great effort, patience, perseverance, ingenuity, tact,
imagination, time and money. In the case of Valenzuela, he was able to build up an
Agency from scratch in 1965 to a highly productive enterprise with gross billings of
about Two Million Five Hundred Thousand Pesos (P2,500,000.00) premiums per
annum. The records sustain the finding that the private respondent started to covet a
share of the insurance business that Valenzuela had built up, developed and nurtured
to profitability through over thirteen (13) years of patient work and perseverance.
When Valenzuela refused to share his commission in the Delta account, the boom
suddenly fell on him.
The private respondents by the simple expedient of terminating the General Agency
Agreement appropriated the entire insurance business of Valenzuela. 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. Worse, despite the termination of the agency, Philamgen continued to
hold Valenzuela jointly and severally liable with the insured for unpaid premiums.
Under these circumstances, it is clear that 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 may be cases
in which an agent has been induced to assume a responsibility or incur a liability, in
reliance upon the continuance of the authority under such circumstances that, if the
authority be withdrawn, the agent will be exposed to personal loss or liability" (See
MEC 569 p. 406).
Furthermore, 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 (See Padilla, Civil Code Annotated, 56 ed., Vol. IV p.
350). The following citations are apropos:
The principal may not defeat the agent's right to indemnification by a termination of
the contract of agency (Erskine v. Chevrolet Motors Co. 185 NC 479, 117 SE 706, 32
ALR 196).
Where the principal terminates or repudiates the agent's employment in violation of
the contract of employment and without cause ... the agent is entitled to receive
either the amount of net losses caused and gains prevented by the breach, or the
reasonable value of the services rendered. Thus, the agent is entitled to prospective
profits which he would have made except for such wrongful termination provided that
such profits are not conjectural, or speculative but are capable of determination upon
some fairly reliable basis. And a principal's revocation of the agency agreement made
to avoid payment of compensation for a result which he has actually accomplished
(Hildendorf v. Hague, 293 NW 2d 272; Newhall v. Journal Printing Co., 105 Minn
44,117 NW 228; Gaylen Machinery Corp. v. Pitman-Moore Co. [C.A. 2 NY] 273 F 2d
340)
If a principal violates a contractual or quasi-contractual duty which he owes his
agent, the agent may as a rule bring an appropriate action for the breach of that
duty. The agent may in a proper case maintain an action at law for compensation or
damages ... A wrongfully discharged agent has a right of action for damages and in
such action the measure and element of damages are controlled generally by the
rules governing any other action for the employer's breach of an employment
contract. (Riggs v. Lindsay, 11 US 500, 3L Ed 419; Tiffin Glass Co. v. Stoehr, 54 Ohio
157, 43 NE 2798)
At any rate, the question of whether or not the agency agreement is coupled with
interest is helpful to the petitioners' cause but is not the primary and compelling
reason. For the pivotal factor rendering Philamgen and the other private respondents
liable in damages is that the termination by them of the General Agency Agreement
was tainted with bad faith. Hence, if a principal acts in bad faith and with abuse of
right in terminating the agency, then he is liable in damages. This is in accordance
with the precepts in Human Relations enshrined in our Civil Code that "every person
must in the exercise of his rights and in the performance of his duties act with
justice, give every one his due, and observe honesty and good faith: (Art. 19, Civil
Code), and every person who, contrary to law, wilfully or negligently causes damages
to another, shall indemnify the latter for the same (Art. 20, id). "Any person who
wilfully causes loss or injury to another in a manner contrary to morals, good customs
and public policy shall compensate the latter for the damages" (Art. 21, id.).
As to the issue of whether or not the petitioners are liable to Philamgen for the
unpaid and uncollected premiums which the respondent court ordered Valenzuela to
pay Philamgen the amount of One Million Nine Hundred Thirty-Two Thousand Five
Hundred Thirty-Two and 17/100 Pesos (P1,932,532,17) with legal interest thereon
until fully paid (Decision-January 20, 1988, p. 16; Petition, Annex "A"), we rule that
the respondent court erred in holding Valenzuela liable. We find no factual and legal
basis for the award. 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 (P.D. 612, as amended otherwise known as the Insurance Code of
1974)
In Philippine Phoenix Surety and Insurance, Inc. v. Woodworks, Inc. (92 SCRA 419
[1979]) 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. "
(Arce v. Capitol Insurance and Surety Co., Inc., 117 SCRA 66; Emphasis supplied)
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. (Citing Insurance Law and
Practice by John Alan Appleman, Vol. 15, p. 331; Emphasis supplied)
The foregoing findings are buttressed by Section 776 of the insurance Code
(Presidential Decree No. 612, promulgated on December 18, 1974), which now
provides that 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 (Ibid., 92 SCRA 425)
Perforce, 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 respondent appellate court also seriously erred in according undue reliance to
the report of Banaria and Banaria and Company, auditors, that as of December 31,
1978, Valenzuela owed Philamgen P1,528,698.40. This audit report of Banaria was
commissioned by Philamgen after Valenzuela was almost through with the
presentation of his evidence. In essence, the Banaria report started with an
unconfirmed and unaudited beginning balance of account of P1,758,185.43 as of
August 20, 1976. But even with that unaudited and unconfirmed beginning balance of
P1,758,185.43, Banaria still came up with the amount of P3,865.49 as Valenzuela's
balance as of December 1978 with Philamgen (Exh. "38-A-3"). In fact, as of
December 31, 1976, and December 31, 1977, Valenzuela had no unpaid account with
Philamgen (Ref: Annexes "D", "D-1", "E", Petitioner's Memorandum). But even
disregarding these annexes which are records of Philamgen and addressed to
Valenzuela in due course of business, the facts show that as of July 1977, the
beginning balance of Valenzuela's account with Philamgen amounted to P744,159.80.
This was confirmed by Philamgen itself not only once but four (4) times on different
occasions, as shown by the records.
On April 3,1978, Philamgen sent Valenzuela a statement of account with a beginning
balance of P744,159-80 as of July 1977.
On May 23, 1978, another statement of account with exactly the same beginning
balance was sent to Valenzuela.
On November 17, 1978, Philamgen sent still another statement of account with
P744,159.80 as the beginning balance.
And on December 20, 1978, a statement of account with exactly the same figure was
sent to Valenzuela.
It was only after the filing of the complaint that a radically different statement of
accounts surfaced in court. Certainly, Philamgen's own statements made by its own
accountants over a long period of time and covering examinations made on four
different occasions must prevail over unconfirmed and unaudited statements made to
support a position made in the course of defending against a lawsuit.
It is not correct to say that Valenzuela should have presented its own records to
refute the unconfirmed and unaudited finding of the Banaria auditor. The records of
Philamgen itself are the best refutation against figures made as an afterthought in
the course of litigation. Moreover, Valenzuela asked for a meeting where the figures
would be reconciled. Philamgen refused to meet with him and, instead, terminated
the agency agreement.
After off-setting the amount of P744,159.80, beginning balance as of July 1977, by
way of credits representing the commission due from Delta and other accounts,
Valenzuela had overpaid Philamgen the amount of P530,040.37 as of November 30,
1978. Philamgen cannot later be heard to complain that it committed a mistake in its
computation. The alleged error may be given credence if committed only once. But as
earlier stated, the reconciliation of accounts was arrived at four (4) times on different
occasions where Philamgen was duly represented by its account executives. On the
basis of these admissions and representations, Philamgen cannot later on assume a
different posture and claim that it was mistaken in its representation with respect to
the correct beginning balance as of July 1977 amounting to P744,159.80. The
Banaria audit report commissioned by Philamgen is unreliable since its results are
admittedly based on an unconfirmed and unaudited beginning balance of
P1,758,185.43 as of August 20,1976.
As so aptly stated by the trial court in its decision:
Defendants also conducted an audit of accounts of plaintiff Arturo P. Valenzuela after
the controversy has started. In fact, after hearing plaintiffs have already rested their
case.
The results of said audit were presented in Court to show plaintiff Arturo P.
Valenzuela's accountability to defendant PHILAMGEN. However, the auditor, when
presented as witness in this case testified that the beginning balance of their audit
report was based on an unaudited amount of P1,758,185.43 (Exhibit 46-A) as of
August 20, 1976, which was unverified and merely supplied by the officers of
defendant PHILAMGEN.
showing that the average gross premium collection monthly of Valenzuela over a
period of four (4) months from December 1978 to February 1979, amounted to over
P300,000.00 from which he is entitled to a commission of P100,000.00 more or less
per month. Moreover, his annual sales production amounted to P2,500,000.00 from
where he was given 32.5% commissions. Under Article 2200 of the new Civil Code,
"indemnification for damages shall comprehend not only the value of the loss
suffered, but also that of the profits which the obligee failed to obtain."
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.

Even defendants very own Exhibit 38- A-3, showed that plaintiff Arturo P. ACCORDINGLY, the petition is GRANTED. The impugned decision of January 29, 1988
Valenzuela's balance as of 1978 amounted to only P3,865.59, not P826,128.46 as and resolution of April 27, 1988 of respondent court are hereby SET ASIDE. The
stated in defendant Bienvenido M. Aragon's letter dated December 20,1978 (Exhibit decision of the trial court dated January 23, 1986 in Civil Case No. 121126 is
14) or P1,528,698.40 as reflected in defendant's Exhibit 46 (Audit Report of Banaria REINSTATED with the MODIFICATIONS that the amount of FIVE HUNDRED TWENTY
dated December 24, 1980). ONE THOUSAND NINE HUNDRED SIXTY-FOUR AND 16/100 PESOS (P521,964.16)
representing the petitioners Delta commission shall earn only legal interests without
any adjustments under Article 1250 of the Civil Code and that the contractual
These glaring discrepancy (sic) in the accountability of plaintiff Arturo P. Valenzuela
relationship between Arturo P. Valenzuela and Philippine American General Insurance
to defendant PHILAMGEN only lends credence to the claim of plaintiff Arturo P.
Company shall be deemed terminated upon the satisfaction of the judgment as
Valenzuela that he has no outstanding account with defendant PHILAMGEN when the
modified.
latter, thru defendant Bienvenido M. Aragon, terminated the General Agency
Agreement entered into by plaintiff (Exhibit A) effective January 31, 1979 (see
Exhibits "2" and "2-A"). Plaintiff Arturo P. Valenzuela has shown that as of October SO ORDERED.
31, 1978, he has overpaid defendant PHILAMGEN in the amount of P53,040.37
(Exhibit "EEE", which computation was based on defendant PHILAMGEN's balance of
P744,159.80 furnished on several occasions to plaintiff Arturo P. Valenzuela by
defendant PHILAMGEN (Exhibits H-1, VV, VV-1, WW, WW-1 , YY , YY-2 , ZZ and , ZZ-
2).

Prescinding from the foregoing, and considering that the private respondents
terminated Valenzuela with evident mala fide it necessarily follows that the former
are liable in damages. Respondent Philamgen has been appropriating for itself all
these years the gross billings and income that it unceremoniously took away from the
petitioners. The preponderance of the authorities sustain the preposition that a
principal can be held liable for damages in cases of unjust termination of agency. In
Danon v. Brimo, 42 Phil. 133 [1921]), this Court ruled that where no time for the
continuance of the contract is fixed by its terms, either party is at liberty to terminate
it at will, subject only to the ordinary requirements of good faith. The right of the
principal to terminate his authority is absolute and unrestricted, except only that he
may not do so in bad faith.

The trial court in its decision awarded to Valenzuela the amount of Seventy Five
Thousand Pesos (P75,000,00) per month as compensatory damages from June 1980
until its decision becomes final and executory. This award is justified in the light of
the evidence extant on record (Exhibits "N", "N-10", "0", "0-1", "P" and "P-1")

G.R. No. L-41420 July 10, 1992
CMS LOGGING, INC., petitioner,
vs.
THE COURT OF APPEALS and D.R. AGUINALDO CORPORATION, respondents.
NOCON, J.:
This is a petition for review on certiorari from the decision dated July 31, 1975 of the
Court of Appeals in CA-G.R. No. 47763-R which affirmed in toto the decision of the
Court of First Instance of Manila, Branch VII, in Civil Case No. 56355 dismissing the
complaint filed by petitioner CMS Logging, Inc. (CMS, for brevity) against private
respondent D.R. Aguinaldo Corporation (DRACOR, for brevity) and ordering the
former to pay the latter attorney's fees in the amount of P1,000.00 and the costs.
The facts of the case are as follows: Petitioner CMS is a forest concessionaire
engaged in the logging business, while private respondent DRACOR is engaged in the
business of exporting and selling logs and lumber. On August 28, 1957, CMS and
DRACOR entered into a contract of agency 1 whereby the former appointed the latter
as its exclusive export and sales agent for all logs that the former may produce, for a
period of five (5) years. The pertinent portions of the agreement, which was drawn
up by DRACOR, 2 are as follows:
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 five (5) years commencing upon the execution of
the agreement and upon the terms and conditions hereinafter provided and DRACOR
hereby accepts such appointment;
xxx xxx xxx
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 anyway [sic] be liable or responsible for
any delay, default or failure of the vessel or vessels to comply with the schedules
agreed upon;
xxx xxx xxx
9. It is expressly agreed by the parties hereto that DRACOR shall receive five (5%)
per cent 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;
By virtue of the aforesaid agreement, CMS was able to sell through DRACOR a total
of 77,264,672 board feet of logs in Japan, from September 20, 1957 to April 4, 1962.
About six months prior to the expiration of the agreement, while on a trip to Tokyo,
Japan, 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. (Shinko for brevity) 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. Under this arrangement, Shinko was
able to collect a total of U.S. $77,264.67. 3
CMS claimed that this commission paid to Shinko was in violation of the agreement
and that it (CMS) is 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 is no longer entitled to the additional commission paid to Shinko as
this tantamount to DRACOR receiving double compensation for the services it
rendered.
After this discovery, CMS sold and shipped logs valued at U.S. $739,321.13 or
P2,883,351.90, 4 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, while DRACOR counterclaimed for its commission, amounting to
P144,167.59, from the sales made by CMS of logs to Japanese firms. In its reply,
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. 5 Thus, as its
counterclaim to DRACOR's counterclaim, CMS demanded DRACOR 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, 6 thus
impliedly admitting that it retained the amount alleged by CMS.
In dismissing the complaint, the trial court ruled that 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, though the trial court stated that "Shinko was able to collect the
total amount of $77,264.67 US Dollars (Exhs. M and M-1)." 7 The counterclaim was
likewise dismissed, as it was shown that DRACOR had waived its rights to the balance
of its commission in a letter dated February 2, 1963 to Atty. Carlos Moran Sison,
president of CMS. 8 From said decision, only CMS appealed to the Court of Appeals.
The Court of Appeals, in a 3 to 2 decision, 9 affirmed the dismissal of the complaint
since "[t]he trial court could not have made a categorical finding that Shinko collected
commissions from the buyers of Sison's logs in Japan, and could not have held that
Sison is entitled to recover from Dracor the amount collected by Shinko as
commissions, plaintiff-appellant having failed to prove by competent evidence its
claims." 10
Moreover, the appellate court held:
There is reason to believe that Shinko Trading Co. Ltd., was paid by defendant-
appellee out of its own commission of 5%, as indicated in the letter of its president to
the president of Sison, dated February 2, 1963 (Exhibit "N"), and in the Agreement
between Aguinaldo Development Corporation (ADECOR) and Shinko Trading Co., Ltd.
(Exhibit "9"). Daniel R. Aguinaldo stated in his said letter:
. . . , 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. 11
Aggrieved, CMS appealed to this Court by way of a petition for review on certiorari,
alleging (1) that the Court of Appeals erred in not making a complete findings of fact;
(2) that the testimony of Atty. Teodoro R. 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; (3) that
the statement of DRACOR's chief legal counsel in his memorandum dated May 31,
1965, Exhibit "K", is an admission that Shinko was able to collect the commission in
question; (4) that the fact that Shinko received the questioned commissions is
deemed admitted by DRACOR by its silence under Section 23, Rule 130 of the Rules
of Court when it failed to reply to Atty. Carlos Moran Sison's letter dated February 6,
1962; (5) that DRACOR is not entitled to its 5% commission arising from the direct
sales made by CMS to buyers in Japan; and (6) that DRACOR is guilty of fraud and
bad faith in its dealings with CMS.
With regard to CMS's arguments concerning whether or not Shinko received the
commission in question, We find the same unmeritorious.
To begin with, these arguments question the findings of fact made by the Court of
Appeals, which are final and conclusive and can not be reviewed on appeal to the
Supreme Court. 12
Moreover, while it is true that the evidence adduced establishes the fact that Shinko
is DRACOR's agent or liaison in Japan, 13 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 logs to various Japanese firms.
The fact that Shinko received the commissions in question was not established by the
testimony of Atty. Teodoro R. Dominguez to the effect that Shinko's president and
director told him that Shinko received a commission of U.S. $1.00 for every 1,000
board feet of logs sold, since the same is hearsay. Similarly, the letter of Mr. K.
Shibata of Toyo Menka Kaisha, Ltd. 14 is also hearsay since Mr. Shibata was not
presented to testify on his letter.
CMS's other evidence have little or no probative value at all. The statements made in
the memorandum of Atty. Simplicio R. Ciocon to DRACOR dated May 31, 1965, 15 the
letter dated February 2, 1963 of Daniel
R. Aguinaldo, 16 president of DRACOR, and the reply-letter dated January 9, 1964 17
by DRACOR's counsel Atty. V. E. Del Rosario to CMS's demand letter dated
September 25, 1963 can not be categorized as admissions that Shinko did receive the
commissions in question.
The alleged admission made by Atty. Ciocon, to wit
Furthermore, as per our records, 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
can not be considered as such since the statement was made in the context of
questioning CMS's tally of logs delivered to various Japanese firms.
Similarly, the statement of Daniel R. Aguinaldo, to wit
. . . Knowing as we do that Toyo Menka is a large and reputable company, it is
obvious that they paid Shinko for certain services which Shinko must have
satisfactorily performed for them in Japan otherwise they would not have paid Shinko
and that of Atty. V. E. Del Rosario,
. . . It does not seem proper, therefore, for CMS Logging, Inc., as principal, to
concern itself with, much less question, the right of Shinko Trading Co., Ltd. with
which our client debt directly, to whatever benefits it might have derived form the
ultimate consumer/buyer of these logs, Toyo Menka Kaisha, Ltd. There appears to be
no justification for your client's contention that these benefits, whether they can be
considered as commissions paid by Toyo Menka Kaisha to Shinko Trading, are to be
regarded part of the gross sales.
can not be considered admissions that Shinko received the questioned commissions
since neither statements declared categorically that Shinko did in fact receive the
commissions and that these arose from the sale of CMS's logs.
As correctly stated by the appellate court:
It is a rule that "a statement is not competent as an admission where it does not,
under a reasonable construction, appear to admit or acknowledge the fact which is
sought to be proved by it". An admission or declaration to be competent must have
been expressed in definite, certain and unequivocal language (Bank of the Philippine
Islands vs. Fidelity & Surety Co., 51 Phil. 57, 64). 18
CMS's contention that DRACOR had admitted by its silence the allegation that Shinko
received the commissions in question when it failed to respond to Atty. Carlos Moran
Sison's letter dated February 6, 1963, is not supported by the evidence. DRACOR did
in fact reply to the letter of Atty. Sison, through the letter dated March 5, 1963 of
F.A. Novenario, 19 which stated:
This is to acknowledge receipt of your letter dated February 6, 1963, and addressed
to Mr. D. R. Aguinaldo, who is at present out of the country.
xxx xxx xxx
We have no record or knowledge of any such payment of commission made by Toyo
Menka to Shinko. If the payment was made by Toyo Menka to Shinko, as stated in
your letter, we knew nothing about it and had nothing to do with it.
The finding of fact made by the trial court, i.e., that "Shinko was able to collect the
total amount of $77,264.67 US Dollars," can not be given weight since this was based
on the summary prepared by CMS itself, Exhibits "M" and "M-1".
entrusted to the agent, dealing directly with third persons.
In New Manila Lumber Company, Inc. vs. Republic of the Philippines, 24 this Court
ruled that 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.
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, since damages are generally not
awarded to the agent for the revocation of the agency, and the case at bar is not one
falling under the exception mentioned, which is to evade the payment of the agent's
commission.
Regarding CMS's contention that the Court of Appeals erred in not finding that
DRACOR had committed acts of fraud and bad faith, We find the same unmeritorious.
Like the contention involving Shinko and the questioned commissions, the findings of
the Court of Appeals on the matter were based on its appreciation of the evidence,
and these findings are binding on this Court.

Moreover, even if it was shown that Shinko did in fact receive the commissions in
In fine, We affirm the ruling of the Court of Appeals that there is no evidence to
question, CMS is not entitled thereto since these were apparently paid by the buyers
support CMS's contention that Shinko earned a separate commission of U.S. $1.00 for
to Shinko for arranging the sale. This is therefore not part of the gross sales of CMS's
every 1,000 board feet of logs from the buyer of CMS's logs. However, We reverse
logs.
the ruling of the Court of Appeals with regard to DRACOR's right to retain the amount
of P101,536.77 as part of its commission from the sale of logs by CMS, and hold that
However, We find merit in CMS's contention that the appellate court erred in holding DRACOR has no right to its commission. Consequently, DRACOR is hereby ordered to
that DRACOR was entitled to its commission from the sales made by CMS to remit to CMS the amount of P101,536.77.
Japanese firms.
WHEREFORE, the decision appealed from is hereby MODIFIED as stated in the
The principal may revoke a contract of agency at will, and such revocation may be preceding paragraph. Costs de officio.
express, or implied, 20 and may be availed of even if the period fixed in the contract
of agency as not yet expired. 21 As the principal has this absolute right to revoke the
SO ORDERED.
agency, the agent can not object thereto; neither may he claim damages arising from
such revocation, 22 unless it is shown that such was done in order to evade the
payment of agent's commission. 23

In the case at bar, CMS appointed DRACOR as its agent for the sale of its logs to
Japanese firms. Yet, during the existence of the contract of agency, DRACOR
admitted that CMS sold its logs directly to several Japanese firms. This act constituted
an implied revocation of the contract of agency under Article 1924 of the Civil Code,
which provides:

Art. 1924 The agency is revoked if the principal directly manages the business

G.R. No. 156015. August 11, 2005
REPUBLIC OF THE PHILIPPINES, represented by LT. GEN. JOSE M.
CALIMLIM, in his capacity as former Chief of the Intelligence Service,
Armed Forces of the Philippines (ISAFP), and former Commanding General,
Presidential Security Group (PSG), and MAJ. DAVID B. DICIANO, in his
capacity as an Officer of ISAFP and former member of the PSG, Petitioners,
vs.
HON. VICTORINO EVANGELISTA, in his capacity as Presiding Judge,
Regional Trial Court, Branch 223, Quezon City, and DANTE LEGASPI,
represented by his attorney-in-fact, Paul Gutierrez, Respondent.
DECISION
PUNO, J.:
The case at bar stems from a complaint for damages, with prayer for the issuance of
a writ of preliminary injunction, filed by private respondent Dante Legaspi, through
his attorney-in-fact Paul Gutierrez, against petitioners Gen. Jose M. Calimlim, Ciriaco
Reyes and Maj. David Diciano before the Regional Trial Court (RTC) of Quezon City.1
The Complaint alleged that private respondent Legaspi is the owner of a land located
in Bigte, Norzagaray, Bulacan. In November 1999, petitioner Calimlim, representing
the Republic of the Philippines, and as then head of the Intelligence Service of the
Armed Forces of the Philippines and the Presidential Security Group, entered into a
Memorandum of Agreement (MOA) with one Ciriaco Reyes. The MOA granted Reyes
a permit to hunt for treasure in a land in Bigte, Norzagaray, Bulacan. Petitioner
Diciano signed the MOA as a witness.2 It was further alleged that thereafter, Reyes,
together with petitioners, started, digging, tunneling and blasting works on the said
land of Legaspi. The complaint also alleged that petitioner Calimlim assigned about
80 military personnel to guard the area and encamp thereon to intimidate Legaspi
and other occupants of the area from going near the subject land.
On February 15, 2000, Legaspi executed a special power of attorney (SPA) appointing
his nephew, private respondent Gutierrez, as his attorney-in-fact. Gutierrez was given
the power to deal with the treasure hunting activities on Legaspis land and to file
charges against those who may enter it without the latters authority. 3 Legaspi agreed
to give Gutierrez 40% of the treasure that may be found in the land.
On February 29, 2000, Gutierrez filed a case for damages and injunction against
petitioners for illegally entering Legaspis land. He hired the legal services of Atty.
Homobono Adaza. Their contract provided that as legal fees, Atty. Adaza shall be
entitled to 30% of Legaspis share in whatever treasure may be found in the land. In
addition, Gutierrez agreed to pay Atty. Adaza 5,000.00 as appearance fee per court
hearing and defray all expenses for the cost of the litigation. 4 Upon the filing of the
complaint, then Executive Judge Perlita J. Tria Tirona issued a 72-hour temporary
restraining order (TRO) against petitioners.
The case5 was subsequently raffled to the RTC of Quezon City, Branch 223, then
presided by public respondent Judge Victorino P. Evangelista. On March 2, 2000,
respondent judge issued another 72-hour TRO and a summary hearing for its
extension was set on March 7, 2000.
On March 14, 2000, petitioners filed a Motion to Dismiss6 contending: first, there is no
real party-in-interest as the SPA of Gutierrez to bring the suit was already revoked by
Legaspi on March 7, 2000, as evidenced by a Deed of Revocation,7 and, second,
Gutierrez failed to establish that the alleged armed men guarding the area were
acting on orders of petitioners. On March 17, 2000, petitioners also filed a Motion for
Inhibition8 of the respondent judge on the ground of alleged partiality in favor of
private respondent.
On March 23, 2000, the trial court granted private respondents application for a writ
of preliminary injunction on the following grounds: (1) the diggings and blastings
appear to have been made on the land of Legaspi, hence, there is an urgent need to
maintain the status quo to prevent serious damage to Legaspis land; and, (2) the
SPA granted to Gutierrez continues to be valid.9 The trial court ordered thus:
WHEREFORE, in view of all the foregoing, the Court hereby resolves to GRANT
plaintiffs application for a writ of preliminary injunction. Upon plaintiffs filing of an
injunction bond in the amount of ONE HUNDRED THOUSAND PESOS (100,000.00),
let a Writ of Preliminary Injunction issue enjoining the defendants as well as their
associates, agents or representatives from continuing to occupy and encamp on the
land of the plaintiff LEGASPI as well as the vicinity thereof; from digging, tunneling
and blasting the said land of plaintiff LEGASPI; from removing whatever treasure may
be found on the said land; from preventing and threatening the plaintiffs and their
representatives from entering the said land and performing acts of ownership; from
threatening the plaintiffs and their representatives as well as plaintiffs lawyer.
On even date, the trial court issued another Order10 denying petitioners motion to
dismiss and requiring petitioners to answer the complaint. On April 4, 2000, it
likewise denied petitioners motion for inhibition.11
On appeal, the Court of Appeals affirmed the decision of the trial court.12
Hence this petition, with the following assigned errors:
I
WHETHER THE CONTRACT OF AGENCY BETWEEN LEGASPI AND PRIVATE
RESPONDENT GUTIERREZ HAS BEEN EFFECTIVELY REVOKED BY LEGASPI.
II
WHETHER THE COMPLAINT AGAINST PETITIONERS SHOULD BE DISMISSED.
III
WHETHER RESPONDENT JUDGE OUGHT TO HAVE INHIBITED HIMSELF FROM
FURTHER PROCEEDING WITH THE CASE.
We find no merit in the petition.
On the first issue, petitioners claim that the special power of attorney of Gutierrez to
represent Legaspi has already been revoked by the latter. Private respondent
Gutierrez, however, contends that the unilateral revocation is invalid as his agency is
coupled with interest.
We agree with private respondent.
Art. 1868 of the Civil Code provides that by the contract of agency, an agent binds
himself to render some service or do something in representation or on behalf of
another, known as the principal, with the consent or authority of the latter.13
A contract of agency is generally revocable as it is a personal contract of
representation based on trust and confidence reposed by the principal on his agent.
As the power of the agent to act depends on the will and license of the principal he
represents, the power of the agent ceases when the will or permission is withdrawn
by the principal. Thus, generally, the agency may be revoked by the principal at
will.14
However, an exception to the revocability of a contract of agency is when it is
coupled with interest, i.e., if a bilateral contract depends upon the agency.15 The
reason for its irrevocability is because the agency becomes part of another obligation
or agreement. It is not solely the rights of the principal but also that of the agent and
third persons which are affected. Hence, the law provides that in such cases, the
agency cannot be revoked at the sole will of the principal.
In the case at bar, we agree with the finding of the trial and appellate courts that the
agency granted by Legaspi to Gutierrez is coupled with interest as a bilateral contract
depends on it. It is clear from the records that Gutierrez was given by Legaspi,
inter alia, the power to manage the treasure hunting activities in the
subject land; to file any case against anyone who enters the land without
authority from Legaspi; to engage the services of lawyers to carry out the
agency; and, to dig for any treasure within the land and enter into
agreements relative thereto. It was likewise agreed upon that Gutierrez shall
be entitled to 40% of whatever treasure may be found in the land. Pursuant
to this authority and to protect Legaspis land from the alleged illegal entry of
petitioners, agent Gutierrez hired the services of Atty. Adaza to prosecute the case
for damages and injunction against petitioners. As payment for legal services,
Gutierrez agreed to assign to Atty. Adaza 30% of Legaspis share in
whatever treasure may be recovered in the subject land. It is clear that the
treasure that may be found in the land is the subject matter of the agency; that
under the SPA, Gutierrez can enter into contract for the legal services of Atty. Adaza;
and, thus Gutierrez and Atty. Adaza have an interest in the subject matter of the
agency, i.e., in the treasures that may be found in the land. This bilateral contract
depends on the agency and thus renders it as one coupled with interest, irrevocable
at the sole will of the principal Legaspi.16 When an agency is constituted as a clause
in a bilateral contract, that is, when the agency is inserted in another agreement, the
agency ceases to be revocable at the pleasure of the principal as the agency shall
now follow the condition of the bilateral agreement.17 Consequently, the Deed of
Revocation executed by Legaspi has no effect. The authority of Gutierrez to file and
continue with the prosecution of the case at bar is unaffected.
On the second issue, we hold that the issuance of the writ of preliminary injunction is
justified. A writ of preliminary injunction is an ancilliary or preventive remedy that is
resorted to by a litigant to protect or preserve his rights or interests and for no other
purpose during the pendency of the principal action.18 It is issued by the court to
prevent threatened or continuous irremediable injury to the applicant before his claim
can be thoroughly studied and adjudicated.19 Its aim is to preserve the status quo
ante until the merits of the case can be heard fully, upon the applicants showing of
two important conditions, viz.: (1) the right to be protected prima facie exists; and,
(2) the acts sought to be enjoined are violative of that right.20
Section 3, Rule 58 of the 1997 Rules of Civil Procedure provides that a writ of
preliminary injunction may be issued when it is established:
(a) that the applicant is entitled to the relief demanded, the whole or part of such
relief consists in restraining the commission or continuance of the act or acts
complained of, or in requiring the performance of an act or acts, either for a limited
period or perpetually;
(b) that the commission, continuance or non-performance of the act or acts
complained of during the litigation would probably work injustice to the applicant; or
(c) that a party, court, agency or a person is doing, threatening, or is attempting to
do, or is procuring or suffering to be done, some act or acts probably in violation of
the rights of the applicant respecting the subject of the action or proceeding, and
tending to render the judgment ineffectual.
It is crystal clear that at the hearing for the issuance of a writ of preliminary
injunction, mere prima facie evidence is needed to establish the applicants rights or
interests in the subject matter of the main action.21 It is not required that the
applicant should conclusively show that there was a violation of his rights as this
issue will still be fully litigated in the main case.22 Thus, an applicant for a writ is
required only to show that he has an ostensible right to the final relief is directed to proceed with dispatch in hearing the main case for damages. No
prayed for in his complaint. 23 pronouncement as to costs.

In the case at bar, we find that respondent judge had sufficient basis to issue the writ SO ORDERED
of preliminary injunction. It was established, prima facie, that Legaspi has a right
to peaceful possession of his land, pendente lite. Legaspi had title to the
subject land. It was likewise established that the diggings were conducted by
petitioners in the enclosed area of Legaspis land. Whether the land fenced by
Gutierrez and claimed to be included in the land of Legaspi covered an area
beyond that which is included in the title of Legaspi is a factual issue still
subject to litigation and proof by the parties in the main case for damages.
It was necessary for the trial court to issue the writ of preliminary injunction during
the pendency of the main case in order to preserve the rights and interests of private
respondents Legaspi and Gutierrez.

On the third issue, petitioners charge that the respondent judge lacked the neutrality
of an impartial judge. They fault the respondent judge for not giving credence to the
testimony of their surveyor that the diggings were conducted outside the land of
Legaspi. They also claim that respondent judges rulings on objections raised by the
parties were biased against them.

We have carefully examined the records and we find no sufficient basis to hold that
respondent judge should have recused himself from hearing the case. There is no
discernible pattern of bias on the rulings of the respondent judge. Bias and partiality
can never be presumed. Bare allegations of partiality will not suffice in an absence of
a clear showing that will overcome the presumption that the judge dispensed justice
without fear or favor.24 It bears to stress again that a judges appreciation or
misappreciation of the sufficiency of evidence adduced by the parties, or the
correctness of a judges orders or rulings on the objections of counsels during the
hearing, without proof of malice on the part of respondent judge, is not sufficient to
show bias or partiality. As we held in the case of Webb vs. People,25 the adverse
and erroneous rulings of a judge on the various motions of a party do not sufficiently
prove bias and prejudice to disqualify him. To be disqualifying, it must be shown that
the bias and prejudice stemmed from an extrajudicial source and result in an opinion
on the merits on some basis other than what the judge learned from his participation
in the case. Opinions formed in the course of judicial proceedings, although
erroneous, as long as based on the evidence adduced, do not prove bias or prejudice.
We also emphasized that repeated rulings against a litigant, no matter how
erroneously, vigorously and consistently expressed, do not amount to bias and
prejudice which can be a bases for the disqualification of a judge.

Finally, the inhibition of respondent judge in hearing the case for damages has
become moot and academic in view of the latters death during the pendency of the
case. The main case for damages shall now be heard and tried before another judge.

IN VIEW WHEREOF, the impugned Orders of the trial court in Civil Case No. Q-00-
40115, dated March 23 and April 4, 2000, are AFFIRMED. The presiding judge of the
Regional Trial Court of Quezon City to whom Civil Case No. Q-00-40115 was assigned