G.R. No. 163720 December 16, 2004 of Saban for the remaining P236,743.00.

GENEVIEVE LIM, petitioner, Saban alleged that Ybaez 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 Ybaez and because he was not a licensed real estate broker.
Ybaez was able to convince Lim to cancel all four checks.
vs.

Saban further averred that Ybaez and Lim connived to deprive him of his sales commission by withholding payment
FLORENCIO SABAN, respondents.
of the first three checks. He also claimed that Lim failed to make good the fourth check which was dishonored
because the account against which it was drawn was closed.

In his Answer, Ybaez claimed that Saban was not entitled to any commission because he concealed the actual
DECISION selling price from him and because he was not a licensed real estate broker.

Lim, for her part, argued that she was not privy to the agreement between Ybaez and Saban, and that she issued
stop payment orders for the three checks because Ybaez requested her to pay the purchase price directly to him,
TINGA, J.: instead of coursing it through Saban. She also alleged that she agreed with Ybaez that the purchase price of the lot
was only P200,000.00.

Before the Court is a Petition for Review on Certiorari assailing the Decision1 dated October 27, 2003 of the Court of
Appeals, Seventh Division, in CA-G.R. V No. 60392.2 Ybaez died during the pendency of the case before the RTC. Upon motion of his counsel, the trial court dismissed
the case only against him without any objection from the other parties.10

The late Eduardo Ybaez (Ybaez), the owner of a 1,000-square meter lot in Cebu City (the "lot"), entered into an
Agreement and Authority to Negotiate and Sell (Agency Agreement) with respondent Florencio Saban (Saban) on On May 14, 1997, the RTC rendered its Decision11 dismissing Sabans complaint, declaring the four (4) checks issued
February 8, 1994. Under the Agency Agreement, Ybaez authorized Saban to look for a buyer of the lot for Two by Lim as stale and non-negotiable, and absolving Lim from any liability towards Saban.
Hundred Thousand Pesos (P200,000.00) and to mark up the selling price to include the amounts needed for
payment of taxes, transfer of title and other expenses incident to the sale, as well as Sabans commission for the Saban appealed the trial courts Decision to the Court of Appeals.
sale.3
On October 27, 2003, the appellate court promulgated its Decision12 reversing the trial courts ruling. It held that
Through Sabans efforts, Ybaez and his wife were able to sell the lot to the petitioner Genevieve Lim (Lim) and the Saban was entitled to his commission amounting to P236,743.00.13
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 Thousand Pesos (P200,000.00).4 It appears, however, that the vendees
The Court of Appeals ruled that Ybaezs revocation of his contract of agency with Saban was invalid because the
agreed to purchase the lot at the price of Six Hundred Thousand Pesos (P600,000.00), inclusive of taxes and other
agency was coupled with an interest and Ybaez effected the revocation in bad faith in order to deprive Saban of his
incidental expenses of the sale. After the sale, Lim remitted to Saban the amounts of One Hundred Thirteen
commission and to keep the profits for himself.14
Thousand Two Hundred Fifty Seven Pesos (P113,257.00) for payment of taxes due on the transaction as well as
Fifty Thousand Pesos (P50,000.00) as brokers commission.5 Lim also issued in the name of Saban four postdated
checks in the aggregate amount of Two Hundred Thirty Six Thousand Seven Hundred Forty Three Pesos The appellate court found that Ybaez and Lim connived to deprive Saban of his commission. It declared that Lim is
(P236,743.00). These checks were Bank of the Philippine Islands (BPI) Check No. 1112645 dated June 12, 1994 for liable to pay Saban the amount of the purchase price of the lot corresponding to his commission because she issued
P25,000.00; BPI Check No. 1112647 dated June 19, 1994 for P18,743.00; BPI Check No. 1112646 dated June 26, the four checks knowing that the total amount thereof corresponded to Sabans commission for the sale, as the
1994 for P25,000.00; and Equitable PCI Bank Check No. 021491B dated June 20, 1994 for P168,000.00. agent of Ybaez. The appellate court further ruled that, in issuing the checks in payment of Sabans commission, Lim
acted as an accommodation party. She signed the checks as drawer, without receiving value therefor, for the
purpose of lending her name to a third person. As such, she is liable to pay Saban as the holder for value of the
Subsequently, Ybaez sent a letter dated June 10, 1994 addressed to Lim. In the letter Ybaez asked Lim to cancel
checks.15
all the checks issued by her in Sabans favor and to "extend another partial payment" for the lot in his (Ybaezs)
favor.6
Lim filed a Motion for Reconsideration of the appellate courts Decision, but her Motion was denied by the Court of
Appeals in a Resolution dated May 6, 2004.16
After the four checks in his favor were dishonored upon presentment, Saban filed a Complaint for collection of sum
of money and damages against Ybaez and Lim with the Regional Trial Court (RTC) of Cebu City on August 3,
1994.7 The case was assigned to Branch 20 of the RTC. Not satisfied with the decision of the Court of Appeals, Lim filed the present petition.

In his Complaint, Saban alleged that Lim and the Spouses Lim agreed to purchase the lot for P600,000.00, i.e., with Lim argues that the appellate court ignored the fact that after paying her agent and remitting to Saban the amounts
a mark-up of Four Hundred Thousand Pesos (P400,000.00) from the price set by Ybaez. Of the total purchase price due for taxes and transfer of title, she paid the balance of the purchase price directly to Ybaez.17
of P600,000.00, P200,000.00 went to Ybaez, P50,000.00 allegedly went to Lims agent, and P113,257.00 was given
to Saban to cover taxes and other expenses incidental to the sale. Lim also issued four (4) postdated checks8 in favor
She further contends that she is not liable for Ybaezs debt to Saban under the Agency Agreement as she is not
privy thereto, and that Saban has no one but himself to blame for consenting to the dismissal of the case against
Ybaez and not moving for his substitution by his heirs.18
Lim also assails the findings of the appellate court that she issued the checks as an accommodation party for Ybaez
and that she connived with the latter to deprive Saban of his commission.19
Lim prays that should she be found liable to pay Saban the amount of his commission, she should only be held liable
to the extent of one-third (1/3) of the amount, since she had two co-vendees (the Spouses Lim) who should share
such liability.20
In his Comment, Saban maintains that Lim agreed to purchase the lot for P600,000.00, which consisted of the
P200,000.00 which would be paid to Ybaez, the P50,000.00 due to her broker, the P113,257.00 earmarked for
taxes and other expenses incidental to the sale and Sabans commission as broker for Ybaez. According to Saban,
Lim assumed the obligation to pay him his commission. He insists that Lim and Ybaez connived to unjustly deprive
him of his commission from the negotiation of the sale.21
The issues for the Courts resolution are whether Saban is entitled to receive his commission from the sale; and,
assuming that Saban is entitled thereto, whether it is Lim who is liable to pay Saban his sales commission.
The Court gives due course to the petition, but agrees with the result reached by the Court of Appeals.
The Court affirms the appellate courts finding that the agency was not revoked since Ybaez requested that Lim
make stop payment orders for the checks payable to Saban only after the consummation of the sale on March 10,
1994. At that time, Saban had already performed his obligation as Ybaezs agent when, through his (Sabans)
efforts, Ybaez executed the Deed of Absolute Sale of the lot with Lim and the Spouses Lim.
To deprive Saban of his commission subsequent to the sale which was consummated through his efforts would be a
breach of his contract of agency with Ybaez which expressly states that Saban would be entitled to any excess in
the purchase price after deducting the P200,000.00 due to Ybaez and the transfer taxes and other incidental
expenses of the sale.22
In Macondray & Co. v. Sellner,23 the Court recognized the right of a broker to his commission for finding a suitable
buyer for the sellers property even though the seller himself consummated the sale with the buyer. 24 The Court held
that it would be in the height of injustice to permit the principal to terminate the contract of agency to the prejudice
of the broker when he had already reaped the benefits of the brokers efforts.
In Infante v. Cunanan, et al.,25 the Court upheld the right of the brokers to their commissions although the seller
revoked their authority to act in his behalf after they had found a buyer for his properties and negotiated the sale
directly with the buyer whom he met through the brokers efforts. The Court ruled that the sellers withdrawal in bad
faith of the brokers authority cannot unjustly deprive the brokers of their commissions as the sellers duly
constituted agents.
The pronouncements of the Court in the aforecited cases are applicable to the present case, especially considering
that Saban had completely performed his obligations under his contract of agency with Ybaez by finding a suitable
buyer to preparing the Deed of Absolute Sale between Ybaez and Lim and her co-vendees. Moreover, the contract
of agency very clearly states that Saban is entitled to the excess of the mark-up of the price of the lot after
deducting Ybaezs share of P200,000.00 and the taxes and other incidental expenses of the sale.
However, the Court does not agree with the appellate courts pronouncement that Sabans agency was one coupled
with an interest. Under Article 1927 of the Civil Code, an agency cannot be revoked if a bilateral contract depends
upon it, or if it is the means of fulfilling an obligation already contracted, or if a partner is appointed manager of a
partnership in the contract of partnership and his removal from the management is unjustifiable. Stated differently,
an agency is deemed as one coupled with an interest where it is established for the mutual benefit of the principal
and of the agent, or for the interest of the principal and of third persons, and it cannot be revoked by the principal
so long as the interest of the agent or of a third person subsists. In an agency coupled with an interest, the agents
interest must be in the subject matter of the power conferred and not merely an interest in the exercise of the
power because it entitles him to compensation. When an agents interest is confined to earning his agreed
compensation, the agency is not one coupled with an interest, since an agents interest in obtaining his
compensation as such agent is an ordinary incident of the agency relationship.26
Sabans entitlement to his commission having been settled, the Court must now determine whether Lim is the proper
party against whom Saban should address his claim.
Sabans right to receive compensation for negotiating as broker for Ybaez arises from the Agency Agreement
between them. Lim is not a party to the contract. However, the record reveals that she had knowledge of the fact
that Ybaez set the price of the lot at P200,000.00 and that the P600,000.00the price agreed upon by her and
Sabanwas more than the amount set by Ybaez because it included the amount for payment of taxes and for
Sabans commission as broker for Ybaez.
According to the trial court, Lim made the following payments for the lot: P113,257.00 for taxes, P50,000.00 for her
broker, and P400.000.00 directly to Ybaez, or a total of Five Hundred Sixty Three Thousand Two Hundred Fifty
Seven Pesos (P563,257.00).27 Lim, on the other hand, claims that on March 10, 1994, the date of execution of the
Deed of Absolute Sale, she paid directly to Ybaez the amount of One Hundred Thousand Pesos (P100,000.00) only,
and gave to Saban P113,257.00 for payment of taxes and P50,000.00 as his commission,28 and One Hundred Thirty
Thousand Pesos (P130,000.00) on June 28, 1994,29 or a total of Three Hundred Ninety Three Thousand Two
Hundred Fifty Seven Pesos (P393,257.00). Ybaez, for his part, acknowledged that Lim and her co-vendees paid him
P400,000.00 which he said was the full amount for the sale of the lot.30 It thus appears that he received P100,000.00
on March 10, 1994, acknowledged receipt (through Saban) of the P113,257.00 earmarked for taxes and P50,000.00
for commission, and received the balance of P130,000.00 on June 28, 1994. Thus, a total of P230,000.00 went
directly to Ybaez. Apparently, although the amount actually paid by Lim was P393,257.00, Ybaez rounded off the
amount to P400,000.00 and waived the difference.
Lims act of issuing the four checks amounting to P236,743.00 in Sabans favor belies her claim that she and her co-
vendees did not agree to purchase the lot at P600,000.00. If she did not agree thereto, there would be no reason
for her to issue those checks which is the balance of P600,000.00 less the amounts of P200,000.00 (due to Ybaez),
P50,000.00 (commission), and the P113,257.00 (taxes). The only logical conclusion is that Lim changed her mind
about agreeing to purchase the lot at P600,000.00 after talking to Ybaez and ultimately realizing that Sabans
commission is even more than what Ybaez received as his share of the purchase price as vendor. Obviously, this
change of mind resulted to the prejudice of Saban whose efforts led to the completion of the sale between the
latter, and Lim and her co-vendees. This the Court cannot countenance.
The ruling of the Court in Infante v. Cunanan, et al., cited earlier, is enlightening for the facts therein are similar to
the circumstances of the present case. In that case, Consejo Infante asked Jose Cunanan and Juan Mijares to find a
buyer for her two lots and the house built thereon for Thirty Thousand Pesos (P30,000.00) . She promised to pay
them five percent (5%) of the purchase price plus whatever overprice they may obtain for the property. Cunanan
and Mijares offered the properties to Pio Noche who in turn expressed willingness to purchase the properties.
Cunanan and Mijares thereafter introduced Noche to Infante. However, the latter told Cunanan and Mijares that she
was no longer interested in selling the property and asked them to sign a document stating that their written
authority to act as her agents for the sale of the properties was already cancelled. Subsequently, Infante sold the
properties directly to Noche for Thirty One Thousand Pesos (P31,000.00). The Court upheld the right of Cunanan
and Mijares to their commission, explaining that
[Infante] had changed her mind even if respondent had found a buyer who was willing to close the deal, is a
matter that would not give rise to a legal consequence if [Cunanan and Mijares] agreed to call off the transaction in
deference to the request of [Infante]. But the situation varies if one of the parties takes advantage of the
benevolence of the other and acts in a manner that would promote his own selfish interest. This act is unfair as
would amount to bad faith. This act cannot be sanctioned without according the party prejudiced the reward which
is due him. This is the situation in which [Cunanan and Mijares] were placed by [Infante]. [Infante] took advantage
of the services rendered by [Cunanan and Mijares], but believing that she could evade payment of their commission,
she made use of a ruse by inducing them to sign the deed of cancellation.This act of subversion cannot be
sanctioned and cannot serve as basis for [Infante] to escape payment of the commission agreed upon.31

The appellate court therefore had sufficient basis for concluding that Ybaez and Lim connived to deprive Saban of
his commission by dealing with each other directly and reducing the purchase price of the lot and leaving nothing to
compensate Saban for his efforts.

Considering the circumstances surrounding the case, and the undisputed fact that Lim had not yet paid the balance
of P200,000.00 of the purchase price of P600,000.00, it is just and proper for her to pay Saban the balance of
P200,000.00.

Furthermore, since Ybaez received a total of P230,000.00 from Lim, or an excess of P30,000.00 from his asking
price of P200,000.00, Saban may claim such excess from Ybaezs estate, if that remedy is still available,32 in view of
the trial courts dismissal of Sabans complaint as against Ybaez, with Sabans express consent, due to the latters
demise on November 11, 1994.33

The appellate court however erred in ruling that Lim is liable on the checks because she issued them as an
accommodation party. Section 29 of the Negotiable Instruments Law defines an accommodation party as a person
"who has signed the negotiable instrument as maker, drawer, acceptor or indorser, without receiving value therefor,
for the purpose of lending his name to some other person." The accommodation party is liable on the instrument to
a holder for value even though the holder at the time of taking the instrument knew him or her to be merely an
accommodation party. The accommodation party may of course seek reimbursement from the party
accommodated.34

As gleaned from the text of Section 29 of the Negotiable Instruments Law, the accommodation party is one who
meets all these three requisites, viz: (1) he signed the instrument as maker, drawer, acceptor, or indorser; (2) he
did not receive value for the signature; and (3) he signed for the purpose of lending his name to some other person.
In the case at bar, while Lim signed as drawer of the checks she did not satisfy the two other remaining requisites.

The absence of the second requisite becomes pellucid when it is noted at the outset that Lim issued the checks in
question on account of her transaction, along with the other purchasers, with Ybaez which was a sale and,
therefore, a reciprocal contract. Specifically, she drew the checks in payment of the balance of the purchase price of
the lot subject of the transaction. And she had to pay the agreed purchase price in consideration for the sale of the
lot to her and her co-vendees. In other words, the amounts covered by the checks form part of the cause or
consideration from Ybaezs end, as vendor, while the lot represented the cause or consideration on the side of Lim,
as vendee.35 Ergo, Lim received value for her signature on the checks.

Neither is there any indication that Lim issued the checks for the purpose of enabling Ybaez, or any other person
for that matter, to obtain credit or to raise money, thereby totally debunking the presence of the third requisite of an
accommodation party.

WHEREFORE, in view of the foregoing, the petition is DISMISSED.

SO ORDERED.

G.R. No. 83122 October 19, 1990
ARTURO P. VALENZUELA and HOSPITALITA N. VALENZUELA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, BIENVENIDO M. ARAGON, ROBERT E. PARNELL, CARLOS K.
CATOLICO and THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., respondents.
Albino B. Achas for petitioners.
Angara, Abello, Concepcion, Regala & Cruz for private respondents.
GUTIERREZ, JR., J.:
This is a petition for review of the January 29, 1988 decision of the Court of Appeals and the April 27, 1988
resolution denying the petitioners' motion for reconsideration, which decision and resolution reversed the decision
dated June 23,1986 of the Court of First Instance of Manila, Branch 34 in Civil Case No. 121126 upholding the
petitioners' causes of action and granting all the reliefs prayed for in their complaint against private respondents.
The antecedent facts of the case are as follows:
Petitioner Arturo P. Valenzuela (Valenzuela for short) is a General Agent of private respondent Philippine American
General Insurance Company, Inc. (Philamgen for short) since 1965. As such, he was authorized to solicit and sell in
behalf of Philamgen all kinds of non-life insurance, and in consideration of services rendered was entitled to receive
the full agent's commission of 32.5% from Philamgen under the scheduled commission rates (Exhibits "A" and "1").
From 1973 to 1975, Valenzuela solicited marine insurance from one of his clients, the Delta Motors, Inc. (Division of
Electronics Airconditioning and Refrigeration) in the amount of P4.4 Million from which he was entitled to a
commission of 32% (Exhibit "B"). However, Valenzuela did not receive his full commission which amounted to P1.6
Million from the P4.4 Million insurance coverage of the Delta Motors. During the period 1976 to 1978, premium
payments amounting to P1,946,886.00 were paid directly to Philamgen and Valenzuela's commission to which he is
entitled amounted to P632,737.00.
In 1977, Philamgen started to become interested in and expressed its intent to share in the commission due
Valenzuela (Exhibits "III" and "III-1") on a fifty-fifty basis (Exhibit "C"). Valenzuela refused (Exhibit "D").
On February 8, 1978 Philamgen and its President, Bienvenido M. Aragon insisted on the sharing of the commission
with Valenzuela (Exhibit E). This was followed by another sharing proposal dated June 1, 1978. On June 16,1978,
Valenzuela firmly reiterated his objection to the proposals of respondents stating that: "It is with great reluctance
that I have to decline upon request to signify my conformity to your alternative proposal regarding the payment of
the commission due me. However, I have no choice for to do otherwise would be violative of the Agency Agreement
executed between our goodselves." (Exhibit B-1)
Because of the refusal of Valenzuela, Philamgen and its officers, namely: Bienvenido Aragon, Carlos Catolico and
Robert E. Parnell took drastic action against Valenzuela. They: (a) reversed the commission due him by not crediting
in his account the commission earned from the Delta Motors, Inc. insurance (Exhibit "J" and "2"); (b) placed agency
transactions on a cash and carry basis; (c) threatened the cancellation of policies issued by his agency (Exhibits "H"
to "H-2"); and (d) started to leak out news that Valenzuela has a substantial account with Philamgen. All of these
acts resulted in the decline of his business as insurance agent (Exhibits "N", "O", "K" and "K-8"). Then on December
27, 1978, Philamgen terminated the General Agency Agreement of Valenzuela (Exhibit "J", pp. 1-3, Decision Trial
Court dated June 23, 1986, Civil Case No. 121126, Annex I, Petition).
The petitioners sought relief by filing the complaint against the private respondents in the court a quo (Complaint of
January 24, 1979, Annex "F" Petition). After due proceedings, the trial court found:
xxx xxx xxx
Defendants tried to justify the termination of plaintiff Arturo P. Valenzuela as one of defendant PHILAMGEN's
General Agent by making it appear that plaintiff Arturo P. Valenzuela has a substantial account with defendant
PHILAMGEN particularly Delta Motors, Inc.'s Account, thereby prejudicing defendant PHILAMGEN's interest (Exhibits
6,"11","11- "12- A"and"13-A").
Defendants also invoked the provisions of the Civil Code of the Philippines (Article 1868) and the provisions of the
General Agency Agreement as their basis for terminating plaintiff Arturo P. Valenzuela as one of their General
Agents.
That defendants' position could have been justified had the termination of plaintiff Arturo P. Valenzuela was (sic)
based solely on the provisions of the Civil Code and the conditions of the General Agency Agreement. But the
records will show that the principal cause of the termination of the plaintiff as General Agent of defendant
PHILAMGEN was his refusal to share his Delta commission.
That it should be noted that there were several attempts made by defendant Bienvenido M. Aragon to share with the
Delta commission of plaintiff Arturo P. Valenzuela. He had persistently pursued the sharing scheme to the point of
terminating plaintiff Arturo P. Valenzuela, and to make matters worse, defendants made it appear that plaintiff
Arturo P. Valenzuela had substantial accounts with defendant PHILAMGEN.
Not only that, defendants have also started (a) to treat separately the Delta Commission of plaintiff Arturo P.
Valenzuela, (b) to reverse the Delta commission due plaintiff Arturo P. Valenzuela by not crediting or applying said
commission earned to the account of plaintiff Arturo P. Valenzuela, (c) placed plaintiff Arturo P. Valenzuela's agency
transactions on a "cash and carry basis", (d) sending threats to cancel existing policies issued by plaintiff Arturo P.
Valenzuela's agency, (e) to divert plaintiff Arturo P. Valenzuela's insurance business to other agencies, and (f) to
spread wild and malicious rumors that plaintiff Arturo P. Valenzuela has substantial account with defendant
PHILAMGEN to force plaintiff Arturo P. Valenzuela into agreeing with the sharing of his Delta commission." (pp. 9-10,
Decision, Annex 1, Petition).
xxx xxx xxx
These acts of harrassment done by defendants on plaintiff Arturo P. Valenzuela to force him to agree to the sharing
of his Delta commission, which culminated in the termination of plaintiff Arturo P. Valenzuela as one of defendant
PHILAMGEN's General Agent, do not justify said termination of the General Agency Agreement entered into by
defendant PHILAMGEN and plaintiff Arturo P. Valenzuela.
That since defendants are not justified in the termination of plaintiff Arturo P. Valenzuela as one of their General
Agents, defendants shall be liable for the resulting damage and loss of business of plaintiff Arturo P. Valenzuela.
(Arts. 2199/2200, Civil Code of the Philippines). (Ibid, p. 11)
The court accordingly rendered judgment, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against defendants ordering the latter to
reinstate plaintiff Arturo P. Valenzuela as its General Agent, and to pay plaintiffs, jointly and severally, the following:
1. The amount of five hundred twenty-one thousand nine hundred sixty four and 16/100 pesos (P521,964.16)
representing plaintiff Arturo P. Valenzuela's Delta Commission with interest at the legal rate from the time of the
filing of the complaint, which amount shall be adjusted in accordance with Article 1250 of the Civil Code of the
Philippines;
2. The amount of seventy-five thousand pesos (P75,000.00) per month as compensatory damages from 1980 until
such time that defendant Philamgen shall reinstate plaintiff Arturo P. Valenzuela as one of its general agents;
3. The amount of three hundred fifty thousand pesos (P350,000.00) for each plaintiff as moral damages;
4. The amount of seventy-five thousand pesos (P75,000.00) as and for attorney's fees;
5. Costs of the suit. (Ibid., P. 12)
From the aforesaid decision of the trial court, Bienvenido Aragon, Robert E. Parnell, Carlos K. Catolico and
PHILAMGEN respondents herein, and defendants-appellants below, interposed an appeal on the following:
ASSIGNMENT OF ERRORS
I principal's liability for damages (Danon v. Antonio A. Brimo & Co., 42 Phil. 133; Reyes v. Mosqueda, 53 O.G. 2158
THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF ARTURO P. VALENZUELA HAD NO OUTSTANDING
ACCOUNT WITH DEFENDANT PHILAMGEN AT THE TIME OF THE TERMINATION OF THE AGENCY.
II
THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF ARTURO P. VALENZUELA IS ENTITLED TO THE FULL
COMMISSION OF 32.5% ON THE DELTA ACCOUNT.
III
THE LOWER COURT ERRED IN HOLDING THAT THE TERMINATION OF PLAINTIFF ARTURO P. VALENZUELA WAS
NOT JUSTIFIED AND THAT CONSEQUENTLY DEFENDANTS ARE LIABLE FOR ACTUAL AND MORAL DAMAGES,
ATTORNEYS FEES AND COSTS.
IV
ASSUMING ARGUENDO THAT THE AWARD OF DAMAGES AGAINST DEFENDANT PHILAMGEN WAS PROPER, THE
LOWER COURT ERRED IN AWARDING DAMAGES EVEN AGAINST THE INDIVIDUAL DEFENDANTS WHO ARE MERE
CORPORATE AGENTS ACTING WITHIN THE SCOPE OF THEIR AUTHORITY.
V We agree with the court a quo that the principal cause of the termination of Valenzuela as General Agent of
ASSUMING ARGUENDO THAT THE AWARD OF DAMAGES IN FAVOR OF PLAINTIFF ARTURO P. VALENZUELA WAS
PROPER, THE LOWER COURT ERRED IN AWARDING DAMAGES IN FAVOR OF HOSPITALITA VALENZUELA, WHO,
NOT BEING THE REAL PARTY IN INTEREST IS NOT TO OBTAIN RELIEF.
On January 29, 1988, respondent Court of Appeals promulgated its decision in the appealed case. The dispositive
portion of the decision reads:
WHEREFORE, the decision appealed from is hereby modified accordingly and judgment is hereby rendered ordering:
1. Plaintiff-appellee Valenzuela to pay defendant-appellant Philamgen the sum of one million nine hundred thirty two
thousand five hundred thirty-two pesos and seventeen centavos (P1,902,532.17), with legal interest thereon from
the date of finality of this judgment until fully paid.
2. Both plaintiff-appellees to pay jointly and severally defendants-appellants the sum of fifty thousand pesos
(P50,000.00) as and by way of attorney's fees.
No pronouncement is made as to costs. (p. 44, Rollo)
There is in this instance irreconcilable divergence in the findings and conclusions of the Court of Appeals, vis-a-vis
those of the trial court particularly on the pivotal issue whether or not 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. In
its questioned decision the Court of Appeals observed that:
In any event the principal's power to revoke an agency at will is so pervasive, that the Supreme Court has
consistently held that termination may be effected even if the principal acts in bad faith, subject only to the
and Infante V. Cunanan, 93 Phil. 691, cited in Paras, Vol. V, Civil Code of the Philippines Annotated [1986] 696).
The lower court, however, thought the termination of Valenzuela as General Agent improper because the record will
show the principal cause of the termination of the plaintiff as General Agent of defendant Philamgen was his refusal
to share his Delta commission. (Decision, p. 9; p. 13, Rollo, 41)
Because of the conflicting conclusions, this Court deemed it necessary in the interest of substantial justice to
scrutinize the evidence and records of the cases. While it is an established principle that the factual findings of the
Court of Appeals are final and may not be reviewed on appeal to this Court, there are however certain exceptions to
the rule which this Court has recognized and accepted, among which, are when the judgment is based on a
misapprehension of facts and when the findings of the appellate court, are contrary to those of the trial court
(Manlapaz v. Court of Appeals, 147 SCRA 236 [1987]); Guita v. Court of Appeals, 139 SCRA 576 [1986]). Where the
findings of the Court of Appeals and the trial court are contrary to each other, this Court may scrutinize the evidence
on record (Cruz v. Court of Appeals, 129 SCRA 222 [1984]; Mendoza v. Court of Appeals, 156 SCRA 597 [1987];
Maclan v. Santos, 156 SCRA 542 [1987]). When the conclusion of the Court of Appeals is grounded entirely on
speculation, surmises or conjectures, or when the inference made is manifestly mistaken, absurd or impossible, or
when there is grave abuse of discretion, or when the judgment is based on a misapprehension of facts, and when
the findings of facts are conflict the exception also applies (Malaysian Airline System Bernad v. Court of Appeals, 156
SCRA 321 [1987]).
After a painstaking review of the entire records of the case and the findings of facts of both the court a quo and
respondent appellate court, we are constrained to affirm the trial court's findings and rule for the petitioners.
Philamgen arose from his refusal to share his Delta commission. The records sustain the conclusions of the trial
court on the apparent bad faith of the private respondents in terminating the General Agency Agreement of
petitioners. It is axiomatic that the findings of fact of a trial judge are entitled to great weight (People v. Atanacio,
128 SCRA 22 [1984]) and should not be disturbed on appeal unless for strong and cogent reasons, because the trial
court is in a better position to examine the evidence as well as to observe the demeanor of the witnesses while
testifying (Chase v. Buencamino, Sr., 136 SCRA 365 [1985]; People v. Pimentel, 147 SCRA 25 [1987]; and Baliwag
Trans., Inc. v. Court of Appeals, 147 SCRA 82 [1987]). In the case at bar, the records show that the findings and
conclusions of the trial court are supported by substantial evidence and there appears to be no cogent reason to
disturb them (Mendoza v. Court of Appeals. 156 SCRA 597 [1987]).
As early as September 30,1977, Philamgen told the 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 commission after full payment by Delta.
On January 23, 1978 Philamgen proposed reducing the petitioners' commissions by 50% thus giving them an agent's
commission of 16.25%. On February 8, 1978, Philamgen insisted on the reduction scheme followed on June 1, 1978
by still another insistence on reducing commissions and proposing two alternative schemes for reduction. There
were other pressures. Demands to settle accounts, to confer and thresh out differences regarding the petitioners'
income and the threat to terminate the agency followed. The petitioners were told that the Delta commissions would
not be credited to their account (Exhibit "J"). They were informed that the Valenzuela agency would be placed on a
cash and carry basis thus removing the 60-day credit for premiums due. (TSN., March 26, 1979, pp. 54-57). Existing
policies were threatened to be cancelled (Exhibits "H" and "14"; TSN., March 26, 1979, pp. 29-30). The Valenzuela
business was threatened with diversion to other agencies. (Exhibit "NNN"). Rumors were also spread about alleged
accounts of the Valenzuela agency (TSN., January 25, 1980, p. 41). The petitioners consistently opposed the
pressures to hand over the agency or half of their commissions and for a treatment of the Delta account distinct
from other accounts. The pressures and demands, however, continued until the agency agreement itself was finally
terminated.
It is also evident from the records that the agency involving petitioner and private respondent is one "coupled with
an interest," and, therefore, should not be freely revocable at the unilateral will of the latter.
In the insurance business in the Philippines, the most difficult and frustrating period is the solicitation and persuasion
of the prospective clients to buy insurance policies. Normally, agents would encounter much embarrassment,
difficulties, and oftentimes frustrations in the solicitation and procurement of the insurance policies. To sell policies,
an agent exerts great effort, patience, perseverance, ingenuity, tact, imagination, time and money. 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 Two Million Five Hundred Thousand Pesos (P2,500,000.00) premiums per annum. The records
sustain the finding that the private respondent started to covet a share of the insurance business that Valenzuela
had built up, developed and nurtured to profitability through over thirteen (13) years of patient work and
perseverance. When Valenzuela refused to share his commission in the Delta account, the boom suddenly fell on
him.
The private respondents by the simple expedient of terminating the General Agency Agreement appropriated the
entire insurance business of Valenzuela. With the termination of the General Agency Agreement, Valenzuela would
no longer be entitled to commission on the renewal of insurance policies of clients sourced from his agency. Worse,
despite the termination of the agency, Philamgen continued to hold Valenzuela jointly and severally liable with the
insured for unpaid premiums. Under these circumstances, it is clear that Valenzuela had an interest in the
continuation of the agency when it was unceremoniously terminated not only because of the commissions he should
continue to receive from the insurance business he has solicited and procured but also for the fact that by the very
acts of the respondents, he was made liable to Philamgen in the event the insured fail to pay the premiums due.
They are estopped by their own positive averments and claims for damages. Therefore, the respondents cannot
state that the agency relationship between Valenzuela and Philamgen is not coupled with interest. "There may be
cases in which an agent has been induced to assume a responsibility or incur a liability, in reliance upon the
continuance of the authority under such circumstances that, if the authority be withdrawn, the agent will be exposed
to personal loss or liability" (See MEC 569 p. 406).
Furthermore, there is an exception to the principle that an agency is revocable at will and that is when the agency
has been given not only for the interest of the principal but for the interest of third persons or for the mutual interest
of the principal and the agent. In these cases, it is evident that the agency ceases to be freely revocable by the sole
will of the principal (See Padilla, Civil Code Annotated, 56 ed., Vol. IV p. 350). The following citations are apropos:
The principal may not defeat the agent's right to indemnification by a termination of the contract of agency (Erskine
v. Chevrolet Motors Co. 185 NC 479, 117 SE 706, 32 ALR 196).
Where the principal terminates or repudiates the agent's employment in violation of the contract of employment and
without cause ... the agent is entitled to receive either the amount of net losses caused and gains prevented by the
breach, or the reasonable value of the services rendered. Thus, the agent is entitled to prospective profits which he
would have made except for such wrongful termination provided that such profits are not conjectural, or speculative
but are capable of determination upon some fairly reliable basis. And a principal's revocation of the agency
agreement made to avoid payment of compensation for a result which he has actually accomplished (Hildendorf v.
Hague, 293 NW 2d 272; Newhall v. Journal Printing Co., 105 Minn 44,117 NW 228; Gaylen Machinery Corp. v.
Pitman-Moore Co. [C.A. 2 NY] 273 F 2d 340)
If a principal violates a contractual or quasi-contractual duty which he owes his agent, the agent may as a rule bring
an appropriate action for the breach of that duty. The agent may in a proper case maintain an action at law for
compensation or damages ... A wrongfully discharged agent has a right of action for damages and in such action the
measure and element of damages are controlled generally by the rules governing any other action for the employer's
breach of an employment contract. (Riggs v. Lindsay, 11 US 500, 3L Ed 419; Tiffin Glass Co. v. Stoehr, 54 Ohio 157,
43 NE 2798)
At any rate, the question of whether or not the agency agreement is coupled with interest is helpful to the
petitioners' cause but is not the primary and compelling reason. For the pivotal factor rendering Philamgen and the
other private respondents liable in damages is that the termination by them of the General Agency Agreement was
tainted with bad faith. Hence, if a principal acts in bad faith and with abuse of right in terminating the agency, then
he is liable in damages. This is in accordance with the precepts in Human Relations enshrined in our Civil Code that
"every person must in the exercise of 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, wilfully or
negligently causes damages to another, shall indemnify the latter for the same (Art. 20, id). "Any person who wilfully
causes loss or injury to another in a manner contrary to morals, good customs and public policy shall compensate
the latter for the damages" (Art. 21, id.).
As to the issue of whether or not the petitioners are liable to Philamgen for the unpaid and uncollected premiums
which the respondent court ordered Valenzuela to pay Philamgen the amount of One Million Nine Hundred Thirty-
Two Thousand Five Hundred Thirty-Two and 17/100 Pesos (P1,932,532,17) with legal interest thereon until fully
paid (Decision-January 20, 1988, p. 16; Petition, Annex "A"), we rule that the respondent court erred in holding
Valenzuela liable. We find no factual and legal basis for the award. Under Section 77 of the Insurance Code, the
remedy for the non-payment of premiums is to put an end to and render the insurance policy not binding
Sec. 77 ... [N]otwithstanding any agreement to the contrary, no policy or contract of insurance is valid and binding
unless and until the premiums thereof have been paid except in the case of a life or industrial life policy whenever
the grace period provision applies (P.D. 612, as amended otherwise known as the Insurance Code of 1974)
In Philippine Phoenix Surety and Insurance, Inc. v. Woodworks, Inc. (92 SCRA 419 [1979]) we held that the non-
payment of premium does not merely suspend but puts an end to an insurance contract since the time of the
payment is peculiarly of the essence of the contract. And in Arce v. The Capital Insurance and Surety Co. Inc. (117
SCRA 63, [1982]), we reiterated the rule that unless premium is paid, an insurance contract does not take effect.
Thus:
It is to be noted that Delgado (Capital Insurance & Surety Co., Inc. v. Delgado, 9 SCRA 177 [1963] was decided in
the light of the Insurance Act before Sec. 72 was amended by the underscored portion. Supra. Prior to the
Amendment, an insurance contract was effective even if the premium had not been paid so that an insurer was
obligated to pay indemnity in case of loss and correlatively he had also the right to sue for payment of the premium.
But the amendment to Sec. 72 has radically changed the legal regime in that unless the premium is paid there is no
insurance. " (Arce v. Capitol Insurance and Surety Co., Inc., 117 SCRA 66; Emphasis supplied)
In Philippine Phoenix Surety case, we held:
Moreover, an insurer cannot treat a contract as valid for the purpose of collecting premiums and invalid for the
purpose of indemnity. (Citing Insurance Law and Practice by John Alan Appleman, Vol. 15, p. 331; Emphasis
supplied)
The foregoing findings are buttressed by Section 776 of the insurance Code (Presidential Decree No. 612,
promulgated on December 18, 1974), which now provides that no contract of Insurance by an insurance company is
valid and binding unless and until the premium thereof has been paid, notwithstanding any agreement to the
contrary (Ibid., 92 SCRA 425)
Perforce, since admittedly the premiums have not been paid, the policies issued have lapsed. The insurance
coverage did not go into effect or did not continue and the obligation of Philamgen as insurer ceased. Hence, for
Philamgen which had no more liability under the lapsed and inexistent policies to demand, much less sue Valenzuela
for the unpaid premiums would be the height of injustice and unfair dealing. In this instance, with the lapsing of the
policies through the nonpayment of premiums by the insured there were no more insurance contracts to speak of.
As this Court held in the Philippine Phoenix Surety case, supra "the non-payment of premiums does not merely
suspend but puts an end to an insurance contract since the time of the payment is peculiarly of the essence of the
contract."
The respondent appellate court also seriously erred in according undue reliance to the report of Banaria and Banaria
and Company, auditors, that as of December 31, 1978, Valenzuela owed Philamgen P1,528,698.40. This audit report
of Banaria was commissioned by Philamgen after Valenzuela was almost through with the presentation of his
evidence. In essence, the Banaria report started with an unconfirmed and unaudited beginning balance of account of
P1,758,185.43 as of August 20, 1976. But even with that unaudited and unconfirmed beginning balance of
P1,758,185.43, Banaria still came up with the amount of P3,865.49 as Valenzuela's balance as of December 1978
with Philamgen (Exh. "38-A-3"). In fact, as of December 31, 1976, and December 31, 1977, Valenzuela had no
unpaid account with Philamgen (Ref: Annexes "D", "D-1", "E", Petitioner's Memorandum). But even disregarding
these annexes which are records of Philamgen and addressed to Valenzuela in due course of business, the facts
show that as of July 1977, the beginning balance of Valenzuela's account with Philamgen amounted to P744,159.80.
This was confirmed by Philamgen itself not only once but four (4) times on different occasions, as shown by the
records.
On April 3,1978, Philamgen sent Valenzuela a statement of account with a beginning balance of P744,159-80 as of
July 1977.
On May 23, 1978, another statement of account with exactly the same beginning balance was sent to Valenzuela.
On November 17, 1978, Philamgen sent still another statement of account with P744,159.80 as the beginning
balance.
And on December 20, 1978, a statement of account with exactly the same figure was sent to Valenzuela.
It was only after the filing of the complaint that a radically different statement of accounts 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 over unconfirmed and unaudited statements made to
support a position made in the course of defending against a lawsuit.
It is not correct to say that Valenzuela should have presented its own records to refute the unconfirmed and
unaudited finding of the Banaria auditor. The records of Philamgen itself are the best refutation against figures made
as an 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 the agency agreement.
After off-setting the amount of P744,159.80, beginning balance as of July 1977, by way of credits representing the
commission due from Delta and other accounts, Valenzuela had overpaid Philamgen the amount of P530,040.37 as
of November 30, 1978. Philamgen cannot later be heard to complain that it committed a 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 occasions where Philamgen was duly represented by its account
executives. On the basis of these admissions and representations, Philamgen cannot later on assume a different
posture and claim that it was mistaken in its representation with respect to the correct beginning balance as of July
1977 amounting to P744,159.80. The Banaria audit report commissioned by Philamgen is unreliable since its results
are admittedly based on an unconfirmed and unaudited beginning balance of P1,758,185.43 as of August 20,1976.
As so aptly stated by the trial court in its decision:
Defendants also conducted an audit of accounts of plaintiff Arturo P. Valenzuela after the controversy has started. In
fact, after hearing plaintiffs have already rested their case.
The results of said audit were presented in Court to show plaintiff Arturo P. Valenzuela's accountability to defendant
PHILAMGEN. However, the auditor, when presented as witness in this case testified that the beginning balance of
their audit report was based on an unaudited amount of P1,758,185.43 (Exhibit 46-A) as of August 20, 1976, which
was unverified and merely supplied by the officers of defendant PHILAMGEN.
Even defendants very own Exhibit 38- A-3, showed that plaintiff Arturo P. Valenzuela's balance as of 1978 amounted
to only P3,865.59, not P826,128.46 as stated in defendant Bienvenido M. Aragon's letter dated December 20,1978
(Exhibit 14) or P1,528,698.40 as reflected in defendant's Exhibit 46 (Audit Report of Banaria dated December 24,
1980).
These glaring discrepancy (sic) in the accountability of plaintiff Arturo P. Valenzuela to defendant PHILAMGEN only
lends credence to the claim of plaintiff Arturo P. Valenzuela that he has no outstanding account with defendant
PHILAMGEN when the latter, thru defendant Bienvenido M. Aragon, terminated the General Agency Agreement
entered into by plaintiff (Exhibit A) effective January 31, 1979 (see Exhibits "2" and "2-A"). Plaintiff Arturo P.
Valenzuela has shown that as of October 31, 1978, he has overpaid defendant PHILAMGEN in the amount of
P53,040.37 (Exhibit "EEE", which computation was based on defendant PHILAMGEN's balance of P744,159.80
furnished on several occasions to plaintiff Arturo P. Valenzuela by defendant PHILAMGEN (Exhibits H-1, VV, VV-1,
WW, WW-1 , YY , YY-2 , ZZ and , ZZ-2).
Prescinding from the foregoing, and considering that the private respondents terminated Valenzuela with evident
mala fide it necessarily follows that the former are liable in damages. Respondent Philamgen has been appropriating
for itself all these years the gross billings and income that it unceremoniously took away from the petitioners. The
preponderance of the authorities sustain the preposition that a principal can be held liable for damages in cases of
unjust termination of agency. In Danon v. Brimo, 42 Phil. 133 [1921]), this Court ruled that where no time for the
continuance of the contract is fixed by its terms, either party is at liberty to terminate it at will, subject only to the
ordinary requirements of good faith. The right of the principal to terminate his authority is absolute and unrestricted,
except only that he may not do so in bad faith.
The trial court in its decision awarded to Valenzuela the amount of Seventy Five Thousand Pesos (P75,000,00) per
month as compensatory damages from June 1980 until its decision becomes final and executory. This award is
justified in the light of the evidence extant on record (Exhibits "N", "N-10", "0", "0-1", "P" and "P-1") showing that
the average gross premium collection monthly of Valenzuela over a period of four (4) months from December 1978
to February 1979, amounted to over P300,000.00 from which he is entitled to a commission of P100,000.00 more or
less per month. Moreover, his annual sales production amounted to P2,500,000.00 from where he was given 32.5%
commissions. Under Article 2200 of the new Civil Code, "indemnification for damages shall comprehend not only the
value of the loss suffered, but also that of the profits which the obligee failed to obtain."
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 from or as a result of the agency shall be
entertained by the courts after that date.
ACCORDINGLY, the petition is GRANTED. The impugned decision of January 29, 1988 and resolution of April 27,
1988 of respondent court are hereby SET ASIDE. The decision of the trial court dated January 23, 1986 in Civil Case
No. 121126 is REINSTATED with the MODIFICATIONS that the amount of FIVE HUNDRED TWENTY ONE THOUSAND
NINE HUNDRED SIXTY-FOUR AND 16/100 PESOS (P521,964.16) representing the petitioners Delta commission shall
earn only legal interests without any adjustments under Article 1250 of the Civil Code and that the contractual
relationship between Arturo P. Valenzuela and Philippine American General Insurance Company shall be deemed
terminated upon the satisfaction of the judgment as modified.
SO ORDERED.
G.R. No. L-41420 July 10, 1992
CMS LOGGING, INC., petitioner,
vs.
THE COURT OF APPEALS and D.R. AGUINALDO CORPORATION, respondents.
NOCON, J.:
This is a petition for review on certiorari from the decision dated July 31, 1975 of the Court of Appeals in CA-G.R.
No. 47763-R which affirmed in toto the decision of the Court of First Instance of Manila, Branch VII, in Civil Case No.
56355 dismissing the complaint filed by petitioner CMS Logging, Inc. (CMS, for brevity) against private respondent
D.R. Aguinaldo Corporation (DRACOR, for brevity) and ordering the former to pay the latter attorney's fees in the
amount of P1,000.00 and the costs.
The facts of the case are as follows: Petitioner CMS is a forest concessionaire engaged in the logging business, while
private 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 1 whereby the former appointed the latter as its exclusive
export and sales agent for all logs that the former may produce, for a period of five (5) years. The pertinent portions
of the agreement, which was drawn up by DRACOR, 2 are as follows:
1. SISON [CMS] hereby appoints DRACOR as his sole and exclusive export sales agent with full authority, subject to
the conditions and limitations hereinafter set forth, to sell and export under a firm sales contract acceptable to
SISON, all logs produced by SISON for a period of five (5) years commencing upon the execution of the agreement
and upon the terms and conditions hereinafter provided and DRACOR hereby accepts such appointment;
xxx xxx xxx
3. It is expressly agreed that DRACOR shall handle exclusively all negotiations of all export sales of SISON with the
buyers and arrange the procurement and schedules of the vessel or vessels for the shipment of SISON's logs in
accordance with SISON's written requests, but DRACOR shall not in anyway [ sic] be liable or responsible for any
delay, default or failure of the vessel or vessels to comply with the schedules agreed upon;
xxx xxx xxx
9. It is expressly agreed by the parties hereto that DRACOR shall receive five (5%) per cent commission of the gross
sales of logs of SISON based on F.O.B. invoice value which commission shall be deducted from the proceeds of any
and/or all moneys received by DRACOR for and in behalf and for the account of SISON;
By virtue of the aforesaid agreement, CMS was able to sell through DRACOR a total of 77,264,672 board feet of logs
in Japan, from September 20, 1957 to April 4, 1962.
About six months prior to the expiration of the agreement, while on a trip to Tokyo, Japan, CMS's president, Atty.
Carlos Moran Sison, and general manager and legal counsel, Atty. Teodoro R. Dominguez, discovered that DRACOR
had used Shinko Trading Co., Ltd. (Shinko for brevity) as agent, representative or liaison officer in selling CMS's logs
in Japan for which Shinko earned a commission of U.S. $1.00 per 1,000 board feet from the buyer of the logs. Under dealings with CMS.
this arrangement, Shinko was able to collect a total of U.S. $77,264.67. 3
With regard to CMS's arguments concerning whether or not Shinko received the commission in question, We find the
CMS claimed that this commission paid to Shinko was in violation of the agreement and that it (CMS) is entitled to same unmeritorious.
this amount as part of the proceeds of the sale of the logs. CMS contended that since DRACOR had been paid the
5% commission under the agreement, it is no longer entitled to the additional commission paid to Shinko as this
To begin with, these arguments question the findings of fact made by the Court of Appeals, which are final and
tantamount to DRACOR receiving double compensation for the services it rendered.
conclusive and can not be reviewed on appeal to the Supreme Court. 12

After this discovery, CMS sold and shipped logs valued at U.S. $739,321.13 or P2,883,351.90, 4
directly to several
Moreover, while it is true that the evidence adduced establishes the fact that Shinko is DRACOR's agent or liaison in
firms in Japan without the aid or intervention of DRACOR.
Japan, 13 there is no evidence which established the fact that Shinko did receive the amount of U.S. $77,264.67 as
commission arising from the sale of CMS's logs to various Japanese firms.
CMS sued DRACOR for the commission received by Shinko and for moral and exemplary damages, while DRACOR
counterclaimed for its commission, amounting to P144,167.59, from the sales made by CMS of logs to Japanese
The fact that Shinko received the commissions in question was not established by the testimony of Atty. Teodoro R.
firms. In its reply, CMS averred as a defense to the counterclaim that DRACOR had retained the sum of P101,167.59
Dominguez to the effect that Shinko's president and director told him that Shinko received a commission of U.S.
as part of its commission for the sales made by CMS. 5 Thus, as its counterclaim to DRACOR's counterclaim, CMS
$1.00 for every 1,000 board feet of logs sold, since the same is hearsay. Similarly, the letter of Mr. K. Shibata of
demanded DRACOR return the amount it unlawfully retained. DRACOR later filed an amended counterclaim, alleging
Toyo Menka Kaisha, Ltd. 14 is also hearsay since Mr. Shibata was not presented to testify on his letter.
that the balance of its commission on the sales made by CMS was P42,630.82, 6 thus impliedly admitting that it
retained the amount alleged by CMS.
CMS's other evidence have little or no probative value at all. The statements made in the memorandum of Atty.
Simplicio R. Ciocon to DRACOR dated May 31, 1965, 15 the letter dated February 2, 1963 of Daniel
In dismissing the complaint, the trial court ruled that no evidence was presented to show that Shinko received the
commission of U.S. $77,264.67 arising from the sale of CMS's logs in Japan, though the trial court stated that
"Shinko was able to collect the total amount of $77,264.67 US Dollars (Exhs. M and M-1)." 7 The counterclaim was R. Aguinaldo, 16 president of DRACOR, and the reply-letter dated January 9, 1964 17 by DRACOR's counsel Atty. V. E.
likewise dismissed, as it was shown that DRACOR had waived its rights to the balance of its commission in a letter Del Rosario to CMS's demand letter dated September 25, 1963 can not be categorized as admissions that Shinko did
dated February 2, 1963 to Atty. Carlos Moran Sison, president of CMS. 8 From said decision, only CMS appealed to receive the commissions in question.
the Court of Appeals.
The alleged admission made by Atty. Ciocon, to wit
The Court of Appeals, in a 3 to 2 decision, 9 affirmed the dismissal of the complaint since "[t]he trial court could not
have made a categorical finding that Shinko collected commissions from the buyers of Sison's logs in Japan, and Furthermore, as per our records, our shipment of logs to Toyo Menka Kaisha, Ltd., is only for a net volume of
could not have held that Sison is entitled to recover from Dracor the amount collected by Shinko as commissions, 67,747,732 board feet which should enable Shinko to collect a commission of US $67,747.73 only
plaintiff-appellant having failed to prove by competent evidence its claims." 10

can not be considered as such since the statement was made in the context of questioning CMS's tally of logs
Moreover, the appellate court held: delivered to various Japanese firms.

There is reason to believe that Shinko Trading Co. Ltd., was paid by defendant-appellee out of its own commission Similarly, the statement of Daniel R. Aguinaldo, to wit
of 5%, as indicated in the letter of its president to the president of Sison, dated February 2, 1963 (Exhibit "N"), and
in the Agreement between Aguinaldo Development Corporation (ADECOR) and Shinko Trading Co., Ltd. (Exhibit
"9"). Daniel R. Aguinaldo stated in his said letter: . . . Knowing as we do that Toyo Menka is a large and reputable company, it is obvious that they paid Shinko for
certain services which Shinko must have satisfactorily performed for them in Japan otherwise they would not have
paid Shinko
. . . , I informed you that if you wanted to pay me for the service, then it would be no more than at the standard
rate of 5% commission because in our own case, we pay our Japanese agents 2-1/2%. Accordingly, we would only
add a similar amount of 2-1/2% for the service which we would render you in the Philippines. 11 and that of Atty. V. E. Del Rosario,

Aggrieved, CMS appealed to this Court by way of a petition for review on certiorari, alleging (1) that the Court of
Appeals erred in not making a complete findings of fact; (2) that the testimony of Atty. Teodoro R. Dominguez,
regarding the admission by Shinko's president and director that it collected a commission of U.S. $1.00 per 1,000
board feet of logs from the Japanese buyers, is admissible against DRACOR; (3) that the statement of DRACOR's
chief legal counsel in his memorandum dated May 31, 1965, Exhibit "K", is an admission that Shinko was able to
collect the commission in question; (4) that the fact that Shinko received the questioned commissions is deemed
admitted by DRACOR by its silence under Section 23, Rule 130 of the Rules of Court when it failed to reply to Atty.
Carlos Moran Sison's letter dated February 6, 1962; (5) that DRACOR is not entitled to its 5% commission arising
from the direct sales made by CMS to buyers in Japan; and (6) that DRACOR is guilty of fraud and bad faith in its
. . . It does not seem proper, therefore, for CMS Logging, Inc., as principal, to concern itself with, much less
question, the right of Shinko Trading Co., Ltd. with which our client debt directly, to whatever benefits it might have
derived form the ultimate consumer/buyer of these logs, Toyo Menka Kaisha, Ltd. There appears to be no
justification for your client's contention that these benefits, whether they can be considered as commissions paid by
Toyo Menka Kaisha to Shinko Trading, are to be regarded part of the gross sales.
can not be considered admissions that Shinko received the questioned commissions since neither statements
declared categorically that Shinko did in fact receive the commissions and that these arose from the sale of CMS's
logs.
As correctly stated by the appellate court: Since the contract of agency was revoked by CMS when it sold its logs to Japanese firms without the intervention of
DRACOR, the latter is no longer entitled to its commission from the proceeds of such sale and is not entitled to
retain whatever moneys it may have received as its commission for said transactions. Neither would DRACOR be
It is a rule that "a statement is not competent as an admission where it does not, under a reasonable construction,
entitled to collect damages from CMS, since damages are generally not awarded to the agent for the revocation of
appear to admit or acknowledge the fact which is sought to be proved by it". An admission or declaration to be
the agency, and the case at bar is not one falling under the exception mentioned, which is to evade the payment of
competent must have been expressed in definite, certain and unequivocal language (Bank of the Philippine Islands
the agent's commission.
vs. Fidelity & Surety Co., 51 Phil. 57, 64). 18

Regarding CMS's contention that the Court of Appeals erred in not finding that DRACOR had committed acts of fraud
CMS's contention that DRACOR had admitted by its silence the allegation that Shinko received the commissions in
and bad faith, We find the same unmeritorious. Like the contention involving Shinko and the questioned
question when it failed to respond to Atty. Carlos Moran Sison's letter dated February 6, 1963, is not supported by
commissions, the findings of the Court of Appeals on the matter were based on its appreciation of the evidence, and
the evidence. DRACOR did in fact reply to the letter of Atty. Sison, through the letter dated March 5, 1963 of F.A.
these findings are binding on this Court.
Novenario, 19 which stated:

In fine, We affirm the ruling of the Court of Appeals that there is no evidence to support CMS's contention that
This is to acknowledge receipt of your letter dated February 6, 1963, and addressed to Mr. D. R. Aguinaldo, who is
Shinko earned a separate commission of U.S. $1.00 for every 1,000 board feet of logs from the buyer of CMS's logs.
at present out of the country.
However, We reverse the ruling of the Court of Appeals with regard to DRACOR's right to retain the amount of
P101,536.77 as part of its commission from the sale of logs by CMS, and hold that DRACOR has no right to its
xxx xxx xxx commission. Consequently, DRACOR is hereby ordered to remit to CMS the amount of P101,536.77.

We have no record or knowledge of any such payment of commission made by Toyo Menka to Shinko. If the WHEREFORE, the decision appealed from is hereby MODIFIED as stated in the preceding paragraph. Costs de
payment was made by Toyo Menka to Shinko, as stated in your letter, we knew nothing about it and had nothing to officio.
do with it.
SO ORDERED.
The finding of fact made by the trial court, i.e., that "Shinko was able to collect the total amount of $77,264.67 US
Dollars," can not be given weight since this was based on the summary prepared by CMS itself, Exhibits "M" and "M-
1".

Moreover, even if it was shown that Shinko did in fact receive the commissions in question, CMS is not entitled
thereto since these were apparently paid by the buyers to Shinko for arranging the sale. This is therefore not part of
the gross sales of CMS's logs.

However, We find merit in CMS's contention that the appellate court erred in holding that DRACOR was entitled to its
commission from the sales made by CMS to Japanese firms.

The principal may revoke a contract of agency at will, and such revocation may be express, or implied, 20 and may
be availed of even if the period fixed in the contract of agency as not yet expired. 21 As the principal has this
absolute right to revoke the agency, the agent can not object thereto; neither may he claim damages arising from
such revocation, 22 unless it is shown that such was done in order to evade the payment of agent's commission. 23

In the case at bar, CMS appointed DRACOR as its agent for the sale of its logs to Japanese firms. Yet, during the
existence of the contract of agency, DRACOR admitted that CMS sold its logs directly to several Japanese firms. This
act constituted an implied revocation of the contract of agency under Article 1924 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.

In New Manila Lumber Company, Inc. vs. Republic of the Philippines, 24 this Court ruled that the act of a contractor,
who, after executing powers of attorney in favor of another empowering the latter to collect whatever amounts may
be due to him from the Government, and thereafter demanded and collected from the government the money the
collection of which he entrusted to his attorney-in-fact, constituted revocation of the agency in favor of the attorney-
in-fact.

G.R. No. 156015. August 11, 2005
REPUBLIC OF THE PHILIPPINES, represented by LT. GEN. JOSE M. CALIMLIM, in his capacity as former
Chief of the Intelligence Service, Armed Forces of the Philippines (ISAFP), and former Commanding
General, Presidential Security Group (PSG), and MAJ. DAVID B. DICIANO, in his capacity as an Officer
of ISAFP and former member of the PSG, Petitioners,
vs.
HON. VICTORINO EVANGELISTA, in his capacity as Presiding Judge, Regional Trial Court, Branch 223,
Quezon City, and DANTE LEGASPI, represented by his attorney-in-fact, Paul Gutierrez, Respondent.
DECISION
the ground of alleged partiality in favor of private respondent.
On March 23, 2000, the trial court granted private respondents application for a writ of preliminary injunction on the
following grounds: (1) the diggings and blastings appear to have been made on the land of Legaspi, hence, there is
an urgent need to maintain the status quo to prevent serious damage to Legaspis land; and, (2) the SPA granted to
Gutierrez continues to be valid.9 The trial court ordered thus:
WHEREFORE, in view of all the foregoing, the Court hereby resolves to GRANT plaintiffs application for a writ of
preliminary injunction. Upon plaintiffs filing of an injunction bond in the amount of ONE HUNDRED THOUSAND
PESOS (100,000.00), let a Writ of Preliminary Injunction issue enjoining the defendants as well as their associates,
agents or representatives from continuing to occupy and encamp on the land of the plaintiff LEGASPI as well as the
vicinity thereof; from digging, tunneling and blasting the said land of plaintiff LEGASPI; from removing whatever
treasure may be found on the said land; from preventing and threatening the plaintiffs and their representatives
from entering the said land and performing acts of ownership; from threatening the plaintiffs and their
representatives as well as plaintiffs lawyer.

PUNO, J.: On even date, the trial court issued another Order10 denying petitioners motion to dismiss and requiring petitioners
to answer the complaint. On April 4, 2000, it likewise denied petitioners motion for inhibition.11

The case at bar stems from a complaint for damages, with prayer for the issuance of a writ of preliminary injunction,
filed by private respondent Dante Legaspi, through his attorney-in-fact Paul Gutierrez, against petitioners Gen. Jose On appeal, the Court of Appeals affirmed the decision of the trial court.12
M. Calimlim, Ciriaco Reyes and Maj. David Diciano before the Regional Trial Court (RTC) of Quezon City.1
Hence this petition, with the following assigned errors:
The Complaint alleged that private respondent Legaspi is the owner of a land located in Bigte, Norzagaray, Bulacan.
In November 1999, petitioner Calimlim, representing the Republic of the Philippines, and as then head of the I
Intelligence Service of the Armed Forces of the Philippines and the Presidential Security Group, entered into a
Memorandum of Agreement (MOA) with one Ciriaco Reyes. The MOA granted Reyes a permit to hunt for treasure in
WHETHER THE CONTRACT OF AGENCY BETWEEN LEGASPI AND PRIVATE RESPONDENT GUTIERREZ HAS BEEN
a land in Bigte, Norzagaray, Bulacan. Petitioner Diciano signed the MOA as a witness.2 It was further alleged that
EFFECTIVELY REVOKED BY LEGASPI.
thereafter, Reyes, together with petitioners, started, digging, tunneling and blasting works on the said land of
Legaspi. The complaint also alleged that petitioner Calimlim assigned about 80 military personnel to guard the area
and encamp thereon to intimidate Legaspi and other occupants of the area from going near the subject land. II

On February 15, 2000, Legaspi executed a special power of attorney (SPA) appointing his nephew, private WHETHER THE COMPLAINT AGAINST PETITIONERS SHOULD BE DISMISSED.
respondent Gutierrez, as his attorney-in-fact. Gutierrez was given the power to deal with the treasure hunting
activities on Legaspis land and to file charges against those who may enter it without the latters authority.3 Legaspi
III
agreed to give Gutierrez 40% of the treasure that may be found in the land.

WHETHER RESPONDENT JUDGE OUGHT TO HAVE INHIBITED HIMSELF FROM FURTHER PROCEEDING WITH THE
On February 29, 2000, Gutierrez filed a case for damages and injunction against petitioners for illegally entering
CASE.
Legaspis land. He hired the legal services of Atty. Homobono Adaza. Their contract provided that as legal fees, Atty.
Adaza shall be entitled to 30% of Legaspis share in whatever treasure may be found in the land. In addition,
Gutierrez agreed to pay Atty. Adaza 5,000.00 as appearance fee per court hearing and defray all expenses for the We find no merit in the petition.
cost of the litigation.4 Upon the filing of the complaint, then Executive Judge Perlita J. Tria Tirona issued a 72-hour
temporary restraining order (TRO) against petitioners. On the first issue, petitioners claim that the special power of attorney of Gutierrez to represent Legaspi has already
been revoked by the latter. Private respondent Gutierrez, however, contends that the unilateral revocation is invalid
The case5 was subsequently raffled to the RTC of Quezon City, Branch 223, then presided by public respondent as his agency is coupled with interest.
Judge Victorino P. Evangelista. On March 2, 2000, respondent judge issued another 72-hour TRO and a summary
hearing for its extension was set on March 7, 2000. We agree with private respondent.

On March 14, 2000, petitioners filed a Motion to Dismiss6 contending: first, there is no real party-in-interest as the Art. 1868 of the Civil Code provides that by the contract of agency, an agent binds himself to render some service or
SPA of Gutierrez to bring the suit was already revoked by Legaspi on March 7, 2000, as evidenced by a Deed of do something in representation or on behalf of another, known as the principal, with the consent or authority of the
Revocation,7 and, second, Gutierrez failed to establish that the alleged armed men guarding the area were acting on latter.13
orders of petitioners. On March 17, 2000, petitioners also filed a Motion for Inhibition 8 of the respondent judge on
A contract of agency is generally revocable as it is a personal contract of representation based on trust and
confidence reposed by the principal on his agent. As the power of the agent to act depends on the will and license of
the principal he represents, the power of the agent ceases when the will or permission is withdrawn by the principal.
Thus, generally, the agency may be revoked by the principal at will.14
However, an exception to the revocability of a contract of agency is when it is coupled with interest, i.e., if a bilateral
contract depends upon the agency.15 The reason for its irrevocability is because the agency becomes part of another
obligation or agreement. It is not solely the rights of the principal but also that of the agent and third persons which
are affected. Hence, the law provides that in such cases, the agency cannot be revoked at the sole will of the
principal.
In the case at bar, we agree with the finding of the trial and appellate courts that the agency granted by Legaspi to
Gutierrez is coupled with interest as a bilateral contract depends on it. It is clear from the records that Gutierrez
was given by Legaspi, inter alia, the power to manage the treasure hunting activities in the subject
land; to file any case against anyone who enters the land without authority from Legaspi; to engage
the services of lawyers to carry out the agency; and, to dig for any treasure within the land and enter
into agreements relative thereto. It was likewise agreed upon that Gutierrez shall be entitled to 40% of
whatever treasure may be found in the land. Pursuant to this authority and to protect Legaspis land from the
alleged illegal entry of petitioners, agent Gutierrez hired the services of Atty. Adaza to prosecute the case for
damages and injunction against petitioners. As payment for legal services, Gutierrez agreed to assign to
Atty. Adaza 30% of Legaspis share in whatever treasure may be recovered in the subject land. It is
clear that the treasure that may be found in the land is the subject matter of the agency; that under the SPA,
Gutierrez can enter into contract for the legal services of Atty. Adaza; and, thus Gutierrez and Atty. Adaza have an
interest in the subject matter of the agency, i.e., in the treasures that may be found in the land. This bilateral
contract depends on the agency and thus renders it as one coupled with interest, irrevocable at the sole will of the
principal Legaspi.16 When an agency is constituted as a clause in a bilateral contract, that is, when the agency is
inserted in another agreement, the agency ceases to be revocable at the pleasure of the principal as the agency
shall now follow the condition of the bilateral agreement.17 Consequently, the Deed of Revocation executed by
Legaspi has no effect. The authority of Gutierrez to file and continue with the prosecution of the case at bar is
unaffected.
On the second issue, we hold that the issuance of the writ of preliminary injunction is justified. A writ of preliminary
injunction is an ancilliary or preventive remedy that is resorted to by a litigant to protect or preserve his rights or
interests and for no other purpose during the pendency of the principal action.18 It is issued by the court to prevent
threatened or continuous irremediable injury to the applicant before his claim can be thoroughly studied and
adjudicated.19 Its aim is to preserve the status quo ante until the merits of the case can be heard fully, upon the
applicants showing of two important conditions, viz.: (1) the right to be protected prima facie exists; and, (2) the
acts sought to be enjoined are violative of that right.20
It is crystal clear that at the hearing for the issuance of a writ of preliminary injunction, mere prima facie evidence is
needed to establish the applicants rights or interests in the subject matter of the main action.21 It is not required
that the applicant should conclusively show that there was a violation of his rights as this issue will still be fully
litigated in the main case.22 Thus, an applicant for a writ is required only to show that he has an ostensible
right to the final relief prayed for in his complaint. 23
In the case at bar, we find that respondent judge had sufficient basis to issue the writ of preliminary injunction. It
was established, prima facie, that Legaspi has a right to peaceful possession of his land, pendente lite.
Legaspi had title to the subject land. It was likewise established that the diggings were conducted by petitioners in
the enclosed area of Legaspis land. Whether the land fenced by Gutierrez and claimed to be included in
the land of Legaspi covered an area beyond that which is included in the title of Legaspi is a factual
issue still subject to litigation and proof by the parties in the main case for damages. It was necessary for
the trial court to issue the writ of preliminary injunction during the pendency of the main case in order to preserve
the rights and interests of private respondents Legaspi and Gutierrez.
On the third issue, petitioners charge that the respondent judge lacked the neutrality of an impartial judge. They
fault the respondent judge for not giving credence to the testimony of their surveyor that the diggings were
conducted outside the land of Legaspi. They also claim that respondent judges rulings on objections raised by the
parties were biased against them.
We have carefully examined the records and we find no sufficient basis to hold that respondent judge should have
recused himself from hearing the case. There is no discernible pattern of bias on the rulings of the respondent
judge. Bias and partiality can never be presumed. Bare allegations of partiality will not suffice in an absence of a
clear showing that will overcome the presumption that the judge dispensed justice without fear or favor.24 It bears to
stress again that a judges appreciation or misappreciation of the sufficiency of evidence adduced by the parties, or
the correctness of a judges orders or rulings on the objections of counsels during the hearing, without proof of
malice on the part of respondent judge, is not sufficient to show bias or partiality. As we held in the case of Webb
vs. People,25 the adverse and erroneous rulings of a judge on the various motions of a party do not sufficiently
prove bias and prejudice to disqualify him. To be disqualifying, it must be shown that the bias and prejudice
stemmed from an extrajudicial source and result in an opinion on the merits on some basis other than what the
judge learned from his participation in the case. Opinions formed in the course of judicial proceedings, although
erroneous, as long as based on the evidence adduced, do not prove bias or prejudice. We also emphasized that
repeated rulings against a litigant, no matter how erroneously, vigorously and consistently expressed, do not amount
to bias and prejudice which can be a bases for the disqualification of a judge.
Finally, the inhibition of respondent judge in hearing the case for damages has become moot and academic in view
of the latters death during the pendency of the case. The main case for damages shall now be heard and tried
before another judge.

Section 3, Rule 58 of the 1997 Rules of Civil Procedure provides that a writ of preliminary injunction may be issued
IN VIEW WHEREOF, the impugned Orders of the trial court in Civil Case No. Q-00-40115, dated March 23 and
when it is established:
April 4, 2000, are AFFIRMED. The presiding judge of the Regional Trial Court of Quezon City to whom Civil Case No.
Q-00-40115 was assigned is directed to proceed with dispatch in hearing the main case for damages. No
(a) that the applicant is entitled to the relief demanded, the whole or part of such relief consists in restraining the pronouncement as to costs.
commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either
for a limited period or perpetually;
SO ORDERED

(b) that the commission, continuance or non-performance of the act or acts complained of during the litigation
would probably work injustice to the applicant; or

(c) that a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering
to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action
or proceeding, and tending to render the judgment ineffectual.