Valenzuela v.
CA o Respondents liable for resulting damage and loss of business of
October 19, 1990 | Guttierez Jr., J. | Extinguishment of Agency
PETITIONER: ARTURO P. VALENZUELA, HOSPITALITA N. VALENZUELA
RESPONDENTS: THE HONORABLE COURT OF APPEALS, et al.
SUMMARY: Valenzuela was a General Agent of respondent Philippine General
Insurance Company, whose agency was terminated because of his refusal to share his
commissions with respondent. Lower Court ruled in favor of Petitioner, because it
found that the agency was one coupled with interest, but CA reversed the decision
hence the case is now before the SC
DOCTRINE: An agency coupled with interest is not freely revocable at the
unilateral will of the principal.
FACTS:
- Petitioner Valenzuela was a General Agent of respondent Philippine
General Insurance Company Inc (Philamgen)
o He was authorized to solicit all kinds of non-life insurance
o In consideration of services, he was entitled to full agents
commission of 32.5%
- From 1973-1975 Valenzuela solicited marine insurance from Delta motors,
in the amount of P4.4M
o He did not receive his full commission which was P1.6M
- From 1976-1978 premiums amounting to P1.9M were paid directly to
Philamgen and Valenzuelas commission amounted to P632k
- Philamgen expressed an intent to have a share in the commission due to
Valenzuela on a 50/50 basis to which Valenzuela refused
- Because of Valenzuelas refusal, Philamgen took drastic actions against him
o Reversed commission due him by not crediting in his account the
commission earned from Delta Motors Insurance
o Placed the agency transactions on a cash and carry basis
o Threatened the cancellation of policies issued by his agency
o Leaked out news that Valenzuela has a substantial account with
Philamgen
- On December 1978, Philamgen terminated the General Agency Agreement
(GAA) of Valenzuela
- Lower court ruled that the acts of harassment done by defendants on
Valenzuela to force him to agree to the sharing of his Delta commission,
which culminated in his termination as General Agent, do not justify said
termination of the General Agency Agreement
Valenzuela
- CA reversed and ordered Valenzuela to pay respondents unpaid and
uncollected premiums
ISSUE/s:
1. WoN Philamgen and/or its officers can be held liable for damages due to
the termination of the General Agency Agreement it entered into with the
petitioners YES
2. WoN Valenzuela is liable to pay Philamgen for unpaid and uncollected
premiums (not important to agency) NO
RULING: SC affirmed the lower courts decision.
RATIO:
1. SC agreed with RTC that the principal cause of the termination of
Valenzuela as General Agent arose from his refusal to share his Delta
commission.
o Records sustain the conclusions of the trial court on the apparent
bad faith of the respondents in terminating the GAA
- Agency involving petitioner and respondent is one coupled with an
interest, and is therefore, not freely revocable at the unilateral will of the
latter
o In the insurance business in the Philippines, the most difficult
period is the solicitation and persuation of the perspective clients to
buy insurance policies In the case of Valenzuela, he was able to
build up an agency from scratch in 1965 to a highly productive
enterprise with gross billings of about P2.5M premiums per
annum
o The respondents, with the simple expedient of terminating the
GAA appropriated the entire insurance business of Valenzuela
o With the termination of the GAA Valenzuela would no longer be
entitled to the commission on the renewal of insurance policies of
clients sourced from his agency
o Worse, despite termination of GAA, Philamgen continued to hold
Valenuela jointly and severally liable with the insured unpaid
premiums.
- If a principal acts in bad faith and with abuse of right in terminating the
agency, then he is liable for damages (Arts 19-21 of the CC)
2. NO. SC held there was no factual and legal basis for the CA issue such
order regarding the unpaid and uncollected premiums.
- Under Sec 77 of the Insurance Code, the remedy for the non-payment
premiums is to put an end to and render the insurance policy not binding
o In this case, since the premiums have not been paid, the policies
issued have lapsed. And the insurance coverage didnt go into
 effect or didnt continue and the obligation of Philamgen as insurer
ceased
o Hence, Philamgen had no more liability under the lapsed and
inexistent policies. Philamgen could neither demand nor sue
Valenzuela for the unpaid premiums since there were no more
insurance contracts to speak of due to the lapsing of the policies
thru the non-payment of premiums by the insured.