INTERNATIONAL EXCHANGE BANK NOW UNION BANK OF THE PHILIPPINES, Petitioner, 

vs. 
SPOUSES JEROME AND QUINNIE BRIONES, AND JOHN DOE, Respondents.
 
GR No. 205657
March 29, 2017
 
FACTS:

 ON JULY 2, 2003, Spouses Jerome and Quinnie Briones took out a loan of P3,789,216 from iBank
to purchase a BMW Z4 Roadster.
 The Spouses Briones executed a promissory note with chattel mortgage that required them to take
out an insurance policy on the vehicle.
 The promissory note also gave iBank, as the Spouses Briones’ attorney-in-fact with the obligation
among others to file an insurance claim in case of loss or damage to the car.
 ON NOVEMBER 5, 2003 at about 10:50 pm, the BMW Z4 Roadster was car napped by three(3)
armed men in front of Metrobank Banlat Branch in Tandang Sora, Quezon City
 The spouses declared the loss to iBank, which instructed them to continue paying the three(3)
monthly installments.
 ON MARCH 26,2004, of after the Spouses Briones finished the 3-month installment, iBank sent
them a letter demanding full payment of the lost vehicle

 
ISSUE:
1.  Whether an agency relationship existed between the parties-- Spouses Briones and
iBank. 
2. Whether the agency relationship was revoked or terminated when Spouses Briones
themselves claimed for insurance.
3.  Whether the petitioner has the right to claim the mortgaged vehicle or, in the alternative,
to collect the outstanding balance for the mortgaged vehicle when a loan was made. 
 
RULING:
1. The Supreme Court ruled in affirmative. In this case, all the elements of agency exist. Spouses
Briones appointed iBank as their attorney-in-fact under the promissory note with chattel
mortgage, 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 lifted from the promissory note state:

6. 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 …
6. In case of loss or damage, the MORTGAGOR hereby irrevocably appoints the MORTGAGEE,
the appointed attorney-in-fact with full power and authority to do the following: 
 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.

Article 1370 of the Civil Code states 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.
This Court refuses to reverse the findings of the Regional Trial Court and the Court of Appeals as the
confirmation of agency factual and the existence of an agency relationship between the Spouses Briones
and iBank was found based on the assertions of Sections 6 and 22 of the promissory note with chattel
mortgage prepared by the petitioner and signed by the respondents. 

2.) The Court ruled that the agency was not revoked nor it was terminated. 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 as stated in the
promissory note with chattel mortgage. A bilateral contract obviously existed between the two
parties. This makes the agency irrevocable. Petitioner included the designation of an irrevocable
agency in the promissory note with chattel mortgage as it was also aware of the bilateral contract. 
3.The Court ruled that as the agent, the petitioner is obliged to protect the interests of the spouses
Briones. The petitioner, however, failed to fulfill its obligation to the latter. It wanted to claim the
full amount of the vehicle from the spouses Briones instead of opting only for the proceeds from
the insurance. This is a disregard of the principal-agency relationship that was established as it
chose to forward its own interests first instead of those of the principal. 

As shown by the facts presented, the insurance policy was still valid when the vehicle was lost, and
because of filing the insurance claim late, it was denied. Petitioner must be held accountable for its
negligence of its duties, making the spouses Briones suffer from damages they shouldn’t have had the
petitioner done its obligations as it should.  
Furthermore, the petitioner violated the fiduciary relationship the principal and the agent should enjoy
when it advised the latter to still pay three monthly installments after the loss of the vehicle. 
What the petitioner should have done in order for it to act in good faith is advise the spouses Briones to
file the insurance claim themselves as it already was terminating the agency relationship between them
and its obligation to file the insurance claim. 
To force the spouses Briones to pay the full amount of the lost property would be inequitable.