3.
ORIENT AIR SERVICES v CA  The TC ruled in favor of the Orient Air and ordered American Air to
GR NO. 76931 & 76933
MAY 29, 1991
By: CHESKA DOMINGUEZ
Topic: AGENCY
GR NO. 76931
Petitioners: ORIENT AIR SERVICES & HOTEL REPRESENTATIVES
Respondents: COURT OF APPEALS and AMERICAN AIRLINES INCORPORATED
GR NO. 76933
Petitioners: AMERICAN AIRLINES, INCORPORATED
Respondents: COURT OF APPEALS and ORIENT AIR SERVICES & HOTEL
REPRESENTATIVES, INCORPORATED,
Ponente: PADILLA, J.
RECIT-READY/SUMMARY: American Air is the principal, while Orient Air is the
agent. The latter is entitled to sales agency commission, and overriding
commission. At one point, Orient Air failed to remit its net proceeds to American
Air so the latter terminated their contract and filed a case before the court. The
Orient Air argued that it retained the said proceeds to compensate for the
overriding commission which American Air owes them. The TC favored Orient
Air and ruled to reinstate it as American Air's agent. The IAC affirmed this
decision but modified the monetary awards. Both parties appealed. The SC
sustained the decision of the IAC as to the monetary awards but ruled out the
reinstatement of the Orient Air, since the court cannot restore an agency
without the consent of the principal.
DOCTRINE: The contract of agency can only be effected with the consent of the
principal and not the order of the court.
FACTS:
 American Air and Orient Air entered into a General Sales Agency
Agreement whereby the former authorized the latter to act as its
exclusive general sales agent within the Philippines for the sale of air
passenger transport. Under the same agreement, the latter is entitled to
sales agency commission, and overriding commission.
 The Orient Air failed to remit the net proceeds of the sales so the
American Air terminated their agreement and filed a suit against the
former.
 The Orient Air argued that the American Air still owes them balance in
unpaid overriding commissions so it refused to remit the net proceeds of
its sales.
reinstate Orient Air as its general sales agent. The IAC affirmed this
decision but modified the monetary awards. Both parties appealed to the
SC.
ISSUE:
(1) WON the court can reinstate the contract of agency between the American Air
and Orient Air?
HELD/RATIO:
(1) NO. Agency can only be effected with the consent of the principal and not the
order of the court.
 The respondent court compelling American Air to extend its personality
to the Orient Air is violative of the principles and essence of agency.
 As defined by NCC 1868, "By the contract of agency a person binds
himself to render some service or to do something in representation or
on behalf of another, with the consent or authority of the latter."
 In this case, the courts cannot reinstate the General Sales Agency
Agreement without the consent of American Air.
 The Agreement itself between the parties states that "Either party may
terminate the Agreement without cause by giving the other 30 days'
notice by letter, telegram or cable."
 The SC ruled out the portion of IAC's decision to reinstate Orient Air as
American Air's agent.
OTHER ISSUE: (But not actually the topic under NCC 1868)
(2) WON the Orient Air is entitled to the overriding commission? YES.
 The Agreement entitles it to the 3% overriding commission based on
total revenue, or as referred to by the parties, "total flown revenue," and
not merely that derived from ticketed sales undertaken by Orient Air.
 Orient Air was clearly justified in retaining and refusing to remit the sums
claimed by American Air.