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BARRETTO V SANTA MARINA (ART. 1919) SANCHEZ VS. MEDICARD PHIL. INC.

FACTS: Santa Marina, owner of the La Insular Cigar and Cigarette Factory, appointed Barretto
FACTS: Sometime in 1987 Medicard Inc. appointed petitioner Sanchez as its special corporate
as agent. Later on, Barretto sent a letter saying he wants to resign because some Chinaman
agent and they gave him a commission based on the "cash brought in." In 1988, through
became insolvent and disappeared without paying his large debt. Then now, Barretto seeks
petitioner's efforts, Medicard and Unilab executed a Health Care Program Contract. Unilab
the payment of his salary and that the revocation of his agency is in violation of the contract
paid Medicard P4,148,005.00 representing the premium for one (1) year. Medicard then
between him and the principal because there is no specific period for the exercise of the
handed petitioner 18% of said amount or P746,640.90 representing his commission. Again,
powers of the agent.
through petitioner's initiative, the agency contract between Medicard and Unilab was
ISSUE: W/N the revocation of agency of Barretto was validly revoked. renewed for another year. Prior to the expiration of the renewed contract, Medicard proposed
an increase of the premium which Unilab rejected "for the reason that it was too high,". In a
HELD: YES. Even if Santa Marina did not yet reply as to his letter of resignation, he appointed letter dated October 3, 1990, Unilab confirmed its decision not to renew the health program.
a new agent to do duties of Barretto. That should be deemed as acceptance of the resignation. Meanwhile, in order not to prejudice its personnel by the termination of their health insurance,
When Barretto resigned, the agency was revoked already. He cannot complain anymore. Unilab negotiated with Dr. Montoya and other officers of Medicard, to discuss new ways in
order to continue the insurance coverage. Under the new scheme, Unilab shall pay Medicard
CMS LOGGING V CA only the amount corresponding to the actual hospitalization expenses incurred by each
personnel plus 15% service fee. Medicard did not give petitioner any commission under the
new scheme. Aggrieved, Petitioner demanded from Medicard payment of P338,000.00 as his
FACTS: Petitioner CMS is a forest concessionaire engaged in the logging business, while private
commission plus damages, but the latter refused to heed his demand.
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 whereby the former
ISSUE: whether or not the contract of agency has been revoked by Medicard, hence, petitioner
appointed the latter as its exclusive export and sales agent for all logs that the former may
is not entitled to a commission.
produce, for a period of five (5) years.
CMS was able to sell through DRACOR a total of 77,264,672 board feet of logs in Japan, from
HELD: Yes the Contract of Agency has been revoked, thus the petitioner is not entitled to any
September 20, 1957 to April 4, 1962. Six months prior the end of their agreement, CMS found
commission. It is dictum that in order for an agent to be entitled to a commission, he must be
out that DRACOR was using Shingko Trading to sell their logs and earned commission for it.
the procuring cause of the sale, which simply means that the measures employed by him and
CMS claimed that it was a violation of their agreement since DRACOR already received 5%
the efforts he exerted must result in a sale. Based on the facts, it may be recalled that through
commission and is no longer entitled to the additional commission to Shinko. After the
petitioner's efforts, Medicard was able to enter into a Contract with Unilab, two times,
discovery, CMS directly transacted with Japanese firms without the aid if DRACOR. CMS sued
However before the expiration of the renewed contract, Unilab rejected the proposal.
DRACOR for the commission Shingko received while DRACOR counterclaimed for the
Medicard then requested petitioner to reduce his commission should the contract be renewed
commission of the sales made by CMS with the Japanese firms.
on its third year, but he was obstinate. It is clear that since petitioner refused to reduce his
commission, Medicard directly negotiated with Unilab, thus revoking its agency contract with
ISSUE: w/n DRACOR is entitled to its commissions from the sales made by CMS to Japanese
petitioner. Such revocation is authorized by Article 1924 of the Civil Code which provides: "The
firms
agency is revoked if the principal directly manages the business entrusted to the agent, dealing
directly with third persons."
HELD: The principal may revoke a contract of agency at will, and such revocation may be
express, or implied, and may be availed of even if the period fixed in the contract of agency as
Moreover, as found by the lower courts, petitioner did not render services to Medicard, his
not yet expired. As the principal has this absolute right to revoke the agency, the agent can not
principal, to entitle him to a commission. There is no indication from the records that he
object thereto; neither may he claim damages arising from such revocation, unless it is shown
exerted any effort in order that Unilab and Medicard, after the expiration of the Health Care
that such was done in order to evade the payment of agent's commission. During the existence
Program Contract, can renew it for the third time. In fact, his refusal to reduce his commission
of the contract of agency, DRACOR admitted that CMS sold its logs directly to several Japanese
constrained Medicard to negotiate directly with Unilab. We find no reason in law or in equity
firms. This act constituted an implied revocation of the contract of agency under Article 1924
to rule that he is entitled to a commission.
of the Civil Code, which provides: Art. 1924 The agency is revoked if the principal directly
manages the business entrusted to the agent, dealing directly with third persons. DRACOR is
not entitled to commission since it was revoked by CMS when they transacted directly with DY BUNCIO V ONG GUAN CAN (ART. 1926)
the Japanese firms
FACTS: This is a suit over a rice-mill and camarin situatedat Dao, Province of Capiz. Plaintiff
claims that the property belongs to its judgment debtor, Ong Guan Can, while defendants Juan
Tong and Pua Giok Eng are claiming to be the owner and lessee by virtue of a deed dated July
31, 1931, by Ong Guan Can, Jr. After trial the Court of First Instance of Capiz held that the deed
was invalid and that the property was subject to the execution which has been levied on said The court of First Instance of Tayabas... named Josef a Samson y San Pedro, administratrix of
properties by the judgment creditor of the owner. Defendants Juan Tong and Pua Giok bring the property of Narciso L. Manzano, and commissioners were duly appointed... the Court of
this appeal and insist that the deed of the 31st of July, 1931, is valid. First Instance ordered the partition of the property amongst the heirs of Narciso L. Manzano.

The first recital of the deed is that Ong Guan Can Jr., as agent of Ong Guan Can, sells the rice- the plaintiff filed his action in the Court of First Instance of Tayabas to foreclose the so-called
mill and camarin for P13,000 and gives as his authority the power of attorney dated the 23d of mortgage
May, 1928. The receipt of the money acknowledged in the deed was to the agent, and the
deed was signed by the agent in his own name and without any words indicating that he was Josefa de Manzano filed a pleading stating that the estate had already been divided; that the
signing it for the principal. Leaving aside the irregularities of the deed and coming to the power property mentioned... the plaintiff had been assigned... that her son Angel had ceded his share
of attorney referred to in the deed and registered therewith, it is at once seen that it is not a to her; that all the other children were minors and suggesting that she be made guardian ad
general power of attorney but a limited one and does not give the express power to alienate litem for the minors.
the properties in question. (Article 1713 of the Civil Code.)
Plaintiff filed his amended complaint on the 2tfh of August, making them individually
ISSUES: W/N the deed of sale executed by Ong Guan Can Jr. was valid. defendants, the minors to be represented by their guardian ad litem, and asking for a judgment
against each and all of them for P14,087.59, being the amount then due on the open account
RULING: NO. Appellants claim that this defect is cured by Exhibit 1, which purports to be a and for P2,700 as attorney's fees, all secured by the so-called mortgage; and that in case the
general power of attorney given to the same agent in 1920. Article 1732 of the Civil Code is judgment was not paid, that the mortgaged property be sold to pay the debt.
silent over the partial termination of an agency. The making and accepting of a new power of
attorney, whether it enlarges or decreases the power of the agent under a prior power of The defendants also filed a counter-claim against Juan Garcia and his wife, Conception Castro,
attorney, must be held to supplant and revoke the latter when the two are inconsistent. If the in which they allege that Narciso L. Manzano... that Garcia taking advantage of the... youtl^
new appointment with limited powers does not revoke the general power of attorney, the and inexperience of Angel L. Manzano falsely and maliciously made him believe that he had
execution of the second power of attorney would be a mere futile gesture. authority under the powerof-attorney from his father to sell the half interest in the San Nicolas,
and that he did so.
JUAN GARCIA Y PALICIO v. JOSEFA DE MANZANO, GR No. 13414, 1919-02-04
The trial court held there was no legal mortgage and gave judgment for the plaintiff against
Facts: Manzano was a merchant in Atimonan... went to Spain... and died there Josefa Samson only, for the amount admitted by her letter to be due, i. e., P12,752.85, and
dismissed the claim against the other defendants and also dismissed the counterclaim of...
He gave a general... power-of-attorney to his son, Angel L. Manzano... on the 9th of February, defendants.
1910, and on the 25th of March a second general power-of-attorney to his wife, Josefa
Samson. Issues: As to the first two alleged errors the defendants argue that the power-of-attorney to
the wife revoked the one to the son, in accordance with article 1735 of the Civil Code, and that
Manzano had had various commercial dealings with the plaintiff in this case and renewed even if not revoked the power-of-attorney did not authorize the sale of the boat by Angel L.
these dealings before leaving for Spain. Manzano.
Manzano was the owner of a half interest in a small steamer... he other half being owned by The defendant's next argument is that the power-ofattorney, if valid, does not authorize the
Ocejo, Perez & Co., with whom there was a partnership agreement to run the steamer for a sale of the half interest in the boat to the plaintiff.
few year
Ruling: There is no proof in the record that the first agent, the son, knew of the power-of-
When this period expired Ocejo, Perez & Co., refused to... continue the contract and attorney to his mother.
demanded that Manzano buy or sell. As he did not want to sell at the price offered and could
not buy, Juan Garcia bought the half interest held by Ocejo, Perez & Co It was necessary under the law for the defendants, in order to establish their counterclaim, to
prove that the son had notice of the second power-of-attorney. They have not done so, and it
Angel L. Manzano, acting under his... power-of-attorney, sold in July, 1911, the other half of must be considered that Angel L. Manzano was acting under a valid power-of-attorney from...
the boat to the plaintiff his father which had riot been legally revoked on the date of the sale of the half interest in the
steamer to the plaintiff's son, which half interest was legally inherited by the plaintiffs.
Angel L. Manzano, by virtue of the power-of-attorney from his father, Narciso L. Manzano,
executed a contract,... by which Juan Garcia agreed to extend a credit to Narciso L. Manzano the defendants allege that the power-of-attorney under which Angel L. Manzano acted, even
in the sum of P12,000, and this... credit was used by the house of Manzano. To secure it a if a valid power, did not authorize the sale of the boat, and... they want it back with one-half
mortgage was given in the same document on three parcels of land of the profits derived from its use by the plaintiff.

The document under which Angel L. Manzano sold the boat reads in part as follows:
To enable him to buy or sell, absolutely or under pacto de retra, any of the rural or urban HELD: YES, the mortgages can be enforced against petitioner. It is admitted that petitioner is
estates that I now own and may acquire in the future, at such price as he may deem most the owner of the parcel of land mortgaged to PNB on five (5) occasions by virtue of the Special
advantageous, which he shall collect in cash or by installments and under such... conditions as Powers of Attorney executed by petitioner in favor of Parangan. Petitioner argues that the last
he may consider proper, and he shall set forth the encumbrances on the properties and their three mortgages were void for lack of authority. She totally failed to consider that said Special
origin. I bind myself to warrant and defend, in accordance with law, the titles to such Powers of Attorney are a continuing one and absent a valid revocation duly furnished to the
properties; and if the properties alienated by this agreement should be redeemed, he... is mortgagee, the same continues to have force and effect as against third persons who had no
empowered to redeem them by paying the price that may have been fixed, and, for this knowledge of such lack of authority. Article 1921 of the Civil Code provides:
purpose, shall execute the proper instrument
Art. 1921. If the agency has been entrusted for the purpose of contracting with specified
The power-of-attorney authorizes the sale of real property, the buying of real property and persons, its revocation shall not prejudice the latter if they were not given notice thereof.
mortgaging the same, the borrowing of money and in fact is general and complete.
The Special Power of Attorney executed by petitioner in favor of Parangan duly authorized the
The power does not expressly state that the agent may sell the boat, but a power so full and
latter to represent and act on behalf of the former. Having done so, petitioner clothed
complete and authorizing the sale of real property; must necessarily carry with it the right to
Parangan with authority to deal with PNB on her behalf and in the absence of any proof that
sell a half interest in a small boat.
the bank had knowledge that the last three loans were without the express authority of
We consider that the authorization is so complete that it carries with it full authority to sell the petitioner, it cannot be prejudiced thereby. As far as third persons are concerned, an act is
one-half interest in the boat which was then owned by Narciso L. Manzano. deemed to have been performed within the scope of the agent's authority if such is within the
terms of the power of attorney as written even if the agent has in fact exceeded the limits of
LUSTAN V CA (ART. 1921) his authority according to the understanding between the principal and the agent. The Special
Power of Attorney particularly provides that the same is good not only for the principal loan
FACTS: Petitioner Adoracion Lustan is the registered owner of a parcel of land in Calinog, Iloilo but also for subsequent commercial, industrial, agricultural loan or credit accommodation that
containing an area of 10.0057 hectares. Petitioner leased the above described property to the attorney-in-fact may obtain and until the power of attorney is revoked in a public
private respondent Nicolas Parangan for a term of ten (10) years and an annual rent of One instrument and a copy of which is furnished to PNB. Even when the agent has exceeded his
Thousand (P1,000.00) Pesos. During the period of lease, Parangan was regularly extending authority, the principal is solidarily liable with the agent if the former allowed the latter to act
loans in small amounts to petitioner to defray her daily expenses and to finance her daughter's as though he had full powers (Article 1911, Civil Code). The mortgage directly and immediately
education. On July 29, 1970, petitioner executed a Special Power of Attorney in favor of subjects the property upon which it is imposed. The property of third persons which has been
Parangan to secure an agricultural loan from private respondent Philippine National Bank expressly mortgaged to guarantee an obligation to which the said persons are foreign, is
(PNB) with the aforesaid lot as collateral. On February 18, 1972, asecond Special Power of directly and jointly liable for the fulfillment thereof; it is therefore subject to execution and
Attorney was executed by petitioner, by virtue of which, Parangan was able to secure four (4) sale for the purpose of paying the amount of the debt for which it is liable. However, petitioner
additional loans, to wit: the sums of P24,000.00, P38,000.00, P38,600.00 and P25,000.00 on has an unquestionable right to demand proportional indemnification from Parangan with
December 15, 1975, September 6, 1976, July 2, 1979 and June 2, 1980, respectively. The last respect to the sum paid to PNB from the proceeds of the sale of her property in case the same
three loans were without the knowledge of herein petitioner and all the proceeds therefrom is sold to satisfy the unpaid debts.
were used by Parangan for his own benefit. These encumbrances were duly annotated on the
certificate of title. RALLOS V. YANGCO, 20 PHIL 269
On April 16, 1973, petitioner signed a Deed of Pacto de Retro Sale in favor of Parangan which FACTS: Yangco sent Rallos a letter inviting the latter to be the consignor in buying and selling
was superseded by the Deed of Definite Sale dated May 4, 1979 which petitioner signed upon leaf tobacco and other native products. Terms and conditions were also contained in the letter.
Parangan's representation that the same merely evidences the loans extended by him unto Accepting the invitation, Rallos proceeded to do a considerable business with Yangco through
the former. For fear that her property might be prejudiced by the continued borrowing of the said Collantes, as his factor, sending to him as agent for Yangco a good deal of produce to
Parangan, petitioner demanded the return of her certificate of title. Instead of complying with be sold on commission. Rallos sent to the said Collantes, as agent for Yangco, 218 bundles
the request, Parangan asserted his rights over the property which allegedly had become his by of tobacco in the leaf to be sold on commission, as had been other produce previously. The
virtue of the aforementioned Deed of said Collantes received said tobacco and sold it for the sum of P1,744. The charges for such
Definite Sale. Under said document, petitioner conveyed the subject property and all the sale were P206.96, leaving in the hands of said Collantes the sum of 1,537.08 belonging to
improvements thereon unto Parangan absolutely for and in consideration of the Rallos. This sum was, apparently, converted to his own use by said agent. It appears, however,
sum of Seventy Five Thousand (P75,000.00) Pesos. that prior to the sending of said tobacco Yangco had severed his relations with Collantes and
that the latter was no longer acting as his factor. This fact was not known to Rallos; and it is
ISSUE: W/N petitioner's property is liable to PNB for the loans contracted by Parangan by virtue conceded in the case that no notice of any kind was given by Yangco of the termination of the
of the special power of attorney. relations between Yangco and his agent, Collantes. Yangco thus refused to pay the said sum
upon demand of Rallos, placing such refusal upon the ground that at the time the said tobacco powers according to the true tenor and purport of the same” does NOT create an agency
was received and sold by Collantes, he was acting personally and not as agent of Yangco. coupled with an interest, nor does it clothe the agency with an irrevocable character.

ISSUE: Whether or not Yangco as principal is liable brought by the sale of theproduce • A mere statement in the power of attorney that is coupled with an interest is not enough. In
what does such interest consist must be stated in the power of attorney.
RULING: Yes. Yangco, as principal is liable. Having advertised the fact that Collantes was his
agent and having given special notice to Rallos of that fact, and having given them a special • The fact that principal had mortgaged the improvements of the parcel of land to agent is not
invitation to deal with such agent, it was the duty of Yangco on the termination of the such an interest as could render irrevocable the power of attorney executed in favor of the
relationship of the principal and agent to give due and timely notice thereof to Rallos. Failing agent.
to do so, he is responsible to them for whatever goods may have been in good faith and
without negligence sent to the agent without knowledge, actual or constructive, of the • The mortgage has nothing to do with the power of attorney and may be foreclosed by the
termination of such relationship. mortgagee upon failure of the mortgagor to comply with his obligation.

DEL ROSARIO V ABAD (ART. 2) YES. Sale is null and void. Teodorico not entitled to reimbursement, but without prejudice
to right of Primitivo to foreclose the mortgage on the improvements of the land if the
FACTS: mortgage debt is not paid by heirs of Tiburcio.

• Tiburcio del Rosario obtained a loan from Primitivo Abad in the sum of P2,000 with a 12% • As the agency is not coupled with an interest, it was terminated upon the death of Tiburcio.
interest payable on 31 December 1941. The agent could no longer validly convey the parcel of land to Teodorico. The sale, therefore,
is null and void.
• As security for payment, he mortgaged the improvements of the parcel of land in favor of
Primitivo. • Even if the power-of-attorney remained valid, sale would still be in violation of the law that
prohibits the alienation or encumbrance of lands acquired by homestead from the date of
• Title for said land, located in Nueva Ecija, was issued under a homestead patent in 12 approval of the application and for a term of 5 years from and after the issuance of the patent
December 1936. or grant.
• On 24 February 1937, Mortgagor (Tiburcio) also executed an “irrevocable power of attorney LIM v. SABAN
coupled with interest” in favor of the mortgagee (Primitivo), authorizing him among others, to
sell and convey the parcel of land. 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
• Sometime in December 1945, Tiburcio died leaving the mortgage debt unpaid. 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.
• On 9 June 1947, Primitivo, acting as attorney-infact of Tiburcio, sold the parcel of land to his
son Teodorico Abad for P1 and the payment of Tiburcio’s mortgage debt.
Through Saban's efforts, Ybañez and his wife were able to sell the lot to the petitioner
• Children and heirs of Tiburcio brought a suit to recover possession and ownership of land. 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
ISSUES: 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
3) W/N the power-of-attorney was coupled with an interest? No. other incidental expenses of the sale.
4) W/N the sale of Primitivo to Teodrico was null and void? Yes.
After the sale, Lim remitted to Saban the amounts of P113,257 for payment of taxes due on
HELD: 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.
1) NO. Since it is not an agency coupled with an interest, agency is terminated upon death
of principal Tiburcio. 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
• The power of attorney executed by Tiburcio (principal) in favor of Primitivo (agent) providing,
another partial payment" for the lot in his (Ybañez's) favor.
among others, “that it is coupled with an interest in favor of the attorney, and is therefore
irrevocable, and conferring upon my said attorney full and ample power and authority to do
After the four checks in his favor were dishonored upon presentment, Saban filed a
and perform all things reasonably necessary and proper for the due carrying out of the said
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 In her appeal, Lina Sevilla claims that a joint bussiness venture was entered into by and
was not a licensed real estate broker. Ybañez was able to convince Lim to cancel all four between her and appellee TWS with offices at the Ermita branch office and that she was not
checks. an employee of the TWS to the end that her relationship with TWS was one of a joint
business venture appellant made declarations.
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 Issue: Whether or not the padlocking of the premises by the Tourist World Service, Inc.
broker. without the knowledge and consent of the appellant Lina Sevilla entitled the latter to the
relief of damages prayed for and whether or not the evidence for the said appellant supports
ISSUE: Whether Saban is entitled to receive his commission from the sale the contention that the appellee Tourist World Service, Inc. unilaterally and without the
consent of the appellant disconnected the telephone lines of the Ermita branch office of the
HELD: Yes, Saban is entitled to receive his commission from the sale. appellee Tourist World Service, Inc.?

The Supreme Court held that to deprive Saban of his commission subsequent to the sale Held: The trial court held for the private respondent on the premise that the private
which was consummated through his efforts would be a breach of his contract of agency respondent, Tourist World Service, Inc., being the true lessee, it was within its prerogative to
with Ybañez which expressly states that Saban would be entitled to any excess in the terminate the lease and padlock the premises. It likewise found the petitioner, Lina Sevilla, to
purchase price after deducting the P200,000.00 due to Ybañez and the transfer taxes and be a mere employee of said Tourist World Service, Inc. and as such, she was bound by the
other incidental expenses of the sale. acts of her employer. The respondent Court of Appeal rendered an affirmance.

Moreover, the Court has already decided in earlier cases that would be in the height of In this jurisdiction, there has been no uniform test to determine the evidence of an
injustice to permit the principal to terminate the contract of agency to the prejudice of the employer-employee relation. In general, we have relied on the so-called right of control test,
broker when he had already reaped the benefits of the broker's efforts. "where the person for whom the services are performed reserves a right to control not only
the end to be achieved but also the means to be used in reaching such end." Subsequently,
SEVILLA VS. COURT OF APPEALS however, we have considered, in addition to the standard of right-of control, the existing
economic conditions prevailing between the parties, like the inclusion of the employee in the
Employer-Employee Relationship payrolls, in determining the existence of an employer-employee relationship.

Facts: The petitioners invoke the provisions on human relations of the Civil Code in this the Decision promulgated on January 23, 1975 as well as the Resolution issued on July 31,
appeal by certiorari. 1975, by the respondent Court of Appeals is hereby REVERSED and SET ASIDE. The private
respondent, Tourist World Service, Inc., and Eliseo Canilao, are ORDERED jointly and severally
Mrs. Segundina Noguera, party of the first part; the Tourist World Service, Inc., represented to indemnify the petitioner, Lina Sevilla, the sum of 25,00.00 as and for moral damages, the
by Mr. Eliseo Canilao as party of the second part, and hereinafter referred to as appellants, sum of P10,000.00, as and for exemplary damages, and the sum of P5,000.00, as and for
the Tourist World Service, Inc. leased the premises belonging to the party of the first part at nominal and/or temperate damages.
Mabini St., Manila for the former-s use as a branch office. In the said contract the party of
the third part held herself solidarily liable with the party of the part for the prompt payment VALENZUELA V CA G.R. NO. 83122 OCTOBER 19, 1990
of the monthly rental agreed on. When the branch office was opened, the same was run by
the herein appellant Una 0. Sevilla payable to Tourist World Service Inc. by any airline for any Facts: Petitioner Valenzuela, a General Agent respondent Philamgen, was authorized to
fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to solicit and sell all kinds of non-life insurance. He had a 32.5% commission rate. From 1973 to
be withheld by the Tourist World Service, Inc. 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
On November 24, 1961 the Tourist World Service, Inc. appears to have been informed that receive his full commission which amounted to P1.6 Million from the P4.4 Million. Premium
Lina Sevilla was connected with a rival firm, the Philippine Travel Bureau, and, since the payments amounting to P1,946,886.00 were paid directly to Philamgen. Valenzuela’s
branch office was anyhow losing, the Tourist World Service considered closing down its commission amounted to P632,737.00.
office.
Philamgen wanted to cut Valenzuela’s commission to 50% of the amount. He declined.
On June 17,1963, appellant Lina Sevilla refiled her case against the herein appellees and after When Philamgen offered again, Valenzuela firmly reiterated his objection.
the issues were joined, the reinstated counterclaim of Segundina Noguera and the new
complaint of appellant Lina Sevilla were jointly heard following which the court ordered both Philamgen took drastic action against Valenzuela. They: reversed the commission due him,
cases dismiss for lack of merit. 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 There is an exception to the principle that an agency is revocable at will and that is when the
court found that the principal cause of the termination as agent was his refusal to share his agency has been given not only for the interest of the principal but also for the mutual
Delta commission. 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
The court considered these acts as harassment and ordered the company to pay for the contractual or quasi-contractual duty which he owes his agent, the agent may as a rule bring
resulting damage in the value of the commission. They also ordered the company to pay an appropriate action for the breach of that duty.
350,000 in moral damages.
2. Hence, if a principal acts in bad faith and with abuse of right in terminating the agency,
The company appealed. The CA ordered Valenzuela to pay the entire amount of the then he is liable in damages. The Civil Code says that "every person must in the exercise of
commission. Hence, this appeal by Valenzuela. 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,
Issue:
wilfully or negligently causes damages to another, shall indemnify the latter for the same
1. WON the agency contract is coupled with interest on the part of agent Valenzuela. (Art. 20, Civil Code).

2. Whether or not Philamgen can be held liable for damages due to the termination of the 3. As to the issue of whether or not the petitioners are liable to Philamgen for the unpaid and
General Agency Agreement it entered into with the petitioners. uncollected premiums which the appellate court ordered Valenzuela to pay, the respondent
court erred in holding Valenzuela liable.
3. WON Valenzuela should pay the premiums he collected.
Under Section 77 of the Insurance Code, the remedy for the non-payment of premiums is to
Held: Yes. Yes. Petition granted put an end to and render the insurance policy not binding.

Ratio: 1. In any event the principal's power to revoke an agency at will is so pervasive, that Philippine Phoenix- non-payment of premium does not merely suspend but puts an end to an
the Supreme Court has consistently held that termination may be effected even if the insurance contract since the time of the payment is peculiarly of the essence of the contract.
principal acts in bad faith, subject only to the principal's liability for damages.
Section 776 of the insurance Code says that no contract of insurance by an insurance
The Supreme Court accorded great weight on the trial court’s factual findings and found the company is valid and binding unless and until the premium has been paid, notwithstanding
cause of the conflict to be Valenzuela’s refusal to share the commission. Philamgen told the any agreement to the contrary
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 Since the premiums have not been paid, the policies issued have lapsed. The insurance
commission after full payment by Delta. 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.
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 The court held that the CA’s giving credence to an audit that showed Valenzuela owing
pressured the agents to share the income with the threat to terminate the agency. The Philamgen P1,528,698.40 was unwarranted. Valenzuela had no unpaid account with
petitioners were also told that the Delta commissions would not be credited to their account. Philamgen. But, facts show that the beginning balance of Valenzuela's account with
This continued until the agency was terminated. Philamgen amounted to P744,159.80. 4 statements of account were sent to the agent.

Records also show that the agency is one "coupled with an interest," and, therefore, should It was only after the filing of the complaint that a radically different statement of accounts
not be freely revocable at the unilateral will of the company. 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
The records sustain the finding that the private respondent started to covet a share of the over unconfirmed and unaudited statements made to support a position made in the course
insurance business that Valenzuela had built up, developed and nurtured. The company of defending against a lawsuit.
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 The records of Philamgen itself are the best refutation against figures made as an
insured for unpaid premiums. 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
Under these circumstances, it is clear that Valenzuela had an interest in the continuation of the agency agreement.
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 After off-setting the amount, Valenzuela had overpaid Philamgen the amount of P530,040.37
respondents cannot state that the agency relationship between Valenzuela and Philamgen is as of November 30, 1978. Philamgen cannot later be heard to complain that it committed a
not coupled with interest. 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 Plant. Both predecessors and successor were owned and controlled by the petitioner
occasions where Philamgen was duly represented by its account executives. On the basis of Eduardo Claparols and there was no break in the succession and continuity of the same
these admissions and representations, Philamgen cannot later on assume a different posture business. This "avoiding-the-liability" scheme is very patent, considering that 90% of the
and claim that it was mistaken in its representation with respect to the correct beginning subscribed shares of stocks of the Claparols Steel Corporation (the second corporation) was
balance as of July 1977 amounting to P744,159.80. The audit report commissioned by owned by respondent (herein petitioner) Claparols himself, and all the assets of the dissolved
Philamgen is unreliable since its results are admittedly based on an unconfirmed and Claparols Steel and Nail Plant were turned over to the emerging Claparols Steel Corporation.
unaudited beginning balance of P1,758,185.43. It is very obvious that the second corporation seeks the protective shield of a corporate
fiction whose veil in the present case could, and should, be pierced as it was deliberately and
Philamgen has been appropriating for itself all these years the gross billings and income that maliciously designed to evade its financial obligation to its employees. Furthermore, the
it took away from the petitioners. A principal can be held liable for damages in cases of Court cited Yutivo & Sons Hardware Company vs. Court of Tax Appeals where it held that
unjust termination of agency. This Court ruled that where no time for the continuance of the when the notion of legal entity is used to defeat public convenience, justify wrong, protect
contract is fixed by its terms, either party is at liberty to terminate it at will, subject only to fraud, or defend crime, the law will regard the corporation as an association or persons, or, in
the ordinary requirements of good faith. The right of the principal to terminate his authority the case of two corporations, will merge them into one.
is absolute and unrestricted, except only that he may not do so in bad faith.
FEDERICO VALERA, vs. MIGUEL VELASCO,
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 FACTS: By virtue of the powers of attorney executed by the plaintiff-appellant, the
from or as a result of the agency shall be entertained by the courts after that date. defendant-appellee was appointed attorney-in-fact with authority to manage his property in
the Philippines, consisting of the usufruct of a real property. The liquidation of accounts
CLAPAROLS, ET. AL. V. COURT OF INDUSTRIAL RELATIONS, ET. AL., 65 SCRA 613 revealed that the plaintiff-appellant owed the defendant P1100, and as misunderstanding
arose between them, the defendant-appellee brought suit against the plaintiff-appellant .
FACTS: A complaint for unfair labor practice was filed by herein private respondent Allied
The trial court decided in favor of agent; sheriff levied upon plaintiff-appellant’s right of
Workers' Association, respondent Demetrio Garlitos and ten (10) respondent workers against
usufruct, sold it at public auction and adjudicated it to defendant-appellee in payment of his
herein petitioners on account of the dismissal of respondent workers from petitioner
claim. Plaintiff-appellant sold his right of redemption to Eduardo Hernandez- Hernandez
Claparols Steel and Nail Plant. On September 16, 1963, respondent Court rendered its
conveyed the same right of redemption himself-but then another person Salvador Vallejo,
decision finding "Mr. Claparols guilty of union busting and" of having "dismissed said
who had an execution upon a judgment against the plaintiff rendered in another case, levied
complainants because of their union activities," and ordering respondents "(1) To cease and
upon said right of redemption- right of redemption sold to Vallejo and was definitely
desist from committing unfair labor practices against their employees and laborers; (2) To
adjudicated to him. Later, he transferred the said right of redemption to defendant-appellee.
reinstate said complainants to their former or equivalent jobs, as soon as possible, with back
The title was consolidated in his name, thus, the agent got the title to the right of usufruct to
wages from the date of their dismissal up to their actual reinstatement". Counsel for herein
the aforementioned property.
respondent workers filed a motion for execution which was granted. On January 23, 1965,
petitioners filed an opposition alleging that under the circumstances presently engulfing the ISSUE: WON the agency was terminated
company, petitioner Claparols could not personally reinstate respondent workers; that
assuming the workers are entitled to back wages, the same should only be limited to three HELD: YES. Art 1732- Agency is terminated by: a) revocation, b) withdrawal of agent, c) death,
months pursuant to the court ruling in the case of Sta. Cecilia Sawmills vs. CIR; and that since interdiction, bankruptcy, or insolvency of the principal or of the agent. While Art 1736- An
Claparols Steel Corporation ceased to operate on December 7, 1962, re-employment of agent may withdraw by giving notice to principal. If principal suffer any damage, agent must
respondent workers cannot go beyond December 7, 1962. On the other had respondent indemnify him unless the agent’s reason should be the impossibility of continuing to act as
workers, contended that Claparols Steel and Nail Plant and Claparols Steel and Nail such without serious detriment to himself. The misunderstanding between the plaintiff and
Corporation are one and the same corporation controlled by petitioner Claparols, with the the defendant over the payment of the balance of P1,000 due the latter more than prove the
latter corporation succeeding the former. breach of the juridical relation between them; for, although the agent has not expressly told
his principal that he renounced the agency, yet neither dignity nor decorum permits the
ISSUE: Whether or not the amount of back wages recoverable by respondent workers from latter to continue representing a person who has adopted such an antagonistic attitude
petitioners should be the amount accruing up to December 7, 1962 when the Claparols Steel towards him. When the agent filed a complaint against his principal for recovery of a sum of
Corporation ceased operations. money arising from the liquidation of the accounts between them in connection with the
agency, principal could not have understood otherwise than that agent renounced the
RULING: Yes. It is not disputed that Claparols Steel and Nail Plant, which ceased operation of
agency; because his act was more expressive than words and could not have caused any
June 30, 1957, was succeeded by the Claparols Steel Corporation effective the next day, July
doubt. In order to terminate their relations by virtue of the agency the defendant, as agent,
1, 1957 up to December 7, 1962. It is very clear that the latter corporation was a
rendered his final account on March 31, 1923 to the plaintiff, as principal.
continuation and successor of the first entity, and its emergence was skillfully timed to avoid
the financial liability that already attached to its predecessor, the Claparols Steel and Nail
Briefly, then, the fact that an agent institutes an action against his principal for the recovery validity of the contract. Moreover, the Supreme Court held that the municipality had no
of the balance in his favor resulting from the liquidation of the accounts between them power to grant exclusive privileges of fishing for more than 5 years.
arising from the agency, and renders and final account of his operations, is equivalent to an
express renunciation of the agency, and terminates the juridical relation between them. (2) NO. Essentially, the contract of management and administration between the
Hence, the said agent's purchase of the aforesaid principal's right of usufruct at public Municipality and Lacuesta is one of agency whereby a person binds himself to render some
auction held by virtue of an execution issued upon the judgment rendered in favor of the service or to do something in representation or on behalf of another, with the consent or
former and against the latter, is valid and legal. Moreover, the defendant-appellee, having authority of the latter. Lacuesta bound himself as Manager-Administrator of the Bayambang
acquired right of redemption from Salvador Vallejo, who had acquired it at public auction by Fishing and Hunting Park and Municipal Watershed to render service or perform duties and
virtue of a writ of execution issued upon the judgment obtained by the said Vallejo against responsibilities in representation or on behalf of the Municipality of Bayambang, with the
the said plaintiff, the latter lost all right to said usufruct. Neither did the trial court err in not consent or authority of the latter. Under Art. 1919 of the Civil Code, agency is extinguished
ordering the agent to render a liquidation of accounts from March 31, 1923, inasmuch as he by the death of the agent. His rights and obligations arising from the contract are not
had acquired the rights of the plaintiff by purchase at the execution sale, and as purchaser, transmittable to his heirs or predecessors-in-interest.
he was entitled to receive the rents from the date of the sale until the date of the
RALLOS V FELIX GO CHAN (ART. 1931)
repurchase, considering them as part of the redemption price; but not having exercised the
right repurchase during the legal period, and the title of the repurchaser having become FACTS: Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel of
absolute, the latter did not have to account for said rents land in Cebu. They executed an SPA in favor of their brother, Simeon Rallos, authorizing him
to sell for and in their behalf. A year after, Concepcion died. Six months after, Simeon, as
TERRADO V CA (ART. 1919)
agent, sold the undivided shares of his sisters to private respondent, Felix Go Chan Realty.
FACTS: On January 21, 1973, the Philippine Legislature ceded a certain portion of Bayambang The deed of sale was registered and a new transfer certificate of Title was issued in the name
Province of Pangasinan (which was once public land) to the municipality of the Bayambang to of the vendee. Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos
be used or disposed of in accordance with the general municipal law relative to the letting of filed a complaint praying (1) that the sale of the undivided share of the deceased Concepcion
fisheries in municipal waters. On 1974, the municipality of Bayambang enacted Ordinance Rallos be decalred unenforceable, and said share be reconveyed to her estate; (2) that the
No. 8, establishing the Bayambang Fishery and Hunting Park and Municipal Water Shed. Also Certificate of title be cancelled and another title be issued in the names of the corporation
in the said ordinance, the municipality appointed and constituted private respondent and the "Intestate estate of Concepcion Rallos."
Lacuesta as Manager-Administrator of the watershed for a period of 25 years, renewable for
ISSUE: Is the sale of the undivided share of Concepcion Rallos valid although it was executed
another 25 years. This is under the condition that saidnrespondent shall pay the municipality
by the agent after the death of his principal? If such death extinguishes agency, is it subject
the sum equivalent to 10% of the annual gross income that may be derived from the forest
to exceptions?
products, wild game and fish. Such ordinance was approved by the Provincial Board of
Pangasinan but was disapproved by the Secretary of Agriculture and Natural Resources as it HELD: NO. 1. ART. 1919. Agency is extinguished. By the death, civil interdiction, insanity or
“grants fishery privileges to respondent Lacuesta without the benefit of competitive public insolvency of the principal or of the agent; ... By reason of the very nature of the relationship
hearing in contravention to law.” The municipality then informed Lacuesta of the disapproval between Principal and agent, agency is extinguished by the death of the principal or the
of the ordinance and directed him to refrain and desist from acting as Administrator- agent. The rationale for the law is found in the juridical basis of agency which is
Manager. However, Lacuesta refused and insisted on retaining possession of the fisheries. representation, an integration of the personality of the principal and of the agent.
Despite such refusal, the municipality of Bayambang passed another resolution resolving to
advertise for public bidding the said fishery area. Among the winning bidders are herein 2. Is the instant case an exception since corporation acted in good faith in buying the
petitioners. There was a long line of petitions/motions filed in the RTC, CA, and SC filed by property in question?
both parties. What is important is that while the case was pending in the CFI of Pangasinan,
Lacuesta died. The judge of said court (Judge Villalon, also a respondent) sided with Lacuesta. No. The exceptions in Article 1931 apply only if the good faith of the third party purchaser is
As such, despite the fact that Lacuesta died, she still ordered the restoration of the coupled with lack of knowledge on the side of the Agent of the death of the Principal. If one
possession of all fisheries and areas covered by the contract to Lacuesta and his party. is absent, act of agent is invalid and unenforceable. As it has been established by the lower
courts that Simeon knew of the death, this case does not fall under Article 1931. CA held that
ISSUES: (1) Whether or not the Management Administration contract between the no notice of the death was aver annotated on said certificate of title by the heirs of the
municipality and Lacuesta was valid principal and accordingly they must suffer the consequences of such omission. SC rules that
such recourse treats of revocation by an act of the principal as a mode of terminating an
(2) Whether or not the Management-Administration contract still stands even if Lacuesta agency, which is to be distinguished from revocation by operation of law such as death of the
already died principal. The Civil Code does not impose a duty on the heirs to notify the agent of the death
of the principal. What the Code provides in Article 1932 is that, if the agent die his heirs must
HELD: (1) NO. The Management-Administration contract entered into by Lacuesta and the
notify the principal thereof.
municipalty was void as it lacked a vital procedural aspect (public bidding) necessary for the
Metropolitan Bank & Trust Company, Inc. vs. Board of Trustees of Riverside Mills
Corporation Provident and Retirement Fund 630 SCRA 350

FACTS:

The Riverside Mills Corporation (RMC) established a Plan for its regular employees. The
contributions to the plan shall form part of the Fund which shall be held, invested and
distributed by the Commercial Bank and Trust Company. The BOT of the fund entered into
an agreement with Philbank to act as an agent of the BOT and to hold, manage, invest and
reinvest the Fund in Trust Account No. 1797 in its behalf. When RMC ceased its business
operations, the BOD of Philbank decided to apply the remaining trust assets held by it in
the name of the Fund against part of the RMC’s outstanding obligations.

When the unpaid employees of RMC learned of the trust account, they demanded the
payment of their share, which went unheeded. They, together with the members of the
Fund, filed a complaint for accounting against the BOD of Philbank and its officers. The trial
court ruled in favor of the BOT of RMC and was affirmed on appeal. The BOD on petition
for review on certiorari under Rule 45 of the Rules of Court contends that without known
claimants of the Fund for eleven (11) years since RMC closed shop, it was justifiable for
petitioner to consider the Fund to have “technically reverted” to, and formed part of RMC’s
assets. Hence, it could be applied to satisfy RMC’s debts to Philbank.

Issue:

Whether the BOD’s contention is correct.

Ruling:

No. The Court held that “a trust is a “fiduciary relationship with respect to property which
involves the existence of equitable duties imposed upon the holder of the title to the
property to deal with it for the benefit of another.” A trust is either express or implied.
Express trusts are those which the direct and positive acts of the parties create, by some
writing or deed, or will, or by words evincing an intention to create a trust.”