Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 76931 May 29, 1991
ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, petitioner,
vs.
COURT OF APPEALS an AMERICAN AIR!LINES INCORPORATE", respondents.
G.R. No. 76933 May 29, 1991
AMERICAN AIRLINES, INCORPORATE", petitioner,
vs.
COURT OF APPEALS an ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, INCORPORATE", respondents.
Francisco A. Lava, Jr. and Andresito X. Fornier for Orient Air Service and Hotel Representatives, Inc.
Sycip, Salazar, Hernandez & Gataitan for Aerican Airlines, Inc.

PA"ILLA, J.:p
his case is a consolidation of t!o "#$ petitions for revie! on certiorari of a decision
1
of the Court of %ppeals in C%&'.R. No.
CV&()#*), entitled +%,erican %irlines, Inc. vs. Orient %ir Services and -otel Representatives, Inc.+ !hich
affir,ed, !ith ,odification, the decision
2
of the Re.ional rial Court of Manila, /ranch IV, !hich
dis,issed the co,plaint and .ranted therein defendant0s counterclai, for a.ent0s overridin. co,,ission
and da,a.es.
he antecedent facts are as follo!s1
On 23 4anuar5 2*66, %,erican %irlines, Inc. "hereinafter referred to as %,erican %ir$, an air carrier
offerin. passen.er and air car.o transportation in the Philippines, and Orient %ir Services and -otel
Representatives "hereinafter referred to as Orient %ir$, entered into a 'eneral Sales %.enc5 %.ree,ent
"hereinafter referred to as the %.ree,ent$, !hereb5 the for,er authori7ed the latter to act as its e8clusive
.eneral sales a.ent !ithin the Philippines for the sale of air passen.er transportation. Pertinent provisions
of the a.ree,ent are reproduced, to !it1
9INESSE-
In consideration of the ,utual convenants herein contained, the parties hereto a.ree as
follo!s1
2. Representation of Aerican !y Orient Air Services
Orient %ir Services !ill act on %,erican0s behalf as its e8clusive 'eneral Sales %.ent
!ithin the Philippines, includin. an5 :nited States ,ilitar5 installation therein !hich are
not serviced b5 an %ir Carrier Representation Office "%CRO$, for the sale of air passen.er
transportation. he services to be perfor,ed b5 Orient %ir Services shall include1
"a$ solicitin. and pro,otin. passen.er traffic for the services of %,erican
and, if necessar5, e,plo5in. staff co,petent and sufficient to do so;
"b$ providin. and ,aintainin. a suitable area in its place of business to
be used e8clusivel5 for the transaction of the business of %,erican;
"c$ arran.in. for distribution of %,erican0s ti,etables, tariffs and
pro,otional ,aterial to sales a.ents and the .eneral public in the
assi.ned territor5;
"d$ servicin. and supervisin. of sales a.ents "includin. such sub&a.ents
as ,a5 be appointed b5 Orient %ir Services !ith the prior !ritten consent
of %,erican$ in the assi.ned territor5 includin. if re<uired b5 %,erican
the control of re,ittances and co,,issions retained; and
"e$ holdin. out a passen.er reservation facilit5 to sales a.ents and the
.eneral public in the assi.ned territor5.
In connection !ith scheduled or non&scheduled air passen.er transportation !ithin the
:nited States, neither Orient %ir Services nor its sub&a.ents !ill perfor, services for an5
other air carrier si,ilar to those to be perfor,ed hereunder for %,erican !ithout the prior
!ritten consent of %,erican. Sub=ect to periodic instructions and continued consent fro,
%,erican, Orient %ir Services ,a5 sell air passen.er transportation to be perfor,ed
!ithin the :nited States b5 other scheduled air carriers provided %,erican does not
provide substantiall5 e<uivalent schedules bet!een the points involved.
888 888 888
). Reittances
Orient %ir Services shall re,it in :nited States dollars to %,erican the tic>et stoc> or
e8chan.e orders, less co,,issions to !hich Orient %ir Services is entitled hereunder, not
less fre<uentl5 than se,i&,onthl5, on the 23th and last da5s of each ,onth for sales
,ade durin. the precedin. half ,onth.
%ll ,onies collected b5 Orient %ir Services for transportation sold hereunder on
%,erican0s tic>et stoc> or on e8chan.e orders, less applicable co,,issions to !hich
Orient %ir Services is entitled hereunder, are the propert5 of %,erican and shall be held
in trust b5 Orient %ir Services until satisfactoril5 accounted for to %,erican.
3. "oissions
%,erican !ill pa5 Orient %ir Services co,,ission on transportation sold hereunder b5
Orient %ir Services or its sub&a.ents as follo!s1
"a$ Sales a#ency coission
%,erican !ill pa5 Orient %ir Services a sales a.enc5 co,,ission for all sales of
transportation b5 Orient %ir Services or its sub&a.ents over %,erican0s services and an5
connectin. throu.h air transportation, !hen ,ade on %,erican0s tic>et stoc>, e<ual to the
follo!in. percenta.es of the tariff fares and char.es1
"i$ ?or transportation solel5 bet!een points !ithin the :nited States and
bet!een such points and Canada1 6@ or such other rate"s$ as ,a5 be
prescribed b5 the %ir raffic Conference of %,erica.
"ii$ ?or transportation included in a throu.h tic>et coverin. transportation
bet!een points other than those described above1 A@ or such other
rate"s$ as ,a5 be prescribed b5 the International %ir ransport
%ssociation.
"b$ Overridin# coission
In addition to the above co,,ission %,erican !ill pa5 Orient %ir Services an overridin.
co,,ission of B@ of the tariff fares and char.es for all sales of transportation over
%,erican0s service b5 Orient %ir Service or its sub&a.ents.
888 888 888
2(. $efa%lt
If Orient %ir Services shall at an5 ti,e default in observin. or perfor,in. an5 of the
provisions of this %.ree,ent or shall beco,e ban>rupt or ,a>e an5 assi.n,ent for the
benefit of or enter into an5 a.ree,ent or pro,ise !ith its creditors or .o into li<uidation,
or suffer an5 of its .oods to be ta>en in e8ecution, or if it ceases to be in business, this
%.ree,ent ,a5, at the option of %,erican, be ter,inated forth!ith and %,erican ,a5,
!ithout pre=udice to an5 of its ri.hts under this %.ree,ent, ta>e possession of an5 tic>et
for,s, e8chan.e orders, traffic ,aterial or other propert5 or funds belon.in. to %,erican.
22. IA&A and A&" R%les
he provisions of this %.ree,ent are sub=ect to an5 applicable rules or resolutions of the
International %ir ransport %ssociation and the %ir raffic Conference of %,erica, and
such rules or resolutions shall control in the event of an5 conflict !ith the provisions
hereof.
888 888 888
2B. &erination
%,erican ,a5 ter,inate the %.ree,ent on t!o da5s0 notice in the event Orient %ir
Services is unable to transfer to the :nited States the funds pa5able b5 Orient %ir
Services to %,erican under this %.ree,ent. Either part5 ,a5 ter,inate the %.ree,ent
!ithout cause b5 .ivin. the other B( da5s0 notice b5 letter, tele.ra, or cable.
888 888 888
3
On 22 Ma5 2*A2, alle.in. that Orient %ir had rene.ed on its obli.ations under the %.ree,ent b5 failin. to
pro,ptl5 re,it the net proceeds of sales for the ,onths of 4anuar5 to March 2*A2 in the a,ount of :S
C#3),)((.)(, %,erican %ir b5 itself undertoo> the collection of the proceeds of tic>ets sold ori.inall5 b5
Orient %ir and ter,inated forth!ith the %.ree,ent in accordance !ith Para.raph 2B thereof "er,ination$.
?our ")$ da5s later, or on 23 Ma5 2*A2, %,erican %ir instituted suit a.ainst Orient %ir !ith the Court of
?irst Instance of Manila, /ranch #), for %ccountin. !ith Preli,inar5 %ttach,ent or 'arnish,ent,
Mandator5 In=unction and Restrainin. Order
#
averrin. the aforesaid basis for the ter,ination of the
%.ree,ent as !ell as therein defendant0s previous record of failures +to pro,ptl5 settle past outstandin.
refunds of !hich there !ere available funds in the possession of the defendant, . . . to the da,a.e and
pre=udice of plaintiff.+
$
In its %ns!er
6
!ith counterclai, dated * 4ul5 2*A2, defendant Orient %ir denied the ,aterial alle.ations
of the co,plaint !ith respect to plaintiff0s entitle,ent to alle.ed unre,itted a,ounts, contendin. that after
application thereof to the co,,issions due it under the %.ree,ent, plaintiff in fact still o!ed Orient %ir a
balance in unpaid overridin. co,,issions. ?urther, the defendant contended that the actions ta>en b5
%,erican %ir in the course of ter,inatin. the %.ree,ent as !ell as the ter,ination itself !ere untenable,
Orient %ir clai,in. that %,erican %ir0s precipitous conduct had occasioned pre=udice to its business
interests.
?indin. that the record and the evidence substantiated the alle.ations of the defendant, the trial court
ruled in its favor, renderin. a decision dated 2D 4ul5 2*A), the dispositive portion of !hich reads1
9-ERE?ORE, all the fore.oin. pre,ises considered, =ud.,ent is hereb5 rendered in
favor of defendant and a.ainst plaintiff dis,issin. the co,plaint and holdin. the
ter,ination ,ade b5 the latter as affectin. the 'S% a.ree,ent ille.al and i,proper and
order the plaintiff to reinstate defendant as its .eneral sales a.ent for passen.er
tranportation in the Philippines in accordance !ith said 'S% a.ree,ent; plaintiff is
ordered to pa5 defendant the balance of the overridin. co,,ission on total flo!n
revenue coverin. the period fro, March 2D, 2*66 to Dece,ber B2, 2*A( in the a,ount of
:SCA),A#2.B2 plus the additional a,ount of :SCA,(((.(( b5 !a5 of proper B@
overridin. co,,ission per ,onth co,,encin. fro, 4anuar5 2, 2*A2 until such
reinstate,ent or said a,ounts in its Philippine peso e<uivalent le.all5 prevailin. at the
ti,e of pa5,ent plus le.al interest to co,,ence fro, the filin. of the counterclai, up to
the ti,e of pa5,ent. ?urther, plaintiff is directed to pa5 defendant the a,ount of One
Million ?ive -undred housand "Pl,3((,(((.(($ pesos as and for e8e,plar5 da,a.es;
and the a,ount of hree -undred housand "PB((,(((.(($ pesos as and b5 !a5 of
attorne50s fees.
Costs a.ainst plaintiff.
7
On appeal, the Inter,ediate %ppellate Court "no! Court of %ppeals$ in a decision pro,ul.ated on #6
4anuar5 2*AD, affir,ed the findin.s of the court a '%o on their ,aterial points but !ith so,e ,odifications
!ith respect to the ,onetar5 a!ards .ranted. he dispositive portion of the appellate court0s decision is
as follo!s1
9-ERE?ORE, !ith the follo!in. ,odifications E
2$ %,erican is ordered to pa5 Orient the su, of (S)*+,,-.... representin. the balance
of the latter0s overridin. co,,ission coverin. the period March 2D, 2*66 to Dece,ber B2,
2*A(, or its /0ilippine peso e'%ivalent in accordance 1it0 t0e official rate of e2c0an#e
le#ally prevailin# on J%ly .3, .-4., t0e date t0e co%nterclai 1as filed;
#$ %,erican is ordered to pa5 Orient the su, of :SC6,))(.(( as the latter0s overridin.
co,,ission per ,onth startin. 4anuar5 2, 2*A2 %ntil date of terination, 5ay -, .-4. or
its /0ilippine peso e'%ivalent in accordance 1it0 t0e official rate of e2c0an#e le#ally
prevailin# on J%ly .3, .-4., t0e date t0e co%nterclai 1as filed
B$ %,erican is ordered to pa5 interest of .67 on said a,ounts fro, 4ul5 2(, 2*A2 the
date the ans!er !ith counterclai, !as filed, until full pa5,ent;
)$ %,erican is ordered to pa5 Orient e2eplary daa#es of /633,333.33;
3$ %,erican is ordered to pa5 Orient the su, of P#3,(((.(( as attorney8s fees.
the rest of the appealed decision is affir,ed.
Costs a.ainst %,erican.
%
%,erican %ir ,oved for reconsideration of the afore,entioned decision, assailin. the substance thereof
and ar.uin. for its reversal. he appellate court0s decision !as also the sub=ect of a Motion for Partial
Reconsideration b5 Orient %ir !hich pra5ed for the restoration of the trial court0s rulin. !ith respect to the
,onetar5 a!ards. he Court of %ppeals, b5 resolution pro,ul.ated on 26 Dece,ber 2*AD, denied
%,erican %ir0s ,otion and !ith respect to that of Orient %ir, ruled thus1
Orient0s ,otion for partial reconsideration is denied insofar as it pra5s for affir,ance of
the trial court0s a!ard of e8e,plar5 da,a.es and attorne50s fees, but .ranted insofar as
the rate of e8chan.e is concerned. he decision of 4anuar5 #6, 2*AD is ,odified in
para.raphs "2$ and "#$ of the dispositive part so that the pa5,ent of the su,s ,entioned
therein shall !e at t0eir /0ilippine peso e'%ivalent in accordance 1it0 t0e official rate of
e2c0an#e le#ally prevailin# on t0e date of act%al payent.
9
/oth parties appealed the aforesaid resolution and decision of the respondent court, Orient %ir as
petitioner in '.R. No. 6D*B2 and %,erican %ir as petitioner in '.R. No. 6D*BB. /5 resolution
1&
of this
Court dated #3 March 2*A6 both petitions !ere consolidated, hence, the case at bar.
he principal issue for resolution b5 the Court is the e8tent of Orient %ir0s ri.ht to the B@ overridin.
co,,ission. It is the stand of %,erican %ir that such co,,ission is based onl5 on sales of its services
actuall5 ne.otiated or transacted b5 Orient %ir, other!ise referred to as +tic>eted sales.+ %s basis thereof,
pri,ar5 reliance is placed upon para.raph 3"b$ of the %.ree,ent !hich, in reiteration, is <uoted as
follo!s1
3. Co,,issions
a$ . . .
b$ Overridin# "oission
In addition to the above co,,ission, %,erican !ill pa5 Orient %ir Services an overridin.
co,,ission of B@ of the tariff fees and char.es for all sales of transportation over
Aerican8s services !y Orient Air Services or its s%!9a#ents. "E,phasis supplied$
Since Orient %ir !as allo!ed to carr5 onl5 the tic>et stoc>s of %,erican %ir, and the for,er not havin.
opted to appoint an5 sub&a.ents, it is %,erican %ir0s contention that Orient %ir can clai, entitle,ent to the
disputed overridin. co,,ission based onl5 on tic:eted sales. his is supposed to be the clear ,eanin. of
the underscored portion of the above provision. hus, to be entitled to the B@ overridin. co,,ission, the
sale ,ust be ,ade b5 Orient %ir and the sale ,ust be done !ith the use of %,erican %ir0s tic>et stoc>s.
On the other hand, Orient %ir contends that the contractual stipulation of a B@ overridin. co,,ission
covers the total revenue of %,erican %ir and not ,erel5 that derived fro, tic>eted sales underta>en b5
Orient %ir. he latter, in =ustification of its sub,ission, invo>es its desi.nation as the e2cl%sive 'eneral
Sales %.ent of %,erican %ir, !ith the correspondin. obli.ations arisin. fro, such a.enc5, such as, the
pro,otion and solicitation for the services of its principal. In effect, b5 virtue of such e8clusivit5, +all sales
of transportation over %,erican %ir0s services are necessaril5 b5 Orient %ir.+
11
It is a !ell settled le.al principle that in the interpretation of a contract, the entiret5 thereof ,ust be ta>en
into consideration to ascertain the ,eanin. of its provisions.
12
he various stipulations in the contract
,ust be read to.ether to .ive effect to all.
13
%fter a careful e8a,ination of the records, the Court finds
,erit in the contention of Orient %ir that the %.ree,ent, !hen interpreted in accordance !ith the fore.oin.
principles, entitles it to the B@ overridin. co,,ission based on total revenue, or as referred to b5 the
parties, +total flo!n revenue.+
%s the desi.nated e8clusive 'eneral Sales %.ent of %,erican %ir, Orient %ir !as responsible for the
pro,otion and ,ar>etin. of %,erican %ir0s services for air passen.er transportation, and the solicitation
of sales therefor. In return for such efforts and services, Orient %ir !as to be paid co,,issions of t!o "#$
>inds1 first, a sales a.enc5 co,,ission, ran.in. fro, 6&A@ of tariff fares and char.es fro, sales b5
Orient Air 10en ade on Aerican Air tic:et stoc:; and second, an overridin. co,,ission of B@ of tariff
fares and char.es for all sales of passen.er transportation over %,erican %ir services. It is i,,ediatel5
observed that the precondition attached to the first t5pe of co,,ission does not obtain for the second
t5pe of co,,issions. he latter t5pe of co,,issions !ould accrue for sales of %,erican %ir services
,ade not on its tic>et stoc> but on the tic>et stoc> of other air carriers sold b5 such carriers or other
authori7ed tic>etin. facilities or travel a.ents. o rule other!ise, i.e., to li,it the basis of such overridin.
co,,issions to sales fro, %,erican %ir tic>et stoc> !ould erase an5 distinction bet!een the t!o "#$
t5pes of co,,issions and !ould lead to the absurd conclusion that the parties had entered into a contract
!ith ,eanin.less provisions. Such an interpretation ,ust at all ti,es be avoided !ith ever5 effort e8erted
to har,oni7e the entire %.ree,ent.
%n additional point before finall5 disposin. of this issue. It is clear fro, the records that %,erican %ir !as
the part5 responsible for the preparation of the %.ree,ent. Conse<uentl5, an5 a,bi.uit5 in this +contract
of adhesion+ is to be ta>en +contra proferente+, i.e., construed a.ainst the part5 !ho caused the
a,bi.uit5 and could have avoided it b5 the e8ercise of a little ,ore care. hus, %rticle 2B66 of the Civil
Code provides that the interpretation of obscure !ords or stipulations in a contract shall not favor the
part5 !ho caused the
obscurit5.
1#
o put it differentl5, !hen several interpretations of a provision are other!ise e<uall5 proper,
that interpretation or construction is to be adopted !hich is ,ost favorable to the part5 in !hose favor the
provision !as ,ade and !ho did not cause the a,bi.uit5.
1$
9e therefore a.ree !ith the respondent
appellate court0s declaration that1
%n5 a,bi.uit5 in a contract, !hose ter,s are susceptible of different interpretations, ,ust
be read a.ainst the part5 !ho drafted it.
16
9e no! turn to the propriet5 of %,erican %ir0s ter,ination of the %.ree,ent. he respondent appellate
court, on this issue, ruled thus1
It is not denied that Orient !ithheld re,ittances but such action finds =ustification fro,
para.raph ) of the %.ree,ent, E8h. ?, !hich provides for re,ittances to %,erican less
coissions to !hich Orient is entitled, and fro, para.raph 3"d$ !hich specificall5
allo!s Orient to retain the full a,ount of its co,,issions. Since, as stated ante, Orient is
entitled to the B@ override. %,erican0s pre,ise, therefore, for the cancellation of the
%.ree,ent did not e8ist. . . .+
9e a.ree !ith the findin.s of the respondent appellate court. %s earlier established, Orient %ir !as
entitled to an overridin. co,,ission based on total flo!n revenue. %,erican %ir0s perception that Orient
%ir !as re,iss or in default of its obli.ations under the %.ree,ent !as, in fact, a situation !here the latter
acted in accordance !ith the %.ree,entEthat of retainin. fro, the sales proceeds its accrued
co,,issions before re,ittin. the balance to %,erican %ir. Since the latter !as still obli.ated to Orient %ir
b5 !a5 of such co,,issions. Orient %ir !as clearl5 =ustified in retainin. and refusin. to re,it the su,s
clai,ed b5 %,erican %ir. he latter0s ter,ination of the %.ree,ent !as, therefore, !ithout cause and
basis, for !hich it should be held liable to Orient %ir.
On the ,atter of da,a.es, the respondent appellate court ,odified b5 reduction the trial court0s a!ard of
e8e,plar5 da,a.es and attorne50s fees. his Court sees no error in such ,odification and, thus, affir,s
the sa,e.
It is believed, ho!ever, that respondent appellate court erred in affir,in. the rest of the decision of the
trial court. 9e refer particularl5 to the lo!er court0s decision orderin. %,erican %ir to +reinstate defendant
as its .eneral sales a.ent for passen.er transportation in the Philippines in accordance !ith said 'S%
%.ree,ent.+
/5 affir,in. this rulin. of the trial court, respondent appellate court, in effect, co,pels %,erican %ir to
e8tend its personalit5 to Orient %ir. Such !ould be violative of the principles and essence of a.enc5,
defined b5 la! as a contract !hereb5 +a person binds hi,self to render so,e service or to do so,ethin.
in representation or on behalf of another, 9I- -E CONSEN OR %:-ORIF O? -E G%ER .
17

"e,phasis supplied$ In an a.ent&principal relationship, the personalit5 of the principal is e8tended throu.h
the facilit5 of the a.ent. In so doin., the a.ent, b5 le.al fiction, beco,es the principal, authori7ed to
perfor, all acts !hich the latter !ould have hi, do. Such a relationship can onl5 be effected !ith the
consent of the principal, !hich ,ust not, in an5 !a5, be co,pelled b5 la! or b5 an5 court. he %.ree,ent
itself bet!een the parties states that +either part5 ,a5 ter,inate the %.ree,ent 1it0o%t ca%se b5 .ivin.
the other B( da5s0 notice b5 letter, tele.ra, or cable.+ "e,phasis supplied$ 9e, therefore, set aside the
portion of the rulin. of the respondent appellate court reinstatin. Orient %ir as .eneral sales a.ent of
%,erican %ir.
9-ERE?ORE, !ith the fore.oin. ,odification, the Court %??IRMS the decision and resolution of the
respondent Court of %ppeals, dated #6 4anuar5 2*AD and 26 Dece,ber 2*AD, respectivel5. Costs a.ainst
petitioner %,erican %ir.
SO ORDERED.
5elencio9Herrera, and Re#alado, JJ., conc%r.
/aras, J., too: no part. Son is a partner in one of t0e co%nsel.
Sariento, J., is on leave.

Foo'no'()
2 Penned b5 4ustice Serafin /. Ca,ilon and concurred in b5 4ustices 4ose C. Ca,pos,
4r. and Desiderio P. 4urado.
# Penned b5 4ud.e -er,inio C. Mariano.
B Rollo, pp. 22(&22A.
) Rollo, p. 2(#.
3 I!id., p. 2().
D I!id., p. 2#2.
6 Rollo, p. 2D#.
A Rollo, pp. 26B&26).
* I!id., p. #2(.
2( Rollo, p. #2#.
22 Rollo, p. #*2.
2# N%ESS Shippin. Philippines, Inc. vs. NGRC, '.R. No. 6B))2, ) Septe,ber 2*A6, 23B
SCR% D36.
2B North Ne.ros Su.ar Co. vs. Co,pania 'eneral de abacos, No. G&*#66, #* March
2*36; %rticle 2B6), Civil Code of the Philippines.
2) E<uitable /an>in. Corporation vs. Inter,ediate %ppellate Court, '.R. No. 6))32, #3
Ma5 2*AA, 2D2 SCR% 32A.
23 'overn,ent of the Philippine Islands vs. Derha, /rothers and the International
/an>in. Corporation, BD Phil. *D(.
he Ga!phil Pro=ect & %rellano Ga! ?oundation