LIM v.

SABAN

G.R. No. 163720; December 16, 2004

Ponente: J. Tinga

FACTS:

Under an Agency Agreement, Ybañez 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 Saban's
commission for the sale.

Through Saban's efforts, Ybañez 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). 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 P113,257 for payment of taxes due on the
transaction as well as P50,000.00 as broker's commission. Lim also issued in the name of Saban four
postdated checks in the aggregate amount of P236,743.00.

Subsequently, Ybañez sent a letter dated June 10, 1994 addressed to Lim. In the letter Ybañez asked Lim
to cancel all the checks issued by her in Saban's favor and to "extend another partial payment" for the
lot in his (Ybañez's) favor.

After the four checks in his favor were dishonored upon presentment, Saban filed a complaint for
collection of sum of money and damages against Ybañez and Lim

Saban alleged that Ybañez 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 Ybañez and because he was not a licensed real
estate broker. Ybañez was able to convince Lim to cancel all four checks.

In his Answer, Ybañez 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.
ISSUE:

Whether Saban is entitled to receive his commission from the sale

HELD:

Yes, Saban is entitled to receive his commission from the sale.

The Supreme Court held that 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 Ybañez which
expressly states that Saban would be entitled to any excess in the purchase price after deducting the
P200,000.00 due to Ybañez and the transfer taxes and other incidental expenses of the sale.

Moreover, the Court has already decided in earlier cases that 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 broker's efforts.

G.R. No. 205657 INTERNATIONAL EXCHANGE BANK NOW UNION BANK OF THE PHILIPPINES vs SPOUSES
JEROME AND QUINNIE BRIONES, AND JOHN DOE

Facts: Spouses Briones took out a loan which was executed though a promissory note which appointed
the bank as attorney-in-fact of the spouse with the obligation among others to file an insurance claim in
case of loss or damage to the vehicle of the car.

The vehicle was subsequently carnapped. iBank instead of filing for insurance filed in behalf of Spouses
it collected from former. Now respondents was forced to claim for insurance.

Issues:

1) Whether an agency relationship existed between the parties.

2)Whether the agency relationship was revoked or terminated when Spouses Briones themselves
claimed for insurance.

3) Whether petitioner is entitled to the return of the mortgaged vehicle or, in the alternative, payment
of the outstanding balance of the loan taken out for the mortgaged vehicle.

Rulings:

1) The Supreme Court ruled in affirmative. All the elements of agency exist in this case. Under the
promissory note with chattel mortgage, Spouses Briones appointed iBank as their attorney-in-fact,
authorizing it to file a claim with the insurance company if the mortgaged vehicle was lost or damaged.
Petitioner was also authorized to collect the insurance proceeds as the beneficiary of the insurance
policy. Sections 6 and 22 of the promissory note state:

The MORTGAGOR agrees that he will cause the mortgaged property/ies to be insured against loss or
damage by accident, theft and fire . . . with an insurance company/ies acceptable to the MORTGAGEE …
; that he will make all loss, if any, under such policy/ies payable to the MORTGAGEE or its assigns …
[w]ith the proceeds thereon in case of loss, payable to the said MORTGAGEE or its assigns … shall be
added to the principal indebtedness hereby secured … [M]ortgagor hereby further constitutes the
MORTGAGEE to be its/his/her Attorney-in-Fact for the purpose of filing claims with insurance company
including but not limited to apply, sign, follow-up and secure any documents, deeds . . . that may be
required by the insurance company to process the insurance claim …

In case of loss or damage, the MORTGAGOR hereby irrevocably appoints the MORTGAGEE or its assigns
as his attorney-in-fact with full power and authority to file, follow-up, prosecute, compromise or settle
insurance claims; to sign, execute and deliver the corresponding papers, receipt and documents to the
insurance company as may be necessary to prove the claim, and to collect from the latter the proceeds
of insurance to the extent of its interest. (Emphasis supplied, citation omitted)

Article 1370 of the Civil Code is categorical that when “the terms of a contract are clear and leave no
doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.”

The determination of agency is ultimately factual in nature and this Court sees no reason to reverse the
findings of the Regional Trial Court and the Court of Appeals. They both found the existence of an
agency relationship between the Spouses Briones and iBank, based on the clear wording of Sections 6
and 22 of the promissory note with chattel mortgage, which petitioner prepared and respondents
signed.
2) The Court ruled that the agency was not revoked. In the promissory note with chattel mortgage, the
Spouses Briones authorized petitioner to claim, collect, and apply· the insurance proceeds towards the
full satisfaction of their loan if the mortgaged vehicle were lost or damaged. Clearly, a bilateral contract
existed between the parties, making the agency irrevocable. Petitioner was also aware of the bilateral
contract; thus, it included the designation of an irrevocable agency in the promissory note with chattel
mortgage that it prepared for the Spouses Briones to sign.

3) The Court ruled that it was as the agent, petitioner was mandated to look after the interests of the
Spouses Briones. However, instead of going after the insurance proceeds, as expected of it as the agent,
petitioner opted to claim the full amount from the Spouses Briones, disregard the established principal-
agency relationship, and put its own interests before those of its principal.

The facts show that the insurance policy was valid when the vehicle was lost, and that the insurance
claim was only denied because of the belated filing. Having been negligent in its duties as the duly
constituted agent, petitioner must be held liable for the damages suffered by the Spouses Briones
because of non-performance of its obligation as the agent, and because it prioritized its interests over
that of its principal.

Furthermore, petitioner’s bad faith was evident when it advised the Spouses Briones to continue paying
three (3) monthly installments after the loss, purportedly to show their good faith. A principal and an
agent enjoy a fiduciary relationship marked with trust and confidence, therefore, the agent has the duty
“to act in good faith [to advance] the interests of [its] principal.”

If petitioner was indeed acting in good faith, it could have timely informed the Spouses Briones that it
was terminating the agency and its right to file an insurance claim, and could have advised them to
facilitate the insurance proceeds themselves. Petitioner’s failure to do so only compounds its negligence
and underscores its bad faith. Thus, it will be inequitable now to compel the Spouses Briones to pay the
full amount of the lost property.

SEVILLA v. CA

G.R. Nos. L-41182-3; April 15, 1988

Ponente: J. Sarmiento

FACTS:
On Oct. 19, 1960, the Tourist World Service, Inc. leased an office at Mabini St., Manila for the former's
use as a branch office. When the branch office was opened, the same was run by the herein appellant
Lina O. Sevilla payable to Tourist World Service Inc. by any airline for any fare brought in on the efforts
of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to be withheld by the Tourist World Service,
Inc.

On or about November 24, 1961, the Tourist World Service, Inc. appears to have been informed that
Lina Sevilla was connected with a rival firm, the Philippine Travel Bureau, and, since the branch office
was anyhow losing, the Tourist World Service considered closing down its office.

This was firmed up by two resolutions of the board of directors of Tourist World Service, Inc. dated Dec.
2, 1961, the first abolishing the office of the manager and vice-president of the Tourist World Service,
Inc., Ermita Branch, and the second, authorizing the corporate secretary to receive the properties of the
Tourist World Service then located at the said branch office. It further appears that on Jan. 3, 1962, the
contract with the appellees for the use of the Branch Office premises was terminated and while the
effectivity thereof was Jan. 31, 1962, the appellees no longer used it. As a matter of fact appellants used
it since Nov. 1961. Because of this, and to comply with the mandate of the Tourist World Service, the
corporate secretary Gabino Canilao went over to the branch office, and, finding the premises locked,
and, being unable to contact Lina Sevilla, he padlocked the premises on June 4, 1962 to protect the
interests of the Tourist World Service.

When neither the appellant Lina Sevilla nor any of her employees could enter the locked premises, a
complaint was filed by the herein appellants against the appellees with a prayer for the issuance of
mandatory preliminary injunction. Both appellees answered with counterclaims. For apparent lack of
interest of the parties therein, the trial court ordered the dismissal of the case without prejudice.

ISSUE:

Whether the act of Tourist World Service in abolishing its Ermita branch proper

HELD:

No, the act of Tourist World Service in abolishing its Ermita branch is not proper.
The Supreme Court held that when the petitioner, Lina Sevilla, agreed to manage Tourist World Service,
Inc.'s Ermita office, she must have done so pursuant to a contract of agency.

In the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist
World Service, Inc. As compensation, she received 4% of the proceeds in the concept of commissions.
And as we said, Sevilla herself, based on her letter of November 28, 1961, presumed her principal's
authority as owner of the business undertaking. We are convinced, considering the circumstances and
from the respondent Court's recital of facts, that the parties had contemplated a principal-agent
relationship, rather than a joint management or a partnership.

But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible
with the intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an
interest, the agency having been created for the mutual interest of the agent and the principal.
Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to damages.

Valenzuela v CA G.R. No. 83122 October 19, 1990

J. Gutierrez Jr.

Facts:

Petitioner Valenzuela, a General Agent respondent Philamgen, was authorized to solicit and sell all kinds
of non-life insurance. He had a 32.5% commission rate. From 1973 to 1975, Valenzuela solicited marine
insurance from Delta Motors, Inc. 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. Premium payments amounting to P1,946,886.00 were paid directly to
Philamgen. Valenzuela’s commission amounted to P632,737.00.

Philamgen wanted to cut Valenzuela’s commission to 50% of the amount. He declined.

When Philamgen offered again, Valenzuela firmly reiterated his objection.

Philamgen took drastic action against Valenzuela. They: reversed the commission due him, threatened
the cancellation of policies issued by his agency, and started to leak out news that Valenzuela has a
substantial debt with Philamgen. His agency contract was terminated.

The petitioners sought relief by filing the complaint against the private respondents. The trial court
found that the principal cause of the termination as agent was his refusal to share his Delta commission.

The court considered these acts as harassment and ordered the company to pay for the resulting
damage in the value of the commission. They also ordered the company to pay 350,000 in moral
damages.
The company appealed. The CA ordered Valenzuela to pay the entire amount of the commission. Hence,
this appeal by Valenzuela.

Issue:

1. WON the agency contract is coupled with interest on the part of agent Valenzuela.

2. Whether or not Philamgen can be held liable for damages due to the termination of the General
Agency Agreement it entered into with the petitioners.

3. WON Valenzuela should pay the premiums he collected.

Held: Yes. Yes. Petition granted

Ratio:

1. 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.

The Supreme Court accorded great weight on the trial court’s factual findings and found the cause of the
conflict to be Valenzuela’s refusal to share the commission. 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.

Philamgen proposed reducing the petitioners' commissions by 50% thus giving them an agent's
commission of 16.25%. The company insisted on the reduction scheme. The company pressured the
agents to share the income with the threat to terminate the agency. The petitioners were also told that
the Delta commissions would not be credited to their account. This continued until the agency was
terminated.

Records also show that the agency is one "coupled with an interest," and, therefore, should not be
freely revocable at the unilateral will of the company.

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. The company appropriated the entire
insurance business of Valenzuela. 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 procured, but also
Philamgen’s stipulation liability against him for unpaid premiums. 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 also for the mutual interest of the principal and
the agent. The principal may not defeat the agent's right to indemnification by a termination of the
contract of agency. Also, 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.

2. Hence, if a principal acts in bad faith and with abuse of right in terminating the agency, then he is
liable in damages. The Civil Code says 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, Civil Code).

3. As to the issue of whether or not the petitioners are liable to Philamgen for the unpaid and
uncollected premiums which the appellate court ordered Valenzuela to pay, the respondent court erred
in holding Valenzuela liable.

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.

Philippine Phoenix- 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.

Section 776 of the insurance Code says that no contract of insurance by an insurance company is valid
and binding unless and until the premium has been paid, notwithstanding any agreement to the
contrary

Since 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. Philam can’t
demand from or sue Valenzuela for the unpaid premiums.

The court held that the CA’s giving credence to an audit that showed Valenzuela owing Philamgen
P1,528,698.40 was unwarranted. Valenzuela had no unpaid account with Philamgen. But, facts show
that the beginning balance of Valenzuela's account with Philamgen amounted to P744,159.80. 4
statements of account were sent to the agent.

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.

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, 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 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.

Philamgen has been appropriating for itself all these years the gross billings and income that it took
away from the petitioners. A principal can be held liable for damages in cases of unjust termination of
agency. 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 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.