G.R. No.

L-10099            January 27, 1916

TEOFILA DEL ROSARIO DE COSTA and BERNARDO COSTA, plaintiffs-appellants, 

vs.
LA BADENIA, a corporation, defendant-appellee.

Albert E. Somersille for appellant.

Williams, Ferrier and SyCip for appellee.

CARSON, J.:

The plaintiffs, Teofila del Rosario de Costa and her husband, Bernardino Costa, brought this action to recover
from the defendant corporation the sum of P1,795.25 a balance alleged to be due Teofila del Rosario de Costa
as the agent of the defendant corporation for services rendered and expenses incurred in the sale of its
products. The defendant denied the claim and set up counterclaim for P55.43. Judgment having been
rendered in favor of the defendant; the record is now before us on plaintiff's bill of exceptions.

The plaintiffs are residents of Legaspi, Albay, and the defendant corporation is engaged in the manufacture
and sale of tobacco products with its head office in the city of Manila. The record shows that in the year 1911
the defendant corporation, a new concern, inaugurated an extensive selling campaign for the purpose of
introducing its products to the retail trade. Celestino Aragon, a general agent of the defendant corporation, was
in charged of this campaign in Albay, Sorsogon, and other provinces in the southern end of Luzon. He
established a central distributing agency or depot at Legaspi with the plaintiff, Teofila del Rosario de Costa,
nominally in charge, though her husband, Bernardino de Costa appears to have been the actual manager of
the agency. The business relations between the plaintiffs and the defendant extended from February 1, 1911,
to March 24, 1912, and during this time no settlement of their accounts was ever had. When Aragon, the
general agent, came to Legaspi in 1911 he established his headquarters there and took up his residence with
the plaintiffs, using the lower part of their house as a store room or depository for large quantities of cigarettes
and cigars. He employed a number of persons as solicitors and paid their salaries; he paid the internal revenue
fees incident to the conduct of the business in Legaspi, and also the rent of the building in which he lived with
the plaintiffs and which he made use of as the general headquarters for the agency. The record shows that
business amounting to more than P24,000 (wholesale) was done by the Legaspi agency from February 1,
1911, to March 24, 1912. All goods sent to Legaspi were charged by the head office at Manila against the
general agent, Aragon, while on the books kept by Aragon these goods were charged against the plaintiffs,
and as goods were withdrawn by himself, he credited the amount of the withdrawals to the account of the
plaintiffs. The business at Legaspi appears to have been that of a distributing agency actively in charge of the
plaintiffs but over which the general agent maintained a close supervision. Goods were withdrawn from the
depository at Legaspi from time to time by the general agent for shipment to other points; goods were likewise
withdrawn by plaintiffs and shipped to neighboring towns without any intervention on the part of the general
agent. All accounts incident to the business were carried on the books of Aragon. The plaintiffs do not appear
to have kept a separate set of books. The account as carried on the books of Aragon, the general agent, was
between Teofila del Rosario de Costa and La Badenia, the defendant corporation. On March 24, 1912, the
general agent had a settlement with the plaintiffs and acknowledged over his signature that these books
showed a balance in favor of the plaintiffs amounting to P1,795.25.

Plaintiffs' Exhibit B is a tabulated statement taken from the books of account kept by Aragon and shows in
detail the whole course of the business at Legaspi from February 1, 1911, to March 24, 1912. In this statement
goods received by the Legaspi agency from the factory in Manila are charged against Teofila del Rosario de
Costa, while credits are given on various items, such as, withdrawals of goods from the depository at Legaspi
shipped to other towns, remittances made to the head office in Manila, money paid over to the general agent,
advertising expenses, commissions on sales, salaries of employees, and other expenses incident to the
conduct of the business.

When this final settlement of accounts was had on the 24th of March, 1912, both Aragon and the plaintiff,
Teofila del Rosario de Costa, confirmed it as a true statement of the account. The defendant corporation
however, refused to pay over to plaintiffs the balance of P1,795.25, claiming that plaintiffs had been improperly
allowed a credit of P1,850.68 which represented unpaid accounts due the business in Legaspi for cigars and
cigarettes sold by it. If these uncollected claims are charged to the defendant corporation a balance is
left in favor of plaintiffs amounting to P1,795.25; and if charged to plaintiffs there remains a balance in
favor of the defendant corporation amounting to P55.43.

It is the contention of the defendant corporation that the plaintiffs were simply merchants who
purchased the goods at fixed wholesale prices and sold them on their own account, and that they were
never employed as their agents. On the other hand plaintiffs contend that they were the agents of the
defendant corporation; that they received commissions on the sales made by the agency; and that
they were authorized to extend a reasonable credit under the supervision of the general agent.

It is not clear from the record just what were the precise terms of the arrangement made by Aragon with the
plaintiffs. It is not denied however, that Aragon was acting as the general agent of the defendant corporation
and that as such he was invested with authority to inaugurate and carry out a selling campaign with a view of
interesting the sale of the defendant's products in the territory assigned to him. The record does not show what
limitations, if any, were placed upon his powers to act for the corporation. The general conduct of the selling
campaign intrusted to him was approved and commended by the head office, and judging from the amount of
the sales the business appears to have been a very prosperous one for the corporation.

It appears further that the head office at Manila was fully informed of plaintiffs' relations with the general agent
in extending the sales of its products. Plaintiffs made direct remittances to the head office in Manila and these
remittances were credited to the account of the agency at Legaspi, and acknowledgment was made directly to
the plaintiffs. Neither the head office nor Aragon appear to have made any distinction between the business
done by Aragon and that done by the plaintiffs. The purchases, sales and remittances made by the plaintiffs do
not seem to have been considered as those of an independent business concern, but rather as a part of the
work of the Legaspi agency under the control and supervision of Aragon. The fact that the defendant
corporation carried the Legaspi account in the name of the general agent, Aragon, and carried no account with
the plaintiffs, would seem to negative the contention that plaintiffs were simply merchants purchasing their
goods in Manila at wholesale and selling them locally on their own account.

The active management and participation of the plaintiffs in the conduct of the business at Legaspi are fully
recognized in the following letters written by the assistant manager of the defendant corporation to one of the
plaintiffs.

EXHIBIT A.

MANILA, P.I., October 9, 1911.

Mr. BERNARDINO COSTA, Legaspi, Albay.

DEAR SIR: We have the pleasure of hereby acknowledging receipt of your two letters dated the 4th
instant, in which we found enclosed two drafts, to wit:

No. 528________________c/ Ang Siliong P200

No. 1240_______________c/ Smith, Bell     980

& Co

1,180

Which sum of one thousand one hundred and eighty pesos we have duly credited on the account
current of Mr. Celestino Aragon.
 We also acknowledge receipt of the bill of lading for the eight packages you have forwarded to us, but
to date we have not received said packages. As soon as we get then we will send you timely notice.

We are, yours very sincerely,

LA BADENIA, INC.,
__________ __________, Assistant
Manager.

EXHIBIT B.

MANILA, P. I., Sept. 19, 1911.

Mr. BERNARDINO COSTA, Legaspi, Albay.

DEAR SIR: We have the pleasure of hereby acknowledging receipt of your letter dated the 12th instant,
of which we have made note.

By the steamer Cebu we are sending, according to the attached invoice, 3 boxes of small cigars (cajas
de tabaquitos) for the agency in your charge.

We are, yours very sincerely,

LA BADENIA, INC.,
__________ __________, Assistant
Manager.

Several other letters received by the plaintiffs from the defendant corporation were offered in evidence, but the
two letters just quoted are sufficient to show that the defendant was fully aware of plaintiffs' connection with the
agency at Legaspi, and recognized them as agents of the company, and clearly did not consider them as
independent merchants buying solely on their own account, but rather as subagents working under the
supervision of the general agent, Aragon.

It seems equally clear that Aragon did not consider the plaintiffs as independent merchants operating on their
own account, but rather as agents cooperating with him and working under his supervision. This fact is clearly
borne out by the nature of the entries made in his books of account. A reference to that statement taken from
the books of account shows that the plaintiffs were given credit on various items, such as advertising
expenses, the free distribution of cigars and cigarettes for advertising purposes, freight and carriage charges
on shipments to neighboring towns, and the like, and it does not seem at all likely that plaintiffs would have
been allowed credit on such items if they had been conducting the business solely on their own account.

Aragon extended credit to certain purchasers of cigars and cigarettes and the entries made by him on his
books of account show that he knew that the plaintiffs were also extending credit to some of the purchasers of
the goods shipped from Legaspi. He approved the very items now questioned when as general agent of the
defendant corporation he signed the statement of account showing a balance of P1,795.25 in favor of the
plaintiffs. Aragon thereby admitted that he, at least, considered these outstanding claims as properly
chargeable against the defendant corporation, and unless the plaintiffs had been specifically authorized by him
to extend credit it seems certain that he would never have approved this balance in their favor.
It is contended that it is unreasonable that plaintiffs would have so large a balance in their favor, and that they
are now merely seeking to saddle upon the defendant corporation a lot of unpaid accounts. In view of the fact
that plaintiffs are only seeking to enforce the payment of a balance admitted by the general agent of the
defendant corporation to be rightly due them, we fail to see how it can be reasonably urged that plaintiffs are
attempting to saddle these unpaid claims on the defendant. The general agent who was in control of the
Legaspi business, and who was fully conversant with all of its details, clearly recognized the right of the
plaintiffs to have credit on their account for the amount of these unpaid claims. This agent had employed the
plaintiffs to assist him in extending the sale of the defendant's products, and the defendant was well aware of
this fact. Certainly the only reliable source of information as to what plaintiffs' account with the defendant
corporation was, is to be found in the books kept by the general agent, Aragon. The defendant carried no
account whatever with the plaintiffs, and having intrusted the entire management of the Legaspi business to
Aragon, it can not now come into court and repudiate the account confirmed by him, unless it can show that he
acted beyond the scope of his authority in making the arrangement he did with the plaintiffs. Aragon's powers
as a selling agent appear to have been very broad, and there is no evidence in the record to indicate that he
acted beyond his powers in conducting the business at Legaspi as he did; and there can be no doubt that
plaintiffs had been authorized by him to extend credit on behalf of the agency. There is no other reasonable
explanation of the entries made by Aragon in his books of account, and his approval of the balance in favor of
the plaintiffs.

The lower court was of the opinion that the specific goods sold to the delinquent debtors, whose unpaid
accounts form the basis of this litigation, had already been paid for by the plaintiffs and that this was conclusive
evidence that the plaintiffs were not acting as the agents of the defendant corporation, and that in effect, the
purpose of this suit was to recover back money already paid for the goods purchased and sold by the plaintiffs.
We find ourselves unable to agree with the conclusions of the trial court in this respect.

It appears that the plan under which the business was conducted was as follows: a shipment of cigars and
cigarettes was made from the Manila office and charged against the account of the general agent, Aragon;
these goods were deposited in the store room at Legaspi, and in the account carried by Aragon were charged
against the plaintiffs. Withdrawals were made from the Legaspi stock by Aragon and the plaintiffs, and credit
was given the plaintiffs for the amount of the withdrawals by Aragon. Both Aragon and the plaintiffs drew on the
Legaspi stock for advertising purposes, such as the free distribution of cigars and cigarettes, and plaintiffs were
credited with the value of the goods so withdrawn. The stock on hand was being replenished from time to time
by new shipments received from Manila. The plaintiffs made remittances to Manila which were credited to the
account of the Legaspi agency and this account included not only the goods sold and withdrawn from stock by
the plaintiffs, but also the goods withdrawn by Aragon. Thus evidently these remittances were not in payment
of any particular shipments, but were simply payments on account and covered goods sold by Aragon as well
as those sold by the plaintiffs. Remittances were doubtless made to Manila by Aragon and credited on the
agency account in the same manner. Under this method of conducting the business a balance for or against
the plaintiffs might well remain at any time, and such a balance would not be determined solely by the value of
the goods withdrawn from stock by the plaintiffs, and the amount of the remittances made by them, but would
be determined by the total value of the stock of the Legaspi agency charged against the plaintiffs and the
amounts allowed them as credits; these credits would include not only the remittances made to Manila, but
also goods withdrawn by Aragon, and such other items as might constitute proper credits on the account. We
do not therefore think it at all unreasonable that a balance should have remained in favor of the plaintiffs when
the settlement was made, nor do we see that the existence of such a balance would necessarily indicate that
the plaintiffs had overpaid their account with the defendant corporation.

It is further contended that the goods were charged to plaintiffs at wholesale prices, and that they were to have
as profits any amounts received over and above the wholesale cost price on the goods sold by them, and it is
urged that such an arrangement indicates that they were independent merchants doing business on their own
account. Even granting that such was the arrangement made with the plaintiffs by Aragon, it does not
necessarily follow that they were conducting an independent business on their own account. As already stated,
the record does not disclose what were the precise terms of arrangement made with the plaintiffs. The record
does show however, that in many instances the plaintiffs were allowed commissions on sales made by them,
but whether or not these were in addition to other profits allowed them the record does not show. Upon a
careful examination of the whole record we are satisfied that plaintiffs were not conducting an independent
business but were the agents of the defendant corporation operating under the supervision of the general
agent, Aragon.

For the reasons set out we are of the opinion, and so hold, that plaintiffs are entitled to the reversal of
the judgment appealed from and to a judgment against La Badenia, the defendant corporation, for the
sum of P1,795.25, with legal interest thereon from August 5, 1914, the date of filing the complaint, until
paid, and under their costs in both instances.

Let judgment be entered in accordance herewith. So ordered.

BANK OF THE PHILIPPINE ISLANDS AND FGU INSURANCE CORPORATION (PRESENTLY

KNOWN AS BPI/MS INSURANCE CORPORATION), Petitioners, v. YOLANDA
LAINGO, Respondent.

DECISION

CARPIO, J.:

The Case

This is a petition for review on certiorari1 assailing the Decision dated 29 June 20122 and
Resolution dated 11 December 20123 of the Court of Appeals in CA-G.R. CV No. 01575.

On 20 July 1999, Rheozel Laingo (Rheozel), the son of respondent Yolanda Laingo (Laingo),
opened a "Platinum 2-in-1 Savings and Insurance" account with petitioner Bank of the Philippine
Islands (BPI) in its Claveria, Davao City branch. The Platinum 2-in-1 Savings and Insurance
account is a savings account where depositors are automatically covered by an insurance policy
against disability or death issued by petitioner FGU Insurance Corporation (FGU Insurance), now
known as BPI/MS Insurance Corporation. BPI issued Passbook No. 50298 to Rheozel
corresponding to Savings Account No. 2233-0251-11. A Personal Accident Insurance Coverage
Certificate No. 043549 was also issued by FGU Insurance in the name of Rheozel with Laingo as
his named beneficiary.

On 25 September 2000, Rheozel died due to a vehicular accident as evidenced by a Certificate of

Death issued by the Office of the Civil Registrar General of Tagum City, Davao del Norte. Since
Rheozel came from a reputable and affluent family, the Daily Mirror headlined the story in its
newspaper on 26 September 2000.

On 27 September 2000, Laingo instructed the family's personal secretary, Alice Torbanos (Alice)
to go to BPI, Claveria, Davao City branch and inquire about the savings account of Rheozel.
Laingo wanted to use the money in the savings account for Rheozel's burial and funeral
expenses.

Alice went to BPI and talked to Jaime Ibe Rodriguez, BPI's Branch Manager regarding Laingo's
request. Due to Laingo's credit standing and relationship with BPI, BPI accommodated Laingo
who was allowed to withdraw P995,000 from the account of Rheozel. A certain Ms. Laura Cabico,
an employee of BPI, went to Rheozel's wake at the Cosmopolitan Funeral Parlor to verify some
information from Alice and brought with her a number of documents for Laingo to sign for the
withdrawal of the P995,000.

More than two years later or on 21 January 2003, Rheozel's sister, Rhealyn Laingo-Concepcion,
while arranging Rheozel's personal things in his room at their residence in Ecoland, Davao City,
found the Personal Accident Insurance Coverage Certificate No. 043549 issued by FGU
Insurance. Rhealyn immediately conveyed the information to Laingo.
Laingo sent two letters dated 11 September 2003 and 7 November 2003 to BPI and FGU
Insurance requesting them to process her claim as beneficiary of Rheozel's insurance policy. On
19 February 2004, FGU Insurance sent a reply-letter to Laingo denying her claim. FGU
Insurance stated that Laingo should have filed the claim within three calendar months
from the death of Rheozel as required under Paragraph 15 of the Personal Accident
Certificate of Insurance which states:
chanRoblesvirtualLawlibrary
15. Written notice of claim shall be given to and filed at FGU Insurance Corporation within three
calendar months of death or disability.
On 20 February 2004, Laingo filed a Complaint4 for Specific Performance with Damages and
Attorney's Fees with the Regional Trial Court of Davao City, Branch 16 (trial court) against BPI
and FGU Insurance.

In a Decision5 dated 21 April 2008, the trial court decided the case in favor of respondents. The
trial court ruled that the prescriptive period of 90 days shall commence from the time of death of
the insured and not from the knowledge of the beneficiary. Since the insurance claim was filed
more than 90 days from the death of the insured, the case must be dismissed. The dispositive
portion of the Decision states:
chanRoblesvirtualLawlibrary
PREMISES CONSIDERED, judgment is hereby rendered dismissing both the complaint and the
counterclaims.

SO ORDERED.6ChanRoblesVirtualawlibrary
Laingo filed an appeal with the Court of Appeals.

The Ruling of the Court of Appeals

In a Decision dated 29 June 2012, the Court of Appeals reversed the ruling of the trial court. The
Court of Appeals ruled that Laingo could not be expected to do an obligation which she did not
know existed. The appellate court added that Laingo was not a party to the insurance contract
entered into between Rheozel and petitioners. Thus, she could not be bound by the 90-day
stipulation. The dispositive portion of the Decision states:
chanRoblesvirtualLawlibrary
WHEREFORE, the Appeal is hereby GRANTED. The Decision dated April 21, 2008 of the Regional
Trial Court, Branch 16, Davao City, is hereby REVERSED and SET ASIDE.

Appellee Bank of the Philippine Islands and FGU Insurance Corporation are DIRECTED to PAY
jointly and severally appellant Yolanda Laingo Actual Damages in the amount of P44,438.75 and
Attorney's Fees in the amount of P200,000.00.

Appellee FGU Insurance Corporation is also DIRECTED to PAY appellant the insurance proceeds
of the Personal Accident Insurance Coverage of Rheozel Laingo with legal interest of six percent
(6%) per annum reckoned from February 20, 2004 until this Decision becomes final. Thereafter,
an interest of twelve percent (12%) per annum shall be imposed until fully paid.

SO ORDERED.7ChanRoblesVirtualawlibrary
Petitioners filed a Motion for Reconsideration which was denied by the appellate court in a
Resolution dated 11 December 2012.

Hence, the instant petition.

The Issue
The main issue for our resolution is whether or not Laingo, as named beneficiary who had no
knowledge of the existence of the insurance contract, is bound by the three calendar month
deadline for filing a written notice of claim upon the death of the insured.

The Court's Ruling

The petition lacks merit.

Petitioners contend that the words or language used in the insurance contract, particularly under
paragraph 15, is clear and plain or readily understandable by any reader which leaves no room
for construction. Petitioners also maintain that ignorance about the insurance policy does not
exempt respondent from abiding by the deadline and petitioners cannot be faulted for
respondent's failure to comply.

Respondent, on the other hand, insists that the insurance contract is ambiguous since there is
no provision indicating how the beneficiary is to be informed of the three calendar month claim
period. Since petitioners did not notify her of the insurance coverage of her son where she was
named as beneficiary in case of his death, then her lack of knowledge made it impossible for her
to fulfill the condition set forth in the insurance contract.

In the present case, the source of controversy stems from the alleged non-compliance with the
written notice of insurance claim to FGU Insurance within three calendar months from the death
of the insured as specified in the insurance contract. Laingo contends that as the named
beneficiary entitled to the benefits of the insurance claim she had no knowledge that Rheozel
was covered by an insurance policy against disability or death issued by FGU Insurance that was
attached to Rheozel's savings account with BPI. Laingo argues that she dealt with BPI after her
son's death, when she was allowed to withdraw funds from his savings account in the amount of
P995,000. However, BPI did not notify her of the attached insurance policy. Thus, Laingo
attributes responsibility to BPI and FGU Insurance for her failure to file the notice of insurance
claim within three months from her son's death.

We agree.

BPI offered a deposit savings account with life and disability insurance coverage to its customers
called the Platinum 2-in-1 Savings and Insurance account. This was a marketing strategy
promoted by BPI in order to entice customers to invest their money with the added benefit of an
insurance policy. Rheozel was one of those who availed of this account, which not only included
banking convenience but also the promise of compensation for loss or injury, to secure his
family's future.

As the main proponent of the 2-in-1 deposit account, BPI tied up with its affiliate, FGU
Insurance, as its partner. Any customer interested to open a deposit account under this 2-in-1
product, after submitting all the required documents to BPI and obtaining BPI's approval, will
automatically be given insurance coverage. Thus, BPI acted as agent of FGU Insurance with
respect to the insurance feature of its own marketed product.

Under the law, an agent is one who binds himself to render some service or to do something in
representation of another.8 In Doles v. Angeles,9 we held that the basis of an agency is
representation. The question of whether an agency has been created is ordinarily a question
which may be established in the same way as any other fact, either by direct or circumstantial
evidence. The question is ultimately one of intention. Agency may even be implied from the
words and conduct of the parties and the circumstances of the particular case. For an agency to
arise, it is not necessary that the principal personally encounter the third person with whom the
agent interacts. The law in fact contemplates impersonal dealings where the principal need not
personally know or meet the third person with whom the agent transacts: precisely, the purpose
of agency is to extend the personality of the principal through the facility of the agent.

In this case, since the Platinum 2-in-1 Savings and Insurance account was BPI's commercial
product, offering the insurance coverage for free for every deposit account opened, Rheozel
directly communicated with BPI, the agent of FGU Insurance. BPI not only facilitated the
processing of the deposit account and the collection of necessary documents but also the
necessary endorsement for the prompt approval of the insurance coverage without any other
action on Rheozel's part. Rheozel did not interact with FGU Insurance directly and every
transaction was coursed through BPI.

In Eurotech Industrial Technologies, Inc. v. Cuizon,10 we held that when an agency relationship
is established, the agent acts for the principal insofar as the world is concerned. Consequently,
the acts of the agent on behalf of the principal within the scope of the delegated authority have
the same legal effect and consequence as though the principal had been the one so acting in the
given situation.

BPI, as agent of FGU Insurance, had the primary responsibility to ensure that the 2-in-1 account
be reasonably carried out with full disclosure to the parties concerned, particularly the
beneficiaries. Thus, it was incumbent upon BPI to give proper notice of the existence of the
insurance coverage and the stipulation in the insurance contract for filing a claim to Laingo, as
Rheozel's beneficiary, upon the latter's death.

Articles 1884 and 1887 of the Civil Code state:

chanRoblesvirtualLawlibrary
Art. 1884. The agent is bound by his acceptance to carry out the agency and is liable for the
damages which, through his non-performance, the principal may suffer.

He must also finish the business already begun on the death of the principal, should delay entail
any danger.

Art. 1887. In the execution of the agency, the agent shall act in accordance with the instructions
of the principal.

In default, thereof, he shall do all that a good father of a family would do, as required by the
nature of the business.
The provision is clear that an agent is bound to carry out the agency. The relationship existing
between principal and agent is a fiduciary one, demanding conditions of trust and confidence. It
is the duty of the agent to act in good faith for the advancement of the interests of the principal.
In this case, BPI had the obligation to carry out the agency by informing the
beneficiary, who appeared before BPI to withdraw funds of the insured who was BPI's
depositor, not only of the existence of the insurance contract but also the
accompanying terms and conditions of the insurance policy in order for the beneficiary
to be able to properly and timely claim the benefit.

Upon Rheozel's death, which was properly communicated to BPI by his mother Laingo, BPI, in
turn, should have fulfilled its duty, as agent of FGU Insurance, of advising Laingo that there was
an added benefit of insurance coverage in Rheozel's savings account. An insurance company has
the duty to communicate with the beneficiary upon receipt of notice of the death of the insured.
This notification is how a good father of a family should have acted within the scope of its
business dealings with its clients. BPI is expected not only to provide utmost customer
satisfaction in terms of its own products and services but also to give assurance that its business
concerns with its partner entities are implemented accordingly.
There is a rationale in the contract of agency, which flows from the "doctrine of
representation," that notice to the agent is notice to the principal, 11 Here, BPI had
been informed of Rheozel's death by the latter's family. Since BPI is the agent of FGU
Insurance, then such notice of death to BPI is considered as notice to FGU Insurance
as well. FGU Insurance cannot now justify the denial of a beneficiary's insurance claim
for being filed out of time when notice of death had been communicated to its agent
within a few days after the death of the depositor-insured. In short, there was timely
notice of Rheozel's death given to FGU Insurance within three months from Rheozel's
death as required by the insurance company.

The records show that BPI had ample opportunity to inform Laingo, whether verbally or in
writing, regarding the existence of the insurance policy attached to the deposit account. First,
Rheozel's death was headlined in a daily major newspaper a day after his death. Second, not
only was Laingo, through her representative, able to inquire about Rheozel's deposit account
with BPI two days after his death but she was also allowed by BPI's Claveria, Davao City branch
to withdraw from the funds in order to help defray Rheozel's funeral and burial expenses. Lastly,
an employee of BPI visited Rheozel's wake and submitted documents for Laingo to sign in order
to process the withdrawal request. These circumstances show that despite being given
many opportunities to communicate with Laingo regarding the existence of the
insurance contract, BPI neglected to carry out its duty.

Since BPI, as agent of FGU Insurance, fell short in notifying Laingo of the existence of the
insurance policy, Laingo had no means to ascertain that she was entitled to the insurance claim.
It would be unfair for Laingo to shoulder the burden of loss when BPI was remiss in its duty to
properly notify her that she was a beneficiary.

Thus, as correctly decided by the appellate court, BPI and FGU Insurance shall bear the loss and
must compensate Laingo for the actual damages suffered by her family plus attorney's fees.
Likewise, FGU Insurance has the obligation to pay the insurance proceeds of Rheozel's personal
accident insurance coverage to Laingo, as Rheozel's named beneficiary.chanrobleslaw

WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 29 June 2012 and

Resolution dated 11 December 2012 of the Court of Appeals in CA-G.R. CV No. 01575.

SO ORDERED.cralawlawlibrary

Danon v. Brim & Co.. 42 Phil. 133 

Facts: 
This action was brought to recover the sum of P60,000, alleged to be the value of services
rendered to the defendant by the Danon as a broker. The plaintiff alleges that in the month of
August, 1918, the defendant company, through its manager, Antonio A.Brimo, employed him to
look for a purchaser of its factory known as "Holland American Oil Co.," for the sum of
P1,200,000, payable in cash; that the defendant promised to pay the plaintiff, as compensation
for his services, a commission of five per cent on the said sum of P1,200,000, if the sale was
consummated, or if the plaintiff should find a purchaser ready, able and willing to buy said
factory for the said sum of P1,200,000;that subsequently the plaintiff found such a purchaser,
but that the defendant refused to sell the said factory without any justifiable motive or reason
therefor and without having previously notified the plaintiff of its desistance or variation in the
price and terms of the sale. To that complaint the defendant interposed a general denial.
Honorable Simplicio delRosario, judge, rendered a judgment in favor of the plaintiff and against
the defendant for the sum of P60,000, with costs. From that judgment the defendant appealed
to this court. 
Issue/Held: 1) WON the Danon had performed all that was required of him under that
contract to entitle him to recover the commission agreed upon. 
HELD: NO. immediately after having an interview with Mr. Brimo, as above stated, the plaintiff
went to see Mr. Mauro Prieto, president of the Santa Ana Oil Mill, a corporation, and offered
to sell to him the defendant’s property at P1,200,000. Mr. Kane, its manager, inspected the
factory and, presumably, made a favorable report to Mr. Prieto. The latter asked for an
appointment with Mr. Brimo to perfect the negotiation. In the meantime Sellner, the other
broker referred to, had found a purchaser for the same property, who ultimately bought it for
P1,300,000. For that reason Mr. Prieto, the would be purchaser found by the plaintiff, never
came to see Mr. Brimo to perfect the proposed negotiation. Under the proofs in this case, the
most that can be said as to what the plaintiff had accomplished is, that he had found a person
who might have bought the defendant’s factory if the defendant had not  sold it to someone else.
The evidence does not show that the Santa Ana Oil Mill had definitely decided to buy the
property in question at the fixed price of P1,200,000. The board of directors of said corporation
had not resolved to purchase said property. The plaintiff claims that the reasons why the sale to
the Santa Ana Mill was not consummated was because Mr. Brimo refused to sell to a Filipino firm
and preferred an American buyer. 

2) WON the plaintiff is entitled to recover the sum of P60,000, claimed by him as
compensation for his services. 
NO. 
It is perfectly clear and undisputed that his "services" did not any way contribute towards
bringing about the sale of the factory in question. He was not "the 
efficient agent or the procuring cause of the sale. “The broker must be the efficient agent or the
procuring cause of sale. The means employed by him and his efforts must result in the sale. He
must find the purchaser, and the sale must proceed from his efforts acting as broker.
a broker is never entitled to commissions for unsuccessful efforts. The risk of a failure is wholly
his.The reward comes only with his success.
"One who has employed a broker can himself sell the property to a purchaser whom he has
procured, without any aid from the broker.

Danon's action here is not one for damages for breach of contract; it is an action to recover "the reasonable
value" of services rendered. Hence, to determine whether Danon is entitled to recover the commission agreed
upon, the pivotal question to be resolved is whether Danon had performed all that was required of him under his
contract with Brimo. It is perfectly clear that his "services" did not in any way contribute towards bringing
about the sale of the factory in question. He was not "the efficient agent or the procuring cause of the sale." This
is in accordance in the case of Wylie vs. Marine National Bank: "The broker must be the efficient agent or the
procuring cause of the sale. The means employed by him and his efforts must result in the sale. He must find the
purchaser, and the sale must proceed from his efforts acting as broker."

Dialosa v. CA, 130 SCRA 350

MARIANO DIOLOSA and ALEGRIA VILLANUEVA-DIOLOSA, petitioners, 
vs.
THE HON. COURT OF APPEALS, and QUIRINO BATERNA (As owner and proprietor of QUIN BATERNA
REALTY), respondents.

Appeal by certiorari from a decision of the then Court of Appeals ordering herein petitioners to pay private
respondent "the sum of P10,000.00 as damages and the sum of P2,000.00 as attorney's fees, and the costs." 

This case originated in the then Court of First Instance of Iloilo where private respondents instituted a case of
recovery of unpaid commission against petitioners over some of the lots subject of an agency agreement that were
not sold. Said complaint, docketed as Civil Case No. 7864 and entitled: "Quirino Baterna vs. Mariano Diolosa and
Alegria Villanueva-Diolosa", was dismissed by the trial court after hearing. Thereafter, private respondent elevated
the case to respondent court whose decision is the subject of the present petition.

The parties — petitioners and respondents-agree on the findings of facts made by respondent court which are
based largely on the pre-trial order of the trial court, as follows: 

PRE-TRIAL ORDER 

When this case was called for a pre-trial conference today, the plaintiff, assisted by Atty. Domingo
Laurea, appeared and the defendants, assisted by Atty. Enrique Soriano, also appeared. 

A. — During the pre-trial conference the parties, in addition to what have been admitted in the
pleadings, have agreed and admitted that the following facts are attendant in this case and that they
will no longer adduce evidence to prove them: 

1. That the plaintiff was and still is a licensed real estate broker, and as such licensed
real estate broker on June 20, 1968, an agreement was entered into between him as
party of the second part and the defendants spouses as party of the first part,
whereby the former was constituted as exclusive sales agent of the defendants, its
successors, heirs and assigns, to dispose of, sell, cede, transfer and convey the lots
included in VILLA ALEGRE SUBDIVISION owned by the defendants, under the
terms and conditions embodied in Exhibit "A", and pursuant to said agreement
(Exhibit "A"), the plaintiff acted for and in behalf of the defendants as their agent in
the sale of the lots included in the VILLA ALEGRE SUBDIVISION; 

2. That on September 27, 1968, the defendants terminated the services of plaintiff as
their exclusive sales agent per letter marked as Exhibit "B", for the reason stated in
the latter. 

B. — During the trial of this case on the merit, the plaintiff will adduce by competent evidence the
following facts: 

1. That as a real estate broker, he had sold the lots comprised in several
subdivisions, to wit: Greenfield Subdivision, the Villa Beach Subdivision, the Juntado
Subdivision, the St. Joseph Village, the Ledesma Subdivision, the Brookside
Subdivision, the Villa Alegre Subdivision, and Cecilia Subdivision, all in the City of
Iloilo except St. Joseph which is in Pavia Iloilo.

2. That the plaintiff, as a licensed real estate broker, has been seriously damaged by
the action of the defendants in rescinding, by Exhibit "B", the contract (Exhibit "A") for
which the plaintiff suffered moral damages in the amount of P50,000.00, damages to
his good will in the amount of P100,000.00, for attorney's fees in the amount of
P10,000.00 to protect his rights and interests, plus exemplary damages to be fixed
by the Court. 
 3. That the plaintiff is entitled to a commission on the lots unsold because of the
rescission of the contract. 

C. — The defendants during the trial will ill prove by competent evidence the following: 

1. That the plaintiff's complaint was filed to make money out of the suit from
defendants, to harrass and to molest defendants; 

2. That because of the unjustified and unfounded complaint of the plaintiff, the
defendants suffered moral damages in the amount of P50,000.00, and that for the
public good, the court may order the plaintiff to pay the defendants exemplary
damages in the amount of P20,000.00, plus attorney's fees of P10,000.00. 

D.— Contentions of the parties: 

1. The plaintiff contends: 

(a) That under the terms of the contract (Exhibit "A") the plaintiff had
unrevocable authority to sell all the lots included in the Villa Alegre
Subdivision and to act as exclusive sales agent of the defendants
until all the lots shall have been disposed of; 

(b) That the rescission of the contract under Exhibit "B", contravenes
the agreement of the parties. 

2. The defendants contend: 

(a) That they were within their legal right to terminate the agency on
the ground that they needed the undisposed lots for the use of the
family; 

(b) That the plaintiff has no right in law to case for commission on lots
that they have not sold. 

E. — The parties hereby submit to the Court the following issues: 

1. Whether under the terms of Exhibit "A" the plaintiff has the irrevocable right to sen
or dispose of all the lots included within Villa Alegre Subdivision; 

2. Can the defendants terminate their agreement with the plaintiff by a letter like
Exhibit "B"? 

F. — The plaintiff submitted the following exhibits which were admitted by the defendants: 

Exhibit "A" — agreement entered into between the parties on June 20, 1968 whereby
the plaintiff had the authority to sell the subdivision lots included in Villa Alegre
subdivision; 

Exhibit "B" — Letter of the defendant Alegria V. Diolosa dated September 27, 1968
addressed to the plaintiff terminating the agency and rescinding Exhibit "A" for the
reason that the lots remained unsold lots were for reservation for their grandchildren. 

The Court will decide this case based on the facts admitted in the pleadings, those agreed by the
parties during the pre-trial conference, and those which they can prove during the trial of this case, in
accordance with the contention of the parties based on the issues submitted by them during the pre-
trial conference.
 SO ORDERED.

Iloilo City, Philippines, August 14, 1969. 

(SGD) VALERIO V.
ROVIRA
Judge
(pp. 22-25, Rollo) 

The only issue in this case is whether the petitioners could terminate the agency agreement, Exhibit "A", without
paying damages to the private respondent. Pertinent portion of said Exhibit "A" reads: 

That the PARTY OF THE FIRST PART is the lawful and absolute owner in fee simple of VILLA
ALEGRE SUBDIVISION situated in the District of Mandurriao, Iloilo City, which parcel of land is
more particularly described as follows, to wit: 

A parcel of land, Lot No. 2110-b-2-C, PSD 74002, Transfer Certificate of Title No.
T_____ situated in the District of Mandurriao, Iloilo, Philippines, containing an area of
39016 square meters, more or less, with improvements thereon. 

That the PARTY OF THE FIRST PART by virtue of these presents, to enhance the sale of the lots of
the above-described subdivision, is engaging as their EXCLUSIVE SALES AGENT the PARTY OF
THE SECOND PART, its successors, heirs and assigns to dispose of, sell, cede, transfer and
convey the above-described property in whatever manner and nature the PARTY OF THE SECOND
PART, with the concurrence of the PARTY OF THE FIRST PART, may deem wise and proper under
the premises, whether it be in cash or installment basis, until all the subject property as subdivided is
fully disposed of. (p. 7 of Petitioner's brief. Emphasis supplied). 

Respondent court, in its decision which is the subject of review said: 

Article 1920 of the Civil Code of the Philippines notwithstanding, the defendants could not terminate
the agency agreement, Exh. "A", at will without paying damages. The said agency agreement
expressly stipulates ... until all the subject property as subdivided is fully disposed of ..." The
testimony of Roberto Malundo(t.s.n. p. 99) that the plaintiff agreed to the intention of Mrs. Diolosa to
reserve some lots for her own famay use cannot prevail over the clear terms of the agency
agreement. Moreover, the plaintiff denied that there was an agreement to reserve any of the lots for
the family of the defendants. (T.s.n. pp. 16). 

There are twenty seven (27) lots of the subdivision remaining unsold on September 27, 1968 when
the defendants rescinded the agency agreement, Exhibit "A". On that day the defendants had only
six grandchildren. That the defendants wanted to reserve the twenty seven remaining lots for
the six grandchildren is not a legal reason for defendants rescind the agency agreement.
Even if the grandchildren were to be given one lot each, there would still be twenty-one lots
available for sale. Besides it is undisputed that the defendants have other lands which could
be reserved for their grandchildren. (pp. 26-27, Rollo) 

The present appeal is manifestly without merit. 

Under the contract, Exhibit "A", herein petitioners allowed the private respondent "to dispose of, sell, cede, transfer
and convey ... until out the subject property as subdivided is fully disposed of." The authority to sell is not
extinguished until all the lots have been disposed of. When, therefore, the petitioners revoked the contract with
private respondent in a letter, Exhibit "B" — 

Dear Mr. Baterna: 

Please be informed that we have finally decided to reserve the remaining unsold lots, as of this date
of our VILLA ALEGRE Subdivision for our grandchildren.
 In view thereof, notice is hereby served upon you to the effect that our agreement dated June 20,
1968 giving you the authority to sell as exclusive sales agent of our subdivision is hereby rescinded.

Please be duly guided. 

Very truly yours, 

(SGD) ALEGRIA V. DIOLOSA

Subdivision Owner

(p. 11 of Petitioner's Brief)

they become liable to the private respondent for damages for breach of contract. 

And, it may be added that since the agency agreement, Exhibit "A", is a valid contract, the same may be rescinded
only on grounds specified in Articles 1381 and 1382 of the Civil Code, as follows: 

ART. 1381. The following contracts are rescissible: 

(1) Those which are entered in to by guardians whenever the wards whom they
represent suffer lesion by more than one-fourth of the value of the things which are
the object thereof;

(2) Those agreed upon in representation of absentees, if the latter suffer the lesion
stated in the preceding number; 

(3) Those undertaken in fraud of creditors when the latter cannot in any other name
collect the claims due them; 

(4) Those which refer to things under litigation if they have been entered into by the
defendant without the knowledge and approval of the litigants or of competent judicial
authority; 

(5) All other contracts specially declared by law to be subject to rescission. 

ART. 1382. Payments made in a state of insolvency for obligations to whose fulfillment the debtor
could not be compelled at the time they were effected, are also rescissible." 

In the case at bar, not one of the grounds mentioned above is present which may be the subject of an action of
rescission, much less can petitioners say that the private respondent violated the terms of their agreement-such as
failure to deliver to them (Subdivision owners) the proceeds of the purchase price of the lots. 

ACCORDINGLY, the petition is hereby dismissed without pronouncement as to costs. 

SO ORDERED.
 EULOGIO DEL ROSARIO, AURELIO DEL ROSARIO, BENITO DEL ROSARIO, BERNARDO DEL
ROSARIO, ISIDRA DEL ROSARIO, DOMINGA DEL ROSARIO and CONCEPCION
BORROMEO, Plaintiffs-Appellees, v. PRIMITIVO ABAD and TEODORICO ABAD, Defendants-
Appellants. 

Bautista & Bautista for Appellees. 

Agustin C. Bagasao for appellants. 

SYLLABUS

1. AGENCY; POWER OF ATTORNEY WHEN COUPLED WITH INTEREST; TERMINATION OF; CASE AT
BAR. — Within the prohibitive period of five years, the homesteader mortgaged the improvements of
the homestead in favor of defendant P. A. At the same time, he executed an "irrevocable special
power of attorney coupled with interest" in favor of the mortgagee authorizing him to sell the land.
After the lapse of the prohibitive period, the mortgagor died leaving the mortgage debt unpaid.
Thereafter, acting on the power of attorney, the mortgagee sold the land. Held: The power of
attorney executed by the homesteader in favor of defendant did not create an agency with interest
nor did it clothe the agency with irrevocable character. A mere statement in the power of attorney
that it is coupled with interest is not enough. In what does such interest consist must be stated in the
power of attorney. The mortgage has nothing to do with the power of attorney and may be
foreclosed by the mortgagee upon failure of the mortgagor to comply with his obligation. As the
agency was not coupled with an interest, it was terminated upon the death of the principal, and the
agent could no longer validly convey the land. Hence, the sale was null and void. 

2. PUBLIC LAND; ENCUMBRANCE MADE WITHIN PROHIBITIVE PERIOD, NULL AND VOID. — Granting
that the power of attorney in question was valid it would subject the land to an encumbrance. And
the encumbrance having been executed within the five-year period from and after the issuance of the
patent, the same is null and void. 

DECISION

PADILLA, J.:

Appeal from a judgment rendered by the Court of First Instance of Nueva Ecija in civil case No.
1084. 

The facts are undisputed, the parties having entered into an agreed statement thereof, the pertinent
and materials part of which are: The plaintiffs are the children and heirs of the late Tiburcio del
Rosario. On 12 December 1936, the Secretary of Agriculture and Commerce, by authority of the
President of the Commonwealth of the Philippines, issued under the provisions of the Public Land Act
(Act No. 2874) homestead patent No. 40596 to Tiburcio del Rosario. The homestead with an area of
9 hectares, 43 ares and 14 centares is situate in barrio San Mauricio, municipality of San José,
province of Nueva Ecija. On 11 February 1937, the Registrar of Deeds in and for the province of
Nueva Ecija issued original certificate of title No. 4820 in the name of the homesteader (Annex A,
stipulation of facts, pp. 25-30, Rec. on App.) . On 24 February 1937, Tiburcio del Rosario obtained a
loan from Primitivo Abad in the sum of P2,000 with interest at the rate of 12% per annum, payable
on 31 December 1941. As security for the payment thereof he mortgaged the improvements of the
parcel of land in favor of the creditor (Annex B, complaint, pp. 10-13, Rec. on App.) . On the same
day, 24 February, the mortgagor executed an ‘irrevocable special power of attorney coupled with
interest" in favor of the mortgagee, authorizing him, among others, to sell and convey the parcel of
land (Annex A, complaint, pp. 7-9, Rec. on App.) . Thereafter the mortgagor and his family moved to
Santiago, Isabela, and there established a new residence. Sometime in December 1945 the
mortgagor died leaving the mortgage debt unpaid. On 9 June 1947, Primitivo Abad, acting as
attorney-in-fact of Tiburcio del Rosario, sold the parcel of land to his son Teodorico Abad for and in
consideration of the token sum of P1.00 and the payment by the vendee of the mortgage debt of
Tiburcio del Rosario to Primitivo Abad (Annex C, complaint, pp. 13-16, Rec. on App.) . The vendee
took possession of the parcel of land. Upon the filing and registration of the last deed of sale, the
Registrar of Deeds in and for the province of Nueva Ecija cancelled original certificate of title No.
4820 in the name of Tiburcio del Rosario and in lieu thereof issued transfer certificate of title No.
1882 in favor of the vendee Teodorico Abad. 

On 29 December 1952 the plaintiffs brought suit against the defendants to recover possession and
ownership of the parcel of land, damages, attorney’s fees and costs. The defendants answered the
complaint and prayed for the dismissal thereof, damages, attorney’s fees and costs. 

On 25 October 1954, after the parties had submitted the case upon a stipulation of facts, the Court
rendered judgment, the dispositive part of which is: chanrob1es virtual 1aw library

WHEREFORE, the deed of sale executed by Primitivo Abad in favor of Teodorico, Abad, Annex C, is
hereby declared null and void; and Teodorico Abad is hereby ordered to execute a deed of
reconveyance of the land originally with OCT No. 4820, now covered by Transfer Certificate of Title
No. 1880, in favor of the plaintiffs. No pronouncement as to costs. 

The defendants appealed to the Court of Appeals, which certified the case to this Court as no
question of fact is involved. 

Section 116 of the Public Land Act (Act No. 2874), under which the homestead was granted to the
appellees’ father, provides:chanrob1es virtual 1aw library

Lands acquired under the free patent or homestead provisions shall not be subject to encumbrance
or alienation from the date of the approval of the application and for a term of five years from and
after the date of the issuance of the patent or grant, nor shall they become liable to the satisfaction
of any debt contracted prior to the expiration of said period; but the improvements or crops on the
land may be mortgaged or pledged to qualified persons, associations, or corporations. 

The encumbrance or alienation of lands acquired by free patent or homestead in violation of this
section is null and void. 1 

There is no question that the mortgage on the improvements of the parcel of land executed by
Tiburcio del Rosario in favor of Primitivo Abad (Annex B, complaint, pp. 10-13, Rec. on App) is valid. 

The power of attorney executed by Tiburcio del Rosario in favor of Primitivo Abad (Annex A,
complaint, pp. 7-9, Rec. on App.) providing, among others, that is coupled with an interest in the
subject matter thereof in favor of the said attorney and are therefore irrevocable, and . . . conferring
upon my said attorney full and ample power and authority to do and perform all things reasonably
necessary and proper for the due carrying out of the said powers according to the true tenor and
purport of the same, . . ." does not create an agency coupled with an interest nor does it clothe the
agency with an irrevocable character. A mere statement in the power of attorney that it is coupled
with an interest is not enough. In what does such interest consist must be stated in the power of
attorney. The fact that Tiburcio del Rosario, the principal, had mortgaged the improvements of the
parcel of land to Primitivo Abad, the agent, (Annex B, complaint, pp. 10-13, Rec. on App.) is not such
an interest as could render irrevocable the power of attorney executed by the principal in favor of the
agent. In fact no mention of it is made in the power of attorney. The mortgage on the
improvements of the parcel of land has nothing to do with the power of attorney and may
be foreclosed by the mortgagee upon failure of the mortgagor to comply with his
obligation. As the agency was not coupled with an interest, it was terminated upon the
death of Tiburcio del Rosario, the principal, sometime in December 1945, and Primitivo
Abad, the agent, could no longer validly convey the parcel of land to Teodorico Abad on 9
June 1947. The sale, therefore, to the latter was null and void. But granting that the
irrevocable power of attorney was lawful and valid it would subject the parcel of land to an
encumbrance. As the homestead patent was issued on 12 December 1936 and the power of attorney
was executed on 24 February 1937, it was in violation of the law that prohibits the alienation or
encumbrance of lands acquired by homestead from the date of the approval of the application and for
a term of five years from and after the issuance of the patent or grant. Appellants contend that the
power of attorney was to be availed of by the agent after the lapse of the prohibition period of five
years, and that in fact Primitivo Abad sold the parcel of land on 9 June 1947, after the lapse of such
period. Nothing to that effect is found in the power of attorney. 

Appellants claim that the trial court should have directed the appellees to reimburse Teodorico Abad
for what he had paid to Primitivo Abad to discharge the mortgage in the latter’s favor as part of the
consideration of the sale. As the sale to Teodorico Abad is null and void, the appellees can not be
compelled to reimburse Teodorico Abad for what he had paid to Primitivo Abad. The former’s right of
action is against the latter, without prejudice to the right of Primitivo Abad to foreclose the mortgage
on the improvements of the parcel of land if the mortgage debt is not paid by the appellees, as heirs
and successors-in-interest of the mortgagor. 

The judgment appealed from is affirmed, with costs against the appellants.